Today the Supreme Court heard oral argument in RJR Nabisco v. European Community, a RICO case involving foreign (extraterritorial) racketeering activity and a foreign enterprise. The Second Circuit decided the case could proceed and was not extraterritorial. The Petitioner, RJR Nabisco Co., has asked the Court to rule that extraterritoriality should be decided by the location of the enterprise. Since the enterprise in this case was foreign, then the analysis would end, and the case should be dismissed. But no justice agreed with that view.
All the justices who asked questions (primarily Kagan, Breyer, Ginsburg, Roberts and Kennedy) were of the view that the place of the racketeering activity was crucial to the extraterritoriality analysis. They focused on predicate acts added to RICO after 9/11 which specifically make certain terrorism-related crimes RICO predicate offenses even if committed abroad (and that was the intent, to cover foreign crimes aimed at the U.S.). Justice Ginsburg asked the corporation’s lawyer if he thought Congress would have wanted foreign terrorists who cut the heads off 100 Americans to get a pass under RICO. He said yes, because they could be prosecuted under other crimes. The justices clearly disagreed.
Justice Breyer was concerned about the effect such RICO cases might have on international relations. Would foreign nations object to their citizens being the subject to RICO suits in U.S. courts? But the lawyer for the Department of Justice (DOJ) told the Court there was no “comity” problem. Justice Breyer remained skeptical and asked the lawyer for the plaintiffs, the European Community, to explain how his clients (several European countries) saw no comity problem in this case but have objected to the application of U.S. law in other cases. Again, the lawyer told the Court there was no inconsistency because the European countries are the plaintiffs here. They want to use RICO and use it in U.S. courts.
The other very troublesome aspect of the case is whether foreign plaintiffs can sue for RICO violations which were committed in the U.S. but cause them injuries in their native countries. This is alleged in this case with regard to mail and wire fraud schemes supposedly hatched in the U.S. by defendant RJR Nabisco which damaged the European countries in lost tax revenues. The justices did not ask questions about this aspect of the case.
However, Justice Kagan was very dismissive of the idea that the Department of Justice could sue under RICO in such a situation but that private parties could not do so, i.e., that there should be a double standard for civil and criminal cases. No justice agreed with that proposition, advocated by the DOJ.
My take is that the Court will affirm the Second Circuit at least as to the allegations involving the post-9/11 predicate acts which expressly authorize extraterritorial application. The location of the enterprise will be not be a decisive factor in the analysis. Whether the mail and wire fraud predicate acts, which occurred in the U.S. will be allowed to be used is unclear.