22 December 2010
The US Supreme Court’s reasoning in Morrison v. National Australia Bank Ltd. concerning extraterritorial jurisdiction has been used in at least two recent cases to limit private RICO claims.1 In one of those actions, Norex Petroleum Ltd. v. Access Indus. Inc., the US Court of Appeals for the Second Circuit affirmed the dismissal of a private civil RICO claim brought by a foreign plaintiff against foreign defendants in a US court based on the Supreme Court’s reasoning in Morrison. Drawing on the presumption against extraterritoriality expressed in Morrison, the Second Circuit held that, because RICO is silent as to its extraterritorial application, it has none.
Apparently concerned that the Second Circuit’s decision in Norex could be broadly read to preclude the government from pursuing RICO actions based on extraterritorial conduct, the US Department of Justice (DOJ) requested that the Norex court clarify its holding. The DOJ argued that precluding such government actions would conflict with “settled Supreme Court and circuit precedent—undisturbed by Morrison.” According to the DOJ, “the government has a strong interest in ensuring that RICO remains available to prosecute and otherwise prevent and restrain extraterritorial offenses in appropriate cases.”
In response to the DOJ’s request, the Second Circuit amended the Norex decision. The court added one paragraph that reads, “Because Norex brought a private lawsuit…we have no occasion to address—and express no opinion on—the extraterritorial application of RICO when enforced by the government….” Thus, the Second Circuit has now expressly limited the holding in Norex to private civil RICO actions.
The DOJ’s concern that criminal defendants might seek to apply Morrison’s presumption against extraterritorial application to criminal matters is well founded. We are aware of at least one action where a criminal defendant is relying on Morrison to seek dismissal of an indictment that alleges violations of various securities laws, including Rule 10b-5 (US v. Mandell, 09-Cr-662 (S.D.N.Y. Dec. 2, 2010)). Based on the DOJ’s request in Norex, the Second Circuit’s agreement to amend its decision in Norex, and the pending motion in Mandell, it is clear that the applicability of Morrison to criminal matters is of particular interest both to government prosecutors and defendants.
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1. For a review of these cases, see our Legal Update “Extraterritorial Jurisdiction: Morrison’s Reasoning Limits RICO Claims As Well.”