The World in U.S. Courts: Winter 2018 - Personal Jurisdiction/Forum Non Conveniens | September.29.2017
Plaintiff Humphrey his wife operated a company in China helping Western businesses comply with Chinese anti-bribery laws. They had a consulting agreement with GlaxoSmithKline, a UK company, and with GSK’s US sub. As a result of a complicated series of events relating to allegations that GSK’s Chinese subsidiary engaged in bribery in China, Humphrey and his wife were tried and incarcerated, and ultimately expelled from China. The plaintiffs attribute these reversals to fraud on the part of the GSK entities, and alleged as a result that “their business was destroyed and their prospective business ventures eviscerated.” They filed suit against the defendants in Philadelphia, where GSK’s US subsidiary is based, alleging violations of the civil RICO statute, 18 USC 1962(c) and (d).
The District Court first considered whether the plaintiffs had standing to sue. Standing, it observed, required both that the plaintiffs have been “injured in their business and property” and that the injury was “proximately caused” by the defendants’ alleged RICO violation. The Court added that the plaintiffs must also plead that they suffered a US “domestic” injury, noting that courts had taken different approaches to determining where a RICO injury had occurred—some focusing on the location of the relevant conduct and others on the location of the plaintiffs or the property allegedly injured. While suggesting that the latter approach was preferable, the Court concluded it need not decide because the plaintiffs had not suffered a US “domestic” injury under either test. All of the conduct alleged to have given rise to the RICO violation occurred in China, which was also where the plaintiffs and their company were based. Because the plaintiffs performed services exclusively in China, it did not matter that some clients or would-be clients may have been based in the US. The Court disregarded as “conclusory” allegations that certain of the acts allegedly giving rise to RICO liability were authorized or directed by GSK in the UK, noting that those allegations did not even relate to GSK’s US subsidiary.