United States: Supreme Court: RICO Has Extraterritorial Reach But Requires Domestic Injury

Nicholas Melzer and Vince Farhat are Partners and Michael Boardman is an Associate in Holland & Knight's Los Angeles office


  • The Supreme Court's June 20, 2016, ruling firmly establishes that certain "predicate acts" committed abroad may result in RICO liability.
  • However, though a RICO claim may be predicated on foreign conduct, a private civil plaintiff must plead "domestic injury."

The Supreme Court issued an important opinion on June 20, 2016, regarding the extraterritorial reach of the Racketeering Influenced and Corrupt Organizations Act (RICO) that may have real-world implications for companies operating abroad. In RJR Nabisco, Inc. v. European Community, et al., No. 15-138 (June 20, 2016), 2016 WL 3369423 (RJR Nabisco), the Court held that some foreign conduct may be actionable under RICO and that private civil plaintiffs may predicate RICO claims on certain foreign conduct if they allege "domestic injury" resulting from those foreign acts.

The Court's ruling is a double-edged sword for multinational companies. While it generally prevents plaintiffs, including foreign governments, from bringing civil RICO claims for conduct that does not cause injury in the United States, the decision also may provide an additional avenue for private plaintiffs to seek treble damages for conduct that occurred solely in other countries.

RICO's Broad Reach

RICO makes it unlawful (and provides a private right of action) for "any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity ..." 18 U.S.C. §1962(c). The statute defines "racketeering activity" very broadly to include activities — referred to as "predicate acts" — normally associated with organized crime, such as "murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in a controlled substance or listed chemical," but it also includes more common predicate acts, such as mail and wire fraud. 18 U.S.C. §1961(1). Civil RICO claims have become a favorite of the plaintiffs' bar in recent years due to their stigma as "quasi-criminal," the Supreme Court's prior admonition that "RICO is to 'be liberally construed,'" and the statute's provision for treble damages and attorney's fees. Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 497-98 (1985); 18 U.S.C. 1964. Until last week, it was unclear to what extent foreign conduct could create RICO liability.

RJR Nabisco in the Lower Courts: Mixed Answers on RICO's Extraterritorial Reach

The facts of RJR Nabisco are complicated and its procedural history is long. Greatly simplified, the European Community (EC), on behalf of 26 of its member states, filed a civil suit against RJR Nabisco, Inc. and various related entities (collectively, RJR) in 2000, alleging that RJR had been engaged in a complex money laundering scheme in violation of RICO. RJR Nabisco, No. 15-138 at 4. The scheme had multiple parts and involved allegations that Colombian and Russian organizations smuggled illegal narcotics into Europe and sold those narcotics in Europe in exchange for euros. Those euros were then sold by money brokers to cigarette importers at discounted rates. The importers then purchased cigarettes from wholesalers, who had purchased cigarettes from RJR Nabisco, and then delivered them into the European Union. The money brokers then used the proceeds from the sale of the euros to help finance further importation of narcotics and continue the money laundering cycle. The EC claimed that this conspiracy harmed its members in various ways, including through competitive harm to their state-owned cigarette businesses, lost tax revenue from black-market cigarette sales, harm to European financial institutions, currency instability and increased law enforcement costs.

Since its filing in 2000, the case has wound its way up and down the federal court system at the pleadings stage. In 2011, the District Court dismissed the EC's Second Amended Complaint — "a structureless morass of allegations, devoid of any sequential description of events" — on the grounds that RICO does not apply to extraterritorial acts. European Community v. RJR Nabisco, Inc., 2011 WL 843957 at 2, 7 (E.D.N.Y. 2011). The District Court reasoned that because "RICO is silent as to extraterritorial application," and the "'enterprise'. . . [is] the 'focus' of the statute," "a RICO 'enterprise' must be a 'domestic enterprise'" in order for RICO to apply. Thus, the District Court held that the EC's RICO claims were extraterritorial and must be dismissed because the complaint "strongly suggests that the money laundering [conspiracy] was directed by South American and European criminal organizations." The Second Circuit rejected the District Court's reasoning and reversed, holding that even though RICO is silent as to its extraterritorial application, its predicate acts are not. European Community v. RJR Nabisco, Inc., 764 F.3d at 139. The Court of Appeals held that "RICO applies extraterritorially if, and only if, liability or guilt could attach to extraterritorial conduct under the relevant RICO predicate," and, because the complaint alleged predicate acts with extraterritorial reach, including money laundering and material support for terrorism, it was dismissed in error. In contrast, the Ninth Circuit had recently held that RICO does not apply extraterritorially. United States v. Chao Fan Xu, 706 F.3d 965, 974–975 (9th Cir. 2013).

The Supreme Court's Answer: RICO Claims May Be Predicated on Some Extraterritorial Acts, But Only Where There is Domestic Injury

The Supreme Court reversed and remanded the Second Circuit's decision on June 20, 2016. RJR Nabisco, No. 15-138. Justice Samuel Alito, writing for a four-justice majority, partially agreed with the Second Circuit and held that "a violation of §1962 [RICO] may be based on a pattern of racketeering that includes predicate offenses committed abroad, provided that each of those offenses violates a predicate statute that is itself extraterritorial." Thus, RICO applies to all "patterns of racketeering," "regardless of whether they are connected to a 'foreign' or 'domestic' enterprise." For example, though "[t]he inclusion of some extraterritorial predicates does not mean that all RICO predicates extend to foreign conduct," "a violation of §1962 could be premised on a pattern of killings of Americans abroad in violation of §2332(a) — a predicate that all agree applies extraterritorially — whether or not any domestic predicates are also alleged." Additionally, however, the court held that even when a RICO claim is permissibly predicated on foreign conduct, "a RICO enterprise must engage in, or affect in some significant way, commerce directly involving the United States." Therefore, "[a] private RICO plaintiff . . . must allege and prove a domestic injury to its business or property." RICO "does not allow recovery for foreign injuries." Justices Ruth Bader Ginsburg, Stephen Breyer and Elena Kagan concurred in the Court's ruling regarding the extraterritorial application of RICO, but dissented from the Court's ruling requiring domestic injury. Justice Sonia Sotomayor took no part in the consideration or decision of the case.

Potential RICO Liability for Foreign Conduct Reinforces the Need for Effective International Compliance Programs

The Court's decision provides much-needed clarity regarding the extraterritorial reach of RICO. It generally prevents plaintiffs, including foreign governments, from bringing civil RICO claims in the U.S. for conduct abroad that injures their interests abroad. But, at the same time, the decision also clears a path for private plaintiffs to bring civil RICO claims in the U.S., and seek treble damages, for conduct that occurred solely in other countries. The overall impact of this decision remains uncertain, but it is possible that companies will see an increase in civil RICO cases based on foreign conduct. Given the size and scope of many multinational companies and organizations, effective international compliance programs remain essential to reduce the risk of civil RICO liability.

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.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.