BRIEF FOR RESPONDENTS

Transcription

1 No & (cons). IN THE Supreme Court of the United States AKASH HASAN et al., Petitioners, cross-respondents V. WORLDCO LTD., ONEWORLD USA, JACK SAILOR, and JONAH FINN, Respondents AND DAVID JONES, Respondent, cross-petitioner ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRTEENTH CIRCUIT BRIEF FOR RESPONDENTS TEAM 1 Counsel of Record Ivette De Moya Alodie Efamba Lauren Ethe Counsel for Respondents

2 QUESTIONS PRESENTED I. Whether the Racketeer Influenced and Corrupt Organizations statute, 18 U.S.C et seq., has extra-territorial reach? II. Whether a letter can satisfy the requirement of Fed. R. Civ. P. 11(c) for the service of a motion? i

3 TABLE OF CONTENTS QUESTIONS PRESENTED i TABLE OF CONTENTS ii TABLE OF AUTHORITIES iv OPINIONS BELOW viii BASIS OF JURISDICTION viii STATEMENT OF THE CASE Statement of Facts Procedural Background SUMMARY OF THE ARGUMENT ARGUMENT I. THE RICO STATUTE DOES NOT HAVE EXTRATERRITORIAL REACH A. The Focus Of Congressional Concern For Which RICO Was Enacted Does Not Extend RICO s Scope Extraterritorially B. The Enterprise Approach Is A Valid Test Under Morrison And Upholds That RICO Does Not Have Extraterritorial Application Abroad Generally And In The Case At Bar The pattern of racketeering activity test (including predicate acts) is in effect a refashioning of the conduct and effects test abrogated by the court in Morrison The enterprise test should control because it is a bright line rule analogous to the transactional test in Morrison that upholds the presumption against extraterritoriality C. The Presumption Against Extraterritoriality Under Morrison Is Not Rebutted By RICO s Foreign Commerce Language D. An Extraterritorial Reach Could Create Unreasonable Interference With Sovereign Nations Through Incompatibility Between Domestic And Foreign Laws ii

4 II. THE LETTER JONES SENT TO PETITIONER SATISFIES THE SERVICE OF A MOTION REQUIREMENT BECAUSE THE LETTER SUBSTANTIALLY COMPLIES WITH FED. R. CIV. P. 11(C) A. Jones Letter To Petitioner Was Sent Timely, Separate From Any Other Motions, And Describes The Specific Conduct Petitioner Engaged In That Violates Rule 11(b) B. Jones Letter Was Served Upon Petitioner In Compliance With FED. R. CIV. P C. Jones Satisfied Rule 11 s Safe-Harbor Provision By Filing The Motion For Sanctions More Than Twenty-one Days After Serving The Letter On Petitioner D. A Determination That Jones Letter Does Not Satisfy The Safe-Harbor Provision Would Overtly Go Against The Letter And Spirit Of Rule CONCLUSION CERTIFICATE OF COMPLIANCE iii

5 TABLE OF AUTHORITIES United States Supreme Court Cases Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 453 (2006) Connecticut v. Duncan, 612 F.3d 107, 112 (2d Cir. 2010) Cooter & Gell v. Hartmarx Corp., 496 U.S. 384 (1990) E.E.O.C. v. Arabian Am. Oil Co., 499 U.S. 244, 255 (1991) , 9, 17, 18, 19, 20 Foley Bros. v. Filardo, 336 U.S. 281, 285 (1949) Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659, 1669 (2013) Morrison v. Nat l Australia Bank Ltd., 561 U.S. 247, 257 (2010) passim New York Cent. R. Co. v. Chisholm, 268 U.S. 29, (1925) , 18, 19 Reves v. Ernst & Young, 507 U.S. 170, 185 (1993) Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 499 (1985) Steele v. Bulova Watch Co., 344 U.S. 280, 287 (1952) , 19, 20, 22 Vermilya-Brown Co. v. Connell, 335 U.S. 377, (1948) United States Court of Appeals Cases Baker v. Chevron U.S.A. Inc., 533 Fed.Appx. 509 (6th Cir. 2013) , 26, 30 Barker v. Bank One, Lexington, N.A., No , 1998 WL (6th Cir. July 30, 1998) , 30 First Bank of Marietta v. Hartford Underwriters Ins. Co., 307 F.3d 501 (6th Cir. 2002) In re Mondelli, No , 2012 WL (3d Cir. Dec. 26, 2012) , 30 Matrix IV, Inc. v. American Nat. Bank and Trust Co. of Chicago, 649 F.3d 539 (7th Cir. 2011) , 25, 26 iv

6 Merritt v. International Ass n of Machinists and Aerospace Workers, 613 F.3d 609 (6th Cir. 2010) Nisenbaum v. Milwaukee County, 333 F.3d 804 (7th Cir. 2003) Norex Petroleum Ltd. v. Access Industries, Inc., 631 F.3d 29, 33 (2d Cir. 2010) Schlaifer Nance & Co. v. Estate of Warhol, 194 F.3d 323 (2d Cir. 1999) SEC v. Berger, 322 F.3d 187, (C.A ) , 11 Star Mark Management, Inc. v. Koon Chun Hing Kee Soy & Sauce Factory, Ltd., 682 F.3d 170 (2d Cir. 2012) , 30 United States v. Chao Fan Xu, 706 F.3d 965 (9th Cir. 2013) , 12, 13 United States v. Parness, 503 F.2d 430, 439 (2d Cir. 1974) United States v. Rogers Cartage Co., 794 F.3d 854 (7th Cir. 2015) United States District Court Cases Cedeno v. Intech Group, Inc., 733 F.Supp.2d 471 (S.D.N.Y. 2010) , 8, 14 Chevron Corp. v. Donziger, 871 F. Supp. 2d 229, (S.D.N.Y. 2012) European Cmty. v. RJR Nabisco, Inc., 2011 WL , at 6 (E.D.N.Y. Mar. 8, 2011)..8, 15, 16 CGC Holding Co., LLC v. Hutchens, 824 F. Supp. 2d 1193 (D. Colo. 2011) , 13 In re Le-Nature s, Inc., 2011 WL , at 3 (W.D. Pa. May 26, 2011) Sorota v. Sosa, 842 F. Supp. 2d 1345 (S.D. Fla. 2012) U.S. Constitutional Provisions Constitution, Art. IV, s 3, cl v

7 Statutes 15 U.S.C.A U.S.C.A (West) , 20 Consumer Product Safety Act, 15 U.S.C. 2052(a)(12) Logan Act, 18 U.S.C U.S.C U.S.C.A (West) U.S.C , 11, U.S.C.A Federal Food, Drug, and Cosmetic Act, 21 U.S.C. 321(b) Labor Management Reporting and Disclosure Act of 1959, 29 U.S.C. 401 et seq U.S.C. 623(f)(1) U.S.C. 2000e 5(f)(3), 2000e Americans with Disabilities Act of 1990, 42 U.S.C et seq Transportation Safety Act of 1974, 49 U.S.C. App. 1802(1) Export Administration Act of 1979, 50 U.S.C. App. 2415(2) Federal Rules Fed. R. Civ. P Fed. R. Civ. P , 27 Fed. R. Civ. P Fed. R. Civ. P passim vi

8 Legislative History Pub.L.No (1970) Secondary Sources 2-11 Moore s Federal Practice, 11.22, (Matthew Bender 3d Ed.) , 25, U.S.C. 2000e(f), 2000e-1(c)(1), 12111(4) and 12112(c)(2)), Extraterritorial Scope of Major US Employment Laws, Practical Law Practice Note Don Zupanec, Sanctions Rule 11 Safe Harbor Provision Motion Requirement, 27 NO FED. LITIGATOR 13, Aug SEC Compliance: Financial Reporting and Forms [ 30,817] Subsidiary., WL , vii

9 OPINIONS BELOW The United States District Court for the Eastern District of Evans, memorandum number 15-CV-05, dated May 31, 2014, entering judgment granting Respondents motion to dismiss Petitioners complaint, and denying respondent Jones motion for Rule 11 sanctions is located in the Record at 2-7. The United States Court of Appeals for the Thirteenth Circuit s opinion, dated October 5, 2014, affirming the District Court s order dismissing Petitioners complaint, and reversing the denial of respondent Jones motion for Rule 11 sanctions, remanding the cause for determination as to whether Petitioners counsel violated Rule 11 is located in the Record at BASIS OF JURISDICTION The United States Court of Appeals for the Thirteenth Judicial Circuit entered judgment on October 5, The Petition for Writ of Certiorari was granted on December 1, This Court has jurisdiction pursuant to 28 U.S.C. 1254(1). viii

10 STATEMENT OF THE CASE Statement of Facts WorldCo (UK) Ltd. is a British corporation that engages in business related to the international shipping industry. (R. 12.) Since 2005, WorldCo has housed all of its operational funds in a single bank account at Barclays (UK) Ltd. in London. (R. 12.) WorldCo s subsidiary in the United States, OneWorld USA, is headquartered in Long Beach, California. (R. 12.) Its president, Jack Sailor, Chief Financial Officer David Jones, and Chief Operating Officer and Vice-President of Operations Jonah Finn, all work and live in the United States. (R. 12.) In April 2013, Finn received an from Fanny Budiman, the accounts manager of OneWorld s office in Tanjung Priok Indonesia, asking for approval for a new business proposal that involved shipping cargo for Sanmen Dongli, a Chinese company, from Sanmen, China to Chittagong, Bangladesh. (R. 12.) Budiman informed Finn that the cargo to be transported was sludge from a nuclear power plant that the customer wished to dispose of in Bangladesh. (R. 12.) Finn asked if the sludge was contaminated, but never received an answer from Budiman, and Finn proceeded to approve the new business via . (R ) Ten voyage charters filled with the sludge were shipped. (R. 13.) The sludge, in fact, was contaminated and caused radiation sickness to the forty-six named Petitioners who live and work in Chittagong, Bangladesh. (R. 13.) In January 2014, Petitioners filed suit against WorldCo Ltd., OneWorld USA, and Jack Sailor, Jonah Finn, and David Jones individually, seeking damages under RICO, 18 U.S.C. 1962(a), (b), (c), and (d). (R. 12.) The complaint alleged that Respondents committed predicate acts of money laundering under 18 U.S.C by performing financial transactions with the proceeds of unlawful activity, wire fraud under 18 U.S.C by sending communications pertaining to the Sanmen Dongli business, and 1

11 violations of the Travel Act, 18 U.S.C. 1952, by travelling to further unlawful activity. (R. 12.) Petitioners argue that these alleged actions constitute RICO predicates, and that Respondents phone calls, s, financial transactions, and global travel support their claim of Respondents involvement in the toxic-waste scheme. (R. 4-5.) Petitioners allege that some of these communications occurred in the U.S. (R. 5.) Specifically, the complaint indicates three activities: Finn s approving the new business, a video conference that took place on October 17, 2013, and the use of revenue from the Sanmen Dongli business to expand the Long Beach, California office. (R. 13.) Petitioners complaint alleged that in the October 17 video conference, Finn, Sailor, and Jones agreed that shipping for Sanmen Dongli was great business. (R. 13.) Jones, however, had not participated in the video conference. Medical records from the Mayo Clinic verify that Jones was undergoing cardiac surgery at the time the video conference took place, and remained in rehab for the entire month of October (R. 13.) The allegation that he was a participant in this video conference had extensive and significant consequences for Jones. (R. 13.) He was running in a hotly contested election for a council seat in the Evans City Council, and his opponent used these allegations against him after learning of the complaint through a local publication that featured an article on the lawsuit. (R. 13.) Jones attorney wrote a letter to Petitioners attorney, Alaina Stein, on March 11, 2014, informing her that the allegations against Jones were false, in violation Fed. R. Civ. P. 11(b). (R ) Jones enclosed with the letter the medical records from the Mayo Clinic proving that he was not a participant in the October 17 video conference. (R. 14.) Jones attorney directed Stein to withdraw the allegations against Jones within twenty-one days as required by Fed. R. Civ. P. 11(c)(2), and notified her that if she failed to do so, Jones would seek sanctions against her for violating Rule 11. (R. 14.) Stein did 2

12 not withdraw the allegations, and Jones filed a motion for Rule 11 sanctions on May 1, (R. 14.) Stein argued that the letter from Jones attorney was not a motion under Fed. R. Civ. P. 11(c)(2); Jones argued that the letter was a functional equivalent. (R. 17.) Procedural Background On May 31, 2014, the District Court for the Eastern District of Evans granted Respondents motion to dismiss Petitioners complaint and denied Jones motion for sanctions against Alaina Stein. (R. 7.) On June 1, 2014, Petitioners appealed from the judgment entered by the District Court. (R. 8.) On June 10, 2014, Respondent David Jones appealed from the order of the District Court denying his motion for Rule 11 sanctions. (R. 9.) On October 5, 2014, the United States Court of Appeals for the Thirteenth Circuit affirmed the District Court s order to dismiss Petitioners complaint, holding that RICO does not have extraterritorial effect. (R ) The Court also found that Jones attorney s letter did constitute a motion under Rule 11(c)(2). (R. 17.) Accordingly, the Court reversed the denial of Jones motion for sanctions, and remanded the cause for the District Court to determine whether Petitioners counsel violated Rule 11. (R. 18.) The Supreme Court of the United States granted petitions for a writ of certiorari on December 1, (R. 21.) SUMMARY OF THE ARGUMENT Issue One: the RICO statute does not apply extraterritorially. The United States Court of Appeals for the Thirteenth Judicial Circuit properly affirmed the District Court s decision below granting Respondents motion to dismiss Petitioners complaint. First, the Court held that the allegations against Respondents created a scheme primarily international in character. Specifically, a British shipping corporation (WorldCo Ltd.) 3

13 and its American subsidiary (OneWorld USA) do business with a Chinese company (Sanmen Dongli) to ship nuclear refuse from China and dispose of it in Chittagong, Bangladesh, which resulted in radiation sickness to forty-six Bangaldeshi nationals. Also, Petitioners specified only three contacts in the United States: an approving the new line of business, a related video conference, and revenue from the business used to make renovations to the United States office. Thus, the case turned on whether Congress expressly intended RICO to have extraterritorial effect. The Court concluded it did not. We ask that the United States Supreme Court affirm that decision upon the grounds that the Racketeer Influenced and Corrupt Organizations statute ( RICO ) does not have extraterritorial reach for the case at bar and in general, for the following reasons: First, the focus of congressional concern for which RICO was enacted does not extend RICO s scope extraterritorially. RICO was implemented to address the impact that organized crime had on the American economy and its citizens this point is fervently raised by Congress through its legislative history. Second, the enterprise approach is a valid test under Morrison, upholding that RICO does not have extraterritorial application abroad, both generally and in the case at bar. In contrast to the pattern of racketeering activity test developed by the lower courts, the enterprise test follows the analysis set forth in Morrison. Specifically, because the test looks at the geographic locality of the enterprise, the test creates a bright line rule whereby RICO applies only to domestic enterprises. This approach upholds the presumption against extraterritoriality that controlled in Morrison. A foreign enterprise would preclude the application of RICO abroad under the enterprise test, while foreign activity comingled with domestic activity may trigger RICO application abroad under the pattern of racketeering test. 4

14 Third, the presumption against extraterritoriality under Morrison is not rebutted by RICO's foreign commerce language this statutory interpretation has been upheld time and time again. Fourth, an extraterritorial reach could create unreasonable interference with sovereign nations through incompatibility with United States laws. Here, Petitioners sought for United States law to be superimposed on an instance that is largely foreign, risking the disturbance of a delicate balance of sovereign control. Issue Two: The letter Jones sent to Petitioner satisfies the service of a motion requirement because the letter substantially complies with Fed. R. Civ. P. 11(C). Petitioners counsel carelessly alleged that Mr. David Jones participated in a video conference, in which he claimed the Sanmen Dongli transaction was good business and deemed it safe. This allegation was not only hugely erroneous, but it caused serious distress in Mr. Jones professional life. Mr. Jones informed Petitioners counsel that he would seek sanctions against her under FED. R. CIV. P. 11 if she did not withdraw this frivolous and damaging claim. Mr. Jones provided Petitioners counsel with indisputable medical records to show that during the time of this alleged video conference, Jones was undergoing heart surgery at the Mayo Clinic. Even after being made aware of her fault and being put on notice of Mr. Jones intent to seek Rule 11 sanctions, Petitioners counsel continued to violate FED. R. CIV. P. 11 by failing to withdraw the false allegations against Mr. Jones. The District Court wrongly denied Mr. Jones motion for sanctions on a technicality that is debated amongst the Circuit Courts and undecided by the U.S. Supreme Court. Mr. Jones letter to Petitioners counsel satisfies the service of a motion requirement of FED. R. CIV. P. 11(c), because the letter substantially complies with Rule 11 as a whole. For the foregoing reason, we ask that this Court affirm the Thirteenth Circuit s decision to reverse the District Court s denial of Mr. Jones valid and compliant Rule 11 motion for sanctions against Petitioner s counsel. 5

15 ARGUMENT I. THE RICO STATUTE DOES NOT HAVE EXTRATERRITORIAL REACH. The factual allegations in the complaint are accepted as true as this case stems from a motion to dismiss. Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 453 (2006). Also, the motion to dismiss for failure to state a claim under Rule 12(b)(6) is examined de novo. Connecticut v. Duncan, 612 F.3d 107, 112 (2d Cir. 2010). A. The Focus Of Congressional Concern For Which RICO Was Enacted Does Not Extend RICO s Scope Extraterritorially. In 2010, the United States Supreme Court in Morrison v. Nat l Australia Bank Ltd., 561 U.S. 247, 257 (2010) eradicated the use of the conduct and effects tests for assessing whether the Securities Exchange Act (SEA) applied extraterritorially, 1 reaffirming instead the often repeated presumption against extraterritoriality 2 as controlling. The crux of the Court s distrust in those tests was that they were divining what Congress would have wanted, complex in formulation and unpredictable in application. Morrison, 561 U.S. at The Court characterized them as judicial-speculation-made-law, and affirmed that the presumption against extraterritoriality shall apply every time. Id. The Majority relied on the Court s statutory interpretation in E.E.O.C. v. Arabian Am. Oil Co., 499 U.S. 244, 255 (1991), that extraterritoriality turned on the focus of congressional concern. Morrison, 561 U.S. at 266. Relying on this, the Court in Morrison held that only transactions in securities listed on 1 There were two formulations: (1) an effects test, whether the wrongful conduct had a substantial effect in the United States or upon United States citizens and (2) a conduct test, whether the wrongful conduct occurred in the United States. Morrison v. Nat'l Australia Bank Ltd., 561 U.S. 247, 257 (2010) (quoting SEC v. Berger, 322 F.3d 187, (C.A )). 2 The court in E.E.O.C. v. Arabian Am. Oil Co. expounded on the presumption against extraterritoriality. [I]t is a longstanding principle of American law that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States. E.E.O.C. v. Arabian Am. Oil Co., 499 U.S. 244, 248 (1991) (quoting Foley Bros. v. Filardo, 336 U.S. 281, 285 (1949)). 6

16 domestic exchanges, and domestic transactions in other securities fell under the purview of the Act. Id. at 267. intent: For the case at bar, contemporaneous to RICO s implementation, Congress spoke to its In its Statement of Findings and Purpose, by way of preface to Title IX, Congress made clear its concern for American investors and businessmen, as well as American institutions: (1) organized crime in the United States... annually drains billions of dollars from America's economy by unlawful conduct...; (4) organized crime activities... weaken the stability of the Nation's economic system, harm innocent investors... and undermine the general welfare of the Nation and (American) citizens;...' United States v. Parness, 503 F.2d 430, 439 (2d Cir. 1974) (quoting Pub.L.No (1970)) (emphasis added). Here, RICO s legislative history expressly recognized the crux of the statute: to mitigate damages against the American economy proliferated by organized crime. A clear line can be drawn between the intent of RICO stated here and its inapplicability to the accusations against Respondents. In the case at bar, the only domestic incidents involve Respondents approving a business proposal via , a video conference to discuss that business deal, and money from that business used to make renovations to the United States office. The District Court correctly stated, mere communication absent racketeering activity is not a crime. (R. 5, ) The activity abroad includes a foreign corporation s shipping activities in foreign nations, as arranged through an unincorporated subsidiary s office in yet another foreign locale. (R. 16.) Yet Petitioners ignore the presumption against extraterritoriality and include foreign activity in their analysis to justify that the totality of the activity triggers its inclusion within RICO s scope for its extraterritorial application. The Petitioners here are similar to plaintiffs in Cedeno v. Intech Grp., Inc., 733 F. Supp. 2d 471, 473 (S.D.N.Y. 2010) aff'd sub nom. Cedeno v. 7

17 Castillo, 457 F. App'x 35 (2d Cir. 2012) 3 who attempted to sidestep Morrison. Id. Plaintiffs in that case alleged predicate acts of money laundering that involved transfers into and out of American banks. The Court referenced Morrison in noting that it is a rare case of prohibited extraterritorial application that lacks all contact with the territory of the United States, and that the presumption against extraterritoriality would be a craven watchdog indeed if it retreated to its kennel whenever some domestic activity is involved in the case. Cedeno v. Intech Grp., Inc., 733 F. Supp. 2d 471, 473 (S.D.N.Y. 2010) aff'd sub nom. Cedeno v. Castillo, 457 F. App'x 35 (2d Cir. 2012) (quoting Morrison, 561 U.S. at 266). For the case at bar, there is only a marginal amount of domestic acts within all of the allegations that Petitioners do not even allege were qualifying predicate act[s] [that] occurred entirely in the U.S or had caused any general harm to the United States or its citizens. (R. 5.) The presumption against extraterritoriality would be a feeble posture if an , video conference, and money used to repair the subsidiary office location, among all the allegations, could impel RICO s application. Thus, the allegations against Respondents are insufficient to contend that it falls under RICO s purview, especially against the presumption against extraterritoriality under Morrison. 3 The Southern District of New York s reliance on the enterprise test in Cedeno v. Intech Grp., Inc., although affirmed by the Second Circuit Court in Cedeno v. Castillo, 457 F. App'x 35 (2d Cir.2012), was abrogated by the Southern District Court's decision in In re Libor-Based Fin. Instruments Antitrust Litig., 2015 WL , at 91 (S.D.N.Y. Aug. 4, 2015) (this Court relied on the abrogation by the Second Circuit Court decision in European Cmty. v. RJR Nabisco, Inc., 764 F.3d 129, 136 (2d Cir.) that held that "[w]e conclude that RICO applies extraterritorially if, and only if, liability or guilt could attach to extraterritorial conduct under the relevant RICO predicate"). Within a single string of litigation involving the European community, analysis shifted drastically from the enterprise test to the predicate acts test. First, the District Court relied initially on the enterprise test at the District Court in European Cmty. v. RJR Nabisco, Inc., 2011 WL , at 5 (E.D.N.Y. Mar. 8, 2011) and now at the forefront is the predicate acts test from its Second Circuit decision that will be addressed by the United States Supreme Court in European Cmty. v. RJR Nabisco, Inc., 764 F.3d 129, 134 (2d Cir.) reh'g denied, 764 F.3d 149 (2d Cir. 2014) and cert. granted, 2015 WL (U.S. Oct. 1, 2015). Within one circuit court, the preeminence of the enterprise test quickly shifted to the predicate acts test following the abrogation of Cedeno. The abrupt shifts of reliance on either test and divide among the lower courts underscores the need for the United States Supreme Court to tackle the question of which test is the appropriate one to apply in assessing RICO's extraterritorial application. 8

18 Furthermore, there are mechanical considerations within the RICO statute that similarly speaks to the intent of Congress not to have the statute apply abroad. As a comparison, the Court in Arabian Am. Oil Co. highlighted several elements of the Securities Exchange Act. First, it fails even to mention foreign nations or foreign proceedings. Arabian Am. Oil Co., 499 U.S. at 255. Also, the statute does not lend itself to enforcement abroad because the only available venue is a state s judicial district and the E.E.O.C. s investigative ability is limited to subpoenas for witnesses and documents issued only within the United States. Id. at 256. See 42 U.S.C. 2000e 5(f)(3), 2000e 9. Lastly, Title VII does not guard against the possibility of state and foreign laws clashing. The Court contrasted Title VII with the Age Discrimination in Employment Act (ADEA) of 1967, which was amended to apply abroad. Arabian Am. Oil Co., 499 U.S. at 255. The amendment stipulated that an employer with a workplace in a foreign country did not have to comply with the Act if the employer would simultaneously violate the foreign laws where the workplace is located. Id. at 256. See 29 U.S.C. 623(f)(1). The Court reasoned here that if Congress [had] intended Title VII to apply overseas, it would have addressed the subject of conflicts with foreign laws and procedures. Arabian Am. Oil Co., 499 U.S. at 256. RICO and Title VII have several similarities. Specifically, RICO does not mention foreign nations or proceedings or any safeguards against domestic discrepancies with them. Also, a civil action may only be instituted in a United States district court and no subpoena can be served on any person more than one hundred miles from the district court where the action originated unless there is a showing of good cause. 18 U.S.C.A (West). In summary, RICO has practical limitations on its application abroad and lacks any congressional refinement of its scope, in contrast to ADEA. Thus, to claim that RICO was meant to apply outside of the United States is an overstatement of its congressional intent. 9

19 B. The Enterprise Approach Is A Valid Test Under Morrison And Upholds That RICO Does Not Have Extraterritorial Application Abroad Generally And In The Case At Bar. Following Morrison, two tests of congressional intent emerged from the lower courts, centering on either the enterprise or the pattern of racketeering activity (including predicate acts) in the assessment of RICO s extraterritorial application. Morrison s abrogation of the conduct and effects test and broad guidance to rely on the focus of RICO s congressional intent still left lower courts split on which test to apply 4. The development of these tests have been problematic, not only because there is divide among the lower courts as to which test is the right one, but because the pattern of racketeering activity test is in effect a reworked version of the conduct and effects test that was abrogated in Morrison. Thus, the doctrinal tension between the pattern of racketeering activity test and the abrogation of the conduct and effects test is a predicament that calls on this Court to address the conflict. The enterprise test, however, can validly assess RICO s application abroad because the presumption against extraterritoriality controls in this formulation, as opposed to the pattern of racketeering activity test that quickly dismisses it. In the case at bar, the enterprise test would validly assess that the allegations made against Respondents constitute a foreign enterprise and that RICO would thus not apply abroad. 1. The pattern of racketeering activity test (including predicate acts) is in effect a refashioning of the conduct and effects test abrogated by the court in Morrison. The racketeering activity test, which also looks to predicate acts, assesses RICO s extraterritorial application in effectively the same way that the conduct and effects test once did, by evaluating whether the wrongful conduct occurred in the United States, and whether the 4 Because RICO jurisprudence borrows heavily from securities jurisprudence, and it borrowed the conduct and effects test in particular, the ruling in Morrison threw courts into turmoil over how to apply RICO to enterprises and transactions that occur abroad. Anneka Huntley, RICO s Extraterritoriality After Morrison: Where Should We Go From Here?, 65 Hastings L.J. 1691, 1693 (2014). 10

20 wrongful conduct had a substantial effect in the United States or upon United States citizens. Morrison, 561 U.S. at 257 (quoting SEC v. Berger, 322 F.3d 187, (C.A )). When the Southern District of New York adopted the racketeering activity test, it described it as the following: the focus properly is on the pattern of racketeering activity and its consequences. If there is a domestic pattern of racketeering activity aimed at or causing injury to a domestic plaintiff, the application of Section 1962(c) to afford a remedy would not [be] an extraterritorial application of the statute. Chevron Corp. v. Donziger, 871 F. Supp. 2d 229, (S.D.N.Y. 2012) (emphasis added). The factors considered under the pattern of racketeering activity (predicate acts) test are the same factors that were abrogated by the court in Morrison, i.e. the conduct (or activity of predicate acts in this case) and effects (or consequences of injury caused in this case). Id. at Consequently, [t]he predicate acts approach is simply a reworking of the invalid conduct and effects test and is counter to the presumption against extraterritoriality. Anneka Huntley, RICO s Extraterritoriality After Morrison: Where Should We Go From Here?, 65 Hastings L.J. 1691, 1706 (2014). In United States v. Chao Fan Xu, 706 F.3d 965 (9th Cir. 2013), the Court relied on RICO's statutory language and legislative history to support its use of the pattern of racketeering activity test in assessing RICO s extraterritorial application. Specifically, 18 U.S.C. 1962(a)-(c) prohibits the conduct of a criminal enterprise's affairs through a pattern of racketeering activity. Chao Fan Xu, 706 F.3d at (quoting 18 U.S.C. 1962(c)). The Court looked at the totality of all the racketeering activity, which included fraud abroad with the Bank of China and defendants entering the United States with fraudulent visas and passports, and held that it falls within the ambit of the [RICO] statute. Chao Fan Xu, 706 F.3d at The outcome in Chao Fan Xu is particularly troubling because [t]his reasoning ignores the presumption against 11

21 extraterritoriality and chooses to include foreign actions where the presumption should otherwise shut them out. Huntley, supra at Furthermore, this test has practical difficulties in its application. Applying this approach going forward, it is uncertain how much activity has to occur domestically for the court to find that the entire pattern and predicate acts occurred domestically. Id. Consequently, utilization by this Court of the pattern of racketeering activity test would be a blatant disregard for the repudiation of the conducts and effects test and the preeminence of the presumption against extraterritoriality that was upheld in Morrison. Other courts similarly relied on the pattern of racketeering activity to frame the test for RICO s extraterritorial application, including the court in CGC Holding Co., LLC v. Hutchens, 824 F. Supp. 2d 1193, 1209 (D. Colo. 2011): The focus of the statute is the racketeering activity, i.e., to render unlawful a pattern of domestic racketeering activity perpetrated by an enterprise. RICO did not apply extraterritorially because the conduct of the enterprise within the United States was a key to its success. Id. at Assuming arguendo that this court were to apply the pattern of racketeering activity test in the case at bar, the conduct by Respondents largely constitutes foreign activity and RICO would nevertheless be inapplicable. In contrast to the minimal contacts in the United States alleged by Petitioners (communications through an and video conference, and money used to renovate an office (R )), the court in Hutchens found that the racketeering activity of defendants in that case was directed at and largely occurred within the United States. Hutchens, 824 F. Supp. 2d at (emphasis added). In that case, defendants targeted American borrowers via telephone, mail, and in a fictitious loan scheme; an agent of the defendants inspected property as collateral for the loans in the United States; and an American lawyer was recruited to aid in the loan process. Id. at Even in the case of Chao Fan 12

22 Xu, where the proportion of domestic activity to foreign activity is not as stressed as it was in Hutchens, the actions of the defendants within the U.S. were more extensive than the alleged domestic acts of the Respondents in the case at bar. Specifically, bank fraud occurred abroad through the Bank of China. Domestically, defendants entered the United States with fraudulent visas and passports, traveled within the United States to further their immigration fraud through the production of documents and opening of bank accounts, and were arrested in possession of those counterfeit documents. Chao Fan Xu, 706 F.3d at 978. If adopting this Court s adaptation of the pattern of racketeering test whereby the connection of the challenged conduct to the proscription in the statute 5 is assessed and the proportion of domestic to foreign activity is not considered, the acts by Respondents would still not fall under the purview of RICO. Id. at 979. Specifically, the allegations against Respondents include the that approved the business with Sanmen Dongli, the related video conference, and earnings form that business used to renovate the U.S. office. The communications do not, in and of themselves, constitute the predicate acts of wire fraud, money laundering, and global travel in furtherance of unlawful activity alleged by Petitioners. (R. 4-5.) The District Court below emphasized this point: But plaintiffs miss the point. First, plaintiffs do not allege that any qualifying predicate act occurred entirely in the U.S.; mere communication absent racketeering activity is not a crime. (R. 5.) Even if Petitioners were to argue that the money used in renovating the subsidiary s office weaves into the predicate act of money laundering, this solitary act that may constitute a predicate act does not suffice for RICO application abroad. See Norex Petroleum Ltd. v. Access 5 Defendants' pattern of racketeering activity may have been conceived and planned overseas, but it was executed and perpetuated in the United States. Under Morrison, we look not upon the place where the deception originated, but instead upon the connection of the challenged conduct to the proscription in the statute. 130 S.Ct. at Having determined that RICO's focus is on the pattern of racketeering activity, we conclude that Defendants' criminal plan, which included violation of United States immigration laws while the Defendants were in the United States, falls within the ambit of the statute. United States v. Chao Fan Xu, 706 F.3d 965, 979 (9th Cir. 2013). 13

23 Industries, Inc., 631 F.3d 29, 33 (2d. Cir. 2010) ( slim contacts with the United States... are insufficient to support extraterritorial application of the RICO statute ); Cedeno v. Intech Group, Inc., 733 F.Supp.2d 471 (S.D.N.Y. 2010) aff'd sub nom. Cedeno v. Castillo, 457 F. App'x 35 (2d Cir. 2012) (rejected the argument that alleging predicate acts of money laundering involving transfers in and out of the United States overcomes the prohibition against extraterritorial application). Consequently, the actions of Respondents raised by Petitioners fail to even constitute the predicate acts and connect to what is prohibited by RICO, let alone constitute domestic racketeering activity under RICO s purview. 2. The enterprise test should control because it is a bright line rule analogous to the transactional test in Morrison that upholds the presumption against extraterritoriality. The Southern District of New York, in Cedeño v. Intech Grp., Inc., implemented the enterprise formulation for assessing extraterritorial application of RICO. The Court explained: [I]t is plain on the face of the statute [RICO] that the statute is focused on how a pattern of racketeering affects an enterprise: it is these that the statute labels the Prohibited activities, 18 U.S.C But nowhere does the statute evidence any concern with foreign enterprises, let alone a concern sufficiently clear to overcome the presumption against extraterritoriality. Cedeno, 733 F.Supp.2d at In addition to creating this enterprise-centric test for deciding whether RICO applied abroad, the Court here suggested that RICO never concerned itself with any foreign enterprises. Thus, this enterprise approach in effect created a bright-line rule whereby RICO could apply only to domestic enterprises. Although on appeal the Second Circuit declined to take a position on what should be the appropriate test, other district courts have since applied the test. Huntley, supra at See, e.g., Sorota v. Sosa, 842 F. Supp. 2d 1345 (S.D. 14

24 Fla. 2012) (Court found that a foreign enterprise was allegedly operating entirely in Peru; funds originating from a Florida bank account did not change the nature of the enterprise); In re Le- Nature s, Inc., 2011 WL , at 3 (W.D. Pa. May 26, 2011) ( RICO focuses, in the context of a territorial analysis, on domestic rather than foreign enterprise. As a result, a claim involving a domestic enterprise falls within range of RICO. ) The enterprise approach is, of the two tests, the only one aligned with the presumption against extraterritoriality under Morrison. In fact, it is analogous to the bright-line rule implemented after Morrison. The Court in Morrison referenced the numerous amicus briefs from sovereign nations, banks, and international and foreign organizations that complained that the Securities Exchange Act s application would produce interference with foreign securities regulation and urge[d] the adoption of a clear test that will avoid that consequence. Morrison, 561 U.S. at In response, the Court implemented a transactional test, which assessed whether the purchase or sale is made in the United States, or involves a security listed on a domestic exchange. Id. Thus, making the bright-line distinction of a RICO enterprise as domestic or foreign is aligned with the territorial approach in Morrison where the Court distinguished domestic and foreign exchanges. The approach taken by the enterprise test is also supported by United States Supreme Court precedence. 6 The test looks to the where the brains of the operation were located. See European Cmty. v. RJR Nabisco, Inc., 2011 WL , at 6 (E.D.N.Y. Mar. 8, 2011) (the Court applied the nerve center test in order to assess an enterprise's territorial location, 6 Sedima, S.P.R.L. v. Imrex Co., Inc. held that Congress wanted to reach both legitimate and illegitimate enterprises. Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 499 (1985). The Court held in Reves v. Ernst & Young that the major purpose of RICO is to attack the infiltration of organized crime and racketeering into legitimate organizations. Reves v. Ernst & Young, 507 U.S. 170, 185 (1993). 15

25 focus[ing] on the decisions effectuating the relationships and common interest of its members, and how those decisions are made ). This distinction is truest to the presumption against extraterritoriality under Morrison because this approach cuts RICO s extraterritorial application along clear lines: RICO applies to enterprises located in the United States, but not to enterprises located abroad. Huntley, supra at Applying the enterprise test for the case at bar, the conduct by Respondents would constitute a foreign enterprise and RICO would not apply. The structure of the purported enterprise falls under a hierarchical business scheme whereby the interests of the subsidiary are subject to that of the holding company. 7 Here, the brains of the purported enterprise would be WorldCo Ltd., as the relation between WorldCo and its subsidiary OneWorld USA falls squarely into a typical hierarchy in business. If leaning on the clarification provided by the court in RJR Nabisco, Inc., the purported enterprise s locality would not be the United States as the leadership and decision-making affecting the common interests of all the members involved in this allegation would stem from WorldCo in the United Kingdom. C. The Presumption Against Extraterritoriality Under Morrison Is Not Rebutted By RICO s Foreign Commerce Language. Applying this canon of construction, i.e. the presumption against extraterritoriality, the Court in Morrison discerned that the language in the Securities Exchange Act did not overcome the presumption against extraterritoriality. Here, Australian shareholders accused defendants, an Australian banking corporation and a United States mortgage servicing company, of finagling valuation models to make the companies look more profitable. Morrison, 561 U.S. at A subsidiary of a specified person is an affiliate controlled by such person directly, or indirectly through one or more intermediaries. SEC Compliance: Financial Reporting and Forms [ 30,817] Subsidiary., 2015 WL , 1. 16

26 The Securities Exchange Act prohibited any breach of the rules prescribed by the Securities and Exchange Commission through any means, including instrumentalities of interstate commerce. The Act defined interstate commerce as including commerce between any foreign country and any State. Despite this explicit inclusion of foreign countries within the definition of interstate commerce, the breadth of the Act s use of interstate commerce could not overcome the presumption against extraterritoriality. The court explained that it has repeatedly not held statutes to apply abroad when there were explicit references to foreign commerce in the statute. Id. at See New York Cent. R. Co. v. Chisholm, 268 U.S. 29, (1925) (U.S. Supreme Court declined to apply aboad the Liability Act which holds railroads liable to employees for damages suffered under the employer s negligence while engaging in interstate or foreign commerce when a U.S. citizen employee of the New York Central Railroad Company suffered fatal injuries in Canada on a passenger train traveling from New York: [The Liability Act] contains no words which definitely disclose an intention to give it extraterritorial effect, nor do the circumstances require an inference of such purpose. ) Consequently, the Court in Morrison held that [t]he general reference to foreign commerce in the definition of interstate commerce does not defeat the presumption against extraterritoriality. Morrison, 561 U.S. at 263. The Court in E.E.O.C. v. Arabian Am. Oil Co. also applied this canon of construction in assessing whether Title VII applied abroad when the incidents of harassment and discrimination between United States employers and employees occurred outside of the United States. Arabian Am. Oil Co., 499 U.S. at 247. Title VII applies to employers of more than fifteen employees that are engaged in an industry affecting commerce. Id. at 249. Petitioners unsuccessfully argued that Title VII s language, which defines commerce as occurring between a State and any place 17

27 outside thereof is a clear indicator that Congress intended to administer the law outside of the United States. The Court relied on its past decisions that repeatedly held that even explicit use of foreign commerce language could not rebut the presumption against extraterritoriality. It found between a State and any place outside thereof ambiguous and a weaker case for foreign application as compared to the express language of foreign commerce. Id. at See also New York Cent. R. Co. v. Chisholm, 268 U.S. at Furthermore, the court pointed to several other statutes that have never been held to apply overseas even though it contained similar language, between a State and any place outside thereof, undermining petitioners approach in deducing an inference from boilerplate language which can be found in any number of congressional Acts. 8 Arabian Am. Oil Co., 499 U.S. at 251. Consequently, commerce occurring between a State and any place outside thereof did not suffice to find Congressional intent of extraterritoriality. 9 In contrast to the preceding United States Supreme Court cases, the Court in Steele v. Bulova Watch Co., 344 U.S. 280, 287 (1952) found that [the Lanham] Act's sweeping reach into all commerce which may lawfully be regulated by Congress does not constrict prior law or deprive courts of jurisdiction previously exercised. Bulova Watch Co., 344 U.S. at 287 (quoting 15 U.S.C.A (West)). In this case, American corporation Bulova sued an American citizen for trade-mark infringements carried out abroad pursuant to Lanham Act s charge that (a)ny person who shall, in commerce, infringe a registered trade-mark, shall be held liable. 8 Consumer Product Safety Act, 15 U.S.C. 2052(a)(12); Federal Food, Drug, and Cosmetic Act, 21 U.S.C. 321(b); Transportation Safety Act of 1974, 49 U.S.C. App. 1802(1); Labor Management Reporting and Disclosure Act of 1959, 29 U.S.C. 401 et seq.; Americans with Disabilities Act of 1990, 42 U.S.C et seq. E.E.O.C. v. Arabian Am. Oil Co., 499 U.S. 244, 251 (1991). 9 In response to the Aramco decision, Congress amended the definition of employee in Title VII and the Americans with Disabilities Act (ADA). Both statutes now expressly protect U.S. citizens employed in a foreign country by a U.S. employer or a foreign company controlled by a U.S. employer (42 U.S.C. 2000e(f), 2000e-1(c)(1), 12111(4) and 12112(c)(2)). Extraterritorial Scope of Major US Employment Laws, Practical Law Practice Note