Last week, a three-judge panel of the U.S. Court of Appeals for the District of Columbia heard oral arguments in an appeal of the District Court's decision in the Department of Justice lawsuit against the tobacco companies. Both sides are appealing Judge Gladys Kessler's decision. The tobacco companies are appealing the basic decision, which found the companies guilty of violating a federal racketeering statute (RICO). The Department of Justice is appealing Kessler's decision not to allow monetary remedies, such as requiring the cigarette companies to fund a national smoking cessation program.
At the hearing, a coalition of anti-smoking groups which included Americans for Nonsmokers' Rights, the Campaign for Tobacco-Free Kids, the American Lung Association, and the American Cancer Society, argued that the panel should overturn the District Court's ruling that monetary remedies are not allowed under the civil remedies provisions of RICO.
According to a Bloomberg news article: "A group of public-health organizations, including the Tobacco-Free Kids Action Fund, the American Cancer Society and the American Lung Association, joined in the appeal to argue that Kessler should have considered stronger measures against the companies, including a program of anti-smoking education, smoking cessation programs and youth-smoking remedies. Howard Crystal, a lawyer for the health groups, argued that Kessler should have used a provision of the RICO law that permits judges to divest racketeers of assets to order an anti- smoking campaign and smoking cessation programs. `The defendants themselves consider addicted smokers to be assets,' said Crystal. 'You can't own another human being,' Judge Sentelle said."
According to a Reuters news article, Judge Sentelle admonished the anti-smoking groups for even bringing forward the argument that the panel should allow monetary remedies: "Judge Sentelle rejected a suggestion by Howard Crystal, speaking for the American Cancer Society and other public health groups, that cigarette companies should be forced to fund smoking cessation programs. Sentelle said tobacco companies could not reasonably control consumers. 'You shouldn't have brought it (to us),' he said."
The Rest of the Story
The rest of the story is that the Appeals Court has already ruled that disgorgement of tobacco industry profits is not an allowable remedy under the RICO statute. The only remedies allowable are those which are intended to directly prevent and restrain future RICO violations. In other words, the remedies must be forward-looking, not backwards-looking and intended to remedy past violations.
The anti-smoking groups appear to be plagued by a misconception of what the D.C. Court of Appeals ruled in disallowing the government's request for disgorgement of past tobacco industry profits as a remedy in this RICO-based litigation.
Somehow, the anti-smoking groups view the Appeals Court decision as only disallowing the disgorgement remedy, but not presenting any barriers to the $130 billion smoking cessation remedy.
However, what the appellate court ruled was not that somehow, the disgorgement remedy was inappropriate for some reason specific to disgorgement. Instead, it ruled that the disgorgement remedy was inconsistent with the RICO statute because that statute requires any remedy to be designed to prevent and restrain future RICO violations, not to punish or remedy past violations.
The language of the Appeals Court was quite clear: "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."
Without a doubt, the government's proposed $130 billion smoking cessation remedy was designed to punish the industry for, and remedy the effects of, past wrongdoing. The government had requested that the industry pay to provide smoking cessation programs to smokers who had already become victims of the industry's alleged RICO violations.
As I argued back in April 2005 (when the appellate court decision was first announced), such a program is not consistent with the appellate court's interpretation of the RICO statute because it represents a backwards-looking remedy that is measured by past wrongdoing and awarded without respect to whether future wrongdoing will take place.
Like disgorgement, the smoking cessation remedy "is measured by the amount of prior unlawful gains and is awarded without respect to whether the defendant will act unlawfully in the future. Thus it is both aimed at and measured by past conduct." These words, directly from the appellate court decision, indicate with little doubt that the $130 billion smoking cessation remedy was not allowable and will certainly not pass legal muster with the appeals court.
I have no doubt that Judge Kessler was fully aware that the "body blow" that the appeals court dealt to the DOJ case was not merely a result of the striking down of disgorgement, but the fact that it also cast doubt on the legality of the other major monetary remedies being sought by the government. That she allowed the government to go ahead with these monetary requests anyway does not indicate that she was giving final approval to such remedies, only that she thought it most prudent to at least allow the government the opportunity to present its requests. But she cautioned DOJ, in the most clear terms, that she was surprised that the government did not seem to be paying much attention to the appellate court decision.
What the rest of the story reveals is that the anti-smoking groups failed to respond appropriately in the wake of the appellate court decision by modifying their remedies requests to be consistent with the Court's interpretation of the civil remedies provisions of the RICO statute.
If anyone undermined the case, it was the anti-smoking groups, by refusing to craft an effective set of remedies that could pass appellate court scrutiny and have any decent chance of being upheld.
I think the anti-smoking groups have a lot of chutzpah going in front of this panel containing two judges who already ruled that backwards-looking remedies are not allowed and arguing that it should reverse its previous decision. You don't generally tell a group of judges that their decision was wrong. I find it extremely unlikely that the appeals court is going to declare that it was wrong and that it is going to reverse its decision.
I think the language of the RICO statute is quite clear. The decision of the District Court regarding monetary remedies will not be overturned, and it should not be overturned based on the clear language of the RICO statute.