As I’ve written over the last several months, the big issue in RICO is whether it applies to cases having some foreign (“extraterritorial”) element. The law itself is silent on this. According to the Supreme Court’s seminal 2010 decision in Morrison, when a law says nothing about extraterritorial application, it has none. So that should end the matter, right? Law is rarely so simple. Many RICO cases have been dismissed because the plaintiff alleged a foreign-based enterprise and a pattern of racketeering activity that occurred abroad. The plaintiff might have been a domestic firm, but every other relevant part of the case occurred abroad. Those cases are properly deemed beyond the purview of federal courts.
But in European Community v. R.J.R. Nabisco the racketeering activity occurred in the U.S. (mail and wire fraud). The recipients of the mails and wire communications might have been in Europe (the European community alleges the tobacco company was conspiring with smugglers to import its cigarettes without paying taxes), but they originated here. That makes the transmissions domestic under established Supreme Court precedent. So the case has enough domestic nexus to arguably be heard in federal courts. Or so the Second Circuit ruled with several dissenting opinions.
RJR Nabisco’s Supreme Court brief argues that extraterritoriality must be decided by the location of the enterprise. Since in this case it is based in Europe, where the smugglers are located (though it seems like some members of the octopus-like association-in-fact are in the U.S.), the case should not be heard in federal court. This test serves the company’s interests nicely. If adopted by the Supreme Court, it would get rid of the case and rein in RICO to some extent.
But as the Department of Justice (DOJ) points out in its amicus brief, Congress added several predicate acts to RICO after 9/11 that expressly apply to conduct committed abroad, such as funding international terrorism. If foreign terrorists are plotting from a foreign country to commit crimes here through a foreign enterprise why should they be exempt from RICO? It would seem Congress wanted them to be covered by the law. DOJ rejects the argument that they can be indicted under those criminal statutes without resort to RICO. That’s true, but the Supreme Court cannot decide which laws to enforce or constrict. That’s up to Congress.
The DOJ test would allow RICO to be enforced against foreigners who operate through foreign enterprises as long as the particular predicate acts apply extraterritorially. While the mail and wire fraud statutes do not, it conceded as did the Second Circuit, that if the mail and wire frauds are commenced in the U.S., then those acts are covered and are not extraterritorial.
However, in civil RICO suits, the DOJ advocates a “domestic injury” requirement. It believes sec. 1964(c), RICO’s private damage remedy, suggests this. Yet, the text of that section says nothing of that nature. DOJ believes allowing private law suits against foreign defendants to redress foreign injuries might make mischief with U.S. foreign policy, i.e., antagonize foreign governments. This might be true, but the “domestic injury” requirement is probably a bridge too far for textualist justices. Justice Scalia in particular, wrote the Morrison decision, and has written for decades about the need to limit all statutes to domestic application. He relies upon a canon of statutory construction which has existed from beginning of the republic. The canon stems from the belief that a sovereign nation cannot usually extend the reach of its courts beyond its borders. He might be persuaded that the few post-9/11 crimes which expressly apply abroad can stand, but I doubt he will be sympathetic to the argument that the mail and wire fraud statutes could ever apply to an injury felt abroad for the more fundamental reason that Congress did not envision they would. He doesn’t need any new “domestic injury” requirement, which is not in the text or the canon, to get there.
Pragmatic Justices like Breyer and Kennedy might favor the approach suggested by DOJ. In the end, I predict RICO will have some extraterritorial reach. The Plaintiff, European Community, which filed this case 15 years ago only to have it reach the Supreme Court twice, will submit its brief in two weeks. I’ll summarize it next month.