Thursday, July 29, 2010

Tobacco Firm Asks High Court to Reconsider Review of Extraterritorial Reach of RICO

This posting was written by Mark Engstrom, Editor of CCH RICO Business Disputes Guide.

British American Tobacco (Investments) Limited (BATCo) has petitioned the U.S. Supreme Court for rehearing of its June 28 denial of certiorari in British American Tobacco (Investments) Limited v. U.S. (Docket No. 09-980). BATCo asked the Court to consider the extraterritorial reach of RICO in light of its June 24 decision in Morrison v. National Australia Bank Ltd. (Docket No. 08-1191).

In Morrison, the Court held that the “conduct” and “effects” tests for determining the extraterritorial reach of a statute could not be used to provide a cause of action for foreign plaintiffs suing under sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 (and under SEC Rule 10b-5) for alleged misconduct in connection with securities traded on foreign exchanges.

Presumption Against Extraterritoriality

In U.S. v. Philip Morris USA Inc., CCH RICO Business Disputes Guide ¶11,688, the D.C. Circuit affirmed a finding that six tobacco companies were liable for conducting the affairs of a RICO enterprise, through a pattern of mail and wire fraud, in a scheme to deceive consumers about the adverse health effects of cigarette smoking.

According to BATCo, the D.C. Circuit created a “flawed exception” to the traditional presumption against extraterritoriality when it held that BATCO’s foreign activities were subject to RICO claims because the alleged misconduct had “substantial, direct, and foreseeable effects in the United States.”

BATCo asked the Supreme Court to decide whether the federal appellate court had: correctly held that the traditional presumption against extraterritoriality was irrelevant to the question of whether a statute was intended to reach a foreign corporation’s “wholly foreign conduct” when that conduct has allegedly had a direct and substantial domestic effect.

It also asked the Court to determine whether the appellate court had improperly:

(1) Ignored the presumption against extraterritoriality and affirmative evidence that Congress never intended RICO to apply extraterritorially;

(2) Borrowed the “ill-suited” effects test from federal securities and antitrust cases to determine the territorial reach of RICO;

(3) Approved a “watered-down” version of the effects test; and

(4) Relied on the domestic effects of the U.S. conduct of other co-defendants and of the overall alleged RICO scheme.

Text of the petition for rehearing in British American Tobacco (Investments) Limited v. United States (Docket No. 09-980) appears here.

Further information regarding BATCo’s original petition for Supreme Court review appears in a March 1, 2010 posting on Trade Regulation Talk.

No comments: