In Hourani v. Mirtchev we appealed the dismissal of a RICO conspiracy case in which one conspirator was a U.S. citizen who conspired with a foreigner to extort the Hourani’s businesses in Kazakhstan. Defendant Mirtchev was alleged to have entered into a scheme to harm the Houranis from his Washington, D.C. office with the daughter of the President of Kazakhstan through in a series of phone calls. She then met with the Hourani brothers, then living there, and demanded they turn over ownership in their large media and oil companies to her. They did so, fearing for their lives as opponents of her father’s regime, and then fled the country. Mirtcehv’s role was revealed to the Houranis a few years later, along with the fact he laundered millions of dollars wired from his co-conspirator in his U.S. bank accounts, some of the proceeds of the seized companies.
Admittedly, one can see much of this conduct occurred in Kazakhstan. But Mirtchev is a U.S. citizen and did his part in the conspiracy from his U.S. office. Is the case “extraterritorial?” The D.C. Circuit has decided our appeal and held it is. The key factor in its analysis is the actual act of extortion, the President’s daughter’s demand to turn over the Hourani’s stock, occurred in that country. The Court held for Mirtchev to be sued under RICO as a co-conspirator, the Hobbs Act, the RICO predicate offense which prevents extortion, must apply to her conduct. It found no indication that the statute was meant to apply abroad. So without the Act applying to her, it cannot apply to a co-conspirator regardless of where he is located.
The logic here is notable in two respects. First, it does not focus on the extraterritoriality of RICO, just the Hobbs Act, the particular federal criminal statute at issue incorporated by reference as a RICO violation. Second, the opinion does not cite any Hobbs Act cases on the crucial question of its application to a conspiracy such as this, where one actor is here and one is abroad. Had it done so, it would have found that the Hobbs Act states that it applies to protect the free flow interstate or “foreign commerce” from interference caused by extortion. Is that reference enough to indicate an intent to apply the Act to a case like this? In its 2010 Morrison decision the Supreme Court said no. Laws do not apply extrateritorially unless they expressly so indicate and a passing reference to the word “foreign” is not enough. Congress had to really want an extraterritorial application. There are only a few such laws stating this, and the Hobbs Act is not one of them.
But Morrison also said courts were supposed to determine the “object of congressional solicitude” in deciding where to draw the line between domestic and foreign application of a law. It said the wire fraud statute was properly applied to a scheme to defraud the government of Canada out of tax revenue by smuggling cigarettes across the border from the U.S. This was so because because the scheme was hatched here and the defendant used U.S. wires to carry it out. The location of the victim did not matter. So what is the key facet of conduct, the object of solicitude, in the Hobbs Act? Is it the extortion/robbery, or the effect on commerce flowing into the U.S.? The many Supreme Court and appellate decisions interpreting the Act strongly suggest the free flow of commerce was the key objective. States already had anti-extortion laws when the Hobbs Act was passed. Congress wanted to use its broad power under the commerce clause to stop interference with the flow of goods moving across state lines. Applying that reasoning to this case, the Houranis have a good argument that moving millions of their seized dollars into Mirtchev’s U.S. bank accounts has some effect on commerce such as to invoke application of the Hobbs Act.
Certainly, the Second Circuit, which last year upheld the use of RICO in a case of mixed foreign and domestic conduct, would have focused on this question. The loser in that decision, R.J. Reynolds Tobacco Co., has asked the Supreme Court to review the decision. Given the Court’s interest in controlling both RICO and extraterritorial litigation, it might do so. But even without further clarification from the Court, it is clear enough that RICO litigation in which any part of the predicate acts occurs abroad faces an uphill battle.