The World in U.S. Courts: Summer 2017 - Racketeer Influenced and Corrupt Organizations Act (RICO) | May.08.2017
In our Fall 2016 Issue, we reported on a decision by the District Court in New York in this case which considered whether the defendants violated the civil RICO statute and other provisions of law through a fraudulent scheme to resell publications that had been obtained at a substantial discount at retail rates. Following a jury verdict for plaintiff Elsevier, the Court entered judgment for the defendants on the RICO claim, concluding that the facts did not show that Elsevier had suffered a US “domestic injury,” as required by the US Supreme Court’s 2016 decision in the RJR Nabisco case. But because the RJR Nabisco decision changed the law after the jury had reached its verdict, the Court permitted Elsevier to ask to amend its complaint and retry the issue of a “domestic injury.” In this opinion, the Court in New York grants that request.
The Court first recites that RJR Nabisco found RICO’s private right of action not to have extraterritorial effect. Then, for the first time in its published opinions, it observes that its task in such case is to determine the “focus” of the private right of action, and with that focus in mind to determine whether the facts established a US domestic injury. Rather than undertaking this analysis on its own, however, the Court identified in the case law two “lines of reasoning” that had been used to determine where an alleged RICO injury had taken place: where the alleged injury “was suffered,” and where the conduct occurred that caused the alleged injury. In its prior opinion, the Court promoted what it called a “flexible” approach in which an injury to a plaintiff’s “business” would be deemed to have occurred “where substantial negative business consequences occurred,” and an injury to “property” would be deemed to have occurred “where the plaintiff parted with the property.” The Court surveyed decisions of other district courts addressing the location of a RICO “domestic injury,” concluding that the majority also focused on the “injury,” although taking very different approaches.
Elsevier alleged both an injury to its business and the loss of specific property, and the Court earlier had found neither to be US “domestic.” In support of its request for a new trial, Elsevier now argued that most of the publications subject to fraud were, or were authorized to be, physically shipped from the US. The Court found this proffer sufficient to warrant a new trial, but did not provide further analysis of why the proffer would satisfy the legal standard described above.