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U.S. v. PHILIP MORRIS USA

May 28, 2004.

UNITED STATES OF AMERICA, Plaintiff,
v.
PHILIP MORRIS USA, Inc., f/k/a Philip Morris, Inc. 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 the Motion of British American Tobacco (Investments) Limited ("BATCo") for Summary Judgment ("Motion"). Upon consideration of the Motion, the Government's Opposition, the Reply and the entire record herein, and for the reasons stated below, the Motion is denied.

I. BACKGROUND

  Plaintiff, the United States of America (the "Government") has brought this suit against the 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.,*fn2 Defendants are manufacturers of cigarettes and other tobacco-related entities. The Government seeks injunctive relief and disgorgement of $280 billion dollars*fn3 of ill-gotten gains for what it alleges to be Defendants' 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.

  One of the Defendants, BATCo, is a British corporation. It sells State Express 555 brand of cigarettes in the United States, and historically has always held a very small share of the United States market (never more than .06%). Until 1979, Brown & Williamson ("B&W") was a subsidiary of BATCo. In a corporate reorganization in 1979, BATCo relinquished ownership of B&W and became its affiliate.

 II. ANALYSIS

  Defendant BATCo seeks summary judgment on all claims against it on the grounds that the Government cannot establish BATCo's liability under either Sections 1962(c) or (d) of RICO.*fn4 Section 1962(c) liability attaches to one who "participate [s] in the operation or management of the enterprise itself." Reves v. Ernst & Young, 507 U.S. 170, 185 (1993) (emphasis in original). Under Section 1962(d), it is "unlawful for any person to conspire to violate any of the provisions of subsection . . . (c) of this section." 18 U.S.C. § 1962 (d). BATCo argues that there is no evidence either connecting it to the "operation or management" of the RICO enterprise or demonstrating a knowing agreement that it embraced the objectives of the alleged conspiracy. See Motion, at 3-4. In addition, BATCo argues that the claims against it must be dismissed because they are based on its relationship with B&W and, as a matter of law, affiliates cannot conspire with each other. Id. at 22.

  In turn, the Government asserts that there is substantial evidence of BATCo's participation in and benefit from the conspiracy. See Govt's Opp'n. at 5-7. In particular, the Government argues that BATCo participated in the "operation or management of the Enterprise" by supporting its scheme to defraud the public. Id. In addition, the Government argues that BATCo can and did conspire with B&W, as well as the other Defendants. See id. at 21.

  A. 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. See 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 Washington Post Co. v. United States Dep't of Health and Human Servs., 865 F.2d 320, 325 (D.C. Cir. 1989).

  Additionally, "if the evidence presented on a dispositive issue is subject to conflicting interpretations, or reasonable persons might differ as to its significance, summary judgment is improper." Greenberg v. FDA, 803 F.2d 1213, 1216 (D.C. Cir. 1986). At the summary judgment stage, "the court is not to make credibility determinations or weigh the evidence." Dunway v. Int'l Bhd. of Teamsters, 310 F.3d 758, 761 (D.C. Cir. 2002).

  B. There Are Material Facts in Dispute About Whether and To What Extent BATCo Participated in the Operation or Management of the Alleged RICO Enterprise or Conspired To Do So

  First, BATCo argues that the Government's claims as to its liability under Sections 1962(c) must fail as a matter of law because the Government has failed to present any evidence that it participated in the operation or management of the alleged RICO enterprise. See Motion at 7; Reves, 507 U.S., at 179 (showing of "operation or management" of the RICO enterprise requires proof [of] "some part in directing [the Enterprise's] affairs").

  In particular, BATCo notes that it did not attend the December 1953 meeting of cigarette company executives at which, according to the Government, the alleged enterprise was conceived, and it did not sign the "Frank Statement" advertisement which, according to the Government, began the alleged scheme to defraud to the American public. See Motion, at 10. In addition, BATCo points out that it was never a member, or represented on the board or management, of either CTR or TI, entities which the Government alleges coordinated the operation and direction of the enterprise. Id. at 11. Finally, BATCo argues that, because it never had more than a .06% market share in the United States and because its primary business interests have ...


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