The Eastern District of Pennsylvania recently dismissed a RICO lawsuit against a serial TCPA plaintiff, finding that, while the conduct alleged “might be unseemly,” it did not amount to racketeering activity. Jacovetti Law, P.C. v. Shelton, No. 2:20-cv-00163, 2020 WL 5211034, at *3 (E.D. Pa. Sept. 1, 2020).
Underlying this case was a TCPA action that had been brought by James Shelton, who, the court found, “has turned the…TCPA into a business” and “filed dozens of cases…around the country.” Id. at *1. According to plaintiffs in the RICO case, Shelton’s TCPA complaint against them had “contained factual errors” and been filed as a “setup” for the “sole purpose of extracting…settlement.’” Id. While that TCPA complaint was ultimately withdrawn, the plaintiffs brought a separate RICO suit against Shelton, asserting “violations of the mail and wire fraud statutes,” “posit[ing] the existence of an association-in-fact as the illegal enterprise,” and seeking “as damages the attorneys’ fees that [they] paid to defend the TCPA Case.” Id. at *2. As support, they alleged that Shelton “talks with other serial TCPA plaintiffs” and told the court that they have “transcripts of Mr. Shelton discussing his approach to TCPA litigation, including (a) the amount that he expects to extract in settlements and (b) his pre-suit research into potential defendants’ ability to pay a judgment.” Id. at *1.
In dismissing the RICO claim, the court found that the operative complaint “primarily disputes the facts that Mr. Shelton alleged in the TCPA Action. But even if Mr. Shelton made incorrect allegations in the TCPA Action, that litigation conduct does not constitute a scheme or artifice to defraud because absent corrupt activity like bribing witnesses or parties, litigation conduct does not constitute a scheme or artifice to defraud for purposes of a civil RICO case.” Id. at *3. The court likewise held that Shelton’s “pecuniary approach to litigation,” specifically his investigating potential defendants to determine if they could satisfy a judgment, “does not demonstrate that Mr. Shelton intends to cheat or defraud anyone.” Id.
Notably, however, the court also took the RICO plaintiffs’ attorney to task for his conduct throughout the litigation, noting it had previously sanctioned him “for his repeated failure to comply with deadlines and Court orders.” Id. at *1; see also Jacovetti Law, P.C. v. Shelton, No. 20-0163, 2020 WL 2556951, at *2 (E.D. Pa. May 20, 2020) (finding that counsel had “demonstrated bad faith” by “willfully disregard[ing] the Court’s Orders” and then “doubl[ing] down and [lying] to the Court when he had the opportunity to explain his failures”). The court also flagged inconsistencies in the RICO plaintiffs’ filings, including the portions of the RICO statute that they claimed were at issue. See Jacovetti Law, 2020 WL 5211034, at *2. Thus, while demonstrating the importance of specific factual allegations of racketeering activity, this decision does not suggest that all RICO claims arising from frivolous litigation should suffer the same fate. To the contrary, it is easily distinguished from other RICO claims that have survived challenges at the pleading stage. See Navient Sols., LLC v. Krohn & Moss Ltd., et al., No. 17-1178 (E.D. Va. Oct. 18, 2017); Navient Sols., Inc. v. The Law Offices of Jeffrey Lohman, A Professional Corp., et al., No. 19-0461 (E.D. Va. Apr. 15, 2019) (previously discussed here).