Availability Of RICO Claims To Foreign Holders Of Arbitral Awards

• Jurisdiction: United States,Federal
• Law Firm: Foley & Lardner
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Personal Injury
• Author: Mr Max B. Chester and Gerald S. Kerska
• Published date: 15 February 2023

The United States Supreme Court may soon provide to foreign holders of arbitral awards a powerful tool to enforce the awards in the United States against recalcitrant parties and their enablers ' a claim under the Racketeer Influenced and Corrupt Organizations Act (RICO). A successful plaintiff in a civil RICO action recovers treble damages, costs, and attorney fees,¹ and one decision from the 1990s famously described RICO as "the litigation equivalent of a thermonuclear device." To establish standing under RICO, however, a plaintiff must demonstrate that it suffered a "domestic" injury to its business or property ' an injury suffered in the United States, rather than abroad.

Once a foreign arbitral award is confirmed in the United States, it becomes a judgment and provides the holder with intangible property rights to enforce the judgment against the assets of the judgment debtor. The federal courts of appeal have split over how to determine where a plaintiff suffers an injury involving judgments arising from confirmed foreign arbitral awards. The Seventh Circuit applies a bright-line rule: A plaintiff suffers an injury to intangible property rights at its place of residence. By contrast, the Third and Ninth Circuits take a multifactor approach, which considers the circumstances surrounding the dispute.

On January, 13, 2023, the Supreme Court granted certiorari to resolve the issue in Yegiazaryan v. Smagin, No. 22-381, 2023 WL 178404 (Jan. 13, 2023), and in CMB Monaco v. Smagin, No. 22-383, 2023 WL 178404 (Jan. 13, 2023).

The Domestic Injury Requirement for Civil RICO Claims

In RJR Nabisco, Inc. v. European Community, 579 U.S. 325 (2016), the United States Supreme Court clarified that a plaintiff's injury for RICO standing must have been suffered within the United States ' a domestic injury. The plaintiff in RJR Nabisco stipulated its injuries were foreign. As a result, the Supreme Court announced the domestic injury requirement but did not elaborate how courts should distinguish between domestic and foreign injuries.

Identifying where a plaintiff suffers an injury is not so difficult with tangible property ' property with a physical existence. A plaintiff generally suffers an injury in the place where tangible property is located.² By contrast, intangible property, including stock options, business goodwill, intellectual property, and judgments, lacks a physical existence. Identifying where a plaintiff suffers an injury to intangible property has...