RICO

United States v. Phillip Morris, 449 F. Supp. 2d 1 (D.D.C.2006)

To partially remedy the long history of “false and misleading [health] claims” in which tobacco manufacturers engaged, a court has issued language that tobacco manufacturers will have to include on all their future advertising.

On November 27, 2012, Senior U.S. District Judge Gladys Kessler issued an order requiring specific statements to be made by tobacco manufacturers as a result of her 2006 United States v. Phillip Morris decision.  In her landmark decision, Judge Kessler found tobacco companies defrauded the public in violation of the Racketeer Influenced and Corrupt Organizations Act [RICO] by concealing known health risks of smoking, including the addictiveness of cigarettes and nicotine.   The 2006 1,683 page opinion also detailed tactics employed by tobacco companies to market their products directly to youth.

As part of the remedy, Judge Kessler ordered companies to issue statements about the dangers associated with tobacco products; the statements must appear in advertisements designed to correct “false and misleading claims” made in the past. Each corrective ad is to be prefaced by a statement that a federal court has concluded that the defendant tobacco companies “deliberately deceived the American public about the health effects of smoking.”  The issuance of the corrective statements was delayed because the tobacco companies appealed Judge Kessler’s initial decision, which was up upheld by the U.S. Court of Appeals in 2009. The corrective statements issued by Judge Kessler were largely based on those proposed by the U.S. Department of Justice (which brought the original suit).

In issuing the corrective statements, the court identified five categories of fraud in which tobacco companies had engaged, based on the explicit findings in the 2006 opinion. According to Judge Kessler, the depth and nature of tobacco companies’ deception over a period of several decades coupled with the likelihood that they would violate RICO in the future necessitated more complex corrective statements than may be otherwise warranted. Each corrective statement falls within one of the five categories:

  • Category 1: Adverse Health Effects of Smoking
    • Smoking kills, on average, 1,200 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 and uterus.
  • Category 2: 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.
  • Category 3: Lack of Significant Health Benefit from Smoking “Low Tar,” “Light,” “Ultra Light,” “Mild,” and “Natural” 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 filtered 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-including lights, low tar, ultra lights, and naturals. There is no safe cigarette.
  • Category 4: Manipulation of Cigarette Design and Composition to Ensure Optimum Nicotine Delivery
    • Defendant 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
  • Category 5: Adverse Health Effects of Exposure to Secondhand Smoke
    • Secondhand smoke kills over 3,000 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.

Each corrective statement will follow a preamble that states: “A Federal Court has ruled that Altria, R.J. Reynolds Tobacco, Lorillard, and Philip Morris USA deliberately deceived the American public about [particular topic], and has ordered those companies to make this statement. Here is the truth:”

Prior to the November 2012 issuance of the statements, tobacco companies argued the statements should solely address the health effects and addictiveness of their products. The statements required to be issued address health effects, but also bring attention to tobacco companies’ prior deceptive actions and statements to manipulate the public into believing there were “safer” tobacco products and intentionally make tobacco products more addictive. The tobacco companies liken the statements to “forced public confessions” designed to humiliate companies and appealed the corrective statements Judge Kessler ordered.

In 2015, the Court of Appeals upheld the statements but ordered that the preamble, which identified the reason for the statements, be reworded to look to the future, rather than identify the tobacco companies’ prior bad acts. A revised preamble simply stating that the defendants have been ordered to make the statement (without mentioning their prior deception) was proposed by the Department of Justice; however, the tobacco companies then implored the court to go back to the drawing board and rewrite the corrective statements themselves–despite the fact that the Court of Appeals upheld them. Judge Kessler, recognizing the industry’s efforts for what they are, stated in her February 8, 2016 order: “[Defendants’ request to revisit the corrective statements] is ridiculous — a  waste of precious time, energy, and money for all concerned — and a loss of information for the public. The Court has no intention of following that path, although it is obvious that Defendants are, once again, attempting to stall any final outcome to this long-standing litigation.” She then accepted the revised wording of the preamble.

On November 1, 2016, the Court of Appeals for the D.C. Circuit upheld a portion of Kessler’s ruling holding one of the plaintiffs, Reynolds American [formerly R.J.Reynolds], responsible for the share of corrective statements attributable to former plaintiff Brown & Williamson, which had merged with R.J. Reynolds in 2004.

This ruling decision is important because it clears yet another Industry-created obstacle to implementation of the court-ordered corrective statements. The “sole” remaining hurdle is Industry’s current challenge to the substance of the statements; while this promises to be a significant battle, this challenge is the tobacco companies’ final appeal. Perhaps we will see corrective statements on cigarette packages by the end of 2018.