Big Tobacco won’t have to pay $280 billion
The ruling means that the government can’t collect $280 billion in penalties for violating the racketeering law.
Media General News Service Published: June 29, 2010
The U.S. Supreme Court yesterday put an end to Washington’s bid to fine big Tobacco more than a quarter of a trillion dollars for violating federal racketeering law.
But the high court also rejected cigarette-makers’ request to review a lower court’s ruling that the companies had violated federal anti-gang laws over several decades by denying the health risks of smoking, marketing to young people and making defective products.
The ruling yesterday means a lower court can order big Tobacco to take steps—such as not labeling cigarettes as light or low tar—already required by last year’s law that gives the U.S. Food and Drug Administration regulatory authority over tobacco products.
Brushing aside appeals from the Justice Department and the tobacco industry, the court left both big Tobacco and public-health advocates saying they had won some key points and lost some in the decade-old legal battle.
Washington lost its argument that the tobacco companies should pay $280 billion in penalties for violating racketeering law—basically, their profits since the 1970s.
Tobacco companies, including Henrico County-based Altria Group and its Philip Morris USA cigarette unit, lost their argument that a law meant to crack down on mobsters was applied wrongly to their actions over the decades.
“the takeaway point is that there will be no monetary judgment. A possible disgorgement has now been completely put to bed,“ said Murray Garnick, Altria Client Services senior vice president and associate general counsel.
Tobacco-control advocates said the key point was that U.S. District Court Judge Gladys Kessler’s 2006 racketeering finding stands.
“It is now established, and will not be overturned, that the major tobacco companies have been adjudicated to be racketeers,“ said Edward L. Sweda, a tobacco-control activist and senior attorney for the Tobacco Control Resource Center at Northeastern University.
The Campaign for Tobacco Free Kids said it was disappointed that the Supreme Court won’t consider whether to reinstate the $280 billion in penalties, along with demands that tobacco companies pay for programs to teach people about the risks of tobacco and to help them quit smoking.
But, it added, “Today’s decision upholds the trial court’s historic verdict that the cigarette manufacturers are racketeers and have engaged in a decades-long conspiracy to deceive the American public and target children with their deadly and addictive products.“
On Wall Street, shares of Altria rose 3 percent to close at $20.34, while Reynolds American ended 4 percent higher at $53.45 and Lorillard Inc. gained 2.5 percent to $73.54.
“While the 2006 ruling stands, the government will not be able to seek any monetary damages from the cigarette makers. This is favorable news,“ said Craig Hutson, senior analyst at Gimme Credit, an independent corporate bond research firm.
The Supreme Court did not explain why it decided against considering appeals on the lawsuit.
“My best guess is the majority of the [Supreme] Court was relatively satisfied with what the D.C. Circuit Court found,“ said Carl Tobias, a law professor at the University of Richmond.
The Department of Justice wanted the high court to overturn a lower-court ruling that the section of the racketeering act it used to prosecute the tobacco companies did not provide for the surrender of profits from past actions.
That particular section, which governs the issue of court orders for future behavior, was what allowed the government to prosecute its case before a single judge, instead of before a jury.
Tobacco companies argued that it was wrong to apply racketeering law to a group of companies that compete with one another, and that many of the actions called racketeering were expressions of opinion about what was for many years a matter of heated public debate—the degree of harm from smoking and second-hand smoke.
Garnick said he believes Kessler’s racketeering finding is unlikely to affect individuals’ lawsuits against tobacco companies.
He said juries and judges in several states had rejected many of the arguments the Justice Department made in its case.
The case now returns to the U.S. District Court in Washington, which is considering how to mesh its ordered remedies with last year’s FDA tobacco law.
Also on the table may be its requirements about signs in stores, which some retailers feel unfairly punish them for the actions of the tobacco companies.
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