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UPDATE 1-US court allows EU money-laundering case vs RJ Reynolds
April 13, 2015 / 3:55 PM / 3 years ago

UPDATE 1-US court allows EU money-laundering case vs RJ Reynolds

(Adds background, details from dissents, case citation, byline)

By Jonathan Stempel

NEW YORK, April 13 (Reuters) - A sharply divided U.S. appeals court on Monday cleared the way for the European Union to pursue its lawsuit accusing R.J. Reynolds of running a global money-laundering scheme that involved drug and cigarette smuggling.

By an 8-5 vote that prompted four written dissents, the 2nd U.S. Circuit Court of Appeals in New York let stand an April 2014 ruling by a three-judge panel of the same court in favor of France, Germany, Italy and 23 other European countries.

These countries accused R.J. Reynolds of directing a decade-long scheme from the United States that involved the smuggling of illegal narcotics into Europe by Colombian and Russian crime groups, the laundering of proceeds from the sale of these drugs, and the use of these proceeds by importers to buy R.J. Reynolds cigarettes.

The European Union said this hurt its economies and legitimate markets, deprived member nations of tax revenue, and violated the Racketeer Influenced and Corrupt Organizations Act, a U.S. anti-racketeering law. The lawsuit began in 2002.

R.J. Reynolds is part of Reynolds American Inc, the 2nd-largest U.S. tobacco company, whose brands include Camel and Pall Mall. The Winston-Salem, North Carolina-based company is awaiting regulatory approval to buy rival Lorillard Inc.

Neither R.J. Reynolds nor its lawyers immediately responded to requests for comment. The company has called the lawsuit baseless.

A lawyer for the EU countries did not immediately respond to requests for comment.

The 2nd Circuit has been a leader in limiting the use of U.S. law to police foreign conduct, in the wake of a 2010 U.S. Supreme Court decision finding a presumption against doing so.

But the three-judge panel said that because some criminal laws underlying RICO involved foreign conduct, violations could provide a basis for punishment under that law.

It also said the U.S. Congress “unmistakably” intended RICO to cover R.J. Reynolds’ alleged conduct.

Circuit Judge José Cabranes, one of the five dissenters, called Monday’s “regrettable” decision “a case of Congress giving an inch and the panel taking a mile,” which wrongly opens the doors of U.S. courthouses to many civil RICO claims.

“If this decision remains undisturbed, the prevailing plaintiffs here, the European Community and its member states, will have achieved a pyrrhic victory,” he wrote. “Why? Because its citizens, natural and corporate, are among the likely targets of future RICO actions.”

The case is European Community v. RJR Nabisco Inc et al, 2nd U.S. Circuit Court of Appeals, No. 11-2475. (Editing by Chizu Nomiyama and Ted Botha)

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