R.J. Reynolds Case Won’t Face En Banc Review

MANHATTAN (CN) - A divided 2nd Circuit declined a request for an en banc hearing on claims that cigarette maker R.J. Reynolds is allegedly running an international drug- and cigarette-smuggling ring.

A three-judge panel of the circuit first ruled last April that RJR Nabisco must face claims by the union representing 26 European states that it allegedly runs a money-laundering plot for Columbian and Russian drug traffickers.

The 13 judges in the circuit then gathered to decide whether American racketeering laws had an international reach.

In an 8-5 decision Monday, they decided that it does.

U.S. Circuit Judge Peter W. Hall says the reexamination "reaffirmed the soundness of our conclusion."

He was joined by judges Robert A. Katzmann, Rosemary S. Pooler, Richard C. Wesley, Denny Chin, Raymond J. Lohier Jr., Susan L. Carney and Christopher F. Droney agreed.

Five judges dissented: Dennis Jacobs, Jose A. Cabranes, Reena Raggi, Debra Ann Livingston and Gerard E. Lynch. They penned four separate dissenting opinions.

Three of those judges found in April 2014 that "[b]y incorporating these statutes into RICO as predicate racketeering acts, Congress has clearly communicated its intention that RICO apply to extraterritorial conduct to the extent that extraterritorial conduct to the extent that extraterritorial violations of those statues serve as the basis for RICO liability."

The most recent question before them challenged the idea that American RICO laws had an international reach. The majority said yes.

"Some colleagues are troubled by the prospect of applying RICO to extraterritorial conduct, which they deem unwise," Hall wrote. "Whether this is wise or unwise is not the court's business when Congress has legislated clearly on the issue."

"That ends our inquiry," he wrote.

The European Community says the R.J. Reynolds bribed Columbian border guards, lied to U.S. customs officials and sold smokes through Panama to hide behind secrecy laws.

The lawsuit has been on three previous occasions, most recently by U.S. District Judge Nicholas Garaufis in 2009. He called it a "structureless morass of allegations, devoid of any sequential description of events."

In his dissent, Judge Jacobs worried that such a decision would face district courts with "vexing questions," that judges might face when determining the issue.

Judge Cabranes called the prevailing judge's decision "novel," and worried that their interpretation "will have a significant and long-term adverse impact" on future cases.

"If the decision remains undisturbed, the prevailing plaintiffs here .... will have achieved a pyrrhic victory, and one that the community's constituents will have cause to regret in the years ahead.

"Why? Because its citizens ... are among the likely targets of future RICO actions under the panel's interpretation of the statute," he wrote.

"This is a case of Congress giving an inch and the panel taking a mile," he wrote, adding that he worried that the "far-reaching" interpretation of the statute will spawn a "new litigation industry exposing business activities abroad to civil claims of 'racketeering,' and that will invite our courts to adjudicate civil RICO claims grounded on extraterritorial activities elsewhere in the world."

Judge Raggi noted that several courts have already found that American RICO laws do not apply to foreign soil, and encouraged an en banc hearing.

"I vote to grant that review because, like a number of my colleagues, I think the panel's treatment of RICO's extraterritorial application conflicts with controlling precedent," Raggi wrote.

She noted that the U.S. Supreme Court already decided against the extraterritorial application of any American law unless Congress specifically indicates such in its legislation.

Raggi continued: "whatever the purported indicator of extraterritoriality, it must be clearly and affirmatively signal Congress' intent for the statute to reach outside this country's borders."

Judge Lynch called for an en banc hearing to resolve "tension" on the issue that "should be resolved."

Lynch also called the question of extending RICO laws to reach foreign soul "an interesting conceptual question."

On Tuesday, R.J. Reynolds sided with the dissenting judges and called the lawsuit "baseless in both law and fact."

"We agree with the four dissenting opinions that this important issue warrants further review," a spokesman for the company said in a statement.

The European Community represents 26 different countries: Belgium, Finland; France, Greece, Germany, Italy, Luxembourg, The Netherlands, Portugal, Spain, Denmark, Czechoslovakia, Lithuania, Slovenia, Malta, Hungary, Ireland, Estonia, Bulgaria, Latvia, Poland, Austria, Sweden, Cyprus, Slovakia and Romania.

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