DOJ Appeal: APPELLANTS’ OPENING BRIEF FINAL VERSION March 12, 2012

March 15, 2012 9:15 am by Gene Borio

The PDF is Here

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.

END EXCERPT

FULL TEXT:

USCA Case #11-5145 Document #1363004 Filed: 03/12/2012 Page 1 of 80

ARGUMENT SCHEDULED FOR APRIL 20, 2012

No. 11-5145

IN THE

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

PHILIP MORRIS USA INC., et al.,

Defendants-Appellants.

On Appeal From An Order Of The United States District Court

For The District Of Columbia

1:99-cv-02496-GK

APPELLANTS’ OPENING BRIEF

FINAL VERSION

Robert F. McDermott Miguel A. Estrada

Peter J. Biersteker Amir C. Tayrani

Noel J. Francisco Dace C. Martinez

JONES DAY GIBSON, DUNN & CRUTCHER LLP

51 Louisiana Avenue, N.W. 1050 Connecticut Avenue, N.W.

Washington, D.C. 20001-2113 Washington, D.C. 20036

Telephone: (202) 879-3939 Telephone: (202) 955-8257

Facsimile: (202) 626-1700 Facsimile: (202) 530-9616

Counsel for Appellant Counsel for Appellants Philip Morris USA

R.J. Reynolds Tobacco Company Inc. and Altria Group, Inc.

[Additional Counsel Listed On Inside Cover]

USCA Case #11-5145 Document #1363004 Filed: 03/12/2012 Page 2 of 80

R. Michael Leonard

WOMBLE CARLYLE SANDRIDGE & RICE,

PLLC

One West Fourth Street

Winston-Salem, NC 27101

Telephone: (336) 721-3721

Facsimile: (336) 733-8389

Counsel for Appellant

R.J. Reynolds Tobacco Company

Michael B. Minton

Bruce D. Ryder

A. Elizabeth Blackwell

THOMPSON COBURN LLP

One U.S. Bank Plaza, Suite 3500

St. Louis, Missouri 63101-1693

Telephone: (314) 552-6000

Facsimile: (314) 552-7597

Counsel for Appellant

Lorillard Tobacco Company

Beth A. Wilkinson

PAUL, WEISS, RIFKIND, WHARTON &

GARRISON LLP

2001 K Street, N.W.

Washington, D.C. 20006-1047

Telephone: (202) 223-7300

Facsimile: (202) 223-7420

Thomas J. Frederick

WINSTON & STRAWN LLP

35 West Wacker Drive

Chicago, Illinois 60601-9703

Telephone: (312) 558-6700

Facsimile: (312) 558-5700

Counsel for Appellants Philip Morris

USA Inc. and Altria Group, Inc.

USCA Case #11-5145 Document #1363004 Filed: 03/12/2012 Page 3 of 80

CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED CASES

Pursuant to D.C. Circuit Rule 28(a)(1), Defendants-Appellants Philip Morris USA Inc., Altria Group, Inc., R.J. Reynolds Tobacco Co., and Lorillard Tobacco Co. file the following Certificate as to Parties, Rulings, and Related Cases. Parties, Intervenors, and Amici

1. District Court

The following is a list of parties, intervenors, and amici that appeared before the district court.

Parties: Plaintiff was the United States of America. Defendants were Philip Morris USA Inc., Altria Group, Inc., R.J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corp.,1 Lorillard Tobacco Company, British American Tobacco (Investments) Ltd., The Council for Tobacco Research – U.S.A., Inc., The Tobacco Institute, Inc., and Liggett Group, Inc.

Intervenors: Tobacco-Free Kids Action Fund, American Cancer Society, American Heart Association, American Lung Association, Americans for Nonsmokers’ Rights, National African American Tobacco Prevention Network,

1 Effective July 30, 2004, Brown & Williamson Tobacco Corporation’s cigarette and tobacco business was merged with R.J. Reynolds Tobacco Company. Contemporaneously, Brown & Williamson Tobacco Corporation changed its name to Brown & Williamson Holdings, Inc., and ceased manufacturing, researching, selling, or marketing cigarettes.

i

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Elan Corporation, PLC, Glaxosmithkline Consumer Healthcare, L.P., Impax Laboratories, Inc., Pfizer, Inc., Pharmacia Corporation, and Smithkline Beecham Corporation.

Amici: Citizens’ Commission to Protect the Truth, Regents of the University of California, Tobacco Control Legal Consortium, Essential Action, City and County of San Francisco, Asian-Pacific Islander American Health Forum, San Francisco African American Tobacco Free Project, Black Network in Children’s Emotional Health, and the Attorneys General of Arkansas, Connecticut, Hawaii, Idaho, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Nevada, New Jersey, New Mexico, New York, Ohio, Oklahoma, Oregon, Tennessee, Vermont, Washington, Wisconsin, Wyoming, and District of Columbia.

2. Court of Appeals

Parties: Appellants are Philip Morris USA Inc., Altria Group, Inc., R.J. Reynolds Tobacco Company (individually and as successor to Brown & Williamson Tobacco Corporation), and Lorillard Tobacco Company. Appellee is the United States of America.

Intervenors: Tobacco-Free Kids Action Fund, American Cancer Society, American Heart Association, American Lung Association, Americans for Nonsmokers’ Rights, and National African American Tobacco Prevention Network.

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Amici: Washington Legal Foundation.

Rulings Under Review

Defendants-Appellants appeal from Order #23-Remand, entered by Judge Gladys Kessler on June 1, 2011, which denied Defendants’ Motion for Vacatur. The Memorandum Opinion accompanying Order #23-Remand is published at 787

F. Supp. 2d 68 (D.D.C. 2011).

Related Cases

This case was previously before this Court in the following appeals: 015244 (United States v. Philip Morris Inc.); 02-5210 (United States v. Philip Morris Inc.); 04-5207, 04-5208 (United States v. British American Tobacco (Investments) Ltd.); 04-5252 (United States v. Philip Morris USA Inc.); 04-5358, 05-5129 (United States v. British American Tobacco Australia Services, Ltd.); 06-5267, 065268, 06-5269, 06-5270, 06-5271, 06-5272, 06-5332, 06-5367, 07-5102, 07-5103 (United States v. Philip Morris USA Inc.). This case is also currently before this Court in Case No. 11-5146 (United States v. Philip Morris USA Inc.).

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CORPORATE DISCLOSURE STATEMENT

Pursuant to Fed. R. App. P. 26.1 and D.C. Circuit Rule 26.1, Defendants- Appellants make the following disclosures:

Philip Morris USA Inc. is a wholly owned subsidiary of Altria Group, Inc. Altria Group, Inc. is the only publicly held company that owns 10% or more of Philip Morris USA Inc.’s stock.

Altria Group, Inc. has no parent company, and no publicly held company owns 10% or more of its stock.

R.J. Reynolds Tobacco Company is a wholly-owned subsidiary of R.J. Reynolds Tobacco Holdings, Inc., which in turn is a wholly-owned subsidiary of Reynolds American Inc. (“RAI”), a publicly-traded corporation. Brown & Williamson Holdings, Inc. and Invesco Ltd. hold more than 10% of the stock of RAI. British American Tobacco p.l.c. indirectly holds more than 10% of the stock of RAI through Brown & Williamson Holdings, Inc.

Lorillard Tobacco Company is a wholly owned subsidiary of Lorillard, Inc. Lorillard, Inc. is the only publicly held company that owns 10% or more of Lorillard Tobacco Company’s stock.

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TABLE OF CONTENTS

Page

CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED CASES ……………………. i

CORPORATE DISCLOSURE STATEMENT ………………………………. iv

TABLE OF AUTHORITIES ……………………. vii

GLOSSARY ………………………….. xiv

INTRODUCTION ……………………. 1

JURISDICTIONAL STATEMENT ……………………………… 6

STATEMENT OF ISSUES ………………………… 6

PERTINENT STATUTORY AND REGULATORY PROVISIONS …………………. 7

STATEMENT OF FACTS …………………………. 7

SUMMARY OF ARGUMENT …………………. 23

STANDARD OF REVIEW ………………………. 25

ARGUMENT …………………………. 26

I. THE DISTRICT COURT LACKS JURISDICTION OVER THIS SUIT UNDER ARTICLE III AND RICO ………………… 27

A. The FDA Act Eliminates Any Realistic Threat Or Reasonable Likelihood That Defendants Will Violate RICO In The Future ………………………. 29

B. The District Court’s Conclusion That It Retains Jurisdiction Over This Case Is Flawed In Multiple Respects ……………………… 34

1. The District Court Applied The Wrong Legal Standard ……………………………… 35

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2. The District Court Misconstrued The Scope Of The FDA Act ………………………. 37

3. The District Court Based Its Decision On Improper Speculation About The Outcome Of Pending Litigation …………………………….. 41

4. The District Court Ignored Significant Differences Between The MSA And The FDA Act …………………….. 44

C. At A Minimum, The District Court Should Have Vacated Specific Portions Of Its Injunctions ………………….. 46

II. IF THE DISTRICT COURT RETAINED JURISDICTION OVER THIS CASE, IT SHOULD HAVE DEFERRED TO THE FDA’S PRIMARY JURISDICTION ………………………… 51

A. Deferring To The FDA’s Regulatory Expertise Would Promote The Purposes Of The Primary Jurisdiction Doctrine ………………………. 51

B. The District Court’s Reasons For Failing To Defer To The FDA’s Primary Jurisdiction Were Erroneous ……………….. 57

CONCLUSION ………………………. 61

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TABLE OF AUTHORITIES

Page(s)

Cases

Allnet Commc’n Serv., Inc. v. Nat’l Exch. Carrier Ass’n,

965 F.2d 1118 (D.C. Cir. 1992) ………………………… 52, 58

Am. Bar Ass’n v. FTC,

636 F.3d 641 (D.C. Cir. 2011) ………………. 27

Arbaugh v. Y & H Corp.,

546 U.S. 500 (2006) …………………………….. 26

Atchison, Topeka & Santa Fe Ry. Co. v. Wichita Bd. of Trade,

412 U.S. 800 (1973) …………………………….. 54

Bender v. Williamsport Area Sch. Dist.,

475 U.S. 534 (1986) …………………………….. 26

Bethany Med. Ctr. v. Harder,

693 F. Supp. 968 (D. Kan. 1988) ……………………………. 29

Boyle v. United States,

129 S. Ct. 2237 (2009) …………………………. 32

Bullfrog Films, Inc. v. Wick,

959 F.2d 778 (9th Cir. 1992) ……………………………. 30, 31

Camreta v. Greene,

131 S. Ct. 2020 (2011) …………………………. 36

Capitol Hill Grp. v. Pillsbury, Winthrop, Shaw, Pittman, LLC,

569 F.3d 485 (D.C. Cir. 2009) ………………. 25

*

Chamber of Commerce v. EPA,

642 F.3d 192 (D.C. Cir. 2011) …………………. 3, 27, 28, 43

City of Erie v. Pap’s A.M.,

529 U.S. 277 (2000) …………………………….. 48

*

Authorities upon which we chiefly rely are marked with asterisks.

vii

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*

City of Los Angeles v. Lyons,

461 U.S. 95 (1983)……………………… 3, 23, 27

Clarke v. United States,

915 F.2d 699 (D.C. Cir. 1990) ………………. 28

Commonwealth Brands, Inc. v. United States,

678 F. Supp. 2d 512 (W.D. Ky. 2010) ……………….. 17, 42

Davis v. FEC,

554 U.S. 724 (2008) …………………………….. 28

Dep’t of Treasury v. Galioto,

477 U.S. 556 (1986) …………………………….. 27

Diffenderfer v. Gomez-Colon,

587 F.3d 445 (1st Cir. 2009) ……………………….. 29, 30, 36

FDA v. Brown & Williamson Tobacco Corp.,

529 U.S. 120 (2000) …………………………….. 16

Fourth Branch Assocs. (Mechanicville) v. FERC,

253 F.3d 741 (D.C. Cir. 2001) ………………. 43

Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc.,

528 U.S. 167 (2000) …………………………….. 35

Fund for Animals, Inc. v. Hogan,

428 F.3d 1059 (D.C. Cir. 2005) ……………………………… 25

Green v. Mansour,

474 U.S. 64 (1985) …………………………. 30, 31

Hagen v. Utah,

510 U.S. 399 (1994) …………………………….. 34

Himmelman v. MCI Commc’ns Corp.,

104 F. Supp. 2d 1 (D.D.C. 2000) ……………………………. 57

Israel v. Baxter Labs., Inc.,

466 F.2d 272 (D.C. Cir. 1972) ………………. 59

*

Kappelmann v. Delta Air Lines, Inc.,

539 F.2d 165 (D.C. Cir. 1976) ………………………….. 52, 53

Kokkonen v. Guardian Life Ins. Co. of Am.,

511 U.S. 375 (1994) …………………………….. 27

Koon v. United States,

518 U.S. 81 (1996) ………………………………. 26

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Landgraf v. USI Film Prods.,

511 U.S. 244 (1994) …………………………….. 34

*

Log Cabin Republicans v. United States,

658 F.3d 1162 (9th Cir. 2011) …………………….. 29, 30, 35

Lytes v. D.C. Water & Sewer Auth.,

572 F.3d 936 (D.C. Cir. 2009) ………………. 34

Martinez v. Wilson,

32 F.3d 1415 (9th Cir. 1994) ………………… 30

Nat’l Commc’ns Ass’n v. Am. Tel. & Tel. Co.,

46 F.3d 220 (2d Cir. 1995) …………………… 26

Nat’l Tel. Coop. Ass’n v. Exxon Mobil Corp.,

244 F.3d 153 (D.C. Cir. 2001) ………………. 25

R.J. Reynolds Tobacco Co. v. United States FDA,

_ F. Supp. 2d _, 2011 WL 5307391 (D.D.C. Nov. 7, 2011) …………………… 14, 42

Tamburello v. Comm-Tract Corp.,

67 F.3d 973 (1st Cir. 1995) ………………………………. 57, 58

Texas & Pac. Ry. v. Abilene Cotton Oil Co.,

204 U.S. 426 (1907) …………………………….. 59

Texas v. United States,

523 U.S. 296 (1998) …………………………….. 42

*

United States v. Philip Morris USA Inc.,

566 F.3d 1095 (D.C. Cir. 2009) ………………. 1, 10, 24, 28, 29, 31, 36,

37, 38, 39, 40, 44, 48, 54

United States v. Philip Morris USA Inc.,

449 F. Supp. 2d 1 (D.D.C. 2006) ….. 1, 8, 9, 21, 37, 38, 39, 40, 45, 46, 48, 50, 56

*

United States v. Philip Morris USA Inc.,

396 F.3d 1190 (D.C. Cir. 2005) ………………………..3, 8, 23, 27, 28, 34

United States v. Rice,

605 F.3d 473 (8th Cir. 2010) ………………… 26

United States v. W. Pac. R.R. Co.,

352 U.S. 59 (1956) …………………………. 51, 52

Valley Forge Christian Coll. v. Ams. United for Separation

of Church & State, Inc., 454 U.S. 464 (1982) …………………………… 34

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Statutes

15 U.S.C. § 1333 …………………….. 17

15 U.S.C. § 1336 ……………….. 33, 49

15 U.S.C. § 4402 …………………….. 17

* 18 U.S.C. § 1964(a) ………………………. 3, 7, 28

21 U.S.C. § 331 …………………..19, 32, 45, 47, 49

21 U.S.C. § 332 …………………..18, 32, 45, 47, 49

21 U.S.C. § 333 …………………………….. 18, 32, 38, 45, 47, 49

21 U.S.C. § 334 …………………..18, 32, 45, 47, 49

21 U.S.C. § 335 ………………………. 19

21 U.S.C. § 372 …………………. 32, 45

21 U.S.C. § 374 …………………………….. 18, 32, 45

21 U.S.C. § 381 …………………………….. 18, 32, 45

28 U.S.C. § 1292(a) ………………….. 6

28 U.S.C. § 1331 ………………………. 6

28 U.S.C. § 1345 ………………………. 6

28 U.S.C. § 2201 ………………………. 6

47 U.S.C. § 206 ………………………. 59

47 U.S.C. § 207 ………………………. 59

* Family Smoking Prevention and Tobacco Control Act,

Pub. L. No. 111-31, 123 Stat. 1776 (2009) …………………………. 1, 2, 6

§ 2(6) …………………. 2

§ 2(44) ………………………………. 53

§ 2(47) ……………….. 2

§ 2(48) …………………………… 2, 45

§ 2(49) …………………………… 2, 38

§ 3(1) ……………………………… 2, 22, 25, 31, 53

§ 3(2) ……………….. 53

§ 3(3) ……………………… 11, 54, 56

§ 3(4) ……………….. 54

§ 3(5) …………………………… 11, 54

§ 3(6) ……………….. 40

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§ 3(8) …………………………….. 2, 54

§ 4(a) ……………….. 58

§ 4(a)(2) ………………………… 4, 33

§ 102 ……………….. 16

§ 103 ……………………………. 32, 45

§ 103(b) ………………….. 12, 17, 18

§ 103(c) …………………………….. 18

§ 103(d) …………………………….. 18

§ 103(i) ……………………………… 18

§ 103(l) ……………………………… 18

§ 105 ………………… 17

§ 106 ………………… 17

§ 201 ………………… 56

§ 201(a) ……………………………… 13, 17, 38, 49

§ 202(b) ……………………….. 13, 55

§ 204(a) …………………………….. 17

§ 205(a) …………………………….. 17

§ 206 ……………………………. 17, 39

§ 301 ………………… 12

* Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq. …………………….. 2

§ 901(e) …………………………. 2, 17

§ 902 ………………… 32

§ 902(8) ……………………….. 46, 47

§ 903 ……………………………. 32, 38

§ 903(a) …………………………12, 17, 37, 49, 50

§ 903(b) …………………………….. 12

§ 904(a) ……………………….. 11, 40

§ 904(b) ……………………………… 18, 32, 41, 45

§ 906(d) …………………………….. 13

§ 907(a)(4) …………………… 11, 39

§ 908(a) ……………………….. 32, 45

§ 910 ………………… 11

§ 910(a) …………………………….. 39

§ 911 ………………… 12

§ 911(a) ……………………….. 12, 39

§ 911(b) …………………………12, 13, 17, 39, 46

§ 911(g) …………………………….. 46

§ 911(g)(1) …………………………. 12, 17, 39, 55

§ 911(i) ……………………………… 46

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§ 911(j) ……………………………… 47

§ 915(b) ……………………….. 11, 55

§ 919 ………………………………. 2, 19, 38, 45, 50

Regulations

21 C.F.R. pt. 1140 …………………… 16

21 C.F.R. § 1140.16(d) …………………………….. 17

21 C.F.R. § 1140.32 ………………… 17

21 C.F.R. § 1140.34 ……………………………. 16, 17

21 C.F.R. § 1141.10(a) ……………………………… 56

21 C.F.R. § 1141.14 ………………… 49

Final Rule, Regulations Restricting the Sale and Distribution of

Cigarettes and Smokeless Tobacco to Protect Children and

Adolescents, 75 Fed. Reg. 13,225 (Mar. 19, 2010) ……………………. 16

Final Rule, Required Warnings for Cigarette Packages and

Advertisements, 76 Fed. Reg. 36,628 (June 22, 2011) ……………….. 14

Other Authorities

Center for Tobacco Products, Enforcement Action Plan for

Promotion and Advertising Restrictions (2010) ………………………………. 17, 32, 49

FDA, FY 2011 Congressional Budget Request ……………………………… 15

FDA, Guidance for Industry and FDA Staff: Use of

“Light,” “Mild,” “Low,” or Similar Descriptors in

the Label, Labeling, or Advertising of Tobacco Products ………………………. 46, 47

FDA, Justification of Estimates for Appropriations

Committees (FY 2012) ………………………… 19

FDA, Regulatory Procedures Manual………………………….. 18

FDA, Strategic Priorities 2011-2015 (draft of Sept. 29, 2010) ………………. 15, 49, 56

FDA Center for Tobacco Products Update (June 22 –

September 30, 2011) ……………………………. 39

FDA Menthol Update ………………………………. 11

FDA Plans $600M Anti-Smoking Campaigns, CBS News, Nov. 2, 2011 ………….. 15

FDA Timeline: Family Smoking Prevention and Tobacco

Control Act …………………… 19, 60

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News Release, FDA, FDA and NIH Announce Joint

Study on Tobacco Use and Risk Perceptions (Oct. 6, 2011) ………………………… 15

News Release, FDA, FDA Takes Action Against

Illegal Marketing of Tobacco Products (May 25, 2011) ……………………………… 32

Request for Comment on Implementation of the Family

Smoking Prevention and Tobacco Control Act,

75 Fed. Reg. 13,241 (Mar. 19, 2010) ………………………. 16

Required Warnings for Cigarette Packages and Advertisements,

75 Fed. Reg. 69,524 (Nov. 12, 2010) ……………………… 14

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GLOSSARY

CTR Council for Tobacco Research-U.S.A., Inc.

FDA Food and Drug Administration

FDA Act Family Smoking Prevention and Tobacco Control Act

FDCA Federal Food, Drug, and Cosmetic Act

MSA Master Settlement Agreement

OCI Office of Criminal Investigations

RICO Racketeer Influenced and Corrupt Organizations Act

TI Tobacco Institute, Inc.

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INTRODUCTION

In 1999, the Government brought this suit against the major domestic tobacco companies in an effort to secure injunctive relief under RICO that would enable the Government to exercise extensive regulatory control over the industry. Until then, the Government had been unable to obtain such regulatory authority from Congress, and the district court itself questioned “whether this litigation was the best vehicle” to “address broad-scale economic and social problems which might be far better and more appropriately grappled with by our elected representatives.” United States v. Philip Morris USA Inc., 449 F. Supp. 2d 1, 31 n.3 (D.D.C. 2006). “In a democracy,” the court continued, “it is the body elected by the people, namely Congress, that should step up to the plate and address national issues with such enormous economic, public health, commercial, and social ramifications.” Id. Despite this acknowledgment, the district court awarded the Government sweeping injunctive relief restricting the manner in which Defendants may manufacture, market, and distribute cigarettes. Not long after this Court upheld those injunctions in substantial part, United States v. Philip Morris USA Inc., 566 F.3d 1095 (D.C. Cir. 2009) (per curiam), cert. denied, 130 S. Ct. 3501 (2010), Congress did “step up to the plate” when it enacted the Family Smoking Prevention and Tobacco Control Act (the “FDA Act” or “Act”), Pub. L. No. 111-31, 123 Stat. 1776 (2009). In the Act, Congress

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explicitly relied on the district court’s findings as a basis for establishing a far- reaching federal regulatory program that imposes significant constraints on the manner in which Defendants may conduct business. § 2(47)-(49).1 The Act designates the Food and Drug Administration (“FDA”) the “primary Federal regulatory authority with respect to the manufacture, marketing, and distribution of tobacco products,” § 3(1); creates a new Center for Tobacco Products to implement the Act’s detailed regulatory mandates through administrative procedures similar to those used to oversee other FDA-regulated products, § 901(e); imposes “comprehensive restrictions on the sale, promotion, and distribution of [tobacco] products” in advance of further regulations to be promulgated by the FDA, § 2(6); and provides the FDA with hundreds of millions of dollars in annual funding paid directly by tobacco manufacturers to ensure that there are “appropriate regulatory controls” on the industry, § 3(8), § 919.

The new federal regulatory framework created by the FDA Act extinguished the district court’s jurisdiction to grant the only remedy potentially available to the Government under the narrow provision of RICO on which its claims rest—

1 All citations to the Family Smoking Prevention and Tobacco Control Act are to the section of the Act itself (reproduced at 123 Stat. 1776), except in the case of Section 101(b) of the Act, which amends Chapter IX of the Federal Food, Drug, and Cosmetic Act (“FDCA”), 21 U.S.C. § 301 et seq. That section is cited through references to Sections 900 to 919 of the amended FDCA.

2

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prospective injunctive relief targeting future RICO violations. Under Article III of the Constitution and Section 1964(a) of RICO, a district court possesses jurisdiction to issue injunctive relief only where 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)), and where the relief will “prevent and restrain” likely future RICO violations. 18 U.S.C. § 1964(a); see also United States v. Philip Morris USA Inc., 396 F.3d 1190, 1198 (D.C. Cir.), cert. denied, 126 S. Ct. 478 (2005) (“Disgorgement Opinion”). These jurisdictional prerequisites are no longer satisfied in this case because the FDA’s comprehensive regulatory authority under the Act eliminates any reasonable likelihood that Defendants will repeat the past conduct on which the district court premised its forward-looking injunctive relief.

None of the district court’s reasons for refusing to vacate its prospective injunctions is persuasive. For example, the court relied heavily on a separate suit that several Defendants have filed challenging the constitutionality of specified provisions of the FDA Act. As this Court has recently reaffirmed, however, “speculation” about the outcome of pending litigation cannot save a case from mootness. Chamber of Commerce v. EPA, 642 F.3d 192, 208 (D.C. Cir. 2011). And the fact that these Defendants have invoked their fundamental right to have a

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court determine the constitutionality of certain restrictions imposed on them by the Act is hardly a basis for deeming them likely future racketeers.

The Government’s reliance on statutory language providing that the FDA Act does not “affect any action pending in Federal, State, or tribal court” is equally misplaced. § 4(a)(2). That provision does not—and cannot—alter the jurisdictional requirements imposed by Article III; instead, it simply preserves existing substantive law applicable to actions pending at the time the FDA Act went into effect. The Government’s reading of this inapposite provision is inconsistent with Congress’s intention to afford the FDA primary regulatory authority over the tobacco industry and with the Government’s own recent acknowledgment that where intervening legislation resolves a controversy, “[r]espect for the coordinate Branches of Government, and for the role of the Judiciary under the Constitution’s separation of powers, requires giving effect to Congress’s action.” Government’s Opp. to Log Cabin’s Mtn. to Vacate Stay of Injunction at 10, Log Cabin Republicans v. United States, 658 F.3d 1162 (9th Cir.
2011) (per curiam) (Nos. 10-56634, 10-56813). Because Congress’s profound changes to the federal regulatory landscape moot the only remedies potentially available to the Government, the district court erred in denying Defendants’ Motion for Vacatur.

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At a minimum, the district court should have vacated or modified several specific aspects of its injunctions, including the prohibitions on Defendants’ use of “light” and “low tar” descriptors and the requirement that Defendants make corrective statements regarding the health effects and addictiveness of smoking. The FDA Act categorically prohibits Defendants from using “light,” “low tar,” and “similar descriptors” in their marketing of cigarettes (in the absence of explicit authorization from the FDA), imposes civil and criminal penalties on Defendants in the event they make false statements in their labeling and advertising about the health effects or addictiveness of smoking, and provides the FDA with extensive authority to monitor Defendants’ labeling and advertising practices. These statutory prohibitions and regulatory controls, which have not been challenged by any Defendant in other litigation, eliminate any reasonable likelihood that the conduct targeted by the district court’s injunctions—the use of “light” and “low tar” descriptors and other marketing practices to disseminate false information about the health risks of smoking—will recur in the future.

Finally, even if the district court did retain jurisdiction over this case, it should have deferred to the FDA’s primary jurisdiction over issues of smoking and health. The future RICO violations the district court insists it has jurisdiction to police through ongoing injunctive relief concern conduct that Congress has now expressly subjected to comprehensive FDA oversight. Unlike the district court, the

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FDA is able to bring to bear substantial scientific expertise and regulatory experience when discharging its statutory obligation to oversee the design, manufacturing, and marketing of cigarettes. The district court’s overlapping injunctions will inevitably interfere with the FDA’s regulatory authority and generate conflicting legal requirements in an area where Congress sought to establish national uniformity.

JURISDICTIONAL STATEMENT

The district court originally had subject matter jurisdiction under 28 U.S.C. §§ 1331, 1345, and 2201, but lacks continuing jurisdiction over this case. On June 8, 2011, Defendants filed their Notice of Appeal from Order #23-Remand entered by the district court on June 1, 2011. This Court has jurisdiction over Defendants’ timely appeal under 28 U.S.C. § 1292(a).

STATEMENT OF ISSUES

1. Whether the district court’s jurisdiction to issue, and continue to enforce, prospective injunctive relief—the only remedy potentially available to the Government under Section 1964(a) of RICO—was extinguished by the Family Smoking Prevention and Tobacco Control Act, Pub. L. No. 111-31, 123 Stat. 1776 (2009), which grants the FDA far-reaching regulatory authority and enforcement power over the same conduct targeted by the district court’s injunctions.

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2. If the district court does retain jurisdiction over this case, whether it should have declined to exercise that jurisdiction because Congress expressly afforded the FDA primary jurisdiction over issues of smoking and health.

PERTINENT STATUTORY AND REGULATORY PROVISIONS

RICO, the Family Smoking Prevention and Tobacco Control Act, the Federal Cigarette Labeling and Advertising Act, Part 1140—Cigarettes and Smokeless Tobacco of 21 C.F.R., and relevant portions of the Federal Food, Drug, and Cosmetic Act are reproduced in the Addendum to this brief.

STATEMENT OF FACTS

I. The Government’s Suit

The Government brought this suit against Philip Morris USA Inc., Altria Group, Inc., R.J. Reynolds Tobacco Company, and Lorillard Tobacco Company, as well as other tobacco companies and industry groups, alleging that they had violated RICO by associating together to deceive the American public about the health effects and addictiveness of smoking. The Government premised its claims on Section 1964(a) of RICO, which grants district courts jurisdiction only to issue “appropriate orders” that “prevent and restrain” RICO violations. 18 U.S.C. § 1964(a). Under that narrow remedial provision, the Government sought injunctive relief restricting nearly every aspect of Defendants’ cigarette business,

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as well as the disgorgement of $280 billion in profits that Defendants had earned from past cigarette sales.

In 2005, this Court held on interlocutory appeal that disgorgement of past profits was not an available remedy because jurisdiction under Section 1964(a) to “prevent and restrain” RICO violations “is limited to forward-looking remedies that are aimed at future violations.” Disgorgement Opinion, 396 F.3d at 1198 (emphasis added). Accordingly, the only relief that the Government was permitted to seek, and that the district court purported to grant, was prospective injunctive relief.

After a bench trial, the district court issued a lengthy set of factual findings regarding Defendants’ past conduct dating back to the early 1950s and entered a series of sweeping injunctions. See Philip Morris USA Inc., 449 F. Supp. 2d 1. The district court found that Defendants had violated RICO by associating together to “deceive the American public” regarding “the health effects of smoking” and environmental tobacco smoke, “the addictiveness of nicotine,” “the health benefits from low tar, ‘light’ cigarettes,” and the “manipulation of the design and composition of cigarettes in order to sustain nicotine addiction.” Id. at 26-27. The district court found that Defendants were likely to commit similar RICO violations in the future, and issued an extensive set of injunctions designed to prevent such future violations of RICO. Id. at 911, 938-45.

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Among other things, the district court’s injunctions prohibit Defendants from making “any material false, misleading, or deceptive statement or representation . . . that misrepresents or suppresses information concerning cigarettes.” Philip Morris USA Inc., 449 F. Supp. 2d at 938. In addition, they prohibit Defendants 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.” Id. The “[f]orbidden health descriptors include the words ‘low tar,’ ‘light,’ ‘ultra light,’ ‘mild,’ ‘natural,’ and any other words which reasonably could be expected to” lead a consumer to believe that those cigarettes are less harmful than other cigarettes. Id. The court’s injunctions also compel Defendants to make “corrective statements” in newspapers and other media outlets concerning “the adverse health effects of smoking,” “the addictiveness of smoking and nicotine,” “the lack of any significant health benefit from smoking ‘low tar,’ ‘light,’ ‘ultra light,’ ‘mild,’ and ‘natural,’ cigarettes,” “Defendants’ manipulation of cigarette design and composition to ensure optimum nicotine delivery,” and “the adverse health effects of exposure to secondhand smoke.” Id. at 938-39.

On appeal, this Court affirmed the district court’s decision in substantial part, but vacated several aspects of the injunctive relief and remanded the case for the district court to reconsider those parts of its injunctions. See Philip Morris

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USA Inc., 566 F.3d at 1135-36. In so doing, the Court reiterated that injunctive relief under Section 1964(a) of RICO is “forward-looking,” id. at 1139, and that, “before a district court may order remedies under” that section, “it must find the defendant exhibits a reasonable likelihood of committing future violations of the Act.” Id. at 1131.

II. The Family Smoking Prevention And Tobacco Control Act

One month after this Court issued its opinion, Congress materially altered the regulatory landscape in which Defendants operate by enacting the FDA Act. That comprehensive federal legislation grants the FDA far-reaching authority over Defendants’ design, manufacturing, and marketing of cigarettes and the dissemination of public-health information about smoking—the very conduct targeted by the district court’s injunctions.

Title I of the Act extends Chapter IX of the Federal Food, Drug, and Cosmetic Act (“FDCA”) to tobacco products; among other things, it requires tobacco manufacturers to disclose extensive research and other information about their products to the FDA and to pay hundreds of millions of dollars in annual user fees to the agency to fund its regulation of the tobacco industry. Title II amends the Federal Cigarette Labeling and Advertising Act by, among other things, establishing new health warnings that must appear on all cigarette packages and advertisements. Title III of the Act further amends the FDCA by imposing

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additional labeling and tracking requirements on tobacco products sold in interstate commerce in the United States.

More specifically, the Act authorizes the FDA to review new or modified tobacco products prior to their introduction, § 910, “to regulate the levels of tar, nicotine, and other harmful components of tobacco products,” §§ 3(5), 907(a)(4), and to “set national standards controlling the manufacture of tobacco products.” § 3(3). It also imposes detailed reporting and disclosure requirements on tobacco companies by, for example, requiring manufacturers to submit to the FDA a “listing of all ingredients, including tobacco, substances, compounds, and additives that are . . . added by the manufacturer to the tobacco, paper, filter, or other part of each tobacco product by brand.” § 904(a)(1). The FDA is authorized to require the testing of tobacco products’ “constituents, ingredients, and additives,” § 915(b)(1), and can order manufacturers to make public disclosures “relating to the results of the testing of tar and nicotine through labels or advertising or other appropriate means.” § 915(b)(2); see also, e.g., FDA Menthol Update, www.fda.gov/TobaccoProduc… (last updated June 27, 2011) (detailing the FDA’s recent actions in furtherance of its duty under the Act to submit a report and recommendation regarding “the impact of the use of menthol in cigarettes on the public health”).

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The Act’s requirements regarding the marketing of cigarettes are especially extensive. Multiple provisions of the FDA Act restrict what tobacco manufacturers can say about their products. Section 911, for example, prohibits claims of reduced risk or harm without prior approval from the Secretary; § 903(a) prohibits labeling or advertising that is “false or misleading in any particular”; § 903(b) gives the Secretary the authority to require prior approval of statements made on tobacco-product labels; and § 103(b)(13) prohibits any statement that would lead consumers to believe that a tobacco product was approved by the FDA.

As part of its prohibition on risk-reduction statements, the Act prohibits Defendants from using descriptors such as “light,” “mild,” or “low” in cigarette brand names and advertising, absent explicit authorization from the FDA. § 911(a), (b)(2)(A)(ii). Such authorization can only be granted under certain narrow, statutorily prescribed circumstances—for example, where the Secretary of Health and Human Services determines that a product will “significantly reduce harm and the risk of tobacco-related disease to individual users; and . . . benefit the health of the population as a whole taking into account both users of tobacco products and persons who do not currently use tobacco products.” § 911(g)(1).2

2 As explained below, Defendants R.J. Reynolds Tobacco Company and Lorillard Tobacco Company have filed a separate lawsuit challenging parts of §§ 301 and 911, along with other parts of the FDA Act. See infra at 16 n.4. That

[Footnote continued on next page]

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The Act also specifies a series of rotating warnings that must appear on all cigarette packages and advertising:

WARNING: Cigarettes are addictive

WARNING: Tobacco smoke can harm your children

WARNING: Cigarettes cause fatal lung disease

WARNING: Cigarettes cause cancer

WARNING: Cigarettes cause strokes and heart disease

WARNING: Smoking during pregnancy can harm your baby

WARNING: Smoking can kill you

WARNING: Tobacco smoke causes fatal lung disease in nonsmokers

WARNING: Quitting smoking now greatly reduces serious risks to your health

§ 201(a). The FDA may also mandate additional or different warnings if “such a change would promote greater public understanding of the risks associated with the use of tobacco products.” § 202(b); see also § 906(d)(1), (2).

The Act further required the FDA to “issue regulations that require color graphics depicting the negative health consequences of smoking to accompany” the textual warnings prescribed by Congress. § 201(a). After publishing a set of

[Footnote continued from previous page]

lawsuit does not challenge the ban on “light” and “low tar” descriptors contained in § 911(b)(2)(A)(ii).

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36 proposed graphic warning labels in November 2010, see Required Warnings for Cigarette Packages and Advertisements, 75 Fed. Reg. 69,524, 69,534 (Nov. 12,
2010), and reviewing more than 1,700 public comments regarding those proposed warnings, the FDA selected nine graphic warnings that, in its view, will effectively convey the health risks associated with smoking. See Final Rule, Required Warnings for Cigarette Packages and Advertisements, 76 Fed. Reg. 36,628, 36,629 (June 22, 2011) (to be codified at 21 C.F.R. pt. 1141). The FDA’s final rule requires that one of those images comprise the top half of both the front and back panels of every cigarette package. Id. at 36,754. The FDA will monitor the effects of the graphic warnings and modify them in the future as necessary to ensure that they effectively communicate the desired health message to the public. 75 Fed. Reg. at 69,534.3

Pursuant to its authority under the Act, the FDA is engaged in a long-term effort to “[p]rovide the public with accurate, trustworthy, and accessible

3 In a lawsuit filed by Defendants R.J. Reynolds Tobacco Company and Lorillard Tobacco Company, as well as other manufacturers not parties to this appeal, the District Court for the District of Columbia has issued a preliminary injunction against the enforcement of the FDA’s graphic-warning rule on the ground that the images selected by the FDA likely violate tobacco companies’ First Amendment rights. R.J. Reynolds Tobacco Co. v. United States FDA, _ F. Supp. 2d _, 2011 WL 5307391 (D.D.C. Nov. 7, 2011). The suit does not challenge the substance of the nine new textual warnings. See id. at *4. The Government has appealed that preliminary-injunction ruling to this Court. No. 11-5332.

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information about tobacco products” by “develop[ing] a communication and public education strategy to address the public health risks of tobacco products.” FDA, Strategic Priorities 2011-2015, at 29 (draft of Sept. 29, 2010), available at www.fda.gov/downloads/Abo… StrategicActionPlan/UCM226907.pdf. To that end, the FDA plans to spend more than $45 million in fiscal year 2011 to “develop and disseminate public education campaigns to decrease initiation of tobacco product use and increase . . . cessation” (FDA, FY 2011 Congressional Budget Request 282, available at www.fda.gov/downloads/Abo… BudgetReports/UCM202324.pdf), and another $600 million over the next five years to educate the public, including youth, about the health risks of tobacco use. FDA Plans $600M Anti-Smoking Campaigns, CBS News, Nov. 2, 2011, www.cbsnews.com/8301-5013… campaigns/; see also News Release, FDA, FDA and NIH Announce Joint Study on Tobacco Use and Risk Perceptions (Oct. 6, 2011), available at www.fda.gov/NewsEvents/Ne…. htm (announcing “a joint, large-scale, national study of tobacco users” with the National Institutes of Health in order to “monitor and assess the behavioral and health impacts of new government tobacco regulations”).

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The Act also required the FDA to reissue its 1996 rule establishing extensive regulations regarding the sale and advertising of tobacco products. See § 102; 21 C.F.R. pt. 1140; see also FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 161 (2000) (holding that the FDA lacked the authority to promulgate the rule under then-existing law). Those regulations, which took effect on June 22, 2010, prohibit, among other things, the sale of cigarettes to persons under the age of 18 and impose a range of restrictions on the marketing of cigarettes. See Final Rule, Regulations Restricting the Sale and Distribution of Cigarettes and Smokeless Tobacco to Protect Children and Adolescents, 75 Fed. Reg. 13,225 (Mar. 19, 2010). For example, manufacturers may not distribute branded merchandise (such as t-shirts and hats), offer non-tobacco product gifts in consideration for the purchase of cigarettes, give free samples of cigarettes, or conduct a sponsorship in the name of a cigarette brand. 21 C.F.R. § 1140.34. The FDA is also currently considering regulations that would impose restrictions on the location and content of outdoor cigarette advertising. See Request for Comment on Implementation of the Family Smoking Prevention and Tobacco Control Act, 75 Fed. Reg. 13,241 (Mar. 19, 2010).4

4 In a separate lawsuit, Defendants R.J. Reynolds Tobacco Company and Lorillard Tobacco Company have challenged the constitutionality of some of the Act’s marketing restrictions, including the ban on color or graphics in advertising,

[Footnote continued on next page]

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Moreover, the Act grants the FDA formidable enforcement authority to ensure compliance with its provisions. The Act creates the Center for Tobacco Products—a new administrative body similar to those that oversee other FDA- regulated industries—to implement the Act’s detailed regulatory mandates (§ 901(e)), and requires the FDA to develop an “action plan to enforce” the Act’s restrictions and report to Congress regarding the Act’s effectiveness. § 105; see also § 106. Within the Center for Tobacco Products, the Office of Compliance and Enforcement is responsible for policing manufacturers’ compliance with the Act and is equipped with a powerful arsenal of enforcement tools. See Center for Tobacco Products, Enforcement Action Plan for Promotion and Advertising

[Footnote continued from previous page]

see 21 C.F.R. § 1140.32(a); the new warning labels, see §§ 201(a), 206 (amending 15 U.S.C. § 1333(a), (b), (d), (e)), §§ 204(a), 205(a) (amending 15 U.S.C. § 4402(a), (b), (d)), § 903(a)(8)(b)(ii); parts of the Modified Risk Tobacco Products Requirement (“MRTPR”), see § 911(b)(2)(A)(i), (iii), (g)(1); the restrictions on brand-name merchandise, see 21 C.F.R. § 1140.34(a), brand-name sponsorships, see id. § 1140.34(c), continuity programs, see id. § 1140.34(b), and free samples, see id. § 1140.16(d); and the ban on references to the efficacy of FDA regulations, § 103(b). The lawsuit does not challenge the MRTPR’s restriction on tobacco products “us[ing] the descriptors ‘light,’ ‘mild,’ or ‘low’ or similar descriptors.” § 911(b)(2)(A)(ii). The Western District of Kentucky invalidated the bans on color or graphics in advertising and references to the efficacy of FDA regulations but upheld the other provisions. See Commonwealth Brands, Inc. v. United States, 678 F. Supp. 2d 512, 541 (W.D. Ky. 2010). Both sides appealed, and the action is currently pending in the Sixth Circuit. See Disc. Tobacco City & Lottery, Inc. v. United States, Nos. 10-5234 & 10-5235 (6th Cir.).

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Restrictions 16-19 (2010), available at www.fda.gov/downloads/ TobaccoProducts/GuidanceComplianceRegulatoryInformation/UCM227882.pdf (“FDA Enforcement Action Plan”) (documenting enforcement tools).

The FDA is authorized to remedy violations of the Act by imposing “notobacco- sale order[s]” and monetary penalties. § 103(c) (amending 21 U.S.C. § 333(f)). It also has the authority to issue requests compelling manufacturers to submit a vast range of scientific and marketing-related data, § 904(b); to inspect tobacco manufacturing facilities, § 103(i) (amending 21 U.S.C. § 374); to detain tobacco products administratively (a tool previously reserved only for medical devices), § 103(d) (amending 21 U.S.C. § 334(g)); to seize tobacco products and subject them to import holds, 21 U.S.C. § 334(g); § 103(l) (amending 21 U.S.C. § 381); to seek injunctions in aid of its enforcement authority, 21 U.S.C. § 332; and to issue warning letters regarding violations, see FDA, Regulatory Procedures Manual ch. 4-1, available at www.fda.gov/ICECI/Complia… RegulatoryProceduresManual/ucm176870.htm (last updated Dec. 7, 2011).

In addition, the FDA has its own criminal investigation arm, the Office of Criminal Investigations (“OCI”). See FDA, Regulatory Procedures Manual ch. 65, available at www.fda.gov/ICECI/Complia… RegulatoryProceduresManual/ucm176738.htm (last updated Jan. 26, 2011). Because many violations of the Act are criminal violations under § 103(b)

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(amending 21 U.S.C. § 331), the OCI has broad authority to investigate manufacturers’ activities. The FDA may refer criminal matters to the Department of Justice for prosecution. See 21 U.S.C. § 335.

The FDA is amply funded and fully staffed to carry out its regulatory mission. The Act requires tobacco manufacturers collectively to pay annual “user fees” of up to $700 million to fund the FDA’s regulation of tobacco products. § 919. Under its Fiscal Year 2011 Continuing Resolution, the FDA will allocate more than $216 million of these user fees to the Center for Tobacco Products’ compliance and enforcement activities. FDA, Justification of Estimates for Appropriations Committees 85 (FY 2012), available at www.fda.gov/downloads/Abo… BudgetReports/UCM243370.pdf. This substantial funding has enabled the FDA to engage in an aggressive recruitment and hiring effort, with a goal of reaching 426 full-time equivalent employees in the tobacco program for Fiscal Year 2012, id., and to actively carry out its mandate under the Act since receiving its regulatory authority over the tobacco industry in 2009. See, e.g., FDA Timeline: Family Smoking Prevention and Tobacco Control Act, www.fda.gov/ TobaccoProducts/GuidanceComplianceRegulatoryInformation/ucm237052.htm (“FDA Timeline”) (last updated Aug. 26, 2011) (presenting the FDA’s implementation timeline).

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III. Defendants’ Motion To Vacate

In light of the profound regulatory changes that occurred after this Court issued its opinion reviewing the district court’s final judgment, Defendants argued in their petitions for rehearing en banc, as well as in a separate Suggestion of Mootness, that the Act eliminated the district court’s jurisdiction to issue injunctive relief because there was no longer any reasonable likelihood that Defendants would violate RICO in the future. See Appellants’ Suggestion of Mootness and Motion for Partial Vacatur, Nos. 06-5267 et al. (July 31, 2009); see also, e.g., Philip Morris USA Inc.’s Petition for Rehearing or Rehearing En Banc, Nos. 065267 et al. (July 31, 2009). In response, the Government argued that “Defendants should make the[ir] arguments in the first instance in the district court.” Appellee’s Opposition to Suggestion of Mootness and Motion for Partial Vacatur, Nos. 06-5267 et al. at 9 (Aug. 17, 2009). This Court denied relief without comment.

Defendants thereafter raised their mootness arguments in their petitions for certiorari to the U.S. Supreme Court. The Government again insisted that Defendants “can assert their claim that the injunction in this case should be modified in light of the new law in the district court, which is the appropriate forum to consider it in the first instance.” Br. for the United States in Opp., at 55 (May 25, 2010).

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After the Supreme Court denied all parties’ petitions for certiorari, Defendants filed a Motion for Vacatur in the district court, arguing that the FDA Act extinguished the district court’s jurisdiction to issue injunctive relief; alternatively, Defendants argued that, to the extent the court retained jurisdiction, it should refrain from exercising that jurisdiction and instead defer to the FDA’s primary jurisdiction over matters of smoking and health. See Defendants’ Motion for Vacatur, D.E. 5880 (Mar. 3, 2011) (JA 51-81).

On June 1, 2011, the district court denied Defendants’ Motion for Vacatur. Memorandum Opinion, D.E. 5937 (June 1, 2011) (“Order”) (JA 2-27). Relying on its earlier factual findings predating the FDA Act, the district court found that Defendants remain likely to commit future RICO violations. Id. at 7-10 (JA 8-11) (citing Philip Morris USA Inc., 449 F. Supp. 2d at 909-12). The court reached that conclusion without analyzing any of the specific provisions of the Act or their effect on Defendants’ business. Moreover, the court referred repeatedly to the “formidable burden” of demonstrating mootness as a result of “voluntary compliance”—even though Defendants’ mootness arguments are premised on the mandatory requirements imposed on them by the FDA Act. Id. at 10, 15 (JA 11, 16) (internal quotation marks omitted).

The court cited three additional “considerations” in support of its ruling. Order at 10 (JA 11). First, it found that the Act and the court’s injunctions “target

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different conduct.” Id. at 11 (JA 12). Second, the court reasoned that Defendants are not likely to comply with the Act based on their previous alleged violations of the Master Settlement Agreement (“MSA”) that Defendants entered into with 46 state attorneys general in 1998. Id. at 11-12 (JA 12-13). Finally, the court stated that its injunctions might remain “necessary” depending on the outcome of the pending Commonwealth Brands litigation in which several Defendants are challenging certain limited provisions of the Act. Id. at 12-13 (JA 13-14).

Without acknowledging Congress’s explicit designation of the FDA as the “primary Federal regulatory authority with respect to the manufacture, marketing, and distribution of tobacco products” (§ 3(1)), the court also rejected Defendants’ argument that the Act placed the conduct regulated by the court’s injunctions within the primary jurisdiction of the FDA. Order at 15-26 (JA 16-27). In reaching that conclusion, the court applied a four-factor test that has not been adopted by the Supreme Court or this Court. Id. at 17 (JA 18). The court determined that all four factors weighed against application of the primary jurisdiction doctrine because, among other reasons, the court possesses experience that the agency lacks in adjudicating RICO claims (id. at 18-20 (JA 19-21)) and the Government’s allegations do not concern any “provision of or rule promulgated under the [Act].” Id. at 23 (JA 24).

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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

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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.

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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.

STANDARD OF REVIEW

This Court reviews a district court’s decision regarding subject matter jurisdiction and mootness de novo. See, e.g., Capitol Hill Grp. v. Pillsbury, Winthrop, Shaw, Pittman, LLC, 569 F.3d 485, 489 (D.C. Cir. 2009); Fund for Animals, Inc. v. Hogan, 428 F.3d 1059, 1063 (D.C. Cir. 2005).

This Court reviews a district court’s decision whether to defer to the primary jurisdiction of an agency for abuse of discretion. See Nat’l Tel. Coop. Ass’n v. Exxon Mobil Corp., 244 F.3d 153, 156 (D.C. Cir. 2001). Other courts review the

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issue de novo. See, e.g., United States v. Rice, 605 F.3d 473, 475 (8th Cir. 2010) (“We review the issue of primary jurisdiction de novo.”); Nat’l Commc’ns Ass’n v. Am. Tel. & Tel. Co., 46 F.3d 220, 222 (2d Cir. 1995) (“Although sometimes framed in terms of whether the district court abused its discretion . . . [review of primary jurisdiction determinations] is essentially de novo.”) (citation omitted). “Little turns, however, on whether [the Court] label[s] review of [a] particular question abuse of discretion or de novo” because a “district court by definition abuses its discretion when it makes an error of law.” Koon v. United States, 518 U.S. 81, 100 (1996).

ARGUMENT

A challenge to subject matter jurisdiction “may be raised by a party, or by a court on its own initiative, at any stage in the litigation, even after trial and the entry of judgment.” Arbaugh v. Y & H Corp., 546 U.S. 500, 506 (2006); see also Order at 5 (JA 6) (examining Defendants’ motion under Fed. R. Civ. P. 12(b)(1)). As a federal appellate court, this Court has a “special obligation to ‘satisfy itself not only of its own jurisdiction, but also that of the lower courts in a cause under review.’” Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986).

For the reasons explained below, the district court lacks continuing jurisdiction over this case. This Court should therefore reverse the district court’s order denying Defendants’ Motion for Vacatur, and remand with instructions to

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vacate the district court’s injunctions and factual findings and dismiss the case as moot. See, e.g., Am. Bar Ass’n v. FTC, 636 F.3d 641, 648 (D.C. Cir. 2011) (“[Where] intervening legislation ‘alters the posture’ of a pending case . . . ‘it is the duty of the appellate court’ to vacate the judgment of the district court and dismiss the case as moot.”) (quoting Dep’t of Treasury v. Galioto, 477 U.S. 556, 559-60 (1986)).

I. THE DISTRICT COURT LACKS JURISDICTION OVER THIS SUIT UNDER ARTICLE III AND RICO.

Federal courts are courts of limited jurisdiction. “‘They possess only that power authorized by Constitution and statute, which is not to be expanded by judicial decree.’” United States v. Philip Morris USA Inc., 396 F.3d 1190, 1197 (D.C. Cir.), cert. denied, 126 S. Ct. 478 (2005) (“Disgorgement Opinion”) (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994)). Under Article III of the Constitution, federal courts’ exercise of jurisdiction is limited to live “cases and controversies.” Chamber of Commerce v. EPA, 642 F.3d 192, 199 (D.C. Cir. 2011). To satisfy Article III’s case-or-controversy requirement in a case seeking injunctive relief, the plaintiff must establish that there is a “realistic threat” that the challenged activity will recur in “the reasonably near future” in the absence of such relief. City of Los Angeles v. Lyons, 461 U.S. 95, 107 n.7, 108 (1983). Moreover, because the Government’s request for relief in this case is limited to prospective injunctive relief under Section 1964(a) of RICO, the district court’s

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jurisdiction is further limited by the narrow scope of that provision, which grants federal courts jurisdiction solely to “prevent and restrain” RICO violations. 18 U.S.C. § 1964(a). Construing that language, this Court has held that Section 1964(a) limits a court’s jurisdiction “to forward-looking remedies that are aimed at future [RICO] violations.” Disgorgement Opinion, 396 F.3d at 1198. Where there is “no reasonable likelihood of future [RICO] violations” by a defendant, the district court lacks jurisdiction to issue, or leave in place, injunctive relief under Section 1964(a). United States v. Philip Morris USA Inc., 566 F.3d 1095, 1135 (D.C. Cir. 2009) (per curiam), cert. denied, 130 S. Ct. 3501 (2010) (internal quotation marks omitted).

These constitutional and statutory requirements are not satisfied simply because jurisdiction existed at the time the case was filed. “‘To qualify as a case fit for federal-court adjudication, an actual controversy must be extant at all stages of review.’” Chamber of Commerce, 642 F.3d at 199 (quoting Davis v. FEC, 554

U.S. 724, 732-33 (2008)). Courts “must dismiss a case as moot ‘if events have so transpired that the decision will neither presently affect the parties’ rights nor have a more-than-speculative chance of affecting them in the future.’” Id. (quoting Clarke v. United States, 915 F.2d 699, 701 (D.C. Cir. 1990) (en banc)). Accordingly, this Court held in a previous appeal in this case that the Government’s claims against the Council for Tobacco Research-USA, Inc.

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(“CTR”) and The Tobacco Institute, Inc. (“TI”) were moot because both entities had been dissolved after the litigation began. Philip Morris USA Inc., 566 F.3d at
1135. In light of their dissolution, there was “‘no reasonable likelihood of future [RICO] violations’” by CTR or TI, and the Court vacated the judgment as to those Defendants. Id.

Because the FDA Act similarly eliminates any “‘reasonable likelihood of future [RICO] violations’” by the remaining Defendants, Philip Morris USA Inc., 566 F.3d at 1135, the Government’s claims for injunctive relief must be dismissed as moot.

A. The FDA Act Eliminates Any Realistic Threat Or Reasonable Likelihood That Defendants Will Violate RICO In The Future.

When intervening legislation “gives a plaintiff everything [it] hoped to achieve by its lawsuit,” there is no longer a live case or controversy because the court “can no longer issue any judicial remedy capable of affecting the parties’ rights.” Log Cabin Republicans v. United States, 658 F.3d 1162, 1166 (9th Cir.
2011) (per curiam) (internal quotation marks omitted; brackets in original); Diffenderfer v. Gomez-Colon, 587 F.3d 445, 451 (1st Cir. 2009). “Issuing an injunction ordering the [defendant] to do what Congress has already mandated would be a mere academic exercise.” Bethany Med. Ctr. v. Harder, 693 F. Supp. 968, 975 (D. Kan. 1988). Thus, as the Government recently argued in seeking to vacate an injunction entered against it, “[i]f a subsequent change in the law

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Applying these jurisdictional principles, courts “have routinely deemed cases moot where,” as here, “a new law is enacted during the pendency of an appeal and resolves the parties’ dispute.” Log Cabin Republicans, 658 F.3d at 1166 (internal quotation marks omitted); see, e.g., id. (vacating the district court’s injunction prohibiting the United States from enforcing “Don’t Ask, Don’t Tell” in light of Congress’s repeal of that statute); Green v. Mansour, 474 U.S. 64, 66-67 (1985) (holding that a claim for injunctive relief against the enforcement of a federal agency’s regulations was rendered moot by intervening congressional legislation that prohibited the agency’s prior policy).5

5 See also, e.g., Diffenderfer, 587 F.3d at 452 (vacating the district court’s injunction requiring bilingual ballots in light of intervening legislation requiring such ballots); Martinez v. Wilson, 32 F.3d 1415, 1419-20 (9th Cir. 1994) (dismissing an appeal as moot and vacating the district court’s injunction where, after the injunction was issued, Congress amended the Older Americans Act and eliminated the challenged factors used by the State of California in distributing funds under that statute); Bullfrog Films, Inc. v. Wick, 959 F.2d 778, 779-81 (9th Cir. 1992) (holding that a claim for an injunction against enforcement of a federal agency’s regulations was rendered moot by an intervening congressional act that prohibited the agency’s prior policy). The district court’s attempt to distinguish these cases is uniformly unconvincing. It asserted, for example, that Green v. Mansour is distinguishable because the Supreme Court purportedly relied on the Eleventh Amendment in holding that the plaintiffs’ suit challenging a State’s

[Footnote continued on next page]

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This case presents a textbook example of a request for injunctive relief that has been mooted by intervening legislation. The specific conduct targeted by the district court’s injunctions is precisely the conduct that the FDA Act now subjects to the comprehensive regulatory oversight of the FDA. Compare Philip Morris USA Inc., 566 F.3d at 1137 (stating that the court’s injunctions regulate Defendants’ conduct related to “the manufacturing, marketing, promotion, health consequences, and sale of cigarettes”), with § 3(1) (deeming the FDA “the primary Federal regulatory authority with respect to the manufacture, marketing, and distribution of tobacco products”). Indeed, as the district court itself acknowledged, Congress expressly relied on the court’s factual findings in framing the scope of the Act and the regulatory powers granted to the FDA. See Order at 21 & n.5 (JA 22 & n.5).

[Footnote continued from previous page]

method for calculating welfare benefits was mooted by legislation prohibiting that method of calculation. Order at 14 (JA 15). But the Court’s reliance on the Eleventh Amendment was limited to the plaintiff’s request for declaratory relief; all the parties—and the Court—agreed that the plaintiffs’ claim for injunctive relief was mooted by the enactment of the new legislation. 474 U.S. at 71. Similarly, the district court pointed to the fact that in Bullfrog Films, “the parties . . . agreed that the case was moot.” Order at 14 (JA 15). In accordance with courts’ general obligation to assess their own subject matter jurisdiction, however, the Ninth Circuit independently concluded that the appeal had been mooted by the enactment of the intervening legislation. 959 F.2d at 781.

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The FDA’s extensive regulatory authority over the tobacco industry

forecloses any reasonable likelihood that Defendants will associate together in the future to commit joint RICO violations. See Boyle v. United States, 129 S. Ct. 2237, 2245 n.4 (2009) (RICO applies only to jointly conducted racketeering activity). For example, the FDA’s Center for Tobacco Products “conducts routine monitoring and surveillance of tobacco product marketing, advertising and promotion to assess compliance with the law.” News Release, FDA, FDA Takes Action Against Illegal Marketing of Tobacco Products (May 25, 2011), at www.fda.gov/NewsEvents/Ne… ucm256527.htm; see also FDA Enforcement Action Plan, supra, at 10 (outlining the FDA’s “multipronged approach” to enforcing the Act’s requirements, including by “surveillance, inspections, [and] enforcement actions”). In the event that manufacturers fail to comply with the Act, they are subject to an array of enforcement mechanisms, including no-tobacco-sale orders, civil penalties, mandatory requests for information, inspections and investigations, administrative detention of tobacco products, import holds, warning letters, mandatory public notification orders, seizures, injunctions, and criminal penalties. §§ 103, 904(b), 908(a); 21 U.S.C. §§ 331, 332, 333, 334, 372, 374, 381; FDA Enforcement Action Plan, supra, at 16; see also, e.g., §§ 902-03 (subjecting adulterated and misbranded tobacco products to FDCA penalties). The FDA’s regulatory powers over the

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tobacco industry are supplemented by the Federal Trade Commission’s authority to regulate “unfair or deceptive acts or practices in the advertising of cigarettes,” 15 U.S.C. § 1336, and by the MSA, which disbanded CTR and TI, the industry organizations that Defendants allegedly used to operate their enterprise in the past. MSA § III(o), available at www.naag.org/backpages/na… MSA%20with%20Sig%20Pages%20and%20Exhibits.pdf/file_view (follow “click here to get the file” hyperlink) (last updated Mar. 4, 2010). In the face of the far-reaching regulatory authority and enforcement powers that Congress has granted the FDA over the tobacco industry, the Government argued below that the district court’s jurisdiction to issue prospective injunctive relief against Defendants was preserved by Section 4 of the FDA Act. That provision requires that the statute not be construed to “affect any action pending in Federal, State, or tribal court.” § 4(a)(2). The district court itself did not rely on Section 4 in holding that it retained jurisdiction over this case—and with good reason.

Properly construed, Section 4 of the FDA Act has nothing to do with the constitutional or statutory jurisdiction of federal courts; it is concerned with the governing law and rules of decision that apply to cases that were pending at the time of enactment in any court, including “tribal” and “state” courts. In accordance with settled retroactivity principles, Section 4 simply makes clear that

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the Act does not defeat existing rights to monetary recovery, “increase a party’s liability for past conduct, or impose new duties with respect to [completed] transactions.” Lytes v. D.C. Water & Sewer Auth., 572 F.3d 936, 939 (D.C. Cir.
2009) (alteration in original; internal quotation marks omitted); see also Landgraf v. USI Film Prods., 511 U.S. 244, 280 (1994). The provision does not—and cannot—preserve the district court’s Article III jurisdiction over this case because Congress lacks the authority to enact legislation altering the requirements of Article III. See Valley Forge Christian Coll. v. Ams. United for Separation of Church & State, Inc., 454 U.S. 464, 488 n.24 (1982) (no “congressional enactment . . . can lower the threshold requirements” of Article III). Nor does Section 4’s preservation of existing substantive rights disturb the procedural requirement under Section 1964(a) that “jurisdiction is limited to forward-looking remedies that are aimed at future violations.” Disgorgement Opinion, 396 F.3d at 1198; see also Hagen v. Utah, 510 U.S. 399, 416 (1994) (“repeals by implication are disfavored”). Section 4 thus cannot insulate the district court’s jurisdictionally deficient injunctions from vacatur.

B. The District Court’s Conclusion That It Retains Jurisdiction Over This Case Is Flawed In Multiple Respects.

Despite the fact that the FDA Act subjects Defendants to stringent FDA regulation—and to the prospect of onerous civil and criminal penalties in the event of regulatory noncompliance—the district court held that it retained jurisdiction to

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issue prospective injunctive relief because Defendants remain likely to commit future RICO violations. None of the court’s four grounds for concluding that it continues to possess jurisdiction over this case is persuasive.

1. The District Court Applied The Wrong Legal Standard.

As an initial matter, the district court examined the jurisdictional implications of the FDA’s regulatory authority under an incorrect legal standard. In rejecting Defendants’ argument that they are not reasonably likely to commit future RICO violations, the court repeatedly emphasized that “a defendant claiming that its voluntary compliance moots a case bears the formidable burden of showing that it is absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur.” Order at 10 (JA 11) (emphasis added) (quoting Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 190 (2000)); see also id. at 15 (JA 16). The district court’s reliance on the onerous standard for establishing mootness based on voluntary compliance was misplaced.

“[V]oluntary cessation is different from a statutory amendment.” Log Cabin Republicans, 658 F.3d at 1167. Defendants’ claim of mootness is not premised on their voluntary abandonment of the joint racketeering activity alleged by the Government. Rather, it is premised on the mandatory requirements that the FDA Act imposes on Defendants’ design, manufacturing, and marketing of cigarettes, and the far-reaching enforcement authority that the legislation grants to the FDA.

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See Diffenderfer, 587 F.3d at 452 (“legislation is generally considered an intervening, independent event and not voluntary action”).

The exacting “absolutely clear” standard for mootness has no application outside the limited voluntary compliance setting. See, e.g., Philip Morris USA Inc., 566 F.3d at 1135 (vacating the district court’s judgment as to CTR and TI because there was “no reasonable expectation that the wrong will be repeated”) (internal quotation marks omitted). As the U.S. Supreme Court recently reaffirmed, an intervening legal or factual development—such as the statutory enactment at issue here—need not eliminate every conceivable possibility of future wrongdoing to render a case moot; a case is moot when an intervening development makes clear “that the allegedly wrongful behavior could not reasonably be expected to recur.” Camreta v. Greene, 131 S. Ct. 2020, 2034 (2011) (emphasis added; internal quotation marks omitted). Thus, in Camreta, the Court held that the plaintiff’s Section 1983 claim based on the denial of her Fourth Amendment rights was moot even though it was possible—although not probable—that her constitutional rights would be violated in the future. Id. In contrast, the district court in this case effectively required Defendants to negate every theoretical possibility that they would violate RICO in the future in order to demonstrate mootness with “absolute[ ] cl[arity].” Order at 10 (JA 11). This

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Court has never required parties claiming mootness based on intervening legislation to meet such an insurmountable burden.

2. The District Court Misconstrued The Scope Of The FDA Act.

In addition to applying the wrong legal standard, the district court also substantially misperceived the scope of the FDA’s regulatory authority under the FDA Act. The district court reasoned that “regulation under the FDA Act and any injunctions issued by this Court target different conduct” because “FDA rulemaking is not designed to prevent future racketeering activity covered by RICO.” Order at 11 (JA 12) (emphasis added). The district court’s conclusion cannot be squared with a comparison of the conduct targeted by the court’s injunctions and the conduct targeted by the FDA’s authority under the Act. In each instance, the conduct is the same.

First, the district court found that Defendants “falsely den[ied] the adverse health effects of smoking,” that “nicotine and smoking are addictive,” and that “secondhand smoke causes disease”; the court enjoined Defendants from making such statements in the future. Philip Morris USA Inc., 566 F.3d at 1108 (citing United States v. Philip Morris USA Inc., 449 F. Supp. 2d 1, 854, 856, 864 (D.D.C.
2006)). The FDA Act, however, forecloses any reasonable future possibility of similar misrepresentations by prohibiting cigarette labeling or advertising that is “false or misleading in any particular,” § 903(a)(1), (a)(7)—including with regard

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to the health effects of smoking and the addictive qualities of nicotine—and by requiring that Defendants place a series of new warning labels on their cigarette packages and advertisements. Those warnings include that “Cigarettes cause fatal lung disease,” “Cigarettes cause cancer,” “Smoking can kill you,” “Cigarettes are addictive,” and “Tobacco smoke causes fatal lung disease in nonsmokers.” § 201(a). The FDA has extensive authority to monitor Defendants’ labeling and advertising for compliance with these requirements. If the FDA determines that a label or advertisement is false or misleading in any respect—including because it does not display one of the prescribed warnings or because it includes a misleading statement about the health risks of smoking—then the product is considered “misbranded” and the manufacturer is subject to civil and criminal penalties. § 903; 21 U.S.C. § 333. The Act funds this regulatory oversight by requiring tobacco manufacturers to pay hundreds of millions of dollars in “user fees” to the FDA each year. § 919.

Second, the district court found that Defendants “falsely den[ied] that they manipulated cigarette design and composition so as to assure nicotine delivery levels that create and sustain addiction,” and enjoined Defendants from making similar statements in the future. Philip Morris USA Inc., 566 F.3d at 1108 (citing Philip Morris USA Inc., 449 F. Supp. 2d at 858). The Act—which explicitly references this finding by the district court (§ 2(49))—eliminates any reasonable

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possibility of future nicotine manipulation; it gives the FDA broad authority to regulate nicotine in cigarettes, including through the regulation of “nicotine yields” in a manner that it determines is “appropriate for the protection of the public health,” § 907(a)(4), and the premarket review and authorization of all proposed new cigarettes and modifications to currently marketed cigarettes. § 910(a)(1), (2). The Act also requires the FDA to determine through a rulemaking whether “tar and nicotine yields” should be displayed on cigarette packages, cigarette advertising, or both. § 206; see also FDA Center for Tobacco Products Update (June 22 – September 30, 2011), available at www.fda.gov/downloads/ TobaccoProducts/NewsEvents/UCM276882.pdf (FDA recently funded a study designed to “evaluate nicotine in cigarettes”).

Third, the district court found that Defendants “falsely represent[ed] that light and low tar cigarettes deliver less nicotine and tar and therefore present fewer health risks than full flavor cigarettes,” and enjoined Defendants from using “light” and “low tar” descriptors in the future. Philip Morris USA Inc., 566 F.3d at 1108 (citing Philip Morris USA Inc., 449 F. Supp. 2d at 859). The Act extinguishes any reasonable possibility that Defendants will use such terms to convey misleading health messages in the future by categorically prohibiting the use of “‘light,’ ‘mild,’ or ‘low’ or similar descriptors” in cigarette marketing, § 911(a), (b)(2)(A)(ii), absent FDA authorization. § 911(g)(1).

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Finally, the district court found that Defendants “suppress[ed] documents, information, and research to prevent the public from learning the truth about these subjects and to avoid or limit liability in litigation,” and required Defendants to adhere to specified document-disclosure obligations on an ongoing basis. Philip Morris USA Inc., 566 F.3d at 1108 (citing Philip Morris USA Inc., 449 F. Supp. 2d at 866). The Act similarly forecloses any reasonable possibility of such violations in the future by “requir[ing] tobacco product manufacturers to disclose research which has not previously been made available, as well as research generated in the future, relating to the health and dependency effects or safety of tobacco products.” § 3(6). To that end, the Act imposes a number of document-disclosure requirements on Defendants, including a requirement that Defendants submit to the FDA “all documents developed after [the date of the enactment of the FDA Act] that relate to health, toxicological, behavioral, or physiologic effects of current or future tobacco products, their constituents (including smoke constituents), ingredients, components, and additives.” § 904(a)(4). Defendants must also submit to the agency a list of all ingredients in each tobacco product by brand; a description of the “content, delivery, and form of nicotine in each tobacco product”; and a listing of all constituents identified by the FDA as harmful or potentially harmful to health in each tobacco product. § 904(a)(1)-(3). The Act further authorizes the FDA to request certain additional documents from

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Defendants, including documents related to scientific research activities and the effectiveness of tobacco-related marketing practices. § 904(b)(1), (3).

The FDA Act thus squarely prohibits Defendants from engaging in the conduct that formed the basis for the district court’s injunctions. Indeed, had the Act been passed before the Government initiated this suit, there is no question that the district court would have lacked jurisdiction to order the remedies at issue. That result is no different where, as here, the Act was passed only a month after the district court’s injunctions were upheld on appeal and extinguished the court’s jurisdiction to continue enforcing those forward-looking remedies.

3. The District Court Based Its Decision On Improper Speculation About The Outcome Of Pending Litigation.

The district court also premised its future-violations analysis on conjecture regarding the outcome of pending litigation challenging limited portions of the FDA Act. Order at 12 (JA 13). Such conjecture was unwarranted in several respects.

In Commonwealth Brands, Inc. v. United States, Reynolds and Lorillard (together with other retailer and manufacturer plaintiffs) are pursuing a First Amendment challenge to certain limited provisions of the FDA Act, including the Act’s ban on color or graphics in most advertising; the new warning labels; parts of the Modified Risk Tobacco Products Requirement; the restrictions on brand-name merchandise, brand-name sponsorships, continuity programs, and free samples;

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and the ban on references to the efficacy of FDA regulations. See supra at 16 n.4. The Western District of Kentucky invalidated the bans on color or graphics in labels and advertising and references to the efficacy of FDA regulations, but upheld the remainder of the challenged portions of the Act. See Commonwealth Brands, Inc. v. United States, 678 F. Supp. 2d 512, 541 (W.D. Ky. 2010). And, after the district court denied Defendants’ Motion for Vacatur, the District Court for the District of Columbia preliminarily enjoined the FDA’s regulation promulgating nine specific graphic warnings. See R.J. Reynolds Tobacco Co. v. United States FDA, _ F. Supp. 2d _, 2011 WL 5307391 (D.D.C. Nov. 7, 2011). The two cases are now pending before the Sixth Circuit and this Court, respectively.

Although the pending appeals have yet to be decided, the district court reasoned that, “if in fact Defendants should prevail in their challenges to the Tobacco Control Act, it will be all the more necessary for them to be restrained by this Court from any future violations of RICO.” Order at 12-13 (JA 13-14) (emphasis added). But subject matter jurisdiction must be evaluated based on present circumstances, not based on speculation about the outcome of ongoing litigation challenging an act of Congress. See Texas v. United States, 523 U.S. 296, 300 (1998) (federal courts lack jurisdiction to adjudicate claims based on “contingent future events that may not occur as anticipated, or indeed may not

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occur at all”) (internal quotation marks omitted); see also Fourth Branch Assocs. (Mechanicville) v. FERC, 253 F.3d 741, 746 (D.C. Cir. 2001) (same). Conjecture that portions of a federal statute might be invalidated in the future is therefore insufficient to preserve a court’s jurisdiction to issue, and continue to enforce, injunctive relief where that statute, as enacted, has extinguished any reasonable likelihood of future wrongdoing by the defendant. See Chamber of Commerce, 642 F.3d at 208 (holding that a claim was moot even though it was possible that the federal regulation that had eliminated the basis for the plaintiffs’ legal challenge might be invalidated in pending litigation).

More fundamentally, even if Reynolds and Lorillard ultimately succeed in all of their pending challenges to limited provisions of the FDA Act in the Commonwealth Brands case and to the FDA’s graphic-warning rule in R.J. Reynolds Tobacco Co. v. United States FDA, the FDA’s authority to oversee Defendants’ design, manufacturing, and marketing of cigarettes and to ensure compliance with those federal regulatory requirements through an array of powerful enforcement tools would still substantially replicate the scope of the injunction in this case. Those challenges do not implicate, for example, the ban on “light” and “low tar” descriptors, the substance of the text of the new statutorily mandated warning labels, the FDA’s review of new tobacco products, the extensive disclosure requirements imposed on tobacco manufacturers, the civil and

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criminal penalties for false or misleading tobacco advertising, or the requirement that manufacturers pay hundreds of millions of dollars in annual “user fees” to the FDA. In light of these far-reaching regulatory powers—which are not disputed by any party—the FDA need not rely on unconstitutional measures to achieve its regulatory objectives.

4. The District Court Ignored Significant Differences Between The MSA And The FDA Act.

Finally, the district court based its conclusion that Defendants remain likely to commit future RICO violations on its earlier finding that Defendants had failed to comply with certain aspects of the MSA. Order at 11-12 (JA 12-13). The district court’s reasoning disregarded important differences between the regulatory requirements and enforcement measures established under the FDA Act and MSA.

The MSA—a 1998 settlement agreement between Defendants and 46 States—“prohibited, inter alia, youth marketing, any material misrepresentations regarding the health consequences of tobacco use, agreements between manufacturers to limit either competition or the distribution of information about the health effects associated with smoking, and other specific marketing techniques (e.g., cartoon characters and billboards).” Philip Morris USA Inc., 566 F.3d at 1131-32. The MSA did not grant States the authority to impose new cigarette labeling requirements, to prohibit “light” and “low tar” descriptors, or to oversee the design and manufacturing of cigarettes. Nor did the MSA afford any

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government agency the authority to regulate the tobacco industry, or enforce the MSA’s provisions, on a nationwide basis.

When enacting the FDA Act, Congress sought to fill the gaps in the MSA’s regulatory and enforcement framework. § 2(48). Unlike the prohibitory provisions of the MSA—which are focused principally on Defendants’ marketing practices—the Act imposes extensive federal regulation on virtually every aspect of Defendants’ conduct when designing and manufacturing cigarettes (and also imposes significant additional marketing restrictions). Moreover, while the district court found that the States lacked the resources “to vigorously enforce the MSA,” Philip Morris USA Inc., 449 F. Supp. 2d at 914, the FDA Act reinforces its regulatory requirements with hundreds of millions of dollars in annual tobacco- specific FDA funding and a panoply of enforcement tools. §§ 103, 904(b), 908(a), 919; 21 U.S.C. §§ 331, 332, 333, 334, 372, 374, 381. The statutorily mandated user fees—which are paid directly by tobacco manufacturers and are not subject to the congressional appropriations process—are expected to generate $4.5 billion for the FDA’s tobacco program between 2009 and 2018. § 919. These federal regulatory requirements and enforcement powers exist in perpetuity.

Accordingly, the comprehensive regulatory oversight that Congress has authorized the FDA to exercise over the tobacco industry—together with the extensive arsenal of enforcement tools the Act affords the agency—eliminate any

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reasonable likelihood of future RICO violations that may have remained after the MSA went into effect.

C. At A Minimum, The District Court Should Have Vacated Specific Portions Of Its Injunctions.

Even if the district court retained jurisdiction over some parts of this case, it should have vacated or modified certain specific aspects of its injunctions that are plainly jurisdictionally deficient and impossible to reconcile with the FDA’s regulatory authority.

Prohibition on the Marketing of “Light” and “Low Tar” Cigarettes. The district court should have vacated its injunction prohibiting Defendants from using the terms “low tar,” “light,” “ultra light,” and similar descriptors in the brand names and advertising of their cigarettes. Philip Morris USA Inc., 449 F. Supp. 2d at 938. The FDA Act flatly prohibits the marketing of “low tar” and “light” cigarettes absent express authorization from the Secretary of Health and Human Services. §§ 902(8), 911(b)(2)(A)(ii), (g); see also FDA, Guidance for Industry and FDA Staff: Use of “Light,” “Mild,” “Low,” or Similar Descriptors in the Label, Labeling, or Advertising of Tobacco Products, available at www.fda.gov/TobaccoProduc… Information/ucm214597.htm (last updated May 11, 2011). If that authorization is given, the Act requires continued monitoring and reassessment of the authorization on a going-forward basis (§ 911(i)(1)), and requires the FDA to withdraw its

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authorization if new information undermines the approval of the product (§ 911(j)). Any violations of the Act’s prohibition on “light” and “low tar” descriptors— which would be readily detectable through the FDA’s comprehensive oversight of Defendants’ labeling and advertising practices—would give rise to civil and criminal liability. § 902(8); 21 U.S.C. §§ 331, 332, 333, 334; see also FDA, Guidance for Industry and FDA Staff: Use of “Light,” “Mild,” “Low,” or Similar Descriptors, supra, at 4 (“FDA has the authority to initiate, among other actions, injunction actions, civil money penalties, and/or criminal prosecution to address violations of the act”).

In accordance with the Act’s unambiguous requirements, Defendants no longer use “light” and “low tar” descriptors in the marketing of their cigarettes. Nor have they requested that the FDA authorize the use of any such descriptors. The Government’s request for an injunction prohibiting Defendants from using those descriptors is therefore moot. Just as it was “‘impossible for the court to grant any effectual relief’” against TI and CTR because they had been legally dissolved, it is impossible to grant the Government “effectual relief” on its challenge to the use of “light” and “low tar” descriptors because, under the legal compulsion of the FDA Act, Defendants have now discontinued their use of those descriptors and there is no “‘reasonable expectation’” that Defendants will resume

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their allegedly deceptive conduct in the future. Philip Morris USA Inc., 566 F.3d at 1135 (quoting City of Erie v. Pap’s A.M., 529 U.S. 277, 287 (2000)).

Requirement That Defendants Make Corrective Statements. The district court also should have vacated its injunction ordering Defendants to make corrective statements about the health risks and addictiveness of cigarettes. See Philip Morris USA Inc., 449 F. Supp. 2d at 938-39. Once the district court determines the content of those communications—a matter that remains pending before the district court on remand—Defendants will be required to make those statements through media outlets and cigarette package onserts pursuant to a schedule prescribed by the court. Id.

This Court has already made clear that the purpose of the corrective- statements injunction is not to remedy past alleged fraud, but to prevent “prospective efforts by Defendants to either directly mislead consumers or capitalize on their prior deceptions by continuing to advertise in a manner that builds on consumers’ existing misperceptions.” Philip Morris USA Inc., 566 F.3d at 1144-45. The Act, however, renders the possibility of such future fraud extremely unlikely because, among other things, it already requires Defendants to make specific communications to the public regarding the health effects and addictiveness of smoking. For example, the Act requires that cigarette packages and advertising include a series of warning labels regarding these issues, including

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the statements that “Cigarettes are addictive,” “Cigarettes cause fatal lung disease,” “Cigarettes cause cancer,” “Tobacco smoke causes fatal lung disease in nonsmokers,” and “Smoking can kill you.” § 201(a). The possibility that Defendants could defraud the public in the future as to the health effects and addictiveness of smoking in the face of these warnings is, to say the least, remote.

The Act’s mandatory warnings about the health risks and addictiveness of smoking are complemented by the FDA’s far-reaching authority to monitor Defendants’ labeling and advertising of cigarettes, to enforce the Act’s requirements, and to disseminate public-health information about smoking. See FDA Enforcement Action Plan, supra, at 10; FDA, Strategic Priorities 2011-2015, supra, at 29. Moreover, if a manufacturer’s labeling or advertising does not bear one of the statutorily prescribed warning labels or includes inaccurate statements about the health effects of cigarettes, the FDA has substantial civil and criminal penalties at its disposal to remedy these violations of the Act. § 903(a)(1), (a)(7); 21 U.S.C. §§ 331, 332, 333, 334; 21 C.F.R. § 1141.14; see also 15 U.S.C. § 1336 (authorizing the Federal Trade Commission to regulate “unfair or deceptive acts or practices in the advertising of cigarettes”).

Together, the new warning labels and expansive FDA monitoring and enforcement powers eliminate any reasonable likelihood that Defendants will commit future RICO violations by misleading consumers about the health effects

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of smoking. Every health-related statement that Defendants make in their labeling and advertising of cigarettes is either specifically mandated by the FDA Act itself or subject to stringent government oversight. The Act therefore extinguished the district court’s jurisdiction to issue, and leave in place, injunctive relief ordering Defendants to make corrective statements because those statements are aimed at preventing future RICO violations that are exceptionally unlikely ever to come to pass.

Prohibition On False Statements. For similar reasons, the district court should have vacated its injunction prohibiting Defendants from making “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.” Philip Morris USA Inc., 449 F. Supp. 2d at 938. As explained above, the FDA has extensive regulatory authority to monitor Defendants’ labeling and advertising of cigarettes and to initiate enforcement proceedings against manufacturers whose labeling or advertising is “false or misleading in any particular.” § 903(a)(1), (a)(7)(A). These monitoring and enforcement efforts are funded by hundreds of millions of dollars in annual “user fees” that tobacco manufacturers are required to pay to the FDA in perpetuity (§ 919)—which will ensure that the FDA has the staff and administrative resources necessary to oversee

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all of Defendants’ labeling and advertising practices. The FDA’s comprehensive oversight of cigarette marketing eliminates any reasonable likelihood that, in the future, Defendants will make false or misleading statements of the type found by the district court.

II. IF THE DISTRICT COURT RETAINED JURISDICTION OVER THIS CASE, IT SHOULD HAVE DEFERRED TO THE FDA’S PRIMARY JURISDICTION.

Even if the district court continued to possess jurisdiction over all or part of this case despite the enactment of the FDA Act, it should nevertheless have vacated its injunctions out of deference to the FDA’s primary jurisdiction over matters of smoking and health. The district court’s injunctions will inevitably interfere with the FDA’s expert regulatory decision-making and give rise to overlapping and inconsistent sets of legal requirements.

A. Deferring To The FDA’s Regulatory Expertise Would Promote The Purposes Of The Primary Jurisdiction Doctrine.

Under the primary jurisdiction doctrine, courts should decline to adjudicate a case where “the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body.” United States v. W. Pac. R.R. Co., 352 U.S. 59, 64 (1956). The doctrine “is concerned with promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties.” Id. at 63.

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Both this Court and the U.S. Supreme Court have recognized that “‘[n]o fixed formula exists for applying the [primary jurisdiction] doctrine’” and that “‘[i]n every case the question is whether the reasons for the existence of the doctrine are present and whether the purposes it serves will be aided by its application in the particular litigation.’” Kappelmann v. Delta Air Lines, Inc., 539 F.2d 165, 169 (D.C. Cir. 1976) (quoting W. Pac. R.R. Co., 352 U.S. at 64). Those purposes are allowing an agency with specialized knowledge to exercise its expertise in its particular area of regulatory authority and promoting uniformity in regulation. See, e.g., id.; Allnet Commc’n Serv., Inc. v. Nat’l Exch. Carrier Ass’n, 965 F.2d 1118, 1120 (D.C. Cir. 1992). Even if a case does not fall neatly within the “traditional” or “classic doctrine of primary jurisdiction,” the doctrine should nevertheless be applied where both of these purposes are present. Kappelmann, 539 F.2d at 169.

Thus, in Kappelmann, for example, this Court held that the district court properly deferred to the primary jurisdiction of the Federal Aviation Administration in a suit seeking an injunction requiring an airline to warn passengers about the presence of radioactive materials on its aircraft. 539 F.2d at
168. The Court reasoned that the “injunction which appellants would have the court fashion here would in effect constitute a regulation covering one phase of the interstate transportation of one group of hazardous materials on one airline.” Id. at 52

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171. “Such determinations,” the Court explained, “are better made on an industry- wide basis in an agency rulemaking proceeding, and this indeed is the choice which Congress has made in enacting the Hazardous Materials Transportation Act.” Id.

As in Kappelmann, both purposes of the primary jurisdiction doctrine— permitting an agency with specialized knowledge to exercise its expertise and promoting regulatory uniformity—would be served by application of the primary jurisdiction doctrine here. In fact, the FDA Act expressly places the regulation of tobacco products within the primary jurisdiction of the FDA. The Act provides that the FDA

is a regulatory agency with the scientific expertise to identify harmful substances in products to which consumers are exposed, to design standards to limit exposure to those substances, to evaluate scientific studies supporting claims about the safety of products, and to evaluate the impact of labels, labeling, and advertising on consumer behavior in order to reduce the risk of harm and promote understanding of the impact of the product on health.

§ 2(44). Based on the FDA’s specialized public-health expertise and experience, the Act designates the FDA “the primary Federal regulatory authority with respect to the manufacturing, marketing, and distribution of tobacco products.” § 3(1). In accordance with that designation, the Act authorizes the FDA “to address issues of particular concern to public health officials, especially the use of tobacco by young people and dependence on tobacco,” §3(2), “to set national standards controlling

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the manufacture of tobacco products and the identity, public disclosure, and amount of ingredients used in such products,” § 3(3), to “over[see] . . . the tobacco industry’s efforts to develop, introduce, and promote less harmful tobacco products,” § 3(4), “to regulate the levels of tar, nicotine, and other harmful components of tobacco products,” § 3(5), and “to impose appropriate regulatory controls on the tobacco industry,” § 3(8).

Like the FDA’s regulatory authority under the Act, the district court’s injunctions also reach Defendants’ conduct with respect to “the manufacturing, marketing, promotion, health consequences, and sale of cigarettes.” Philip Morris USA Inc., 566 F.3d at 1137. The district court should have vacated its injunctions to permit the FDA to exercise its regulatory expertise unfettered by potentially overlapping and conflicting judicial oversight. See Atchison, Topeka & Santa Fe Ry. Co. v. Wichita Bd. of Trade, 412 U.S. 800, 819 (1973) (plurality opinion) (courts should refrain from issuing an injunction that “might substantially interfere with the function of [an] administrative agency”).

If the district court’s injunctions remain in place, the court will retain authority over a subject matter that Congress has expressly assigned to the FDA, and, in exercising that authority, will be able to second-guess the FDA’s regulatory discretion, including by prohibiting conduct that, in the FDA’s expert judgment, does not warrant regulatory intervention. This is most apparent in the conflict

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between the district court’s blanket prohibition on the use of “light” and “low tar” descriptors and the FDA’s authority to permit the use of such descriptors when the Secretary finds, for example, that a product “will . . . significantly reduce harm and the risk of tobacco-related disease to individual tobacco users” and “benefit the health of the population as a whole.” § 911(g)(1). Under the district court’s across-the-board injunction, it would be unlawful for Defendants to use “light” and “low tar” descriptors even if they obtained this express authorization from the FDA.

Moreover, the Act includes a number of open-ended provisions that grant the FDA substantial discretion in selecting the means for accomplishing the Act’s objectives. See, e.g., § 202(b) (authorizing the FDA to develop additional warning labels beyond those specified in the Act); § 915(b)(2) (authorizing the FDA to require manufacturers to make public disclosures “relating to the results of the testing of tar and nicotine” yields of cigarettes). Even where the district court’s injunctions do not directly conflict with the FDA’s exercise of its authority, they may undermine the agency’s effort to use this regulatory discretion to formulate a comprehensive, nationwide tobacco policy. Indeed, the district court’s injunctions do not apply to the scores of tobacco manufacturers who are not defendants in this case, and are therefore fundamentally incompatible with Congress’s goal of

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empowering the FDA to set “national standards” governing tobacco products. § 3(3).

For example, the FDA is currently designing and implementing an extensive campaign to “[p]rovide the public with accurate, trustworthy, and accessible information about tobacco products.” FDA, Strategic Priorities 2011-2015, supra, at 29. The corrective-statements injunction ordered by the district court would create a duplicative regime that overlaps—and could potentially interfere—with the FDA’s separate efforts to implement this public-education campaign. The dissemination of these court-ordered public statements about the health effects and addictiveness of smoking would alter the overall mix of public-health information available about smoking and divert attention from the FDA’s public-health communications. Moreover, the district court’s injunction requires Defendants to distribute their corrective statements through cigarette package “onserts.” Philip Morris USA Inc., 449 F. Supp. 2d at 939. But the Act requires that the statutorily mandated warnings comprise at least the top half of both the front and back panels of cigarette packages. § 201; see also 21 C.F.R. § 1141.10(a)(3), (4). It is therefore likely that the onserts displaying the district court’s prescribed corrective statements will partially conceal the public-health warnings required by the FDA Act and implemented by the FDA. In order to avoid such overlapping regulation,

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Congress decided to place regulatory authority in the FDA, not in the federal judiciary.

B. The District Court’s Reasons For Failing To Defer To The FDA’s Primary Jurisdiction Were Erroneous.

Applying a four-factor test that neither the Supreme Court nor this Court has adopted, the district court concluded that there was no basis for it to defer to the FDA’s primary jurisdiction. Each of the district court’s reasons was flawed.

The district court first asserted that “‘the question at issue is within the conventional expertise of judges’” and that “[c]ourts have consistently declined to invoke the primary jurisdiction [doctrine] when adjudicating RICO or fraud claims.” Order at 17, 18 (JA 18, 19) (quoting Himmelman v. MCI Commc’ns Corp., 104 F. Supp. 2d 1, 4 (D.D.C. 2000)). The court reasoned that, “[b]ecause any injunctive relief entered by [the court] must be drawn narrowly so as to prevent and restrain future RICO violations only, there is no need to defer to the expertise of an administrative agency.” Id. at 19 (JA 20).

Courts have recognized, however, that “[i]t is the conduct being regulated, not the formal description of the governing legal standards, that is the proper focus of concern” when determining whether to defer to an agency’s primary jurisdiction. Tamburello v. Comm-Tract Corp., 67 F.3d 973, 979 n.6 (1st Cir.
1995) (emphasis added; internal quotation marks omitted). Here, the Government’s fraud and RICO claims are inextricably intertwined with the FDA’s

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expert regulatory authority over the design, manufacturing, and marketing of cigarettes. Because the FDA has been tasked with regulating the very conduct that the injunctive relief in this case is intended to prevent, the district court should have deferred to the FDA’s primary jurisdiction over that conduct. See id. at 97677 (deferring to the primary jurisdiction of the National Labor Relations Board in a RICO action where the court’s review of the conduct that formed the basis for the predicate act of extortion would be intertwined with the determination whether the conduct violated the National Labor Relations Act).

Next, the district court concluded that the “question at issue” did not “lie[ ] particularly within the agency’s discretion or require[ ] the exercise of agency expertise.” Order at 17 (JA 18). According to the district court, “Congress explicitly and unequivocally declined to place the discretion to craft a remedy in this case in the hands of the FDA” because the Act states that nothing in it “‘shall be construed to . . . affect any action pending in Federal, State, or tribal court.’” Id. at 21 (JA 22) (quoting § 4(a)). Both this Court and the Supreme Court, however, have held that similar statutory provisions were insufficient to displace the normal operation of the primary jurisdiction doctrine. See Allnet Commc’n Serv., Inc., 965 F.2d at 1122 (holding that it was appropriate to defer to the primary jurisdiction of the Federal Communications Commission despite statutory provisions in the Communications Act that expressly authorized damages actions in the district

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court, 47 U.S.C. §§ 206 & 207); see also Texas & Pac. Ry. v. Abilene Cotton Oil Co., 204 U.S. 426 (1907) (applying the primary jurisdiction doctrine even though a provision of the Interstate Commerce Act explicitly preserved shippers’ common- law remedies). Nothing in Section 4 of the FDA Act prohibited the district court from vacating its injunctions in order to preserve the FDA’s primary jurisdiction over matters of smoking and health. See also supra at 33-34.

Under the third prong of its test—“whether there exists a substantial danger of inconsistent rulings” (Order at 17 (JA 18) (internal quotation marks omitted))— the court concluded that this case “presents no risk of conflict with the FDA’s resolution of any issue delegated to it under the [FDA] Act” because it “concerns no provision of or rule promulgated under the . . . Act.” Id. at 23 (JA 24). But the fact that the district court’s regulation of Defendants is accomplished through RICO injunctions and the FDA’s regulation is accomplished through its FDA Act authority does not diminish the fact that these two overlapping federal regulatory frameworks will inevitably generate inconsistencies, inefficiencies, and uncertainty, and undermine Congress’s allocation of regulatory authority in the FDA Act. This Court has made clear that, to avoid these outcomes, courts must defer to an agency’s primary jurisdiction where awarding the requested relief would interfere with an agency’s regulatory authority. See Israel v. Baxter Labs., Inc., 466 F.2d 272, 280-82 (D.C. Cir. 1972) (declining to determine whether a drug

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was “safe and effective” for purposes of an antitrust claim because Congress had afforded the FDA primary jurisdiction over the issue).

The district court also dismissed Defendants’ primary-jurisdiction argument as “premature” because Defendants supposedly “have ample recourse through a Rule 60(b) motion” in the event they “find that they are subject to conflicting requirements from this Court and the FDA.” Order at 23, 24 (JA 24, 25). But requiring Defendants to resort to a Rule 60(b) filing every time they seek to engage in conduct authorized by the FDA but potentially prohibited by the district court— such as the use of a “light” or “low tar” descriptor specifically authorized by the FDA but prohibited by the district court’s blanket injunction—would generate needless inefficiency that could substantially impair the attainment of the FDA’s regulatory objectives and undermine Congress’s decision to place regulatory authority over the tobacco industry in the FDA, not the federal judiciary.

Finally, the district court considered “whether a prior application to the agency ha[d] been made.” Order at 17 (JA 18) (internal quotation marks omitted). This factor is inapplicable here because the FDA is already actively exercising its regulatory authority over the very aspects of Defendants’ business targeted by the district court’s injunctions. See, e.g., FDA Timeline, supra. An agency application serves no purpose in a case involving ongoing, comprehensive agency oversight of an industry.

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CONCLUSION

For the foregoing reasons, this Court should reverse the district court’s order denying Defendants’ Motion for Vacatur, and remand with instructions to vacate the district court’s injunctions and factual findings and dismiss the case with prejudice.

Dated: March 12, 2012

Respectfully submitted,

/s/ Miguel A. Estrada

Robert F. McDermott Miguel A. Estrada

Peter J. Biersteker Amir C. Tayrani

Noel J. Francisco Dace C. Martinez

JONES DAY GIBSON, DUNN & CRUTCHER LLP

51 Louisiana Avenue, N.W. 1050 Connecticut Avenue, N.W.

Washington, D.C. 20001-2113 Washington, D.C. 20036

Telephone: (202) 879-3939 Telephone: (202) 955-8257

Facsimile: (202) 626-1700 Facsimile: (202) 530-9616

R. Michael Leonard Beth A. Wilkinson

WOMBLE CARLYLE SANDRIDGE & RICE, PAUL, WEISS, RIFKIND, WHARTON &

PLLC GARRISON LLP

One West Fourth Street 2001 K Street, N.W.

Winston-Salem, NC 27101 Washington, D.C. 20006-1047

Telephone: (336) 721-3721 Telephone: (202) 223-7300

Facsimile: (336) 733-8389 Facsimile: (202) 223-7420

Counsel for Appellant

Thomas J. Frederick

R.J. Reynolds Tobacco Company

WINSTON & STRAWN LLP

35 West Wacker Drive

Chicago, Illinois 60601-9703

Telephone: (312) 558-6700

Facsimile: (312) 558-5700

Counsel for Appellants Philip Morris

USA Inc. and Altria Group, Inc.

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Michael B. Minton

Bruce D. Ryder

A. Elizabeth Blackwell

THOMPSON COBURN LLP

One U.S. Bank Plaza, Suite 3500

St. Louis, Missouri 63101-1693

Telephone: (314) 552-6000

Facsimile: (314) 552-7597

Counsel for Appellant

Lorillard Tobacco Company

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CERTIFICATE OF COMPLIANCE

This brief complies with the type-volume limitation established by Rule 32(a)(7)(B)(i) of the Federal Rules of Appellate Procedure and this Court’s Order of November 1, 2011, because it contains 13,754 words, excluding the parts of the brief exempted by Rule 32(a)(7)(B)(iii). This brief complies with the typeface requirements of Rule 32(a)(5) and the type-style requirements of Rule 32(a)(6) because it has been prepared in a proportionally spaced font using Microsoft Word 2010 in 14-point Times New Roman type. Dated: March 12, 2012

/s/ Miguel A. Estrada

Miguel A. Estrada

Counsel for Appellants Philip Morris USA Inc. and Altria Group, Inc.

USCA Case #11-5145 Document #1363004 Filed: 03/12/2012 Page 80 of 80

CERTIFICATE OF SERVICE

I hereby certify that on this 12th day of March, 2012, I electronically filed the foregoing Final Version of Appellants’ Opening Brief with the Clerk of the Court for the United States Court of Appeals for the D.C. Circuit by using the appellate CM/ECF system.

I certify that all participants in the case are registered CM/ECF users and that service will be accomplished by the appellate CM/ECF system.

/s/ Miguel A. Estrada

Miguel A. Estrada

Counsel for Appellants Philip Morris USA Inc. and Altria Group, Inc.

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