RJR Nabisco, Inc. v. European Cmty.

• Citation: 195 L.Ed.2d 476,136 S.Ct. 2090
• Decision Date: 20 June 2016
• Docket Number: No. 15–138.,15–138.
• Parties: RJR NABISCO, INC., et al., Petitioners v. EUROPEAN COMMUNITY, et al.
• Court: United States Supreme Court

136 S.Ct. 2090

195 L.Ed.2d 476

RJR NABISCO, INC., et al., Petitioners

v.EUROPEAN COMMUNITY, et al.

No. 15–138.

Supreme Court of the United States

Argued March 21, 2016.

Decided June 20, 2016.

Gregory G. Katsas, Washington, DC, for petitioners.

Elaine J. Goldenbergfor the United States as amicus curiae, by special leave of the Court, supporting vacatur.

David C. Frederick, Washington, DC, for the respondents.

Mark R. Seiden, Jones Day, New York, NY, Gregory G. Katsas, Hashim M. Mooppan, Yaakov M. Roth, Anthony J. Dick, Emily J. Kennedy, Jones Day, Washington, DC, for petitioners.

John J. Halloran, Jr., John J. Halloran, Jr., P.C., White Plains, NY, Kevin A. Malone, Carlos A. Acevedo, Krupnick Campbell Malone Buser Slama Hancock Liberman P.A., Fort Lauderdale, FL, David C. Frederick, Geoffrey M. Klineberg, Matthew A. Seligman, Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C., Washington, DC, John K. Weston, Sacks Weston Diamond, Philadelphia, PA, for respondents.

Justice ALITOdelivered the opinion of the Court.

The Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961–1968, created four new criminal offenses involving the activities of organized criminal groups in relation to an enterprise. §§ 1962(a)-(d). RICO also created a new civil cause of action for "[a]ny person injured in his business or property by reason of a violation" of those prohibitions. § 1964(c). We are asked to decide whether RICO applies extraterritorially—that is, to events occurring and injuries suffered outside the United States.

I

A

RICO is founded on the concept of racketeering activity. The statute defines "racketeering activity" to encompass dozens of state and federal offenses, known in RICO parlance as predicates. These predicates include any act "indictable" under specified federal statutes, §§ 1961(1)(B)-(C), (E)-(G), as well as certain crimes "chargeable" under state law, § 1961(1)(A), and any offense involving bankruptcy or securities fraud or drug-related activity that is "punishable" under federal law, § 1961(1)(D). A predicate offense implicates RICO when it is part of a "pattern of racketeering activity"—a series of related predicates that together demonstrate the existence or threat of continued criminal activity. H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 239, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989); see § 1961(5)(specifying that a "pattern of racketeering activity" requires at least two predicates committed within 10 years of each other).

RICO's § 1962sets forth four specific prohibitions aimed at different ways in which a pattern of racketeering activity may be used to infiltrate, control, or operate "a[n] enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce." These prohibitions can be summarized as follows. Section 1962(a)makes it unlawful to invest income derived from a pattern of racketeering activity in an enterprise. Section 1962(b)makes it unlawful to acquire or maintain an interest in an enterprise through a pattern of racketeering activity. Section 1962(c)makes it unlawful for a person employed by or associated with an enterprise to conduct the enterprise's affairs through a pattern of racketeering activity. Finally, § 1962(d)makes it unlawful to conspire to violate any of the other three prohibitions.¹

Violations of § 1962are subject to criminal penalties, § 1963(a), and civil proceedings to enforce those prohibitions may be brought by the Attorney General, §§ 1964(a)-(b). Separately, RICO creates a private civil cause of action that allows "[a]ny person injured in his business or property by reason of a violation of section 1962" to sue in federal district court and recover treble damages, costs, and attorney's fees. § 1964(c).²

B

This case arises from allegations that petitioners—RJR Nabisco and numerous related entities (collectively RJR)—participated in a global money-laundering scheme in association with various organized crime groups. Respondents—the European Community and 26 of its member states—first sued RJR in the Eastern District of New York in 2000, alleging that RJR had violated RICO. Over the past 16 years, the resulting litigation (spread over at least three separate actions, with this case the lone survivor) has seen multiple complaints and multiple trips up and down the federal court system. See 2011 WL 843957, *1–*2 (E.D.N.Y., Mar. 8, 2011)(tracing the procedural history through the District Court's dismissal of the present complaint). In the interest of brevity, we confine our discussion to the operative complaint and its journey to this Court.

Greatly simplified, the complaint alleges a scheme in which Colombian and Russian drug traffickers smuggled narcotics into Europe and sold the drugs for euros that—through a series of transactions involving black-market money brokers, cigarette importers, and wholesalers—were used to pay for large shipments of RJR cigarettes into Europe. In other variations of this scheme, RJR allegedly dealt directly with drug traffickers and money launderers in South America and sold cigarettes to Iraq in violation of international sanctions. RJR is also said to have acquired Brown & Williamson Tobacco Corporation for the purpose of expanding these illegal activities.

The complaint alleges that RJR engaged in a pattern of racketeering activity consisting of numerous acts of money laundering, material support to foreign terrorist organizations, mail fraud, wire fraud, and violations of the Travel Act. RJR, in concert with the other participants in the scheme, allegedly formed an association in fact that was engaged in interstate and foreign commerce, and therefore constituted a RICO enterprise that the complaint dubs the "RJR Money–Laundering Enterprise." App. to Pet. for Cert. 238a, Complaint ¶ 158; see § 1961(4)(defining an enterprise to include "any union or group of individuals associated in fact although not a legal entity").

Putting these pieces together, the complaint alleges that RJR violated each of RICO's prohibitions. RJR allegedly used income derived from the pattern of racketeering to invest in, acquire an interest in, and operate the RJR Money–Laundering Enterprise in violation of § 1962(a); acquired and maintained control of the enterprise through the pattern of racketeering in violation of § 1962(b); operated the enterprise through the pattern of racketeering in violation of § 1962(c); and conspired with other participants in the scheme in violation of § 1962(d).³ These violations allegedly harmed respondents in various ways, including through competitive harm to their state-owned cigarette businesses, lost tax revenue from black-market cigarette sales, harm to European financial institutions, currency instability, and increased law enforcement costs.⁴

RJR moved to dismiss the complaint, arguing that RICO does not apply to racketeering activity occurring outside U.S. territory or to foreign enterprises. The District Court agreed and dismissed the RICO claims as impermissibly extraterritorial. 2011 WL 843957, at *7.

The Second Circuit reinstated the RICO claims. It concluded that, "with respect to a number of offenses that constitute predicates for RICO liability and are alleged in this case, Congress has clearly manifested an intent that they apply extraterritorially." 764 F.3d 129, 133 (2014). "By incorporating these statutes into RICO as predicate racketeering acts," the court reasoned, "Congress has clearly communicated its intention that RICO apply to extraterritorial conduct to the extent that extraterritorial violations of these statutes serve as the basis for RICO liability." Id., at 137. Turning to the predicates alleged in the complaint, the Second Circuit found that they passed muster. The court concluded that the money laundering and material support of terrorism statutes expressly apply extraterritorially in the circumstances alleged in the complaint. Id., at 139–140. The court held that the mail fraud, wire fraud, and Travel Act statutes do not apply extraterritorially. Id., at 141. But it concluded that the complaint states domestic violations of those predicates because it "allege[s] conduct in the United States that satisfies every essential element" of those offenses. Id., at 142.

RJR sought rehearing, arguing (among other things) that RICO's civil cause of action requires a plaintiff to allege a domestic injury, even if a domestic pattern of racketeering or a domestic enterprise is not necessary to make out a violation of RICO's substantive prohibitions. The panel denied rehearing and issued a supplemental opinion holding that RICO does not require a domestic injury. 764 F.3d 149 (C.A.2 2014)(per curiam ). If a foreign injury was caused by the violation of a predicate statute that applies extraterritorially, the court concluded, then the plaintiff may seek recovery for that injury under RICO. Id., at 151. The Second Circuit later denied rehearing en banc, with five judges dissenting. 783 F.3d 123 (2015).

The lower courts have come to different conclusions regarding RICO's extraterritorial application. Compare 764 F.3d 129(case below) (holding that RICO may apply extraterritorially) with United States v. Chao Fan Xu, 706 F.3d 965, 974–975 (C.A.9 2013)(holding that RICO does not apply extraterritorially; collecting cases). Because of this conflict and the importance of the issue, we granted certiorari. 576 U.S. ––––, 136 S.Ct. 28, 192 L.Ed.2d 998 (2015).

II

The question of RICO's extraterritorial application really involves two questions. First, do RICO's substantive prohibitions, contained in § 1962, apply to conduct that occurs in foreign countries? Second, does RICO's private right of action, contained in § 1964(c), apply to injuries that are suffered in foreign countries? We consider each of these questions in turn. To guide our inquiry, we begin by reviewing the law of extraterritoriality.

It is a basic premise of our legal system that, in general, "United...