The mind-bending international comity debate in RJR RICO case at SCOTUS

February 9, 2016

(Reuters) – The irony is running thick in a debate at the U.S. Supreme Court between the Justice Department and 26 European governments suing the tobacco company RJR Nabisco under the Racketeer Influenced and Corrupt Organizations Act. The issue is international comity and the reach of U.S. courts – but the two sides haven’t taken the positions you might expect.

The U.S. government, in an amicus brief filed last December, urged the Supreme Court to restrict the rights of private plaintiffs – including foreign governments – to seek treble damages under RICO’s civil provision. The U.S. racketeering law, according to the Justice Department (and, for that matter, to RJR), permits private plaintiffs to sue in U.S. courts only when those plaintiffs have suffered harm within American borders. To hold otherwise, the Justice Department said, would interfere with international comity.

“Private suits involving injuries suffered outside the United States have a propensity to produce significant international friction,” the Justice brief said. “Other nations may perceive our affording a private remedy to foreign plaintiffs as circumventing the (often more limited) causes of action and remedies that those nations provide their own citizens, particularly when a plaintiff’s principal grievance is with foreign conduct or entities.”

The U.S. government, in other words, wants to restrict access to American courts in the name of international comity.

The European nations filed their merits brief at the Supreme Court last Thursday – and they said it’s mighty strange that the U.S. is citing international comity concerns to shoot down a suit by 26 of its closest allies.

And that’s particularly odd, the brief said, because the Justice Department previously argued in the 1978 case Pfizer v. Government of India that India had the right to sue Pfizer for antitrust violations under the Clayton Act. Congress relied on the language of the Clayton Act in drafting RICO’s private litigation provision, the Europeans argued, so the U.S. government’s position ought to be consistent.

On the other hand, the Europeans’ brief does implicitly concede that the Justice Department isn’t the only government changing its mind about the extraterritorial application of American laws. The foreign sovereigns suing RJR “consistently have advocated that this court respect the important limitations on the application of U.S. law outside its borders by interpreting statutes to conform to customary international law limits on the exercise of the United States’ prescriptive jurisdiction abroad,” the filing said, noting European sovereigns’ amicus briefs backing limits on for instance, the Alien Tort Statute.

But now the Europeans want U.S. courthouse doors to swing wide for their claims that RJR participated in an international money-laundering scheme to sell U.S.-manufactured cigarettes through drug syndicates and militant groups. “American courts have always been open to foreign plaintiffs who suffer injuries abroad caused by an American defendant’s unlawful conduct,” their brief argues. “That traditional rule is particularly clear and especially important with respect to an American’s unlawful conduct committed on American soil that causes injury abroad.”

The broad question in the RJR case, you may recall, is what test courts should apply to decide whether RICO allegations may be brought in U.S. courts. The federal racketeering statute includes a panoply of “predicate crimes,” some of which apply to foreign conduct and some of which do not extend abroad. But the statute itself doesn’t specifically explain whether RICO’s scope is extraterritorial.

In the wake of the Supreme Court’s 2010 decision in Morrison v. National Australia Bank, which held that U.S. laws should not be presumed to apply overseas, lower courts overseeing RICO cases involving international crimes had focused on whether the alleged RICO enterprise is based in the U.S. or whether the alleged underlying racketeering acts took place in the U.S.

The 2nd U.S. Circuit Court of Appeals adopted a different test last April, in a splintered decision not to hear the RJR case en banc. The appeals court held that the proper test isn’t the location of either the enterprise or the underlying crimes, but instead the reach of the statutes the racketeers supposedly violated. According to the 2nd Circuit, if defendants are accused of a pattern of, for instance, international money laundering or acts of terrorism, RICO applies because U.S. laws for those crimes extend to overseas conduct. If, however, the alleged predicate acts would not be prosecutable in U.S. courts, RICO doesn’t apply.

RJR’s lawyers at Jones Day have long argued, including in the tobacco company’s merits brief to the Supreme Court, that the test should focus on the location of the accused racketeering enterprise, and that the European nations’ allegations cannot survive because the supposedly illegal activities were directed by Russian and South American gangs. Alternatively, RJR said, the Europeans can’t seek damages because they cannot show they were injured in the U.S.

The U.S. government, as I’ve reported, endorsed the 2nd Circuit’s test in the context of criminal RICO cases. But the Justice Department agreed with RJR’s argument that in civil RICO litigation, plaintiffs must show a domestic injury. The U.S. government said that under that standard, the European nations’ case must be dismissed.

The Europeans, represented by Kellogg Huber Hansen Todd Evans & Figel, said the domestic injury test advocated by both RJR and the Justice Department was “atextual” and contrary to Congress’ goal of discouraging racketeering. “The novelty of petitioners’ claim that, absent an express indication to the contrary, a cause of action may recover only for domestic injuries is evident in its total absence from this court’s prior extraterritoriality jurisprudence,” the brief said. “Not a single case even hinted that the fact that the injury occurred abroad was dispositive notwithstanding the statute’s silence about foreign injuries.”

For more of my posts, please go to WestlawNext Practitioner Insights

Follow me on Twitter

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/