June 20, 2016

Supreme Court Decides RJR Nabisco, Inc. et al. v. European Community et al.

On June 20, 2016, the Supreme Court of the United States decided RJR Nabisco, Inc. et al. v. European Community et al., No. 15-138, holding that at least some of the substantive provisions of the Racketeer Influenced and Corrupt Organization Act, better known as RICO, apply to conduct that occurs in foreign countries, but the private right of action allows civil RICO plaintiffs to sue only for domestic injuries to business or property.

The European Community and 26 of its member states sued RJR Nabisco in the Eastern District of New York, alleging that RJR violated RICO when Colombian and Russian drug traffickers smuggled narcotics into Europe and sold the drugs for euros that were used to pay for a large shipment of RJR cigarettes shipped into Europe. RJR moved to dismiss the claims on the basis that RICO does not apply to racketeering activity occurring outside the United States or to foreign enterprises. The district court dismissed the claims, but the Second Circuit reversed and held that RICO applied.

The Supreme Court reversed. The Court first addressed whether RICO’s substantive provisions apply to conduct that occurs in foreign countries and held that some of them do. Although United States laws are presumed not to apply extraterritorially, RICO overcomes that presumption by defining racketeering activity to include a number of predicate acts that plainly apply to foreign conduct. RICO itself thus applies extraterritorially to the extent that the particular predicate act relied upon to prove a pattern of racketeering applies extraterritorially — at least as to the RICO offenses of conducting an enterprise’s affairs and acquiring and maintaining control of an enterprise.

Next, the Court considered the scope of the private right of action created by RICO and held that it allows suit only for a “domestic injury” to the plaintiff’s business or property. The creation of a private right of action, the Court explained, raises issues beyond the mere consideration of whether certain conduct should be regulated. Providing civil remedies for foreign conduct presents potential “international friction” and could “upset that delicate balance and offend the sovereign interests of foreign nations.” Although Congress modeled RICO’s private right of action on the Clayton Act’s provision that allows for recovery for antitrust injuries suffered abroad, RICO lacked the Clayton Act’s language defining a person to include foreign entities.

Justice Alito delivered the opinion of the Court, in which Chief Justice Roberts and Justices Kennedy and Thomas joined in full and in which Justices Ginsburg, Breyer, and Kagan joined in part. Justice Ginsburg filed an opinion concurring in part, dissenting in part, and dissenting from the judgment, in which Justices Breyer and Kagan joined. Justice Breyer filed an opinion concurring in part, dissenting in part, and dissenting from the judgment. Justice Sotomayor took no part in the case.

Download Opinion of the Court

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