Published January 13, 2015
The Justice Department (search) is seeking anew to force tobacco companies to turn over $280 billion in past profits, asking the Supreme Court (search) on Monday to overturn an appeals court ruling that barred an earlier effort.
The government should be allowed to pursue the $280 billion to address "ongoing concerted unlawful activity in the tobacco industry spanning decades and affecting the lives of millions of Americans," the department said in asking the high court to take the case.
The appeals court decision barring the action had been a major blow to the government's long-running racketeering lawsuit against the cigarette companies.
Monday's request came at the deadline for the administration to decide whether to appeal the February ruling, by the U.S. Court of Appeals for the District of Columbia Circuit, that the government could not use the RICO federal racketeering law (search) to seek the huge penalty.
The tobacco case is "the most important civil RICO" lawsuit the government has ever filed, Monday's brief said. The ruling on the penalty could affect other civil racketeering cases as well, it said.
The $280 billion is the most ever sought in a civil racketeering trial. The government has described the sum as an estimate of money the companies earned illegally through fraudulent activities such as marketing to children and denying doing so.
A nine-month trial ended in June, but it could be months before U.S. District Judge Gladys Kessler decides the case. The judge has urged the sides to try to reach a settlement.
Filed in 1999, the suit contends that tobacco companies knew about the health dangers of smoking but hid that information from the public.
The issue is separate from the Justice Department's decision to ask cigarette companies to pay for a $10 billion, five-year nationwide stop-smoking program. That total was far less than the $130 billion, 25-year program called for by a key prosecution witness.
Democrats and other administration critics claimed that top Justice Department officials pressured the lawyers handling the case to back off the more expensive anti-smoking campaign.
Attorney General Alberto Gonzales (search) has said that decision was made on the merits of the case, independent of political considerations. But Justice is investigating whether improper political influence factored into the case.
The new matter also is independent of settlements worth $246 billion that states reached with the industry in the late 1990s to recoup the cost of treating sick smokers. The agreements imposed marketing restrictions on the companies and forced them to adjust other business practices. Cigarette makers say these agreements revolutionized the way they do business, and render moot the Justice Department's racketeering claims.
But Kessler ruled last year that the government could seek the penalty, called a "disgorgement," under the racketeering statute. The tobacco companies appealed and the appellate court sided with them, ruling the government couldn't recover any money using the racketeering law because the statute requires "forward-looking remedies."
The initial ruling by a three-judge panel was 2-1. Disgorgement is "a remedy aimed at past violations," Judge David Sentelle wrote. He was joined by Judge Stephen Williams. Both were appointed by President Reagan.
In dissent, Judge David Tatel said his colleagues ignored Supreme Court precedent, misread the law and contradicted the decision of another appeals court, the 2nd U.S. Circuit Court of Appeals in New York. Tatel was appointed by President Clinton.
The full appeals court split 3-3 when the government asked it to rehear the disgorgement issue. That left the initial ruling in place.
Targeted in the 1999 lawsuit are: Altria Group Inc. (MO) and Philip Morris USA (search); Loews Corp.'s (LTR) Lorillard Tobacco unit, which has a tracking stock, Carolina Group (CG); Vector Group Ltd.'s (VGR) Liggett Group; Reynolds American Inc.'s (RAI) R.J. Reynolds Tobacco unit and British American Tobacco Plc unit British American Tobacco Investments Ltd.