UPDATE: Appeals Court Largely Upholds Ruling Against Tobacco Cos
May 22 2009 - 2:07PM
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 national
smoking-cessation campaign.
The appeals court also affirmed an earlier ruling that the
government could not obtain hundreds of millions of dollars in
disgorgement from the tobacco companies.
In a unanimous 92-page ruling, 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 Loews Corp.'s (LTR) Lorillard Inc.
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.
A U.S. Justice Department spokesman said government lawyers were
reviewing the decision.
In her 2006 opinion, 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."
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