United States v. Philip Morris USA Inc.

• Citation: 801 F.3d 250
• Decision Date: 22 May 2015
• Docket Number: Nos. 13–5028,14–5161.,s. 13–5028
• Parties: UNITED STATES of America, United States Department of Justice, et al., Appellees v. PHILIP MORRIS USA INC., formerly known as Philip Morris Incorporated, et al., Appellants American Tobacco Company, Directly and as successor to the Tobacco interest of American Brands, Inc., et al., Appellees Altria Group, Inc., Formerly Philip Morris Companies Inc., Appellant Smithkline Beecham Corp., Doing Business as GlaxoSmithKline, et al., Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

801 F.3d 250

UNITED STATES of America, United States Department of Justice, et al., Appellees

v.PHILIP MORRIS USA INC., formerly known as Philip Morris Incorporated, et al., Appellants

American Tobacco Company, Directly and as successor to the Tobacco interest of American Brands, Inc., et al., Appellees

Altria Group, Inc., Formerly Philip Morris Companies Inc., Appellant

Smithkline Beecham Corp., Doing Business as GlaxoSmithKline, et al., Appellees.

Nos. 13–5028

14–5161.

United States Court of Appeals, District of Columbia Circuit.

Argued Feb. 23, 2015.

Decided May 22, 2015.

Miguel A. Estrada argued the cause for appellants. With him on the briefs were Amir C. Tayrani, Noel Francisco, Robert F. McDermott, Peter J. Biersteker, Thomas J. Frederick, Michael B. Minton, and Bruce D. Ryder.

Richard A. Samp and Cory L. Andrews were on the brief for Washington Legal Foundation in support of appellants.

Melissa N. Patterson Attorney, U.S. Department of Justice, argued the cause for appellees United States of America, et al. With her on the briefs were Ronald C. Machen, Jr., U.S. Attorney, and Mark B. Stern and Alisa B. Klein, Attorneys.

Howard M. Crystal argued the cause for appellees Tobacco–Free Kids Action Fund, et al. With him on the brief was Katherine A. Meyer.

Thomas Bennigson, appointed by the court, was on the brief for amicus curiae Tobacco Control Legal Consortium in support of appellee.

Before: TATEL, Circuit Judge, and EDWARDS and RANDOLPH, Senior Circuit Judges.

Opinion

Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge:

In this appeal, the fifth in this long-running RICO case against the nation's cigarette manufacturers, defendants challenge a district court order requiring that they add two statements to their cigarette packages and advertisements: an announcement that a federal court has ruled that they “deliberately deceived the American public” about the dangers of cigarettes; and a declaration that they “intentionally designed cigarettes” to maximize addiction. Reading the extensive briefs the parties and their amici have submitted, one might think this case presents thorny, unresolved questions under both RICO and the First Amendment. As we explain below, however, the heavy lifting has already been done. Given our earlier decisions in this case, the manufacturers' objection to disclosing that they intentionally designed cigarettes to ensure addiction is both waived and foreclosed by the law of the case. Those decisions make equally clear that the district court, in ordering defendants to announce that they deliberately deceived the public, exceeded its authority under RICO to craft remedies that “prevent and restrain” future violations. 18 U.S.C. § 1964(a).

I.

Fifteen years ago, the United States filed this suit in the U.S. District Court for the District of Columbia alleging that Philip Morris and eight other cigarette manufacturers violated the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 –1968, by engaging in a then still-ongoing conspiracy to deceive the American public about the health consequences and addictiveness of smoking cigarettes. Pretrial proceedings lasted for years, and when the bench trial finally began in 2004, it spanned nine months, involved hundreds of witnesses, and saw nearly 14,000 exhibits entered into evidence.

Two years later, supported by more than 4,000 findings of fact detailing the cigarette manufacturers' “pervasive scheme to defraud consumers and potential consumers of cigarettes,” carried out “over the course of more than 50 years,” the district court entered final judgment against the defendants. United States v. Philip Morris USA, Inc., 449 F.Supp.2d 1, 851–54 (D.D.C.2006) ; see also id. at 936. Finding that they joined together to “maximize their profits” through “false and fraudulent statements, representations, and promises” about “the devastating health effects of smoking,” id. at 852, the court concluded that the manufacturers operated an illegal racketeering enterprise in violation of RICO section 1962(c), and that they conspired to do so in violation of RICO section 1962(d), id. at 851, 903. Given the defendants' then-ongoing business practices, the district court also determined that many of them, including appellants Philip Morris, R.J. Reynolds, Brown & Williamson, Altria, and Lorillard, were, unless enjoined, likely to commit future RICO violations, id. at 909, a prerequisite to ordering relief under RICO, see SEC v. Savoy Industries, Inc., 587 F.2d 1149, 1168 (D.C.Cir.1978). In 2009, we affirmed the district court's finding of RICO liability with respect to each cigarette manufacturer, United States v. Philip Morris USA Inc., 566 F.3d 1095, 1150 (D.C.Cir.2009) (2009 Opinion ), along with its conclusion that many of the manufacturers, unless enjoined, would likely commit similar RICO violations in the future, id. at 1134.

This overview tells only half the story. Because the government initially sought not only injunctive relief under 18 U.S.C. § 1964(a), but also disgorgement of $280 billion in proceeds from the manufacturers' fraudulent sale of cigarettes, the issue of available remedies under RICO's civil-remedy provision has from the very beginning loomed just as large as the liability question itself. The district court determined that were it to find that the manufacturers had violated RICO, it had authority under the statute to order disgorgement. On pretrial interlocutory appeal, we reversed. Using language central to the issues before us here, we held that “because disgorgement is aimed at past violations,” it does not “prevent or restrain” future RICO violations as required by section 1964. United States v. Philip Morris USA, Inc., 396 F.3d 1190, 1192 (D.C.Cir.2005) (emphasis added) (Disgorgement Opinion ).

After our disgorgement decision, the government reformulated its remedial request, and the district court permitted a handful of public health organizations to intervene to assert their interests in the proposed remedies. Those same organizations—the American Cancer Society, the American Heart Association, the American Lung Association, Americans for Nonsmokers' Rights, the National African American Tobacco Prevention Network, and the Tobacco–Free Kids Action Fund—are parties to this appeal.

Following a two-week trial on remedies, the district court enjoined the manufacturers from making any false or misleading public representation about cigarettes, and, most relevant here, ordered them to make corrective disclosures about five topics on which the court found they had made fraudulent public claims: (1) the adverse health effects of smoking; (2) the addictiveness of smoking and nicotine; (3) the lack of any significant health benefit from smoking “low tar” or “light” cigarettes as opposed to regular cigarettes; (4) the manufacturers' manipulation of cigarette design to ensure optimum nicotine delivery; and (5) the dangers of exposure to secondhand smoke. Philip Morris USA, Inc., 449 F.Supp.2d at 938–39. The district court also directed the manufacturers to disseminate the statements via their websites, retail point-of-sale displays, newspaper and television ads, and cigarette-package “onserts,” i.e., “communication[s] affixed to” cigarette packs. Id. at 939–41, 948. The district court rejected other remedies the government and public-health intervenors had requested, including counter-marketing and national smoking-cessation programs. Id. at 933, 936–37. Both sides appealed.

In our 2009 opinion, we largely affirmed the district court's remedial order. Recognizing that “breadth is warranted to prevent further violations where, as here, a proclivity for unlawful conduct has been shown,” we upheld the broad injunction prohibiting defendants from making any false or misleading public statement about cigarettes. 2009 Opinion, 566 F.3d at 1137 (citation, internal quotation marks, and alteration omitted). We also rejected the manufacturers' RICO and First Amendment challenges to the corrective-disclosure remedy, vacating only the requirement that the statements be published on retail displays. Id. at 1141–44. Although the statements' precise content had yet to be determined, we concluded that ordering the manufacturers to issue corrective statements on the proposed topics complied with RICO since “[r]equiring Defendants to reveal the previously hidden truth about their products [would] prevent and restrain” future RICO violations. Id. at 1140. We further explained that, in light of their subject matter, the corrective statements would qualify as commercial speech and satisfy the First Amendment if designed to prevent defendants from misleading consumers through fraudulent marketing in the future. Id. at 1144–45. Finally, we agreed with the manufacturers that the counter-marketing campaign and smoking-cessation program exceeded the district court's RICO authority. These programs, we explained, sought not to prevent and restrain future RICO violations—section 1964's sole permissible objective—but rather to “remedy the continuing effects of past illegal conduct” and generally reduce the manufacturers' “incentive to market their products.” Id. at 1147–48 (emphasis added).

On remand, the district court set about drafting the required corrective disclosures. After additional briefing and oral argument, and over defendants' objections on RICO and First Amendment grounds, the court ordered the manufacturers to disseminate the following statements, which we reproduce in full for the reader's benefit (at issue in this case are the five preambles announcing that a federal court has ruled that defendants “deliberately deceived the American public,” as well as the underlined bulleted statements):

A. Adverse Health Effects of Smoking

A Federal Court has ruled that Altria, R.J. Reynolds Tobacco, Lorillard, and Philip Morris USA deliberately deceived the American public about the health effects of smoking, and has ordered those

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