The World in U.S. Courts: Winter 2018 - Racketeer Influenced and Corrupt Organizations Act (RICO)
November.03.2017
This opinion is the latest in a long-running dispute between Elsevier, a distributor of technical publications, and defendant Grossman, a customer found at trial to have obtained discounted subscriptions from Elsevier based on a false representation that they were for Grossman’s own use. The publications were all ultimately shipped to customers of Grossman’s company in Brazil.
The District Court in New York had previously denied Elsevier’s motion for summary judgment, finding the facts did not establish that the company had suffered a US “domestic injury,” as required for private RICO claims by the US Supreme Court’s 2016 decision in the RJR Nabisco case. Elsevier submitted additional information showing that publications comprising 31 of the 51 fraudulent subscriptions were shipped from the US, and that a US-based employee authorized the shipment of publications comprising 17 of the remaining 20 subscriptions—presumably shipments that originated outside the US.
The Court first noted that courts in New York had adopted a “locus of effects” test, meaning that the location of a RICO injury would be determined based on “where the plaintiff suffered the injury,” not where the injurious conduct took place. Citing the recent appellate decision in the Bascuñán case (see note above), the Court also observed that an injury to “tangible” property would be deemed to be US “domestic” if the property “was located in the United States when it was stolen or harmed.”
The Court found that standard to be met, and that Elsevier’s injury was adequately “linked” to the US. As to copies of journals mailed from the US, the Court concluded that the injury occurred “when Elsevier relinquished control . . . under false pretenses.” The Court also found the standard to be met where the journals had never been in the US, but where a US-based employee had authorized the mailing.
The Court’s opinion came against the background of sanctions having been imposed against Grossman that, among other things, resulted in Elsevier’s motion being deemed unopposed.