United States v. Philip Morris

United States v. Philip Morris USA, Inc.[1] was a case in which the United States District Court for the District of Columbia held several major tobacco companies liable for violations of the Racketeer Influenced and Corrupt Organization (RICO) Act[2] by engaging in numerous acts of fraud to further a conspiracy to deceive the American public about nicotine addiction and the health effects of cigarettes and environmental tobacco smoke.

On September 22, 1999, the United States Department of Justice brought a lawsuit against nine cigarette manufacturers and two tobacco industry trade associations [3] in the United States District Court of the District of Columbia ("District Court"): The complaint alleged that the tobacco companies had engaged in an approximately fifty-year conspiracy to fraudulently deceive the American public about the health effects of smoking and environmental tobacco smoke, the addictiveness of nicotine, the health benefits from low tar, "light" cigarettes, and their manipulation of the design and composition of cigarettes in order to sustain nicotine addiction.

In furtherance of this strategy, Defendants allegedly issued deceptive press releases, published false and misleading articles, destroyed and concealed documents which indicated that there was in fact a correlation between smoking and disease, and aggressively targeted children as potential new smokers.

The lawsuit sought to recover health care expenditures the government had paid and would have to pay to treat tobacco-related illnesses as a result of the tobacco companies' unlawful action under three federal statutes: the Medical Care Recovery Act ("MCRA),[4] the Medicare Secondary Payer ("MSP") provisions,[5] and the Racketeer Influenced and Corrupt Organizations Act ("RICO").

On interlocutory appeal, the DC Circuit determined that disgorgement is not a permissible remedy in civil RICO cases because injunctive relief must be "forward looking" to prevent and restrain future violations.

[8] On August 17, 2006, Judge Gladys Kessler issued a landmark 1,683-page opinion holding the tobacco companies liable for conspiracy and violations of RICO by fraudulently covering up the health risks associated with cigarettes and for marketing their products to children.

Because the DC Circuit held that RICO permits only forward-looking remedies to prevent and restrain future violations, Judge Kessler ruled that the tobacco companies could not be made to fund the smoking cessation and awareness programs.

The DC Circuit also vacated a requirement that the statements be published on retail displays, instructing the District Court to consider the third-party implications of this remedy on remand.