This Report summarizes an opinion issued on January 23 (Part I); and cases granted review on December 27, 2022, and January 13, 2023 (Part II).
Case Granted Review: Yegiazaryan v. Smagin, 22-381; CMB Monaco v. Smagin, 22-383
Yegiazaryan v. Smagin, 22-381; CMB Monaco v. Smagin, 22-383. In RJR Nabisco, Inc. v. European Community, 579 U.S. 325 (2016), the Court held that a civil RICO plaintiff states a cognizable claim under RICO’s private right of action only if it alleges a “domestic”—not foreign—injury. The Court, however, acknowledged that “disputes may arise” in future cases “as to whether a particular alleged injury is ‘foreign’ or ‘domestic.’” Such a dispute is presented in these consolidated cases, in which the Court will resolve “[w]hether a foreign plaintiff state[s] a cognizable civil RICO claim when it suffers an injury to intangible property, and if so, under what circumstances.”
Vitaly Smagin, a Russian resident, obtained a $92 million judgment in district court in California (the “California Judgment”) to enforce a foreign arbitration award against Ashot Yegiazaryan, a former Russian resident now living in California. Smagin later filed the underlying action: a civil RICO suit against Yegiazaryan and other defendants, including the financial institution CMB Monaco, alleging that they sought to prevent Smagin from collecting the California Judgment by concealing $198 million that Yegiazaryan had recently obtained (and thus could have used to pay the judgment owed to Smagin). The district court dismissed Smagin’s RICO action, concluding that he lacked standing because he failed to plead a domestic injury. The Ninth Circuit reversed, holding that Smagin had pled a domestic injury. 37 F.4th 562. The Ninth Circuit reasoned that a judgment is intangible property and concluded that the California Judgment “exists as property in California” because it was obtained there and can be executed only in California. The court’s decision was “bolstered by the fact that much of the conduct underlying the alleged injury occurred in, or was targeted at, California.” The court also observed that its approach was consistent with approaches taken by the Second and Third Circuits but departed from that of the Seventh Circuit, which uses a “rigid, residency-based test.”
Yegiazaryan and CMB Monaco filed separate petitions, both seeking reversal of the Ninth Circuit’s decision. They argue that the Ninth Circuit’s decision is incorrect because it focuses on the defendant’s injurious conduct, contrary to the Court’s instruction in RJR Nabisco that the inquiry depends on whether the “injuries [are] suffered outside the United States,” 579 U.S. at 329—that is, where the injuries are felt. The Ninth Circuit’s approach, petitioners warn, will provide foreign plaintiffs with broad access to civil RICO actions and thereby circumvent the Court’s holding in RJR Nabisco that RICO provides civil remedies only for domestic injuries.