Antitrust Law Daily Wrap Up, RICO—S.D. Tex.: RICO Claim dismissed because statute did not apply extraterritorially, (Aug 26, 2013)

By Peter Reap, J.D., LL.M.

The RICO claim brought by Plaintiff Buddi Prasad Gurung and the surviving family members of twelve other men (collectively, the “Deceased Plaintiffs”) against Kellogg Brown and Root, Inc. and several of its affiliated entities (collectively “KBR”) and against Daoud & Partners, impermissibly sought to apply RICO extraterritorially, the federal district court in Houston, decided (Adhikari v. Daoud & Partners, August 21, 2013, Ellison, K.). Thus, judgment on the RICO claim was granted for both KBR and Daoud.

Background. The complaint alleged that, in an effort to fulfill their contractual obligations, Defendants Daoud and KBR “willfully and purposefully formed an enterprise with the goal of procuring cheap labor and increasing profits,” and thereby engaged in human trafficking.

The complaint alleged that the Deceased Plaintiffs, whose ages ranged from 18 to 27, were recruited from their places of residence in August 2004 by Moonlight Consultant Pvt. Ltd., a recruiting company based in Nepal. All of the men were led to believe that they would not be placed in a dangerous location, and that, if they found themselves in a dangerous area, they would be sent home at the employer’s expense. They were promised a salary of approximately $500 per month and the men and their families incurred substantial debt to pay the brokerage fees in seeking out this employment, the Complaint alleged.

After they were recruited, the Deceased Plaintiffs were then transferred to the custody of Morning Star for Recruitment and Manpower Supply (“Morning Star”), a Jordanian job brokerage company that operates in Amman. Morning Star housed the Deceased Plaintiffs upon their arrival in Jordan and arranged for their transfer to Iraq. Morning Star then transferred the Deceased Plaintiffs to Daoud. The men were held in Jordan by agents of Daoud, and were required to turn over their passports to Daoud. It was there that the Deceased Plaintiffs first discovered that they were actually being sent to work at Al Asad, a dangerous area in the Iraqi war zone, north of Ramadi, Iraq.

Daoud allegedly transported the Deceased Plaintiffs into Iraq on or about August 19, 2004, via an unprotected automobile caravan of seventeen vehicles. As they were nearing Al Asad, the two lead cars in which the Deceased Plaintiffs were being transported were stopped by a group of men who later revealed themselves to be members of the Ansar al-Sunna Army, an insurgent group in Iraq.

Between August 20 and August 24, the Ansar al-Sunna Army posted an Internet statement that it had captured the Deceased Plaintiffs, posted pictures of the Deceased Plaintiffs, and sent a video of ten of the Deceased Plaintiffs to the Foreign Ministry of Nepal. On or about August 31, 2004, international media outlets broadcasted video of the Ansar al-Sunna Army executing the Deceased Plaintiffs. The group beheaded one of the men, and shot the other eleven men, one by one, in the back of their heads. The families of Deceased Victims saw the execution video, which caused them great emotional distress.

Like the Deceased Plaintiffs, Plaintiff Gurung was recruited from his residence in Nepal. Upon learning about the death of the Deceased Plaintiffs, Gurung became frightened and expressed his desire to return to Nepal. He was told by both Daoud and KBR that he could not leave until his work in Iraq was complete. After 15 months, during which he experienced frequent mortar fire without protection, Gurung was permitted to return to Nepal.

The Plaintiffs brought claims for relief against the Defendants under the Trafficking Victims Protection Reauthorization Act, the Racketeering Influenced and Corrupt Organizations Act (“RICO”), as well as conspiracy to violate the same; the Alien Tort Statute and also asserted various common law claims.

RICO. In a 2009 Order, the court held that Plaintiffs’ RICO claims could proceed against KBR. Following the Supreme Court’s decision in Morrison v. National Autralia Bank Ltd., 130 S. Ct. 2869, 2010, this court again held that, even under Morrison, RICO was clearly intended by Congress to have an extraterritorial reach when the predicate acts are themselves extraterritorially indictable. The court now revisited its previous holdings in light of the recent Supreme Court ruling in Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659, 2013.

Although this Court was not bound by the holdings of courts in other circuits, they were informative. It appeared that post-Morrison courts have uniformly held that RICO did not apply extraterritorially, the court observed.

Kiobel reiterated Morrison, “[w]hen a statute gives no clear indication of an extraterritorial application, it has none.” Morrison, 130 S.Ct. at 2878. With such a clear holding from the Supreme Court, this court could not read the language of RICO to overcome the presumption against extraterritoriality, the court reasoned.

No language within RICO clearly indicated that Congress intended the statute to be applied extraterritorially, the court noted. The Plaintiffs argued that the Military Extraterritorial Jurisdiction Act (“MEJA”) was another basis for overcoming the presumption. However, MEJA did not establish extraterritorial jurisdiction for any underlying RICO predicate.

As stated in the 2009 Order, this court was not willing to rest on the “murky area of law” that is MEJA to overcome the presumption against extraterritoriality. Thus, the court reconsidered its previous holding in light of recent Supreme Court developments and determined that it was not clear that Congress intended RICO to apply extraterritorially. In line with other courts who have considered the issue, the court concluded that RICO did not apply extraterritorially.

In its previous Order, the court did not need to apply the second step of Morrison and address whether the Plaintiffs were actually seeking to apply RICO extraterritorially. Now that the court held that RICO did not apply extraterritorially, it turned to the second step of Morrison.

The Plaintiffs argued that their RICO claims “arguably require no extraterritorial application” because the alleged acts orbited a U.S. military facility. However, the court previously stated that, because “a significant portion of the events and conduct that make up the alleged RICO violation took place outside of the Al Asad base, we find that, regardless of the status of the base, it is necessary to perform an extraterritorial RICO analysis.”

The majority of the events and conduct that made up the alleged RICO violation took place outside of the base. In fact, the Deceased Plaintiffs never made it to the military base. Thus, the Plaintiffs’ RICO claim impermissibly sought to apply RICO extraterritorially and judgment on the RICO claim was granted for both KBR and Daoud.

The case is Civil Action No. 09-cv-1237.

Attorneys: Agnieszka M. Fryszman (Cohen Milstein) for Ramchandra Adhikari. David B Rivkin, Jr. (Baker and Hostetler) for KBR, Inc.

Companies: KBR, Inc.

Cases: RICO TexasNews