Supreme Court Rejects EU Lawsuit Against Reynolds American -- Update
June 20 2016 - 3:46PM
Dow Jones News
By Brent Kendall
WASHINGTON -- The U.S. Supreme Court on Monday threw out a
European Union lawsuit against Reynolds American Inc. that alleged
the company directed a money-laundering scheme involving cigarette
sales through organized crime groups.
The court, in a divided opinion by Justice Samuel Alito, said a
New York-based appeals court was incorrect when it allowed the
racketeering lawsuit to go forward in U.S. courts.
The EU had been attempting to pursue Reynolds and its
subsidiaries in U.S. courts for more than a decade. It and 26
member states alleged the cigarette maker engaged in "grave
misconduct" by participating in a money laundering cycle in which
criminal groups smuggled illegal narcotics into Europe and
laundered the resulting proceeds through illegal cigarette
purchases with Reynolds.
The EU argued the lawsuit was allowed because some of Reynolds'
alleged conduct took place in the U.S. and involved domestic
enterprises. It also argued Congress meant for U.S. racketeering
law to apply to overseas conduct in some circumstances.
Reynolds, which has denied the allegations, argued the EU was
improperly attempting to use the U.S. legal system to address
European matters.
Justice Alito in a 28-page ruling said Congress hasn't clearly
allowed for civil racketeering lawsuits that seek monetary damages
for harms suffered in foreign countries. Letting such cases proceed
could create "international friction," he wrote.
Justice Alito also noted that some of the same European
countries seeking to sue Reynolds have in past Supreme Court cases
urged the justices not to allow lawsuits in U.S. courts against
their corporations for events that occurred overseas. "We refuse to
adopt this double standard," he said.
The court split 4-3 along ideological lines on the central
holding in the case. Only seven justices considered the case
because Justice Sonia Sotomayor was recused. Justices don't usually
announce a reason for their recusals, but it is likely related to
her involvement in similar litigation as an appeals judge.
In dissent, Justice Ruth Bader Ginsburg said the lawsuit should
have been allowed, given the EU alleged Reynolds directed and
managed money-laundering conduct from its domestic locations. "In
short, this case has the United States written all over it,"
Justice Ginsburg said.
Jeff Raborn, vice president and assistant general counsel for
R.J. Reynolds Tobacco Company, said the company was pleased with
the ruling. "The company has long believed that the EU's claims are
legally and factually baseless," he said.
The EU didn't immediately respond to a request for comment.
Write to Brent Kendall at brent.kendall@wsj.com
(END) Dow Jones Newswires
June 20, 2016 15:31 ET (19:31 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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