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March 10, 2004.

PHILIP MORRIS USA., f/k/a Philip Morris, Inc. 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 Regarding Defendants'*fn1 Affirmative Defenses Asserting Violations of the Eighth Amendment and the Ex Post Facto Clause of the United States Constitution and that the Decision in United States v. Carson Controls the Scope of Disgorgement in this Case ("Motion"). The Government argues that each of these affirmative defenses is insufficient as a matter of law and must be dismissed.*fn2 Page 2

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 in part and denied in part.


  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. ยง 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 alleged conspiracy has been described at length in prior opinions, see e.g., United States v. Philip Morris, 116 F. Supp.2d 131, 136-138 (D.D.C. 2000); Mem. Op. January 23, 2004 at 3-5, and need not be repeated here.

  In its Motion, the Government seeks partial summary judgment as to certain of Defendants' affirmative defenses that relate to the disgorgement it seeks. Specifically, in the challenged Page 3 defenses Defendants assert that: (1) the disgorgement sought is so grossly disproportionate to the alleged RICO offenses as to constitute an excessive fine prohibited by the Eighth Amendment to the United States Constitution; (2) the Government's attempt to disgorge proceeds acquired from conduct pre-dating RICO's effective date (October 15, 1970) is foreclosed by the Ex Post Facto Clause of the Constitution; and (3) any disgorgement in this case is limited, as a matter of law, to ill-gotten gains that "are being used to fund or promote the [alleged] illegal conduct, or constitute capital available for that purpose." United States v. Carson, 52 F.3d 1173, 1182 (2d Cir. 1995). For the reasons set forth below, the Court will not grant summary judgment at this time as to issues (1) and (3) because a pending motion raises arguments relevant to resolving them. The Government is entitled to partial summary judgment as to issue (2).


  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). Page 4

  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. 1989).


  A. Whether the Relief the Government Seeks Is, in Fact, "Disgorgement" Is Very Much in Dispute

  The Excessive Fines Clause*fn5 applies only to penalties that are properly characterized as "punishment." Austin v. United States, 509 U.S. 602, 609-10 (1993)("The Excessive Fines Clause limits the government's power to extract payments . . . `as punishment for some offense.'")(emphasis in original)(quoting Browning-Ferris Industries of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 265 (1989)). As set forth below, it is well-established that disgorgement of ill-gotten proceeds is not punishment. SEC v. Bilzerian, 29 F.3d 689, 696 (D.C. Cir. 1994).*fn6 Therefore, insofar as the relief sought by the Government can be Page 5 properly characterized as "disgorgement," it does not implicate the Excessive Fines Clause.

  In Bilzerian, the defendant was ordered by the district court to disgorge the profits he had obtained from his violations of the securities laws. Id. at 691. He argued on appeal that the disgorgement order violated the double jeopardy clause of the Fifth Amendment because it punished him for the same conduct that had led to his criminal conviction. Id. at 696. However, the Court of Appeals rejected this argument, holding that the disgorgement order did not constitute "punishment" because "[t]he district court ordered Bilzerian to give up only his ill-gotten gains; it did not subject him to an additional penalty. Therefore the disgorgement does not constitute punishment." Id. (citing United States v. Tilley, 18 F.3d 295, 300 (5th Cir. 1994) (" [T] he forfeiture of illegal proceeds, much like the confiscation of stolen money from a bank robber, merely places that party in the lawfully protected financial status quo that he enjoyed prior to launching his illegal scheme. This is not punishment within the plain meaning of the word.")(internal citation omitted)).

  Disgorgement of ill-gotten gains is instead remedial, serving to deprive a wrongdoer of unjust enrichment as well as to deter*fn7 Page 6 others from violating the law. SEC v. First City Financial Corp., 890 F.2d 1215, 1230 (D.C. Cir. 1989).*fn8 The remedial nature of disgorgement serves to limit its application. Because disgorgement "may not be used punitively," a court's equitable power is restricted to "property causally related to the wrongdoing." Id. Page ...

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