Get ready, folks, for a new wave of cases under the Racketeer-Influenced and Corrupt Organizations Act of 1970 — RICO, for short. The Second Circuit ruled this week that a case by the European Community and EC member states may proceed with a RICO case against RJR Nabisco for money laundering and worse. European Community v. RJR Nabisco, Inc., No. 11-2475-cv (2d Cir. Apr. 23, 2014). Plaintiffs may now deploy RICO to reach conduct that occurs outside of the United States but that other laws cannot reach.
Morrison Presents No Barrier
The panel's decision reversed the district court's dismissal. The dismissal relied on the Supreme Court's sharp limitation of cases that attempt to apply federal law to conduct overseas. In Morrison v. Nat'l Australian Bank Ltd., 130 S. Ct. 2869 (2010), the Court upheld this ruling by the Second Circuit:
Something about a class of overseas people suing an Australian bank about securities fraud that emanated from the world's smallest continent. They lost on subject matter grounds. Seems the U.S. Securities Exchange Act doesn't reach so far.
See Morrison, 130 S. Ct. at ("When a statute gives no clear indication of an extraterritorial application, it has none.") (post here).
Some Predicate Act Statutes Say They Apply Overseas
The panel's reversal hinged on the fact that RICO deems violations of certain criminal statutes "predicate acts" and the fact that some of the predicate act statutes expressly allow extraterritorial application. The money laundering statute, for example, states that "[t]here is extraterritorial jurisdiction over the conduct prohibited by this section." 18 U.S.C. 1956(f). Because the EC plaintiffs alleged violations of that and other predicate act statutes that by their terms reach beyond our national borders, the largely European nature of the unlawful "enterprise" that engaged in the "pattern of racketeering activity" didn't matter. The panel held:
The claims of the Complaint asserting RICO liability for a pattern of violations of these predicates meet the statutory requirements for extraterritorial application of RICO. The district court erred in dismissing, as impermissibly extraterritorial, the RICO claims.
European Community, slip op. at 19 (foonote omitted).
Victims of foreign conduct that violates any of the dozens of statutes that RICO section 1961 defines as predicate act offenses will want to see whether the relevant statutes call for extraterritorial application. If they do, those victims will further want to look into whether the conduct overseas also satisfies the "enterprise", "pattern", and other requirements of RICO. That the victims suffered harm outside the United States may not matter under RICO. And for that reason RICO may have a rebirth of sorts.