At some point in the not too distant future, all the pending criminal charges in the case of the U.S. v. Raniere Et Al will have been resolved – and, hopefully, we’ll just be waiting to find out how much time each of the defendants will be spending in federal prison.
But that will hardly be the end of litigation for at least some of the defendants in this case.
That’s because, despite Keith Raniere’s word-salad bullshit, there are lots of victims of NXIVM out there who may decide to seek recompense for their losses.
So, how exactly is that going to work?
Well, like a lot of legal issues, it’s a bit complicated.
Let me see if I can uncomplicate at least some of it for our readers.
The first question is whether the presiding judge in the case, U.S. District Court Judge Nicholas G. Garaufis, will order any defendants who pleaded guilty – or who are found guilty at trial – to pay restitution to the victims of their crimes.
In general, federal courts are statutorily required to order victim restitution when sentencing a defendant for certain types of felonies. In addition, they can also order victim restitution for a wide variety of other felonies.
When Nancy Salzman pleaded guilty, Judge Garaufis informed her that “restitution is mandatory in the full amount of each victim’s losses as determined by the Court”.
When Lauren Salzman and Allison Mack each pleaded guilty, he similarly informed them that “Restitution… is mandatory, and it would be in the full amount of each victim’s losses as determined by the Court”. He also indicated that they would be subject to civil forfeiture as spelled out in the agreements they signed as part of their plea deals.
Presumably, victim restitution will also be imposed on Keith Raniere, Clare Bronfman, and Kathy Russell if/when any of them enter into plea deals or are found guilty at trial.
While that all sounds very promising, one problem is that restitution is only available to those who have suffered a physical injury or a financial loss as a direct and proximate consequence of the crimes of admission or conviction – and only to the extent of their loss.
Another problem is that, except for Clare, Keith, and Allison, the defendants in this case may not have a lot of assets that can be tapped for immediate payments to victims.
Clare has whatever assets are not tied up in trusts; Keith presumably has the funds that he inherited from Pam Cafritz; and Allison likely has some residuals from her former acting career.
But it’s unlikely that Nancy, Lauren, and Kathy are going to bring much to the table – now or in the future.
At the end of the day, it will be up to Judge Garaufis to decide all the important questions regarding restitution – including, but not limited to, the following:
• How much will each of the defendants be required to pay into the restitution fund?
• Who will be eligible to submit claims for restitution?
• What types of claims will be eligible for restitution?
• How much will each approved claimant receive from the restitution fund?
If you think you may have a restitution claim – or if you have any restitution-related questions – I urge you to contact an attorney who has experience dealing with these types of claims.
So, if victims of the NXIVM cult are not going to receive any court-ordered restitution, their only other option will likely be some sort of civil action against some/all of the defendants and/or other people who were involved in financing or running the cult.
Here are some of the issues facing those who choose to go that route.
Class Action Lawsuits
Although these were once very popular – and resulted in some huge payouts for plaintiffs – courts have become very negative towards them in recent years.
And they have very specific requirements, such as:
• Precisely defining the class of plaintiffs (These have to be people who have common claims against the defendant); and
• Identifying a small number of suitable class representatives (These have to be people whose experiences, circumstances and claims are virtually identical to all members of the class).
Although there is already a class-action effort underway to recover what people paid to take NXIVM training courses, I think it’s going to be difficult – if not impossible – to prove that everyone who took such courses was duped in the same way (Unlike a telemarketing scheme that recruits new clients via one fraudulent ad or series of ads, a pyramid scheme like NXIVM las lots of individual recruiters).
For people who believe they were harmed beyond the cost of the courses – e.g., people who suffered emotional injuries, trauma, etc. – it is extremely unlikely that their claims can be pursued via a class action lawsuit because their experiences will all tend to be different from one another.
Even if they able to meet the requirements for a class-action lawsuit, there will need to be a series of “mini-trials” to resolve individualized issues: e.g., what type of injury did they suffer, what damages are they entitled to, etc.
New York State’s consumer protection laws also pose a problem for potential class action lawsuits. That’s because they generally apply only to consumers who actually live in New York State.
RE: Collective Actions
Also known as “Mass Tort” lawsuits, these types of legal actions allow plaintiffs to retain their own attorneys and work cooperatively with one another – or to utilize one law firm (or a group of law firms) to represent all of them.
One advantage of this type of legal action is that it provides for economies of scale: e.g., common issues can be litigated in one proceeding, discovery can be shared with other plaintiffs, and evidence obtained regarding defendants can be used by all plaintiffs, etc.
Another advantage of individual plaintiffs banding together in a collective action is that it can reduce or eliminate the risk of inconsistent decisions that can result if there are numerous lawsuits going on at the same time. This is especially true if they are being handled in different courts and before different judges (An adverse decision for the plaintiff in one case can sometimes have a tremendously negative impact on plaintiffs in other related cases).
Regardless of how someone chooses to pursue their NXIVM-related claims, there are many other factors that they will have to consider. Here are a few of them.
RE: Federal RICO Civil Claims
As readers of the Frank Report know, the pending criminal case centers around Racketeering and Racketeering Conspiracy charges (So far, all three guilty pleas have been limited to those types of crimes).
And as has already been pointed out by several readers, there is also a civil counterpart to the federal RICO criminal statute that may offer the best chance for those who have been victimized by NXIVM to assert their claims for damages (Although some states also have statutes that allow for civil RICO claims, only the State Attorney General can assert such claims in New York York).
But civil RICO lawsuits are also very complex, very expensive to prosecute, and very difficult to manage.
Based on discussions with attorneys who have successfully brought such lawsuits, I would estimate that discovery alone is going to cost several millions of dollars in this case.
Expert witnesses – which will be an absolute necessity in this case – will cost several more millions.
Because of all those costs, it is unlikely that any victim of NXIVM will be able to pursue any sort of claim unless they’re able to find attorneys who are able and willing to take the case on a contingency fee only basis.
The legal team – regardless of whether it is a single law firm or several law firms working together – will have to have the financial wherewithal to fully pursue all aspects of the lawsuit without requiring the plaintiffs to put forth any money until a judgment is awarded or a settlement is reached.
And the legal team will have to be fully-staffed with enough lawyers, paralegals, investigators and support staff to deal with all the filings and legal maneuverings that will be involved in this type of case.
NXIVM victims will also have to be very patient because any lawsuit to recover for damages that they’ve incurred is likely going to go on for several years.
Bronfman and Raniere are well-seasoned veterans when it comes to complex, slow-to-resolve civil lawsuits. That includes, but is not limited to, the Rick Ross case that dragged on for more than 14 years.
And even if the lawsuit results in a judgment for the plaintiffs, several rounds of appeal are almost inevitable.
Types Of Claims
The types of claims that have the highest chance for success fall into two categories: claims for economic losses – and claims for emotional/psychological injuries. There are also a variety of other potential claims that, for purposes of this post, we’ll label as “Miscellaneous Claims”.
RE: Claims For Economic Losses
Those who only took one module – or one intensive – are unlikely to recover any damages for the fees they paid unless they can prove that they were fraudulently induced to take the module/intensive.
And the mere fact that NXIVM coaches utilized “puffery” to convince someone to sign up for a module or course is not going to be enough to meet the applicable standard for that someone to pursue a claim for economic loss.
Hamburger joints that advertise “best burger in town”, car dealers that advertise “best deals ever”, and cult leaders who claim to be “the world’s smartest man” are all allowed to engage in puffery.
Being able to recover the fees that were paid for NXIVM courses will require proof of the elaborate con that was the backbone of the NXIVM operation.
And while that can be done, it’s going to take an extremely creative and diligent legal team to pull it off.
RE: Claims For Emotional/Psychological Injuries
There is no doubt that NXIVM caused large numbers of people to be traumatized.
Claims for those emotional/psychological injuries can likely be pursued in state court or federal court – but, regardless of venue, these types of claims can result in the awarding of compensatory damages and, at least in some cases, punitive damages as well.
But, as might be expected, being able to prove that you have incurred emotional or psychological injuries is much more difficult than proving you spent money taking NXIVM courses.
So, while these types of claims can definitely be asserted, it will take a law firm with the right type of expertise and experience to generate positive results for the victims.
RE: Miscellaneous Claims
There are other types of claims that can likely be pursued against NXIVM and the people who financed and/or operated it: e.g., extortion, forced labor, identity theft, servitude, sexual abuse, trafficking, etc.
But in order to be successfully pursued, these types of claims generally require highly-specialized legal expertise and knowledge.
So, victims who wish to pursue these types of claims may have to search well outside their own geographical areas in order to find firms that can successfully represent them with respect to these types of claims.
What To Avoid
Just as it’s important for victims of NXIVM to know what to look for when hiring an attorney to represent them in a civil action, it’s just as important that they know what to avoid.
First and foremost, potential plaintiffs should avoid attorneys and law firms that want to talk about “settlement strategies” before any lawsuit has been filed – or in the early stages of the case. If an attorney starts out looking for a settlement, it’s unlikely that they will do all the work that will be needed to get one that is fair and just.
Second, they should avoid attorneys and law firms that have not been involved in complex civil litigation cases. While everyone has to start somewhere, you don’t want to be the “where” when it comes to an attorney or law firm learning the ropes as regards this type of litigation.
Third, they should avoid attorneys and law firms that do not have the financial wherewithal to “invest” a substantial amount of money in a case that will likely take several years to resolve. If the lawyer or law firm you’re interviewing doesn’t have the type of “deep pockets” this type of litigation will require, then keep looking until you find one who does.
This post is not meant to provide legal advice but rather to outline some of the things that victims of NXIVM should think about if they are interested in pursuing civil claims against NXIVM and those who financed it and managed it.
Editor’s Note: Readers of this blog may recall mention of Neil L. Glazer, an attorney at the law firm of Kohn, Swift & Graf, P.C. (His name has appeared in several court filings – and he was prominently mentioned in the series of posts concerning the Storage Locker Wars). While he would not comment on the record, he has confirmed that he represents numerous witnesses in the criminal proceedings – and that he and a team of lawyers from his firm and one other firm will be commencing civil litigation and taking “other appropriate actions” on behalf of a large number of people that have been harmed by NXIVM and its leadership.
Although Glazer would not discuss any details, he did say that his firm will continue to take calls from anyone who feels they were harmed by NXIVM and its leaders. When asked one last time for a quote, Glazer said, “We prefer to speak through our court papers and appearances.”