United States v. Philip Morris USA Inc.

855 F.3d 321

UNITED STATES of America, United States Department of Justice, et al., Appellees

v.PHILIP MORRIS USA INC., formerly known as Philip Morris Incorporated, et al., Appellants

Brown & Williamson Tobacco Corporation, directly and as successor by merger to American Tobacco Company, et al., Appellees

No. 16-5101

C/w 16-5127

United States Court of Appeals, District of Columbia Circuit.

Argued February 14, 2017

Decided April 25, 2017

Michael A. Carvin, Washington, DC, argued the cause for appellants. On the briefs were Noel J. Francisco, Peter J. Biersteker, Miguel A. Estrada, Amir C. Tayrani, Washington, DC, Jeffrey A. Mandell, and Robert J. Brookhiser Jr.

Melissa N. Patterson, Attorney, U.S. Department of Justice, argued the cause for federal appellees. With her on the brief were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, and Mark B. Stern and Alisa B. Klein, Attorneys.

Eric R. Glitzenstein, Washington, DC, argued the cause for appellees Tobacco-Free Kids Action Fund, et al. With him on the brief was Katherine A. Meyer, Washington, DC.

Before: Brown, Circuit Judge, and Sentelle and Randolph, Senior Circuit Judges.

Sentelle, Senior Circuit Judge:

In 2006, the district court found that Appellant cigarette manufacturers had for decades conspired to deny the health effects of smoking in violation of RICO. United States v. Philip Morris USA, Inc. , 449 F.Supp.2d 1 (D.D.C. 2006) (" Liability Opinion "). As a remedy, the court ordered Appellants to disseminate "corrective statements" relating to the health effects of smoking in newspapers, on television, on cigarette packages, and on websites. Id. at 938-41. For more than a decade since, the parties have battled over the precise language of these statements—both in and out of court. Appellants claim the most recent language proposed by the government is conduct-focused and is backward-looking beyond the scope of RICO and, for other reasons, violates the First Amendment. The district court approved the government's proposed language. We affirm in part and reverse in part.

BACKGROUND

In August 2006, a district court found that Appellant cigarette manufacturers ("Defendants") had violated RICO by associating together to misinform the public about smoking. Liability Opinion , 449 F.Supp.2d at 851-906. The district court found 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." Id. at 926. The court identified five topics about which it would order Defendants to make corrective statements but deferred deciding the wording of the statements pending further briefing. Id. at 928, 939-40.

On appeal, we upheld the concept of a corrective-statements remedy against RICO and First Amendment challenges because "[r]equiring Defendants to reveal the previously hidden truth about their products will prevent and restrain them from disseminating false and misleading statements, thereby violating RICO, in the future." United States v. Philip Morris USA Inc. , 566 F.3d 1095, 1140 (D.C. Cir. 2009) (" 2009 Opinion "). Still, we noted, such statements must be "confine[d] ... to ‘purely factual and uncontroversial information,’ geared toward[ ] thwarting prospective efforts by Defendants to either directly mislead consumers or capitalize on their prior deceptions by continuing to advertise in a manner that builds on consumers' existing misperceptions." Id. at 1144-45 (quoting Zauderer v. Office of Disciplinary Counsel , 471 U.S. 626, 651, 105 S.Ct. 2265, 85 L.Ed.2d 652 (1985) ).

On remand from the 2009 Opinion , the district court formulated the text of the corrective statements, including bullet points containing factual statements on each topic preceded by a preamble stating: "A Federal Court has ruled that [Defendants] deliberately deceived the American public about [the topic of the statement], and has ordered those companies to make this statement. Here is the truth[.]" United States v. Philip Morris USA, Inc. , 907 F.Supp.2d 1, 8-9 (D.D.C. 2012). Defendants appealed.

This Court held that the "district court exceeded its authority under RICO because the preambles reveal nothing about cigarettes; instead, they disclose defendants' prior deceptive conduct ." United States v. Philip Morris USA Inc. , 801 F.3d 250, 261 (D.C. Cir. 2015) (" Corrective Statements Opinion ") (emphasis in original). While the bulleted statements "reveal[ed] the previously hidden truth about [Defendants'] products ," the preambles did not and could "not be justified on grounds of general deterrence." Id. at 263 (quoting 2009 Opinion , 566 F.3d at 1140) (emphasis in original). The Court did not address Defendants' constitutional challenges to the preambles. See id. at 256. The Court remanded for further proceedings. The United States filed a petition for panel rehearing, seeking clarification regarding which portions of the preambles the Court expected to be altered. We denied the petition, stating that the Government sought "relief that the district court may consider in the first instance on remand." Orders, United States v. Philip Morris USA Inc. , Nos. 13-5028 & 14-5161 (D.C. Cir. Aug. 5, 2015).

Subsequently, the district court granted two Defendants permission to sell certain cigarette brands to non-Defendant ITG Brands, LLC, and to make ITG and its affiliates ("ITG Entities") parties to this case for limited purposes. The order specified that the ITG Entities would be responsible for publishing corrective statements with "slightly modified preamble language." Order Authorizing Transfer of Certain Cigarette Brands and Businesses to ITG Brands, LLC, 6-7, United States v. Philip Morris USA, Inc. , No. 99-2496 (D.D.C. June 8, 2015), ECF No. 6151.

On remand, the district court ordered the preambles to read as follows:

A Federal Court has ordered [Defendants] to make this statement about [the topic of the statement]. Here is the truth: ....

United States v. Philip Morris USA Inc. , 164 F.Supp.3d 121, 124-25 (D.D.C. 2016) (" Revised Preamble Opinion "). The district court explained that the new preambles "do not in any way send a message to the public that Defendants deceived them in the past, nor that Defendants are being punished for their previous conduct." Id. at 125-26. The district court also rejected Defendants' First Amendment arguments. Id. at 126-27. Defendants appealed.

DISCUSSION

A. Standard of Review

This Court reviews de novo the district court's conclusions that the corrective statements comport with RICO and the First Amendment. 2009 Opinion , 566 F.3d at 1110, 1147.

B. RICO

In a civil RICO action, the statute provides district courts with jurisdiction to impose remedies that "prevent and restrain" future RICO violations, not to punish prior violations. 18 U.S.C. § 1964(a). Thus, the district court's remedy requiring Defendants to issue corrective statements complied with RICO because Defendants would be "impaired in making false and misleading assurances" about cigarettes if simultaneously required to tell the truth. 2009 Opinion , 566 F.3d at 1140. "In other words, we held, disseminating corrective statements on the proposed topics would prevent and restrain future RICO violations by ‘[r]equiring Defendants to reveal the previously hidden truth about their products .’ " Corrective Statements Opinion , 801 F.3d at 261 (quoting 2009 Opinion , 566 F.3d at 1140 ) (emphasis in original). However, the district 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) (" Disgorgement Opinion ").

Defendants allege that the preambles approved by the district court exceed its RICO jurisdiction because the preambles "convey the unequivocal message that Defendants previously deceived the American public and, further, that they are being compelled by a court to make the corrective statements as a sanction for prior wrongdoing." Defendants' Br. at 30. Defendants point to five elements that they believe demonstrate the backward-looking nature of the preambles, both individually and cumulatively: (1) the "Here is the truth" tagline; (2) the declaration that "A Federal Court has ordered [Defendants] to make this statement"; (3) that different preambles are permitted for the ITG Entities; (4) the description in the preamble of two of the specific topics; and (5) the district court's rejection of Defendants' proposed alternative preambles.

Defendants assert that the "Here is the truth" tagline conveys the unambiguous message that Defendants have previously withheld "the truth" about the effects of smoking because "[n]o one affirms that a message is ‘the truth’—or is ordered by a court to tell ‘the truth’—for no reason." Defendants' Br. at 31-32. There was no evidence that the public would doubt the truth of the bullet points without this tagline and Defendants urge that "[t]he imprimatur of a federal court unequivocally validates the veracity of the bullet points." Id. at 41. Similarly, Defendants allege that the declaration "A Federal Court has ordered [Defendants] to make this statement" is backward-looking. Because courts do not ordinarily order companies to disseminate information absent prior wrongdoing, Defendants allege that this phrase communicates that they are being compelled to speak as punishment for prior wrongdoing. Ultimately, they argue, these aspects of the tagline reveal nothing about cigarettes and focus only on prior deceptive conduct.

We agree that, read together, these two phrases most naturally suggest prior misconduct by Defendants. Such language "can serve only two purposes: either to attract attention that a correction follows or to humiliate the advertiser," Warner-Lambert Co. v. FTC , 562 F.2d 749, 763 (D.C. Cir. 1977), neither of which is a permissible goal under civil RICO, Corrective Statements...