On June 20, 2016, in RJR Nabisco v. European Community, the US Supreme Court held that complaints under the private right of action provision of the Racketeer Influenced and Corrupt Organizations Act (RICO) must allege a domestic injury to business or property to state a claim. The RICO private right of action does not provide a cause of action for injuries suffered outside of the US. ( (June 20, 2016).)

The European Community and 26 of its member states sued RJR Nabisco (RJR) in the US District Court for the Eastern District of New York under the RICO private right of action statute, 18 USC §1964(c), as well as under state law claims. The European Community alleged that RJR and several criminal organizations engaged in a money laundering scheme that injured the business and property of the European Community and its member states.

RJR moved to dismiss the RICO claims under Federal Rules of Civil Procedure (FRCP) 12(b)(1) and 12(b)(6), contending that the RICO private right of action statute did not apply to conduct occurring outside US territory. The district court agreed and dismissed the European Community's RICO claims. The European Community appealed.

The Second Circuit reversed. It explained that many RICO allegations are predicated on acts which violate criminal statutes that Congress intended to apply extraterritorially. Therefore, the Second Circuit reasoned, Congress must have intended that RICO allegations predicated on violation of those statutes also apply extraterritorially. On this basis, the Second Circuit held that certain RICO violations could be alleged based on extraterritorial conduct, as long as the alleged RICO violation was predicated on violation of a statute allowing extraterritorial application. For this reason, among others, the Second Circuit ruled that the European Community stated a private RICO claim, and it reversed the district court.

RJR moved for rehearing, arguing that, even if a criminal RICO allegation can be based on violation of a predicate statute that applies extraterritorially, RICO's separate civil private right of action does not apply extraterritorially. Therefore, according to RJR, the private right of action requirement that a RICO violation cause "injury to business or property" should be construed as "domestic injury to business or property." The Second Circuit panel denied rehearing, holding that RICO's private right of action does not require a domestic injury, because the extraterritorial application of the predicate criminal offenses confers extraterritorial application on the private right of action. RJR petitioned for rehearing en banc, which the Second Circuit denied, though five judges dissented.

The US Supreme Court granted certiorari and reversed. The Court initially explained that there is a judicial presumption against statutes applying extraterritorially. If Congress does not affirmatively and unmistakably instruct that a statute apply extraterritorially, the Court will presume that it does not. The Court held that while the predicate statutes with extraterritorial application are sufficient to overcome the presumption against extraterritoriality for criminal RICO violations, RICO's civil private right of action does not apply extraterritorially, because:

Because RICO's private right of action does not apply extraterritorially, the Supreme Court held that a plaintiff must allege a domestic injury to business or property to state a RICO claim. The European's Community's RICO claim did not allege a domestic injury, so it did not state a claim.

Practitioners involved in RICO civil actions should be aware that RICO private rights of action do not apply to extraterritorial conduct, so there must be a domestic injury to business or property to state a claim.