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United States of America v. Philip Morris Usa

March 28, 2011


The opinion of the court was delivered by: Gladys Kessler United States District Judge


This civil action brought by the United States under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968, is now before the Court on Plaintiff's Motion to Compel Defendant British American Tobacco (Investments) Limited's ("BATCo's") Compliance [Dkt. No. 5847] and Defendant BATCo's Motion for Reconsideration [Dkt. No. 5849]. Upon consideration of the respective Motions, Oppositions, Replies, and the entire record herein, and for the reasons stated below, Plaintiff's Motion to Compel is granted in part and denied in part and Defendant BATCo's Motion for Reconsideration is granted in part and denied in part.


On August 17, 2006, this Court issued a lengthy opinion finding that all Defendants, including BATCo, "(1) have conspired together to violate the substantive provisions of RICO, pursuant to 18 U.S.C. § 1962(d), and (2) have in fact violated those provisions of the statute, pursuant to 18 U.S.C. § 1962(c)." U.S. v. Philip Morris USA, Inc., et al., 449 F. Supp. 2d 1, 26 (D.D.C. 2006). In particular, the Court held that Defendants "knowingly and intentionally engaged in a scheme to defraud smokers and potential smokers, for purposes of financial gain, by making false and fraudulent statements, representations, and promises." Id. at 852.*fn1 On May 22, 2009, the Court of Appeals for the District of Columbia Circuit affirmed this Court's judgment of liability and affirmed major provisions in its remedial order.*fn2 U.S. v. Philip Morris USA, Inc., et al., 566 F.3d 1095, 1150 (D.C. Cir. 2009), cert. denied, 130 S. Ct. 3501 (2010).

Unlike the other Defendants, BATCo is a corporation organized under the laws of England and Wales with its principal place of business in England. Although BATCo's scientists and officials did attend certain meetings with the other Defendants in the United States, "many of BATCo's activities and statements took place outside of the United States." Philip Morris, 449 F. Supp. 2d at 43, 51-52, 82, 125, 228, 873. Accordingly, this Court held BATCo liable under RICO because "BATCo's activities and statements furthered the Enterprise's overall scheme to defraud, which had a tremendous impact on the United States." Id. at 873.

On December 28, 2010, the United States filed a Motion to Compel BATCo's Compliance ("U.S. Mot.") with the Court's Final Order #1015, dated August 17, 2006. On January 21, 2011, BATCo opposed the United States' Motion and moved for reconsideration of the Court's Final Order #1015 ("BATCo Mot."). BATCo argues that the Supreme Court's intervening decision in Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869, 177 L.Ed.2d 535 (2010), rejected the "effects" test for extraterritoriality, thereby invalidating the basis for BATCo's liability under RICO. BATCo Mot.

1. On February 7, 2011, the United States filed its reply and opposition [Dkt. No. 5861]. On February 21, 2011, BATCo filed its reply [Dkt. No. 5868].


The central issue presented by these two motions is whether BATCo's Motion for Reconsideration should be granted due to an intervening change of controlling law. The parties agree that BATCo's Motion may be considered under Federal Rule of Civil Procedure 60(b)(5). U.S. Opp'n 1 n. 1, 2; BATCo Mot. 9 n. 5.

Rule 60(b)(5) provides, in relevant part, that a district court may grant relief from a final order if "applying it prospectively is no longer equitable." Fed. R. Civ. P. 60(b)(5) (2011). The Supreme Court has held that "it is appropriate to grant a Rule 60(b)(5) motion when the party seeking relief from an injunction or consent decree can show 'a significant change either in factual conditions or in law.'" Agostini v. Felton, 521 U.S. 203, 215, 117 S. Ct. 1997, 138 L.Ed.2d 391 (1997) (quoting Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367, 384, 112 S. Ct. 748, 116 L.Ed.2d 867 (1992)). The Court went on to explain that "[a] court may recognize subsequent changes in either statutory or decisional law." Agostini, 531 U.S. at 215 (citing Railway Employees v. Wright, 364 U.S. 642, 652-653, 81 S.Ct. 368, 5 L.Ed.2d 349 (1961) (consent decree should be vacated under Rule 60(b) in light of amendments to the Railway Labor Act); Rufo, 502 U.S. at 393 (vacating denial of Rule 60(b)(5) motion and remanding so District Court could consider whether consent decree should be modified in light of Bell v. Wolfish, 441 U.S. 520, 99 S.Ct. 1861, 60 L.Ed.2d 447 (1979)); Pasadena City Bd. of Ed. v. Spangler, 427 U.S. 424, 437-438, 96 S.Ct. 2697, 49 L.Ed.2d 599 (1976) (injunction should have been vacated in light of Swann v. Charlotte-Mecklenburg Bd. of Ed., 402 U.S. 1, 91 S.Ct. 1267, 28 L.Ed.2d 554 (1971))); see also Potter v. District of Columbia, 558 F.3d 542, 554 (D.C. Cir. 2009).*fn3

In its Motion, BATCo erroneously relies on Rule 54(b), although it suggests that Rule 60(b)(5) could serve as an alternative procedural vehicle. Rule 54(b) states, in relevant part, that "any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities." Fed. R. Civ. P. 54(b). In order to meet the requirements of Rule 54(b), BATCo contends that "this Court's July 29, 2010 [O]rder entering the D.C. Circuit's mandate as the judgment of this Court is not a final judgment, because there has been no final resolution of all the claims and requests for relief as to all the parties."*fn4 BATCo Mot. 8-9 n. 5.

BATCo is simply wrong about the scope of Rule 54(b). The Federal Circuit has held that "Rule 54(b), which concerns the power of the trial court before appeal, is not applicable" where the Court of Appeals has affirmed a portion of the judgment. King Instrument Corp. v. Otari Corp., 814 F.2d 1560, 1563 (Fed. Cir. 1987) (emphasis in original); Nat'l Australia Bank v. U.S., 74 Fed. Cl. 435, 438 (Fed. Cl. 2006); Home Savings of America, F.S.B. v. U.S., 69 Fed. Cl. 187, 190 (Fed. Cl. 2005); see also Jones v. District of Columbia, 646 F. Supp. 2d 42, 46-47 (D.D.C. 2009) (res judicata applies to claims upon which judgment is affirmed by the Court of Appeals, even when judgment is reversed as to other claims).

Therefore, in light of King Instrument Corp., Rule 54(b) has no applicability to this case, since appeals have been exhausted and the judgment of liability has been affirmed by the Court of Appeals. See King Instrument Corp., 814 F.2d at 1563; Jones, 646 F. Supp. 2d at 46-47.

Consequently, the Court concludes that Rule 60(b)(5), not Rule 54(b), properly governs BATCo's ...

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