Circuits, Supreme Court Justices, Split On Extraterritorial Reach

On October 10 the U.S. Supreme Court denied cert in Elbaz v. United States. The order preserves a decision of the Fourth Circuit which held that the wire fraud statute was applicable in a scheme to defraud investors that originated in Israel because it involved two emails and a phone call with residents of Maryland.

Circuits are split on the extraterritorial reach of the federal wire fraud statute, and extraterritorial reach in general, according to the Transnational Litigation Blog. Some circuits require that the use of U.S. wires be a “core component” of the scheme to defraud.

The Supreme Court recently denied cert in another extraterritoriality case, Laydon v. Cooperative Rabobank U.A, which questioned the geographic scope of the Commodity Exchange Act. That case raised the question (indirectly, according to TLB) whether the “transactional test” that the Supreme Court adopted in Morrison v. National Australia Bank for claims under the Securities Exchange Act is exclusive or whether it can be supplemented with other limits on extraterritoriality, another issue on which the circuits are divided.

The Court decided two extraterritorial reach cases last term, and the opinions revealed a split between Justices. In Yegiazaryan v. Smagin, a “context-specific” approach to the domestic injury requirement under civil RICO was adopted. Justice Sotomayor wrote for the majority and indicated openness to flexible standards. Justice Alito dissented.

In Abitron Austria GmbH v. Hectronic International, Inc., Alito wrote for the majority and hewed to a hardline version of the presumption against extraterritoriality. Sotomayor’s dissent argued for a less “myopic” approach.