Thursday, June 09, 2005

DOJ Claims Reduction in Amount Requested for Smoking Cessation Program Represents a Narrowed Remedy

In a USA Today opinion piece, United States Associate Attorney General Robert McCallum today explained that the reason for the reduction in the amount requested for a national smoking cessation program in the DOJ tobacco lawsuit was that it reflects a narrow tailoring of the remedy so that it applies only to newly-addicted smokers, not to current smokers.

McCallum explained the rationale for the reduction in the requested amount from $130 to $10 billion: "First and foremost, the government's suggested cessation program comports with a recent decision of the D.C. Circuit Court of Appeals. The United States vigorously argued for the industry to disgorge $280 billion in profits for decades of fraudulent behavior. This spring, the Circuit Court ruled in favor of the tobacco industry, reversing a prior decision of the trial court, and held that any remedies in the case must be "forward-looking" to prevent and restrain future wrongful acts, rather than to address even lingering consequences of past acts."

McCallum also explained that the remedy would be fashioned in a way so that it could extend beyond the initial five-year period, and would be based on the defendants' conduct during the post-judgment period: "If court-appointed monitors find that the defendants continue to commit acts of fraud, the court can extend and expand the program to exceed the $10 billion over five years proposed Tuesday, in order to prevent and restrain the continuation of fraudulent activities by the tobacco companies."

The Rest of the Story

What McCallum is saying is that the reduction in the requested amount for the cessation program is due to a narrowing of the scope of the proposed remedy: instead of applying to all current and future smokers, the requested remedy is now narrowly-tailored so that it only applies to future smokers - those who become addicted after the final court judgment is made. In this way, DOJ hopes to convince the judge and the appellate court that the remedy is forward-looking, rather than backwards-looking.

Despite an outcry about this saga in the tobacco control community, the legal basis for this change in the proposed remedy actually makes a lot of sense. There is no way that a program to treat current smokers would ever be viewed as being consistent with the civil remedies provision of the RICO statute, since such an approach is clearly an attempt to redress past wrongs of the cigarette companies. Current smokers are, by definition, not a result of any future wrongdoing on the part of the companies.

In contrast, asking for a program to treat the sequelae of future RICO violations, which would result in newly-addicted smokers, can be construed to be forward-looking, as it could conceivably deter future RICO violations. This is especially true if the payments were tied to the number of newly-addicted smokers. This would impose some financial incentive for the companies to take actions to reduce the number of newly-addicted smokers (and refraining from RICO violations alleged to increase the number of new smokers would serve such a purpose).

Although it is understandable that tobacco control advocates are outraged about the abrupt change, this type of tailoring of the remedy is something that I have been suggesting is warranted for quite some time. It was honestly quite surprising to me that the government seemed to be ignoring the Appeals Court's ruling, as if the Department weren't even aware of the ruling and its most clear language: "Section 1964(a) provides jurisdiction to issue a variety of orders 'to prevent and restrain' RICO violations. This language indicates that the jurisdiction is limited to forward-looking remedies that are aimed at future violations. ... Disgorgement ... is a quintessentially backward-looking remedy focused on remedying the effects of past conduct to restore the status quo."

Unfortunately, I do not believe that even this narrowed remedy will be imposed by Judge Kessler and upheld by the Appeals Court. The problem is that there are just too many potential reasons why persons may become addicted smokers, and these reasons are not limited to future RICO violations on the part of the defendant companies. Moreover, it seems difficult (if not impossible) to determine whether any particular addicted smoker in the future became addicted because of a continuing RICO violation or because of some other factor. This is the same problem that holds for the proposed remedy of imposing fines on cigarette companies based on the number of youth smokers. So while this remedy is certainly forward-looking and much more narrowly and appropriately tailored, there still does not appear to be enough of a direct relationship between the proposed remedy and the prevention of future RICO violations to make it consistent with statute.

While it appears that the $120 billion saga is due to a strategic change in approach (as I suggested earlier today), rather than a purely political directive as many have charged, it still represents quite a blunder. The remedy should have been worked out well in advance of the closing argument, and in fact, it should have been worked out prior to the government's putting Dr. Fiore on the witness stand to provide evidence in support of its proposed remedy. It's difficult to present a convincing case in support of a proposal when that proposal is not clearly articulated in one's own thinking.

Public health groups that have been criticizing the reduction of $120 billion in the requested remedy because it deprives millions of current smokers of potential access to smoking cessation services are missing the point. The purpose of the case is not to find ways to fund needed anti-smoking programs. The purpose of the case is to seek justice under the laws of the United States. And unfortunately, the D.C. Court of Appeals has ruled that under section 1964(a) of RICO, the law simply does not support a national smoking cessation program for all current smokers as a remedy for past RICO violations on the part of the tobacco companies.

For two months, The Rest of the Story has been pointing out the failure of many of the Department of Justice's proposed remedies to meet the statutory requirements of section 1964(a) of RICO. It is unclear why it took the Department until two days ago to fashion the proposed remedies in a more legally defensible way.

My guess (and I don't have any inside information at all, so this is just speculation) is that the change in strategy hinges around an internal Department (and perhaps Administration) decision on whether to appeal this case ultimately to the U.S. Supreme Court. My sense is that the lawyers prosecuting the case were in this for the long haul and felt that an appeal to the Supreme Court might have a chance of reversing the appellate court decision and allowing for disgorgement and/or other huge financial remedies. Thus, their strategy was to pursue the most financially damaging and meaningful remedies, even if they were in clear contradiction with the Appeals Court's ruling. Should that ruling be overturned, the door would then be open to these huge financial awards.

But once a decision were made that this would not be appealed to the Supreme Court, there would no longer be any reason to present anything other than the most narrowly-tailored remedies that would have a chance of being upheld by the Appeals Court.

My guess: the Department decided (perhaps upon the insistence of the Administration) on June 6 that it will not pursue an appeal to the Supreme Court.

After all is said and done, it appears that what many thought was a politically-motivated breach of justice may end up being nothing more than a huge legal blunder. But the blunder is more in what DOJ failed to do prior to the change in this remedy than in what they have done in the past two days. Ignoring the clear dictates of an appellate court is not generally a good strategy for winning a lawsuit.

June 9: DOJ Slashes Amount of Funds Requested for Smoking Cessation Program Remedy
May 23: DOJ Case Ends with Request for Multi-Billion Dollar Smoking Cessation Program
April 20: DC Appeals Court Will Not Hear DOJ Disgorgement Appeal
March 30: The Citizens' Commission Amicus Brief: Further Commentary

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