United States District Court for the District of Columbia
July 9, 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' Motion for
Partial Summary Judgment on Claims That Defendants Suppressed the
Development of Potentially Less Hazardous Cigarettes ("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*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 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.
RICO prohibits entities from engaging in racketeering activity
associated with an enterprise. To prove the alleged RICO
violations, the Government must show: (1) the conduct (2) of an
enterprise (3) through a pattern of racketeering activity."
Salinas v. United States, 522 U.S. 52, 62 (1997). Racketeering
activity includes, among other things, acts prohibited by any one
of a number of enumerated criminal statutes. 18 U.S.C. § 1961(1).
A "pattern" is demonstrated by two or more instances of "racketeering activity" that occur within 10 years of one
another. 18 U.S.C. § 1961(5). In this case, the racketeering acts
relied on by the Government are alleged to be violations of
18 U.S.C. § 1341 (mail fraud) and 1343 (wire fraud). To demonstrate
mail fraud or wire fraud, the Government must prove: (1) a scheme
to defraud and (2) use of mails or interstate wire communications
to further that scheme. United States v. Winstead,
74 F.3d 1313, 1317 (D.C. Cir. 1996).
In the present Motion, Defendants seek partial summary judgment
on the claims that they engaged in a "concerted plan not to make
cigarettes less hazardous" through acts of mail and wire fraud.
See Motion, at 1. First, Defendants argue that such claims must
fail in light of the Government's own policy "that a safe
cigarette cannot be developed," a policy which Defendants claim
has undermined their efforts to develop and market such safer
products. Id. at 14. Second, Defendants argue that these claims
fail to establish a prima facie violation of the mail and
wire fraud statutes because the Government has not shown a
"scheme to defraud" with respect to less hazardous cigarettes or,
if it has, has not shown how the purpose of any such scheme is to
deprive a person of money or property. See id. at 16.
Finally, Defendants argue that the equitable doctrines of unclean
hands and in pari delicto bar the Government's pursuit of these
claims because it has acted in bad faith with respect to the
development and endorsement of less hazardous cigarettes. Id. at 13.*fn3
In turn, the Government responds that Defendants' present
Motion incorrectly treats the suppression of less hazardous
cigarettes as an independent and freestanding scheme when, in
fact, it is only a component of the overarching scheme to
preserve and expand the market for cigarettes, maximize profits,
and avoid adverse litigation verdicts. See Govt's Opp'n., at
3-4. For this reason, the Government argues that it is not
required to prove that there were specific mailings and wire
transmissions in furtherance of the scheme to suppress the
development of less hazardous cigarettes. See id. at 13.
Finally, the Government argues that the defenses of unclean hands
and in pari delicto cannot be asserted against the United
States in these circumstances. Id. at 23.
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. 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.
B. There Are Material Facts in Dispute About Whether
Defendants Suppressed the Development and Marketing of Less
The Government disputes almost every factual assertion
contained in Defendants' Motion.
First, the Government challenges Defendants' claim that their efforts to develop and market potentially less hazardous
cigarettes were thwarted by a Governmental policy aimed at
eradicating smoking rather than encouraging consumers to try
"safer" cigarettes. See Govt's Opp'n., at 4. The Government
argues that Defendants' efforts to develop and market these
products were not in earnest. In particular, the Government
asserts that Defendants considered the research or marketing of a
cigarette acknowledged to be less harmful to be an implicit
admission that other cigarettes were more hazardous. Id. at 6.
For that reason, Defendants' continuing public denials of harms
from smoking precluded them from incorporating design features or
processes which would reduce the hazards of smoking. Id. at 8.
Thus, the Government asserts that it was the Defendants'
fraudulent scheme, rather than Governmental policy
considerations, which suppressed the development of less
Second, the Government argues that it has, contrary to
Defendants' assertions, made its prima facie case for mail
and wire fraud. Id. at 13. The Government claims that there is
substantial evidence of Defendants' single overarching scheme to
defraud and that the allegations concerning suppression of
development of less hazardous cigarettes are simply one component
of that comprehensive scheme to defraud the American public.
Id. The Government emphasizes that Defendants' conduct relating
to less hazardous cigarettes served the Enterprise's central goal
of defrauding consumers of the purchase price of cigarettes in order to sustain
and expand the market for cigarettes and to maximize profits.
Id. at 16. Thus, the Government argues, the racketeering acts
which it alleges are evidence of the entire scheme to defraud.
The foregoing recitation of the parties' positions makes it
eminently clear that there are numerous disputes about material
facts, and about the inferences and interpretations to be drawn
from those facts, which can only be resolved at trial. Moreover,
a determination of the context and sufficiency of the allegations
in this Motion must be based on the totality of the
evidence.*fn4 Consequently, summary judgment is
For all the foregoing reasons, Defendants are not entitled to
partial summary judgment on claims that they suppressed the
development of potentially less hazardous cigarettes, and their
Motion is denied. An Order will accompany this opinion.