British American Tobacco Plc, Europe’s largest cigarette maker, was dropped from the U.S. government’s racketeering lawsuit after a judge in Washington ruled the U.S. no longer has the authority to hold the U.K. company liable for hiding the health hazards of smoking Parliament.
U.S. District Judge Gladys Kessler today said a 2010 ruling by the U.S. Supreme Court in a securities case restricts the U.S. from seeking liability from “what is essentially foreign activity.”
“There is no evidence that Congress intended to criminalize foreign racketeering activities under RICO,” Kessler wrote.
In 2006, Kessler found that the British American Tobacco (Investments) Ltd. unit of British American Tobacco and other cigarette companies violated anti-racketeering laws by conspiring to hide the dangers of cigarettes. Kessler ordered the companies to stop marketing cigarettes as “light” and “low-tar” and to make statements about the health effects of smoking in newspapers and magazines and on cigarette packages.
The Justice Department, in court papers, argued British American Tobacco’s liability can be premised on its conduct in the U.S., including the company’s involvement with an experimental farm in North Carolina.
“The problem with the Government’s argument is that BATCo’s domestic conduct was not the basis for its RICO liability in this case,” Kessler said.
Kessler said in her ruling today that British American Tobacco must still contribute payments to cover the government’s legal costs.
Charles Miller, a Justice Department spokesman, declined to comment.
An e-mail message and telephone message left with British American Tobacco’s London press office after normal business hours weren’t immediately returned.
Earlier this month, British American Tobacco, along with Altria Group Inc.’s Philip Morris USA unit, Reynolds American Inc.’s R.J. Reynolds Tobacco and Lorillard Inc.’s Lorillard Tobacco, asked Kessler to dismiss the 1999 racketeering case, saying court oversight of the industry is no longer needed.
The companies said a 2009 law, the Family Smoking Prevention and Tobacco Control Act, empowered the U.S. Food and Drug Administration to watch over the industry and establish restrictions on the sale, promotion and distribution of tobacco products.