6175: COMBINED OPENING BRIEF AND OPPOSITION OF DEFENDANTS AND POST-JUDGMENT PARTIES REGARDING REMEDIES ADDRESSING REVISED LANGUAGE AND IMPLEMENTATION OF THE CORRECTIVE STATEMENTS Nov. 11, 2015

November 11, 2015 6:01 pm by Gene Borio

The PDF is Here

EXCERPT:

These preambles are no different, in substance or effect, from the preambles rejected by the D.C. Circuit, which asserted that Defendants had “deliberately deceived” the public and were being “ordered to make” the corrective statements. Such conduct-focused, retrospective language—which compels Defendants to confess publicly that they are liars who deceived the American public and have now been “ordered” by a court to the tell “the truth”—cannot be reconciled with the requirements imposed by RICO, the First Amendment, and the D.C Circuit’s mandates.

In contrast, Defendants . . . propose preambles that would capture viewers’ attention and provide meaningful context without suggesting that Defendants engaged in past wrongdoing. Adopting the Manufacturers’ clear, simple, and evenhanded proposal would comport with the D.C. Circuit’s prior decisions in this case and facilitate the prompt dissemination of the corrective statements by obviating the need for yet-another appeal on this issue. The Court should also reject the Government’s improper unilateral attempt— discussed nowhere in its brief—to revise critical, binding terms of the parties’ negotiated implementation Consent Order that were unaffected by the D.C. Circuit’s opinion, including unwarranted revisions that would eviscerate the Manufacturers’ right to a meaningful appeal.

END EXCERPT

FULL TEXT:

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 1 of 40

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,

Plaintiff,

v.

PHILIP MORRIS USA INC., et al.,

Defendants.

Civil Action No. 99-2496 (GK)

Next Scheduled Court Date: None

__________________________________________

COMBINED OPENING BRIEF AND OPPOSITION OF DEFENDANTS AND POST-JUDGMENT PARTIES REGARDING REMEDIES ADDRESSING REVISED LANGUAGE AND IMPLEMENTATION OF THE CORRECTIVE STATEMENTS

When the D.C. Circuit upheld the general concept of a corrective-statements remedy in this case, it did so on what the court itself described as “exceedingly narrow grounds.” United States v. Philip Morris USA Inc., 801 F.3d 250, 257 (D.C. Cir. 2015) (“Corrective Statements Opinion”). In particular, the D.C. Circuit made clear that, to comport with the jurisdictional requirements of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), the corrective statements must be “forward-looking” communications that “‘reveal the previously hidden truth about [Defendants’] products’” and thereby “‘prevent and restrain them from disseminating false and misleading statements . . . in the future.’” Id. at 256, 257 (quoting United States v. Philip Morris USA Inc., 566 F.3d 1095, 1140 (D.C. Cir. 2009) (per curiam) (“2009 Opinion”)). To satisfy the First Amendment, the corrective statements must be “confine[d] . . . to ‘purely factual and uncontroversial information,’ geared towards thwarting prospective efforts” by Defendants to deceive the American public about their products. 2009

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 2 of 40

Opinion, 566 F.3d at 1144 (quoting Zauderer v. Office of Disciplinary Counsel, 471 U.S. 650, 651 (1985)).

The D.C. Circuit disapproved in part the corrective statements adopted by this Court because the preambles to those statements “reveal[ed] nothing about cigarettes,” but “instead . . . disclose[d] defendants’ prior deceptive conduct.” Corrective Statements Opinion, 801 F.3d at 261 (emphasis omitted). Because RICO “empowers district courts to issue injunctions for one purpose and one purpose only”—“to prevent and restrain future RICO violations”—the D.C. Circuit concluded that the backward-looking preambles adopted by this Court exceeded RICO’s narrow jurisdictional bounds. Id. at 262 (emphasis added). Rather than “prevent[ing] and restrain[ing]” Defendants from violating RICO in the future, the preambles were, at most, “means of curing consumer misconception and preventing consumer deception,” neither of which is a permissible remedial objective under RICO. Id.

Unchastened, the Government has proposed revised preambles that again unambiguously communicate that Defendants engaged in prior wrongdoing and are being compelled by the Court to make the corrective statements as punishment for that past misconduct. Indeed, there is no other reasonable interpretation of the Government’s proposed preambles, which state that a “Federal Court has ordered [Defendants] to make this statement” and then require Defendants to proclaim “Here is the truth” about each of five smoking-related topics. The unmistakable message is that Defendants deceived the public about those topics in the past and are being ordered by a court to atone for their transgressions by disseminating “truth[ful]” statements. These preambles are no different, in substance or effect, from the preambles rejected by the D.C. Circuit, which asserted that Defendants had “deliberately deceived” the public and were being “ordered to make” the corrective statements. Such conduct-focused, retrospective language—

2

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 3 of 40

which compels Defendants to confess publicly that they are liars who deceived the American public and have now been “ordered” by a court to the tell “the truth”—cannot be reconciled with the requirements imposed by RICO, the First Amendment, and the D.C Circuit’s mandates.

In contrast, Defendants Altria Group, Inc., Philip Morris USA Inc., and R.J. Reynolds Tobacco Company (individually and as successor to Lorillard Tobacco Company), as well as Post-Judgment Parties Regarding Remedies ITG Brands, LLC, Commonwealth Brands, Inc., and Commonwealth-Altadis, Inc. (collectively, “Manufacturers”), propose preambles that would capture viewers’ attention and provide meaningful context without suggesting that Defendants engaged in past wrongdoing. Adopting the Manufacturers’ clear, simple, and evenhanded proposal would comport with the D.C. Circuit’s prior decisions in this case and facilitate the prompt dissemination of the corrective statements by obviating the need for yet-another appeal on this issue. The Court should also reject the Government’s improper unilateral attempt— discussed nowhere in its brief—to revise critical, binding terms of the parties’ negotiated implementation Consent Order that were unaffected by the D.C. Circuit’s opinion, including unwarranted revisions that would eviscerate the Manufacturers’ right to a meaningful appeal.

BACKGROUND

The United States brought this suit against Defendants, and certain other tobacco companies and industry groups, under Section 1964(a) of RICO, which grants district courts jurisdiction to issue “appropriate orders” that “prevent and restrain” RICO violations. 18 U.S.C. § 1964(a). Multiple times throughout this case, the D.C. Circuit has emphasized the narrow jurisdictional scope of Section 1964(a).

In 2005, the D.C. Circuit held on interlocutory appeal that the Government cannot obtain disgorgement of past profits under Section 1964(a) because that provision “is limited to forward- looking remedies that are aimed at future violations” of RICO. United States v. Philip Morris

3

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 4 of 40

USA Inc., 396 F.3d 1190, 1198 (D.C. Cir. 2005) (“Disgorgement Opinion”). “Disgorgement,” the court of appeals emphasized, “is a quintessentially backward-looking remedy focused on remedying the effects of past conduct” and therefore exceeds the scope of Section 1964(a). Id.

The D.C. Circuit reiterated those jurisdictional limitations when reviewing this Court’s Final Judgment and Remedial Order. As part of that order, this Court required Defendants to make corrective statements on five topics as to which this Court found they had previously made false and misleading statements. United States v. Philip Morris USA Inc., 449 F. Supp. 2d 1, 938-39 (D.D.C. 2006). The Court left the specific language and implementation of the corrective statements for future proceedings.

On appeal, the D.C. Circuit upheld the general concept of a corrective-statements remedy under RICO as long as the statements were crafted to “[r]equir[e] Defendants to reveal the previously hidden truth about their products,” which “will prevent and restrain them from disseminating false and misleading statements, thereby violating RICO, in the future.” 2009 Opinion, 566 F.3d at 1140. The D.C. Circuit also emphasized that this Court “must ensure the corrective disclosures are carefully phrased so they do not impermissibly chill protected speech,” and that, “[c]onsequently,” the Court “must confine the statements to ‘purely factual and uncontroversial information’ geared towards thwarting 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.” Id. at 1144-45 (quoting Zauderer, 471 U.S. at 651).

On remand, this Court considered competing corrective-statements proposals from the parties. Casting aside Defendants’ RICO and First Amendment objections to statements that compelled them to disclose prior wrongdoing, the Court adopted statements that began with the

4

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 5 of 40

following preamble: “A Federal Court has ruled that Altria, R.J. Reynolds Tobacco, Lorillard, and Philip Morris USA deliberately deceived the American public about [one of five topics], and has ordered those companies to make this statement. Here is the truth: . . . .” Corrective Statements Opinion, 801 F.3d at 254-56. The district court thereafter directed the parties to mediate regarding the implementation of the corrective statements, and after more than a year of negotiations, the parties presented a mutually acceptable proposed Consent Order that embodied a series of compromises by all parties to the proceedings. The district court entered the Consent Order in June 2014. D.E. 6095.

As expressly contemplated by the Consent Order, Defendants appealed, challenging the language of various aspects of the corrective statements, including the preambles, as inconsistent with RICO, the First Amendment, and the D.C. Circuit’s 2009 mandate. While rejecting most of Defendants’ challenges directed to the statements’ bullet-pointed text, the D.C. Circuit agreed with Defendants’ principal argument that the preambles “exceeded [this Court’s] authority under RICO to craft remedies that ‘prevent and restrain’ future violations.” Corrective Statements Opinion, 801 F.3d at 252 (quoting 18 U.S.C. § 1964(a)). The court of appeals emphasized that it had previously “endorsed” the “corrective-disclosure remedy . . . on exceedingly narrow grounds” and had “declined to adopt the government’s argument that the statements were necessary to correct and prevent ongoing consumer misconception about cigarettes.” Id. at 257. The court had “[i]nstead . . . held simply that the corrective-statement remedy was permissible under section 1964 because defendants, if compelled to tell the truth about cigarettes, would, at the same time, be ‘impaired in making false and misleading assurances.’” Id. (quoting 2009 Opinion, 566 F.3d at 1140). The preambles adopted by this Court, however, “reveal[ed] nothing about cigarettes,” but rather, “disclose[d] defendants’ prior deceptive conduct.” Id. at 261. Nor

5

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 6 of 40

could the preambles be justified on the ground that they served the “impermissible” purposes of “curing consumer misconception and preventing consumer deception.” Id. at 262. The preambles therefore exceeded the limited jurisdictional scope of Section 1964(a). Id. Because the D.C. Circuit agreed with Defendants’ RICO argument, it did not reach Defendants’ First Amendment challenge to the preambles. See id. at 256.

At the initial hearing on remand, this Court proposed an expeditious schedule to resolve the language of the revised preambles in light of the D.C. Circuit’s ruling. See June 30, 2015 Hr’g Tr. 6. The Government, however, subsequently petitioned for panel rehearing, thereby delaying the issuance of the D.C. Circuit’s mandate by more than a month. In its petition, the Government asked the D.C. Circuit to approve the following preamble: “A Federal Court has ordered Altria, R.J. Reynolds Tobacco, Lorillard, and Philip Morris USA to make this statement about the [statement topic]. Here is the truth: . . . .” U.S. Pet. for Panel Reh’g 1 (footnote omitted; brackets in original). The Government further requested that the panel “clarify that defendants’ reading” of its opinion—in particular, their view that three elements of the Government’s proposed preambles were “impermissibly backward-looking”—was “mistaken.” Id. at 2. The D.C. Circuit denied the petition.

This Court then referred the parties to a six-week period of mediation regarding the language and implementation of revised preambles. D.E. 6164. Although the Manufacturers remain willing to disseminate forward-looking corrective statements that provide factual and noncontroversial information about the health effects of smoking, that mediation concluded unsuccessfully.

6

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 7 of 40

THE MANUFACTURERS’ PROPOSAL

The Manufacturers propose the following corrective statements, which are consistent with the D.C. Circuit’s decisions regarding the restrictions that RICO and the First Amendment impose on the statements’ text: Statement A

A federal court has determined that you should know the following about the health effects of smoking:

• Smoking kills, on average, 1200 Americans. Every day.

• More people die every year from smoking than from murder, AIDS, suicide, drugs, car crashes, and alcohol, combined.

• Smoking causes heart disease, emphysema, acute myeloid leukemia, and cancer of the mouth, esophagus, larynx, lung, stomach, kidney, bladder, and pancreas.

• Smoking also causes reduced fertility, low birth weight in newborns, and cancer of the cervix.

Under court order, paid for by Philip Morris USA, R.J. Reynolds Tobacco, Lorillard, and Altria.1

Statement B

A federal court has determined that you should know the following about the addictiveness of smoking and nicotine:

• Smoking is highly addictive. Nicotine is the addictive drug in tobacco.

• Cigarette companies intentionally designed cigarettes with enough nicotine to create and sustain addiction.

• It’s not easy to quit.

• When you smoke, the nicotine actually changes the brain – that’s why quitting is so hard.

Under court order, paid for by Philip Morris USA, R.J. Reynolds Tobacco, Lorillard, and Altria.

——————-

1 The language “Under court order, paid for by Philip Morris USA, R.J. Reynolds Tobacco, Lorillard, and Altria” at the bottom of the statements would not be included on websites and onserts and, if applicable, social media, because it will be apparent that the statement is being funded by the company that sponsors the website or manufactures the relevant brand. Omitting this language from websites, onserts, and social media would also avoid needless complications because it would be necessary to formulate modified language for ITG Brands making clear its status as a purchaser of brands rather than a Defendant.

7

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 8 of 40

Statement C

A federal court has determined that you should know the following about low tar and light cigarettes:

• Many smokers switch to low tar and light cigarettes rather than quitting because they think low tar and light cigarettes are less harmful. They are not.

• “Low tar” and “light” cigarette smokers inhale essentially the same amount of tar and nicotine as they would from regular cigarettes.

• All cigarettes cause cancer, lung disease, heart attacks, and premature death – lights, low tar, ultra lights, and naturals. There is no safe cigarette.

Under court order, paid for by Philip Morris USA, R.J. Reynolds Tobacco, Lorillard, and Altria.

Statement D

A federal court has determined that you should know the following about the way your cigarettes are made:

• Tobacco companies intentionally designed cigarettes to make them more addictive.

• Cigarette companies control the impact and delivery of nicotine in many ways, including designing filters and selecting cigarette paper to maximize the ingestion of nicotine, adding ammonia to make the cigarette taste less harsh, and controlling the physical and chemical make-up of the tobacco blend.

• When you smoke, the nicotine actually changes the brain – that’s why quitting is so hard.

Under court order, paid for by Philip Morris USA, R.J. Reynolds Tobacco, Lorillard, and Altria.

Statement E

A federal court has determined that you should know the following about the health effects of secondhand smoke:

• Secondhand smoke kills over 38,000 Americans each year.

• Secondhand smoke causes lung cancer and coronary heart disease in adults who do not smoke.

• Children exposed to secondhand smoke are at an increased risk for sudden infant death syndrome (SIDS), acute respiratory infections, ear problems, severe asthma, and reduced lung function.

• There is no safe level of exposure to secondhand smoke.

Under court order, paid for by Philip Morris USA, R.J. Reynolds Tobacco, Lorillard, and Altria.

8

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 9 of 40

The Manufacturers have prepared a set of exemplars with this new language, which differ as little as possible from the agreed-upon format required by the parties’ implementation Consent Order. They will provide those exemplars to the Court on request.

ARGUMENT

I. THE MANUFACTURERS’PROPOSAL IS CONSISTENT WITH THE D.C. CIRCUIT’S MANDATES.

Each revision that the Manufacturers have proposed to the corrective statements previously adopted by this Court is necessary to comply with the D.C. Circuit’s mandates and the requirements of RICO and the First Amendment.

Introductory Language Of Preambles. The Manufacturers propose replacing the preambles invalidated by the D.C. Circuit with the statement: “A federal court has determined that you should know the following about [one of five topics] . . . .” The Manufacturers’ proposed preambles unambiguously inform viewers that a federal court has made the decision that the statements should be disseminated. Because the statements have the imprimatur of a federal court, viewers will undoubtedly perceive the statements to be true and accurate. The references to a federal court and to information that the court believes viewers “should know” will also capture viewers’ attention. Indeed, there is reason to believe that the Manufacturers’ proposal will be more effective at capturing attention than the Government’s proposal because the Manufacturers’ preambles are more concise and focus at the outset on the viewer—and what the viewer “should know”—rather than on a listing of four companies’ names that many viewers are unlikely to recognize. See Gov’t Br. 10 (proposing preambles that begin, “A Federal Court has ordered Altria, R.J. Reynolds Tobacco, Lorillard, and Philip Morris USA to make this statement . . . .”).

9

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 10 of 40

Nor does the Manufacturers’ proposal leave any doubt about the identity of the tobacco companies disseminating the statements. Under the Manufacturers’ proposal, each television and newspaper statement will include a clear attribution, “Under court order, paid for by Philip Morris USA, R.J. Reynolds Tobacco, Lorillard, and Altria,” which is the same language that the parties agreed in the implementation Consent Order to include in the television statements. Order #51-Remand, § III(6). (The Manufacturers are not proposing similar language for websites and onserts, and, if applicable, social media, because the identity of the tobacco company funding the statements will be clear in those formats.) As the D.C. Circuit contemplated, Defendants will therefore be “impaired in making false and misleading assurances” about the five smoking-and-health topics addressed in the corrective statements because, “at the same time,” they will be “communicat[ing] the opposite, truthful message about these matters to consumers” through the corrective statements. 2009 Opinion, 566 F.3d at 1140. The Manufacturers’ proposal thus would further this Court’s objective of “prevent[ing] and restrain[ing] future RICO violations.” Id.

Statement C. The Manufacturers propose revising this Court’s formulation of the topic addressed in Statement C—“falsely selling and advertising low tar and light cigarettes as less harmful than regular cigarettes”—to read “low tar and light cigarettes.” As even the Government recognizes, “Statement C’s original reference to ‘falsely’ selling such cigarettes as less harmful might be considered to address ‘conduct’ and thus . . . not be authorized by RICO.” Gov’t Br. 14. The reference to “selling and advertising low tar and light cigarettes as less harmful than regular cigarettes” is equally problematic because, in contravention of the D.C. Circuit’s Corrective Statements Opinion, the language “disclose[s] defendants’ prior deceptive conduct” by unambiguously informing viewers that Defendants previously sold and advertised

10

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 11 of 40

low tar and light cigarettes as less harmful than regular cigarettes—a claim that the bullet- pointed text then makes clear is not true. 801 F.3d at 261. That backward-looking, conduct- focused language should therefore be replaced with a plain and simple reference to the products at issue—“low tar and light cigarettes”—that does not impermissibly suggest prior wrongdoing by Defendants.

Statement D. In addition to the across-the-board changes that the Manufacturers are proposing to all five statements, several other aspects of this Court’s prior Statement D also require modification to bring that statement into line with the D.C. Circuit’s mandates. The subject-matter description formulated by this Court—“designing cigarettes to enhance the delivery of nicotine”—improperly focuses on Defendants’ conduct, rather than their products. Corrective Statements Opinion, 801 F.3d at 261-63. The Manufacturers therefore propose replacing that language with a formulation that is directed more closely to Defendants’ products: “the way your cigarettes are made.” In addition, the first bullet point in the Manufacturers’ proposed Statement D substitutes “[t]obacco companies” for “Defendant tobacco companies.” Using the term “Defendant” would unambiguously communicate to viewers that the corrective statements are being ordered as a sanction for past wrongdoing by tobacco companies who are defendants in judicial proceedings and would therefore improperly “disclose defendants’ prior deceptive conduct.” Id. at 261 (emphasis omitted). Moreover, “Defendant” would be inaccurate for ITG Brands, which was not a Defendant, and would require additional clarifying language on statements disseminated by ITG Brands.2

——————-

2 While Defendants previously agreed as part of the Consent Order on implementation to substitute the names of each company for the phrase “Defendant tobacco companies,” that aspect of the Consent Order has been superseded by the D.C. Circuit’s Corrective Statements Opinion. As adopted by this Court, the corrective statements included the term “Defendant tobacco

11

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 12 of 40

* * *

As contemplated by the D.C. Circuit, the Manufacturers’ proposed corrective statements will “prevent and restrain [Defendants] from disseminating false and misleading statements, thereby violating RICO, in the future” by “[r]equiring Defendants to reveal the previously hidden truth about their products.” Corrective Statements Opinion, 801 F.3d at 257 (internal quotation marks omitted; second alteration in original). The Manufacturers’ proposed preambles would also effectively draw viewers’ attention to the important public-health information included in the statements and, if adopted by this Court, would facilitate the prompt dissemination of those statements by eliminating the need for further appeals. Any material deviations from the Manufacturers’ proposal, in contrast, would raise serious issues under the D.C. Circuit’s mandates, RICO, and the First Amendment.

II. THE GOVERNMENT’S PROPOSAL VIOLATES THE D.C. CIRCUIT’S MANDATES,SECTION 1964(A), AND THE FIRST AMENDMENT.

The D.C. Circuit’s prior opinions in this case set forth clear ground rules for the corrective statements. To comply with RICO and the First Amendment, the corrective statements must (1) be “forward-looking” communications that “reveal the previously hidden truth about [Defendants’] products,” rather than “defendants’ prior deceptive conduct,” Corrective Statements Opinion, 801 F.3d at 256, 261 (internal quotation marks omitted), and

——————-

(2) be “confine[d] . . . to ‘purely factual and uncontroversial information,’ geared towards companies” in the preamble to each of the five statements as well as in the first bullet point in Statement D. Based on that court-ordered text, Defendants agreed to replace all six references to “Defendant tobacco companies” with their company names. That agreement does not have continuing force because the D.C. Circuit vacated the preambles, thereby materially altering the factual predicate for Defendants’ prior agreement to the language modification.

12

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 13 of 40

thwarting prospective efforts” by Defendants to deceive the American public about cigarettes. 2009 Opinion, 566 F.3d at 1144 (quoting Zauderer, 471 U.S. at 651).

Against that settled backdrop, the Government proposes that the corrective statements include a preamble that states, “A Federal Court has ordered Altria, R.J. Reynolds Tobacco, Lorillard, and Philip Morris USA to make this statement about [statement topic]. Here is the truth: . . . .” The topics proposed by the Government are (A) “the adverse health effects of smoking”; (B) “the addictiveness of smoking and nicotine”; (C) “selling and advertising low tar and light cigarettes as less harmful than regular cigarettes”; (D) “designing cigarettes to enhance the delivery of nicotine”; and (E) “the health effects of secondhand smoke.” Gov’t Br. 10-12.

The Government’s proposed preambles convey the clear and unequivocal message that Defendants previously deceived the American public on each of the referenced topics and are being ordered by a court to make the corrective statements as a sanction for their prior wrongdoing. That message follows inexorably from three elements of the preambles, individually and cumulatively: (1) the “Here is the truth” tagline; (2) the language stating that a “Federal Court has ordered” Defendants to make the statements and then listing each Defendant by name; and (3) the conduct-focused formulations of topics (C) and (D). The Government itself appears to recognize and embrace this backward-looking message, arguing that “inferences about a RICO defendant’s ‘past conduct’” are consistent with the D.C. Circuit’s directives regarding the language of the corrective statements. Gov’t Br. 20. Moreover, even though the Government has proposed several improper unilateral modifications to the parties’ implementation Consent Order, see infra at 33-39, it has continued to include provisions in its proposed order (as agreed upon with ITG Brands and ordered in Order #56-Remand) that would permit ITG Brands to state on package onserts and websites that R.J. Reynolds Tobacco

13

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 14 of 40

Company or Lorillard Tobacco Company, as applicable, was the prior manufacturer of the relevant cigarette brand. See, e.g., Gov’t Br., Ex. 3 (redline of proposed Order), at 29 (“A Federal Court has ordered Altria, Philip Morris USA, Lorillard, and R.J. Reynolds Tobacco (the previous maker of [insert brand]) to make this statement about the health effects of smoking.”) (brackets in original). That language permitting ITG Brands—which was not a defendant and is not alleged to have engaged in the past conduct at issue in this case—to differentiate itself from the other parties disseminating the corrective statements underscores the extent to which the Government’s proposed statements communicate that the companies identified by name in the statements engaged in past wrongdoing.

The Court should therefore reject the Government’s proposed preambles in their entirety because, like the preambles disapproved by the D.C. Circuit, they are impermissibly backward- looking and would require Defendants to confess prior misconduct to the American public in violation of RICO and the First Amendment.

1. The “Here Is The Truth” Tagline Is Improper.

Viewers will understand the “Here is the truth” tagline as an unambiguous message that Defendants previously withheld the “truth” about the health effects of smoking from the American public. The clause plainly communicates that Defendants—who are being “ordered” by a “Federal Court . . . to make this statement”—denied the “truth” of the information conveyed in each of the bullet-pointed clauses because Defendants would not have been “ordered” by a court to tell the “truth” if they had previously been forthright on those topics. Indeed, in substance and effect, the “Here is the truth” tagline is indistinguishable from the “Contrary to prior advertising” language rejected by the D.C. Circuit in Warner-Lambert Co. v. FTC, 562 F.2d 749, 763 (D.C. Cir. 1977). Just as the “[c]ontrary to prior advertising” clause would have

14

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 15 of 40

told viewers that the manufacturer of Listerine had previously made representations inconsistent with the information in the corrective disclosure, the “Here is the truth” tagline communicates to viewers that the “truth” about cigarettes was previously withheld from them by Defendants.

This language requiring Defendants to proclaim that they engaged in “prior deceptive conduct,” Corrective Statements Opinion, 801 F.3d at 261 (emphasis altered), is incompatible with the D.C. Circuit’s opinions in this case, which make clear that the jurisdictional scope of Section 1964(a) “is limited to forward-looking remedies that are aimed at future violations” of the statute, Disgorgement Opinion, 396 F.3d at 1198 (emphasis added); see also 2009 Opinion, 566 F.3d at 1140. The language of the corrective statements therefore must “reveal the previously hidden truth about [Defendants’] products,” which “will prevent and restrain them from disseminating false and misleading statements, thereby violating RICO, in the future.” 2009 Opinion, 566 F.3d at 1140; see also Corrective Statements Opinion, 801 F.3d at 261. The “Here is the truth” tagline, however, focuses on Defendants’ past conduct, not on restraining future RICO violations through the dissemination of information about Defendants’ products. This clause is thus no less problematic than the “deliberately deceived” language in this Court’s prior preambles, which the government itself acknowledges is inconsistent with RICO and the D.C. Circuit’s most recent mandate. Gov’t Br. 13.

The “Here is the truth” language is also a far cry from the “‘purely factual and uncontroversial statements’” required by the D.C. Circuit’s 2009 mandate and the First Amendment. 2009 Opinion, 566 F.3d at 1144. Ordering Defendants to humiliate themselves publicly by declaring that they are “liars” who deceived the American people and now have been ordered by a Court to reveal “the truth” does not fall within Zauderer’s narrow exception for compelled commercial disclosures that provide accurate, evenhanded information about a “good

15

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 16 of 40

or service offered by the regulated party.” Am. Meat Inst. v. U.S. Dep’t of Agric., 760 F.3d 18, 26 (D.C. Cir. 2014) (en banc); see also Nat’l Ass’n of Mfrs. v. SEC, 800 F.3d 518, 530 (D.C. Cir.
2015) (“requiring a company to publicly condemn itself is undoubtedly a more ‘effective’ way for the government to stigmatize and shape behavior than for the government to have to convey its views itself, but that makes the requirement more constitutionally offensive, not less so”) (internal quotation marks omitted); R.J. Reynolds Tobacco Co. v. FDA, 696 F.3d 1205, 1217 (D.C. Cir. 2012) (holding that graphic warnings on cigarette labels did not comport with Zauderer because the images were “unabashed attempts to evoke emotion (and perhaps embarrassment)”), overruled on other grounds by Am. Meat Inst., 760 F.3d 18.3 Because the Government’s proposed preambles do not satisfy Zauderer, they must, at a minimum, meet Central Hudson’s stringent standard for restrictions on commercial speech, which requires the Government to establish, among other things, that the speech restraints are “narrowly drawn.” Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of N.Y., 447 U.S. 557, 565 (1980) (internal quotation marks omitted). The Government cannot conceivably meet that burden here because the Manufacturers’ alternative formulation of the preambles would enable the Government to accomplish its objective of preventing and restraining future RICO violations without requiring Defendants to brand themselves publicly as liars who are now required to reveal “the truth.” That less burdensome alternative is fatal to the Government’s

——————-

3 In addition, the Government’s proposed preambles are not “purely factual” because they create the misimpression that Defendants are continuing to dispute the health effects and addictiveness of smoking to this day. Contrary to the implication of the Government’s proposed preambles, Defendants have acknowledged that cigarette smoking causes disease and is addictive for more than a decade. See Philip Morris USA Inc., Smoking and Health Issues, www.altria.com/our-compan… default.aspx (last visited Nov. 10, 2015); R.J. Reynolds Tobacco Company, Guiding Principles and Beliefs, www.rjrt.com/prinbeliefs…. (last visited Nov. 10, 2015).

16

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 17 of 40

“Here is the truth” proposal. See Rubin v. Coors Brewing Co., 514 U.S. 476, 491 (1995) (“[T]he availability of these options . . . which could advance the Government’s asserted interest in a manner less intrusive to [the plaintiff’s] First Amendment rights[ ] indicates that [the Government’s preferred approach] is more extensive than necessary” and therefore unconstitutional).4

The Government contends that the “Here is the truth” tagline somehow emerged unscathed from the D.C. Circuit’s Corrective Statements Opinion because, in the Government’s view, there is “no suggestion that the Court of Appeals meant to subsume the sentence ‘Here is the truth’ in its criticism of ‘the preambles.’” Gov’t Br. 22. To be sure, the D.C. Circuit did not single out the “Here is the truth” language when invalidating the preambles adopted by this Court. But the implementation Consent Order defined the preambles to include the “Here is the truth” tagline. See D.E. 6095, at 3 (“‘Preamble Text’ refers to the text of each Corrective Statement that begins with the words ‘A Federal Court’ and ends with the words ‘Here is the truth.’”). Defendants squarely challenged the entirety of those preambles—including the “Here is the truth” language—on appeal. See, e.g., Defs.’ C.A. Opening Br. 17, 30, 40, 55; C.A. Reply

——————-

4 Defendants maintain that strict scrutiny should apply to compelled commercial speech that does not meet Zauderer’s requirements, but recognize that the D.C. Circuit has rejected that position and held that Central Hudson should be applied. See R.J. Reynolds Tobacco Co., 696 F.3d at 1217. Even under existing D.C. Circuit precedent, however, the Government’s proposal does not qualify for review under Central Hudson because it predominantly targets Defendants’ conduct, rather than providing information about the “efficacy, safety, and quality of [their] product.” 2009 Opinion, 566 F.3d at 1143 (emphasis added); see also Am. Meat Inst., 760 F.3d at 26; id. at 33 n.1 (Kavanaugh, J., concurring) (“To state what is probably obvious, the compelled disclosure must be a disclosure about the product or service in question to be justified under Central Hudson and Zauderer.”). The Court should therefore subject the Government’s proposed corrective statements to strict scrutiny because they infringe upon Defendants’ basic right to make “the choice of what not to say.” Pac. Gas & Elec. Co. v. Pub. Utils. Comm’n, 475 U.S. 1, 16 (1986) (plurality opinion). The Government’s proposed preambles cannot possibly satisfy that exacting standard.

17

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 18 of 40

Br. 16. Moreover, the D.C. Circuit’s criticism of the preambles ordered by this Court applies with full force to the “Here is the truth” tagline, which, like the other elements of the Court’s prefatory language, “reveal[s] nothing about cigarettes” but “instead . . . disclose[s] defendants’ prior deceptive conduct” by signaling to viewers that Defendants previously disputed the accuracy of the information in the bullet-pointed clauses and have now been ordered to correct their past deceptions. Corrective Statements Opinion, 801 F.3d at 261 (emphasis omitted). The Government’s schizophrenic reading of the D.C. Circuit’s opinion—in which the court condemned backward-looking language focused on Defendants’ past wrongdoing but left the “Here is the truth” tagline intact—is untenable.

The Government also asserts that the “Here is the truth” language is appropriate because it “makes the facts more memorable and trustworthy” and “emphasiz[es] the accuracy of the bullet points that follow.” Gov’t Br. 22, 23. But there is no record evidence substantiating those assertions. Moreover, the Government’s proposed preambles already begin with the statement, “A Federal Court has ordered [Defendants] to make this statement . . .”, and the Manufacturers’ proposed preambles likewise make clear that “[a] federal court has determined that you should know the following . . . .” Because, under either proposal, the statements will have the imprimatur of a federal court—which presumably would not order the dissemination of statements that it deemed to be inaccurate—the “Here is the truth” tagline is unnecessary to validate the statements’ accuracy. Similarly, the fact that the corrective statements should be designed “‘to reveal the previously hidden truth about’” Defendants’ products, id. at 22 (quoting Corrective Statements Opinion, 801 F.3d at 261) (emphasis altered); see also Intervenors’ Br. 10, does not authorize this Court to accomplish that objective by including the word “truth” in the corrective statements themselves any more than it authorizes use of the words “previously

18

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 19 of 40

hidden.” All of that language is impermissibly backward-looking and focuses on Defendants’ “prior deceptive conduct” rather than preventing and restraining future RICO violations. Corrective Statements Opinion, 801 F.3d at 261 (emphasis altered).

Nor is it relevant that “the placement of ‘Here is the truth’ as a subhead[ ] is consistent with recommendations from a classic copywriting book.” Gov’t Br. 23. To the extent that copywriting principles are relevant here, the concise, straightforward preambles proposed by the Manufacturers may well be more effective at capturing attention than the Government’s longer, more complex proposal, which confronts viewers at the outset with the names of four corporations with which many viewers will likely be unfamiliar. See supra at 9. In any event, the propriety of the “Here is the truth” language is governed by RICO and the First Amendment—as construed and applied in the D.C. Circuit’s prior opinions in this case—not by principles of effective copywriting. Even if the use of a subheading could make the corrective statements more memorable, the D.C. Circuit’s mandates, RICO, and the First Amendment all prohibit the use of a subheading that captures viewers’ attention by emphasizing Defendants’ prior wrongdoing. Just as the preambles rejected by the D.C. Circuit might well have been “the very best . . . means of curing consumer misconception and preventing consumer deception going forward,” Corrective Statements Opinion, 801 F.3d at 262, the retrospective, conduct- focused “Here is the Truth” tagline might be the most effective means of capturing viewers’ attention—but there is no exception to RICO or the First Amendment for effective copywriting tools.5

——————-

5 The Government contends that Defendants waived any objection “to the use of a subhead or tagline per se” by failing to challenge that copywriting feature of this Court’s corrective statements on appeal. Gov’t Br. 23. But, as the Government concedes, Defendants “argued against the ‘Here is the truth’ clause” on appeal to the D.C. Circuit. Id. at 5 (citing Defs.’ C.A.

19

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 20 of 40

2. The Language That “A Federal Court Has Ordered” Each Defendant To Make The Corrective Statements Is Improper.

The Government compounds the backward-looking, confessional nature of its preambles by proposing that the corrective statements declare, “A Federal Court has ordered Altria, R.J. Reynolds Tobacco, Lorillard, and Philip Morris USA to make this statement.” This proposed language is impossible to reconcile with the D.C. Circuit’s prior opinions in this case or with the requirements of RICO and the First Amendment embodied in those opinions.

In its Corrective Statements Opinion, the D.C. Circuit specifically quoted the nearly identical language in the corrective statements adopted by this Court, recounting that “[e]ach preamble announces that ‘[a] Federal Court has’ . . . ‘ordered [those companies] to make this statement.’” 801 F.3d at 261 (second alteration in original). The court then concluded in the very next paragraph that the preambles exceeded the jurisdictional scope of Section 1964(a) because they “reveal[ed] nothing about cigarettes” but “instead . . . disclose[d] defendants’ prior deceptive conduct.” Id. (emphasis omitted). The D.C. Circuit’s rejection of this Court’s preambles therefore plainly encompassed the language stating that a federal court has “ordered [those companies]”—listed by name earlier in the same prefatory clause—“to make this statement.” In light of that holding, the Government’s request that the Court re-impose materially identical language is a nonstarter.

——————-

Opening Br. 17, 30, 40, 55). Defendants did not raise an across-the-board challenge to all “subhead[s] or tagline[s]” because this Court has never ruled that a subheading or tagline is a necessary component of the corrective-statements remedy, and Defendants therefore had no occasion to challenge any subheading or tagline other than the “Here is the Truth” language ordered by this Court. In any event, the Manufacturers’ objection here is not to the use of a subheading itself, but rather to a subheading that draws attention to Defendants’ past wrongdoing.

20

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 21 of 40

The invalidity of this aspect of the Government’s proposed preambles is also clear from the D.C. Circuit’s reasoning. By emphasizing that each of the Defendants—identified by name—has been “ordered” by a federal court to make the statements, the Government’s preambles unequivocally communicate that Defendants have engaged in prior wrongdoing and are being compelled by a court to make these statements as punishment for their past misconduct. After all, courts do not typically order manufacturers to disseminate information about their products unless the companies have been found to have deceived the public in the past. This component of the preambles is therefore indistinguishable from the “deliberately deceived” language that the D.C. Circuit likewise condemned. Corrective Statements Opinion, 801 F.3d at 261.

For similar reasons, disclosing that a “Federal Court has ordered” each Defendant to make the corrective statements also amplifies their First Amendment shortcomings by making clear that Defendants are being required by a court to confess past wrongdoing. Court-ordered public shaming of parties required to admit, in their own words, to prior transgressions is not compatible with Zauderer or any other standard of First Amendment scrutiny. See Warner- Lambert Co., 562 F.2d at 763 (invalidating a confessional preamble that would have “humiliat[ed]” the manufacturer by requiring it to admit inaccuracies in prior advertising).

To be clear, the Manufacturers do not object to including language in the corrective statements that discloses that Defendants are paying for the statements pursuant to court order. The Manufacturers have proposed that, in the television and newspaper formats (where the identity of the companies funding the statements would otherwise be unclear), the corrective statements include the language, “Under court order, paid for by Philip Morris USA, R.J. Reynolds Tobacco, Lorillard, and Altria,” which is the same language the parties previously

21

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 22 of 40

agreed to include in each television statement. See Order #51-Remand, § III(6). Viewers will therefore have no doubt that Defendants are funding the corrective statements, and, in accordance with the objectives of Section 1964(a), “Defendants will be impaired in making false and misleading assurances about” the topics addressed in the statements because they will “at the same time [be] communicat[ing] the opposite, truthful message.” 2009 Opinion, 566 F.3d at
1140. There is no RICO-based reason, however, that Defendants should be required to state that they have been “ordered” by a federal court to disseminate the corrective statements. The statements would be equally effective at preventing and restraining future RICO violations if, as the Manufacturers suggest, the statements disclosed that they are being paid for “[u]nder court order” (or even if the statements included no references to a court order at all). It is the fact that Defendants are being required to “reveal the previously hidden truth about their products” that “will prevent and restrain them from disseminating false and misleading statements, thereby violating RICO, in the future.” Id. Public knowledge that Defendants are being compelled to disseminate the statements by a federal court does not advance RICO’s prevent-and-restrain objective.

The Government mounts almost no substantive defense of its “A Federal Court has ordered” formulation, arguing only that this language “distinguishes [the corrective statements] from routine public-health education and counter-marketing messages—which this Court and the Court of Appeals have both held cannot be imposed as RICO remedies.” Gov’t Br. 20; see also Intervenors’ Br. 9 n.6. But the Manufacturers’ proposed preambles—which expressly reference the involvement of a “federal court” in the dissemination of the corrective statements—likewise make clear to viewers that the corrective statements are not simply a standard public-health message, which is reinforced by the “[u]nder court order” language at the bottom of the

22

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 23 of 40

Manufacturers’ proposed statements. There is thus no discernable RICO-based benefit to selecting the Government’s proposed formulation over the Manufacturers’—and, even if there were, that benefit would be an inadequate justification for selecting a preamble that “disclose[s] defendants’ prior deceptive conduct” to the public. Corrective Statements Opinion, 801 F.3d at 261 (emphasis omitted).

In fact, the Government even recognizes that its “A Federal Court has ordered” proposal may “allow . . . inferences about [Defendants’] ‘past conduct,’” but attempts to justify that effect by contending that the D.C. Circuit’s 2009 Opinion approved the concept of corrective statements “that disclose past misconduct on Defendants’ part—such as their manipulating cigarette design and composition.” Gov’t Br. 20-21. But the D.C. Circuit held in its most recent opinion that Defendants “raised no specific objection to the” nicotine-manipulation topic when they appealed this Court’s Final Judgment and Remedial Order, and instead launched an acrossthe- board challenge to the corrective-statements remedy as a whole. Corrective Statements Opinion, 801 F.3d at 258. The D.C. Circuit therefore had no occasion in its 2009 Opinion to address whether the nicotine-manipulation topic was impermissibly backward-looking, and that opinion thus does not, as the Government suggests, reflect the conclusion that “disclos[ing] past misconduct on Defendants’ part . . . will prevent and restrain future violations.” Gov’t Br. 21. Nor did the D.C. Circuit address the propriety of references to nicotine manipulation in its Corrective Statements Opinion, where the court held that Defendants had waived the issue by failing to challenge the nicotine-manipulation topic during the prior appeal. 801 F.3d at 258. When the D.C. Circuit turned to considering the preambles to this Court’s corrective statements, however, it held unequivocally that the preambles could not “be justified on the basis of [its] 2009 opinion” because “they disclose[d] defendants’ prior deceptive conduct,” id. at 261

23

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 24 of 40

(emphasis omitted)—a holding that conclusively undermines the Government’s attempt to reconcile its conduct-focused, backward-looking language with the D.C. Circuit’s decisions.

The Government is equally unsuccessful in its attempt to erect procedural barriers that would insulate its “A Federal Court has ordered” language from judicial scrutiny. The fact that several Defendants proposed so-called “mandatory attribution language” in post-trial briefing in 2006 does not estop them from challenging this aspect of the Government’s preambles because the language proposed by those Defendants—which disclosed that the statements were being made “‘pursuant to a Court order’” or “‘Pursuant to Order #1015, § II.B, ¶ 5’”—is substantively distinct from the Government’s formulation. Gov’t Br. 17. Consistent with the Manufacturers’ current proposal—which makes clear that the statements are being paid for by Defendants “[u]nder court order”—the 2006 proposals would have enabled Defendants “to disassociate themselves from the compelled speech,” D.E. 5787, at 6, by disclosing the Court’s involvement in the dissemination of the corrective statements. Defendants’ 2006 proposals, however, would have disclosed the Court’s participation without stating, as the Government has proposed, that Defendants were being “ordered” to make those statements, which communicates the unmistakable and impermissible message that Defendants are being required to make the statements as punishment for prior wrongdoing.6

——————-

6 Nor did PM USA and Altria somehow waive their objection to “mandatory attribution language” “by remaining silent when the Court . . . specifically ordered the parties to submit their views on ‘[w]hether the corrective statements should indicate that they are being issued pursuant to Court Order.’” Gov’t Br. 17-18 (quoting D.E. 5784, at 2) (emphasis omitted; brackets in original). PM USA and Altria had already made clear their position by submitting proposed corrective statements that did not make any reference to this Court, while also preserving the position that, “if the Court requires PM USA to make a statement with which it disagrees, it should allow it to disassociate itself from the assertion by, for example, attributing the statement to the Court.” D.E. 5776, at 7; see also D.E. 5777, at 1 (same for Altria). In response to this Court’s inquiry about whether the statements should include “pursuant to Court

24

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 25 of 40

For the same reasons, Defendants did not challenge the “mandatory attribution language” in the Government’s 2011 proposed corrective statements on topics B-D because that language stated, “Paid for by [Cigarette Manufacturer Name] under order of a Federal District court.” Gov’t Br. 18, 19 (brackets in original). That proposal was materially indistinguishable from the language that the parties later agreed to include in each television statement, see Order #51Remand, § III(6), and that the Manufacturers propose in this brief to use for all television and newspaper publications of the corrective statements, but is far different from the backward- looking alternative currently being pressed by the Government. In fact, Defendants did object to the preamble to the Government’s proposed Statement A, which read, “A Federal court is requiring tobacco companies to tell the truth about cigarette smoking.” D.E. 5875, Appendix (highlighting that phrase). That preamble is by far the closest analogue to the Government’s current proposal.

Finally, contrary to the Government’s contention, Defendants actively “challenge[d] the mandatory attribution language on appeal.” Gov’t Br. 19. Throughout their briefs to the D.C. Circuit, Defendants took issue with what they characterized as the “confessional preambles” adopted by this Court. See Defs.’ C.A. Opening Br. 45 (“Indeed, the Government’s own expert report submitted in support of its proposed corrective statements indicated that prefatory language attributing the statements to the Surgeon General and the National Cancer Institute attracted almost as much viewer attention, and was seen as being nearly as credible, as

——————-

Order” language, PM USA and Altria referred the Court to that prior submission. D.E. 5787, at 6 (citing D.E. 5776, at 3-7). In any event, this Court requested the parties’ views on whether the statements should disclose that they were “issued pursuant to Court Order,” not whether they would state that a “Federal Court has ordered” each Defendant to make the statements. Thus, PM USA and Altria could not possibly have waived their right to challenge the Government’s current “A Federal Court has ordered” proposal, which this Court did not contemplate in 2006.

25

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 26 of 40

confessional prefatory language.”); C.A. Reply Br. 6 (“The preambles to each of the district court’s compelled statements require Defendants to confess that they ‘deliberately deceived the American public’ and are now being ordered to tell ‘the truth.’”) (emphasis added); see also, e.g., Defs.’ C.A. Opening Br. 17, 30, 33, 44, 45, 50, 55; C.A. Reply Br. 1, 5, 9, 10, 11, 13, 21,
26. Those arguments challenged the preambles in their entirety, which is clear not only from the express terms of Defendants’ submissions but also from the definition of “preambles” in the implementation Consent Order. See D.E. 6095, at 3 (“‘Preamble Text’ refers to the text of each Corrective Statement that begins with the words ‘A Federal Court’ and ends with the words ‘Here is the truth.’”).

3. The Backward-Looking Formulations Of Topics (C) And (D) Are Improper.

The message that Defendants have engaged in prior misconduct—generated by both the “Here is the Truth” tagline and “A Federal Court has ordered” language—is underscored by the topics that the Government proposes for two of the corrective statements: Statement C, which the Government describes as a “statement about selling and advertising low tar and light cigarettes as less harmful than regular cigarettes,” and Statement D, which the Government describes as a “statement about designing cigarettes to enhance the delivery of nicotine.” Gov’t Br. 11, 12. These aspects of the Government’s proposed statements track the language of the preambles that were adopted by this Court and subsequently invalidated by the D.C. Circuit— except that the Government has deleted the word “falsely” from the topic for Statement C because the D.C. Circuit’s “most recent decision suggests that Statement C’s original reference to ‘falsely’ selling [low tar and light cigarettes] as less harmful might be considered to address ‘conduct’ and thus . . . not be authorized by RICO.” Id. at 14.

As explained above, however, the Government’s begrudging concession that a statement accusing Defendants of falsely marketing cigarettes “might” exceed the bounds of RICO does

26

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 27 of 40

not go nearly far enough to remove the improper focus on “defendants’ prior deceptive conduct” from the preambles to Statements C and D. Corrective Statements Opinion, 801 F.3d at 261; see also supra at 10-11. The references to “selling and advertising low tar and light cigarettes as less harmful” and “designing cigarettes to enhance the delivery of nicotine” still convey the unavoidable message that Defendants engaged in this misconduct in the past and are now being “ordered” by a federal court to disclose the “truth” about their prior wrongdoing. To obviate that backward-looking focus, the Court should adopt the Manufacturers’ proposed preambles, which describe the subject of Statement C as “low tar and light cigarettes” and the subject of Statement D as “the way your cigarettes are made.” As contemplated by the D.C. Circuit’s decisions, those formulations “‘requir[e] Defendants to reveal the previously hidden truth about their products,’” rather than to “disclose [their] prior deceptive conduct.” Corrective Statements Opinion, 801 F.3d at 261 (alteration and emphases omitted).

None of the Government’s arguments provides an adequate justification for reimposing language foreclosed by the D.C. Circuit’s mandate. First, Defendants’ decision not to challenge the “headers in the ‘full text’ website displays” has no bearing on the Manufacturers’ right to challenge the text of the corrective statements’ preambles. Gov’t Br. 24. Defendants challenged the entirety of the preambles on appeal as impermissibly focused on their prior alleged misconduct—including this Court’s formulation of the topics for Statements C and D in the preambles to those statements, see supra at 25-26—and, consistent with that position on appeal, the Manufacturers are continuing to challenge on remand the Government’s request that this Court reinstate virtually the same language disapproved by the D.C. Circuit. In any event, the Government’s proposed formulation of the topic for Statement C—“selling and advertising low tar and light cigarettes as less harmful than regular cigarettes”—is materially distinct from the

27

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 28 of 40

header language for the “full text” website displays of that statement, which refers to the “Lack of Significant Health Benefit From Smoking ‘Low Tar,’ ‘Light,’ ‘Ultra Light,’ ‘Mild,’ and ‘Natural’ Cigarettes.” D.E. 6081-8, at 5. Unlike the Government’s formulation of the topic, the header is focused on information “about cigarettes,” rather than “defendants’ prior deceptive conduct.” Corrective Statements Opinion, 801 F.3d at 261 (emphasis omitted).

Second, the Government emphasizes that the D.C. Circuit “upheld mandatory statements on all five topics, including Statement B’s disclosing that Defendants ‘intentionally designed cigarettes with enough nicotine to create and sustain addiction,” and Statement D that Defendants “‘intentionally designed cigarettes to make them more addictive.’” Gov’t Br. 24-25; see also Intervenors’ Br. 10 n.7. But the D.C. Circuit’s conclusions with respect to those aspects of Statements B and D were premised on its determination that Defendants did not raise on appeal from this Court’s Final Judgment and Remedial Order a specific challenge to the nicotine- manipulation corrective-statements topic and instead mounted a broad challenge to the entirety of the corrective-statements remedy. Corrective Statements Opinion, 801 F.3d at 258. That earlier strategic decision does not foreclose the Manufacturers from now challenging retrospective, conduct-focused language in the preambles, which “were nowhere presaged in the district court’s 2006 remedial order.” Id. at 261.

Finally, the Government argues that, even if its proposed topics do “imply that the tobacco companies have engaged in fraud and deception about those topics,” the D.C. Circuit has already “‘conclud[ed] that such disclosures would ‘prevent and restrain’” future RICO violations. Gov’t Br. 25 (quoting Corrective Statements Opinion, 801 F.3d at 258 (alteration in original), quoting, in turn, 2009 Opinion, 566 F.3d at 1140). To be sure, the D.C. Circuit did uphold the general concept of corrective statements on this Court’s five designated topics in

28

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 29 of 40

2009. It did so, however, on “exceedingly narrow grounds,” Corrective Statements Opinion, 801 F.3d at 257, and made clear in that opinion that the language of the statements must be carefully crafted to “prevent and restrain [Defendants] from making fraudulent public statements . . . in the future” by “reveal[ing] the previously hidden truth about [Defendants’] products” and must convey only “‘purely factual and uncontroversial information’” about those products. 2009 Opinion, 566 F.3d at 1140, 1144 (quoting Zauderer, 471 U.S. at 651) (internal quotation marks omitted in part). The Government’s backward-looking, confessional formulations of the topics addressed in Statements C and D fail both of those requirements.

* * *

The Government’s proposed preambles share many of the shortcomings of the preambles already rejected by the D.C. Circuit. The “Here is the truth” tagline, the language stating that a “Federal Court has ordered” Defendants to make the statements, and the conduct-focused topics of Statements (C) and (D) are all independently at odds with RICO, the First Amendment, and the D.C. Circuit’s mandates. Each of these aspects of the Government’s preambles is focused on Defendants’ prior misconduct, rather than on preventing and restraining future RICO violations, and requires Defendants to shame themselves through a public confession of past wrongdoing. Taken together, they leave no doubt that Defendants are being compelled by a court to make the statements as punishment for past transgressions. The Court should reject the Government’s retrospective, conduct-focused, self-accusatory preambles and instead adopt the straightforward, evenhanded corrective statements proposed by the Manufacturers, which provide public-health information about cigarettes—and thereby prevent Defendants from making inaccurate statements on those topics in the future—without compelling Defendants to denigrate themselves through admissions of past wrongdoing.

29

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 30 of 40

III. THE COURT SHOULD ADOPT THE MANUFACTURERS’PROPOSED REVISIONS TO THE IMPLEMENTATION CONSENT ORDER AND REJECT THE GOVERNMENT’S PROPOSAL.

“[A] court may not enter a consent decree that imposes obligations on a party that did not consent to the decree.” Local No. 93, Int’l Ass’n of Firefighters, AFL-CIO C.L.C. v. City of Cleveland, 478 U.S. 501, 529 (1986). Likewise, although a court may modify an existing consent order when it “is based on an earlier judgment that has been reversed” in part, Fed. R. Civ. P. 60(b)(5), any modifications must be “‘suitably tailored’” to the changes required by the court of appeals’ decision and “must preserve the essence of the parties’ bargain.” Pigford v. Veneman, 292 F.3d 918, 927 (D.C. Cir. 2002) (quoting Rufo v. Inmates of Suffolk Cnty. Jail, 502 U.S. 367, 391 (1992)); see also id. at 925 (“Who would sign a consent decree if district courts had free-ranging interpretive or enforcement authority untethered from the decree’s negotiated terms?”).

In this case, the parties “negotiated for well over a year to reach the proposed Consent Order” on implementation, which reflects compromises and negotiated trade-offs by all parties. D.E. 6081, at 16; see also Intervenors’ Br. 13 (the Consent Order “reflected a ‘complex’ agreement hammered out through many months of negotiation and compromises on all sides”). Yet, the Government now proposes a series of unilateral modifications to the Consent Order that would upend that carefully negotiated framework. The Court should reject the Government’s proposals—none of which is required to comply with the D.C. Circuit’s Corrective Statements Opinion—and adopt the Manufacturers’ proposed amendments, which are limited to changes necessitated by the D.C. Circuit’s decision.

A. The Manufacturers’ Proposed Amended Order Is Consistent With The Parties’ Implementation Agreement Approved By The Court.

The parties’ negotiated Consent Order—entered by the Court in June 2014—covers virtually every facet of implementation: from the websites that must publish the statements, to

30

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 31 of 40

the font and pixel size used in each media, to the spacing between lines, to the dates on which the statements would be disseminated.

The Consent Order also specifically addresses the situation now confronting the parties and the Court—an appeal resulting in changes to the corrective statements. The parties agreed that “[s]hould the language of the Corrective Statements be changed as a result of further litigation, the parties reserve the right to seek different requirements than those stated herein.” Order #51-Remand, § VI(5). At the same time, the Consent Order makes clear that the terms of the agreement “cannot be modified or amended without written consent by all parties.” Id. § VI(10).

The Government and Intervenors have acknowledged that any material changes to the Consent Order would undo the agreement the parties reached after a year of negotiations. As the parties previously informed the Court, “pulling on any single thread of the complex agreement could cause the whole to unravel.” D.E. 6081, at 13. The Government’s counsel similarly explained to the Court in presenting the initial proposed Consent Order:

[T]he presentations might be altered to communicate in ways that resonate more loudly or longer or — but we have a deal. We do have an agreement that was reached that we really do believe will communicate effectively the Court’s intended message. . . . [Strengthening one media channel] at this juncture could run some risk, possibly a substantial risk, of unraveling the work that we have achieved in reaching agreement.

Jan. 22, 2014 Hr’g Tr. 31-32; see also id. at 32 (“[T]he deal is a package, and addressing particular pieces of it for particular attention might yield undesired side effects.”).

In accordance with the parties’ negotiated compromise and the limitations on courts’ power to modify consent orders, the Manufacturers propose only modest modifications to the Consent Order necessary to account for the changes to the preambles mandated by the D.C. Circuit’s opinion. A redline reflecting the Manufacturers’ proposed revisions to the Consent

31

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 32 of 40

Order is attached as Exhibit 3; a clean version of the Manufacturers’ amended order is attached as Exhibit 4. To summarize the changes:

x The Manufacturers’ amended order removes the specifications concerning the font size, leading, and placement for “Here is the truth” across all media.

x The Manufacturers’ amended order updates the language in the Phase 1 and Phase 2 website preambles, and changes the text in Phase 3 from “Court Ordered Corrective Statements” to “Corrective Statements.” These changes conform to the text of the Manufacturers’ proposed corrective statements. The Manufacturers’ amended order also clarifies the language that must appear “above the fold” in the website preambles to ensure the statements retain the same level of prominence as in the Consent Order.

x The Manufacturers’ amended order increases the font size and leading of the corrective statements in some executions. The Consent Order provided smaller font size and leading for the longer corrective statements (e.g., “Low Tar and Light Cigarettes”) than the shorter statements. But given the decrease in the length of the statements under the Manufacturers’ proposal, all corrective statements can now use the same larger font size and leading.

x The Manufacturers’ amended order includes additions to address brands manufactured by ITG Brands, consistent with Order #56-Remand.

The Manufacturers have prepared revised exhibits consistent with their proposed order, and will submit them to the Court upon request.

One change requires further explanation. The Manufacturers enclose as Exhibit 2 TV spots that have the same look and feel as the ones previously approved by the Court. Because the Manufacturers’ proposed language is materially shorter than the original text, the TV spots in Exhibit 2 are also shorter than the ones attached to the Consent Order. In Order #1015, the Court required the TV spots to be at least 15 seconds. See Order #1015, at 9. In the Consent Order, the parties agreed, based upon the Court’s 2012 order setting forth the text of the corrective statements, that four of the spots would be 45 seconds and one spot would be 30 seconds in order to allow sufficient time for the statements to be read and understood. See Order #51-Remand,

32

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 33 of 40

§ III(5). Now that the introductory language is shorter, all five of the corrective statements can be read and understood in 30-second spots.

B. The Government’s Proposal Impermissibly Seeks Unilateral Alterations To Key Provisions Of The Consent Order.

The Government’s proposed amendments to the Consent Order purport to keep the parties’ agreement intact. According to the Government, it has used “the same font, typesize, and layout that the Court previously approved, with the tobacco companies’ consent.” Gov’t Br. 8 (emphasis added). The Government, in fact, has asked the Court to “re-issue” the parties’ prior agreement. See id. Ex. 3 (redline of proposed Order), at 2 (“[I]t is hereby ORDERED that the Corrective Statement Consent Order is re-issued as set forth below.”). Likewise, at the October 1, 2015 status hearing, counsel for Intervenors “emphasize[d] that, in our view, because so little will change in the wording of the corrective statements, there is no need to have any type of discussions, negotiations, or briefing with that implementation because it will be all governed by our existing prior agreement.” Oct. 1, 2015 Hr’g Tr. 15 (emphasis added); id. at 8 (describing any changes to the Consent Order as “extremely minor adjustments”).

The Government has nevertheless proposed modifications to the Consent Order that are inconsistent with the parties’ agreement and not required by the D.C. Circuit’s decision. The Court should therefore enter the Manufacturers’ proposal, which faithfully “preserve[s] the essence of the parties’ bargain.” Pigford, 292 F.3d at 927. The Court should especially reject the Government’s most egregious proposed modifications: changes to the “Trigger Date” and reformulated TV spots. Those changes are never mentioned in the Government’s brief, they are not required by revisions to the preambles or by the D.C. Circuit’s opinion, and they do not have the agreement of all parties.

33

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 34 of 40

1. The Court Cannot Redefine “Trigger Date” Without Eviscerating The Parties’ Negotiated Agreement And The Manufacturers’ Ability To Pursue A Meaningful Appeal.

The Consent Order provides that the Manufacturers will begin publishing the corrective statements within defined time periods after a “Trigger Date.” That agreement defines “Trigger Date” as “the date on which appeals are exhausted in the appeal noticed from Order #34Remand, United States v. Philip Morris USA, appeal docketed, No. 13-5028 (D.C. Cir. Jan. 30,
2013), and in any timely appeals noticed from this Consent Order.” Order #51-Remand, § I(L). The Government now requests, without explanation, that the Court modify the Consent Order’s “Trigger Date” to mean “the date of this order.” Gov’t Br., Ex. 3 (redline of proposed Order), Part 2, § I(N). For multiple reasons, the Court should reject this unilateral effort to re-write the Consent Order.

First, the parties’ agreement could not have been clearer: they agreed to stay implementation until litigation regarding the Consent Order concludes. That litigation is not over. The parties contemplated that Defendants could appeal, which they did. The parties also contemplated that, following the appeal, the Consent Order might need to be amended, which is what the Court is considering now. The Court ultimately will enter an amended version of the Consent Order incorporating changes required by the D.C. Circuit, just as the parties anticipated would happen in this circumstance. Under the parties’ agreement, the “Trigger Date” does not occur until completion of any further appeals noticed from the amended Consent Order.

Second, modifying the “Trigger Date” definition would deprive Defendants of an essential term of their bargain. See Decl. of Mark F. Rutledge, ¶¶ 5, 15. The bargain itself was hard-fought on both sides. The “Trigger Date” definition was of critical importance to Defendants because, without a stay of the implementation, the corrective statements will be

34

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 35 of 40

published while an appeal is pending. If the D.C. Circuit concludes that the language of the corrective statements violates RICO or the First Amendment, the improper statements already will have been disseminated to the public. That bell cannot be un-rung. See Ramirez v. U.S. Customs & Border Protection, 477 F. Supp. 2d 150, 159 (D.D.C. 2007) (“As the Supreme Court has said on many occasions, any violation of one’s First Amendment rights constitutes irreparable harm.”) (citing Elrod v. Burns, 427 U.S. 347, 373-74 (1976)). Moreover, requiring implementation of the statements during an ongoing appeal would impose an immediate financial burden on the Manufacturers because, under the Government’s proposal, they would have to begin to disseminate the statements on television, newspapers, and websites within eight weeks and on onserts within thirty weeks of this Court’s amended Order. Rutledge Decl., ¶ 8; Decl. of Smith W. Welborn, Jr., ¶ 7. The Manufacturers would need to spend significant sums of money in advance just to secure space on television and in newspapers. Decl. of K.C. Crosthwaite, ¶¶ 7-8; Rutledge Decl., ¶ 7. They would also need to devote resources to producing onserts, affixing them to cigarette packs, and distributing those packs to wholesalers for future retail sale. Crosthwaite Decl., ¶ 9; Welborn Decl., ¶¶ 10, 13-14. Those costs—which will reach tens of millions of dollars and thousands of hours of employee and third-party vendor time— could not be recouped if a court subsequently granted a stay of implementation or ruled on appeal that the text of the corrective statements must be amended again. Crosthwaite Decl., ¶¶ 710; Rutledge Decl., ¶¶ 7, 17; Welborn Decl., ¶¶ 6, 12-16, 18. Because the current definition of “Trigger Date” guards against those irreparable harms, there would have been no agreement at all on implementation issues in the absence of that fundamentally important term. Rutledge Decl., ¶¶ 5, 15.

35

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 36 of 40

Third, the Government should not be permitted to pick and choose the provisions of the Consent Order to retain (e.g., font, typesize, and layout) and to reject (e.g., “Trigger Date”). Although the Government now suggests that it is “entitled to propose wholly new implementation specifications,” Gov’t Br. 9 n.2, this misinterprets the Consent Order, which does not itself authorize such far-reaching changes. If the Government were to propose new specifications, the Consent Order would unravel completely and all of its agreed-upon provisions would become void. The Court would then need to accept briefing and issue a ruling on each and every implementation detail addressed in Order #51-Remand. A “consent order” must be an order to which the parties have consented. This Court cannot unilaterally change required provisions in the order and then maintain that the resulting order is still subject to consent.

Accordingly, the Court should retain the agreed-upon definition of “Trigger Date.” To do otherwise would vitiate a fundamental premise of the Consent Order and deprive the Manufacturers of their due process right to be heard on all of the implementation details to which they agreed as part of a larger deal that included, as one of its material terms, a definition of “Trigger Date” that guaranteed a stay pending appeal.

If the Court is nevertheless inclined, over the Manufacturers’ objection, to modify the definition of “Trigger Date” in the Consent Order, the Manufacturers respectfully request that the Court set a Trigger Date at least four months after the date of its order, and in no event earlier than May 16, 2016. Although the Manufacturers maintain that the Trigger Date should not be amended at all, that alternative to the Government’s proposal would afford the Manufacturers an opportunity to seek a stay pending appeal and also mitigate to a limited extent some of the serious practical difficulties presented by the Government’s proposal. See Crosthwaite Decl., ¶¶ 7-10; Welborn Decl., ¶ 12. In particular, the parties previously agreed that the first

36

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 37 of 40

implementation obligation would begin less than eight weeks after the Trigger Date, when the corrective statements would start running in newspapers, on television, and on websites. See Crosthwaite Decl., ¶¶ 7-8; Rutledge Decl., ¶ 8. At the time of the Consent Order, however, the Manufacturers had already produced executions for each of those formats based on the then- mandated text of the statements and received the Government’s approval of those executions. The same is not true now. The Court has yet to determine the text of the corrective statements. Crosthwaite Decl., ¶ 3; Rutledge Decl., ¶ 6; Welborn Decl., ¶ 6. Once the Court determines the text, the Manufacturers will need to create mock-ups for each format and resolve the ambiguities that will inevitably arise in planning to implement the Consent Order specifications for each medium. Crosthwaite Decl., ¶ 5; Rutledge Decl., ¶¶ 11-14; Welborn Decl., ¶ 13. Only after that time-consuming process is completed could the Manufacturers purchase TV and newspaper advertisement space, implement changes across all of their covered websites, and move forward with plans to adapt manufacturing lines and distribution practices to fulfill the onsert requirement. Crosthwaite Decl., ¶ 6; Rutledge Decl., ¶¶ 8, 11-14; Welborn Decl., ¶ 11. During the mediation, the parties did not contemplate that the Manufacturers could possibly take all of those steps in less than eight weeks. Rutledge Decl., ¶¶ 5, 15. Moreover, the burdens on the Manufacturers would be heightened if the Court were to set the Trigger Date between Thanksgiving and the resumption of normal work schedules and employee attendance after the new year. Rutledge Decl., ¶ 8.7

——————-

7 The agreed-upon “Trigger Date” definition would also afford more time for the D.C. Circuit to resolve the appeal on R.J. Reynolds Tobacco Company’s challenge to the requirement that it publish corrective statements on television in its capacity as successor to Brown & Williamson Tobacco Corporation. See Order #55-Remand (May 28, 2015), appeal docketed No. 15-5210 (D.C. Cir. July 27, 2015). The Government recognizes the need for that appeal to be resolved, as demonstrated by its proposal that “obligations regarding Corrective Statements on television will

37

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 38 of 40

2. The Court Should Not Give Binding Effect To The Government’s TV Mock-ups.

After months of negotiation, the parties agreed on TV spots that each “contain[ ] display and sounds acceptable to the parties.” Order #51-Remand, § III(5). The Consent Order provided that “no additional text, images, voice-over or other elements may be included.” Id. § VI(2). The Government’s brief attaches new TV spots, and requests that the Court adopt those reformulated statements as the versions that must be broadcast. The Court should not do so.

The Government asserts that its TV spots have “the same look and feel that the parties agreed upon last time.” Gov’t Br. 9. They do not. The Government’s TV spots have a different voiceover—in a male rather than a female voice—and emphasize certain words that the prior TV spots did not. For example, the Government’s TV spots emphasize the word “kills” in Statements A and E. The Government’s TV spots also emphasize the words “highly addictive” and “intentionally designed” in Statement B.

Moreover, the Government created the TV spots on its own, even though the parties agreed in the Consent Order that Defendants would be “responsible for the production of all Corrective Statements.” Order #51-Remand, § VI(3). Defendants created the mock-ups for all media executions, and presented them to the Government and Intervenors for comment and approval. Television was no different: In an iterative process that required several versions, Defendants prepared the prior TV spots, the Government and Intervenors reviewed and approved them, and then the parties jointly presented them to the Court. See Intervenors’ Br. 3 n.2 (“[T]he Consent Order included the actual television ads the parties had agreed on, which were prepared

——————-

conform to the outcome of the pending appeal [on the Brown & Williamson issue], such that, should R.J. Reynolds Tobacco Company prevail, there will be four sets of Corrective Statement spots on television.” Gov’t Br., Ex. 3 (redline of proposed Order), Part 2, § VI(2).

38

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 39 of 40

by Defendants . . . .”). The Court should not depart from the parties’ binding agreement and compel Defendants to run TV spots that the Government created without their input or approval.

CONCLUSION

The Court should adopt the Manufacturers’ proposed corrective statements and amended implementation order, and reject the alternatives proposed by the Government.

Dated: November 11, 2015

Respectfully submitted,

/s/ Miguel A. Estrada

Miguel A. Estrada (D.C. Bar No. 456289)

Amir C. Tayrani (D.C. Bar No. 490994)

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Avenue, N.W.

Washington, DC 20036-5306

Telephone: (202) 955-8257

Fax: (202) 530-9016

Attorneys for Defendants Altria Group, Inc. and

Philip Morris USA Inc.

Noel J. Francisco (D.C. Bar No. 464752)

Peter J. Biersteker (D.C. Bar No. 358108)

JONES DAY

51 Louisiana Avenue, N.W.

Washington, DC 20001-2113

Telephone: (202) 879-3939

Fax: (202) 626-1700

Jeffrey A. Mandell (D.C. Bar No. 999791)

STAFFORD ROSENBAUM LLP

222 West Washington Avenue

Madison, WI 53703

Telephone: (608) 256-0226

Fax: (608) 259-2600

Attorneys for Defendant R. J. Reynolds Tobacco Company (individually and as successor to Lorillard Tobacco Company)

39

Case 1:99-cv-02496-GK Document 6175 Filed 11/11/15 Page 40 of 40

Robert J. Brookhiser, Jr. (D.C. Bar No. 202168)

Elizabeth B. McCallum (D.C. Bar No. 451361)

BAKER & HOSTETLER LLP

1050 Connecticut Avenue, N.W.

Washington, DC 20036-5304

Telephone: (202) 861-1500

Fax: (202) 861-1783

Attorneys for Post-Judgment Parties Regarding Remedies ITG Brands, LLC, Commonwealth Brands, Inc. and Commonwealth-Altadis, Inc.

40

Leave a Reply

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

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