DOJ Requests Supreme Court Review of Decision on Past Profits in Tobacco Lawsuit
The Department of Justice on Monday in a "forcefully worded" filing requested a Supreme Court review of a February ruling by the U.S. Court of Appeals for the District of Columbia that the federal government cannot seek disgorgement of $280 billion in past profits from several large U.S. tobacco companies under federal racketeering laws, the Washington Post reports (Eggen, Washington Post, 7/19). A three-judge panel of the appeals court on Feb. 4 ruled that DOJ could not claim $280 billion in past profits sought in the government's racketeering lawsuit against tobacco companies and could only seek penalties that would prevent or restrain future violations.
The lawsuit alleges that Brown & Williamson, Philip Morris, R.J. Reynolds, Lorillard Tobacco and the Liggett Group misled consumers about the health risks of smoking and directed multibillion-dollar promotional campaigns at children in violation of RICO.
The appeals court in April voted to reject an appeal to reconsider the decision (California Healthline, 4/21). In its appeal to the Supreme Court, DOJ said that if the appeals court's decision is allowed to stand, it could hurt the federal government's ability to bring similar racketeering cases against other business and industries (Lichtblau, New York Times, 7/19).
DOJ called its case against the tobacco companies "the most important" civil filing ever brought by the department under federal racketeering laws and said, "This case graphically illustrates the practical consequences of the court of appeals' decision. Under that decision, ... violators may retain the profits of their unlawful activity no matter how destructive the consequences for the American public as a whole" (Washington Post, 7/19).
DOJ lawyers called the appeals court's decision "a mistaken precedent that will continue to misdirect the courts" (New York Times, 7/19). In addition, the lawyers said the February ruling contradicted a previous Supreme Court decision that gave judges the "full scope" of remedies when hearing racketeering cases (Kaplan, Reuters/Boston Globe, 7/19).
DOJ's filing came at the deadline for the Bush administration to decide whether to appeal the February ruling (Sherman, AP/Philadelphia Inquirer, 7/19). The tobacco companies have 30 days to respond to DOJ's request. An unnamed industry lawyer said he expects the tobacco companies to argue that the appeal is "ill-timed" because U.S. District Judge Gladys Kessler, who is presiding over the case, has not yet ruled on damages.
According to the Times, DOJ officials did not comment on their reasons for requesting that the Supreme Court overturn the February ruling. However, some tobacco industry lawyers and others involved in the case said the decision could be the result of public reaction to the federal government's June decision to reduce the amount of damages it would request from the tobacco companies (New York Times, 7/19).
In its final judgment proposal, DOJ asked Kessler to order the tobacco industry to pay $10 billion to fund smoking-cessation programs, spend $4 billion to launch an education campaign about the dangers of smoking and be subject to financial penalties if youth smoking rates are not reduced by nearly half in the next 10 years. Previously, the government was expected to ask for $130 billion over 25 years.
News reports have said that senior political appointees at DOJ allegedly pressured lawyers to reduce penalties and soften the testimony of government witnesses. At the request of 50 Democratic lawmakers, DOJ's Professional Responsibility Advisory Office has launched an investigation to determine whether there was political interference in the case (California Healthline, 6/29).
William Schultz, a former DOJ lawyer who led the tobacco team at the beginning of the case, said, "Nothing in this case surprises me anymore. I think the government has been schizophrenic in how they've litigated this case, but maybe now they've resolved to treat it as an advocate would" (New York Times, 7/19).
According to the Post, DOJ's move "drew praise from activists" (Washington Post, 7/19). William Corr, executive director of the Campaign for Tobacco-Free Kids, said, "After weakening its own case by reducing its proposed cessation remedy during closing arguments, we are pleased that the government in its Supreme Court filing recognized that the tobacco lawsuit is an extraordinarily important case" (AP/Philadelphia Inquirer, 7/19).
TFK President Matthew Myers said the February ruling "had really tied the hands of the Justice Department in pursuing the most serious racketeering cases. The concept that someone could engage in a massive criminal enterprise without any risk of giving up their ill-gotten gains turned the racketeering statute into a paper tiger" (New York Times, 7/19).
Philip Morris said in a statement that it will oppose the government's request for a Supreme Court review, adding that the appellate court "reached the correct ruling last February" (Washington Post, 7/19).
According to the Wall Street Journal, DOJ's appeal does not "directly affect" the federal government's civil racketeering lawsuit against the tobacco companies. However, "some observers believe it could give the Justice Department an edge in settlement talks with cigarette makers by injecting another element of uncertainty into the case," the Journal reports.
Kessler, who has urged the two sides to reach a settlement, might not issue a ruling in the case for months, according to the Journal (O'Connell/Blackstone, Wall Street Journal, 7/19).