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the fact that the court of appeals’ questionable decision has already generated a conflict among the courts of appeals, this Court should review the court of appeals’ decision now. That mistaken decision will not only prevent the district court from formulating appropri- ate remedies at this time and necessitate a future remand if it is corrected later, but it will continue to misdirect other courts and constrain the government’s ability to seek full re- lief in future civil RICO cases. Prompt review by this Court accordingly would fulfill the overarching objectives of Section 1292(b)’s provision for interlocutory review: to resolve a “question of law as to which there is * * * difference of opinion,” and to ‘materially advance the ultimate termination of the litigation.”
For the foregoing reasons, and those stated in the petition, the petition for a writ of certiorari should be granted. Respectfully submitted.
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After claiming that the Philip Morris court erred in reaching the merits of the case, Judge Tatel argued in dissent that Supreme Court precedent pointed toward permitting disgorgement as an available equitable remedy.97 He would have held that Porter’s broad grant of equitable power controls as opposed to the restrictions on the facts of Meghrig.98 He also relied on Mitchell v Robert De Mario Jewelry, Inc,99 which held that “in an action by the Secretary to restrain violations of [the Fair Labor Standards Act (FLSA)], a District Court has jurisdiction to order an employer to reimburse employees, unlawfully discharged or otherwise discriminated against, for wages lost because of that discharge or discrimination.”100 The FLSA provided that “the district courts are given jurisdiction . . . for cause shown, to restrain violations” of the statute.101 The Mitchell Court reasoned that this jurisdictional hook grants district courts broad authority to use their equitable powers.102 Judge Tatel argued that “if [FLSA’s] language opens the door to all equitable relief, then RICO’s language . . . certainly does the same.”103 The majority countered by arguing that with RICO, “Congress provided a statute granting jurisdiction defined with the sort of limitations not present in the FLSA or the EPCA.”104 Nonetheless, RICO grants jurisdiction to “prevent and restrain” violations and the FLSA grants jurisdiction to “restrain” violations; thus the jurisdictional limitations look very similar.
However, as Judge Tatel noted, “reconciling Meghrig with Porter and Mitchell is difficult.” . . .
CONCLUSION
Congress enacted RICO to combat a wide range of enterprise criminality, and granted the courts jurisdiction to order remedies for RICO violations. The civil portion of RICO authorizes district courts to “prevent and restrain” RICO violations. The circuit courts that have considered whether this grant of equitable power includes the authority to order disgorgement issue have reached different conclusions. In the Second Circuit and the Fifth Circuit, courts can order disgorgement when it would serve to prevent future violations. The Second Circuit and Fifth Circuit Courts of Appeals relied on ambiguous statutory language to justify the outcome they reached. The D.C. Circuit, however, concluded that disgorgement could never be a forward- looking remedy as required by its reading of the statute.
In making this determination, the D.C. Circuit misapplied Supreme Court precedent. In its attempt to reconcile Meghrig and Mitchell, it ignored the fact that the statutes at issue in those cases shared identical jurisdictional language. Meghrig and Mitchell can be reconciled by looking at the objectives of the respective statutes. By applying this same objective-focused reading to RICO, this Comment concludes that district courts should have the power to order disgorgement in a civil RICO suit brought by the government. Disgorgement could serve to “prevent and restrain” violations of RICO both by operating as a general deterrent and by reducing the funds available to chronic RICO violators to set up other offending enterprises.
Additionally, the Supreme Court’s antitrust jurisprudence fortifies the conclusion that disgorgement should be available as a remedy when the government requests it in a civil RICO action. The Court has repeatedly recognized the usefulness of using antitrust law to inform interpretations of RICO. At the very least, antitrust precedent indicates that district courts should have the power to order disgorgement where it would specifically forestall future violations. It also lends support to the permissibility of using disgorgement as a general deterrent. Because both the analogy to antitrust law and the purposive reading of the jurisdictional language based on the reconciliation of Meghrig and Mitchell support allowing disgorgement, district courts should have the power to order disgorgement in civil RICO actions brought by the government.
Lawyers representing a group of tobacco companies on appeal urged the U.S. Court of Appeals for the District of Columbia Circuit to reject the “grotesque” expansion of RICO laws that a federal judge applied to Big Tobacco in a landmark decision in 2006.
The survival of that decision, which held that the tobacco industry conspired to mislead consumers for decades about the health risks of smoking, could be in jeopardy. A three-judge panel—Chief Judge David Sentelle sat with Judges David Tatel and Janice Rogers Brown—questioned key elements of U.S. District Judge Gladys Kessler’s nearly 1,700-page decision.
Sentelle and Tatel—who dominated the nearly three hours worth of argument, held in the court’s ceremonial courtroom—questioned whether Kessler and the government sufficiently and clearly identified the acts that make up a pattern of racketeering activity. Sentelle explored the extent to which a corporation, beyond any individual employee, can be found to have a specific intent to defraud.
“They had to turn our entire industry into something like the Gambino family,” argued Jones Day partner Michael Carvin, who represented Philip Morris with Gibson, Dunn & Crutcher partner Miguel Estrada. RICO laws, established in 1970 to take on the mob, are commonly used in the criminal arena.
May 24, 2004, also had the potential to be the leaping-off point for what could have been one of the most devastating chain of events to ever hit the tobacco industry. On that day, the United States Justice Department, in U.S. District Court, was given the green light by Judge Gladys Kessler to proceed with its $280-billion (yes, billion) lawsuit against the tobacco industry. The DOJ said the potential $280-billion award, or "disgorgement," coincided with the amount of "ill-gotten gains" earned by the industry over the previous 40 years. Justice lawyers also wanted new restrictions on the industry, including limiting in-store promotions or banning product descriptions such as "low tar" or light." The government first brought the racketeering case in 1999 (what were you doing then?) and had spent $135 million pursuing it.
Over the next 17 months, though many in the CTS industry were unaware of it, the future of tobacco retailing rested on a knife edge as the case slowly wound toward its conclusion. At stake was cigarette retailing as we know it, with a favorable ruling for the DOJ bringing with it the potential to bankrupt the entire cigarette industry. . . .
February 2005 On Feb. 4, Circuit Court of Appeals for the District of Columbia ruled in a 2-1 decision that disgorgement was not an appropriate remedy for the Department of Justice case against the tobacco industry, a "major win" for the industry that essentially removed the financial risk to the defendants.
As expected, Judges Williams and Sentelle ruled in favor of the industry while Judge David Tatel dissented.
Disgorgement is "a remedy aimed at past violations," Judge Sentelle wrote in the ruling.
In dissent, Judge Tatel said his colleagues ignored Supreme Court precedent, misread the law and contradicted the decision of another appeals court, the 2nd U.S. Circuit Court of Appeals in New York.
The disgorgement ruling in favor of the defendants took away an essential part of the government's case, rendering it a "toothless" prosecution and meaning that the only remedy the industry would be responsible for is a non-financial remedy such as funding more public education, smoking cessation programs or further disclosures of health risks.
In a new Washington ritual, President Bush has repeatedly drawn from the Federalist Society for cabinet members, senior aides and judges. And perhaps to deflect what many conservatives call unfair attacks by liberals, the nominees have repeatedly claimed to know little about the group's beliefs.
White House aides have worked hard to put distance between the society and John G. Roberts, the federal appeals judge Mr. Bush has nominated for the Supreme Court. They have even demanded corrections from newspapers that identified him as a member.
Then an old directory surfaced last week, listing Judge Roberts as part of one of the group's steering committees. The White House spokesmen clung to their line; since Judge Roberts had not, apparently, written a $25 membership check, he was not a formal member.
Who cares? Lots of people, it seems, because a fight over the influence of the Federalist Society is a proxy in the war over the federal judiciary and the Constitution itself. . . .
Kenneth W. Starr, the independent counsel whose report led to Mr. Clinton's impeachment, is a prominent member of the society, as is Theodore B. Olson, who successfully argued Bush v. Gore, the case that stopped the Florida recount in 2000 and ensured Mr. Bush's election.
For the last fifty years there have been essentially two competing histories of smoking and health - the one put forward by the public health and anti-tobacco establishments, and also by various governments, the other put forward put by the industry and supported in parts on scientific grounds by many outside of it. For the public health community the tobacco industry is a criminal enterprise which has systematically lied about every smoking and public policy issue that it has confronted. It recruits underage smokers through profoundly deceptive advertising that has always denied the risks of smoking and keeps them smoking through a carefully contrived program of nicotine addiction. It's cigarettes represent a significant health hazard to nonsmokers, and its claims about light cigarettes attempt to skirt the obvious truth that there is no safe cigarette. For the tobacco industry, the risks of smoking for the smoker, at least until the publication of the initial Surgeon General's Report, has been an area of scientific dispute, while the health effects of secondhand smoke continue to be unclear. For the industry, marketing has been about brand share as opposed to new consumers, and advertising has never been directed to underage smokers. As for the claims about addiction, the claims about smoking as addictive were manufactured for policy as opposed to scientific reasons, and whatever the meaning given to addiction, the evidence has never shown that smokers are unable to stop smoking. And light cigarettes, even in the hands of compensating smokers, offer a less risky smoke. . . .
did Judge Kessler get it right? . . . . rather than an accurate account of the tobacco controversies of the last half of the 20th century, one which carefully seeks to arrive at the truth, it is often much closer to a revisionist account of what happened that bears little resemblance to a careful sifting of the facts. We will examine the Kessler "facts" on seven key tobacco issues - the question of fraud, witness credibility, addiction, less hazardous cigarettes, marketing to children, nicotine manipulation and ETS. . . .
Consider what Judge William Osteen, a fellow District Court judge, wrote of the EPA process and decision, including those long-serving members of the public health establishment whose veracity Judge Kessler is so taken by
"Using it normal methodology and its selected studies, EPA did not demonstrate a statistically significant association between ETS and lung cancer." . . .
Then too, Kessler seems completely unaware of the fact that the EPA report which she cites failed to establish a statistically significant association between ETS and disease in nonsmokers, or that it, along with Samet’s biological plausibility thesis were savaged by a US District Court in 1998. Or even that Samet’s IARC project failed to establish a statistically significant connection between both residential and occupational ETS exposure and disease in nonsmokers.
At the end of the day Judge Kessler has produced a story of the tobacco wars of the last 50 years that is deeply flawed in almost every respect. Instead of attempting to discharge her responsibility to arrive at the truth, to provide the facts, she has provided instead a decision that is a mélange of bias, selective data, scientific ignorance and confused reasoning.
Federal Judge Gladys Kessler blatantly ignored the rules of toxicology and epidemiology published in the Federal Judicial Center's Reference Manual on Scientific Evidence (2nd Edition) in her decision . . .
Judge Kessler is a graduate of Cornell, then Harvard, who went to work as a labor and public interest lawyer and legislative aid for Democrat politicians in Congress and the Senate. . . .
Judge Kessler's decision in the 6 year long Racketeering case brought by the Federal Department of Justice against the tobacco industry tobacco case is an example of the grand overreach and tyrannical approach that characterizes activist judges when they have an American industry in their gun sights and a quasi-religious grudge. . . .
Judge Kessler ignored the insightful opinion of Judge William Osteen in 1998 that nullified the EPA's research on second hand smoke as scientific misconduct. . . .
Judge Kessler in contravention of the Osteen opinion, ruled:
* The tobacco companies were guilty of racketeering under the criminal code for asserting that secondhand smoke and low tar and nicotine cigarettes have less toxic effects on human health. . . .
Judge Kessler refused to allow the defendant tobacco companies at trial to show the clear-cut evidence that secondhand smoke even in the worst of circumstances is the equivalent of one cigarette a day and that no research has ever shown a health effect from such a low exposure. Even worse, in making her sweeping decision, Judge Kessler has decided to criminalize research that she disagrees with and advocacy by or for people of whom she disapproves.
The Court received arguments and pleadings in the case filed by the United States that branded as a criminal conspiracy the writings of columnists, researchers, and scientists who disagreed with the claims of anti-smoking activists. Epidemiologists whose research was published in peer reviewed journals and who found results that conflicted with the EPA position were implicated as conspirators by the Kafkaesque opinion of Judge Kessler. . . .
One might ask if Judge Kessler includes Judge Osteen as complicit
What the rest of the story reveals is that the anti-smoking groups failed to respond appropriately in the wake of the appellate court decision by modifying their remedies requests to be consistent with the Court's interpretation of the civil remedies provisions of the RICO statute.
If anyone undermined the case, it was the anti-smoking groups, by refusing to craft an effective set of remedies that could pass appellate court scrutiny and have any decent chance of being upheld.
I think the anti-smoking groups have a lot of chutzpah going in front of this panel containing two judges who already ruled that backwards-looking remedies are not allowed and arguing that it should reverse its previous decision. You don't generally tell a group of judges that their decision was wrong. I find it extremely unlikely that the appeals court is going to declare that it was wrong and that it is going to reverse its decision.
I think the language of the RICO statute is quite clear. The decision of the District Court regarding monetary remedies will not be overturned, and it should not be overturned based on the clear language of the RICO statute.
Investment conclusion: Following today’s oral argument, our assessment of the outlook for the DOJ lawsuit is largely unchanged. While we believe the panel may uphold the finding that the industry violated Civil RICO, some or all of Judge Kessler’s proposed remedies may be reversed. However, even in the worst-case scenario (upholding the original ruling), both this lawsuit and overall tobacco litigation should remain very manageable.
Overview of the Oral Argument: The three judge panel was, in our view, very even-handed during the proceedings. Specific issues that appeared to favor the industry’s position included: (1) Whether the government had adequately demonstrated a “reasonable likelihood” of the industry committing future violations, particularly in light of the MSA’s permanent injunctions; (2) A lack of clarity over which actions formed the specific “pattern of racketeering activity” that would justify forward-looking remedies; and (3) Judges’ critical comments regarding several of the proposed remedies (e.g., ban on Lights descriptors, corrective statements).
On the other hand, the panel appeared less receptive than we anticipated to: (1) The industry’s argument that specific intent could not be imputed from individual employees to a corporate defendant, despite the Court’s acknowledgement of legal issues underlying Judge Kessler’s collective intent justification; and (2) The industry’s contention that a group of corporations cannot constitute a RICO enterprise, under the language of the original statute.
Implications: While it is difficult to forecast the outcome of an appellate review based solely on the oral argument, we felt that the industry argued its case effectively and were encouraged by the panel’s collective skepticism regarding the proposed remedies.
We anticipate a ruling in the case by mid-2009.
On Tuesday, the companies and the Justice Department argued in federal appeals court over whether they can be found in violation of RICO laws for allegedly lying to the public about the health effects of smoking. A federal judge ruled in 2006--in a 1,700-page decision--that the RICO law applies, and that the companies should be held in violation for their history of lying to the public. That judge, Gladys Kessler, did not fine the companies. The Justice Department wants money, and the companies want the ruling reversed.
A star-studded team led by Gibson Dunn's Miguel Estrada (for Philip Morris) and Jones Day's Michael Carvin (for R.J. Reynolds) told a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit that the RICO argument fails. To prove a RICO violation, the government must show the tobacco companies are likely to continue their fraudulent marketing, they said. That's unlikely, because the 1998 settlement agreement already prohibits those practices, and the tobacco companies have changed the way they do business, Estrada said in an interview with the Am Law Daily.
"This is a case that should never have been brought under RICO," Estrada says. The government disagreed, claiming it can prove the companies continue to lie in marketing campaigns.
The bulk of the argument centered on the marketing of light and low tar cigarettes, an issue that wasn't fully decided by the master settlement agreement.
Today, The U.S. Department of Justice and Public Health Intervenors, including the American Lung Association, presented oral arguments before the United States Court of Appeals in a landmark case against the tobacco industry.
The plaintiff-intervenors (Tobacco-Free Kids Action Fund, American Cancer Society, American Heart Association, American Lung Association, Americans for Nonsmokers' Rights and National African-American Tobacco Prevention Network) argued today that the Court of Appeals should permit the District Court to impose a broad range of remedies against the tobacco industry.
The American Lung Association maintains that Judge Kessler was well within her authority to prohibit the companies from using "light," "low-tar" and other phrases designed intentionally to mislead the public - despite the tobacco industry's subsequent request to continue to use these deceitful phrases abroad.
Sentelle and Tatel -- who dominated the nearly three hours worth of argument, held in the court's ceremonial courtroom -- questioned whether Kessler and the government sufficiently and clearly identified the acts that make up a pattern of racketeering activity. Sentelle explored the extent to which a corporation, beyond any individual employee, can be found to have a specific intent to defraud.
"They had to turn our entire industry into something like the Gambino family," argued Jones Day partner Michael Carvin, who represented Philip Morris with Gibson, Dunn & Crutcher partner Miguel Estrada. RICO laws, established in 1970 to take on the mob, are commonly used in the criminal arena. . . .
Meyer Glitzenstein & Crystal partner Howard Crystal, representing public health groups as intervenors, argued Tuesday that tobacco companies should be required to fund a smoking cessation program. "Here what we have is a contract of addiction," Crystal argued. Smokers, he said, are an asset of the tobacco industry.
Sentelle asked Justice Department lawyer Mark Stern several times whether the government was challenging the tar numbers on cigarette boxes -- asking for a yes or no response -- but the judge did not immediately get a answer. "Counsel, you've been coming here a long time and you know that you need to answer my questions," Sentelle told Stern. Stern called the numbers misleading. Carvin disagreed. "'Light' is perfectly truthful, legitimate and endorsed by the (Federal Trade Commission)," Carvin said. . . .
Sentelle and Tatel questioned whether Kessler had authority to force convenience store owners to put up "corrective" signs in stores for each cigarette product on sale. "Where's the due process of making store owners put up signs?"
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All Things Considered, October 14, 2008 · A federal appeals panel hears oral arguments in the Clinton-era case accusing the tobacco industry of violating civil racketeering laws by defrauding the public about the deadly nature of cigarettes.
Kessler ruled after a nine-month trial that the cigarette makers violated U.S. racketeering laws by misleading consumers about the risks of smoking. In a 1,653-page decision, she ordered the companies to stop marketing their products as ``light'' and ``low-tar'' and to issue ``corrective statements'' about the health effects and addictiveness of smoking.
``She's imputing to them knowledge of corporate employees with whom they'd never come in contact,'' Michael Carvin, a lawyer for the companies, today told a three-judge panel. ``You need specific intent by an individual.'' . . .
The companies argued that, because of voluntary marketing and advertising restrictions contained in a 1998 settlement with 46 states, there is no reasonable likelihood they will break the racketeering law in the future. While the trial was proceeding, the appeals court directed Kessler to consider only legal remedies designed to ``prevent and restrain'' future violations.
British American Tobacco, based in London, claimed that its activities, which included communications with its former U.S. affiliate, Brown & Williamson, and document destruction in Australia and Canada, aren't sufficient to subject it to U.S. liability.
Kessler found that Liggett isn't likely to violate RICO in the future.
A government lawyer, Mark Stern, argued that Kessler's opinion identified ``countless statements and also acts that were authorized at the highest level.''
Circuit Judges David Sentelle and David Tatel questioned Stern closely about the government's contention that the ``lights'' and ``low-tar'' labels were fraudulent. . . .
A group of public-health organizations, including the Tobacco-Free Kids Action Fund, the American Cancer Society and the American Lung Association, joined in the appeal to argue that Kessler should have considered stronger measures against the companies, including a program of anti-smoking education, smoking cessation programs and youth-smoking remedies.
Howard Crystal, a lawyer for the health groups, argued that Kessler should have used a provision of the RICO law that permits judges to divest racketeers of assets to order an anti- smoking campaign and smoking cessation programs.
Arnold & Porter partner David Eggert, representing Philip Morris on appeal in a complex civil RICO case that is set for oral argument today, raised this point in a brief: the federal district judge who sided with the government in 2006 in bringing sanctions against Big Tobacco copied government language—right down to typographical errors.
U.S. District Judge Gladys Kessler’s 1,653-page ruling, Eggert wrote in an appellate brief, “reproduced large sections of the government’s proposed findings verbatim, complete with the government’s typographical errors. Indeed, over 80 percent of the court’s findings were simply copied from the government’s proposed findings.”
Arnold & Porter lawyers ran Kessler’s landmark decision through a program called “WCopyfind,” plagiarism-detecting software distributed for free by a physics professor at the University of Virginia. The program, found at the “Plagiarism Resource Site,” detects shared text between documents. Eggert noted two typographical errors in a footnote.