(CN) – Philip Morris and eight other cigarette makers cannot be forced to “vilify themselves” and publicly declare that they “deliberately deceived” the U.S. public about the health effects of smoking, the D.C. Circuit ruled.
The ruling stems from a case the U.S. brought 15 years ago against the nine companies under federal anti-racketeering law. A federal judge concluded at the end of a nine-month trial that the defendants had engaged in a “pervasive scheme to defraud customers and potential customers of cigarettes” for more than 50 years.
The judgment found that the cigarette makers joined together to “maximize their profits” by misleading the public about the “devastating health effects of smoking.”
Despite that court’s finding that it had the authority to order disgorgement of fraudulently gained profits, the D.C. Circuit barred that damages route “because disgorgement is aimed at past violations,” and the RICO Act permits damages only to prevent future violations.
The government instead sought and won a judgment ordering the cigarette manufacturers to make corrective disclosures on cigarette packaging, in advertising and on their websites.
Affirming this remedy in 2009, the D.C. Circuit found that exposing “the previously hidden truth about their products [will] prevent and restrain” future RICO violations.
On remand, a federal judge approved a draft of the disclosures that the defendants were required to make.
The draft required the cigarette makers to declare that they “intentionally designed cigarettes to make them more addictive,” 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.”
It also required that they include a preamble admitting that a federal court found they “deliberately deceived the American public” about the adverse health effects of smoking and second-hand smoke, the addictiveness of nicotine, the manipulation of cigarette design, and the lack of a significant difference between regular and “light” cigarettes.
R.J. Reynolds and the others appealed, however, saying such backward-looking corrective disclosures “force defendants to vilify and shame themselves for past wrongdoing” rather than “reveal the previously hidden truth.”
A three-judge panel of the D.C. Circuit upheld the corrective statements Friday, insofar as they correct possible misinformation about tobacco products.
For example, the disclosure that the companies deliberately manipulated the design and composition of a cigarette to make it more addictive is “squarely” within the bounds of a forward-looking remedy that will prevent defendants from making false statements in the future, the court found.
The appeals court took issue, however, with requiring the defendants to announce that they “deliberately deceived” the American public, saying this admission “reveal[s] nothing about cigarettes.”
“Instead, [it] disclose[s] defendants’ prior deceptive conduct,” Judge David Tatel wrote for the panel (emphasis in original). “Accordingly, [it] cannot be justified.”
Tatel rejected the government’s defense of this preamble as alerting consumers that they had been misinformed in the past, and making them aware that they might be deceived in the future.
“This may be true,” he wrote. “The preamble might provide an effective – perhaps even the very best – means of curing consumer misconception and preventing consumer deception going forward.”
But the civil RICO statute does not empower courts to order remedies to dissipate the future effects of past conduct, the court concluded.
“Seeking to prevent consumer deception is similarly impermissible because, although forward-looking, it focuses not on restraining the RICO violator, but on safeguarding consumers against RICO violations,” Tatel said (emphasis in original).
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