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.

LEGAL BACKGROUND

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