Big Tobacco Loses Appeal of Racketeering Ruling

(CN) - The D.C. Circuit on Friday largely upheld a judge's landmark ruling that the tobacco industry violated federal racketeering laws by lying to the public about the dangers and addictiveness of smoking.

In a legal dispute spanning 10 years, the government claimed that big tobacco spent decades denying the health hazards of smoking and second-hand smoke, including cancer and emphysema. Tobacco companies were also accused of denying the addictiveness of cigarettes, manipulating their products to sustain addiction, misrepresenting light cigarettes as being less harmful than regular cigarettes, and intentionally marketing their dangerous products to youth.

The government charged the industry with 148 racketeering acts of mail and wire fraud, claiming the defendants concealed evidence and destroyed documents to cover up the dangers of smoking and to protect themselves from litigation.

The case went to trial in September 2004. The government spent nine months laying out its case against the industry. As early as the 1950s, the government claimed, the presidents of major tobacco companies met and agreed not gain a competitive edge by claiming one brand of cigarettes was less risky or "less likely to cause you-know-what" than any other brand.

In 1954, cigarette makers allegedly published a full-page ad in newspapers across the country, stating that smoking was not a proven cause of lung cancer and that cigarettes were not harmful to health.

The government said the industry has been hiding, denying and distorting the truth since, despite scientific evidence revealing the dangers of smoking and second-hand smoke.

U.S. District Judge Gladys Kessler sided with the government, saying it presented ample evidence of deception and cover up. She ordered various remedies, including restrictions on marketing, sales and advertising.

The Washington, D.C.-based federal appeals court largely upheld Kessler's judgment, hinging its decision on the "overwhelming indirect and circumstantial evidence" presented at trial.

The defendants tried to attack the judgment from multiple legal angles, such as asserting First Amendment protection for statements made throughout the years.

"Were these statements false, but not deliberately so, defendants would have a better argument," the court wrote. The three-judge panel went on to reject a litany of the defendants' remaining arguments.

However, the court denied the government's bid to impose other remedies, such as requiring the tobacco industry to fund a national stop-smoking campaign and a youth-smoking reduction plan. It also vacated some of the existing remedies and remanded for further clarification, to ensure they don't inadvertently burden foreign companies and innocent third parties.

The court dismissed tobacco trade organizations as defendants, because they do not make or sell cigarettes. The judges also upheld Kessler's ruling that three of the defendants - the Tobacco Company Ltd., the Council for Tobacco Research and Liggett - were not likely to commit future violations.

The D.C. Circuit nixed any notion for a massive recovery during trial, when it determined that RICO laws do not allow the government to receive hundreds of millions of dollars in disgorgement.

Defendants in the case included Philip Morris, Reynolds, Brown & Williamson, Lorillard, American and Altria.

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