Tobacco On Trial

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EXCERPT:

United States of America, United States Department of Justice, et al.,

Appellees

v.

Philip Morris USA Inc., Formerly known as Philip Morris Incorporated, et al.,

Appellants

American Tobacco Company, Directly and as Successor to the tobacco interest of AMERICAN BRANDS, INC., et al.,

Appellees

BEFORE:

Chief Judge Sentelle, Circuit Judge Brown, and Senior Circuit Judge Silberman

COURTROOM MINUTES OF ORAL ARGUMENT

PROCLAMATION BEING MADE, the Court opened on April 20, 2012 at 10:09 a.m. The cause was heard as case No. 2 of 3 and argued before the Court by:

Miguel Estrada, counsel for Appellants.

Sarang V. Damle (DOJ), counsel for Appellees.

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A surprisingly small crowd showed up at the DC courthouse to hear the government’s Appeal of U.S. District Judge Richard Leon’s Feb. 29 ruling striking down the FDA’s 9 proposed warning labels developed in accord with 2009’s Tobacco Control Act.

Campaign for Tobacco-Free Kids’ Matt Myers was there, as well as USA v. Philip Morris lawyer Daniel Crane-Hirsh as a spectator(!), and various interests from American Lung to Lorillard. Roughly 80 people in a courtroom about the same size, gallery-wise, as Judge Kessler’s Courtroom #19, though the lawyers’ space beyond the bar was smaller. Large portraits of previous DC Circuit Judges hung on the dark, wood-paneled walls–including current Supreme Court Justice Ruth Bader Ginsburg and famed Supreme Court nominee Robert Bork.

The bench was wide, accommodating the three judges of today’s appellate panel. Some of their questions may have seemed shockingly dumb, as if they’d hardly looked over the case at all, and sometimes the lawyers’ answers seemed off-point, but I think all the jockeying was because, as Judge A. Raymond Randolph said, “We’re in new territory here”.

That’s because, as the Court established, there is no case law that says the government may not compel companies to speak in the public interest. Government can make manufacturers label their poisonous products with a prominent skull and crossbones. It can mandate that pharmaceuticals display the risks of their products. Congress first established warning labels on cigarette packs almost 50 years ago.

“And there’s no 1st Amendment case law on this??” Judge Randolph asked.

“Not that I know of,” replied the DOJ’s Mark Stern.

The Government may compel speech, OK, but the question then is: how much? How far can the government go, to what purpose, and for what reason? So our lawyers and judges today were desperately trying to find that “fuzzy at the border” line between providing information and advocacy. As Judge Leon wrote in his ruling, “[T]he line between the constitutionally permissible dissemination of factual information and the impermissible expropriation of a company’s advertising space for government advocacy can be frustratingly blurry.” Judge Leon found the line clear, but this panel wondered on what bases do you determine where the line is? As Judge Janice Rogers Brown said, can you test for the line between warning and campaigning? “Quit Now,” or “Don’t Smoke,” she felt, is not a warning, but advocacy.

SALIENCY

Mr. Stern argued that the enormity of the health risks and the public’s proven ignorance of the true nature and magnitude of those risks justified the increased taking of pack space, and a rigorous investigation by the FDA determined the content and tone of the graphics.

Size, color and image as a package with words is, after all, how you get a message across; and the full impact of that message is characterized by what Mr. Stern described as “saliency”–how one perceives a combined message of text and graphics, and how it impacts a person who sees that message daily, over years. The total impact is a combination of cognition and emotion which is predictive of how a person reacts into the future, how a person processes that information daily, year after year. (No mention was made of the small, easily ignored black and white text warnings of the last 5 decades; not this session.) It’s how you get across a warning that sinks in, and sticks. (As Judge Brown said, “Tobacco companies have already proved that size and colors and graphics work, in their own advertising.”)

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,

Plaintiff,

v.

PHILIP MORRIS USA INC., et al.,

Defendants.

Civil Action No. 99-2496 (GK)

ORDER #30-Remand

On December 29, 2011, in Order 29-Remand [Dkt. No. 5962], the Court ordered a temporary halt to all removals of documents available to the public at the Minnesota Depository. Since that time, with the assistance of Depository staff, the Court has continued to review the operation of the Depository. The Court now concludes that certain changes to both verification and correction procedures and removal and reclassification procedures will prevent potential harm to the public due to inaccurate document information or improper removal of documents from the publicly available collection.

WHEREFORE, it is this 4th day of April, 2012, hereby

ORDERED, that Defendants shall correct, by November 1, 2012, on a box-by-box basis, all errors, including but not limited to index discrepancies, missing documents, and 4b database errors, identified by the Depository staff and submitted to the Defendants prior to the date of this Order; and it is further

ORDERED, that Defendants shall correct any future errors identified by the Depository staff within 30 days of receipt of notification of the error; and it is further

Case 1:99-cv-02496-GK Document 5970 Filed 04/04/12 Page 2 of 2

ORDERED, that Defendants shall file with the Court, by June 11, 2012, a Privilege Log listing each document that was at one time submitted to be part of the publicly available population but which has subsequently been removed by Defendants as privileged or for any other reason. The Privilege Log shall identify the document number, author, recipients, document date, document type, the reason for the removal, and whether proper removal procedures were followed as ordered in Judge Lawrence Cohen’s January 12, 1999 Order. Upon receiving this Privilege Log, the Court will consider how best to proceed.

/s/

Gladys Kessler

United States District Judge

Copies via ECF to all counsel of record

1 Defendants are free to return any removed documents to the 4b database and public population.

-2

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EXCERPT:

The undersigned Defendants hereby give notice that the Minnesota Depository will be moving to accommodate expansion and provide improved office space. The current address of the Depository is 1021 10th Avenue, S.E., Hennepin Business Center, Minneapolis, MN 55414. The Depository will be moving to the Westgate Business Center II, 1045 Westgate Drive, St. Paul, MN 55114. Defendants understand that the move is currently scheduled to take place between March 21 and March 31, 2012. Further, Defendants understand that the Depository’s administrator, Smart Legal Assistance, will be supervising the move and will attempt to accommodate requests from the public during the move (except for two days during the course of the move, anticipated to be March 29 and March 30, 2012, when the Depository staff will have no computer access). Finally, Defendants understand that the anticipated re-opening date for the Depository at its new location is April 2, 2012.

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EXCERPT:

SUMMARY OF ARGUMENT

Defendants’ latest efforts to avoid the findings and remedies in this case must fail.

1. The Tobacco Control Act does not render this lawsuit moot.

Defendants present no facts demonstrating that they have ceased their unlawful practices, which continue. To the contrary, the new statute expressly provides that it does not “affect” this case in any way, and it covers different conduct than what was at issue here. Moreover, because Defendants are challenging key provisions of the statute, and other provisions have not even gone into effect, there is no basis upon which Defendants can legitimately contend that the mere enactment of the statute ended their decades-long campaign of fraud and deceit against the American public. Defendants also fail to explain why this particular statute will fundamentally constrain their misconduct despite their failure to comply with prior purported constraints such as the MSA.

2. The primary jurisdiction doctrine also has no application here. This case has already been decided, and, in any event, the FDA has no role in monitoring Defendants’ compliance with RICO.

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EXCERPT:

SUMMARY OF ARGUMENT

The district court found that defendants violated RICO by conducting an enterprise, through a pattern of racketeering activity consisting of violations of federal mail and wire fraud statutes, as part of a scheme to defraud American consumers about the health effects and addictiveness of cigarettes. The court further found that defendants were reasonably likely to commit future RICO violations and that equitable relief was warranted pursuant to 18 U.S.C. § 1964(a). This Court affirmed the district court’s liability findings and remedial order in all significant respects. Philip Morris, 566 F.3d at 1150.

Defendants now argue that passage of the Tobacco Control Act has deprived the district court of jurisdiction by precluding “any reasonable possibility” of future RICO violations. Def. Br. 39. On this basis, defendants urge that there is no longer a live controversy and that the district court should be required “to vacate [its] injunctions and factual findings and dismiss the case with prejudice.” Def. Br. 61.

Their argument fails at every turn.

I. Congress did not believe that the Tobacco Control Act obviated the need for equitable relief in this litigation. Congress was fully aware of this litigation and its legislative findings make repeated references to the district court’s findings. See Pub. L. No. 111-31, § 2(47)–(49), codified at 21 U.S.C. § 387 note. Congress was also at pains to make clear that the legislation would not disturb the judgment affirmed by this Court. The statute provides that “[n]othing” in its provisions “shall be construed to . . . affect any action pending in Federal, State, or tribal court[.]” Pub. L. No. 111-31, § 4(a), 123 Stat. at 1782, codified at 21 U.S.C. § 387 note.

The district court properly rejected defendants’ contention that the Tobacco Control Act “forecloses any reasonable likelihood that Defendants will associate together in the future to commit joint RICO violations.” Def. Br. 32. The court explained that its previous ruling did not rest on the absence of legal restrictions. The court found a reasonable likelihood of future violations precisely because defendants, in this Court’s phrase, had demonstrated a “proclivity for unlawful conduct.” Philip Morris, 566 F.3d at 1137. The district court’s opinion is replete with findings that detail the varied means by which defendants violated or circumvented statutes, regulations, and settlement agreements. This Court substantially affirmed the remedial order precisely because of defendants’ demonstrated “proclivity for unlawful conduct.” Ibid. The district court was not required to assume that passage of the Tobacco Control Act would effect a sea change in defendants’ behavior so as to deprive it of jurisdiction.

Defendants’ strategy is impressively audacious. They ask this Court to order that this case be dismissed with prejudice in light of the Tobacco Control Act. At the same time, in litigation in this Circuit and the Sixth Circuit, they seek to have key provisions of the Act and its implementing regulations declared unconstitutional.

Were defendants to succeed in both efforts, they would thus dispense with both the RICO judgment and the Tobacco Control Act. Even apart from the other fundamental flaws in defendants’ contentions, they cannot properly seek vacatur and dismissal on the basis of a statute that they are attempting to invalidate.

II. Defendants’ invocation of the primary jurisdiction doctrine is equally unavailing. As the district court correctly explained, that doctrine applies in “circumstances in which an agency and a court ha[ve] to make the same determination under the same statute or regulation—obviously, not the case here.”

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EXCERPT:

SUMMARY OF ARGUMENT

The FDA Act extinguished the district court’s jurisdiction to issue, and continue to enforce, forward-looking injunctive relief against Defendants—which is the only relief that the Government can even potentially recover under Section 1964(a) of RICO. Accordingly, this Court should reverse the district court’s order and remand with instructions to vacate the court’s injunctions and underlying factual findings and dismiss the case as moot.

I. Under Article III, a district court has jurisdiction to issue injunctive relief only where, in the absence of such relief, there is a “realistic threat” that the challenged activity will recur in the “reasonably near future.” City of Los Angeles v. Lyons, 461 U.S. 95, 107 n.7, 108 (1983). Moreover, even where the requirements of Article III are met, a district court’s jurisdiction to issue injunctive relief under RICO is further limited by Section 1964(a) to “forward-looking remedies” that “prevent and restrain” RICO violations that are reasonably likely to occur in the future. United States v. Philip Morris USA Inc., 396 F.3d 1190, 1198 (D.C. Cir.), cert. denied, 126 S. Ct. 478 (2005).

The FDA Act eliminated the district court’s jurisdiction under both Article III and Section 1964(a) of RICO. The Act grants the FDA far-reaching authority to regulate Defendants’ design, manufacturing, and marketing of cigarettes, and provides the FDA with substantial funding and powerful enforcement tools to ensure compliance with its requirements. In light of this comprehensive federal regulatory program governing virtually every aspect of Defendants’ business, there is no realistic threat or reasonable likelihood that Defendants will engage in the future in any of the joint racketeering conduct that the district court’s injunctions are designed to prevent.

At a minimum, the district court should have vacated or modified several specific portions of its injunctions. These include the district court’s prohibition on the use of “light” and “low tar” descriptors, as well as the requirement that Defendants make corrective statements about the health effects and addictiveness of smoking, which, this Court has held, must be “confine[d]” to statements “geared towards thwarting prospective efforts by Defendants to . . . mislead consumers.” United States v. Philip Morris USA Inc., 566 F.3d 1095, 1145 (D.C. Cir. 2009) (per curiam), cert. denied, 130 S. Ct. 3501 (2010) (emphasis added). There is no reasonable likelihood that Defendants will engage in the future in the activity targeted by these injunctions—the dissemination of false information about the health risks of smoking—because the FDA Act prohibits the use of “light” and “low tar” descriptors, imposes stringent civil and criminal penalties for the false labeling and advertising of cigarettes (including false statements about the health effects and addictiveness of smoking), and affords the FDA extensive authority to monitor Defendants’ marketing practices.

II. Even if the district court did retain jurisdiction to issue injunctive relief in this case, it should have vacated its injunctions in deference to the primary jurisdiction of the FDA over matters of smoking and health. The Act designates the FDA “the primary Federal regulatory authority with respect to the manufacture, marketing, and distribution of tobacco products.” § 3(1). In discharging this statutory mandate, the FDA will be able to invoke its substantial scientific expertise and institutional experience regarding public-health issues. The district court, in contrast, lacks any such expertise or experience, and the overlapping set of federal regulatory requirements imposed by its injunctions will inevitably interfere with the FDA’s regulatory authority and create conflicting sets of legal obligations. The primary jurisdiction doctrine is intended to avoid precisely this type of regulatory uncertainty and disuniformity.

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EXCERPT:

NOTICE OF APPEAL

All defendants (the United States Food and Drug Administration, Margaret Hamburg, and Kathleen Sebelius) appeal from the Court’s summary judgment order and accompanying memorandum of February 29, 2012, docket numbers 58 and 59. Appeal from this judgment includes any and all orders antecedent and ancillary thereto, including any and all interlocutory judgments, decrees, decisions, rulings, and opinions that merged into and became part of the judgment, that shaped the judgment, that are related to the judgment, or upon which the judgment is based.

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Date Filed # Docket Text

03/05/2012 60 NOTICE OF APPEAL as to 59 Order on Motion for Summary Judgment,,,,,,, 58 Memorandum & Opinion by MARGARET A. HAMBURG, UNITED STATES FOOD AND DRUG ADMINISTRATION, KATHLEEN G. SEBELIUS. Fee Status: No Fee Paid. Parties have been notified. (Cutini, Drake) (Entered: 03/05/2012)

03/06/2012 61 Transmission of the Notice of Appeal, Order Appealed, and Docket Sheet to US Court of Appeals. The Court of Appeals docketing fee was not paid because the fee was an Appeal by the Government re 60 Notice of Appeal,. (jf, ) (Entered: 03/06/2012)

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EXCERPT:

For the reasons set forth in Plaintiffs’ Memorandum of Law in Support of Plaintiffs’ Motion for Summary Judgment, and based on the Court’s review of both parties’ arguments and the agency record, it is this day of February, 2012 hereby

ORDERED that Plaintiffs’ Motion for Summary Judgment [Dkt. #101 is GRANTED; and it is further

ORDERED that Defendants’ Cross-Motion for Summary Judgment [#35] is DENIED; and it is further

ORDERED that the FDA is permanently enjoined, until 15 months following the issuance of new regulations implementing Section 201(a) of the Tobacco Control Act that are substantively and procedurally valid and permissible under the United States Constitution and federal law, from enforcing against Plaintiffs in this action the new textual and graphic warnings required by Section 201 (a) of the Tobacco Control Act.

SO ORDERED.

RICHARD J. LEON United States District Judge

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