CORRECT: Appeals Court Largely Upholds Ruling Vs Tobacco Cos
May 22 2009 - 5:40PM
Dow Jones News
A federal appeals court Friday largely upheld a landmark ruling
which found that the tobacco industry violated federal racketeering
laws by engaging in a decades-long scheme to deceive the public
about the dangers of smoking.
The court affirmed most remedies that a trial judge imposed
against tobacco companies in 2006, which included restrictions on
tobacco marketing and a requirement that the industry make
corrective public statements about the health effects and
addictiveness of smoking.
The appeals court, however, rejected the government's request
for additional penalties against cigarette makers.
Among other things, the government and anti-smoking groups
wanted to force the tobacco industry to fund a $10 billion national
smoking-cessation campaign.
The appeals court also affirmed an earlier ruling that the
government couldn't force the tobacco companies to forfeit up to
$280 billion in profits.
In a unanimous 92-page ruling, a three-judge panel of the U.S.
Court of Appeals for the District of Columbia Circuit said there
was ample evidence to conclude that the tobacco industry intended
to deceive the public about the dangers of smoking.
The court said the tobacco companies "knew about the negative
health consequences of smoking, the addictiveness and manipulation
of nicotine, the harmfulness of secondhand smoke, and the concept
of smoker compensation, which makes light cigarettes no less
harmful than regular cigarettes and possibly more."
The court also said the government had adequately proven that
the tobacco industry was likely to commit future racketeering
violations unless restrictions were imposed.
Defendants in the case included Altria Group Inc.'s (MO) Philip
Morris subsidiary, Reynolds American Inc. (RAI), British American
Tobacco PLC (BTI) and Lorillard Inc. (LO).
Murray Garnick, an Altria senior vice president, said the
company disagreed with the ruling and would appeal it further.
"PM USA and Altria Group continue to believe that the court's
conclusions are not supported by the law or the evidence presented
at trial, and we believe the exceptional importance of these issues
justifies further review," Garnick said.
Tobacco companies can ask all the active judges on the appeals
court to reconsider the case, or they can appeal to the U.S.
Supreme Court.
A U.S. Justice Department spokesman said government lawyers were
reviewing the decision.
Matthew Myers, the president of the Campaign For Tobacco-Free
Kids, said the ruling was a "tremendous victory for public health"
but said the court's refusal to allow additional remedies was
disappointing.
"It means that there's much more that needs to be done to
counter decades of wrongful behavior by the tobacco industry,"
Myers said.
The long-running case dates back to 1999, when the Clinton
administration alleged that nine tobacco companies and two related
trade associations engaged in a 50-year conspiracy to deceive the
public about the dangers of smoking. A nine-month trial took place
in 2005.
In a 2006 opinion that logged 1,653 pages, U.S. District Court
Judge Gladys Kessler ordered a variety of marketing, sales and
advertising restrictions on the tobacco industry, including an
order that barred cigarette makers from promoting brands as "light"
or "low tar."
That ban is sure to force major changes in tobacco marketing
because most cigarettes sold in the U.S. carry light and low-tar
labels.
Kessler also required cigarette makers to issue corrective
statements about the dangers of their products, which would appear
on television, newspapers, product packaging and countertop
displays in retail outlets.
The appeals court largely affirmed those remedies, though it
said Kessler should reconsider her order on countertop displays to
take into account the impact on retailers.
In rejecting the government's bid to have the industry fund a
national smoking-cessation program, the appeals court said federal
law gave the courts no power to order such a remedy.
-By Brent Kendall, Dow Jones Newswires; 202-862-9222;
brent.kendall@dowjones.com