Georgia Supreme Court: Corporations Are “Persons” Under Georgia RICO

Williams General Corp. v. Stone, --- S.E.2d ----, 2006 WL 1584434 (Ga. Jun 12, 2006) (NO. S06G0006)

    In a unanimous opinion released on June 12, 2006, the Georgia Supreme Court held that corporations are considered “persons” under the Georgia RICO Act. Williams General Corp. v. Stone, --- S.E.2d ----, 2006 WL 1584434 (Ga. Jun 12, 2006) (NO. S06G0006). (Disclosure: BME represented plaintiff-appellant Williams General.)

    Last August, in Stone v. Williams General Corp., 275 Ga. App. 33 (2005), the Georgia Court of Appeals held that, because corporations are not a “person[s]” within the meaning of the Georgia RICO statute, they cannot be directly liable for conspiring to violate Georgia RICO because Georgia RICO’s conspiracy provision, O.C.G.A. § 16-14-4(c), prohibits only “persons” from conspiring to violate one of the two other RICO subsections. Id. at 34. In doing so, that Court of Appeals overturned a Gwinnett County jury’s verdict against Stone Cold Chemical for conspiring with one of its officers and directors, Thomas D. Stone, to violate Georgia’s RICO statute and steal Plaintiff Williams General Corp.’s trade secrets. In December, the Supreme Court granted certiorari to review whether “a corporation [is] a ‘person’ for purposes of the Georgia RICO Act, O.C.G.A. §§ 16-14-1 et seq.?” Williams General Corporation d/b/a Buck Head Products v. Thomas D. Stone et al., S06G0006 (letter to counsel attached to Writ of Certiorari).

    In reversing this decision, the Supreme Court made the following two important determinations: (1) corporations are “persons” for purposes of Georgia RICO; and (2) O.C.G.A. § 16-2-22(a), which determines the standards under which a “corporation may be prosecuted for an act or omission constituting a crime,” does not apply to private civil RICO damage actions.

    First, the Supreme Court concluded that corporations are “persons” under Georgia RICO because: (1) the Georgia Criminal Code defines “persons” as including “public or private corporation[s],” O.C.G.A. § 16-1-3(12); (2) the Georgia Code’s general definitional provisions define “persons” as including “corporations,” O.C.G.A. § 1-3-3(14); and (3) Georgia RICO contains a liberal construction mandate dictating that the Act “be liberally construed to effectuate the remedial purposes embodied in its operative provisions,” O.C.G.A. § 16-14-2(b), and, therefore, “it would be error to give a more restrictive meaning to the [person] term, thus limiting the remedial purposes of the Act and violating the liberal construction imperative of the legislature.” Williams General, 2006 WL 1584434 at * 1.

      In reaching its conclusion, the Georgia Supreme Court recognized and overruled language in a footnote from a prior Supreme Court decisions, Clark v. Security Life Ins. Co. of America, 509 S.E.2d 602, 605, n.11 (Ga. 1998). The Clark footnote suggested, without any analysis, that Georgia RICO “prohibits only ‘persons’ from engaging in racketeering activity” and does not “indicate[] a legislative purpose to impose liability on a corporation."  Id.  Concluding that “[t]his language . . . adds confusion to a straightforward interpretation of the RICO statute,” the Supreme Court expressly “disapprove[d]” the footnote’s language.

    Second, the Supreme Court overruled another important portion of the Clark decision. In Clark, the Court applied O.C.G.A. § 16-2-22(a), which provides the standards under which corporations may be criminally prosecuted in Georgia, to a civil RICO case because “RICO is directed to ‘organized criminal elements’.” 509 S.E.2d at 604-05. In Williams General, the Supreme Court found that this approach was flawed and threatened to cause unintended consequences. According to the Court, “to construe the statute” in this manner “would mandate that O.C.G.A. § 16-2-22 and other criminal statues that limit imposition of corporation criminal liability would now be applied to civil suits which stem from criminal law violations. We have not previously applied O.C.G.A. § 16-2--22 or any other criminal statutes to civil suits brought by individuals, and we decline to do so here.” Williams General, 2006 WL 1584434 at * 2 (footnote omitted).