After the landmark decision holding major tobacco companies liable for violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), the tobacco industry attempted to vacate the remedies imposed by the court. The case is ongoing, with the industry continuing to challenge various portions aspects of the remedies imposed. This synopsis pertains specifically to the determination by the U.S. Court of Appeals for the D.C. Circuit that violations under RICO are not rendered moot or otherwise superseded by the Tobacco Control Act.
On September 22, 1999, the U.S. Department of Justice (“DOJ”) sued several of the largest tobacco companies in federal district court for civil violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”). On August 17, 2006, Judge Kessler of the U.S. District Court for the D.C. Circuit issued a 1,683-page opinion holding the tobacco companies liable for violating RICO due to their participation in a decades-long scheme to defraud the public about the health risks and addictiveness of smoking. For more about the opinion and its key portions, see The Verdict is In: Findings from United States v. Philip Morris. In part, the district court determined that there was a reasonable likelihood that the companies would commit RICO violations in the future and imposed a set of restrictions that, among other things, prohibited the companies from making false or deceptive statements about cigarettes and their health impact and required disclosures of marketing and sales information to the public and the DOJ. On May 22, 2009, the U.S. Court of Appeals for the D.C. Circuit largely affirmed the district court opinion and these remedies.
In June 2009, just one month after the court issued its order, the Tobacco Control Act (“TCA” or “Act”) was signed into law, granting the FDA comprehensive regulatory authority over the marketing, manufacture, and distribution of cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco, and any other tobacco products the FDA deems to be subject to the Act’s requirements. The TCA imposed strict restrictions on the conduct of manufacturers, including limiting marketing, prohibiting false or misleading labeling, restricting claims of modified risk, and requiring warning labels.
District Court Proceedings
After the TCA was signed into law, the tobacco companies that were defendants in the RICO case filed a motion to vacate, or set aside, the requirements imposed by the court in its 2006 decision. The companies argued that the TCA’s restrictions on their conduct deprived the district court of ongoing jurisdiction by eliminating any likelihood that the companies would commit further RICO violations. In the alternative, the companies argued that the court should vacate the injunctions out of deference to FDA, which as of the TCA’s enactment had primary jurisdiction over cigarette sales and marketing. On June 1, 2011, the district court rejected the tobacco companies’ arguments, refusing to set aside the 2006 ruling. The tobacco companies appealed.
Proceedings in the U.S. Court of Appeals for the District of Columbia
On July 27, 2012, the U.S. Court of Appeals for the D.C. Circuit affirmed the 2011 decision of the district court. First, the appeals court rejected the tobacco companies’ argument that the Tobacco Control Act made the requirements imposed by the district court irrelevant or unnecessary. Specifically, the Court of Appeals found that the Act’s restrictions did not make it impossible for the companies to commit future RICO violations—it “simply subjected the [companies] to the comprehensive regulatory oversight of the FDA. Moreover, “in light of the defendants’ history of non-compliance with various legal requirements,” there was no reason for the district court to conclude that the companies would be deterred by the legal restrictions imposed by the Act. The court also noted that relevant provisions of the Tobacco Control Act were the subject of ongoing litigation in another case; in other words, even as the companies were arguing in this case that the Act would prevent further RICO violations, the companies were simultaneously trying to limit their obligations under the Act by challenging its provisions in Discount Tobacco City & Lottery, Inc. v. United States.
The appeals court also rejected the companies’ argument that the district court should defer to the FDA, which now had primary authority over tobacco products. The court found the doctrine of “primary jurisdiction” inapplicable to the circumstances here, where the court had particular expertise in the tobacco companies’ likelihood to commit further RICO violations. The court had, after all, presided over 13 years of litigation, nine months of trial, and issued 4,000 findings on the matter, giving it “unique insight into the defendants’ tendency to circumvent or ignore the law.” Furthermore, the court noted that Congress was well aware of the ongoing litigation when it passed the TCA, having included an explicit provision stating that it should not be interpreted to affect any pending legal action.
The tobacco industry did not seek review of the appellate court’s decision. The district court’s decision not to vacate the injunctions still stands. However, the litigation is ongoing, as the industry continues to press other challenges to the RICO remedies imposed by Judge Kessler.