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New plea by tobacco company

In a new plea that U.S. law should not reach overseas, British American Tobacco Co. on Friday asked the Supreme Court to order a second look by lower courts at the federal anti-racketeering law’s scope. That law was used in the federal government’s massive lawsuit against nearly the entire tobacco industry, including the British firm — a case the Supreme Court refused to hear, denying seven separate appeals last month. The petition for rehearing (found here) is based mainly on the Supreme Court’s broad ruling on June 24 against the overseas reach of U.S. securities law (Morrison v. National Australia Bank, 08-1191).

While conceding that the Court seldom grants rehearing to review a case once denied, the petition said it was “far more common” for the Court to agree to rehear a denied case and then set aside a lower court ruling so that “an intervening decision” by the Justices can be taken into account. The D.C. Circuit Court, it argued, should be told to “consider Morrison‘s impact in the first instance.” In upholding all key parts of a District Court ruling against the industry, BATCo’s lawyers contended, the Circuit Court created a “flawed ‘exception’ to the traditional presumption against extra-territoriality” of a U.S. law based on the alleged “effects” on the U.S. of overseas conduct.

“The D.C. Circuit Court held that RICO [the anti-racketeering law] could properly be applied to BATCo’s foreign conduct based on that novel theory, and on its twin conclusions that the ‘effects’ test could be properly transplanted from securities and antitrust law to RICO and that a severely watered-down version of the ‘effects’ test is satisfied here,” the petition said. The Morrison decision, it added, directly rejected that test for securities law, thus undercutting the Circuit Court’s conclusion about BATCo.

“Not only does Morrison invalidate the rationales underlying the D.C. Circuit’s extraterritoriality decision, but it also repudiates the legal authorities on which the lower courts relied,” the petition contended. “In light of Morrison, there is a virtual certainty — far more than merely the requisite ‘reasonable probability’ — that the D.C. Circuit would reject the premises underlying its decision to use the ‘effects’ test (a) to measure RICO’s extraterritorial reach, and more generally (b) to disregard the presumption against extraterritorial application of U.S. laws.”

Within the wording of the RICO law, how that law’s various parts fit together, and the history of its passage by Congress, there is “substantial evidence…that Congress did not intend RICO to extend beyond the Nation’s borders….Morrison reaffirmed that domestic conduct must be the ‘focus of congressional concern’ for it to render an otherwise extraterritorial application of a U.S. statute domestic in nature.”

Under the Supreme Court’s Rule 44, the Justice Department will not be allowed to respond to the rehearing petition unless the Court asked it to do so.  And, the Rule adds, “in the absence of extraordinary circumstances,” a rehearing petition will not be granted if no response has been requested.  Amicus briefs also will not be accepted on such a plea.

In the government’s RICO case against the cigarette-making companies, it charged that the firms had engaged — for more than four decades — in a scheme to defraud the American consuming public by denying and covering up the health hazards of smoking. As the case was finally resolved in many respects in the government’s favor, it was based solely on the RICO statute.  The Justice Department, anti-smoking groups, and most of the major cigarette companies had sought review by the Justices; all were denied (as usual, without comment) on June 28.  The one key part of the Department’s case that failed in the D.C. Circuit was a plea to force the industry to forfeit some $280 billion in profits it had made since 1971.  The Supreme Court, in fact, had refused twice to hear a government appeal on that point — once when the case was in the midst of trial, and then again in the June 28 denials.