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The Wall Street Journal / DPK in the News

Supreme Court Ruling To Rein in RICO Cases

The U.S. Supreme Court’s decision Monday to limit the international application of the country’s racketeering statute should offer protection to companies from private suits, legal experts say. In RJR Nabisco v. European Community the court ruled that a group of European countries cannot sue over racketeering violations, saying there is no extraterritorial application of the private cause of action section of the U.S. Racketeer Influenced and Corrupt Organizations Act.

That determination will dial back considerably the number of RICO cases successfully brought by foreign persons, experts said. “U.S.-based corporations are less likely to be successfully sued by civil RICO plaintiffs, including those seeking to pursue a class action, for activities whose impacts occur outside the borders of the United States,” explained Roy Goldberg from Steptoe & Johnson. “If the alleged victims reside overseas it will be difficult for a plaintiff to hold a U.S. company liable under RICO.”

The decision, delivered by Justice Samuel Alito, made a policy-minded argument that could be used in similar disputes over the extraterritorial application of statutes, said Jeremy Sternberg from Holland & Knight. Private RICO suits create a “danger of international friction,” Justice Alito warned, a line that Mr. Sternberg suggested could be cited by defendants in similar court disputes to stop extraterritorial action against companies. He said he considered the actual court holding as “pretty narrow.”

Thomas Dewey, a lawyer from Dewey Pegno & Kramarsky, said “this ruling will add another significant constraint to private civil RICO litigants, and should reduce, if not entirely eliminate, RICO claims that are focused on foreign activity.”


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