Plaintiff-Appellant Jorge Bascuñán, a citizen and resident of Chile, inherited a substantial fortune in the 1990s. Due to a variety of emotional and physical ailments, Plaintiff was unable to manage his fortune. Plaintiff appointed his cousin, Defendant, as his financial manager. Ultimately, Plaintiff granted Defendant a broad power-of-attorney. Over ten years, Defendant and co-defendants allegedly engaged in at least four fraudulent financial schemes, transferring approximately $64 million worth of assets from the estate to their possession. Two of these schemes involved transferring assets from foreign locations to New York. The other two schemes involved assets originally located in New York. Plaintiff brought a civil claim under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1964(c) ("RICO") in the United States District Court for the Southern District of New York against Defendants, alleging several RICO predicate acts. During the pendency of a motion to dismiss, the Supreme Court issued its opinion in RJR Nabisco, Inc. v. European Community, which held that a plaintiff bringing a private action under section 1964(c) of RICO must allege a "domestic injury." Plaintiff sought leave to amend the complaint, which the district court rejected as futile. The district court dismissed the case solely on the ground that Plaintiff failed to meet the "domestic injury" requirement.
The issue on appeal was an issue of first impression: what constitutes a "domestic injury" for the purposes of civil claims under RICO. The Second Circuit analyzed each alleged injury individually to determine if the harm in question was a "domestic injury" for the purposes of the statute.
Under two of the schemes, assets were transferred from foreign locations to New York. The Second Circuit held that these schemes did not result in "domestic injury." The assets in question were owned by a foreign corporation and held in a foreign bank account. "[A]n injury to tangible property is generally a domestic injury only if the property was physically located in the United States ...." The mere use of the US financial system to "to conceal or effectuate" a tort does not, on its own, turn an otherwise foreign injury into a domestic injury.
Under two other of the schemes, the allegation was that property was located within the United States when it was stolen. The court acknowledged that, while money is fungible, it is analogous to tangible property and can "be fairly said to exist in a precise location." Based on this analysis, because the money and financial instruments were in New York, the court determined that there was "domestic injury" sufficient to allege a cause of action under RICO. "Where the injury is to tangible property, we conclude that, absent some extraordinary circumstance, the injury is domestic if the plaintiff's property was located in the United States when it was stolen or harmed, even if the plaintiff himself resides abroad." For the foregoing reasons, the Second Circuit reversed the district court's order granting Defendant's motion to dismiss, vacated the order denying Plaintiff's motion for leave to file a second amended complaint, and remanded the case for further proceedings. Brandon Graves of the Washington, DC office contributed to this summary.