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New plea on RICO’s reach

Lawyers for British American Tobacco Co., seeking a chance to overturn an anti-racketeering ruling against it, on Friday notified the Supreme Court of a new lower court ruling that bars the overseas reach of the Racketeer Influenced and Corrupt Organizations Act of 1970 — one of the main U.S. laws used to challenge business misconduct.  In a letter filed with the Court’s clerk, the attorneys attached the decision reached on Wednesday by U.S. District Judge Jed S. Rakoff in New York City in the case of Cedeno, et al., v. Intech Group, et al. (District docket 09-9716).

The letter was filed to further support BATCo’s petition for rehearing in British American Tobacco Ltd. v. U.S. (Supreme Court docket 09-980).  The plea is discussed in this blog post.  The Justices have not yet acted on the petition.

The British company’s rehearing plea, like Judge Rakoff’s ruling, is based on the Supreme Court’s June 24 decision in Morrison v. National Australia Bank (08-1191).  In the Cedeno case, Judge Rakoff concluded that the reasoning of Morrison — barring the overseas reach of a U.S. securities fraud law — applies fully to RICO.  A Second Circuit Court precedent that ruled the other way, the judge ruled, “is no longer good precedent in light of Morrison.”

In sending the Rakoff decision to the Supreme Court, BATCo’s Washington lawyers argued that it “has a direct bearing on BATCo’s pending petition for rehearing….Judge Rakoff has agreed with BATCo’s position that Morrison is ‘dispositive’ on the issue of RICO’s extraterritorial reach…As Judge Rakoff correctly notes, Morrison ‘repudiated the Second Circuit’s prior development of an ‘efffects’ test and ‘conduct’ test to evaluate the extraterritoriality of statutes that were silent on that issue.”  RICO is silent on the question.

The letter also mentioned that Judge Rakoff is “the author of a well-respected treatise on RICO.”  (That apparently was a reference to the Law Journal Press’s publication, “RICO: Civil and Criminal Law and Strategy.”)

RICO was the only federal law used by the federal government in its successful case against BATCo and most of the rest of the tobacco industry, at least as that case finally developed.  The Supreme Court on June 28 denied review of BATCo’s case, as well as six other appeals by tobacco firms.   On July 23, BATCo’s counsel filed for rehearing, urging the Court to return its case to the D.C. Circuit Court to consider the impact of the Morrison decision.

Judge Rakoff’s RICO decision earlier this week came in a case seeking damages for a money-laundering scheme that used New York-based banks to move funds that were generated by allegedly corrupt actions of officials of the government of Venezuela.  The judge said that, in enacting RICO, Congress had shown “no concern with foreign enterprises.”  Thus, he concluded, “RICO does not apply where, as here, the alleged enterprise and the impact of the predicate activity upon it are entirely foreign….Although the dreadful events alleged [in this case] may be perfectly plausible given what is generally known about the Chavez regime [in Venezuela], the connections to the United States may be too peripheral or problematic to support a RICO lawsuit brought here.”