Supreme Court rules for R.J. Reynolds in racketeering case

Reuters News
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Posted: Jun 20, 2016 10:15 AM

By Lawrence Hurley

WASHINGTON (Reuters) - The U.S. Supreme Court on Monday limited the scope of federal racketeering law, handing R.J. Reynolds a victory in its effort to fend off a lawsuit by European Union nations accusing the cigarette maker of running a global money-laundering scheme involving narcotics smuggling into Europe.

The justices in their 4-3 ruling reversed a lower-court ruling in favor of the EU and 26 member states, saying that the racketeering law does not extend to claims concerning conduct that takes place overseas. The court sent the case back for further proceedings on some other claims in the lawsuit.

The case focused on whether the Racketeer Influenced and Corrupt Organizations Act (RICO), a U.S. law used to target illegal conspiracies including organized crime, applied to overseas conduct.

Winston-Salem, North Carolina-based R.J. Reynolds is part of Reynolds American Inc <RAI.N>, the second-largest U.S. tobacco company with brands including Camel and Pall Mall.

The EU countries accused R.J. Reynolds in 2002 of directing a decade-long scheme from the United States that involved the smuggling of illegal narcotics into Europe by Colombian and Russian crime groups, the laundering of proceeds from the sale of those drugs, and the use of the proceeds by importers to buy R.J. Reynolds cigarettes.

The 2nd U.S. Circuit Court of Appeals in New York ruled in 2014 that the case brought by the EU and 26 member states could go forward.

The Obama administration took a compromise position. Although it disagreed with the 2nd Circuit ruling, it said it saw some circumstances in which the racketeering law could apply to conduct abroad.

The administration said a plaintiff in a civil case like the EU must be able to allege an injury that took place in the United States in order for its lawsuit to move forward. The administration had asked the high court to send the case back to lower courts for further proceedings on that point.

Only seven justices heard the March 21 oral arguments in the case. Justice Antonin Scalia died in February, while Justice Sonia Sotomayor recused herself.

The case is RJR Nabisco v. European Community, U.S. Supreme Court, No. 15-138.

(Reporting by Lawrence Hurley; Editing by Will Dunham)