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The U.S. Justice Department won't seek a rehearing of a landmark decision this spring that found the tobacco industry violated federal racketeering laws, potentially increasing the odds that the controversy could make its way to the Supreme Court.

Tobacco companies involved in the litigation filed requests due Friday to have the matter heard by the full circuit court, but the Justice Department won't do the same.

"We will not be filing something today," said Justice Department spokesman Charles S. Miller. He declined to elaborate.

The May 22 opinion in the largest civil racketeering case to date was a mixed bag for the U.S. government, with the panel agreeing that cigarette makers conspired to deceive the public about the dangers of smoking, while rejecting the Justice Department's request for additional penalties against cigarette manufacturers.

The unanimous decision by a three judge panel of the U.S. Court of Appeals for the D.C. Circuit also affirmed an earlier ruling that the government could not force cigarette companies to forfeit up to $280 billion of profits.

Odds that an appeals court will agree to rehear a case decided by a smaller three-judge panel are slim, particularly when the panel's decision is unanimous. The fact that the Justice Department isn't asking for the full circuit to review the earlier ruling makes a rehearing even more of a long shot and could prompt litigants to seek review by the Supreme Court.

Attorneys representing the tobacco companies declined to comment or could not be reached immediately for comment.

Defendants in the case include Altria Group Inc.'s (MO) Philip Morris subsidiary, Reynolds American Inc. (RAI), British American Tobacco PLC (BTI) and Lorillard Inc. (LO).

In legal documents filed Friday, the tobacco companies offered numerous arguments as to why the full court should rehear the matter, including legislative changes approved in June that they say will tighten federal oversight of the tobacco industry to the point that industry members aren't likely to violate federal racketeering laws again, mooting the panel's ruling.

British-American Tobacco raised other issues, saying the panel's decision conflicts with those of other federal appellate courts and the U.S. Supreme Court on the application of U.S. anti-racketeering laws to non-U.S. firms. It called the panel's ruling "a breathtaking extension" of RICO, the Racketeer Influenced and Corrupt Organizations Act, to a foreign company, and called for review to correct an "unwise and unwarranted" extension of the U.S. law to a foreign firm.

The May ruling affirmed most of the remedies that a trial judge imposed against tobacco companies in 2006, including restrictions on tobacco marketing and a requirement that the industry make corrective public statements about the health effects and addictiveness of smoking. But in a blow to the government and anti-smoking groups, the court rejected additional penalties they sought, including tobacco industry funding of a $10 billion national smoking-cessation campaign.

The court said the tobacco companies "knew about the negative health consequences of smoking, the addictiveness and manipulation of nicotine, the harmfulness of secondhand smoke," and agreed with the government's argument that tobacco firms were likely to commit future racketeering violations.

 
  -By Judith Burns, Dow Jones Newswires, 202-862-6692; Judith.Burns@dowjones.com 

(Brent Kendall contributed to this article.)