USA v PHILIP MORRIS, et. al. #6249: MEMORANDUM OPINION AND ORDER, Feb 27, 2018

February 27, 2018 5:41 pm by Gene Borio

The PDF is Here

EXCERPT:

In 2006, Judge Gladys Kessler of this Court issued a 1,600-page opinion and a final judgment and remedial order…Since that date, this case has been to the United States Court of Appeals for the District of Columbia Circuit on a number of occasions. The court of appeals has largely affirmed Judge Kessler’s factual findings, legal conclusions, and remedial directives.

. . .

Having reviewed the parties’ briefings and the record in this case, the Court does not believe that now is the time to seek enforcement or move to hold defendants in contempt of court. The parties have come too far. Continued good faith negotiations will provide the most expedient avenue for all parties to resolve the very few and discrete issues that remain. Such negotiations should resume promptly and proceed apace. If necessary, the Court will resolve whether resolution requires the assistance of Judge Levie.

Accordingly, it is hereby

ORDERED that the parties shall appear for a hearing at 10:00 a.m. on March 13, 2018. Should the parties resolve the remaining issues prior to the hearing, they may file a proposed second superseding consent order for websites and onserts or a motion to continue the hearing indicating that such a proposed consent order is forthcoming. Otherwise, the parties shall appear to explain to the Court why resolution of these issues has not yet occurred and argue their respective positions on the Court’s referral of this matter to the Special Master.

END EXCERPT

FULL TEXT:

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 (PLF)

____________________________________

MEMORANDUM OPINION AND ORDER

In 2006, Judge Gladys Kessler of this Court issued a 1,600-page opinion and a final judgment and remedial order in the above captioned case finding that the defendants had made false, deceptive, and misleading statements and mandating that they publish corrective statements as a remedy. See United States v. Philip Morris USA, Inc., 449 F. Supp. 2d 1 (D.D.C. 2006). These corrective statements were to be published in newspapers and on their corporate websites and disseminated through television, advertisements, onserts and retail displays. See id. at 925-41. Since that date, this case has been to the United States Court of Appeals for the District of Columbia Circuit on a number of occasions. The court of appeals has largely affirmed Judge Kessler’s factual findings, legal conclusions, and remedial directives.

In its most recent opinion, the court of appeals directed two changes to the text of the corrective statements required by Judge Kessler in Order #64-Remand (Apr. 19, 2016) [Dkt. No. 6195]. See United States v. Philip Morris USA, Inc., 855 F.3d 321 (D.C. Cir. 2017). First, the court of appeals removed four words from the preamble to each of the five corrective statements: “Here is the truth.” See id. at 325-26. As a result, the preamble now reads: “A

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Federal Court has ordered [Defendants] to make this statement about [the topic of the statement].” See id. at 326. Second, with respect to the corrective statement for low tar, light, ultra-light, mild, and natural cigarettes (referred to as “Statement C”), the court of appeals agreed with the defendants that the “statement about selling and advertising low tar and light cigarettes as less harmful than regular cigarettes” was impermissibly “backward-looking.” See id. at 328-29. It suggested three possible alternative descriptions that would be permissible under both the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and the First Amendment. See id. at 329. For these two reasons – and only these reasons – the court of appeals remanded the matter to this Court for further proceedings. In doing so, the court explicitly noted: “[W]e see no reason why extensive proceedings will be required in the district court. With the minor revisions mandated in this opinion, the district court can simply issue an order requiring the corrected statements remedy to go forward.” See id.

And that is precisely what Judge Kessler did. On remand, she deleted the text “Here is the truth” from the preamble language and selected one of the three alternatives proffered by the court of appeals – the one she considered to be the “simplest and clearest to understand and . . . easiest for the public to understand.” See United States v. Philip Morris USA, Inc., 257 F. Supp. 3d 1, 4 (D.D.C. 2017). And she ordered that the parties would be governed by these revised corrective statements. See Order #67-Remand (June 27, 2017) [Dkt. No. 6208].

Since that time, the parties have worked together to agree upon and propose a superseding consent order with respect to the corrective statements and each of the modes of communication. They reported their progress first to Judge Kessler, and more recently to the undersigned, in periodic status reports. The parties succeeded in negotiating a second

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superseding consent order implementing the corrective statements for newspapers and television, but not for websites or cigarette package onserts. On October 5, 2017, the Court issued Order #72-Remand [Dkt. No. 6227] approving the second superseding consent order for newspapers and television.

It now appears that the parties have hit a snag in finalizing the implementation plans for websites and onserts, and the defendants and remedies parties have filed a motion seeking the aid of the Special Master in this case.1 After months of negotiation, only a few issues remain to be resolved regarding the implementation of corrective statements for websites and onserts. The defendants and remedies parties explain:

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1 In connection with the pending motion, the Court has reviewed the following filings and exhibits attached thereto: Defendants’ and Remedies Parties’ Motion for Referral to the Special Master for Mediation, or, in the Alternative for Clarification (“Mot.”) [Dkt. No. 6245], Plaintiffs’ Opposition to the Motion (“Opp’n”) [Dkt. No. 6247], and the Reply Brief of Defendants and Remedies Parties in Support of the Motion (“Reply”) [Dkt. No. 6248].

As to websites, the parties have agreed on updated mockups for 9 of the 14 websites at issue, including mockups for all websites presented by the Remedies Parties. All that remains in dispute is a narrow range of details regarding the mockups for five of Defendants’ brand-specific websites, where outstanding items relate to issues such as font sizes and background colors. As to onserts, the parties have agreed on all mockups for Philip Morris USA. The parties disagree on a single discrete issue regarding mockups for R.J. Reynolds Tobacco Company and ITG Brands, LLC – namely, whether a solid, right-facing triangle needs to appear on the front of each onsert to indicate that the text continues on the back. Resolution of these few remaining issues is all that separates the parties from a final agreement on a superseding consent order for websites and onserts.

See Mot. at 3-4. The defendants and remedies parties ask the Court to refer these few remaining issues to the long-time Special Master in this litigation, retired Judge Richard A. Levie, and request that he mediate the parties’ differences and help them reach agreement as quickly as

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“[C]ompared to the agreements already reached,” the defendants and remedies parties explain, “these remaining issues are limited and the gaps can be bridged.” See id. at 5.

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In its opposition, theplaintiff argues that the Court does not have the authority to compelmediationbefore the Special Master–including under its inherentpowers–absent all parties’ consent, nor is theregood reason to do so.SeeOpp’nat 10-15. Furthermore, the plaintiff takes the position thatthe deadlines set forth in Order #64-Remandremainin full force withrespect to websitesand onsertsand,as a result,thatit may seek enforcement at any time. Seeid. at 18-22.3The plaintiff thusasks that the Court not bar the plaintiff from seeking enforcement, as thealternative would amount to “mandatory and seeminglyopen-ended mediation.”Seeid. at 9, 15-18.

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2The motion makes clear that most of the unresolved issues involve the plaintiffand defendants, as the remedies parties do not have any remaining websiteimplementation issuesand have only oneremaining issue regarding onserts. The remedies parties join the defendants, however,in theirrequestto have all remaining issues resolved by the Special Master.

3The parties propose conflicting interpretations ofOrder #64-Remand. Although the plaintiffhas engaged in negotiations with thedefendantsand remedies parties, it asserts that thisfactdoes not negate the rightto seek enforcement ofthe deadlines set forth in Order #64-Remand. SeeOpp’n at21. If the defendantsand remedies parties want certainty in the face of these deadlines(and protection froma threatened contempt motion), the governmentarguesthattheymay implement mock-up designs that are substantially similar to the 2014 designs(under Order #64-Remand’s safe harbor provision) or submit proposed new designs and ask theCourt to determine whether these new designs meet the comparative prominence standard (afterallowing the parties to brief the issue).Seeid. at 17.The defendants and remedies parties, on the other hand, point to the plain language of Order #64-Remand, which states: “Should thelanguage of the Corrective Statements be changedas a result of further litigation, the partiesreserve the right to seekdifferentrequirements than those stated herein.” SeeMot. at 9;Order #64-Remand at 32. Thedefendantsand remediesparties argue that this provision was written with the appeal to theD.C. Circuit in mind and, because the D.C. Circuit did subsequently strikedown portions of the corrective statements’ text, the plain language of Order #64-Remand nowpermits any party to seek different implementation requirements.SeeMot. at 9; Reply at 8-9. Furthermore, the defendants and remedies partiesattach the current mock-ups to their reply brief, asking that if the Court will not order the parties to mediationbefore the Special Master, it permitthe defendants and remedies parties to proceed with implementation without post hoc second guessing or the threat ofa contempt motion. SeeReply at 13-14; Mot. at 12-14. 4

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Having reviewed the parties’ briefings and the record in this case, the Court does not believe that now is the time to seek enforcement or move to hold defendants in contempt of court. The parties have come too far. Continued good faith negotiations will provide the most expedient avenue for all parties to resolve the very few and discrete issues that remain. Such negotiations should resume promptly and proceed apace. If necessary, the Court will resolve whether resolution requires the assistance of Judge Levie.

Accordingly, it is hereby

ORDERED that the parties shall appear for a hearing at 10:00 a.m. on March 13, 2018. Should the parties resolve the remaining issues prior to the hearing, they may file a proposed second superseding consent order for websites and onserts or a motion to continue the hearing indicating that such a proposed consent order is forthcoming. Otherwise, the parties shall appear to explain to the Court why resolution of these issues has not yet occurred and argue their respective positions on the Court’s referral of this matter to the Special Master.

SO ORDERED.

__________/s/______________

PAUL L. FRIEDMAN

United States District Judge

DATE: February 27, 2018

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