Government of Dominican Republic v. AES CORP.
2006 WL 3692617, 466 F. Supp. 2d 680, 2006 U.S. Dist. LEXIS 90649 (2006)
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Rule of Law:
To establish a 'pattern of racketeering activity' under the Racketeer Influenced and Corrupt Organizations Act (RICO), a plaintiff must show that the predicate acts are not only related but also demonstrate continuity, meaning they either occurred over a substantial period (closed-ended continuity) or pose a threat of future criminal conduct (open-ended continuity).
Facts:
- AES Corporation's subsidiary, AES Puerto Rico, produced approximately 1000 tons of coal ash daily from its power plant and faced substantial disposal costs.
- To handle the waste, AES created subsidiaries and hired Silver Spot Enterprises to transport the coal ash out of Puerto Rico under the pretense of legal disposal.
- From October 2003 to March 2004, ten barge-loads of coal ash were transported from Puerto Rico and dumped in the Dominican Republic, with approximately 30,000 tons left in Manzanillo and up to 50,000 tons in Samana Bay.
- The exposed coal ash, which contained high levels of toxic materials, caused severe environmental damage and resulted in serious health problems for local residents, including skin lesions, respiratory distress, hospitalizations, and deaths.
- During this period, Roger Fina, owner of Silver Spot, attempted to bribe a Dominican congressman to obtain permits for the dumping.
- When a local District Attorney, Arias, publicly objected to the dumping, he faced harassment, attempted assault, death threats, and was ultimately fired from his position.
- AES Puerto Rico executives allegedly paid bribes to Dominican government officials to facilitate the operation.
- After the dumping, tourism and local fish sales in the affected areas declined dramatically.
Procedural Posture:
- The Government of the Dominican Republic filed a lawsuit against AES Corporation and several related entities in the U.S. District Court for the Eastern District of Virginia.
- The First Amended Complaint alleged multiple claims, including civil violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), nuisance, and product liability.
- The AES defendants filed a Motion to Dismiss the First Amended Complaint, arguing, among other things, that the plaintiff lacked standing and failed to state a valid claim under RICO.
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Issue:
Does a scheme to illegally dispose of coal ash over a six-month period, involving predicate acts of bribery and threats, constitute a 'pattern of racketeering activity' under RICO by satisfying the continuity requirement?
Opinions:
Majority - Lee, District Judge
No. The scheme to illegally dispose of coal ash does not constitute a 'pattern of racketeering activity' because the alleged conduct fails to meet the continuity requirement under RICO. To establish a pattern, a plaintiff must show both relatedness and continuity. Here, while the predicate acts of bribery and threats were related to the common purpose of disposing of the ash, they do not establish continuity. The acts occurred over a limited period of approximately six months to achieve a single, finite goal. This does not satisfy 'closed-ended continuity,' which requires criminal activity over a substantial period, typically longer than one year. The scheme also fails the 'open-ended continuity' test because once the dumping was complete, there was no threat of future repetition of the predicate acts. As an alternative holding, the court found the RICO claim also fails for lack of proximate cause, as the predicate acts (bribery and threats) did not directly cause the plaintiff's injury (environmental pollution); rather, the mishandling of the ash was the direct cause.
Analysis:
This decision reinforces the high bar for pleading a civil RICO claim, particularly the 'continuity' element of the pattern requirement. It demonstrates that a series of illegal acts, even if harmful and related to a single criminal enterprise, may not be sufficient for RICO liability if they occur over a short period to accomplish a discrete goal. The ruling distinguishes between a finite criminal scheme and the kind of long-term, ongoing criminal conduct that poses a special threat to society, which RICO was designed to combat. This case serves as a crucial example for students on how courts narrowly interpret the 'pattern' requirement, preventing RICO from becoming a general remedy for all commercial fraud or wrongdoing.
