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On September 28, 2009, the tobacco Defendants asked the US Court of Appeals, DC Circuit to stay issuance of its mandate for the Defendants to adhere to Judge Kessler's order, pending their filing and disposition of a petition for a writ of certiorari to the Supreme Court.
Defendants' motion briefly delineates the arguments they will undoubtedly present in their petition to SCOTUS, mainly, in the words of their motion:
- whether a court of appeals is required to undertake de novo review of factual findings in a case that squarely implicates a defendant's First Amendment rights;
- whether corporations can be part of an "association in fact" RICO enterprise; and
- whether jurisdiction over this case was extinguished by the enactment of new federal legislation [ie, the FDA bill] that imposes comprehensive regulation on every aspect of Defendants' business. . . .
- The balance of equities also weighs strongly in favor of a stay because, in the absence of a stay, Defendants would be required to incur substantial, unrecoverable expenses to comply with the district court's injunctions during the pendency of their petitions for certiorari. . . .
-whether the fraud statutes and First Amendment permit allowing a corporation's specific intent to defraud to be proven through the collective knowledge of various employees, instead of the actual specific intent of one or more particular employees;
-and whether the district court's injunctions are impermissibly vague and overbroad.
This paragraph is particularly intriguing:
The [Appeals Court] Panel held that Defendants had formed an "association in fact" RICO enterprise, and concluded that Defendants were likely to commit future RICO violations-even though they had entered into the MSA with the States in 1998, which categorically prohibited Defendants from engaging in the racketeering activity alleged by the Government.2 In reviewing the district court's findings on this (and every other) issue, the Panel applied the clearly erroneous standard of review (slip op. 45), rather than undertaking an independent review of the district court's factual findings. The Panel applied this "highly deferential" standard (id.) despite the fact that the Government's RICO allegations were premised on Defendants' constitutionally protected speech, including statements that Defendants had made in legislative and regulatory forums as part of the public-health debate about smoking.
The FDA argument was to be expected:
Shortly after the Panel issued its opinion, Congress enacted the Family Smoking Prevention and Tobacco Control Act ("FDA Act"), Pub. L. No. 111-31, 123 Stat. 1776 (June 22, 2009), which subjects every aspect of Defendants' business to comprehensive oversight by the Food and Drug Administration ("FDA"). On July 31, 2009, Defendants petitioned for rehearing or rehearing en banc on the grounds that both the Panel and the full Court should consider the effect of that intervening legislation and reconsider several aspects of the Panel's decision.
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The plaintiff's attorneys continued to present the government's opening statement. Ms. Eubanks discussed the development of a "gentlemen's agreement" to restrict in-house biological research. She contended that the defendants refused to provide useful information to the Tobacco Working Group and made other efforts to stymie or neutralize research. She discussed the defendants' promotion and marketing of low-tar and nicotine cigarettes as a way of reducing the risk of adverse health effects. She said that smokers believed the implied message: "low tar cigarettes are less harmful." Mr. Marine then summarized the evidence that will be introduced to show the defendants targeted youth with their advertising. He cited internal documents as proof that the industry viewed youth as replacement smokers. He accused the industry of document destruction and cited specific instances. . . .
105 pages
The witness, an attorney with Shook, Hardy and Bacon Law Firm, testified as a fact witness on behalf of the defendant. He responded to Dr. Schwartz's testimony that everyone deferred to Mr. Hoel regarding environmental tobacco smoke. He laughed at Dr. Schwartz's assertion that Mr. Hoel "seemed to be in charge of the entire industry." He discussed his firm's responsibility to protect the tobacco industry in product liability actions and to ensure the industry's continued viability. He described the positions of Brown & Williamson, American Tobacco Company and Philip Morris on the health effects of environmental tobacco smoke. The witness explained the process of the Special Projects on environmental tobacco smoke. The testimony ended abruptly as Mr. Hoel was rushed to the hospital in an ambulance. . . .
Pursuant to FED. R. APP. P. 41(d)(2) and D.C. Circuit Rule 41(a)(2), Defendants respectfully move this Court to stay issuance of its mandate pending the filling and disposition of timely petitions for writs of certiorari. This Court recognized the substantial nature of the arguments raised by Defendants—and the risk of irreparable harm confronting Defendants—when it issued a stay pending appeal. For similar reasons, a stay is also warranted pending the filing and disposition of Defendants’ petitions for certiorari.
A stay is appropriate because the Panel’s opinion raises substantial questions for certiorari, including: (1) whether a court of appeals is required to undertake de novo review of factual findings in a case that squarely implicates a defendant’s First Amendment rights; (2) whether corporations can be part of an “association in fact” RICO enterprise; and (3) whether jurisdiction over this case was extinguished by the enactment of new federal legislation that imposes comprehensive regulation on every aspect of Defendants’ business. The balance of equities also weighs strongly in favor of a stay because, in the absence of a stay, Defendants would be required to incur substantial, unrecoverable expenses to comply with the district court’s injunctions during the pendency of their petitions for certiorari. No other party would be prejudiced by the issuance of a stay because Defendants’ business will continue to be subject to stringent government oversight by the States and the federal Government while their petitions for certiorari are pending.
BEFORE: Sentelle, Chief Judge, and Ginsburg,* Henderson,* Rogers, Tatel, Garland,* Brown, Griffith, and Kavanaugh,* Circuit Judges
O R D E R
Upon consideration of the petitions of Philip Morris USA Inc., R.J. Reynolds Tobacco Co., Lorillard Tobacco Co., Altria Group Inc., and British American Tobacco (Investments) Ltd. for rehearing en banc, and the absence of a request by any member
Altria Group Inc.,Reynolds American Inc. and other U.S. cigarette makers signaled that they will ask the U.S. Supreme Court to overturn a ruling barring them from selling cigarettes as “light” or “low-tar.”
Altria, the biggest U.S. cigarette maker, and the other companies asked the U.S. Court of Appeals in Washington yesterday to delay implementation of its May 22 decision against them until the Supreme Court decides whether to hear the case.
“Defendants would be required to incur substantial, unrecoverable expenses to comply with the district court’s injunctions,” including the order barring the use of “light” or “low-tar” to describe their products, the defendants claimed in their request.
They've been a long time coming, but harsh new clampdowns on smoking have been signed into law by President Jacob Zuma, who is among the 78 percent of South African adults who don't smoke.
Owners of pubs, restaurants and workplaces who allow people to smoke in non-smoking areas may have sniffed at the paltry R200 fine they faced up to now, but may think twice of flouting the anti-puffing law now that the fine is R50 000.
Partially enclosed patios, balconies and walkways no longer qualify as open spaces, so smoking is out in those spots, too.
Parents can no longer subject their children to smoke-infested areas of restaurants, and adults may not smoke in a car if any of the passengers are under 12. . . .
It's now also illegal for the cigarette companies to stage "by invitation only" parties or use "viral" marketing to target young people - tactics the industry has resorted to since 2000 when advertising was banned. . . .
If the following post on a local blog is anything to go by, it's a strategy that's worked for them. In answer to the question "which brand do you smoke?" someone shared this: "I used to smoke Stuyvesant red. Then one day at RAU these super hot chickies were doing promos for Rothmans so I signed up!
"Ever since then they've been sending me two packs a month and free lighters, free stuff and party invites! Been smoking Rothmans ever since!"
More big changes are expected in the coming months . . .
Interestingly, two weeks after being ordered by US federal court judge Gladys Kessler to publicise the dangers of smoking and to stop marketing so-called "light" and "mild" cigarettes as healthier than others, the tobacco companies returned to court to effectively ask the judge if they could carry on deceiving their overseas markets about "light" and "low-tar" cigarettes.
Altria Group Inc. and other U.S. cigarette makers asked a federal appeals court to reconsider its ruling that the companies violated racketeering laws and barring them from marketing cigarettes as “light” or “low-tar.”
On July 31, Altria and the other companies asked the full U.S. Circuit Court of Appeals in Washington to overturn the decision by a three-judge panel in a case filed by the Clinton administration in 1999. In the May decision, the court upheld a 2006 ruling by U.S. District Judge Gladys Kessler, who found the companies conspired for decades to defraud the public and were likely to violate racketeering laws in the future.
“The panel’s opinion upholds the government’s unprecedented effort to impose pervasive regulation on the tobacco industry, not through legislative channels, but through the Racketeer Influenced and Corrupt Organizations Act,” Altria’s Philip Morris USA unit said in its court filing.
The companies have argued that the ban on “light” and “low-tar” descriptors, which was delayed pending resolution of the appeal, would cost hundreds of millions of dollars and would “fundamentally alter the business landscape.” . . .
In court papers filed July 31, Philip Morris argued that legislation signed in June giving the U.S. Food and Drug Administration new authority to regulate the tobacco industry “makes clear that there is no reasonable likelihood of defendants’ committing future RICO violations.”
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. . . .
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.
Altria Group Inc., the largest U.S. tobacco producer, and Reynolds American Inc. were accused in a consumer lawsuit of fraudulent marketing by claiming “light” cigarettes were less harmful than regular cigarettes.
The suit filed by three Tennessee residents on behalf of smokers who bought “light” or “ultra-light” cigarettes in the state since Jan. 1, 2005, seeks class-action, or group, status.
The tobacco companies “have known for decades that filtered and low-tar cigarettes do not offer a meaningful reduction of risk to smokers,” the plaintiffs said in the complaint, filed in Nashville federal court yesterday. “Their marketing, which emphasized reductions in tar and nicotine, was false and misleading.”
The lawsuit is unsuitable for class-action status because a wide array of individual issues prompt people to choose light cigarettes, Jack Marshall, a spokesman at Philip Morris, said in a telephone interview. . . .
Altria and Reynolds were convicted of violating racketeering laws in August 2006 when U.S. District Judge Gladys Kessler found the companies conspired for decades to defraud the public by marketing cigarettes as “light” or “low-tar.” The U.S. Court of Appeals in Washington in May upheld the conviction that also bars the companies from labeling the cigarettes as “light.” . . .
The case is Alcorn v. Philip Morris USA Inc., Altria Group Inc., R.J. Reynolds Tobacco Co. and Reynolds American Inc., 09cv0624, U.S. District Court of Middle Tennessee (Nashville).
* Tobacco industry once known for big spending on campaigns, effective lobbyists
* As public opinion has turned on Big Tobacco, courts and Congress has too
* Despite moves against industry, "tobacco wars are anything but over," author says . . .
"My own view is that in many ways, the tobacco industry invented the kind of special-interest lobbying that has become so characteristic of the late 20th- and earlier 21st-century American politics," said Allan Brandt, dean of Harvard's Graduate School of Arts and Sciences.
The industry was known for its giant spending on political campaigns and effective lobbyists. The industry's representatives often had experience in politics or close ties to major power players.
"Today obviously, that lobby is much less powerful and successful than it was a generation ago," said Brandt, author of "The Cigarette Century: The Rise, Fall, and Deadly Persistence of the Product That Defined America." . . .
And just last month, in what Brandt considers "one of the most significant racketeering and fraud litigations" the U.S. Court of Appeals for the D.C. Circuit upheld U.S. District Judge Gladys Kessler's ruling in a Racketeer Influenced and Corrupt Organizations, or RICO, case, which found the tobacco industry guilty of engaging in a decades-long conspiracy to defraud the American public about the health risks of tobacco.
"Given the character of Kessler's findings -- and now the fact that her findings have been upheld by the appeals court -- this is really in a way a road map to tobacco regulation," Brandt said.
Stanton Glantz, a longtime anti-tobacco advocate and director of the Center for Tobacco Control Research and Education at the University of California, San Francisco, said the RICO ruling is what the public health community should use in its fight against the tobacco industry.
"I think it really can undermine the power of the industry politically by going to politicians and saying, 'These guys are crooks. They are crooks according to the D.C. Court of Appeals. Not just me,' " Glantz said.
After more than a decade of struggle -- and countless smoking-related deaths -- the Senate overwhelmingly approved a bill on Thursday that gives the Food and Drug Administration the power to regulate tobacco products. The House approved a similar bill in April, also by an overwhelming margin. The days when this rogue industry could inflict its harmful products on Americans with impunity are drawing to a close.
This is an enormous victory for public health. For that, we owe thanks to tireless advocacy by the Campaign for Tobacco-Free Kids, a nonprofit organization, and strong endorsements from medical groups.
It still might not have passed without the decision by Philip Morris . . .
To the extent allowed by the First Amendment, the regulators could restrict advertising and promotions to children -- industry needs to addict them to keep replenishing the population of smokers -- and could shape advertisements aimed at adults as well. The agency could prohibit unsubstantiated health claims about supposedly "reduced risk" products and require larger, more effective health warnings on packages and advertisements. . . .
It has now been proved beyond a shadow of a doubt that cigarette makers have spent decades making false statements, suppressing evidence of harm, and manipulating the design of cigarettes to increase their addictiveness. Federal regulators should be able to stop many of these abuses -- and we hope help prevent more Americans from losing their lives to smoking.
After her clerkship, Gillibrand returned to Davis Polk, where she worked for nine years, logging long workweeks for a series of clients including the tobacco conglomerate Philip Morris. During her 2008 congressional reelection, operatives for Sandy Treadwell, her Republican opponent, compiled boxes of information that documented Gillibrand’s involvement with Philip Morris, but the media was largely uninterested. The New York Times revisited the material after Gillibrand’s Senate appointment. The Times’ 2,700-word front-page story depicted Gillibrand as a key player on the account, making trips to Philip Morris’s European cigarette-testing lab and using her office as a war room to plot strategy to defend the company against government claims that it knew tobacco was a carcinogen and hid that information from consumers. The story noted that Davis Polk allowed associates to decline to work for certain clients if they found the work ethically objectionable, but that Gillibrand appeared to have thrown herself wholeheartedly into her Philip Morris assignment.
. . . I asked her if she regretted her work, she answered with a defiant “No.” She didn’t defend the work on its own terms, however. “I had an opportunity to work with Robert Fiske on the case, and he is universally regarded as one of the great lawyers of our time,” she told me. Then she said, “And the work on that case allowed me to do pro bono cases.” . . .
Gillibrand says it was Bible study that awakened her to public service. “When I was working in New York, I taught a Bible class for 10-year-olds,” she says. “My favorite parable is the one Jesus tells about the talents.” She’s referring to the story in which a master becomes angry with a servant for wasting a coin, or “talent,” he was given. “What I took from that is we have to do the most with the talents God has given us. I was working as a corporate lawyer, where I wasn’t helping people. I was just helping big companies make money. And I wanted to do more.” The story may be true, but it clearly sounded rehearsed. . . .
It’s Schumer, more than anyone, who is responsible for Gillibrand’s relaunch. At Gillibrand’s lowest point, shortly after the Times tobacco story, New York’s senior senator agreed to cooperate with (and some suspect he orchestrated) what was viewed by some as a Times makeup call, a front-page story about how Schumer was taking Gillibrand under his wing. The piece implied that Schumer was supporting Gillibrand because he could manage her. The message Schumer meant to send was clear: He is on Gillibrand’s side and expects others to be as well.
I had an opportunity to work with Robert Fiske on the case, and he is universally regarded as one of the great lawyers of our time. . . . And the work on that case allowed me to do pro bono cases.NY Sen. Kirsten Gillibrand defends her work for Philip Morris in a NY Magazine article.
But defense lawyers and legal scholars following the case point out that the tobacco industry did not walk away with a wholesale loss. The cigarette makers "lost liability, but they lost the liability question years ago," said University of Notre Dame Law School professor G. Robert Blakey, who drafted the RICO law in the 1970s. "What they've won in this case is the narrowest possible remedy." . . .
Going forward, there are two main areas for a defense attack: corporate liability and available remedies.
The D.C. Circuit opinion -- issued per curiam by Chief Judge David Sentelle and judges David Tatel and Janice Rogers Brown -- rejected for a second time the government's bid for disgorgement as a remedy to prevent future RICO violations. . . .
Lawyers following the case predict the tobacco companies will also seek review in the high court on the liability finding, which is rooted in the government's theory that the defendants made up an "association-in-fact" enterprise with individuals and trade associations. Lawyers for the tobacco companies argued in briefs that association-in-fact enterprises involve individuals, not corporations. The D.C. Circuit, citing its own precedent, ruled that corporations can also be part of an association in fact.
The risk, say defense lawyers, is that a company will face RICO liability as part of an association-in-fact based on the actions of just a few employees. "It creates a huge opportunity for plaintiffs to haul multiple defendants into court, scare them with treble damages and induce them to settle cases that otherwise lack merit," said Steven Cottreau, a Washington partner at Clifford Chance who has defended clients in civil RICO cases.
More good news from a defense vantage: The appellate judges directed the trial court to re-examine whether subsidiaries should be lumped in with parent companies under the same remedial restraining order.
The unanimous ruling by a three-judge panel of the United States Court of Appeals for the District of Columbia upheld major elements of a 2006 lower court decision that found big tobacco companies guilty of racketeering and fraud as part of a prolonged campaign to deceive and addict the public. That 1,742-page opinion, rendered by Judge Gladys Kessler, laid out in painstaking detail how the tobacco companies made false statements and suppressed evidence to deny or play down the addictive qualities and the adverse health effects of smoking. . . .
The House has already voted to give the F.D.A. power to regulate tobacco. Senators, who are getting ready to vote on similar legislation, now have fair warning, if they needed any more, that this is a rogue industry. It can't be trusted to behave responsibly or even adhere to agreements it has signed. It is time to grant the F.D.A. the power to regulate the content and marketing of tobacco products.