US Judge Questions Applying Landmark Ruling To British American Tobacco

A U.S. trial judge on Monday questioned whether a British American Tobacco PLC (BTI, BATS.LN) subsidiary remained subject to her landmark 2006 racketeering ruling against the tobacco industry.

U.S. District Court Judge Gladys Kessler suggested that new legal precedent by the U.S. Supreme Court may upend her previous decision that British American Tobacco (Investments) Ltd. was liable under U.S. racketeering laws.

Kessler told U.S. government lawyers that she was "not at all clear" how they could avoid the implications of a recent Supreme Court ruling that may be favorable to BATCo.

Kessler, however, emphasized during a court status conference on Monday that her comments were not a ruling on the issue. The judge said she would consider legal arguments by both sides in the coming weeks before making a decision.

In a June ruling, the Supreme Court used a case involving National Australia Bank Ltd. (NABZY, NAB.AU) to limit the extraterritorial reach of U.S. securities laws.

BATCo now argues that the same legal logic should be used to limit the reach of U.S. racketeering laws against foreign defendants.

A BATCo lawyer said Monday that the company wants Kessler to resolve the issue as soon as possible.

Kessler famously ruled that the tobacco industry violated federal racketeering laws by engaging in a decades-long scheme to deceive the public about the dangers of smoking.

In a 2006 opinion that logged 1,653 pages, the judge ordered a variety of marketing, sales and advertising restrictions on the tobacco industry. She also required cigarette makers to issue corrective statements about the dangers of their products, which would appear on television, newspapers, product packaging and countertop displays in retail outlets.

Other defendants in the case include Altria Group Inc.'s (MO) Philip Morris subsidiary; Reynolds American Inc.'s (RAI) R.J. Reynolds Tobacco Co.; and Lorillard Tobacco Co., a unit of Lorillard Inc. (LO).

A Justice Department lawyer said Monday that the agency's upcoming legal arguments would make clear why BATCO should remain subject to Kessler's ruling.

-By Brent Kendall, Dow Jones Newswires; 202-862-9222; brent.kendall@dowjones.com

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