US Supreme Court hands major victory to Big Tobacco

June 28, 2010 by Michael Mathes

The US Supreme Court gave a substantial victory to major tobacco firms Monday, rebuffing an appeal that would have allowed the government to pocket 280 billion dollars of their profits.

The decision not to hear the case dealt a potentially fatal blow to long-running government efforts to penalize tobacco firms for 50 years of allegedly deceptive practices aimed at getting people hooked on smoking, the most preventable cause of premature death in the United States.

Tobacco shares surged on news of the ruling. Altria Group added 3.25 percent at 20.34 dollars and Reynolds American vaulted 4.05 percent to 53.45 dollars.

Former president Bill Clinton's administration launched the original suit in 1999, seeking damages for the allegedly ill-gotten hundreds of billions of dollars in gains and another 10 billion dollars to fund an expanded anti-smoking campaign.

But an appeals court in the US capital, Washington, ruled in 2005 that the seizure of illegal profits by the government, known as "disgorgement," was not allowable.

An immediate appeal of that ruling was not taken up by the Supreme Court, making this the second occasion in which the highest court in the land has refused to consider the government's case.

Philip Morris USA swiftly welcomed the high court's ruling.

"Although we are disappointed that the Supreme Court did not grant our petitions challenging the basis for the lawsuit, we are pleased that the Supreme Court has confirmed once again that disgorgement is not an available remedy," said Murray Garnick, senior vice president of Philip Morris parent Altria.

The Supreme Court on Monday also refused to hear appeals from the tobacco industry seeking to overturn a judge's 2006 findings that it violated racketeering laws by defrauding smokers and potential smokers about the health risks.

American Cancer Society chief executive John Seffrin said the decision was a "clear statement" from the high court that "Big Tobacco is guilty of knowingly and willingly deceiving the American public about the hazards of its products and engaging in egregious practices, including fraud."

Seffrin acknowledged he was "disappointed" the tobacco industry will not be forced to pay the damages sought in full" but expressed confidence that progress could be made.

"It is time for Big Tobacco to finally be held accountable for its deplorable actions," he added.

In the 2006 decision stretching to more than 1,600 pages, US district judge Gladys Kessler ruled that nine tobacco companies had engaged in a scheme to defraud smokers, in part by denying smoking's addictive nature and intentionally marketing cigarettes to youth.

She made various restrictions on cigarette advertising, marketing and sales, and ordered the industry to make remedies, including barring companies from making health claims about cigarettes and requiring them to publicly correct their denials of smoking's health hazards.

But she said her hands were tied over the government's multi-billion-dollar suit, citing the crucial 2005 ruling in the Washington, DC circuit court.

That decision, the culmination of a nine-month trial, essentially shielded tobacco companies from what had been a looming burden that could have permanently shifted the nature of the industry.

A second ruling by the DC circuit court last year upheld most of Kessler's findings and found Big Tobacco liable in the conspiracy, but again denied consideration of the massive US suit and said federal law did not give courts power to order a national anti-smoking program.

The defendants, which the US government says collectively control over 85 percent of the US cigarette market, included Altria, Reynolds American Inc, British American Tobacco and Lorillard, part of Loews Corp

In 2007, after the government filed a fresh lawsuit that led to the 2009 court case, the defendants slammed the government for "urging an unprecedented expansion" of portions of the 1970 Racketeer Influenced and Corrupt Organizations Act (RICO).

They said the move would "convert RICO into a blunt instrument to impose sweeping regulatory requirements upon a lawful industry."

In its November 2007 appellate brief, the government alleged that defendants were engaged since 1953 in a "conspiracy to deceive the American public about the toxicity and addictiveness of cigarettes, and that they did so to retain and extend the mass market for their product."

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3 / 5 (4) Jun 29, 2010
Dear USA, enjoy your corrupt goverment system
1 / 5 (1) Jun 29, 2010
It's amazing how companies can peddle their toxic products onto the general public. Shame you don't have a regulatory body to screen harmful products before they go on sale. Without one [that works], these companies will continue making millions from these scams, possibly similar to Aspartame and some GMO (to name a couple), both of which have the potential to cause cancer but fully testing them doesn't seem necessary. I wonder how the courts will handle them in a few decades time if millions have died from their use similar to tobacco?

If history repeats itself, and the unexpected always happens, how incapable must Man be of learning from experience.
George Bernard Shaw
not rated yet Jun 29, 2010
Does anyone know why the Courts have refused the suit while admitting that the tobacco industry was engaged in fraud? There must be a legal reason since all it takes is ONE Supreme Court Justice to agree to a hearing for one to happen.

I doubt that this a corruption issue, outside the Tabacco industry that is. I suspect that there is an actual legal reason for not allowing the suit.

1 / 5 (1) Jun 29, 2010
How frustrating this ruling must be for Europeans and Canadians to understand. To them, government decides who owns what, and of course government ultimately owns everything.

However agitated you collectivists must be, individual liberty is still alive in the United States, even if its just the right to have a smoke without being extorted by an armed executive branch seeking to make your possessions their own.

Everyone knows smoking is bad for you, but so is a government that can extort hundred of billions of dollars from private citizens. The lawsuit was irrational, and the penalty was unconstitutionally excessive. Case closed.
1 / 5 (1) Jun 29, 2010
Maybe they just believe that corporations have the legal right to make a profit when they peddle drugs, disease & death?
5 / 5 (3) Jun 29, 2010
So just because its a private enterprise its OK to lie, defraud, corrupt youth and kill citizens of the US thereby.

There is nothing in the Constitution that protects the bastards from being sued for lying for a half a century so they can make a profit by destroying people. However the RICO act is most likely the cause of the decision as it was designed to go after the Mafia.

Heck the bastards even lied to a Senate Investigating Committee by claiming that tobacco wasn't addictive at the same time they were engaged in research to make it more addictive.

1 / 5 (2) Jun 29, 2010
The first lawsuit against a tobacco company was thrown out of court over 100 years ago, because as the judge in the case declared, "Everyone knows smoking is bad for you."
Today, everyone still knows smoking is bad for you. Does anyone think otherwise? Golly, big tobacco did a great job of pulling the wool over everyone's eyes.

A branch of government saw a huge pile of cash and went for it. If they wanted to get everyone to quit smoking, they could make it illegal or apply the taxes on it in one fell swoop. Bang. 80 to 90% of the smokers would have decided to quit right there.

But no. Let's ratchet up the taxes slowly over years, a quarter or 50 cents at a time... The frog won't jump out of the pot and he'll be cooked.

One might conclude that groups of gov't officials are as devious as any tobacco company. They set it up to collect as much money as they can while talking up public welfare and crying out about evil, greedy tobacco. That's the real smoke screen.
5 / 5 (1) Jun 30, 2010
Golly, big tobacco did a great job of pulling the wool over everyone's eyes
They lied about the cancer.
They about the addiction.
They pandered to children.
They gave cigarettes away to addict people.
They made adds aimed directly at young people.
Candy cigarettes even

They did all these things knowing, since the sixties, exactly what they were doing. Knowing that all they needed was to a get a person to try smoking a few times to have an addict for life.

So yes that is greedy what else do you think it is?
Yes it is evil. Are you pretending that it isn't?

This idea that a business can get away with any reprehensible action simply because it is a business and not the government is ideology over reality. Any ideology that puts belief over reality is just plain wrong headed.

We are talking about actual human beings not some theoretical entity that does not now and never has existed. It is just as pigheaded as Communism. Neither ideology deals with real human beings.


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