United States District Court, District of Columbia
OPINION & ORDER #92 - REMAND
L. FRIEDMAN United States District Judge.
in this case has persisted for over two decades. In 2006,
Judge Gladys Kessler, after conducting a nine-month bench
trial, issued a thorough opinion in which she found that the
defendant manufacturers had conspired to violate and in fact
did violate the substantive provisions of the Racketeer
Influenced and Corrupt Organizations Act ("RICO"),
18 U.S.C. § 1962. See United States v. Philip Morris
USA, Inc., 449 F.Supp.2d 1, 27 (D.D.C. 2006) ("J.
Kessler Op."). Section 1964 of RICO gives the Court
"jurisdiction to prevent and restrain violations of
section 1962 of this chapter by issuing appropriate orders .
. . making due provision for the rights of innocent
persons." See 18 U.S.C. § 1964(a). Judge Kessler
issued a remedial order that set out specific remedies to
prevent and restrain future RICO violations by the defendant
tobacco manufacturers, including an injunction requiring the
defendants to issue "corrective statements." See J.
Kessler Op. at 27; 938-41. The D.C. Circuit "largely
affirm[ed] the remedial order . . . and remand[ed] to the
district court regarding only four discrete issues."
See United Stales v. Philip Morris, 566 F.3d 1095,
1150 (D.C. Cir. 2009). One of those four discrete issues is
the implementation of one remedy: the corrective statements
the defendants must include in their retail point-of-sale
("POS") displays. The D.C. Circuit "vacate[d]
the remedial order as it regards point-of-sale displays and
remand[ed] for the district court to make due provision for
the rights of innocent third parties." Id. This
is the single remaining issue on remand before this
2006 omnibus opinion, Judge Kessler determined that "an
injunction ordering Defendants to issue corrective statements
is appropriate and necessary to prevent and restrain them
from making fraudulent public statements on smoking and
health matters in the future." See J. Kessler Op. at
926. Judge Kessler ordered that the corrective statements be
disseminated through newspapers, television, advertisements,
onsets in cigarette packages, in retail displays, and on the
manufacturers' corporate websites. See
Id. at 928. The corrective statements disseminated
in retail displays (the POS remedy) would require retailers
that participate in the defendants' Retail Merchandising
Program - that is, those that contract to display the
manufacturers' in-store advertising - to display signs
containing corrective statements. See United States v.
Philip Morris, 566 F.3d at 1141. The Remedial Order set
out the specifications for the corrective statements;
specifically, it dictated that the POS corrective statements
be publicized in countertop displays and header displays. See
J. Kessler Op. at 939-40.
D.C. Circuit vacated Judge Kessler's remedial order as it
pertained to the POS displays only, finding that "the
district court exceeded its authority by failing to consider
the rights of retailers and crafting an injunction that works
a potentially serious detriment to innocent persons not
parties to or otherwise heard in the district court
proceedings." See United States v. Philip
Morris, 566 F.3d at 1141-42: see also 18 U.S.C. §
1964(a). The court reasoned that the "[r]etailers
affected by this order - none of whom were involved in the
litigation in any way - did not receive notice of this remedy
or an opportunity to present evidence or arguments to the
district court regarding the impact the injunction would have
on their businesses. Nor does it appear that the district
court independently considered the impact of this program on
affected retailers," a part of the Court's
obligations under Section 1964(a). See United States v.
Philip Morris, 566 F.3d at 1141.
vacating the remedial order as it pertained to the POS
displays, the D.C. Circuit instructed this Court "to
evaluate and 'mak[e] due provision for the rights of
innocent persons,' either by abandoning this part of the
remedial order or by crafting a new version reflecting the
rights of third parties." See United States v.
Philip Morris, 566 F.3d at 1142 (quoting 18 U.S.C.
§ 1964(a)). In other words, the Court may now order
"some form of a point-of-sale display injunction"
if it finds that it "is still appropriate after
considering the rights of third parties and existing
contracts." See Id. After considering a joint
status report [Dkt. No. 6261] from the parties, this Court
decided that an evidentiary hearing would be necessary for
the parties to adequately present their legal and factual
arguments with respect to a "new version" of how
the POS remedy would be implemented, and to allow third party
retailers the opportunity to air their concerns. See May 21,
2019 Order [Dkt. No. 6283]. The Court's immediate task,
therefore, is to determine the scope of that evidentiary
hearing. A status conference was held on June 24, 2019,
during which the parties expressed disagreement about the
meaning and import of the D.C. Circuit's instructions.
The Court then ordered the parties to brief their
interpretations of those instructions regarding the scope of
the evidentiary hearing. It turns now to an evaluation of the
arguments the parties presented at the status conference and
in their filings.
The Parties' Arguments
The defendant manufacturers assert that the D.C. Circuit
vacated the POS remedy in to to. Thus, they maintain
that the Court's task is expansive: it must essentially
begin at square one, allowing the parties to relitigate Judge
Kessler's legal conclusions and factual findings.
Specifically, defendants argue that the Court must evaluate
its own statutory authority under Section 1964(a) and balance
the equities before issuing an injunction. See
Manufacturers' Opening Brief on the Scope of the
Evidentiary Hearing ("Def. Op. Br.") [Dkt. No.
6293] at 2, 15-16. According to the defendants, the Court
also must determine the benefit that the proposed POS remedy
would provide, so that any such benefit may be weighed
against "the burdens the remedy would impose on innocent
third parties." See Id. at 2. Such a
calculation is necessary, the defendants argue, for the Court
to determine whether it should impose a new POS remedy or
whether such remedy should be abandoned altogether. See
Id. at 5; Manufacturers' Reply Brief ("Def.
Reply") [Dkt. No. 6303] at 4. In evaluating the
propriety of the POS remedy, the defendants maintain that the
Court must consider current information - updated from the
point in time that Judge Kessler made her factual findings
and announced her legal conclusions - to determine anew
whether the POS remedy will prevent and restrain future RICO
violations. See Def. Op. Br. at 5-10.
plaintiffs urge a more limited approach. In contrast to
the defendants' argument, the plaintiffs contend that
"[t]he D.C. Circuit's narrow remand does not
authorize, much less require, this Court to consider or
reconsider the many issues advanced by the manufacturers and
retailers that are not specific to the retailers, such as
whether the corrective statement remedy at retail
points-of-sale is necessary and appropriate to prevent and
restrain future violations of the RICO statute by the
manufacturers." See Plaintiffs' Response Brief
("PI. Response") [Dkt. No. 6300] at 7-8. They
maintain that the question to be considered at the hearing
instead is "whether Plaintiffs' proposed
implementation of the corrective statement remedy at retail
points-of-sale will affect retailers' rights, and if so,
whether the order can be tailored to make 'due
provision' for them." See Id. at 7
National Association of Convenience Stores ("NACS")
has also submitted briefing on this topic. The arguments of
the NACS mirror those of the defendant manufacturers. Like
the defendants, NACS contends that "making due provision
for the rights of innocent persons" requires the Court
to "consider the burdens to non-parties versus the need
to restrain future RICO harms." See NACS Opening Brief
("NACS Op. Br.") [Dkt. No. 6294] at 8; see
also Id. at 11-12. NACS also argues that the
statutory language permitting district courts to order
"reasonable restrictions" necessarily implicates a
balancing analysis. See M. at 11. But the NACS goes further.
Analogizing to the process provided to innocent third parties
under Section 1963 of the same statute (related to forfeiture
remedies), NACS argues that "[fundamental principles of
due process require notice and individual process for
each and every retailer or other non-party that
would be affected by the proposed injunction" - which
would total over 200, 000 retailers, according to its
calculations. See Id. at 6 (emphasis in original).
It therefore argues that "there simply is no practical
way to 'make due provision' for third parties not
before the Court," see Id. at 6, and
"[p]roviding NACS with the opportunity to brief issues
and appear at the evidentiary hearing is insufficient."
See Id. at 14. Thus, the "concerns that led the
D.C. Circuit to vacate the prior POS remedy will not be
alleviated," and the POS remedy must be
« abandoned. See M. at 6. In addition,
NACS contends that the Court has no jurisdiction to issue an
injunction, binding the retailers, without such process. See
Id. at 13.
Court's Role is Limited The Court concludes that its role
is significantly narrower than the defendants and NACS
suggest, but somewhat more expansive than the plaintiffs
urge. Judge Kessler issued a detailed opinion that settles
most of the legal questions involved in the Court's
instant task. Specifically, she resolved the following
matters: (1) Once it made a finding of liability under
Section 1962, the Court had authority to enjoin future RICO
violations pursuant to Section 1964(a), see J. Kessler Op. at
932; (2) pursuant to that authority, "an injunction
ordering Defendants to issue corrective statements is
appropriate and necessary to prevent and restrain them from
making fraudulent public statements," see J. Kessler Op.
at 926; (3) the defendants' First Amendment rights did
not prohibit the corrective statement remedy, see id.; and
(4) the corrective statement injunction is "narrowly
tailored to prevent Defendants from continuing to disseminate
fraudulent public statements and marketing messages by
requiring them to issue truthful corrective
communications." See Id. at 927.
these remain open questions to be litigated - or more
accurately, relitigated. Contrary to the defendants'
arguments, the D.C. Circuit did not upset these legal
conclusions. In fact, the court of appeals generally affirmed
the "corrective statements" fashioned by Judge
Kessler's remedial order as appropriate RICO remedies,
concluding that the "corrective statements will prevent
and restrain [the defendants] from making fraudulent public
statements on smoking and health matters in the future."
See United States v. Philip Morris, 566 F.3d at 1140
(internal quotations omitted). There was no suggestion in the
court of appeals' opinion that this conclusion did not
apply also to corrective statements for POS displays, so long
as this Court considered and gave due consideration to the
rights of innocent persons.
of the case doctrine establishes that "a court involved
in later phases of a lawsuit should not re-open questions
decided (i.e. established as the law of the case) by that
court or a higher one in earlier phases." See
Crocker v. Piedmont Aviation, Inc., 49 F.3d 735, 739
(D.C. Cir. 1995). See also United States v. Philip
Morris, 855 F.3d 321. 327-28 (D.C. Cir. 2017);
United States v. Philip Morris, 801 F.3d 250, 257
(D.C. Cir. 2015); LaShawn v. Barry, 87 F.3d 1389,
1393 (D.C. Cir. 1996) (en banc) (explaining that the law of
the case doctrine dictates that "[t]he same
issue presented a second time in the same case in
the same court should lead to the same
result" (emphasis in original)). It would be a
waste of judicial resources - and it would contravene the law
of the case doctrine - to permit relitigation of those legal
conclusions. See, e.g.. New York v.
Microsoft Corp., 224 F.Supp.2d 76, 88 (D.D.C. 2002)
("When issues have been resolved at a prior stage in the
litigation, based upon principles of judicial economy, courts
generally decline to revisit resolved issues.")- Because
the D.C. Circuit affirmed the majority of Judge Kessler's
Remedial Order and remanded only as to four discrete issues,
Judge Kessler's legal conclusions - even if not
explicitly affirmed by the D.C. Circuit - remain the law of
the case. Consistent with the law of the case doctrine, this
Court will respect and apply Judge Kessler's prior legal
conclusions to the POS remedy issue.
contrary to the defendants' arguments, the Court's
task is not to determine whether the POS remedy -
one form of corrective statement - is an appropriate remedy
under Section 1964(a), or whether to enter a permanent
injunction after engaging anew in a balancing of the
equities. See Def. Op. Br. at 2, 12-16; Def. Reply at 4-5.
The prevent-and-restrain efficacy of a POS remedy, its
constitutionality, and its propriety as injunctive relief
have already been decided by Judge Kessler. The D.C.
Circuit's decision to vacate and remand part of the
Remedial Order did not disturb her conclusions; it merely set
aside the specific plan to implement the POS remedy proposed
by Judge Kessler and directed this Court to determine whether
a new version of the POS remedy could be crafted. See
United States v. Philip Morris, 566 F.3d at
1142. Specifically, the D.C. Circuit
"vacate[d] the order regarding point-of-sale displays
and remand[ed] for the district court to evaluate and
'mak[e] due provision for the rights of innocent
persons,' either by abandoning this part of the remedial
order or by crafting a new version reflecting the rights of
third parties." Id. The only question therefore
is whether this Court can craft a new proposal to implement
the POS remedy that makes due provision for retailers'
rights. The Court will not revisit Judge Kessler's
justifications for ordering corrective statements in the
Provision for the Rights of Innocent Persons
court of appeals vacated the POS remedy because in crafting
it, Judge Kessler had not "considered] the impact of
th[e] program on affected retailers," United States
v. Philip Morris, 566 F.3d at 1141; accordingly, the
court of appeals directed this Court to "evaluate and
make due provision for the rights of innocent persons"
on remand. Id. at 1142 (internal quotations
omitted). After the court of appeals' decision, Judge
Kessler required the parties to identify third parties who
should be invited to file briefs on the impact of POS
displays; being so advised she invited eight retailer
associations to participate in the litigation. See Order
#19-Remand [Dkt. No. 5916]. Two prominent national retailers
associations accepted her invitation, and will participate in
the upcoming evidentiary hearing. NACS is the
"preeminent representative" of convenience store
operators. See NACS's Submission Concerning Order
#1015's Point of Sale Display Requirements [Dkt. No.
5934] at 6. It is a non-profit organization founded almost 60
year ago that represents 2, 100 retail members and 1, 500
supply companies. Id. NATO is a national retail
trade association that represents approximately 20, 000
tobacco stores, convenience stores, grocery stores, and
liquor stores that sell cigarettes and tobacco products. See
NATO Brief Regarding Retailers Affected by the Retail Display
Component of the Court's Corrective Statement Remedy
[Dkt. No. 5933] at 1. Their participation will help this
Court "consider the impact of [proposals to implement
the POS remedy] on affected retailers." See United
States v. Philip Morris, 566 F.3d at 1141.
remanding to this Court, the court of appeals did not give
much direction as to how this Court should go about
"considering" the retailers' rights, in order
to satisfy Section 1964's requirement that "due
provision" be made for the rights of innocent persons.
The statute itself does not give any express indication about
what "due provision" means, and there is sparse
case law addressing this question.
defendants and amici argue that when "making
due provision" for the rights of innocent persons under
Section 1964(a) the Court must undertake a
"balancing" of competing interests - here,
comparing the benefits of the POS remedy against the harms to
or the burden on the retailers. See Def. Op. Br. at 13
(arguing the Court must "measur[e] the intrusions [on
the retailers] against the remedy's ostensible
benefit"). According to the defendants, the benefits to
be considered are the need to prevent and restrain future
RICO violations and the POS remedy's ability to do so
within the current factual context. See Id. at 11.
In framing the Court's task as one of
"balancing," the defendants place great emphasis on
the D.C. Circuit's instructions that the POS remedy
should be abandoned if the Court cannot craft a version that
"reflect[s] the rights of third parties." See
United States v. Philip Morris, 566 F.3d at 1142.
contrast, the plaintiffs argue that the Court's task does
not involve balancing at all; rather, it is to
"tailor" an order imposing a new POS remedy, taking
into account the rights of the retailers. See PI. Response at
22, 25-26. The plaintiffs frame the Court's task as
merely adjusting the design of the POS remedy to conform with
Section 1964(a)'s requirements, emphasizing ...