Commercial Litigation and Arbitration

RICO Is Not Extraterritorial — Part 2

From Norex Petroleum Ltd. v. Access Indus., 2010 U.S. App. LEXIS 19982 (2d Cir. Sept. 28, 2010):

The issue before us is whether a United States federal court can properly hear a claim under the Racketeer Influenced and Corrupt Organization Act ("RICO"), 18 U.S.C. § 1961 et seq., arising from allegations of a conspiracy which primarily involves foreign actors and foreign acts. Applying the Supreme Court's decision in Morrison v. National Australian Bank Ltd., 130 S. Ct. 2869, 177 L. Ed. 2d 535 (2010), we hold that this issue is properly considered as a question of whether the complaint states a claim for which a United States federal court can provide relief, not as a question of whether the court possesses subject matter jurisdiction to hear the claim. Morrison also holds that absent an express intention by Congress of extraterritorial effect, a statute applies only domestically. Id. at 2877-78. As RICO "is silent as to any extraterritorial application," North South Finance Corp. v. Al-Turki, 100 F.3d 1046, 1051 (2d Cir. 1996), we affirm the district court's dismissal of plaintiff's complaint ***.

In sum, Norex alleges that the defendants participated in a widespread racketeering and money laundering scheme with the goal of seizing control over most of the Russian oil industry through the use of Russian oil companies including Tyumen Oil Company ("TNK") and Yugraneft. *** Norex further alleges that defendants committed numerous acts in the United States in furtherance of its scheme that constitute racketeering within the meaning of RICO, including mail and wire fraud, money laundering, Hobbs Act violations, Travel Act violations and bribery. *** Norex alleges that as a result of this scheme, its majority ownership stake in Yugraneft and of certain quantities of oil owed to it by Yugraneft and other Russian oil entities was stolen from it through a series of unlawful actions that included bribery of Russian governmental officials and corrupt Russian bankruptcy proceedings. ***

Morrison wholeheartedly embraces application of the presumption against extraterritoriality, finding that "unless there is the affirmative intention of the Congress clearly expressed to give a statute extraterritorial effect, we must presume it is primarily concerned with domestic conditions." *** The Morrison Court rejected various tests devised over the years to divine a statute's extraterritorial application in favor of a bright line rule: "[w]hen a statute gives no clear indication of an extraterritorial application, it has none." ***

Our Court's precedent holds that "RICO is silent as to any extraterritorial application." Al-Turki, 100 F.3d at 1051. While Norex urges us to consider this statement dicta, we cannot do so. The finding that RICO is silent as to its extraterritorial application is a key holding of the opinion, because it is only upon finding RICO silent as to its extraterritorial application that the Al-Turki court turned to its now-abrogated analysis of RICO's extraterritorial application under the conduct and effects test. ***

Even if we were to revisit Al-Turki, Norex's arguments are unavailing. First, Norex argues that RICO § 1962(a)-(d) applies to "any enterprise which is engaged in, or that activities of which affect, interstate or foreign commerce." *** Morrison forecloses that argument, noting that "we have repeatedly held that even statutes that contain broad language in their definitions of commerce do not apply abroad." 130 S. Ct. at 2882. Morrison similarly forecloses Norex's argument that because a number of RICO's predicate acts possess an extraterritorial reach, RICO itself possesses an extraterritorial reach. Id. at 2882-83 (noting that while Section 30(b) of the Exchange Act, 15 U.S.C. § 78dd(b), can be interpreted to apply abroad, "the presumption against extraterritoriality operates to limit that provision to its terms"). Finally, contrary to Norex's claims, simply alleging that some domestic conduct occurred cannot support a claim of domestic application. "[I]t is a rare case of prohibited extraterritorial application that lacks all contact with the territory of the United States." *** The slim contacts with the United States alleged by Norex are insufficient to support extraterritorial application of the RICO statute. We have considered the remainder of Norex's claims and find them without merit.

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