Monday, March 29, 2010

Government Contractor May Have RICO Liability for Human Trafficking

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

RICO claims predicated on forced labor and human trafficking could proceed against defense contractor Kellogg, Brown, and Root (KBR), the federal district court in Houston has ruled. The claims were filed by a Nepali man who allegedly was forced to work in Iraq and the family members of twelve Nepali men who were executed in Iraq by a group of terrorists.

Forced Transport, Labor

According to the plaintiffs, a Nepal-based company had recruited workers from Nepal and Sri Lanka to work in a luxury hotel in Amman, Jordan, and in other areas where their lives would not be in danger. When the workers arrived in Jordan, however, their passports were confiscated and another defendant—a Jordanian subcontractor—transported them to Iraq, against their will, to work under the supervision of KBR.

The subcontractor used an unprotected automobile caravan to transport the workers to an air base near Ramadi. The caravan was traveling on the “highly dangerous” Amman-to-Baghdad highway when terrorists stopped the lead cars and took twelve of the workers hostage. The terrorists videotaped hostage statements, sent a copy of the videotape to the Foreign Ministry of Nepal, and then executed the hostages.

The plaintiff, who survived the trip, worked at the air base as a warehouse laborer under the supervision of KBR. After hearing about the deaths of the twelve, the survivor “expressed his desire to return to Nepal,” but KBR told him that he could not leave until he had fulfilled his employment contract. The gravamen of the plaintiffs' complaint was that the defendants had formed a RICO enterprise to procure cheap foreign labor, and thus increase profits, through human trafficking and forced labor.


The court found that subject matter jurisdiction existed because the Military Extraterritoriality Jurisdiction Act had extended extraterritorial indictability to parties employed by the U.S. armed forces (including KBR). Nevertheless, the court applied the “conduct test” and the “effects test” to avoid resting jurisdiction on a “relatively murky” area of the law. Although the conduct test was not met, the effects test was.

The effects test asked whether conduct outside of the United States had a substantial adverse effect on U.S. investors or securities markets, the court noted. The plaintiffs alleged that KBR’s acquisition of “cheap labor” through human trafficking had benefited the defendants, disadvantaged their competitors, and adversely affected the U.S. labor market. They also alleged that U.S. taxpayers had funded KBR’s contracts and the racketeering enterprise had passed money through the U.S. banking system.

Because these allegations sufficiently identified “substantial” domestic effects, the court’s adjudication of the plaintiffs’ RICO claims was proper.


The plaintiffs' alleged injuries—lost wages, out-of-pocket fees, and the loss of alternative employment—were sufficient to establish RICO standing, in the court's view. Although the Fifth Circuit had not addressed the question of whether the family member of a deceased individual had standing to assert RICO claims, the Fourth Circuit’s determination that RICO claims survived the death of an injured party was persuasive.


The absence of a decision-making structure did not prevent the formation of an association-in-fact enterprise composed of KBR and the Jordanian subcontractor, the court determined. The plaintiffs sufficiently alleged that the defendants had worked cooperatively to accomplish an illegal purpose: the acquisition of cheap labor through trafficking and forced labor.

Pattern of Racketeering

Assertions that KBR “regularly” employed workers that were transported into Iraq against their will were sufficient to allege a threat of continued criminal activity. According to the plaintiffs, 92 laborers were brought into Iraq—against their will in 2003 and 2004—to work under the supervision of KBR.

These facts were sufficient to allege that the acquisition of cheap workers, against their will, was part of KBR’s modus operandi. The continuity element of a pattern of racketeering was therefore met, the court concluded.

Predicate Acts

The predicate acts of forced labor and human trafficking were sufficiently pled, according to the court. The fact that the complaint did not explicitly allege physical force was inconsequential because “conduct other than the use, or threatened use, of law or physical force may, under some circumstances, have the same effect as the more traditional forma of coercion—or may even be more coercive”

In this case, the plaintiffs’ complaint made the acts of forced labor and human trafficking plausible, which was all that was necessary to allege RICO predicate acts.

The decision is Adhikari v. Daoud & Partners, CCH RICO Business Disputes Guide ¶11,824

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