Federal Judge Allows Department of Justice To Seek Past Profits in Lawsuit Against Tobacco Companies
U.S. District Judge Gladys Kessler on Monday denied a pretrial motion in a Department of Justice lawsuit filed against four tobacco companies that sought to "disallow the government's bid for the surrender" of $280 billion in past profits, the Wall Street Journal reports (O'Connell, Wall Street Journal, 5/25). The $280 billion represents revenues from sales to smokers younger than age 21 between 1971 and 2000, as well as interest (Levin, Los Angeles Times, 5/25). DOJ announced the lawsuit -- which names Brown & Williamson, Philip Morris USA, R.J. Reynolds, Lorillard Tobacco and the Liggett Group as defendants -- in March 2003. The lawsuit alleges that the profits resulted from fraud and dangerous promotional practices. DOJ in more than 1,400 pages of court documents alleges that the tobacco companies manipulated nicotine levels, misled consumers about the health risks of smoking and directed multibillion-dollar promotional campaigns at children. DOJ made the allegations as part of larger federal lawsuit first filed by the Clinton administration in 1999 that accuses the tobacco industry of conspiracy to mislead consumers about the health risks of smoking (California Healthline, 3/19). In addition to the $280 billion in profits, the lawsuit seeks funds to pay for smoking-cessation programs and research into safer cigarettes (Kaufman, Washington Post, 5/25). In total, the lawsuit seeks $289 billion from the tobacco companies (Iwata, USA Today, 5/25).
Attorneys for the tobacco companies argued that DOJ failed to differentiate between profits earned through fraud and those earned legally, the AP/Hartford Courant reports (Zuckerbrod, AP/Hartford Courant, 5/25). However, Kessler ruled that DOJ has the right to seek past profits under the Racketeer Influenced and Corrupt Organizations Act, provided that the department can prove that the profits were earned through fraud and that payment of the profits would prevent future wrongdoing (Washington Post, 5/25). Kessler added that whether DOJ estimates of the amount of the profits are "accurate, adequate or appropriate ... can only be resolved at trial" (Los Angeles Times, 5/25). The trial, which Kessler will conduct without a jury, is scheduled to begin Sept. 13 in the U.S. District Court for the District of Columbia (Wall Street Journal, 5/25).
William Corr, executive director of the Campaign for Tobacco-Free Kids, said that the decision "means DOJ can put on the strongest possible case and seek the strongest possible remedies that would amount to fundamental reform of the industry's harmful practices over the past 50 years" (Washington Post, 5/25). He added that the "lawsuit has great potential to hold the tobacco industry accountable for its long history of wrongdoing and to bring about fundamental change in the industry's harmful practices" (USA Today, 5/25). William Ohlemeyer, vice president and associate general counsel for Altria, said that Philip Morris USA may appeal the decision before the trial. He added that Kessler "ignored, if not rejected, two federal circuit courts of appeals' prior decisions, which we think are persuasive, if not legally binding. We think she's wrong on the law and, before or after trial, an appellate court will have to tell us who is right or wrong" (Washington Post, 5/25). Seth Moskowitz, a spokesperson for R.J. Reynolds, said that the company also may appeal the decision (AP/Hartford Courant, 5/25). Mark Smith, a spokesperson for Brown & Williamson, said, "Although the judge did not throw out the disgorgement claim as we have requested, we have no doubt that once we get to trial the evidence will demonstrate that this claim is absurd" (Wall Street Journal, 5/25).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.