NOTICE: This opinion is subject to formal
revision before publication in the United States Reports. Readers
are requested to notify the Reporter of Decisions, Supreme Court of
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errors.
SUPREME COURT OF THE UNITED STATES
_________________
Nos. 22–381 and 22–383
_________________
ASHOT YEGIAZARYAN, aka ASHOT EGIAZARYAN,
PETITIONER
22–381
v.
VITALY IVANOVICH SMAGIN,
et al.
CMB MONACO, fka COMPAGNIE MONEGASQUE de
BANQUE, PETITIONER
22–383
v.
VITALY IVANOVICH SMAGIN,
et al.
on writs of certiorari to the united states
court of appeals for the ninth circuit
[June 22, 2023]
Justice Sotomayor delivered the opinion of the
Court.
Respondent Vitaly Smagin holds a multimillion
dollar California judgment against petitioner Ashot Yegiazaryan,
who lives in California. Smagin, who resides in Russia, filed suit
in the Central District of California alleging that Yegiazaryan,
with the assistance of petitioner CMB Monaco (formerly Compagnie
Monégasque de Banque), engaged in a pattern of criminal activity,
predominantly in and targeted at California, to prevent him from
collecting on his California judgment, in violation of the
Racketeer Influenced and Corrupt Organizations Act (RICO), 18
U. S. C. §§1961–1968. The District Court dismissed the
complaint after concluding that Smagin had failed to allege a
“domestic injury,” as required by
RJR Nabisco, Inc. v.
European Community, 579 U.S. 325, 334 (2016). The Ninth
Circuit reversed, concluding that Smagin had alleged a domestic
injury. This Court agrees with the Ninth Circuit.
I
A
The essential facts as alleged by Smagin are
as follows. From 2003 to 2009, Yegiazaryan committed fraud against
Smagin, stealing his shares in a joint real estate venture in
Moscow. To avoid a Russian criminal indictment for that fraud,
Yegiazaryan fled to a mansion in Beverly Hills in 2010, where he
has lived ever since. In 2014, Smagin, who lives in Russia, won an
arbitration award in London against Yegiazaryan for the
misappropriation of his real estate investment (London Award).
Yegiazaryan refused to pay that award, which is over $84
million.
Seeking to collect, Smagin filed an enforcement
action in the Central District of California to confirm and enforce
the London Award under the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, June 10, 1958, 21
U. S. T. 2517, T. I. A. S. No. 6997, as implemented by 9
U. S. C. §§201–208. The District Court issued a temporary
protective order, followed by a preliminary injunction, freezing
Yegiazaryan’s California assets.
In his application for injunctive relief, Smagin
informed the District Court that Yegiazaryan had been granted a
substantial arbitration award in an unrelated proceeding involving
Yegiazaryan and yet another Russian businessman, Suleymon Kerimov
(Kerimov Award). At the time, no funds had yet been paid to
Yegiazaryan in satisfaction of that award, but Smagin was concerned
that when they were paid, Yegiazaryan would take steps to transfer
the money out of Smagin’s reach.
Smagin’s concerns were justified. In May 2015,
Yegiazaryan received a $198 million settlement in satisfaction of
the Kerimov Award. To avoid the District Court’s asset freeze,
Yegiazaryan accepted the money through the London office of an
American law firm headquartered in Los Angeles. Yegiazaryan then
created “a complex web of offshore entities to conceal the funds,”
App. 56a, and ultimately transferred the funds to a bank account
with petitioner CMB Monaco. Yegiazaryan also directed those in his
inner circle to file fraudulent claims against him in foreign
jurisdictions, which he would not oppose, in an attempt to obtain
sham judgments that would encumber the $198 million, thereby
blocking Smagin’s access to it.
Around the same time, Yegiazaryan was hiding his
assets in the United States through a system of “shell companies”
owned by family members.
Id., at 61a. This included a Nevada
company, which was owned by his brother and created “for the
purpose of sheltering [Yegiazaryan’s] U. S. assets from his
creditors,” including Smagin.
Id., at 44a.
Smagin did not learn about the $198 million
settlement, Yegiazaryan’s efforts to hide it, or the U. S.
shell companies until February 2016, when Smagin was granted leave
to intervene in Yegiazaryan’s California divorce proceedings. The
next month, the California District Court in the London Award
enforcement action granted Smagin’s motion for summary judgment on
his petition for confirmation of the Award and entered judgment
against Yegiazaryan for $92 million, including interest. The court
also issued several postjudgment orders barring Yegiazaryan and
those acting at his direction from preventing collection on the
judgment.
For failing to comply with those orders, the
District Court subsequently found Yegiazaryan in contempt of court.
To avoid having to comply with the contempt order, however,
Yegiazaryan falsely claimed he was too ill, and submitted a forged
doctor’s note to the District Court. When Smagin notified
Yegiazaryan that he would be seeking to depose the doctor in
question, who resides in California, Yegiazaryan used
“intimidation, threats, or corrupt persuasion,”
id., at 82a,
to get the doctor to avoid service of the subpoena.
B
At issue here is a civil RICO suit that Smagin
brought in 2020 based on the allegations just described. RICO
provides a private right of action to “[a]ny person injured in his
business or property by reason of a violation of ” RICO’s
substantive provisions. 18 U. S. C. §1964(c). Invoking
that cause of action, Smagin sued Yegiazaryan and CMB Bank (the two
petitioners here), as well as 10 other defendants, in the Central
District of California.[
1] The
complaint asserts two claims against each: a substantive RICO
violation, §1962(c), and a RICO conspiracy claim, §1962(d). The
thrust of Smagin’s allegations is that the defendants worked
together under Yegiazaryan’s direction to frustrate Smagin’s
collection on the California judgment through a pattern of wire
fraud and other RICO predicate racketeering acts, including witness
tampering and obstruction of justice. For these violations, Smagin
seeks not only actual damages “no less than $130 million,” App.
100a, but also attorney’s fees and treble damages as authorized
under RICO. See §1964(c).
The District Court dismissed the complaint on
the ground that Smagin had “fail[ed] to adequately plead a domestic
injury,”
id., at 31a, as required by this Court’s decision
in
RJR Nabisco. See 579 U. S., at 346 (“A private RICO
plaintiff therefore must allege and prove a
domestic injury
to its business or property”). The District Court “place[d] great
weight on the fact that Smagin is a resident and citizen of Russia
and therefore experiences the loss from his inability to collect on
his judgment in Russia.” App. 27a (internal quotation marks and
alterations omitted).
The Ninth Circuit reversed. It rejected
petitioners’ invitation to follow the domestic-injury approach of
the Seventh Circuit, “which has adopted a rigid, residency-based
test for domestic injuries involving intangible property,” such as
a judgment. 37 F. 4th 562, 568, 570 (2022) (citing
Armada
(Sing.) PTE Ltd. v.
Amcol Int’l Corp., 885 F.3d 1090
(2018)). Under the Seventh Circuit’s rule, which locates an injury
to intangible property at the plaintiff ’s residence, Smagin
could not allege a domestic injury because he resides in Russia.
See
Armada, 885 F. 3d, at 1094. The Ninth Circuit
instead adopted a “context-specific” approach to the
domestic-injury inquiry, which it found consistent with the
approaches of the Second and Third Circuits. 37 F. 4th, at 568–570;
see
Bascuñán v.
Elsaca, 874 F.3d 806, 809 (CA2 2017);
Humphrey v.
GlaxoSmithKline PLC, 905 F.3d 694, 696
(CA3 2018). Applying that approach, the Ninth Circuit concluded
that Smagin had pleaded a domestic injury because he had alleged
that his efforts to execute on a California judgment in California
against a California resident were foiled by a pattern of
racketeering activity that largely “occurred in, or was targeted
at, California” and was “designed to subvert” enforcement of the
judgment in California. 37 F. 4th, at 567–568.
This Court granted certiorari to resolve the
Circuit split. 598 U. S. ___ (2023). Because a
context-specific inquiry is most consistent with this Court’s
decision in
RJR Nabisco, and because the context here makes
clear Smagin has alleged a domestic injury, the Court affirms.
II
A
The “domestic-injury” requirement for private
civil RICO suits stems from this Court’s decision in
RJR
Nabisco. There, the question before the Court was whether RICO
applies extraterritorially. To answer that question, the Court
employed the presumption against extraterritoriality, which
“represents a canon of construction, or a presumption about a
statute’s meaning, rather than a limit upon Congress’s power to
legislate.”
Morrison v.
National Australia Bank Ltd.,
561 U.S.
247, 255 (2010). The presumption provides that “[a]bsent
clearly expressed congressional intent to the contrary, federal
laws will be construed to have only domestic application.”
RJR
Nabisco, 579 U. S., at 335.
Dual rationales support the presumption against
extraterritoriality. On the one hand, it reflects concerns of
international comity insofar as it “ ‘serves to protect
against unintended clashes between our laws and those of other
nations which could result in international discord.’ ”
Kiobel v.
Royal Dutch Petroleum Co.,
569 U.S.
108, 115 (2013) (quoting
EEOC v.
Arabian American Oil
Co.,
499 U.S.
244, 248 (1991)). On the other hand, the presumption is
informed by “the commonsense notion that Congress generally
legislates with domestic concerns in mind.”
Smith v.
United States,
507 U.S.
197, 204, n. 5 (1993). In fact, consistent application of
the presumption “preserv[es] a stable background against which
Congress can legislate with predictable effects.”
Morrison,
561 U. S., at 261.
RJR Nabisco distilled the presumption
against extraterritoriality into two steps. The first asks “whether
the statute gives a clear, affirmative indication that it applies
extraterritorially.” 579 U. S., at 337. If the answer is
“yes,” then the presumption is rebutted, obviating any need to
proceed to step two. If the presumption is not rebutted, however,
then step two asks whether the case involves a domestic application
of the statute, which is assessed “by looking to the statute’s
‘focus.’ ”
Ibid.[
2]
Applying this framework, the Court assessed the
extraterritoriality of two of RICO’s substantive provisions and, as
relevant here, its private cause of action. As to the substantive
provisions, the Court held at step one that they apply
extraterritorially to the same extent that RICO’s predicates do,
making it unnecessary to proceed to step two.
Id., at 340.
Regarding RICO’s private right of action, §1964(c), however, the
Court’s conclusion was different. The Court determined that
§1964(c) does not overcome the presumption at step one because
there is no “clear indication that Congress intended to create a
private right of action for injuries suffered outside of the United
States.”
Id., at 349. “If anything,” the Court reasoned, by
“cabining” the private cause of action to “injur[ies] to ‘business
or property,’ ” “Congress signaled that the civil remedy is
not coextensive with §1962’s substantive prohibitions.”
Id.,
at 350. Accordingly, in reference to step two, the Court held that
“[a] private RICO plaintiff . . . must allege and prove a
domestic injury to its business or property.”
Id., at
346.
In announcing this “domestic-injury”
requirement, the Court did not have occasion to explain what
constitutes a “domestic-injury,” because the plaintiffs in
RJR
Nabisco had stipulated that they were not seeking redress for
domestic injuries.
Id.
, at 354. The question now
before the Court is whether Smagin has alleged a domestic
injury.
B
The parties advance competing approaches to
the domestic injury inquiry. Petitioners urge the Court to adopt a
bright-line rule, akin to the Seventh Circuit’s, that locates a
plaintiff ’s injury at the plaintiff ’s residence.
Petitioners advance two different versions of this rule.
As their primary position, petitioners argue
that
any injury cognizable under §1964(c) is necessarily
suffered at the plaintiff ’s residence because “the private
cause of action remedies only economic injuries, and a plaintiff
necessarily suffers that injury at its residence” where the
economic injury is felt. Brief for Petitioners 2. In the
alternative, petitioners argue that, at least when the alleged
injury involves
intangible property, such as the judgment
here, relevant common-law principles locate the intangible property
at the plaintiff ’s place of residence, such that the injury
is also located there.
Id., at 2–3, 43–44. On either version
of petitioners’ rule, Smagin cannot allege a domestic injury
because he lives in Russia.
Smagin, in contrast, defends a contextual
approach that considers all case-specific facts bearing on where
the injury “arises,” not just where it is “felt.” Brief for
Respondent 9. In the context of this suit, Smagin argues that he
has stated a domestic injury because he has alleged that he was
injured in his ability to enforce a California judgment, against a
California resident, through racketeering acts that were largely
“designed and carried out in California” and were “targeted at
California.”
Id., at 3, 21.
C
The Court agrees with Smagin and the Ninth
Circuit that “determining whether a plaintiff has alleged a
domestic injury [for purposes of RICO] is a context-specific
inquiry that turns largely on the particular facts alleged in a
complaint.” 37 F. 4th, at 570. Specifically, courts should look to
the circumstances surrounding the alleged injury to assess whether
it arose in the United States. In this suit, that means looking to
the nature of the alleged injury, the racketeering activity that
directly caused it,[
3] and the
injurious aims and effects of that activity.
This approach to the domestic-injury requirement
is most consistent with
RJR Nabisco. There, the Court
clarified that its domestic-injury requirement “does not mean that
foreign plaintiffs may not sue under RICO.” 579 U. S., at 353,
n. 12. Similarly, the Court explained that “application of
[the domestic-injury] rule in any given case will not always be
self-evident, as disputes may arise as to whether a particular
alleged injury is ‘foreign’ or ‘domestic.’ ”
Id., at
354. These remarks point toward a case-specific inquiry that
considers the particular facts surrounding the alleged injury.
Petitioners’ bright-line rule, in contrast, dispenses with any such
subtlety. It makes the location of the plaintiff ’s residence
determinative, thus barring all foreign plaintiffs, exactly as
RJR Nabisco said it was not doing.
A contextual approach to the domestic-injury
requirement also better reflects the requirement’s origin in step
two of the extraterritoriality framework, which assesses whether
there is a domestic application of a statute by looking to the
statute’s focus.
RJR Nabisco implied that the focus of
§1964(c) is injuries in “business or property by reason of a
violation of [RICO’s substantive provisions].” §1964(c). This focus
makes sense because, in the context of RICO, “the compensable
injury necessarily is the harm caused by predicate acts
sufficiently related to constitute a pattern, for the essence of
the violation is the commission of those acts in connection with
the conduct of an enterprise.”
Sedima, S. P. R. L. v.
Imrex Co.,
473 U.S.
479, 497 (1985). So understood, §1964(c)’s focus is on the
injury, not in isolation, but as the product of racketeering
activity. Thus, in assessing whether there is a domestic injury,
courts should engage in a case-specific analysis that looks to the
circumstances surrounding the injury. If those circumstances
sufficiently ground the injury in the United States, such that it
is clear the injury arose domestically, then the plaintiff has
alleged a domestic injury.
Because of the contextual nature of the inquiry,
no set of factors can capture the relevant considerations for all
cases. RICO covers a wide range of predicate acts and is
notoriously “expansive” in scope.
Id., at 498–499. Thus,
depending on the allegations, what is relevant in one case to
assessing where the injury arose may not be pertinent in another.
While a bright-line rule would no doubt be easier to apply, fealty
to the statute’s focus requires a more nuanced approach.
D
This suit illustrates well why the
domestic-injury inquiry must account for the facts of the case,
rather than rely on a residency-based rule. While it may be true,
in some sense, that Smagin has felt his economic injury in Russia,
focusing solely on that fact would miss central features of the
alleged injury. Zooming out, the circumstances surrounding Smagin’s
injury make clear it arose in the United States.
Smagin alleges that he “has been injured in his
inability to collect [his] massive judgment.” App. 38a. Much of the
alleged racketeering activity that caused the injury occurred in
the United States. Yegiazaryan took domestic actions to avoid
collection, including allegedly creating U. S. shell companies
to hide his U. S. assets, submitting a forged doctor’s note to
a California District Court, and intimidating a U. S.-based
witness. It is true that other components of the scheme occurred
abroad. As Smagin alleges, however, even those “wrongful acts and
plans were devised, initiated, and carried out . . .
through acts and communications initiated in and directed towards
Los Angeles County, California,” with the “central purpose of
frustrating enforcement of [the] California judgment.”
Id.,
at 45a–46a.
Further, the injurious effects of the
racketeering activity largely manifested in California. Smagin
obtained a judgment in California because that is where Yegiazaryan
lives, and where Smagin had thus hoped to collect. The rights that
the California judgment provides to Smagin exist only in
California, including the right to obtain postjudgment discovery,
the right to seize assets in California, and the right to seek
other appropriate relief from the California District Court. The
alleged RICO scheme thwarted those rights, thereby undercutting the
orders of the California District Court and Smagin’s efforts to
collect on Yegiazaryan’s assets in California.
In sum, Smagin’s interests in his California
judgment against Yegiazaryan, a California resident, were directly
injured by racketeering activity either taken in California or
directed from California, with the aim and effect of subverting
Smagin’s rights to execute on that judgment in California. On the
Court’s contextual approach, those allegations suffice to state a
domestic injury in this suit.
III
Petitioners argue that a contextual approach
is inconsistent with certain common-law principles, which instead
favor their bright-line rule. According to petitioners, because
Smagin has alleged an “economic injury” or an “injury in intangible
property,” Brief in Opposition 15–16, courts should look to
common-law principles governing “the situs” of such injuries, when
determining whether those injuries are foreign or domestic.
Specifically, as to economic injuries, petitioners point to the
Restatement (First) of Conflict of Laws §377 (1934), from which
they discern the principle that “a fraud plaintiff suffers an
economic loss at the plaintiff ’s domicile.” Brief for
Petitioners 36; see also
Sack v.
Low, 478 F.2d 360,
366 (CA2 1973) (Under the First Restatement, “loss from fraud is
deemed to be suffered where its economic impact is felt, normally
the plaintiff ’s residence”). As to intangible injuries,
petitioners further rely on the principle of
mobilia sequuntur
personam, which they claim “generally locat[es] intangible
property at the domicile of its owner.” Brief for Petitioners 44.
Both principles, they argue, locate Smagin’s alleged injury at his
residence.
Petitioners fall short, however, when explaining
the relevance of these principles. They do not clearly explain why
choice-of-law principles are germane here, let alone why the First
Restatement dictates those principles.[
4] Meanwhile, it is far from clear that petitioners’ gloss
on the principle of
mobilia sequuntur personam was as well
established or as wide sweeping as petitioners take it to be, in
light of the many twists and turns in the doctrine across a range
of contexts. See A. Simowitz, Siting Intangibles, 48 N. Y. U. J.
Int’l L. & Pol. 259, 270–292 (2015). In short, at the time of
RICO’s enactment, both principles were hardly “settled
. . . at common law.”
Beck v.
Prupis,
529 U.S.
494, 500 (2000).
The core problem with petitioners’ approach is
that it is unmoored from the presumption against
extraterritoriality. While legal fictions regarding the situs of
economic injuries and intangible property have their justifications
in other areas of law, those justifications do not necessarily
translate to the presumption against extraterritoriality, with its
distinctive concerns for comity and discerning congressional
meaning.
Indeed, it is because petitioners’ view invokes
these fictions that it generates results so counter to comity and
so far afield from any reasonable interpretation of what qualifies
as a domestic application of §1964(c). On petitioners’ primary
view, a business owner who resides abroad but owns a
brick-and-mortar business in the United States cannot bring a
§1964(c) suit even if an American RICO organization burns down her
storefront. Perhaps aware of how odd this seems, petitioners offer
a fallback rule for intangible property. That rule fares no better.
It provides that if racketeering activity targets the intangible
business interests of two U. S. businesses, one owned by a
U. S. resident and one owned by someone living abroad, only
the former business owner can bring a §1964(c) suit. There is no
evidence Congress intended to impose such a double standard,
especially because doing so runs its own risks of generating
international discord. These implausible consequences are strong
evidence that petitioners have gone astray in assessing the focus
of §1964(c) and, thus, the meaning of “domestic injury” as
contemplated by
RJR Nabisco.
Finally, petitioners, as well as the dissent,
post, at 5 (opinion of Alito, J.), argue that a contextual
approach is unworkable because it does not provide a bright-line
rule. Reply Brief 17–18. An approach is not unworkable, however,
merely because it directs courts to consider the case-specific
circumstances surrounding an injury when assessing where it arises.
While “the ease with which [petitioners’] bright-line rule can be
applied gives it some surface appeal,”
Humphrey, 905
F. 3d, at 709, a look beneath the surface quickly reveals that
the test is inconsistent with
RJR Nabisco, the presumption
against extraterritoriality, and the thrust of §1964(c) itself.
Concerns about a fact-intensive test cannot displace congressional
policy choices, where a more nuanced test is true to the statute’s
meaning.
* * *
A plaintiff has alleged a domestic injury for
purposes of §1964(c) when the circumstances surrounding the injury
indicate it arose in the United States. Smagin alleges that he was
injured in California because his ability to enforce a California
judgment in California against a California resident was impaired
by racketeering activity that largely occurred in or was directed
from and targeted at California. Those allegations state a domestic
injury. The judgment of the Ninth Circuit is affirmed, and the
cases are remanded for further proceedings consistent with this
opinion.
It is so ordered.
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