RAI Reynolds American (delisted)

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)

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