United States v. Philip Morris USA Inc., 11–5145.

686 F.3d 832

UNITED STATES of America, Appellee

v.PHILIP MORRIS USA INC., et al., Appellants.

No. 11–5145.

United States Court of Appeals, District of Columbia Circuit.

Argued April 20, 2012.

Decided July 27, 2012.

Appeal from the United States District Court for the District of Columbia (No. 1:99–cv–02496).

Miguel A. Estrada argued the cause for appellants. With him on the briefs were Amir C. Tayrani, Dace C. Martinez, Robert F. McDermott, Peter J. Biersteker, Noel J. Francisco, R. Michael Leonard, Michael B. Minton, Bruce D. Ryder, A. Elizabeth Blackwell, Beth A. Wilkinson, and Thomas J. Frederick.

Daniel J. Popeo and Richard A. Samp were on the brief for amicus curiae Washington Legal Foundation in support of appellants.

Sarang Vijay Damle, Attorney, U.S. Department of Justice, argued the cause for appellee. With him on the brief were Michael F. Hertz, Deputy Assistant Attorney General, and Mark B. Stern and Alisa B. Klein, Attorneys. R. Craig Lawrence, AssistantU.S. Attorney, entered an appearance.

Katherine A. Meyer and Howard M. Crystal were on the brief for appellees Tobacco Free Kids Action Fund, et al.

Before: SENTELLE, Chief Judge, BROWN, Circuit Judge, and SILBERMAN, Senior Circuit Judge.

Opinion for the Court by Circuit Judge BROWN.

BROWN, Circuit Judge:

In this latest round in the Government's heavyweight bout against the tobacco industry, the defendant cigarette manufacturers challenge the district court's refusal to vacate injunctions imposed in 2009. Because the district court's ruling survives our review, we give this round to the Government.

I

Thirteen years ago, the Government sued several cigarette manufacturers and related industry organizations for civil violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”). The suit asserted the defendants had conspired to deceive consumers about the health effects and addictiveness of smoking. It sought injunctive relief and disgorgement of $280 billion in profits under RICO's Section 1964(a). See18 U.S.C. § 1964(a).

On appeal of an interlocutory order, we held Section 1964(a) did not provide a disgorgement remedy. We explained that because the Section only affords the district court with jurisdiction to “prevent and restrain” future RICO violations, the court was “limited to forward-looking remedies.” United States v. Philip Morris USA, Inc., 396 F.3d 1190, 1198 (D.C.Cir.2005). Disgorgement, as “a quintessentially backward-looking remedy,” was out. Id.

The district court proceeded to conduct a nine-month bench trial, make over 4000 findings of fact, and impose an extensive set of injunctions. The court identified “more than 100 predicate [RICO violations] spanning more than a half-century,” and found the defendants' “numerous misstatements and acts of concealment and deception were made intentionally and deliberately ... as part of a multi-faceted, sophisticated scheme to defraud.” United States v. Philip Morris USA, Inc., 449 F.Supp.2d 1, 909 (D.D.C.2009) (“Injunction Opinion”). Based on that long history of misconduct, and the defendants' “countless [future] ‘opportunities' and temptations to take similar unlawful actions in order to maximize their revenues,” the court determined there was “a reasonable likelihood that [d]efendants' RICO violations will continue in most of the areas in which they have committed violations in the past.” Id. at 909–12. Asserting its authority to “prevent and restrain” the defendants from committing such future RICO violations, 18 U.S.C. § 1964(a), the court prohibited the defendants from making false or deceptive statements about cigarettes, or “conveying any express or implied health message or health descriptor for any cigarette brand.” Id. at 938. The court also ordered the defendants to issue “corrective statements” in various media outlets about the health effects of smoking, id. at 938–41, and disclose certain marketing and sales information to the public and the Department of Justice, id. at 941–45.

On appeal, we affirmed all but four discrete aspects of the injunction order and remanded for further proceedings on those narrow issues alone. See United States v. Philip Morris USA, Inc., 566 F.3d 1095 (D.C.Cir.2009) (per curiam) (“Affirmance Opinion”). We held the district court had jurisdiction to issue the injunctions because it did not clearly err in finding the defendants exhibited a reasonable likelihoodof committing future RICO violations. See id. at 1131–34. And though we acknowledged that the court's chosen injunctions were “broad,” we held that breadth was “warranted to prevent further violations where[, as here,] a proclivity for unlawful conduct has been shown.” Id. at 1137.

Exactly one month after we issued our opinion, the President signed the Family Smoking Prevention and Tobacco Control Act (the “Tobacco Control Act” or the “Act”) into law. SeePub.L. No. 111-31, 123 Stat. 1776 (2009). The Act imposed stringent restrictions on the conduct of cigarette manufacturers. It limited marketing by prohibiting distribution of branded merchandise, id. § 102, false or misleading labeling, id. § 903(a), and claims of reduced risk of harm (such as the use of descriptors like “light” or “mild”) without prior approval of the FDA, id. § 911. It strengthened warning labels by directing cigarette manufacturers to include one of several textual warnings on every pack. Id. § 202(b). And to ensure enforcement, it granted the FDA a hefty budget, id. § 919, and the authority to impose monetary penalties, id. § 103(c).

The defendants responded by moving to vacate the injunctions on jurisdictional grounds because the Tobacco Control Act's restrictions on their conduct eliminated any “reasonable likelihood” they would commit future RICO violations. Alternatively, they claimed the court should vacate the injunctions out of deference to the FDA's newfound primary jurisdiction over cigarette sales and marketing.

The court rejected both arguments and left the injunctions intact. See United States v. Philip Morris USA, Inc., 787 F.Supp.2d 68 (D.D.C.2011) ( “Vacatur Opinion”). On the jurisdictional argument, it found the defendants were still reasonably likely to commit future RICO violations because: (1) the defendants were not likely to comply with the Tobacco Control Act given their previous disregard for RICO and the Master Settlement Agreement they had entered into with 46 state attorneys general in 1998; (2) the Act “target[ed] different conduct” than the injunctions did; and (3) the defendants' pending lawsuits challenging the Act had resulted in the invalidation of some of its restrictions, and could result in the invalidation of even more restrictions, id. at 75–76. On the primary jurisdiction argument, the court chose to retain jurisdiction because several factors—including its relative expertise in RICO cases, and the dissimilarities between the proscriptions of the RICO statute and the requirements of the Tobacco Control Act—weighed against ceding jurisdiction to the FDA. Id. at 77–82.

The defendants appealed. We have jurisdiction to entertain their challenge under 28 U.S.C. § 1292(a)(1).

II

The defendants advance the same arguments they advanced below. Their primary argument is that the Tobacco Control Act deprived the district court of jurisdiction by eliminating any reasonable likelihood they would commit future RICO violations. Their fallback argument is that even if the district court retained jurisdiction following the passage of the Act, it should have vacated the injunctions out of deference to the FDA's newly obtained primary jurisdiction. We address those claims in turn.

A

RICO's “Section 1964(a) grants district courts jurisdiction ‘to prevent and restrain’ RICO violations.” Affirmance Opinion, 566 F.3d at 1131. Accordingly, the district court only had jurisdiction to maintain its injunctions if it found the defendants “exhibit[ed] a reasonable likelihoodof committing future [RICO] violations.” Id. The court found such a likelihood existed despite the passage of the Tobacco Control Act because the defendants “offer[ed] no facts which would warrant revisiting” the court's pre-Act findings on their proclivity for misconduct. Vacatur Opinion, 787 F.Supp.2d at 75.

The defendants contend the district court twice applied the wrong legal standard. They argue the court erred first when it refused to vacate the injunctions under a line of cases involving intervening legislation. In those circumstances, courts had “deemed cases moot where a new law [wa]s enacted during the pendency of an appeal and resolve[d] the parties' dispute.” Log Cabin Republicans v. United States, 658 F.3d 1162, 1166 (9th Cir.2011) (per curiam).

The intervening legislation in those cases is distinguishable from the Tobacco Control Act because the legislation there made it “impossible for the court to grant any effectual relief whatever.” Cody v. Cox, 509 F.3d 606, 608 (D.C.Cir.2007). In Log Cabin Republicans, for example, the court could not grant the plaintiffs any effectual relief on their challenge to the “Don't Ask, Don't Tell” policy because Congress subsequently passed a law repealing the policy. See658 F.3d at 1165–66. Similarly, in Diffenderfer v. Gomez-Colon, 587 F.3d 445 (1st Cir.2009), the court could not grant the plaintiffs any effectual relief on their challenge to Puerto Rico's Spanish-only ballots because Puerto Rico subsequently passed a law requiring the bilingual ballots plaintiffs desired. Id. at 450–51. By contrast, the Tobacco Control Act did not make it impossible to grant effectual relief because it did not make it impossible for the defendants to commit future RICO violations; it did not repeal RICO, exempt the defendants from RICO's application, or legislate the defendants out of existence. It simply subjected the defendants “to the comprehensive regulatory oversight of the FDA.” Appellants' Br. at 31. The relevant question—as the district court recognized—was whether that oversight...