Armada (Singapore) PTE Limited v. Amcol International, 885 F.3d 1090 (7th Cir. 2018)
The Seventh Circuit affirmed the lower court’s ruling dismissing a civil RICO plaintiff, granting judgment on the pleadings, after the Supreme Court ruling in RJR Nabisco, Inc. v. European Community, ___U.S.___, 136 S.Ct. 2090, 195 L.Ed.2d 476 (2016). Addressing RICO’s extraterritorial effect, the Supreme Court held that “[a] private RICO plaintiff … must allege and prove a domestic injury to its business or property.” Id. at 2106.
Here, Armada, a foreign corporation, alleges Amcol used its influence as largest shareholder of Ashapura, a foreign corporation, to engage in a number of schemes aimed at draining Ashapura of assets to thwart Armada’s collection efforts. The plaintiff brought a civil RICO action against Amcol, Ashapura and five John Does. Armada claimed that it suffered an injury to its property, namely its judgment and other claims against Ashapura. Armanda claims that Amcol, by means of racketeering activity, injured that property by divesting Ashapura of assets, thereby making the judgment and other claims against Ashapura uncollectable.
In discussing what the Supreme Court meant by “domestic injury,” the Court referred to the location where an injury was suffered. It also made a point of noting the domestic-injury requirement does not categorically bar foreigners from recovering under the statute’s provisions. The district courts have issued a wide range of opinions, but the Second Circuit became the first court of appeals to address the “domestic injury” issue.
In Bascuñán v. Elsaca, 874 F.3d 806 (2d Cir. 2017), the plaintiff, a resident of Chile, alleged that his cousin had stolen millions of dollars from him through various schemes. The Second Circuit rejected a one-dimensional approach, noting that RICO’s requirement that injury must be to business or property means all RICO claims are by nature based on “economic” injury. Id. at 1094. The Second Circuit adopted an approach that addressed each individual injury alleged, considered the four injuries pleaded by the plaintiff, and concluded that such minimal, defendant-initiated contacts with the United States were not sufficient to make the resulting injuries to the plaintiff “domestic.” On the other hand, the court held that the alleged theft of the bearer shares and the theft of the money in a New York bank account were “domestic injuries” as there was harm to tangible property that was located in the United States.
The court in Bascunan held that “where the injury is to tangible property, we conclude that, absent some extraordinary circumstance, the injury is domestic if the plaintiff’s property was located in the United States when it was stolen or harmed, even if the plaintiff himself resides abroad.”
The court here in Armada rejected Armada’s argument that its judgment and claims are tangible properties located in the United States. Amcol argued that there is no tangible property in this case, only “a bundle of litigation rights,” and that the connections to the United States are too tenuous to make Armada’s alleged injuries domestic.
The court followed Bascunan in discussing that injuries to a plaintiff’s intangible property is “suffered” at its residence, which for a corporation like Armada is its principal place of business. Here, Armada’s principal place of business is in Singapore, so any harm to Armada’s intangible bundle of litigation rights was suffered in Singapore. Thus, the injury is not domestic, and Armada failed to plead a plausible claim under civil RICO.
Ed. Note: Intangible property rights can constitute sufficient injury to “business or property” if the plaintiff suffers concrete monetary loss. It is interesting that tangible property is treated differently from intangible property for purposes of “domestic injury.”