RICO Law Blog : RICO Lawyer & Attorney : Thomas Walker : Cosho Humphrey Law Firm : RICO Act, Federal and State Racketeering Litigation, Boise Idaho

The AP reported on February 19, 2010 that the Obama Administration "asked the US Supreme Court on Friday to allow the government to seek nearly $300 billion from the tobacco industry for a half-century of deception that 'has cost the lives and damaged the health of untold millions of Americans.'" The Administration "wants the court to throw out rulings that bar the government from collecting $280 billion of past tobacco profits and $14 billion for a national campaign to curb smoking." Meanwhile, "leading tobacco companies want the justices to wipe away court rulings that the industry illegally concealed the dangers of cigarette smoking," and "if they succeed, the attack on their profits also would be halted."

The New York Times also noted that a "consortium of health and antitobacco groups also filed a petition with the Supreme Court Friday supporting the return of profits. 'The government is asking for a much more expansive set of remedies than it asked for at the conclusion of the trial or before the Court of Appeals,' said Matthew L. Myers, a lawyer and president of the Campaign for Tobacco-Free Kids."

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The Supreme Court has ruled against New York City in its effort to use federal racketeering law to sue Internet cigarette sellers for lost tax revenue.

By a 5-3 vote Monday, the court ended the city’s lawsuit against Hemi Group, a New Mexico-based company that sells cigarettes online.

New York taxes the possession of cigarettes but finds it difficult to collect those taxes from Internet sales. The city says it loses millions of dollars in tax revenues from online sales.

Sellers like Hemi are not required to charge or collect the taxes, but they are supposed to provide information about their customers to states.

New York’s lawsuit under the Racketeer Influenced and Corrupt Organizations Act accused Hemi of fraud for failing to provide the customer information.

The court said Monday that the city cannot use the racketeering law to collect tobacco taxes from Hemi.

Chief Justice John Roberts and Justices Samuel Alito, Ruth Bader Ginsburg, Antonin Scalia and Clarence Thomas formed the majority.

Justice Sonia Sotomayor did not take part in the case because it came from the federal appeals court in New York on which she served before her elevation to the high court.

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Altria Group Inc. and other U.S. cigarette makers asked a federal appeals court to reconsider its ruling that the companies violated racketeering laws and barring them from marketing cigarettes as “light” or “low-tar.”

On July 31, Altria and the other companies asked the full U.S. Circuit Court of Appeals in Washington to overturn the decision by a three-judge panel in a case filed by the Clinton administration in 1999. In the May decision, the court upheld a 2006 ruling by U.S. District Judge Gladys Kessler, who found the companies conspired for decades to defraud the public and were likely to violate racketeering laws in the future.

“The panel’s opinion upholds the government’s unprecedented effort to impose pervasive regulation on the tobacco industry, not through legislative channels, but through the Racketeer Influenced and Corrupt Organizations Act,” Altria’s Philip Morris USA unit said in its court filing.

The companies have argued that the ban on “light” and “low-tar” descriptors, which was delayed pending resolution of the appeal, would cost hundreds of millions of dollars and would “fundamentally alter the business landscape.”

Kessler’s ruling came after a nine-month trial that began in September 2004. In May the appeals court also upheld Kessler’s order barring the companies from future violations of the Racketeer Influenced and Corrupt Organizations Act, or RICO.

The appeals court agreed that the companies may be required to publish statements correcting past misstatements about addiction, the dangers of smoking and second-hand smoke, the companies’ manipulation of cigarette design and the dangers of “light” and “low-tar” cigarettes.

Kessler found that the companies misled consumers into believing that “light” cigarettes are less dangerous than other types. She ruled the restrictions were needed to prevent future RICO violations, rejecting the companies’ argument that a 1999 agreement between U.S. cigarette makers and 46 states already prevents them from violating the law.

In court papers filed July 31, Philip Morris argued that legislation signed in June giving the U.S. Food and Drug Administration new authority to regulate the tobacco industry “makes clear that there is no reasonable likelihood of defendants’ committing future RICO violations.”

The case is U.S. v. Philip Morris USA, 06-5267, U.S. Court of Appeals, District of Columbia Circuit (Washington).

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The tobacco industry has hit a rough patch lately. The industry lost big in the courts in May. First, the California Supreme Court reinstated a major consumer lawsuit aimed at cigarette-makers’ decades-long advertising campaign. The case focuses on industry deceits including claims implying that “light” cigarettes were less harmful than regular cigarettes.

A few days later, the U.S. Court of Appeals in Washington, D.C., affirmed a 2006 lower court decision that the tobacco industry violated the Racketeer Influenced and Corrupt Organizations Act, citing past industry claims that nicotine was not addictive, that tobacco did not cause cancer and that secondhand smoke was not harmful. Then in June, President Obama signed legislation placing the U.S. Food and Drug Administration in charge of tobacco regulation.

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