## Facts

- The European Community and numerous member states sued RJR Nabisco and related entities alleging participation in an international scheme involving narcotics trafficking proceeds and black-market cigarette sales in Europe.
- The alleged scheme involved criminal groups selling narcotics in Europe for euros, brokers exchanging and moving funds, and cigarette importers using euros to buy RJR cigarettes in bulk for distribution into European markets.
- Plaintiffs alleged RJR directed or controlled the scheme, used intermediaries to handle product distribution, bribed foreign officials, filed fraudulent documents with U.S. agencies, and received profits in the United States.
- Plaintiffs asserted civil RICO claims predicated on offenses including mail fraud, wire fraud, money laundering, Travel Act violations, and providing material support to foreign terrorist organizations.
- Plaintiffs also brought New York common-law claims including fraud, public nuisance, unjust enrichment, negligence, negligent misrepresentation, conversion, and money had and received.
- The district court dismissed the RICO claims as impermissibly extraterritorial and dismissed the state-law claims for lack of subject-matter jurisdiction, concluding the European Community was not a qualifying “foreign state” or “organ” for alienage diversity jurisdiction.

## Issues

1. Whether civil RICO may apply when much alleged racketeering conduct and the enterprise are largely foreign, in light of the presumption against extraterritoriality.
2. Whether the European Community qualifies as an “organ” of its member states under 28 U.S.C. §§ 1332(a)(4) and 1603, supporting alienage diversity jurisdiction over state-law claims.

## Decision

- The Second Circuit vacated the district court’s judgment and remanded.
- The court held the RICO claims were not barred as impermissibly extraterritorial where the alleged pattern included predicate statutes that expressly reach conduct abroad and the allegations included substantial U.S. connections (e.g., use of U.S. mails and wires, filings with U.S. agencies, and receipt of proceeds in the United States).
- The court held the European Community qualified as an “organ” of its member states and therefore a “foreign state” for purposes of § 1332(a)(4), permitting diversity jurisdiction over the state-law claims.

## Legal Principles

- The presumption against extraterritoriality limits application of federal statutes absent a clear indication of foreign reach.
- For civil RICO, alleged racketeering based on predicate offenses that themselves apply extraterritorially may be actionable to that same extent, because RICO incorporates those predicate offenses by reference.
- Allegations of domestic conduct and effects (including use of U.S. instrumentalities and receipt of proceeds in the United States) may support application of RICO to a cross-border racketeering scheme.
- Under 28 U.S.C. § 1332(a)(4) and § 1603, an entity that functions as an “organ” of foreign states may be treated as a “foreign state” plaintiff, supplying alienage diversity jurisdiction against U.S. citizen defendants.

## Conclusion

The Second Circuit allowed the case to proceed by holding that civil RICO could reach the alleged cross-border racketeering where predicates had extraterritorial scope and by recognizing the European Community as an “organ” of its member states for diversity jurisdiction, vacating the dismissals and remanding for further proceedings.


European Cmty. v. RJR Nabisco, Inc., 764 F.3d 129 (2d Cir. 2014)