MOSCOW, October 29 - RAPSI, Ingrid Burke. The US District Court for the Northern District of Illinois has dismissed in part a claim brought under the Racketeer Influenced and Corrupt Organizations (RICO) Act against BP PLC, its CEO Robert Dudley, and a number of BP subsidiaries, for failure of the plaintiff to establish with requisite specificity a pattern of racketeering activity allegedly engaged in by defendants.
The facts according to the plaintiff
Lillian Borich worked for BP in various capacities between 2004 and 2008. For three years, she worked as a Strategic Account Manager in Illinois before relocating to Kiev, Ukraine, where she took on the position of Commercial Marketing Manager. While she was employed by BP Products North America, Inc., she effectively worked for TNK-BP, Russian joint venture.
Borich claims that when she agreed to take the Ukraine job, she had unwittingly signed on to becoming a pawn in the BP defendants' game to "wrest control" of TNK-BP from Alfa Access-Renova (AAR), a stakeholder in the joint venture.
Specifically, she alleges that she was sent in to disrupt business as usual in the country. Borich explains that Russia and Ukraine enjoy a unique business climate, wherein business is conducted in a less casual manner than in the West, replete with, "personal relationships... unwritten rules and agreements... illegal payments, protection schemes... [and] other activity that is illegal in the United States and United Kingdom." (Internal quotes omitted.)
The plaintiff claims that in acting as a pawn in the TNK-BP ownership game, she was expected to disrupt the informal relations that the Ukrainian and Russian business worlds were built on. She maintains in retrospect that these practices were designed to fail, and even these failures were part of the BP domination scheme. Specifically, Borich insists that her Dudley and the other defendants knew that her work would "ultimately depress the TNK-BP's capitalization so that defendant BP, p.l.c. could wrest control of TNK-BP at a drastically reduced price."
Upon arriving in Kiev in June 2007, Borich claims to have been shocked to learn of illegal payments made to persons in Ukraine and Russia, and about the "bribes and kickbacks that were necessary to obtain government contracts."
As noted by the court, however, certain elements of Borich's fact pattern seem at odds with each other. Specifically, the bribery and kickback claims are "somewhat at odds with Borich's theory that the defendants were trying to instill Western-style business practices in order to reduce TNK-BP's market capitalization."
In March 2008, Borich's contract and Ukrainian visa were canceled based allegedly on the fact that her position was being phased out. She then claims to have been frozen "out of any opportunity to obtain another position within the BP organization." Having failed to timely find another position within the company, she was officially terminated from BP in November 2008. She further notes that she would not have accepted the Kiev position had she been informed that she wouldn't have a job waiting for her with a BP subsidiary upon returning to the US.
In addition to noting the seeming incongruity of Borich's fact pattern in relation to BP's game plan in Kiev, the court pointed to the plaintiff's tendency toward focusing on extraneous details in her complaint.
Federal and state claims, original and supplemental jurisdiction
Borich brought five claims against the defendants, including one federal claim, arising under the RICO Act, and four state claims: fraudulent misrepresentation, conspiracy to defraud, aiding and abetting fraud, and breach of contract. The federal court issuing this order had original jurisdiction over the first claim as it arises under a federal statute, and supplemental jurisdiction over the other four, which would otherwise fall within state-court jurisdiction.
The RICO Act, which essentially prohibits racketeering in interstate and foreign business enterprises, aims to "eradicate organized, long-term criminal activity."
The BP defendants challenged the claim on two bases: extraterritoriality, and failure to describe a specific pattern of racketeering activity.
First, they charge that Borich improperly applied the domestic act extraterritorially. Opting to focus on "the pattern or racketeering activity and its consequences," rather than on "whether the enterprise is extraterritorial," the court concluded that "a domestic plaintiff injured by a domestic pattern of racketeering activity is not attempting to apply RICO extraterritorially." The court declined, however, to consider any racketeering activity alleged to have been committed abroad.
Second, they charge that Borich has failed to describe with the requisite specificity a pattern of racketeering activity committed by the defendants. On this point, the court agreed with the defendants. Noting that her complaint was replete with general statements, the court concluded that Borich "fails to allege a pattern of racketeering activity, because she fails to allege with the requisite specificity at least two predicate acts of mail or wire fraud."
The court dismissed Borich's RICO claim without prejudice, meaning she has been given the opportunity to file an amended complaint within the next 28 days remedying the current complaints shortcomings.
As mentioned above, the RICO Act - being a federal statute - gives rise to the federal court's original jurisdiction in this case. The other four claims arise under state-law. Having dismissed the RICO claim, the court dismissed the only claim to which it had original jurisdiction. The court notes that a federal court is entitled to decline supplemental jurisdiction if it has dismissed the claim(s) over which it had original jurisdiction, and that to do so is "the norm, not the exception."