US: Federal Government Sides with Reynolds in RICO Case

Source from:  Winston-Salem Journal 12/25/2015

In a case of strange legal bedfellows, the U.S. Justice Department has filed an amicus brief on behalf of R.J. Reynolds Tobacco Co. in a case before the U.S. Supreme Court.

The brief was filed Friday by U.S. Solicitor General Donald Verrilli Jr.

The justices agreed on Oct. 1 to review a U.S. Court of Appeals ruling saying that the European Union and 26 of its member states were within their rights to sue in U.S. courts under federal racketeering laws.

The key element with U.S. legal implications is accusations that Reynolds and subsidiaries violated the Racketeer Influenced and Corrupt Organizations, or RICO, Act of 1970. RICO refers to the prosecution and defense of individuals who engage in organized crime.

The EU and the countries claim Reynolds sponsored cigarette smuggling in Europe as part of a global money-laundering scheme with organized crime groups. The lawsuit, initially filed in October 2002, alleges that Reynolds directed, managed and controlled a decade-long global money-laundering scheme with Colombian and Russian criminal organizations.

The EU and the 26 countries said they were deprived of tax revenue, including in the U.S. The complaint did not list a specific amount of compensatory, restitution and punitive damages.

The lawsuit was dismissed by a federal court judge in Brooklyn in May 2011.

However, in April 2014, a three-member panel of the U.S. Court of Appeals for the 2nd Circuit in New York ruled in favor of the EU and the countries. In April 2015, the full appeals court voted 8-5 to allow the lawsuit to proceed. Four dissenting judges warned that the court had reached a new and far-reaching interpretation of RICO "that finds little support in the history of the statute, its implementation, or the precedents of the Supreme Court."

Reynolds argues the appeals court decision "opens the door to a type of civil litigation that will adversely affect important American interests" in a way Congress did not authorize.

Verrilli said in his brief that Congress "clearly expressed its intention" to give RICO laws "limited extraterritorial reach." That includes a plaintiff having to prove that domestic injury occurred.

He said the appeals court "rejected any requirement that a defendant be 'associated with a domestic enterprise in order to sustain RICO liability.' "
"A private RICO suit seeking treble damages for a foreign injury has significant potential to cause international friction," Verrilli wrote.

"Accordingly, the bar for showing a clear congressional intent to allow private RICO actions on the basis of a foreign injury is high."

He said the cited section in the RICO law "gives no indication that Congress intended foreign injury to support a private RICO claim."
"Dismissal is therefore required absent a showing of domestic injury."

Verrilli recommended remanding the case "to evaluate the complaint in light of that requirement."

Reynolds spokeswoman Jane Seccombe said the company had no comment on the brief. Enditem