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U.S. v. PHILIP MORRIS INCORPORATED

February 24, 2004.

UNITED STATES OF AMERICA, Plaintiff,
v.
PHILIP MORRIS INCORPORATED, et al., Defendants



The opinion of the court was delivered by: GLADYS KESSLER, District Judge

MEMORANDUM OPINION

This matter is now before the Court on Defendants'*fn1 Motion for Partial Summary Judgment on Claims that Defendants Advertised, Marketed, and Promoted Cigarettes to Youth and Fraudulently Denied Such Conduct. Upon consideration of the Motion, the Government's Opposition and the entire record herein, and for the reasons stated below, the Joint Defendants' Motion is denied.

I. BACKGROUND

  Plaintiff, the United States of America ("the Government") has brought this suit against the Defendants pursuant to Sections 1962(c) and (d) of the Racketeer Influenced and Corrupt Page 2 Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq.*fn2 Defendants are manufacturers of cigarettes and other tobacco-related entities. The Government seeks injunctive relief and billions of dollars 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 about, among other things, the harmful nature of tobacco products, the addictive nature of nicotine, and the possibility of manufacturing safer and less addictive tobacco products. Amended Complaint ("Am. Compl.") at ¶ 3.

  The present Motion focuses on one sub-scheme of the overarching conspiracy alleged by the Government, namely the Government's allegations that the Defendants have deliberately marketed cigarettes to children and fraudulently denied doing so. According to the Government, even though the sale of cigarettes to children is illegal, and even though Defendants deny doing so, they have marketed their products to children. Defendants are allegedly motivated to target children as new smokers because they "fail to appreciate the risk that, by engaging in smoking while they are Page 3 adolescents, they will become long term smokers because of the development of an addiction to nicotine." Am. Compl. at ¶ 95. Once addicted, these new smokers serve as "replacements" for older smokers who quit smoking or die. Am. Compl. at ¶ 94.

  R.J. Reynolds' Joe Camel campaign is just one of the most well-known examples of what the Government characterizes as Defendants' practice of "aggressively target[ing] their campaigns to children." Am. Compl. at ¶¶ 96-97. According to the Government, Defendants have conducted research on young people and designed their marketing practices to exploit what they have learned about their interests and vulnerabilities, in order to induce them to smoke. Gov't Mem. in Opp'n at 7 (citing United States' Master Rule 7.1/56.1 Statement of Material Facts Demonstrating the Existence of Genuine Issues for Trial ("Master Stmt"). Defendants have allegedly enticed children to smoke using advertising that "glamorizes smoking," using "content . . . intended to entice young people to smoke, for example, as a rite of passage into adulthood or as a status symbol." Am. Compl. at 1 96.

  Defendants are also alleged to have advertised in stores near high schools, given away cigarettes at places where young persons congregate, paid for product placement in movies with youth audiences, placed advertisements in magazines with high youth readership, and sponsored sporting events, rock concerts, and other events of interest to children. Am. Compl. at 1 96. At the same Page 4 time, according to the Government, Defendants have consistently made false and misleading statements that their expenditures on advertising and marketing were directed exclusively at convincing current smokers to switch brands, not at enticing children to start smoking. Am. Compl. at ¶ 100.

  Defendants vehemently deny that they have advertised, marketed and promoted cigarettes to children. In their Motion they seek summary judgment against the Government's allegations relating to what Defendants call "the youth marketing sub-scheme." Mem. in Supp. at 13. Defendants ask the Court to dismiss with prejudice all of the Government's racketeering acts*fn3 related to this sub-scheme along with the related claims. Page 5

  These racketeering acts comprise two groups. The first category is actual cigarette advertisements that allegedly promote cigarettes to children along with conduct, apart from advertising, that furthers the goal of marketing smoking to children, such as obtaining surveys of youth smoking habits (collectively "youth marketing acts"). The second category of racketeering acts are Defendants' denials that they targeted their marketing at children.

  Defendants advance three principal arguments that these racketeering acts should be dismissed:

  (1) The youth marketing acts do not constitute RICO predicate acts of mail and wire fraud.

  (2) Their conduct is protected by the First Amendment.

  (3) Their denials of marketing to children were not part of a scheme to defraud anyone of "money or property" as required by the mail and wire fraud statutes.

  Defendants are not entitled to summary judgment on the basis of any of these arguments, for the following reasons; consequently, the Government must be given the opportunity to prove its claims about Defendants' youth marketing sub-scheme at trial.

  First, the youth marketing acts cannot be assessed in isolation, but must be evaluated in the context of the totality of the Government's allegations of fraud.

  Second, whether Defendants have targeted children as replacement smokers and whether they have falsely denied doing so, Page 6 involve disputed factual issues of intent that must be resolved at trial.

  Third, the Government has, contrary to Defendants' argument, alleged a deprivation of "money or property," namely the purchase ...


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