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United States of America v. Philip Morris Usa

June 1, 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 Defendant's Motion for Vacatur [Dkt. No. 5880]. Upon consideration of the Motion, Oppositions, Reply, and the entire record herein, and for the reasons stated below, Defendants' Motion for Vacatur is denied.


On August 17, 2006, this Court issued a lengthy opinion finding that all Defendants "(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 potentialsmokers, for purposes of financial gain, by making false and fraudulent statements, representations, and promises." Id. at 852.*fn1

The resulting injunctive relief rested on a finding that there was a reasonable likelihood that Defendants would continue to violate RICO in the future. Philip Morris, 449 F. Supp. 2d at 908-919. After a nine-month bench trial, and based on a considerable factual record, this Court found that the "evidence in this case clearly establishes that Defendants," with the exception of several parties who have since been dismissed, "have not ceased engaging in unlawful activity." Id. at 910. Further, "[e]ven after the Complaint in this action was filed in September 1999, Defendants continued to engage in conduct that is materially indistinguishable from their previous actions, activity that continues to this day." Id.

Accordingly, the Court imposed an array of injunctive measures in order to prevent future violations of RICO. Id. at 937-945. 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. 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). The specifics of the remanded portions of injunctive relief continue to be litigated in this Court.

On June 22, 2009, President Barack Obama signed the Family Smoking Prevention and Tobacco Control Act (the "Tobacco Control Act" or the "Act") into law. Pub. L. No. 111-31, 123 Stat. 1776 (2009). Congress found that "[t]he use of tobacco products by the Nation's children is a pediatric disease of considerable proportions that results in new generations of tobacco-dependent children and adults" and that "Federal and State public health officials, the public health community, and the public at large recognize that the tobacco industry should be subject to ongoing oversight." Pub. L. No. 111-31, §§ 2(1), (8), 123 Stat. at 1777, codified at 21 U.S.C. § 387 note. Accordingly, Congress amended the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq., in order "to provide the authority to the Food and Drug Administration to regulate tobacco products." Pub. L. No. 111-31, § 3(1), 123 Stat. at 1781, codified at 21 U.S.C. § 387 note. Notably, Congress expressly provided that "[n]othing" in the Tobacco Control Act "shall be construed to . . . affect any action pending in Federal, State, or tribal court." Pub. L. No. 111-31, § 4(a), 123 Stat. at 1782, codified at 21 U.S.C. § 387 note.

After the Tobacco Control Act was passed into law, Defendants petitioned for rehearing en banc by the Court of Appeals on the ground that the Act extinguished jurisdiction for prospective relief. Defendants filed a separate "Suggestion of Mootness and Motion for Partial Vacatur" before that court, contending that the Act rendered the case moot. In opposing those motions, the Government argued, in part, that Defendants should properly bring their arguments before this Court first. The Court of Appeals denied the motions, and the Supreme Court denied Defendants' subsequent petition for writ of certiorari. United States v. Philip Morris USA, Inc., No. 06-5267 (D.C. Cir. Sept. 22, 2009); Philip Morris USA, Inc. v. United States, 130 S.Ct. 3501 (2010).

On September 15, 2010, this Court held the first of several scheduling conferences intended to establish a briefing schedule for resolving the four discrete remedial issues remanded by the Court of Appeals.*fn2 On March 3, 2011, Defendants filed a Motion for Vacatur, contending that the Tobacco Control Act in whole or in significant part extinguished this Court's jurisdiction or, in the alternative, that this Court should decline to move forward with any injunctive remedy in deference to the FDA's new regulatory authority. On April 4, 2011, the Government ("Gov.'s Opp'n") [Dkt.No. 5907] and the Public Health Intervenors ("PHI's Opp'n") [Dkt. No. 5908] filed separate Oppositions. On April 15, 2011, Defendants filed their Reply [Dkt. No. 5920].


Defendants contest this Court's subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(h)(3), which instructs that "[w]henever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action." Although Defendants do not cite Rule 12(b)(1), Defendants' Rule 12(h)(3) motion must be treated as a challenge to subject matter jurisdiction under Rule 12(b)(1), which "may be raised by a party, or by a court on its own initiative, at any stage in the litigation, even after trial and the entry of judgment." Arbaugh v. Y & H Corp., 546 U.S. 500, 506, 126 S.Ct. 1235, 1240, 163 L.Ed.2d 1097 (2006); Harbury v. Hayden, 444 F. Supp. 2d 19, 26 (D.D.C. 2006) ("When faced with what a party characterizes as a Rule 12(h)(3) motion, a court should treat the motion as a traditional Rule 12(b)(1) motion for lack of subject matter jurisdiction.") (citing Haase v. Sessions, 835 F.2d 902, 905-06 (D.C. Cir. 1987)).

In general, under Rule 12(b)(1), the plaintiff bears the burden of proving by a preponderance of the evidence that the Court has subject matter jurisdiction. See Shuler v. U.S., 531 F.3d 930, 932 (D.C. Cir. 2008). In reviewing a motion to dismiss for lack of subject matter jurisdiction, the Court must accept as true all of the factual allegations set forth in the Complaint; however, such allegations "will bear closer scrutiny in resolving a 12(b)(1) motion than in resolving a 12(b)(6) motion for failure to state a claim." Wilbur v. CIA, 273 F. Supp. 2d 119, 122 (D.D.C. 2003)(citations and quotations omitted). The Court may rest its decision on its own resolution of disputed facts. Id.


Defendants argue that the Tobacco Control Act provides two separate grounds for vacating some or all of the Court's factual findings and remedial order. First, Defendants contend that the Act removes this Court's jurisdiction because it renders the Defendants unlikely to commit further RICO violations. Defs.' Mot. 14-18. Second, Defendants argue that, even if this Court does continue to have jurisdiction over the Government's claims, it should decline to order injunctive relief pursuant to the doctrine of primary jurisdiction. Id. at 19-22.

A. Jurisdiction Under RICO

Defendants argue that, "[i]n light of the extensive federal regulatory requirements imposed by the Act, there is no 'realistic threat' or reasonable likelihood that the RICO violations on which this Court premised its forward-looking injunctive relief will reoccur in the future." Id. at 18. The Government responds that the Defendants' "request for vacatur turns entirely on the unsubstantiated factual assertion" that the Act renders Defendants unlikely to engage in further joint racketeering activity. Gov.'s Opp'n 10.

As the D.C. Circuit explained in a prior phase of this litigation, this Court's "jurisdiction is limited to forward-looking remedies that are aimed at future violations." United States v. Philip Morris USA Inc., 396 F.3d 1190, 1198 (D.C. Cir. 2005). This Court has already held that:

To obtain injunctive relief in this Circuit, a plaintiff must show that the defendant's past unlawful conduct indicates a "'reasonable likelihood of further violation(s) in the future.'" SEC v. Kenton Capital, Ltd., 69 F. Supp. 2d 1, 15 (D.D.C. 1998) (Kollar-Kotelly, J.) (quoting SEC v. Savoy Ind., Inc., 587 F.2d 1149, 1168 (D.C. Cir. 1978)); SEC v. Bilzerian, 29 F.3d 689, 695 (D.C. Cir. 1994). To determine whether there is a "reasonable likelihood" of future violations, the following factors must be considered: "(1) whether a defendant's violation was isolated or part of a pattern, (2) whether the violation was flagrant and deliberate or merely technical in nature, and (3) whether the defendant's business will present opportunities to violate the law in the future." [SEC v. First City Fin. Corp., 890 F.2d 1215, 1228 (D.C. Cir. 1989)] (citing Savoy Indus., 587 F.2d at 1168); Bilzerian, 29 F.3d at 695. None of these three ...

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