Goodman") maintained eight separate commodity futures trading accounts which were carried by a futures commission merchant registered with the United States Commodity Futures Trading Commission. Plaintiff alleges that M. Goodman used these accounts to operate a multi-million dollar "Ponzi" scheme wherein M. Goodman solicited substantial investments from customers for the stated purpose of investing in the futures market. Plaintiff alleges that instead of investing these funds M. Goodman either converted them to his own use or used them to allocate fictitious trading profits to the existing accounts of his customers.
It is alleged that pursuant to this scheme M. Goodman created trusts which would, upon his death, divide trust assets among his customers in proportion to the size of their trading account assets at the time of his death. M. Goodman is alleged to have funded the trusts through the purchase of approximately 25 life insurance policies from 18 different companies including the plaintiff. These purchases constituted or affected interstate commerce. Plaintiff alleges that it and the other insurance companies issued these policies on the basis of material misrepresentations and omissions contained in M. Goodman's insurance policy applications.
Plaintiff asserts that M. Goodman's alleged acts constituted a pattern of racketeering activity in violation of RICO, that his trusts and trading accounts constituted an enterprise and that M. Goodman and his estate are persons within the meaning of the Civil RICO statute. In Count III of its complaint, plaintiff alleges that M. Goodman violated 18 U.S.C. § 1962 (a) and (d).
In Count IV of its complaint plaintiff alleges that M. Goodman violated 18 U.S.C. § 1962 (c) and (d).
On the basis of M. Goodman's alleged RICO activities, plaintiff seeks to recover threefold damages from M. Goodman's estate pursuant to 18 U.S.C. § 1964(c).
Although the Court of Appeals has not directly addressed the present question, defendant asserts that controlling precedent of this circuit mandates that this Court hold that Civil RICO claims do not survive the death of the defendant. I agree.
When a federal statute is silent upon the issue of survival, federal common law determines whether the claim survives or abates upon the death of one of the parties. Carlson v. Green, 446 U.S. 14, 23, 64 L. Ed. 2d 15, 100 S. Ct. 1468 (1980). Courts that have considered the question of claim survival in the context of Civil RICO have adopted a common law rule that remedial claims survive while punitive claims abate upon the death of the defendant.
See, eg., County of Oakland by Kuhn v. City of Detroit, 784 F. Supp. 1275, 1284-85 (E.D.Mich. 1992)(holding that RICO civil penalties are primarily remedial); State Farm Fire & Casualty Co. v. Estate of Caton, 540 F. Supp. 673, 681 (N.D.Ind. 1982)(holding that RICO civil penalties are primarily remedial), overruled on other grounds, Ashland Oil, Inc. v. Arnett, 656 F. Supp. 950, 953 (N.D.Ind. 1987)(following Tellis v. United States Fidelity and Guarantee Co., 805 F.2d 741, 746 (7th Cir. 1986) (holding that Civil RICO claims are penal in nature in determining the appropriate statute of limitations to apply to the statute) vacated in part 483 U.S. 1015, 107 S. Ct. 3255, 97 L. Ed. 2d 755 (1987)).
The Court of Appeals for the Third Circuit examined the remedial/punitive nature of Civil RICO to determine whether such claims could be maintained against a municipal corporation in Genty v. Resolution Trust Corp., 937 F.2d 899 (3rd Cir. 1991). After determining that Congress' primary intent in enacting Civil RICO was to punish wrongs against the public interest rather than to redress individual wrongs, the Gentry Court stated:
the furnishing of a civil remedy far in excess of the amount necessary to compensate an injured RICO victim is further confirmation that these damages are punitive. Although in some special contexts courts have stated that statutory multiple damages may be liquidated damages to assure the plaintiff's full compensation, the more generally applicable principle is that multiple damages are imposed as a penalty for egregious conduct of the wrongdoer and a means of deterring the future repetition of such conduct.