Mineral Rights Claim Shows Novel Use of Racketeering Law

The Racketeer Influenced and Corrupt Organizations Act (RICO) was originally intended as a criminal statute. Congress wanted to arm prosecutors with a new law to address criminal conspiracies involving gangs and organized crime. A last minute amendment allowed private litigants to use the law in civil cases against wrongdoers. Today it is a powerful remedy for victims of fraud. In this post, we will see how it is being used to address the alleged theft of mineral rights.

Verde Minerals Lawsuit

Verde Minerals is a Texas company located in Austin. Verde says it and others are the rightful owners of oil and gas mineral rights in 2098 acres of land located in Live Oak County, Texas. They say they were deeded those rights from Edward Mattison.

Mineral rights are a big deal in Texas. It is possible to own the surface of the land but not what is underneath it and vice versa. Owning mineral rights means that one owns whatever oil and gas may be found underground. Depending on where you live in Texas, those rights could be worth millions of dollars or more.

When Mattison conveyed his mineral rights, he kept a percentage of those rights for himself. Along with his percentage was the “executive rights to enter into oil and gas leases.” In other words, Verde Minerals had a right to a portion of the proceeds but control remained with Mr. Mattison.

Later Mattison transferred his remaining rights to three other companies. If you think you see where this is headed, you are probably correct.

Verde says the new co-owners executed leases but failed to share in the royalties. It claims that 22 wells have been drilled on the 2100 acre tract. Those wells have generated over 2,800,000 barrels of oil and 20 million cubic feet of gas.

The complaint says that the new co-owners executed and filed phony documents claiming they held more rights to the royalties than allowed. Those documents were then delivered to the oil and gas companies for payment.

Verde brought the case on its own behalf as well as on a class action basis for the other rightful owners of the mineral rights.

Verde’s Racketeering Claims

Verde brought a number of claims against the wrongdoers. Claims include a count for declaratory relief. That counts asks the court to determine exactly what everyone’s rights are in the mineral royalties.

Verde has also made a breach of fiduciary duty claim. The company claims because the defendants have the executive rights to negotiate drilling leases, they have an obligation to treat Verde and the class members fairly and to honor everyone’s respective rights.

Perhaps the most powerful claim is the racketeering claim brought under the federal RICO law. If successful, that claim will allow Verde and the rightful owners to receive triple damages and attorney’s fees.

According to Verde, the defendants with the executive rights have formed an illegal enterprise designed to claim and receive royalty payments that do not belong to them. They conspired together to generate phony deeds, execute leases and issue former division orders. (A division order tells the driller who owns the mineral rights and how royalty payments are to be divided.)

At its heart, the RICO law requires there to be certain predicate acts indicative of “racketeering activity”. Congress identified many criminal behaviors that qualify but for most civil RICO claims, those predicate acts are either mail fraud or wire fraud. Verde says both were present.

Each time the defendants mailed or sent a phony lease or division order, they engaged in mail fraud. Similarly, every fax or email that contained phony or fraudulent documents is an act of wire fraud.

RICO as a Civil Recovery Tool

If used properly, RICO is one of the most powerful civil recovery tools on the books. Unfortunately, the statute is extremely complex, judges grow weary of poorly pled RICO claims and many lawyers misuse the statute.

RICO requires multiple acts of specifically defined racketeering activity. It can not be used in a simple breach of contract case. If there is fraud and if used wisely, however, the law becomes a big hammer and can often force wrongdoers to the settlement table. Defendants know that the longer they fight, the more they will have to pay both for their own lawyers and for the victims’ lawyers. That is the beauty of attorney’s fees for successful plaintiffs.

The lender liability / RICO lawyers at MahanyLaw and Judge, Lang & Katers work tirelessly for plaintiffs and victims of fraud. Many RICO lawyers defend banks or big corporations. Not us. Our joint RICO practice is focused on fraud victims.

We are two national boutique firms under one roof and working together on RICO claims and cases against banks. Our business model is unique but because of lawyers located throughout the United States, we can put together the best team for any specific case. Because we are boutiques, our overhead is low (meaning reasonable rates). Because we are experienced, the total number of hours necessary to successfully complete a case is also lower.

For more information, contact attorney Chris Katers at [hidden email] or by phone at (414) 777-0778. The author of this post, attorney Brian Mahany, can also be reached at [hidden email]. We also have many other RICO stories on our blog and have a lender liability RICO information page geared to those interested in suing banks.

MahanyLaw and Judge, Lang & Katers – America’s Fraud Recovery and RICO Lawyers

[Cases handled throughout the United States. Our minimum actual loss is generally $10 million but depending on where the case is located and the issues involved, we often will take smaller cases. We regret that we are unable to handle individual consumer cases.]

Related topics: RICO (14) | RICO lawsuit (11) | breach of fiduciary duty (6) | racketeering (11)