Case Information
*2 Before: LEVAL, SACK, HALL, Circuit Judges .
Plaintiffs appeal from a judgment of the United States District Court for the Eastern District of New York (Garaufis, J. ) dismissing their complaint. The district court dismissed the claims under the federal RICO statute, 18 U.S.C. § 1961 et seq. , because it concluded that RICO does not apply to enterprises outside the United States. The state law claims were dismissed on the ground that they were not within the diversity jurisdiction of the federal courts. 28 U.S.C. § 1332. The Court of Appeals (Leval, J. ) concludes that the RICO claims are within the scope of the statute and that the state law claims are within federal diversity jurisdiction. Accordingly, the judgment of the district court is VACATED , and the case is REMANDED .
JOHN J. HALLORAN, JR., Speiser, Krause, Nolan & Granito, New York, N.Y. (Kevin A. Malone, Carlos A. Acevedo, Krupnick Campbell Malone Buser Slama Hancock Liberman & McKee, P.A., Fort Lauderdale, Fla., on the brief ), for Plaintiff-Appellants .
GREGORY G. KATSAS, Jones Day, Washington, D.C. (David M. Cooper, Mark R. Seiden, Jones Day, New York, N.Y., on the brief ), for Defendant-Appellees .
LEWIS S. YELIN, Attorney, Appellate Staff, Civil Division, Department of Justice, Washington, D.C. (Harold Hongju Koh, Legal Advisor, Department of State, Washington, D.C.; Tony West, Assistant Attorney General, Civil Division, Department of Justice, Washington, D.C.; Loretta E. Lynch, United States Attorney for the Eastern District of New York, New York, N.Y., Douglas N. Letter, Attorney, Appellate Staff, Civil Division, Department of Justice, Washington, D.C., on the brief ), for Amicus Curiae United States of America in support of neither party . Leval, Circuit Judge :
This is the latest installment in litigation brought by the European Community and twenty-six of its member states [1] (collectively “Plaintiffs”) against RJR Nabisco, Inc., and related entities (collectively “RJR”). [2] Plaintiffs appeal from the dismissal of their Second Amended Complaint (the “Complaint”) by the United States District Court for the Eastern District of New York (Garaufis, J. ). The principal issues they raise are (1) whether their claims under the Racketeer Influenced and Corrupt Organizations (RICO) statute, 18 U.S.C. § 1961 et seq ., are impermissibly extraterritorial, and (2) whether the European Community qualifies as an organ of a foreign state for purposes of diversity jurisdiction under 28 U.S.C. §§ 1332, 1603. The Complaint alleges that RJR directed, managed, and controlled a global money-laundering scheme with organized crime groups in violation of the RICO statute, laundered money through New York-based financial institutions and repatriated the profits of the scheme to the United States, and committed various common law torts in violation of New York state law. The district court dismissed the RICO claims because it concluded that RICO has no extraterritorial application. The court dismissed the state law claims because it determined that the European Community did not qualify as an organ of a foreign state under 28 U.S.C. §§ 1332, 1603 so that its participation in the suit destroyed complete diversity, and thus deprived the court of jurisdiction over the state law claims.
We conclude that the district court erred in dismissing the federal and state law claims. We disagree with the district court’s conclusion that RICO cannot apply to a foreign enterprise or to extraterritorial conduct. Recognizing that there is a presumption against extraterritorial application of a U.S. statute unless Congress has clearly indicated that the statute applies extraterritorially, see Morrison v. Nat’l Austl. Bank Ltd. , 130 S. Ct. 2869 (2010), we conclude that, with respect to a number of offenses that constitute predicates for RICO liability and are alleged in this case, Congress has clearly manifested an intent that they apply extraterritorially. As to the other alleged offenses, the Complaint alleges sufficiently important domestic activity to come within RICO’s coverage.
We believe that the district court also erred in ruling that the European Community’s participation as a plaintiff in this lawsuit destroyed complete diversity. The European Community is an “agency or instrumentality of a foreign state” as that term is defined in 28 U.S.C. § 1603(b). It therefore qualifies as a “foreign state” for purposes of 28 U.S.C. § 1332(a)(4), and its suit against “citizens of a State or of different States” comes within the diversity jurisdiction.
BACKGROUND
According to the Complaint, the scheme alleged to violate RICO involves a multi-step process beginning with the smuggling of illegal narcotics into Europe by Colombian and Russian criminal organizations. The drugs are sold, producing revenue in euros, which the criminal organizations “launder” by using money brokers in Europe to exchange the euros for the domestic currency of the criminal organizations’ home countries. The money brokers then sell the euros to cigarette importers at a discounted rate. The cigarette importers use these euros to purchase RJR’s cigarettes from wholesalers or “cut-outs.” The wholesalers then purchase the cigarettes from RJR and ship the cigarettes to the importers who purchased them. And the money brokers use the funds derived from the cigarette importers to continue the laundering cycle.
The Complaint alleges that RJR directed and controlled this money-laundering scheme, utilizing other companies to handle and sell their products. It alleges that RJR gave special handling instructions “intended to conceal the true purchaser of the cigarettes.” Complaint & 58. The Complaint also alleges that RJR’s executives and employees would travel from the United States to Europe, the Caribbean, and Central America in order to further these money-laundering arrangements; that they shipped cigarettes through Panama in order to use Panama’s secrecy laws to shield the transactions from government scrutiny; that RJR’s employees would take monthly trips from the United States to Colombia through Venezuela, bribe border guards in order to enter Colombia illegally, receive payments for cigarettes, travel back to Venezuela, and wire the funds to RJR’s accounts in the United States; that RJR employees traveled extensively from the United States to Europe and South America to supervise the money-laundering scheme and to entertain the criminal customers; that RJR communicated internally and with its coconspirators by means of U.S. interstate and international mail and wires; that RJR’s employees filed large volumes of fraudulent documents with the U.S. Customs Service and the Bureau of Alcohol, Tobacco and Firearms to further their scheme; that RJR received the profits of its money-laundering schemes in the United States; and that RJR acquired Brown & Williamson Tobacco “for the purpose of expanding upon their illegal cigarette sales and money-laundering activities,” id. && 100-103.
The Complaint asserts that in the course of executing this scheme RJR committed various predicate racketeering acts in violation of RICO, including mail fraud, wire fraud, money laundering, violations of the Travel Act, 18 U.S.C. § 1952, and providing material support to foreign terrorist organizations. In addition the Complaint asserts that RJR committed New York common law torts of fraud, public nuisance, unjust enrichment, negligence, negligent misrepresentation, conversion, and money had and received.
Defendants moved to dismiss both the RICO and state law claims. In its first
decision, the district court dismissed the RICO claims on the ground that RICO has no
application to activity outside the territory of the United States and cannot apply to a
foreign enterprise.
European Cmty. v. RJR Nabisco, Inc. (European Cmty. I)
, No.
02-CV-5771,
As for the state law claims alleged to come within the federal courts’ diversity jurisdiction, the district court observed that the necessary complete diversity might be destroyed if the European Community remained a plaintiff. European Cmty. I , 2011 WL 843957, at *8. The court allowed Plaintiffs’ counsel time to determine whether the European Community intended to remain a party to the suit. Id.
Once advised that the European Community would remain a party, the court ruled
that the state law claims did not come within the diversity jurisdiction of the federal courts.
It held that the European Community was not a “foreign state,” as used in 28 U.S.C.
§ 1332, with the consequence that the European Community’s continued participation in
the suit together with various foreign nation plaintiffs destroyed complete diversity and
deprived the court of jurisdiction.
European Cmty. v. RJR Nabisco, Inc. (European Cmty.
II)
,
DISCUSSION
Plaintiffs contend on appeal that the district court erred in concluding that the Complaint failed to allege federal law claims, and that the district court erred in finding absence of diversity jurisdiction for the state law claims. We agree with both contentions. I. RICO Claims
We turn first to the dismissal of the RICO claims. We review a district court’s
dismissal under Rule 12(b)(6)
de novo
.
Connecticut v. Duncan
,
A. The Extraterritoriality of RICO
The district court concluded that the Complaint failed to state actionable RICO
claims because the alleged enterprise was located and directed outside the United States.
The court’s analysis was based on the Supreme Court’s ruling in
Morrison
that the
presumption against extraterritorial application of U.S. statutes bars such application
absent a clear manifestation of congressional intent.
European Cmty. I
,
The RICO statute incorporates by reference numerous specifically identified federal criminal statutes, as well as a number of generically described state criminal offenses (known in RICO jurisprudence as “predicates”). 18 U.S.C. § 1961(1). It adds new criminal and civil consequences to the predicate offenses in certain circumstances C generally speaking, when those offenses are committed in a pattern (consisting of two or more instances) in the context of “any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.” 18 U.S.C. § 1962; see also id. § 1964.
Litigants, including Plaintiffs in this case, have argued that this just-quoted
provision of the statute, which makes RICO applicable to enterprises whose activities
affect foreign commerce, sufficiently indicates congressional intent that RICO should
apply extraterritorially. In
Norex
we rejected that argument, noting the Supreme Court’s
admonishment in
Morrison
that the mere fact of a statute’s generic reference to “interstate
or foreign commerce,” identifying the source of Congress’s authority to regulate, would
not qualify as a manifestation of congressional intent that the statute apply
extraterritorially.
Norex
,
We rejected also a similarly ambitious argument to the effect that Congress’s adoption of some RICO predicate statutes with extraterritorial reach indicated a congressional intent that RICO have extraterritorial reach for all its predicates. See id. In so holding, we refused to equate the extraterritoriality of certain RICO predicates with the extraterritoriality of RICO as a whole. See id. (“ Morrison similarly forecloses Norex’s argument that because a number of RICO’s predicate acts possess an extraterritorial reach, RICO itself possesses an extraterritorial reach.”).
The district court here construed our rejection in
Norex
of arguments that RICO
applies extraterritorially
in all of its applications
as a ruling that RICO can never have
extraterritorial reach in
any
of its applications.
See European Cmty. I
,
We conclude that RICO applies extraterritorially if, and only if, liability or guilt could attach to extraterritorial conduct under the relevant RICO predicate. Thus, when a RICO claim depends on violations of a predicate statute that manifests an unmistakable congressional intent to apply extraterritorially, RICO will apply to extraterritorial conduct, too, but only to the extent that the predicate would. Conversely, when a RICO claim depends on violations of a predicate statute that does not overcome Morrison ’s presumption against extraterritoriality, RICO will not apply extraterritorially either. In all cases, what constitutes sufficient domestic conduct to trigger liability is the same as between RICO and the predicate that forms the basis for RICO liability.
Our conclusion is compelled primarily by the text of RICO. Section 1961(1), which defines “racketeering activity” for purposes of RICO, incorporates by reference various federal criminal statutes, which serve as predicates for RICO liability. Some of these statutes unambiguously and necessarily involve extraterritorial conduct. They can apply only to conduct outside the United States. As examples, § 2332 of Title 18 criminalizes killing, and attempting to kill, “a national of the United States, while such national is outside the United States .” 18 U.S.C. § 2332(a) (emphasis added). Section 2423(c) criminalizes “[e]ngaging in illicit sexual conduct in foreign places .” Id. § 2423(c) (emphasis added). As the conduct which violates these two statutes can occur only outside the United States, Congress unmistakably intended that they apply extraterritorially. By explicitly incorporating these statutes by reference as RICO predicate offenses, Congress also unmistakably intended RICO to apply extraterritorially when § 2332 or § 2423(c) form the basis for RICO liability. Indeed, it is hard to imagine why Congress would incorporate these statutes as RICO predicates if RICO could never have extraterritorial application.
Other statutes that serve as RICO predicates clearly state that they apply to both domestic and extraterritorial conduct. For example, § 1203(b), which criminalizes hostage taking, explicitly applies to conduct that “occurred outside the United States” if the offender or the hostage is a U.S. national, the offender is found in the United States, or the conduct sought to coerce the government of the United States; sections 351(i) and 1751(k) expressly provide “extraterritorial jurisdiction” for their criminalization of assassination, kidnapping, or assault of various U.S. government officials; a provision of § 1512 criminalizes extraterritorial tampering with witnesses, victims, or informants; and § 2332b(e) expressly asserts “extraterritorial Federal jurisdiction” as to its criminalization of various “conduct transcending national boundaries” [3] including attempts, threats, or conspiracies to kill persons within the United States or damage property within the United States. Here too, Congress has not only incorporated into RICO statutes that overcome the presumption against extraterritoriality, it has also provided detailed instructions for when certain extraterritorial conduct should be actionable.
By incorporating these statutes into RICO as predicate racketeering acts, Congress has clearly communicated its intention that RICO apply to extraterritorial conduct to the extent that extraterritorial violations of those statutes serve as the basis for RICO liability. Thus, a RICO complaint predicating the defendants’ liability on their having engaged in a pattern of attempting, while “outside the United States,” to kill the plaintiff, “a national of the United States,” as prohibited by 18 U.S.C. § 2332(b), would state an actionable violation of RICO notwithstanding the extraterritorial conduct because RICO incorporates Congress’s express statement that § 2332(b) applies to whomever “ outside the United States attempts to kill . . . a national of the United States.” Id. (emphasis added). When, and to the extent that, a RICO charge is based on an incorporated predicate that manifests Congress’s clear intention to apply extraterritorially, the presumption against extraterritorial application of U.S. statutes is overcome. The district court was mistaken in interpreting our Norex decision as holding that RICO can never apply extraterritorially.
Applying its perception of our holding in Norex , the district court approached the question whether a RICO claim can apply to extraterritorial conduct by determining that the “focus” of RICO is the criminal enterprise and that any application of RICO is therefore impermissibly extraterritorial when the alleged enterprise is foreign. Because the district court viewed the enterprise alleged in the Complaint as consisting primarily of a loose association of foreign criminal organizations whose policies and activities were directed from outside the United States, it concluded that the enterprise was foreign. It accordingly held that the presumption against extraterritorial application of U.S. statutes barred application of RICO to the facts alleged in the Complaint. In our view, the court erred in that analysis for two principal reasons.
First, the district court’s approach necessarily disregards the textual distinctions in the statutes incorporated by reference as RICO predicates. For example, the money laundering statute explicitly applies to extraterritorial conduct “if (1) the conduct is by a United States citizen . . . and (2) the transaction or series of related transactions involves funds or monetary instruments of a value exceeding $10,000.” 18 U.S.C. § 1956(f). The district court’s reading of RICO would preclude extraterritorial applications of RICO where they are explicitly permitted under the money laundering statute. By contrast, some RICO predicates do not mention any extraterritorial application, see, e.g. , 18 U.S.C. § 1511 (criminalizing the obstruction of state or local law enforcement), while others clearly apply to extraterritorial conduct, but under different circumstances than the money laundering statute, see, e.g. , id. § 1203(b) (criminalizing a subset of extraterritorial hostage-taking). The district court would presumably have RICO apply extraterritorially in the same manner when claims are brought under these different predicates, effectively erasing carefully crafted congressional distinctions.
Nothing in RICO requires or even suggests such an erasure of statutory distinctions. Rather, RICO prohibits, roughly speaking, investing in, acquiring control of, working for, or associating with an “enterprise” if the defendant’s conduct involves (in a variety of potential fashions) a “pattern of racketeering activity.” 18 U.S.C. §§ 1962(c), 1964(c). RICO does not qualify the geographic scope of the enterprise. [4] Nor does RICO contain any other language that would suggest its extraterritorial application differs from that specified in its various predicates. Without any congressional instruction to the contrary, we see no reason to adopt a construction of RICO that would permit a defendant associated with a foreign enterprise to escape liability for conduct that indisputably violates a RICO predicate, but that could impose liability on a defendant associated with a domestic enterprise for extraterritorial conduct that does not fall within the geographic scope of the relevant predicate.
Second, the district court’s requirement that the defendant be, loosely speaking,
associated with a domestic enterprise in order to sustain RICO liability seems to us
illogical. Under that standard, if an enterprise formed in another nation sent emissaries to
the United States to engage in domestic murders, kidnappings, and violations of the various
RICO predicate statutes, its participants would be immune from RICO liability merely
because the crimes committed in the United States were done in conjunction with a foreign
enterprise. Surely the presumption against extraterritorial application of United States laws
does not command giving foreigners carte blanche to violate the laws of the United States
in the United States.
Cf. United States v. Parness
,
The district court’s standard has the additional, undesirable effect of complicating the question of what conduct exposes a party to liability in the United States. Under the substantive criminal law, conduct may be sufficiently extraterritorial to provide a party with peace of mind that it is not subject to U.S. law. Under the district court’s reasoning, however, if the party acts in concert with a “domestic enterprise,” it may nevertheless face stiff penalties under RICO. An important value of the presumption against extraterritoriality is predictability. An interpretation of RICO that depends on the location of the enterprise would undermine, rather than promote, that value.
We think it far more reasonable to make the extraterritorial application of RICO
coextensive with the extraterritorial application of the relevant predicate statutes. This
interpretation at once recognizes that “RICO is silent as to any extraterritorial application”
and thus has no extraterritorial application independent of its predicate statutes.
See Norex
,
B. The Conduct Alleged in the Complaint
The Complaint in our case alleges a pattern of racketeering activity based on predicates that include (1) money laundering, 18 U.S.C. §§ 1956-57, (2) providing material support to foreign terrorist organizations, 18 U.S.C. § 2339B, (3) mail fraud, 18 U.S.C. § 1341, (4) wire fraud, 18 U.S.C. § 1343, and (5) violations of the Travel Act, 18 U.S.C. § 1952. Applying Morrison ’s presumption against extraterritoriality to these predicate statutes, we conclude first that the money laundering and material support of terrorism statutes both apply extraterritorially under specified circumstances, including those circumstances alleged in the Complaint. Second, we conclude that the wire fraud and money fraud statutes, as well as the Travel Act, do not overcome Morrison ’s presumption against extraterritoriality. Nevertheless, because Plaintiffs have alleged that all elements of the wire fraud, money fraud, and Travel Act violations were completed in the United States or while crossing U.S. borders, we conclude that the Complaint states domestic RICO claims based on violations of those predicates.
1. Allegations of Money Laundering and Material Support of Terrorism
The money laundering predicates apply extraterritorially “if (1) the conduct is by a United States citizen . . . and (2) the transaction or series of related transactions involves funds or monetary instruments of a value exceeding $10,000.” 18 U.S.C. § 1956(f). Section 1956(f) expressly states that “[t]here is extraterritorial jurisdiction over the conduct prohibited by this section.” Section 1957 similarly criminalizes knowingly engaging “in a monetary transaction in criminally derived property of a value greater than $10,000 . . . derived from specified unlawful activity,” id. § 1957(a), if the offense A takes place outside the United States . . . , but the defendant is a United States person,” [6] id. § 1957(d) (emphasis added). The predicate act criminalizing material support for terrorism similarly states that it applies extraterritorially. It covers “knowingly provid[ing] material support or resources to a foreign terrorist organization,” id. § 2339B(a)(1), and adds that “[t]here is extraterritorial Federal jurisdiction over an offense under this section,” id. § 2339B(d)(2).
The claims of the Complaint asserting RICO liability for a pattern of violations of these predicates meet the statutory requirements for extraterritorial application of RICO. The district court erred in dismissing, as impermissibly extraterritorial, the RICO claims based on these predicates. [7]
2. Allegations of Mail Fraud, Wire Fraud, and Travel Act Violations
Whether Congress manifested an intent that the wire fraud statute, 18 U.S.C.
§ 1343,
[8]
or the Travel Act, 18 U.S.C. § 1952,
[9]
applies extraterritorially presents a more
complicated question. The argument in favor of extraterritoriality depends on their
references to foreign commerce. The wire fraud statute applies to the transmission of
communications by “wire, radio, or television . . . in interstate or foreign commerce” in the
execution of a scheme to defraud.
Id.
§ 1343. The Travel Act applies to “travel[] in
interstate or foreign commerce or use[] [of] the mail or any facility in interstate or foreign
commerce” with intent to further unlawful activity.
Id.
§ 1952(a). In
Morrison
, the
Supreme Court observed that a “general reference to foreign commerce . . . does not defeat
the presumption against extraterritoriality.”
Morrison
,
and thereafter performs or attempts to perform--
(A) an act described in paragraph (1) or (3) . . . or
(B) an act described in paragraph (2) . . . shall be fined . . . , imprisoned . . . , or both.
(b) As used in this section (i) A unlawful activity @ means . . . any act . . .
indictable under . . . section 1956 or 1957 [the money-laundering statute].
[10]
In
Pasquantino v. United States
,
Court suggested, in dictum, that, because “the wire fraud statute punishes frauds executed in interstate or foreign commerce” it “is surely not a statute in which Congress had only domestic concerns in mind.” Id. (internal citations and quotation marks omitted). Because that statement is dictum, and because Morrison explicitly rejects the reasoning on which it relies, we do not read Pasquantino to require us to construe the “foreign commerce” language of the wire fraud statute as rebutting the presumption against extraterritoriality.
[11] The mail fraud statute, 18 U.S.C. § 1341, provides that: Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, . . . for the purpose of executing such scheme or artifice or attempting so to do, places in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or deposits or causes to be deposited any matter or thing whatever to be sent or delivered by any private or commercial interstate carrier . . . shall be fined under this title or imprisoned . . . .
[12] As noted above, the allegations based on the money-laundering predicate and the predicate covering material support for terrorist activities state an actionable claim notwithstanding their non-domestic elements, because Congress manifested its intention that those predicates apply extraterritorially as RICO violations.
The Complaint alleges that RJR essentially orchestrated a global money laundering scheme from the United States by sending employees and communications abroad. It claims that RJR “communicated . . . with [its] coconspirators on virtually a daily basis by means of U.S. interstate and international wires as a means of obtaining orders for cigarettes, arranging for the sale and shipment of cigarettes, and arranging for and receiving payment for the cigarettes in question.” Complaint & 94. The Complaint also states that RJR and its coconspirators “utilized the interstate and international mail and wires, and other means of communication, to prepare and transmit documents that intentionally misstated the purchases of the cigarettes in question so as to mislead the authorities within the United States, the European Community, and the Member States.” Id. & 95. The Complaint alleges that “the U.S. mails and wires are used by [RJR] to bill and pay for the cigarettes, to confirm billing and payment for the cigarettes, to account for the payment of the cigarettes to [RJR] and [its] subsidiaries, and to maintain an accounting of the proceeds received by [RJR] from the sale of the cigarettes, with said proceeds ultimately being returned to [RJR] in the United States.” Id. & 96. The Complaint furthermore alleges:
[T]he employees, executives, and managers of [RJR] often traveled extensively, both to supervise the schemes and also to entertain [RJR = s] criminal customers. RJR executives traveled from the United States to Europe and South America to meet with, entertain, and maintain relations with RJR = s criminal customers. RJR executives and managers who engaged in such travel and entertainment often received large travel and entertainment budgets from [RJR].
Id. & 84.
Beyond these allegations that the Defendants managed their global money laundering schemes from the United States through foreign travel and communications, the Complaint also claims that the schemes themselves were directed at the United States and had substantial domestic effects. The Complaint alleges that RJR repatriated the profits of its unlawful activity into the United States through money laundering and other acts of concealment. The money laundering involved in one portion of the scheme C that comprising Russian organized crime and the Bank of New York C was largely centered in and operated from Queens, New York, where tens of millions of dollars were allegedly laundered. Defendants allegedly filed large volumes of false documents with the United States Customs Service and the Bureau of Alcohol, Tobacco and Firearms in order to deceive these agencies and permit the unlawful activity to continue. Finally, the Complaint alleges that the money laundering scheme it describes is intertwined with organized crime and narcotics trafficking in New York City, that much of the money laundering through cigarette sales occurs in New York City, and that millions of dollars’ worth of real estate have been purchased within New York in conjunction with the scheme.
We need not now decide precisely how to draw the line between domestic and extraterritorial applications of the wire fraud statute, mail fraud statute, and Travel Act, because wherever that line should be drawn, the conduct alleged here clearly states a domestic cause of action. The complaint alleges that defendants hatched schemes to defraud in the United States, and that they used the U.S. mails and wires in furtherance of those schemes and with the intent to do so. Defendants are also alleged to have traveled from and to the United States in furtherance of their schemes. In other words, plaintiffs have alleged conduct in the United States that satisfies every essential element of the mail fraud, wire fraud, and Travel Act claims. If domestic conduct satisfies every essential element to prove a violation of a United States statute that does not apply extraterritorially, that statute is violated even if some further conduct contributing to the violation occurred outside the United States. [13]
We note that, as we are reviewing a dismissal based solely on the contents of the Complaint, our conclusion is based entirely on the Complaint, which we find sufficient to state an actionable claim. Plaintiffs’ ability to prevail will depend, in part, on their ability to present evidence showing that the alleged statutory violation was domestic. Should the pattern of conduct of certain Defendants or certain schemes prove to be extraterritorial, the district court may need to narrow the scope of this action accordingly, through either motions for (partial) summary judgment or through carefully tailored jury instructions. II. Diversity Jurisdiction and State Law Claims
Next, we turn to the district court’s dismissal of Plaintiffs’ state law claims. We
review a district court’s legal conclusions dismissing state law claims for lack of subject
matter jurisdiction
de novo
.
Capital Ventures Int’l v. Republic of Argentina
,
Federal courts are powerless to adjudicate a suit unless they have subject matter
jurisdiction over the action. The district court determined that it lacked subject matter
jurisdiction over Plaintiffs’ state law claims under the diversity jurisdiction statute, 28
U.S.C. ' 1332. Section 1332 requires complete diversity between opposing parties.
See,
e.g.
,
Hallingby v. Hallingby
,
Section 1332(a)(4) grants the federal courts jurisdiction over suits where the amount in controversy exceeds $75,000 and the suit is between “a foreign state . . . as plaintiff and citizens of a State.” 28 U.S.C. § 1332(a)(4). A “foreign state” is defined for purposes of § 1332(a)(4) by § 1603, which is part of the Foreign Sovereign Immunities Act (“FSIA”). This latter section provides:
(a) A “foreign state” . . . includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state as defined in subsection (b). (b) An “agency or instrumentality of a foreign state” means any entity-- (1) which is a separate legal person, corporate or otherwise, and (2) which is an organ of a foreign state or political subdivision thereof . . .
and
(3) which is neither a citizen of a State of the United States . . . nor created under the laws of any third country.
Id. § 1603.
The European Community is therefore a “foreign state” for purposes of § 1332(a)(4) if it is an “agency or instrumentality of a foreign state.” Whether it is an agency or instrumentality of a foreign state, in turn, depends on whether it conforms to the definition in subsection (b). There is no doubt that the European Community satisfies the first and third elements of the definition of “agency or instrumentality” provided in § 1603(b). [15] It is clear also that the European Community is not a political subdivision of a foreign state. The question is whether the European Community is “an organ of a foreign state.” Id.
For the reasons discussed below, we conclude that the European Community is an organ of a foreign state, and thus an agency or instrumentality of a foreign state. As a result, the continued participation of the European Community in this suit does not destroy complete diversity.
A. Definitions
The FSIA does not include a definition of the term “organ.” A number of dictionaries we have consulted include definitions of “organ” that are altogether compatible with the European Community in its relationship to the states that formed it. See Organ Definition , Oxford English Dictionary, http://www.oed.com/view/Entry/ 132421 (last visited July 10, 2013) (“A means of action or operation, an instrument; (now) esp . a person, body of people, or thing by which some purpose is carried out or some function is performed.”); American Heritage Dictionary 875 (2d College ed. 1982) (“An organization that performs certain specified functions: The FBI is an organ of the Justice Department.”); Merriam-Webster’s Third New International Dictionary of the English Language 1589 (1976) (“an instrumentality exercising some function or accomplishing some end”). RJR in rebuttal points to definitions that characterize an organ as subordinate to a larger entity, arguing that this is not the case with the European Community’s relationship to its member nations. But the fact that the word is sometimes used to refer to a smaller part of a larger whole does not mean that the word can serve only in that fashion. The European Community was formed by its member nations to serve on their collective behalf as a body exercising governmental functions over their collective territories. We see no reason why it is not properly described as an organ of each nation.
In
Filler v. Hanvitt Bank
,
(1) whether the foreign state created the entity for a national purpose; (2) whether the foreign state actively supervises the entity; (3) whether the foreign state requires the hiring of public employees and pays their salaries; (4) whether the entity holds exclusive rights to some right in the [foreign] country; and (5) how the entity is treated under foreign state law.
Id.
(quoting
Kelly v. Syria Shell Petroleum Dev. B.V.
,
1. National Purpose
It seems beyond doubt that the member states that founded the European
Community did so for a “national purpose.”
Filler
,
2.
Supervision
We have said that a foreign state actively supervises an organ when it appoints the
organ’s key officials and regulates some of the activities the organ can undertake.
See, e.g.
,
Peninsula Asset Mgmt. (Cayman) Ltd. v. Hankook Tire Co.
,
It is true that these entities are just two of the five basic institutions of the European Community. However, this factor does not require the foreign state to micro-manage every aspect of the organ’s activities. The Council of Ministers is the European Community = s primary policy-making and legislative body. Therefore, the member states’ supervision of this entity enables the member states to supervise the most significant policy decisions made by the European Community.
3. Public Employees
The third factor asks “whether the foreign state requires the hiring of public
employees and pays their salaries.”
Filler
,
RJR argues that the European Community does not satisfy this factor because its
employees are not public employees
of the member states
.
See, e.g.
,
Patrickson v. Dole
Food Co.
,
4. Exclusive Rights
Fourth, we consider “whether the entity holds exclusive rights to some right in the
foreign country.”
Filler
,
5. Foreign State Law
Finally, the fifth factor asks “how the entity is treated under foreign state law.”
Filler
,
RJR argues that none of the member states has treated the European Community as its “organ,” rather than as a supranational body of the member states. This argument, however, depends on the proposition that a governmental entity created by a collectivity of governments to exercise certain powers in their stead and on their behalf cannot be at once a supranational entity and an organ or agency of the actors that created it. It appears to us that both descriptions are accurate, and the fact that the European Community functions as a supranational governmental entity does not negate its also being an organ and agency of its member states, which continue to exist as sovereign nations, notwithstanding having delegated some of their governmental powers to the supranational agency they created.
B. Multi-National Entities
RJR argues that the text and legislative history of the FSIA, along with the common law at the time of the FSIA’s enactment, demonstrate that an “organ” of a foreign state cannot include an international organization created by multiple states. We disagree.
First, we turn to the text of § 1603. The fact that § 1603(b)(2) uses the term “organ
of
a
foreign state” in the singular does not necessarily negate application to the European
Community, which serves numerous foreign states. 28 U.S.C. § 1603(b)(2) (emphasis
added). There is no logic to the proposition that an entity that serves as an organ of one
foreign state cannot also serve as the organ of another. The Dictionary Act furthermore
states that “[i]n determining the meaning of any Act of Congress, unless the context
indicates otherwise[,] words importing the singular include and apply to several persons,
parties, or things.” 1 U.S.C. § 1. Context “means the text of the Act of Congress
surrounding the word at issue, or the texts of other related congressional Acts.”
Rowland v.
Cal. Men’s Colony
,
RJR argues that because some dictionaries define “organ” as a smaller unit of a larger entity, an “organ” cannot be a larger international organization created by multiple foreign states. See Merriam-Webster’s Collegiate Dictionary 819 (10th ed. 1997) (giving as a definition of “organ”: “a subordinate group or organization that performs specialized functions”). This argument is not persuasive for at least two reasons: First, while some dictionary definitions treat an organ as smaller than, or subordinate to, the entity for which it functions as an organ, other dictionary definitions do not include any specification that the entity serving as an organ must be smaller or subordinate, but focus rather on the organ’s performance of a service. See definitions provided supra . Second, even if we accept an implicit connotation of subordinate status, that is not necessarily inconsistent with treating the European Community as an organ of the nations that created it. While the member states ceded to the European Community primacy as to certain specified governmental functions, they retained the vast majority of governmental control. Each member state continued to exist as a sovereign state, notwithstanding having voluntarily ceded portions of its authority to the European Community, and, through the Treaty of Lisbon, the member states dissolved the European Community and incorporated it into the European Union. Thus, in certain senses, the European Community exercised its powers by the sufferance of the member states, and was both subordinate to and smaller than the aggregate of the nation states that created it.
RJR advances a number of additional strained arguments to the effect that an international organization should not be considered an agency or instrumentality, none of which are convincing. [16]
* * * 1 2 We are satisfied that the European Community meets at least four, and possibly all 3 five of the Filler factors, and therefore qualifies as an organ and agency of a foreign state 4 under ' 1332(a)(4). The suit accordingly comes within the diversity jurisdiction, as 5 specified in 28 U.S.C. § 1332. [17]
6 CONCLUSION The judgment of the district court dismissing the action is VACATED, and the case
7 REMANDED for further proceedings. 8
framework for analyzing the immunities of international organizations suggests that Congress did not contemplate that such organizations would fall within the definition of “foreign state” under the FSIA. It suffices to say that Congress’s belief that certain international organizations were not organs of foreign states under the FSIA cannot be read to imply that Congress believed none could be organs of foreign states. Nothing in the statutes cited by RJR suggests that international organizations that do qualify as organs of a foreign state cannot, by virtue of their status as international organizations, be treated as foreign states under the FSIA.
[17] Plaintiffs also contend that the district court erred by dismissing their federal common law nuisance claim without discussion. Although the Complaint does not specify whether Plaintiffs’ public nuisance claim was brought under federal or state law, it appears that Plaintiffs stipulated that all of their common law claims were to be decided under New York law. Therefore, we have considered the dismissal of Plaintiffs’ public nuisance claim along with Plaintiffs’ other state law claims.
Notes
[1] The member state plaintiffs are: the Kingdom of Belgium, the Republic of Finland, the French Republic, the Hellenic Republic, the Federal Republic of Germany, the Italian Republic, the Grand Duchy of Luxembourg, the Kingdom of the Netherlands, the Portuguese Republic, the Kingdom of Spain, the Kingdom of Denmark, the Czech Republic, the Republic of Lithuania, the Republic of Slovenia, the Republic of Malta, the Republic of Hungary, the Republic of Ireland, the Republic of Estonia, the Republic of Bulgaria, the Republic of Latvia, the Republic of Poland, the Republic of Austria, the Kingdom of Sweden, the Republic of Cyprus, the Slovak Republic, and Romania.
[2] The procedural history of this litigation was summarized by the district court.
See
European Cmty. v. RJR Nabisco, Inc.
, No. 02-CV-5771,
[3] “[C]onduct transcending national boundaries” is defined as “conduct occurring outside of the United States in addition to the conduct occurring in the United States.” 18 U.S.C. § 2332b(g)(1).
[4] RICO does, however, limit its application to conduct associated with enterprises “engaged in, or the activities of which affect interstate or foreign commerce.” 18 U.S.C. § 1962.
[5] Our rejection of the district court’s conclusion — that RICO has an exclusive
focus on the location of the enterprise, which alone determines whether a particular
application is impermissibly extraterritorial — accords with the Ninth Circuit’s ruling in
United States v. Chao Fan Xu
,
[6] In defining the offense of money laundering, § 1956 also states that money laundering includes transporting “a monetary instrument or funds from a place in the United States to or through a place outside the United States or to a place in the United States from or through a place outside the United States.” 18 U.S.C. § 1956(a)(2). This however is irrelevant to our inquiry. The quoted passage necessarily involves crossing the United States border. Regulation of conduct in crossing the United States borders is not regulation of extraterritorial conduct. The presumption against extraterritorial application of United States statutes does not apply to statutes that regulate entering and exiting the United States.
[7] It might be argued that Congress’s clear statement in the predicate statute that it applies extraterritorially does not constitute a congressional statement that a RICO charge predicated on that statute applies extraterritorially. This overlooks the fact that the predicate statutes are incorporated by reference into the RICO statute and are a part of it.
[8] The wire fraud statute, 18 U.S.C. § 1343, provides that: Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned . . . .
[9] The Travel Act, 18 U.S.C. § 1952, provides, in pertinent part, as follows: (a) Whoever travels in interstate or foreign commerce or uses the mail or any
[13] We need not decide whether domestic conduct satisfying fewer than all of the statute’s essential elements could constitute a violation of such a statute.
[14] Since this lawsuit was filed, the European Community has been incorporated into
the European Union. Despite this change, the European Community remains the relevant
entity, as the court’s subject matter jurisdiction and a party’s instrumentality status for
purposes of § 1603 are both determined at the time when the complaint is filed.
See
Newman-Green, Inc. v. Alfonzo-Larrain
,
[15] The European Community has independent legal status. Consolidated Version of
the Treaty Establishing the European Community, art. 281, Oct. 11, 1997, O.J. (C340) 293
(1997) [hereinafter EC Treaty] (“The Community shall have legal personality.”). The
European Community was not created under the laws of a non-member state.
See
EC
Treaty, art. 313;
see also In re Air Crash Disaster Near Roselawn, Ind.
,
[16] RJR also cites, in support of its position, the enactment of separate statutes, 22 U.S.C. §§ 288-288 l , which provide certain immunities to certain international organizations, but which do not grant co-extensive immunities to all international organizations as the FSIA provides to foreign states. RJR argues that this separate statutory