Vikings Owners Granted Massive Reduction in Damages in RICO Suit
On June 1, 2018, a three-judge appellate panel in New Jersey reviewed a 26-year old racketeering case against Minnesota Vikings owners, Zygmunt, Mark, Leonard Wilf, and other defendants, determining that a nearly $103 million award must be reconsidered.
In its 90-page decision, the panel upheld Racketeer Influenced and Corrupt Organizations Act (RICO) claims, as well as some non-RICO claims, including fraud and breach of fiduciary duties. In doing so, however, it decided that the total award required reexamination because it improperly included RICO and non-RICO claims falling outside of their respective statutes of limitations. Additionally, the panel provided that the $17.5 million award for attorneys’ fees and costs should be reduced and limited to efforts “reasonably devoted to plaintiffs’ pursuit of their respective RICO claims.”
The underlying issues arose when the partnership structure of a New Jersey apartment complex changed and stakeholders Josef Halpern and Ada Reichmann accused The Wilfs of altering financial records in effort to assert control over ownership. The complex, called Rachel Gardens, is a 764-unit garden compound, the shares for which were agreed to be split amongst the Wilfs, Halpern, and Halpern and Reichmann’s brother, Abe in 1985. In 1988, however, the Wilfs discovered that Abe had misappropriated funds, causing his removal from management and sparking the creation of a new entity to take title to the complex. A subsequent entity, Jarwick Developments Inc., was then formed in connection with loans between the parties, in which Ada was the sole shareholder and in which Abe had interest.
In 1992, Jarwick commenced the suit against the Wilfs, alleging fraud and seeking interest in one of the parties’ companies, as well as partnership status in another, among additional relief. The complaint was later amended, with Jarwick contending that the Wilfs had misappropriated partnership funds by “engaging in organized crime type activities” and using them “to pay the salaries of persons who worked for Wilf-related entities and did little or no work for [their company]”. It also accused the defendants of falsifying the “[p]artnership’s books, financial statements and tax returns.”
In 2013, Jarwick and Halpern succeeded in their claims, resulting in the dissolution of the partnership, and requiring the sale of Rachel Gardens, its proceeds being divvied in accordance with the parties’ partnership interests. Upon recent review by the panel, prejudgment interest and compensatory damages were upheld to Jarwick, but all awards relating to RICO claims, including punitives and attorneys’ fees were to be recalculated on remand, as were all RICO and non-RICO claims relating to Halpern.
Further, the Wilfs attempted to get the case reassigned based on alleged conflicts of interest with the judge and her husband, though the panel concluded that there was no need for recusal. It reasoned that although the firm employing the judge’s husband was representing Leonard Wilf in another matter, the matter was unrelated and did not render the judge or her husband a “direct or indirect financial interest in that award” and thus, it was a non-issue.