Peter Humphrey v. Glaxosmithkline, PLC

Section 1964(c) of the Racketeer Influenced and

Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961–

1968, creates a private right of action for a plaintiff that “is

injured in his [or her] business or property” as a result of

conduct that is proscribed by the statute. In RJR Nabisco, Inc.

v. European Community, the Supreme Court determined that,

although a litigant may file a civil suit against parties for

racketeering activity committed abroad, § 1964(c)’s private

right of action is only available to a litigant that can “allege and

prove a domestic injury to its business or property.”1

In this case of first impression for this court, we must

decide whether Plaintiffs pled sufficient facts to establish that

they suffered a domestic injury under § 1964(c). For the

reasons that follow, we will affirm the District Court’s

judgment that they have not.

I.

A. Factual Background

Plaintiffs Peter Humphrey and Yu Yingzeng are cofounders

of ChinaWhys, an investigations firm that assists

foreign companies doing business in China with American

anti-bribery regulations compliance. Although Plaintiffs

resided in Beijing during the events alleged in their complaint,

much of ChinaWhys’ business was conducted with American

companies.

Plaintiffs allege that Defendants, GlaxoSmithKline plc

(“GSK PLC”) and GlaxoSmithKline LLC (“GSK LLC”),

engaged in widespread bribery in China in order to obtain

improper commercial advantages and that they did so with the

approval of Mark Reilly. Reilly was the Chief Executive

Officer of GlaxoSmithKline Investment Co., Ltd. (“GSK

China”). GlaxoSmithKline is a multinational healthcare

1 136 S. Ct. 2090, 2106 (2016).

4

company that has offices in England and the United States.

Sometime in 2011, a whistleblower who had worked for

Defendants sent Chinese regulators correspondence accusing

GlaxoSmithKline of bribery. Those allegations of corruption

included a claim that GSK China maintained a policy of paying

off doctors to increase sales. Thereafter, Defendants tried to

uncover the whistleblower’s identity.

As part of the ensuing inquiry, Humphrey and Yingzeng

met with Reilly and other members of GSK China’s senior

management in GSK China’s Shanghai office to discuss

GlaxoSmithKline’s internal investigation into the source of the

whistleblower reports. According to Plaintiffs, GSK China

representatives told ChinaWhys that it believed Vivian Shi, a

GSK China employee who had been fired, orchestrated a

“smear campaign” against GlaxoSmithKline by falsely

accusing the pharmaceutical company of engaging in corrupt

practices. ChinaWhys agreed to conduct a background

investigation of Shi in what Plaintiffs describe as an attempt to

limit the “efficacy of her extortion.”2 The details of that

understanding were memorialized in a “Consultancy

Agreement.”3 That agreement provided that, among other

things, the arrangement was to be governed by Chinese law and

that all disputes arising out of, or in connection to, it were

subject to arbitration in China.4

GlaxoSmithKline later learned of additional

whistleblower emails and GSK China asked ChinaWhys to

also identify the source of those communications. In addition,

GSK China personnel asked ChinaWhys to investigate certain

Chinese agencies to find out who was conducting the

investigation into GSK China’s alleged misconduct.

In July 2013, Plaintiffs were arrested when police raided

ChinaWhys’ Shanghai office and Plaintiffs’ Beijing home.

The arrests resulted in Plaintiffs’ conviction and imprisonment.

They were deported from China upon their release from prison.

Reilly was subsequently convicted of bribing

physicians and was also imprisoned and deported from China

upon his release. The Chinese government fined GSK PLC

$492 million for its bribery practices in the region, and GSK

2 Plaintiffs’ Br. 13, 16.

3 Joint App’x A69.

4 Joint App’x A74.

5

PLC entered a settlement agreement with the United States

Securities Exchange Commission.

Plaintiffs brought this suit in the United States District

Court, alleging, inter alia, RICO claims and pendent state law

claims. GSK China was not named as a party.5 Plaintiffs

contend that their business was “destroyed and their

prospective business ventures eviscerated” as a result of

Defendants’ misconduct.6 They also contended that “GSK

officials” knew that the accusations of corruption were true and

that the bribery had been carried out at Reilly’s direction.

Defendants moved to compel arbitration, or, in the

alternative, to dismiss the complaint for lack of subject-matter

jurisdiction. They argued that subject-matter jurisdiction was

lacking because, even though Plaintiffs may have had

numerous clients in the United States, their alleged injuries

were foreign because Plaintiffs’ business was in China, their

only offices were in China, no work was done outside of China,

Plaintiffs resided in China, and because any destruction of

Plaintiffs’ business occurred while Plaintiffs were imprisoned

in China by Chinese authorities. The District Court agreed and

granted Defendants’ motion to dismiss. This timely appeal

followed.

B. Legal Background

RICO “creates a private civil cause of action that allows

‘[a]ny person injured in his business or property by reason of a

violation of section 1962 to sue in federal district court . . . .”7

5 GSK China was not named a defendant even though it is the

arm of GlaxoSmithKline that ChinaWhys entered into the

Consultancy Agreement with. Moreover, as the District

Court observed, “all of Plaintiffs’ contacts were with

employees of either GSK China or GSK Pte Ltd., a

Singaporean entity, and none were with Defendants. From

the complaint, it is apparent that it was GSK China employees

and GSK China’s CEO who requested that Plaintiffs

investigate Shi . . . .” Humphrey v. GlaxoSmithKline, PLC.,

No. CV 16-5924, 2017 WL 4347587, at *7 (E.D. Pa. Sept. 29,

2017). The decision not to name GSK China as a defendant

is likely an attempt to downplay ties to China.

6 Plaintiffs’ Br. 8.

7 RJR Nabisco, Inc. v. European Cmty., 136 S. Ct. 2090, 2097

(citing 18 U.S.C. § 1964(c)).

6

A successful plaintiff may “recover threefold the damages. . .

.”8

RICO is implicated when defendants have engaged in a

“pattern of racketeering activity.”9 That pattern consists of

certain statutorily defined predicate acts “encompass[ing]

dozens of state and federal offenses” “that together

demonstrate the existence or threat of continued criminal

activity.”10 The statute “sets forth four specific prohibitions

aimed at different ways in which a pattern of racketeering

activity may be used to infiltrate, control, or operate a[n]

enterprise[’s]” criminal misconduct.11 Plaintiffs allege that

Defendants violated two of those prohibitions—§§ 1962(c) and

(d). Section 1962(c) proscribes participating in the conduct of

an interstate enterprise’s affairs through a “pattern of

racketeering activity,”12 which RICO defines as “at least two

acts of racketeering activity.”13 Section 1962(d) makes it

unlawful to conspire to violate subsections (a) through (c).14

8 18 U.S.C. § 1964(c).

9 18 U.S.C. § 1962(c).

10 RJR Nabisco, 136 S. Ct. at 2096–97.

11 Id. at 2097 (brackets in original) (citation and internal

quotation marks omitted).

12 18 U.S.C. § 1962(c).

13 18 U.S.C. § 1961(5).

14 Id. (citing 18 U.S.C. § 1962). 18 U.S.C. § 1962 provides:

(a) It shall be unlawful for any person who

has received any income derived, directly or

indirectly, from a pattern of racketeering

activity or through collection of an unlawful

debt in which such person has participated as

a principal within the meaning of section 2,

title 18, United States Code, to use or invest,

directly or indirectly, any part of such

income, or the proceeds of such income, in

acquisition of any interest in, or the

establishment or operation of, any enterprise

which is engaged in, or the activities of

which affect, interstate or foreign commerce.

A purchase of securities on the open market

for purposes of investment, and without the

intention of controlling or participating in the

7

To prove a violation under §1962(c), Plaintiffs must

show:

(1) that two or more persons agreed to conduct

or to participate, directly or indirectly, in the

conduct of an enterprise’s affairs through a

pattern of racketeering activity; (2) that the

defendant was a party to or member of that

agreement; and (3) that the defendant joined

control of the issuer, or of assisting another

to do so, shall not be unlawful under this

subsection if the securities of the issuer held

by the purchaser, the members of his

immediate family, and his or their

accomplices in any pattern or racketeering

activity or the collection of an unlawful debt

after such purchase do not amount in the

aggregate to one percent of the outstanding

securities of any one class, and do not confer,

either in law or in fact, the power to elect one

or more directors of the issuer.

(b) It shall be unlawful for any person

through a pattern of racketeering activity or

through collection of an unlawful debt to

acquire or maintain, directly or indirectly,

any interest in or control of any enterprise

which is engaged in, or the activities of

which affect, interstate or foreign commerce.

(c) It shall be unlawful for any person

employed by or associated with any

enterprise engaged in, or the activities of

which affect, interstate or foreign commerce,

to conduct or participate, directly or

indirectly, in the conduct of such enterprise's

affairs through a pattern of racketeering

activity or collection of unlawful debt.

(d) It shall be unlawful for any person to

conspire to violate any of the provisions of

subsection (a), (b), or (c) of this section.

8

the agreement or conspiracy knowing of its

objective to conduct or participate, directly or

indirectly, in the conduct of an enterprise’s

affairs through a pattern of racketeering

activity.15

To establish liability pursuant to § 1962(c), a plaintiff

must establish the existence of an enterprise that exists

“separate and apart from the pattern of activity in which [the

enterprise] engages.”16 RICO defines “enterprise” as “any

individual, partnership, corporation, association, or other legal

entity, and any union or group of individuals associated in fact

although not a legal entity.”17 Plaintiffs can show the presence

of an enterprise by pointing to a “group of persons associated

together for a common purpose of engaging in a course of

conduct.”18

The complaint alleges that the enterprise here is an

association of, inter alia, Defendants, “others convicted of

crimes related to GSK activities,” “and other countries who

accepted bribes and kickbacks from GSK.”19 Plaintiffs further

allege that Defendants participated in the following

racketeering activity: mail fraud; wire fraud; obstruction of a

criminal investigation; tampering with witnesses; retaliating

against a witness, victim, or an informant; use of interstate

facilities to conduct unlawful activity; and money laundering.20

Plaintiffs contend they lost their business as a result of these

alleged predicate racketeering acts.21

In RJR Nabisco, the Supreme Court considered

“whether RICO applies extraterritorially—that is, to events

15 United States v. John-Baptiste, 747 F.3d 186, 207 (3d Cir.

2014) (citation omitted); see also Sedima, S.P.R.L. v. Imrex

Co., 473 U.S. 479, 496 (1985) (“A violation of § 1962(c) . . .

requires (1) conduct (2) of an enterprise (3) through a pattern

(4) of racketeering activity.”).

16 United States v. Turkette, 452 U.S. 576, 583 (1981).

17 18 U.S.C. § 1961(4).

18 Turkette, 452 U.S. at 583.

19 Joint App’x A54.

20 Joint App’x A56.

21 Joint App’x A59.

9

occurring and injuries suffered outside the United States.”22

The relevant inquiry involves two separate questions: first,

whether RICO’s substantive provisions apply to extraterritorial

conduct, and second, whether RICO’s private right of action

affords relief for “injuries that are suffered” outside the United

States. 23

The Court explained that “[a]bsent clearly expressed

congressional intent to the contrary, federal laws will be

construed to have only domestic application.”24 This

presumption against extraterritoriality “avoid[s] the

international discord that can result when U.S. law is applied

to conduct in foreign countries[.]”25 It also ensures that

Congress—rather than the judiciary—is responsible for

navigating the “delicate field of international relations.”26

Nevertheless, the Court concluded that RICO can reach

extraterritorial conduct.27 However, the Court held that 18

U.S.C. § 1964(c) does not allow recovery for injuries suffered

in foreign territories.28 The Court explained that “[n]othing in

§ 1964(c) provides a clear indication that Congress intended to

create a private right of action for injuries suffered outside of

the United States.”29 Thus, although RICO creates a cause of

action for misconduct committed abroad, § 1964(c) requires a

“domestic injury.”

However, since the plaintiffs in RJR Nabisco had

waived their claims for domestic injuries,30 the Court did not

need to explain how courts should determine whether an

alleged injury has been suffered domestically or abroad.31

Moreover, as the District Court observed here, there is a dearth

22 RJR Nabisco, Inc., 136 S. Ct. at 2096.

23 Id. at 2099 (emphasis added).

24 Id. (citation omitted).

25 Id. (citations omitted).

26 Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659,

1664 (2013).

27 RJR Nabisco, Inc., 136 S. Ct. at 2103.

28 See id. at 2106.

29 Id. at 2108.

30 Id. at 2111.

31 Bascuñán v. Elsaca, 874 F.3d 806, 809 (2d Cir. 2017)

(“The Supreme Court did not explain, however, how to

determine whether an alleged injury is domestic or foreign.”).

10

of case law grappling with the RJR Nabisco decision.32 In

addition, those courts that have considered whether an alleged

injury was suffered in the United States have applied varying

standards.33 Thus, there is no consensus on what specific

factors must be considered when deciding whether an injury is

domestic or foreign.

RJR Nabisco did advise courts to proceed cautiously

when deciding if RICO plaintiffs have alleged a sufficient

domestic injury to recover under § 1964(c). “[P]roviding a

private civil remedy for foreign conduct creates a potential for

international friction beyond that presented by merely applying

U.S. substantive law to that foreign conduct.”34 The Court

observed that the domestic injury requirement promotes

comity and avoids international friction because it, inter alia,

creates less of an opportunity for litigants in foreign countries

to bypass those territories’ “less generous remedial

schemes.”35 The Supreme Court also warned that allowing

litigants who are abroad to sidestep foreign remedies only to

seek those available under domestic law would upset the

balance of competing considerations embodied in the laws of

foreign countries.36 The Court cautioned that “the need to

enforce the presumption [against extraterritoriality] is at its

32 Humphrey, 2017 WL 4347587 at *5 (“Neither the Third

Circuit Court of Appeals, other Appellate Circuits, nor the

District Court for the Eastern District of Pennsylvania have

addressed what constitutes a domestic or foreign injury for

civil RICO purposes subsequent to the RJR Nabisco decision

. . . .”).

33 Compare Dandong Old N.-E. Agric. & Animal Husbandry

Co. v. Hu., No. 15 CIV. 10015 (KPF), 2017 WL 3328239, at

*6 (S.D.N.Y. Aug. 3, 2017) (considering the totality of the

circumstances without relying on any single circumstance),

with Union Commercial Servs., 2016 WL 6650399, at *4

(E.D. Mich. Nov. 10, 2016) (considering whether the

defendant’s conduct was intended to have effects in the

United States).

34 Id. at 2106.

35 Id. at 2106–07 & n. 9.

36 Id.

11

apex” when extraterritorial application of U.S. law raises the

“risk” of international friction.37

II.

Because this case does not involve Article III standing,

but rather presents an issue of statutory standing, subject matter

jurisdiction is not implicated, and the parties incorrectly relied

on Rule 12(b)(1). Our precedent makes clear that “[c]ivil

RICO standing is usually viewed as a 12(b)(6) question of

stating an actionable claim, rather than as a 12(b)(1) question

of subject matter jurisdiction.”38 Moreover, given that Rule

12(b)(6) provides a plaintiff with “significantly more

protections,”39 and because we may affirm on any ground

supported by the record and “there is no prejudice to appellants

in our reviewing the district court’s dismissal as if it were

grounded on Rule 12(b)(6),”40 we will review this matter under

Rule 12(b)(6). Accordingly, we “consider only the allegations

contained in the complaint, exhibits attached to the complaint

and matters of public record.”41 In evaluating whether the

complaint adequately pleads the elements of standing, we

accept as true all material allegations set forth in the complaint

and construe those facts in favor of Plaintiffs, the nonmoving

party.42

III.

Plaintiffs allege that, as a result of Defendants’

racketeering activity, Plaintiffs lost “numerous ongoing

contracts and engagements with U.S. law firms and

companies”—purportedly destroying “Plaintiffs’ business . . .

and their prospective business ventures.”43 Plaintiffs thus seek

redress under § 1964(c). However, as we stated above, §

37 Id. at 2107.

38 Anderson v. Ayling, 396 F.3d 265 (2005) (citing Maio v.

Aetna, Inc., 221 F.3d 472, 482 n.7 (3d Cir. 2000)).

39 Hartig Drug Co. Inc. v. Senju Pharmaceutical Co. Ltd.,

836 F.3d 261, 270 (3d Cir. 2016).

40 Maio, 221 F.3d at 481 n.7.

41 Pension Benefit Guar. Corp. v. White Consol. Indus., Inc.,

998 F.2d 1192, 1196 (3d Cir. 1993). No documents were

attached for the District Court’s consideration.

42 Maio, 221 F.3d at 481–82 (citations and internal quotation

marks omitted).

43 Joint App’x A59.

12

1964(c) creates no private cause of action for injuries “suffered

outside the United States.”44 Accordingly, Plaintiffs’ civil

RICO suit can survive a motion to dismiss only if they

sufficiently allege domestic injuries.45 As we will explain,

there is no bright-line rule that we can apply in assessing

whether the alleged injuries are domestic or foreign. Rather,

we must engage in a fact-intensive inquiry that will ordinarily

include consideration of multiple factors that vary from case to

case.

A. The Domestic Injury Requirement

The District Court recognized that two “schools of

thought” have emerged regarding proof of domestic injury for

civil RICO claims. The “locus of effects” test looks only to

where the plaintiff felt the effects of the alleged injury and not

where the injurious acts were allegedly committed.46 Courts

applying this approach have largely focused upon the

plaintiffs’ place of residency or principal place of business.47

Other courts are guided by where the alleged misconduct was

“targeted” or “directed” and focus largely, though not

exclusively, on that location.48 Although the District Court

44 RJR Nabisco, 136 S. Ct. at 2108 (“Nothing in § 1964(c)

provides a clear indication that Congress intended to create a

private right of action for injuries suffered outside of the

United States.”).

45 Id.

46 Humphrey, 2017 WL 4347587 at *6.

47 See, e.g., Bascuñan v. Daniel Yarur ELS Amended

ComplaintA, No. 15-CV-2009 (GBD), 2016 WL 5475998, at

*6 (S.D.N.Y. Sept. 28, 2016) (“All of the funds at issue, even

those distributed among the Corporate Plaintiffs, were

purportedly owned by Bascuñan, and thus, he is the person

that ultimately suffered the loss. And as a Chilean citizen and

resident, he suffered the losses in Chile.” (citations omitted)),

rev'd in part, vacated in part sub nom. Bascuñan v. Elsaca,

874 F.3d 806 (2d Cir. 2017).

48 See, e.g., Akishev v. Kapustin, No. CV 13-7152, 2016 WL

7165714, at *1–2, 7– 8 (D.N.J. Dec. 8, 2016); Union

Commercial Servs. Ltd. v. FCA Int’l Operations LLC, No. 16-

CV-10925, 2016 WL 6650399, at *4 (E.D. Mich. Nov. 10,

2016); Tatung Co., Ltd. v. Shu Tze Hsu, 217 F. Supp. 3d

1138, 1156 (C.D. Cal. 2016).

13

found the former school of thought more persuasive, it

ultimately did not have to adopt either approach because

Plaintiffs were unable to prevail under either test.49

This case presents an excellent example of why the

inquiry required under § 1964(c) must be undertaken in the

context of the specific injuries alleged in a given case rather

than relying on a one-size-fits-all approach or bright-line rule.

Plaintiffs allege injuries to intangible business interests,

including reputation and goodwill. Accordingly, relying on

such tangible factors as the location of lost funds, damaged

property or plaintiff’s residence is not only of little use, but it

could also be very misleading. Instead, we must consider

multiple factors in determining whether the injuries in question

were suffered in the United States or abroad.

Nevertheless, there is a general consensus among the

courts that have had to apply RJR Nabisco that the location of

a RICO injury depends on where the plaintiff “suffered the

injury”—not where the injurious conduct took place.50 That

may result from the Court’s framing of the issue in RJR

Nabisco. The Court specifically framed the question before it

as whether: “RICO’s private right of action, contained in §

1964(c), applies to injuries that are suffered in foreign

countries?”51

The Court of Appeals for the Second Circuit is one of

only two federal appellate courts that have grappled with RJR

Nabisco’s domestic injury instruction. In Bascuñán v. Elsaca,

the court considered whether a Chilean resident suffered a

domestic injury although he was not located in the United

States during the events in question.52 The plaintiff there

alleged that the defendant had fraudulently caused banks to

wire the plaintiff’s funds from the plaintiff’s U.S. bank

49 Humphrey, 2017 WL 4347587 at *6. (“[T]his Court need

not decide whether the focus is entirely on where the injury

occurred or if the location of the conduct is relevant, because

under any of the injury-focused tests employed by other

district courts, and under a conduct-focused test, it is clear to

this Court that the alleged injuries suffered by Plaintiffs are

foreign, and not domestic.”).

50 See id. (collecting cases).

51 RJR Nabisco, 136 S. Ct. at 2099.

52 874 F.3d 809 (2d Cir. 2017).

14

accounts to the defendant’s accounts.53 The plaintiff also

alleged that the defendant or his agent physically removed

bank shares from the plaintiff’s New York safety deposit box.54

The district court held that the plaintiff could not allege a

domestic injury because he was a resident of Chile, and the

injuries alleged were necessarily suffered at the plaintiff’s

place of residence.55 Two questions guided the court’s inquiry:

who became poorer as a result of the alleged conduct and

where did that individual become poorer?56 “Its holding set

forth, in sum and substance, the following rule: a foreign

plaintiff who suffered an ‘economic loss’ due to a RICO

violation cannot, absent extraordinary circumstances, allege a

domestic injury.”57

On appeal, the Court of Appeals for the Second Circuit

rejected the district court’s “residency-based” approach and

held that “a plaintiff who is a foreign resident may [in fact]

allege a civil RICO injury that is domestic.”58 It noted that the

district court’s focus on the plaintiff’s place of residence

improperly disregards RJR Nabisco’s attempt “to make plain

that its opinion should not be taken to ‘mean that foreign

plaintiffs may not sue under RICO.’”59 The Second Circuit

opined that the focus of the domestic injury analysis should be

the location of the alleged injuries as opposed to the location

of the plaintiff’s residence or of the defendant’s alleged

misconduct. The court explained: “[i]n order to determine

where the [injuries] alleged by a civil RICO plaintiff are

located geographically, courts must examine more closely the

specific type of injuries alleged.”60 It then categorized the

alleged injury as an injury to tangible property, which “can be

fairly said to exist in a precise location.”61 Taking that

approach, the court easily concluded that “[w]here the injury is

53 Id. at 811.

54 Id. at 810.

55 Id. at 809.

56 Id. at 813–14.

57 Id. 809–10.

58 Id. at 814.

59 Id. at 821 (emphasis omitted) (citing RJR Nabisco, 136 S.

Ct. at 2110 n. 12).

60 Id. at 817.

61 Id. at 820.

15

to tangible property . . . absent some extraordinary

circumstance, the injury is domestic if the plaintiff’s property

was located in the United States when it was stolen or harmed,

even if the plaintiff himself resides abroad.”62

Thus, the court held that when a defendant’s conduct is

alleged to effect tangible property, the location of that property

usually constitutes the place of the injury. Since the plaintiff’s

money and bank shares were in the United States when stolen,

the court reasoned that the injury occurred in New York and

the plaintiff therefore properly alleged a domestic RICO

injury.63 Several considerations counseled that conclusion.

The court reasoned that plaintiffs who are injured as a result of

harm done to their domestically located tangible property are

entitled to the remedial benefits conferred by a RICO private

right of action because such litigants “expect that our laws will

protect them in the event of damage to that property.”64 That

“expectation [was] entirely justified, especially when we

consider that a foreign resident’s property located in the United

States is otherwise subject to all of the regulations imposed on

private property by American state and federal law.”65 The

rule thus “ensures that both foreign and domestic plaintiffs can

obtain civil RICO’s remedy for damage to their property[.]”66

Although this approach, which focuses on the location

of the property giving rise to the harm, is useful where the

alleged injury is to tangible property, it is not helpful where, as

here, harm to intangible business interests is alleged. The

location of such injuries simply cannot be identified with the

same geographic certainty that is endemic in the very concept

of tangible property. Thus, courts grappling with alleged

injuries to intangible property have largely tried to trace the

location of the effects of the alleged injurious conduct to

determine the place of injury. In other words, these courts have

aligned themselves with the locus of effects approach and

focus on where the plaintiff felt the effects of the injuryinducing

predicate acts, no matter where they occurred.

62 Id. at 820–21.

63 Id.

64 Id. at 821.

65 Id. at 821.

66 Id.

16

For example, in Cevdet Aksut Ogullari Koll. Sti. v.

Cavusoglu, the district court found that a plaintiff’s principal

place of business and the location of its operations were merely

helpful considerations in determining whether the effects of an

alleged injury were domestic or foreign.67 There, a Turkish

corporation “assert[ed] that its domestic business was injured

because it had . . . annual sales to customers in the United States

prior to transacting with the RICO enterprise.”68 The court

held that, even if it were to assume that the plaintiff lost

earnings from customers located in the United States, it

nonetheless could ascertain no “domestic injury to [the

plaintiff’s] business because its business [was] entirely located

in and operated out of Turkey.”69 The “plaintiff’s injury was

felt in the only place it had ever been located, in Turkey.”70

Although the Cevdet court found the physical location of the

plaintiff’s corporation to be relevant, it did not announce the

same kind of residency-based rule that was rejected by the

Court of Appeals in Bascuñán. Instead, it declared that a

foreign corporation with “substantial business operations

within the United States” could, hypothetically, assert a RICO

domestic injury because the injury could be felt in the United

States.71

Picking up where Cevdet left off, the district court in

Elsevier, Inc. v. Grossman (Elsevier II) held that, in assessing

whether a plaintiff has alleged a domestic RICO injury to its

intangible business operations, courts should determine where

the “substantial negative business consequences occurred.”72

The court suggested that a plaintiff might be able to show a

domestic injury by alleging “some effect on Plaintiffs’

67 245 F. Supp. 3d 650 (D.N.J. 2017).

68 Id. at 653.

69 Id. at 659.

70 Id. at 660.

71 Id. at 659.

72 199 F. Supp. 3d 768, 786 (S.D.N.Y. 2016) (“If the plaintiff

has suffered an injury to his or her business, the court should

ask where substantial negative business consequences

occurred. By contrast, if the plaintiff has suffered an injury to

his or her property, the court should ask where the plaintiff

parted with the property or where the property was

damaged.”).

17

relationships with actual or prospective U.S. customers.”73

The court, however, found that the plaintiff had made no such

allegation. Elsevier, the plaintiff, had sued to recover after it

sold academic journals to the defendants at discounted rates

because of the defendants’ alleged misrepresentations that they

were buying the journals for “valid personal use.”74 The

plaintiff argued that he suffered a domestic injury simply

because the defendants ordered the subscriptions from the

United States and paid for them with checks drawn on a U.S.

bank account. First, the court held that this was insufficient to

show that the plaintiff’s injuries occurred in the United States.

The trial court noted “that it is possible for fraudulent conduct

to take place in one location, but cause injury in another

location.”75 While resolving post-trial motions, though, the

district court found that, as alleged, “48 of the 51 fraudulent

subscriptions were either physically shipped from the United

States or were authorized for shipment by an Elsevier

employee located in the United States.”76 Accordingly, the

district court reversed course and found that the plaintiff

“relinquished control of the journals in the United States under

false pretenses and thereby suffered the effects of [the

defendant’s fraudulent] conduct in the States.”77 The court

therefore found that the plaintiff’s harm constituted a domestic

injury “even if [the plaintiff] were a foreign entity.”78

Despite Elsevier II’s earlier indication that, in

determining whether an injury is domestic, “court[s] should

ask where substantial negative business consequences

occurred,”79 its post-trial opinion was based on its finding that

the alleged misappropriation of the plaintiff’s property

occurred in the United States. That is consistent with the

approach taken by the Court of Appeals in Bascuñán.

73 Id. at 788.

74 Elsevier Inc. v. Pierre Grossmann, IBIS Corp. (Elsevier

III), 2017 WL 5135992, at *1 (S.D.N.Y. Nov. 2, 2017).

75 Elsevier II, 199 F. Supp. 3d at 788.

76 Elsevier III, 2017 WL 5135992, at *4.

77 Id.

78 Id.

79 Elsevier II, 199 F. Supp. 3d at 786.

18

Nevertheless, since Elsevier involved an alleged injury to

tangible property, it is not helpful to our inquiry here.80

The court’s analysis in Dandong Old N.-E. Agric. &

Animal Husbandry Co. v. Hu is more analogous to our

inquiry.81 The plaintiff there was a Chinese company that was

one of the largest purchasers of soybeans produced in the

United States.82 It alleged, inter alia, that the defendant’s

RICO misconduct caused the plaintiff to lose contracts with

soybean suppliers in the United States.83 The plaintiff claimed

the loss of much of its market share and that its business

operations slowed as a result of its inability to receive soybeans

from U.S. suppliers at the same volume as before the

defendant’s alleged misconduct.84 The plaintiff also alleged

that it was forced to terminate 90 of its China-based

employees.85 The court disregarded the location of the

predicate acts that were alleged and instead focused only on

where the plaintiff felt the effects of the alleged injury.86 That

analysis caused the court to conclude that the plaintiff failed to

establish a domestic injury. The trial court found that “[a]ny

deprivation of [the] [p]laintiff’s money was felt in China. And,

in sharp contrast to Elsevier, [the] Plaintiff was not deprived of

its property in the United States[] [because,] indeed, [the]

Plaintiff received all of the soybeans for which it contracted

with U.S. suppliers.”87

80 Dandong Old N.-E. Agric. & Animal Husbandry Co., 2017

WL 3328239 at *6 (clarifying that Elsevier “focused on

where the plaintiff had been deprived of money or property

[and] . . . found that the plaintiff had sufficiently alleged a

domestic injury by asserting that nearly all of the

subscriptions at issue had been shipped from within the

United States—and thus, that the plaintiff had been deprived

of its property (i.e., the scientific journals) in the United

States” (citing Elsevier III, 2017 WL 1843298, at *6)).

81 Id. *13

82 Id. at *1.

83 Id. at *3.

84 Id.

85 Id.

86 Id. at *11.

87 Id. at *13.

19

The plaintiff’s principal place of business was in China,

all the terminated employees were fired in China, any expenses

resulting from the alleged misconduct were paid from China,

and the plaintiff’s business operated only out of China.88 The

court found that the foreign plaintiff’s allegation that it lost

prospective business opportunities from U.S. suppliers

insufficient to establish that the plaintiff experienced a

domestic injury because such a claim, without more, “is far too

attenuated to suffice as a domestic injury under RICO.”89 For

these reasons, the Dandong court ultimately held that

“[r]egardless of where the conspirators’ conduct took place,

[the p]laintiff’s injury was felt in China, the only place its

business had ever been located.”90 Although other courts have

reached similar results,91 Dandong’s approach to determining

the location of the alleged injury is particularly helpful because

it is nuanced and the court considered the totality of the

circumstances without relying on any single circumstance.

As we will explain, a focus upon where the alleged

injuries were felt best guides our inquiry. However, unlike

courts that have taken this “locus of effects” approach, we do

not view a plaintiff’s residence or principal place of business

as detemintive. Although it will almost always be an important

88 Id. at *14.

89 Id. at *13.

90 Id. at *14.

91 In City of Almaty, Kazakhstan v. Ablyazov for example, the

plaintiff alleged that the defendant (who was the former

mayor) stole city funds and invested those funds in New York

City real estate projects. 226 F. Supp. 3d 272, 275 (S.D.N.Y

2016). The court held that even though the mayor and his coconspirators

used the funds in the United States, the plaintiff

did not suffer a domestic injury. Id. at 284. In other words,

because the plaintiff suffered economic harm to its business,

the place of injury was “the state of plaintiff’s residence, and

foreign corporations are recognized to reside either in their

principal place of business or their place of incorporation.”

Id. at 282 (citation and internal quotations omitted). Unlike

Plaintiffs here, the plaintiff in City of Almaty alleged no

additional contacts with the United States. The case therefore

offers limited guidance here.

20

factor, allegations in a given case will ususally necessitate

consideration of additional factors as well.

B. Merits

With this background as our guide, we must determine

if Plaintiffs here have alleged a plausible domestic injury under

§ 1964(c). We begin with RJR Nabisco’s clear command: the

analysis of whether a plaintiff has alleged a domestic injury

must focus principally on where the plaintiff has suffered the

alleged injury.92 “Nothing in § 1964(c) provides a clear

indication that Congress intended to create a private right of

action for injuries suffered outside of the United States.”93

As noted above, the Court in RJR Nabisco cautioned

against applying U.S. law in the absence of a domestic injury

for the substantial practical and policy reasons the Court

explained. Thus, we must decide if Plaintiffs’ alleged domestic

injuries justify allowing a civil remedy under RICO. There

may well be cases where plaintiffs do, in fact, suffer some

injury in the United States and courts must determine whether

those domestic injuries are sufficient to justify application of

domestic law despite the concerns the Supreme Court has

explained. As with any standard that is not susceptible to

mechanical application, “few answers will be written in black

and white.”94 We therefore appreciate that some cases will be

so close that courts may have to split jurisdictional hairs to

determine if a domestic injury has been alleged. As we

explain, the Plaintiffs here have not really alleged any domestic

injury, so we have no trouble concluding that they have not

alleged a sufficient injury to defeat that presumption and justify

the extraterritorial application of domestic law.

Given the intangible nature of the alleged injuries here,

our inquiry must focus primarily upon where the effects of the

predicate acts were experienced. This will better allow for

appropriate consideration of the nuanced nature of intangible

interests.

Whether an alleged injury to an intangible interest was

suffered domestically is a particularly fact-sensitive question

requiring consideration of multiple factors. These include, but

are not limited to, where the injury itself arose; the location of

92RJR Nabisco, 136 S. Ct. at 2108.

93 Id.

94 Kulko v. Superior Court of California, 436 U.S. 84, 92

(1978) (internal quotation marks omitted).

21

the plaintiff’s residence or principal place of business; where

any alleged services were provided; where the plaintiff

received or expected to receive the benefits associated with

providing such services; where any relevant business

agreements were entered into and the laws binding such

agreements; and the location of the activities giving rise to the

underlying dispute.

As we have already explained, the applicable factors

depend on the plaintiff’s allegations; no one factor is

presumptively dispositive.95 A domestic injury under §

1964(c) is found where the relevant factors, appropriately

weighed, establish that the alleged harm was suffered in the

United States.96 Although they have rarely done so explicitly,

the courts that have applied RJR Nabisco—including the

District Court here—have largely engaged in this kind of

multi-factor inquiry.97

Applying these principles to the allegations here, we

have no difficulty concluding that Plaintiffs have not alleged a

domestic injury. Rather, it is clear that the alleged injuries

were suffered in China. As the District Court noted, at all

relevant times, Plaintiffs lived in China; had their principal

place of business in China; provided services in China (albeit

to some American companies – but even they were operating

in China); entered the Consultancy Agreement in China and

agreed to have Chinese law govern it;98 met with Defendants’

95 See, e.g., Bascuñán, 874 F.3d at 824 (noting that “[a]

plaintiff’s residence may often be relevant—perhaps even

dispositive—in determining whether certain types of business

or property injuries constitute a domestic injury”); Dandong,

2017 WL 3328239, at *13–14 (considering a plethora of

factors to determine whether the alleged intangible injuries

constitute a domestic injury).

96 RJR Nabisco, 136 S. Ct. at 2108 (“Nothing in § 1964(c)

provides a clear indication that Congress intended to create a

private right of action for injuries suffered outside of the

United States.”).

97 See, e.g., Dandong, 2017 WL 3328239 at *13–14; Tatung

Co., Ltd., 217 F. Supp. 3d at 1155–56.

98 We recognize that our review of a motion to dismiss is

generally limited to the face of the complaint and documents

attached to it. However, we may consider the Consultancy

22

representatives only in China; and themselves indicated on the

civil cover sheet that the underlying incident arose in China.99

“[C]ompanies came to [ChinaWhys] when they sought to do

business in China.”100 Plaintiffs have not alleged that they

possess offices, assets, or any other property in the United

States. Thus, Plaintiffs have not alleged a domestic injury

pursuant to 18 U.S.C. § 1964(c), even though they do allege

loss of goodwill and some unidentified number of actual and

prospective U.S. customers.101 To the extent that these

intangible assets were injured, it is not enough to overcome the

Supreme Court’s caution against extraterritorial application of

domestic law in RJR Nabisco. Consequently, the District

Court correctly dismissed Plaintiffs’ RICO claims.

Dismissal of those claims is consistent with RJR

Nabisco’s policy considerations. As noted earlier, the

Supreme Court cautioned against the risks of “international

friction” associated with allowing foreign entities to “bypass”

potentially “less generous remedial schemes” available in their

home jurisdictions and pursue treble damages for injuries

suffered abroad through civil RICO actions in the United

States.102 Plaintiffs seek redress here for Defendants’ alleged

racketeering activity although Plaintiffs were prosecuted and

imprisoned in China. “Allowing [Plaintiff’s] RICO claims to

Agreement because Defendants attached the undisputed

document as an exhibit to its motion to dismiss and Plaintiffs

claims are based on the document. See Pension Ben. Guar.

Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d

Cir. 1993); see also Schuchardt, 839 F.3d 336, 343 (3d Cir.

2016) (“If . . . the defendant contests the pleaded

jurisdictional facts, “the court must permit the plaintiff to

respond with evidence supporting jurisdiction.” (citation and

internal quotation marks omitted).

99 Humphrey, 2017 WL 4347587, at *6 n.14.

100 Id. at *6.

101 It is unclear whether an allegation of harm to goodwill

constitutes a showing of “a concrete financial loss and not

mere injury to a valuable intangible property interest.” Maio,

221 F.3d at 483 (citation and internal quotation marks

omitted).

102 RJR Nabisco, 136 S. Ct. at 2106–07 (citation and internal

quotation marks omitted).

23

proceed under these circumstances would be at odds with the

Supreme Court’s directive that the need to enforce the

presumption against extraterritoriality is ‘at its apex’ when

remedies available in United States courts may conflict with

those available abroad.”103 Indeed, it would be odd to permit

Plaintiffs to seek civil redress for alleged harm arising from the

very crimes they were convicted of in China and that arose

from China’s application of its own criminal laws, absent

allegations that would give rise to a domestic injury in the

United States.

We realize that the Court of Appeals for the Seventh

Circuit rejected the analytical approach that we today adopt, in

Armada (Singapore) PTE Ltd. v. Amcol Int’l Corp.104 But we

do not find that analysis particularly helpful or persuasive here.

There, that court held that “a party experiences or sustains

injuries to its intangible property at its residence.”105 The

Armada plaintiff was a Singapore shipping company that

alleged that the Illinois-based defendant violated RICO by

thwarting the plaintiff’s attempt to recover on its breach of

contract claim. The court held, without much discussion, that

the plaintiff’s “principal place of business [was] in Singapore,

so any harm to [the plaintiff’s] intangible bundle of litigation

rights was suffered in Singapore.”106 It therefore concluded

that the “injury [was] not domestic, and [that the plaintiff had]

failed to plead a plausible claim under civil RICO.”107

Although the ease with which such a bright-line rule can

be applied gives it some surface appeal, we resist the

temptation to adopt it as the law of this circuit. While courts

have generally noted that a company suffers economic injuries

103 City of Almaty, 226 F. Supp. 3d at 287 (citing RJR

Nabisco, 136 S. Ct. at 2107).

104 885 F.3d 1090 (7th Cir. 2018).

105 Armada, 885 F.3d at 1094–95 (citing Kamel v. Hill-Rom

Co., Inc., 108 F.3d 799, 805 (7th Cir. 1997). Although we

reject the analytical framework used in Armada, we note that

it would not necessarily lead to a different result here because

Plaintiffs resided in China when Defendants are alleged to

have engaged in the conduct Plaintiffs rely upon for RICO

liability.

106 Id. at 1095.

107 Id.

24

at its principal place of business, few have done so in the

context of a RICO claim that would extend beyond the borders

of the United States. 108 Even fewer have done so where the

alleged conduct had an effect on intangible property. Although

a litigant’s residence or principal place of business is obviously

a relevant consideration, and perhaps a useful place to begin a

§ 1964(c) inquiry, it does not necessarily determine the

ultimate question of whether there has been a domestic injury.

It is merely one factor that informs our inquiry.

The Supreme Court anticipated that the RICO domestic

injury inquiry would not always be susceptible to easy

resolution. The Court explained that “[t]he application of [the

domestic injury rule] in any given case will not always be selfevident,

as disputes may arise as to whether a particular alleged

injury is ‘foreign’ or ‘domestic.’” 109 Moreover, we think the

Armada rule is too inflexible to be useful in resolving cases

where the nature of the injured property interest is not “selfevident.”

110

Armada’s residency-based rule also effectively

precludes all foreign plaintiffs alleging intangible injuries from

recovering under § 1964(c) regardless of their alleged

connection with the United States. “It cannot be the case that

the mere fact that a loss is economic means that foreign

corporations are unable to avail themselves of the protections

of civil RICO, even in cases where all of the actions causing

the injury took place in the United States.”111 There is no

evidence that Congress meant to so preclude foreign

corporations from the protection offered by § 1964(c) and

doing so conflicts with the Supreme Court’s recognition that

“Congress did not limit RICO to domestic enterprises.”112

We next address Plaintiffs’ contention that,

notwithstanding factors supporting a finding that the alleged

108 See, e.g., id. (collecting cases); see also Global Fin. Corp.

v. Triarc Corp., 715 N.E.2d 482, 485 (N.Y. 1999) (“When an

alleged injury is purely economic, the place of injury usually

is where the plaintiff resides and sustains the economic

impact of the loss.”).

109 RJR Nabisco, 136 S. Ct. at 2111.

110 Id.

111 Tatung Co., Ltd., 217 F. Supp. 3d at 1155.

112 RJR Nabisco, 136 S. Ct. at 2104.

25

injury was foreign, they have nonetheless alleged a domestic

injury because “the alleged underlying RICO conduct plainly

was both targeted at, and was intended to have substantial

effects in, the United States.”113 We disagree.

As we mentioned at the outset, a minority of courts have

suggested that a plaintiff can show that it has suffered a

domestic injury by merely pointing to misconduct that

occurred in, or was directed to, the United States. However,

those cases are also not helpful here and do not establish the

domestic injury that Plaintiffs claim. Plaintiffs contend

Akishev v. Kapustin114 relied on this so-called “location of the

injury-inducing conduct” test.115 The plaintiffs there were

citizens of multiple foreign countries who were fraudulently

induced to make online purchases of used cars from the

defendant’s U.S. dealership.116 The plaintiffs alleged no other

connection to the United States. The court found that the

location of the fraudulent conduct was an important factor in

determining whether there was a “domestic injury,” because

the case arose in the context of an online sale. The court

reasoned that “[i]f [the] plaintiffs [had] traveled to the United

States, went to the physical location of [the defendant’s]

purported car dealerships . . . chose a car, paid for it on the spot,

and arranged for the car to be shipped to Eastern Europe, [the]

plaintiffs would have suffered from a clear domestic injury

when [the defendant] failed to deliver the car and failed to

return plaintiffs their money.”117 The case may well be helpful

when allegations involve the tenaciously difficult question of

where misconduct in cyberspace occurs. However, it is of

limited assistance here.

We do note, however, that “the court [ultimately]

appeared to focus on where plaintiffs’ injuries were felt—i.e.,

on defendant’s United States-based website and, therefore, in

the United States.”118 To this extent, Akishev’s actual holding

relies on the “locus of effects” approach discussed above and

113 Plaintiffs’ Br. 35.

114 2016 WL 7165714 at *1 (D.N.J. Dec. 8, 2016).

115 Plaintiffs’ Br. 32–33.

116 Akishev, 2016 WL 7165714 at *7.

117 Id.

118 Cevdet Aksut Ogullari Koll. Sti, 245 F. 3d Supp. at 657

(citing Akishev, 2016 WL 7165714 at 8*).

26

does not itself compel the adoption of an approach that places

undue emphasis on the location of the alleged injury-inducing

misconduct.

Plaintiffs also rely on Tatung Co., Ltd. v. Shu Tze Hsu119

and claim that it emphasizes that the location of a defendant’s

conduct is important in determining whether a domestic injury

has been alleged. Even so viewed, Tatung does not support

Plaintiffs’ contention. The foreign plaintiff maintained a “hub”

of business in the United States and extended credit and

delivered goods to one of the defendants within the United

States.120 When the defendant defaulted on its credit

obligation, the plaintiff was awarded a judgment through

arbitration in California.121 The plaintiff subsequently alleged

a RICO conspiracy to siphon funds from the defendant’s

corporation and render it an empty shell in order to avoid the

judgment.122 The court found that RICO civil liability was

appropriate because “the defendants specifically targeted their

conduct at California with the aim of thwarting [the plaintiff’s]

rights in California.”123 The court found a domestic injury

because the plaintiff had a domestic judgment entitled to the

protection of United States law.124 The Tatung plaintiff also

maintained substantial business operations within the United

States and contractually availed itself of dispute resolution via

arbitration within the United States.125 Consequently, the

plaintiff in that case could plausibly argue that its United

States-based business was harmed by the defendants’ RICO

conduct and that it suffered a domestic injury because it felt the

impact of that injury within the United States.

Finally, Plaintiffs rely upon Union Commercial

Services. Ltd. v. FCA International Operations LLC’s

suggestion that a plaintiff could allege a domestic injury under

RICO by simply pointing to injurious conduct intended to

119 217 F. Supp. 3d 1138, 1155 (C.D. Cal. 2016).

120 Id. at 1155.

121 Id. at 1156.

122 Id. at 1158.

123 Id. at 1157.

124 Id. at 1156.

125 Id. at 1155–56.

27

produce effects in the United States.126 They contend that “the

alleged underlying RICO conduct [here] plainly was both

targeted at, and was intended to have substantial effects in, the

United States” because “[a] central goal of the alleged

racketeering conduct was to avoid detection and further

sanctions from U.S. regulators and criminal authorities . . . .”127

In Union Commercial, the court relied upon cases decided in

the context of antitrust law and concluded that courts must ask

“whether a defendant’s conduct is intended to or has produced

‘substantial effects’ in the United States.”128, 129 The court

found that the plaintiff suffered no “domestic injury” because

the “defendants’ alleged conduct was directed at, and any

effects were felt by, plaintiff’s business or property interests

outside of the United States.”130 Here again, even though the

court emphasized the nature of the defendant’s conduct, it

focused on the fact that the effects of the alleged harm were

felt outside the United States.

Given the numerous factors we have discussed that

converge to paint a picture of an injury in China and not in the

United States, the individual circumstances that Plaintiffs rely

on cannot establish a domestic injury.

IV.

For the foregoing reasons, we will affirm the judgment

of the District Court.

126 No. 16-CV-10925, 2016 WL 6650399, at *4 (E.D. Mich.

Nov. 10, 2016).

127 Plaintiffs’ Br. 35.

128 Union Commercial Servs. Ltd., 2016 WL 6650399 at *4.

129 RJR Nabisco observed that “[t]here is good reason not to

interpret § 1964(c) to cover foreign injuries just because the

Clayton Act[, a federal antitrust statute,] does so.” RJR

Nabisco, 136 S.Ct. at 2109. First, the Clayton Act explicitly

authorizes foreign entities to bring suit under the statute. Id.

Further, and as the Court described in F. Hoffmann-La Roche

Ltd. v. Empagran S.A., 542 U.S. 155 (2004), the Foreign

Trade Antitrust Improvements Act of 1982 excludes from the

reach of antitrust laws “most conduct that ‘causes only

foreign injury.’” RJR Nabisco, 136 S.Ct. at 2109 (citing

Empagran, 542 U.S. at 158).

130 Union Commercial Servs., 2016 WL 6650399, at *5.

Affirmed