(a) It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity … has participated as a principal … to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. …

(b) It shall be unlawful for any person through a pattern of racketeering activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.

(c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.

(d) It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section.

18 U.S.C. §1962(a)-(d)[1]

(c) Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee …

18 U.S.C. §1964(c)[2]

[This is Fred; Larry, our legal consultant called the other day to tell me that some of our readers are ecstatic about his last blog, the one on McDonnell v. United States.[3] I hadn’t noticed and, really, don’t know why anyone is impressed. The piece was mostly quotations. On the other hand, he did rearrange the material to highlight what he thought we ought to take away from the case. When I was a consultant we called that “information mapping.” If done correctly it allowed us to simplify issues, but without adding bias or new material. At least that was the theory. Apparently some people think he did that.

Anyway, Larry’s found another case, this time from June 20, 2016, that he thinks is interesting. This one touches on the drug trade, money laundering, and other international crime, and a civil suit by various foreign governments in a U.S. court and against a U.S. company. I don’t know anything about that kind of thing, but it sounds interesting; so I asked for more.

Yes, I’m going to talk about RJR Nabisco, Inc. v. European Community,[4] a recent decision involving organized crime, the Europeans and us. The U.S. statute at issue is the Racketeer Influenced and Corrupt Organizations Act (RICO).[5] But before we get into the details, let’s talk about the Supreme Court for a bit.

Supreme Court Membership

Normally the Court has nine members. One of them, Justice Scalia, died in February of 2016,[6] and President Obama named a successor; but the U.S. Senate, which must “advise and consent” on the appointment, has taken no action. So back in June, when this case was decided, the Court had only eight justices.

Of those eight one of them, Justice Sonia Sotomayor, “took no part in the consideration or decision of the case.”[7] The decision doesn’t say why, but often judges will recuse themselves from matters where they have or might have a conflict of interest. Whatever her reason, the net effect was that only 7 justices were available to decide RJR Nabisco. A majority of the Court for that case was 4 justices.

Without discussing the merits of the case – we’ll do that later – let’s see how the voting actually came out. There was an opinion of the Court, authored by Justice Alito, and two dissents to part of it, as follows.

OPINION Alito, Roberts, Thomas, Kennedy Ginsburg, Breyer, Kagan Breyer
Part I agree concur concur
Part II agree concur concur
Part III agree concur concur
Part IV agree dissent dissent

The Court was unanimous on the issues evident in Parts I, II, and III of the decision. Seven out of 8, or eventually 9 justices is a substantial majority no matter what happens next year. On the other hand, it’s possible that the court’s position with respect to Part IV might change if Justice Sotomayor participates in another, similar case. No doubt that also will depend on who is selected for the 9th seat. Now if I haven’t confused you enough, let’s look at the substance of the issues.

Cigarettes and Money Laundering

This case involves suits brought by the European Community (and 26 of its member states) against RJR Nabisco and related entities, alleging that Nabisco, etc. “participated in a global money-laundering scheme in association with various organized crime groups.”[8] By the time it reached the Supreme Court the litigation had gone on for 16 years, spread over “at least” three separate actions, and had seen “multiple trips up and down the federal court system.”[9]

But viewed from a distance, the alleged facts were relatively simple. Drug traffickers, it was said, smuggled narcotics into Europe and sold them for euros. The proceeds were used to pay for RJR cigarettes, many of which were shipped, into Europe; and these were sold and converted back into cash. The complaint charged that these complex transactions violated 18 U.S.C. §§1962(a)-(d). Buried in all this was a pattern of racketeering activity, involving black-market money brokers, cigarette importers and wholesalers, material support to foreign terrorist organizations, mail fraud, wire fraud, and so forth.[10]

The case was dismissed at the trial level on the theory that RICO did not apply outside of the United States.[11] However, the appeals court reinstated the RICO claims, and the matter went to the Supreme Court. The Court took the case to decide two questions:

  • Does §1962, quoted at the beginning of this piece, apply to criminal conduct in foreign countries?
  • Does §1964(c), also quoted above, which creates a private right of action for victims of RICO crimes, apply to injuries suffered in foreign countries?[12]

Why are there two issues? Well, § 1962 identifies conduct prohibited by RICO. If such conduct – in foreign countries – is not prohibited by RICO, then there are no further issues. If it is prohibited, then the next question is who can sue? More specifically, can the European Union bring a civil action for damages under § 1964(c)?

All judges agreed that § 1962(b) & (c) had extraterritorial effect, i.e., applied to some crimes committed overseas; but four of them also ruled that § 1964(c) did not authorize the European Community to bring a civil action based on the RICO violations.

Crime in Foreign Countries

In general Congress does not write laws that operate in other countries. “It is a basic premise of our legal system that, in general, ‘United States law governs domestically but does not rule the world.’”[13] Of course, Congress has the power to write a law that expressly applies in foreign countries[14] and if so, no doubt our courts will enforce it. But if Congressional intent is unclear, it’s presumed that U.S. laws apply in the U.S., and not elsewhere. “Absent clearly expressed congressional intent to the contrary, federal laws will be construed to have only domestic application.”[15]

So what would constitute a “clearly expressed … intent” otherwise? It could be something really clear, I suppose, like a statute that says “[t]here is extraterritorial jurisdiction over the conduct prohibited by this section.[16]” Or, and here the analysis gets a little bit tricky, there could be something not quite so specific that nevertheless shows “Congress … affirmatively and unmistakably instructed” that a statute apply overseas.[17] There has to be enough evidence to rebut the presumption[18]against extraterritorial application, but not more.

So which kind of presumption is harder to rebut, a negative or a positive one? I don’t know, but hope to find out someday. In the meantime, it’s enough to say that the majority, 4 justices, agreed that Congress “clearly” intended some foreign crimes to be subject to RICO. That’s some, not all; specifically, the offenses outlined in 18 U.S.C. §§1962 (b) & (c).[19] The other parts of §1962, that’s subparagraphs (a) & (d), do not have extraterritorial effect.

The remaining three justices also joined in this view. Led by Justice Ginsburg, they said: “In this case, the Court properly holds that Congress signaled its “affirmative [intent] … in many instances, should apply extraterritorially. As the Court relates … Congress deliberately included within RICO’s compass … federal offenses that manifestly reach conduct occurring abroad. … I [i.e., we] agree with that conclusion.”[20] Justice Breyer, on his own, said “I join Parts I through III of the Court’s opinion. But I do not join Part IV.”[21]

Right to Sue

So let’s grant that some RICO offenses can be committed overseas. Then, who can sue on them? Is it “any person?” That’s what 18 U.S.C. §1964(c) seems to say. It says, “[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee.” Why wouldn’t “any person” include the European Community and 26 of its member states?

The majority of the Court didn’t think it did. While §1962 might have “extraterritorial application,” the Court said, §1964(c) did not. “Irrespective of any extraterritorial application of §1962, we conclude that §1964(c) does not overcome the presumption against extraterritoriality.”[22]

Come again? If some RICO offenses can be committed overseas, then why can’t their overseas victims bring suit on them? Well, because each section of RICO must be separately evaluated to determine if Congress gave clear instructions about applying it overseas. It may be that RICO outlaws certain conduct overseas, but only our Government may prosecute the crimes. A private right of action – when it exists – would circumvent that. Congress intended to authorize private suits on domestic RICO offenses, but it’s not clear that Congress intended to extend that to foreign offenses as well.[23] Who knows, such law suits might well cause needless friction overseas. “Although ‘a risk of conflict between the American statute and a foreign law” is not a prerequisite for applying the presumption against extraterritoriality … where such a risk is evident, the need to enforce the presumption is at its apex.’”[24]

If you think that’s a little weak, so do I. Too bad we don’t get to vote on the matter.

Anyway, this is where the majority and the minority parted company. Basically Justice Ginsburg said that Congress had more than adequately indicated its intent to extend §1964(c) overseas. The law applied on its face to “[a]ny person injured in his business or property by reason of a violation of [§] 1962.”[25]  Agreeing with the Appeals Court, she said: “I would hold that “[i]f an injury abroad was proximately caused by the violation of a statute which Congress intended should apply to injurious conduct performed abroad, [there is] no reason to import a domestic injury requirement simply because the victim sought redress through the RICO statute.”[26]

Justice Breyer agreed, but added that there was nothing in the record to support the Government’s argument that allowing people with property overseas to recover of damages would cause “friction” with foreign governments. “Unlike the Court, I cannot accept as controlling the Government’s argument as amicus curiae that ‘[a]llowing recovery for foreign injuries in a civil RICO action . . . presents the . . . danger of international friction’ … The Government does not provide examples, nor apparently has it consulted with foreign governments on the matter. … By way of contrast, the European Community and 26 of its member states tell us ‘that the complaint in this case, which alleges that American corporations engaged in a pattern of racketeering activity that caused injury to respondents’ businesses and property, comports with limitations on prescriptive jurisdiction under international law and respects the dignity of foreign sovereigns.’”[27]

Conclusion

So why did we discuss this case? What’s so interesting about it? Well, I think the vacancy on the Court, and justice Sotomayor’s absence are the most interesting parts. Justice Scalia was a highly respected jurist and, more to the point today, was greatly prized by Conservatives. There was no way the Senate was going to consider a replacement before last November’s election. It would have affected the 5-4 conservative majority. Better to wait until after the election. Now that the Republicans have won, Republicans most definitely won’t spring for President Obama’s nominee.

In the meantime, the Court decides cases, and the justices continue to find ways to agree on things. The McDonnell decision is a case in point; the Court was unanimous, after all. And this decision is not that different. The justices agreed on a good part of the law, and narrowed their disagreement down to one issue that the Congress, if it takes exception, can easily change with new legislation.

So that’s my point. Life will go on and the Court will function, even if the current vacancy isn’t filled for a while. After all RJR Nabisco was decided with 7 justices, not 8. Not that I think it’s healthy, to have a judge court; but it’s survivable for the short term. Hopefully it won’t be necessary to do so for much longer.

President Trump needs to pay attention to the Court in his first 100 days.

[1] This is from Ch. 96 of Title 18, dealing with Racketeer Influenced and Corrupt Organizations. You can get the official [2015] version of Ch. 96 from the “Government Publishing [formerly, “Printing] Office,” at https://www.gpo.gov/fdsys/pkg/USCODE-2015-title18/pdf/USCODE-2015-title18-partI-chap96.pdf

[2] See n. 1. The remainder of the paragraph, not relevant here, discusses an exception to the general rule, plus an exception to the exception. The language is: “except that no person may rely upon any conduct that would have been actionable as fraud in the purchase or sale of securities to establish a violation of section 1962. The exception contained in the preceding sentence does not apply to an action against any person that is criminally convicted in connection with the fraud, in which case the statute of limitations shall start to run on the date on which the conviction becomes final.”

[3] 579 U.S.  ___ (2016). The case is too new to appear in an official report; that’s why no page reference is given. The best version out is the “slip opinion” the Court released when it announced the decision. That’s available at https://www.supremecourt.gov/opinions/15pdf/15-474_ljgm.pdf . If we cite it, we’ll do so as McDonnell, slip op. at p.  __.

[4] 579 U.S. ___ (2016). The case also is too new to appear in an official report; that’s why no page reference is given. The best version out is the “slip opinion” the Court released when it announced the decision. That’s available at https://www.supremecourt.gov/opinions/15pdf/15-138_5866.pdf.  If we cite it, we’ll do so as RJR Nabisco, slip op. ( ___ opinion) at p.  __. Each of the opinions are separately numbered, so we’ll indicate “Alito opinion” for the majority, or “Ginsburg opinion” for the minority, etc.

[5] See n. 1 for citations and web address.

[6] For information on Justice Scalia, see the Wikipedia entry at https://en.wikipedia.org/wiki/Antonin_Scalia.

[7] See RJR Nabisco, slip op. at Syllabus, p. 5. “SOTOMAYOR, J., took no part in the consideration or decision of the case.”

[8] See RJR Nabisco, slip op. at Alito, p. 4.

[9] Id.

[10] The Court summarized §1962 as follows: “Section 1962(a) makes it unlawful to invest income derived from a pattern of racketeering activity in an enterprise. Section 1962(b) makes it unlawful to acquire or maintain an interest in an enterprise through a pattern of racketeering activity.  Section 1962(c) makes it unlawful for a person employed by or associated with an enterprise to conduct the enterprise’s affairs through a pattern of racketeering activity.  Finally, §1962(d) makes it unlawful to conspire to violate any of the other three prohibitions.” See RJR Nabisco, slip op. at Alito, p. 2.

[11] See RJR Nabisco, slip op. at Alito, p. 5. “The District Court agreed and dismissed the RICO claims as impermissibly extraterritorial.”

[12] See RJR Nabisco, slip op. at Alito, p. 7.

[13] See RJR Nabisco, slip op. at Alito, p. 7, citing Microsoft Corp. v. AT&T Corp., 550 U. S. 437, 454 (2007).

[14] See, e.g., 18 U.S.C. §351(i), “There is extraterritorial jurisdiction over the conduct prohibited by this section.”

[15] See RJR Nabisco, slip op. at Alito, p. 7, citing Morrison v. National Australia Bank Ltd., 561 U. S. 247, 255 (2010). 

[16] See, e.g.,18 U.S.C. §351(i).

[17] See RJR Nabisco, slip op. at Alito, p. 7: “The question is not whether we think ‘Congress would have wanted’ a statute to apply to foreign conduct ‘if it had thought of the situation before the court, ‘but whether Congress has affirmatively and unmistakably instructed that the statute will do so. …’ When a statute gives no clear indication of an extraterritorial application, it has none ….”

[18] See RJR Nabisco, slip op. at Alito, p. 9: “At the first step, we ask whether the presumption against extraterritoriality has been rebutted—that is, whether the statute gives a clear, affirmative indication that it applies extraterritorially.”

[19] See RJR Nabisco, slip op. at Alito, p. 13: “We therefore conclude that RICO applies to some foreign racketeering activity. A violation of §1962 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. This fact is determinative as to §1962(b) and §1962(c), both of which prohibit the employment of a pattern of racketeering.  Although they differ as to the end for which the pattern is employed—to acquire or maintain control of an enterprise under subsection (b), or to conduct an enterprise’s affairs under subsection (c)—this difference is immaterial for extraterritoriality purposes.”

[20] See RJR Nabisco, slip op. at Ginsburg, p. 3. “The “predicate offenses” were, for example, 18 U.S.C. §§1956–1957 (money laundering); and §2339B (material support to foreign terrorist organizations).  Accordingly, the Court concludes, when the predicate crimes underlying invocation of §1962 thrust extraterritorially, so too does §1962.”

[21] See RJR Nabisco, slip op. at Breyer,  p. 1.

[22] See RJR Nabisco, slip op. at Alito, p. 18.

[23] See RJR Nabisco, slip op. at Alito, p. 19. “The same logic requires that we separately apply the presumption against extraterritoriality to RICO’s cause of action despite our conclusion that the presumption has been overcome with respect to RICO’s substantive prohibitions. ‘The creation of a private right of action raises issues beyond the mere consideration whether underlying primary conduct should be allowed or not, entailing, for example, a decision to permit enforcement without the check imposed by prosecutorial discretion’ (citing Sosa v. Alvarez Machain, 542 U. S. 692, 727 (2004)).”

[24] See RJR Nabisco, slip op. at Alito, p. 21 (citing Morrison v. v. National Australia Bank Ltd., 561 U. S. 247, 255)  (2010).

[25] See RJR Nabisco, slip op. at Ginsburg, p. 3.

[26] See RJR Nabisco, slip op. at Ginsburg, p. 5.

[27] See RJR Nabisco, slip op. at Breyer p. 2.

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