Owen C. Pell over at White & Case has reported on the first decision by a circuit court applying the Supreme Court’s ruling in Morrison v. National Australia Bank beyond federal securities laws. In Norex Petroleum Ltd. v. Access Indus., Inc., et al., the U.S. Second Circuit Court of Appeals affirmed the dismissal of a case "which primarily involves foreign actors and foreign acts," for failure to state a claim under the RICO statute.
In Morrison, the Supreme Court found that the Securities Exchange Act of 1934 should not be applied extraterritorially because statutes that lack an expressed congressional intent to apply extraterritorially are presumed to not so apply.
Closely tracking Morrison, the Second Circuit held that there also was no basis for inferring extraterritorial application of the RICO statute from the way certain terms were used or defined in the RICO statute. The Court found that Norex, whose case “primarily involves foreign actors and foreign acts,” had failed to plead sufficient domestic conduct to support a RICO claim.
As Pell noted, the Norex ruling will make it more difficult for non-US companies to be sued under the RICO statute for disputes lacking clear US connections. Given the Court’s interpretation of the RICO statute, the burden will be on plaintiffs to plead domestic conduct sufficient to sustain a RICO claim. Norex shows that this burden is not met where a non-US plaintiff’s alleged RICO injuries are incurred abroad and are caused by alleged non-US acts (e.g., acts in Russia).
Significantly, the Second Circuit did not shed light on what types of facts in the context of a RICO claim could satisfy that burden. Thus, future cases will have to assess, as set forth in Morrison, what “the object of the [RICO] statute’s solicitude” is and what “the [RICO] statute seeks to ‘regulate’” in the context of a case with significant non-US characteristics.
The case is Norex Petroleum Limited v. Access Industries, Inc. et al., 07-4553-cv, Second Circuit Court of Appeals.
Trend to Watch: Look for U.S. Courts to Get Tougher on Foreign Plaintiffs Filing Lawsuits with Little or no U.S. Connection.