Court Rules a Foreign Corporation’s Inability to Collect on a Judgement Was Not “Domestic Injury” and Thus No Claim Existed Under Civil RICO

Cevdet Aksut Ve Ogullari Koll.Sti (“Cevdet”) v. Cavusoglu, 2018 WL 6016549 (3rd Cir., November 16, 2018)

The Third Circuit affirmed the dismissal of plaintiff’s “RICO” claims. The plaintiffs asserted defendant Cavusoglu failed to pay Cevdet for goods. The District Court dismissed Cevdet’s RICO claims holding that Cevdet failed to plead a predicate pattern of racketeering activity and continuity to state a RICO claim and that Cevdet failed to plead a domestic injury as required by RICO.

The Court reviewed Cevdet’s assertion that the District Court erred in concluding that it did not suffer a domestic injury as required under RICO, 18 U.S.C. § 1964(c), and dismissing its RICO claim. RICO creates a private right of action for injuries to a person’s business or property. 18 U.S.C. § 1964(c). While “RICO applies to some foreign racketeering activity,” “[s]ection 1964(c) requires a civil RICO plaintiff to allege and prove a domestic injury to business or property and does not allow recovery for foreign injuries.” RJR Nabisco, Inc. v. European Cmty., 136 S. Ct. 2090, 2103, 2111 (2016).

The Court stated that RICO allows recovery for domestic injuries to both tangible and intangible property, and the Court must identify where the property is harmed. The harm to tangible property is deemed to occur where the property is located. So, a plaintiff suffers a domestic injury to tangible property “if the plaintiff’s property was located in the United States when it was stolen or harmed, even if the plaintiff himself resides abroad.” *3, citing Bascunan v. Elsaca, 874 F.3d 806, 820-21 (2d Cir. 2017).

However, where “harm to intangible business interests is alleged[,] [t]he location of such injuries simply cannot be identified with the same geographic certainty that is endemic in the very concept of tangible property.” Humphrey v. GlaxoSmithKline PLC, 905 F.3d 694, 703-04 (3d Cir. 2018). To determine the location of an injury to intangible property, the court “must focus primarily upon where the effects of the predicate acts were experienced.” Id. at 707. To this end, the Court stated that it must weigh a number of factors, including:

where the injury itself arose; the location of the plaintiff’s residence or principal place of business; where any alleged services were provided; where the plaintiff received or expected to receive the benefits associated with providing such services; where any relevant business agreements were entered into and the laws binding such agreements; and the location of the activities giving rise to the underlying dispute.

Id.

No one factor is “presumptively dispositive.” Id.

The Court discussed that Cevdet describes its injury as the damage to its $1.1 million judgment against Cavusoglu caused by Defendants’ transfer of funds that shielded Cavugolu’s assets from collection by creditors like Cevdet. This judgment does not have a physical existence and is an ‘intangible asset[.]’ ” Applying the Humphrey factors, the Court concluded that Cevdet’s injury is not domestic for the purposes of § 1964(c). Although Cevdet has a judgment against Cavusoglu under United States law, Cevdet is a Turkish company with its principal place of business in Turkey, and Cevdet experiences the loss from its inability to collect on its judgment in Turkey. Because its injury is not felt in the United States, Cevdet has not suffered a domestic injury and is therefore foreclosed from stating a RICO claim, and the District Court properly dismissed it. *3.

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