The World in U.S. Courts: Winter 2016 - Racketeer Influenced and Corrupt Organizations Act (RICO)
Plaintiffs (Exeed) are United Arab Emirates corporations that sued a number of their former employees for allegedly running an illegal kickback scheme in the UAE. Some of the monies allegedly paid to the defendants originated with US companies and US banks, and the defendants allegedly transferred some of their ill-gotten gains to US banks and used certain of the proceeds to buy property in California and Illinois. The complaint alleged various civil RICO violations.
The Court initially focused on the requirement that RICO plaintiffs show a “US injury,” which the Court described as an injury “initially” suffered by the plaintiffs in the US. The plaintiffs argued that they satisfied this requirement through a theory of “continued deprivation”—that assets to which they were entitled were unlawfully “tied up” in the US. The Court rejected this argument because it concluded the plaintiffs’ injury was alleged “initially” to have been suffered in the UAE, and at no time did the plaintiffs even maintain a US presence. The Court also rejected a claim of jurisdiction based on two of the alleged kickbacks having been paid through US banks: The US link “may be related to the central scheme but it is not integral or pervasive enough to overcome the fact that the bulk of the illegal racketeering activities are alleged to have occurred abroad.” Without a sufficient claim of injury, the RICO claim was dismissed.
[Editor’s note: The “domestic injury” requirement for a private right of action under RICO was recently the subject of an article by editors of The World in US Courts, which may be found here.]