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November 06, 2017

Second Circuit Explains Alleging a Domestic Injury in RICO Complaint for Extraterritorial Actions

Authored by Eric (Rick) Rein

 in International Asset Recovery

The Second Circuit is the first court of appeals to consider the holding in the United States Supreme Court's decision in RJR Nabisco Inc. v. European Community, 136 S. Ct. 2090 (2016), which said that Section 1964 (c) of RICO does not apply extraterritorially for injury to business or property and requires a domestic injury, not merely recovery for foreign injuries. The Supreme Court did not explain how to determine a domestic injury.

In Bascunan v. Elsaca, 2017 US App Lexis 21517 (2d Cir. Oct. 30, 2017), the Second Circuit addressed whether the plaintiffs alleged a plausible domestic injury under Section 1964 (c). There, the plaintiff alleged that the defendant, who had a power of attorney, stole millions through several fraudulent financial schemes. Since there were several schemes, each harm needed to be analyzed separately for domestic injury purposes. The court held that neither a plaintiff's place of residence nor merely any contact with the US suffices for relevant consideration.

The court held that a plaintiff, even one who is a foreign resident, can allege a civil RICO injury that is domestic. At a minimum, the misappropriation of property physically located in the US constitutes a domestic injury. However, the use of bank accounts in the US to conceal or effectuate the theft, for instance for money laundering, of property located outside the US does not, on its own, constitute a domestic injury. Hence, it is the location of the property that caused the domestic injury that is pertinent for alleging a civil RICO claim. 

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