Artist May Pursue State, Not Federal, Copyright-Based RICO Claims

This postisng was written by Mark Engstrom, Editor of CCH RICO Business Disputes Guide.

An artist could not pursue federal RICO claims against a sports art company and its owner, who allegedly (1) reproduced one of the artist’s drawings without permission; (2) deleted the artist’s numbering system and original signature; and (3) sold at least 349 unauthorized copies of the work, the federal district court in Atlanta has ruled. The artist could, however, pursue racketeering claims under Georgia’s RICO statute.

Enterprise

The company did not constitute a RICO enterprise because it was not distinct from its owner, in the court’s view. Although a corporation and its owner were generally distinct from the corporation itself (Cedric Kushner Promotions, Ltd. v. King,  CCH RICO Business Disputes Guide ¶10,085), the artist attempted to pierce the corporate veil of the sports art company, and thus contradicted his assertion that the company was distinct from its owner. Because the plaintiff failed to distinguish between the company and its owner, his RICO claim could not proceed.

Continuity

The artist failed to allege acts involving open-ended or closed-ended continuity. The alleged racketeering activity involved a single scheme with a discrete goal, which precluded closed-ended activity. Open-ended continuity was absent because the plaintiff failed to allege that the defendants had regularly conducted business by impermissibly selling copyrighted works. In addition, evidence failed to show that:

(1) The defendants’ scheme involved more than one victim (the plaintiff) or more than one copyrighted work or

(2) The defendants had engaged in other similar schemes.

The plaintiff argued that a threat of future racketeering activity existed because the defendants’ acts “could have continued indefinitely.” Continued criminal activity was almost always theoretically possible, but the type of speculation that the artist advocated would undermine: (1) the purpose of limiting RICO claims to “non-sporadic racketeering activity” and (2) the purpose of requiring a heightened pleading standard for RICO claims. Because the artist failed to sufficiently plead a pattern of racketeering activity, his federal RICO claim was dismissed.

State RICO Claim

The artist’s Georgia RICO claim survived the defendants’ motion to dismiss, despite the artist’s failure to adequately plead open-ended or closed-ended continuity, because the Georgia RICO statute did not include a continuity requirement. Instead, Georgia RICO required that the alleged predicate acts share “the same or similar intents, results, accomplices, victims, or methods of commission.” The predicate acts alleged by the artist were very similar in each of these respects. In addition, the predicate activity included criminal copyright infringement, which qualified as a predicate act under Georgia RICO because criminal copyright infringement was a predicate act under the federal RICO statute.

The decision is Burchett v. Lagi, CCH RICO Business Disputes Guide ¶12,250.