What are the facts?
The European Community and 26 of its member states sued RJR Nabisco, Inc. in federal court, alleging that RJR and affiliated entities participated in a global money-laundering and cigarette-smuggling enterprise that funneled narcotics proceeds through international financial networks to purchase large quantities of RJR cigarettes, which were then smuggled into Europe to evade taxes and fund organized crime and terrorist groups. Plaintiffs alleged violations of RICO, 18 U.S.C. §§ 1962(a)–(d), relying on a pattern of racketeering activity comprised of various predicate offenses, including money laundering, material support for terrorism, mail/wire fraud, and violations of the Travel Act. Most of the alleged racketeering conduct and the resulting injuries occurred outside the United States; the plaintiffs sought treble damages under the civil cause of action in § 1964(c) for injuries to their business or property, such as lost tax revenues and increased law-enforcement and border-control costs. The district court dismissed on extraterritoriality grounds; the Second Circuit reversed in relevant part, holding that RICO could apply extraterritorially and that private civil RICO could reach foreign injuries. The Supreme Court granted certiorari to resolve the extraterritorial scope of RICO's substantive prohibitions and its private civil remedy.
What is the legal issue?
1) Do RICO's substantive prohibitions in 18 U.S.C. § 1962 apply to conduct occurring outside the United States? 2) May a private civil RICO plaintiff recover damages under § 1964(c) for injuries to business or property suffered outside the United States?
What rule applies?
Presumption against extraterritoriality: Unless Congress clearly indicates a statute's extraterritorial application, it is presumed to apply only domestically. Application proceeds in two steps: (1) ask whether the statute gives a clear, affirmative indication of extraterritoriality; if not, (2) determine whether the case involves a permissible domestic application by identifying the statute's focus. Applying this to RICO: (a) RICO's substantive prohibitions in § 1962 can apply extraterritorially to the extent the underlying predicate offenses listed in § 1961(1) themselves apply extraterritorially; RICO does not require the 'enterprise' to be domestic, and § 1962(d) conspiracy cannot extend beyond the reach of §§ 1962(a)–(c). (b) The private civil cause of action in § 1964(c) does not contain a clear indication of extraterritorial application and therefore requires a domestic injury to business or property; private plaintiffs may not recover for foreign injuries under civil RICO.
What did the court hold?
Yes in part; no in part. The Court held that RICO's substantive provisions (§ 1962) apply extraterritorially to the extent that the alleged predicate offenses have extraterritorial reach, and the statute does not require that the RICO enterprise be domestic. However, private civil RICO plaintiffs under § 1964(c) must allege a domestic injury to business or property; civil RICO does not permit recovery for purely foreign injuries. The judgment of the Second Circuit was reversed in part, vacated in part, and remanded.
What is the reasoning?
The Court applied the presumption against extraterritoriality using a structured, provision-by-provision approach. For § 1962, the Court found a clear indication that Congress contemplated some extraterritorial application by incorporating a broad list of predicate offenses, several of which expressly apply abroad (e.g., money-laundering and material-support-of-terrorism statutes). Because RICO defines a 'pattern of racketeering activity' in terms of those predicates, § 1962 reaches foreign conduct to the same extent as the predicates. The Court rejected the argument that the RICO 'enterprise' must be domestic, reasoning that the statutory text and structure focus on patterns of racketeering rather than the enterprise's geography, and nothing in § 1962 conditions liability on a domestic enterprise. Nor can § 1962(d) conspiracy liability expand beyond the substantive reach of §§ 1962(a)–(c). Turning to § 1964(c), the Court concluded there was no clear affirmative indication that Congress intended private civil RICO to apply extraterritorially. Proceeding to step two, the Court identified the focus of § 1964(c) as the compensated injury—injury to business or property 'by reason of' a RICO violation. Allowing private plaintiffs to recover for foreign injuries would, in practical effect, give § 1964(c) extraterritorial application contrary to the presumption. The Court also cited comity concerns: empowering private treble-damages suits for foreign harms risks conflict with other nations' regulatory regimes and remedial choices. By contrast, leaving criminal enforcement and civil actions by the government to proceed based on extraterritorial predicates preserves the ability to address transnational racketeering while avoiding the most acute comity problems. Accordingly, private civil RICO plaintiffs must allege a domestic injury; the case was remanded to determine whether the complaint plausibly alleged such injuries and whether the asserted predicates with extraterritorial reach were adequately pleaded.
Why is this case significant?
RJR Nabisco is the Supreme Court's definitive statement on RICO's extraterritorial scope. It creates a two-track regime: the government may pursue RICO based on foreign conduct to the extent predicates apply abroad, but private civil plaintiffs must show a domestic injury. This significantly narrows the use of civil RICO in transnational disputes and has led litigants to focus on where the injury occurred and whether alleged predicates have extraterritorial reach. For law students, the case is essential for understanding the modern presumption against extraterritoriality, how courts parse multi-section statutes, the role of statutory structure (predicates and enterprise), and comity considerations in transnational litigation. Subsequent cases have applied and refined the domestic-injury requirement, including Supreme Court guidance on assessing domestic injury for intangible property interests.
Does RICO apply to conduct that occurs entirely outside the United States?
RICO's substantive prohibitions (§ 1962) can reach foreign conduct only to the extent that the alleged predicate offenses themselves apply extraterritorially. If a predicate statute (e.g., certain money-laundering or terrorism-support provisions) expressly covers foreign conduct, then a RICO pattern built on those predicates may include foreign acts. Predicates that do not apply extraterritorially cannot be used to extend RICO to wholly foreign conduct.
What does it mean that civil RICO requires a 'domestic injury'?
Private plaintiffs suing under § 1964(c) must allege and prove that their injury to business or property occurred in the United States. Harm suffered entirely abroad—such as foreign lost profits or foreign tax losses—does not qualify. Determining whether an injury is domestic can be fact-intensive, especially for intangible property interests; courts look to the nature of the property right and where the effects of the injury are felt. The Supreme Court has since clarified that context matters when assessing whether an injury is domestic, particularly for intangible rights associated with U.S.-based enforcement.
Does the RICO enterprise have to be located in the United States?
No. The Court held that nothing in § 1962 requires a domestic enterprise. The focus of the statute is the pattern of racketeering activity, not the enterprise's geography. Thus, a foreign enterprise can be the vehicle for RICO liability, provided the pattern consists of predicate offenses that either occurred domestically or have extraterritorial reach.
Is the outcome different for criminal prosecutions versus private civil suits under RICO?
Yes. The government may bring criminal RICO cases (and seek related equitable relief) based on foreign conduct to the extent the predicates apply extraterritorially. Private civil plaintiffs, however, face the additional hurdle of the domestic-injury requirement. This creates an intentional asymmetry: broader public enforcement power to address transnational racketeering, but narrower private treble-damages suits to avoid comity conflicts.
How does RJR Nabisco relate to the Supreme Court's extraterritoriality framework in Morrison and Kiobel?
RJR applies the same two-step presumption against extraterritoriality developed in Morrison and Kiobel. It shows how Congress can indicate extraterritoriality indirectly by incorporating other statutes with explicit extraterritorial reach (for § 1962), and it emphasizes that remedial provisions (like § 1964(c)) are analyzed separately. The decision confirms a provision-by-provision approach: different sections of the same statute can have different territorial scopes.