The gold standard of excellence for more than 80 years, Bloomberg BNA’s The United States Law Week® is the most authoritative way to keep up with important cases and other legal developments...
March 21 — The international reach of the Racketeer Influenced and Corrupt Organizations Act, and its potential ramifications for international comity, were the focus of oral argument at the U.S. Supreme Court March 21.
Justice Stephen G. Breyer in particular seemed frustrated at apparently inconsistent positions the U.S. and several European Union governments took here and in other cases on how far U.S. law reaches.
He noted that in a case concerning the Alien Tort Statute, several EU countries had urged the court to narrow the reach of U.S. law and the U.S. had disagreed. Here, both parties seemed to be reversing positions.
“Is this the right hand not knowing what the left hand is doing?” Breyer asked.
“I have no idea what the right result is here in one important aspect unless I know what afterthought and consideration you, the State Department, and those other countries and their ambassadors, et cetera, actually think,” he told Assistant to the Solicitor General Elaine Goldenberg, arguing for the government.
But the case could turn on a more fundamental issue upon which the two parties completely disagreed: whether the EU's claims were domestic or foreign.
“The European Union and 26 of its member states brought this case in the United States against a United States corporation for the actions it committed in the United States and from the United States,” David C. Frederick of Kellogg Huber Hansen Todd Evans & Figel PLLC, Washington, said.
Frederick represented the EU and its participating member states.
But according to Gregory G. Katsas of Jones Day, Washington, arguing for RJR Nabisco Inc., the Second Circuit below “extended civil RICO to claims involving foreign injuries, foreign enterprises and foreign patterns of racketeering.”
Arguments took place before a depleted bench after Justice Antonin Scalia's death and Justice Sonia Sotomayor recused herself—but were no less lively than usual.
The European Union sued RJR in U.S. court under RICO, alleging that the company directed a money laundering scheme involving the proceeds from illegal narcotics smuggled into Europe.
It said that RJR's activities supported terrorism, and sued to recover for lost tax revenues and increased law enforcement budgets.
The district court dismissed the EU's mail fraud, wire fraud, money laundering and Travel Act claims, saying that the alleged conduct was located and directed outside the U.S., and therefore beyond the reach of RICO.
The Second Circuit reversed, holding that RICO has extraterritorial reach if “liability or guilt could attach to extraterritorial conduct” under a relevant predicate statute incorporated by reference in RICO.
There are some 200 such predicate statutes, Katsas said. Of those, 46—mostly terrorism related—specifically contemplate extraterritorial application.
Katsas tried to differentiate the extraterritorially applicable criminal prohibitions, contained in Section 1962 of RICO, from the private right of action, contained in Section 1964(c).
Doing so was “a straightforward application of this court's decision in” Morrison v. Nat'l Australia Bank Ltd., 561 U.S. 247, 2010 BL 142333 (2010), “which said you identify the focus of the provision before you and limit it to domestic application unless Congress says otherwise,” he said.
Justice Elena Kagan didn't seem convinced. “I would have thought that the question is whether these are discrete provisions,” such that “a conclusion as to the extraterritoriality of one doesn't tell you anything about the extraterritoriality of the other.”
Breyer also seemed to have a hard time accepting that. He pointed out that one of the acts incorporated in RICO was violence against a person at an international airport outside the United States.
“Why would they put it in RICO unless they wanted somebody who was hurt to be able to get damages?” he asked.
Katsas noted that only one of the predicate statutes, relating to importation of child pornography, had an exclusively extraterritorial focus.
“Your answer to my question is four words: It was an accident,” Breyer deadpanned.
Katsas responded that the statute had “perfectly meaningful application for people who suffer domestic injuries” under that statute, and that one crime of more than 200 shouldn't be the basis for expanding RICO extraterritorially.
Katsas also argued that in RICO, Congress specifically was looking to combat the domestic effects of racketeering.
“Well, that may have been true, or largely true, at the beginning, but how about all these amendments that happened after 9/11 which clearly seemed to focus on foreign conduct, foreign organziation, foreign harm?” Kagan asked.
“Don't you think that what was in Congress's heads at that moment in time was foreign terrorist organizations committing terrorist conduct on foreign soil?”
“We don't know for sure,” Katsas responded, but regardless, RICO lacked a “clear indication” that Congress intended it to apply extraterritorially.
Frederick, however, argued that RICO did have such a clear indication.
First, Section 1964 directly incorporated Section 1962 and its included predicate acts, some of which have extraterritorial application, he said.
Second, Congress incorporated language from the Clayton Antitrust Act, which has extraterritorial effect, he said.
Justice Samuel A. Alito Jr. noted that the Clayton Act language wouldn't have had the extraterritorial meaning when it was adopted by RICO. Frederick responded that Congress had readopted the language unchanged in 1970, suggesting that it had acceded to the court's interpretation.
Breyer said that the Clayton Act has “been a nightmare for foreign countries, and there has always been controversy around it.”
“Congress is very well-equipped to deal with this issue,” Frederick said.
“It would be odd to suppose that Congress is intending to turn the United States into a place where criminal activities could occur from the United States that were affecting our closest allies and there was nothing those allies could do about it,” he added.
Goldenberg tried to chart a middle course.
It was clear that Congress intended RICO to have some extraterritorial reach, both as to actions and to enterprises, she said.
Congress believed that law enforcement needed the additional tools included in RICO to fight patterns or racketeering—it wasn't enough to simply prosecute the crimes outside of RICO, she said.
When governments pursue such actions, they have the ability and incentive to take the international ramifications into account, she said. But the “concerns about comity are much greater” when private parties can bring treble damages claims.
Kagan called this distinction “policy-ish,” saying “there doesn't seem to be a lot of law behind it.”
Goldenberg responded that comity concerns, the common law principle that the place of the injury determines the governing law, and Congress's choice to provide recovery only for business injury, not personal injury, supported this distinction.
Frederick, however, argued that “Congress imposed a domestic proof requirement as to every extension of extraterritoriality” for the predicate crimes, meaning either the victim or defendant was American, the conduct took place in the U.S. or an important U.S. interest was involved.
This requirement satisfied the requirements of comity and international law, he said. It was “a decision made by Congress, and it is not for the executive branch to change its position for the purpose of trying to snuff out a remedy that otherwise would have been available to a foreign plaintiff,” he said.
Two justices questioned why the EU would sue in the U.S. in the first place.
“Isn't it strange for a government to choose to sue in the courts of another country?” Alito asked Frederick.
Frederick noted that RJR has no European subsidiaries, and that if the EU countries would eventually have to enforce a judgment in the United States, “the simplest thing to do would be a one-stop process.”
Justice Ruth Bader Ginsburg was more direct.
“Candidly, why is the EU suing here? Does it have something to do with no one else has a treble damage provision like RICO?” she asked.
Frederick denied it, and said that he was authorized to stipulate that the EU would not accept treble damages.
Instead, the EU sought redress for the harms it suffered due to the alleged racketeering.
“I have seen the evidence for this. I have looked at the documents from RJR. I can tell you this is the most serious misconduct, and it involves very, very serious allegations that have been proved by the internal documents of the company itself,” he said.
To contact the reporter on this story: Nicholas Datlowe in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jeffrey D. Koelemay at email@example.com
Transcript available at http://src.bna.com/dsD.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)