Morrison, RICO And Extraterritorial Reach

by Dorsey & Whitney LLP

In the wake of Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010), a critical question has been whether a statute has extraterritorial reach. In Morrison the Court rejected a claim that Exchange Act Section 10(b) had such effect despite years of Circuit Court president to the contrary. Rather, the High Court in Morrison concluded that the reach of the Section was the U.S. water’s edge – either the securities transaction had to take place on a U.S. exchange or within the country or it was not covered by the statute. This conclusion was based largely on the presumption against extraterritorial effect absent express language in the provision that Congress intended such an effect.

Following Morrison the Second Circuit rejected claims of extraterritoriality in a RICO suit. Norex Petroleum Ltd. v. Access Industries, Inc., 631 F. 3d 29 (2nd Cir. 2010). In European Community v. RJR Nabisco, Inc., 11-2475 (2nd Cir. Decided April 29, 2014) the Court clarified Norex, however, holding that Morrison does not always bar RICO from having extraterritorial reach.

The complaint claims that RJR directed, managed and controlled a global money-laundering scheme with organized crime groups in violation of RICO. The firm is claimed to have laundered money through New York based financial institutions and repatriated the profits of the scheme to the United States. This is accomplished through a multi-step scheme that begins with the sale of drugs which produces euros. Money brokers then sell the euros to cigarette importers at a discount and use the money to buy RJR’s cigarettes. The money brokers then use the funds from the cigarette importers to repeat the cycle. The enterprise is a loose association of Colombian and Russian drug-dealing organizations and European money brokers whose activity were directed outside the U.S. RJR committed various predicate racketeering act including mail fraud, wire fraud, money laundering, violations of the Travel Act and providing material support to foreign terrorist organizations.

The District Court dismissed the RICO claim, following Norex and Morrison. The Circuit reversed. In Norex the Court rejected a claim that RICO had extraterritorial reach simply because it involved an enterprise which is engaged in activities that affect “interstate or foreign commerce.” The Court also rejected claims of extraterritorial effect simply because some of the predicate acts for RICO are based on statutes which in and of themselves clearly have such effect. However, the District Court’s conclusion that Norex rejected of extraterritorially in all of its applications . . “ is incorrect. Rather, the Court “conclude[d] 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.”

This conclusion, the Court held, is compelled largely by the statutory language. RICO itself does not have language which compels the conclusion that it has extraterritorial effect. Yet Section 1961(1), which defines “racketeering activity” for purposes of RICO, incorporates by reference a number of federal criminal statutes. Some of those statutes by their terms can only apply to activities outside the U.S. Other statutes clearly apply to both domestic and extraterritorial conduct. “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.”

The District Court’s conclusion that RICO could never have extraterritorial effect disregarded the differences between the statutes which can be predicate acts. Likewise the Court’s conclusion that the defendant must be associated with a domestic enterprise to sustain RICO liability is “illogical.” This would mean that foreign actors who engage in domestic crimes are immune under the statute. That clearly is not the meaning of the presumption against extraterritorial application. Rather, “[w]e think it is 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.” This result is consistent with the recent ruling in U.S. v. Chao Fan Xu, 706 F. 3d 965 (9th Cir. 2013).


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dorsey & Whitney LLP | Attorney Advertising

Written by:

Dorsey & Whitney LLP

Dorsey & Whitney LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.