United States: Second Circuit Shifts Focus From Enterprise To Predicates In Evaluating RICO Extraterritoriality

In European Community v. RJR Nabisco, Inc.,1 the latest decision to address the extraterritorial application of the federal RICO statute,2 the Second Circuit ruled last week that the question of what is or is not an impermissible application of RICO beyond domestic borders turns not on the location of the "enterprise," but on the scope and reach of the statutes that form the underlying predicate violations. In so doing, the Circuit rejected the principle—previously adopted by certain district courts—that RICO's reach depends on the location of the enterprise, and it paved the way for RICO claims involving a purely foreign enterprise.


In Morrison v. National Australian Bank Ltd., decided in 2010, the Supreme Court addressed whether plaintiffs impermissibly sought extraterritorial application of Section 10(b) of the Securities Exchange Act of 1934. At the outset, the Court reaffirmed the "longstanding principle of American law that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States." It then explained that, in the absence of such intent, one must look to the "focus" of the statute at issue— i.e., "the activities the statute seeks to regulate [and] parties or prospective parties to those [activities] that the statute seeks to protect"—to determine whether the claim in question is improperly extraterritorial.3 The Morrison Court found that Section 10(b) focused "not upon the place where the deception originated, but upon purchases and sales of securities in the United States." Because the sales of securities at issue occurred outside the U.S., the Court rejected plaintiffs' argument that they sought merely to enforce a domestic claim since the deceptive conduct was alleged to have occurred in Florida.4

Three months later, in Norex Petroleum Ltd. v. Access Industries, Inc.,5 the Second Circuit applied Morrison to a private RICO claim. The Court observed that RICO was "silent" as to extraterritorial application and is thus presumed to apply only within the territorial jurisdiction of the U.S. Among other things, it also rejected plaintiff's argument that the RICO statute applies extraterritorially for all of its predicates merely because certain RICO predicate statutes specifically apply to foreign conduct.6

Norex, however, did not articulate an overall standard for determining when a RICO claim is sufficiently domestic or improperly extraterritorial. Thereafter, district courts in the Second Circuit took different approaches to evaluating RICO claims. Some focused on the location of the alleged enterprise,7 others concentrated on the location of the purported pattern of racketeering activity (or predicate acts),8 and still others considered a combination of factors.9



In European Community, plaintiffs alleged that RJR Nabisco, Inc. and related entities ("RJR") managed and controlled a global money-laundering scheme involving organized criminal factions in Russia and Colombia. According to plaintiffs, these organizations smuggled narcotics into Europe, earning revenue in Euros. The Euros were then laundered: first, using money brokers, the Colombian and Russian organizations exchanged the Euros for various domestic currencies; second, the brokers sold the Euros to cigarette importers at a discounted rate; and third, the importers used the Euros to purchase RJR cigarettes from wholesalers, who in turn purchased the cigarettes from RJR. Plaintiffs also alleged, inter alia, that RJR employees travelled from the U.S. to Europe, Central America and other locations to facilitate the scheme, repatriated foreign profits from the scheme to accounts in the U.S., communicated with co-conspirators via interstate and international mail and wires, and defrauded certain government agencies, such as the U.S. Customs Service.

Based on these allegations, plaintiffs asserted violations of RICO predicated on mail fraud, wire fraud, money laundering, providing material support to foreign terrorist organizations, and violations of the Travel Act.10

District Court's Ruling

Following the approach in Morrison, the District Court analyzed the RICO statute and found that it focused on the purported enterprise, not the alleged (pattern of) predicate acts. The District determined that the alleged enterprise was located and directed from outside the U.S. and thus dismissed the claims as improper attempts to apply RICO extraterritorially.11 In essence, the Court ruled that RICO allegations involving a foreign enterprise cannot, as a matter of law, form the basis for RICO liability. While the Court devoted little substantive attention to Norex, it cited the case for the proposition that RICO "is silent as to any extraterritorial application," and, given Morrison, "this silence prohibits any extraterritorial application of RICO."12

Second Circuit's Decision

The Second Circuit reversed, holding that the lower court had erred in finding that RICO cannot apply to a foreign enterprise or to foreign conduct.13 The Court found that the District Court had mistakenly construed the rejection of plaintiff's arguments in Norex as a blanket holding that RICO can never have extraterritorial reach in any of its applications. It also rejected the enterprisebased approach in favor of a predicate-statute-based test, holding that RICO applies extraterritorially if, but only if, "liability or guilt could attach to extraterritorial conduct under the relevant RICO predicate" —even where the enterprise itself is outside the U.S. As the Second Circuit put it, "[w]hen . . . 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."14

Next, the Court held that the statutory language of two of the predicate violations alleged by plaintiffs—money laundering and providing material support to foreign terrorist organizations—expressly apply beyond the geographic borders of the U.S. in certain circumstances—including those alleged by plaintiffs—and thus overcome the presumption against extraterritorial application. The money laundering statute, for example, criminalizes transactions in criminally derived property valued at greater than $10,000 where, among other things, the conduct "takes place outside the United States" but "the defendant is a United States person." Similarly, Section 2399B of Title 18 expressly prohibits "'knowingly provid[ing] material support or resources to a foreign terrorist organization,'" and expressly extends "extraterritorial Federal jurisdiction over an offense under this section."15

The Court found that that the remaining predicates do not apply extraterritorially. The mail fraud statute, the Court noted, contains no provision at all for transnational application, and the reference to "interstate or foreign" commerce in the wire fraud statute and Travel Act is too generic to defeat the presumption against extraterritoriality.16

Notwithstanding its ruling that the mail and wire fraud statutes and the Travel Act cannot be applied extraterritorially, the Court did not dismiss the RICO claims predicated thereon, finding that the complaint alleged sufficient domestic conduct in violation of those statutes. While the Court catalogued such allegations, it refused to state "precisely how to draw the line between domestic and extraterritorial applications of the wire fraud statute, mail fraud statute, and Travel Act." The Court found that "wherever that line should be drawn, the conduct alleged here clearly states a domestic cause of action" because "plaintiffs have alleged conduct in the United States that satisfies every essential element of" those statutes.17


The European Community decision clarified the ruling in Norex. It also rejected the location-of-the-enterprise test in favor of a predicate-statute-based standard to determine the appropriate reach of RICO. Thus, RICO claims may apply to a foreign enterprise and foreign predicate conduct if the text of the predicate statute evinces specific and direct Congressional intent to reach beyond U.S. borders. Likewise, RICO claims may proceed notwithstanding the fact that the enterprise at issue is foreign, and even if the predicate statute does not overcome the presumption against extraterritorially, if the conduct alleged to violate that statute is sufficiently domestic.


1 No. 11-2475-CV, 2014 WL 1613878 (2d Cir. Apr. 23, 2014).

2 Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et. seq.

3 Morrison v. Nat'l Australian Bank Ltd., 130 S. Ct. 2869, 2877, 2881-84 (2010).

4 Id. at 2883-84, 2888.

5 631 F.3d 29 (2d Cir. 2010).

6 Id. at 31, 33.

7 See, e.g., Cedeño v. Intech Grp., Inc., 733 F. Supp. 2d 471, 73-74 (S.D.N.Y. 2010); In re LIBORBased Fin. Instruments Antitrust Litig., 935 F. Supp. 2d 666, 731-32 (S.D.N.Y. 2013).

8 See, e.g., Chevron Corp. v. Donziger, 871 F. Supp. 2d 229, 243-45 (S.D.N.Y. 2012).

9 See, e.g., Tymoshenko v. Firtash, 11-CV-2794, 2013 WL 1234821, at *11-13 (S.D.N.Y. Mar. 26, 2013).

10 European Cmty., 2014 WL 1613878, at *1-2.

11 European Cmty. v. RJR Nabisco, Inc., 02-CV-5771, 2011 WL 843957, at *4-5, 7 (E.D.N.Y. Mar. 8, 2011).

12 Id. at *4.

13 European Cmty., 2014 WL 1613878, at *7.

14 Id. at *4-5.

15 Id. at *8 (quoting, discussing and analyzing the statutes noted above).

16 See id. (quoting, discussing and analyzing the statutes noted above).

17 Id. at *9-10.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions