United States District Court for the District of Columbia
July 8, 2004.
UNITED STATES OF AMERICA, Plaintiff,
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
This matter is now before the Court on Defendants'*fn1
Motion for Partial Summary Judgment With Respect to the
Government's Nicotine Manipulation and Addiction Allegations
("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.
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 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
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.
In the present Motion, Defendants challenge one sub-scheme of
the overarching conspiracy, namely the Government's allegations
that they "understood nicotine's addictive properties" and have
been "developing and using highly sophisticated technologies to
deliver nicotine in precisely calculated ways that are more than
sufficient to create and sustain addiction." Id. at ¶¶ 72, 77.
In support of these allegations, the Government offered, among
other pieces of evidence, the testimony of the chief executive
officers ("CEOs") of six major American cigarette manufacturers
at the televised Congressional hearings held by Rep. Henry Waxman in
April, 1994 examining whether nicotine should be regulated as a
drug under the Food and Drug Administration Act,
21 U.S.C. § 321(G) (2001) ("Waxman Hearings"). At those hearings, each of the
CEOs denied under oath any manipulation of nicotine content. The
Government claims that this testimony constituted two acts of
fraudulent denial of nicotine manipulation in furtherance of the
alleged conspiracy to mislead the American public. The Government
also relies on twenty-two other acts it alleges were in
furtherance of a fraudulent scheme to deny that smoking is
Defendants deny all the nicotine manipulation and addiction
claims and ask the Court to dismiss with prejudice the alleged
racketeering acts related to this sub-scheme.*fn3 See
Motion, at 2.
Defendants advance three principal arguments why these racketeering acts should be dismissed: (1) their opinions
concerning nicotine manipulation and addiction do not constitute
RICO predicate acts of mail and wire fraud; (2) their conduct is
protected by the First Amendment; and (3) the testimony of the
CEOs before Congress is afforded absolute immunity under the
None of these arguments entitle Defendants to summary judgment.
First, the nicotine manipulation and addiction acts cannot be
assessed in isolation, but must be evaluated in the context of
the totality of the Government's fraud case. Second, whether
Defendants have manipulated the nicotine content of their
cigarettes, whether they have falsely denied doing so, and
whether they have falsely denied that nicotine is addictive,
involve disputed factual issues of intent and knowledge that can
only be resolved at trial. Third, Defendants' sworn denials of
nicotine manipulation and addiction are not immune from liability
under common law. Finally, whether any of the challenged
racketeering acts are properly defined as "petitioning," and thus
immunized under the Noerr-Pennington doctrine, is a factual
matter in dispute which must also be resolved at trial.
Consequently, the Government must be given the opportunity to
prove its claims about Defendants' alleged nicotine manipulation
and addiction sub-scheme at trial.
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 nonmovant 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).
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 Brotherhood of Teamsters, 310 F.3d 758, 761 (D.C. Cir.
III. DEFENDANTS ARE NOT ENTITLED TO SUMMARY JUDGMENT
A. Claims Relating to Nicotine Manipulation and Addiction Must
Be Decided in the Context of the Entire Alleged Scheme to
The Government has alleged the existence of a pervasive,
overarching scheme to defraud the public of money which extends
back fifty years and continues to the present. According to the
Government, this conspiracy has been carried out through a
variety of sub-schemes, one of which is the nicotine manipulation and
addiction sub-scheme. The other sub-schemes allege that
Defendants have (1) advertised, marketed, and promoted cigarettes
to children while repeatedly denying such conduct, Am. Compl., at
¶¶ 94-97, 100; (2) disseminated false and misleading statements
denying that smoking causes disease, United States' Master
Rule 7.1/56.1 Statement of Material Facts Demonstrating the Existence
of Genuine Issues for Trial ("Master Stmt"), ¶¶ 227-384, 572-672;
(3) fraudulently promised to sponsor independent research into
the health risks of smoking, id. at ¶¶ 385-571; and (4)
marketed "low tar" cigarettes as less hazardous than other
cigarettes, even though they knew that smokers of these
cigarettes are "not appreciably reducing their health risk." Am.
Compl. at ¶ 86, 87.
In the pending Motion, Defendants ask the Court to carve out
the nicotine manipulation and addiction racketeering acts and
view them in isolation. They then argue that these particular
racketeering acts, when viewed as stand-alone incidents, can not
meet the proof requirements for mail or wire fraud. See Motion,
Defendants ignore that the claims relating to alleged nicotine
manipulation, denial of nicotine manipulation, and denial of the
addictiveness of nicotine are just one component of the
Government's allegations of an overarching scheme to defraud.
See Govt's Opp'n., at 3-4. The Government's theory is that the component sub-schemes described above collectively served the
goal of sustaining and expanding the market for Defendants'
cigarettes and maximizing their profits. Id. Under that theory,
Defendants used the televised Congressional hearings, their press
releases and other public statements to further their overarching
scheme to defraud by attempting to mislead both Congress and the
American public regarding the truth of the addictiveness of
nicotine and their manipulation of it in cigarettes. See Id.
at 11, 14.
In making a determination on summary judgment, the Court must
evaluate the over-all scheme to defraud based on the totality of
the circumstances alleged, including the relationship of the
challenged acts to the other sub-schemes. See United States v.
Godwin, 272 F.3d 659, 666-667 (4th Cir. 2001) ("In order to
establish . . . the scheme to defraud, the Government must prove
that the defendants acted with the specific intent to defraud,
which may be inferred from the totality of the circumstances and
need not be proven by direct evidence.") (internal citation
omitted). Because the sub-schemes are interdependent, the
totality of circumstances necessary to evaluate the challenged
racketeering acts goes beyond those particular acts challenged in
this Motion and can only be meaningfully assessed in the context
of the entirety of the Defendants' alleged conduct.
B. Material Issues of Intent, Knowledge, and Good Faith Are
Very Much in Dispute
Summary judgment with regard to the nicotine manipulation and addiction claims is also inappropriate because material factual
issues of intent and knowledge remain very much in dispute. The
Government has put forth evidence, including expert opinions, to
show that Defendants have intentionally manipulated nicotine
content and delivery in their cigarettes and have knowingly made
false and misleading statements denying that either nicotine or
smoking is addictive. See Master Stmt, at ¶¶ 595-636.
For example, the Government has offered a June 1966 report,
entitled "Market Potential of a Health Cigarette," by William L.
Dunn, a onetime Principal Scientist for Philip Morris, which
states that without nicotine, a health cigarette would not sell:
Flavor and nicotine are both necessary to sell a
cigarette. A cigarette that does not deliver nicotine
cannot satisfy the habituated smoker and cannot lead
to habituation, and therefore would almost certainly
Govt's Opp'n., at 7 (citing Master Stmt, at ¶ 597).
The Government offers evidence that, while Defendants knew
nicotine was addictive and the primary reason people continued
smoking, they intentionally withheld this data and attempted to
discredit independent research which corroborated it. See
Master Stmt, at ¶¶ 637-57. Therefore, the Government argues,
Defendants' suggestion that their public statements on the issue
of nicotine addiction were mere opinions that echoed the current
state of thinking in the scientific community were untrue, flatly misleading, and deceptive.*fn4 See Govt's Opp'n., at 11.
The Government has put forth evidence to show that Defendants'
denials of nicotine manipulation were also knowingly false. For
example, in addition to the Waxman Hearings, at which the CEOs of
six Defendants denied manipulation of nicotine, the Government
offered a 1994 R.J. Reynolds advertisement stating, "[w]e do not
increase the level of nicotine in any of our products in order to
addict smokers. Instead of increasing the nicotine levels . . .,
we have in fact worked hard to decrease tar and nicotine." Master
Stmt, at ¶ 678.
As proof of the falsity of this 1994 statement, the Government
points to Defendants' use of cigarette design features, such as
ventilation holes and burn accelerants, in order to deliver more
nicotine than is stated on the cigarette packaging. See id.
at ¶¶ 712-721. The Government also alleges that cigarette smoke
pH is modified through the use of ammonia and other additives to
deliver more nicotine "kick" to the smoker. Id. at ¶¶ 729-764.
Thus, according to the Government, Defendants' suggestion that
the testimony of the CEOs at the Waxman Hearings was merely their
personal "opinions" flies in the face of their corporate activities.
The question of fraudulent intent is a question of fact that is
rarely appropriate for summary judgment. Citizens Bank of
Clearwater v. Hunt, 927 F.2d 707, 711 (2d Cir. 1991); see ABB
Daimler-Benz Transport. (N. Amer.), Inc. v. Nat'l RR Passenger
Corp., 14 F. Supp.2d 75, 86 (D.D.C. 1998). Because the
Government, as non-movant, has demonstrated that there are
disputed material facts regarding whether the Defendants
intentionally manipulated nicotine content in cigarettes and
whether their denials of such manipulation or of nicotine's
addictiveness were knowingly false, Defendants are not entitled
to summary judgment. See Hunt v. Cromartie, 526 U.S. 541, 552
(1999) ("it was error . . . for the District Court to resolve the
disputed fact of motivation at the summary judgment stage" where
non-movant had presented circumstantial evidence in support of
C. Neither the First Amendment nor Common Law Justify Summary
Judgment on Claims Concerning Nicotine Manipulation and
Defendants assert, on a variety of grounds, that certain of the
Racketeering Acts on which the Government bases its claims of
nicotine manipulation and addiction constitute activities
protected by the First Amendment and the common law. For the
reasons set forth below, these arguments do not justify a grant
of summary judgment.
1. Whether the Government Has Met the Heightened Standard of Proof To Demonstrate Fraud Based on Defendants'
Speech Is a Question Properly Left for Trial
According to Defendants, their CEOs' testimony at the Waxman
Hearings as well as other publicly expressed opinions,
constituted the exercise of their First Amendment right to free
speech. See Motion, at 18. As such, Defendants assert that they
are entitled to the full panoply of First Amendment protections.
Id. at 19. Defendants argue that because the statements were
offered in the context of a "robust policy debate," the
Government must prove, by clear and convincing evidence (rather
than just the "preponderance of the evidence" standard) that
Defendants' statements concerning nicotine manipulation and
addiction were intentionally fraudulent. Id.
The Government responds that Defendants' statements concerning
nicotine manipulation and addiction denial constitute conduct in
furtherance of the multifaceted scheme to defraud, as described
above, and are therefore entitled to no First Amendment
The Supreme Court has recently reiterated, albeit in a
different factual context, that "the First Amendment does not
shield fraud." Illinois ex rel. Madigan v. Telemarketing
Associates, Inc., 123 S.Ct. 1829, 1836 (2003). In Madigan,
the Court held that "[w]hat the First Amendment . . .
emphatically do[es] not require . . . is a blanket exemption from
fraud liability for a [defendant] who intentionally misleads [his audience]." Id. at
1831; see also Gertz v. Robert Welch, Inc., 418 U.S. 323, 340
(1974) (the intentional lie [does not] materially advance
society's interest in uninhibited, robust, and wide-open debate
on public issues").
However, in order to ensure the greatest protection for speech,
the State bears the full burden of proof in any fraud action
based on false, misleading, or deceptive statements. In
Madigan, the Court found that the State was required to prove
every element of fraud by clear and convincing evidence.
Madigan, at 1831. "Exacting proof requirements of this order,
in other contexts, have been held to provide sufficient breathing
room for protected speech." Id. at 1841; see New York Times
Co. v. Sullivan, 376 U.S. 254, 279-280 (1964) (requiring a
showing of "actual malice" for allegedly fraudulent statements in
a defamation case); Bose Corp. v. Consumers Union of United
States, Inc., 466 U.S. 485, 502 (same). Thus, the First
Amendment requires a heightened burden of proof to demonstrate
that speech is fraudulent. Determining the sufficiency of the
Government's showing of fraud under this heightened standard
necessarily involves an evaluation of the evidence presented at
2. There Are Material Facts in Dispute About Whether the
Challenged Predicate Acts Occurred in the Context of Petitioning
the Government, as Required under the Noerr-Pennington
Defendants seek to immunize all of their public denials about nicotine manipulation and addiction under the
Noerr-Pennington doctrine.*fn5 "The `doctrine is a
direct application of the Petition Clause' of the First
Amendment." Falise v. American Tobacco Co., 94 F. Supp.2d 316,
350 (E.D.N.Y. 2000) (quoting Kottle v. Northwest Kidney
Centers, 146 F.3d 1056, 1059) (9th Cir. 1998).*fn6
According to Defendants, all of the denials of nicotine
manipulation and addiction alleged as predicate acts "are
statements of opinion, made in the course of petitioning the
Government, and are fully protected by the First Amendment."
See Motion, at 27. For example, in addition to the CEOs'
testimony at the Waxman Hearings, Defendants cite Racketeering
Act #114, a May, 1994 letter from Philip Morris to Rep. Waxman
expressing the view that nicotine is not addictive, in support of
their assertion that the challenged acts are primarily aimed at influencing
governmental action.*fn7 However, even if these two
examples, the CEOs' testimony and the letter, do constitute
"petitioning," none of the other challenged Acts can be so
described. They are simply press releases aimed at influencing
the public, not government officials. See e.g., Racketeering
Acts Nos. 56, 79, 81, 132, 133.
Moreover, the Noerr-Pennington doctrine does not
automatically characterize (and therefore immunize) every public
relations campaign as "petitioning" of the government.*fn8
Here, whether the conduct in question is petitioning or public
relations is very much in dispute. The Government contends that
the conduct was undertaken "pursuant to a multifaceted fraudulent
scheme aimed at defrauding the public," not as an exercise of First Amendment
rights to influence legislators. Govt's Opp'n., at 28 n. 29.
Because a determination of whether the challenged predicate acts
constitute petitioning is a fact-intensive inquiry that can only
be resolved at trial, Defendants are not entitled to summary
judgment on the basis of the Noerr-Pennington doctrine. See
Allied Tube & Conduit Corporation, 486 U.S. 492 at 499
(applicability of Noerr immunity "varies with the context and
the nature of the activity").
3. The Common Law Does Not Afford Absolute Immunity to the
CEOs' Testimony before Congress
Defendants' argument that their CEOs' testimony at the Waxman
Hearings, even if false, cannot provide any basis for civil
liability because statements to a legislature are afforded
"absolute immunity" at common law relies upon a misinterpretation
of the law.*fn9 While the common law provides absolute
immunity for witnesses in judicial proceedings in order to
encourage candor without fear of prosecution, the immunity in
legislative proceedings extends only to actions for defamation
or libel. See Webster I, at 5 ("[a]n individual must feel
unrestrained by potential defamation liability when addressing the
legislature") (emphasis added).*fn10
The Supreme Court and other federal courts have rejected
Defendants' claim that the common law immunity from defamation
and libel suits, which protects litigants in judicial
proceedings, amounts to "absolute immunity" for fraudulent
conduct. See Tower v. Glover, 467 U.S. 914, 921-22 (1984)
(public defender's common law immunity from defamation liability
did not extend to allegations that he conspired to violate
plaintiff's civil rights); Robinson v. Volkswagenwerk AG,
940 F.2d 1369, 1373-74 (10th Cir. 1991) (law firm not immune from
civil liability for fraud claim based on false discovery answers
despite common law immunity from defamation or libel actions
arising from attorney's courtroom conduct).
Accordingly, because the Government has not brought claims for
defamation or libel based on the CEOs' testimony before Congress,
the common law immunity which may attach to such testimony would,
in any event, not be absolute.
For all the foregoing reasons, the Defendants are not entitled to summary judgment as to claims of nicotine manipulation and
addiction, and their Motion is denied.
An Order will accompany this opinion. ORDER #588
This matter is now before the Court on Defendants' Motion for
Partial Summary Judgment With Respect to the Government's
Nicotine Manipulation and Addiction Allegations ("Motion"). Upon
consideration of the Motion, the Government's Opposition and the
entire record herein, and for the reasons stated in the
accompanying Memorandum Opinion, it is hereby
ORDERED that Defendants' Motion is denied.