Financial Times / DPK in the News

June 20, 2016

Multinational relief in Supreme Court ruling on laundering claims


The Supreme Court delivered a big win for RJR Nabisco in its long-running legal fight with the European Community, ruling on Monday that a US anti-racketeering law could not be used to justify civil lawsuits alleging criminal behaviour outside the United States.The 4-3 decision settles a protracted battle between the EC and the tobacco maker and reverses an appeals court ruling that multinational corporations had feared would open the door to a flood of American lawsuits regarding their global activities.

 

Chief Justice John Roberts and Justices Anthony Kennedy and Clarence Thomas joined the opinion by Justice Samuel Alito. Justices Elena Kagan, Stephen Breyer and Ruth Ginsburg dissented.

 

The EC sued RJR Nabisco alleging that the company had engaged in a sprawling money laundering and cigarette smuggling enterprise for more than two decades. The EC relied upon the Racketeer Influenced and Corrupt Organizations (Rico) Act, a 1970 law designed to battle the mafia with both civil and criminal penalties, including triple financial damages. 

 

The case attracted enormous attention from multinational corporations, which feared a wave of civil lawsuits targeting their actions in non-US markets. The National Foreign Trade Council, representing more than 300 companies such as Google, Walmart, Ford and Chevron, had warned that allowing civil Rico suits for overseas actions “would substantially increase litigation exposure” for companies, especially financial institutions.

 

Those fears have now been put to rest. “It’s the end of the road,” said Cory Andrews, chief litigation counsel for the Washington Legal Foundation, which supported the tobacco maker in a friend-of-the-court brief.

 

The court ruled that while the crimes covered by the act, such as money laundering or mail fraud, could occur outside the US, only plaintiffs who could “prove a domestic injury” would have standing to sue. “Unless you can show injury in the US, you have no claim,” said Tom Dewey, a partner in Dewey, Pegno & Kramarsky LLP in New York.

 

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