DEFENSE CHALLENGES KESSLER’S ORDERS
September 1, 2006 1:10 pm by Gene BorioSeveral tobacco defendants (Philip Morris USA, Altria, RJR, B&W, Lorillard, and BATCo.) filed a motion Thursday that asks Judge Kessler to clarify, change or even stay various Aug. 17 orders.
There are two main issues:
1. The Defendants claim the injunction against racketeering is far too general to be reasonably followed, and thus is not supported by the Federal Rules of Civil Procedure nor case law.
2. Defendants want Judge Kessler to specifically verify that her orders regarding “light” descriptors and point-of-sale corrective communications apply ONLY in the US.
RACKETEERING
Defendants claim 2 of the Court’s provisions against racketeering activity are “broad and amorphous requirements that raise serious issues under the law [and] create great uncertainty regarding the precise scope of the conduct the Court seeks to prohibit.”
Those provisions are:
1. All Defendants, Covered Persons and Entities are permanently enjoined from committing any act of racketeering, as defined in 18 U.S.C. § 1961(1), relating in any way to the manufacturing, marketing, promotion, health consequences or sale of cigarettes in the United States. . . .
3. All Defendants, Covered Persons and Entities are permanently enjoined from making, or causing to be made in any way, any material false, misleading, or deceptive statement or representation, or engaging in any public relations or marketing endeavor that is disseminated to the United States public and that misrepresents or suppresses information concerning cigarettes
–Final Judgement and Remedial Order, II. A. 1. & 3.
Defendants argue that such generic orders “create great uncertainty regarding the precise scope of the conduct the Court seeks to prohibit” and are “vague and difficult to implement against the backdrop of the Court’s 1,600-plus pages of factual findings. ” Defendants want Judge Kessler to detail “the precise conduct that is prohibited.” They argue that without clarification, Judge Kessler’s order prohibiting them from “committing any act of racketeering” would wind up as “nothing more than a vague directive to obey a panoply of state and federal criminal laws. It would thus fail to satisfy the requirements of Rule 65″
Defendants point out that The Court’s injunction against racketeering activity applies to those acts “’relating in any way to the manufacturing, marketing, promotion, health consequences or sale of cigarettes in the United States’” is not a meaningful limitation for defendants who are cigarette manufacturers, since this encompasses virtually everything that they do.”
Defendants feel even specific injunctions barring them from making the following affirmative statements to the public are not specific enough. As Defendants understand their obligations [based partly on “the Court’s comments during the August 18, 2006, conference call hearing “, these are:
• “misrepresenting the adverse health effects caused by smoking and exposure to environmental tobacco smoke”;
• “maintaining that neither smoking nor nicotine is addictive”;
• stating that light or low tar cigarettes are safer than other cigarettes;
• denying that they manipulate nicotine; and
• denying that they market to youth.
Defendants also understand the Order to preclude them from entering into any agreement to limit or suppress research.
Defendants argue that such “obligations are vague and difficult to implement against the backdrop of the Court’s 1,600-plus pages of factual findings. They would result in irreparable harm to defendants if required to be implemented immediately.”
This is possibly the most problematic of the Defense’s claims. That list of their offenses is so large that Kessler would have to individually tally each possible racketeering activity, leaving outside her purview a host of racketeering options the industry might come up with. Judge Kessler is well aware of the industry’s ingenuity in bypassing regulations that aren’t rock solid. By being so specific, Judge Kessler would perforce be allowing any _other_ racketeering activities. Besides bogging her order down in minutiae, Judge Kessler may have considered that when it comes to injunctions for this industry, the broader the better.
COMMUNICATIONS
Defendants argue that the “bulk of the provisions in the Order apply by their terms only to activities in the United States.” Yet in several sections–those concerning the use of “lights” descriptors and “corrective statements in Countertop Display, and Header Display, at retail point of sale”– the injunctions are not specifically limited to the US. Defendants want Judge Kessler’s Order to be altered or amended to specify this limitation.
“Banning the use of the low tar descriptors in foreign countries would be an unwarranted intrusion upon the right of these countries to regulate cigarette sales within their own borders” Defendants claim, as well as giving competitors unfair advantage to market such products.
SUMMARY
Defendants conclude:
Given (1) the fact that the numerous other provisions in the Court’s Order are expressly limited to the United States, (2) the limited jurisdictional reach of the RICO statute, (3) the severe problems involving international comity that would result if this Court’s injunction were read to supersede other countries’ regulatory policies concerning cigarette descriptors, and (4) the lack of any factual findings in the opinion concerning the use of light cigarettes in foreign countries, it seems highly unlikely that the Court intended for its prohibition of these descriptors to extend to cigarettes sold at retail in foreign countries.
The Defendants requested “oral argument on this motion.” Whether this means a conference call or one more session in Courtroom #19 is unknown.
None of this activity precludes Defendants’ sure-to-be-upcoming appeal.
UPDATE: Defendants have requested an expedited briefing on their motion for a stay of judgement, based on these and other issues. According to their timetable, all documents–motion and replies– should be in to Judge Kessler by September 12.
See:
CERTAIN DEFENDANTS’ AMENDED MOTION FOR EXPEDITED BRIEFING OF THEIR MOTION FOR STAY OF JUDGMENT PENDING APPEAL AND INCORPORATED MEMORANDUM OF POINTS AND AUTHORITIES August 31, 2006 (PDF)
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Texts follow of:
Defendants’ Memo Supporting Clarification, August 31, 2006
Defendants’ Motion for Clarification, August 31, 2006
Text of relevant sections of Judge Kessler’s Final Judgement and Remedial Order, August 17, 2006
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Defendants’ Motion for Clarification, August 31, 2006
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
And
Civil Action No. 99-CV-2496 (GK)
TOBACCO-FREE KIDS ACTION FUND,
et al.,
Next Scheduled Court Appearance:
) None
v.
PHILIP MORRIS USA INC. (f/k/a
ORAL ARGUMENT REQUESTED
PHILIP MORRIS INCORPORATED), et
al.,
Defendants.
CERTAIN DEFENDANTS’ MOTION FOR CLARIFICATION OR IN THE ALTERNATIVE FOR RELIEF UNDER RULES 52, 59, AND 60 WITH RESPECT TO THE COURT’S AUGUST 17, 2006 ORDER
The undersigned defendants respectfully move this Court to alter or amend the Court’s August 17, 2006 Final Opinion and Final Judgment and Remedial Order. The reasons supporting this motion are set forth in the accompanying memorandum of points and authorities.
Defendants request oral argument on this motion.
Pursuant to Local Civil Rule 7(m), counsel for defendants have met and conferred with counsel for plaintiff in an effort to narrow or resolve the parties’ differences regarding this motion. Plaintiff opposes the motion.
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DATED: August 31, 2006 Respectfully submitted,
/s/ Matthew A. Campbell for _______________
Timothy M. Broas (D.C. Bar No. 391145)
WINSTON & STRAWN LLP
1700 K Street, N.W.
Washington, D.C. 20006-3817
Telephone: (202) 282-5000
Fax: (202) 282-5100
Dan K. Webb
Thomas J. Frederick
WINSTON & STRAWN LLP
35 West Wacker Drive
Chicago, Illinois 60601-9703
Telephone: (312) 558-5600
Fax: (312) 558-5700
Theodore V. Wells, Jr. (D.C. Bar No.
468934)
James L. Brochin (D.C. Bar No. 455456)
PAUL, WEISS, RIFKIND, WHARTON &
GARRISON LLP
1285 Avenue of the Americas
New York, New York 10019-6064
Telephone: (212) 373-3000
Fax: (212) 757-3990
Attorneys for Defendants
Altria Group Inc. and Philip Morris USA Inc
/s/ Matthew A. Campbell for _______________
Robert F. McDermott (D.C. Bar No. 261164)
Peter J. Biersteker (D.C. Bar No. 358108)
JONES DAY
51 Louisiana Avenue, N. W.
Washington, D.C. 20001-2113
Telephone: (202) 879-3939
Fax: (202) 626-1700
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Paul G. Crist
JONES DAY
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114-1190
Telephone: (216) 586-3939
Fax: (216) 579-0212
Attorneys for Defendant
R. J. Reynolds Tobacco Company
/s/ Matthew A. Campbell for _______________
David E. Mendelson (D.C. Bar No. 471863)
KIRKLAND & ELLIS LLP
655 15th Street, N.W., Suite 1200
Washington, D.C. 200005
Telephone: (202) 879-5000
Fax: (202) 879-5200
David M. Bernick
Stephen R. Patton
Renee D. Honigberg
KIRKLAND & ELLIS LLP
200 East Randolph Drive, Suite 5900
Chicago, Illinois 60601
Telephone: (312) 861-2000
Fax: (312) 861-2200
Attorneys for Defendant
Brown & Williamson Tobacco Holdings, Inc.
/s/ Matthew A. Campbell for _______________
Michael B. Minton
THOMPSON COBURN LLP
One US Bank Plaza, Suite 3500
St. Louis, Missouri 63101-1693
Telephone: (314) 552-6000
Fax: (314) 552-7597
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Gene E. Voigts
SHOOK, HARDY & BACON LLP
2555 Grand Blvd.
Kansas City, Missouri 64108-2613
Telephone: (816) 474-6550
Fax: (816) 421-2708
Attorneys for Defendant
Lorillard Tobacco Company
/s/ Matthew A. Campbell for _______________
Bruce G. Sheffler
David L. Wallace
CHADBOURNE & PARKE LLP
30 Rockefeller Plaza, 34th Floor
New York, New York 10112-0219
Telephone: (212) 408-5100
Attorneys for Defendant
British American Tobacco (Investments) Limited (f/k/a British-American Tobacco Company Limited)
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Defendants’ Memo Supporting Clarification, August 31, 2006
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
And
TOBACCO-FREE KIDS ACTION FUND,
et al.,
v.
PHILIP MORRIS USA INC. (f/k/a
PHILIP MORRIS INCORPORATED), et
al.,
Defendants.
Civil Action No. 99-CV-2496 (GK)
Next Scheduled Court Appearance: None
ORAL ARGUMENT REQUESTED
CERTAIN DEFENDANTS’ MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR CLARIFICATION OR IN THE ALTERNATIVE FOR RELIEF UNDER RULES 52, 59, AND 60 WITH RESPECT TO THE COURT’S AUGUST 17, 2006 ORDER
Pursuant to Rules 52, 59, and 60 of the Federal Rules of Civil Procedure, certain defendants1 request clarification, or in the alternative an amendment to, or relief from, the Court’s August 17, 2006 Final Judgment & Remedial Order (the “Order”) and Final Opinion (the “Opinion”).
Defendants seek clarification from the Court on two discrete issues arising from the Order. First, defendants seek clarification as to the meaning and application of the general injunctive provisions in paragraphs II.A.1. and II.A.3. of the Order. Second, defendants seek
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1 The defendants joining this motion are Philip Morris USA, Altria, R.J. Reynolds, Brown & Williamson, Lorillard, and BATCo.
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clarification that the Court does not intend that certain aspects of the Order — i.e., those provisions prohibiting the use of descriptors and those requiring corrective statements at retail point-of-sale — apply to sales wholly outside the United States.2
I. DEFENDANTS REQUEST CLARIFICATION REGARDING THE GENERAL INJUNCTIVE PROVISIONS IN SECTIONS II.A.1. AND II.A.3. OF THE ORDER
A. The Court Should Clarify The Scope Of The General Injunctions It Has Ordered
Although a number of the provisions in the Court’s Order detail specific actions that defendants are required to take to be in compliance with the Order, two provisions set forth broad and amorphous requirements that raise serious issues under the law. Specifically, the Order provides that defendants are (1) “enjoined from committing any act of racketeering, as defined in 18 U.S.C. § 1961(1), relating in any way to the manufacturing, marketing, promotion, health consequences or sale of cigarettes in the United States,” Order § II.A.1., and (2) “enjoined from making, or causing to be made in any way, any material false, misleading, or deceptive statement or representation, or engaging in any public relations or marketing endeavor . . . that misrepresents or suppresses information concerning cigarettes.” Order § II.A.3. As defendants emphasized in support of their request for an emergency stay, to the
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2 As the Court is aware, defendants contest numerous findings and conclusions contained in the Court’s 1,653 page Opinion. Defendants’ positions on those issues have been set forth in detail in defendants’ post-trial submissions as well as numerous other submissions made throughout the course of this proceeding. Defendants will challenge those findings and conclusions on appeal and submit this motion without waiver of their position that the extensive findings and conclusions underlying this Court’s Order are incorrect and that defendants should not be subject to any of the relief set forth in the Order. This motion focuses on several discrete issues where defendants believe that the Order is unclear and requires clarification, or in the alternative amendment or relief from the judgment.
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extent that these provisions are intended to impose obligations above and beyond those imposed by the specific provisions in the Order, they create great uncertainty regarding the precise scope of the conduct the Court seeks to prohibit.3 Defendants seek clarification from the Court as to the precise conduct that is prohibited under these sections. Given the structure of the Order and the Court’s comments during the August 18, 2006, conference call hearing, defendants interpret these general injunctive provisions as barring them from making affirmative statements to the public respecting the manufacture and sale of cigarettes within the United States:
• “misrepresenting the adverse health effects caused by smoking and exposure to environmental tobacco smoke”;
• “maintaining that neither smoking nor nicotine is addictive”;
• stating that light or low tar cigarettes are safer than other cigarettes;4
• denying that they manipulate nicotine; and
• denying that they market to youth.
Opinion at 1501-02; see also id. at 1604-05. Defendants also understand the Order to preclude them from entering into any agreement to limit or suppress research. Defendants’ interpretation of the Order is that this list of specific obligations fully encompasses all of the injunctive relief
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3 The Court’s denial of defendants’ request for the emergency stay, coupled with its statement that the Order does not require defendants to do anything yet, is consistent with defendants’ view that the general provisions do not add to the specific obligations of the Order. But it does not definitively resolve the issue.
4 Pursuant to the more specific injunctive relief ordered by the Court, however, the use of low tar cigarette descriptors is not prohibited until January 1, 2007. Opinion at 1632.
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imposed by Sections II.A.1. & II.A.3. Defendants request that the Court indicate otherwise if defendants’ interpretation of these provisions is incorrect.
As we detail in our motion for a stay pending appeal, even these obligations are vague and difficult to implement against the backdrop of the Court’s 1,600-plus pages of factual findings. They would result in irreparable harm to defendants if required to be implemented immediately. See Certain Defs’ Mem. of Points and Authorities in Supp. of Their Mot. to Stay the Final Judgment and Remedial Order Pending Appeal (Aug. 31, 2006). But the government apparently has taken a position that goes well beyond even this interpretation of the injunction.
The government describes the injunction as a general requirement to obey the law. See United States Mem. in Opp. to Defs.’ Emergency Mot. for Stay of Judgment (Aug. 23, 2006) at 2-3. The government’s reading, if adopted by this Court, would exponentially increase both the ambiguity and the harm. It would impose additional, impossible-to-define burdens on defendants in violation of Rule 65 and longstanding Supreme Court and D.C. Circuit precedent, leave defendants nothing but their own best guess as a guide for determining what conduct is prohibited by the general provisions, and unfairly subject defendants to the threat of judicial contempt proceedings arising out of mere “uncertainty and confusion.” Schmidt v. Lessard, 414 U.S. 473, 476 (1974).5
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5 In the event that a stay is not granted, defendants may bring any additional issues involving the implementation and interpretation of the Order to the Court’s attention pursuant to the Court’s continuing jurisdiction over its injunctive order.
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B. Absent Clarification From The Court, The General Injunctive Provisions Fail To Conform With Rule 65(d)
Rule 65(d) mandates that “[e]very order granting an injunction and every restraining order . . . shall be specific in its terms [and] shall describe in reasonable detail, and not by reference to the complaint or other document, the act or acts sought to be restrained.” Fed. R. Civ. P. 65(d). The Supreme Court has long held that the need for specificity is “no mere technical requirement[ ].” Schmidt, 414 U.S. 473 at 476. To the contrary, “[s]ince an injunctive order prohibits conduct under threat of judicial punishment, basic fairness requires that those enjoined receive explicit notice of precisely what conduct is outlawed.” Id.; see also Gunn v. Univ. Comm. to End the War in Viet Nam, 399 U.S. 383, 388-89 (1970) (specificity requirement imposed by Rule 65 “is essential in cases where private conduct is sought to be enjoined”). The need to ensure effective appellate review also demands that injunctions be specific: “In the absence of specific injunctive relief, informed and intelligent appellate review is greatly complicated, if not made impossible.” Schmidt, 414 U.S. at 477. Thus, a federal court must “frame its orders so that those who must obey them will know what the court intends to require and what it means to forbid.” Int’l Longshoremen’s Ass’n., Local 1291 v. Phila. Marine Trade Ass’n., 389 U.S. 64, 75-76 (1967).
Recognizing the importance of these goals, federal appellate courts, including the D.C. Circuit, have not hesitated to strike down provisions that fail to comport with Rule 65. See, e.g., Gulf Oil Corp. v. Brock, 778 F.2d 834, 843 (D.C. Cir. 1985) (injunction containing ambiguous phrase “similar in nature” violated specificity requirements of rule 65); Common Cause v. Nuclear Regulatory Comm’n, 674 F.2d 921, 926-27 (D.C. Cir. 1982) (deeming an injunction violative of Fed. R. Civ. P. 65 because it was “susceptible to more than one interpretation” and
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“failed to give adequate notice to the [enjoined party] of the nature of the prohibited activity”); SEC v. Savoy Indus., Inc., 665 F.2d 1310, 1318-19 (D.C. Cir. 1981) (striking injunction ordering the defendant “not to engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person” because it was “so vague as to put the whole conduct of [the defendant’s] business at the peril of a summons for contempt”) (internal quotation marks and citations omitted).6
Defendants submit that their interpretation of the general injunctive provisions comes closer to adherence to these principles than does the government’s interpretation. First, the government’s interpretation of the provision against “committing any act of racketeering as defined in 18 U.S.C. § 1961(1)” would violate the above requirements. 18 U.S.C. § 1961(1) defines “racketeering activity” to mean any act indictable under any of more than sixty listed federal statutory provisions, including (to name a few) not only the mail and wire fraud statutes at issue in this case, but also statutes ranging from those governing extortionate credit transactions, to financial institution fraud, to immigration fraud, to obscenity laws, to false
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6 See also Corning Inc. v. PicVue Elec., Ltd., 365 F.3d 156, 158 (2d Cir. 2004) (concluding that a preliminary injunction violated Rule 65 because it was “not possible to ascertain from the four corners of the order precisely what acts [were] forbidden”) (internal quotation marks and citations omitted); United States v. Dinwiddie, 76 F.3d 913, 928 n.12 (8th Cir. 1996) (concluding that “[w]ith its prohibition on activities that can be ‘remotely construed’ to violate FACE and its lack of a definition for legitimate personal activity, the [challenged] injunction violate[d] Rule 65(d) by calling on [the defendant] to guess at what kind of conduct is permissible”) (citations and internal quotation omitted); Calvin Klein Cosmetics Corp. v. Parfums de Coeur, Ltd., 824 F.2d 665, 669 (8th Cir. 1987) (vacating injunction that “too broadly require[d] [the defendant] to guess at what kind of conduct would be deemed [prohibited conduct]”); Payne v. Travenol Labs., Inc., 565 F.2d 895, 897 (5th Cir. 1978) (noting that Rule 65’s “command of specificity is a reflection of the seriousness of the consequences which may flow from a violation of an injunctive order”).
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statements in application and use of passports, to copyright infringement, to unauthorized trafficking in sound recordings, and to laws governing reporting of currency and foreign transactions. On top of these sixty-plus federal statutory provisions, “racketeering activity” can also include broad categories of criminal offenses chargeable under state law. 18 U.S.C. § 1961(1)(A). Accordingly, an order not to engage in “racketeering activity” not limited in the manner defendants propose would amount to nothing more than a vague directive to obey a panoply of state and federal criminal laws. It would thus fail to satisfy the requirements of Rule 65. See, e.g., Cobell v. Norton, 392 F.3d 461, 475 (D.C. Cir. 2004) (injunction invalid where it “amount[ed] to an order to obey the law”); Burton v. City of Belle Glade, 178 F.3d 1175, 1201 (11th Cir. 1999) (injunction preventing city from discriminating on the basis of race in its annexation decisions “would do no more than instruct the City to ‘obey the law,’” and thus “would not satisfy the specificity requirements of Rule 65(d)”); Payne, 565 F.2d at 898 (“‘obey the law’ injunctions cannot be sustained.”); Sterling Drug, Inc. v. Bayer AG, 14 F.3d 733, 748 (2d Cir. 1994) (striking down an injunction prohibiting the defendant from violating the Lanham Act and state trademark statutes because “requiring [the defendant] to guess — on pain of contempt — at what conduct the Lanham Act proscribes is too onerous a burden”).7 Second, the Court’s prohibition on “making, or causing to be made in any way, any material false, misleading, or deceptive statement or representation, or engaging in any public
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7 The Court’s limitation of the prohibition against “racketeering activity” to those acts “relating in any way to the manufacturing, marketing, promotion, health consequences or sale of cigarettes in the United States” is not a meaningful limitation for defendants who are cigarette manufacturers, since this encompasses virtually everything that they do.
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8 relations or marketing endeavor . . . that misrepresents or suppresses information concerning cigarettes” also could be interpreted so broadly as to be unlawful. Read as the government apparently reads it, this provision is indistinguishable from a provision that the D.C. Circuit has expressly deemed insufficiently precise under Rule 65. In SEC v. Savoy Indus., Inc., the Court of Appeals struck a provision enjoining the defendant from “engag[ing] in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.” 665 F.2d at 1318-19. The Court recognized that allowing such a provision to stand “could subject to the federal civil contempt power future acts by [the defendant] . . . unrelated to his lawbreaking in the past.” Id. at 1319. As the Court aptly noted, the provision was “‘so vague as to put the whole conduct of [defendant’s] business at the peril of a summons for contempt.”’ Id.; see also United States v. Vitasafe Corp., 345 F.2d 864, 871 (3d Cir. 1965) (finding that an injunction prohibiting distribution of literature considered “otherwise false and misleading” violated Rule 65).
Indeed, given the specific remedies ordered, the government’s interpretation of the Order does not make sense. For example, notwithstanding that every cigarette package contains the health warnings required by Congress, the Opinion criticizes defendants for not stating on their cigarette packaging that they “agree” that smoking causes cancer and other diseases. Opinion at 331. Presumably, the Court chose to remedy this defect by requiring corrective statements to be published in the manner specified in the Order, including the use of onserts on some cigarette packages for six weeks per year for two years beginning in February 2007. Thus, it would seem unreasonable to conclude that it would be fraudulent for defendants to sell cigarettes that do not contain such statements before February 2007 (or after 2009), or during the 46 weeks per year when the onserts are not required. Indeed, the Court deems the precise content of those to-be-
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developed corrective statements so important that, even if “slight variations” are necessary to accommodate the media or format utilized, “no such variations may be implemented without prior approval of the Court.” Order § II.B.5. Given these directives, defendants’ reading of the general injunctive provisions conforms to the words and context of the Court’s Order and Opinion.
II. DEFENDANTS REQUEST THAT THE COURT CLARIFY THE ORDER’S APPLICATION TO CERTAIN INTERNATIONAL ACTIVITIES
The bulk of the provisions in the Order apply by their terms only to activities in the United States. E.g., Order § II.A.1. (enjoining racketeering activity “relating in any way to the manufacturing, marketing … or sale of cigarettes in the United States”); § II.A.3. (enjoining false, misleading or deceptive statements “disseminated to the United States public”); § II.B.7.a. (requiring corrective statements in onserts for “cigarettes shipped for retail distribution in the United States”); § II.B.7.c.-d. (requiring publication of corrective statements in various United States publications and broadcasts of such statements as advertisements on United States television networks). However, there are certain provisions that lack any specific limitation to the United States. These provisions, however, do not expressly state that they have international application either. Defendants point especially to two provisions — Section II.A.4. and Section II.B.7.b.
First, defendants seek clarification that the prohibition against express or implied health messages or health descriptors in section II.A.4. of the Order (p. 3) applies only to statements made by defendants in the United States and to cigarettes sold by defendants at retail in the United States. This provision prohibits use of descriptors such as “low tar,” “light,” “ultra light,” “mild,” and “natural.” Some defendants (or their subsidiaries) manufacture cigarettes bearing
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these or similar descriptors for sale in various foreign countries, where permitted under applicable law. For example, BATCo manufactures cigarettes for distribution and sale internationally.
Given (1) the fact that the numerous other provisions in the Court’s Order are expressly limited to the United States, (2) the limited jurisdictional reach of the RICO statute, (3) the severe problems involving international comity that would result if this Court’s injunction were read to supersede other countries’ regulatory policies concerning cigarette descriptors, and (4) the lack of any factual findings in the opinion concerning the use of light cigarettes in foreign countries, it seems highly unlikely that the Court intended for its prohibition of these descriptors to extend to cigarettes sold at retail in foreign countries. Indeed, it would appear that section II.A.4. is simply a more specific application of the general prohibitions against false, misleading or deceptive statements in Section II.A.3. — a provision that is limited by its terms to the United States. Moreover, banning the use of the low tar descriptors in foreign countries would be an unwarranted intrusion upon the right of these countries to regulate cigarette sales within their own borders. See, e.g., McColloch v. Sociedad Nacional de Marineros de Honduras, 372 U.S. 10, 21-22 (1963) (refusing to apply federal law to foreign activities where doing so would create “[t]he possibility of international discord”); United States v. Aluminum Co. of Am., 148 F.2d 416, 443 (2d Cir. 1945) (Hand, J.) (concluding that the Sherman Act did not reach agreements limiting the supply of product to foreign nations given “the international complications likely to arise from an effort in this country to treat such arguments as unlawful”); Restatement (Third) of Foreign Relations Law of the United States § 403(2)(g) (describing unreasonableness of regulating activity primarily of interest to foreign sovereign). And prohibiting BATCo from manufacturing such products for distribution and sale — while leaving its international
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competitors free to continue using such descriptors — would place it at an unfair marketing disadvantage in overseas markets.
Second, defendants request clarification that the inclusion of corrective statements in Countertop Display, and Header Display, at retail point of sale (Section II.B.7.) is limited to retail locations in the United States. Although this provision contains no express U.S. limitation, like the descriptor provision, it is surrounded by other provisions that are so limited8 and it would make no sense to impose an international obligation with respect to such countertop and header displays.
CONCLUSION
For the reasons stated, defendants request the Court to clarify or amend its Order in the respects described above.
DATED: August 31, 2006
Respectfully submitted,
/s/ Matthew A. Campbell for _______________
Timothy M. Broas (D.C. Bar No. 391145)
WINSTON & STRAWN LLP
1700 K Street, N.W.
Washington, D.C. 20006-3817
Telephone: (202) 282-5000
Fax: (202) 282-5100
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8 E.g., Section II.B.7.a. (requiring onserts on “each pack of Defendants’ cigarettes shipped for retail distribution in the United States” during certain periods); Section II.B.7.c. (requiring publication in various United States newspapers).
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Dan K. Webb
Thomas J. Frederick
WINSTON & STRAWN LLP
35 West Wacker Drive
Chicago, Illinois 60601-9703
Telephone: (312) 558-5600
Fax: (312) 558-5700
Theodore V. Wells, Jr. (D.C. Bar No.
468934)
James L. Brochin (D.C. Bar No. 455456)
PAUL, WEISS, RIFKIND, WHARTON &
GARRISON LLP
1285 Avenue of the Americas
New York, New York 10019-6064
Telephone: (212) 373-3000
Fax: (212) 757-3990
Attorneys for Defendants
Altria Group Inc. and Philip Morris USA Inc
/s/ Matthew A. Campbell for _______________
Robert F. McDermott (D.C. Bar No. 261164)
Peter J. Biersteker (D.C. Bar No. 358108)
JONES DAY
51 Louisiana Avenue, N. W.
Washington, D.C. 20001-2113
Telephone: (202) 879-3939
Fax: (202) 626-1700
Paul G. Crist
JONES DAY
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114-1190
Telephone: (216) 586-3939
Fax: (216) 579-0212
Attorneys for Defendant
R. J. Reynolds Tobacco Company
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/s/ Matthew A. Campbell for _______________
David E. Mendelson (D.C. Bar No. 471863)
KIRKLAND & ELLIS LLP
655 15th Street, N.W., Suite 1200
Washington, D.C. 200005
Telephone: (202) 879-5000
Fax: (202) 879-5200
David M. Bernick
Stephen R. Patton
Renee D. Honigberg
KIRKLAND & ELLIS LLP
200 East Randolph Drive, Suite 5900
Chicago, Illinois 60601
Telephone: (312) 861-2000
Fax: (312) 861-2200
Attorneys for Defendant
Brown & Williamson Tobacco Holdings, Inc.
/s/ Matthew A. Campbell for _______________
Michael B. Minton
THOMPSON COBURN LLP
One US Bank Plaza, Suite 3500
St. Louis, Missouri 63101-1693
Telephone: (314) 552-6000
Fax: (314) 552-7597
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Gene E. Voigts
SHOOK, HARDY & BACON LLP
2555 Grand Blvd.
Kansas City, Missouri 64108-2613
Telephone: (816) 474-6550
Fax: (816) 421-2708
Attorneys for Defendant
Lorillard Tobacco Company
/s/ Matthew A. Campbell for _______________
Bruce G. Sheffler
David L. Wallace
CHADBOURNE & PARKE LLP
30 Rockefeller Plaza, 34th Floor
New York, New York 10112-0219
Telephone: (212) 408-5100
Attorneys for Defendant
British American Tobacco (Investments) Limited (f/k/a British-American Tobacco Company Limited)
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Judge Kessler Final Judgement and Remedial Order, August 17, 2006
EXCERPTS:
II. Specific Remedial Orders
A. General Injunctive Relief
1. All Defendants, Covered Persons and Entities are permanently enjoined from committing any act of racketeering, as defined in 18 U.S.C. § 1961(1), relating in any way to the manufacturing, marketing, promotion, health consequences or sale of cigarettes in the United States. . . .
3. All Defendants, Covered Persons and Entities are permanently enjoined from making, or causing to be made in any way, any material false, misleading, or deceptive statement or representation, or engaging in any public relations or marketing endeavor that is disseminated to the United States public and that misrepresents or suppresses information concerning cigarettes. Such material statements include, but are not limited to, any matter that: (a) involves health, safety, or other areas with which a reasonable consumer or potential consumer of cigarettes would be concerned; (b) a reasonable consumer or potential consumer would attach importance to in determining whether to purchase or smoke cigarettes; or (c) the Defendant, Covered Person or Entity making the representation knows or has reason to know that its recipient regards or is likely to regard as important in determining whether to purchase cigarettes or to smoke cigarettes, even if a reasonable person would not so regard it.
4. All Defendants, Covered Persons and Entities are permanently enjoined from conveying any express or implied health message or health descriptor for any cigarette brand either in the brand name or on any packaging, advertising or other promotional, informational or other material. Forbidden health descriptors include the words “low tar,” “light,” “ultra light,” “mild,” “natural,” and any other words which reasonably could be expected to result in a consumer believing that smoking the cigarette brand using that descriptor may result in a lower risk of disease or be less hazardous to health than smoking other brands of cigarettes. Defendants are also prohibited from representing directly, indirectly, or by implication, in advertising, promotional, informational or other material, public statements or by any other means, that low-tar, light, ultra light, mild, natural, or low-nicotine cigarettes may result in a lower risk of disease or are less hazardous to health than other brands of cigarettes.. . .
B. Corrective Statements
7. In order to ensure maximum exposure to consumers, potential consumers, and the general public, the corrective statements shall also be disseminated in the following ways:
a. Using their existing (or future acquired or improved) technology, each Defendant shall affix to cigarette packaging, either to the outside of or within the outer cellophane wrapping around the package, an “onsert” containing the corrective statements, in the same manner as certain Defendants, such as Philip Morris and Brown & Williamson, have utilized package onserts in the past. One corrective statement shall be placed on package onserts, to be included with each pack of Defendants’ cigarettes shipped for retail distribution in the United States during the first two weeks of every February, June, and October (“installments”), beginning no later than February 2007 and continuing for two years thereafter. During the course of these two years, each Defendant must include each of the five corrective statements approved pursuant to Section III(B)(¶5) in at least one installment.
b. Each of the corrective statements approved pursuant to Section III(B)(¶5) of this Final Judgment and Remedial Order shall also be designed by Defendants for inclusion in a Countertop Display and Header Display at retail point-of-sale. Each Defendant that utilizes a Retail Merchandising
Program shall require retailers who participate in such program to display each Countertop Display in a position of prominent visibility for the entire four month period, until it is replaced by a subsequent Countertop Display during the two-year duration set forth in Section III(B)(¶7)(a) of this Order.
Each Defendant that utilizes a Retail Merchandising Program shall require retailers who participate in such program to display each Header Display in an equivalent position with any other brand advertising header for the entire period on the same schedule, whether monthly or quarterly, that any other brand advertising header is utilized. The Header Display shall be of at least equivalent size as any other brand advertising header or headers provided by Defendants. During the two year period set forth in Section III(B)(¶7)(a) of this Order, each Defendant shall include each of the five Court approved corrective statements in a Countertop Display and Header Display at least once. Each Defendant shall suspend from its Retail Merchandising Program for a period of one year any retailer that fails to comply with this provision.
c. Each Defendant shall cause the text of all corrective statements approved pursuant to Section III(B)(¶5) of this Final Judgment and Remedial Order to be published as a full page advertisement in the first section of the Sunday edition of each of the following newspapers: Atlanta Journal-Constitution, Boston Globe, Boston Herald, Charlotte Observer, Chicago Sun Times, Chicago Tribune, Dallas Morning News, Florida Times Union, Fresno Bee, Ft. Worth Star-Telegram, Houston Chronicle, Los Angleles Times, Miami
Herald, New York Daily News, New York Post, New York Sun, New York Times, Orlando Sentinel, Palm Beach Post, Philadelphia Inquirer, Richmond Times-Dispatch, Sacramento Bee, San Diego Union-Tribune, San Francisco Chronicle, St. Petersburg Times, Tallahassee Democrat, USA Today, Wall Street Journal, Washington Post, LA Eastern Group Publications, San Francisco La Oferta Review/El Vistaz-Combo, NAHP, Chicago Lawndale Group News, NAHP, Houston – Que Onda! Corrective statements published in Spanish-language newspapers shall appear in Spanish. The statements shall identify the Defendant making the corrective statements. Full page advertisements shall be placed by each Defendant on the following schedule:
(1) Altria: the Sunday edition on the 16th Sunday following the date of this Final Judgment and Remedial Order, except that for any newspaper that does not have a Sunday edition at the time that publication of the corrective statements is required, the corrective statements shall be published in the first section of the Friday edition on the 16th Friday following the date of this Final Judgment and Remedial Order.
(2) BATCo: the Sunday edition on the 20th Sunday following the date of this Final Judgment and Remedial Order, except that for any newspaper that does not have a Sunday edition at the time that publication of the corrective statements is required, the corrective statements shall be published in the first section of the Friday edition
on the 20th Friday following the date of this Final Judgment and Remedial Order.
(3) B&W: the Sunday edition on the 24th Sunday following the date of this Final Judgment and Remedial Order, except that for any newspaper that does not have a Sunday edition at the time that publication of the corrective statements is required, the corrective statements shall be published in the first section of the Friday edition on the 24th Friday following the date of this Final Judgment and Remedial Order.
(4) Lorillard: the Sunday edition on the 28th Sunday following the date of this Final Judgment and Remedial Order, except that for any newspaper that does not have a Sunday edition at the time that publication of the corrective statements is required, the corrective statements shall be published in the first section of the Friday edition on the 28th Friday following the date of this Final Judgment and Remedial Order.
(5) Philip Morris: the Sunday edition on the 32nd Sunday following the date of this Final Judgment and Remedial Order, except that for any newspaper that does not have a Sunday edition at the time that publication of the corrective statements is required, the corrective statements shall be published in the first section of the
Friday edition on the 32nd Friday following the date of this Final Judgment and Remedial Order.
(6) R. J. Reynolds: the Sunday edition on the 36th Sunday following the date of this Final Judgment and Remedial Order, except that for any newspaper that does not have a Sunday edition at the time that publication of the corrective statements is required, the corrective statements shall be published in the first section of the Friday edition on the 36th Friday following the date of this Final Judgment and Remedial Order.
d. Each Defendant shall cause at least one of the corrective statements approved pursuant to Section III(B)(¶5) of this Final Judgment and Remedial Order to appear as an advertisement on one or more of the three major television networks, i.e., CBS, ABC, or NBC. The ads shall last at least 15 seconds and shall run at least once per week between the hours of 7:00 p.m. and 10:00 p.m between Monday and Thursday. Each Defendant shall run its advertisements on their chosen network(s) for one year. Each of the corrective statements approved pursuant to Section III(B)(¶5) of this Final Judgment and Remedial Order must be advertised by each Defendant at least ten times during the one year period. Defendants shall commence airing the first of their ads no later than February, 2007.