07-4553-cv
Norex Petroleum v. Acess Industries
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
__________
August Term, 2008
Argued: February 4, 2009 Decided: September 28, 2010
Amended: December 8, 2010
Docket No. 07-4553-cv
__________
_______________________________________________________________
NOREX PETROLEUM LIMITED,
Plaintiff-Appellant,
-v-
ACCESS INDUSTRIES, INC., RENOVA, INC., LEONARD BLA-
VATNIK, VICTOR VEKSELBERG, ALFA GROUP CONSORTIUM,
CROWN FINANCE FOUNDATION, CTF HOLDINGS, LTD., ALFA
FINANCE HOLDINGS, S.A., CROWN LUXEMBOURG HOLDINGS,
S.A.R.L., ELLIOT SPITZ, OAO TNK-BP HOLDING, SIMON KUKES, JOSEPH
BAKALEYNIK, LT ENTERPRISES LIMITED, SANDWELL
ENTERPRISES LIMITED, EAST-MOUNT PROPERTIES LIMITED,
ALETAR COMPANY, INC., ASTONS TRUSTEES, LIMITED,
BP P.L.C., LORD BROWNE of MADINGLEY, GILIAN CAINE,
SUSAN CUBBON, ROBERT DUDLEY, SIMON ELMONT,
JAMES GRASSICK, KELLAND, GERMAN KHAN,
ALEXEY KUZMITCHEV, OZERLA BUSINESS CORP.,
VALDIMIR PLOUZHNIKOV, ROBERT SHEPPARD, STAR PORT
LLC, TNK-BP LIMITED, WATFORD LIMITED, and TNK-BP
INTERNATIONAL LTD.,
Defendants-Appellees.
_______________________________________________________________
POOLER, KATZMANN, Circuit Judges, and PRESKA, Chief District Judge.1
The plaintiff alleges injury arising from the activities of an international criminal
enterprise. The district court held that it could not properly exercise subject matter jurisdiction
over the plaintiff’s claims under the Racketeer Influenced and Corrupt Organization Act, 18
U.S.C. § 1961 et seq. (“RICO”). Pursuant to the authority of Morrison v. Nat’l Austl. Bank Ltd.,
130 S. Ct. 2869 (2010), we hold that (1) the question of the justiciability of the RICO claims is
properly one of whether the complaint adequately states a claim for relief; and (2) because the
RICO statute lacks a clear statement of extraterritorial reach, plaintiff’s claims are barred.
Accordingly, we AFFIRM the district court’s dismissal of the complaint, albeit on different
grounds than below.
__________
PETER J.W. SHERWIN (Eric H. Blinderman, on the
brief), Proskauer Rose LLP, New York, NY.
BRUCE S. MARKS (Maria Temkin, on the brief), Marks
& Sokolov, LLC, Philadelphia, PA.
Attorneys for Plaintiff-Appellant.
OWEN C. PELL, White & Case LLP, New York, NY.
Attorney for Defendants-Appellees.
PER CURIAM:
The issue before us is whether a United States federal court can properly hear a claim
under the Racketeer Influenced and Corrupt Organization Act (“RICO”), 18 U.S.C. § 1961 et
seq., arising from allegations of a conspiracy which primarily involves foreign actors and foreign
acts. Applying the Supreme Court’s decision in Morrison v. National Australian Bank Ltd., 130
S. Ct. 2869 (2010), we hold that this issue is properly considered as a question of whether the
1
The Honorable Loretta A. Preska, Chief United States District Judge for the Southern
District of New York, sitting by designation.
2
complaint states a claim for which a United States federal court can provide relief, not as a
question of whether the court possesses subject matter jurisdiction to hear the claim. Morrison
also holds that absent an express intention by Congress of extraterritorial effect, a statute applies
only domestically. Id. at 2877-78. As RICO “is silent as to any extraterritorial application,”
North South Finance Corp. v. Al-Turki, 100 F.3d 1046, 1051 (2d Cir. 1996), we affirm the
district court’s dismissal of plaintiff’s complaint, albeit on different grounds.
FACTS
According to the first amended complaint, which is the operative complaint on this
appeal, this case involves “a massive racketeering scheme to take over a substantial portion of
the Russian oil industry.” (¶ 1)2 Specifically, plaintiff Norex Petroleum Limited (“Norex”)
alleges that defendants conspired to take “control of Yugraneft, a Russian oil company, illegally
obtaining much of Norex’s ownership of Yugraneft and reducing it from the controlling majority
shareholder to a powerless minority shareholder.” (¶ 1) Norex alleges that, as a result, it “has
lost the vast portion of its interest in, and therefore control of, Yugraneft, which has an estimated
value in excess of $500 million, and has not been paid millions of dollars in dividends.” (¶ 11)
Somewhat in the manner of one of the great Russian novels of the nineteenth century, the first
amended complaint is heavily laden with characters and incident, laid out more fully in the
previous opinions in this case, familiarity with which is presumed. See Norex Petroleum Ltd. v.
Access Indus., Inc., 304 F. Supp. 2d 570 (S.D.N.Y. 2004) (“Norex I”); Norex Petroleum Ltd. v.
Access Indus., Inc., 416 F.3d 146 (2d Cir. 2005), cert. denied, 547 U.S. 1175 (2006); Norex
2
The first amended complaint, the allegations of which are assumed to be true for the
purposes of the present discussion, will be cited by paragraph number.
3
Petroleum Ltd. v. Access Indus. Inc., 540 F. Supp. 2d 438 (S.D.N.Y. 2007) (“Norex II”).
In sum, Norex alleges that the defendants participated in a widespread racketeering and
money laundering scheme with the goal of seizing control over most of the Russian oil industry
through the use of Russian oil companies including Tyumen Oil Company (“TNK”) and
Yugraneft. ( ¶¶ 1, 4.) Norex further alleges that defendants committed numerous acts in the
United States in furtherance of its scheme that constitute racketeering within the meaning of
RICO, including mail and wire fraud, money laundering, Hobbs Act violations, Travel Act
violations and bribery. ( ¶¶ 261-321.) Norex alleges that as a result of this scheme, its majority
ownership stake in Yugraneft and of certain quantities of oil owed to it by Yugraneft and other
Russian oil entities was stolen from it through a series of unlawful actions that included bribery
of Russian governmental officials and corrupt Russian bankruptcy proceedings.
Norex’s initial complaint in this action was filed in February 2002. The defendants
subsequently moved for dismissal of the complaint on grounds of forum non conveniens, a
motion the district court granted. Norex I, 304 F. Supp. 2d at 581. Norex appealed, and this
Court vacated the district court’s ruling. See Norex Petroleum, 416 F.3d at 154-56.
On remand, the defendants filed a joint motion to dismiss for lack of subject matter
jurisdiction on the grounds that Norex could not properly raise a RICO claim “because the
principal actions and events underlying [its] claim occurred outside of the United States.” Norex
II, 540 F. Supp. 2d at 440. Norex argued that RICO’s extraterritorial reach was properly
considered under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. Relying on our decision in
North South Finance Corp. v. Al-Turki, 100 F.3d 1046 (2d Cir. 1996), the district court held that
existing Second Circuit precedent clearly treated the extraterritorial reach of RICO as a question
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of subject matter jurisdiction. Norex II, 540 F. Supp. 2d at 441. It then granted defendants’
motion to dismiss. This appeal followed.
On June 24, 2010, while this case was sub judice before this Court, the Supreme Court
issued Morrison v. National Australian Bank, 130 S. Ct. 2869 (2010). Morrison rejected the
“conduct and effect” test traditionally used by the Second Circuit and other courts to determine a
statute’s extraterritorial application in favor of a bright-line rule: absent a clear Congressional
expression of a statute’s extraterritorial application, a statute lacks extraterritorial reach. Id. at
2877. The parties submitted supplemental briefing discussing Morrison’s application to the case
at hand, and we find additional oral argument is not necessary.
ANALYSIS
We review de novo the district court’s dismissal of Norex’s complaint for lack of subject
matter jurisdiction. See Capital Ventures Int’l v. Republic of Arg., 552 F.3d 289, 293 (2d Cir.
2009).
In Morrison, the Supreme Court considered whether the Securities and Exchange Act of
1934 § 10(b) provided a cause of action to foreign plaintiffs suing foreign and American
defendants in courts of the United States. Morrison, 130 S. Ct. at 2876-77. First, Morrison
determined that the question of a statute’s extraterritorial reach is properly analyzed as a merits
question pursuant to Fed. R. Civ. P. 12(b)(6), not as a question of subject matter jurisdiction
raised by Fed. R. Civ. P. 12(b)(1). Id. Accordingly, we find the district court erred in
dismissing Norex’s first amended complaint for lack of subject matter jurisdiction. Rather, the
analysis of RICO’s extraterritorial reach must be conducted under the auspices of Fed. R. Civ. P.
12(b)(6).
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Rather than remand to the district court - and in keeping with the spirit of Morrison - we
accept the invitation of the parties in their supplemental briefing to consider the question of
whether dismissal is appropriate under Fed. R. Civ. P. 12(b)(6) without first remanding. Id. at
2877.
Morrison wholeheartedly embraces application of the presumption against
extraterritoriality, finding that “unless there is the affirmative intention of the Congress clearly
expressed to give a statute extraterritorial effect, we must presume it is primarily concerned with
domestic conditions.” Id. at 2877-78 (internal quotations and citation omitted). The Morrison
Court rejected various tests devised over the years to divine a statute’s extraterritorial application
in favor of a bright line rule: “[w]hen a statute gives no clear indication of an extraterritorial
application, it has none.” Id. at 2878.
Our Court’s precedent holds that “RICO is silent as to any extraterritorial
application.” Al-Turki, 100 F.3d at 1051. While Norex urges us to consider this statement dicta,
we cannot do so. The finding that RICO is silent as to its extraterritorial application is a key
holding of the opinion, because it is only upon finding RICO silent as to its extraterritorial
application that the Al-Turki court turned to its now-abrogated analysis of RICO’s extraterritorial
application under the conduct and effects test. Id.
Even if we were to revisit Al-Turki, Norex’s arguments are unavailing. First, Norex
argues that RICO § 1962(a)-(d) applies to “any enterprise which is engaged in, or that activities
of which affect, interstate or foreign commerce.” (¶¶ 322-381) Morrison forecloses that
argument, noting that “we have repeatedly held that even statutes that contain broad language in
their definitions of commerce do not apply abroad.” 130 S. Ct. at 2882. Morrison similarly
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forecloses Norex’s argument that because a number of RICO’s predicate acts possess an
extraterritorial reach, RICO itself possesses an extraterritorial reach. Id. at 2882-83 (noting that
while Section 30(b) of the Exchange Act, 15 U.S.C. § 78dd(b), can be interpreted to apply
abroad, “the presumption against extraterritoriality operates to limit that provision to its terms”).
Finally, contrary to Norex’s claims, simply alleging that some domestic conduct occurred cannot
support a claim of domestic application. “[I]t is a rare case of prohibited extraterritorial
application that lacks all contact with the territory of the United States.” Id. at 2884 (emphasis
in the original). The slim contacts with the United States alleged by Norex are insufficient to
support extraterritorial application of the RICO statute. We have considered the remainder of
Norex’s claims and find them without merit.
Because Norex brought a private lawsuit pursuant to 18 U.S.C. § 1964(c), we have no
occasion to address - and express no opinion on - the extraterroritorial application of RICO when
enforced by the government pursuant to Sections 1962, 1963 or 1964 (a) and (b).
CONCLUSION
We AFFIRM the district court’s dismissal of this action, albeit on different grounds than
below.
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