U.S. v. Philip Morris Inc.

• Decision Date: 23 May 2003
• Docket Number: No. CIV.A.99-2496 GK.,CIV.A.99-2496 GK.
• Citation: 263 F.Supp.2d 72
• Parties: UNITED STATES of America, Plaintiff, v. PHILIP MORRIS INCORPORATED, et al., Defendants.
• Court: U.S. District Court — District of Columbia

263 F.Supp.2d 72

UNITED STATES of America, Plaintiff, v. PHILIP MORRIS INCORPORATED, et al., Defendants.

No. CIV.A.99-2496 GK.

United States District Court, District of Columbia.

May 23, 2003.

Robert D. McCallum, Jr., Sharon Y. Eubanks, Stephen D. Brady, Frank J. Marine, Gregory C.J. Lisa, U.S. Dept. of Justice, Washington, DC, for U.S.

David S. Eggert, Jonathan L. Stern, Arnold & Porter, Washington, DC, Timothy M. Broas, Dan K. Webb, pro hac vice, Thomas J. Frederick, Winston & Strawn, Chicago, IL, for Philip Morris USA, Inc., Altria Group, Inc.

Robert Francis McDermott, Jr., Jonathan M. Redgrave, Robert H. Klonoff, Michael A. Carvin, Michael S. Fried, Todd R. Geremia, Jones Day, Washington, DC, Robert C. Weber, pro hac vice, Paul Crist, Jones, Day, Reavis & Pogue, Cleveland, OH, for R.J. Reynolds Tobacco Co.

David M. Bernick, Kirkland & Ellis, Chicago, IL, Kenneth N. Bass, Kirkland & Ellis, LLP, Washington, DC, Stephen R. Patton, for Brown & Williamson Tobacco Corp. (individually, and as successor in interest to The American Tobacco Company).

Matthew David Schwartz, Edward Craig Schmidt, Thompson Coburn, LLP, Washington, DC, Michael B. Minton, J. William Newbold, Richard, Richard Paul

Cassetta, pro hac vice, Thompson Coburn, LLP, St. Louis, MO, for Lorillard Tobacco Co.

Aaron H. Marks, pro hac vice, Nancy E. Straub, pro hac vice, Leonard A. Feiwus, pro hac vice, Kasowitz, Benson, Torres Friedman, L.L.P., New York City, for Liggett Group, Inc.

Timothy M. Hughes, pro hac vice, Garyowen P. Morrisroe, Chadbourne & PArke, New York City, for British American Tobacco (investments) Ltd.

Steven Klugman, Steven S. Michaels, pro hac vice, Debevoise & Plimpton, New York City, for Council for Tobacco Research-USA, Inc.

James Alexander Goold, Covington & Burling, Washington, DC, for Tobacco Institute, Inc.

MEMORANDUM OPINION

KESSLER, District Judge.

This matter is now before the Court on Joint Defendants'¹ Motion for Partial Summary Judgment on Advertising, Marketing, Promotion, and Warning Claims and the United States' Cross Motion for Partial Summary Judgment on Affirmative Defenses. The Defendants² seek summary judgment as to the United States' advertising, marketing, promotion and warning claims on the basis that these claims are within the exclusive jurisdiction of the Federal Trade Commission ("FTC" or "the Agency"). The United States seeks summary judgment as to all of Defendants' affirmative defenses premised upon the FTC's purportedly exclusive jurisdiction.

Upon consideration of the Motions, Oppositions and the entire record herein, and for the reasons stated below, the Joint Defendants' Motion is denied and the Government's Cross Motion is granted in part and denied in part.

I. BACKGROUND

A. Factual Allegations

Plaintiff, the United States of America ("the Government") has brought this suit against the Defendants pursuant to Sections 1962(c) and (d) of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq.³ Defendants are manufacturers of cigarettes and other tobacco-related entities. The Government seeks injunctive relief and billions of dollars for what it alleges to be an unlawful conspiracy to deceive the American public.

The Government's Amended Complaint describes a four-decade long conspiracy, dating from at least 1953, to intentionally and willfully deceive and mislead the American public. According to the Government, the underlying strategy Defendants adopted was to deny that smoking caused disease and to consistently maintain that whether smoking caused disease was an "open question." Am. Compl. at ¶ 34. In furtherance of the strategy, Defendants allegedly issued deceptive press releases, published false and misleading articles, destroyed and concealed documents which indicated that there was in fact a correlation between smoking and disease, and aggressively targeted children as potential new smokers. Am. Compl. at ¶ 36.

The Government also alleges that over the course of the conspiracy, Defendants have made false and misleading statements concerning the addictiveness of nicotine. Defendants continually denied that nicotine is addictive, even in the face of what the Government calls overwhelming evidence to the contrary. Am. Compl. at ¶¶ 71-72. Defendants allegedly have taken actions to make cigarettes even more addictive by manipulating and increasing the potency of nicotine in their cigarettes. Am. Compl. at ¶ 77. Nevertheless, Defendants have repeatedly denied that they manipulated the level of nicotine in their products. Am. Compl. at ¶ 79.

The Government also alleges that Defendants have used deceptive marketing to exploit smokers' desire for less hazardous products and have "misled consumers by marketing products that consumers believe are less harmful, even though they are not." Am. Compl. at ¶ 83. For example, according to the Government, Defendants have marketed "light" or "low tar/low nicotine" cigarettes as being less hazardous to smokers even though there is no basis for believing they are safer than other cigarettes. Am. Compl. at ¶ 86.

II. SUMMARY JUDGMENT STADARD

Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment is appropriate if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P 56(c). Material facts are those that "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In considering a summary judgment motion, "the evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 255, 106 S.Ct. 2505; see also Washington Post Co. v. United States Dep't of Health and Human Servs., 865 F.2d 320, 325 (D.C.Cir.1989). In the pending Motions, we are concerned with issues of law, rather than factual disputes.

III. ANALYSIS

A. Overlapping Federal Statutes Must Each Be Given Effect Unless They Conflict

When two federal statutes overlap, courts must give effect to both, if at all possible. United States v. Borden Co., 308 U.S. 188, 198, 60 S.Ct. 182, 84 L.Ed. 181 (1939). Only if there is a "positive repugnancy" between overlapping statutes may a court regard one of them as impliedly repealed by the other. Id. Even then, the repeal of one federal statute by another conflicting one is effected only "to the extent of the repugnancy." Id. at 199, 60 S.Ct. 182. Mere overlap between or among federal statutes is not enough to show that one of them is meant to be exclusive over a given subject matter; one of the statutes "may be merely affirmative, or cumulative, or auxiliary." Id. at 198, 60 S.Ct. 182.

The Supreme Court recently reaffirmed this longstanding principle of statutory interpretation, stating:

[W]hen two statutes are capable of coexistence, it is the duty of the courts, absent a clearly expressed congressional intention to the contrary, to regard each as effective.

FCC v. NextWave Personal Communications, Inc., 537 U.S. 293, ____, 123 S.Ct. 832, 840, 154 L.Ed.2d 863 (2003) (internal quotation omitted). Each federal statute must be regarded as effective in the absence of "inherent conflict." Id.

In their Motion Defendants argue that they are entitled to summary judgment on the Government's advertising, marketing, promotion and warning claims because they fall within the exclusive jurisdiction of the FTC. According to the Defendants, the FTC administers a regulatory regime that would be effectively repealed by the challenged RICO claims. Joint Defendants' Mem. at 22. This regime consists primarily of the Federal Trade Commission Act ("FTCA" or "FTC Act") and the Federal Cigarette Labeling and Advertising Act ("FCLAA" or "Labeling Act"), 15 U.S.C. §§ 1331-40.

The Defendants misperceive the thrust of the Government's case. It is true that conduct relating to advertising, marketing, promotion and product warning labels can fall within the reach of a number of overlapping statutes, including the FTCA, and the Labeling Act, as well as RICO. However, in this case, the Government's Amended Complaint charges only RICO violations; it does not allege violation of any other statutes. Because the FTC has no authority to enforce RICO, the logical consequence of the Defendants' position would be that, at least in this instance, the RICO statute would be nullified. Under Borden and NextWave, this result must be rejected unless the overlapping statutes which authorize FTC jurisdiction over the alleged conduct inherently conflict with RICO.

Defendants argue that because the FTCA and the FCLAA together address tobacco advertising, marketing, promotion and warnings with more specificity than does RICO, permitting the Government to pursue its claims pursuant to RICO will undermine the FTC's ability to administer its own statutes. However, Defendants ignore the fact that RICO is a broad statute that often overlaps with more specifically targeted laws and regulations. Nevertheless, under Borden and NextWave, the relevant issue is not whether one of two overlapping statutes is more specific than the other, but whether the statutes actually conflict⁴ with one another. So long as they do not, both must be given effect.

The Seventh Circuit rejected a similar argument that conduct charged under RICO was within the exclusive jurisdiction of a federal agency in United States v. Palumbo Brothers, Inc., 145 F.3d 850 (7th Cir.1998). In Palumbo Brothers, the United States charged the defendants under RICO; the predicate acts of mail and wire fraud advanced a scheme to defraud employees and unions of wages and benefit payments. The defendants argued that the conduct complained of was covered by a more specific legal framework, namely the National Labor Relations Act ("NLRA"). They...