Bloomberg News

Cigarette Makers Lose Bid to End Racketeer Case Monitor

July 27, 2012

Cigarette makers including Altria Group Inc. (MO:US)’s Philip Morris USA unit lost a bid to end court monitoring of their marketing practices established under the U.S. government’s 13-year-old racketeering lawsuit.

The U.S. Appeals Court in Washington today upheld a lower court decision that the oversight is necessary and should continue because of the industry’s record.

U.S. District Judge Gladys Kessler ruled June 1 that a 2009 law giving the Food and Drug Administration authority to monitor the industry and restrict the sale, promotion and distribution of tobacco products didn’t end her oversight of the cigarette makers.

Reynolds American Inc. (RAI:US)’s R.J. Reynolds Tobacco Co. and Lorillard Inc. (LO:US)’s Lorillard Tobacco Co. are also defendants in the case.

The three-judge panel, in a decision by Circuit Judge Janice Rogers Brown, said the district court “did not clearly err” when it found the companies were reasonably likely to commit future violations of the Racketeer Influenced and Corrupt Organizations Act.

Kessler rejected claims by the companies that the 2009 law and subsequent regulation by the FDA meant there was no longer a likelihood of future violations.

‘Non-Compliance’

The appeals court said that “in light of the defendants’ history of non-compliance with various legal requirements” Kessler had no reason to assume they would comply with the Family Smoking Prevention and Tobacco Control Act

“If the defendants were not deterred by the possibility of RICO liability, the district court reasonably found the defendants were not likely to be deterred by the Tobacco Control Act either,” the appeals court said.

Bryan Hatchell, a spokesman for R.J. Reynolds Tobacco, said the company was reviewing the decision and another, narrower appeal the court rejected. Brian May, a spokesman for Philip Morris USA, said the company was disappointed with today’s decisions.

“We are studying the decisions to determine the most appropriate next steps, but today’s ruling will not have an immediate impact on our business,” he said.

A spokesman for Lorillard didn’t return a phone message seeking comment.

The case is U.S. v. Philip Morris USA Inc., 11-5145, U.S. Court of Appeals for the District of Columbia Circuit (Washington).

Editors: Fred Strasser, Andrew Dunn

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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Companies Mentioned

  • MO
    (Altria Group Inc)
    • $49.72 USD
    • 0.26
    • 0.52%
  • RAI
    (Reynolds American Inc)
    • $65.2 USD
    • 0.25
    • 0.38%
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