Court Opinion

ID: 7006510
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:51:25.635764+00
Date Added: 2024-06-11T16:10:05.761845
License: Public Domain

CALABRESI, Circuit Judge
(dissenting).
On its face, and despite the considerable confusion created by defendants’ able arguments, the revenue rule has nothing to do with this case. As described by the relevant Restatement, the rule provides only that “[cjourts in the United States are not required to recognize or to enforce judgments for the collection of taxes, fines, or penalties rendered by the courts of other states.” Restatement (Third) of Foreign Relations Law § 483 (1987). The majority describes the rule in a similar fashion: “The revenue rule is a longstanding common law doctrine providing that courts of one sovereign will not enforce final tax judgments or unadjudicated tax claims of other sovereigns.” Majority Op. at 109. It is manifest that the suit before us in no way requires our courts to enforce foreign judgments or claims; it simply is an action for damages provided for and brought under federal law. Nevertheless, the majority invokes the revenue rule to bar the suit. Because I do not think the rule applies and because none of the possible rationales for the rule supports its extension to the facts in this case, I respectfully dissent.
The majority’s description of Canada’s suit makes clear that this action arises from a violation of a United States statute, namely the civil enforcement provision of RICO, 18 U.S.C. § 1964(c), which itself creates the cause of action. “Canada alleges that defendants violated RICO by ... repeated instances of mail fraud, 18 U.S.C. § 1341, and wire fraud, 18 U.S.C. § 1962(c). Second, Canada alleges a conspiracy, in violation of 18 U.S.C. § 1962(d), to violate subsections (a), (b) and (c) of section 1962.” Majority Op. at 107-08 (footnote omitted). The Canadian tax laws come into play only indirectly, as a factor to be used in the calculation of damages, and do so entirely because the RICO statute itself makes the Canadian laws relevant to that calculation. Thus RICO states that, in the calculation of damages, “any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit....” 18 U.S.C. § 1964(c). It follows that Canada, in suing for damages resulting from the violation of a United States statute, neither is seeking to have non-Canadian courts enforce Canadian judgments, laws, or policies, nor is basing this action on the violation of the Canadian statute.
Undaunted by this fact, the majority seeks to justify its position by undertaking an extended examination of the supposed *136functions served by the revenue rule, with the result that the rule is greatly expanded in its scope, and, indeed, would seemingly be applicable whenever a foreign country seeks to recover government funds.1 But in fact, the functions of the revenue rule either are not served at all by foreclosing this action or are furthered in ways that this Circuit has already held do not justify application of the revenue rule. See United States v. Pierce, 224 F.3d 158, 167 (2d Cir.2000); United States v. Trapilo, 130 F.3d 547, 552-53 (2d Cir.1997).
The majority cites three major bases for the revenue rule, each of which I shall examine in the context of the case before us.
I
The first argument has to do with a reluctance to permit, much less promote, extraterritorial effect of foreign laws. In this view, the revenue rule acts as a bar against the assertion of foreign sovereignty within domestic borders. This position probably represents the original basis for the rule.2 It is also the rationale given by Justice White dissenting in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964), in which he explained that “no country has an obligation to further the governmental interests of a foreign sovereign.” Id. at 448, 84 S.Ct. 923.
I have no argument with Justice White, and agree (a) that no country has this obligation and (b) that the determination of such an obligation (should this country desire to advance foreign interests) is not for the courts but for the legislative and executive branches. This concern for extra-territoriality, however, has no meaning whatever when what is enforced by imposing damages or penalties is, in fact, a domestic law, that is, a law enacted by the legislative and executive branches of our country.3 And, what Canada alleges in this suit is a violation of the RICO statute.
As a court, we have no obligation to further Canada’s sovereign interests. But we do have an obligation to further America’s sovereign interests. That is, we are bound to entertain suits brought under federal statutes, and to award the damages that such statutes establish. In enacting RICO and its civil enforcement provision, Congress chose to create this action. It follows that, by enacting RICO, our government has determined that this suit advances our own interests, and any collateral effect furthering the governmental interests of a foreign sovereign is, therefore, necessarily incidental. See Trapilo, 130 F.3d at 553 (“Whether our decision today indirectly assists our Canadian neighbors in keeping smugglers at bay or assists them in the collections of taxes, is not our Court’s concern.”)
II
The majority’s second argument supporting the rule relates to separation of *137powers, foreign policy, and court competency concerns. It focuses on the idea that enforcement of particular foreign laws by American courts may not reflect United States policy — and, in any event, does not represent that policy as formulated by an appropriate branch of government. But this concern is once again misplaced whenever the legislative and executive branches have created the cause of action. Under the circumstances, the courts cannot be said to be formulating foreign policy, they are simply implementing the policy established by the other branches.
An analogy to the enforcement of foreign judgments is apt. Generally speaking, foreign judgments are not directly enforceable in United States courts because of foreign policy and separation of powers concerns. See, e.g., Moore v. Mitchell, 30 F.2d 600, 604 (2d Cir.1929) (Hand, J., concurring). But, the moment treaties or laws are enacted that provide for the enforcement of certain foreign judgments, the situation changes. United States courts can thereafter enforce these judgments and must do so regardless of whether our foreign policy favors or disfavors the specific judgment before the court. Similarly, though foreign tax laws cannot be enforced directly, when American law renders an activity — including the violations of foreign tax laws — an American tort or crime, the issues of whether our foreign policy favors or disfavors the particular form of taxation involved or the choice of items to be taxed must disappear. As the Supreme Court has explained, the purpose of civil RICO is “not merely to compensate victims but to turn them into prosecutors, “private attorneys general,” dedicated to eliminating racketeering activity.” Rotella v. Wood, 528 U.S. 549, 557, 120 S.Ct. 1075, 145 L.Ed.2d 1047 (2000). “The aim is to divest the association of the fruits of its ill-gotten gains.” United States v. Turkette, 452 U.S. 576, 585, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981). To reject the application of civil RICO to the case at hand is to hamper this congressional objective.
Ill
The third argument relied on by the majority is, to my way of thinking, the only one that is at all germane. It was suggested by Judge Learned Hand in Moore, 30 F.2d at 604, and is based on the alleged difficulty involved in figuring out the meaning and significance of some foreign laws — especially foreign tax laws. As such, it is directly relevant to this suit, given the fact that, in the instant case, the damages to be assessed under RICO are to be calculated on the basis of the revenue that Canada has lost.
This rationale suggests that we should try to avoid determining the degree to which certain foreign laws have been violated. And, in this view, statutory interpretation of foreign laws is beyond the purview of the courts of this country — not because such interpretation involves extraterritoriality or because it infringes on the domain of other governmental bodies, but for the pragmatic reason that it is very complicated. This concern, in other words, suggests a practical obstacle to the suit before us because the suit, to calculate damages, requires just such an analysis. Cf.id.
Whatever the possible merits of this argument,4 this Circuit has rejected it. At *138least that is the lesson that I draw from United States v. Trapilo, 130 F.3d 547 (2d Cir.1997), and United States v. Pierce, 224 F.3d 158 (2d Cir.2000). Trapilo presented the question of whether a scheme (essentially identical to the one before us) to defraud the Canadian government of tax revenue is cognizable under the federal wire fraud statute, 18 U.S.C. § 1343. Trapilo, 130 F.3d at 548. We there held that “[t]he statute neither expressly, nor impliedly, precludes the prosecution of a scheme to defraud a foreign government of tax revenue, and the common law revenue rule, inapplicable to the instant case, provides no justification for departing from the plain meaning of the statute.” Id. at 551. But in Trapilo, because the statute prohibited schemes to defraud regardless of their success, we assumed that we could find a violation without delving into the intricacies of Canadian law. Id. at 552-53. As a result, we avoided confronting Judge Hand’s concerns.
In Pierce, however, a case involving essentially the same question, we addressed those concerns and necessarily rejected them. The Pierce court held that “[t]o prove the existence of a scheme to defraud the Canadian government the prosecution had to prove the existence of [the property] right.” Pierce, 224 F.3d at 165. That is, the court held that the prosecution had to prove the existence of a duty imposed by the Canadian government so that there would be a “property right — a right to revenue — of which the Canadian government could be defrauded.” Id. at 166. What is more, if a conviction is obtained— as Pierce clearly allows — the sentencing guidelines require that the sentence imposed be based on the amount of tax revenue lost.5 In other words, the guidelines make necessary precisely the same degree of involvement with, and interpretation of, Canadian law that the case before us entails. Pierce, Trapilo, and the guidelines mandate this degree of involvement in order to determine the existence of a RICO crime and the proper sentence for that crime (i.e., the criminal penalty). The instant case does so in order to determine the existence of a RICO civil action and to calculate the proper damages under that action (i.e., the civil penalty). •
As a result, I must conclude that the rationale for the revenue rule that is based on the desire to avoid analysis of foreign statutes has been effectively rejected by our court. Trapilo permitted a criminal charge to be brought for the very same underlying behavior as is involved in the case before us. Pierce required that we know in detail the nature of the foreign tax laws to make out that criminal charge. And, the sentencing guidelines make necessary that, after a conviction for actions like those charged here, the amount of revenue lost be calculated. If American courts can look to and examine the foreign *139statute for criminal RICO purposes, there is no reason why the same courts must be deemed incompetent to undertake an identical analysis in civil RICO cases. It follows that the majority’s third rationale for the revenue rule cannot, at least in this Circuit, provide support for applying the rule to this case.
In light of Pierce and Tra/pilo, the majority, understandably, tries to assert differences between civil and criminal RICO actions. But this approach founders in the face of the Supreme Court’s consistent refusal to treat criminal and civil RICO actions differently.6 It also fails because there is no basis in the revenue rule itself for treating criminal and civil cases differently.
Surprisingly, in trying to make a distinction between civil and criminal RICO cases, for revenue rule purposes, the majority states that it finds the First Circuit’s reasoning in United States v. Boots, 80 F.3d 580 (1996) “persuasive with respect to the present civil suit.” Majority Op. at 123. But in Boots, the First Circuit held that the revenue rule barred a criminal action involving deprivation of the tax revenue of a foreign nation. And, in its holding, the Boots court derided the civil-criminal distinction (purportedly based on the existence of prosecutorial discretion) that the majority seeks to use in this case. The Boots court noted that “[pjrosecutors, who operate within the executive branch, might of course be expected not to pursue wire fraud prosecutions based on smuggling schemes aimed at blatantly hostile countries, but whether conduct is criminal cannot be a determination left solely to prose-cutorial discretion.” Boots, 80 F.3d at 588. No, Boots did not, and could not, rest on a civil-criminal distinction (based on prosecu-torial discretion) that the Supreme Court has uniformly rejected. It relied, instead, for its prohibition of criminal RICO actions, on the very same Learned Hand rationale that we rejected in Pierce and Trapilo, two cases which, moreover, in re-*140jeeting that rationale, self-consciously declined to follow Boots. Pierce, 224 F.3d at 164; Trapilo, 130 F.3d at 549.
IV
In the end, all the arguments based on the revenue rule’s functions apply, if at all, with equal force in both the criminal and civil context. The first two have no meaning when the cause of action — whether criminal or civil — is based on American laws. The third — the desire to avoid interpretation of complex foreign laws — has little merit in the complex global economy. And it has, in any event, effectively been rejected in this circuit by Trafilo and Pierce because its rationale would as fully preclude criminal convictions followed by sentences based on Canada’s revenue losses, as it would civil suit damage awards that use those losses as the basis for calculating the civil sanctions.7
All that being said, I fully share the majority’s concerns that applying civil RICO to violations of foreign tax laws may be harmful to American trade interests and to American companies doing business abroad. And, I do not deny that the absence in civil cases of prosecutorial discretion removes one possible means by which such American companies can avoid domestic sanctions for some foreign misdeeds that many here might not wish to punish. But, this problem is in no way limited to, or especially severe with respect to, behavior that might be insulated from punishment through a revivification and expansion of the revenue rule. The problem derives, instead, from the extraordinary scope of the RICO statute (the wisdom of whose breadth one may well doubt),8 and from the Supreme Court’s repeated unwillingness to distinguish between civil and criminal RICO, thereby declining to make use of prosecutorial discretion as a way of limiting RICO’s breadth.
In this respect, I note my own discomfort with various aspects of RICO, and especially of civil RICO. I would not be displeased if the Supreme Court, faced with the possible effects of civil RICO in a case like this one, were to retreat from its insistence on an identical scope for civil and criminal RICO. Similarly, I would welcome a reconsideration by Congress of how far civil RICO ought to go.9 As a Court of Appeals judge, I cannot, however, join an opinion that applies an old and dubious common law rule, in ways that have nothing to do with its roots or rationales, in order to limit an act of Congress that the Supreme Court has repeatedly applied in the broadest possible ways.10
*141For these reasons, I, regretfully and respectfully, dissent.

. See Majority Op. at 111-12.

. It is unlikely that the rationale applies even when the domestic law is a domestic common law rule — i.e. state common law fraud. It certainly does not apply when the domestic law being enforced by our courts is both statutory and federal.

. The argument is, to put it mildly, dubious in a global economy, which requires a great amount of interpretation of foreign laws. E.g., Trapilo, 130 F.3d at 550 n. 4 ("In an age when virtually all states impose and collect taxes and when instantaneous transfer of assets can be easily arranged, the rationale for not recognizing or enforcing tax judgments is *138largely obsolete.” (quoting Restatement § 483)); Banco Frances e Brasileiro S.A. v. Doe, 36 N.Y.2d 592, 370 N.Y.S.2d 534, 538, 331 N.E.2d 502 (1975) (commenting that "much doubt has been expressed that the reasons advanced for the rule, if ever valid, remain so ... in light of the economic interdependence of all nations ....”) cert. denied, 423 U.S. 867, 96 S.Ct. 129, 46 L.Ed.2d 96 (1975). See also Roger J. Miner, The Reception of Foreign Law in the U.S. Federal Courts, 43 Am. J. Comp. L. 581, 586 (1995) (decrying the reluctance of federal courts to interpret foreign law in a global economy and stating that “federal courts have shown a commendable ability to get their hands around foreign law when fully briefed on the issues”).

. Under the sentencing guidelines, the offense level will usually be determined by the offense level of the underlying conduct. U.S.S.G. § 2E 1.1. If, as here, the underlying conduct is wire fraud, the offense level increases based on the amount of money lost. U.S.S.G. § 2F1.1.

. The Court made clear that it would not interpret civil RICO narrowly in Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985). The Court noted that its broad interpretation of civil RICO "is amply supported by our prior cases and the general principles surrounding the statute. ... This is the lesson not only of Congress's self-consciously expansive language and overall approach, ... but also of its express admonition that RICO is to ‘be literally construed to effectuate its remedial purposes.'" Id. at 497-98, 105 S.Ct. 3275 (citation omitted) (quoting Pub.L. 91-452 § 904(a), 84 Stat. 947). The Court further explained: "The statute's 'remedial purposes’ are nowhere more evident than in the provision of a private action for those injured by racketeering activity.... RICO was an aggressive initiative to supplement old remedies and develop new methods for fighting crime.... While few of the legislative statements about novel remedies and attacking crime on all fronts ... were made with direct reference to § 1964(c), it is in this spirit that all of the Act’s provisions should be read.” Id. at 498, 105 S.Ct. 3275 (citations omitted). The Court noted the concern of the Court of Appeals over the uses to which civil RICO was being put but explained that these uses are "hardly a sufficient reason for assuming that the provision is being misconstrued.” Id. at 499, 105 S.Ct. 3275The Court stressed the expansive take it had on civil RICO by noting: '[T]he fact that RICO has been applied in situations not expressly anticipated by Congress does not demonstrate ambiguity. It demonstrates breadth.’ ” Id. (quoting Haroco, Inc. v. Am. Nat’l Bank & Trust Co. of Chi., 747 F.2d 384, 398 (7th Cir.1984) (alteration in original)). See also, e.g., H.J. Inc. v. Northwestern Bell Tel., Co., 492 U.S. 229, 236, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989) (commenting that the breadth of the predicate offenses and Congress’s failure to interpret the term "pattern” in the statute applies to criminal and civil applications of the Act); Sedima, 473 U.S. at 493, 105 S.Ct. 3275 (rejecting a restrictive interpretation of § 1964(c) that would have made a criminal conviction a prerequisite for a civil RICO suit).

. Notably in both the civil and criminal context, the lost tax revenue does not itself constitute the penalty exacted. Instead, the fine, jail time, or damages assessed simply use the lost revenue as a factor to be employed — after appropriate multiplication, etc. — to determine the size of the civil or criminal penalties to be imposed.

. As the Supreme Court has noted, the civil and criminal remedies taken together mean that "RICO provides for drastic remedies.” H.J. Inc., 492 U.S. at 233, 109 S.Ct. 2893.

. In support of its holding that civil RICO suits against "legitimate” business enterprises were permissible in addition to those brought against organized crime organizations, the Supreme Court stated: "Yet this defect — if defect it is — is inherent in the statute as written, and its correction must lie with Congress. It is not for the judiciary to eliminate the private action in situations where Congress has provided it....” Sedima, 473 U.S. at 499-500, 105 S.Ct. 3275.

.The majority characterizes the issue in this case as whether Congress intended to abrogate the revenue rule when it passed RICO. As is apparent from my dissent, I view the issue differently. For me, the question is whether Congress, in RICO, created a cause of action giving rise to damages, and did so *141without regard to the existence of the revenue rule.