Supreme Court Rules for Online Tobacco Seller in NYC’s RICO Suit
The U.S. Supreme Court has ruled that New York City may not sue an online tobacco seller for RICO violations in an effort to collect tax revenue.
The Associated Press and Bloomberg covered today’s 5-3 decision.
New York had claimed that the tobacco seller, a New Mexico company called the Hemi Group, had failed to turn over customer records to the state as required by law. New York City taxes possession of cigarettes, but does not require out-of-state tobacco sellers to collect the tax. The city claimed the failure to release the information amounted to mail and wire fraud, predicate offenses under RICO.
The majority opinion (PDF) by Chief Justice John G. Roberts Jr. criticized New York’s theory as “attenuated.” Under the city’s theory, the court would “extend RICO liability to situations where the defendant’s fraud on the third party (the state) has made it easier for a fourth party (the taxpayer) to cause harm to the plaintiff (the city),” he wrote.
Roberts’ opinion was joined by the court’s three other conservative justices. Justice Ruth Bader Ginsburg concurred in the result, but wrote separately to say she does not subscribe “to the broader range of the court’s proximate cause analysis.”
Justice Sonia Sotomayor did not take part in the decision.
