March 21, 2016 / 8:00 PM / 3 years ago

U.S. top court weighs racketeering law's scope in R.J. Reynolds case

WASHINGTON (Reuters) - The U.S. Supreme Court on Monday wrestled with whether a lawsuit filed by European Union countries accusing cigarette maker R.J. Reynolds of running a global money-laundering scheme involving narcotics smuggling into Europe can move forward.

An R.J. Reynolds sign is seen outside the 1-million-square-foot cigarette manufacturing facility in Tobaccoville, North Carolina May 23, 2014. REUTERS/Chris Keane

The case focuses on the international scope of a law called the Racketeer Influenced and Corrupt Organizations Act, or RICO, that is used to target illegal conspiracies including organized crime. The justices must decide to what extent, if any, the law can be applied to conduct overseas.

The EU countries accused R.J. Reynolds in 2002 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 the proceeds by importers to buy R.J. Reynolds cigarettes.

It was unclear how the court will rule based on Monday’s oral argument, with some justices questioning the potential broad international reach of the racketeering law.

Chief Justice John Roberts said the law, which covers both criminal and civil claims, would give the government “extremely strong prosecutorial reach” in criminal cases, which could cause friction with other countries.

Other justices noted that the U.S. Congress intended the law to cover certain international actions, especially involving foreign militant networks that target Americans.

Justice Elena Kagan noted the law was amended after the Sept. 11, 2001 attacks on the United States by al Qaeda Islamic militants.

“I mean, don’t you think that what was in Congress’ heads at that moment in time was foreign terrorist organizations committing terrorist conduct on foreign soil?” Kagan asked.

The Obama administration has taken a compromise position. Although it disagrees with a 2014 ruling by the 2nd U.S. Circuit Court of Appeals in New York in favor of the EU and 26 member states, it sees some circumstances in which the racketeering law can apply to overseas conduct.

The administration said a plaintiff in a civil case like the EU must be able to allege an injury that took place in the United States in order for its lawsuit to move forward. The administration has asked the high court to send the case back to lower courts for further proceedings on that point.

Winston-Salem, North Carolina-based R.J. Reynolds is part of Reynolds American Inc, the second-largest U.S. tobacco company with brands including Camel and Pall Mall.

Only seven justices heard arguments in the case. Justice Antonin Scalia died in February, while Justice Sonia Sotomayor recused herself.

A ruling is due by the end of June.

The case is RJR Nabisco v. European Community, U.S. Supreme Court, No. 15-138.

Reporting by Lawrence Hurley; Editing by Will Dunham

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