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Published online by Cambridge University Press: 27 February 2017
In the course of litigation against an ex-employee, Gould, Inc. (Gould) allegedly learned that its proprietary technical data had been improperly supplied to Mitsui Mining & Smelting Co., Ltd. (Mitsui) and Miyakoshi Machine Tools Co., Ltd. (Miyakoshi), which then used those trade secrets in a joint venture with Pechiney Ugine Kuhlmann, a French state-owned company, and its wholly owned subsidiary, Trefimetaux (Pechiney/Trefimetaux). Gould filed a civil lawsuit against Pechiney/Trefimetaux, together with Mitsui and Miyakoshi, in U.S. district court, alleging violations of the Racketeer Influenced and Corrupt Organizations provisions of the Organized Crime Control Act of 1970 (18 U.S.C. §1961-1968 (1988)) (RICO). Gould’s complaint also included claims of unfair competition and unjust enrichment based upon the defendants’ alleged misappropriation of trade secrets. On the motion of Pechiney/Trefimetaux, the district court held that the civil RICO claim should be dismissed because, as “foreign states” under the Foreign Sovereign Immunities Act of 1976 (28 U.S.C. §1330, 1602-1611 (1988)) (FSIA), Pechiney and Trefimetaux were immune from criminal indictment for the acts alleged to have formed the basis for the RICO violation.
1 After commencement of the lawsuit, Pechiney sold a majority of the shares of Trefimetaux to a privately owned Italian company but retained Trefimetaux’s interest in the joint venture with Mitsui, which allegedly was continuing to use Gould’s trade secrets improperly. The Sixth Circuit held that a determination whether Pechiney and Trefimetaux qualified as “foreign states” under the FSIA for the purposes of subject matter jurisdiction should be based upon their status at the time the act complained of had occurred. Gould v. Pechiney Ugine Kulhmann & Trefimetaux, 853 F.2d 445, 450 (6th Cir. 1988).
2 See, e.g., J. Rakoff & H. Goldstein, RICO Civil and Criminal Law and Strategy 2–17 (1990); Note, RICO, 26 Am. Crim. L. Rev. 971, 971–72 & nn. 7–10 (1989).
3 18 U.S.C. § 1964(c) (1988).
4 Although many lower federal courts have expressed distaste for RICO because it federalizes the law of fraud and stigmatizes defendants in a manner that Congress never anticipated, the Supreme Court has steadfastly refused to approve a variety of strategems designed to narrow the statute in civil cases. See, e.g., H.J. Inc. v. Northwestern Bell Tel. Co., 109 S.Ct. 2893 (1989); Sedima, S.P.L.R. v. Imrex Co., 473 U.S. 479 (1985); J. Rakoff & H. Goldstein, supra note 2, at 1–5.
5 The definition of “racketeering activity” is set forth in 18 U.S.C. § 1961(1). It includes (A) “any act or threat involving murder, kidnaping [and other state law crimes] which is chargeable under State law”; (B) “any act which is indictable under any of the following provisions of title 18, United States Code … section 1341 (relating to mail fraud), section 1343 (relating to wire fraud)”; (C) “any act which is indictable under [labor statutes]”; (D) “any offense involving fraud connected with a case under title 11 [bankruptcy], fraud in the sale of securities, or [drug offenses], punishable under any law of the United States”; and (E) “any act which is indictable under the Currency and Foreign Transactions Reporting Act.”
6 See, e.g., Carpenter v. United States, 484 U.S. 19, 25 (1987); Schmuck v. United States, 109 S.Ct. 1443, 1453 (1989).
7 Pechiney/Trefimetaux and Mitsui both challenged the RICO allegations on the separate ground that Gould had failed to comply with Rule 9(b) of the Federal Rules of Civil Procedure in pleading fraud with particularity. The district court dismissed the RICO claims as to all defendants because the complaint failed to specify the time, place and contents of the material misrepresentations or omissions upon which Gould relied in alleging a scheme to defraud, as it interpreted the Sixth Circuit precedents to require. See Bender v. Southland Corp., 749 F.2d 1205, 1215–16 (6th Cir. 1984).
8 28 U.S.C. §1603(a)–(b) (1988).
9 See H.R. Rep. No. 1487, 94th Cong., 2d Sess. (1976), reprinted in 1976 U.S. Code Cong. & Admin. News 6604, 6610.
10 109 S.Ct. 683, 688 (1989).
11 Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 488 (1985).
12 750 F.Supp. 838, 844.
13 In a decision dated October 12, 1990, the district court held that Gould’s non-RICO claims were based on commercial activity by Pechiney/Trefimetaux having sufficient contact with the United States to impose subject matter jurisdiction under the first clause of 28 U.S.C. § 1605(a)(2). The court also found that personal jurisdiction existed over the French defendants.