Recently, in Bascuñan v. Elsaca, the Second Circuit adopted a new test for domestic injuries alleged under the Racketeer Influenced and Corrupt Organizations Act (RICO) when the plaintiff is a foreign litigant. The Second Circuit reversed the district court's dismissal, thereby reviving the civil RICO suit by a Chilean national alleging theft of specifically identifiable property valued at $64 million that was located in the United States when stolen.
This case is the first to tackle the question of how to determine whether an injury under RICO is "domestic" after the Supreme Court's ruling in RJR Nabisco v. European Community. In RJR Nabisco, the Court held that a private right of action under RICO does not apply extraterritorially, but did not specifically set forth a test for determining whether an injury is domestic. Shortly after the RJR Nabisco decision, the district court in Bascuñan dismissed the plaintiff's complaint, applying a residency-based test. The court of appeals ultimately rejected the district court's residency test, noting that under such test, "a plaintiff who is a foreign resident may nevertheless allege a civil RICO injury that is domestic." Furthermore, the court stated that "[a]t a minimum, when a foreign plaintiff maintains tangible property in the United States, the misappropriation of that property constitutes a domestic injury."
While the court acknowledged that a plaintiff's residence may often be relevant in determining whether certain types of business injuries constitute a domestic injury, when it comes to the property injury alleged here (i.e., misappropriation of the plaintiff's trust funds from a specific bank account located in the United States), the location of the property and not the residence of the plaintiff is the dispositive factor.
Additionally, the Second Circuit highlighted that under the district court's decision, no foreign plaintiff could bring a RICO case, noting that "[f]ew things could be more destructive to the comity underlying the international system than legal rules that penalize international economic cooperation and deter foreign investment simply because such activity involves 'foreign' counterparties."
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