Yegiazaryan v. Smagin

This case involves a dispute between two Russian nationals, Vitaly Smagin and Ashot Yegiazaryan. Smagin obtained a multimillion-dollar arbitration award in London against Yegiazaryan. Smagin then sued in California federal court, alleging that Yegiazaryan engaged in a fraudulent scheme conducted partly in the U.S. to hide assets and avoid paying the award, causing Smagin to lose the value of a California judgment he had obtained to enforce the award. The central question was whether the civil provisions of the Racketeer Influenced and Corrupt Organizations Act (RICO) can apply to largely foreign conduct when the plaintiff claims a domestic property injury. The Supreme Court affirmed that the focus is on the injury, holding that a domestic injury to property can trigger RICO’s application even if many predicate acts occurred abroad.

The U.S. Supreme Court ruled 6-3 that a civil RICO claim can reach extraterritorial conduct if the plaintiff proves a domestic property injury. The Court reversed the Ninth Circuit’s dismissal and remanded the case for further proceedings consistent with the principle that the location of the property injury is determinative for assessing the application of RICO’s private right of action.

Whether the private civil cause of action under RICO can be applied to conduct that is primarily extraterritorial, based solely on the plaintiff’s allegation of a domestic injury to property.

The decision significantly broadened the reach of civil RICO in transnational disputes, making it easier for plaintiffs with U.S. property interests to bring suit over foreign schemes. It clarified that the relevant element for RICO’s application is the location of the alleged property injury, not where the racketeering acts occurred. This has prompted concerns about increased extraterritorial litigation in U.S. courts and may affect how international businesses structure their assets and operations to mitigate exposure to U.S. racketeering claims.