Throwback Thursday: RJR Nabisco v. European Community
June 11, 2026
Ten years ago, on June 20, 2016, the U.S. Supreme Court handed down its decision in RJR Nabisco, Inc. v. European Community. The Court held that two of RICO’s criminal provisions apply extraterritorially to the same extent as RICO’s predicate offenses, but that RICO’s civil cause of action applies only when there is injury to business or property in the United States. More significantly, RJR Nabisco articulated a “two-step framework” for applying the presumption against extraterritoriality that federal courts have used ever since.
In this Throwback Thursday post, I look at the development and articulation of RJR Nabisco’s two-step approach, as well as its later application. In particular, I explain how Justice Alito strategically planted language in the majority opinion to influence the presumption’s future direction. One of those seeds bore fruit in Abitron Austria GmbH v. Hetronic International, Inc. (2023). The other still lies dormant.
The Origins of RJR’s Two-Step Framework
The U.S. Supreme Court has applied a presumption against extraterritorial application of federal statutes for more than two centuries. But the presumption has changed over time, as I have explained here, and in greater detail here. The traditional presumption was conduct-based—that is, it looked to the place where the defendant’s conduct occurred.
Morrison v. National Australia Bank (2010) changed this. Morrison was a securities fraud case in which the alleged fraud occurred in the United States but the affected transaction occurred in Australia. The Supreme Court first looked to see if § 10(b) of the Securities Exchange Act gave a clear indication that the provision applies extraterritorially and found that it did not. The Court then looked to see if the case involved a domestic application of the statute because misrepresentations were made in the United States. Here, it considered the “focus” of the provision. The Court concluded that § 10(b) focuses on the transaction, not the fraud, and that applying § 10(b) would therefore be impermissibly extraterritorial because the transaction occurred abroad.
Writing for the majority in RJR Nabisco, Justice Alito looked not just to Morrison but also to Kiobel v. Royal Dutch Petroleum Co. (2013), in which the Court applied the presumption against extraterritoriality to the implied cause of action under the Alien Tort Statute (ATS). In Kiobel, he explained, the Court held that the ATS has no clear indication of extraterritoriality and found it unnecessary to determine the provision’s focus because “all the relevant conduct” occurred outside the United States.
Based on Morrison and Kiobel, Justice Alito articulated a “two-step framework” for the presumption against extraterritoriality:
At the first step, we ask whether the presumption against extraterritoriality has been rebutted—that is, whether the statute gives a clear, affirmative indication that it applies extraterritorially. We must ask this question regardless of whether the statute in question regulates conduct, affords relief, or merely confers jurisdiction. If the statute is not extraterritorial, then at the second step we determine whether the case involves a domestic application of the statute, and we do this by looking to the statute’s “focus.” If the conduct relevant to the statute’s focus occurred in the United States, then the case involves a permissible domestic application even if other conduct occurred abroad; but if the conduct relevant to the focus occurred in a foreign country, then the case involves an impermissible extraterritorial application regardless of any other conduct that occurred in U.S. territory.
Although this is the key passage in RJR Nabisco, Justice Alito added three important points later in the opinion. First, step one is not a clear statement rule. “[A]n express statement of extraterritoriality is not essential,” he wrote. Second, if a court finds a clear indication of extraterritoriality at step one, it does not proceed to the focus step. “The scope of an extraterritorial statute thus turns on the limits Congress has (or has not) imposed on the statute’s foreign application, and not on the statute’s ‘focus.’” And third, a court need not take these steps in order—it may start at step two in “appropriate cases.”
All seven participating Justices joined this part of the opinion. (Justice Scalia had died and not been replaced, while Justice Sotomayor was recused because she participated in the case at an earlier stage as a judge on the Second Circuit.)
Applying the Framework to RICO
RICO is the acronym for the Racketeer Influenced and Corrupt Organizations Act, a federal statute making it illegal to use a pattern of racketeering activity in particular ways relating to an enterprise. Racketeering activity consists of certain federal and state offenses known as predicates. RICO also creates a civil cause of action for treble damages for “[a]ny person injured in his business or property by reason of a RICO violation.”
One of RICO’s predicates is money laundering. The federal money-laundering statute expressly applies “outside the United States” when the defendant is a U.S. national. The European Community sued RJR Nabisco, alleging that it engaged in a scheme to launder drug-trafficking money through cigarette purchases, harming state-owed cigarette businesses in Europe.
At step one of the extraterritoriality framework, the Court found a clear indication of extraterritoriality in the “structure” of the statute. RICO does not say expressly that it applies extraterritorially, but it incorporates predicates that do, such as the money-laundering statute. Such incorporation, Justice Alito said, clearly indicated that RICO’s criminal provisions apply extraterritorially to the same extent as the predicates on which a RICO charge is based.
Having found a clear indication of extraterritoriality at step one, the Court found it unnecessary to consider the “focus” of the provision. It therefore rejected RJR Nabisco’s argument that RICO applies only to racketeering that involves “domestic” enterprises. “RICO covers foreign predicate offenses only to the extent that the underlying predicate statutes are extraterritorial,” the Court wrote. “But within those bounds, the location of the affected enterprise does not impose an independent constraint.”
Although the interpretation of RICO’s criminal provisions was unanimous, the Court split four-to-three on the geographic scope of RICO’s civil cause of action. Writing for the four-Justice majority, Justice Alito found no clear indication that RICO’s civil cause of action applies extraterritorially. If anything, the statutory language requiring injury to business or property “signaled that the civil remedy is not coextensive with [RICO’s] substantive prohibitions.” Turning to step two, he concluded with little analysis that the focus of RICO’s civil cause of action was injury to business or property. “Section 1964(c) requires a civil RICO plaintiff to allege and prove a domestic injury to business or property,” he wrote, “and does not allow recovery for foreign injuries.”
Justice Ginsburg dissented on RICO’s civil cause of action, joined by Justices Breyer and Kagan. After all, RICO’s civil cause of action incorporated its extraterritorial criminal provisions in much the same way that RICO’s criminal provisions incorporated its extraterritorial predicates. If the latter was sufficient to provide a clear indication of extraterritoriality, it was not clear why the former should not also be sufficient. Moreover, Congress borrowed RICO’s “injury to business and property” language from the Clayton Act, which had already been held to apply to foreign injuries.
Planting Seeds
The central passage articulating RJR’s two-step framework, quoted above, contains two phrases that are worth examining in greater detail. One is the reference to “conduct relevant to the statute’s focus.” The other is the reference to statutes that “merely confer[] jurisdiction.”
“Conduct Relevant to the Statute’s Focus”
At first glance, RJR Nabisco’s reference to conduct seems odd. In Morrison, the case that first applied the presumption in two steps, the Supreme Court did not ask whether conduct relevant to § 10(b)’s focus occurred in the United States. Rather, it asked whether the provision’s focus itself—the transaction—occurred in the United States. Indeed, Morrisondeemphasized the location of the defendant’s conduct, which occurred in Florida, in favor of the location of the transaction, which occurred in Australia.
Ironically, the same was true in RJR Nabisco itself. Although the Court phrased the step-two test as whether “the conduct relevant to the focus occurred in the United States [or] … in a foreign country,” it did not apply the test that way. The Court looked only at where the injury to business or property occurred, not at where conduct relevant to this injury occurred.
In Abitron, by contrast, Justice Alito seized on the language “conduct relevant to the statute’s focus” to hold that the federal trademark statute, known as the Lanham Act, applies only to domestic conduct infringing U.S. trademarks. The defendants in Abitron placed allegedly infringing trademarks on products manufactured abroad that were later imported to the United States. As I have previously explained, this was a case in which the likely focus of the provision—consumer confusion—occurred in the United States but all the defendants’ conduct occurred outside the United States. Justice Sotomayor and three of her colleagues reasoned that the statute should apply if the focus of congressional concern occurred in the United States. (Disclosure: I wrote an amicus brief supporting that position.)
However, Justice Alito, writing for a five-Justice majority, took the view that having the focus in the United States was not enough. “Step two does not end with identifying statutory focus,” he wrote. “We have repeatedly and explicitly held that courts must ‘identif[y] the statute’s focus and as[k] whether the conduct relevant to that focus occurred in United States territory’” (Alito’s emphases; some quotation marks removed). Therefore, the Lanham Act did not apply unless some infringing conduct occurred in the United States.
The result, as I have observed before, was to rebuild a connection between the presumption and the location of the conduct that Morrison had seemingly broken. Indeed, Justice Alito characterized the presumption against extraterritoriality as a “presumption against application to conduct in the territory of a foreign sovereign” (emphasis added). Such a connection to conduct is harmless when conduct is the focus of congressional concern. But when Congress’s focus is something else—such as preventing harmful effects—a domestic conduct requirement may exclude cases from the scope of the statute that Congress wanted to reach.
I suspect that none of this was accidental. Justice Alito is a strong opponent of applying U.S. remedial statutes extraterritorially. By including the phrase “conduct relevant to the statute’s focus” in RJR Nabisco’s statement of the two-step framework, he planted the seed for a more restrictive presumption and then harvested its fruit in Abitron.
“Merely Confers Jurisdiction”
Justice Alito’s opinion in RJR Nabisco also says that the presumption against extraterritoriality applies “regardless of whether the statute in question regulates conduct, affords relief, or merely confers jurisdiction” (emphasis added). Does this really mean that the presumption applies to subject-matter-jurisdiction statutes?
As Maggie Gardner has noted, applying the presumption to jurisdictional statutes would be “deeply disruptive.” Neither the federal question statute (28 U.S.C. § 1331), nor the diversity statute (28 U.S.C. § 1332), nor the general jurisdictional statute for federal criminal offenses (18 U.S.C. § 3231) contains a clear indication of extraterritoriality. If the presumption were applied to the federal question statute, for example, a federal court might have to dismiss a case based on foreign conduct for lack of jurisdiction even if the substantive statute providing the cause of action were expressly extraterritorial. Claims under such federal statutes would instead have to be brought in state court. The same problem would arise if the presumption were applied to the jurisdictional grant for federal criminal offenses, except that there would be no state-court fallback option because § 3231’s grant of jurisdiction is “exclusive of the courts of the States.”
RJR Nabisco’s reference to jurisdictional statutes seems to have been trying to capture the Supreme Court’s application of the presumption against extraterritoriality in Kiobel, an ATS case. Although the ATS is a jurisdictional statute, it is clear from both Kiobel and RJR Nabisco that the Court applied the presumption not to the ATS itself but rather to the implied cause of action that the Court had previously recognized.
In RJR Nabisco, the Court applied the presumption to RICO’s substantive provisions, not the federal question statute on which subject-matter jurisdiction rested. The same was true in Morrison. There, the Court applied the presumption to § 10(b) of the Securities Exchange Act rather than to § 27, which provides jurisdiction over such claims. For these reasons, the Restatement (Fourth) of U.S. Foreign Relations Law took the position in § 404, comment a, that “[t]he presumption does not apply to provisions granting subject-matter jurisdiction to federal courts.”
To my knowledge, no U.S. court has seized upon the “merely confers jurisdiction” language and applied the presumption to a subject-matter-jurisdiction statute. But the phrase still lies there, like a loaded gun, waiting for lawyers or judges to pick it up and cause damage.
Conclusion
A decade later, RJR Nabisco remains the leading Supreme Court decision articulating the presumption against extraterritoriality, which federal courts have applied in case after case.
In retrospect, what is most surprising to me is that the Court’s articulation of the two-step framework was unanimous. It should not have been difficult spot the implications of requiring conduct in the United States or applying the presumption to jurisdictional statutes. Yet none of the other Justices challenged the problematic language that Justice Alito planted in the opinion’s key passage. Particularly when the Court is announcing a “framework” for future cases, it would behoove the joining Justices (and their law clerks) to parse it carefully.