Wednesday, May 27, 2009

Appeals Court Upholds Denial of Monetary Remedies in Department of Justice Tobacco Lawsuit

This Demonstrates that Anti-Smoking Groups Were Wrong in their Attacks on Associate Attorney General Robert McCallum

Last week, the United States Court of Appeals for the District of Columbia largely upheld the district court's opinion in the Department of Justice's racketeering lawsuit against the tobacco companies. While anti-smoking groups have focused their publicity on the upholding of the racketeering verdict against the companies, I believe the most important aspect of the appellate court's decision was its upholding of the district court's denial of monetary remedies against the tobacco companies.

To refresh our memories, the Department of Justice, along with several intervening anti-smoking organizations --the Campaign for Tobacco-Free Kids, the American Heart Association, the American Lung Association, the American Cancer Society, and Americans for Nonsmokers' Rights -- had requested three monetary remedies: (1) a national anti-tobacco counter-marketing campaign (to be administered by the American Legacy Foundation or a similar organization); (2) a national smoking cessation program; and (3) a youth smoking reduction program, where companies would have to pay fines if youth smoking prevalence did not drop by specified amounts.

In addition, several of these anti-smoking organizations had attacked then-Associate Attorney General Robert McCallum, accusing him of intentionally undermining the case by reducing the requested amount of the smoking cessation remedy from $130 billion to $10 billion and arguing that he was doing this to protect Big Tobacco because of his having been a "former tobacco industry lawyer."

In an extensive set of commentaries, I criticized the anti-smoking groups for: (1) deceiving the public about McCallum, as he was never a tobacco industry lawyer, but merely a partner in a law firm that represented a tobacco company (McCallum never represented the company himself); (2) issuing an unwarranted and undocumented barrage of personal, political attacks against McCallum; and (3) disregarding the clear law governing the case, which made it obvious that monetary remedies of the type being sought were not consistent with the RICO statute.

Further, I argued that none of the requested monetary remedies would be allowed by the Appeals Court because they were backwards-looking remedies intended to remediate the effects of past wrongdoing, rather than to directly prevent and restrain future RICO violations, which is the only rationale for a civil remedy that is allowable under the RICO statute.

The tobacco companies appealed the district court's decision because they wanted to overturn the racketeering finding. The government cross-appealed because it wanted to overturn the district court's decision to disallow any monetary remedies in the case.

The Appeals Court's Decision

The Appeals Court upheld the district court's decision to disallow all three types of monetary remedies that were requested by the government and the anti-smoking groups.

The counter-marketing and smoking cessation remedies were disallowed by the Appeals Court because they are not aimed at preventing and restraining future RICO violations, but at remedying the effects of past violations, which is not consistent with the RICO statute.

The Court writes: "This [the government's and intervenors'] argument overlooks the explicit instruction of section 1964(a) that district courts may only order remedies 'to prevent and restrain violations of [RICO].' 18 U.S.C.1964(a). Future cigarettes sales, even to addicted smokers, are not by tehmselves RICO violations. The proposed remedies attempt to prevent and restrain future effects of past RICO violations, not future RICO violations, therefore they are outside the district court's authority under section 1964(a). Even those courts that would allow some version of disgorgement under section 1964(a) recognize that the statute is limited to preventing future violations and does not extend to future effects flowing from past violations."

In terms of the youths smoking reduction plan remedy goes, the Court writes: "The intervenors' argument in favor of the youth smoking reduction proposal is based on the incorrect assumption that the underlying RICO violation to be prevented and restrained is Defendants' youth marketing, rather than the false denials of their efforts to market to youth. As noted above, we need not decide whether such denials amounted to RICO violations. Even if they did, the district court correctly concluded that an injunction aimed solely at reducing youth smoking rates does not address the section 1964 goal of preventing and restraining the underlying RICO violation. The intervenors' argument is unavailing."

The Rest of the Story

What this decision demonstrates is that the anti-smoking groups were wrong in their attack on McCallum and their insistence that the reduction of the $130 billion smoking cessation remedy to $10 billion represented an undermining of the case designed to aid the tobacco companies. As it turns out, that change had no effect on the government's case because, as I argued, no smoking cessation remedy was allowable in the first place.

As I wrote on August 18, 2006: "McCallum's decision to substitute a $10 billion smoking cessation remedy for a $130 billion smoking cessation remedy had no impact whatsoever on the case, because as Judge Gladys Kessler ruled, $0 of smoking cessation remedy was allowable under the D.C. Appeals Court's interpretation of the RICO statute."

If anything, McCallum's insistence on changing the request for a massive $130 billion smoking cessation remedy helped the Department of Justice save face somewhat.

Now it will be interesting to see if the anti-smoking groups apologize to McCallum and retract their political accusations, which have now been shown to have had no reasonable basis or merit. Americans for Nonsmokers' Rights (ANR) went so far as calling McCallum a "cancer" in the Justice Department. Certainly, ANR owes Mr. McCallum an apology. It will be interesting to see if ANR retracts its attack and apologizes.

Other groups which had attacked McCallum, accusing him of political interference, and which therefore need to retract their attacks and apologize, include the Campaign for Tobacco-Free Kids and the Stan Glantz Announcement List-Serve.

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