I was speaking recently with a Chevronologist who will remain nameless, and we were speculating that perhaps the reason the Second Circuit has delayed so long in announcing its decision in the Chevron v. Donziger case because it was awaiting the Supreme Court’s decision in today’s case of the day, RJR Nabisco v. European Community (S. Ct. 2016), which was decided on June 20. More recently, Steven Donziger himself has trumpeted the Nabisco decision, asserting that the decision was a “major setback” for Chevron. More formally, he argued the importance of the decision to the Second Circuit in a letter submitted under FRAP 28(j). And I have been thinking a good deal about Nabisco in connection with one of my own cases. So I thought it would be worthwhile to feature the case, presenting it primarily through the lens of the Donziger case.
As you may or may not recall (see my backgrounder if you need a refresher), After many pretrial twists and turns, at the end of the day Chevron tried and won a civil RICO claim against Donziger. RICO is an unusual statute (though not unique in the relevant respects).[efn_note]For example, the sex tourism statute, 18 U.S.C. § 2423(b), appears to have clear extraterritorial application, but the statute giving rise to civil liability for violations, 18 U.S.C. § 2255, is silent on the question.[/efn_note] The criminal RICO statute, 18 U.S.C. § 1962, speaking very generally, makes it a crime to engage in a pattern of racketeering activity in interstate or foreign commerce. How do you know what is, or is not, “racketeering activity?” The statute defines that term with reference to a bunch of underlying criminal statutes, called “predicates” (because lawyers like fancy words and RICO liability can be predicated on violations of the underlying statutes). RICO also creates a private right of action:
Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee …
We know, from Morrison v. National Australia Bank, 561 U.S. 247 (2010), that there is a presumption that statutes do not apply extraterritorially, and that “[w]hen a statute gives no clear indication of an extraterritorial application, it has none.” And we know, from Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659 (2013), that that principle applies not just to the statutes that define the conduct prescribed but to jurisdictional statutes, too: the Alien Tort Statute, which was at issue in Kiobel is purely jurisdictional.
So the stage was set for Nabisco, which in some ways is the mirror image of Donziger. Both cases arise out of claims
of transnational mass torts. But in Donziger, it’s the US corporate defendant asserting RICO claims against the lawyer for the injured foreigners. In Nabisco, the injured foreigners brought their own RICO claim against the US corporate defendant.
The courts must apply a two-part test to see whether a statute has extraterritorial application. First, is Congress’s intention to have the statute apply extraterritorially clear? If so, then the presumption against extraterritoriality is overcome. Second, if not, where did the conduct that is the focus of the statute’s concern take place?
The interesting twist is that when dealing with a criminal statutory scheme that has a separate statute creating a civil cause of action, it’s not enough to ask whether Congress intended the underlying criminal statute should apply extraterritorially. You also have to ask whether the civil statute has extraterritorial application. In this respect, the Court reversed the Second Circuit, which had concluded that you only need to look at the statute that defines the conduct proscribed, not at the statute creating civil liability. Kiobel showed that the Second Circuit’s approach was wrong, as the statute there was purely jurisdictional and did not define the proscribed conduct. In at least one case, the Clayton Act (an antitrust statute), the language of the statute creating civil liability showed Congress’s intent that the statute should apply extraterritorially. But in the absence of such evidence, you have to show a domestic injury, i.e., an injury suffered in the United States.
Now, Chevron is a U.S. corporation, so most likely the domestic injury requirement is not going to be fatal to its RICO claim, as I think Donziger’s new submission to the Second Circuit tacitly concedes (the claim is that Chevron has not suffered an injury in fact, not that any injury it did suffer was not domestic). The real question is what the Second Circuit will make of one of the Supreme Court’s rationales for the domestic injury requirement. The Court pointed to comity concerns—the risk of “international friction” that could result from extraterritorial application of US laws. The issue of comity was already in the Donziger case, and so it seems to me that the Second Circuit is going to have to decide whether Nabisco puts a thumb on the scale when it is weighing the comity implications of its decision, or whether the Court was just restating the idea of comity that was already before the court. So I think it is too early to know whether Nabisco will make a difference to the Second Circuit’s decision.