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RJR Nabisco, Inc. v. European Cmty. - 136 S. Ct. 2090 (2016)

Rule:

There is a two-step framework for analyzing extraterritoriality issues. At the first step, a court asks whether the presumption against extraterritoriality has been rebutted—that is, whether the statute gives a clear, affirmative indication that it applies extraterritorially. The court must ask this question regardless of whether the statute in question regulates conduct, affords relief, or merely confers jurisdiction. If the statute is not extraterritorial, then at the second step the court determines whether the case involves a domestic application of the statute, and the court does this by looking to the statute’s “focus.” If the conduct relevant to the statute’s focus occurred in the United States, then the case involves a permissible domestic application even if other conduct occurred abroad; but if the conduct relevant to the focus occurred in a foreign country, then the case involves an impermissible extraterritorial application regardless of any other conduct that occurred in U.S. territory.

Facts:

The Racketeer Influenced and Corrupt Organizations Act (RICO) prohibits certain activities of organized crime groups in relation to an enterprise. RICO makes it a crime to invest income derived from a pattern of racketeering activity in an enterprise “which is engaged in, or the activities of which affect, interstate or foreign commerce,” 18 U.S.C. §1962(a); to acquire or maintain an interest in an enterprise through a pattern of racketeering activity, §1962(b); to conduct an enterprise's affairs through a pattern of racketeering activity, §1962(c); and to conspire to violate any of the other three prohibitions, §1962(d). RICO also provides a civil cause of action for “[a]ny person injured in his business or property by reason of a violation” of those prohibitions. §1964(c).

Respondents (the European Community and 26 of its member states) filed suit under RICO, alleging that petitioners (RJR Nabisco and related entities (collectively RJR)) participated in a global money-laundering scheme in association with various organized crime groups. Under the alleged scheme, drug traffickers smuggled narcotics into Europe and sold them for euros that--through transactions involving black-market money brokers, cigarette importers, and wholesalers--were used to pay for large shipments of RJR cigarettes into Europe. The complaint alleged that RJR violated §§1962(a)-(d) by engaging in a pattern of racketeering activity that included numerous predicate acts of money laundering, material support to foreign terrorist organizations, mail fraud, wire fraud, and violations of the Travel Act. The District Court granted RJR's motion to dismiss on the ground that RICO does not apply to racketeering activity occurring outside U.S. territory or to foreign enterprises. The Second Circuit reinstated the claims, however, concluding that RICO applies extraterritorially to the same extent as the predicate acts of racketeering that underlie the alleged RICO violation, and that certain predicates alleged in this case expressly apply extraterritorially. In denying rehearing, the court held further that RICO's civil action does not require a domestic injury, but permits recovery for a foreign injury caused by the violation of a predicate statute that applies extraterritorially.

Issue:

Does RICO apply to foreign racketeering activity?

Answer:

Yes

Conclusion:

The Court held that RICO applies to some foreign racketeering activity. A violation of 18 U.S.C.S. § 1962 may be based on a pattern of racketeering that includes predicate offenses committed abroad, provided that each of those offenses violates a predicate statute that is itself extraterritorial. RICO imposes no domestic enterprise requirement, although the enterprise must engage in or affect commerce involving the U.S. The European Community's allegations that a cigarette company engaged in a global money-laundering scheme did not involve an impermissibly extraterritorial application of § 1962. RICO's private right of action under 18 U.S.C.S. § 1964(c) did not overcome the presumption against extraterritoriality. It was therefore necessary to allege and prove a domestic injury to business or property, and claims for domestic injuries had been waived in the instant case.

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