An interesting collateral consequence of the U.S. Supreme Court’s decision in Morrison (discussed in our postings of 7/16/10 and 7/19/10) has just come to the fore. Morrison held that the long-used “effects” test (to determine if federal jurisdiction was proper in international litigation) was not the proper one to employ to determine whether, in that case, the U.S. securities laws should be applied to an “essentially” non-U.S. transaction. Instead Morrison held that a strong presumption against extraterritorial application of U.S. law exists and should be overcome only by persuasive evidence that Congress in fact intended extraterritorial application.
Now, if that is true for federal securities laws, what about other federal laws, including antitrust and RICO. In our post of 8/27/10, we reported on a decision two days earlier by Judge Rakoff in the Southern District of New York holding that Morrison’s reasoning precluded a finding of extraterritorial application in the facts before the Court of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968.
Wasting no time at all, parties to the massive RICO cases brought by the federal government against various tobacco concerns have embraced Judge Rakoff’s decision and sought to bolster a petition for rehearing from the denial of a petition for certiorari. (The cert denial was on 6/28/10; the petition to rehear was filed in July 2010; and the letter to the Court is dated 8/27/10.) The matter is variously docketed in the Supreme Court, including as British American Tobacco (Investments) Limited, Petitioner v. United States of America, et al., Respondents, No. 09-980 (for convenience the Tobacco Case). In the Tobacco Case, the United States Court of Appeals for the D.C. Circuit in 2009, U.S. v. Philip Morris, et. al, 595 F.3d 1095 (D.C. Cir. 2009), upheld much of the decision and rulings earlier made by the trial court in Washington, D.C. federal court. In the district court’s 1600 page decision, the court found, and the D.C. Circuit affirmed, that Philip Morris USA, Inc., R.J. Reynolds Tobacco Company, Lorillard Tobacco Company, The Liggett Group, Inc., and others had violated certain sections of the RICO by conspiring to mislead the American public about the health effects and addictiveness of smoking cigarettes.
In the petition to rehear and in the recent filing of a letter with the Supreme Court discussing Judge Rakoff’s decision, the tobacco companies urge that jurisdiction was lacking for the federal court to consider the underlying RICO case – or at least that the case should be remanded to the D.C. Circuit for a determination of the extent to which Morrison should control the outcome of the Tobacco Case.