Armada (Singapore) Pte Ltd. v. Amcol Int'l Corp.

Citation: 885 F.3d 1090Docket: No. 17-2324

Court: Court of Appeals for the Seventh Circuit; March 26, 2018; Federal Appellate Court

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The plaintiff, a Singaporean shipping company, entered into contracts with an Indian mining company that subsequently breached those agreements. Alleging that American businesses engaged in racketeering to deprive the Indian company of assets and impede the plaintiff's recovery efforts, the plaintiff filed a lawsuit under the Racketeering Influenced and Corrupt Organizations Act (RICO). Following the Supreme Court's decision in RJR Nabisco, which established that a private RICO plaintiff must demonstrate a domestic injury, the American defendants moved for judgment on the pleadings, arguing the plaintiff failed to plead such an injury. The district court agreed, dismissing the RICO claims, and the plaintiff appealed. The appellate court affirmed the lower court's decision, concluding the plaintiff did not adequately plead a domestic injury. 

The case also involves Amcol International Corporation, an Illinois corporation and the largest shareholder of the Indian company Ashapura Minechem Limited. Following Ashapura's default on contracts with the plaintiff, arbitration awarded the plaintiff over $70 million. Despite this, the plaintiff alleges that Amcol obstructed recovery efforts by using its influence to drain Ashapura's assets through various means, including bankruptcy filings and debt set-offs.

In 2013, Armada initiated legal action against Amcol, Ashapura, and five unidentified defendants, later amending its complaint in July 2015 to include state-law claims of fraudulent transfer, wrongful dividend, breach of fiduciary duties, and a maritime fraudulent transfer claim, alongside two RICO claims alleging racketeering activity by Amcol that harmed Armada's business. Following the Supreme Court's RJR Nabisco decision, which established a "domestic injury" requirement for civil RICO cases, Amcol sought judgment on the pleadings. The district court ruled in favor of Amcol regarding the state-law claims and the RICO claims, reasoning that Armada's alleged economic injuries were not "domestic" since they were incurred at Armada's principal place of business in Singapore. However, the court allowed the maritime fraudulent transfer claim to proceed. Armada subsequently appealed, focusing solely on the RICO claims. The appellate review is de novo, assessing whether Armada sufficiently pleaded a "domestic injury." Civil RICO, under 18 U.S.C. § 1964(c), permits private lawsuits for harm caused by racketeering activity, but requires that the injury be domestic. Although Armada claims its property rights were injured by Amcol's actions, the Supreme Court's lack of clarity on the definition of "domestic injury" complicates the assessment, particularly since injuries suffered outside the U.S. do not qualify. The court noted that while the possibility for foreign entities to recover exists, it is contingent upon suffering injuries within the U.S.

The Court established a domestic-injury requirement without defining it, warning that determining whether an injury is 'foreign' or 'domestic' may not be straightforward. Since the RJR Nabisco decision, district courts have attempted to create guidelines for distinguishing between domestic and foreign injuries, leading to varied interpretations. The Second Circuit recently addressed this issue in Bascuñán v. Elsaca, where a Chilean plaintiff claimed his cousin stole millions through various schemes. The district court classified all injuries as economic and thus foreign. However, the Second Circuit rejected this narrow view, emphasizing that RICO's injury requirement relates to business or property, meaning all claims involve economic harm.

The court evaluated four specific injuries: theft of dividends from a foreign corporation, misappropriation of funds in Chile, theft from a New York bank account, and theft of physical bearer shares in New York. It found the first two injuries insufficiently connected to the U.S. to be considered domestic, as their only link was that funds passed through U.S. accounts. In contrast, the theft of the bearer shares and the funds in the New York account were deemed domestic injuries due to the tangible property being located in the U.S. The court concluded that injuries to tangible property are domestic if the property is in the U.S. at the time of the theft, regardless of the plaintiff's residence. This ruling highlights the distinction between tangible and intangible harms, as the plaintiff's claim involved the physical theft of the shares rather than a decline in their value. The case is seen as favorable for entities like Armada and Amcol, which argue their claims involve tangible properties in the U.S.

Amcol contended that the matter at hand involves only "a bundle of litigation rights" rather than tangible property, asserting that the connections to the United States are insufficient to classify Armada's alleged injuries as domestic. The court concurred with Amcol, clarifying that the property claimed to be harmed is classified as an intangible asset, lacking physical existence and thus differing from tangible assets, which are defined as having a physical presence and value. The distinction is significant, as the court emphasized that injuries to intangible property are experienced at the entity's principal place of business. In Armada's case, this location is Singapore. Consequently, any harm to Armada's intangible rights occurred in Singapore, indicating that the injury is not domestic under civil RICO provisions. A plaintiff must demonstrate a domestic injury to advance a civil RICO claim, which Armada failed to do. As a result, the district court's judgment on the pleadings regarding Armada's RICO claims was affirmed.