European Community v. RJR Nabisco, Inc.
764 F.3d 129
2d Cir.2014Background
- Plaintiffs: the European Community and 26 member states sued RJR Nabisco alleging a global cigarette-based money‑laundering scheme tied to narcotics and organized crime, causing repatriated profits and domestic harms in the U.S.
- Complaint alleges RJR directed/coordinated laundering via European money brokers, importers, shipments through Panama, travel by RJR executives, use of U.S. mails/wires, false customs/ATF filings, and receipt of profits in the U.S.
- Causes of action: civil RICO claims based on predicates (money laundering, mail/wire fraud, Travel Act, material support for terrorism), and New York state common‑law torts (fraud, nuisance, unjust enrichment, etc.).
- District court dismissed RICO claims holding RICO has no extraterritorial application and dismissed state claims for lack of diversity because it found the European Community was not a “foreign state” under 28 U.S.C. §§ 1332, 1603.
- Second Circuit vacated and remanded: held RICO can apply extraterritorially to the extent its predicate statutes do, and held the European Community qualifies as an “agency or instrumentality” (thus a foreign state) for diversity jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether RICO applies extraterritorially | RICO reaches foreign enterprises and conduct because it covers enterprises whose activities affect foreign commerce and incorporates predicates with extraterritorial reach | RICO is silent on extraterritoriality; Morrison and Norex require RICO not apply to foreign enterprises/conduct | RICO applies extraterritorially only to the extent the underlying predicate statute authorizes extraterritorial application; otherwise RICO requires sufficient domestic conduct to proceed |
| Whether particular predicates here overcome presumption against extraterritoriality (money laundering; material support; mail/wire fraud; Travel Act) | Predicates like money laundering and material support expressly provide extraterritorial jurisdiction; mail/wire fraud and Travel Act refer to foreign commerce and thus apply | Defendants argued predicates do not show clear congressional intent to apply abroad (esp. mail/wire fraud and Travel Act) | Money‑laundering statutes and material‑support statute have express extraterritorial reach and support RICO claims; mail/wire fraud and Travel Act do not per se overcome Morrison, but alleged domestic use of U.S. mails/wires and travel sufficed to make those predicates domestic here |
| Whether enterprise location (foreign enterprise) alone bars RICO liability | Enterprise focus means foreign enterprise precludes RICO application | Enterprise location is dispositive under district court reading of Norex/Morrison | Rejected: enterprise location alone does not determine extraterritoriality; analysis should track predicate statutes and domestic conduct elements |
| Whether the European Community is a “foreign state” under §1332/§1603 (diversity jurisdiction) | EC is an agency/instrumentality (organ) of member states and thus a foreign state for §1332(a)(4) purposes | RJR argued EC is a supranational organization not an "organ" of any single foreign state and thus destroys diversity | Held that EC meets the FSIA §1603 factors (created for national purpose, supervised by member states, public employees funded, exclusive rights, treated as governmental) and qualifies as an agency/instrumentality; diversity jurisdiction exists |
Key Cases Cited
- Morrison v. National Australia Bank Ltd., 561 U.S. 247 (limitation on extraterritorial application of U.S. statutes; presumption against extraterritoriality)
- Norex Petroleum Ltd. v. Access Indus., 631 F.3d 29 (2d Cir.) (interpretation of RICO extraterritoriality arguments in light of Morrison)
- Pasquantino v. United States, 544 U.S. 349 (discusses wire fraud and foreign commerce; dictum noted)
- Filler v. Hanvit Bank, 378 F.3d 213 (2d Cir.) (five‑factor test for whether an entity is an “organ” under FSIA)
- In re Terrorist Attacks on September 11, 2001, 538 F.3d 71 (2d Cir.) (application of FSIA instrumentality analysis)
- United States v. Parness, 503 F.2d 430 (2d Cir.) (rejecting immunity for foreign enterprises committing domestic acts under RICO)