RJR Nabisco, Inc. v. European Community

Background

The European Community and 26 member states sued RJR Nabisco and related companies, accusing them of a global money‑laundering scheme. The complaint says drug sales in Europe were turned into euros that helped pay for large shipments of RJR cigarettes and that other illegal sales and transfers were involved. The District Court dismissed the case as reaching activity and injury outside the United States. The Second Circuit reinstated the RICO claims and held RICO can apply extraterritorially and that private plaintiffs may recover for foreign injuries.

Reasoning

The Court used a two‑step test based on the presumption against extraterritoriality. First it asked whether Congress clearly indicated a law applies abroad. Because several criminal statutes that RICO incorporates expressly cover some foreign conduct, the Court held RICO’s substantive prohibitions (§1962(b) and (c)) may reach overseas racketeering when those predicates themselves apply abroad. The Court said the location of the enterprise does not by itself block RICO liability. Second, the Court treated RICO’s private damages provision (§1964(c)) separately and found it contains no clear instruction to allow recovery for injuries suffered abroad, so a private plaintiff must allege and prove a domestic injury.

Real world impact

The decision permits criminal or civil RICO claims tied to predicates that clearly reach abroad, but it prevents private treble‑damages suits for harms that occurred only outside the United States. Because the European plaintiffs waived any domestic damages claims in this case, their remaining private damages claims were dismissed. Lower courts must apply these rules to other cross‑border disputes.

Dissents or concurrances

Justice Ginsburg, joined by Justices Breyer and Kagan in part, would have allowed private RICO suits for foreign injuries in many circumstances, arguing §1964(c) should follow §1962’s reach and that the complaint shows significant U.S. conduct.