The Obama administration wants the U.S. Supreme Court to help it recover $280 billion from the major tobacco companies, money described as "ill-gotten gains" from past racketeering violations.
At least one analyst says if the effort is successful, it might bankrupt the industry.
One interesting aspect of the case: Were statements made to the public and to Congress denying the harmfulness of tobacco a knowing attempt to defraud, as the administration contends, or were they simply the exercise of protected free speech, as the companies insist?
The case against the tobacco companies has gone up and down the appeals court ladder since it was first filed by the Clinton administration in 1999 under the federal Racketeer Influenced and Corrupt Organizations Act -- a law usually used against organized crime.
In the civil case, the government asked for the "equitable disgorgement of approximately $280 billion for ill-gotten gains that (the companies) obtained through their scheme to defraud" the public with deceptive statements about tobacco.
Richard A. Daynard, a tobacco law specialist at the Northeastern University School of Law in Boston, told The New York Times earlier this month: "However rich these companies are, they're not quite that rich. The (Supreme) Court would have to decide whether it wanted to bankrupt the companies" if it ruled for the administration.
Earlier in the case, after much legal maneuvering and a trial, a federal judge in Washington found the nine major tobacco companies guilty of manipulating the nicotine content of cigarettes to ensure addiction, and lying to the public about the dangers of cigarettes.
U.S. District Judge Gladys Kessler didn't mince words in her ruling: "(T)he evidentiary picture must be viewed in its totality ... to fully appreciate how massive the case is against (the companies), how irresponsible their actions have been and how heedless they have been of the public welfare and the suffering caused by the cigarettes they sell."
She added the companies' business "survives, and profits, from selling a highly addictive product which causes diseases that lead to a staggering number of deaths per year, an immeasurable amount of human suffering and economic loss, and a profound burden on our national health care system." She put the death toll from tobacco at 400,000 a year.
Kessler agreed to consider whether the companies should "disgorge" past profits earned from the racketeering behavior.
But in 2005, a divided panel of the U.S. Appeals Court for the District of Columbia Circuit reversed the verdict and said RICO doesn't provide for the disgorgement of past "ill-gotten gains." The Supreme Court at the time refused review on the penalty issue.
The case went back to the trial level, where the judge ruled it was likely the companies would continue to violate RICO in the future.
Last May, the appeals court this time upheld the trial judge's verdict as it applied to the tobacco companies' RICO violations, saying there were "countless examples of (the companies') deliberately false statements." But again, the appeals court said the trial judge could craft only "forward looking" remedies, not impose heavy penalties for past behavior.
Then earlier this month, both the Obama administration and the companies filed separate petitions with the Supreme Court.
In the petition filed by U.S. Solicitor General Elena Kagan last month, the administration asked the justices to determine whether federal law "categorically bars a district court from ordering disgorgement of ill-gotten gains as well as other equitable relief, such as smoking cessation and public-education remedies, designed to redress the continuing consequences of RICO violations."
"For the last half century, those defendants ... have engaged in a pattern of racketeering activity and a conspiracy to engage in racketeering that has cost the lives and damaged the health of untold millions of Americans," the administration petition said.
The companies long have been aware of the addictive effects of nicotine, and the misery caused by their products, the petition said. Citing the trial judge, the petition said the companies also "have repeatedly made vigorous and impassioned public denials -- before congressional committees, in advertisements in the national print media and on television -- that neither smoking nor nicotine is addictive, and that they do not manipulate, alter or control the amount of nicotine contained in the cigarettes they manufacture."
The petition adds, "Those denials were false."
The administration's petition said the appeals court's ruling barring the recovery of penalties for past actions violated the intent of Congress in enacting RICO, and conflicted with the language and meaning of the law.
The petitions filed by the tobacco companies take an entirely different tack, of course.
The major company petition, filed for Philip Morris USA by prominent Washington attorney Miguel Estrada, wants the Supreme Court to throw out the original verdict -- which would obviate any need to assess damages.
"The United States brought this suit against the major domestic tobacco companies in an unprecedented effort to use litigation to obtain extensive regulatory authority over the tobacco industry that, until recently, it had been unable to secure through the legislative process," the petition said.
Estrada also takes the position that the companies' public statements and marketing are protected free speech. What the administration sees as a fraud upon the public, the Estrada petition sees as an exercise in First Amendment freedoms.
"There are compelling First Amendment reasons for this (Supreme) Court to grant review (of the proposed company petition, not the administration's) to resolve this deep and irreconcilable conflict among the (federal appeals courts on the issue) and to ensure that every court of appeals is properly applying the important constitutional principles set forth in (high court precedents)," his petition says.
Estrada argues the Supreme Court has recognized a trial judge or jury should not have the power to make factual findings that deny a defendant "fundamental First Amendment freedoms."
"First, the government took the unprecedented step of invoking civil RICO to secure sweeping regulatory authority over the tobacco industry that, until recently, Congress itself had repeatedly rejected -- and
did so at the direction of the president rather than the professional (and politically insulated) prosecutors traditionally responsible for making such decisions," his petition says. "The First Amendment concerns generated by this litigation strategy are particularly acute because the district court used its largely unreviewed factual findings as a basis for issuing injunctive relief that imposes a prior restraint upon defendants' future public statements about the health effects of smoking."
Curiously, Estrada easily could have been sitting on the Supreme Court instead of arguing before it.
President George W. Bush named him to the U.S. Appeals Court for the District of Columbia Circuit in 2001. The court, often called the second most important in the country, is prime hunting territory when presidents go looking for Supreme Court nominees.
Even though Republicans took over the U.S. Senate in 2003 -- Estrada's nomination was held up -- minority Democrats were able to filibuster to keep his nomination from a vote on the Senate floor, so Estrada remained in private practice.
Meanwhile, the justices should decide whether to accept the administration and tobacco companies petitions, or just one of the petitions, or simply just deny review to the whole shebang sometime over the next several months.
—
