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A lawsuit over the marketing of light cigarettes could be headed back to the U.S. Supreme Court after a federal judge denied a motion to apply facts found in a previous case to the current one.
U.S. District Judge John Woodcock said in a 16-page decision issued Friday that it would not be fair to the litigants to apply the facts found by a judge in a jury-waived criminal trial in a case brought by the U.S. Department of Justice against tobacco companies to the potential class-action civil suit.
The lawsuit contends smokers of Marlboro Lights, Virginia Slims Lights and other light cigarettes were misled into thinking that the cigarettes contained less tar and nicotine than regular cigarettes.
Attorneys for the plaintiffs, who live all over the country, had asked Woodcock to apply the doctrine of collateral estoppel to the current case and adopt the facts found in the 2005 verdict in which a federal judge in Washington, D.C., concluded cigarette makers had violated racketeering statutes.
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Judge Kessler‟s exhaustive August 17, 2006 ruling contains thousands of factual findings against the tobacco company defendants and in this ensuing multi-district litigation, individual smokers, who claim harm from smoking light cigarettes, are anxious to avoid proving before this Court what the United States so painstakingly proved to Judge Kessler. Relying on the doctrine of issue preclusion, they ask this Court to hold that Philip Morris USA, Inc. (PM) and its corporate parent Altria, Inc. (Altria) are bound by Judge Kessler‟s factual findings. From the standpoint of judicial efficiency, the Plaintiffs‟ argument has an undeniable attractiveness. However, upon analysis, the Court concludes the Plaintiffs have failed to meet their burden to establish the criteria for non-mutual issue preclusion, and the Court denies their motion. . . .
Whether PM and Altria violated various state marketing and unjust enrichment statutes by fraudulently advertising light cigarettes is distinct from whether nine different cigarette companies and trade organizations participated in a decades-long enterprise to defraud consumers in six different ways. Liability in the pending actions must depend on the specific actions or inactions of the named defendants in relation to light cigarettes.
Similarly, liability in DOJ was based on fraudulent activity that took place “throughout the past fifty years.” DOJ, 449 F. Supp. 2d at 866. Many of the proposed class periods for the pending cases, however, are limited to fraudulent activity occurring within a more circumscribed time.15 The DOJ conclusions based on the consideration of a larger time period do not sufficiently overlap. . . .
None of the predicate RICO actions alleged against Altria involved light cigarettes, . . .
The additional Parklane considerations underscore why issue preclusion is inappropriate in this case. First, the decision in DOJ was reached through a bench trial whereas the Defendants are entitled to a jury trial in the pending actions. Although Parklane found the lack of a jury in the initial action did not bar offensive issue preclusion and was “basically neutral,” 439 U.S. at 332 n.19, Parklane also gave district courts “broad discretion” over the issue preclusion decision. Id. at 331. The Court follows the lead of other courts that have given weight to the deprivation of a jury trial.
Second, the Court is concerned about the possibility for jury confusion and the lack of efficiency.18 Punitive damages may not be used to “punish a defendant for injury that it inflicts upon nonparties.” Williams, 549 U.S. at 353. If issue preclusion were imposed, however, much of the Defendants‟ underlying liability would be based in part on actions that inflicted injuries
Furthermore, proving causation and reliance might also involve the introduction of evidence that duplicates DOJ‟s basic findings, negating efficiency benefits. The Plaintiffs contend that “the majority of plaintiffs” do not have to prove “reliance and deception.” However, they base this argument on statutes from only two of the states in which actions are pending, Pls.’ Mot. for Collateral Estoppel at 17-19, and implicitly concede that some Plaintiffs will have to make both showings.
Finally, even if issue preclusion were appropriate against PM, there is a significant question as to whether it may be used against Altria. Applying issue preclusion to PM and not to Altria would yield few efficiency benefits and would likely confuse the jury.
Because the Plaintiffs have failed to satisfy traditional issue preclusion requirements and additional fairness considerations weigh against its application, the Court declines to apply the doctrine of issue preclusion to the facts in these consolidated cases.
III. CONCLUSION
The Court DENIES the Plaintiffs‟ Motion for Collateral Estoppel (Docket # 59).
Smokers suing Philip Morris and its parent company over light cigarettes will have to start from scratch with their lawsuit in Maine.
A federal judge in Bangor has denied plaintiffs' request to have facts from a previous lawsuit by the Department of Justice applied to the new litigation over so-called "light" or "low-tar" cigarettes. The order, issued Friday, will likely be appealed.
The Obama administration wants the U.S. Supreme Court to help it recover $280 billion from the major tobacco companies, money described as "ill-gotten gains" from past racketeering violations. . . .
U.S. District Judge Gladys Kessler didn't mince words in her ruling: "(T)he evidentiary picture must be viewed in its totality ... to fully appreciate how massive the case is against (the companies), how irresponsible their actions have been and how heedless they have been of the public welfare and the suffering caused by the cigarettes they sell." . . .
Curiously, Estrada easily could have been sitting on the Supreme Court instead of arguing before it.
President George W. Bush named him to the U.S. Appeals Court for the District of Columbia Circuit in 2001. The court, often called the second most important in the country, is prime hunting territory when presidents go looking for Supreme Court nominees.
Even though Republicans took over the U.S. Senate in 2003 -- Estrada's nomination was held up -- minority Democrats were able to filibuster to keep his nomination from a vote on the Senate floor, so Estrada remained in private practice.
Meanwhile, the justices should decide whether to accept the administration and tobacco companies petitions, or just one of the petitions, or simply just deny review to the whole shebang sometime over the next several months.
The pre-trial ruling for which the United States seeks review rejected the proposed remedy under the civil provisions of the Racketeer Influenced and Corrupt Organizations Act (RICO) seeking forfeiture of the cigarette industry’s ill-gotten gains flowing from sales to children. It also limited other potential remedies that often available to the judiciary unless they were clearly “forward looking” and carefully tailored to prevent future RICO violations. . . .
Mark Gottlieb, Director of the Tobacco Products Liability Project at Northeastern University School of Law in Boston said: “The Solicitor General’s Petition is enormously important because it could result in a second opportunity for the District Court to mete out justice with a fuller option of remedies in its arsenal. These could include disgorgement of ill-gotten gains; industry-funded cessation programs; counter-marketing; and many other remedies.”
Edward L. Sweda, Jr., Senior Attorney for the Tobacco Products Liability Project noted that: “Freed from the constraints of the pre-trial decision by the DC Circuit Court of Appeals, the District Court would be able to reshape the public health landscape around cigarettes and prevent future violations of RICO.”
The Obama administration wants the Supreme Court to allow the government to seek nearly $300-billion from the tobacco industry due to a half century of deception.
We spoke with a local tobacco farmer about this issue and what might happen if the government gets the money.
"As far as the 50 states, Kentucky ranks the highest in tobacco production, and if something like this were to happen, there'd be many families affected by this," said Joel Cook, a local tobacco farmer from Simpson County.
Cook just recently sold the last of his tobacco crop, and he'll start replanting mid-March to once again start the year-long process of growing tobacco.
Tobacco companies are relying heavily on the First Amendment in challenging the government’s prosecution of cigarette makers under the federal racketeering statute.
Several big tobacco companies filed briefs at the Supreme Court on Feb. 19, seeking reversal of an appeals court ruling that upheld a finding of guilt under the RICO law (Racketeeering Influenced and Corrupt Organizations Act). The finding was based on a “multi-faceted, sophisticated scheme to defraud” the public about the dangers of smoking.
The companies assert that the First Amendment protects statements made to congressional committees and in press releases that the government pointed to in its prosecution. The district court and the U.S. Court of Appeals for the D.C. Circuit ruled that because the statements were examples of fraudulent commercial speech, they were not protected by the First Amendment.
If the rulings are allowed to stand, Philip Morris USA told the Supreme Court, “the government will henceforth be free to pervert RICO into a device for … penalizing and chilling public debate on scientific matters, and constraining constitutionally protected speech.” D.C. lawyer Miguel Estrada, author of the brief in Philip Morris v. U.S., asserted that under the 1984 Supreme Court ruling Bose Corp. v. Consumers Union, the appeals court should have fully reviewed the record because of the First Amendment issue involved.
In a separate brief in the parallel case R.J. Reynolds Tobacco Company v. U.S., R.J. Reynolds said the statements challenged by the government were valid opinions at the time, not fraudulent statements. For example, when companies and the now-defunct Tobacco Institute denied the harmfulness of secondhand smoke in the 1980s, their view was “shared by very reputable scientists,” wrote D.C. lawyer Michael Carvin in the R.J. Reynolds brief.
The Justice Department asked the Supreme Court on Friday to review a 2006 federal fraud racketeering conviction against the tobacco industry and to authorize the district judge in the case to require tobacco companies to give up as much as $280 billion in "ill-gotten gains." . . .
If the Supreme Court were to agree to reopen the case, "it puts everything back on the table," said Richard A. Daynard, a tobacco law specialist at the Northeastern University School of Law in Boston. "However rich these companies are, they're not quite that rich. The court would have to decide whether it wanted to bankrupt the companies."
David Adelman, a tobacco industry analyst at Morgan Stanley, predicted that the Supreme Court would accept the case. But he said it was unlikely that the necessary legal decisions would go against the tobacco companies to require them to pay the money the Justice Department was seeking.
"It's certainly not a good development for the industry," Mr. Adelman said, but added, "I think it's a manageable issue."
In its filing Friday, Philip Morris, maker of the dominant Marlboro brand, wrote that some of what it termed the trial judge's "flimsy" findings had penalized companies for exercising free-speech rights in questioning some of the emerging science on tobacco and addiction.
Should Philip Morris be responsible for paying for anti-smoking campaigns or for returning profits made over the years from sales of their dangerous products to consumers? Clearly, in the U.S., the original ruling had a huge impact on smoking and on cigarette sales, but the impacts did not extend into non-U.S. countries where companies like Philip Morris continued to feed misleading and deceptive marketing to smokers. The fact that Philip Morris could actually afford to pay either the damages or the penalties as originally ordered is a sign that cigarette smoking continues around the world, and that the companies are a long way from going up in a puff of their own smoke.
Tobacco giant Philip Morris USA, a division of Altria Group (MO), on Friday asked the U.S. Supreme Court to throw out the landmark ruling determining that the cigarette industry had misled the public about the dangers of smoking. Hours later, the Obama administration asked the court to allow it access to nearly $300 billion in what it calls ill-gotten profits from the industry. The dueling filings are the latest chapter in an epic legal fight that has gone on for more than a decade.
In its filing, Philip Morris asked the court to overturn a massive racketeering verdict that forced the company to change its practices and increase its warnings about the dangers of smoking. Philip Morris argued that, in addition to letting the U.S. "pervert" the racketeering statute, known as RICO, the courts had violated its First Amendment rights.
"Absent further review, the government will henceforth be free to pervert RICO into a device for evading the legislative process, penalizing and chilling public debate on scientific matters, and constraining constitutionally protected speech through vague and sweeping injunctions," Philip Morris said in its appeal.
The tobacco industry and the Obama administration filed dueling appeals with the U.S. Supreme Court on the government’s racketeering suit against the industry, a case that at one point sought $280 billion.
Cigarette makers, including Altria Group Inc.’s Philip Morris USA, are asking the court to review a ruling that they conspired to defraud the public about the dangers of smoking. The ruling could open companies to continuing judicial oversight and impose more stringent limits than the 2009 law that let the Food and Drug Administration regulate tobacco.
Philip Morris, the maker of Marlboros and the largest U.S. tobacco company, called the lawsuit “an unprecedented effort to use litigation to obtain extensive regulatory authority over the tobacco industry that, until recently, it had been unable to secure through the legislative process.” . . .
Private litigants have attempted to use Kessler’s 1,653- page opinion as ammunition in their own lawsuits against tobacco companies. A federal appeals court in Washington upheld Kessler’s ruling in May.
Philip Morris contends that, because the case affects its free-speech rights, the appeals court should have given closer scrutiny to Kessler’s factual conclusions. The cigarette maker, based in Richmond, Virginia, also argues that the lower courts improperly extended the reach of RICO.
QUESTION PRESENTED
Under 18 U.S.C. 1964(a), a district court has jurisdiction to issue "appropriate orders" to "prevent and restrain" violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1961 et seq.
Respondents were found liable for decades-long RICO violations that entailed a multi-faceted scheme to defraud the American public for the purpose of addicting smokers, deceiving actual and prospective smokers about the health effects and addictive properties of respondents' products, and thereby obtaining revenue from the sale of cigarettes. The question presented is:
Whether 18 U.S.C. 1964(a) categorically bars a district court from ordering disgorgement of ill-gotten gains as well as other equitable relief, such as smoking- cessation and public-education remedies, designed to redress the continuing consequences of RICO violations. . . .
Reasons for granting the petition...... 13
A.
The D.C. Circuit's narrow interpretation of Section 1964(a) conflicts with decisions of this Court and imposes unwarranted constraints on equitable jurisdiction ...... 14
B.
The D.C. Circuit's interpretation of Section 1964(a) conflicts with decisions of other courts of appeals ...... 26
C.
The court of appeals incorrectly decided an issue of exceptional importance . . .
1. The United States brought this action under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1961 et seq., against nine cigarette manufacturers and two related trade organizations. For the last half century, those defendants (collectively, respondents) have engaged in a pattern of racketeering activity and a conspiracy to engage in racketeering that has cost the lives and damaged the health of untold millions of Americans.
As the district court explained, "the evidentiary picture must be viewed in its totality in order to fully appreciate how massive the case is against [respondents], how irresponsible their actions have been, and how heedless they have been of the public welfare and the suffering caused by the cigarettes they sell." Pet. App. 298a.
Respondents' business "survives, and profits, from selling a highly addictive product which causes diseases that lead to a staggering number of deaths per year, an immeasurable amount of human suffering and economic loss, and a profound burden on our national health care system."
QUESTIONS PRESENTED
"It is a longstanding principle of American law that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States." EEOC v. Arabian Am. Oil Co., 499 U.S. 244, 248 (1991) (Aramco) (emphasis added; internal quotation marks omitted).
The questions presented are:
1. Whether the D.C. Circuit correctly held, in conflict with decisions of other circuits and of this Court, that the traditional presumption against extraterritoriality is completely irrelevant to determining whether Congress intends a statute to reach the wholly foreign conduct of a foreign corporation, if such foreign conduct is alleged to have had a direct and substantial effect within the United States.
2. Whether the D.C. Circuit, in concluding that the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. ¤ 1961 et seq. (RICO), regulates petitioner's wholly foreign conduct, improperly (a) ignored the presumption against extraterritoriality and affirmative evidence that Congress never intended RICO to apply extraterritorially; (b) borrowed from federal securities and antitrust cases the ill-suited "effects" test as a measure of RICO's extraterritorial reach; (c) approved a watered-down version of that test that conflicts with the test used by other circuits; and (d) relied on the U.S. "effects" of the U.S. conduct of other co-defendants and of the "overall" alleged RICO scheme. . . .
REASONS FOR GRANTING THE PETITION...... 9
I.
The D.C. Circuit's Decision Exacerbates Serious Conflicts And Confusion In The Lower Courts ...... 11
A. The Conflict Over The Meaning Of The Presumption Against Extraterritoriality...... 11
B. The Conflict And Confusion Over The Extraterritorial Reach Of RICO...... 17
C. The Conflict Over The Meaning Of The"Effects" Test...... 22
II. The Issues Presented Are Important And Recurring ...... 28
III. The Decision Below Is Erroneous
May a corporation be found to have the necessary specific intent to defraud in a RICO case without any evidence that any particular individual in the corporation had such specific intent? . . .
B. Altria Is Solely a Holding Company ......2
C. The Basis for Altria's Liability Is Four Attorney Cease-and-Desist Letters ......3
D. There Is No Evidence That Any Officer or Employee of Altria Had Any Specific Intent to Defraud in Sending the Letters ......3
E. Before and at Trial, the Government Disclaimed Any Need to Prove That Any Individual Officer or Employee Had Specific Intent......4
F. The Courts Below Upheld Altria's Liability Without Any Evidence That Anyone at Altria Had Specific Intent to Defraud......5
REASONS FOR GRANTING THE PETITION ......7 . . .
The RICO judgment against Altria was affirmed in the absence of any finding that any particular person caused the predicate acts of mail fraud charged against Altria with a specific intent to further any fraudulent scheme. Instead, both courts below apparently embraced the notion that Altria could be found liable under RICO pursuant to an inference based on findings that other corporate participants in the alleged RICO enterprise committed other acts with specific intent to defraud. That holding, which effectively dispensed with the need to prove specific intent as to each corporate defendant, conflicts with the holdings of other Courts of Appeals and presents an important issue that warrants this Court's review.
The United States brought this suit against the major domestic tobacco companies in an unprecedented effort to use litigation to obtain extensive regulatory authority over the tobacco industry that, until recently, it had been unable to secure through the legislative process. The government alleged that defendants violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. ¤ 1961 et seq., by associating together to operate a purported racketeering enterprise for the purpose of defrauding the public about the health risks of smoking.
The government sought sweeping injunctive relief under 18 U.S.C. ¤ 1964(a), which authorizes courts to "prevent and restrain" likely future RICO violations.
After a nine-month trial, the district court issued a 1,600-page opinion that adopted the government's proposed findings of fact virtually verbatim. The court found that defendants had committed RICO predicate acts of mail and wire fraud based primarily on decades-old statements that challenged the public- health community's consensus on the health risks of smoking--statements that, if not found by the court to be fraudulent, would have been protected by the First Amendment. Notwithstanding the First Amendment rights at stake in the district court's determination, the D.C. Circuit applied the highly deferential clearly erroneous standard of review to the district court's factual findings, and affirmed in all significant respects. Shortly after that decision was issued, the President signed the Family Smoking Prevention and Tobacco Control Act, which granted the government extensive regulatory authority over the tobacco industry.
(1) Whether a court of appeals is required under the First Amendment and Bose Corp. v. Consumers Union of United States, Inc., 466 U.S. 485 (1984), to undertake independent appellate review where a district court has found that speech is not constitutionally protected because it is fraudulent. . . .
REASONS FOR GRANTING THE PETITION ......10
THE COURT OF APPEALS' APPLICATION OF THE HIGHLY DEFERENTIAL CLEARLY ERRONEOUS STANDARD OF REVIEW CONFLICTS WITH THE DECISIONS OF THIS COURT AND OTHER CIRCUITS......13
The Decision Below Deepens An Existing Circuit Split Regarding The Scope Of Bose's Independent Appellate Review Requirement......14
The Question Presented Has Profound Implications For Both First Amendment Rights And The Outcome Of This Exceptionally Important Case ......19 v
II. THE COURT OF APPEALS' HOLDING DISREGARDS THE JURISDICTIONAL BOUNDS OF RICO AND ARTICLE III ......24
The Court Of Appeals' Conclusion That A Group Of Corporations Can Form An "Associated In Fact" RICO Enterprise Conflicts With The Plain Language Of RICO ......24
Because The MSA And The Newly Enacted FDA Act Foreclose Future Racketeering, The District Court Lacked Jurisdiction To Issue Injunctive Relief......28
III. THE COURT OF APPEALS CONTRAVENED FED. R. CIV. P. 65(d) AND THIS COURT'S PRECEDENT WHEN IT RELIED ON THE DISTRICT COURT'S FACTUAL FINDINGS TO UPHOLD ITS VAGUE INJUNCTIONS ......31
(2) Whether federal courts may exercise injunctive jurisdiction under RICO and Article III of the Constitution where there is no statutory "enterprise" and any reasonable likelihood of future violations has been extinguished by, among other things, extensive federal tobacco legislation.
(3) Whether injunctions that track broad statutory commands may be upheld under Fed. R. Civ. P. 65(d) and this Court's precedent by "read[ing]" them "in the context" of the district court's voluminous factual findings.