U.S. Seeks Reversal of Tobacco Ruling

The Justice Department on Monday asked the U.S. Supreme Court to reverse a federal appeals court ruling that barred the government from seeking $280 billion in past profits from the tobacco industry, a decision that severely weakened its massive fraud and racketeering case against top cigarette makers.

Six years ago, the federal government sued the major tobacco companies, accusing the industry for over a half century of hiding the addictiveness and risks of smoking.

Midway through the trial, a panel of the U.S. Court of Appeals for the District of Columbia voted 2 to 1 that the tobacco industry could not be forced to “disgorge,” or forfeit, profits even if found guilty of conspiring to defraud the public about the dangers of smoking.

The appeals court decision was a major blow to the government’s case because it ruled that the federal Racketeer Influenced and Corrupt Organizations Act could not be used to punish past wrongdoing, only to prevent future acts of fraud.

In its 35-page petition, the government asked the Supreme Court to overturn the “erroneous” decision in February that undermined the “most important civil action that the government has ever brought” under the RICO act. Monday was the deadline for the Justice Department to file its petition.

Justice Department lawyers said the appeals court decision conflicted with rulings in two other federal circuits, and could have “far reaching implications for RICO cases generally,” not just the tobacco case.

After the appeals court barred efforts to seize past profits, the government in June, at the end of a nine-month trial, asked U.S. District Judge Gladys Kessler to order the tobacco industry to fund about $14 billion worth of anti-smoking measures. Kessler is not expected to rule at least until the fall.

Tobacco companies said they would fight the request for the Supreme Court to intervene. Industry leader Philip Morris USA, a unit of Altria Group Inc., issued a statement Monday saying that the appeals court “reached the correct decision this past February in ruling the law does not permit” stripping the companies of past profits.

In contrast, anti-smoking activists applauded the move. William V. Corr, executive director of the Campaign for Tobacco Free Kids, called the request “a welcome step.” If the appeals court decision is left intact, it could gut enforcement of the RICO act, “not only against the tobacco companies but against other wrongdoers,” he said.

With the Supreme Court on summer recess, a decision on whether to accept the appeal is not likely before October.

Whether the justices will accept an appeal is highly uncertain, legal experts say. The high court usually is loath to review cases until they are over and federal appeals courts have weighed any challenges. However, the importance of the case and the split among federal circuits make acceptance of the petition more likely, some observers said.

Either way, the Justice Department had strong incentives to file an appeal in what has become a highly politicized case. Judge Kessler has made no secret of her desire to end the case in a settlement -- rather than through a ruling by her that both sides will appeal. Last month, she summoned tobacco executives to a meeting in her chambers in an effort to kick-start settlement talks that began at her initiative but that had languished.

It would have been a “tactical blunder” for the government not to file the petition, because “they would significantly weaken their position in settlement discussions with tobacco,” said Jonathan Turley, a law professor at George Washington University.

With the constraints imposed by the appeals court, “this case has gone from an iceberg to an ice cube,” he said. Without the threat of a Supreme Court review, Turley said, the Justice Department is in a very weakened position.

The move also may muffle criticism of the Justice Department after its decision to soften its major demand.

After the appeals court barred efforts to seize past profits, a proposed $130-billion, industry-funded smoking cessation program became the centerpiece of the government’s case.

In a surprising conclusion to the tobacco trial, prosecutors -- under orders from political appointees in the Justice Department -- scaled back the program to $10 billion. The department also has asked Kessler to order a $4-billion anti-smoking ad campaign and other measures.

Public health groups and Democrats in Congress denounced the move as a sellout, claiming the Bush administration was trying to shield the industry from a devastating financial hit.

Justice officials said they scaled back the program to maintain credibility with a skeptical judge, and to comply with the appeals court ruling.

Even so, critics who had accused the Justice Department of switching sides praised Monday’s decision to file the appeal.

The government has presented “a compelling and coherent legal argument” for reversing the appeals court decision, said Edward L. Sweda Jr., a senior attorney with Tobacco Products Liability Project, a Boston-based anti-smoking group.