Appeal court says US cannot seek payout from tobacco firmsBMJ 2005; 330 doi: http://dx.doi.org/10.1136/bmj.330.7487.323 (Published 10 February 2005) Cite this as: BMJ 2005;330:323
The US government's case against the tobacco industry received a major blow last week when an appeal court ruled that federal government had no right to recover $280bn (£150bn; €220bn) in past profits from the industry.
The Department of Justice has charged that tobacco companies made the huge sum by selling cigarettes to minors and must “disgorge” (hand over to the government) these profits as a punishment to help prevent future wrongdoing (BMJ 2004;329: 701). It is suing six tobacco companies and two industry trade groups for conspiring to mislead the public about the risks and addictiveness of smoking. The suit, brought under the civil section of the Racketeer Influenced Corrupt Organizations (RICO) Act, was originally filed during the Clinton era and finally went to trial last September.
Judge Gladys Kessler, who is hearing the main case, had said she could order disgorgement if the prosecution was able to show a pattern of past fraud in the industry. The tobacco companies had appealed Judge Kessler's ruling.
If the government wins its case, the judge still may require the tobacco companies to take certain actions, such as changing marketing or advertising practices, but the biggest threat to the defendants is now off the table.
This week the Department of Justice's spokesman, Charles Miller, told the BMJ that attorneys were reviewing last week's decision by the appeal court and had no further comment. Altria, the parent company of Philip Morris USA, had no comment on the case beyond a brief press release on its website (www.altria.com/).
Judge David Sentelle, one of the two Reagan appointed judges on the three judge panel who sided with the tobacco companies in the decision, argued that the civil section of the RICO act does not authorise the government to recover past profits in order to prevent future misdeeds. He called the penalty a “quintessentially backward looking remedy.” Judge David Tatel, the lone dissenting judge and a Clinton appointee, countered that disgorgement would in fact have the effect of restraining the industry from illegal actions in the future.
“This has got to be a major disappointment for the Department of Justice,” Mary Aronson, a tobacco industry analyst based in Washington, DC, told the Washington Post. “While they're crying in their beer, I think the tobacco industry is going to be popping champagne corks with a major sigh of relief.” (See p 325.)