The Supreme Court has agreed to hear R.J.R. Nabisco Co.’s appeal in its decade- long RICO suit brought by the European Community. The Community accuses the tobacco giant of smuggling its cigarettes into its member states and avoiding the payment of their cigarette taxes. It claims the smuggling scheme has been hatched in the U.S. and involves repeated uses of the U.S. mails and wires. Since these RICO violations occurred domestically, the Second Circuit ruled the case was not extraterritorial despite the fact the plaintiffs are foreign and their injuries are foreign. After issuing the decision to allow the case to proceed R.J.R. Reynolds asked the entire Second Circuit to reconsider. The Court fell just one vote short of doing so, and several of the judges wrote strong opinions indicating they thought the case was extraterritorial and should not be heard.

It’s not surprising that the Supreme Court would agree to hear this case. As I’ve written many times, extraterritoriality is the biggest issue in civil RICO right now. Nothing else come even close to the difficulty of figuring out what cases can and cannot be heard by U.S. courts. The problem stems from the fact that the bar on extraterritorial cases was issued just five years ago in a securities fraud suit and offered no guidance for how that bar should be applied to other laws. All federal judges are struggling with it.

The Supreme Court will, of course, be inclined to limit RICO. The justices did not want securities fraud cases involving securities traded on foreign exchanges to be brought in American courts. They will not want RICO cases brought by foreign plaintiffs heard in American courts either. But what if the foreign plaintiff was harmed by RICO violations which occurred in the U.S. by a U.S. company? It theory, it makes sense for such a case to be heard in this country. A rule that no RICO case can be brought against a U.S. defendant which has any foreign aspect at all seems too restrictive. As Judge Pierre Leval noted in the Second Circuit opinion, some of the predicate crimes that Congress added to RICO can only be committed abroad, like foreign terrorist acts and assassinations of U.S. officials while abroad. Obviously, Congress intended the law to apply to some foreign conduct. Once that principle is conceded, then the idea that RICO can apply when a foreign plaintiff is harmed by schemes carried out in the U.S. becomes sensible.

As I’ve also written, Hourani v. Mirtchev was held to be extraterritorial by the D.C. Circuit in August. We might ask the Supreme Court to review that decision as its extraterritoriality analysis was very restrictive and may need to be vacated by whatever the result in R.J.R. Nabisco.