外国の仲裁判断の保有者に対するRICO請求の可否

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 prompted disagreement among the federal courts of appeal.

The Seventh Circuit was first to confront the question. It adopted a bright-line rule that “a party experiences or sustains injuries to its intangible property at its residence, which for a corporation . . . is its principal place of business.”³ The Seventh Circuit concluded a foreign-corporation plaintiff did not suffer a domestic injury and could not bring a civil RICO lawsuit against a defendant who allegedly obstructed efforts to collect on a judgment resulting from a confirmed arbitral award.

The Third Circuit weighed in several months later. In a case involving an alleged RICO enterprise to bribe foreign officials and harm the plaintiff’s business interests, including its goodwill and reputation, the Third Circuit rejected the Seventh Circuit’s residence-based approach. It instead determined that “whether an alleged injury to an intangible interest was suffered domestically is a particularly fact-sensitive question requiring consideration of multiple factors”⁴ and outlined several such factors. Because harm to the foreign-plaintiff’s business occurred mainly abroad, the Third Circuit determined the foreign-plaintiff had not suffered a domestic injury.

Yegiazaryan v. Smagin & CMB Monaco v. Smagin

The cases pending before the Supreme Court — Yegiazaryan v. Smagin (No. 22-381) & CMB Monaco v. Smagin (No. 22-383) — arise from the Ninth Circuit. In the early 2000s, Ashot Yegiazaryan and others executed a scheme to steal Vitaly Smagin’s shares in a Russian real estate venture. Yegiazaryan fled to California after Russian authorities charged him criminally for the fraudulent scheme. In 2014, Smagin, a Russian national, secured an $84 million arbitration award against Yegiazaryan and filed a successful action in California federal court to enforce the award under the New York Convention.

Smagin later filed a civil RICO action in California against Yegiazaryan and others, including CMB Monaco, a Monaco-based bank. He alleged Yegiazaryan and his associates conducted an enterprise designed to prevent him from collecting on his California judgment. Yegiazaryan’s alleged scheme involved creating shell companies in the United States, having his associates file fraudulent judgments against Smagin, and establishing foreign trusts, companies, and bank accounts. One of those bank accounts was at CMB Monaco. Smagin alleges CMB Monaco knew about Yegiazaryan’s illegal scheme but accepted the deposit anyway. The district court dismissed the complaint for lack of a domestic injury.

In reversing the decision below, the Ninth Circuit first recognized that a judgment is intangible property. Under its precedent, the location of intangible property turns on the purpose the intangible property serves. Smagin’s judgment provided him with rights only in California, and Smagin decided to obtain the judgment in California precisely because Yegiazaryan resides there. “It would make no sense to conclude that the California Judgment exists as property in Russia,” the Ninth Circuit explained, “because the judgment grants no rights whatsoever to Plaintiff in Russia.”⁵ Thus, Yegiazaryan’s “illegal acts were designed to subvert Plaintiff’s rights that were executable in California.”⁶

After concluding Smagin suffered a domestic injury, the Ninth Circuit addressed the split among its sister circuits. It rejected the Seventh Circuit’s residence-based approach. According to the Ninth Circuit, the Supreme Court’s decision in RJR Nabsico, Inc. focused on where the injury occurs, not where the plaintiff resides. The Ninth Circuit agreed with the Third Circuit that “whether a plaintiff has alleged a domestic injury is a context-specific inquiry that turns largely on the particular facts alleged in a complaint.”⁷

結論

If the Supreme Court rejects a bright-line residency standard articulated by the Seventh Circuit and instead adopts a context-specific standard, foreign holders of arbitral awards will have a potentially powerful tool in their arsenal to collect on the awards following their enforcement in the United States. If, after an award is confirmed in the United States, the award loser engages in unlawful acts to fight collection on the award, the award holder may bring a RICO claim against the recalcitrant party. Of course, claimants would still need to satisfy the rigorous requirements for establishing a civil RICO claim on the merits.

The Supreme Court’s decision will also affect financial institutions, both foreign and domestic. A complicated scheme to evade collection will often involve a defendant moving money through financial institutions, and a judgment creditor may include such financial institutions as alleged participants in the RICO enterprise, where they face potential joint and several liability.

On the other hand, if the Supreme Court adopts the Seventh Circuit’s approach, foreign holders of arbitral awards will not have standing to bring RICO claims, and the financial institutions with little connection to alleged wrongdoing will avoid having to defend against costly civil RICO allegations.