6178: REPLY BRIEF OF DEFENDANTS AND POST-JUDGMENT PARTIES REGARDING REMEDIES ADDRESSING REVISED LANGUAGE AND IMPLEMENTATION OF THE CORRECTIVE STATEMENTS, Nov. 25, 2015

November 25, 2015 12:48 pm by Gene Borio

The PDF is Here

EXCERPT:

Neither the Government nor Intervenors are able to mount a legally coherent, factually grounded defense of the Government’s proposed preambles and unilateral modifications to the parties’ implementation Consent Order. Their arguments regarding the Government’s backward- looking, conduct-focused preambles fail at the outset because they rest on the premise that the D.C. Circuit rejected only the “deliberately deceived” language in this Court’s preambles and otherwise left the language of the preambles intact. In fact, the D.C. Circuit’s opinion rejected the preambles in full because they “reveal[ed] nothing about cigarettes,” but “instead . . . disclose[d] defendants’ prior deceptive conduct.” The Government’s proposed preambles are materially indistinguishable from those disapproved by the D.C. Circuit because they continue to communicate the clear message that Defendants are being “ordered” by a “Federal Court” to disclose “the truth” about their products as punishment for past deceptions.

In classic understatement, the Government acknowledges the possibility that its proposed preambles might give rise to the “suggestion” of “past misconduct,” but contends that such a retrospective message is acceptable as long as the statements will also “prevent and restrain future violations” of RICO. But that position cannot be reconciled with the “exceedingly narrow grounds” on which the D.C. Circuit upheld the corrective statements, which must be limited to “forward-looking” language. Language is not “forward-looking” if it leads viewers—through “suggestion,” implication, or otherwise—to conclude that Defendants engaged in “prior deceptive conduct.” Plaintiffs’ insistence on the Government’s proposed preambles—in the face of a clear and effective alternative from the Manufacturers that would facilitate dissemination of the corrective statements without a further appeal—makes clear that the illicit message of past wrongdoing, rather than the dissemination of information about Defendants’ products, is Plaintiffs’ true objective.

Plaintiffs’ arguments regarding the Government’s proposed unilateral modifications to the parties’ carefully negotiated implementation Consent Order are equally ineffectual. Those arguments rest on the Consent Order’s reservation-of-rights clause, which Plaintiffs suggest somehow authorizes the Government to request, and this Court to order, modifications to contractual provisions that were unaffected by the D.C. Circuit’s Corrective Statements Opinion. But that clause does not override the settled precedent that strictly limits this Court’s authority to modify a negotiated consent order to changes necessitated by the appellate court’s mandate. This Court has no authority to rewrite the parties’ Consent Order to suit the whim and fancy of the Government, which is seeking to backtrack on terms to which it voluntarily agreed as part of the implementation negotiations.

END EXCERPT

FULL TEXT:

Case 1:99-cv-02496-GK Document 6178 Filed 11/25/15 Page 1 of 21

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

__________________________________________

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

Neither the Government nor Intervenors are able to mount a legally coherent, factually grounded defense of the Government’s proposed preambles and unilateral modifications to the parties’ implementation Consent Order. Their arguments regarding the Government’s backward- looking, conduct-focused preambles fail at the outset because they rest on the premise that the

D.C. Circuit rejected only the “deliberately deceived” language in this Court’s preambles and otherwise left the language of the preambles intact. Gov’t Resp. 1; Intervenors Resp. 1. In fact, the D.C. Circuit’s opinion rejected the preambles in full because they “reveal[ed] nothing about cigarettes,” but “instead . . . disclose[d] defendants’ prior deceptive conduct.” United States v. Philip Morris USA Inc., 801 F.3d 250, 261 (D.C. Cir. 2015) (“Corrective Statements Opinion”) (emphasis omitted). The Government’s proposed preambles are materially indistinguishable from those disapproved by the D.C. Circuit because they continue to communicate the clear message that Defendants are being “ordered” by a “Federal Court” to disclose “the truth” about their products as punishment for past deceptions. Case 1:99-cv-02496-GK Document 6178 Filed 11/25/15 Page 2 of 21

In classic understatement, the Government acknowledges the possibility that its proposed preambles might give rise to the “suggestion” of “past misconduct,” but contends that such a retrospective message is acceptable as long as the statements will also “prevent and restrain future violations” of RICO. Gov’t Resp. 6, 7 (emphasis added). But that position cannot be reconciled with the “exceedingly narrow grounds” on which the D.C. Circuit upheld the corrective statements, which must be limited to “forward-looking” language. Corrective Statements Opinion, 801 F.3d at 256, 257 (internal quotation marks omitted). Language is not “forward-looking” if it leads viewers—through “suggestion,” implication, or otherwise—to conclude that Defendants engaged in “prior deceptive conduct.” Id. at 261 (emphasis omitted). Plaintiffs’ insistence on the Government’s proposed preambles—in the face of a clear and effective alternative from the Manufacturers that would facilitate dissemination of the corrective statements without a further appeal—makes clear that the illicit message of past wrongdoing, rather than the dissemination of information about Defendants’ products, is Plaintiffs’ true objective.

Plaintiffs’ arguments regarding the Government’s proposed unilateral modifications to the parties’ carefully negotiated implementation Consent Order are equally ineffectual. Those arguments rest on the Consent Order’s reservation-of-rights clause, which Plaintiffs suggest somehow authorizes the Government to request, and this Court to order, modifications to contractual provisions that were unaffected by the D.C. Circuit’s Corrective Statements Opinion. But that clause does not override the settled precedent that strictly limits this Court’s authority to modify a negotiated consent order to changes necessitated by the appellate court’s mandate. Pigford v. Veneman, 292 F.3d 918, 927 (D.C. Cir. 2002). This Court has no authority to rewrite

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the parties’ Consent Order to suit the whim and fancy of the Government, which is seeking to backtrack on terms to which it voluntarily agreed as part of the implementation negotiations.

ARGUMENT

I.

THE GOVERNMENT’S PROPOSED PREAMBLES IMPERMISSIBLY REQUIRE DEFENDANTS TO CONFESS PRIOR WRONGDOING.

Plaintiffs do not identify factual inaccuracies, backward-looking language, or conduct- focused elements in the Manufacturers’ proposed preambles that would raise questions under RICO, the First Amendment, and the D.C Circuit’s mandates. Nor do they point to any evidence that the Government’s proposed preambles are more effective at capturing attention and preventing future RICO violations than the Manufacturers’ proposals. Plaintiffs instead focus on convincing this Court that the Government’s proposed preambles somehow barely squeak by the settled statutory and constitutional constraints on this Court’s remedial authority. Their arguments are uniformly unavailing.

A.

Plaintiffs’ Arguments Are Premised On A Misreading Of The Corrective Statements Opinion And The Remedial Limitations Imposed By RICO And The First Amendment.

Plaintiffs are simply wrong that the “only phrase the Court of Appeals found objectionable in this Court’s corrective statements” was the “deliberately deceived” language. Intervenors Resp. 1; see also, e.g., Gov’t Resp. 1 (“[T]he Court of Appeals remanded solely for replacement language of the phrase singled out by the Court of Appeals.”) (internal quotation marks omitted). Defendants challenged the entirety of the preambles on appeal under both RICO and the First Amendment. See, e.g., Defs.’ C.A. Opening Br. 17, 30, 40, 55; C.A. Reply Br. 16. In response, the D.C. Circuit invalidated the preambles as a whole under RICO because they “disclose[d] defendants’ prior deceptive conduct,” while “reveal[ing] nothing about cigarettes,” and therefore would not “prevent and restrain future RICO violations.” Corrective Statements

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Opinion, 801 F.3d at 261, 262 (emphasis omitted). The scope of the D.C. Circuit’s ruling is apparent not only from its broad language and expansive reasoning, but also from the fact that the court of appeals did not address Defendants’ First Amendment objection to the preambles. If the D.C. Circuit had concluded that every aspect of the preambles, other than the “deliberately deceived” language, was consistent with RICO, then the D.C. Circuit would have been required to address whether the preambles were “‘purely factual and uncontroversial’” under the court’s 2009 mandate and the Supreme Court’s decision in Zauderer. United States v. Philip Morris USA Inc., 566 F.3d 1095, 1140 (D.C. Cir. 2009) (per curiam) (“2009 Opinion”) (quoting Zauderer v. Office of Disciplinary Counsel, 471 U.S. 650, 651 (1985)); see also Defs.’ C.A. Opening Br. 21-52 (challenging the preambles under the D.C. Circuit’s 2009 mandate and the First Amendment). But the court did not say a word about the First Amendment in analyzing the preambles—even though it explicitly considered First Amendment arguments that Defendants raised regarding other aspects of the corrective-statements remedy. See Corrective Statements Opinion, 801 F.3d at 263 (considering and rejecting Defendants’ First Amendment challenge to the multiple media channels through which the statements will be disseminated). This Court therefore must scrutinize each element of the Government’s proposed preambles to ensure compliance with the D.C. Circuit’s mandates, RICO, and the First Amendment.

Somewhat ironically, when the Government turns to defending the text of its proposed preambles, it urges the Court to “consider them as a whole, rather than as individual words or clauses in isolation.” Gov’t Resp. 3-4. Taken as a whole, however, the Government’s proposed preambles communicate clearly that Defendants have lied to the American public in the past and are being ordered by a court to disseminate the statements as a remedy for their prior transgressions. That is the unavoidable message of the language declaring that a “Federal Court

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has ordered [Defendants] to make th[e] statement[s]” in order to reveal “the truth” about smoking.

The Government attempts to obscure this message by invoking statements in the labor, antitrust, and consumer-safety settings that supposedly “disseminate important information about people’s rights, competitive opportunities and obligations, and goods and services” without conveying a message of past wrongdoing. Gov’t Resp. 4 (footnotes omitted). But those examples simply underscore the Manufacturers’ point: All of the court-approved corrective statements cited by the Government were imposed as remedies for prior misconduct. See, e.g., id. at 4 n.2 (quoting a notice stating that the “National Labor Relations Board has found that we violated Federal labor law and has ordered us to post and obey this notice”). If those are the models for this Court’s corrective-statements remedy, the public will be predisposed to view the statements as remedial measures that Defendants were required to undertake due to past wrongdoing—an impression that will be confirmed by the language of the Government’s proposed preambles. While Intervenors laud this backward-looking confession of past wrongdoing—contending that it is “vital” that the statements “inform[ ] the public of the reason the statements are being disseminated” and “communicat[e] that these are corrective statements,” Intervenors Resp. 5—RICO precludes this Court from “ordering defendants to announce that they deliberately deceived the public.” Corrective Statements Opinion, 801 F.3d at 252. Indeed, Intervenors’ argument proves our point: The Government’s proposed preambles are fundamentally backward-looking and barred by RICO.

The Government itself ultimately acknowledges that the corrective statements may well “suggest[ ] . . . past misconduct” by Defendants, but argues that nothing in RICO forecloses “communicating that the defendants engaged in past deceit” as long as the preambles also

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“prevent and restrain” future RICO violations. Gov’t Resp. 6-7; see also Gov’t Opening Br. 20 (same); Intervenors Resp. 7 (arguing that the Court should not “dilute the remedy any further in order to try to keep the reasons for the corrective statements a secret from the public”). But the fundamental RICO shortcoming with the Government’s proposed preambles is that they do not “prevent and restrain” future RICO violations because, like the preambles adopted by this Court, they “reveal nothing about cigarettes,” but “instead . . . disclose defendants’ prior deceptive conduct.” Corrective Statements Opinion, 801 F.3d at 261 (emphasis omitted).

In any event, even if the preambles did simultaneously reveal information about cigarettes and disclose Defendants’ prior conduct, they would still exceed this Court’s “exceedingly narrow” authority under RICO to order corrective statements, which must be limited to “forward-looking” language. Corrective Statements Opinion, 801 F.3d at 256, 257 (internal quotation marks omitted). Language that “communicat[es] that the defendants engaged in past deceit” (Gov’t Resp. 6 (emphasis added)) is the antithesis of the “forward-looking” language required by the D.C. Circuit’s mandates and RICO. Indeed, the Government raised the same argument in the D.C. Circuit in defense of this Court’s preambles, contending that the corrective statements could “properly refer to [Defendants’] past conduct.” Gov’t C.A. Br. 45. That contention was squarely rejected by the D.C. Circuit, Corrective Statements Opinion, 801 F.3d at 252, 261, as even Intervenors admit. See Intervenors Resp. 14 (“[T]he D.C. Circuit’s concern with the original corrective statements” turned on “whether they referred to ‘backwardlooking’ conduct”) (emphasis omitted). The Government is again asking this Court to adopt a position contrary to the D.C. Circuit’s mandate and RICO. The Court should refuse.

The Government’s attempt to reconcile its proposed preambles with the requirements of the First Amendment is equally unsuccessful. In fact, the Government offers little substantive

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First Amendment analysis at all, instead asserting that there is “no reason” for this Court “to revisit its prior analysis and holding.” Gov’t Resp. 16-17. But there are compelling reasons for this Court to reconsider the First Amendment analysis it undertook in 2012. Since then, the D.C. Circuit has issued two highly relevant decisions making clear that the First Amendment does not countenance compelled confessions of past wrongdoing. See Nat’l Ass’n of Mfrs. v. SEC, 800 F.3d 518, 530 (D.C. Cir. 2015) (holding that a company could not be compelled “to confess blood on its hands”); id. at 523 (“[T]he Supreme Court has refused to apply Zauderer when the case before it did not involve voluntary commercial advertising.”); Am. Meat Inst. v. U.S. Dep’t of Agric., 760 F.3d 18, 27 (D.C. Cir. 2014) (en banc) (Zauderer “requires the disclosures to be of ‘purely factual and uncontroversial information’ about the good or service being offered”).

The Government is also far off the mark in contending that the “D.C. Circuit saw no mismatch between Zauderer and the purpose of the disclosures in this case.” Gov’t Resp. 18. The D.C. Circuit had no need to reach—and thus did not address—Defendants’ First Amendment challenge to the preambles in its Corrective Statements Opinion because it concluded that the preambles violated RICO. See POM Wonderful, LLC v. FTC, 777 F.3d 478, 490 (D.C. Cir. 2015) (“Per our usual practice, we first address petitioners’ statutory challenges to the Commission’s order before turning to their constitutional claims.”). And, in its prior opinion in this case, the D.C. Circuit emphasized that the “purpose” of the corrective statements is to “prevent and restrain [Defendants] from disseminating false and misleading statements . . . in the future” by “[r]equiring [them] to reveal the previously hidden truth about their products,” 2009 Opinion, 566 F.3d at 1140—not, as the Government would have it, to shame and humiliate Defendants by requiring them to reveal past wrongdoing.

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For their part, Intervenors hyperbolically accuse the Manufacturers of “shamelessly mischaracteriz[ing]” First Amendment doctrine. Intervenors Resp. 17. This accusation is baseless. While Intervenors are correct that there “is no ‘least restrictive means’ test under Central Hudson” (id.)—indeed, Manufacturers have never argued that there is one—restrictions on commercial speech must nonetheless be “narrowly tailored.” Am. Meat Inst., 760 F.3d at 25. “The government cannot satisfy that standard if it presents no evidence that less restrictive means would fail.” Nat’l Ass’n of Mfrs. v. SEC, 748 F.3d 359, 372 (D.C. Cir. 2014), adhered to on reh’g, 800 F.3d at 524; see also Thompson v. W. States Med. Ctr., 535 U.S. 357, 371 (2002) (“In previous cases addressing this final prong of the Central Hudson test, we have made clear that if the Government could achieve its interests in a manner that does not restrict speech, or that restricts less speech, the Government must do so.”). Because the Government has not presented any evidence that its proposal would be more effective than the Manufacturers’ proposed preambles at attracting viewers’ attention and furthering RICO’s remedial objectives, the Government’s proposed preambles—which indisputably impose greater burdens on the Manufacturers’ First Amendment rights—are “more extensive than reasonably necessary to further” its interests and therefore unconstitutional. Bd. of Trs. of State Univ. of N.Y. v. Fox, 492

U.S. 469, 477 (1989) (internal quotation marks omitted).

B.

The Government’s “Here Is The Truth” Tagline, “Federal Court Has Ordered” Clause, And Topics (C) And (D) Each Violate Section 1964(a) And The First Amendment.

As the foregoing discussion demonstrates, when the Government’s proposed preambles are considered “as a whole,” Gov’t Resp. 3, they violate RICO, the First Amendment, and the

D.C. Circuit’s mandates because they would compel Defendants to confess publicly that they deceived the American public and are now being “ordered” by “a Federal Court” to disclose “the

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truth” about smoking. That conclusion is confirmed when the elements of the Government’s proposed preambles are analyzed individually.

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

Plaintiffs offer virtually no substantive defense of the Government’s proposed “Here is the truth” subheading. The Government asserts that “[r]obust statements with a strong tagline to introduce the factual bullets and unify the statements into a single campaign are far more likely to prevent and restrain misconduct than the companies’ preferred introductions.” Gov’t Resp.

15. But it offers no analysis or evidence to substantiate that ipse dixit. To be sure, the “Here is the truth” tagline would unquestionably be more effective than the Manufacturers’ preambles at publicly shaming and humiliating Defendants by requiring them to confess past wrongdoing. The D.C. Circuit has repeatedly made clear, however, that a “remedy . . . ‘may not be justified simply on the ground that whatever hurts a civil RICO violator necessarily serves to “prevent and restrain” future RICO violations.’” Corrective Statements Opinion, 801 F.3d at 263 (quoting 2009 Opinion, 566 F.3d at 1148).

Moreover, while the Government acknowledges that the meaning of its proposed tagline must be “analyzed in relation to the entirety” of its proposed preambles, “not in isolation,” Gov’t Resp. 14-15, the Government fails to apply that standard. The phrase “Here is the truth” does not appear in isolation. Rather, the phrase follows language stating that “[a] Federal Court has ordered [Defendants] to make this statement about” one of five smoking-related topics. The “Federal Court” obviously believes that its communications are “the truth.” That goes without saying. By needlessly emphasizing “Here is the truth,” the Government’s proposed preambles clearly mean to convey something in addition to the proposition that the following statements are “true.” The language is plainly meant to communicate the additional message that “here—

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finally—is the truth” that Defendants previously hid about each topic addressed in the corrective statements.

Intervenors also insist on contending that the “Here is the truth” tagline “simply conveys the accuracy of the bulleted information that follows.” Intervenors Resp. 12. Apparently, Intervenors are concerned that the public may not believe a court-ordered statement unless the court also orders the speaker to affirm that the statements are “true.” If that were a plausible concern, virtually every government pronouncement would also affirm that its statements were “true.” The bottom line is that the “Here is the truth” language conveys opprobrium, not

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accuracy.

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

Plaintiffs’ defense of the language stating that “[a] Federal Court has ordered Altria, R.J. Reynolds Tobacco, Lorillard, and Philip Morris USA to make this statement” is likewise flawed in both procedural and substantive respects.

The Government has nothing new to add to its empty procedural objections to the Manufacturers’ arguments. Gov’t Resp. 7-9. R.J. Reynolds Tobacco Company (“RJRT”) and ITG Brands are not “estopped” from challenging the Government’s “[a] Federal Court has ordered” language because it is materially distinct from the language proposed by RJRT and Lorillard Tobacco Company (“Lorillard”) in 2006, which would have informed the public that the corrective statements were being made “pursuant to a Court Order.” Id. at 7-8 (internal

1 For similar reasons, the Government’s fallback “Here are the facts” formulation also violates RICO and the First Amendment because, when viewed in the context of language declaring that a “Federal Court has ordered [Defendants] to make this statement,” the subheading will communicate that Defendants have withheld these “facts” from the American public in the past and are being required by a court to disclose them as a remedy for their prior wrongdoing.

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quotation marks omitted). RJRT did not object to that formulation in 2006—and none of the Manufacturers objects to it today—because, unlike the Government’s proposed preambles, that language does not communicate that Defendants have been “ordered” by a “Federal Court” to make the corrective statements, which conveys the message that the statements are a remedy for past wrongdoing. In any event, even if the substance of the proposals were the same, estoppel still would not apply because this Court did not adopt RJRT’s or Lorillard’s proposals. See New Hampshire v. Maine, 532 U.S. 742, 749 (2001) (judicial estoppel “prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase”) (internal quotation marks omitted; emphasis added); Pierce v. SEC, 786 F.3d 1027, 1038-39 (D.C. Cir. 2015) (same).

Estoppel is doubly inapplicable to ITG Brands, which was not even a party to this case when Defendants submitted their initial corrective-statements proposals in 2006. Order #56Remand provides that ITG Brands is bound only by Order #1015, “as supplemented and modified by subsequent orders,” Order #56-Remand ¶ 2, and does not bind ITG Brands to Defendants’ previous arguments. Nor is ITG Brands estopped or bound by operation of law. As a purchaser of assets from RJRT and Lorillard (and only a small fraction of their assets at that), ITG Brands does not automatically step into the shoes of RJRT or Lorillard in this litigation. If it did, there would have been no need for this Court to join ITG Brands to the case as a new party in Order #56-Remand.

The Government’s waiver argument with respect to Philip Morris USA (“PM USA”) and Altria is similarly nonsensical. The Government contends that the “Court ordered all statements to ‘identify the Defendant making the corrective statements’” and that “when the Court ordered all parties to propose compliant statements, Philip Morris USA and Altria ignored that

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specification.” Gov’t Resp. 8 (quoting United States v. Philip Morris USA Inc., 449 F. Supp. 2d 1, 940 (D.D.C. 2006)). But even if Philip Morris USA and Altria had “ignored” that supposed requirement, their silence regarding the identity of the companies making the statements would have absolutely no bearing on their ability to challenge the Government’s “[a] Federal Court has ordered language,” which was not previewed anywhere in this Court’s 2006 opinion. See Corrective Statements Opinion, 801 F.3d at 261.

Moreover, this Court did not order that “all statements . . . ‘identify the Defendant.’” Gov’t Resp. 8 (emphasis added). That requirement applies only to the corrective statements “published as a full page advertisement” in newspapers. Philip Morris USA Inc., 449 F. Supp. 2d at 940. The Manufacturers’ proposed corrective statements comply in full with that requirement—and, in fact, extend it to the television statements. See Mfrs.’ Opening Br. 7-8 (proposing that newspaper and television statements include the following language: “Under court order, paid for by Philip Morris USA, R.J. Reynolds Tobacco, Lorillard, and Altria”).2

On the merits, Plaintiffs provide no plausible, RICO-based reason why the corrective statements must include preambles declaring that “[a] Federal Court has ordered” Defendants to make the statements, rather than stating in a footer that Defendants are paying for the statements “[u]nder court order,” as the Manufacturers propose. Plaintiffs identify no legal or factual basis for concluding that the Manufacturers’ proposed language would be an ineffective RICO remedy. As the D.C. Circuit contemplated when it upheld the corrective-statements remedy,

2 Contrary to the Government’s suggestion, the Manufacturers’ proposed revisions to the implementation Consent Order do not delete the sentence “call[ing] for the sequence of Defendants’ names to change from one TV spot to another.” Gov’t Resp. 12 n.6; see also Ex. 3 to Mfrs.’ Opening Br. at 13 (“The Defendant that bears the cost of the spot will be listed first in the ‘paid for’ footer, so that Altria, R.J. Reynolds Tobacco Company, Lorillard, and Philip Morris USA will each be listed first on at least one spot per week.”). Nor is there any reason to modify that provision.

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Defendants will be “prevent[ed] and restrain[ed]” from deceiving the public about cigarettes in the future because “at the same time” they would be “compelled to tell the truth about cigarettes” in corrective statements in which they are identified by name. Corrective Statements Opinion, 801 F.3d at 257 (internal quotation marks omitted). Thus, the Manufacturers’ proposed statements are not, as Intervenors contend, simply “a new set of public health messages.” Intervenors Resp. 10. They are a carefully formulated remedial measure that will “prevent and restrain” Defendants from attempting to disavow the substance of the corrective statements in future inconsistent pronouncements.

Nor do Plaintiffs identify a valid reason for requiring the Manufacturers to include their proposed “[u]nder court order” language on websites, onserts, and (if applicable) social media. While the Government objects that onserts and websites may identify a brand, but “not what company owns the brand,” Gov’t Resp. 13 n.7, the Manufacturers’ cigarette packages invariably list the company behind the brand and their branded websites likewise identify the company itself, not just the brand being promoted. See, e.g., D.E. 6081-7, at 20 (Philip Morris USA website link and copyright displayed at bottom of webpage for Parliament cigarettes); camel.com/Security/Login (clear textual acknowledgement of R.J. Reynolds Tobacco Company); www.pallmallusa.com/Secur… (same).3 Moreover, adding language identifying Defendants by name in those statements would necessitate additional text explaining

3 All of the brands ITG Brands acquired from RJRT and Lorillard will list ITG Brands on cigarette packaging by January 1, 2016 (months before the earliest conceivable implementation for onserts). Packaging for the Lorillard-legacy brands that RJRT sells is transitioning to list RJRT, rather than Lorillard; this transition is expected to be complete for all cigarette brand styles by the end of June 2016. Between now and then, the packaging identifies a company (Lorillard) that is subject to the corrective-statements remedy, and consumer efforts to learn about or contact Lorillard will lead to RJRT.

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ITG Brands’ status as a purchaser of brands, rather than a Defendant, which would complicate the statements for which ITG Brands is responsible.4

Thus, far from “seek[ing] to avoid being named,” Intervenors Resp. 8, the Manufacturers have proposed corrective statements that will make clear Defendants are paying for the statements and that will “prevent and restrain them from disseminating false and misleading statements . . . in the future.” Corrective Statements Opinion, 801 F.3d at 257 (internal quotation marks omitted). It is therefore apparent that Plaintiffs’ insistence on the Government’s “[a] Federal Court has ordered” formulation has nothing to do with actually furthering RICO’s remedial objectives, but is instead motivated by a concern that the Manufacturers’ supposedly “bland statements” will not sufficiently discredit and castigate Defendants in the eyes of the public. Gov’t Resp. 14. The purpose of the corrective statements, however, is not to brand Defendants as inveterate “liars,” but to “prevent and restrain” them from making false statements in the future on the five specific smoking-related topics addressed in the corrective statements. Corrective Statements Opinion, 801 F.3d at 257 (internal quotation marks omitted). The

4 The Government accuses ITG Brands of reneging on a representation that “no complications would arise” from its acquisition of brands from RJRT and Lorillard. Gov’t Resp. 13 n.8. While ITG Brands has no intention of complicating these proceedings unnecessarily, the Government mischaracterizes its representation. ITG Brands informed the Court that its joinder would subject it to the Court’s jurisdiction and “would not be a diminution in the kind of exposure to corrective statements that consumers would get.” D.E. 6152, at 8 (internal quotation marks omitted). The Manufacturers’ suggestion that identifying Defendants by name on website and onsert corrective statements would necessitate a modification to clarify ITG Brands’ status is consistent with those truthful representations and with the provisions of Order #56-Remand. In fact, Order #56-Remand recognizes that when ITG Brands publishes corrective statements that name Defendants, ITG Brands may include such clarifying language. Order #56-Remand ¶ 9. It also recognizes generally that there are likely to be circumstances in this case where ITG Brands will point to its unique status in connection with the application of Order #1015. Among other things, the Court ordered that ITG Brands would be bound by modifications of orders that apply to all Manufacturers “unless company-specific factors warrant different treatment,” id. ¶ 18, and ordered that ITG Brands would be permitted to submit its own briefing, raising issues unique to it, on the point-of-sale issues, id. ¶ 10; see also Oct. 1, 2015 Hr’g Tr. at 17-19.

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Manufacturers’ forward-looking, product-focused statements will accomplish that remedial objective.

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

The Government’s proposed formulations of Topics (C) and (D) are improper because their references to “selling and advertising low tar and light cigarettes as less harmful” and “designing cigarettes to enhance the delivery of nicotine” convey the message that Defendants engaged in past wrongdoing. See Mfrs.’ Opening Br. 26-29.

Rather than respond to the Manufacturers’ arguments about Topic (C), the Government simply attacks a straw man, suggesting that the Manufacturers are objecting to its proposed Topic (C) on the “grounds that they no longer sell ‘light’ and ‘low-tar’ cigarettes.” Gov’t Resp.

19. But it is not the fact that Defendants have discontinued the use of “light” and “low tar” descriptors that invalidates the Government’s formulation of Topic (C). The Government’s proposal is flawed because—whether or not Defendants will continue to sell “light” and “low tar” cigarettes in the future—the text conveys to consumers that Defendants in the past have sold and advertised those cigarettes as “less harmful than regular cigarettes,” which the bullet-pointed text makes clear is not true. “[D]isclosing defendants’ prior deceptive conduct” is incompatible with RICO. Corrective Statements Opinion, 801 F.3d at 261 (emphasis omitted).5

5 The Government is also incorrect to assert that Winston brand cigarettes include “express or implied health claims” regarding cigarettes. Gov’t Resp. 20 n.10. Although FDA has long been aware that the tobacco in Winston cigarettes has been marketed as “additive free,” it has only very recently objected to the use of the phrase. Nor did the Government or Intervenors ever claim that the phrase was problematic during the months-long discussions over ITG Brands’ acquisition of Winston and its joinder in this case. Moreover, in a 1999 Consent Order, the Federal Trade Commission approved use of that phrase provided that a disclaimer was also included in advertisements for Winston. See In re R.J. Reynolds Tobacco Company, 128 F.T.C. 262 (1999). ITG Brands represents that regardless, however, it has informed FDA that although

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The Government offers no substantive defense whatsoever of its formulation of Topic (D). Instead, it reiterates the same waiver argument that the Manufacturers addressed at length in their opening brief. See Mfrs.’ Opening Br. 27-28. The Government’s procedural arguments do not become more persuasive by dint of sheer repetition or do anything to reconcile its conduct-focused formulation of Topic (D) with the requirements of RICO and the D.C. Circuit’s mandates.

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

Plaintiffs completely ignore the case law defining this Court’s authority to modify the parties’ carefully negotiated implementation Consent Order. In particular, they make no attempt to demonstrate that the Government’s proposed unilateral modifications to the Consent Order are “‘suitably tailored’” to the changes necessitated by the D.C. Circuit’s Corrective Statements Opinion or that they “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)).

Plaintiffs instead seek to circumvent this precedent by emphasizing that the parties “‘reserve[d] the right to seek different requirements’” if the D.C. Circuit modified the language of the corrective statements. Gov’t Resp. 23 (quoting Order #51-Remand, § VI(5)); Intervenors Resp. 18-19 (same). That reservation-of-rights clause, however, simply reflects the general principle that this Court may modify a consent order when it “is based on an earlier judgment that has been reversed” in part. Fed. R. Civ. P. 60(b)(5). It does not displace the limitations that

it believes that the phrase “additive free” does not violate the Tobacco Control Act, its current marketing plans for Winston do not include using the phrase in advertising and the words will be removed from the one place they currently appear on Winston packaging (the cartons) beginning in the first quarter of 2016, thus resolving FDA’s notice.

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Rule 60(b)(5) and controlling precedent impose on that authority or empower this Court to adopt unilateral modifications that are not required by a ruling on appeal. To conclude otherwise would nullify the provision of the Consent Order providing that the agreement cannot “be modified or amended without written consent by all parties,” Order #51-Remand § VI(10), and eviscerate the carefully negotiated set of compromises embodied in the Order.

In unacknowledged recognition of these restrictions, the Government asserts that its proposed amendments to the Consent Order “make the alterations required by the D.C. Circuit but otherwise leave undisturbed the text and implementation details” to which the parties agreed. Gov’t Resp. 1. But, unlike the Manufacturers’ circumscribed set of proposed modifications, the Government’s proposals far exceed the changes necessitated by the Corrective Statements Opinion. The Government would modify the Consent Order’s “Trigger Date,” which stays implementation of the corrective statements until litigation regarding the Consent Order concludes, and would change the look and feel of the television spots. See id. at 23-28. Altering these negotiated terms would violate the “essence of the parties’ bargain.” Pigford, 292 F.3d at

927.

Trigger Date. The Government asserts that the Court can modify the Trigger Date provision simply “[b]ecause the language of the Corrective Statements is being changed.” Gov’t Resp. 24 (citing Order #51-Remand, § VI(5)). The Government’s position is untenable in light of the scope and scale of the parties’ negotiations and their eventual agreement. The parties did not spend more than a year trying to anticipate every implementation detail that might arise only to have the whole agreement upended by even the smallest change to the language of the corrective statements. Quite the contrary, as the parties explained to this Court, they understood that “pulling on any single thread of the complex agreement could cause the whole to unravel,”

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D.E. 6081, at 13, and went to great lengths to ensure that the agreement remained as intact as possible. The parties therefore included the reservation-of-rights clause to facilitate implementation changes necessitated by future textual alterations, but also made clear that no party could unilaterally modify the agreement. Order #51-Remand, § VI(10). Allowing unfettered amendments to the Consent Order would nullify that agreement and take the parties back to square one. All implementation details would then need to be briefed and ruled upon, a result that is in no one’s interest.

The Government is also wrong that Defendants have already received the full benefit of their bargain on the Trigger Date because the corrective-statements remedy was not implemented during the last appeal to the D.C. Circuit. See Gov’t Resp. 25-26. As the Government acknowledges, Defendants have consistently emphasized their right to appeal the language of the corrective statements, see id. at 23 n.11, and Defendants agreed to many otherwise-objectionable implementation terms in exchange for a stay pending appeal of the corrective statements’ language. Because the D.C. Circuit remanded the case for further proceedings instead of requiring specific textual changes that could be implemented immediately—and, in fact, denied the Government’s petition for rehearing requesting that the court endorse specific substitute language—the appellate process is not yet concluded. The possibility of a multi-stage appeal was foreseeable to all parties when the Consent Order was negotiated, and the fact that the D.C. Circuit remanded the preambles to this Court without even reaching Defendants’ First Amendment arguments neither changes the fact that Plaintiffs agreed to the stay provision nor satisfies their “heavy burden” to show that they “should be relieved” from the terms of their agreement. Rufo, 502 U.S. at 385; see also id. (“[M]odification [of a consent order] should not

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be granted where a party relies upon events that actually were anticipated at the time it entered into a decree.”).

To modify the Trigger Date provision now would deny Defendants the benefit of the bargain for which they negotiated. Defendants insisted on the Trigger Date language because they would suffer substantial irreparable harm—documented at length in declarations attached to their opening brief—if the corrective statements were published while an appeal was pending. See Mfrs.’ Opening Br. 34-35. The Government cannot pocket the concessions that Defendants made to secure the Trigger Date provision as part of the parties’ overall agreement while at the same time depriving Defendants of that critical term.6

Television. The Government identifies no reason for this Court to depart from the parties’ binding agreement and adopt the Government’s proposed television spots over Defendants’ versions. The Government does not deny that the gender, tone, and delivery of the voiceover in their TV spots are different from the ones the parties agreed upon. It instead insists that any differences are “incidental and immaterial.” Gov’t Resp. 28. The Manufacturers

6 As the Government notes, the parties have different understandings of the current status of the corrective-statements obligations assigned to “Brown & Williamson” in Order #1015. Gov’t Resp. 24 n.12. The parties agreed that the number of television spots would reflect the outcome of further litigation on that matter. Order #51-Remand, § VI(4). There is no reason for the Government now to renege on that agreement—or for this Court to accept the Government’s proposal to do so. Nor should RJRT’s due process rights be violated simply because adjudication of that issue has not yet concluded. RJRT filed its motion for relief promptly after this Court entered the Consent Order. See D.E. 6103 (filed June 11, 2014). Nearly a year passed before this Court denied the motion. See Order #55-Remand (May 28, 2015). RJRT filed a timely notice of appeal and promptly submitted all preliminary materials requested by the D.C. Circuit. As the Government notes, the D.C. Circuit has not yet issued a scheduling order. Neither the Government nor Intervenors have sought to expedite the appeal, or even approached RJRT about the idea of doing so. RJRT has not sought expedited treatment because the Consent Order stays implementation of the corrective statements until the conclusion of all appeals about the text, and the Brown & Williamson appeal is already queued up ahead of any further appeals that either side may take from this Court’s order amending the text of the preambles.

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disagree. See Mfrs.’ Opening Br. 38-39. But if the tone and delivery differences are truly “incidental and immaterial,” then the Government should have no objection to using the voiceover in the television spots that Defendants produced, as the parties previously agreed. See Order #51-Remand, § VI(3) (Defendants are “responsible for the production of all Corrective Statements”).7

CONCLUSION

The Court should adopt the Manufacturers’ proposed corrective statements and amended

implementation order, and reject the alternatives proposed by the Government.

Dated: November 25, 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.

7 Plaintiffs’ accusation that Defendants breached mediation confidentiality by describing the manner in which the parties developed and exchanged mock-ups is baseless. See Gov’t Resp. 27 n.15; Intervenors Resp. 19 n.16. Defendants did not reveal any information about any party’s position or the substance of the mediation discussions. Rather, Defendants described what is evident from the Consent Order—that Defendants, as the parties responsible for the production of all Corrective Statements, created the mock-ups that the Consent Order requires them to implement. See Order #51-Remand, § VI(3); see also id. Exs. C & D (including “Philip Morris USA” header on print and online newspaper mock-ups).

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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)

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.

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