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Manisero, Pryba, and Beach Prevail on a Pre-Answer Motion to Kick Federal RICO Action to Arbitration

January 13, 2021

Tom Manisero (Partner-White Plains), Bradley Pryba (Of Counsel-White Plains) and Kenneth Beach (Associate-White Plains) prevailed on a pre-answer motion to compel mediation and arbitration of a federal civil RICO suit before Judge Halpern in United States District Court, Southern District of New York. The firm’s client, a top-50 accounting and advisory firm, had served as the auditors for a nonprofit managed long-term care plan (the Plan) from 2009 through 2015. On April 1, 2020, the Plan filed a complaint alleging that our client and various individuals associated with the firm had conspired with the Plan’s former owners and committed civil RICO violations under 18 U.S.C. § 1962(c); conspiracy to violate RICO under 18 U.S.C. § 1962(d); common law fraud; aiding and abetting common law fraud; breach of fiduciary duty; aiding and abetting breach of fiduciary duty; breach of contract; and auditor malpractice, claiming damages in excess of $25 million. 

Upon hearing the parties’ initial arguments at the pre-motion conference, Judge Halpern directed the parties to brief only the issue of the enforceability of the mediation and arbitration clauses. Accordingly, Tom, Brad and Kenneth moved under the Federal Arbitration Act to enforce the mediation and arbitration clause contained in the engagement letters between the parties, as well as the regulations governing the audits of managed care organizations (MCOs), which expressly allow for such agreements between auditors and MCOs. They further argued that the RICO allegations while, erroneous, were not a bar to arbitration, and under prevailing law must be arbitrated in the context of a valid arbitration clause between the parties. In reply the Plan’s opposition to the motion, the team pointed to the plaintiff’s knack for “selective citation,” and kept the court focused on the valid arbitration clause and permissible language in the controlling regulations. Judge Halpern granted our motion to compel arbitration, and stayed the federal action pending mediation and arbitration. The federal case has since been administratively closed without prejudice for the parties to move to reinstate the case after the conclusion of mediation and arbitration. 

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