(CN) - The European Community's lawsuit accusing tobacco giant RJR Nabisco of laundering money through international drug cartels appeared to divide the Supreme Court along traditional partisan lines on Monday.
For roughly 14 years, dozens of European countries have vigorously fought to advance a federal lawsuit in New York that blames RJR and its subsidiaries for a globe-hopping conspiracy involving bribery, border fraud and money laundering.
The most recent version of the lawsuit alleges that R.J. Reynolds 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.
The third dismissal of the lawsuit by Brooklyn-based U.S. District Judge Nicholas Garaufis in 2009 derided the countries' filing as "a structureless morass of allegations, devoid of any sequential description of events."
Despite that blistering critique, Garaufis grounded his decision on a more procedural finding that the federal anti-racketeering statute could not be applied outside the United States.
The Second Circuit reversed that finding two years ago, noting that the RICO statute includes two clauses that apply only to conduct abroad.
One section criminalizes killing, or attempted killing, of "a national of the United States, while such national is outside the United States," and another prohibits "engaging in illicit sexual conduct in foreign places."
"Indeed, it is hard to imagine why Congress would incorporate these statutes as RICO predicates if RICO could never have extraterritorial application," Judge Pierre Leval wrote for the unanimous panel.
The Supreme Court's more liberal wing appeared to agree with this assessment today, according to a 51-page transcript from the hearing.
Justice Ruth Bader Ginsburg prodded Jones Day attorney Gregory Katsas, representing RJ Reynolds, about the law's application to a foreign terrorist organization that "operates only abroad, but it repeatedly cuts off the heads of U.S. citizens."
Katsas replied that criminal law, rather than the civil RICO statute, would cover that conduct.
"I think the - the underlying acts would be criminally prosecuted and could be punished very severely," he said.
Rather than punishing a "pattern" of crimes, RICO is meant to target the "infiltration and corruption of the enterprise," the lawyer added.
Justice Elana Kagan called it a "fool's errand" to try to parse such a distinction.
"I mean, the whole point of RICO is that it does both," she said. "It says 'a pattern of conduct,' and it links that pattern of conduct to the enterprise."
Federal anti-racketeering law traces its origins to efforts to clamp down on organized crime.
Hearkening back to this history, Justice Ginsburg asked whether the statute would apply if a New York-based Mafia family committed a series of violent crimes, but not if a Sicilian mob family did so.
Katsas agreed that would be this distinction would apply.
Assistant U.S. Solicitor General Elaine Goldenberg, who argued as a friend-of-the-court for the Department of State, noted that Congress voted to expand RICO to apply abroad after the Sept. 11 attacks.
Congress found that "just prosecuting the crime itself," as RJ Reynolds reads the law, "was not a strong enough tool for the government," she said.
For Chief Justice John Roberts, the strength of the RICO statute meant the court should approach it with caution.
"It obviously provides the government with extremely strong prosecutorial reach and penalties, far beyond what the substantive elements do," he said. "And I'm wondering why that shouldn't cause us to be more concerned with respect to the comity interests that are at stake when you're talking about extraterritorial applicability."
David Frederick, an attorney with Kellogg Huber representing the European countries, framed the jurisdictional controversy as a commonsense case "against a United States corporation for the actions it committed in the United States and from the United States, that had effects in Europe."
"This was a completely logical and natural place for this case to be brought," he added.
Unconvinced, Justice Samuel Alito interrupted: "Why is that?"
"Isn't it rather strange that countries in Europe, member states of the European Union, are suing in the courts of the United States for injuries sustained to their business interests in Europe?" Alito continued. "Why didn't they just sue in their own courts?"
Frederick noted that RJ Reynolds has no subsidiary in Europe, so the lawsuit would suffer jurisdictional questions.
Ginsberg wondered whether the countries simply wanted a bigger payday here.
"Candidly, is [that] why is the EU suing here?" she asked. "Does it have something to do with no one else having a treble damage provision like RICO?"
Under RICO, a successful plaintiff can triple any cash award against a defendant.
Frederick denied that this was a motive.
"In fact, if you want me to stipulate that we will not accept treble damages, I've been authorized by my clients to say that that is not what we are seeking here," he said. "What we are seeking here is a situation where an American company is operating through largely illegal cutouts and middlemen and organized criminal operators in Europe and in the Mediterranean and violating and affecting European enterprises."
In his rebuttal for the company, Katsos warned that the ruling could have far-reaching repercussions.
"The United States is the party that has to live with the consequences of your decision one way or the other," he said.
The court reserved decision on the case shortly after noon.
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.