Antitrust Law Daily Wrap Up, RICO—2d Cir.: Rehearing of RICO application to extraterritorial predicate acts denied, (Apr 13, 2015)

By Jody Coultas, J.D.

Judges from the U.S. Court of Appeals in New York City issued conflicting opinions after the court rejected en banc review of its August 30, 2014 decision in a Racketeer Influenced and Corrupt Organizations (RICO) case filed by the 26 member states of the European Community against tobacco company RJR Nabisco, Inc. The court previously held that RICO did not require the European Community to allege a domestic injury and denied RJR’s petition for a panel rehearing (European Community v. RJR Nabisco, Inc., April 13, 2015).

The European Community, consisting of 26 member states, filed a RICO suit against RJR Nabisco, Inc. and other affiliated tobacco companies (collectively, RJR). The court held that RICO applies to foreign conduct when liability is based on “racketeering acts” consisting of violations of predicate statutes that Congress expressly made applicable to foreign conduct. The European Community was not required to plead that their injuries actually occurred in the United States, and RJR’s petition for panel rehearing was denied.

An active judge of the court requested a poll on whether to rehear the case en banc. A poll was conducted and there was not a majority favoring en banc review. Therefore rehearing en banc was denied.

Concurrence. Circuit Judge Peter W. Hall concurred with the opinion in the denial of rehearing en banc. Judge Hall noted that The Patriot Act amended RICO by adding to its list of predicates nearly 20 antiterrorism statutes that expressly apply to foreign conduct. Congress’ incorporating the statutes into RICO showed its intention that RICO apply to extraterritorial conduct to the extent that extraterritorial violations of those statutes serve as the basis for RICO liability. Morrison v. Nat’l Australia Bank, Ltd., 561 U.S. 247 (2010) states a presumption against construing United States statutes as applying extraterritorially but that the presumption is overcome when the statute clearly manifests a congressional intent that it apply extraterritorially. Judge Hall notes that, in this case, Congress explicitly provided for extraterritorial application of RICO by incorporating statutes that apply extraterritorially into RICO as predicates.

Dissent. Dissenting circuit judges argued that the previous decision in this case conflicted with Norex Petroleum Ltd. v. Access Industries, Inc., 631 F.3d 29 (2d Cir. 2010), in which the court addressed the application of RICO to extraterritorial actions. In Norex, the court stated that “RICO is silent as to any extraterritorial application” and, therefore, “it has none.” The panel found that Norex did not hold that RICO could never have extraterritorial application. The dissent disagreed with this position and felt a review was required to reconcile this case with Norex. The dissent also felt the opinion conflicted with the Supreme Court’s holding in Morrison, which mandates a presumption against the extraterritorial application of United States statutes unless Congress clearly expresses an affirmative intent to have a statute reach abroad.

The dissenting judges argued that the court needed to clarify whether RICO applies extraterritorially, and the criteria for determining whether a RICO claim is domestic or extraterritorial. While Congress intended for certain RICO predicate statutes to apply to actions or events abroad, there was no clear basis for concluding that Congress intended for RICO itself to go along with them, the dissenters wrote. The panel’s opinion may allow an end-run around the revivified presumption against extraterritoriality, according to the dissent.

Circuit Judge Gerard E. Lynch found the better outcome would be to adopt the view of the panel in this case and hold that RICO applies to patterns of predicate acts committed abroad where those predicate acts violate federal statutes with express extraterritorial reach. Judge Lynch felt an en banc review was necessary and that this case was in conflict with Norex. However, Judge Lynch believed that any interpretation suggesting that operatives of a foreign enterprise cannot be held accountable under RICO would conflict with Congressional intent.

The case number is 11-2475-cv.

Attorneys: John J. Halloran, Jr. (John J. Halloran, Jr., P.C.), Kevin A. Malone, and Carlos A. Acevedo (Krupnick Campbell Malone Buser Slama Hancock Liberman & McKee, P.A.) for European Community. Gregory G. Katsas, David M. Cooper, and Mark R. Seiden (Jones Day) for RJR Nabisco, Inc.

Companies: RJR Nabisco, Inc.

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