__ U.S. __ (2016), 15-138, RJR Nabisco, Inc. v. The European Community

Docket Nº:15-138
Citation:__ U.S. __, 136 S.Ct. 2090, 195 L.Ed.2d 476, 84 U.S.L.W. 4450, 26 Fla.L.Weekly Fed. S 263
Opinion Judge:Alito, Justice.
Party Name:RJR Nabisco, Inc., et al., Petitioners. v. The European Community, et al
Attorney:Gregory G. Katsas argued the cause for petitioner. Ms. Elaine J. Goldenberg argued the cause for the United States, as amicus curiae, by special leave of court, supporting vacatur. David C. Frederick argued the cause for respondent.
Judge Panel:Alito, J., delivered the opinion of the Court, in which Roberts, C. J., and Kennedy and Thomas, JJ., joined, and in which Ginsburg, Breyer, and Kagan, JJ., joined as to Parts I, II, and III. Ginsburg, J., filed an opinion concurring in part, dissenting in part, and dissenting from the judgment, i...
Case Date:June 20, 2016
Court:United States Supreme Court
SUMMARY

The Racketeer Influenced and Corrupt Organizations Act (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... (see full summary)

 
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Page __

__ U.S. __ (2016)

136 S.Ct. 2090, 195 L.Ed.2d 476, 84 U.S.L.W. 4450, 26 Fla.L.Weekly Fed. S 263

RJR Nabisco, Inc., et al., Petitioners.

v.

The European Community, et al

No. 15-138

United States Supreme Court

June 20, 2016

[136 S.Ct. 2092] Argued March 21, 2016.

DECISION BELOW: 764 F.3d 129

LOWER COURT CASE NUMBER: 11-2475-cv

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

764 F.3d 129, reversed and remanded.

SYLLABUS

[136 S.Ct. 2093] [195 L.Ed.2d 484] 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 [195 L.Ed.2d 485] 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.

Held :

1. The law of extraterritoriality provides guidance in determining RICO's reach to events outside the United States. The Court applies a canon of statutory construction known as the presumption against extraterritoriality: Absent clearly expressed congressional intent to the contrary, federal laws will be construed to have only domestic application. Morrison v. Nat'l Austl. Bank Ltd., 561 U.S. 247, 255, 130 S.Ct. 2869, 177 L.Ed.2d 535. Morrison and Kiobel v. Royal Dutch Petroleum Co., 133 S.Ct. 1659, 185 L.Ed.2d 671, reflect a two-step framework for analyzing extraterritoriality issues. First, the Court asks whether the presumption against extraterritoriality has been rebutted-- i.e., whether the statute [136 S.Ct. 2094] gives a clear, affirmative indication that it applies extraterritorially. This question is asked regardless of whether the particular statute regulates conduct, affords relief, or merely confers jurisdiction. If, and only if, the statute is not found extraterritorial at step one, the Court moves to step two, where it examines the statute's " focus" to determine whether the case involves a domestic application of the statute. 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 relevant conduct occurred in a foreign country, then the case involves an impermissible extraterritorial application regardless of whether other conduct occurred in U.S. territory. In the event the statute is found to have clear extraterritorial effect at step one, then the statute's scope turns on the limits Congress has or has not imposed on the statute's foreign application, and not on the statute's " focus." Pp. 7-10.

2. The presumption against extraterritoriality has been rebutted with respect to certain applications of RICO's substantive prohibitions in § 1962. Pp. 10-18.

(a) RICO defines racketeering activity to include a number of predicates [195 L.Ed.2d 486] that plainly apply to at least some foreign conduct, such as the prohibition against engaging in monetary transactions in criminally derived property, § 1957(d)(2), the prohibitions against the assassination of Government officials, § § 351(i), 1751(k), and the prohibition against hostage taking, § 1203(b). Congress has thus given a clear, affirmative indication that § 1962 applies to foreign racketeering activity--but only to the extent that the predicates alleged in a particular case themselves apply extraterritorially. This fact is determinative as to § § 1962(b) and (c), which both prohibit the employment of a pattern of racketeering. But § 1962(a), which targets certain uses of income derived from a pattern of racketeering, arguably extends only to domestic uses of that income. Because the parties have not focused on this issue, and because its resolution does not affect this case, it is assumed that respondents have pleaded a domestic investment of racketeering income in violation of § 1962(a). It is also assumed that the extraterritoriality of a violation of RICO's conspiracy provision, § 1962(d), tracks that of the RICO provision underlying the alleged conspiracy. Pp. 10-14.

(b) RJR contends that RICO's " focus" is its enterprise element, which gives no clear indication of extraterritorial effect. But focus is considered only when it is necessary to proceed to the inquiry's second step. See Morrison, supra, at 267, n. 9, 130 S.Ct. 2869, 177 L.Ed.2d 535. Here, however, there is a clear indication at step one that at least § § 1962(b) and (c) apply to all transnational patterns of racketeering, subject to the stated limitation. A domestic enterprise requirement would lead to difficult line-drawing problems and counterintuitive results, such as excluding from RICO's reach foreign enterprises that operate within the United States. Such troubling consequences reinforce the conclusion that Congress intended the § § 1962(b) and (c) prohibitions to apply extraterritorially in tandem with the underlying predicates, without regard to the locus of the enterprise. Of course, foreign enterprises will qualify only if they engage in, or significantly affect, commerce directly involving the United States. Pp. 14-17.

(c) Applying these principles here, respondents' allegations that RJR violated § § 1962(b) and (c) do not involve an impermissibly extraterritorial application of RICO. The Court assumes that the alleged pattern of racketeering activity consists entirely of predicate offenses that were [136 S.Ct. 2095] either committed in the United States or committed in a foreign country in violation of a predicate statute that applies extraterritorially. The alleged enterprise also has a sufficient tie to U.S. commerce, as its members include U.S. companies and its activities depend on sales of RJR's cigarettes conducted through " the U.S. mails and wires," among other things. Pp. 17-18.

3. Irrespective of any extraterritoriality of § 1962's substantive provisions, § 1964(c)'s private right of action does not overcome the presumption against extraterritoriality, and thus a private RICO plaintiff must allege and prove a domestic injury. Pp. 18-27.

(a) The Second Circuit reasoned [195 L.Ed.2d 487] that the presumption against extraterritoriality did not apply to § 1964(c) independently of its application to § 1962's substantive provisions because § 1964(c) does not regulate conduct. But this view was rejected in Kiobel, 569 U.S., at ___, 133 S.Ct. 1659, 185 L.Ed.2d 671, and the logic of that decision requires that the presumption be applied separately to RICO's cause of action even though it has been overcome with respect to RICO's substantive prohibitions. As in other contexts, allowing recovery for foreign injuries in a civil RICO action creates a danger of international friction that militates against recognizing foreign-injury claims without clear direction from Congress. Respondents, in arguing that such concerns are inapplicable here...

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