Yegiazaryan v. Smagin

by Supreme Court of the United States

Note: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

YEGIAZARYAN, AKA EGIAZARYAN v. SMAGIN ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
No. 22–381. Argued April 25, 2023—Decided June 22, 2023^[1]

Respondent Vitaly Smagin won a multimillion dollar arbitration award in 2014 against petitioner Ashot Yegiazaryan stemming from the misappropriation of investment funds in a joint real estate venture in Moscow. Because Yegiazaryan has lived in California since 2010, Smagin, who lives in Russia, filed suit to confirm and enforce the award in the Central District of California pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The District Court initially froze Yegiazaryan’s California assets before finally entering judgment against him. The District Court also entered several postjudgment orders barring Yegiazaryan and those acting at his direction from preventing collection on the judgment. While the action was ongoing, Yegiazaryan himself was awarded a multimillion dollar arbitration award in an unrelated matter and sought to avoid the District Court’s asset freeze by concealing the funds, which were ultimately transferred to a bank account with petitioner CMB Monaco.

In 2020, Smagin filed this civil suit under the Racketeer Influenced and Corrupt Organizations Act (RICO), which 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). As relevant, Smagin alleges Yegiazaryan and others worked together 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. The District Court dismissed the complaint on the ground that Smagin had failed to plead a “domestic injury” as required by RJR Nabisco, Inc. v. European Community, 579 U. S. 325, 346. Smagin’s Russian residency weighed heavily in the District Court’s decision. The Ninth Circuit reversed. Rejecting the District Court’s rigid, residency-based approach to the domestic-injury inquiry, the Ninth Circuit instead applied a context-specific approach and 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 California and was designed to subvert enforcement of the judgment there.

Held: A plaintiff alleges a domestic injury for purposes of §1964(c) when the circumstances surrounding the injury indicate it arose in the United States. Pp. 5–14.

(a) The “domestic-injury” requirement for private civil RICO suits stems from RJR Nabisco, a case in which the Court was asked whether RICO applies extraterritorially. To answer the question, the Court applied the presumption against extraterritoriality, a canon of construction that provides “[a]bsent clearly expressed congressional intent to the contrary, federal laws will be construed to have only domestic application.” 579 U. S., at 335. Guided by concerns of international comity and the reasonable discernment of congressional intent, the Court distilled the presumption against extraterritoriality into two steps. The first asks “whether the statute gives a clear, affirmative indication that it applies extraterritorially.” Id., at 337. If the answer is “yes,” the presumption is rebutted, and the test ends. If the answer is “no,” the inquiry proceeds and step two asks whether the case involves a domestic application of the statute, which is assessed “by looking to the statute’s ‘focus.’ ” Ibid. Applying this framework, the Court assessed the extraterritoriality of RICO’s private right of action, §1964(c), and determined that it does not overcome the presumption at step one. Proceeding 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. Because the RJR Nabisco plaintiffs were not seeking redress for domestic injuries, the Court did not have occasion to explain what constitutes a “domestic injury.” Pp. 5–7.

(b) The parties advance competing approaches to the domestic-injury inquiry. Petitioners urge a bright-line rule that locates a plaintiff’s injury at the plaintiff’s residence. They argue that because a private RICO action remedies only economic injuries and a plaintiff necessarily suffers that injury at its residence where the economic injury is felt, any cognizable §1964(c) injury is necessarily suffered at the plaintiff’s residence. Alternatively, petitioners argue that at least when intangible property is concerned, common-law principles locate the intangible property at the plaintiff’s residence, such that the injury is also located there. Smagin defends a contextual approach that considers all case-specific facts bearing on where the injury arises. Pp. 7–8.

(c) The Court agrees with Smagin and the Ninth Circuit that the domestic-injury inquiry is context specific and turns largely on the facts alleged in the complaint. Specifically, courts should look to the circumstances surrounding the alleged injury to assess whether it arose in the United States. Here, that means looking to the nature of the alleged injury, the racketeering activity that directly caused it, and the injurious aims and effects of that activity.

The context-specific approach is most consistent with RJR Nabisco. The Court’s statements in RJR Nabisco that the domestic-injury requirement “does not mean that foreign plaintiffs may not sue under RICO,” 579 U. S., at 353, n. 12, and that “application of [the] rule in any given case will not always be self-evident,” point toward a case-specific inquiry that considers the particular facts surrounding the alleged injury, id., at 354. That approach also better reflects the requirement’s origin in step two, which assesses whether there is a domestic application of a statute by looking to the statute’s focus. RJR Nabisco implied that §1964(c)’s focus is injuries in “business or property by reason of a violation of” RICO’s substantive provisions. So understood, §1964(c)’s focus is not on the isolated injury but on the injury as a product of racketeering activity. This requires courts to look to the circumstances surrounding the injury to see if those circumstances sufficiently ground the injury in the United States. Pp. 8–10.

(d) The circumstances surrounding Smagin’s injury make clear that the injury arose in the United States. Smagin’s alleged injury is his inability to collect his judgment. Much of the alleged racketeering activity that caused that injury occurred in the United States. And while some of Yegiazaryan’s scheme to avoid collection occurred abroad, the scheme was directed toward frustrating the California judgment. Further, the injurious effects of the racketeering activity largely manifested in California. Smagin obtained a judgment in California where Yegiazaryan lives, and the rights provided by that judgment exist only in California. 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. Under a contextual approach, Smagin’s allegations suffice to state a domestic injury. Pp. 10–11.

(e) Petitioners argue that a contextual approach is inconsistent with certain common-law principles governing “the situs” of injuries to intangible property. Specifically, petitioners point to the Restatement (First) of Conflict of Laws—under which fraud is typically deemed felt at the plaintiff’s residence—and to the principle of mobilia sequuntur personam—which generally locates intangible property at the domicile of its owner—and argue that both principles locate Smagin’s alleged injury at his residence. Petitioners fail both to explain the relevance of these principles and to show that they were principles settled at common law at the time of RICO’s enactment. The core problem with petitioners’ reliance on legal fictions concerning the situs of injuries in other areas of the law is that the justifications of that approach do not necessarily translate to the presumption against extraterritoriality, with its distinctive concerns for comity and discerning congressional meaning. Indeed, petitioners’ approach generates results counter to comity and far afield from any reasonable interpretation of what qualifies as a domestic application of §1964(c). Consider two U. S. businesses targeted by racketeering activity, one owned by a U. S. resident and one owned by someone living abroad. There is no evidence that Congress intended that only the former business owner can bring a §1964(c) suit, especially since doing so runs the risk of generating international discord. Finally, petitioners argue that a contextual approach is unworkable because it does not provide a bright-line rule. Such concerns about a fact-intensive test cannot displace congressional policy choices, where a more nuanced test is true to the statute’s meaning. Pp. 11–14.

37 F. 4th 562, affirmed and remanded.

Sotomayor, J., delivered the opinion of the Court, in which Roberts, C. J., and Kagan, Kavanaugh, Barrett, and Jackson, JJ., joined. Alito, J., filed a dissenting opinion, in which Thomas, J., joined, and in which Gorsuch, J., joined as to Part I.

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1. Together with No. 22–383, CMB Monaco, fka Compagnie Monegasque de Banque v. Smagin et al., also on certiorari to the same court.

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