The World in U.S. Courts: Spring 2013 - Racketeer Influenced and Corrupt Organizations Act (RICO)
After a three-week bench trial, a U.S. District Court in San Francisco dismissed the plaintiffs’ civil RICO claim. The court had previously adopted the so-called “nerve center test” to determine the location of the alleged RICO enterprise, which it described as focusing on the “brains rather than the brawns” of the enterprise and which examines the decisions effectuating the relationships and common interest of the enterprise’s members, and how those decisions are made. Although the court had denied a motion to dismiss based upon the allegations in the pleadings, the court found that the facts adduced at trial demonstrated that the nerve center of the enterprise was not in the United States and thus the plaintiffs’ claims must be dismissed. The court found that the evidence showed that the enterprise was established in and governed from Hong Kong. Although there was one key player located in the United States, the court found that he was likely acting at the direction of a person in Hong Kong.
[Editor’s note: The LIBOR and Chao Fan Xu cases, discussed in this issue, also address the focus of RICO. The three cases do not reach the same conclusions.]