United States v. Philip Morris USA

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

This civil action brought by the United States under the

Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18

U.S.C. §§ 1961-1968, is now before the Court on Defendant’s Motion

for Vacatur [Dkt. No. 5880]. Upon consideration of the Motion,

Oppositions, Reply, and the entire record herein, and for the

reasons stated below, Defendants’ Motion for Vacatur is denied.

I. BACKGROUND

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).” U.S. v. Philip Morris

USA, Inc., et al., 449 F. Supp. 2d 1, 26 (D.D.C. 2006). In

particular, the Court held 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 852.1

The resulting injunctive relief rested on a finding that there

was a reasonable likelihood that Defendants would continue to

violate RICO in the future. Philip Morris, 449 F. Supp. 2d at 908-

919. After a nine-month bench trial, and based on a considerable

factual record, this Court 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.

Accordingly, the Court imposed an array of injunctive measures

in order to prevent future violations of RICO. Id. at 937-945. On

May 22, 2009, the Court of Appeals for the District of Columbia

Circuit affirmed this Court’s judgment of liability and affirmed

major provisions in its remedial order. U.S. v. Philip Morris USA,

Inc., et al., 566 F.3d 1095, 1150 (D.C. Cir. 2009), cert. denied,

130 S. Ct. 3501 (2010). The specifics of the remanded portions of

injunctive relief continue to be litigated in this Court.

1
The extensive factual findings of the Court may be found at
Philip Morris, 449 F. Supp. 2d at 34-851.

2
 On June 22, 2009, President Barack Obama signed the Family

Smoking Prevention and Tobacco Control Act (the “Tobacco Control

Act” or the “Act”) into law. Pub. L. No. 111-31, 123 Stat. 1776

(2009). Congress found that “[t]he use of tobacco products by the

Nation’s children is a pediatric disease of considerable

proportions that results in new generations of tobacco-dependent

children and adults” and that “Federal and State public health

officials, the public health community, and the public at large

recognize that the tobacco industry should be subject to ongoing

oversight.” Pub. L. No. 111-31, §§ 2(1), (8), 123 Stat. at 1777,

codified at 21 U.S.C. § 387 note. Accordingly, Congress amended the

Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq., in

order “to provide the authority to the Food and Drug Administration

to regulate tobacco products.” Pub. L. No. 111-31, § 3(1), 123

Stat. at 1781, codified at 21 U.S.C. § 387 note. Notably, Congress

expressly provided that “[n]othing” in the Tobacco Control Act

“shall be construed to . . . affect any action pending in Federal,

State, or tribal court.” Pub. L. No. 111-31, § 4(a), 123 Stat. at

1782, codified at 21 U.S.C. § 387 note.

After the Tobacco Control Act was passed into law, Defendants

petitioned for rehearing en banc by the Court of Appeals on the

ground that the Act extinguished jurisdiction for prospective

relief. Defendants filed a separate “Suggestion of Mootness and

Motion for Partial Vacatur” before that court, contending that the

3
Act rendered the case moot. In opposing those motions, the

Government argued, in part, that Defendants should properly bring

their arguments before this Court first. The Court of Appeals

denied the motions, and the Supreme Court denied Defendants’

subsequent petition for writ of certiorari. United States v. Philip

Morris USA, Inc., No. 06-5267 (D.C. Cir. Sept. 22, 2009); Philip

Morris USA, Inc. v. United States, 130 S.Ct. 3501 (2010).

On September 15, 2010, this Court held the first of several

scheduling conferences intended to establish a briefing schedule

for resolving the four discrete remedial issues remanded by the

Court of Appeals.2 On March 3, 2011, Defendants filed a Motion for

Vacatur, contending that the Tobacco Control Act in whole or in

significant part extinguished this Court’s jurisdiction or, in the

alternative, that this Court should decline to move forward with

any injunctive remedy in deference to the FDA’s new regulatory

authority. On April 4, 2011, the Government (“Gov.’s Opp’n”) [Dkt.

2
The Court of Appeals remanded the case with directions to
(1) evaluate the extent to which Brown & Williams Holdings is
reasonably likely to commit future violations; (2) determine which
subsidiaries of the Defendants should be included in the remedial
order; (3) reformulate the prohibition on the use of health
messages or descriptors to exempt foreign activities that have no
substantial, direct, and foreseeable domestic effects; and (4)
consider the rights of innocent third parties and clarify
accordingly the remedial order’s provisions regarding point-of-sale
displays. Philip Morris, 566 F.3d at 1150. The Court of Appeals
also ordered this Court to dismiss CTR and TI from the suit, as
those organizations had dissolved, id., and that was done in Order
#7-Remand [Dkt. No. 5846]. The Court has already addressed the
first two issues, in Orders #7-Remand and #13-Remand [Dkt. No.
5877].

4
No. 5907] and the Public Health Intervenors (“PHI’s Opp’n”) [Dkt.

No. 5908] filed separate Oppositions. On April 15, 2011, Defendants

filed their Reply [Dkt. No. 5920].

II. STANDARD OF REVIEW

Defendants contest this Court’s subject matter jurisdiction

pursuant to Federal Rule of Civil Procedure 12(h)(3), which

instructs that “[w]henever it appears by suggestion of the parties

or otherwise that the court lacks jurisdiction of the subject

matter, the court shall dismiss the action.” Although Defendants do

not cite Rule 12(b)(1), Defendants’ Rule 12(h)(3) motion must be

treated as a challenge to subject matter jurisdiction under Rule

12(b)(1), which “may be raised by a party, or by a court on its own

initiative, at any stage in the litigation, even after trial and

the entry of judgment.” Arbaugh v. Y & H Corp., 546 U.S. 500, 506,

126 S.Ct. 1235, 1240, 163 L.Ed.2d 1097 (2006); Harbury v. Hayden,

444 F. Supp. 2d 19, 26 (D.D.C. 2006) (“When faced with what a party

characterizes as a Rule 12(h)(3) motion, a court should treat the

motion as a traditional Rule 12(b)(1) motion for lack of subject

matter jurisdiction.”) (citing Haase v. Sessions, 835 F.2d 902,

905-06 (D.C. Cir. 1987)).

In general, under Rule 12(b)(1), the plaintiff bears the

burden of proving by a preponderance of the evidence that the Court

has subject matter jurisdiction. See Shuler v. U.S., 531 F.3d 930,

932 (D.C. Cir. 2008). In reviewing a motion to dismiss for lack of

5
subject matter jurisdiction, the Court must accept as true all of

the factual allegations set forth in the Complaint; however, such

allegations “will bear closer scrutiny in resolving a 12(b)(1)

motion than in resolving a 12(b)(6) motion for failure to state a

claim.” Wilbur v. CIA, 273 F. Supp. 2d 119, 122 (D.D.C.

2003)(citations and quotations omitted). The Court may rest its

decision on its own resolution of disputed facts. Id.

III. ANALYSIS

Defendants argue that the Tobacco Control Act provides two

separate grounds for vacating some or all of the Court’s factual

findings and remedial order. First, Defendants contend that the Act

removes this Court’s jurisdiction because it renders the Defendants

unlikely to commit further RICO violations. Defs.’ Mot. 14-18.

Second, Defendants argue that, even if this Court does continue to

have jurisdiction over the Government’s claims, it should decline

to order injunctive relief pursuant to the doctrine of primary

jurisdiction. Id. at 19-22.

A. Jurisdiction Under RICO

Defendants argue that, “[i]n light of the extensive federal

regulatory requirements imposed by the Act, there is no ‘realistic

threat’ or reasonable likelihood that the RICO violations on which

this Court premised its forward-looking injunctive relief will

reoccur in the future.” Id. at 18. The Government responds that the

Defendants’ “request for vacatur turns entirely on the

6
unsubstantiated factual assertion” that the Act renders Defendants

unlikely to engage in further joint racketeering activity. Gov.’s

Opp’n 10.

As the D.C. Circuit explained in a prior phase of this

litigation, this Court’s “jurisdiction is limited to forward-

looking remedies that are aimed at future violations.” United

States v. Philip Morris USA Inc., 396 F.3d 1190, 1198 (D.C. Cir.

2005). This Court has already held that:

To obtain injunctive relief in this Circuit, a
plaintiff must show that the defendant’s past
unlawful conduct indicates a “‘reasonable
likelihood of further violation(s) in the
future.’” SEC v. Kenton Capital, Ltd., 69 F.
Supp. 2d 1, 15 (D.D.C. 1998) (Kollar-Kotelly,
J.) (quoting SEC v. Savoy Ind., Inc., 587 F.2d
1149, 1168 (D.C. Cir. 1978)); SEC v.
Bilzerian, 29 F.3d 689, 695 (D.C. Cir. 1994).

To determine whether there is a “reasonable
likelihood” of future violations, the
following factors must be considered: “(1)
whether a defendant’s violation was isolated
or part of a pattern, (2) whether the
violation was flagrant and deliberate or
merely technical in nature, and (3) whether
the defendant's business will present
opportunities to violate the law in the
future.” [SEC v. First City Fin. Corp., 890
F.2d 1215, 1228 (D.C. Cir. 1989)] (citing
Savoy Indus., 587 F.2d at 1168); Bilzerian, 29
F.3d at 695. None of these three factors is
determinative; rather, “the district court
should determine the propensity for future
violations based on the totality of
circumstances.” First City, 890 F.2d at 1228
(citing SEC v. Youmans, 729 F.2d 413, 415 (6th
Cir. 1984)).

7
United States v. Philip Morris, Inc., 116 F. Supp. 2d 131, 148

(D.D.C. 2000). “In addition, the requisite ‘reasonable likelihood’

of future violations may be established by inferences drawn from

past conduct alone.” Philip Morris, 449 F. Supp. 2d at 908.

After a nine-month bench trial, this Court made extensive

factual findings, which provided a firm basis for exercising its

authority under RICO. Most notably, the Court found:

Defendants’ RICO violations were not
“isolated.” On the contrary, the Findings of
Fact describes more than 100 predicate acts
spanning more than a half-century. Second,
Defendants’ RICO violations were not
“technical in nature.” As discussed above,
Defendants’ numerous misstatements and acts of
concealment and deception were made
intentionally and deliberately, rather than
accidentally or negligently, as part of a
multi-faceted, sophisticated scheme to
defraud. Third, as this Court has already
found, Defendants’ business of manufacturing,
selling and marketing tobacco products
“present[s] opportunities to violate the law
in the future.” Philip Morris, 116 F. Supp. 2d
at 149 (alteration in original). As the
Government points out, as long as Defendants
are in the business of selling and marketing
tobacco products, they will have countless
“opportunities” and temptations to take
similar unlawful actions in order to maximize
their revenues, just as they have done for the
past five decades.
....
The evidence in this case clearly establishes
that Defendants have not ceased engaging in
unlawful activity. Even 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. For example, most Defendants
continue to fraudulently deny the adverse

8
health effects of secondhand smoke which they
recognize internally; all Defendants continue
to market “low tar” cigarettes to consumers
seeking to reduce their health risks or quit;
all Defendants continue to fraudulently deny
that they manipulate the nicotine delivery of
their cigarettes in order to create and
sustain addiction; some Defendants continue to
deny that they market to youth in publications
with significant youth readership and with
imagery that targets youth; and some
Defendants continue to suppress and conceal
information which might undermine their public
or litigation positions. See generally
Findings of Fact Section V. Significantly,
their conduct continues to further the
objectives of the overarching scheme to
defraud, which began by at least 1953. Their
continuing conduct misleads consumers in order
to maximize Defendants’ revenues by recruiting
new smokers (the majority of whom are under
the age of 18), preventing current smokers
from quitting, and thereby sustaining the
industry.
....
There is a reasonable likelihood that
Defendants’ RICO violations will continue in
most of the areas in which they have committed
violations in the past. Defendants’ practices
have not materially changed in most of the
Enterprise's activities, including: denial
that ETS causes disease, denial that
Defendants market to youth, denial of the
addictiveness of nicotine, denial of
manipulation of the design and content of
cigarettes, suppression of information and
research, and claims that light and low tar
cigarettes are less hazardous than full-flavor
cigarettes.
....
Similarly, Defendants continue to engage in
many practices which target youth, and deny
that they do so. Despite the provisions of the
MSA, Defendants continue to track youth
behavior and preferences and market to youth
using imagery which appeals to the needs and
desires of adolescents. Defendants are well
aware that over eighty percent of adult

9
 smokers began smoking before the age of 18,
and therefore know that securing the youth
market is critical to their survival. There is
therefore no reason, especially given their
long history of denial and deceit, to trust
their assurances that they will not continue
committing RICO violations denying their
marketing to youth.

Philip Morris, 449 F. Supp. 2d at 909-912.

Defendants’ claim that, due to the passage of the Tobacco

Control Act, and subsequent regulation of the tobacco industry by

the FDA, there is no longer a reasonable likelihood of future RICO

violations is simply unconvincing in light of these factual

findings. Defendants offer no facts which would warrant revisiting

the findings of this Court––findings that were affirmed by the

Court of Appeals. See Philip Morris, 566 F.3d at 1132-33, 1137-38;

Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc.,

528 U.S. 167, 190, 120 S.Ct. 693, 709, 145 L.Ed.2d 610 (2000) (“a

defendant claiming that its voluntary compliance moots a case bears

the formidable burden of showing that it is absolutely clear that

the allegedly wrongful behavior could not reasonably be expected to

recur.”); United States v. Concentrated Phosphate Exp. Assoc., 393

U.S. 199, 203, 89 S.Ct. 361, 364, 21 L.Ed.2d 344 (1968) (“A case

might become moot if subsequent events made it absolutely clear

that the allegedly wrongful behavior could not reasonably be

expected to recur.”). Three further considerations make Defendants’

argument particularly untenable.

10
 First, regulation under the FDA Act and any injunctions issued

by this Court target different conduct. Congress passed the Tobacco

Control Act “to ensure that the Food and Drug Administration has

the authority to address issues of particular concern to public

health officials.” Pub. L. No. 111-31, § 3(2), 123 Stat. at 1777,

codified at 21 U.S.C. § 387 note. By contrast, any remedial orders

issued by this Court must be carefully drawn “to prevent and

restrain violations of” RICO. 18 U.S.C. § 1964(a). FDA rulemaking

is not designed to prevent future racketeering activity covered by

RICO.

Second, Defendants have already attempted to make a similar

argument––and failed to prevail. Defendants previously argued, in

an earlier phase of this case, that the signing of the Master

Settlement Agreement (“MSA”), which resulted from a tort suit

between cigarette manufacturers and 46 states and the District of

Columbia, removed the reasonable likelihood of future RICO

violations. Thereafter, this Court found that “Defendants have not

fully complied with the letter or spirit of the MSA.” Philip

Morris, 449 F. Supp. 2d at 913. In addressing the same argument,

the Court of Appeals stated that “future violations remain likely

notwithstanding the MSA” and affirmed this Court’s finding that

“Defendants began to evade and at times even violate the MSA’s

prohibitions almost immediately after signing the agreement.”

Philip Morris, 566 F.3d at 1132-33. The Court cannot accept the

11
Defendants’ contention that the Tobacco Control Act will produce

their conformity to the law even though RICO and the MSA could not.

Third, Defendants’ contention that no reasonable likelihood of

future RICO violations exists due to the FDA’s regulation is

particularly unconvincing when Defendants are simultaneously and

vigorously challenging, both in a separate law suit and in

administrative proceedings, many of the provisions of the Tobacco

Control Act--including provisions which they claim render them

unlikely to commit future violations of RICO. In Commonwealth

Brands, Inc. v. United States, tobacco companies, including some of

the Defendants in this case, argued “that various provisions of

[the Act] . . . violate their free speech rights under the First

Amendment; their rights to Due Process under the Fifth Amendment;

and effect an unconstitutional Taking under the Fifth Amendment.”

678 F. Supp. 2d 512, 521 (W.D. Ky. 2010). Although the district

court in that case upheld the majority of the statute, both sides

have appealed the ruling to the Court of Appeals for the Sixth

Circuit. See Disc. Tobacco City & Lottery v. United States, Nos.

10-5234 & 10-5235 (6th Cir.). It is difficult to understand how

Defendants can argue that the Tobacco Control Act will produce

their future compliance with RICO when they do not believe that a

great portion of the Act should apply to them at all. And, if in

fact Defendants should prevail in their challenges to the Tobacco

12
Control Act, it will be all the more necessary for them to be

restrained by this Court from any future violations of RICO.

Defendants offer three cases that they believe serve as

examples of “federal legislation eliminat[ing] any reasonable

likelihood that the conduct at issue will be repeated in the

future.” Defs.’ Mot. 15. None are convincing analogues.

Bethany Med. Ctr. v. Harder, 693 F. Supp. 968 (D. Kan. 1988),

upon which Defendants rely, is readily distinguishable for two

reasons. First, in that case, the District Court for the District

of Kansas found that there was no “reasonable expectation” of

unlawful activity “in the future” because “Plaintiff’s bare

assertion that the agency is likely to violate its rights in the

future, without more, is insufficient.” Id. at 975. This Court, by

contrast, did find a reasonable likelihood of future RICO

violations by Defendants based on an extensive factual showing by

the Government. See Philip Morris, 449 F. Supp. 2d at 909-912.

Second, the defendant in Bethany Med. Ctr. was an administrative

agency, and it “is presumed that administrative agencies will act

within the law.” Id. at 976. Defendants in this case enjoy no such

presumption.

Defendants next cite to Green v. Mansour, 474 U.S. 64, 106

S.Ct. 423, 88 L.Ed.2d 371 (1985). Defs.’ Mot. 15. In that case,

plaintiffs challenged the Michigan Department of Social Services’

method of calculating benefits under the federal Aid to Families

13
With Dependent Children program. Green, 474 U.S. at 67. While the

case was pending, Congress amended the relevant statutory

provisions and the Department of Social Services conformed its

policy to the new federal law. Id. The Supreme Court held that the

Eleventh Amendment precluded federal courts from issuing a

declaratory judgment against a state agency where no continuing

violation of federal law was claimed. Id. at 73-74. Because the

plaintiffs were arguing that the defendant’s former policy violated

a law no longer in effect, there could not be “any threat of state

officials violating the repealed law in the future.” Id. at 73.

Additionally, the defendant was a state agency and the case turned

on the strictures of the Eleventh Amendment. Id. None of those

circumstances are relevant to the case before this Court.

Finally, Bullfrog Films, Inc. v. Wick similarly involved a

government regulation superceded by Congressional action, and is

similarly irrelevant. 959 F.2d 778, 779-780 (9th Cir. 1992). What

is more, the parties in that case agreed that the case was moot.

Id. at 780. None of these cases suggest that the fact that a

government agency has been granted the authority to regulate in a

given substantive area replaces a court’s jurisdiction to issue an

injunction, based on extensive factual findings, to prevent and

restrain violations of RICO that a defendant is reasonably likely

to commit in the future.

14
 In sum, this Court has already made ample findings supporting

its proper exercise of jurisdiction. These findings have been

upheld by the Court of Appeals. Defendants have put forth no

convincing evidence to suggest that this Court should revisit, let

alone vacate, over four thousand factual findings, as well as the

injunctive provisions contained in Remedial Order #1015. Friends of

the Earth, 528 U.S. at 190 (“a defendant claiming that its

voluntary compliance moots a case bears the formidable burden of

showing that it is absolutely clear that the allegedly wrongful

behavior could not reasonably be expected to recur.”) Based on the

factual findings affirmed by the Court of Appeals, this Court

continues to have jurisdiction over this matter.

B. Primary Jurisdiction Doctrine

Defendants argue in the alternative that, even if the Court

does have jurisdiction, it should decline to exercise it. Defs.’

Mot. 19-23. Defendants contend that “any court-ordered relief would

interfere with the implementation of the agency’s expert regulatory

judgment and potentially generate conflicting federal regulatory

requirements.” Id. at 19. Therefore, Defendants state, the Court

should invoke the doctrine of primary jurisdiction and “dissolve

its injunctions and decline to exercise any jurisdiction it might

possess over this case.” Id. at 23.

The primary jurisdiction doctrine “applies where a claim is

originally cognizable in the courts, and comes into play whenever

15
enforcement of the claim requires the resolution of issues which,

under a regulatory scheme, have been placed within the special

competence of an administrative body; in such a case the judicial

process is suspended pending referral of such issues to the

administrative body for its views.” United States v. W. Pac. R.R.

Co., 352 U.S. 59, 64, 77 S.Ct. 161, 165, 1 L.Ed.2d 126 (1956).

“In every case the question is whether the reasons for the

existence of the doctrine are present and whether the purposes it

serves will be aided by its application in the particular

litigation.” W. Pac. R.R. Co., 352 U.S. at 64. These purposes

include “the desirable uniformity which would obtain if initially

a specialized agency passed on certain types of administrative

questions” and “the expert and specialized knowledge of the

agencies involved.” Id. Critically, “[w]hether there should be

judicial forbearance hinges . . . on the authority Congress

delegated to the agency in the legislative scheme.” Golden Hill

Paugusett Tribe of Indians v. Weicker, 39 F.3d 51, 59 (2d Cir.

1994); see also W. Pac. R.R. Co., 352 U.S. at 64 (the doctrine is

appropriately applied to “issues which, under a regulatory scheme,

have been placed within the special competence of an administrative

body.”); Atchison, T. & S. F. Ry. Co. v. Wichita Bd. of Trade, 412

U.S. 800, 820-21, 93 S.Ct. 2367, 2381-82, 37 L.Ed.2d 350 (1973).

Although “[n]o fixed formula exists for applying the doctrine

of primary jurisdiction,” W. Pac. R.R. Co., 352 U.S. at 64, courts

16
traditionally consider four factors in deciding whether to invoke

the doctrine. Schiller v. Tower Semiconducter Ltd., 449 F.3d 286,

295 (2d Cir. 2006); Davel Commc’ns, Inc. v. Qwest Corp., 460 F.3d

1075, 1086-87 (9th Cir. 2006); Oasis Petroleum Corp. v. United

States Dep’t of Energy, 718 F.2d 1558, 1564 (Temp. Emer. Ct. App.

1983) (identifying the factors in various cases, including Nader v.

Allegheny Airlines, Inc., 426 U.S. 290, 96 S.Ct. 1978, 48 L.Ed.2d

643 (1976)); Himmelman v. MCI Commc’ns Corp., 104 F. Supp. 2d 1, 4

(D.D.C. 2000); AT&T v. MCI, 919 F. Supp. 13, 16 (D.D.C. 1993).

These factors are: “(1) whether the question at issue is within the

conventional expertise of judges; (2) whether the question at issue

lies particularly within the agency’s discretion or requires the

exercise of agency expertise; (3) whether there exists a

substantial danger of inconsistent rulings; and (4) whether a prior

application to the agency has been made.” Himmelman, 104 F. Supp.

2d 1, 4 (D.D.C. 2000); Ellis v. Tribune Television Co., 443 F.3d

71, 82-83 (2d Cir. 2006).

It is telling that none of the parties cite to any of these

factors in their briefs. See Defs.’ Mot. 19-23; Gov.’s Opp’n 22-29;

PHI’s Opp’n 20-21; Defs.’ Reply 11-13. The reason for this omission

is simple: this case does not present the appropriate circumstances

for invocation of the primary jurisdiction doctrine. Nonetheless,

the Court will consider in turn each of the factors.

17
 1. Relevant Expertise

The first factor requires a court to assess “whether the

question at issue is within the conventional experience of judges

or whether it involves technical or policy considerations within

the agency’s particular field of expertise.” Ellis, 443 F.3d at 82-

83; Himmelman, 104 F. Supp. 2d at 4. Defendants state simply that

“the FDA possesses unique regulatory expertise about smoking-and-

health issues.” Defs.’ Mot. 19. The problem with Defendants’ claim

is that they fail to recognize the distinction between this Court’s

responsibility to fashion a remedy “to prevent and restrain

violations of” RICO under 18 U.S.C. § 1964(a), and the FDA’s

authority “to set national standards controlling the manufacture of

tobacco products and the identity, public disclosure, and amount of

ingredients used in such products.” Pub. L. No. 111-31, § 3(3), 123

Stat. at 1782, codified at 21 U.S.C. § 387 note.

Courts have consistently declined to invoke the primary

jurisdiction when adjudicating RICO or fraud claims, as such claims

“do not require agency expertise for their treatment because such

claims are within the conventional expertise of judges.” Dana Corp.

v. Blue Cross & Blue Shield Mut. of N. Ohio, 900 F.2d 882, 889 (6th

Cir. 1990); Nader, 426 U.S. at 305-06 (“The standards to be applied

in an action for fraudulent misrepresentation are within the

conventional competence of the courts . . . .”); Bendzak v. Midland

Nat. Life Ins. Co., 440 F. Supp. 2d 970, 977 (S.D. Iowa 2006)

18
(plaintiff’s RICO claims “are within the conventional expertise of

judges, and none of them require the special expertise of a state

insurance commission.”) (internal quotations omitted); Shaw v.

Rolex Watch U.S.A., Inc., 776 F. Supp. 128, 132 (S.D.N.Y. 1991)

(“The standards of fraudulent misrepresentation and omission to be

applied in this RICO action are within the conventional competence

of this Court.”). Because any injunctive relief entered by this

Court must be drawn narrowly so as to prevent and restrain future

RICO violations only, there is no need to defer to the expertise of

an administrative agency. W. Pac. R.R. Co., 352 U.S. at 64.

In this light, the cases cited by Defendants are readily

distinguishable. All of the cases cited in Defendants’ briefs

concerned circumstances in which an agency and a court had to make

the same determination under the same statute or regulation--

obviously, not the case here. See, e.g., Ellis, 443 F.3d at 92 (the

district court should have invoked the primary jurisdiction

doctrine where the question was whether the defendant was in

violation of an agency rule and the agency was considering an

application for waiver at the time of the suit); Allnet Commc’n

Serv. v. Nat’l Exchange Carrier Assoc., Inc., 965 F.2d 1118, 1120

(D.C. Cir. 1992) (primary jurisdiction doctrine applied where an

FCC staff letter and FCC order potentially conflicted as to whether

certain tariffs were valid); Israel v. Baxter Labs., Inc., 466 F.2d

272, 280-82 (D.C. Cir. 1971) (court invoked primary jurisdiction

19
doctrine where parties agreed that the FDA should address drug’s

safety and efficacy).3 None of these cases dealt with a situation

in which a court, having made a ruling as to liability under one

statute, was asked to vacate relief because such relief could

implicate an agency’s area of concern under a separate statute.4

In short, Defendants have invoked no authority for the

proposition that the primary jurisdiction doctrine requires a court

to vacate an injunction resulting from RICO violations because an

administrative agency has expertise in the defendant’s industry. To

the contrary, this Court has ample expertise to fashion a remedy

that will comply with RICO. See Nader, 426 U.S. at 305-06; Dana

Corp., 900 F.2d at 889.

3
Defendants also cite to Atchison, 412 U.S. at 820-21, at
some length. See Defs.’ Mot. 20-21. Atchison is wholly off-point.
In that case, the district court reversed and remanded an order of
the Interstate Commerce Commission, which found certain charges by
carriers reasonable, because “the Commission had not adequately
justified its failure to follow” a longstanding rule. Id. at 805.
The district court also enjoined the carriers’ charges while the
Commission reconsidered the matter. Id. at 817-18. The Supreme
Court affirmed the remand to the Commission, but struck down the
injunction because “[c]arriers may put into effect any rate that
the Commission has not declared unreasonable” and the district
court should not have “estimate[d] . . . the probability of
ultimate success on the merits by the party challenging the agency
action.” Id. at 819, 821. This case involves no such direct
interaction with an agency, nor does it involve an assessment of
the reasonableness of an activity regulated by an agency.
4
As the Public Health Intervenors observe, Defendants “do
not cite a single case where this doctrine has been applied to
vacate a district court decision on the merits that has already
been resolved on appeal, especially one involving the type of long
term fraud and sustained pattern of deception that the court found
in this case.” PHI Opp’n 2 (emphasis in original).

20
 2. Agency Discretion

The second factor in assessing primary jurisdiction concerns

“whether the question at issue is particularly within the agency’s

discretion.” Ellis, 443 F.3d at 83; Himmelman, 104 F. Supp. 2d at

4. Defendants observe simply that the “FDA has already begun to

exercise [its] regulatory discretion with regard to numerous

aspects of tobacco manufacture, marketing, and distribution.”

Defs.’ Mot. 22.

Congress explicitly and unequivocally declined to place the

discretion to craft a remedy in this case in the hands of the FDA.

The text of the statute states, “[n]othing” in the Tobacco Control

Act “shall be construed to . . . affect any action pending in

Federal, State, or tribal court.” Pub. L. No. 111-31, § 4(a), 123

Stat. at 1782, codified at 21 U.S.C. § 387 note. There can be no

doubt that Congress was well aware of this case when drafting that

language, given that the statute cites to this case three times in

its early sections. See Pub. L. No. 111-31, §§ 2(47)-(49), 123

Stat. at 1781, codified at 21 U.S.C. § 387 note.5 Congress,

5
Specifically, under “Findings,” the statute reads:

(47) In August 2006 a United States district
court judge found that the major United States
cigarette companies continue to target and
market to youth. USA v. Philip Morris, USA,
Inc., et al. (Civil Action No. 99-2496 (GK),
August 17, 2006).

(48) In August 2006 a United States district
(continued...)

21
therefore, assumed and intended that this Court would retain

control over remedial decisions. Golden Hill Paugusett Tribe of

Indians, 39 F.3d at 59; W. Pac. R.R. Co., 352 U.S. at 64.

Congress has made it plain: the remedies for Defendants’

violation of RICO are not “issues which, under a regulatory scheme,

have been placed within the special competence of an administrative

body.” W. Pac. R.R. Co., 352 U.S. at 64.

3. Danger of Inconsistent Rulings

Among the central purposes of the primary jurisdiction

doctrine is to encourage “the desirable uniformity which would

obtain if initially a specialized agency passed on certain types of

administrative questions.” W. Pac. R.R. Co., 352 U.S. at 64. As

5
(...continued)
court judge found that the major United States
cigarette companies dramatically increased
their advertising and promotional spending in
ways that encourage youth to start smoking
subsequent to the signing of the Master
Settlement Agreement in 1998. USA v. Philip
Morris, USA, Inc., et al. (Civil Action No.
99-2496 (GK), August 17, 2006).

(49) In August 2006 a United States district
court judge found that the major United States
cigarette companies have designed their
cigarettes to precisely control nicotine
delivery levels and provide doses of nicotine
sufficient to create and sustain addiction
while also concealing much of their
nicotine-related research. USA v. Philip
Morris, USA, Inc., et al. (Civil Action No.
99-2496 (GK), August 17, 2006).

Pub. L. No. 111-31, §§ 2(47)-(49), 123 Stat. at 1781, codified at
21 U.S.C. § 387 note.

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explained above, this Court only has jurisdiction to prevent and

restrain future RICO violations by the Defendants, and the FDA has

no authority under the Tobacco Control Act to address RICO

remedies. Because this case concerns no provision of or rule

promulgated under the Tobacco Control Act, it presents no risk of

conflict with the FDA’s resolution of any issue delegated to it

under that Act. See Ellis, 443 F.3d at 88 (“Courts should be

especially solicitous in deferring to agencies that are

simultaneously contemplating the same issues.”) (emphasis added).

Nonetheless, Defendants claim that “the Court’s general and

specific injunctions would inevitably give rise to requirements on

a number of smoking-related issues that are inconsistent with the

regulatory requirements established by the FDA.” Defs.’ Mot. 19.

This fear is both premature and speculative.

Defendants point to (1) an FDA request for comments regarding

proposed graphic warnings on cigarette packages and advertising, 75

Fed. Reg. 69,524; (2) an FDA request for comments regarding

regulations that would restrict the location and content of outdoor

cigarette advertising, id. at 13,241; and (3) a letter from the

Director for the Center for Tobacco Products requesting information

from the tobacco industry to assist the FDA in studying the impact

of menthol cigarettes on public health. Defs.’ Mot 22. Notably,

none of these agency actions conflict with any injunction issued by

this Court.

23
 In a separate section of their brief, Defendants make a

similar argument that the Court should vacate its injunctions (1)

relating to the marketing of “light” and “low tar” cigarettes, (2)

prohibiting Defendants from making false statements, and (3)

requiring Defendants to make corrective statements. Defs.’ Mot. 23-

31. Although included under a separate heading, this argument is

essentially a reworking of Defendants’ subject matter jurisdiction

and primary jurisdiction arguments. The crux of this section of

their Motion is that these injunctions encroach on the FDA’s zone

of authority and “would inevitably impair the implementation of the

FDA’s expert regulatory judgments.” Id. at 27. Once again,

Defendants point to no regulation in conflict with any order of

this Court.

In the event that the FDA issues regulations that do conflict

with an order of this Court, the Government may always file a

motion to amend the injunction. Similarly, should Defendants find

that they are subject to conflicting requirements from this Court

and the FDA, they have ample recourse through a Rule 60(b) motion.

In relation to the primary jurisdiction doctrine, however,

Defendants have made no showing that any factual finding as to

their RICO violations could come into conflict with an FDA

decision, nor have they demonstrated a “substantial danger of

inconsistent rulings” between this Court’s remedial order and the

24
rules they speculate the FDA will promulgate. Ellis, 443 F.3d at

83.

4. Prior Application to the Agency

Needless to say, Defendants have made no prior application to

the FDA regarding restraining future violations of RICO. See id. at

89 (“if prior application to the agency is absent, this factor may

weigh against the referral of the matter to the agency on the basis

of primary jurisdiction.”). The presence of this factor only serves

to highlight the inapplicability of the primary jurisdiction

doctrine in this context. While the FDA may currently be

considering a number of issues relating to the Defendants’

marketing and production of tobacco products, Defendants have made

no suggestion that the FDA is contemplating the issue before this

Court, namely how to prevent and restrain future violations of

RICO.

It is worth noting, in summation, that the Court’s discretion

to dismiss a case under the primary jurisdiction doctrine “is

appropriately exercised only where ‘the parties would not be

unfairly disadvantaged . . . .’” Himmelman, 104 F. Supp. at 8

(quoting Reiter v. Cooper, 507 U.S. 258, 268, 113 S.Ct. 1213, 122

L.Ed.2d 604 (1993)). It has been well over eleven years since this

case was filed and nearly five years since this Court found that

Defendants “knowingly and intentionally engaged in a scheme to

defraud smokers and potential smokers, for purposes of financial

25
gain, by making false and fraudulent statements, representations,

and promises.” Philip Morris, 449 F. Supp. 2d at 852. Defendants

now ask this Court to “dissolve its injunctions and decline to

exercise any jurisdiction it might possess over this case.” Defs.’

Mot. 23. For all the reasons noted, this is not a case in which

“the judicial process [should be] suspended pending referral of

such issues to the administrative body for its views.” W. Pac. R.R.

Co., 352 U.S. at 64.

IV. CONCLUSION

For the reasons set forth above, Defendants’ Motion for

Vacatur is denied.

An Order will issue with this opinion.

/s/
June 1, 2011 Gladys Kessler
United States District Judge

Copies to: counsel of record via ECF

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