United States v. Philip Morris USA ( 2011 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA, :
:
Plaintiff, :
: Civil Action No.
v. : 99-2496 (GK)
:
PHILIP MORRIS USA, Inc., :
et al. :
:
Defendants. :
MEMORANDUM OPINION
This civil action brought by the United States under the
Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18
U.S.C. §§ 1961-1968, is now before the Court on Defendant’s Motion
for Vacatur [Dkt. No. 5880]. Upon consideration of the Motion,
Oppositions, Reply, and the entire record herein, and for the
reasons stated below, Defendants’ Motion for Vacatur is denied.
I. BACKGROUND
On August 17, 2006, this Court issued a lengthy opinion
finding that all Defendants “(1) have conspired together to violate
the substantive provisions of RICO, pursuant to 18 U.S.C. §
1962(d), and (2) have in fact violated those provisions of the
statute, pursuant to 18 U.S.C. § 1962(c).” U.S. v. Philip Morris
USA, Inc., et al., 449 F. Supp. 2d 1, 26 (D.D.C. 2006). In
particular, the Court held that Defendants “knowingly and
intentionally engaged in a scheme to defraud smokers and potential
smokers, for purposes of financial gain, by making false and
fraudulent statements, representations, and promises.” Id. at 852.1
The resulting injunctive relief rested on a finding that there
was a reasonable likelihood that Defendants would continue to
violate RICO in the future. Philip Morris, 449 F. Supp. 2d at 908-
919. After a nine-month bench trial, and based on a considerable
factual record, this Court found that the “evidence in this case
clearly establishes that Defendants,” with the exception of several
parties who have since been dismissed, “have not ceased engaging in
unlawful activity.” Id. at 910. Further, “[e]ven after the
Complaint in this action was filed in September 1999, Defendants
continued to engage in conduct that is materially indistinguishable
from their previous actions, activity that continues to this
day.” Id.
Accordingly, the Court imposed an array of injunctive measures
in order to prevent future violations of RICO. Id. at 937-945. On
May 22, 2009, the Court of Appeals for the District of Columbia
Circuit affirmed this Court’s judgment of liability and affirmed
major provisions in its remedial order. U.S. v. Philip Morris USA,
Inc., et al., 566 F.3d 1095, 1150 (D.C. Cir. 2009), cert. denied,
130 S. Ct. 3501 (2010). The specifics of the remanded portions of
injunctive relief continue to be litigated in this Court.
1
The extensive factual findings of the Court may be found at
Philip Morris, 449 F. Supp. 2d at 34-851.
2
On June 22, 2009, President Barack Obama signed the Family
Smoking Prevention and Tobacco Control Act (the “Tobacco Control
Act” or the “Act”) into law. Pub. L. No. 111-31, 123 Stat. 1776(2009). Congress found that “[t]he use of tobacco products by the
Nation’s children is a pediatric disease of considerable
proportions that results in new generations of tobacco-dependent
children and adults” and that “Federal and State public health
officials, the public health community, and the public at large
recognize that the tobacco industry should be subject to ongoing
oversight.” Pub. L. No. 111-31, §§ 2(1), (8), 123 Stat. at 1777,
codified at 21 U.S.C. § 387 note. Accordingly, Congress amended the
Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq., in
order “to provide the authority to the Food and Drug Administration
to regulate tobacco products.” Pub. L. No. 111-31, § 3(1), 123
Stat. at 1781, codified at 21 U.S.C. § 387 note. Notably, Congress
expressly provided that “[n]othing” in the Tobacco Control Act
“shall be construed to . . . affect any action pending in Federal,
State, or tribal court.” Pub. L. No. 111-31, § 4(a), 123 Stat. at
1782, codified at 21 U.S.C. § 387 note.
After the Tobacco Control Act was passed into law, Defendants
petitioned for rehearing en banc by the Court of Appeals on the
ground that the Act extinguished jurisdiction for prospective
relief. Defendants filed a separate “Suggestion of Mootness and
Motion for Partial Vacatur” before that court, contending that the
3
Act rendered the case moot. In opposing those motions, the
Government argued, in part, that Defendants should properly bring
their arguments before this Court first. The Court of Appeals
denied the motions, and the Supreme Court denied Defendants’
subsequent petition for writ of certiorari. United States v. Philip
Morris USA, Inc., No. 06-5267 (D.C. Cir. Sept. 22, 2009); Philip
Morris USA, Inc. v. United States, 130 S.Ct. 3501 (2010).
On September 15, 2010, this Court held the first of several
scheduling conferences intended to establish a briefing schedule
for resolving the four discrete remedial issues remanded by the
Court of Appeals.2 On March 3, 2011, Defendants filed a Motion for
Vacatur, contending that the Tobacco Control Act in whole or in
significant part extinguished this Court’s jurisdiction or, in the
alternative, that this Court should decline to move forward with
any injunctive remedy in deference to the FDA’s new regulatory
authority. On April 4, 2011, the Government (“Gov.’s Opp’n”) [Dkt.
2
The Court of Appeals remanded the case with directions to
(1) evaluate the extent to which Brown & Williams Holdings is
reasonably likely to commit future violations; (2) determine which
subsidiaries of the Defendants should be included in the remedial
order; (3) reformulate the prohibition on the use of health
messages or descriptors to exempt foreign activities that have no
substantial, direct, and foreseeable domestic effects; and (4)
consider the rights of innocent third parties and clarify
accordingly the remedial order’s provisions regarding point-of-sale
displays. Philip Morris, 566 F.3d at 1150. The Court of Appeals
also ordered this Court to dismiss CTR and TI from the suit, as
those organizations had dissolved, id., and that was done in Order
#7-Remand [Dkt. No. 5846]. The Court has already addressed the
first two issues, in Orders #7-Remand and #13-Remand [Dkt. No.
5877].
4
No. 5907] and the Public Health Intervenors (“PHI’s Opp’n”) [Dkt.
No. 5908] filed separate Oppositions. On April 15, 2011, Defendants
filed their Reply [Dkt. No. 5920].
II. STANDARD OF REVIEW
Defendants contest this Court’s subject matter jurisdiction
pursuant to Federal Rule of Civil Procedure 12(h)(3), which
instructs that “[w]henever it appears by suggestion of the parties
or otherwise that the court lacks jurisdiction of the subject
matter, the court shall dismiss the action.” Although Defendants do
not cite Rule 12(b)(1), Defendants’ Rule 12(h)(3) motion must be
treated as a challenge to subject matter jurisdiction under Rule
12(b)(1), which “may be raised by a party, or by a court on its own
initiative, at any stage in the litigation, even after trial and
the entry of judgment.” Arbaugh v. Y & H Corp., 546 U.S. 500, 506,
126 S.Ct. 1235, 1240, 163 L.Ed.2d 1097 (2006); Harbury v. Hayden,
444 F. Supp. 2d 19, 26 (D.D.C. 2006) (“When faced with what a party
characterizes as a Rule 12(h)(3) motion, a court should treat the
motion as a traditional Rule 12(b)(1) motion for lack of subject
matter jurisdiction.”) (citing Haase v. Sessions, 835 F.2d 902,
905-06 (D.C. Cir. 1987)).
In general, under Rule 12(b)(1), the plaintiff bears the
burden of proving by a preponderance of the evidence that the Court
has subject matter jurisdiction. See Shuler v. U.S., 531 F.3d 930,
932 (D.C. Cir. 2008). In reviewing a motion to dismiss for lack of
5
subject matter jurisdiction, the Court must accept as true all of
the factual allegations set forth in the Complaint; however, such
allegations “will bear closer scrutiny in resolving a 12(b)(1)
motion than in resolving a 12(b)(6) motion for failure to state a
claim.” Wilbur v. CIA, 273 F. Supp. 2d 119, 122 (D.D.C.
2003)(citations and quotations omitted). The Court may rest its
decision on its own resolution of disputed facts. Id.III. ANALYSIS
Defendants argue that the Tobacco Control Act provides two
separate grounds for vacating some or all of the Court’s factual
findings and remedial order. First, Defendants contend that the Act
removes this Court’s jurisdiction because it renders the Defendants
unlikely to commit further RICO violations. Defs.’ Mot. 14-18.
Second, Defendants argue that, even if this Court does continue to
have jurisdiction over the Government’s claims, it should decline
to order injunctive relief pursuant to the doctrine of primary
jurisdiction. Id. at 19-22.
A. Jurisdiction Under RICO
Defendants argue that, “[i]n light of the extensive federal
regulatory requirements imposed by the Act, there is no ‘realistic
threat’ or reasonable likelihood that the RICO violations on which
this Court premised its forward-looking injunctive relief will
reoccur in the future.” Id. at 18. The Government responds that the
Defendants’ “request for vacatur turns entirely on the
6
unsubstantiated factual assertion” that the Act renders Defendants
unlikely to engage in further joint racketeering activity. Gov.’s
Opp’n 10.
As the D.C. Circuit explained in a prior phase of this
litigation, this Court’s “jurisdiction is limited to forward-
looking remedies that are aimed at future violations.” United
States v. Philip Morris USA Inc., 396 F.3d 1190, 1198 (D.C. Cir.
2005). This Court has already held that:
To obtain injunctive relief in this Circuit, a
plaintiff must show that the defendant’s past
unlawful conduct indicates a “‘reasonable
likelihood of further violation(s) in the
future.’” SEC v. Kenton Capital, Ltd., 69 F.
Supp. 2d 1, 15 (D.D.C. 1998) (Kollar-Kotelly,
J.) (quoting SEC v. Savoy Ind., Inc., 587 F.2d
1149, 1168 (D.C. Cir. 1978)); SEC v.
Bilzerian, 29 F.3d 689, 695 (D.C. Cir. 1994).
To determine whether there is a “reasonable
likelihood” of future violations, the
following factors must be considered: “(1)
whether a defendant’s violation was isolated
or part of a pattern, (2) whether the
violation was flagrant and deliberate or
merely technical in nature, and (3) whether
the defendant's business will present
opportunities to violate the law in the
future.” [SEC v. First City Fin. Corp., 890
F.2d 1215, 1228 (D.C. Cir. 1989)] (citing
Savoy Indus., 587 F.2d at 1168); Bilzerian, 29
F.3d at 695. None of these three factors is
determinative; rather, “the district court
should determine the propensity for future
violations based on the totality of
circumstances.” First City, 890 F.2d at 1228
(citing SEC v. Youmans, 729 F.2d 413, 415 (6th
Cir. 1984)).
7
United States v. Philip Morris, Inc., 116 F. Supp. 2d 131, 148
(D.D.C. 2000). “In addition, the requisite ‘reasonable likelihood’
of future violations may be established by inferences drawn from
past conduct alone.” Philip Morris, 449 F. Supp. 2d at 908.
After a nine-month bench trial, this Court made extensive
factual findings, which provided a firm basis for exercising its
authority under RICO. Most notably, the Court found:
Defendants’ RICO violations were not
“isolated.” On the contrary, the Findings of
Fact describes more than 100 predicate acts
spanning more than a half-century. Second,
Defendants’ RICO violations were not
“technical in nature.” As discussed above,
Defendants’ numerous misstatements and acts of
concealment and deception were made
intentionally and deliberately, rather than
accidentally or negligently, as part of a
multi-faceted, sophisticated scheme to
defraud. Third, as this Court has already
found, Defendants’ business of manufacturing,
selling and marketing tobacco products
“present[s] opportunities to violate the law
in the future.” Philip Morris, 116 F. Supp. 2d
at 149 (alteration in original). As the
Government points out, as long as Defendants
are in the business of selling and marketing
tobacco products, they will have countless
“opportunities” and temptations to take
similar unlawful actions in order to maximize
their revenues, just as they have done for the
past five decades.
....
The evidence in this case clearly establishes
that Defendants have not ceased engaging in
unlawful activity. Even after the Complaint in
this action was filed in September 1999,
Defendants continued to engage in conduct that
is materially indistinguishable from their
previous actions, activity that continues to
this day. For example, most Defendants
continue to fraudulently deny the adverse
8
health effects of secondhand smoke which they
recognize internally; all Defendants continue
to market “low tar” cigarettes to consumers
seeking to reduce their health risks or quit;
all Defendants continue to fraudulently deny
that they manipulate the nicotine delivery of
their cigarettes in order to create and
sustain addiction; some Defendants continue to
deny that they market to youth in publications
with significant youth readership and with
imagery that targets youth; and some
Defendants continue to suppress and conceal
information which might undermine their public
or litigation positions. See generally
Findings of Fact Section V. Significantly,
their conduct continues to further the
objectives of the overarching scheme to
defraud, which began by at least 1953. Their
continuing conduct misleads consumers in order
to maximize Defendants’ revenues by recruiting
new smokers (the majority of whom are under
the age of 18), preventing current smokers
from quitting, and thereby sustaining the
industry.
....
There is a reasonable likelihood that
Defendants’ RICO violations will continue in
most of the areas in which they have committed
violations in the past. Defendants’ practices
have not materially changed in most of the
Enterprise's activities, including: denial
that ETS causes disease, denial that
Defendants market to youth, denial of the
addictiveness of nicotine, denial of
manipulation of the design and content of
cigarettes, suppression of information and
research, and claims that light and low tar
cigarettes are less hazardous than full-flavor
cigarettes.
....
Similarly, Defendants continue to engage in
many practices which target youth, and deny
that they do so. Despite the provisions of the
MSA, Defendants continue to track youth
behavior and preferences and market to youth
using imagery which appeals to the needs and
desires of adolescents. Defendants are well
aware that over eighty percent of adult
9
smokers began smoking before the age of 18,
and therefore know that securing the youth
market is critical to their survival. There is
therefore no reason, especially given their
long history of denial and deceit, to trust
their assurances that they will not continue
committing RICO violations denying their
marketing to youth.
Philip Morris, 449 F. Supp. 2d at 909-912.
Defendants’ claim that, due to the passage of the Tobacco
Control Act, and subsequent regulation of the tobacco industry by
the FDA, there is no longer a reasonable likelihood of future RICO
violations is simply unconvincing in light of these factual
findings. Defendants offer no facts which would warrant revisiting
the findings of this Court––findings that were affirmed by the
Court of Appeals. See Philip Morris, 566 F.3d at 1132-33, 1137-38;
Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc.,
528 U.S. 167, 190, 120 S.Ct. 693, 709, 145 L.Ed.2d 610 (2000) (“a
defendant claiming that its voluntary compliance moots a case bears
the formidable burden of showing that it is absolutely clear that
the allegedly wrongful behavior could not reasonably be expected to
recur.”); United States v. Concentrated Phosphate Exp. Assoc., 393
U.S. 199, 203, 89 S.Ct. 361, 364, 21 L.Ed.2d 344 (1968) (“A case
might become moot if subsequent events made it absolutely clear
that the allegedly wrongful behavior could not reasonably be
expected to recur.”). Three further considerations make Defendants’
argument particularly untenable.
10
First, regulation under the FDA Act and any injunctions issued
by this Court target different conduct. Congress passed the Tobacco
Control Act “to ensure that the Food and Drug Administration has
the authority to address issues of particular concern to public
health officials.” Pub. L. No. 111-31, § 3(2), 123 Stat. at 1777,
codified at 21 U.S.C. § 387 note. By contrast, any remedial orders
issued by this Court must be carefully drawn “to prevent and
restrain violations of” RICO. 18 U.S.C. § 1964(a). FDA rulemaking
is not designed to prevent future racketeering activity covered by
RICO.
Second, Defendants have already attempted to make a similar
argument––and failed to prevail. Defendants previously argued, in
an earlier phase of this case, that the signing of the Master
Settlement Agreement (“MSA”), which resulted from a tort suit
between cigarette manufacturers and 46 states and the District of
Columbia, removed the reasonable likelihood of future RICO
violations. Thereafter, this Court found that “Defendants have not
fully complied with the letter or spirit of the MSA.” Philip
Morris, 449 F. Supp. 2d at 913. In addressing the same argument,
the Court of Appeals stated that “future violations remain likely
notwithstanding the MSA” and affirmed this Court’s finding that
“Defendants began to evade and at times even violate the MSA’s
prohibitions almost immediately after signing the agreement.”
Philip Morris, 566 F.3d at 1132-33. The Court cannot accept the
11
Defendants’ contention that the Tobacco Control Act will produce
their conformity to the law even though RICO and the MSA could not.
Third, Defendants’ contention that no reasonable likelihood of
future RICO violations exists due to the FDA’s regulation is
particularly unconvincing when Defendants are simultaneously and
vigorously challenging, both in a separate law suit and in
administrative proceedings, many of the provisions of the Tobacco
Control Act--including provisions which they claim render them
unlikely to commit future violations of RICO. In Commonwealth
Brands, Inc. v. United States, tobacco companies, including some of
the Defendants in this case, argued “that various provisions of
[the Act] . . . violate their free speech rights under the First
Amendment; their rights to Due Process under the Fifth Amendment;
and effect an unconstitutional Taking under the Fifth Amendment.”
678 F. Supp. 2d 512, 521 (W.D. Ky. 2010). Although the district
court in that case upheld the majority of the statute, both sides
have appealed the ruling to the Court of Appeals for the Sixth
Circuit. See Disc. Tobacco City & Lottery v. United States, Nos.
10-5234 & 10-5235 (6th Cir.). It is difficult to understand how
Defendants can argue that the Tobacco Control Act will produce
their future compliance with RICO when they do not believe that a
great portion of the Act should apply to them at all. And, if in
fact Defendants should prevail in their challenges to the Tobacco
12
Control Act, it will be all the more necessary for them to be
restrained by this Court from any future violations of RICO.
Defendants offer three cases that they believe serve as
examples of “federal legislation eliminat[ing] any reasonable
likelihood that the conduct at issue will be repeated in the
future.” Defs.’ Mot. 15. None are convincing analogues.
Bethany Med. Ctr. v. Harder, 693 F. Supp. 968 (D. Kan. 1988),
upon which Defendants rely, is readily distinguishable for two
reasons. First, in that case, the District Court for the District
of Kansas found that there was no “reasonable expectation” of
unlawful activity “in the future” because “Plaintiff’s bare
assertion that the agency is likely to violate its rights in the
future, without more, is insufficient.” Id. at 975. This Court, by
contrast, did find a reasonable likelihood of future RICO
violations by Defendants based on an extensive factual showing by
the Government. See Philip Morris, 449 F. Supp. 2d at 909-912.
Second, the defendant in Bethany Med. Ctr. was an administrative
agency, and it “is presumed that administrative agencies will act
within the law.” Id. at 976. Defendants in this case enjoy no such
presumption.
Defendants next cite to Green v. Mansour, 474 U.S. 64, 106
S.Ct. 423, 88 L.Ed.2d 371 (1985). Defs.’ Mot. 15. In that case,
plaintiffs challenged the Michigan Department of Social Services’
method of calculating benefits under the federal Aid to Families
13
With Dependent Children program. Green, 474 U.S. at 67. While the
case was pending, Congress amended the relevant statutory
provisions and the Department of Social Services conformed its
policy to the new federal law. Id. The Supreme Court held that the
Eleventh Amendment precluded federal courts from issuing a
declaratory judgment against a state agency where no continuing
violation of federal law was claimed. Id. at 73-74. Because the
plaintiffs were arguing that the defendant’s former policy violated
a law no longer in effect, there could not be “any threat of state
officials violating the repealed law in the future.” Id. at 73.
Additionally, the defendant was a state agency and the case turned
on the strictures of the Eleventh Amendment. Id. None of those
circumstances are relevant to the case before this Court.
Finally, Bullfrog Films, Inc. v. Wick similarly involved a
government regulation superceded by Congressional action, and is
similarly irrelevant. 959 F.2d 778, 779-780 (9th Cir. 1992). What
is more, the parties in that case agreed that the case was moot.
Id. at 780. None of these cases suggest that the fact that a
government agency has been granted the authority to regulate in a
given substantive area replaces a court’s jurisdiction to issue an
injunction, based on extensive factual findings, to prevent and
restrain violations of RICO that a defendant is reasonably likely
to commit in the future.
14
In sum, this Court has already made ample findings supporting
its proper exercise of jurisdiction. These findings have been
upheld by the Court of Appeals. Defendants have put forth no
convincing evidence to suggest that this Court should revisit, let
alone vacate, over four thousand factual findings, as well as the
injunctive provisions contained in Remedial Order #1015. Friends of
the Earth, 528 U.S. at 190 (“a defendant claiming that its
voluntary compliance moots a case bears the formidable burden of
showing that it is absolutely clear that the allegedly wrongful
behavior could not reasonably be expected to recur.”) Based on the
factual findings affirmed by the Court of Appeals, this Court
continues to have jurisdiction over this matter.
B. Primary Jurisdiction Doctrine
Defendants argue in the alternative that, even if the Court
does have jurisdiction, it should decline to exercise it. Defs.’
Mot. 19-23. Defendants contend that “any court-ordered relief would
interfere with the implementation of the agency’s expert regulatory
judgment and potentially generate conflicting federal regulatory
requirements.” Id. at 19. Therefore, Defendants state, the Court
should invoke the doctrine of primary jurisdiction and “dissolve
its injunctions and decline to exercise any jurisdiction it might
possess over this case.” Id. at 23.
The primary jurisdiction doctrine “applies where a claim is
originally cognizable in the courts, and comes into play whenever
15
enforcement of the claim requires the resolution of issues which,
under a regulatory scheme, have been placed within the special
competence of an administrative body; in such a case the judicial
process is suspended pending referral of such issues to the
administrative body for its views.” United States v. W. Pac. R.R.
Co., 352 U.S. 59, 64, 77 S.Ct. 161, 165, 1 L.Ed.2d 126 (1956).
“In every case the question is whether the reasons for the
existence of the doctrine are present and whether the purposes it
serves will be aided by its application in the particular
litigation.” W. Pac. R.R. Co., 352 U.S. at 64. These purposes
include “the desirable uniformity which would obtain if initially
a specialized agency passed on certain types of administrative
questions” and “the expert and specialized knowledge of the
agencies involved.” Id. Critically, “[w]hether there should be
judicial forbearance hinges . . . on the authority Congress
delegated to the agency in the legislative scheme.” Golden Hill
Paugusett Tribe of Indians v. Weicker, 39 F.3d 51, 59 (2d Cir.
1994); see also W. Pac. R.R. Co., 352 U.S. at 64 (the doctrine is
appropriately applied to “issues which, under a regulatory scheme,
have been placed within the special competence of an administrative
body.”); Atchison, T. & S. F. Ry. Co. v. Wichita Bd. of Trade, 412
U.S. 800, 820-21, 93 S.Ct. 2367, 2381-82, 37 L.Ed.2d 350 (1973).
Although “[n]o fixed formula exists for applying the doctrine
of primary jurisdiction,” W. Pac. R.R. Co., 352 U.S. at 64, courts
16
traditionally consider four factors in deciding whether to invoke
the doctrine. Schiller v. Tower Semiconducter Ltd., 449 F.3d 286,
295 (2d Cir. 2006); Davel Commc’ns, Inc. v. Qwest Corp., 460 F.3d
1075, 1086-87 (9th Cir. 2006); Oasis Petroleum Corp. v. United
States Dep’t of Energy, 718 F.2d 1558, 1564 (Temp. Emer. Ct. App.
1983) (identifying the factors in various cases, including Nader v.
Allegheny Airlines, Inc., 426 U.S. 290, 96 S.Ct. 1978, 48 L.Ed.2d
643 (1976)); Himmelman v. MCI Commc’ns Corp., 104 F. Supp. 2d 1, 4
(D.D.C. 2000); AT&T v. MCI, 919 F. Supp. 13, 16 (D.D.C. 1993).
These factors are: “(1) whether the question at issue is within the
conventional expertise of judges; (2) whether the question at issue
lies particularly within the agency’s discretion or requires the
exercise of agency expertise; (3) whether there exists a
substantial danger of inconsistent rulings; and (4) whether a prior
application to the agency has been made.” Himmelman, 104 F. Supp.
2d 1, 4 (D.D.C. 2000); Ellis v. Tribune Television Co., 443 F.3d
71, 82-83 (2d Cir. 2006).
It is telling that none of the parties cite to any of these
factors in their briefs. See Defs.’ Mot. 19-23; Gov.’s Opp’n 22-29;
PHI’s Opp’n 20-21; Defs.’ Reply 11-13. The reason for this omission
is simple: this case does not present the appropriate circumstances
for invocation of the primary jurisdiction doctrine. Nonetheless,
the Court will consider in turn each of the factors.
17
1. Relevant Expertise
The first factor requires a court to assess “whether the
question at issue is within the conventional experience of judges
or whether it involves technical or policy considerations within
the agency’s particular field of expertise.” Ellis, 443 F.3d at 82-
83; Himmelman, 104 F. Supp. 2d at 4. Defendants state simply that
“the FDA possesses unique regulatory expertise about smoking-and-
health issues.” Defs.’ Mot. 19. The problem with Defendants’ claim
is that they fail to recognize the distinction between this Court’s
responsibility to fashion a remedy “to prevent and restrain
violations of” RICO under 18 U.S.C. § 1964(a), and the FDA’s
authority “to set national standards controlling the manufacture of
tobacco products and the identity, public disclosure, and amount of
ingredients used in such products.” Pub. L. No. 111-31, § 3(3), 123
Stat. at 1782, codified at 21 U.S.C. § 387 note.
Courts have consistently declined to invoke the primary
jurisdiction when adjudicating RICO or fraud claims, as such claims
“do not require agency expertise for their treatment because such
claims are within the conventional expertise of judges.” Dana Corp.
v. Blue Cross & Blue Shield Mut. of N. Ohio, 900 F.2d 882, 889 (6th
Cir. 1990); Nader, 426 U.S. at 305-06 (“The standards to be applied
in an action for fraudulent misrepresentation are within the
conventional competence of the courts . . . .”); Bendzak v. Midland
Nat. Life Ins. Co., 440 F. Supp. 2d 970, 977 (S.D. Iowa 2006)
18
(plaintiff’s RICO claims “are within the conventional expertise of
judges, and none of them require the special expertise of a state
insurance commission.”) (internal quotations omitted); Shaw v.
Rolex Watch U.S.A., Inc., 776 F. Supp. 128, 132 (S.D.N.Y. 1991)
(“The standards of fraudulent misrepresentation and omission to be
applied in this RICO action are within the conventional competence
of this Court.”). Because any injunctive relief entered by this
Court must be drawn narrowly so as to prevent and restrain future
RICO violations only, there is no need to defer to the expertise of
an administrative agency. W. Pac. R.R. Co., 352 U.S. at 64.
In this light, the cases cited by Defendants are readily
distinguishable. All of the cases cited in Defendants’ briefs
concerned circumstances in which an agency and a court had to make
the same determination under the same statute or regulation--
obviously, not the case here. See, e.g., Ellis, 443 F.3d at 92 (the
district court should have invoked the primary jurisdiction
doctrine where the question was whether the defendant was in
violation of an agency rule and the agency was considering an
application for waiver at the time of the suit); Allnet Commc’n
Serv. v. Nat’l Exchange Carrier Assoc., Inc., 965 F.2d 1118, 1120
(D.C. Cir. 1992) (primary jurisdiction doctrine applied where an
FCC staff letter and FCC order potentially conflicted as to whether
certain tariffs were valid); Israel v. Baxter Labs., Inc., 466 F.2d
272, 280-82 (D.C. Cir. 1971) (court invoked primary jurisdiction
19
doctrine where parties agreed that the FDA should address drug’s
safety and efficacy).3 None of these cases dealt with a situation
in which a court, having made a ruling as to liability under one
statute, was asked to vacate relief because such relief could
implicate an agency’s area of concern under a separate statute.4
In short, Defendants have invoked no authority for the
proposition that the primary jurisdiction doctrine requires a court
to vacate an injunction resulting from RICO violations because an
administrative agency has expertise in the defendant’s industry. To
the contrary, this Court has ample expertise to fashion a remedy
that will comply with RICO. See Nader, 426 U.S. at 305-06; Dana
Corp., 900 F.2d at 889.
3
Defendants also cite to Atchison, 412 U.S. at 820-21, at
some length. See Defs.’ Mot. 20-21. Atchison is wholly off-point.
In that case, the district court reversed and remanded an order of
the Interstate Commerce Commission, which found certain charges by
carriers reasonable, because “the Commission had not adequately
justified its failure to follow” a longstanding rule. Id. at 805.
The district court also enjoined the carriers’ charges while the
Commission reconsidered the matter. Id. at 817-18. The Supreme
Court affirmed the remand to the Commission, but struck down the
injunction because “[c]arriers may put into effect any rate that
the Commission has not declared unreasonable” and the district
court should not have “estimate[d] . . . the probability of
ultimate success on the merits by the party challenging the agency
action.” Id. at 819, 821. This case involves no such direct
interaction with an agency, nor does it involve an assessment of
the reasonableness of an activity regulated by an agency.
4
As the Public Health Intervenors observe, Defendants “do
not cite a single case where this doctrine has been applied to
vacate a district court decision on the merits that has already
been resolved on appeal, especially one involving the type of long
term fraud and sustained pattern of deception that the court found
in this case.” PHI Opp’n 2 (emphasis in original).
20
2. Agency Discretion
The second factor in assessing primary jurisdiction concerns
“whether the question at issue is particularly within the agency’s
discretion.” Ellis, 443 F.3d at 83; Himmelman, 104 F. Supp. 2d at
4. Defendants observe simply that the “FDA has already begun to
exercise [its] regulatory discretion with regard to numerous
aspects of tobacco manufacture, marketing, and distribution.”
Defs.’ Mot. 22.
Congress explicitly and unequivocally declined to place the
discretion to craft a remedy in this case in the hands of the FDA.
The text of the statute states, “[n]othing” in the Tobacco Control
Act “shall be construed to . . . affect any action pending in
Federal, State, or tribal court.” Pub. L. No. 111-31, § 4(a), 123
Stat. at 1782, codified at 21 U.S.C. § 387 note. There can be no
doubt that Congress was well aware of this case when drafting that
language, given that the statute cites to this case three times in
its early sections. See Pub. L. No. 111-31, §§ 2(47)-(49), 123
Stat. at 1781, codified at 21 U.S.C. § 387 note.5 Congress,
5
Specifically, under “Findings,” the statute reads:
(47) In August 2006 a United States district
court judge found that the major United States
cigarette companies continue to target and
market to youth. USA v. Philip Morris, USA,
Inc., et al. (Civil Action No. 99-2496 (GK),
August 17, 2006).
(48) In August 2006 a United States district
(continued...)
21
therefore, assumed and intended that this Court would retain
control over remedial decisions. Golden Hill Paugusett Tribe of
Indians, 39 F.3d at 59; W. Pac. R.R. Co., 352 U.S. at 64.
Congress has made it plain: the remedies for Defendants’
violation of RICO are not “issues which, under a regulatory scheme,
have been placed within the special competence of an administrative
body.” W. Pac. R.R. Co., 352 U.S. at 64.
3. Danger of Inconsistent Rulings
Among the central purposes of the primary jurisdiction
doctrine is to encourage “the desirable uniformity which would
obtain if initially a specialized agency passed on certain types of
administrative questions.” W. Pac. R.R. Co., 352 U.S. at 64. As
5
(...continued)
court judge found that the major United States
cigarette companies dramatically increased
their advertising and promotional spending in
ways that encourage youth to start smoking
subsequent to the signing of the Master
Settlement Agreement in 1998. USA v. Philip
Morris, USA, Inc., et al. (Civil Action No.
99-2496 (GK), August 17, 2006).
(49) In August 2006 a United States district
court judge found that the major United States
cigarette companies have designed their
cigarettes to precisely control nicotine
delivery levels and provide doses of nicotine
sufficient to create and sustain addiction
while also concealing much of their
nicotine-related research. USA v. Philip
Morris, USA, Inc., et al. (Civil Action No.
99-2496 (GK), August 17, 2006).
Pub. L. No. 111-31, §§ 2(47)-(49), 123 Stat. at 1781, codified at
21 U.S.C. § 387 note.
22
explained above, this Court only has jurisdiction to prevent and
restrain future RICO violations by the Defendants, and the FDA has
no authority under the Tobacco Control Act to address RICO
remedies. Because this case concerns no provision of or rule
promulgated under the Tobacco Control Act, it presents no risk of
conflict with the FDA’s resolution of any issue delegated to it
under that Act. See Ellis, 443 F.3d at 88 (“Courts should be
especially solicitous in deferring to agencies that are
simultaneously contemplating the same issues.”) (emphasis added).
Nonetheless, Defendants claim that “the Court’s general and
specific injunctions would inevitably give rise to requirements on
a number of smoking-related issues that are inconsistent with the
regulatory requirements established by the FDA.” Defs.’ Mot. 19.
This fear is both premature and speculative.
Defendants point to (1) an FDA request for comments regarding
proposed graphic warnings on cigarette packages and advertising, 75
Fed. Reg. 69,524; (2) an FDA request for comments regarding
regulations that would restrict the location and content of outdoor
cigarette advertising, id. at 13,241; and (3) a letter from the
Director for the Center for Tobacco Products requesting information
from the tobacco industry to assist the FDA in studying the impact
of menthol cigarettes on public health. Defs.’ Mot 22. Notably,
none of these agency actions conflict with any injunction issued by
this Court.
23
In a separate section of their brief, Defendants make a
similar argument that the Court should vacate its injunctions (1)
relating to the marketing of “light” and “low tar” cigarettes, (2)
prohibiting Defendants from making false statements, and (3)
requiring Defendants to make corrective statements. Defs.’ Mot. 23-
31. Although included under a separate heading, this argument is
essentially a reworking of Defendants’ subject matter jurisdiction
and primary jurisdiction arguments. The crux of this section of
their Motion is that these injunctions encroach on the FDA’s zone
of authority and “would inevitably impair the implementation of the
FDA’s expert regulatory judgments.” Id. at 27. Once again,
Defendants point to no regulation in conflict with any order of
this Court.
In the event that the FDA issues regulations that do conflict
with an order of this Court, the Government may always file a
motion to amend the injunction. Similarly, should Defendants find
that they are subject to conflicting requirements from this Court
and the FDA, they have ample recourse through a Rule 60(b) motion.
In relation to the primary jurisdiction doctrine, however,
Defendants have made no showing that any factual finding as to
their RICO violations could come into conflict with an FDA
decision, nor have they demonstrated a “substantial danger of
inconsistent rulings” between this Court’s remedial order and the
24
rules they speculate the FDA will promulgate. Ellis, 443 F.3d at
83.
4. Prior Application to the Agency
Needless to say, Defendants have made no prior application to
the FDA regarding restraining future violations of RICO. See id. at
89 (“if prior application to the agency is absent, this factor may
weigh against the referral of the matter to the agency on the basis
of primary jurisdiction.”). The presence of this factor only serves
to highlight the inapplicability of the primary jurisdiction
doctrine in this context. While the FDA may currently be
considering a number of issues relating to the Defendants’
marketing and production of tobacco products, Defendants have made
no suggestion that the FDA is contemplating the issue before this
Court, namely how to prevent and restrain future violations of
RICO.
It is worth noting, in summation, that the Court’s discretion
to dismiss a case under the primary jurisdiction doctrine “is
appropriately exercised only where ‘the parties would not be
unfairly disadvantaged . . . .’” Himmelman, 104 F. Supp. at 8
(quoting Reiter v. Cooper, 507 U.S. 258, 268, 113 S.Ct. 1213, 122
L.Ed.2d 604 (1993)). It has been well over eleven years since this
case was filed and nearly five years since this Court found that
Defendants “knowingly and intentionally engaged in a scheme to
defraud smokers and potential smokers, for purposes of financial
25
gain, by making false and fraudulent statements, representations,
and promises.” Philip Morris, 449 F. Supp. 2d at 852. Defendants
now ask this Court to “dissolve its injunctions and decline to
exercise any jurisdiction it might possess over this case.” Defs.’
Mot. 23. For all the reasons noted, this is not a case in which
“the judicial process [should be] suspended pending referral of
such issues to the administrative body for its views.” W. Pac. R.R.
Co., 352 U.S. at 64.
IV. CONCLUSION
For the reasons set forth above, Defendants’ Motion for
Vacatur is denied.
An Order will issue with this opinion.
/s/
June 1, 2011 Gladys Kessler
United States District Judge
Copies to: counsel of record via ECF
26