High court nixes European suit against R.J. Reynolds

AP News
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Posted: Jun 20, 2016 2:35 PM

WASHINGTON (AP) — The Supreme Court ruled Monday that the European Union can't pursue a federal racketeering lawsuit accusing tobacco giant R.J. Reynolds of taking part in a global money-laundering scheme that sponsored cigarette-smuggling in Europe.

In a 4-3 ruling, the justices said the EU has no right to sue in U.S. courts because racketeering laws don't allow recovery for injuries occurring outside the United States.

The decision is a major win for the tobacco company, which has been fighting the allegations for more than a decade. The case was closely watched by multinational corporations concerned about the threat of increased exposure to U.S. litigation based on their actions abroad.

The high court sent the case back to lower courts, where RJR still faces other state law claims.

The EU and 26 of its member states alleged that RJR coordinated the scheme with the help of Colombian and Russian criminal groups and laundered money through New York-based financial institutions.

The EU claims the company's actions hurt the economies of EU member nations by depriving governments of tax revenues.

Writing for the court, Justice Samuel Alito said nothing in the civil racketeering laws indicates that Congress intended to create a private right of action for foreign injuries.

Alito said applying U.S. remedies to the case would "unjustifiably" allow European citizens to bypass the legal system in their own countries where damage awards are less generous. Plaintiffs who bring civil racketeering lawsuits in U.S. courts are eligible for triple damages.

"Allowing foreign investors to pursue private suits in the United States, we are told, would upset that delicate balance and offend the sovereign interests of foreign nations," Alito said. "There is a potential for international controversy that militates against recognizing foreign injury claims without clear direction from Congress."

Alito was joined by Chief Justice John Roberts and Justices Anthony Kennedy and Clarence Thomas.

A federal judge threw out the claims but a federal appeals court ruled racketeering laws can apply to crimes committed in foreign countries.

Prosecutors alleged that RJR directed and controlled the scheme that involved laundering money through New York-based financial institutions.

A federal judge dismissed the claims, but the case was revived last year after a three-judge panel of the 2nd U.S. Circuit Court of Appeals ruled that racketeering laws can apply to crimes committed in foreign countries.

Spokesman David Howard said the company is pleased with the ruling and "has long believed that the EU's claims are legally and factually baseless."

Justice Ruth Bader Ginsburg dissented, saying the text of the law places no limitation on where the injury must occur. She was joined by Justices Stephen Breyer and Elena Kagan.

Justice Sonia Sotomayor took no part in considering the case. She had previously served on the appeals court and had written a 2004 opinion in the case at an earlier stage of the litigation.