In the wake of Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010), a critical question has been whether a statute has extraterritorial reach. In Morrison the Court rejected a claim that Exchange Act Section 10(b) had such effect despite years of Circuit Court president to the contrary. Rather, the High Court in Morrison concluded that the reach of the Section was the U.S. water’s edge – either the securities transaction had to take place on a U.S. exchange or within the country or it was not covered by the statute. This conclusion was based largely on the presumption against extraterritorial effect absent express language in the provision that Congress intended such an effect.
Following Morrison the Second Circuit rejected claims of extraterritoriality in a RICO suit. Norex Petroleum Ltd. v. Access Industries, Inc., 631 F. 3d 29 (2nd Cir. 2010). In European Community v. RJR Nabisco, Inc., 11-2475 (2nd Cir. Decided April 29, 2014) the Court clarified Norex, however, holding that Morrison does not always bar RICO from having extraterritorial reach.
The complaint claims that RJR directed, managed and controlled a global money-laundering scheme with organized crime groups in violation of RICO. The firm is claimed to have laundered money through New York based financial institutions and repatriated the profits of the scheme to the United States. This is accomplished through a multi-step scheme that begins with the sale of drugs which produces euros. Money brokers then sell the euros to cigarette importers at a discount and use the money to buy RJR’s cigarettes. The money brokers then use the funds from the cigarette importers to repeat the cycle. The enterprise is a loose association of Colombian and Russian drug-dealing organizations and European money brokers whose activity were directed outside the U.S. RJR committed various predicate racketeering act including mail fraud, wire fraud, money laundering, violations of the Travel Act and providing material support to foreign terrorist organizations.
The District Court dismissed the RICO claim, following Norex and Morrison. The Circuit reversed. In Norex the Court rejected a claim that RICO had extraterritorial reach simply because it involved an enterprise which is engaged in activities that affect “interstate or foreign commerce.” The Court also rejected claims of extraterritorial effect simply because some of the predicate acts for RICO are based on statutes which in and of...
