Plaintiff’s RICO Claims Alleging Wire Fraud Apply Extraterritorially as Two-Part Test Was Satisfied [Corrected Copy]

Drummond Company Inc. v. Collingsworth, 2017 WL 3268907 (N.D. Ala., Aug. 1, 2017)

The court denied the Defendants’ motions to dismiss the civil RICO claims and found sufficient personal jurisdiction over the Defendants Van Bilderbeek and Ramirez. Also, in a case of first impression in the Eleventh Circuit, the court ruled that the wire fraud statute has extraterritorial reach provided there is domestic injury.
Personal jurisdiction Found Over Non-Resident Defendants
The court first stated that Plaintiff has alleged that defendant van Bilderbeek, a Dutch non-resident perpetrated intentional, tortious and/or criminal acts that were intended to cause, and actually caused, injury in Alabama. Plaintiff has alleged, and cited to evidence of, intentional acts by van Bilderbeek directed at Plaintiff, an Alabama resident. Where intentional acts are at issue, “ ‘the defendant may be held to have expected its conduct to have an effect in that state, and further to have expected that the victim will bring suit for redress there.’ ”
Van Bilderbeek is alleged to have intentionally paid witnesses for their testimony in a case that was being litigated in Alabama and it is further alleged he intended to cause harm to an Alabama business and this court (each located in Alabama). Licciardello, 544 F.3d at 1286; see also Calder, 465 U.S. at 791 (“jurisdiction over petitioners in California is proper because of their intentional conduct in Florida calculated to cause injury to respondent in California”).
The court ruled that because Plaintiff has established the relatedness and purposeful availment prongs of the specific jurisdiction inquiry, the burden shifts to van Bilderbeek to present a “compelling case” that the exercise of personal jurisdiction over him in Alabama would be unreasonable. The court concluded that van Bilderbeek’s argument failed to acknowledge that Plaintiff has alleged that his activities were “purposefully directed” at an Alabama resident and allegedly caused injuries to a resident in this forum. Therefore, van Bilderbeek had “fair warning” that his activities could subject him to jurisdiction in Alabama.
There was also personal jurisdiction over non-resident Ramirez as “‘[u]nder the “effects test,” even a nonresident defendant’s single tortious act can establish purposeful availment, without regard to whether the defendant had any other contacts with the forum’ if the intentional conduct has a direct impact on [an Alabama] resident.”. Ramirez is alleged to have been involved in more than one tortious act directed at an Alabama resident and causing damage there.

The court denied the Defendants’ motions to dismiss the civil RICO claims and found sufficient personal jurisdiction over the Defendants Van Bilderbeek and Ramirez. Also, in a case of first impression in the Eleventh Circuit, the court ruled that the wire fraud statute has extraterritorial reach provided there is domestic injury.
injuries to a resident in this forum. Therefore, van Bilderbeek had “fair warning” that his activities could subject him to jurisdiction in Alabama.
There was also personal jurisdiction over non-resident Ramirez as “‘[u]nder the “effects test,” even a nonresident defendant’s single tortious act can establish purposeful availment, without regard to whether the defendant had any other contacts with the forum’ if the intentional conduct has a direct impact on [an Alabama] resident.”. Ramirez is alleged to have been involved in more than one tortious act directed at an Alabama resident and causing damage there.
Plaintiff’s RICO Claims Alleging Wire Fraud Apply Extraterritorially

Van Bilderbeek argued that Plaintiff’s RICO claims should be dismissed because RICO does not apply extraterritorially. In RJR Nabisco, Inc. v. European Community, 136 S.Ct. 2090, 2102 (2016), the Supreme Court determined that, because some RICO predicates “plainly apply to at least some foreign conduct,” Section 1962 was intended to apply and, so long as a private RICO plaintiff alleges and proves a domestic injury to its business or property, does apply to racketeering conduct abroad “to the extent that the predicates alleged in the particular case themselves apply extraterritorially.” RJR Nabisco, Inc., 136 S.Ct. at 2102, 2106. The Court concluded that “[t]his unique structure makes RICO the rare statute that clearly evidences extraterritorial effect despite lacking an express statement of extraterritoriality.” Id. at 2103. That is, “the domestic and extraterritorial reach of the RICO statute is coterminous with that of the underlying predicate offenses in a given case.” United States v. Hawit, 2017 WL 663542, at *10 (E.D.N.Y. Feb. 17, 2017).

The Complaint alleges that van Bilderbeek paid Blanco on at least three separate occasions for his testimony and participation in cases filed in Alabama. Based on those allegations, it further asserts that “the Enterprise’s conduct with respect to Blanco violates 18 U.S.C. § 1343 (wire fraud), 18 U.S.C. § 201 (witness bribery), 18 U.S.C. § 1956(a)(2)(A) (money laundering), 18 U.S.C. § 1503 (obstruction of justice), and 18 U.S.C. § 1512 (witness tampering).” The Complaint further alleges that the “adverse effects” of van Bilderbeek’s witness bribery, witness tampering, money laundering, obstruction of justice and wire fraud were felt by Plaintiff here in Alabama, and thus asserted a domestic injury. Therefore, RICO may apply extraterritorially, depending on the underlying predicate offense.

The court ruled that all of the predicate offenses for Plaintiff’s RICO claims have extraterritorial application. “Congress expressly provided for extraterritorial application of jurisdiction in the obstruction of justice statute.” The money laundering statute also specifically provides for extraterritorial application where the alleged conduct is by a United States citizen. 18 U.S.C. § 1956(f) (“There is extraterritorial jurisdiction over the conduct prohibited by this section if—(1) the conduct is by a United States citizen.”). The Complaint alleges that van Bilderbeek is a United States citizen. Although his affidavit addresses his residence, it does not contradict the allegation regarding his citizenship. There is also authority for the proposition that the witness bribery statute (section 201) applies extraterritorially.

The key question is the extraterritorial application of the wire fraud statute,
While the Second Circuit has held that 18 U.S.C. § 1343 does not have extraterritorial application, European Cmty. v. RJR Nabisco, Inc.(RJR Nabsico, Inc. 2d Cir.), 764 F.3d 129, 140–41 (2d Cir. 2014) (finding the wire fraud statute does not overcome the presumption against extraterritoriality), rev’d on other grounds, RJR Nabisco, Inc., ––– U.S. ––––, 136 S.Ct. 2090, 195 L.Ed.2d 476, other courts have held to the contrary. Here, the First and Third Circuits, in recent year 2014 and 2015 decisions state “the wire fraud statute punishes frauds executed in ‘interstate or foreign commerce,’ ” and therefore can be applied extraterritorially because Congress did not have “only ‘domestic concerns in mind.’ ”) (quoting Pasquantino v. United States, 544 U.S. 349, 371–72 (2005), in turn quoting 18 U.S.C. § 1343).
The Eleventh Circuit has not ruled on this issue, but based on the case authority the court concluded that the First and Third Circuits have the better side of the debate. Therefore, van Bilderbeek’s argument that Plaintiff’s RICO claim fails due to its extraterritorial application is without merit.
Accordingly, based on the above, and finding that Plaintiff’s RICO claims are not conclusory and sufficiently pled, the RICO defendants’ motions to dismiss the civil RICO claims were denied.

Ed Note: Two subsequent SDNY decisions have followed this decision, i.e., Dandong Old North East, and Drummond Company, each of which involved fraud and money laundering cases but only addressed the “domestic injury” argument. Thus, given the Second Circuit decision on wire fraud not having extraterritorial effect may no longer be valid given the S.Court decision, it appears the two-part test of (1) domestic injury and (2) whether Congress expressly provided for extraterritorial application of the predicate offense need to be met.

 

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