Tobacco Companies, Justice Department Ask High Court to Review Civil RICO Decision

This posting was written by Mark Engstrom, Editor of CCH RICO Business Disputes Guide.

In five separate petitions, six tobacco companies have asked the U.S. Supreme Court to review a 2009 RICO decision (United States v. Philip Morris USA, Inc., CCH RICO Business Disputes Guide ¶11,688), which affirmed a finding that the companies were liable for conducting the affairs of a RICO enterprise, through a pattern of mail and wire fraud, in a scheme to deceive consumers about the adverse health effects of cigarette smoking.

The United States Department of Justice (DOJ) also filed a petition for review of that decision. The DOJ asked the Court to review the denial of its request for disgorgement.

Tobacco Company Petitions

The tobacco companies—Philip Morris, Altria Group, R.J. Reynolds, Brown & Williamson, British American Tobacco, and Lorillard—asked the Court to review various constitutional, jurisdictional, and liability issues, as well as issues concerning injunctive relief.

Philip Morris asked the court to decide: (1) whether the First Amendment required an appellate court to conduct an independent review when a district court finds that speech is fraudulent and thus not protected by the Constitution; (2) whether the federal court may exercise injunctive jurisdiction under RICO and Article III of the Constitution when there is no statutory enterprise and when any reasonable likelihood of future violations has been extinguished; and (3) whether injunctions tracking broad statutory commands may be upheld.(Philip Morris USA, Inc. v. United States, Docket No. 09-976, filed February 19, 2010)

Altria Group petitioned the court to decide whether a corporation in a RICO case could demonstrate a specific intent to defraud through “collective knowledge.” (Altria Group v. United States, Docket No. 09-979, filed February 19, 2010).

R.J. Reynolds asked the Court to decide whether the D.C. Circuit had: (1) erroneously imposed liability for “light” and “low-tar” cigarette descriptors; (2) erred by imposing a remedy that required corrective statements; (3) improperly failed to review facts relating to the Constitutional protection of the defendants’ speech, and (4) erred by deeming speech that discussed “matters of public concern” fraudulent. (R.J. Reynolds Tobacco Company and Brown & Williamson Holding Company v. United States, Docket No. 09-977, filed February 19, 2010)

Lorillard sought a determination of whether: (1) a group of corporations could constitute an association-in-fact enterprise; (2) the appellate court should have conducted an independent review of the district court’s factual findings implicating the First Amendment right to free speech; (3) a wide range of non-commercial speech could be deemed fraudulent when the speech involved important public controversies and scientific opinions, no person associated with Lorillard possessed a specific intent to defraud, and evidence failed to show that the speech was material to a reasonable consumer; (4) the use of “light” and “low tar” was protected by the First Amendment when the Federal Trade Commission had approved the method used to measure tar and nicotine levels; and (5) the appellate court properly affirmed an injunction that tracked broad statutory commands, compelled corrective statements, and failed to find a reasonable likelihood of future RICO violations. (Lorillard Tobacco Company v. United States, Docket No. 09-1012, February 19, 2010)

British American Tobacco asked the Court to decide whether the Circuit court had improperly: (1) ignored the traditional presumption against extraterritoriality and the “affirmative evidence” that Congress had never intended RICO to apply extraterritorially; (2) borrowed from federal securities and antitrust cases the “ill-suited” domestic effects test as a measure of RICO’s extraterritorial reach; (3) approved a version of the effects test that conflicted with the test used by other circuits; and (4) relied on the effects of the domestic conduct of BAT’s co-defendants and of the overall RICO scheme. (British American Tobacco (Investments) Limited v. United States of America, Docket No. 09-980, filed February 19, 2010)

Justice Department Petition

In its petition, the Justice Department requested that the Court determine whether RICO categorically barred the disgorgement of ill-gotten gains and other equitable relief that was designed to redress the “continuing consequences of RICO violations.” (United States v. Philip Morris, Docket No. 09-978, filed February 19, 2010)