Source: http://openjurist.org/268/f3d/103
Timestamp: 2015-01-26 12:45:54
Document Index: 336908099

Matched Legal Cases: ['§ 1961', '§ 1964', '§ 1341', '§ 1343', '§ 1962', '§ 1962']

268 F3d 103 The Attorney General of Canada v. Rj Reynolds Tobacco Holdings Inc | OpenJurist
268 F. 3d 103 - The Attorney General of Canada v. Rj Reynolds Tobacco Holdings Inc Home268 f3d 103 the attorney general of canada v. rj reynolds tobacco holdings inc 268 F3d 103 The Attorney General of Canada v. Rj Reynolds Tobacco Holdings Inc 268 F.3d 103 (2nd Cir. 2001)
THE ATTORNEY GENERAL OF CANADA, PLAINTIFF-APPELLANT,v.R.J. REYNOLDS TOBACCO HOLDINGS, INC., R.J. REYNOLDS TOBACCO CO., R.J. REYNOLDS TOBACCO INTERNATIONAL, INC., RJR-MACDONALD, INC., R.J. REYNOLDS TOBACCO COMPANY, PUERTO RICO, NORTHERN BRANDS INTERNATIONAL, INC., AND CANADIAN TOBACCO MANUFACTURERS COUNCIL, DEFENDANTS-APPELLEES.
Docket No. 00-7972Spring Term, 2001
Argued: May 30, 2001Decided October 12, 2001
This action was brought by the Attorney General of Canada ("Canada") on behalf of the government of Canada for damages based on lost tax revenue and additional law enforcement costs. Canada alleges that these damages resulted from a scheme facilitated by defendants to avoid various Canadian cigarette taxes by smuggling cigarettes across the United States-Canadian border for sale on the Canadian black market. Under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., Canada seeks revenue that it lost "from the evasion of tobacco duties and taxes," and from "[d]efendants' conduct [that] compelled [Canada] to rollback duties and taxes," as well as monies spent "seeking to stop the smuggling and catch the wrongdoers."
In the present action, Canada brings claims against defendants under RICO's civil enforcement provision. RICO is a broadly worded statute that "has as its purpose the elimination of the infiltration of organized crime and racketeering into legitimate organizations operating in interstate commerce." S. Rep. No. 91-617, at 76 (1969); see Statement of Findings and Purpose, Organized Crime Control Act of 1970, Pub. L. 91-452, 84 Stat. 922, 922-23 (1970). "RICO provides that `[a]ny person injured in his business or property by reason of' a RICO violation may bring a civil action to recover treble damages." Metromedia Co. v. Fugazy, 983 F.2d 350, 368 (2d Cir. 1992) (quoting 18 U.S.C. § 1964(c)), cert. denied, 508 U.S. 952 (1993). "To establish a RICO claim, a plaintiff must show: (1) a violation of the RICO statute...; (2) an injury to business or property; and (3) that the injury was caused by the violation of [RICO]." De Falco v. Bernas, 244 F.3d 286, 305 (2d Cir. 2001) (internal quotation marks and citation omitted), cert. denied, 70 U.S.L.W. 3090 (U.S. Oct. 1, 2001) (No. 01-117). Canada alleges that defendants violated RICO by "conduct[ing] or participat[ing]... in the conduct of [an] enterprise's affairs through a pattern of racketeering activity," namely repeated instances of mail fraud, 18 U.S.C. § 1341, and wire fraud, 18 U.S.C. § 1343, in violation of 18 U.S.C. § 1962(c). Second, Canada alleges a conspiracy, in violation of 18 U.S.C. § 1962(d), to violate subsections (a), (b) and (c) of section 1962.1 Canada explains that these RICO violations were the proximate cause of injury to its "property" because it was deprived of revenue from tobacco duties and taxes and was forced to spend money to stop defendants' illegal activity.
Defendants moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). In a thorough and thoughtful opinion, the district court rejected some of the grounds of defendants' motion, finding that Canada is a "person" entitled to bring a RICO action and refusing to dismiss the action under the act-of-state and political-question doctrines. See Attorney General of Canada v. RJ Reynolds Tobacco Holdings, Inc., 103 F. Supp. 2d 134, 144-50 (N.D.N.Y. 2000). Nonetheless, the district court granted the motion to dismiss because it held that Canada's lost revenue claims were barred by the revenue rule; that a government's claim for damages based on increased law enforcement and related costs does not satisfy civil RICO's requirement that the plaintiff suffer an injury to its commercial interests; and that RICO does not provide for the disgorgement and other equitable relief requested by Canada. See id. at 140-44, 150-55. With regard to the revenue rule, the district court explained:
In defense of the revenue rule, some courts have observed that the rule prevents foreign sovereigns from asserting their sovereignty within the borders of other nations, thereby helping nations maintain their mutual respect and security.6 See Sabbatino, 376 U.S. at 448, 84 S.Ct. 923(White, J., dissenting on other grounds) ("Our courts customarily refuse to enforce the revenue and penal laws of a foreign state, since no country has an obligation to further the governmental interests of a foreign sovereign"); see generally F.A. Mann, Prerogative Rights of Foreign States & the Conflict of Laws, in Studies in International Law, 492-514 (1973).
The tenor of the times, at least among many people in the states of this judicial circuit, is anti-smoking. It is unlikely that enforcing a foreign tax regime aimed at deterring smoking would offend most citizens of New York, Connecticut or Vermont, whatever our personal habits or vices. (Of course, citizens of United States tobacco-growing states might vehemently object to Canada's taxation scheme.) But consider, for example, other possibilities involving a foreign sovereign's taxes. How would we respond if a foreign sovereign asked us to help enforce a tax designed to render it very expensive to sell United States newspapers in that nation? Or to make the inclusion of United States-made content in machinery built in that foreign country prohibitively expensive? Suppose it were a tax that had been raised to deter the sale of United States pharmaceuticals in that country? Or if a foreign nation imposed an immigration tax on members of a particular religious group or racial minority? It is much less likely that United States citizens would be kindly disposed towards tolerating such taxes, let alone providing judicial resources to enforce them. These hypotheticals-and we do not suggest that they are anything but hypotheticals-demonstrate the sensitive nature of the issues that can be raised through a foreign sovereign's exercise of its taxation powers. See Stoel, supra note 2, at 678 ("[T]he tax judgments of one nation may be used to attain what other nations consider odious ends...."). Addressing the public policy concerns raised by the imposition of such foreign taxes could embroil United States courts in delicate issues in which they have little expertise or capacity.
Moore, 30 F.2d at 604 (L. Hand, J., concurring); see also Smith, supra note 2, at 257 ("[T]he possibility of a court engendering ill will and hindering the conduct of foreign relations by refusing to enforce a particular tax claim or judgment... is very real in the international context."); Stoel, supra note 2, at 678 ("[A]pplication of forum public policy to revenue laws may be offensive to the plaintiff State and have undesirable foreign relations consequences for the forum State."); cf. Boots, 80 F.3d at 587-88 (dismissing a criminal RICO action based on wire and mail fraud in connection with smuggling over the Canadian border on the ground that the action was barred by the revenue rule and the rule's foreign affairs rationale); Alan R. Johnson, Systems for Tax Enforcement Treaties: The Choice Between Administrative Assessments & Court Judgments, 10 Harv. Int'l L.J. 263, 264 (1969) (noting that many commentators dissatisfied with the revenue rule "view executive action by treaty as a preferable means of reform" because of "the supposed foreign relations consequences").
United States v. First Nat'l City Bank, 321 F.2d 14, 24 (2d Cir. 1963) (citation omitted), rev'd on other grounds, 379 U.S. 378 (1965); see Her Majesty the Queen in Right of the Province of British Columbia v. Gilbertson, 597 F.2d 1161, 1165 (9th Cir. 1979) (considering United States-Canadian tax treaties, and stating "[e]ven though the political branches of the two countries could have abolished the revenue rule between themselves at the time they entered into the treaties, they did not"). The concerns expressed in First National City Bank and Gilbertson remain relevant today.10
In accordance with these views, "[t]he Senate gave its advice and consent to those treaties subject to an understanding that the countries would only provide such collection assistance as would be necessary to ensure that the exemption or reduced rate of tax granted by the treaties would not be enjoyed by persons not entitled to those benefits." Taxation Comm. Staff Explanation of Canada-U.S. Protocol, at 43 n.52 (discussing Sept. 17, 1951 Senate vote); see generally Smith, supra note 2, at 261-62. This Senate policy was also implemented through an analogous narrowing of the collection assistance provision when the Netherlands tax convention, whose broad collection assistance provisions had been negotiated before the September 17, 1951 Senate vote, see Legislative History Vol. 2, at 1667, was extended to cover the Netherlands Antilles. See id. at 1678, 1680-82.
Consistent with this continuing policy, the United States has over the years entered into a number of tax treaties with foreign sovereigns that provide for information exchange and, sometimes, limited collection assistance, but notably fail to make any provision for general enforcement of foreign tax judgments or claims.16 It seems to us that the usual absence in our negotiated tax conventions of any provision for the extraterritorial enforcement of a sovereign's tax judgments or claims cannot be not accidental, but instead must reflect the considered policy of the political branches of our government. Thus, the political branches of our government have clearly expressed their intention to define and strictly limit the parameters of any assistance given with regard to the extraterritorial enforcement of a foreign sovereign's tax laws. In this area of foreign relations policy where the political branches have primacy, courts must be wary of intruding in a way that undermines carefully conceived and negotiated policy choices. Accordingly, as a general matter, that version of the revenue rule under which United States courts abstain from assisting foreign sovereign plaintiffs with extraterritorial tax enforcement is fully consistent with our broader legal, diplo