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United States v. Philip Morris Inc.

July 1, 2002

UNITED STATES OF AMERICA, PLAINTIFF,
v.
PHILIP MORRIS INCORPORATED, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Gladys Kessler U.S. District Judge

MEMORANDUM OPINION

Plaintiff, the United States of America ("the Government") has brought suit against Joint Defendants, *fn1 pursuant to Sections 1962(c) and (d) of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. The Government seeks to enjoin Joint Defendants from engaging in fraudulent and other unlawful conduct and to order Joint Defendants to disgorge the proceeds of their past unlawful activity. *fn2

This matter is now before the Court on Joint Defendants' Motion to Enforce Jury Demand [#882]. Upon consideration of the motion, opposition, reply, the arguments presented at the motions hearing on May 31, 2002, and the entire record herein, for the reasons stated below, Joint Defendants' Motion to Enforce Jury Demand is denied.

I. BACKGROUND

The Government alleges that Joint Defendants have violated Sections 1962(c) and (d) of RICO. Section 1962(c) prohibits participation in the conduct of an enterprise's affairs through a pattern of racketeering activity. *fn3 The racketeering activity, or predicate acts, alleged in this case are mail and wire fraud. Section 1962(d) prohibits conspiracy to violate Section 1962(c). *fn4 The Government brings its claims pursuant to Section 1964(a) of RICO, which authorizes district courts to prevent and restrain violations of Section 1962. *fn5

Joint Defendants have made timely requests for a jury trial in their Answers. The Government opposes those demands, contending that the Seventh Amendment does not confer a right to a jury trial for this RICO action. Joint Defendants now seek to enforce their jury demand. Accordingly, the present issue before the Court is whether this case shall be tried before a jury or by the Court.

II. ANALYSIS

It is well established that the Seventh Amendment preserves the right to a jury trial in "suits[] which the common law recognized among its old and settled proceedings, [and in] suits in which legal rights were to be ascertained and determined, in contradistinction to those where equitable rights alone were recognized, and equitable remedies were administered." Parsons v. Bedford, 28 U.S. 433, 447 (1830) (emphasis in original).

The Supreme Court requires a two-step inquiry for determining when the right to a jury trial attaches. Accordingly, to determine whether a particular action will resolve legal, as opposed to equitable, rights the Court must (1) compare the statutory action to 18th -century actions brought in the courts of England prior to the merger of the courts of law and equity, and (2) examine the remedy sought and determine whether it is legal or equitable in nature. See Wooddell v. Int'l Bhd. of Elec. Workers, 502 U.S. 93, 97 (1991). The Supreme Court has repeatedly asserted that the second part of this test is more important than the first. See Teamsters v. Terry, 494 U.S. 558, 565 (1990) ("the second inquiry is more important in our analysis"); Granfinanciera, S.A., v . Nordberg, 492 U.S. 33, 42 (1989) ("the second stage of this analysis is more important than the first"); Crocker v. Piedmont Aviation, Inc., 49 F.3d 735, 745 (D.C. Cir. 1995) ("the second part of this test (the nature of the remedy) is more important than the first").

Joint Defendants advance two arguments in support of their Seventh Amendment right to a jury trial. First, Joint Defendants contend that the Government's RICO claim sounds in common-law fraud and common-law conspiracy, which are actions at law. Second, Joint Defendants argue that, because the injunctive and equitable relief the Government seeks constitutes nothing more than monetary relief, that relief is legal in nature. For the reasons discussed below, both of these arguments fail.

A. The Government's RICO Action Is Not Analogous to Common-Law Fraud or Common-Law Conspiracy and Therefore Is Not an Action at Law Entitling Joint Defendants to a Jury Trial

As noted above, the Government has brought suit against Joint Defendants for violations of Sections 1962(c) and (d) of RICO. There is no dispute that a cause of action under Sections 1962(c) and (d) of RICO did not exist in 18th century England. The Court must therefore "look for an analogous cause of action that existed in the 18th century to determine whether the nature of [the action] is legal or equitable." Terry, 494 U.S. at 566.

Joint Defendants contend that the RICO cause of action is legal because the underlying theories of liability for the Section 1962(c) and (d) action--namely mail and wire fraud--sound in common-law fraud. Joint Defendants further contend that the Section 1962(d) claim is analogous to a cause of action for common-law conspiracy.

As the following analysis demonstrates, there are substantial differences between the statutory elements the Government must establish in this case and the elements for common-law fraud and conspiracy. Because of these differences, the Court rejects Joint Defendants' contention ...


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