The Supreme Court’s opinion in RJR Nabisco, Inc. v. European Community (decided June 20, 2016) limited the extraterritorial reach of the Racketeering Influence and Corrupt Organizations Act (RICO). Now, a recent case out of the Southern District of New York illustrates the practical effects of the Nabisco decision. Because the Court appears to have incorporated a choice of law analysis into RICO’s private right of action, civil RICO plaintiffs are now well-advised to consider very carefully a forum’s choice of law rules prior to filing suit.

RICO creates both civil and criminal liability for engaging in a pattern of prohibited, or “predicate,” acts. RICO’s private right of action, which was at issue in Nabisco, is very attractive to private plaintiffs because it offers treble damages along with the recovery of attorney’s fees. In Nabisco, the Court articulated two tests for RICO’s extraterritorial scope: one for RICO’s provisions enforced by the United States (including its criminal provisions), and an entirely different one for RICO’s private right of action.

The Court first held that the extraterritorial reach of criminal liability under RICO is coextensive with the extraterritorial reach of the predicate statutes allegedly violated, i.e., that “RICO’s extraterritorial effect is pegged to the extraterritoriality judgments Congress has made in the predicate statutes.” Under this predictable and easy-to-apply rule, the extraterritorial reach of criminal RICO liability simply piggybacks on the extraterritoriality jurisprudence that courts continue to develop around the predicate statutes underlying a RICO violation.

The Court applied an entirely different test to RICO’s private right of action, explaining that the remedy, found in 18 U.S.C. § 1964(c), is available only to a plaintiff “injured in his business or property” within the United States. Plaintiffs who have been injured abroad – such as the European Community in its suit against RJR Nabisco – therefore have no private civil remedy under RICO.

While the Court was clear that RICO’s private right of action remedies only domestic injuries, the Court did not explain how district courts should determine the location of a plaintiff’s injury, i.e., whether an injury is domestic or foreign, and thus whether it supports a civil RICO claim under § 1964(c). The European Community had stipulated earlier in the case that its injuries had not occurred in the United States, thereby allowing the Court to sidestep the issue. District courts, of course, will not have such luxury, and instead must now decide not only whether a RICO plaintiff’s injury is domestic, but also the threshold issue of how to determine the location of the plaintiff’s injury in the first place.

That latter issue is a classic choice of law question. But would the Supreme Court really make application of the federal RICO private right of action dependent upon a choice of law analysis driven by state law? Well, if a recent case out of the Southern District of New York is any indication, the Court did exactly that. In Bascuñan v. Els, a Chilean plaintiff brought a civil RICO claim against his Chilean cousin, alleging that his cousin had siphoned millions of dollars from his New York bank accounts through a pattern of racketeering activity consisting of wire fraud, mail fraud and bank fraud. After noting that the Nabisco court had not needed to determine the location of the European Community’s injury (due to the stipulation in that case), Judge Daniels observed that “[j]ust such a case is now before this court.”

Both parties looked to New York law to determine the location of the injury. While the defendants relied on New York’s choice of law statute, the plaintiffs pointed to New York’s personal jurisdiction long-arm statute. Judge Daniels held that because Nabisco requires consideration of the location of the injury, the choice of law statute (which looks to the location of the injury, as opposed to the long-arm statute, which looks to the location of the wrongful conduct) controlled:

… Defendants’ proposed test, which focuses on the plaintiff and where the alleged injury was suffered, is the appropriate approach to determine whether a plaintiff may maintain a private cause of action under § 1964(c). Plaintiffs’ proposed approach, which focuses on whether the defendant’s contacts with the forum are sufficient to comport with due process—to determine where a plaintiff suffered an alleged RICO injury—is misguided.

Judge Daniels’ specific holding is instructive, but more instructive still is the parties’ and the court’s unanimity that, in any event, New York law controlled the location-of-the-injury test.

Of course, district courts commonly apply the choice of law rules of the state in which the court is seated (as Judge Daniels did in Bascuñan), but that principle’s sudden importance in civil RICO litigation shows that the case may be the first of many district and circuit court cases grappling with the choice of law inquiry the Supreme Court seems to have mandated. If courts continue to rely on state laws to determine the location of a plaintiff’s RICO injury – which is far from certain – well-advised RICO plaintiffs will carefully scrutinize prospective forums’ choice of law rules prior to filing suit. And this approach suggests that civil RICO may not mean the same in each state, because there are as many approaches to choice of law as there are states in the Union. While the Supreme Court may not have intended to incentivize civil RICO plaintiffs’ forum shopping, the interplay between the Court’s holding and federal courts’ application of state choice of law rules may guarantee it.