[Intl-tobacco] =?X-UNKNOWN?Q?Ottawa_Appeals_Billion-dollar=A0=A0Tobacco_Suit_In?= =?X-UNKNOWN?Q?_U=2ES=2E_Court_=28fwd=29?=

[Robert Weissman]

Ottawa Appeals Billion-dollar=A0=A0Tobacco Suit In U.S. Court
by JIM BROWN
Source: Vancouver Sun, Saturday, 7/29/00

 OTTAWA (CP) - The federal government is appealing an American court
decision that stalled its billion-dollar lawsuit against tobacco companies
for allegedly conspiring to smuggle smokes across the U.S.-Canada border.

 "Canada will not tolerate smuggling schemes that undermine this country's
tobacco-control policies and programs," the Justice Department said in a
statement Friday. "The government of Canada is determined to pursue this
case to a successful conclusion."

 The notice of appeal, filed with U.S. Federal Court for the northern
district of New York, is the first step in challenging a lower-court
ruling that dismissed Canada's claim.

Judge Thomas McAvoy of U.S. District Court, in a decision a month ago,
threw out the suit against Canadian-based RJR-Macdonald Inc., U.S.-based
R.J.  Reynolds Tobacco Holdings Inc., several related companies and the
Canadian Tobacco Manufacturers' Council.

The judge cited the Revenue Rule, an 18th century common-law principle
that allows an American court to decline to enforce another country's tax
laws.

Ottawa contends it suffered $1 billion in damages from lost tax revenue
and money spent trying to combat smuggling.

The Justice Department maintains the centuries-old rule cited by McAvoy is
outdated and has been superseded by other court decisions.

It also argues that, in any event, the United States is not being asked to
enforce Canadian tax law.

Government lawyers say the key legal question is whether the defendants
broke American racketeering laws by scheming to export cigarettes from
Canada, then have them smuggled back.

Reaction to the appeal was predictably split.

"I think they're crazy," said Rob Parker, head of the Canadian Tobacco
Manufacturers' Council, who maintained the battle will cost taxpayers
millions in legal fees.

"They're throwing good money after bad for what I think are political
reasons .  . . There's no wrongdoing by (the council) or by its member
companies and we're going to defend ourselves vigorously."

Cynthia Callard, of Physicians for a Smoke-Free Canada, welcomed the
government decision.

"I'm really glad they're not giving up. It seems that they're committing
themselves to really push this through to the end."

Callard expressed disappointment, however, that criminal charges have not
been laid in Canada along with the U.S. civil suit.

The RCMP has been investigating for years but has yet to decide whether to
recommend criminal prosecution of tobacco firms.

David Sweanor, of the Non-Smokers Rights Association, said the U.S. case
will at least serve to publicize alleged wrongdoing by tobacco companies
and their senior executives.

"This court case has huge potential to educate Canadians on just what
these companies were involved in. We think that . . . it's going to
radically change attitudes toward this industry."

The suit, filed in December 1999 in Syracuse, N.Y., alleges that R.J.
Reynolds and affiliated firms conspired with known smugglers and used an
elaborate network of shell companies to keep cheap cigarettes flowing into
the Canadian market in the early 1990s.

The government had doubled cigarette taxes and duties as part of an
anti-smoking campaign, and was especially intent on keeping cheap smokes
out of the hands of young people.

Ottawa was forced by 1994 to slash taxes after smuggling had become
epidemic, especially near the Akwesasne Mohawk reserve along the New
York-Ontario-Quebec borders where there were violent confrontations.

Gordon Bourgard, a Justice Department lawyer, said the suit was filed in
New York because most of the firms named as defendants were based in the
United States.

In addition, U.S. racketeering laws provide for triple damages, raising
the prospect of a $3-billion award, much higher than usually granted in
Canadian courts.

"That wasn't an official factor, but it is a fact," said Bourgard. "We
take the law as we find it."

Although the appeal notice was filed in northern New York, the case will
likely be heard eventually in New York City. It is expected to take eight
to 12 months to reach a verdict.

At last estimate in May, the government had paid $3.9 million to U.S.
lawyers to argue its case, and Bourgard said the money was well spent.

"We believe that it's important to show that we intend to defend our
borders against smuggling," he said. "That's why the appeal is necessary."

R.J. Reynolds has sold its international holdings, including
RJR-Macdonald, to Japan Tobacco Inc., but Reynolds remains legally liable
in the case.