Kessler Orders Delay; Warns DOJ to Adhere to Appeals Court Ruling

February 28, 2005 7:02 pm by Gene Borio

PDF File of Order 886

Judge Kessler’s Order #886, granting the DOJ’s request to present its evidence on non-disgorgement remedies after the Defense presents its liability evidence, contains some remarkable passages, at once seeming to side with Appeals Court Judge Tatel’s dissent, and yet admonishing DOJ for not adhering to Judge Sentelle’s majority ruling. To wit:

Indeed, it is not an overstatement to say that the 2-1 Opinion of the Court of Appeals, written by Judge Sentelle, has struck a body blow to the Government’s case. . .

As the Government points out in its Reply at p. 4, “the elimination of disgorgement as an available remedy necessitates a wholesale recalculation of what combination of equitable relief is necessary to best prevent and restrain the Defendants from future racketeering activity.” This is a fair assessment of the work to be done by the Government if it is to satisfy the new legal standard announced in Judge Sentelle’s 2-1 Opinion. . . .

The Court finds itself in the peculiar and extremely uncomfortable position of interpreting the scope of an appellate decision which, in the words of Judge Tatel’s dissent, “ignores controlling Supreme Court precedent, disregards Congress’s plain language, and creates a Circuit split — all in deciding an issue not properly before [the appellate court]”. . .

The Government’s Memorandum . . . reads as if Judge Sentelle had never written his Opinion. . . . .

Virtually all of the arguments made by the United States in its Memorandum were arguments relied upon by this Court in its original opinion and by Judge Tatel in his dissent. The fact of the matter is that those arguments were rejected by Judge Sentelle in his 2-1 Opinion and are simply not the law to be followed at this time.

Judge Sentelle’s Opinion, as this Court reads it, simply does not permit non-disgorgement remedies to prevent and restrain the effects of past violations of RICO. Rather, this Court’s “jurisdiction is limited to forward-looking remedies that are aimed at future violations” In fashioning its remedies testimony, the Government must be mindful of the plain, explicit language of Judge Sentelle’s 2-1 Opinion.

Full Text of Order 886 follows:

**———————————————————

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,

Plaintiff,

PHILIP MORRIS USA INC.,

f/k/a PHILIP MORRIS INC., et al.,

Defendants.

Civil Action No. v. : 99-2496 (GK)

ORDER #886

On February 4, 2005, the Court of Appeals of our Circuit issued its 2-1 decision barring disgorgement as an available remedy in this case. United States v. Philip Morris USA Inc., et al., 2005 WL 267948 (D.C. Cir., February 4, 2005). Thereafter, on February 10, 2005, in Order #875, the Court asked the parties, after conferring with them informally, to address the Government’s request to postpone presentation of its evidence on remedies, and the scope and meaning of the Court of Appeals’ decision. Those issues have now been fully addressed by the parties in their memoranda and in an amicus curiae brief submitted by the Citizens’ Commission to Protect the Truth in Support of Presentation of Plaintiff United States of America. Upon consideration of these 1

1 Defendants have filed an Opposition to the filing of the brief.

**———————————————————

-2-

submissions, as well as the extensive record in this case, the Court reaches the following conclusions.

I. PRESENTATION OF EVIDENCE ON REMEDIES

The Government argues in its Memorandum, that the February 4, 2005 ruling of the Court of Appeals “has fundamentally changed the law that has governed this case for the past four and half years” and “has dramatically changed any assessment of the overall remedy scheme necessary to prevent and restrain future wrongful conduct by the Defendants.” See United States’ Memorandum Regarding Non- Disgorgement Equitable Remedies Pursuant to Order #875, at 4, 13.

Indeed, it is not an overstatement to say that the 2-1 Opinion of the Court of Appeals, written by Judge Sentelle, has struck a body blow to the Government’s case.

In light of this development, the Government requests that it be allowed to evaluate its testimony and exhibits to conform with the newly announced remedy scheme which excludes disgorgement. As the Government points out in its Reply at p. 4, “the elimination of disgorgement as an available remedy necessitates a wholesale recalculation of what combination of equitable relief is necessary to best prevent and restrain the Defendants from future racketeering activity.” This is a fair assessment of the work to be done by the Government if it is to satisfy the new legal standard announced in Judge Sentelle’s 2-1 Opinion. In short, the

**———————————————————

reordering of witnesses is necessary to avoid a manifest injustice to the United States.

Defendants strongly oppose postponement of the Government’s evidence on non-disgorgement remedies. Defendants complain about logistical difficulties in scheduling their own witnesses and the possibility of having to call some of those witnesses twice — both on liability and remedies issues. While the scheduling of the many witnesses involved in this case, almost all of whom are extraordinarily busy people, has been a real burden to both sides, all counsel have worked diligently and effectively to avoid any “down” time in the Court’s trial schedule, and have accommodated each other to a substantial degree. There is no doubt that Defendants can continue to do so. Moreover, with the practical resources available to Defendants (i.e., first class air travel, limousines, and perhaps corporate planes), the Court has no doubt that the Defendants will be able to present their case in an orderly, efficient way that makes maximum use of all available trial time. Finally, in an effort to fully accommodate the concerns that Defendants have voiced, through informal e-mail, about this rearrangement of testimony, Defendants will be allowed to commence their testimony on Monday, March 7, 2005. 2

—-

2 It should be noted that Defendants clearly represented to the Court that they would be able to begin their direct case on Tuesday, March 1, 2005. In fact, we will begin their case on Monday, March 7, 2005. Thus, this witness reordering comes as no (continued…)

-3-

**———————————————————

II. SCOPE AND MEANING OF THE COURT OF APPEALS OPINION

The Court finds itself in the peculiar and extremely uncomfortable position of interpreting the scope of an appellate decision which, in the words of Judge Tatel’s dissent, “ignores controlling Supreme Court precedent, disregards Congress’s plain language, and creates a Circuit split — all in deciding an issue not properly before [the appellate court].” United States v. Philip Morris USA Inc., et al., 2005 WL 267948, *14 (D.C. Cir. February 4, 2005). As all parties know at this point, Judge Sentelle’s 2-1 decision held that disgorgement is not available to the Government in a suit under 18 U.S.C. § 1964(a) because it does not prevent or restrain future violations of the statute.

The Government’s Memorandum regarding the scope of the Court of Appeals’ ruling and which, if any, non-disgorgement remedies are available reads as if Judge Sentelle had never written his Opinion.

While the Court is aware that the Government is pursuing en banc reconsideration by the Court of Appeals, and that it may at some point seek certiorari from the Supreme Court, as of now, this Court is bound by the existing 2-1 Opinion written by Judge Sentelle.

Virtually all of the arguments made by the United States in its Memorandum were arguments relied upon by this Court in its original opinion, United States v. Philip Morris USA Inc., 321 F. Supp.2d 72

—-

2 (…continued) surprise to the Defendants.

-4-

**———————————————————

(D.D.C. 2004), and by Judge Tatel in his dissent. The fact of the matter is that those arguments were rejected by Judge Sentelle in his 2-1 Opinion and are simply not the law to be followed at this time.

Judge Sentelle’s Opinion, as this Court reads it, simply does not permit non-disgorgement remedies to prevent and restrain the effects of past violations of RICO. Rather, this Court’s “jurisdiction is limited to forward-looking remedies that are aimed at future violations” of RICO. United States v. Philip Morris USA Inc., et al., 2005 WL 267948, *7 (D.C. Cir., February 4, 2005). In fashioning its remedies testimony, the Government must be mindful of the plain, explicit language of Judge Sentelle’s 2-1 Opinion.

It would be premature for the Court, at this point, to rule out as a matter of law the non-disgorgement remedies which the Government has identified on pp. 8-12 of its opening Memorandum.

The Government is entitled to an opportunity to present evidence that will meet the new appellate standard announced by Judge Sentelle.

WHEREFORE, it is this 28th day of February, 2005, hereby

ORDERED that the Defendants shall commence their evidence on liability on Monday, March 7, 2005, the Government shall present its evidence on non-disgorgement remedies after completion of the

-5-

**———————————————————

Defendants’ evidence on liability, and the Defendants shall then present their evidence on non-disgorgement remedies.

/s/

Gladys Kessler

United States District Judge

Copies via ECF to all counsel of record

-6-

4 Responses to “Kessler Orders Delay; Warns DOJ to Adhere to Appeals Court Ruling”

  1. tobacco observer Says:

    Judge Kessler’s Order #886, granting the DOJ’s request to present its evidence on non-disgorgement remedies after the Defense presents its liability evidence, contains some remarkable passages, at once seeming to side with Appeals Court Judge Tatel’s dissent, and yet admonishing DOJ for not adhering to Judge Sentelle’s majority ruling
    ==========================================================

    Naturally Kessler doesn’t like the majority decision considering it completely contradicts her legally erroneous mis-interpretation of RICO 1964(a). She may disagree with the DCCA but that doesn’t grant her the legal right to “side” with the dissent. Its strange that she acts so suprised by all of this; its not as though she has never had major decisions reversed by the DCCA before. In fact, she had already been reversed once before during this very trial!

    Anyway, to say that this decision lays waste to the gov’t case is an understatement. Simply put the DOJ had no legal right to ask for the majority of the penalties it is asking for under the auspices of the civil RICO act. If the DOJ can prove ONGOING (not past) RICO violations, or a likelihood of same, they can get injuctions to stop said violations, but that’s about it.

    Since marketing to “youth” between the ages of 18-21 is legal, Kessler MAY NOT order tobacco to cease such marketing. Since medical monitoring, smoking cessation programs, or public health campaigns don’t prevent any illegal behavior, Kessler may not grant those either. The real question is, what is LEFT?

    From the gov’t request:
    “Several of the components of the injunction [the gov’t is asking for]– including a prohibition on engaging in future racketeering activity; preventing Defendants or their agents from making false or misleading statements about the health effects of smoking and secondhand smoke, the addictiveness of smoking and nicotine, and the marketing of cigarettes; and ordering Defendants to make affirmative corrective statements in future cigarette advertising, marketing, and promotional materials – are plainly aimed at preventing and restraining Defendants from engaging in precisely the same fraudulent conduct that lies at the heart of the United States’ claims.”

    So some of that is still valid. Kessler probably has little real authority to regulate tobacco marketing since third parties are involved, there are first amendment issues, and and it is already regulated by the FTC. Assuming they can make their allegations of ongoing and likely ongoing violations stick (which is going to be hard, once Tobacco starts talking about the MSA in their defense next week), they can force tobacco NOT to lie about addiction anymore, or not to make anymore misleading health claims.

    Considering that all of the tobacco companies already concede that smoking is addictive, that it has associated health risks, and most of them are no longer willing to make *any* health related claims about their products anymore the practical effect of that injunction is ZERO. Its already subsumed by the MSA, which, of course, is what tobacco has been saying since the inception of this waste-of-the taxpayer’s money.

  2. krueger Says:

    “most of them are no longer willing to make *any* health related claims about their products anymore”

    I wish that were true.

    But it’s not. I just saw one today: lite and ultralite product.

    Yesterday I saw a similar one: filters.

    These are two longstanding — and utterly misleading — health claims about tobacco product that Big Tobacco continues to put forward every day.

    Big Tobacco still lies and misleads every day about what its product does to its customer. By no stretch of the imagination has Big Tobacco come clean.

    In fact, Big Tobacco is entering a new phase of lies, regarding reduced carnage product. “May pose a reduced risk” and so on.

    In this very trial trial, it continues to deny the facts about smoking and disease, secondhand smoke, and addictive tobacco product.

    http://democrats.reform.house.gov/Documents/20040827162948-44223.pdf

    “Despite their attempts to portray themselves as new and responsible companies, leading cigarette manufacturers continue to deny or evade in the DOJ litigation the truth about the health effects of smoking, the harm of environmental tobacco smoke, and the addictiveness of nicotine. Moreover, Philip Morris, R.J. Reynolds, and British American Tobacco have also not accepted evidence of their corporate behavior regarding control of nicotine in cigarettes, marketing to children, and document destruction. Their misleading and evasive statements conflict with the companies assertions that they have reformed.”

  3. tobacco observer Says:

    >>>”Yesterday I saw a similar one [health claim]: filters.”

    LOL! Are you serious??

    You find the WORD “filter” to be a deceptive health claim? What’s the claim exactly? I think I missed it!

    If you don’t like the word “filter” what word would you suggest the cigarette manufacturers use to designate the cigarettes that have the little cellulose acetate “thingies” on them, from the ones that don’t? “non-unfiltered”? “Cigarettes with plastic cylinders formerly known as filters”? Or maybe you are just against “thingies” on the ends of cigarettes altogether?

    >>>”In fact, Big Tobacco is entering a new phase of lies, regarding reduced carnage product. “May pose a reduced risk” and so on.”

    So let me get this straight. You are claiming that every single cigarette. . .high tar. . .low tar. . .high nicotine. . .low nicotine. . .high nitrosamine. . .low nitrosamine. . .lights. . .non-lights. . .menthol. . .filtered. . .non-filtered. . .100s, etc are all EQUALLY DANGEROUS? They are all identical? No difference whatsoever between them?

    Because if some of them are MORE dangerous, by extension, some of them have to be LESS dangerous. If some of them are LESS dangerous, doesn’t it behoove the tobacco companies to figure out which ones are more dangerous, and which ones are less dangerous and point that out to the consumers? If tobacco doesn’t do that, who is going to do it?

    The gov’t tried to do that by requiring tar and nicotine labelling requirements. Then AFTER requiring them (over tobacco’s objections that they were practically speaking irrelevant) the gov’t then turned around and SUED tobacco claiming the machines they mandated were inaccurate!

    Look, its pretty simple. Either tobacco is supposed to make safer cigarettes. . .or they aren’t! The DOJ claims as part of this hypocritical lawsuit, that tobacco was supposed to make safer cigarettes, but didn’t do it. So now you’re saying that they tobacco **shouldn’t** do it? You can’t have it both ways. Which is it. . .safer cigarettes, or not?

    If the issue is who decides which ones are “safer”, Philip Morris has been petitioning the gov’t for years to make that kind of evaluation. . .but the FTC absolutely refuses to do it, or make any guidelines on how others should do it. Philip Morris has been trying for years to get the FDA authority to do that, but that has failed in Congress three seperate times.

  4. krueger Says:

    Nonsense. It’s simply not the case that Philip Morris needs “FDA authority” to make any health claim it wants. It doesn’t need FDA’s blessing, or FTC’s, or anyone’s.

    For instance, Philip Morris led customers to believe that “light” and “ultralight” product was less lethal. It didn’t need FDA’s permission to do that. It didn’t need anyone’s permission.

    The slight problem for Philip Morris is that it didn’t deliver on its claim, the product wasn’t safer, it knew that at the time, and all these facts came to light. So it’s now being held accountable for its deception.

    But Philip Morris is smart and learns from its mistakes. Its strategy now appears to be to set up circumstances so it can make a health claim yet not be accountable for it. How to do this? Get FDA involved. Then later point at FDA and say “we didn’t say it, they said it!”

    Philip Morris doesn’t need FDA to make a health claim. What FDA can do for Philip Morris is give it teflon in court later when customers start getting sick.

    But the history of Big Tobacco and health claims isn’t all about litigation. It’s about millions of smokers who were sold a lie. Litigation came too late for most of them.

    Big Tobacco pours literally billions of dollars of advertising into selling that lie: at least it’s filtered, at least it’s low tar, it’s not as bad for you. Yes you can switch down.

    Very few smokers knew the truth. To this day, few know what Philip Morris knows about filters and light and ultralight product.

    Whenever I hear a cry to let Big Tobacco “inform” customers, I wonder when Philip Morris will start telling its customers what it knows about this. Nothing stopped it from doing that, either. It chose not to.

    The same as it chose not to tell its customers what it knew about engineering the product for addiction.

    How many people died from this?

    How many lives were cut short?

    How many people spent their last years in pain, unable to walk far, unable to breathe normally, losing their voice, mobility, independence, dignity?

    That’s the history of “safer” tobacco product.

    And litigation won’t change that.

    It might reduce Philip Morris’s profits, though.

    Which is why Philip Morris wants FDA approval of health claims. So it can keep and hook new customers with health claims, but then back away from those claims when the customers start getting sick. And dying.

    http://www.ash.org.uk/html/regulation/html/big-one.html

Leave a Reply

The primary purpose of this site is to provide information in a timely manner. Postings should be informative. The usual rules apply: No libel, no profanity, no personal abuse, keep it on topic, and short.

If you are scheduled as a court witness, CHECK with your lawyer before posting anything here!