District Court Concludes that RICO Cannot Be Given Extraterritorial Application in Light of Claims Alleged, But That Sufficient Connection With U.S. Nonetheless Alleged

The World in U.S. Courts: Fall 2014 - Personal Jurisdiction

Reich v. Lopez, U.S. District Court for the Southern District of New York, August 18, 2014

Plaintiffs, a former U.S. ambassador to Venezuela and his consulting company, sued a number of defendants for RICO and state claims including tortious interference with contract arising out of the defendants' alleged efforts to bribe Venezuelan officials and punish the plaintiffs for opposing these activities.  Following dismissal of the plaintiffs' federal RICO claim, the District Court in New York considered whether it could obtain personal jurisdiction over two non-U.S. entities in connection with the state claims.

The District Court observed that an assertion of personal jurisdiction must comply with state requirements as well as federal constitutional requirements.  Many federal decisions, noting that state "long-arm" statutes are typically construed to extend to the full limits of the Due Process clause of the U.S. Constitution, recite that the state and federal tests are essentially the same.  The Court here observed, however, that the New York statute conferred general personal jurisdiction more broadly, over a corporation that was merely "doing business" in New York.  The Court observed that traditional understanding of the New York jurisdictional statute might no longer be consistent with the rule laid down by the U.S. Supreme Court in the 2014 Daimler AG v. Bauman decision.  In that case, the Supreme Court limited general personal jurisdiction over individuals and corporations to situations where they are "at home" in a state—typically, where they are domiciled in the state in the case of an individual, and incorporated or having its principal place of business in the state in the case of a corporation.

Adopting the Daimler approach, the Court first asked whether the two individual defendants—a Venezuelan citizen and a dual citizen of Venezuela and Spain—were "domiciled" in New York.  In answering this question, it looked to attributes of domicile including the holding of a driver's license, the filing of state taxes, the maintenance of personal and business banking relationships, and representations that the defendants had their "home" addresses in New York, and found that the Complaint had not alleged any of these adequately.  Nor did the complaint allege the amount of time each defendant spent in New York, or the number or locations of other residences they may own.  The Court did, however, permit discovery to be taken to address these factors.

The Court also examined whether, consistent with the Bauman rule, general personal jurisdiction could be obtained over an individual by means other than their being "domiciled" in New York.  While acknowledging that such circumstances may exist, the Court found an insufficient showing through allegations that the defendants merely transacted business in New York, even if that activity was "substantial, continuous, and systematic."

The Court finally considered whether specific personal jurisdiction could be obtained over the defendants arising from an alleged connection between the injuries they suffered and acts taken by the defendants in New York.  Here, those acts included the hiring of New York legal counsel.  Relying on precedent addressing similar claims, the Court found that specific personal jurisdiction would only be created if the legal counsel had itself taken actions giving rise to the claims, which had not been alleged.

[Editor's Note:  The Reich case is also addressed in the RICO section of this report.]

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