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Jurisdictional Power Of The Racketeer Influenced And Corrupt Organizations Act (RICO) Part 1

Dec 20, 2007
* This article discusses the extent of the Racketeer Influenced and Corrupt Organizations Act's (RICO) jurisdictional power over out-of-state defendants. Courts have split on which subsection of 18 U.S.C. Section 1965 to invoke. Depending on which subsection a court chooses, certain restrictions and liberties arise that may run afoul to the Due Process Clause. This is Part I of a two part series.

With the venue provision of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. Section 1965, Congress intended to provide an avenue for trying all alleged participants of a conspiracy in one forum - nationwide service of process. Whether and how the statute accomplishes this goal is, of course, the subject of much litigation and confusion. The Supreme Court has never definitively interpreted this section of the statute, leaving the lower courts in a state of disarray.

The key question is which clause of Section 1965 allows for nationwide service of process. Though it might seem academic - what difference does it make which section spells out the rule so long as the statute allows nationwide service of process? - the question is vitally important to determining personal jurisdiction over RICO defendants: read one way, the grant of nationwide service of process also confers nationwide personal jurisdiction, while the other reading places limits on the court's exercise of personal jurisdiction over non-resident RICO defendants. The competing readings also create a split as to whether a defendant served via nationwide process must still have minimum contacts with the forum or if only contacts with the United States as a whole are required.

In an attempt to sort through the issue, this article addresses the following questions: (1) does Section 1965 provide for nationwide service of process, and, if so, which section of the statute authorizes it? (2) If nationwide service of process is permitted, are there any limits placed on it? (3) Assuming nationwide service of process is allowed, does the statute automatically confer personal jurisdiction through minimum contacts with the United States, or must defendants still have minimum contacts with the forum?

Which Part of the Statute Governs?

Courts generally agree that the RICO statute authorizes nationwide service of process in some fashion. Some courts rely on Section 1965 (d) to support that decision, while the others have ruled that subsection (b) authorizes nationwide service. The statute reads as follows:

(a) Any civil action or proceeding under this chapter against any person may be instituted in the district court of the United States for any district in which such person resides, is found, has an agent, or transacts his affairs.

(b) In any action under section 1964 of this chapter in any district court of the United States in which it is shown that the ends of justice require that other parties residing in any other district be brought before the court, the court may cause such parties to be summoned, and process for that purpose may be served in any judicial district of the United States by the marshal thereof.

(c) In any civil or criminal action or proceeding instituted by the United States under this chapter in the district court of the United States for any judicial district, subpoenas issued by such court to compel the attendance of witnesses may be served in any other judicial district, except that in any civil action or proceeding no such subpoena shall be issued for service upon any individual who resides in another district at a place more than one hundred miles from the place at which such court is held without approval given by a judge of such court upon a showing of good cause.

(d) All other process in any action or proceeding under this chapter may be served on any person in any judicial district in which such person resides, is found, has an agent, or transacts his affairs.

The majority of courts have ruled that subsection (b) is the basis for nationwide service of process, while subsection (d) is a venue provision. The Second Circuit, in PT United Can Co., was the first court to do a close reading of the statute and to interpret each of the four subsections in relation to the others. When read "sequentially," the court held, the statute "gives coherent effect to all sections of Section 1965, and effectively provides for all eventualities without rendering any of the sections duplicative, without impeding RICO actions and without unnecessarily burdening parties." The Second Circuit interpreted - and the majority of courts have since agreed - the meaning of the sections as follows:

(a) Section1965(a) sets venue so that "a civil RICO action can only be brought where personal jurisdiction based on minimum contacts is established as to at least one defendant."

(b) for other parties not residing in the district, Section 1965(b) provides for nationwide service and jurisdiction, subject to a showing that "the ends of justice" so require.

(c) subsection (c) governs service of subpoenas on witnesses.

(d) Since (a) and (b) relate to serving a summons on a defendant and (c) concerns subpoena of a witness, the reference in subsection (d) to all "other process" means everything that is neither a summons of a defendant nor a subpoena of a witness.

A recent Tenth Circuit decision, Cory v. Aztec Steel Building, Inc., noted that not only did this reading make sense, but it also was consistent with congressional intent:

In its report on the Organized Crime Control Act of 1970, which gave birth to RICO, the House Judiciary Committee declared that "[s]ubsection (b) provides nationwide service of process ... in actions under section 1964" ... and that "[s]ubsection (d) provides ... all other process in actions under the [entire RICO] chapter."

This "sequential" reading shows that subsection (d) means something other than that already stated in the previous sections.

The subsection (d) theory, on the other hand, is the minority position, supported only by the Fourth and Eleventh Circuits. Neither court offered much analysis to explain this position, but a number of district courts have since clarified: they reason that subsection (b) "is implicated only when venue is proper as to at least one defendant but challenged as improper by another." For all others - any defendants who do not challenge venue - subsection (d) would provide the basis for personal jurisdiction through nationwide service of process.

One of the few commentators to have addressed the issue, and who supports the (d) reading, explains it like this:

(a) the first subsection does not authorize process, but expands venue from rule 4's provisions;

(b) subsection (b) grants national service of process if at least one defendant is within the court's jurisdiction and "ends of justice" allow it;

(c) subsection (c) authorizes subpoenas over witnesses; and

(d) finally, subsection (d) authorizes service of process on defendants generally; "all other process" means service of process on defendants where no other defendant is properly within the court's jurisdiction, but process can only be served in a judicial district where venue could have been appropriate under subsection (a).

Subsection (d) in this reading can only authorize nationwide service of process because proponents believe a RICO action may be brought in a district where no defendant has minimum contacts with the forum. This leaves virtually no limits on service of process.

Limitations on Nationwide Service of Process Under Section 1965(b)

Where subsection (b) is the statutory basis for the exercise of personal jurisdiction, as opposed to subsection (d), there are limitations on the exercise of personal jurisdiction. First, personal jurisdiction over at least one RICO defendant must be established via a typical minimum contacts analysis. Unlike the subsection (d) school, this branch reads subsection (a) and (b) together to limit filing a RICO action to a jurisdiction where at least one defendant is subject to personal jurisdiction. Even once the court has jurisdiction over that initial defendant, nationwide service of process and personal jurisdiction over the others may only be exercised where the ends of justice require. "[M]erely naming person in a RICO complaint does not, in itself, make them subject to section 1965(b)'s nationwide service provisions."

Congress did not define "ends of justice," leaving the courts to determine the contours of this limitation on nationwide service of process. The prevailing test for "ends of justice" has been whether all the defendants are amenable to suit in another forum; if so, the "ends of justice" do not require exercising personal jurisdiction over all the defendants. There is general agreement that it is the plaintiff's burden to show the ends of justice require the exercise of personal jurisdiction.
About the Author
Mr. Taillieu is a partner in the litigation department of Zuber & Taillieu LLP. He earned his J.D. with highest honors from George Washington University School of Law, where he graduated #1 in the day class and was Managing Editor of the Law Review.
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