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Jurisdictional Power Of The Racketeer Influenced And Corrupt Organizations Act (rico) Part Ii

Dec 21, 2007
At least one court has rejected this test, however, deeming it too restrictive. The Cory court held that while it might promote judicial economy, "it also might mean that some RICO violations would go unpunished whenever organized criminals operate within the same locale and cause harm in a distant state." The financial difficulties may be too much for a victim in one forum to have to litigate in another.

Still, neither the Cory court, nor the court in Brown v. Kerkhoff, which also rejected the test, offered an alternative. In Cory, the court simply determined that the facts of that case did not satisfy the "ends of justice" standard. The court stated that it "need not ... offer a competing definition, as the 'ends of justice' is a flexible concept uniquely tailored to the facts of each case. The Brown court examined the facts of the case under both tests - the Butcher's Union standard and the flexible approach advocated by Cory - and determined that neither supported a finding that the ends of justice required it to exercise jurisdiction over non-resident defendants.

Minimum Contacts with the Forum or the United States?

The last issue is whether a defendant must have minimum contacts with the forum or with the United States as a whole. Where subsection (b) is considered the governing section, the courts have performed a minimum contacts with the forum analysis, to determine if there is jurisdiction over at least one defendant. This follows the reading of subsection (a) as requiring at least one defendant to be subject to personal jurisdiction in that forum.

Generally, where courts have used subsection (d) as the basis for finding personal jurisdiction, a "national contacts" test has been considered sufficient. As one court explained it, subsection (d) requires only a "showing that a defendant has contacts with the United States. Minimum contacts with the forum state, as required under the traditional long-arm jurisdictional analysis, is not necessary." Because process may be served anywhere in the nation, the defendant need only have contacts anywhere in the nation for jurisdiction to be appropriate.

The "national contacts' tests, however, has been criticized as being violative of the fairness and liberty requirements of the due process clause. For example, Judge Garza of the Fifth Circuit strongly disagreed with his colleagues, who held that where a federal statute provides for nationwide service of process, the "relevant inquiry is whether the defendant has had minimum contacts with the United States." Judge Garza disagreed, arguing instead that the national contacts test violated the due process clause:

Because the personal jurisdiction requirement is a function of the individual liberty interest, the proper focus for a personal jurisdiction test should be on protecting an individual's liberty interest in avoiding the burdens of litigating in a distant or inconvenient forum. Requiring that the individual defendant in a national service of process case only reside somewhere in the United States does not protect this interest.

Similarly, one commentator has argued that the national contacts test runs counter to the fairness requirement the Supreme Court established in International Shoe. He notes that though the Supreme Court has never specifically ruled on how the minimum contacts test should be applied where a federal statute authorizes national service of process, courts have taken guidance from Justice Stewart's dissent from Stafford v. Briggs, in which he reasoned that though the International Shoe minimum contacts test would apply where a federal statute provides for nationwide service of process, the contacts need only be between the defendant and the "sovereign that has created the court."

The fairness component of the due process analysis is satisfied, according to Justice Stewart's reading, by the fairness "of the exercise of personal jurisdiction by a particular sovereign, rather than the fairness to the defendant of litigating in a distant forum." Whether this actually comports with International Shoe is questionable. "[T]he more persuasive conclusion is that fairness is a necessary due process consideration even where nationwide service of process is statutorily authorized."

Thus, courts are split on precisely which clause gives RICO it's jurisdictional power over defendants. While the majority of courts have relied on subsection (b) and placed limits on the statute's power, other courts have elected to use subsection (d), giving courts more breadth is summoning out-of-state defendants. Although such a liberal reading implicates due process concerns, the Supreme Court has yet to weigh in, leaving the controversy thus far unresolved.

1. Butcher's Union Local No. 498 v. SDC Inv., Inc., 788 F.2d 535 (9th Cir. 1986); Brown v. Kerkhoff, No. 4:06-cv-00342-JEG, 2007 WL 2481422 (S.D. Iowa Aug. 23, 2007); Katulla v. Jade, No. 5:07-CV-52, 2007 WL 1695669 (W.D. Ky. June 8, 2007).

2. E.g., Cory v. Aztec Steel Bldg., Inc., 468 F.3d 1226, 1231 (10th Cir. 2006) ("Where a civil RICO action is brought in a district court where personal jurisdiction can be established over at least one defendant, summonses can be served nationwide on other defendants if required by the ends of justice."); PT United Can Co. LTD. v. Crown Cork & Seal Co., Inc., 138 F.3d 65, 71 (2d Cir. 1998) (nationwide service of process over "other parties" where "ends of justice" require); Butcher's Union., 788 F.2d at 538-39 (same).

3. 18 U.S.C. Section 1965.

4. E.g., Multi-Media Int'l, LLC v. Promag Retail Serv., LLC, 343 F. Supp. 2d 1024, 1030 (D. Kan. 2004) (citing numerous other cases to have followed majority position); Hawkins v. Upjohn Co., 890 F. Supp. 601, 606 & n. 8 (E.D. Tex. 1994) (relying on (b) because other reading is "contrary to the plain meaning of the words used")

5. PT United Can Co. v. Crown Cork & Seal Co., Inc., 138 F.3d 65 (2d Cir. 1998).

6. Id. at 72.

7. PT United, 138 F.3d at 72.

8. Id. at 71.

9. Id.

10. Id

11. 468 F.3d 1226 (10th Cir. 2006).

12. Id. at 1231 (quoting H.R. Rep.. No. 91-1549, reprinted in 1970 U.S.C.C.A.N. 4007, 4034).

13. Republic of Panama v. BCCI Holdings (Luxembourg) S.A., 119 F.3d 935, 942 (11th Cir. 1997); ESAB Group, Inc. v. Centricut, Inc., 126 F.3d 617, 627 (4th Cir. 1997).

14. Brown v. Kerkhoff, No. 4:06-cv-00342-JEG, 2007 WL 2481422, *16 (S.D. Iowa Aug. 23, 2007) (reviewing other cases and choosing (b) as support for limited nationwide service of process)

15. Id. (discussing BankAtlantic v. Coast to Coast Contractors, Inc., 947 F. Supp. 480, 485 (S.D. Fla. 1996)).

16. Benjamin Rolf, The "Ends of Justice" Revised: How to Interpret RICO's Procedural Provision, 18 U.S.C. Section 1965, 80 Notre Dame L. Rev. 1225, 1231-32 (2005).

17. Butcher's Union, 788 F.2d at 539.

18. E.g., Kattula v. Jade, No. 5:07-CV-52, 2007 WL 1695669 at *3 (W.D. Ky. June 8, 2007) ("Plaintiffs bear the burden of showing that the ends of justice require the exercise of nationwide service of process for personal jurisdiction purposes.")

19. Brown, 2007 WL 2481422 at *20-21.

20. Cory, 468 F.3d at 1232.

21. Brown, 2007 WL 2481422 at *21 (relying instead on plaintiff's failure to show any way ends of justice would be served).

22. E.g., Hawkins, 890 F. Supp. at 606-07 (must determine whether Texas long-arm statute reaches one of the RICO defendants).

23. E.g., Gatz v. Ponsoldt, 271 F. Supp. 2d 1143, 1153 (D. Neb. 2003) ("It is clear that each of these defendants has sufficient contacts with the United States to support this court's exercise of personal jurisdiction over them."); Herbstein v. Bruetman, 768 F. Supp. 79, 81 (S.D.N.Y. 1991) ("[T]he jurisdictional inquiry focuses on the defendant's contacts with the United States, not just the forum state.")

24. Dooley v. United Tech. Corp., 786 F. Supp. 65, 70-71 (D.D.C. 1992).

25. Busch v. Buchman, Buchman & O'Brien, Law Firm, 11 F.3d 1255, 1258 (5th Cir. 1994) (addressing Securities Exchange Act of 1934, not RICO)

26. Id at 1259-60 (Garza, J., dissenting) (internal footnotes omitted).

27. Jon Heller, Pendent Personal Jurisdiction and Nationwide Service of Process, 64 N.Y.U. L. Rev. 113, 126-28 (1989).

28. 444 U.S. 527, 553 (1980) (Stewart, J., dissenting).

29. Heller, Pendent Personal Jurisdiction, 64 N.Y.U. L. Rev. at 127.

30. Id. at 128.
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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