Under the federal system, the states possess sovereignty concurrent with that of the federal government, subject only to limitations imposed by the Supremacy Clause. Under this system of dual sovereignty, state courts have inherent authority, and are thus presumptively competent, to adjudicate claims arising under the laws of the United States.
After the failure of a Maryland savings and loan association, a deposit insurance fund corporation was appointed as receiver of the association and brought suit in the Circuit Court for Baltimore City against various parties, including the former officers and directors of the association. Also, class actions by depositors were brought against the association and its principals in federal court alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO). The association questioned the jurisdiction of the court over civil RICO claims and the District Court granted the motion to dismiss holding that state courts have concurrent jurisdiction over civil RICO claims and federal abstention was appropriate for the other causes of action, since they had been raised in the pending litigation in the Circuit Court. On appeal, the United States Court of Appeals for the Fourth Circuit held that a civil action brought under the RICO could be instituted in a state court. The case was appealed.
Could a civil action brought under the RICO be brought in a state court?
The Supreme Court affirmed the judgment of the appellate court, which held that a RICO action could be instituted in a state court and that the state's comprehensive scheme for the rehabilitation and liquidation of insolvent state-chartered savings and loan associations provided a proper basis for the federal court to abstain. The Supreme Court held that state courts had concurrent jurisdiction over civil actions brought under RICO. The state courts retained their presumptive authority to adjudicate civil RICO claims because there was no divestiture of jurisdiction to hear such claims by explicit statutory directive, by unmistakable implication from legislative history, or by a clear incompatibility between state court jurisdiction and federal interests. Thus, the Court affirmed the judgment that held that state courts had concurrent jurisdiction to consider civil claims arising under RICO where nothing in the language, structure, legislative history, or underlying policies of RICO suggested that Congress intended otherwise.