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Six years, two presidential administrations, and three attorneys general later, the Justice Department’s effort to “disgorge” big money from Big Tobacco may be in its final throes. Alleging decades of conspiracy to hide smoking health risks from the American public, the government wants financial flagellation and is seeking $280 billion in past profits — repeatedly referred to in briefs as “ill-gotten gains” — from nine tobacco companies. After losing in the U.S. Court of Appeals for the D.C. Circuit, the Justice Department has asked the Supreme Court to grant review and clarify whether companies can be forced to surrender profits for their past transgressions under the civil Racketeer Influenced and Corrupt Organizations Act (RICO). The Supreme Court will consider United States v. Philip Morris USA Inc., et al. during its private conference on Oct. 14. If the Court agrees to hear the case, opening arguments could begin next spring — and possibly without Chief Justice John Roberts Jr. The disgorgement appeal is part of the ongoing civil case in the U.S. District Court for the District of Columbia, which wrapped up a 10-month trial in June and is currently awaiting a ruling from Judge Gladys Kessler. In 1999 the federal government sued the tobacco industry, alleging collusion and fraud under civil RICO, a law originally aimed at organized crime. In 2003, Justice Department lawyers revealed that they would seek the disgorgement of any profits that the industry had received from selling cigarettes to minors over three decades. The estimate was $280 billion. Lawyers for the tobacco companies fought the effort, claiming that civil RICO cases did not allow disgorgement. But in May 2004, Kessler sided with the government. Then, in February, a D.C. Circuit panel dealt the Justice Department a severe blow when it ruled 2-1 that the government may not seek disgorgement because any remedies under civil RICO must be forward-looking. Criminal RICO provisions explicitly allow for disgorgement, but civil RICO law does not, the court found. The government sought, but was denied, an en banc review. John Banzhaf, a law professor at George Washington University Law School who runs an anti-smoking advocacy group, says that because the appeal comes from the government, conventional wisdom dictates that the Court is more likely to hear the case. Anti-tobacco advocates say that federal circuits have split on the issue of remedies under civil RICO. They point to a 1995 ruling by the U.S. Court of Appeals for the 2nd Circuit in United States v. Carson that stated disgorgement is permissible in civil RICO. They say that ruling is now in direct conflict with the D.C. Circuit. “You have a split decision,” Banzhaf says, adding that cert should be granted because “any time there is a conflict between the circuits, that could affect other cases in the future.” Bill Corr, executive director of the Campaign for Tobacco-Free Kids, calls the D.C. Circuit ruling “absurd.” “The majority opinion, to our mind, does not follow the clear congressional intent,” Corr says. “I think it misreads the language of the statute, being that under the ruling, even if they stop all RICO violations forever more, they can continue to collect revenue from people they have addicted. It makes no sense. Congress did not intend for the courts to stop future violations but benefit from past behavior.” In its brief, the Justice Department argues that Congress intended for the government to be able to recoup profits generated from a company’s illicit behavior. “Congress enacted RICO to create new tools to combat structured illicit activities and gave the government the full panoply of equitable remedies needed to achieve that goal,” the government wrote in its brief to the Court. “The government cannot protect the public interest if it cannot �divest the (RICO Enterprise) of the fruits of its ill-gotten gains.’ “ Charles Miller, a spokesman for the Justice Department, declined to comment other than to say, “We certainly hope, and think, the Court should grant cert on this very important case.” Michael Carvin, a partner at Jones Day who represents Philip Morris, says the government has gotten ahead of itself by seeking cert before the case has concluded. “The case is pending in the court, and the Supreme Court hearing this would be disruptive and counterproductive,” Carvin says. “There is no reason to hear this case at this time.” Carvin says a ruling in favor of disgorgement would not “prevent and restrain” future wrongdoing. He says the appeals court followed binding precedent in making its ruling. In an interesting aside, it remains unclear what role, if any, Roberts will have in the Court’s decision on whether to take the case. When the government sought a rehearing en banc earlier this year, Roberts, then a judge on the D.C. Circuit, recused himself. He gave no reason. OTHER CASES UP FOR REVIEW • Cattell v. White, No. 05-6. Sixth Amendment right of confrontation in sexual assault cases. • Cooper v. Southern Co., No. 05-88. Equitable relief in employment discrimination class actions. • Vertrue Inc. v. MedValUSA Health Programs Inc., No. 05-117. Limits on punitive damages in arbitration awards. • Hadfield v. McDonough, No. 05-214. Due process rights for discharged county employees. • Merck & Co. v. Teva Pharmaceuticals USA Inc., No. 05-236. De novo review in patent claim cases.
This column seeks to identify cases on the Supreme Court’s conference agenda that are leading candidates for Supreme Court review or that raise significant national issues. Thomas Goldstein of Washington, D.C.’s Goldstein & Howe selects these cases from the many petitions filed based on several factors, including whether lower courts have split on the issues presented. He does not otherwise participate in the preparation of this column. Goldstein & Howe represents the petitioner in case No. 05-214. Nathan Carlile can be contacted at [email protected].

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