RJR Nabisco, Inc. v. European Community: Analysis and Collected Commentary

Isaac Park
Tuesday, June 21, 2016, 9:04 AM

The Supreme Court handed down its ruling this week in RJR Nabisco, Inc. v. European Community, holding that the Racketeer Influenced and Corrupt Organizations Act (RICO) applies extraterritorially in certain cases. However, the Court held that RICO’s private cause of action, 18 U.S.C.

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The Supreme Court handed down its ruling this week in RJR Nabisco, Inc. v. European Community, holding that the Racketeer Influenced and Corrupt Organizations Act (RICO) applies extraterritorially in certain cases. However, the Court held that RICO’s private cause of action, 18 U.S.C. § 1964(c), does not overcome the presumption against extraterritoriality. Citing Kiobel v. Royal Dutch Petroleum Co., the Court reasoned that the text of § 1964(c) evinces no clear indicia of extraterritorial application and that recognizing extraterritorial application of a private cause of action would result in an increased “potential for international controversy that militates against recognizing foreign-injury claims.” Thus, the Court held that the European Community’s complaint, which proceeded under § 1964(c) and alleged only foreign injuries, must be dismissed.

In their complaint, the European Community and other plaintiffs alleged that RJR Nabisco and other entities (collectively RJR) participated in a scheme where drug traffickers smuggled narcotics into Europe, sold the drugs for euros, and laundered the money by purchasing shipments of RJR cigarettes. The complaint alleged various foreign injuries, including competitive harm to state-owned cigarette businesses, lost tax revenue, currency instability, and increased law enforcement costs.

Writing for the Court, Justice Alito applied the two-step extraterritoriality analysis from Morrison v. National Australia Bank Ltd. and Kiobel v. Royal Dutch Petroleum Co. At the first step of this analysis, the Court looks to the statute to determine whether there is a clear indication of extraterritorial application. If so, the presumption has been overcome. Otherwise, the Court proceeds to the second step, which looks to the statute’s “focus” to determine whether the complaint nonetheless involves a domestic application of the statute.

In this case, the Court first noted that RICO defines racketeering to include certain predicate offenses that clearly countenance extraterritorial application. For instance, one RICO predicate is the prohibition against assassination of government officials, 18 U.S.C. § 351(i), which expressly notes that “[t]here is extraterritorial jurisdiction over the conduct prohibited by this section.” Thus, although RICO itself does not contain an express statement of extraterritoriality, the Court recognized the “unique structure” of RICO to be clear evidence of congressional intent to reach some foreign conduct at step one of the analysis. Therefore, for those specific predicate offenses, RICO overcomes the presumption against extraterritoriality.

Nonetheless, the Court held that RICO’s private right of action does not overcome the presumption. On step one, the Court argued, nothing in the text of § 1964(c) provides a clear indication that Congress intended to create a private right of action for foreign injuries. Further, citing concerns about “international friction,” the Court argued that permitting private suits for foreign injuries under RICO would pose a greater risk of offending the sovereign interests of other nations than permitting only government actions. Turning to step two, the Court interpreted the “focus” of § 1964(c) to be the injury to business or property required for a private suit. Thus, because the complaint alleges only foreign injuries, the complaint involves an impermissible extraterritorial application of the statute and must be dismissed.

Amy Howe at SCOTUSblog argues that the Court’s decision preserves the government’s ability to prosecute racketeering involving foreign conduct while avoiding the international comity concerns posed by a private cause of action:

Today was certainly a good day for RJR Nabisco. But there was another winner as well: the federal government. Like the EC, the United States had urged the Court to rule that, at least in some circumstances, RICO applies extraterritorially. But it had agreed with RJR that RICO’s private treble-damages remedy is only available for plaintiffs that can show an injury in the United States. So the Court’s ruling today reduces the likelihood that the federal government will have to deal with foreign policy problems created by pesky private lawsuits in U.S. courts, while at the same time preserving the federal government’s own option to bring RICO lawsuits involving foreign conduct.

Cassandra Robertson at PrawfsBlawg suggests that the Court’s interpretation of RICO’s private right of action is in tension with its recognition that the Clayton Act’s similar remedial provisions do apply extraterritorially:

Interestingly, . . . as Justice Ginsburg noted in her dissent, RICO's remedial provisions are based on the Clayton Act. So the logic of the Court's position is tenuously balanced: the Court has held the Clayton Act's remedial provisions do apply extraterritorially. Now the Court uses the foreign reaction to this application as a reason to deny extraterritoral application of RICO's very similar provisions (but doesn't suggest re-thinking its earlier decision on Clayton Act extraterritoriality). It's kind of like a parent who gives their younger child an earlier curfew after the older one misbehaves ("Sorry, little Rico--Clayton showed us what happens when we let you wander around around outside! It's too late for him, but we are keeping you in.").

And, as Justice Ginsburg points out, it is highly unlikely that extraterritorial application of RICO's private right of action would in fact give rise to the same frictions that extraterritorial application of the Clayton Act did--and, for those cases that are more appropriately tried abroad, the U.S. courts have broad powers under the forum non conveniens doctrine to dismiss in favor of a foreign tribunal. Obviously in this case, the plaintiffs are foreign states who are not going to view the extraterritorial application of the statute as a threat to their sovereignty. But even in other cases, the typical use of the statute would be by foreign plaintiffs against U.S. defendants.

Howard Wasserman at PrawfsBlawg, echoing Justice Ginsburg’s dissent, argues that “[i]t makes no sense for a statute's private right of action not to be coextensive with the substantive law being applied”:

Ginsburg is correct that there should be a link, not separation, between prohibited activities and authorized remedies. At the very least, that should be the presumption, unless Congress provides otherwise in the cause of action itself. And a statute that says "[a]ny person injured in his business or property by reason of a violation" of some substantive law--where that substantive law has been (and, per Congress, can be) violated by that extraterritorial conduct--should allow for a claim for extraterritorial violation. By applying the presumption of extraterritoriality to the cause of action, the Court now requires Congress to draft the cause of action not only to link the right of action to the substantive law being enforced, but also to include language dealing with extraterritoriality.

Isaac Park is a student at Harvard Law School. He graduated with a B.A. from Yale University in 2013.

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