United States District Court for the District of Columbia
January 23, 2004.
UNITED STATES OF AMERICA, Plaintiff, PHILIP MORRIS INCORPORATED, et al., Defendants
The opinion of the court was delivered by: GLADYS KESSLER, District Judge
This matter is now before the Court on the United States' Motion for
Partial Summary Judgment on Defendants'*fn1 Equitable Defenses of
Waiver, Equitable Estoppel, Laches, Unclean Hands, and In Pari Delicto
("Motion"). The Government argues that each of these affirmative defenses
is insufficient as a matter of law and must be dismissed.*fn2
The essence of the Government's argument is that the equitable defenses
of waiver, equitable estoppel, laches, unclean hands and in pari
delicto may not be asserted against the United States when,
as here, "it is acting in its sovereign capacity to exercise public
rights to protect the public interest." Motion at 1-2. Defendants argue
to the contrary that equitable defenses are routinely available against
the Government and are supported by the evidence in this case.
The case law overwhelmingly supports the Government's position. The
United States brings its RICO claims in its capacity as sovereign, acting
on behalf of the public to vindicate public rights. The Supreme Court has
stated that any waiver of such sovereign authority must be unmistakable,
United States v. Cherokee Nation of Oklahoma, 480 U.S. 700, 707 (1987)
(internal citation omitted), yet the Defendants have not pointed to
anything in the record that constitutes an unmistakable waiver of the
Government's right to pursue these claims. The case law is also clear
that if equitable estoppel is ever to apply to the Government, the
justification for it must be compelling and must go beyond the showing a
party would have to make against an ordinary opponent in an ordinary
case. ATC Petroleum, Inc. v. Sanders, 860 F.2d 1104, 1111 (D.C. Cir.
1988). In this case, the Defendants have not even satisfied the
traditional elements of equitable estoppel. It is equally clear that,
under the law of this Circuit, laches and unclean hands are both
unavailable as a matter of law when, as here, the Government acts in the
public interest. Illinois Central Railroad Co. v. Rogers, 253 F.2d 349,
353 (D.C. Cir. 1958)(laches);
United States ex rel. Purcell v. MWI Corp., 254 F. Supp.2d 69, 74 n.2
(D.D.C. 2003)(laches); SEC v. Sprecher, No. 92-2860, 1993 WL 544306, *2
(D.D.C. 1993) (citing Pan American Petroleum & Transport Co. v.
United States, 273 U.S. 456, 506 (1927))(unclean hands); SEC v. Gulf
& Western Ind., Inc., 502 F. Supp. 343, 348 (D.D.C. 1980)(unclean
hands). Finally, in pari delicto is only available when a party has
"violated the law in cooperation with the defendant," Pinter v. Dahl, 486
U.S 622, 632 (1988). Since Defendants have not even alleged that the
Government has committed any illegality during the period covered by the
Complaint's allegations of conspiracy, the defense of in pari delicto has
Upon consideration of the Motion, the Opposition, the Reply and the
entire record herein, and for the reasons set forth below, the United
States' Motion is granted.
A. Factual Allegations
Plaintiff, the United States of America ("the Government") has brought
this suit against Defendants pursuant to Sections 1962(c) and (d) of the
Racketeer Influenced and Corrupt Organizations Act ("RICO),
18 U.S.C. § 1961 et seq.*fn3 Defendants are manufacturers of
cigarettes and other tobacco-related entities. The Government seeks
injunctive relief and $289 billion *fn4 for what it alleges to be an
unlawful conspiracy to deceive the American public.
The Government's Amended Complaint describes a four-decade long
conspiracy, dating from at least 1953, to intentionally and willfully
deceive and mislead the American public. According to the Government, the
underlying strategy Defendants adopted was to deny that smoking caused
disease and to consistently maintain that whether smoking caused disease
was an "open question." Am. Compl. at ¶ 34. In furtherance of that
strategy, Defendants allegedly issued deceptive press releases, published
false and misleading articles, destroyed and concealed documents which
indicated that there was in fact a correlation between smoking and
disease, and aggressively targeted children as potential new smokers. Am.
Compl. at ¶ 36.
The Government also alleges that over the course of the conspiracy,
Defendants made false and misleading statements concerning the
addictiveness of nicotine. Defendants continually denied that nicotine is
addictive, even in the face of what the Government calls overwhelming
evidence to the contrary. Am. Compl.
at ¶¶ 71-72. Defendants allegedly took actions to make cigarettes even
more addictive by manipulating and increasing the potency of nicotine in
their cigarettes. Am. Compl. at ¶ 77. Nevertheless, Defendants have
repeatedly denied that they manipulated the level of nicotine in their
products. Am. Compl. at ¶ 79.
The Government also alleges that Defendants used deceptive marketing to
exploit smokers' desire for less hazardous products and "misled consumers
by marketing products that consumers believe are less harmful, even
though they are not." Am. Compl. at ¶ 83. For example, according to
the Government, Defendants have marketed "light" or "low tar/low
nicotine" cigarettes as being less hazardous to smokers even though there
is no basis for believing they are any safer than other cigarettes. Am.
Compl. at ¶ 86.
B. Affirmative Defenses
Defendants have asserted a variety of affirmative defenses to these
allegations in their Answers, responses to interrogatories, and in Joint
Defendants' Preliminary Proposed Conclusions of Law Regarding Affirmative
Defenses ("J.D. PPCL"). These defenses include waiver, equitable
estoppel, laches, unclean hands and in pari delicto.
The thrust of Defendants' equitable defenses is that the Government
itself has been involved with, permitted, encouraged, and even mandated
the very conduct it now challenges in this RICO action. For example,
while the Government claims that the
Defendants deceived its agencies and employees about the relationship
between smoking and disease, Defendants respond that the Government
itself has known of that relationship for decades. Mem. in Opp'n at 1.
Regarding allegations of Defendants' concealment of the addictive nature
of nicotine, they claim that "the Government seeks to obscure the fact
that . . . it officially maintained that nicotine was not `addictive'
until the Surgeon General changed the definition of addiction in 1988."
Id. According to Defendants, despite the fact that the Federal Trade
Commission ("FTC") required Defendants to use the so called FTC
Method for reporting tar and nicotine, the Government now alleges that
their compliance with this requirement is fraudulent. J.D. PPCL 816.
Similarly, regarding the allegation that they affirmatively suppressed
research into safer cigarettes, Defendants claim that "the Government
disregards that, for over ten years, it worked closely with [D]efendants
in pursuit of such a cigarette, and that it was responsible for
disbanding the joint effort." Mem. in Opp'n at 1. Although the Government
now attacks Defendants' development and marketing of low tar cigarettes,
"it was the Government that actively encouraged and publicly lauded the
development of those cigarettes." Id. (emphasis in original).
In short, Defendants contend in their affirmative defenses that "the
Government's involvement with, acquiescence in, and
encouragement of the challenged conduct forecloses equitable relief."
Mem. in Opp'n at 5.
II. SUMMARY JUDGMENT STANDARD
Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment
is appropriate if the pleadings, depositions, answers to interrogatories
and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving
party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c).
Material facts are those that "might affect the outcome of the suit under
the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). In considering a summary judgment motion, "the evidence of the
non-movant is to be believed, and all justifiable inferences are to be
drawn in his favor." Id. at 255; see also Washington Post Co. v. United
States Dep't of Health and Human Servs., 865 F.2d 320, 325 (D.C. Cir.
The Court will assume for purposes of this Motion that the facts relied
upon by Defendants are true and undisputed.*fn6
A. As a Matter of Law Defendants Have Not Established Waiver of the
Government's Right to Bring a RICO Suit
Waiver is the "intentional relinquishment or abandonment of a known
right." United States v. Weathers, 186 F.3d 948, 955 (D.C. Cir. 1999)
(citations and quotation omitted). Defendants assert that the
Government's past conduct "is replete with instances of behavior
demonstrating that the Government has knowingly abandoned its right or
interests in equitable relief as to defendants' historical conduct."
Mem. in Opp'n at 19 (citing Defendants' Rule 7.1/56.1 Counter Statement
("Defendants' Statement") at ¶¶ 1-107). They argue that the Government
has waived its interest because its "silence and delay" over the years
are inconsistent with the right to pursue its RICO claims. Mem. in Opp'n
For example, according to Defendants, the Government was "obliged to
speak out to the extent it considered defendants' conduct unlawful" in
light of its long standing knowledge of the adverse health
consequences of tobacco use, and its extensive regulation of cigarettes.
Mem. in Opp'n at 19-20. As other
asserted examples of intentional waiver, Defendants note: the Government
worked with Defendants in the Tobacco Working Group to develop a "safer"
cigarette; the FTC has required Defendants to "report tar and nicotine
levels for `light' cigarettes using the FTC Method"; the Government has
long been aware that the FTC Method "does not accurately measure the tar
and nicotine actually ingested by smokers"; and the Government itself
"encouraged smokers to switch to low tar cigarettes on the ground
that they were safer." J.D. PPCL 816. See also Mem. in Opp'n at 19-20.
The Supreme Court has clearly stated that "a waiver of sovereign
authority will not be implied, but instead must be surrendered in
unmistakable terms." United States v. Cherokee Nation of Oklahoma,
480 U.S. 700, 707(1987)(internal citation omitted). See also Merrion v.
Jicarilla Apache Tribe, 455 U.S. 130, 148 (1982)(same). The Attorney
General is expressly authorized to bring civil RICO suits pursuant to
18 U.S.C. § 1964(b) and there is no question that the Government
brings its RICO claims in its sovereign capacity. Therefore, any waiver
must be made in unmistakable terms.
Defendants argue that the intent to waive "may be inferred from
circumstances," including silence "under such circumstances when . . .
one would naturally speak." Mem. in Opp'n at 18-19 (citations omitted).
However, Defendants ignore the heightened standard that applies when the
waiver of sovereign power is in
question. Indeed, in United States v. Winstar, 518 U.S. 839, 877, upon
which Defendants rely, the Supreme Court explained that it had "refused
to infer a waiver of federal sovereign power from silence" in Cherokee
Nation of Oklahoma, supra.*fn7
The other facts cited by Defendants to establish waiver simply do not
demonstrate an "unmistakable" intent on the part of the United States to
waive its right to bring a civil RICO action, predicated on mail and wire
fraud against Defendants.*fn8 None of the facts set forth by Defendants
mentions RICO or has any connection to the Attorney General's statutory
right to enforce that statute, or any other statute. The paragraphs from
Defendants' Statement cited in support of their waiver defense likewise
fail to show the Government's unmistakable intent to waive its right to
bring a RICO action, or any other action, against Defendants. See Mem. in
Opp'n at 19 (citing Defendants' Statement at ¶¶ 1-107.)
The Court therefore finds that, viewing the evidence in the light most
favorable to the Defendants, they have, as a matter of law, failed to
offer evidence sufficient to justify a finding of the Government's
unmistakable intent to waive its right to bring a civil RICO suit against
them. See Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587
(1986) ("Where the record taken as a whole could not lead a rational
trier of fact to find for the non-moving party, there is no genuine issue
for trial")(internal citation omitted). Therefore, the affirmative
defense of waiver is insufficient as a matter of law.*fn9 The
Government's motion for summary judgment as to affirmative defenses based
on waiver is granted.
B. As a Matter of Law, Defendants Have Not Established that the
Government Is Estopped from Bringing a RICO Suit
The doctrine of equitable estoppel "is a means of precluding a litigant
from asserting an otherwise available claim or defense against a party
who has detrimentally relied on that litigant's conduct." ATC Petroleum,
Inc. v. Sanders, 860 F.2d 1104, 1111 (B.C. Cir. 1988) (citations
omitted). As described more fully below, the Defendants argue that
because the Government encouraged and
even mandated some of the conduct which is the subject of the RICO
allegations in this case, it is now estopped from claiming that this same
conduct violates RICO.
The Supreme Court has not decided the question of whether the doctrine
of equitable estoppel can ever apply against the government. Office of
Personnel Management v. Richmond, 496 U.S. 414, 423 (1990)("[w]e leave
for another day whether an estoppel claim could ever succeed against the
Government" although the arguments in favor of a flat rule against it
"are substantial"); Heckler v. Community Health Services of Crawford
County, Inc., 467 U.S. 51, 60 (1984)("[w]e have left the issue open in
the past and do so again today."). This Circuit has held that "the
fundamental principle of equitable estoppel applies to government
agencies, as well as private parties." ATC Petroleum, 860 F.2d at 1111
(internal quotation and citations omitted). However, neither the Supreme
Court nor this Circuit has ever upheld a finding of equitable estoppel
against the Government. See Office of Personnel v. Richmond, 496 U.S. at
422 ("we have reversed every finding of estoppel that we have
It is clear, however, that even if equitable estoppel does apply to the
Government, any such application "must be rigid and sparing" and that the
case for estoppel "must be compelling." Id. The rationale for this
heightened burden is that "[w]hen the Government is unable to enforce the
law because the conduct of its
agents has given rise to an estoppel, the interest of the citizenry as a
whole in obedience to the rule of law is undermined." Heckler, 467 U.S.
at 60. The party wishing to assert estoppel against the government must
not only demonstrate "each of the traditional elements of the doctrine, "
but must also make "a showing of an injustice . . . and lack of undue
damage to the public interest." ATC Petroleum, 860 F.2d at 1111 (internal
quotation and citations omitted).*fn10
The traditional elements of equitable estoppel are, therefore, a
threshold requirement that Defendants must meet in order to assert the
doctrine in this case. These elements are: (1) false representation, (2)
a purpose to invite action by the party to whom the representation was
made, (3) ignorance of the true facts by that party and (4) reliance.
Here, viewing the facts in the light most favorable to Defendants, they
have failed to establish, as a matter of law, the false representation
element of equitable estoppel. In an effort
to establish this factor, Defendants rely on the Government's regulation
of their industry, arguing that "the Government's participation in, and
regulation of, the cigarette industry can be characterized as a
misrepresentation of the claims now advanced." Mem. in Opp'n at 29.
(internal quotation omitted). For example, they argue that the Government
encouraged the development and marketing of reduced tar products, and
that this encouragement constituted a representation that such conduct
would not later subject Defendants to prosecution. Id. at 29-30.
Assertion of equitable estoppel requires a "definite
misrepresentation." Heckler, 467 U.S. at 59 (quoting with approval
Restatement (Second) of Torts § 894(1) (1979)); Grumman Ohio Corp.,
776 F.2d at 347-48 (equitable estoppel against government agency rejected
where "there appears to have been no actual misrepresentation or
concealment" and "no definitive statement was made"); Hertzberg v.
Veneman, 273 F. Supp.2d 67, 83 (D.D.C. 2003)(doctrine of estoppel
requires showing that "there was a `definite' representation to the party
claiming estoppel"). None of the facts recited in Defendants' Memorandum
in Opposition or Statement constitute representations, much less
misrepresentations or definitive statements, concerning whether
Defendants would ever be subject to RICO prosecution.*fn11 The Court
does not agree that
regulation of an industry constitutes a definite representation regarding
potential liability under RICO. Certainly, Defendants cite no authority
for the proposition that lawful government regulation can be deemed a
"misrepresentation" for the purpose of establishing the elements of
"[H]owever heavy the burden might be when an estoppel is asserted
against the Government, the private party surely cannot prevail without
at least demonstrating that the traditional elements of an estoppel are
present." Heckler, 467 U.S. at 60. The Court finds that government
regulation and related facts cited in Defendants' Statement do not make a
"compelling" case for the assertion of equitable estoppel. In the absence
of any representations or definitive statements by the Government
concerning pursuit of Defendants under RICO, or any other statute, the
application of equitable estoppel would not be "rigid and sparing" as
required by this Circuit. Because the Defendants have failed to present
evidence that could constitute a misrepresentation by the Government, the
Government's motion for summary judgment as to affirmative defenses based
estoppel is granted. See Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986) ("the plain language of Rule 56(c) mandates the entry of summary
judgment . . . against a party who fails to make a showing sufficient to
establish the existence of an element essential to that party's case, and
on which that party will bear the burden of proof at trial.").
C. Laches Is Unavailable as a Matter of Law
The doctrine of laches bars relief to parties who "delay the assertion
of their claims for an unreasonable time." NAACP v. NAACP Legal Def.
& Educ. Fund, Inc., 753 F.2d 131, 137 (B.C. Cir. 1985). "Laches is
founded on the notion that equity aids the vigilant and not those who
slumber on their rights." Id. The doctrine serves several purposes. It
encourages plaintiffs to file suits before their claims are stale and
evidence is lost, and prevents plaintiffs from gaining the unfair
advantage of hindsight Id.
Here, Defendants assert laches as an affirmative defense to the
Government's allegations. They argue that the Government's claims have,
in whole or in part, "grown stale beyond revival." Mem. in Opp'n at
23.*fn12 For example, Defendants point out that several witnesses are
deceased or otherwise unavailable and that numerous documents have been
destroyed or become otherwise
irretrievable. Id. The Government's delay is unreasonable, according to
Defendants, because the Government has for decades been fully aware of
their activities and of the health effects of smoking but "never made any
claim of criminal misconduct." Id. at 24 n. 12. Moreover, the amount of
profits that the Government seeks to disgorge is "largely attributable to
the timing of the [G]overnment's decision to prosecute." Id. "In sum
. . . the timing of the Government's prosecution is both unreasonable and
prejudicial." Id. at 24.
It is correct that the United States is subject to laches in certain
restricted contexts, such as commercial suits. Clearfield Trust Co. v.
United States, 318 U.S. 363, 369 (1943)(United States is not exempt from
laches in commercial context because it "does business on business
terms").*fn13 However, "[a]s a general rule, laches or neglect of duty
on the part of officers of the government is no defense to a suit by it
to enforce a public right or protect a public interest." Utah Power
& Light Co. v. United States, 243 U.S. 389, 409 (1917). The
inapplicability of laches when the Government sues to enforce the public
interest is sometimes called the "Summerlin rule." See United States v.
310 U.S. 414, 416 (1940)(it is "well settled that the United States is
not . . . subject to the defense of laches in enforcing its rights"). The
Supreme Court has noted that the "continuing vitality" of this rule rests
on "the great public policy of preserving the public rights, revenues,
and property from injury and loss, by the negligence of public officers."
Guaranty Trust Co. of New York v. United States, 304 U.S. 126, 132 (1938)
(quoting Story, J., in United States v. Hoar, 26 F Cas. 329, 330,
(C.C.D. Mass. 1821) (No. 15373)).*fn14 See Illinois Central Railroad
Co. v. Rogers, 253 F.2d 349, 353 (D.C. Cir. 1958) ("[n]o rule is better
established than that the United States are not bound by limitations or
barred by laches where they are asserting a public right.")(internal
Defendants rely on Resolution Trust Corp. v. Vanderweele,
833 F. Supp. 1383, 1388 (N.D. Ind. 1993), for the proposition that "`no
. . . precedent forecloses a laches defense as a matter of law when the
Government asserts rights on behalf of the public at large.'" Mem. in
Opp'n at 12 (quoting Vanderweele, 833 F. Supp at 1388)*fn15
In that case, the court acknowledged that the Supreme Court has held that
laches could not be asserted against the Government. 833 F. Supp. at
1388. However, Vanderweele observes that the Seventh Circuit has relied
on dicta in more recent Supreme Court cases, such as Occidental Life
Ins. Co. v. EEOC, 432 U.S. 355, 373 (1977), to find laches "applicable to
suits by government agencies" on a "case by case" basis. Id. (citing NLRB
v. P*I*E Nationwide, Inc., 894 F.2d 887, 894 (7th Cir. 1990)).
Defendants' reliance on Vanderweele and P*I*E Nationwide is misplaced
for two compelling reasons.
First, this is not the Seventh Circuit. Summerlin, which has not been
overruled by the Supreme Court, remains the law of this Circuit. United
States ex rel. Purcell v. MWI Corp., 254 F. Supp.2d 69, 74 n.2 (D.D.C.
2003) (Urbina, J.) (citing Mount Vernon Mortgage Corp. v. United States,
236 F.2d 724, 725 (D.C. Cir. 1956). While noting that the Seventh Circuit
in P*I*E Nationwide had concluded that laches could be applied to
government agencies based on Supreme Court dictum, MWI rejected such an
application because "[t]his circuit has adopted the Summerlin rule." Id.
Other cases within this circuit which post date Occidental
Life have similarly applied the Summerlin rule. See e.g., SEC v.
Sprecher, No. 92-2860, 1993 WL 544306, *2 (D.D.C. 1993) ("the government
is not subject to the defense of laches when acting in a nonproprietary
capacity.")(citing Summerlin); SEC v. Gulf & Western Industries,
Inc., 502 F. Supp. 343, 348 (D.D.C. 1980) ("[a] claim of laches . . .
cannot be applied to a government agency working in the public
interest.")(citing Summerlin). Here, there is no question that the
Government has brought a RICO suit on behalf of the public and is not
acting in a proprietary capacity or on behalf of individuals. See United
States v. International Brotherhood of Teamsters, 3 F.3d 634, 638 (2d
Cir. 1993) (when it proceeds under 18 U.S.C. § 1964, "the government
sues in its sovereign capacity pursuant to a compelling governmental
interest and strong congressional policy")(citations omitted).*fn16
Second, both Vanderweele and P*I*E Nationwide rely upon Occidental
Life, an enforcement action undertaken by the EEOC on behalf of an
individual claimant, not on behalf of the public. Moreover, the Seventh
Circuit has recognized in a case decided after P*I*E Nationwide, that
cases in which the Government asserts the rights of individual claimants
are an "exception" to what
remains the "general rule" that "the United States is not subject to the
equitable defense of laches in enforcing its rights." Martin v.
Consultants and Administrators Inc., 966 F.2d 1078 (7th Cir. 1992)
(citing Summerlin),*fn17 Vanderweele itself acknowledged that the
Seventh Circuit "has not allowed a laches defense in suits on behalf of
the public interest," 833 F. Supp. 1383, although such a defense is
apparently not foreclosed in that circuit.
Finally, the dicta in Occidental upon which P*I*E* Nationwide and
Vanderweele rely is hardly compelling. Justice Stewart noted that
when a Title VII defendant is in fact prejudiced by a
private plaintiff's unexcused conduct of [sic] a
particular case, the trial court may restrict or even
deny backpay relief. The same discretionary power to
locate a just result in light of the circumstances
peculiar to the case, can also be exercised when the
EEOC is the plaintiff.
432 U.S. at 373. This is not language which can be read to overturn the
long-standing Summerlin rule.
Therefore, the affirmative defense of laches is foreclosed by
Summerlin and is insufficient as a matter of law. The Government's
motion for summary judgment as to affirmative defenses based on laches is
D. The Defenses of Unclean Hands and In Pari Delicto Are Unavailable
as a Matter of Law
Defendants also assert the related defenses of unclean hands and in
pari delicto. The unclean hands doctrine derives from the equitable maxim
that "he who comes into equity must come with clean hands." Precision
Instrument Mfg. Co. v. Automotive Maintenance Mach. Co., 324 U.S. 806,
814 (1945). The doctrine "closes the doors of a court of equity to one
tainted with inequitableness or bad faith relative to the matter in which
he seeks relief." Id.
In pari delicto "literally means `in equal fault1" and is based on "the
common law notion that a plaintiff's recovery may be barred by
his own wrongful conduct." Pinter v. Dahl, 486 U.S. 622, 632, 632
(1988). Historically the doctrine has been "limited to situations where
the plaintiff bore at least substantially equal responsibility for his
injury, and where the parties' culpability arose out of the same illegal
act." Id. (internal quotation
omitted; citing 1 J. Story, Equity of Jurisprudence 399-400 (14th
The Defendants make it clear that they do not allege that any of the
Government's conduct relied upon in support of these defenses was
actually wrongful. Mem. in Opp'n at 24. Rather, they argue that the
Government engaged in the same sort of conduct as Defendants themselves.
According to Defendants, conduct that demonstrates the Government's
unclean hands includes: Government scientists questioned whether smoking
causes disease, Mem. in Opp'n at 25; the Government failed to communicate
to the public its knowledge of the properties of nicotine until 1988,
id. at 26; the Department of Defense has subsidized cigarette sales to
servicemen in "an attempt to profit at the expense of the health and
welfare of military personnel," id. at 26; the Government has supported
domestic tobacco farming, id. at 27; the Government encouraged smokers to
switch to lower tar products, id. at 27-28; and the Government has
discouraged and interfered with the creation of safer cigarettes, id. at
When, as here, the Government acts in the public interest the unclean
hands doctrine is unavailable as a matter of law. See SEC v. Gulf &
Western Ind., Inc., 502 F. Supp. 343, 348 (D.D.C. 1980) (in SEC
enforcement action "the doctrine of unclean hands is clearly without
merit because it may not be invoked against a governmental agency which
is attempting to enforce a congressional mandate in the public
interest."); SEC v. Sprecher, No. 92-2860, 1993 WL 544306, *2 (D.D.C.
1993) ("an unclean hands defense does not lie in a civil enforcement
action brought by a federal agency, as distinguished from a private
plaintiff.")(citing Pan American Petroleum & Transport Co. v. United
States, 273 U.S. 456, 506 (1927)); See also SEC v. Rivlin, No. 99-1455,
1999 WL 1455758, *5 (D.D.C. 1999) (striking affirmative defense of
unclean hands because it "may not be invoked against the SEC").*fn20
Moreover, even if the unclean hands doctrine could apply to the United
States when it acts to enforce RICO, the Defendants have not alleged the
fundamental requirement of that defense: they have not alleged that any
of the Government conduct upon which they rely is wrongful, inequitable,
or a manifestation of bad faith. Although their Memorandum in Opposition
claims that the Government has committed the "same sort of wrongdoing" as
is alleged against them, Defendants in fact do not allege that the
Government fraudulently misrepresented anything or that it committed mail
and wire fraud.
In pari delicto is similarly unavailable. "One of the premises on which
the in pari delicto doctrine is grounded is that `denying judicial relief
to an admitted wrongdoer is an effective means of deterring illegality.1"
Pinter, 486 U.S. at 634 (quoting Bateman Eichler, Hill Richards, Inc. v.
Berner, 472 U.S. 299 (1985)). A party "truly in pari delicto" is one who
"violated the law in cooperation with the defendant." Id. at 636. Here,
there is no claim that the Government has "violated the law in
cooperation with the defendant[s]".
The Government's motion for summary judgment as to the affirmative
defenses of unclean hands and in pari delicto is granted because these
defenses are insufficient as a matter of law.
The Government is entitled to summary judgment as to the affirmative
defense of waiver because the Defendants did not offer evidence to show
that the Government waived its right to bring a civil RICO suit, or any
other suit, against them in "unmistakable terms". The Government is not
estopped from pursuing its RICO claims because the Defendants have not
set forth material facts concerning any misrepresentations by the
Government about whether it would enforce RICO against them. Laches is
unavailable as a matter of law in a suit brought by the United States
acting in the public interest. Finally, the unclean hands and in
pari delicto defenses fail as a matter of law because these defenses
are not available against the Government when it acts in the public
interest; even if these two defenses were available, summary judgment
would still be appropriate because Defendants have not
alleged any wrongdoing by the Government. Consequently, the
Government's Motion is granted in whole.*fn21
An Order will accompany this opinion.
Upon consideration of the United States' Motion for Partial Summary
Judgment on Defendants' Equitable Defenses of Waiver, Equitable
Estoppel, Laches, Unclean Hands, and In Pari Delicto, the Defendants'
Opposition, the United Reply, and the entire record herein, it is this
23rd day of January, 2004,
ORDERED, that the United States' Motion for Partial Summary Judgment on
Defendants' Equitable Defenses of Waiver, Equitable Estoppel, Laches,
Unclean Hands, and In Pari Delicto is granted; and it is further
ORDERED, that the following affirmative Defenses are dismissed:
Philip Morris USA, Inc. (f/k/a/ Philip Morris Incorporated):
Affirmative Defenses 3 and 5;
Altria Group, Inc. (f/k/a/ Philip Morris Companies Inc.): Affirmative
Defenses 4 and 6:
R.J. Reynolds Tobacco Co.: Affirmative Defenses 2, 3, and 10;
Brown & Williamson Tobacco Co.: Affirmative Defenses 3, 4, 5 and
British American Tobacco (Investments) Limited: Affirmative Defenses
4, 5, and 6;
Lorillard Tobacco Company: Affirmative Defenses 10, 11, 41, and 43;
The Liggett Group Inc.: Affirmative Defenses 4 and 29;
Counsel for Tobacco Research U.S.A.: Affirmative Defenses 2,
3, 4, and 16;
The Tobacco Institute: Affirmative Defenses 3 and 5; and it is further
ORDERED, that any other Affirmative Defense that depends, in part or in
whole, on the equitable defenses of waiver, equitable estoppel, laches,
unclean hands, or in pari delicto is hereby dismissed.