InsuranceProduct Manufacturers Face New Liability Risks as Plaintiffs Employ Tactics to Drive Up Stakes for Business Owners by Styling Claims as RICO Violations

04/18/2024by Thomas Fee

In recent years, product manufacturers in Texas and across the United States have faced escalating challenges in the realm of product liability litigation. A growing trend among plaintiffs is to pursue claims against businesses under the Racketeer Influenced and Corrupt Organizations Act (RICO), a federal statute originally designed to combat organized crime. This tactic represents a significant shift in the state’s legal landscape, posing new risks and challenges for business owners who find themselves targeted by such allegations.

At Fee Smith & Sharp LLP, our Texas trial lawyers understand this developing trend and its potential implications for Texas businesses. We can interpret the crucial considerations manufacturers and distributors must consider when facing product liability lawsuits. Our insurance coverage attorneys will advise you on product safety best practices and effectively defend against product liability claims, including those with a RICO component.

Understanding RICO and Its Application in Civil Litigation


Enacted in 1970, RICO was initially crafted to address criminal enterprises engaging in predicate acts such as racketeering, money laundering, extortion, securities fraud, and mail and wire fraud. However, over time, plaintiffs have increasingly utilized RICO provisions in civil lawsuits, alleging that defendants participated in a pattern of racketeering activity that harmed them economically.

This expansion of RICO’s application into civil litigation has opened the door for a broad range of claims against businesses, including product manufacturers. RICO allows for significant civil remedies for plaintiffs who can prove they were harmed by a RICO violation, including treble damages, attorney’s fees, and negative publicity for your company.

Treble damages refer to damages that are triple the amount of actual damages awarded in lawsuits. These damages are typically awarded in specific types of lawsuits, most commonly involving violations of the Texas Deceptive Trade Practices Act (DTPA), which protects consumers from false, misleading, or deceptive business practices.

The Rise of RICO in Texas Product Liability Lawsuits

Traditionally, product liability claims in Texas have focused on proving that a manufacturer or distributor placed a defective product into the stream of commerce, causing harm to the plaintiff. However, some plaintiffs’ attorneys are now attempting to leverage RICO in product liability cases, arguing that a manufacturer’s knowledge of a product’s defect, combined with continued production and sale, constitutes a pattern of mail and wire fraud.

This argument is broken down as follows:

  • Mail and wire fraud as predicate acts: Plaintiffs allege that the manufacturer is essentially defrauding customers by using mail or wire services to market and sell a defective product.
  • Pattern of activity: They argue that the continued production and sale of the product demonstrates a pattern of fraudulent conduct.
  • Enterprise: The corporation itself can be considered the “enterprise” under RICO.

The Implications of RICO Allegations for Product Manufacturers

For product manufacturers, facing allegations under RICO can be particularly daunting. Regardless of their validity, these claims often carry severe financial consequences and reputational damage. Plaintiffs may allege that manufacturers engaged in a pattern of fraudulent or deceptive practices, such as misrepresenting product safety or failing to disclose risks associated with product use.

Even in cases where no criminal activity is proven, the mere accusation of RICO violations can tarnish a company’s brand and erode consumer trust.

Strategic Considerations for Businesses

In light of the increased use of RICO claims in product liability cases, it is essential for businesses to adopt proactive strategies to mitigate risks and protect their interests. Some key considerations include the following:

  • Comprehensive compliance programs: Implementing robust compliance programs that promote transparency, adherence to regulatory standards, and ethical business practices can help demonstrate a commitment to legal compliance and mitigate the risk of RICO allegations.
  • Document retention and preservation: Maintaining accurate records of product development, testing, manufacturing processes, and communications can be crucial in defending against RICO claims. Effective document retention and preservation policies ensure that relevant evidence is available to refute allegations of wrongdoing.
  • Vigilant risk management: Conducting regular risk assessments and staying informed about emerging legal trends can help businesses proactively identify and address potential liability risks. By staying ahead of the curve, companies can implement preemptive measures to minimize exposure to RICO claims.
  • Collaborations with legal counsel: Engaging experienced legal counsel with significant experience handling matters involving RICO and product liability litigation is essential for navigating the complexities of these cases.

Our business attorneys at Fee, Smith & Sharp LLP can provide invaluable guidance, develop tailored defense strategies, and advocate vigorously on your behalf to achieve favorable outcomes in cases involving RICO allegations.

The Role of Legislative and Judicial Oversight in Product Liability RICO Cases

Whether RICO claims become a mainstream tactic in Texas product liability litigation remains to be seen. However, business owners and manufacturers should be aware of this developing trend and take steps to protect their businesses and operations.

As the use of RICO claims in civil litigation continues to evolve, lawmakers and the judiciary must provide clear legal guidance and oversight to prevent abuse of the RICO statute. Balancing the need to hold wrongdoers accountable with the protection of legitimate businesses from frivolous or meritless claims is paramount to maintaining fairness and justice within the Texas legal system.

The rising prevalence of RICO claims in product liability cases represents a significant challenge for businesses, particularly product manufacturers, in Texas and beyond. By understanding the implications of these claims and implementing proactive risk management strategies, you can mitigate your business’s exposure to liability and safeguard its reputation and financial well-being.

Let Fee, Smith & Sharp LLP Help Protect Your Business Against Tactics Involving RICO Violation Claims


Ultimately, a proactive and vigilant approach to compliance and risk management is vital to protecting your business from the potentially devastating consequences of RICO allegations in the ever-evolving legal landscape. Collaborating with our experienced product liability counsel is essential to successfully navigating the complexities of RICO litigation.

Contact us today to schedule a consultation with our experienced and successful business lawyers in Texas to discuss how we can protect your company and mitigate losses in the wake of a RICO claim allegation.

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