UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA, :
:
Plaintiff, :
: Civil Action No.
v. : 99-2496 (GK)
:
PHILIP MORRIS USA, INC., :
et al. :
:
Defendants. :
MEMORANDUM OPINION
Back in 2006, the Court issued its Final Judgment and Remedial
Order #1015 [Dkt. No. 5733], mandating that Defendants publish
corrective statements on each of five topics on which the Court
found they had made false and deceptive statements. These topics
are: “(a) the adverse health effects of smoking; (b) the
addictiveness of smoking and nicotine; (c) the lack of any
significant health benefit from smoking ‘low tar,’ ‘light,’ ‘ultra
light,’ ‘mild,’ and ‘natural,’ cigarettes; (d) Defendants'
manipulation of cigarette design and composition to ensure optimum
nicotine delivery; and (e) the adverse health effects of exposure
to secondhand smoke.” United States v. Philip Morris USA, Inc., 449
F. Supp. 2d 1, 938-39 (D.D.C. 2006) (“Original Opinion”). Upon
consideration of the briefs, the oral argument, and the entire
record herein, the Court herein finalizes the text of the
corrective messages to be published. See infra Section II.A-E.
I. Background
On September 22, 1999, the United States filed this civil suit
against Defendants pursuant to the Racketeer Influenced and Corrupt
Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968. After nearly
five years of discovery, motions, and other pretrial proceedings,
trial began in September 2004. The bench trial lasted nine months
and 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).” Original Opinion, 449 F. Supp. 2d
at 26. In particular, the Court concluded that Defendants
“knowingly and intentionally engaged in a scheme to defraud smokers
and potential smokers, for purposes of financial gain, by making
false and fraudulent statements, representations, and promises.”
Id. at 852.
A. Factual Findings
The Court made detailed Findings of Fact on each of the
various topics on which Defendants made their false, deceptive, and
misleading public statements. Id. at 146-839. First, the Court
found that “each and every one of these Defendants repeatedly,
consistently, vigorously - and falsely - denied the existence of
any adverse health effects from smoking,” despite “the massive
documentation in their internal corporate files from their own
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scientists, executives, and public relations people” that confirmed
that there was little evidence supporting their claims. Id. at 208.
Specifically, Defendants “knew there was a consensus in the
scientific community that smoking caused lung cancer and other
diseases” by at least January 1964. Id. at 180. Despite this
internal knowledge, the Defendants embarked on a “campaign of
proactive and reactive responses to scientific evidence that was
designed to mislead the public about the health consequences of
smoking.” Id. at 187-88.
Second, the Court found that Defendants “have publicly denied
and distorted the truth as to the addictive nature of their
products for several decades.” Id. at 209. Defendants “knew and
internally acknowledged that nicotine is an addictive drug,” id. at
218, but “publicly made false and misleading denials of the
addictiveness of smoking, as well as nicotine’s role in causing
that addiction.” Id. at 271. The Court found that this conduct was
continuing, observing that “no Defendant accepts the Surgeon
General’s definition of addiction, no Defendant admits that
nicotine is the drug delivered by cigarettes that creates and
sustains addiction, and no Defendant acknowledges that the reason
quitting smoking is so difficult, and not simply a function of
individual will power, is because of its addictive nature.” Id. at
286.
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Third, the Court found that “Defendants have designed their
cigarettes to precisely control nicotine delivery levels and
provide doses of nicotine sufficient to create and sustain
addiction.” Id. at 309. Specifically, most cigarettes are
“manufactured using reconstituted tobacco material, additives, burn
accelerants, ash conditioners, and buffering substances, all of
which affect nicotine levels and delivery.” Id. “Other cigarette
design features used by Defendants to control nicotine delivery
include filter design, paper selection and perforation, ventilation
holes, leaf blending, and use of additives (such as ammonia) to
control the PH of cigarette smoke.” Id. However, the Defendants
“denied, repeatedly and publicly, that they manipulate nicotine
content and delivery in cigarettes in order to create and sustain
addiction.” Id. at 374.
Fourth, the Court found that, for several decades, Defendants
marketed and promoted “low tar brands” as less harmful than
conventional cigarettes. Id. at 430. Defendants knew that “smokers
of low tar cigarettes modify their smoking behavior, or
‘compensate,’ for the reduced nicotine yields by taking more
frequent puffs, inhaling smoke more deeply, holding smoke in their
lungs longer, covering cigarette ventilation holes with fingers or
lips, and/or smoking more cigarettes.” Id. at 431. Based on their
sophisticated understanding of compensation, Defendants understood
that low tar/light cigarettes offered no clear health benefits. Id.
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at 456-75. However, they “concealed that knowledge and disseminated
false and misleading statements to downplay its existence and
prevalence.” Id. at 500. Defendants “continue to make[] false and
misleading statements regarding low tar cigarettes in order to
reassure smokers and dissuade them from quitting.” Id. at 507-08.
Fifth, the Court found that “Defendants crafted and
implemented a broad strategy to undermine and distort the evidence
indicating passive smoke as a health hazard.”1 Id. at 693. Research
funded by Defendants provided evidence confirming that
“nonsmokers[’] exposure to cigarette smoke was a health hazard.”
Id. at 709. However, Defendants made “numerous public statements
denying the linkage” between secondhand smoke and disease in
nonsmokers. Id. at 788. The Court found that the Defendants’
conduct was continuing, noting that “currently no Defendant
publicly admits that passive exposure to cigarette smoke causes
disease or other adverse health effects.” Id. at 693.
B. Remedies
Based on these findings, as well as many others, the Court
imposed a number of injunctive measures in order to prevent and
restrain future violations of RICO. Id. at 937-45; see also id. at
908-09 (recognizing that 18 U.S.C. § 1964(a) limits remedies to
1
Secondhand smoke, “also called passive smoke or environmental tobacco
smoke (‘ETS’), is a mixture of mostly sidestream smoke given off by the
smoldering cigarette and some mainstream smoke exhaled by smokers.” Id.
at 693.
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those which “prevent and restrain violations of section 1962"). The
Court concluded that there was a reasonable likelihood that
Defendants would continue to violate RICO in the future. Id. at
908-19. The Court also 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.
One of the injunctive measures ordered Defendants to make
corrective statements on each of the five topics on which they had
historically made (and were currently making) false and deceptive
statements. Id. at 925-26. These statements were necessary to
prevent and restrain “Defendants from continuing to disseminate
fraudulent public statements and marketing messages by requiring
them to issue truthful corrective communications.” Id. at 927. The
statements are to be published in newspapers and disseminated
“through television, advertisements, onserts, in retail displays,
and on their corporate websites.” Id. at 928; see also id. at 938-
41. The Court stated that it would receive proposals from the
parties “for the exact wording of such corrective statements, with
any supporting materials deemed necessary.” Id. at 939.
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C. Post-Trial Rulings of the Court of Appeals
On May 22, 2009, the Court of Appeals affirmed this Court’s
judgment of liability and affirmed major provisions in its Remedial
Order.2 United States v. Philip Morris USA, Inc., 566 F.3d 1095,
1150 (D.C. Cir. 2009) (“Affirmance Opinion”). The Court of Appeals
specifically affirmed many of the individual Findings of Fact
discussed above, including that Defendants made false and
misleading statements: (1) denying the addictive properties of
nicotine; (2) suggesting that “light” and “low tar” cigarettes were
less harmful than regular cigarettes; and (3) denying the health
hazards of secondhand smoke. 566 F.3d at 1124-26, 1126-27, 1127-28.
In addition, the Court upheld the finding that there was a
reasonable likelihood that Defendants would commit future RICO
violations and concluded that corrective statements were
appropriate “to counteract these anticipated violations.” Id. at
1131-34, 1144. Defendants petitioned for a writ of certiorari,
which was denied. 130 S. Ct. 3501 (2010).
Since then, the Court of Appeals has issued two additional
opinions upholding this Court’s post-remedial decisions.3 First,
the Court of Appeals affirmed this Court’s broad remedial powers
2
The Court of Appeals remanded the case with directions to address four
discrete matters not at issue in this opinion.
3
Those decisions by this Court can be found at 778 F. Supp. 2d 8 (D.D.C.
2011) (disaggregated marketing data decision) and 787 F. Supp. 2d 68
(D.D.C. 2011) (denying motion for vacatur).
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when it declined to overturn its clarification of its disaggregated
marketing disclosure remedy. United States v. Philip Morris USA
Inc., 686 F.3d 839 (D.C. Cir. 2012). Second, the Court of Appeals
upheld this Court’s determination that the passage of the Family
Smoking Prevention and Tobacco Control Act (“TCA” or “Act”), Pub.
L. No. 111-31, 123 Stat. 1776 (2009), did not eliminate the
reasonable likelihood that Defendants would commit future RICO
violations. United States v. Philip Morris USA Inc., 686 F.3d 832,
837 (D.C. Cir. 2012). In affirming this Court’s decision not to
assume that the Defendants would comply with the TCA, the Court of
Appeals noted that the Act did not establish penalties as broad as
those available under RICO, and observed that, “[i]f the defendants
were not deterred by the possibility of RICO liability, the
district court reasonably found the defendants were not likely to
be deterred by the Tobacco Control Act either.” Id. at 836-37.4
Thereafter, this Court ordered briefing from the parties on
whether it should defer consideration of the issue of corrective
statements pending the resolution of various challenges to the
regulations promulgated by the Food and Drug Administration under
the TCA. Order, Nov. 17, 2011 [Dkt. No. 5950]. After considering
4
This finding is corroborated by the continuing legal challenges being
brought by tobacco companies, including many of the Defendants, against
various provisions of the Tobacco Control Act. See, e.g., Discount
Tobacco City & Lottery, Inc. v. United States, 674 F.3d 509 (6th Cir.
2012) (refusing to grant facial challenge under the First Amendment to
FDA’s authority to require graphic warning labels), pet. for cert. filed,
Oct. 26, 2012.
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the submissions of the parties, this Court decided not to defer a
decision pending a final resolution of R.J. Reynolds Tobacco Co. v.
Food & Drug Administration, 823 F. Supp. 2d 36 (D.D.C. 2011), then
pending on appeal. However, mindful of the expedited manner in
which the Court of Appeals was handling that case and mindful of
the possibility that a ruling in that case might have a substantial
impact on its corrective statements ruling in this case, this Court
took no action until the Court of Appeals ruled on Aug. 24, 2012 in
R.J. Reynolds Tobacco Co. v. Food & Drug Administration, 696 F.3d.
1205 (D.C. Cir. 2012) (“Reynolds”).
II. Corrective Statements
Each party submitted proposed corrective statements. After
carefully evaluating the submissions, the Court concludes that the
following Corrective Statements will most effectively prevent and
restrain future violations of RICO. Appendix A directs the reader
to the citations in the Original Opinion supporting each of these
Statements.
A. Adverse Health Effects of Smoking
A Federal Court has ruled that the Defendant tobacco companies
deliberately deceived the American public about the health effects
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of smoking, and has ordered those companies to make this statement.
Here is the truth:5
• Smoking kills, on average, 1200 Americans. Every
day.
• More people die every year from smoking than from
murder, AIDS, suicide, drugs, car crashes, and
alcohol, combined.
• Smoking causes heart disease, emphysema, acute
myeloid leukemia, and cancer of the mouth,
esophagus, larynx, lung, stomach, kidney, bladder,
and pancreas.
• Smoking also causes reduced fertility, low birth
weight in newborns, and cancer of the cervix and
uterus.
B. Addictiveness of Smoking and Nicotine
A Federal Court has ruled that the Defendant tobacco companies
deliberately deceived the American public about the addictiveness
of smoking and nicotine, and has ordered those companies to make
this statement. Here is the truth:
• Smoking is highly addictive. Nicotine is the
addictive drug in tobacco.
• Cigarette companies intentionally designed
cigarettes with enough nicotine to create and
sustain addiction.
• It's not easy to quit.
• When you smoke, the nicotine actually changes the
brain - that's why quitting is so hard.
5
Each Statement begins with similar language declaring that a court has
ruled the Defendants deceived the public about a particular topic and has
ordered them to make corrective statements. These introductory sentences
will be referred to as the “preamble.”
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C. Lack of Significant Health Benefit from Smoking
“Low Tar,” “Light,” “Ultra Light,” “Mild,” and
“Natural” Cigarettes
A Federal Court has ruled that the Defendant tobacco companies
deliberately deceived the American public by falsely selling and
advertising low tar and light cigarettes as less harmful than
regular cigarettes, and has ordered those companies to make this
statement. Here is the truth:
• Many smokers switch to low tar and light cigarettes
rather than quitting because they think low tar and
light cigarettes are less harmful. They are not.
• "Low tar" and filtered cigarette smokers inhale
essentially the same amount of tar and nicotine as
they would from regular cigarettes.
∙ All cigarettes cause cancer, lung disease, heart
attacks, and premature death - lights, low tar,
ultra lights, and naturals. There is no safe
cigarette.
D. Manipulation of Cigarette Design and Composition to
Ensure Optimum Nicotine Delivery
A Federal Court has ruled that the Defendant tobacco companies
deliberately deceived the American public about designing
cigarettes to enhance the delivery of nicotine, and has ordered
those companies to make this statement. Here is the truth:
∙ Defendant tobacco companies intentionally designed
cigarettes to make them more addictive.
∙ Cigarette companies control the impact and delivery
of nicotine in many ways, including designing
filters and selecting cigarette paper to maximize
the ingestion of nicotine, adding ammonia to make
the cigarette taste less harsh, and controlling the
physical and chemical make-up of the tobacco blend.
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∙ When you smoke, the nicotine actually changes the
brain - that's why quitting is so hard.
E. Adverse Health Effects of Exposure to Secondhand
Smoke
A Federal Court has ruled that the Defendant tobacco companies
deliberately deceived the American public about the health effects
of secondhand smoke, and has ordered those companies to make this
statement. Here is the truth:
∙ Secondhand smoke kills over 3,000 Americans each
year.
∙ Secondhand smoke causes lung cancer and coronary
heart disease in adults who do not smoke.
∙ Children exposed to secondhand smoke are at an
increased risk for sudden infant death syndrome
(SIDS), acute respiratory infections, ear problems,
severe asthma, and reduced lung function.
∙ There is no safe level of exposure to secondhand
smoke.
III. The Court Has Broad Discretion to Formulate Corrective
Statements
The parties are in agreement that this Court has broad
discretion to determine the content of the Corrective Statements in
order to most effectively prevent and restrain future RICO
violations. See Hr’g. Tr., Oct. 15, 2012. The Court can, but is not
obligated to, receive additional evidence. See United States v.
Local 1804-1, Int’l Longshoremen’s Ass’n, 812 F. Supp. 1303
(S.D.N.Y. 1993), modified by 831 F. Supp. 177, 182-84 (S.D.N.Y.
1993) (evaluating whether to admit additional evidence in remedial
phase of RICO litigation and determining not to admit it after
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deeming it irrelevant on the questions of fact at issue). The
parties have submitted twenty-five briefs related to the content of
these Corrective Statements, and the Court heard oral argument on
October 15, 2012.
Naturally, this Court’s equitable power is limited by the
terms of the underlying statute, as well as the Constitution. See
United States v. Philip Morris USA, Inc., 396 F.3d 1190, 1197 (D.C.
Cir. 2005). While RICO provides a district court with jurisdiction
to issue orders that “prevent and restrain” RICO violations, our
Court of Appeals made it clear that this language limits a court’s
equitable discretion to “forward looking remedies that are aimed at
future violations.” 396 F.3d at 1198.
In its Affirmance Opinion, the Court of Appeals upheld this
Court’s determination that corrective statements, targeted at
“reveal[ing] the previously hidden truth” about cigarettes and
“correct[ing] Defendants’ campaign of deceptive marketing,” will
prevent and restrain future RICO violations. Id.; see also
Reynolds, 696 F.3d at 1216 & n.10 (observing that this case
requires statements in order “to correct any false or misleading
claims made by cigarette manufacturers in the past”). Thus, the
corrective statements remedy has been upheld as within the scope of
this Court’s discretion, presuming that the Statements are targeted
at correcting the fraud perpetuated by the Defendants.
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IV. First Amendment Analysis
As already noted, even though the Court has a significant
amount of equitable discretion under RICO, its discretion is also
cabined by the provisions of the Constitution. The Defendants argue
that certain portions of the Statements violate the First Amendment
because they exceed the scope of permissible governmental
restrictions on commercial speech. After reviewing the Supreme
Court’s development of the commercial speech doctrine and in light
of recent cases decided by the Supreme Court and our Court of
Appeals, this Court concludes that the Statements pass
constitutional muster.
A. Historical Development of “Commercial Speech”
Protection
The First Amendment prohibits the government from
“restrict[ing] expression because of its message, its ideas, its
subject matter, or its content.” Brown v. Entm’t Merchs. Ass’n, 131
S. Ct. 2729, 2733 (2011) (quoting Ashcroft v. A.C.L.U., 535 U.S.
564, 573 (2002)). Content-based restrictions on protected speech
are entitled to “strict scrutiny” when reviewed by courts. Id. at
2738. This heightened scrutiny invalidates a government restriction
on speech “unless it is justified by a compelling government
interest and is narrowly drawn to serve that interest.” Id. (citing
R.A.V. v. City of St. Paul, 505 U.S. 377, 395 (1992)). However,
certain types of speech, such as obscenity, incitement, and
fighting words, have been deemed unworthy of such heightened
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scrutiny, and are considered “unprotected speech.” See Brown, 131
S. Ct. at 2733 (discussing categories of unprotected speech). Thus,
when the government restricts speech, the court must evaluate what
kind of speech it is and what level of protection is due that type
of speech.
Over the years, the Supreme Court has sought to identify how
much and what level of protection the First Amendment provides for
so-called “commercial speech,” defined as “expression related
solely to the economic interests of the speaker and its audience.”
Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n, 447 U.S. 557,
562 (1980). Initially, the Court indicated that “purely commercial
advertising” might be entirely unprotected. Valentine v.
Chrestensen, 316 U.S. 52, 54 (1942) (observing that “the
Constitution imposes no . . . restraint on government as respects
purely commercial advertising”). However, a quarter of a century
later, the Court decided that commercial speech was not outside the
realm of constitutional protection, observing that “speech does not
lose its First Amendment protection because money is spent to
project it.” Virginia Bd. of Pharm. v. Virginia Citizens Consumer
Council, Inc., 425 U.S. 748, 761 (1976). While the Court did not
specify what level of protection commercial speech was entitled to,
it did conclude that “whatever may be the proper bounds” of
permissible government restrictions, they were “plainly exceeded”
in that case. Id. at 771.
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A few years later, the Court set forth a general framework for
evaluating whether a particular government restriction on
commercial speech was constitutional. See Central Hudson, 447 U.S.
at 566. The Court established a four-step test:
For commercial speech to come [under the First
Amendment], it at least must concern lawful
activity and not be misleading. Next, we ask
whether the asserted governmental interest is
substantial. If both inquiries yield positive
answers, we must determine whether the
regulation directly advances the governmental
interest asserted, and whether it is not more
extensive than is necessary to serve that
interest.
Id. at 566. This standard, which is often referred to as an
“intermediate” level of scrutiny, is less demanding than the strict
scrutiny standard applied to traditionally protected speech. See
Brown, 131 S. Ct. at 2733 (defining strict scrutiny); see also
Reynolds, 696 F.3d at 1212 (describing Central Hudson test as “not
quite as demanding” as strict scrutiny).
In 1985, the Supreme Court then established an even lower
level of scrutiny for government restrictions aimed at commercial
speech that is false or misleading. In Zauderer v. Office of
Disciplinary Counsel, 471 U.S. 626 (1985), the Court analyzed the
constitutionality of various Ohio state disciplinary rules,
including a rule requiring an attorney to affirmatively disclose
that clients may be responsible for legal costs regardless of the
outcome of their case. Id. at 629-30.
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The Court began by observing that an advertiser has only a
“minimal” constitutional interest in not providing any particular
“purely factual and uncontroversial” information. Id. at 651. Thus,
given that the interests of the advertiser are less pressing,
warnings or disclaimers “might be appropriately required” to avoid
“consumer confusion or deception.” Id. (citing In re R.M.J., 455
U.S. 191, 201 (1982)).
The Court then concluded that “an advertiser's rights are
adequately protected as long as disclosure requirements are
reasonably related to the State's interest in preventing deception
of consumers.” 471 U.S. at 651. It specified in a footnote that
such disclosure requirements were not subject to a “least
restrictive means” analysis. Id. at 651 n.14. However, the Court
also noted that “unjustified or unduly burdensome” disclosure
requirements might offend the First Amendment if they “chill[ed]
protected commercial speech.” Id. at 651.
B. Choosing the Appropriate Standard of Review
1. Recent Cases Discussing Which Commercial
Speech Standard Applies
a. Affirmance Opinion
Courts have long struggled on a case-by-case basis with
whether Central Hudson or Zauderer applies to particular
governmental restrictions on commercial speech. In the Affirmance
Opinion, the Court of Appeals directly addressed the question of
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what level of First Amendment scrutiny should be applied to the
corrective statements in this case. 566 F.3d at 1142-45.
The Court began by acknowledging that several standards exist
for evaluating commercial speech restrictions under the First
Amendment. Id. at 1142. It went on to observe that, whatever
standard was applicable, the “fit” required between the means and
the end was the same: such restrictions must be “narrowly tailored
to achieve a substantial government goal.” Id. at 1143 (citing Bd.
of Trustees v. Fox, 492 U.S. 469, 480 (1989)).6
The Court of Appeals rejected the Defendants’ argument that
the corrective statements should not be considered “commercial
speech,” id. at 1143, and then analyzed whether the corrective
statements remedy was appropriately tailored to the government’s
interest as required by the various commercial speech standards.
Id.
The Court of Appeals began by discussing this Court’s Factual
Findings, observing that Defendants had “violated RICO by making
false and fraudulent statements to consumers about their products,”
and were “reasonably likely to commit similar violations in the
future.” Id. It also emphasized this Court’s determination that a
corrective statements remedy was “necessary to counteract these
6
It is clear that strict scrutiny does not apply in this case, although
Defendants have preserved the issue for appellate review. See Hr’g. Tr.,
Oct. 15, 2012; see also Defs.’ Supplemental Br. Regarding the Gov’t’s
Proposed Corrective Statements, 6 n.2 [Dkt. No. 5985] (raising strict
scrutiny argument).
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anticipated violations.” Id. The Court of Appeals concluded, based
on this Court’s Findings, that the corrective statements remedy was
narrowly tailored to achieve the substantial governmental interest
of “preventing Defendants from committing future RICO violations.”
Id. at 1144.
The Court of Appeals then directed this Court to develop
statements that would satisfy the Zauderer requirements. Id. It
cautioned that this Court “must confine the statements to purely
factual and uncontroversial information, geared towards 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 (citations and internal quotations
omitted). This statement echoes the key requirements of Zauderer,
which, as discussed above, apply to the review of mandatory
disclosures of purely factual and uncontroversial information
directed towards preventing consumer deception. Zauderer, 471 U.S.
at 651.
In sum, the Court of Appeals’ discussion of the corrective
statements remedy in the Affirmance Opinion established two
important guidelines. First, the Court has established that,
regardless of which commercial-speech standard applies, the test
regarding the “fit” is the same and is satisfied in this case.
Second, the Court of Appeals directed this Court to develop
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statements that would satisfy the requirements of Zauderer, thereby
indicating that the Zauderer test was the appropriate standard of
review.
b. Cases Decided Since the Affirmance Opinion
Several cases decided by the Supreme Court and our Court of
Appeals since the issuance of the Affirmance Opinion in 2009
underscore the appropriateness of applying Zauderer to these
Corrective Statements.
First, in 2010, the Supreme Court considered whether Central
Hudson or Zauderer review applied to federal regulations that
required a law firm to identify itself as a “debt relief agency.”
Milavetz, Gallop & Milavetz, P.A. v. United States, 130 S. Ct. 1324
(2010). Emphasizing the fact that the disclosure requirements were
directed at misleading commercial speech, id. at 1339, the Court
concluded that Zauderer review was appropriate and then re-affirmed
the Zauderer analysis:
Unjustified or unduly burdensome disclosure
requirements offend the First Amendment by
chilling protected speech, but “an
advertiser's rights are adequately protected
as long as disclosure requirements are
reasonably related to the State's interest in
preventing deception of consumers.”
Id. at 1339-40 (citing Zauderer, 471 U.S. at 651).
Second, our Court of Appeals recently applied Zauderer to a
final rule issued by the Department of Transportation (“DOT”)
requiring that the most prominent figure on airline print
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advertisements and websites be the final price, including taxes, in
order to avoid consumer confusion. Spirit Airlines, Inc. v. Dep’t
of Transp., 687 F.3d 403, 408 (D.C. Cir. 2012). The Court noted
that, as in Milavetz, the regulation required a disclosure of
accurate information targeted at correcting misleading or confusing
commercial speech. Id. at 412-13 (describing rule in Zauderer as
requiring a “clarifying” disclosure). The Court also held that the
DOT rule was reasonably related to the goal of “prevent[ing]
consumer confusion” about the total price consumers would have to
pay. Id. at 414.
In addition, the Court of Appeals analyzed the DOT rule under
Central Hudson, and summarized the Central Hudson analysis as
follows:
First, is the asserted government interest
substantial? . . . The second and third
inquiries are related: whether the regulation
directly advances the governmental interest
asserted, and whether the fit between the
government's ends and the means chosen to
accomplish those ends is not necessarily
perfect, but reasonable.
687 F.3d at 415 (citing Pearson v. Shalala, 164 F.3d 650, 656 (D.C.
Cir. 1999) (internal quotation and citation omitted)). Remarking
that the analysis was “easy,” the Court first declared that there
was no question that the government’s interest in “ensuring the
accuracy of commercial information in the marketplace is
substantial.” Id. (citing Edenfield v. Fane, 507 U.S. 761, 769
(1993)). It then observed that the interest was “clearly and
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directly advanced” by a rule requiring the total price to be the
most prominent price in a particular advertisement. Id. Finally,
the Court of Appeals concluded that the rule was “reasonably
tailored.” Id. (noting that the rule focused primarily on the
manner of disclosure and did not impose any burden on speech other
than requiring disclosure of the final price).
Third, our Court of Appeals again examined the issue of which
level of First Amendment scrutiny applies to restrictions on
commercial speech in Reynolds. As noted above, tobacco companies
challenged a Final Rule issued by the Food and Drug Administration
that used its authority under the TCA to promulgate graphic warning
labels depicting the negative health consequences of smoking to be
placed on cigarette packages. Reynolds, 696 F.3d at 1209.
In Reynolds, the Court rejected application of the Zauderer
test. It concluded that Zauderer review is limited to government
restrictions targeted at “misleading or incomplete commercial
messages.” Id. at 1213 (citing Glickman v. Wileman Bros. v.
Elliott, Inc., 521 U.S. 457, 491 (1997) (Souter, J., dissenting)).
Because the FDA’s “interest” was in discouraging consumers from
buying cigarette products, not preventing consumer deception, the
Court held that Zauderer did not apply. See id. at 1215-16.
Significantly, the Court of Appeals specifically distinguished
Reynolds from this litigation. It noted that this case did involve
“remedial measure[s] designed to counteract specific deceptive
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claims made by the Companies.” Id. at 1216 n.10 (observing that
“[s]uch matters are the subject of a pending — and entirely
separate — line of litigation against the Companies,” citing this
case).
The Court then discussed how, even if Zauderer applied, the
warnings would fail that test because the graphic images were not
“purely factual and uncontroversial.” Id. at 1216 (citing Zauderer,
471 U.S. at 651); see also id. (describing the disclosures in
Zauderer and Milavetz as “clear statements that were both
indisputably accurate and not subject to misinterpretation by
consumers”).
The Court relied on two crucial concessions made by the FDA in
determining that the images were not “purely factual.” First, the
FDA conceded that the graphic images were “not meant to be
interpreted literally,” which raised concerns that the images
“could be misinterpreted by consumers.” Id. Second, the FDA
“tacitly admit[ted]” the images were intended to evoke an emotional
response and/or shock the reader into retaining information. Id. at
1216. Because of these admissions, the Court concluded:
These inflammatory images . . . cannot
rationally be viewed as pure attempts to
convey information to consumers. They are
unabashed attempts to evoke emotion (and
perhaps embarrassment) and browbeat consumers
into quitting. . . . While none of these
images are patently false, they certainly do
not impart purely factual, accurate, or
uncontroversial information to consumers.
-23-
Consequently, the images fall outside the
ambit of Zauderer.
Id. at 1216-17.
The Court of Appeals then found that the appropriate level of
scrutiny to apply to the graphic images was the Central Hudson
test. Id. at 1217 (citing its Affirmance Opinion, 566 F.3d at 1142-
43). The Court reiterated its finding that the intended purpose of
the FDA rule was “to encourage current smokers to quit and dissuade
other consumers from ever buying cigarettes.” Id. at 1218. Assuming
without deciding that such a government interest was substantial,
the Court concluded that the FDA had offered no evidence to show
that the graphic warnings directly advanced that interest. Id. at
1218-21. For those reasons, the FDA rule did not survive Central
Hudson scrutiny and was struck down.
These recent cases clarify two basic principles regarding
First Amendment scrutiny of commercial speech. First, Zauderer only
applies to government restrictions on commercial speech that
require purely factual and noncontroversial disclosures in order to
prevent and correct consumer deception. If a restriction qualifies
for Zauderer review, it then need only be “reasonably related” to
the state’s interest, as long as it is not otherwise unjustified or
unduly burdensome. Second, assuming Zauderer does not apply, the
restriction is to be reviewed under Central Hudson and will survive
First Amendment scrutiny if it directly advances a substantial
-24-
government interest, and the fit between the government’s interest
and the means chosen to advance that interest is reasonable.
2. Zauderer Is the Applicable Standard for Review of
the Corrective Statements
A government restriction on speech is reviewed under Zauderer
if: (1) the government restriction requires a disclosure rather
than a ban on speech; (2) the required disclosures are purely
factual and uncontroversial; and (3) the disclosures are aimed at
false and misleading commercial speech and preventing such speech
from deceiving consumers. Since no party is arguing that the
Corrective Statements are bans on speech rather than “disclosures,”
the Court will turn to the remaining two requirements.
a. The Statements Are Purely Factual
and Uncontroversial
i. “Purely Factual”
Every sentence of the Corrective Statements is based in
specific Findings of Fact made by this Court in the Original
Opinion. See Appendix A. Moreover, each Statement is “clear” and
“accurate.” Reynolds, 696 F.3d at 1216 (describing the statements
found factual in Zauderer and Milavetz). Defendants disagree.
Defendants’ first argument alleges that the preamble language
that introduces the various Statements is not “purely factual.”
However, Defendants fail to raise any substantive argument against
the content of the preamble, which does nothing more than state
that a federal court ruled that Defendant tobacco companies
-25-
deceived the public about the topic of the particular Statement and
ordered them to issue an accurate Statement.
For example, the preamble in Corrective Statement B states, “A
Federal Court has ruled that the Defendant tobacco companies
deliberately deceived the American public about the addictiveness
of smoking and nicotine, and has ordered those companies to make
this statement.” This Court made a number of explicit findings that
the tobacco companies perpetuated fraud and deceived the public
regarding the addictiveness of cigarettes and nicotine. See, e.g.,
Original Opinion, 449 F. Supp. 2d at 209 (“Defendants have publicly
denied and distorted the truth as to the addictive nature of their
products for several decades.”); id. at 271 (“Defendants have
publicly made false and misleading denials of the addictiveness of
smoking[.]”); id. at 307 (“For approximately forty years,
Defendants publicly, vehemently, and repeatedly denied the
addictiveness of smoking and nicotine’s central role in smoking.”);
id. at 856 (“Defendants have made and continue to make false and
fraudulent statements about the addictiveness of nicotine and
smoking.”). These findings were upheld on appeal. Affirmance
Opinion, 566 F.3d at 1127-28 (upholding the district court’s
conclusion that Defendants engaged in “a campaign of statements
intended to mislead the public into believing that giving up
smoking is not markedly more difficult than giving up everyday
habits”).
-26-
It is also factually true that the Court is ordering the
Corrective Statements to be made on this topic so as to prevent
further dissemination of untruthful information by Defendants.
Original Opinion, 449 F. Supp. 2d at 928 (ordering Defendants to
make corrective statement about addiction). Similar findings of
fraud were made as to each of the other topics addressed, and the
Court similarly ordered the Defendants to make statements on those
topics. See Appendix A. Thus, there is simply no support for
Defendants’ argument that the language of the preamble text is not
“factual.”
Recognizing this flaw in their argument, Defendants’ attack on
the preamble language does not suggest that the actual content is
inaccurate, but instead argues that the language evokes an
“emotional response” and “embarrassment” and thus is not factual
under Reynolds.7 Defendants’ attempts to analogize this case to
Reynolds ignore the enormous and analytically significant
differences between the two. The required disclosures in the two
cases contain vastly different content, were issued under different
statutes, and serve different government interests.
The warnings at issue in Reynolds contained graphic images
such as a man smoking through a tracheotomy hole, a woman crying,
7
In this context, as in the Supreme Court’s many cases attempting to
define obscenity, whether a Statement evokes an “emotional response” or
“embarrassment” will often be in the eye of the beholder. See, e.g.,
Jacobellis v. Ohio, 378 U.S. 184, 197 (1964) (Stewart, J., concurring)
(noting difficulty of defining “hard-core pornography,” but observing “I
know it when I see it”).
-27-
and a man wearing a shirt with the words “I QUIT” on it. Reynolds,
696 F.3d at 1216. The FDA conceded that these images were “not
meant to be interpreted literally.” Id. In contrast, the Corrective
Statements contain no pictures and merely disclose facts. Thus,
there is no danger that the Statements do “not convey any warning
information” nor is there any fear that they are “not meant to be
interpreted literally,” as the Court of Appeals concluded about the
graphic images. Id. at 1216-17 (emphasis in original). Thus,
Defendants make no substantive argument for why the Statements
should be found not to be factual under Reynolds.
Defendants then raise a number of challenges against the
phrasing of particular facts in various Statements. First,
Defendants argue that the assertion in Corrective Statement A
regarding how many Americans die each day from smoking-related
illnesses is not factual “because the calculation is based on a
rough estimate of the number of Americans who die each year from
smoking-related illnesses, not each day.” Defs.’ Resp. to the
Gov’t’s Proposed Corrective Statements, 18 [Dkt. No. 5881]. The
Original Opinion explicitly phrased the statistic in terms of days.
Original Opinion at 854-55 (“Cigarette smoking and exposure to
secondhand smoke kills . . . more than 1,200 [Americans] every
single day.”). To the extent the Defendants’ argument is that the
text of the statement does not properly indicate that the number is
a “rough estimate,” the final version of Corrective Statement A
-28-
reads, “Smoking kills, on average, 1,200 Americans. Every day.”
Thus, the text has been amended to address Defendants’ concerns.
Second, Defendants argue that the portion of Corrective
Statement D which asserts that Defendants “manipulated cigarettes
to make them more addictive” is “misleading” because “it suggests
that Defendants spike cigarettes with additional nicotine.” Defs.’
Resp. to the Gov’t’s Proposed Corrective Statements, 18 [Dkt. No.
5881]; see also Defs.’ Reply to Pub. Health Intervenors’ Resp. to
U.S. Submission of Proposed Corrective Statements & Expert Report,
3-4 [Dkt. No. 5889]. It does no such thing.
The language does not state or imply that Defendants “spiked”
or added nicotine to their cigarettes. Instead, the Statement
summarizes the Factual Findings concluding that Defendants
manipulated nicotine delivery in a number of ways. This Court found
that:
Defendants have used a variety of physical and
chemical design parameters to manipulate the
nicotine delivery of their commercial
products. . . . Defendants' goal to ensure
that their products deliver sufficient
nicotine to create and sustain addiction
influences their selection and combination of
design parameters. No single design parameter
is responsible, on its own, for the level of
nicotine delivered by a particular cigarette.
Rather, Defendants combine design parameters
to ensure that any particular cigarette
delivers a sufficient level of nicotine.
Original Opinion, 449 F. Supp. 2d at 337-38 (emphasis added); see
also id. at 858-59 (“Defendants have studied extensively how every
-29-
characteristic of every component of cigarettes – including the
tobacco blend, the paper, the filter, additives, and the
manufacturing process – affects nicotine delivery. They have
utilized that understanding in designing their cigarettes.”)
(emphasis added). Thus, the language asserting that Defendants
manipulated cigarettes is amply supported by the record and is
factually accurate.
Third, Defendants argue that Corrective Statement D errs when
it states that cigarette companies “add[] ammonia to make the
cigarette taste less harsh,” because the assertion is “subject to
the misinterpretation that all of Defendants’ cigarettes are
presently made with ammonia as an added ingredient, which is not
correct.” Defs.’ Supplemental Br. Regarding the Gov’t’s Proposed
Corrective Statements, 5 [Dkt. No. 5985]. However, the text clearly
specifies that adding ammonia is only one of “many ways” in which
cigarette companies control the impact and delivery of nicotine.
See Corrective Statement D (“Cigarette companies control the impact
and delivery of nicotine in many ways, including . . . adding
ammonia to make the cigarette taste less harsh . . . .”). The
language of Statement D in no way suggests that all Defendants add
ammonia to all of their cigarettes.
Fourth and finally, Defendants challenge the assertion in
Corrective Statements B and D that quitting is difficult because
nicotine actually changes the brain. They suggest that the language
-30-
inaccurately suggests that “smokers cannot quit smoking because of
changes to the brain caused by smoking.” Defs.’ Resp. to the
Gov’t’s Proposed Corrective Statements, 13 n.3 [Dkt. No. 5881].
Again, the Corrective Statement cannot reasonably be read in this
way. The challenged language states, “When you smoke, the nicotine
actually changes the brain – that’s why quitting is so hard.” The
Factual Findings of this Court, affirmed by the Court of Appeals,
support this assertion. See Original Opinion, 449 F. Supp. 2d at
210 (“[B]ecause the smoker's brain has adapted to the constant
presence of nicotine, it becomes dependent on nicotine to function
normally. When a smoker doesn't have nicotine, the brain functions
abnormally and most people, approximately 80%, experience
withdrawal symptoms.”); see also id. (“Over time, the brain becomes
tolerant to the effects of nicotine and needs even greater amounts
of it to produce the same effects on hormones as it once did before
the development of tolerance.”). Identifying that quitting smoking
is difficult, a fact Defendants do not dispute, is not the same as
asserting that quitting smoking is impossible.
In conclusion, it is significant that Defendants do not point
to any evidence that the assertions they challenge are not true.
Rather, they argue that certain portions of the Statements will be
misconstrued by consumers. As discussed above, their arguments are
not based on reasonable readings of the language. Thus, since the
Corrective Statements are grounded in the affirmed Findings of Fact
-31-
of this Court, convey accurate information, and do not attempt to
“shock” the reader or elicit embarrassment, they are “factual”
under Zauderer.
ii. “Uncontroversial”
The Corrective Statements also satisfy Zauderer’s requirement
that they be uncontroversial. “Controversy” is defined as “a cause,
occasion or instance of disagreement or contention,” or “a
difference marked especially by the expression of opposing views.”
Webster’s Third New International Dictionary 497 (1993). However,
in the context of litigation, controversy must mean more than “the
fact that some people may be highly agitated and be willing to go
to court over the matter.” Fund for Animals v. Frizzell, 530 F.2d
982, 988 (D.C. Cir. 1975). By the same token, it must also mean
more than that Defendants simply disagree with a particular
proposition that has been decided against them.
Our Court of Appeals discussed the contours of a
“controversial” government restriction on commercial speech in
Reynolds. The FDA, as noted earlier, conceded that the graphic
images were intended to “symbolize the textual warning statements.”
Reynolds, 696 F.3d at 1216. The Court found this to be problematic
because the images did not clearly convey the particular text, but
rather were “subject to misinterpretation” and required
“significant extrapolation on the part of consumers.” Id.
The text of the Corrective Statements, in comparison, consists
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of simple declarative sentences and basic, uncomplicated language.
There are no images at issue and the language used does not raise
similar concerns about misinterpretation. Nor is there any need for
the consumer to “extrapolate” from the text. In short, the
Statements are, as noted earlier, entirely distinguishable from the
images in Reynolds.
Defendants raise two specific arguments to support their claim
that the Statements are “controversial.” First, Defendants again
attack the preamble, reiterating their argument that it is
controversial under Reynolds because it intends to evoke an
emotional response. Defs.’ Supplemental Br. Regarding the Gov’t’s
Proposed Corrective Statements, 4 [Dkt. No. 5985] (citing Reynolds,
696 F.3d at 1217); see also Defs.’ Reply to Pub. Health
Intervenors’ Resp. to U.S. Submission of Proposed Corrective
Statements & Expert Report, 3 [Dkt. No. 5889] (calling the preamble
“unprecedented, self-denigrating language which would compel
Defendants to make public admissions of past wrongdoing”).
Putting aside Defendants’ hyperbole, their argument ignores
the fact that the government regularly requires wrongdoers to make
similar disclosures in a number of different contexts. The language
of the preamble is hardly “unprecedented,” and the variety of
contexts in which such language has been approved undermines
Defendants’ position that the preamble is “controversial.”
For example, the Federal Trade Commission (“FTC”) has required
-33-
corporations to issue corrective messages for decades. Recently,
the FTC ordered a seller of supposed “cancer remedies” to send a
letter, on its own letterhead, signed by the seller itself, to
individuals who had purchased its product. In re Daniel Chapter
One, No. 9329, 2010 WL 387917, at *2 (F.T.C. Jan. 25, 2010). The
letter included the statement, “the Federal Trade Commission
(‘FTC’) has found our advertising claims for these products to be
deceptive because they were not substantiated by competent and
reliable scientific evidence, and the FTC has issued an Order
prohibiting us from making these claims in the future.” Id. at *4.
The letter went on to specify that “[c]ompetent and reliable
scientific evidence” did not support the company’s claims that
their products were “effective when used for prevention, treatment
or cure of cancer.” Id.
The company argued that requiring it to send the letter was
compelled speech, barred by the First Amendment. See Br. of Pet’rs
at *61, Daniel Chapter One v. F.T.C., 405 F. App’x 505 (D.C. Cir.
2010) (No. 10-1064), 2010 WL 5644693 (citations omitted). Our Court
of Appeals firmly rejected this claim:
Deceptive commercial speech is entitled to no
protection under the First Amendment and, even
if it were, that would not preclude the
Commission's order, which is carefully
tailored to protect DCO's clientele from
deception.
Daniel Chapter One, 405 F. App’x at 506 (citations omitted), cert.
-34-
denied, 131 S. Ct. 2917 (2011).8 The Corrective Statements are
similarly “carefully tailored to protect” consumers from deception.
They alert the consumer to the fact that they have been
misinformed, and then provide the accurate information.
The National Labor Relations Board (“NLRB” or “Board”) has
also required companies that have violated federal labor law to
post at their facilities a notice that it refers to as an
“Appendix.” See, e.g., Parkwood Dev. Ctr., Inc., 347 N.L.R.B. 974,
977-78 (2006), pet. for rev. denied, 521 F.3d 404 (D.C. Cir. 2008);
Guardsmark, LLC & Serv. Employees Int’l Union, Local 24/7, 344
N.L.R.B. 809, 812, 814 (2005), pet. for rev. denied in relevant
part, 475 F.3d 369, 380-81 (D.C. Cir. 2007). The Appendix begins:
NOTICE TO EMPLOYEES
POSTED BY ORDER OF THE NATIONAL LABOR
RELATIONS BOARD
An Agency of the United States Government
The National Labor Relations Board has found
that we violated Federal labor law and has
ordered us to post and obey this notice.
Parkwood, 347 N.L.R.B. at 978; Guardsmark, 344 N.L.R.B. at 814. The
Appendix then goes on to detail what rights the workers have and
specifies what the company can and cannot do under federal law.
Parkwood, 347 N.L.R.B. at 978; Guardsmark, 344 N.L.R.B. at 814. The
Appendix is signed by the company itself. Parkwood, 347 N.L.R.B. at
8
Similar FTC orders have been upheld. See, e.g., In re Brake Guard
Prods., Inc., 125 F.T.C. 138 (1998) (requiring letter saying that FTC had
determined that certain statements are “FALSE and MISLEADING”), aff’d sub
nom. Jones v. F.T.C., 194 F.3d 1317 (9th Cir. 1999) (unpublished table
opinion).
-35-
978; Guardsmark, 344 N.L.R.B. at 814. Again, these cases
demonstrate that there is nothing novel about requiring those who
have violated the law to identify their wrongdoing and correct
their conduct.
In addition, a number of other statutory and regulatory
provisions establish that manufacturers can be compelled to
disclose adverse determinations about themselves and their
products. For example, under the National Traffic and Motor Vehicle
Safety Act, the National Highway Transit Safety Administration
(“NHTSA”) can determine that there is a safety defect or
noncompliance with an applicable safety standard and order the
manufacturer to issue a notice alerting “owners, purchasers, and
dealers” to that defect or noncompliance. 48 U.S.C.
§ 30118(b)(2)(A). If there is litigation and the government
prevails, NHTSA can order the manufacturer to provide a notice
alerting consumers that a defect exists, and that NHTSA’s “decision
has been upheld in a proceeding in the Federal Courts.” 49 C.F.R.
§§ 577.5, 577.6(c)(I). Thus, mandatory disclosures alerting the
consumer to wrongdoing and giving accurate information about that
wrongdoing have been upheld. They are neither unprecedented nor
controversial.
Defendants’ second argument is that the Factual Findings of
this Court are inherently “controversial” because no other court
has made similar findings. In fact, Defendants go so far as to
-36-
argue that other courts have actually made findings that directly
contradict the Findings of this Court. See Defs.’ Resp. to the
Gov’t’s Proposed Corrective Statements, 10 [Dkt. No. 5881]; Defs.’
Reply in Support of Resp. to the Gov’t’s Proposed Corrective
Statements, 8-9 [Dkt. No. 5893].
The simplest response is that this Court’s Findings are the
law of this case – differing findings in another case do not create
a legal “controversy.” Regardless, none of the cases cited by
Defendants support their argument. See U.S.’ Surreply in Support of
the U.S.’ Submission of Proposed Corrective Statements & Expert
Report, App’x 1 (addressing each case cited by Defendants and
identifying why those cases do not contain findings that contradict
the findings in this case); see also Grisham v. Philip Morris,
Inc., 670 F. Supp. 2d 1014, 1035 (C.D. Cal. 2009) (“[N]o previous
case appears to include an ultimate finding of fact absolving
tobacco companies of liability on the basis that they did not
engage in fraudulent activities. Rather, the verdicts in favor of
the tobacco companies are based on issues such as standing, absence
of harm, or plaintiffs' non-reliance on the fraud.”). Thus, the
Defendants point to nothing that directly and substantively
contradicts the Findings of this Court.
Because the Statements are grounded in Factual Findings that
have been upheld on appeal and are not inflammatory or likely to be
-37-
misunderstood, they are both factual and uncontroversial under
Zauderer and its progeny.
b. The Government Interest Is to Correct and
Prevent Consumer Deception
The next requirement for a government restriction on speech to
receive First Amendment review under Zauderer is that the factual
and uncontroversial disclosures must be aimed at correcting
misleading speech and preventing deception of consumers. Milavetz,
130 S. Ct. at 1339-40. There can be no question that this is the
purpose of the Corrective Statements. In the words of the Court of
Appeals, the Statements intend to “reveal the previously hidden
truth” about the products and “correct Defendants’ campaign of
deceptive marketing” in an attempt to prevent and restrain future
RICO violations. Affirmance Opinion, 566 F.3d at 1140; see also
Reynolds, 696 F.3d at 1216 & n.10 (observing that this case’s
remedial justification is “to correct any false or misleading
claims made by cigarette manufacturers in the past”).
Defendants suggest that the government’s proposed statements
were inappropriately motivated by a desire to motivate smokers to
quit. Defs.’ Reply in Support of Resp. to the Gov’t’s Proposed
Corrective Statements, 13 [Dkt. No. 5893]. The Statements say
nothing about the choices of individual smokers to quit or continue
smoking. Unlike in Reynolds, where the FDA chose images with the
express purpose of “encourag[ing] current smokers to quit and
dissuad[ing] other consumers from ever buying cigarettes,” 696 F.3d
-38-
at 1218, this Court has never suggested or indicated that its
Corrective Statements seek to encourage smokers to quit. In fact,
it has specifically acknowledged that such a goal would be
inappropriate and not authorized by the RICO statute.9
Thus, the Defendants offer no substantive argument that the
Statements are not “geared towards 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,” as directed by the
Court of Appeals. Affirmance Opinion, 566 F.3d at 1144-45 (citation
omitted).
In conclusion, the Corrective Statements should be reviewed
under Zauderer because they are purely factual and uncontroversial
disclosures aimed at preventing commercial speech from deceiving
consumers.
C. The Corrective Statements Satisfy the Zauderer
Requirements
Once a court has concluded that the Zauderer standard of
review is appropriate, the challenged disclosures survive
constitutional scrutiny under Zauderer if they are (1) reasonably
9
This Court rejected the government’s request that a national smoking
cessation program be included in the Remedial Order. Original Opinion,
449 F. Supp. 2d at 933. At that time, the Court observed that, while
adoption of a cessation program would “unquestionably serve the public
interest,” it was not a permissible remedy under section 1964(a) because
“it is not specifically aimed at preventing and restraining future RICO
violations.” Id.
-39-
related to the government interest in preventing consumer deception
and (2) not otherwise unjust or unduly burdensome. The Court will
address these issues separately.
1. The Statements Are Reasonably Related to Correcting
and Preventing Consumer Deception
To satisfy Zauderer, the Statements must be “reasonably
related” to the government’s interest in correcting Defendants’
false and misleading speech in order to prevent future consumer
deception.10
As already discussed, the FTC regularly uses corrective
statements as a tool to correct a public campaign of
misinformation. In Warner-Lambert Company v. F.T.C., 562 F.2d 749
(D.C. Cir. 1977), the FTC ordered the manufacturer to inform
consumers that, “[c]ontrary to prior advertising, Listerine will
not help prevent colds or sore throats or lessen their severity.”
562 F.2d at 763. Our Court of Appeals ruled that the First
Amendment presented “no obstacle to government regulation of false
or misleading advertising.” Id. at 758 (discussing Virginia Bd. of
Pharm., 425 U.S. at 772). After examining the specific wording and
the details of publication, the Court approved the corrective
statement as “well calculated to assure that the disclosure will
10
This does not require a “least restrictive means” analysis. See Full
Value Advisors, LLC v. S.E.C., 633 F.3d 1101, 1109 (D.C. Cir.) (noting
that Zauderer rejected idea that disclosure requirements are subject to
“least restrictive means” analysis), cert. denied, 131 S. Ct. 3003
(2011).
-40-
reach the public.” Warner-Lambert, 562 F.2d at 763.
Though the Court of Appeals affirmed the corrective statement
generally, it deleted the “contrary to prior advertising” language
as unnecessary. Id. It observed that, although this case was not
such an “egregious case of deliberate deception” as to justify the
inclusion of such a preamble, it was possible that such a statement
might be appropriate in another situation. Id.
While Warner-Lambert was decided well before the development
of the commercial speech doctrine, our Court of Appeals reaffirmed
its principal holding as to the value of corrective statements in
Novartis Corporation v. F.T.C., 223 F.3d 783 (D.C. Cir. 2000). In
that case, the FTC found that Novartis’s advertisements for Doan
back pain remedies were “deceptive.” 223 F.3d at 785. The
administrative law judge who originally ruled on the complaint
decided that corrective advertising was unjustified and too
“drastic.” Id. at 786. The Commission, however, concluded that it
was warranted “because the Doan's advertisements had created or
reinforced consumer misbelief in Doan's superior efficacy and the
misbelief was likely to continue.” Id. Therefore, it ordered
Novartis to include a disclaimer stating, “Although Doan's is an
-41-
effective pain reliever, there is no evidence that Doan's is more
effective than other pain relievers for back pain.” Id.
The Court of Appeals affirmed the Commission’s finding that
the advertising was “deceptive,” id. at 786-87, and held that the
expert testimony proffered by the FTC provided “substantial
evidence” in support of the Commission’s decision. Id. at 788.
Significantly, the Court of Appeals also concluded that there was
“no First Amendment impediment to the remedy” under Central
Hudson.11 Id. at 788-89. The Court observed that the remedy chosen
by the FTC advanced the government’s interest in the “avoidance of
misleading and deceptive advertising.” Id. at 789. It then noted
that, because the order was appropriate and justified under the
Commission’s regulatory standard, the remedy was no greater than
necessary to serve the interest involved, and was thus not overly
broad. Id. (citing Warner-Lambert, 562 F.2d at 758).
In addition to the fact that corrective statements have
historically been used to target and redress consumer deception,
our Court of Appeals has already ruled in this case that “the
publication of corrective statements addressing Defendants’ false
assertions is adequately tailored to preventing Defendants from
deceiving consumers.” Affirmance Opinion, 566 F.3d at 1144. The
Court of Appeals explained that “[r]equiring Defendants to reveal
11
Interestingly, Novartis reviews the statements under Central Hudson,
without any mention or discussion of Zauderer.
-42-
the previously hidden truth about their products will prevent and
restrain them from disseminating false and misleading statements,
thereby violating RICO, in the future.” Id. at 1140; see also id.
(“Defendants will be impaired in making false and misleading
assurances about, for instance, smoking-related diseases or the
addictiveness of nicotine . . . if they must at the same time
communicate the opposite, truthful message about these matters to
consumers.”) Defendants offer no argument that challenges this
conclusion.
Defendants’ only concrete argument is that the preamble to the
Corrective Statements is not “reasonably related” to the
government’s interest, because, under Warner-Lambert and Novartis,
the Corrective Statements must be focused on facts regarding the
product, not the speaker’s past conduct. Defs.’ Resp. to the
Gov’t’s Proposed Corrective Statements, 7 [Dkt. No. 5881].
Defendants’ argument is not persuasive for two reasons. First,
as discussed above, while Warner-Lambert and Novartis did not see
the need for a preamble focused on a speaker’s past conduct, the
FTC and our Court of Appeals have upheld determinations that
alerting people to the deceptive nature of a business practice is
warranted and tailored to “protect” consumers from further
deception. See, e.g., Daniel Chapter One, 405 F. App’x at 506; see
also supra Sec. IV.B.2.a.ii (discussing compelled disclosures under
other statutes).
-43-
Second, the deception at issue in Warner-Lambert and Novartis
is very different from the deceptive campaign waged for close to
fifty years by Defendants.12 In those cases, companies presented one
specific claim, namely, that their product provided a benefit that
it did not, in fact, provide. To address that single untruth, the
corrective statements merely had to state that the claim was not
true. Warner-Lambert, 562 F.2d at 763 (“Listerine will not help
prevent colds or sore throats or lessen their severity.”);
Novartis, 223 F.3d at 786 (“Although Doan's is an effective pain
reliever, there is no evidence that Doan's is more effective than
other pain relievers for back pain.”). There was no finding of bad
faith or intentional deception in either of those cases. See
Warner-Lambert, 562 F.2d at 763 (“While we do not decide whether
petitioner proffered its cold claims in good faith or bad, the
record compiled could support a finding of good faith.”); Novartis,
223 F.3d at 786 (noting that Novartis did not dispute that the
implied claim was “likely to deceive,” but not mentioning fraud,
intentional deception, or bad faith).
The scope of the consumer fraud at issue here is much greater.
The Defendants not only proffered scientific claims they knew were
false, such as when they explicitly denied the adverse health
12
As the Original Opinion discussed at length, even though a scientific
consensus existed by 1964 that smoking caused disease, 449 F. Supp. 2d
at 174-179, Defendants falsely denied and distorted that information for
many years thereafter. Id. at 187-204.
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effects of smoking and secondhand smoke, Original Opinion, 449 F.
Supp. 2d at 187-204, 788-800, but also, for example, concealed and
repressed research data showing that nicotine is addictive, id. at
289-307, marketed to young people to recruit “replacement smokers”
in order to ensure their economic future, id. at 561-691,
manipulated cigarette designs to ensure that cigarettes delivered
doses of nicotine adequate to create and sustain addiction, id. at
338-74, conspired to undermine and discredit the scientific
consensus that secondhand smoke causes disease, id. at 723-88,
suppressed and concealed scientific research, id. at 801-14, and
destroyed relevant documents to support their public and litigation
positions, id. at 814-31. The length of time this went on and the
scope of the manipulation of information that was given to
consumers went far beyond a single advertising campaign making a
single claim that a health benefit existed when it did not.
The Court of Appeals directed this Court to look to the
entirety of the Defendants’ deceptive scheme in crafting its
remedy. See Affirmance Opinion, 566 F.3d at 1144-45 (citation
omitted) (noting that the interest at issue is “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.”); see also Warner-Lambert, 562 F.2d at 769
(determining that “advertising which fails to rebut the prior
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claims . . . [would] inevitably build[] upon those claims;
continued advertising continues the deception, albeit implicitly
rather than explicitly”). Thus, in light of the record, this Court
concludes that the massive scope of Defendants’ campaign of
deception and fraud differentiates this case from cases requiring
simpler corrective statements such as Warner-Lambert and Novartis.
Given the lengthy record detailing Defendants’ deceptions over
the last several decades, and the finding, affirmed twice by the
Court of Appeals, that Defendants are likely to commit future RICO
violations, the preamble language provides important and necessary
context for the consumer to understand the accurate information
that follows.
Since the preamble is reasonably related to correcting and
preventing future consumer deception, and the Defendants offer no
substantive argument to suggest that the substance of the
Statements is not also reasonably related to that interest, the
Court concludes that the Statements in their entirety satisfy the
“reasonably related” prong of Zauderer review.
2. The Corrective Statements Are Not Unjustified or
Unduly Burdensome
The final step in the Zauderer analysis is determining whether
the Corrective Statements are unjustified or unduly burdensome.
Defendants argue that the Statements are “unduly burdensome”
because they “impose far greater burdens on Defendants’ speech than
necessary to further the Government’s anti-fraud interest.” Defs.’
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Supplemental Br. Regarding the Gov’t’s Proposed Corrective
Statements, 9 n.3 (citing Zauderer, 471 U.S. at 651).
Defendants fail to point to any “burden” or “chill” that the
Statements would actually have on their speech. There is no reason
to believe that issuing these Corrective Statements would place any
burden on Defendants’ speech other than the desired one, namely
preventing Defendants from denying the accuracy of them. See Spirit
Airlines, 687 F.3d at 415 (considering, while conducting more
stringent Central Hudson review, that DOT rule did not impose any
burden on speech other than requiring disclosure of final price).
Nor do Defendants acknowledge that the Court of Appeals has already
concluded, presuming the Statements are “‘purely factual and
uncontroversial information’ geared towards thwarting prospective
efforts by Defendants to either directly mislead consumers or
capitalize on their prior deceptions,” that such Statements do not
impermissibly chill Defendants’ protected speech. Affirmance
Opinion, 566 F.3d at 1144-45 (quoting Zauderer, 471 U.S. at 651).
In sum, the Court finds no basis for deeming the Statements to be
unduly burdensome.
Based on the foregoing review, the Court concludes that the
Corrective Statements satisfy the Zauderer requirements.
D. Even if the Zauderer Requirements Are Not Satisfied, the
Corrective Statements Satisfy the Requirements of Central
Hudson
Even if the Corrective Statements do not satisfy Zauderer,
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they meet the Central Hudson requirements and thus survive First
Amendment scrutiny. Our Court of Appeals has indicated that it is
correct to evaluate a government restriction on commercial speech
under Central Hudson if it does not survive Zauderer review. See
Reynolds, 696 F.3d at 1217 (holding that when FDA rule did not
“fall within the narrow enclave carved out by Zauderer,” Central
Hudson review was appropriate); see also Spirit Airlines, 687 F.3d
at 415 (determining that Zauderer applied and was satisfied, but
also ruling that the DOT rule survived Central Hudson scrutiny).
Three questions must be answered under Central Hudson: (1)
whether the asserted government interest is substantial; (2)
whether the regulation directly advances the government interest
asserted; and (3) whether the fit between the government’s interest
and the means chosen is “not necessarily perfect, but reasonable.”
Id. (citation omitted).
The answer to the first question is easy. Defendants do not
deny that the government’s interest in preventing and restraining
future consumer deception is substantial.
As to the second question regarding whether the Statements
directly advance the governmental interest asserted, the burden is
on the government to show that “the harms it recites are real and
that its restriction will in fact alleviate them to a material
degree.” Florida Bar v. Went for It, Inc., 515 U.S. 618, 626 (1995)
(citing Rubin v. Coors Brewing Co., 514 U.S. 476, 487 (1995)).
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There has been some discussion as to what quantum of evidence is
necessary to support the government’s assertion that corrective
statements are necessary and will be effective. Florida Bar, 515
U.S. at 626. However, in 2001 the Supreme Court clarified that:
We do not . . . require that empirical data
come . . . accompanied by a surfeit of
background information. . . . [W]e have
permitted litigants to justify speech
restrictions by reference to studies and
anecdotes pertaining to different locales
altogether, or even, in a case applying strict
scrutiny, to justify restrictions based solely
on history, consensus, and simple common
sense.
Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 555 (2001)
(citations and internal quotation marks omitted).
In this case, “simple common sense,” as well as deference to
the guidance proffered by the Court of Appeals, supports this
Court’s conclusion that "reveal[ing] the previously hidden truth"
about the products and "correct[ing] Defendants' campaign of
deceptive marketing" will prevent and restrain future RICO
violations. Affirmance Opinion, 566 F.3d at 1140.
As to the third question, Defendants argue that the statements
they originally proposed advance the same government interest with
less encroachment on their First Amendment rights. Defendants
appear to be arguing that the “fit” between the government’s
interest and the Statements is not “reasonable.” Spirit Airlines,
687 F.3d at 415 (citation omitted).
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This argument fails for several reasons. First, there is no
“least restrictive means” test under Central Hudson. Fox, 492 U.S.
at 477 (“Whatever the conflicting tenor of our prior dicta may be,
we now focus upon this specific issue for the first time, and
conclude that the reason of the matter requires something short of
a least-restrictive-means standard.”). Rather, the test is whether
there is “a reasonable fit between the [government]’s ends and the
means chosen to accomplish those ends, . . . a means narrowly
tailored to achieve the desired objective.” Lorillard Tobacco, 533
U.S. at 556 (citing Florida Bar, 515 U.S. at 632 (citations and
internal quotation marks omitted)).
Our Court of Appeals has already concluded that the Corrective
Statements meet this standard, observing that the remedy is
narrowly tailored to achieve the substantial government interest in
“preventing Defendants from committing future RICO violations.” Id.
at 1144; see also Novartis, 223 F.3d at 789 (citing Warner-Lambert,
562 F.2d at 758) (holding that corrective statements were no
greater than necessary to serve the interest involved). In its
Affirmance Opinion, the Court made clear that “[a]lthough the
standard for assessing burdens on commercial speech has
varied . . ., the Supreme Court’s bottom line is clear: the
government must affirmatively demonstrate its means are ‘narrowly
tailored’ to achieve a substantial government goal.” Affirmance
Opinion, 566 F.3d at 1143 (citations omitted).
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Moreover, there are significant differences between
Defendants’ proposed submissions and the Statements fashioned by
the Court. These differences are material for predicting how
effective the Statements will be at preventing and restraining
Defendants from violating RICO in the future. For example, the
Original Opinion found that an “overwhelming accumulation of data
demonstrates that [secondhand smoke] causes disease,” 449 F. Supp.
2d at 703, and that such a consensus has existed since at least
1986. Id. at 800. The Opinion also found that Defendants recognized
these dangers as early as 1961, based on studies done by public
health officials and their own internal research. Id. at 708-09.
Despite publicly promising to fund independent research on the
issue, Defendants “took steps to undermine independent research, to
fund research designed and controlled to generate industry-
favorable results, and to suppress adverse research results.” Id.
at 722-23; see also id. at 724-88 (describing various consultants
and organizations created and funded by Defendants and publicized
as “independent” that in reality controlled and manipulated
scientific information about secondhand smoke).
Based on these Findings of Fact, this Court and the Court of
Appeals concluded that there was a reasonable likelihood that
Defendants would continue to engage in false and deceptive
advertising practices in the future. Original Opinion, 449 F. Supp.
2d at 910; Affirmance Opinion, 566 F. 3d at 1131-34.
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The corrective statements submitted by the Defendants would be
less effective at preventing and restraining such future violations
because they would allow Defendants, once the two-year publication
period expires,13 to falsely deny that secondhand smoke causes
disease. Defendants’ proposed statements depict this well-
established fact as if it were a mere opinion held by public health
officials, rather than representing a consensus held by the
scientific community at large.14
By ensuring that consumers know that Defendants have misled
the public in the past on the issue of secondhand smoke in addition
to putting forth the fact that a scientific consensus on this
subject exists, Defendants will be less likely to attempt to argue
in the future that such a consensus does not exist. Thus,
Defendants’ proposed statements do not advance the interest in
13
The corrective statements are to be published in various forms, but the
longest-running public statements will be the cigarette onserts and the
point-of-sale displays, which will continue for two years. 449 F. Supp.
2d at 939-40. The statements will be placed on Defendants’ websites “for
the duration of this Final Judgment and Remedial Order,” however, which
may be longer. Id. at 939.
14
All of the statements on secondhand smoke submitted by the Defendants
phrased the fact as merely a “conclusion” held by either the Surgeon
General or “public health officials.” See Philip Morris USA’s Proposed
Corrective Statements As Compelled by the Final J. & Remedial Order, 5
[Dkt. No. 5776] (“Public health officials have concluded that secondhand
smoke from cigarettes causes disease . . . .”); Certain Joint Defs.’
Submission of Proposed Corrective Statements Pursuant to Order #1015, 6-7
[Dkt. No. 5780] (“The Surgeon General has concluded: Exposure to
environmental tobacco smoke has been proven to cause . . . .”); Lorillard
Tobacco Company’s Proposed Corrective Statements Required by Order #1015,
4 [Dkt. No. 5781] (“The Surgeon General has concluded: The evidence is
sufficient to infer a causal relationship between exposure to secondhand
smoke and [various diseases].”).
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preventing future consumer deception to the same extent as the
final Corrective Statements. Beyond that, Defendants offer no
concrete reasons to support their argument that the “fit” between
the chosen Corrective Statements and the government’s interest is
not “reasonable.”15
Thus, since the Corrective Statements satisfy the requirements
of both Central Hudson and Zauderer, they do not violate the First
Amendment.
V. Due Process
One last argument needs to be briefly addressed. Defendants
argue that the preamble is “confessional” and has “an exclusively
punitive purpose.” It then argues that such a punitive measure
cannot be imposed in the absence of the procedural protections
available to defendants in criminal cases. Defs.’ Resp. to the
Gov’t’s Proposed Corrective Statements, 25-26 [Dkt. No. 5881].
First, the Court does not construe the preamble as
confessional. Its purpose is not punitive, but corrective. Second,
court have, in various cases and under various statutes, upheld
decisions ordering defendants to admit wrongdoing and publish
15
Defendants’ only other support for the proposition that its statements
would be effective is the government’s expert report. See Defs.’
Supplemental Br. Regarding the Gov’t’s Proposed Corrective Statements,
8-9 [Dkt. No. 5985]; Defs.’ Supplemental Reply Br. Regarding the Gov’t’s
Proposed Corrective Statements, 7 [Dkt. No. 5989]. Although the Court has
not relied on the report, it can’t help but note that the Defendants’
reliance on the report contradicts its vigorous attempts to convince the
Court that it is “fundamentally flawed” and “unreliable.” Defs.’ Resp.
to the Gov’t’s Proposed Corrective Statements, 3 [Dkt. No. 5881].
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corrections, though those defendants were not provided with the
procedural protections of the criminal justice system. See supra
IV.B.2.a.ii. Third, this argument attempts to relitigate an issue
raised by Defendants at an earlier stage that was resolved against
them. See United States v. Philip Morris, Inc., 273 F. Supp. 2d 3
(D.D.C. 2002) (rejecting Defendants’ arguments for a jury trial).
VI. Conclusion
This Court’s authority to order corrective statements as a
remedy for past deception was affirmed by the Court of Appeals.
This Court has heeded its mandate to fashion Corrective Statements
that are purely factual and uncontroversial and are directed at
preventing and restraining the Defendants from deceiving the
American public in the future.
Now that the text for the Corrective Statements has been
finalized, the Court intends to address the details of
implementation. Originally, Defendants were ordered to publish the
Statements on their corporate websites, publish them as full-page
advertisements in major newspapers, run them on major television
networks, and attach onserts containing the Statements to their
cigarette packaging. Original Opinion, 449 F. Supp. 2d at 939-41.16
16
Defendants were also ordered to include the statements on Countertop
Displays and Header Displays provided as part of their Retail
Merchandising Programs. Id. at 939-40. This part of the remedial order
was vacated and remanded “for the district court to evaluate and ‘make
due provisions 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.” Affirmance Opinion, 566 F.3d at 1142
(continued...)
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These media were chosen in order to “structure a remedy which uses
the same vehicles which Defendants have themselves historically
used to promulgate false smoking and health messages.” Id. at 928.
Over six years have passed since the Court issued that ruling.
During that interval, the types of media in which Defendants convey
commercial messages of this nature have changed dramatically. See
Appendix B (listing various implementation considerations).
Because of the complexity of these issues, the Court has
concluded that the most efficient way to address them is to have
the parties meet and confer with the Special Master to see if
agreement can be reached. If not, the Court will order a Report and
Recommendation from the Special Master.
Even though the holiday season is upon us, the Court wants
discussions to begin in December and expects them to conclude by
March 1, 2013, unless the Special Master believes that additional
time would prove useful.
/s/
November 27, 2012 Gladys Kessler
United States District Judge
Copies via ECF to all counsel of record
16
(...continued)
(citing 18 U.S.C. § 1964(a)). This issue has been fully briefed, and will
be resolved in the near future.
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