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O’Hagan Meyer Lawyer Seeks Dismissal of RICO Complaint

By July 10, 2017 No Comments

O’Hagan Meyer Partner, Kevin F. Berry was retained to defend two Florida corporations and their principals against allegations of RICO violations. According to the Plaintiff, the case arose from an Aruban national’s orchestration, oversight, and direction of a more than decade-long scheme of anti-competitive and racketeering activity that targeted an Aruban company organized under the laws of and operating entirely within the country of Aruba. The key defendant was an employee of Plaintiff and, again according to Plaintiff, caused millions of dollars of damages to a foreign entity operating in Aruba. Plaintiff also alleged that the two Florida corporations and their principals cooperated and participated in the conspiracy.

In the motion to dismiss the Complaint, Berry relied on the June 20, 2016 United States Supreme Court opinion in RJR Nabisco, Inc. v. European Community, in which a 4-3 majority held that the Racketeer Influenced and Corrupt Organizations Act (“RICO”) does not apply extraterritorially to injuries that are suffered outside the United States.  RJR Nabisco, Inc., et al. v. European Community et al., No. 15-138, 579 U.S. ___ (Jun. 20, 2016), slip op., available at:  https://www.supremecourt.gov/opinions/15pdf/15-138_5866.pdf.  The Supreme Court noted that the question of RICO’s extraterritorial application really involves two questions.  Id.  First, do RICO’s substantive prohibitions, contained in 18 U.S.C. § 1962, apply to conduct that occurs in foreign countries?  Id.  Second, does RICO’s private right of action, contained in § 1964(c), apply to injuries that are suffered in foreign countries?  Id.  With respect to whether RICO applies to extraterritorial “conduct,” the Court noted that while there is a presumption against the extraterritorial application of RICO, that presumption may be rebutted.  Id.  As a result, a RICO claim may be “based on a pattern of racketeering that includes predicate offenses committed abroad, provided that each of those offenses violates a predicate statute that is itself extraterritorial.”  Id.  at 13.

In RJR Nabisco, the Supreme Court also considered the question of whether RICO applies to foreign enterprises and observed that “it is easy to see why Congress did not limit RICO to domestic enterprises,” as such a requirement “would lead to difficult line-drawing problems and counter-intuitive results.”  RJR Nabisco, slip op. at 15.  For example, a domestic enterprise requirement would exclude from RICO’s reach foreign enterprises that operate within the United States.  Id.  The Court, however, disagreed with the Second Circuit’s conclusion that RICO’s presumption against extraterritoriality did not apply to actions for injuries brought under RICO’s private cause of action provided in § 1964(c).  Noting that nothing in that section “provides a clear indication that Congress intended to create a private right of action for injuries suffered outside of the United States,” the Court concluded that § 1964(c) requires a civil RICO plaintiff to allege and prove a domestic injury to business.  Id. at 27.  The Supreme Court’s holding, which resolved an ongoing split among the circuits on this issue, is plainly a significant pronouncement regarding the extraterritorial application of RICO. It makes clear that foreign plaintiffs wishing to bring RICO claims in U.S. courts must base those claims on injuries suffered in the United States.

Counsel also relied upon Cevdet Aksüt Oğullari Koll. Sti V. Robin A. Cavusoglu, et al., 2017 U.S. Dist. LEXIS 45325 *28 (D.C. NJ 2017) where a federal District Court Judge in New Jersey reviewed numerous District Court cases that have discussed RJR Nabisco, Inc., et al and concluded that the location of the injury, not the place of the conduct governs the application of the law.  It noted:

These cases exhibit a wide array of factual scenarios and justifiable reasoning, with no clear victor in the “domestic injury” debate. What is clear from the statute and the Supreme Court is that the “focus” of § 1964(c) is the injury suffered and not the predicate acts that caused the injury. See RJR, 136 S. Ct. at 2108 (“the presumption against extraterritoriality must be applied separately to both RICO’s substantive prohibitions and its private right of action”); see also Ablyazov, 2016 WL 7756629, at *6 (“RJR Nabisco makes clear that ‘domestic injury to business or property’ is an independent requirement for bringing a private RICO action—separate and apart from the requirement of a substantive RICO violation that is either domestic or permissibly extraterritorial—and, as such, the existence of such an injury cannot, as a matter of logic, turn entirely on whether it was caused by conduct occurring in the U.S.”) (emphasis original). The Court, therefore, concludes that the only relevant inquiry is where Plaintiff’s injury occurred—i.e. where the impact of Plaintiff’s injury was felt—and not where the predicate acts occurred.

Id. at 7.

            Thus, a prerequisite for any RICO claim is domestic damages.

Kevin F. Berry is a commercial litigator with extensive trial experience, having tried over 175 civil jury trials to verdict. His practice focuses on the representation of financial institutions, corporations, banking, insurance and reinsurance entities.