Supremes Put End to EU’s Tobacco Conspiracy Suit

     WASHINGTON (CN) — The Supreme Court on Monday cut the legs off a lawsuit in which the EU accused tobacco giant R.J. Reynolds of running a drug-smuggling ring.
     With the justices split on party lines over the issue of proving domestic injury, the conservatives edged out a narrow majority because Justice Sonia Sotomayor did not participate in the case.
     Had she participated and aligned with the other liberal justices, the court would have failed to disturb the lower court’s ruling with a 4-4 split, thus advancing the EU’s case against R.J. Reynolds.
     The European Community, a group with 28 member states since 2013, brought the underlying suit in New York over a decade ago — saying RJR Nabisco executives bribed Colombian border guards, misled U.S. customs officials and shipped cigarettes through Panama to exploit secrecy laws that shield illicit dealings from government oversight.
     Though U.S. District Judge Nicholas Garaufis decried the case as “a structureless morass of allegations, devoid of any sequential description of events,” he dismissed the case in 2009 upon purely procedural grounds.
     Garaufis ruled that the European Community lacked standing to accuse R.J. Reynolds of violating federal anti-racketeering law because the RICO statute could not be applied outside the United States.
     R.J. Reynolds took the case to the U.S. Supreme Court after a three-judge panel with the Second Circuit breathed new life into the case.
     Noting the EU’s lawsuit rests on “RICO’s private right of action,” which is contained in a law called Section 1964(c), the justices reversed for the tobacco giant Monday.
     Because that law “does not overcome the presumption against extraterritoriality,” according to the ruling, the EU would have to “allege and prove a domestic injury to its business or property.”
     “Section 1964(c) requires a civil RICO plaintiff to allege and prove a domestic injury to business or property and does not allow recovery for foreign injuries,” Justice Samuel Alito wrote for the majority. “The application of this rule in any given case will not always be self-evident, as disputes may arise as to whether a particular alleged injury is ‘foreign’ or ‘domestic.’ But we need not concern ourselves with that question in this case. As this case was being briefed before this court, respondents filed a stipulation in the District Court waiving their damages claims for domestic injuries. The District Court accepted this waiver and dismissed those claims with prejudice. Respondents’ remaining RICO damages claims therefore rest entirely on injury suffered abroad and must be dismissed.”
     While the chief justice joined Alito’s opinion in full, as did Justices Anthony Kennedy and Clarence Roberts, the court’s more left-leaning judges said they would have affirmed.
     “Denying [the EU] a remedy under RICO, the court today reads into §1964(c) a domestic-injury requirement for suits by private plaintiffs nowhere indicated in the statute’s text,” an opinion by Justice Ruth Bader Ginsburg says. “Correctly, the court imposes no such restriction on the United States when it initiates a civil suit under §1964(b). Unsupported by RICO’s text, inconsistent with its purposes, and unnecessary to protect the comity interests the court emphasizes, the domestic-injury requirement for private suits replaces Congress’ prescription with one of the court’s own invention. Because the court has no authority so to amend RICO, I dissent.”
     Justices Stephen Breyer and Elena Kagan joined Ginsburg’s opinion, but Justice Sotomayor took no part in the case, giving the conservatives the majority.
     In a separate dissent, Breyer blasted the majority for crediting the argument of the U.S. government in an amicus brief that “allowing recovery for foreign injuries in a civil RICO action … presents the … danger of international friction.”
     “The government does not provide examples, nor apparently has it consulted with foreign governments on the matter,” Breyer wrote. “By way of contrast, the European Community and 26 of its member states tell us ‘that the complaint in this case, which alleges that American corporations engaged in a pattern of racketeering activity that caused injury to respondents’ businesses and property, comports with limitations on prescriptive jurisdiction under international law and respects the dignity of foreign sovereigns.'”
     Uncle Sam’s “contrary view” thus does not merit controlling weight, Breyer said.

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