Federal Judge Rules Against Tobacco Companies
U.S. District Judge Gladys Kessler on Thursday ruled against the tobacco industry in a racketeering case brought by the Department of Justice, finding that the nation's leading tobacco companies conspired to break anti-racketeering laws and deceive the public about the dangers of smoking for nearly 50 years, USA Today reports (Iwata, USA Today, 8/18). However, the ruling "appeared to be a largely moral victory" for DOJ because Kessler also ruled that DOJ's demands for the industry to provide $14.5 billion in penalties could not be fulfilled because of an earlier appeals court decision, the Los Angeles Times reports.
The tobacco suit -- filed in 1999 during the Clinton administration -- charged that the nation's major tobacco companies violated the federal Racketeer Influenced and Corrupt Organizations Act. DOJ initially sought $280 billion in past profits from the tobacco companies, but a federal appeals panel in February 2005 ruled that RICO could not be used to collect damages from past wrongdoing.
As a result, DOJ lawyers altered their case to demand $130 billion over 25 years for a smoking-cessation program. The demands were later reduced to $14.5 billion, including $10 billion for a smoking-cessation program (Levin, Los Angeles Times, 8/18).
In a 1,742 page opinion, Kessler ruled that there was "overwhelming evidence" that the industry violated federal racketeering laws and that most charges made against the companies were true. Kessler ordered the companies to stop using terms for their products such as "low tar" and "light" and to provide the court with detailed marketing data for the next 10 years.
The companies will also have to place "corrective statements" in newspaper and television advertisements, on their Web sites and on cigarette packs (Cauvin/Stein, Washington Post, 8/18).
The companies found liable are Philip Morris USA, part of Altria Group; Reynolds American; Lorillard Tobacco; and British American Tobacco. Liggett Group was not found liable (Los Angeles Times, 8/18).
Kessler in her ruling said the tobacco companies for 50 years "lied, misrepresented, and deceived the American public, including smokers and the young people they avidly sought as 'replacement smokers,' about the devastating health effects of smoking and environmental tobacco smoke," adding, "They suppressed research, they destroyed documents, they manipulated the use of nicotine so as to increase and perpetuate addiction, they distorted the truth about low tar and light cigarettes so as to discourage smokers from quitting" (Hardin/Reid Blackwell, Richmond Times-Dispatch, 8/18).
Kessler said the companies profited from "selling highly addictive product which causes diseases that lead to a staggering number of deaths per year, an immeasurable amount of human suffering and economic loss and a profound burden on our national health care system" (Shenon, New York Times, 8/18). Kessler said that the appeals court ruling about past damages "unfortunately" prevented her from ordering multibillion-dollar remedies for the companies' actions (Los Angeles Times, 8/18).
Kessler said a smoking-cessation program funded by the industry "would unquestionably serve the public interest." The companies, with the exception of Liggett, were ordered to pay DOJ's legal fees, estimated at more than $140 million (AP/Baltimore Sun, 8/18).
Tobacco company officials "indicated that they will appeal at least parts of the decision," the Post reports (Washington Post, 8/18).
William Ohlemeyer, a vice president and attorney for Altria, said the companies believed many parts of the decision were "not supported by the law or the evidence presented at trial, and appear to be constitutionally impermissible or infringe on Congress' sole right to provide for the regulation of tobacco products" (Richmond Times-Dispatch, 8/18).
R.J. Reynolds spokesperson Mark Smith said company officials were "gratified that the court did not reward unjustified and extraordinarily expensive monetary penalties." Smith said that the company was disappointed that Kessler had found it guilty of violating racketeering laws and that R.J. Reynolds' next course of action has not been decided (AP/Baltimore Sun, 8/18).
DOJ in a statement said it was "pleased with the court's finding of liability on the part of the defendants, but disappointed that the court did not impose all of the remedies sought by the government." The statement added, "Nevertheless, we are hopeful that the remedies that were imposed by the court can have a significant, positive impact on the health of the American public" (Richmond Times-Dispatch, 8/18).
William Corr, executive director of the Campaign for Tobacco-Free Kids, said that he had hoped for more severe penalties against the companies but that he was pleased that Kessler had identified the tobacco industry as a "rogue industry" guilty of "50 years of lying to the American people" (New York Times, 8/18).
The Post reports that in the wake of Kessler's decision and last month's Florida Supreme Court decision overturning a $145 million judgment against tobacco companies, "some said the industry may not be as threatened as it once appeared to be."
Mary Aronson, a tobacco litigation analyst, said, "This was the last big, really major case against the industry. Individual smokers will continue to sue, but that's going to amount to static. I don't think there's going to be another big case like this."
However, G. Robert Blakey of Notre Dame Law School said, "If it's appealed, and the government wins its remedies, then this will hit the industry" (Washington Post, 8/18).
Wall Street analysts "hailed the case as a big victory for the companies," the New York Times reports.
David Adelman, an analyst at Morgan Stanley, said, "There's nothing in this ruling that is going to hurt the profitability of the businesses."
Marc Greenberg, an analyst at Deutsche Bank, said it is unlikely that the companies will not appeal Kessler's order that they stop using terms such as "light" and "low tar" (New York Times, 8/18).
- CBS' "Evening News": The segment includes comments from Cheryl Heaton, president of the American Legacy Foundation (Andrews, "Evening News," CBS, 8/17). The complete segment is available online in RealPlayer.
- NPR's "All Things Considered": NPR's Libby Lewis discusses the case (Block, "All Things Considered," NPR, 8/17). The complete segment is available online in RealPlayer.
- NPR's "Morning Edition": The segment includes comments from analyst Mary Aronson and Mark Gottlieb of the Tobacco Products Litigation Project (Lewis, "Morning Edition," NPR, 8/18). The complete segment is available online in RealPlayer.