Monday, September 12, 2005

Tobacco Companies File Post-Trial Brief in DOJ Case

On September 7, the tobacco company defendants in the DOJ lawsuit filed their post-trial brief. This post will provide commentary on the aspects of that brief that address the government's monetary remedies requests.

In the brief, the defendants outline a number of criteria which they assert proposed RICO remedies must meet in order to be permissible under the law (as interpreted by the D.C. Court of Appeals). Of these, I wish to highlight 8 major criteria suggested therein which I think are particularly important for readers to understand. I have provided my own titles for these criteria to try to make them easier for readers to understand, but the text is from the brief itself.

1. Remedies must be designed to prevent and restrain future RICO violations, not merely to address the need to establish effective policies to remedy the tobacco problem:

"for the most part, the Government’s proposals represent a naked attempt to have this Court create, under the guise of a 'remedy' order, a comprehensive national smoking policy that various factions within the Government have previously attempted to have enacted by Congress. A court of equity, however, is no place to enact social policy."

2. Remedies must have a relatively direct effect of restraining the violations they are designed to prevent:

"traditional injunctive relief should ordinarily form the core of any remedy order, which must be 'aimed at' future conduct, not just designed to have an incidental or indirect effect on that conduct."

3. Remedies must be specifically designed to prevent and restrain future RICO violations, not merely have the effect of discouraging such violations by inflicting pain on the Defendants:

"a remedy is not forward-looking merely because, by 'inflicting pain,' it has the effect of discouraging potential RICO violations. As the Court noted, “If this were adequate justification, the phrase ‘prevent and restrain’ would read ‘prevent, restrain, and discourage,’ and would allow any remedy that inflicts pain.”

4. Remedies must be directly tied to the specific RICO violation they seek to prevent and must be tailored narrowly so that they are no more burdensome than necessary to prevent the violation:

"Injunctive or other equitable relief must also be closely tailored to remedy or prevent the specific harm alleged – in this case, future RICO violations. ... Implicit in this 'narrowly tailoring' requirement is the equally important proposition that 'injunctive relief should be no more burdensome to the defendant than necessary to provide complete relief to plaintiffs.' ... These principles thus prohibit injunctions that unnecessarily burden lawful activity."

5. Remedies must not require that Defendants take an action that is beyond their control:

"Another important principle is that, 'because the violation of an equitable decree is punishable as a contempt of court, the decree should not command the defendants to do something that is beyond their control.'"

6. Remedies cannot intrude upon the regulatory authority of a body that has already been granted jurisdiction over the relevant area by Congress:

"RICO remedies cannot be used to displace an otherwise highly specific and exclusive regulatory regime. ... Any equitable remedy crafted by a court pursuant to RICO – even in response to an asserted fraud – should therefore avoid interfering with the regime Congress has adopted, and thereby usurp the role of the FTC."

7. In order not to infringe upon First Amendment rights, the remedies must be tailored as narrowly as possible to prevent the specific violations for which the Defendants were found liable:

"Any injunctive relief must also respect Defendants’ own constitutional rights, including their First Amendment right to free speech. Prohibitions against making specific false or misleading statements are, of course, permissible after a finding of liability. But even in those cases the First Amendment requires that the prohibition be no broader than necessary to prevent repetition of the specific false statements giving rise to liability."

8. There must be reliable evidence that the proposed remedies will be effective at preventing and restraining future RICO violations:

"Finally, any injunctive relief must satisfy a bedrock evidentiary requirement, i.e., that it has been proven to satisfy the relevant substantive constraints by competent, admissible evidence. For example, to comply with Section 1964(a), any remedy must be demonstrated – through reliable, empirical evidence – to be effective at preventing and restraining violations."

The Rest of the Story

I think the above sections of the Defendant's post-trial brief should be required reading for all organizations and advocates in tobacco control because they shed light on exactly why I have been arguing for months that the monetary remedies being requested by anti-smoking organizations (as well as these groups' complaining and political attacks regarding changes in the proposed remedies) are so far off-base, and why I think these groups have done a disservice to the public's interest by becoming so obsessed with their defense of these massive monetary remedies.

Let's go through each of the criteria and see how the proposed monetary remedies fare:

1. Remedies must be designed to prevent and restrain future RICO violations, not merely to address the need to establish effective policies to remedy the tobacco problem:

The best example of the violation of this criterion is anti-smoking organizations' insistence that the change in the requested smoking cessation remedy is a "tragedy" and that the government has "betrayed" the nation's smokers. It seems that anti-smoking groups are viewing the DOJ case as an opportunity to obtain funding for a smoking cessation program. Only as an afterthought was an attempt made to tie the need for such a program to the need to prevent and restrain future RICO violations (and that attempt was only really made by the intervenors, not by the government itself).

2. Remedies must have a relatively direct effect of restraining the violations they are designed to prevent
AND
3. Remedies must be specifically designed to prevent and restrain future RICO violations, not merely have the effect of discouraging such violations by inflicting pain on the Defendants:

The government's and the interveners' justification for the public education and counter-marketing campaign as well as the youth smoking reduction targets and the interveners' justification for the smoking cessation program is that these programs will prevent and restrain future RICO violations by creating economic incentives that will discourage companies from committing future RICO violations. But these remedies in no way have any direct effect of restraining or preventing the alleged violations, even if one were to concede that they would indeed create an incentive for the Defendants to refrain from such violations (which I do not think is the case - I believe it is the exact opposite).

4. Remedies must be directly tied to the specific RICO violation they seek to prevent and must be tailored narrowly so that they are no more burdensome than necessary to prevent the violation:

The proposed youth smoking reduction targets clearly violate this criterion because the alleged RICO violations are only one small factor that influences youth smoking prevalence. To require the companies to meet specific targets for youth smoking prevalence reductions is obviously far broader a remedy than necessary to prevent the specific RICO violations that are outlined in the government's case.

All of the interveners' proposed monetary remedies violate this criterion because they tie the remedies to outcomes that have only an indirect relationship to RICO violations. Requiring companies to fund educational programs until 90% or more of smokers do not wish to quit, for example, is far more burdensome than necessary to simply restrain companies from lying to smokers about the health benefits of smoking low-tar and light cigarettes.

5. Remedies must not require that Defendants take an action that is beyond their control:

The proposed youth smoking reduction targets violate this criterion. Reducing youth smoking prevalence by 42% in 10 years (or in 7 years) is clearly not something that is in the Defendants' control.

6. Remedies cannot intrude upon the regulatory authority of a body that has already been granted jurisdiction over the relevant area by Congress:

The request for a public education and counter-marketing campaign to correct the public's understanding of the benefits of light and ultra-light cigarettes is probably going to be viewed by the courts as an infringement of jurisdiction that Congress has granted to FTC to regulate the content of cigarette advertising and for which Congress has itself occupied the field by requiring specific warning statements to be made on cigarette packages and advertisements.

7. In order not to infringe upon First Amendment rights, the remedies must be tailored as narrowly as possible to prevent the specific violations for which the Defendants were found liable:

This is where all three of the monetary remedies fail. They are broadly crafted remedies that do far more than simple prevent the specific violations for which the Defendants are allegedly liable.

8. There must be reliable evidence that the proposed remedies will be effective at preventing and restraining future RICO violations:

I think that again, all three proposed monetary remedies fail here as well. First, I don't think there is empirical evidence that the proposed national smoking cessation program will have the effect that it is claimed it will have. Nor do I think there is evidence that public counter-marketing campaigns such as the American Legacy Foundation's "truth" campaign have been effective in reducing youth smoking prevalence, much less that they will be effective in inoculating the public against any possible deceptive or fraudulent tobacco industry statements or marketing. And more importantly, there is certainly no evidence that such a campaign would restrain companies from committing RICO violations. Finally, there is little if any evidence to suggest that the required reductions in youth smoking prevalence could be obtained at all, whether Defendants continue to commit RICO violations or not, and there is no evidence that setting such targets would prevent future RICO violations.

In summary, I find the Defendants' arguments against the monetary remedies to be quite compelling. I think they have established, on multiple grounds, that each of these 3 major remedies are not allowable under RICO, especially as the statute has been interpreted by the appellate court.

The rest of the story suggests that the monetary remedies proposed by the government as well as by public health interveners in the case are not allowable because they are not narrowly tailored remedies that seek to directly prevent and restrain specific future RICO violations without imposing any broader burden on the Defendants than necessary in order to achieve that purpose.

What the tobacco defendants' brief establishes, I think correctly, is that the monetary remedies are simply "a public health policy measure dressed up as civil RICO remedy."

Or to put it another way, I think that the government and anti-smoking groups have attempted to fit a square peg into a round hole. It just doesn't fit, and I think that will be obvious to Judge Kessler (if not, it will certainly be obvious to the appellate court). But until it becomes obvious to the anti-smoking groups themselves and to tobacco control advocates, I think these groups are going to continue doing more harm than good through their intervention in this case.

6 comments:

benpal said...

A very nice analysis indeed.

"The proposed youth smoking reduction targets violate this criterion. Reducing youth smoking prevalence by 42% in 10 years (or in 7 years) is clearly not something that is in the Defendants' control."

Tabacco consumption is not only a result of potentially deceiving advertisment by the tabacco industry. Tabacco existed long before the tabacco industry emerged.

As an analogy, we could look at the crime rates. Despite the death penalty still being enforced in many states, and despite the fact that fighting crime is under its direct responsibility, the government is not capable of effectively preventing crimes. Because crimes are simply not under its control.

Another example is the consumption of hard drugs. There is no industry, no advertisement, and everybody knows it's bad for your health. Again, the government is not able to effectively prevent the consumption of hard drugs.

Michael Siegel said...

Benpal,
Thanks for your comments - these are very good examples and illustrate why it is inappropriate to expect that the tobacco industry somehow has control over the prevalence of youth smoking. Thus, tying a RICO remedy to targeted youth smoking prevalence reductions seems to have no merit.

Michael J. McFadden said...

I may be wrong on this, but didn't the feds at one point tie state drug funding to the States having responsibility for meeting tobacco purchase targets? And didnt they then subsequently turn around and simply ignore their own regulations when the states didn't meet those targets?

:?
Michael

Michael J. McFadden
Author of "Dissecting Antismokers' Brains"
http://pasan.TheTruthIsALie.com

Anonymous said...

"I think the above sections of the Defendant's post-trial brief should be required reading for all organizations and advocates in tobacco control"


No kidding.

I suspect all these groups are going to get a rather nasty wake-up call when this case is ultimately dismissed leaving tobacco with zero liability, and Judge Kessler issues a characteristically understated, but scathing condemnation of the gov't for failing to satisfy the black letter requirements of RICO case law in their presentations.

Without making a fundamental case for the existence of a RICO enterprise, at that point Judge Kessler won't have to make any decision on the applicability of remedies whatever. The gov'ts extraordinary failings in making a legal case for the remedies they seek will be moot, as will *ALL* interventions by the various health groups and their outstretched palms.

It might be argued that the gov't dropped the ball here, but I think a better statement is that they never had it to begin with. This entire concoction of the RICO case itself was tacked on as a last-minute addition to the (already) failed Medicare health expense recovery case.

The point is, the health groups remedies never stood a chance to begin with since on its merits, this RICO case is garbage.

Bill Godshall said...

The best case scenario for civil justice, public health and the Intervenors in the DOJ case is for the US Supreme Court to agree to consider, and to then overturn, the DC Court of Appeal ruling on permissible remedies under the RICO statute.

And the chance of this scenario may have increased recently with the passing of Chief Justice Rehnquist, as it appears that only the seven sitting Justices will consider the DOJ's appeal (with votes of 3 Justices needed to review the DOJ's appeal, and the votes of 4 Justices needed to overturn the DC Court of Appeals ruling.

And there are now 4 liberal Justices, compared to just 3 conservative Justices.

Regarding Michael McFadden's question, the US SAMHSA extended (by four years as I recall) the deadline set by US Congress for all States to comply with the "Synar Law" (which was enacted in 1992 and that required states to reduce tobacco sales to minors via compliance checks).

SAMHSA (Substance Abuse and Mental Health Services Administration) basically caved in to lobbying by the States that were set to lose a portion of their drug and alcohol block grant, which I believe was illegal because it violated federal law.

Anonymous said...

The best case scenario for civil justice, public health and the Intervenors in the DOJ case is for the US Supreme Court to agree to consider, and to then overturn, the DC Court of Appeal ruling on permissible remedies under the RICO statute.
======

That would be the "best case", but its still a hail-Mary long shot.

The chance of the SCOTUS accepting certiorari on this case is, as you say, recently increased due to the demise of Justice Rhenquist, though I still believe its at best no more than 50-50, and probably a lot less.

The main reason is that SCOTUS is notoriously reluctant to accept interlocutory appeals like this one. They don't want to waste their precious time considering an issue that may well turn out to be moot. In this particular case, no matter what the SCOTUS might think about applying disgorgement in a civil RICO case for the first time in American history, there is no guarantee whatever that Judge Kessler will find Tobacco liable for RICO violations. Even if she were to do that, there is also no guarantee that she would find disgorgement to be an appropriate remedy. Either way, the disgorgement issue would be moot.

But apart from that, the chance of the DOJ actually winning this disgorgement appeal on its merits in front of the SCOTUS is remote *at best*.

There is already SCOTUS precedent against disgorgement in somewhat related circumstances, and, in fact, the DOJ itself has explicity rejected disgorgement as inappropriate in the USA vs. Microsoft case.

Tobacco makes a far more eloquent argument as to why this appeal is inappropriate here, released today:

http://altria.com/download/pdf/media_doj_05-92_%20opposition_brief_supreme_court.pdf