Big Tobacco suffered a big loss in the U.S. Court of Appeals for the D.C. Circuit today.
The court, upholding a trial judge’s landmark ruling, found Big Tobacco liable in a decades-long conspiracy to deceive consumers about the adverse health effects of smoking, a substantial win for the Justice Department in a closely-watched RICO case. The appeals court, however, rejected the government’s request to seize billions of dollars in corporate profit from companies that include Altria Group, Reynolds, and Brown and Williamson.
A three-judge D.C. Circuit panel, ruling per curiam in a 92-page opinion today, partly vacated the trial court’s remedial order against the defendant tobacco companies and remanded for further proceedings to address four narrow issues. The appeals court wants further analysis of whether subsidiaries of the defendants should be ordered to comply with remedies and the court wants the trial judge to reexamine the issue of injunctive signage at retail stores. The D.C. Circuit opinion is here.
Justice lawyers, led by Mark Stern, who argued the case in October, alleged the defendant cigarette companies conspired to dupe consumers about the health affects and addictiveness of smoking. The case went to trial in September 2004 and lasted nine months. Government lawyers argued, among other things, that the defendants manipulated nicotine to sustain addiction and marketed and promoted low-tar cigarettes as less harmful than “full flavor” cigarettes.
Lawyers for the tobacco companies argued that Judge Gladys Kessler of U.S District Court for the District of Columbia failed to note in her order the racketeering acts to substantiate liability against the defendants.
“While it is true the district court’s opinion provided no single, discrete list of specific racketeering acts, the comprehensive findings—detailing over one-hundred racketeering acts—are sufficient to warrant affirmance,” the appellate judges said. The D.C. Circuit holds that a mix of individuals and corporations may comprise a RICO enterprise. The court declined to explore the extent to which RICO laws have reach outside the United States.
The defense lawyers for the tobacco companies say the Justice Department failed to prove specific intent to defraud on behalf of the corporations themselves. The appeals court was not convinced.
Government lawyers presented evidence showing that scientists working within the companies—and scientists hired by the companies—were continually researching the health effect and addictiveness of smoking.
“The evidence at trial demonstrated that the results of this research—essential to the core of the defendant’s operations, including strategic planning, product development, and advertising—were well known, acknowledged, and accepted throughout the corporations,” the appeals court wrote.
Kessler, who presided over the liability and remedies phases of the trial, denied the government’s request for a smoking cessation program and youth smoking reduction plan. The panel juges—Chief Judge David Sentelle and Judges David Tatel and Janice Rogers Brown—affirmed Kessler’s ruling on those proposed remedies.
The appellate court also upheld the remedy that bans cigarette makers from using “low tar” and “light” in marketing. Lawyers for the companies, including Michael Carvin of Jones Day and Miguel Estrada of Gibson, Dunn & Crutcher, argued Big Tobacco is immune from liability because the Federal Trade Commission permitted cigarette companies to use such labeling. The D.C. Circuit panel said last year’s Supreme Court decision in Altria v. Good undercuts the defendants’ argument because the FTC never condoned “light” and “low tar” descriptions.
Carvin and Estrada declined to comment on the D.C. Circuit ruling. An Altria Group official was not immediately reached for comment. A Justice Department spokesman also declined to discuss the ruling, saying Justice is still assessing the opinion.
The appeals court dismissed two trade associations that were defendants in the case but upheld liability against nine cigarette manufacturers, including the Altria Group.