Cedeño v. Castillo, 457 F. App'x 35

SUMMARY ORDER

Plaintiff-appellants Eligió Cedeño and Cedel International Investment Ltd. (Collectively “Cedeño”) appeals from an order and partial final judgment entered on September 13, 2010, by the United States District Court for the Southern District of New York (Rakoff, /.), dismissing his case as to the defendants-appellees for failure to state a claim pursuant to Rule 12(b)(6), Fed.R.Civ.P. Cedeño’s complaint alleges that the defendants are liable under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq., for harm caused to him by their associated enterprise and its pattern of racketeering, particularly money laundering in violation of 18 U.S.C. § 1956 and extortion in violation of 18 U.S.C. § 1951. By opinion dated August 24, 2010, the district court held that Cedeño’s complaint alleged an extraterritorial violation of RICO that the statute did not reach. We assume the parties’ familiarity with the facts and procedural history of the case.

“We review de novo a district court’s dismissal for failure to state a claim, see Fed.R.Civ.P. 12(b)(6), assuming all well-pleaded, non-eonclusory factual allegations in the complaint to be true.” Kiobel v. Royal Dutch Petroleum, Co., 621 F.3d 111, 124 (2d Cir.2010). A district court’s refusal to grant leave to amend is reviewed for abuse of discretion. ATSI v. Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 108 (2d Cir.2007).

On appeal, Cedeño raises principally three arguments. First, he contends that his claim fits within the scope of RICO’s domestic application because it alleges conduct in the United States that is within RICO’s “focus.” See Morrison v. Nat’l Austl. Bank Ltd., — U.S. -, -, 130 S.Ct. 2869, 2884, 177 L.Ed.2d 535 (2010) (“Morrison ”) (holding that to determine whether a complaint alleges a claim within a statute’s domestic ambit, courts should consider if the alleged conduct in or contact with the United States is within the statute’s “focus,” meaning “the object[ ]” of the statute’s “solicitude” or what the “statute seeks to regulate”) (internal quotation marks omitted). This argument lacks merit. Regardless of whether RICO is found to focus on domestic enterprises, as the district court held, or on patterns of racketeering, as Cedeño contends it should be, the complaint here alleges inadequate conduct in the United States to state a domestic RICO claim. See Norex Petroleum, Ltd. v. Access Indus., Inc., 631 F.3d 29, 33 (2d Cir.2010) (per curiam) (finding that the “slim contacts” with the United States alleged by plaintiff were “insufficient to support extraterritorial application of the RICO statute”). Accordingly, it is unnecessary for us to decide what constitutes the “object[ ]” of RICO’s “solicitude.” Morrison, 130 S.Ct. at 2884.

If an enterprise must be located in the United States for a private plaintiff to bring a domestic RICO claim, then Cede-ño’s complaint was rightfully dismissed as the enterprise he alleges is almost exclusively Venezuelan. The parties dispute what standard this Court should use when determining the locus of an enterprise, but under any of the proposed standards the association-in-fact enterprise alleged here — comprised of various components of the Venezuelan government — is patently foreign.

Alternatively, even if this Court adopted the “pattern of racketeering” focus advocated by Cedeño and the government, it would still affirm the district court’s decision. The only connection between (1) the pattern of racketeering that Cedeño alleges occurred in the United States (money laundering) and (2) the injuries he sustained (imprisonment and interference with his assets) is that members of the Venezuelan Government used the Micros-tar Transaction as a pretext for his subsequent arrest. Thus, Cedeño fails to allege that the domestic predicate acts proximately caused his injuries. See Hemi Grp. LLC v. N.Y.C., — U.S. -, -, 130 S.Ct. 983, 991, 175 L.Ed.2d 943 (2010) (“[T]he compensable injury flowing from a [RICO] violation ... necessarily is the harm caused by [the] predicate acts”) (internal quotation marks omitted) (alterations in original) (emphasis added); Holmes v. Secs. Investor Prot. Corp., 503 U.S. 258, 268, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992) (explaining that proximate cause, for the purposes of RICO, requires “some direct relation between the injury asserted and the injurious conduct alleged”).

Second, Cedeño asserts that even if his complaint does not allege a domestic RICO violation, his claims should not have been dismissed because the predicate offenses on which they are based — 18 U.S.C. §§ 1951 and 1956(f) — apply extraterritorially, and RICO incorporates these statutes. This argument is foreclosed by Norex, 631 F.3d 29, where this Court declined to link the extraterritorial application of RICO to the scope of its predicate offenses. Id. at 33 (holding that RICO is inapplicable extraterritorially even though statutes defining some of its predicate offenses explicitly apply abroad).

Third, Cedeño avers that the district court erred by denying his request — in his supplemental reply brief submitted to the district court — to “replead the U.S. contacts with greater particularity.” PL Br. at 50 (quotation marks omitted). But Ce-deño never provided the district court with any details as to how he might remedy his deficient complaint in light of Morrison. Nor does he on appeal, aside from reciting “recent factual developments” that occurred after the district court entered judgment. Id. at 51. Accordingly, the district court did not abuse its discretion in denying Cedeño’s request. Nevertheless, Cedeño argues this Court should vacate and remand in light of the “change in law” effected by Norex and “recent factual developments that bring []his case more clearly within the domestic application of RICO.” Id. at 51, 52. But Cedeño was on notice of the territorial deficiencies in his complaint well before Norex, because several of the defendants raised extraterritoriality as a basis for dismissal, even before the Supreme Court entered its decision in Morrison. Moreover, Cedeño’s reliance on “recent factual developments” is misplaced. If the defendants committed additional RICO violations after Cedeño filed his notice of appeal, he remains free to initiate a second action. Thus, we reject Cedeño’s request to remand with instructions to permit the filing of an amended complaint.

We have considered all of Cedeño’s remaining arguments and find them to be without merit. Accordingly, for the reasons stated above, the judgment of the district court is AFFIRMED.

Case Details

Case Name: Cedeño v. Castillo

Court Name: Court of Appeals for the Second Circuit

Date Published: Jan 25, 2012

Citations: 457 F. App'x 35; No. 10-3861-cv

Docket Number: No. 10-3861-cv

Court Abbreviation: 2d Cir.