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United States of America v. Philip Morris Usa Inc.

July 27, 2012


Appeal from the United States District Court for the District of Columbia (No. 1:99-cv-02496)

The opinion of the court was delivered by: Brown, Circuit Judge

Argued April 20, 2012

Before: SENTELLE, Chief Judge, BROWN, Circuit Judge, and SILBERMAN, Senior Circuit Judge.

Opinion for the Court by Circuit Judge BROWN.

In this latest round in the Government's heavyweight bout against the tobacco industry, the defendant cigarette manufacturers challenge the district court's refusal to vacate injunctions imposed in 2009.

Because the district court's ruling survives our review, we give this round to the Government.


Thirteen years ago, the Government sued several cigarette manufacturers and related industry organizations for civil violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"). The suit asserted the defendants had conspired to deceive consumers about the health effects and addictiveness of smoking. It sought injunctive relief and disgorgement of $280 billion in profits under RICO's Section 1964(a). See 18 U.S.C. § 1964(a).

On appeal of an interlocutory order, we held Section 1964(a) did not provide a disgorgement remedy. We explained that because the Section only affords the district court with jurisdiction to "prevent and restrain" future RICO violations, the court was "limited to forward-looking remedies." United States v. Philip Morris USA, Inc., 396 F.3d 1190, 1198 (D.C. Cir. 2005). Disgorgement, as "a quintessentially backward-looking remedy," was out. Id.

The district court proceeded to conduct a nine-month bench trial, make over 4000 findings of fact, and impose an extensive set of injunctions. The court identified "more than 100 predicate [RICO violations] spanning more than a half- century," and found the defendants' "numerous misstatements and acts of concealment and deception were made intentionally and deliberately . . . as part of a multi-faceted, sophisticated scheme to defraud." United States v. Philip Morris USA, Inc., 449 F. Supp. 2d 1, 909 (D.D.C. 2009) ("Injunction Opinion"). Based on that long history of misconduct, and the defendants' "countless [future]

'opportunities' and temptations to take similar unlawful actions in order to maximize their revenues," the court determined there was "a reasonable likelihood that

[d]efendants' RICO violations will continue in most of the areas in which they have committed violations in the past." Id. at 909-12. Asserting its authority to "prevent and restrain" the defendants from committing such future RICO violations, 18 U.S.C. § 1964(a), the court prohibited the defendants from making false or deceptive statements about cigarettes, or "conveying any express or implied health message or health descriptor for any cigarette brand." Id. at 938. The court also ordered the defendants to issue "corrective statements" in various media outlets about the health effects of smoking, id. at 938-41, and disclose certain marketing and sales information to the public and the Department of Justice, id. at 941-45.

On appeal, we affirmed all but four discrete aspects of the injunction order and remanded for further proceedings on those narrow issues alone. See United States v. Philip Morris USA, Inc., 566 F.3d 1095 (D.C. Cir. 2009) (per curiam) ("Affirmance Opinion"). We held the district court had jurisdiction to issue the injunctions because it did not clearly err in finding the defendants exhibited a reasonable likelihood of committing future RICO violations. See id. at 1131-34. And though we acknowledged that the court's chosen injunctions were "broad," we held that breadth was "warranted to prevent further violations where[, as here,] a proclivity for unlawful conduct has been shown." Id. at 1137.

Exactly one month after we issued our opinion, the President signed the Family Smoking Prevention and Tobacco Control Act (the "Tobacco Control Act" or the "Act") into law. See Pub. L. No. 111-31, 123 Stat. 1776 (2009). The Act imposed stringent restrictions on the conduct of cigarette manufacturers. It limited marketing by prohibiting distribution of branded merchandise, id. § 102, false or misleading labeling, id. § 903(a), and claims of reduced risk of harm (such as the use of descriptors like "light" or "mild") without prior approval of the FDA, id. § 911. It strengthened warning labels by directing cigarette manufacturers to include one of several textual warnings on ...

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