Court Applies Morrison Decision To Dismiss Extraterritorial RICO Action

In the U.S. Supreme Court's very recent decision in Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010), the Court addressed the extraterritorial reach of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The Court reaffirmed the presumption that "[w]hen a statute gives no clear indication of an extraterritorial application, it has none." In particular, the Court rejected the argument that Section 10(b) applied abroad because its definition of "interstate commerce" included activities between "any foreign country and any State." This language, said the Court, was only intended to catch situations where, for example, a foreign person perpetrated a fraud in the United States. 

Morrison did not address the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968, but a federal district court in New York has applied that decision to a RICO case, ruling that it had to be dismissed.
 
Cedeño v. Intech Group Inc., 09 Civ. 9716 (JSR) (S.D.N.Y. Aug. 24, 2010),was a civil RICO action that sought damages arising out of an alleged “wide-ranging money laundering scheme that utilized New York-based U.S. banks to hold, move and conceal the fruits of fraud, extortion, and private abuse of public authority" by Venezuelan government officials and their confederates. The defendants were not the banks, but rather a collection of persons and entities – many of them associated with the government of Venezuela – who allegedly arranged to have plaintiff Eligio Cendeño (a citizen of Venezuela) unjustifiably imprisoned for almost three years in Venezuela and who allegedly damaged his business, co-plaintiff Cedel International Investment Ltd., a company incorporated in the British Virgin Islands. The defendants conducted their scheme, the plaintiff alleged, through an "association-in-fact" RICO enterprise comprised of "[t]he foreign exchange regime of the government of Venezuela, including CADIVI, the Central Bank of Venezuela, and the Venezuelan government agency that prosecutes alleged violations of Venezuela's laws." The alleged scheme's contacts with the United States, however, were limited to the movement of funds into and out of U.S.-based bank accounts.
 
The district court ruled, based on Morrison, that the case had to be dismissed because the case was “essentially extraterritorial in focus” and its connections to the United States were “too peripheral or problematic to support a RICO lawsuit brought here.”