.


FOR IMMEDIATE RELEASE  

Contact: Edward L. Sweda
 Mark Gottlieb
(617) 373-2026

e-mail to media[at]tplp.org (use @sign)

 

August 17, 2006

 

US CIGARETTE COMPANIES LIABLE FOR VIOLATING
FEDERAL ANTI-RACKETEERING STATUTE

 

Backgrounder and Commentary

 

 

The importance of today's decision will be minimized by the racketeering defendants, but the historic finding and remedies imposed by the Court will 1) forever brand the cigarette companies as racketeers; 2) energize trial attorneys and provide a powerful set of documentary and testimonial evidence and findings of fact to bolster cigarette litigation; 3) undermine the credibility of the companies as they try to push into emerging markets around the world; and 4) serve as a powerful antidote to cigarette company attempts to portray themselves as responsible corporate citizens.

 

 

 

Background

UNITED STATES COURT OF APPEALS,
DISTRICT OF COLUMBIA CIRCUIT. 

UNITED STATES OF AMERICA,
plaintiff

 v.

 PHILIP MORRIS USA INC., f/k/a Philip Morris Incorporated, et al.,
defendants,

Case No. 99-2496.

For background on the trial, please see The United States Government’s Racketeering Lawsuit against the Cigarette Industry (pdf) by Mark Gottlieb, Edward Sweda, Jr. and Sara D. Guardino (at
www.wmitchell.edu/tobaccolaw/resources/DOJ.pdf).

 

The Decision:

 

 Judge Kessler's Final Opinion weighs in at around 1,700 pages.  Much of it is dedicated to presenting the Court's Findings of Fact which articulately describes the despicable history of the defendants' deadly misdeeds over half a century.  For example, over the first 200 pages, Judge Kessler describes:

the intricate, interlocking, and overlapping web of national and international organizations, committees, affiliations, conferences,research laboratories, funding mechanisms, and repositories for smoking and health information which Defendants established, staffed, and funded in order to accomplish the following goals: counter the growing scientific evidence that smoking causes cancer and other illnesses, avoid liability verdicts in the growing number of plaintiffs’ personal injury lawsuits against Defendants, and ensure the future economic viability of the industry.

In Section 1959 of the Opinion, Judge Kessler summarizes the Defendants' scheme to defraud consumers by stating:

For approximately forty years, Defendants publicly, vehemently, and repeatedly denied the addictiveness of smoking and nicotine's central role in smoking. They made these denials out of fear that public acknowledgment of what was so well documented and widely accepted internally within their corporate offices and scientific laboratories could result in governmental (i.e., FDA) regulation, adverse liability judgments from addicted smokers suffering the adverse health effects of smoking, loss of social acceptability of smoking, and the ultimate loss of corporate profits.

The Court also rejected the cigarette companies' long-standing strategy of stating that "everybody knew" that their products were dangerous while simultaneously claiming that "nobody knows" what causes lung cancer and other cigarette-caused diseases.  Judge Kessler asks at Section 1361, "if everybody knew” that smoking and nicotine were addictive, then why were Defendants publicly, vehemently, and repeatedly denying it?" She goes on to observe that, "after reassuring the smoker that smoking was not bad for her health, and was not addictive, Defendants then blamed her for being unable to stop using the product they had so successfully marketed with false information."

 

Remedies Ordered by the Court

 

See the Court's Remedial Order

 

The Court has the power to issue remedial orders to prevent and restrain the defendants from committing future violations of the Racketeer Influenced and Corrupt Organizations (RICO) statute under which the lawsuit was filed.  The scope of available remedies was narrowed significantly after a controversial 2-1 decision by a panel of the DC Circuit Court of Appeals issued in February, 2005 that reversed Judge Kessler and found that the remedy of disgorgement, the taking of ill-gotten gains, was not available and, furthermore, remedies needed to be forward-looking and seeking to prevent new violations rather than backward looking and seeking to punish or correct past misconduct. 

 

Within these significant constraints, Judge Kessler, expressing some frustration with the limitations imposed by the DC Circuit Court of Appeals, fashioned the following remedies:

  • Prohibition of brand descriptors like “low tar,” “light,” “ultra light,” “mild,” “natural,” and any other words which reasonably could be expected to result in a consumer believing that smoking the cigarette brand using that descriptor may result in a lower risk of disease or be less hazardous.

  • Issuance of corrective statement dealing with (a) the adverse health effects of smoking; (b) the addictiveness of smoking and nicotine; (c) the lack of any significant health benefit from smoking “low tar,” “light,” “ultra light,” “mild,” and “natural,” cigarettes; (d) Defendants’ manipulation of cigarette design and composition to ensure optimum nicotine delivery; and (e) the adverse health effects of exposure to secondhand smoke.  These statements will appear on the Defendants' websites; on or in all cigarette packs; in full page ads in all major newspapers; retail countertop displays; and primetime network TV spots. Such disclosures will really educate consumers and, to a large extent, help to inoculate them against the massive cigarette company public relations and image rehabilitation campaigns that have been going on throughout the decade.

  • Make all litigation documents and key evidence available on Defendants' websites through 2016.

  • Disclose disaggregated marketing data to the Government.

  • Pay the Government's cost associated with the litigation (which may be in 10 figures).
     

Some remedies that the Court did not issue in addition to disgorgement included a national smoking cessation program and national counter-marketing program.  This saved the Defendants billions of dollars.

 

From Blueprint to Treasure Map

 

The findings of fact set forth by the Court lay out with great detail exactly how the cigarette companies worked together to defraud the public, leading to incalculable injury to their customers. Everything the Judge describes has been proven to the Court through the submission of documents and testimony.  It tells a shocking story, but beyond that, it gives trial lawyers representing the Defendants' injured customers or their estates an unprecedented tool for persuading juries in subsequent proceedings.

 

It is difficult to imagine that trial attorneys will not seize the opportunity provided by this decision to file tens of thousands of new cases in the near to mid-term. This Opinion, combined with the effect of a major state supreme court decisions in Massachusetts and, particularly, Florida, that have greatly benefited plaintiffs, adds dramatically to the cigarette companies' legal woes.

 

Appeals

 

Obviously, the cigarette companies will appeal the finding of liability for engaging in racketeering to the DC Court of Appeals and, perhaps eventually, to the U.S. Supreme Court.  The Government should appeal the 2005 finding of the appeals court that drastically reduced the scope of remedies.  The Government sought to appeal that decision to the U.S. Supreme Court last year, but the appeal was reject as premature because the trial court had yet to issue its Opinion.  If the Government is successful in such an appeal, it could reopen the remedies process.

 

One remarkable aspect of this trial was the allegations of political interference from political appointees at the Department of Justice in the final weeks of the trial.  These allegations are part of a lawsuit brought against the DOJ by Citizens for Responsibility and Ethics in Washington (CREW).  They also led the judge to allow a group of membership-based public health organizations to act as interveners or parties to the remedies portions of the trial.  A leading member of this group of organizations, the Campaign for Tobacco Free Kids, has indicated that the remedies order should be appealed. 

 

Commentary:

 

Mark Gottlieb, Director of the Tobacco Products Liability Project at Northeastern University School of Law in Boston, noted that, "while the lack of a large payout by the Defendants is unsatisfying, the findings of fact and conclusions of law issued by Judge Kessler are absolutely devastating for the cigarette companies.  They are now adjudicated racketeers.  Trial lawyers will take advantage and lawmakers, policy-makers, and the public will be shocked to learn how these companies' wanton disregard for their customers and their unbridled greed led them to commit the atrocities described by the Court."

 

 

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See our Mid-trial Summary Report (2-4-05) (pdf)

See our Pre-Trial Backgrounder and Q&A on the case