May. 13 2002
Washington, DC — The U.S. Supreme Court today asked the Bush Administration to file a brief outlining the government's views in a case that will determine whether the Canadian government can sue R.J. Reynolds Tobacco (RJR) for damages caused by RJR's wrongful involvement in cigarette smuggling into Canada. We urge the Administration to support Canada. This case is critical to holding the cigarette companies responsible for their involvement in widespread, worldwide smuggling. The Bush Administration has voiced strong concerns about cigarette smuggling during negotiations on the proposed international tobacco treaty, the Framework Convention on Tobacco Control.
We also urge Solicitor General Theodore Olson to recuse himself from the case because, as a private attorney, he represented the National Association of Manufacturers and the U.S. Chamber of Commerce in this case in support of R.J. Reynolds (brief filed February 6, 2001). His recusal is necessary to avoid any perceived or actual conflict of interest in the Administration's approach to this case.
For years, tobacco company executives have fought cigarette tax increases by arguing that they would lead to increased cigarette smuggling. However, recent investigative news reports and documents show that the tobacco companies themselves have aided and abetted international smuggling operations. These reports and lawsuits indicate that the cigarette companies have facilitated smuggling to penetrate closed markets, increase the sale of their brands by making them available at reduced prices, and undermine national efforts to reduce tobacco use by increasing cigarette taxes and import duties. Canada's lawsuit is a critical test of whether foreign governments can turn to U.S. laws and courts to combat these massive smuggling schemes and the tremendous harm they cause.
Lower courts have dismissed the Canadian lawsuit on the basis that it violates the so-called "revenue rule," which bars one country from enforcing its tax laws in the courts of another country. However, this case is much broader than a tax matter, involving possible violations of racketeering, wire- and mail-fraud statutes, and other organized criminal activities. When it passed the Financial Anti-Terrorism Act, commonly known as the Patriot Act, last fall, Congress took explicit action to delete language that would have restricted the ability of foreign governments to bring lawsuits against U.S. cigarette companies related to cigarette smuggling. Based on this legislative history and the importance of this case to combating cigarette smuggling, the Administration should file a brief supporting Canada's right to sue R.J. Reynolds for its role in cigarette smuggling.