Government appeals on tobacco remedy
on Jul 18, 2005 at 3:29 pm
The Justice Department on Monday afternoon asked the Supreme Court to rule that the tobacco industry may be ordered to give up corporate revenues obtained from an alleged four-decade campaign of deception about the health hazards of smoking. (An earlier post, below, examines some of the reasons for and against Supreme Court review of the case.)
The industry has not yet been found by a U.S. District Court to have violated the federal anti-racketeering law, popularly known as “RICO.” The surrender of gains would be a remedy only if the Supreme Court allowed it, and only if liability were first found at the trial that is ongoing. The government has said the industry should be required to surrender $280 billion in “ill-gotten gains.”
Ending uncertainty about whether it would take the long-running case on to the highest court, the Department filed a petition for review (U.S. v. Philip Morris USA, Inc., et al., docket 05-92). It poses a single question:
“Whether the District Court’s equitable jurisdiction to issue ‘appropriate orders’ to ‘prevent and restrain’ violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 USC 1964-a, encompasses the remedial authority to order disgorgement of illegally-obtained proceeds.”
Solicitor General Paul D. Clement is not taking part in the appeal. The petition said, without explanation, that he “is disqualified in this case.” The lead attorney on the case is one of his deputies, Acting Solicitor General Edwin S. Kneedler.
The appeal, calling the case “extraordinarily important,” challenges a February 4 ruling by the D.C. Circuit. Dividing 2-1, a panel of the Circuit Court ruled that RICO does not give federal judges power to require a violator to disgorge its gains from past illegal activity, as a remedy for a civil violation of the Act. The civil remedies allowed by RICO, the panel found, must be limited to “forward-looking remedies that are aimed at future violations.”
That ruling, the Justice Department appeal contended, “is inconsistent with this Court’s decisions, squarely conflicts with the decisions of other courts of appeals, wrongly decides an important issue and, if left uncorrected, will impede, rather than advance, the ultimate resolution of the proceedings in this extraordinarily important case.”
“The court of appeals,” the government contends in the petition, “has disabled the government from employing a critically important remedial tool — equitable disgorgement — for achieving Congress’s objectives. That court has done so in a case of vital interest to the American public.”
The government did not ask the Court to expedite its handling of the new appeal, so it will come up in regular order in the Court Term that starts Oct. 3. The industry has 30 days to file its opposition. The government’s appeal is from a Circuit Court so it is not mandatory that the Court hear and decide it; that is a matter left to its discretion.
In arguing for review, the petition not only laments the denial of a disgorgement remedy, but also complains that the Circuit Court ruling threatens the scope of any other remedy that could emerge if a RICO violation is found. The petition noted that the industry is now arguing in District Court that the February ruling prohibits any remedy that would cure the ill effects of past unlawful conduct, including a stop-smoking campaign aimed at those who previously had become addicted to nicotine-laced cigarettes.
The government noted that U.S. District Judge Gladys Kessler had not yet issued a final ruling on remedies, but that she had commented that the Circuit Court ruling “simply does not permit non-disgorgement remedies to prevent and restrain the effects of past violations.”
As a result, it noted, the government has curtailed its proposal for remedies, cutting a cessation and education program down to $14 billion lasting no longer than ten years. (It had previously sought a $130 billion plan, to run for 25 years.)
Even though the case is not yet over in District Court, the new appeal argues that the Supreme Court should step in now to resolve the availability of a disgorgement remedy. “If the Court postpones correction of the court of appeals’ mistaken guidance until after the district court issues an artificially constrained final judgment and this complex case traces a new route through the court of appeals, then the district court will be precluded from correctly resolving this litigation until remand proceedings can be convened at a far distant date.”
The petition suggested that the case might not get back to the Supreme Court until the summer of 2007, putting off a final decision until 2008. If the Court takes the case in its next Term, and resolves it by the summer of 2005, the District Court could issue a final ruling by the summer of 2006, it said.
The case has already run on in the lower courts for nearly six years.
