The U.S. Supreme Court on Monday dismissed a lawsuit filed by the European Union that claimed Reynolds American was violating the Racketeer Influenced and Corrupt Organizations Act (RICO) by selling cigarettes in Europe through organized crime groups.

Under the alleged scheme, drug traffickers smuggled narcotics into Europe and sold them for euros that — through transactions involving black-market money brokers, cigarette importers, and wholesalers — were used to pay for large shipments of the Winston-Salem, N.C.-based Reynold’s cigarettes into Europe, Justice Samuel Alito wrote in the majority opinion of the split decision.

The complaint alleged that Reynolds violated RICO by engaging in a pattern of racketeering activity that included numerous predicate acts of money laundering, material support to foreign terrorist organizations, mail fraud, wire fraud, and violations of the Travel Act, a federal criminal statute.

While a district court dismissed the case, the Court of Appeals in the Second Circuit reinstated it, ruling that certain predicates alleged in the case expressly “apply extraterritorially.”

“In denying rehearing, the court held further that RICO’s civil action does not require a domestic injury, but permits recovery for a foreign injury … ,” Justice Alioto wrote.

But the Supreme Court rejected that argument and threw out the case.

“Absent clearly expressed congressional intent to the contrary, federal laws will be construed to have only domestic application,” Alito wrote.

The justice added that entities alleging RICO violations must prove a domestic injury to business or property and does not allow recovery for foreign injuries.

“Respondents waived their domestic injury damages claims, so the District Court dismissed them with prejudice,” Alito wrote. “Their remaining RICO damages claims therefore rest entirely on injury suffered abroad and must be dismissed.”

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