Circuit Affirms The Extraterritorial Limits Of RICO
The U.S. Court of Appeals for the Second Circuit has affirmed a decision by District Court Judge Jed Rakoff dismissing a RICO complaint that alleged an extraterritorial violation of the law that was almost exclusively Venezuelan on the ground that it was not reached by the statute.
The plaintiffs in the case, Eligio Cedeño and Cedel International Investment Ltd. (collectively “Cedeño), alleged that the defendants were liable under RICO for harm caused by their associated enterprise and its pattern of racketeering, particularly money laundering in violation of 18 U.S.C. § 1956 and extortion in violation of 18 U.S.C. § 1951. After Judge Rakoff dismissed the complaint, Cedeño appealed to the Second Circuit.
The circuit court first rejected the argument that the RICO claim fit within the scope of RICO’s domestic application because it alleged conduct in the United States that was within RICO’s “focus.” It explained that regardless of whether RICO focused on domestic enterprises, as the district court held, or on patterns of racketeering, as Cedeño contended it should be, “the complaint here alleges inadequate conduct in the United States to state a domestic RICO claim.” Simply put, the circuit court declared, the association-in-fact enterprise alleged here – comprised of various components of the Venezuelan government – was “patently foreign.”
The Second Circuit added that, in any event, Cedeño failed to allege that domestic predicate acts proximately caused his injuries.
Moreover, the circuit court rejected Cedeño’s contention that even if the complaint did not allege a domestic RICO violation, his claims should not have been dismissed because the predicate offenses on which they were based – 18 U.S.C. §§ 1951 and 1956(f) – applied extraterritorially, and RICO incorporated these statutes. This argument, the circuit declared was “foreclosed” by Norex Petroleum Ltd. v. Access Indus., Inc., 631 F.3d 29 (2d Cir. 2010) (per curiam), where it declined to link the extraterritorial application of RICO to the scope of its predicate offenses.
Accordingly, the circuit court affirmed the district court’s decision.
“The appellate court determined that the allegations in the complaint, which alleged conduct occurring almost entirely in Venezuela, did not trigger U.S. jurisdiction,” said Miami attorney Michael Diaz, Jr. managing partner of the law firm of Diaz Reus and Targ, LLP. Diaz led the firm’s defense team on behalf of one of the defendants. “This case was important because it tested the outer limits of a federal court’s jurisdiction to hear a RICO case based on conduct occurring almost entirely outside of the U.S.,” added Carlos F. Gonzalez, a partner at the Diaz firm.
The case is Eligio Cedeño v. Castillo, 10-3861-cv (2d Cir. Jan. 24, 2012).
Attorneys involved include:
For Plaintiffs-Appellants: Jerome M. Marcus, Marcus & Auerbach LLC, Jenkintown, P.A. (Jonathan Auerbach, Marcus & Auerbach LLC, Jenkintown, P.A., Thomas E.L. Dewey, Dewey Pegno & Kramarsky LLP, New York, N.Y., Paul D. Clement, Jeffrey S. Bucholtz, Zachary D. Tripp, King & Spalding LLP, Washington, D.C., on the brief)
For Defendant-Appellee Adina Mercedes Bastidas Castillo: Robert B. Buehler (Dennis H. Tracey, III, Lisa J. Fried, on the brief) Hogan Lovells US LLP, New York, N.Y.
For Defendants-Appellees Alhambra Investments LLC and Juan Felipe Lara Fernandez: Paul E. Dans, Rivero Mestre, LLP, New York, N.Y., Andres Rivero, Catherine C. Grieve, Erimar von der Osten, Rivero Mestre LLP, Miami, F.L.
For Defendant-Appellee Ruben Rogelio Idler Osuna: Carlos F. Gonzalez (Michael Diaz, Jr., Gary E. Davidson, Margaret T. Perez, on the brief) Diaz Reus & Targ, LLP, Miami, F.L.
For Defendant-Appellee Jose Jesus Zambrano Lucero: Norman A. Moscowitz, Moscowitz & Moscowitz, P.A., Miami, F.L.
For United States as Amicus Curiae in support of no party: Lewis S. Yelin, Attorney, Appellate Staff, Civil Division (Douglas N. Letter, Attorney, Appellate Staff, Civil Division, on the brief) for Tony West, Assistant Attorney General, U.S. Department of Justice, Washington, D.C. (Jesse M. Furman, Assistant United States Attorney, Benjamin H. Torrance, Assistant United States Attorney, for Preet Bharara, United States Attorney for the Southern District of New York, on the brief).