• High court agrees to scrutinize EU suit against Reynolds
  • Case may limit reach of powerful U.S. racketeering law

The U.S. Supreme Court will hear an appeal by Reynolds American Inc. and consider stopping a European Union suit that accuses the tobacco company of orchestrating a global scheme to launder drug money.

The case will test the overseas reach of a federal racketeering law that can impose heavy damage awards. Reynolds is seeking to overturn a lower court ruling that the cigarette maker says would invite a torrent of lawsuits against American companies over their activities abroad.

The ruling “broadly opens the door for civil plaintiffs to target, in U.S. courts, business practices across the globe,” Reynolds argued in its appeal.

The dispute is one of 13 the justices added to their docket in advance of the
formal opening of their term Monday. In another new case, the court will hear
an appeal from Iran’s central bank, which is seeking to stop almost $2 billion
from being turned over to American terrorism victims.

The EU has been pursuing Reynolds and other tobacco companies in court for more than a decade. The lawsuit before the high court centers on an alleged network involving Russian and Colombian criminal organizations that smuggled illegal narcotics into Europe. As part of the complex scheme, the money from the drug sales allegedly was used to buy Reynolds cigarettes.

The EU says Reynolds directed the scheme from the U.S., putting it under the ambit of the federal Racketeer Influenced and Corrupt Organizations Act.

“This case unquestionably involves domestic racketeering activity committed by a group of U.S. companies,” the EU and more than two dozen of its member states argued in court papers.

The dispute, which the Supreme Court will consider next year, is a follow-up to a 2010 case that curbed the reach of the main federal securities-fraud law. The justices unanimously said that law doesn’t protect foreign investors who buy stocks of non-American companies on overseas exchanges.

Both cases concern only the reach of a federal statute and not the scope of Congress’s power. The 2010 ruling said the courts will presume that statutes don’t apply outside the U.S. unless Congress clearly indicates a desire to do so.

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