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What 2nd Circ. Did And Didn't Tell Us About RICO's Reach
By Robert Reznick
November 3, 2017, 12:58 PM EDT
On Oct. 30, 2017, the Second Circuit issued its opinion in Bascuñán v. Elsaca,[1]
becoming the first court of appeals to address the requirement that a private claim
under the Racketeer Influenced and Corrupt Organizations Act must be based on a
“domestic” injury to the plaintiff’s business or property. That requirement emerged
with little explanation of its meaning from the U.S. Supreme Court’s 2016 decision
in RJR Nabisco,[2] and in the 16 months since that decision was issued, district
courts have failed to reach a consensus as to how the geographic location of an
injury should be determined in RICO cases having cross-border facts. The Second
Circuit’s decision addresses the issue with two main holdings.
First, if “a civil RICO plaintiff alleges separate schemes that harmed materially
distinct interests to property or business, each harm — that is to say, each ‘injury’ — should be analyzed
separately for purposes of [the domestic injury] inquiry.”[3] Second, “a plaintiff who is a foreign resident
may nevertheless allege a civil RICO injury that is domestic. At a minimum, when a foreign plaintiff
maintains tangible property in the United States, the misappropriation of that property constitutes a
domestic injury.”[4]
The Bascuñán decision, though narrow because it focuses on misappropriation of money or its
equivalents held in the United States, resolves some of the uncertainty seen in district courts, at least in
the Second Circuit. Perhaps it is also fair to add “for the time being.” The court of appeals’ analysis
appears to depart from that required by RJR Nabisco in ways that other courts, or even the Supreme
Court itself, may ultimately confront and decide with a different outcome.
Background
Plaintiff-appellant Jorge Bascuñán, a citizen and resident of Chile, has led a privileged but difficult life.
Born the only heir to a substantial fortune, he “was afflicted with a number of emotional and physical
ailments,”[5] and was unable to manage his own finances. Ultimately, he appointed his cousin,
defendant Daniel Yarur Elsaca, to be his financial manager and gave Elsaca a broad power of attorney.
Over the next 10 years until Bascuñán fired him, Elsaca allegedly engaged in a variety of fraudulent
financial schemes resulting in his acquiring control of approximately $64 million from the estate of
Bascuñán’s late parents. In 2015, Bascuñán sued Elsaca and related entities in U.S. district court in
Manhattan, claiming violations of the RICO statute through breaches of the mail fraud, wire fraud, bank
Robert Reznick
