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Justices Side With R.J. Reynolds in RICO Case Supreme Court Sides With R.J. Reynolds in RICO Case
(about 4 hours later)
WASHINGTON — The Supreme Court on Monday sided with the R.J. Reynolds Tobacco Company in a lawsuit filed by European countries accusing it of complicity in an international money laundering scheme.WASHINGTON — The Supreme Court on Monday sided with the R.J. Reynolds Tobacco Company in a lawsuit filed by European countries accusing it of complicity in an international money laundering scheme.
The court, by a 4-to-3 vote, found that the company could not be sued under the federal Racketeer Influenced and Corrupt Organizations Act, or RICO, over its conduct abroad.The court, by a 4-to-3 vote, found that the company could not be sued under the federal Racketeer Influenced and Corrupt Organizations Act, or RICO, over its conduct abroad.
The case, RJR Nabisco Inc. v. The European Community, No. 15-138, was brought by the European Union and 26 of its member states. They accused RJR Nabisco and several associated companies of being part of a sprawling cigarette smuggling enterprise that deprived them of billions of dollars in customs and tax revenues.The case, RJR Nabisco Inc. v. The European Community, No. 15-138, was brought by the European Union and 26 of its member states. They accused RJR Nabisco and several associated companies of being part of a sprawling cigarette smuggling enterprise that deprived them of billions of dollars in customs and tax revenues.
Justice Samuel A. Alito Jr., writing for the majority, summarized the accusations against RJR Nabisco, which ceased operating as a united entity in 1999.Justice Samuel A. Alito Jr., writing for the majority, summarized the accusations against RJR Nabisco, which ceased operating as a united entity in 1999.
“Greatly simplified,” he wrote, “the complaint alleges a scheme in which Colombian and Russian drug traffickers smuggled narcotics into Europe and sold the drugs for euros that — through a series of transactions involving black-market money brokers, cigarette importers and wholesalers — were used to pay for large shipments of RJR cigarettes into Europe.“Greatly simplified,” he wrote, “the complaint alleges a scheme in which Colombian and Russian drug traffickers smuggled narcotics into Europe and sold the drugs for euros that — through a series of transactions involving black-market money brokers, cigarette importers and wholesalers — were used to pay for large shipments of RJR cigarettes into Europe.
“In other variations of this scheme, RJR allegedly dealt directly with drug traffickers and money launderers in South America and sold cigarettes to Iraq in violation of international sanctions,” Justice Alito added. “RJR is also said to have acquired Brown & Williamson Tobacco Corporation for the purpose of expanding these illegal activities.”“In other variations of this scheme, RJR allegedly dealt directly with drug traffickers and money launderers in South America and sold cigarettes to Iraq in violation of international sanctions,” Justice Alito added. “RJR is also said to have acquired Brown & Williamson Tobacco Corporation for the purpose of expanding these illegal activities.”
The European Union filed the case about 15 years ago, and R. J. Reynolds said at the time that any suggestion that it had been involved in smuggling was untrue.The European Union filed the case about 15 years ago, and R. J. Reynolds said at the time that any suggestion that it had been involved in smuggling was untrue.
In 2014, a three-judge panel of the United States Court of Appeals for the Second Circuit, in New York, allowed the case to proceed. The full court declined to rehear that decision by an 8-to-5 vote; dissenting judges asserted that the panel had been unfaithful to Supreme Court precedent.In 2014, a three-judge panel of the United States Court of Appeals for the Second Circuit, in New York, allowed the case to proceed. The full court declined to rehear that decision by an 8-to-5 vote; dissenting judges asserted that the panel had been unfaithful to Supreme Court precedent.
In general, the Supreme Court has said that a United States law should be presumed not to apply abroad unless Congress has clearly said it does. On subjects like securities fraud and human rights abuses, the court has limited the power of American courts to hear cases based on foreign activities.In general, the Supreme Court has said that a United States law should be presumed not to apply abroad unless Congress has clearly said it does. On subjects like securities fraud and human rights abuses, the court has limited the power of American courts to hear cases based on foreign activities.
Justice Alito said parts of the racketeering law overcame that presumption. The law requires proof of violations of underlying state and federal laws, he wrote, and at least some of those laws apply to conduct abroad. At least one applies only abroad, he wrote, referring to the crime of killing a United States national outside the United States.Justice Alito said parts of the racketeering law overcame that presumption. The law requires proof of violations of underlying state and federal laws, he wrote, and at least some of those laws apply to conduct abroad. At least one applies only abroad, he wrote, referring to the crime of killing a United States national outside the United States.
“Short of an explicit declaration,” Justice Alito wrote, “it is hard to imagine how Congress could have more clearly indicated that it intended RICO to have (some) extraterritorial effect. This unique structure makes RICO the rare statute that clearly evidences extraterritorial effect despite lacking an express statement of extraterritoriality.”“Short of an explicit declaration,” Justice Alito wrote, “it is hard to imagine how Congress could have more clearly indicated that it intended RICO to have (some) extraterritorial effect. This unique structure makes RICO the rare statute that clearly evidences extraterritorial effect despite lacking an express statement of extraterritoriality.”
All seven justices hearing the case agreed on that analysis. But they parted ways about whether the part of the racketeering law authorizing private civil suits, as opposed to ones brought by the United States government itself, applied to conduct abroad. The majority said no.All seven justices hearing the case agreed on that analysis. But they parted ways about whether the part of the racketeering law authorizing private civil suits, as opposed to ones brought by the United States government itself, applied to conduct abroad. The majority said no.
“It is not enough to say that a private right of action must reach abroad because the underlying law governs conduct in foreign countries,” Justice Alito wrote. “Something more is needed, and here it is absent.”“It is not enough to say that a private right of action must reach abroad because the underlying law governs conduct in foreign countries,” Justice Alito wrote. “Something more is needed, and here it is absent.”
“There is a potential for international controversy that militates against recognizing foreign injury claims without clear direction from Congress,” he added.“There is a potential for international controversy that militates against recognizing foreign injury claims without clear direction from Congress,” he added.
Chief Justice John G. Roberts Jr. and Justices Anthony M. Kennedy and Clarence Thomas joined the majority opinion. Justice Sonia Sotomayor, who sat on the Second Circuit before she joined the Supreme Court, recused herself from the case.Chief Justice John G. Roberts Jr. and Justices Anthony M. Kennedy and Clarence Thomas joined the majority opinion. Justice Sonia Sotomayor, who sat on the Second Circuit before she joined the Supreme Court, recused herself from the case.
In dissent, Justice Ruth Bader Ginsburg, joined by Justices Stephen G. Breyer and Elena Kagan, said the suit should have been allowed to proceed because of its ample connections to the United States.In dissent, Justice Ruth Bader Ginsburg, joined by Justices Stephen G. Breyer and Elena Kagan, said the suit should have been allowed to proceed because of its ample connections to the United States.
“All defendants are U.S. corporations, headquartered in the United States, charged with a pattern of racketeering activity directed and managed from the United States, involving conduct occurring in the United States,” Justice Ginsburg wrote, summarizing the complaint. “In short, this case has the United States written all over it.”“All defendants are U.S. corporations, headquartered in the United States, charged with a pattern of racketeering activity directed and managed from the United States, involving conduct occurring in the United States,” Justice Ginsburg wrote, summarizing the complaint. “In short, this case has the United States written all over it.”
She added that the majority had acted inconsistently by creating “a domestic-injury requirement for suits by private plaintiffs nowhere indicated in the statute’s text,” while imposing “no such restriction on the United States when it initiates a civil suit.”She added that the majority had acted inconsistently by creating “a domestic-injury requirement for suits by private plaintiffs nowhere indicated in the statute’s text,” while imposing “no such restriction on the United States when it initiates a civil suit.”
“Unsupported by RICO’s text, inconsistent with its purposes, and unnecessary to protect the comity interests the court emphasizes,” she added, “the domestic-injury requirement for private suits replaces Congress’s prescription with one of the court’s own invention.”“Unsupported by RICO’s text, inconsistent with its purposes, and unnecessary to protect the comity interests the court emphasizes,” she added, “the domestic-injury requirement for private suits replaces Congress’s prescription with one of the court’s own invention.”
Justice Ginsburg said the decision was as likely to exacerbate as to ease international tensions. “Making such litigation available to domestic but not foreign plaintiffs is hardly solicitous of international comity or respectful of foreign interests,” she wrote.Justice Ginsburg said the decision was as likely to exacerbate as to ease international tensions. “Making such litigation available to domestic but not foreign plaintiffs is hardly solicitous of international comity or respectful of foreign interests,” she wrote.