RJR Nabisco, Inc. v. European Community, No. 15-138, 579 U.S. ___ (June 20, 2016) [click for opinion]
Respondents—the European Community and 26 of its member states—claimed that Petitioner RJR Nabisco and several related entities participated in a global money laundering scheme whereby drug traffickers smuggled and sold drugs in Europe, then used the proceeds to pay for shipments of RJR cigarettes into Europe. Central to the Respondents' lawsuit were claims that Petitioner violated RICO by engaging in a pattern of racketeering activity.
Petitioner moved to dismiss these claims, arguing that RICO does not apply to racketeering activity outside the United States or to foreign enterprises. The U.S. District Court for the Eastern District of New York granted the motion and held that Respondents' claims were impermissibly extraterritorial. On appeal, the U.S. Court of Appeals for the Second Circuit reversed and held that a number of RICO predicates (i.e., criminal statutes tied to a "pattern of racketeering" and which, once breached, implicate RICO) apply extraterritorially. Respondents relied on five predicates: money laundering, material support of foreign terrorist organizations, mail fraud, wire fraud, and violations of the Travel Act.
The U.S. Supreme Court granted certiorari to determine the extraterritorial application of RICO. It analyzed: (1) whether RICO's substantive violations (specifically, those found in 18 U.S.C. § 1962) applied to conduct occurring abroad; and (2) whether RICO's private right of action (found in 18 U.S.C. § 1964(c)) applied to injuries suffered abroad.
Justice Alito, writing for the majority in a 4-3 decision, began by emphasizing that federal laws contain a presumption against extraterritoriality, and that, absent contrary Congressional intent, they will be construed to have only a domestic application. Therefore, when analyzing extraterritoriality, the court first asks whether the presumption against extraterritoriality has been rebutted, and if not, whether the case involves a domestic application of the statute.
Using this framework, the court found that RICO's definition of "racketeering activity" includes several predicates that apply to foreign conduct, that rebut the presumption against extraterritoriality. For example, one such predicate is the prohibition against killing a United States national while such national is outside the United States (18 U.S.C. § 2332(a)). Critically, the court found that Congress intended the extraterritorial application of RICO to be limited to when the predicates themselves—alleged in a particular case—apply extraterritorially and when there is an unmistakable congressional intent for the predicate statute to apply extraterritorially.
The court therefore held that the alleged violations did not involve an impermissibly extraterritorial application of RICO. The predicates involving money laundering and material support of foreign terrorist organizations provided for extraterritorial application in these circumstances, and, while the fraud statutes and Travel Act do not have a clear indication to overcome extraterritoriality, the complaint alleged domestic violations of those statutes.
Next, the court analyzed RICO's private right of action (18 U.S.C. § 1964(c)) to determine if it could apply extraterritorially. The court found that it could not. To bring a private action under § 1964(c), a private RICO plaintiff must allege and prove a domestic injury to its business or property. The statute thus did not evidence the unmistakable congressional intent necessary for extraterritorial application.
The court also voiced its concerns about the international friction that could arise from providing a private civil remedy for foreign conduct, as foreign citizens could bypass their own stringent remedies by relying on American remedies. While Respondents argued that these concerns were moot since the Respondents were foreign countries, the court refused to allow extraterritoriality to hinge on the consent of the affected sovereign in each case.
Finally, Respondents argued that RICO's private right of action is modeled after section 4 of the Clayton Act, (which allows for recovery for injuries suffered abroad as a result of antitrust violations) and that § 1964(c) should similarly allow plaintiffs to sue for injuries suffered in foreign countries. The court disagreed. It found that these sections were not interchangeable, because RICO lacks the explicit language supporting foreign-injury lawsuits found in the Clayton Act.
Ultimately, the court held that § 1964(c) does not allow a civil RICO plaintiff to recover for foreign injuries. In district court, Respondents had waived their damages claims for domestic injuries, so the only remaining RICO damages claims rested on injury suffered abroad. Because of this, the court reversed the Second Circuit judgment and dismissed Respondents' claims.
Justices Ginsburg, Breyer, and Kagan specifically dissented on the majority's holding on bringing private RICO suits under § 1964(c). Justice Sotomayor took no part in the decision of this case.