U.S. v. PHILIP MORRIS USA INC. 1095 · 2010-04-28 · U.S. v. PHILIP MORRIS USA INC. 1097 Cite as 566 F.3d 1095 (D.C. Cir. 2009) 11. Postal Service O35(11.1) Telecommunications O1014(9)

1095U.S. v. PHILIP MORRIS USA INC.Cite as 566 F.3d 1095 (D.C. Cir. 2009)

UNITED STATES of America, UnitedStates Department of Justice, et

al., Appellees

v.

PHILIP MORRIS USA Inc., FormerlyKnown as Philip Morris Incorpo-

rated, et al., Appellees

British American Tobacco (Investments)Ltd., Directly and as Successor toBritish–American Tobacco Company,Ltd., Appellant

The Council for Tobacco Research–USA, Inc., et al., Appellees.

Nos. 06–5267, 06–5268.

United States Court of Appeals,District of Columbia Circuit.

Argued Oct. 14, 2008.

Decided May 22, 2009.

Background: United States brought ac-tion alleging that cigarette manufacturersand tobacco-related trade organizations vi-olated, and continued to violate, RacketeerInfluenced and Corrupt Organizations Act(RICO) by engaging in conspiracy to de-ceive American public about health effectsof smoking and environmental tobaccosmoke, addictiveness of nicotine, andhealth benefits from low tar ‘‘light’’ ciga-rettes, and to manipulate design and com-position of cigarettes in order to sustainnicotine addiction. The United States Dis-trict Court for the District of Columbia,Gladys Kessler, J., 449 F.Supp.2d 1, en-tered judgment in government’s favor, anddefendants appealed.

Holdings: The Court of Appeals held that:

(1) there was sufficient evidence to sup-port district court’s finding that defen-dants engaged in mail and wire fraud;

(2) defendants’ statements regardinghealth effects of smoking were not pro-tected by Noerr–Pennington doctrine;

(3) manufacturers’ use of terms ‘‘light’’and ‘‘low tar’’ to describe their low tarand nicotine cigarettes was misleading;

(4) finding that manufacturers fraudulent-ly denied adverse health effects of sec-ondhand smoke was not clearly errone-ous;

(5) finding that manufacturers’ represen-tations disputing addictiveness of ciga-rettes were intentionally misleadingwas not clearly erroneous;

(6) master settlement agreement (MSA)between manufacturers and states didnot preclude need for injunctive relief;and

(7) trade organizations could not partici-pate in future RICO violations.

Affirmed in part, vacated in part, and re-manded.

1. Federal Courts O776Court of Appeals reviews district

court’s conclusions of law de novo.

2. Federal Courts O814.1To extent it is not based on legal

error, Court of Appeals reviews districtcourt’s decision to issue injunction forabuse of discretion.

3. Racketeer Influenced and CorruptOrganizations O50

When enterprise is association-in-fact,members of association may be both partof ‘‘enterprise’’ and liable as ‘‘persons’’ un-der Racketeer Influenced and Corrupt Or-ganizations Act (RICO) if they conductenterprise’s affairs through racketeeringactivity. 18 U.S.C.A. § 1962(c).


Group of individuals, cigarette manu-facturers, and trade organizations associat-ed in fact could qualify as ‘‘enterprise’’under Racketeer Influenced and Corrupt

1096 566 FEDERAL REPORTER, 3d SERIES

Organizations Act (RICO), even thoughdefendants were mixed group of corpora-tions and individuals, rather than just indi-viduals. 18 U.S.C.A. § 1961(4).

See publication Words and Phras-es for other judicial constructionsand definitions.

5. Conspiracy O22District court adequately identified

racketeering acts that supported its find-ing of liability in action alleging that ciga-rette manufacturers and tobacco-relatedtrade organizations violated, and continuedto violate, Racketeer Influenced and Cor-rupt Organizations Act (RICO) by engag-ing in conspiracy to deceive American pub-lic about health effects of smoking andenvironmental tobacco smoke, addictive-ness of nicotine, and health benefits fromlow tar ‘‘light’’ cigarettes, and to manipu-late design and composition of cigarettes inorder to sustain nicotine addiction, eventhough court did not provide single, dis-crete list of specific racketeering acts,where court stated that enterprise know-ingly and intentionally engaged in schemeto defraud smokers and potential smokers,detailed 108 racketeering acts involving alldefendants, and held that each allegedmailing and wire transmission was in fur-therance of scheme to defraud. 18U.S.C.A. § 1961(1).

6. Postal Service O35(8) Telecommunications O1014(6)

Where mail and wire fraud statutesserve as predicate offenses for violation ofRacketeer Influenced and Corrupt Organi-zations Act (RICO), each racketeering actmust be mailing or wire transmission madein furtherance of scheme or artifice todefraud. 18 U.S.C.A. §§ 1341, 1343,1961(1).

7. Corporations O526Corporations may be held liable for

specific intent offenses based on knowl-edge and intent of their employees.

8. Corporations O526

To determine whether corporationmade false or misleading statement withspecific intent to defraud, court must lookto state of mind of individual corporateofficers and employees who made, ordered,or approved statement.

9. Postal Service O49(11)

Telecommunications O1018(4)

There was sufficient evidence to sup-port district court’s finding that cigarettemanufacturers and tobacco-related tradeorganizations engaged in mail and wirefraud with specific intent to defraudsmokers and potential smokers abouthealth effects of smoking and environmen-tal tobacco smoke, addictiveness of nico-tine, and health benefits from low tar‘‘light’’ cigarettes, despite defendants’ con-tention that court applied impermissible‘‘collective intent’’ standard, where compa-nies’ research indicated that cigarettesmoking caused disease, that nicotine wasaddictive, that light cigarettes did notpresent lower health risks than regularcigarettes due to smoker compensation,and that secondhand smoke was hazardousto health, there was ensuing pattern ofmemoranda within corporations acknowl-edging that smoking was addictive, andaccepted throughout corporations, and au-thors of fraudulent statements were highranking executives. 18 U.S.C.A. §§ 1341,1343.

10. Corporations O526

Corporation’s specific intent to de-fraud may be inferred where there is pat-tern of corporate research revealing par-ticular proposition, ensuing pattern ofmemoranda within corporation acknowl-edging proposition, and corporate CEO orother official of high corporate status thenmakes public statement contrary to knowl-edge within corporation.


11. Postal Service O35(11.1) Telecommunications O1014(9)

In order for false or misleading state-ment to qualify as mail or wire fraud, itmust concern material or important fact ormatter. 18 U.S.C.A. §§ 1341, 1343.


Materiality requirement for establish-ing mail or wire fraud is met if matter atissue is of importance to reasonable personin making decision about particular matteror transaction. 18 U.S.C.A. §§ 1341, 1343.


To establish materiality requirementfor mail or wire fraud offense, no subjec-tive evidence regarding any particular per-son is required; test is only whether rea-sonable person would consider matter tobe of importance regarding transaction.18 U.S.C.A. §§ 1341, 1343.


Statements by cigarette manufactur-ers and tobacco-related trade organiza-tions about health effects of smoking, riskof addiction, and effects of secondhandsmoke would be matter of importance toreasonable person deciding to purchasecigarettes, and thus were sufficiently mate-rial to support finding that they violatedfederal mail and wire fraud statutes, eventhough scientific community had reachedconsensus regarding severely adversehealth consequences of smoking. 18U.S.C.A. §§ 1341, 1343.

15. Constitutional Law O1170First Amendment does not protect

fraud. U.S.C.A. Const.Amend. 1.

16. Constitutional Law O1435, 1437(1)Neither Noerr–Pennington doctrine

nor First Amendment more generally pro-tects petitions predicated on fraud or de-

liberate misrepresentation. U.S.C.A.Const.Amend. 1.

17. Constitutional Law O1437(1) Fraud O36

Statements by cigarette manufactur-ers and tobacco-related trade organiza-tions regarding health effects of smokingwere not protected by Noerr–Penningtondoctrine, where companies’ research indi-cated that cigarette smoking caused dis-ease, that nicotine was addictive, that lightcigarettes did not present lower healthrisks than regular cigarettes due tosmoker compensation, and that second-hand smoke was hazardous to health, therewas ensuing pattern of memoranda withincorporations acknowledging that smokingwas addictive, and accepted throughoutcorporations, and statements were madewith intent to deceive smokers and poten-tial smokers. U.S.C.A. Const.Amend. 1.


Federal Trade Commission’s (FTC)failure to prohibit cigarette manufacturersfrom using misleading ‘‘light’’ and ‘‘lowtar’’ descriptors did not defeat finding ofspecific intent to defraud in government’saction alleging that manufacturer violatedmail and wire fraud statutes by misrepre-senting health benefits from low tar ‘‘light’’cigarettes to public, where FTC never re-quired manufacturers to disclose tar andnicotine yields, and had never condonedrepresentations of those yields through useof ‘‘light’’ or ‘‘low tar’’ descriptors. 18U.S.C.A. §§ 1341, 1343.


Cigarette manufacturers’ use of terms‘‘light’’ and ‘‘low tar’’ to describe their lowtar and nicotine cigarettes was misleadingto public, and thus violated federal mailand wire fraud statutes, where manufac-


turers were aware that smokers subcon-sciously adjusted their puff volume andfrequency, and smoking frequency, so as toobtain and maintain their per hour and perday requirements for nicotine, and thatpuff volume and frequency were not tied tonumber of ‘‘light’’ cigarettes smoked. 18U.S.C.A. §§ 1341, 1343.


Terms ‘‘light’’ and ‘‘low tar,’’ as usedby cigarette manufacturers to describetheir low tar and nicotine cigarettes, werenot literally true verbal representations ofnumerical ratings authorized by FederalTrade Commission (FTC), and thus manu-facturers violated federal wire and mailfraud statutes by using terms to misrepre-sent health benefits of such cigarettes topublic, where there were lights of certainbrands with higher tar levels than regularsof other brands from same company, andthere were also lights and regulars ofsame brands that had same FTC tar rat-ing. 18 U.S.C.A. §§ 1341, 1343.

21. Federal Courts O853Under clear error standard of review,

Court of Appeals may disturb the districtcourt’s findings of fact only if it is left withdefinite and firm conviction that mistakehas been committed. Fed.Rules Civ.Proc.Rule 52(a)(6), 28 U.S.C.A.


District court’s finding that cigarettemanufacturers fraudulently denied adversehealth effects of secondhand smoke, in vio-lation of federal mail and wire fraud stat-utes, was not clearly erroneous, despitemanufacturers’ contention that their state-ments prior to issuance of Surgeon Gener-al’s report determining secondhand smoketo be hazardous were merely good-faithexpressions of opinion, where manufactur-ers’ research and analysis revealed haz-ards of secondhand smoke years before

issuance of Surgeon General’s report, andmanufacturers concealed their role in mak-ing statements regarding secondhandsmoke. 18 U.S.C.A. §§ 1341, 1343.


Telecommunications O1018(4)

District court’s finding that cigarettemanufacturers’ representations disputingaddictiveness of cigarettes were intention-ally misleading, in violation of federal mailand wire fraud statutes, was not clearlyerroneous, despite manufacturers’ conten-tion that their statements merely clung toearlier, narrower, definitions of term ‘‘ad-diction,’’ in light of evidence that manufac-turers had known for decades that nicotinewas addictive drug and that cigarette de-pendence was stronger than mere habitformation, but continued to make numer-ous statements trivializing and denying de-pendence that cigarettes caused. 18U.S.C.A. §§ 1341, 1343.


Mailings sent by cigarette manufac-turers and tobacco-related trade organiza-tions in furtherance of separately-provenscheme to defraud public did not fall out-side mail fraud statute’s coverage due tofact that they were drafted and physicallysent by lawyers who themselves had nofraudulent intent, where mailings werecaused by high-level executives who hadintent to defraud. 18 U.S.C.A. § 1341.


Federal mail fraud statute looks tointent of individual who caused mailing,not individual who drafted or physicallymailed it. 18 U.S.C.A. § 1341.

26. International Law O7

When statute is applied to conductmeeting effects test, presumption againstextraterritoriality does not apply.



Actions taken by British cigarettemanufacturer in furtherance of scheme tomisrepresent health effects of smoking topublic had substantial, direct, and foresee-able effect within United States, as re-quired to subject manufacturer to liabilityunder Racketeer Influenced and CorruptOrganizations Act (RICO), where manufac-turer conducted sensitive nicotine researchabroad and secretly shared results withcompany in United States, and manufac-turer, in concert with other manufacturers,founded, funded, and actively participatedin various international organizations,which they saw as instrumental to theirefforts to perpetuate fraudulent scheme inUnited States. 18 U.S.C.A. §§ 1341, 1343,1964(a).

28. Injunction O22Before district court may order in-

junctive remedies under Racketeer Influ-enced and Corrupt Organizations Act(RICO), it must find that defendant exhib-its reasonable likelihood of committing fu-ture RICO violations. 18 U.S.C.A.§ 1964(a).

29. Injunction O104In determining whether to grant in-

junctive relief in action brought underRacketeer Influenced and Corrupt Organi-zations Act (RICO), three factors deter-mine whether reasonable likelihood exists:(1) whether defendant’s violation was iso-lated or part of pattern, (2) whether viola-tion was flagrant and deliberate or merelytechnical in nature, and (3) whether defen-dant’s business will present opportunitiesto violate law in future. 18 U.S.C.A.§ 1964(a).

30. Injunction O104Master settlement agreement (MSA)

between cigarette manufacturers and 46states and District of Columbia did noteliminate reasonable likelihood of future

Racketeer Influenced and Corrupt Organi-zations Act (RICO) violations by manufac-turers, so as to preclude need for injunc-tive relief under RICO, even though MSAprohibited them from participating in ‘‘en-terprise’’ or committing any ‘‘predicateacts,’’ where manufacturers began toevade and violate MSA’s prohibitions al-most immediately after signing it, someMSA provisions were scheduled to expire,manufacturers continued to deny dangersof secondhand smoke, market ‘‘low tar’’cigarettes as healthier alternative to quit-ting, and deny manipulating nicotine deliv-ery and marketing to youth, and manufac-turers’ essential position on relationship ofsmoking and health remained virtually un-changed. 18 U.S.C.A. § 1964(a).

31. Injunction O104Issuance of injunctive relief against

holding company was warranted in actionalleging that cigarette manufacturers vio-lated, and continued to violate, RacketeerInfluenced and Corrupt Organizations Act(RICO) by engaging in conspiracy to de-ceive American public about health effectsof smoking and environmental tobaccosmoke, addictiveness of nicotine, andhealth benefits from low tar ‘‘light’’ ciga-rettes, and to manipulate design and com-position of cigarettes in order to sustainnicotine addiction, where holding companyeffectively and actively controlled activitiesof all of its subsidiaries, including cigarettemanufacturer, and holding company partic-ipated directly in RICO enterprise andconspiracy. 18 U.S.C.A. § 1964(a).

32. Federal Courts O947There was insufficient evidence to

support imposition of injunctive reliefagainst reconstituted passive holding com-pany in action alleging that cigarette man-ufacturers violated Racketeer Influencedand Corrupt Organizations Act (RICO) byengaging in conspiracy to deceive Ameri-can public about health effects of smoking


and environmental tobacco smoke, addic-tiveness of nicotine, and health benefitsfrom low tar ‘‘light’’ cigarettes, and to ma-nipulate design and composition of ciga-rettes in order to sustain nicotine addic-tion, and thus remand for further factfinding was warranted, where company didnot exist at time of RICO violations, andthere was no evidence about extent of itscontrol over tobacco operations. 18U.S.C.A. § 1964(a).

33. Injunction O22Tobacco-related trade organizations

could not participate in future violations ofRacketeer Influenced and Corrupt Organi-zations Act (RICO), and thus government’srequest for injunction barring them fromparticipating in future RICO violations wasmoot, where organizations’ dissolution hadbeen ordered in settlement agreement, andorganizations existed only to wind up theirrespective affairs. 18 U.S.C.A. § 1964(a).

34. Federal Courts O12.1Case is ‘‘moot’’ when challenged con-

duct ceases such that there is no reason-able expectation that wrong will be re-peated in circumstances where it becomesimpossible for court to grant any effectualrelief whatever to prevailing party.


35. Corporations O510 Injunction O212

Subsidiary corporation is in privitywith its parent in respect to common cor-porate business, and thus is bound by in-junction against parent, to extent it is soidentified in interest with parent that itrepresents precisely same legal right inrespect to subject matter involved in in-junction. Fed.Rules Civ.Proc.Rule 65, 28U.S.C.A.

36. Injunction O204Because injunction prohibits conduct

under threat of judicial punishment, basic

fairness requires that those enjoined re-ceive explicit notice of precisely what con-duct is outlawed. Fed.Rules Civ.Proc.Rule65, 28 U.S.C.A.

37. Injunction O204Even if it tracks statutory language,

general injunction is not too vague if itrelates enjoined violations to context ofcase. Fed.Rules Civ.Proc.Rule 65, 28U.S.C.A.

38. Injunction O204Injunctions barring cigarette manu-

facturers from committing any act of rack-eteering and from misrepresenting or sup-pressing information concerning cigarettessufficiently specified activities enjoined asto provide manufacturers with fair noticeof prohibited conduct, where district courthad made 4,088 findings of fact aboutfraud in manufacture, promotion, and saleof cigarettes, and injunction specified thatmanufacturers avoid making false state-ments or committing racketeering acts re-garding manufacturing, marketing, pro-motion, health consequences, and sale ofcigarettes, along with related issues thatthey had reason to know were of concernto cigarette consumers. 18 U.S.C.A.§ 1964(a); Fed.Rules Civ.Proc.Rule 65, 28U.S.C.A.

39. Constitutional Law O3994 Injunction O130

Government’s failure to disclose untilits post-trial proposed remedial order inremedies phase its final proposal for cor-rective statements that cigarette manufac-turers would be required to make did notviolate manufacturers’ due process rightsin action alleging that manufacturers vio-lated Racketeer Influenced and CorruptOrganizations Act (RICO) by engaging inconspiracy to deceive American publicabout health effects of smoking and envi-ronmental tobacco smoke, addictiveness ofnicotine, and health benefits from low tar


‘‘light’’ cigarettes, and to manipulate de-sign and composition of cigarettes in orderto sustain nicotine addiction, where manu-facturers received government’s proposedremedies, including general correctivestatements proposal, two months beforethe remedies phase of trial began, manu-facturers participated in fourteen-day, ful-ly briefed remedies trial, and manufactur-ers responded to government’s proposedorder in their own post-trial brief andraised numerous legal objections to propri-ety of corrective statements remedy, whichdistrict court considered and resolved inits final opinion and order. U.S.C.A.Const.Amend. 5; 18 U.S.C.A. § 1964(a).

40. Antitrust and Trade RegulationO236

Provision of injunctive order requiringcigarette manufacturers to affix correctivestatements to cigarette packaging, eitheron outside of or within outer cellophanewrapping around package, did not violateFederal Cigarette Labeling and Advertis-ing Act provision barring communicationson cigarette packages. Federal CigaretteLabeling and Advertising Act, § 5(a), 15U.S.C.A. § 1334(a).

41. Injunction O115, 130

District court exceeded its authorityin government’s action alleging that ciga-rette manufacturers violated Racketeer In-fluenced and Corrupt Organizations Act(RICO) in issuing injunction requiring re-tailers to use cigarette manufacturers’ in-store advertising to display correctivestatements for two-year period, where re-tailers were not parties to litigation anddid not receive notice of remedy or oppor-tunity to present evidence, court did notindependently consider program’s impacton retailers, and remedy was likely to costretailers substantial revenue. 18 U.S.C.A.§ 1964(a).

42. Constitutional Law O1490, 1503

First Amendment protects againstgovernment infringement on right to speakfreely and right to refrain from speakingat all. U.S.C.A. Const.Amend. 1.

43. Constitutional Law O1535, 1539

Under commercial speech doctrine,government’s power to regulate commer-cial transactions justifies its concomitantpower to regulate commercial speech thatis linked inextricably to those transactions,and thus government may require com-mercial speech to appear in such form, orinclude such additional information, warn-ings, and disclaimers, as are necessary toprevent its being deceptive.

44. Constitutional Law O1536

For First Amendment purposes,‘‘commercial speech’’ is expression relatedsolely to economic interests of speaker andits audience or speech proposing commer-cial transaction. U.S.C.A. Const.Amend.1.



Cigarette manufacturers’ claims deny-ing adverse effects of cigarettes and nico-tine in relation to health and addictionconstituted commercial speech, for FirstAmendment purposes. U.S.C.A. Const.Amend. 1.


Burden on commercial speech, wheth-er it be suppression or mandatory disclo-sure, only triggers higher level of scrutinyunder First Amendment if commercialspeech is inextricably intertwined with ful-ly protected speech. U.S.C.A. Const.Amend. 1.



Injunction O104

District court order requiring ciga-rette manufacturers that violated Racke-teer Influenced and Corrupt OrganizationsAct (RICO) by fraudulently misrepresent-ing adverse health effects of active smok-ing, addictiveness of nicotine and cigarettesmoking, their manipulation of cigarettes’nicotine content, and health risks attachedto light and low tar cigarettes to publishcorrective statements in national newspa-pers and on national television did notimpermissibly burden manufacturers’ pro-tected speech, in violation of First Amend-ment, where manufacturers had violatedRICO for 50 years by making false andfraudulent statements to consumers abouttheir products, manufacturers were rea-sonably likely to commit similar violationsin future, and corrective statements werenecessary to counteract anticipated viola-tions. U.S.C.A. Const.Amend. 1; 18U.S.C.A. § 1964(a).

48. Injunction O114(4)

Public health organizations were notprecluded from intervening in govern-ment’s action alleging that cigarette manu-facturers violated Racketeer Influencedand Corrupt Organizations Act (RICO) byfraudulently misrepresenting adversehealth effects of active smoking, addictive-ness of nicotine and cigarette smoking,their manipulation of cigarettes’ nicotinecontent, and health risks attached to lightand low tar cigarettes, despite manufactur-ers’ contention that organizations could notbring RICO action seeking equitable reme-dies; RICO did not explicitly preclude pri-vate parties from seeking equitable relief,and organizations did not assert any novelclaims of illegality, but merely sought toexpand remedies sought by government.18 U.S.C.A. § 1964; Fed.Rules Civ.Proc.Rule 24(a)(2), 28 U.S.C.A.

49. Federal Civil Procedure O311Because intervenor participates on

equal footing with original parties to suit,prospective intervenor must satisfy ArticleIII standing requirements. U.S.C.A.Const. Art. 3, § 2, cl. 1; Fed.Rules Civ.Proc.Rule 24(a), 28 U.S.C.A.

50. Associations O20(1)Public health organizations presented

sufficient injuries directly caused by ciga-rette manufacturers’ violations of Racke-teer Influenced and Corrupt Organiza-tions Act (RICO) to provide associationalstanding to intervene to advocate addi-tional remedies in action alleging thatmanufacturers fraudulently misrepresen-ted adverse health effects of active smok-ing, addictiveness of nicotine and cigarettesmoking, their manipulation of cigarettes’nicotine content, and health risks attachedto light and low tar cigarettes; manufac-turers’ deceptive marketing exposed chil-dren organizations sought to protect topredatory and misleading advertisementsintended to entice them to smoke. 18U.S.C.A. § 1964(a); Fed.Rules Civ.Proc.Rule 24(a), 28 U.S.C.A.


Remedies focused on effects of pastconduct or awarded without respect towhether defendant will act unlawfully infuture are beyond court’s statutory juris-diction under Racketeer Influenced andCorrupt Organizations Act (RICO). 18U.S.C.A. § 1964(a).

52. Injunction O104Provision of Racketeer Influenced and

Corrupt Organizations Act (RICO) autho-rizing district courts to order remedies ‘‘toprevent and restrain violations of [RICO]’’did not permit district court to order ciga-rette manufacturers to undertake counter-marketing campaign and national smokingcessation program, even though manufac-


turers had violated RICO by fraudulentlymisrepresenting adverse health effects ofactive smoking, addictiveness of nicotineand cigarette smoking, their manipulationof cigarettes’ nicotine content, and healthrisks attached to light and low tar ciga-rettes; proposed remedies attempted toprevent and restrain future effects of pastRICO violations, not future RICO viola-tions. 18 U.S.C.A. § 1964(a).

53. Injunction O104Proposed youth smoking reduction

plan would not serve to prevent or restraincigarette manufacturers from committingfuture violations of Racketeer Influencedand Corrupt Organizations Act (RICO),and thus proposed plan was not authorizedunder RICO provision permitting districtcourts to order remedies ‘‘to prevent andrestrain violations of [RICO],’’ even thoughproposed plan was forward-looking, couldprevent future RICO violations, and wouldserve public interest, where youth smokingtargets could increase or decrease due toinput factors beyond manufacturers’ con-trol. 18 U.S.C.A. § 1964(a).

54. Injunction O104District court did not abuse its discre-

tion in action alleging that cigarette manu-facturers and tobacco-related trade organi-zations violated Racketeer Influenced andCorrupt Organizations Act (RICO) by en-gaging in conspiracy to deceive Americanpublic about health effects of smoking andenvironmental tobacco smoke, addictive-ness of nicotine, and health benefits fromlow tar ‘‘light’’ cigarettes, by deciding notto create monitoring scheme to ensuremanufacturers’ compliance with its remedi-al orders. 18 U.S.C.A. § 1964(a).

Appeals from the United States DistrictCourt for the District of Columbia (No.99cv02496).

Michael A. Carvin and Miguel A. Estra-da argued the causes for appellants. With

them on the briefs were David S. Eggert,Guy Miller Struve, Charles S. Duggan,David M. Bernick, Robert F. McDermott,Jr., Peter J. Biersteker, Michael S. Fried,John K. Crisham, Michael B. Minton,Bruce D. Ryder, Bruce G. Sheffler, AlanE. Untereiner, Joseph Kresse, and Debo-rah Israel. Murray R. Garnick, TimothyM. Broas, James A. Goold, Gene E. Voigts,Clausen Ely Jr., Leonard A. Feiwus,James W. Newbold, Edward C. Schmidt,Arnon D. Siegel, Keith A. Teel, TheodoreV. Wells, Jr., and Dan K. Webb enteredappearances.

Alan E. Untereiner and Bruce G. Shef-fler were on the briefs for appellant Brit-ish American Tobacco (Investments) Lim-ited.

David S. Eggert, Guy Miller Struve, andCharles S. Duggan were on the briefs forappellant Altria Group, Inc.

Daniel J. Popeo, Paul D. Kamenar, An-drew G. McBride, and Thomas R. McCar-thy were on the brief for amici curiaeNational Association of Manufacturers andthe Washington Legal Foundation urgingreversal.

Scott A. Sinder was on the brief foramicus curiae National Association of Con-venience Stores in support of appellants.

Robin S. Conrad, Amar D. Sarwal,Theodore B. Olson, and Matthew D.McGill were on the brief for amicus curiaeChamber of Commerce of the UnitedStates of America in support of appellantsurging reversal.

Mark B. Stern, Attorney, U.S. Depart-ment of Justice, argued the cause for ap-pellees. With him on the brief were Mi-chael F. Hertz, Deputy Assistant AttorneyGeneral, Jonathan F. Cohn, Deputy Assis-tant Attorney General, and Alisa B. Klein,Mark R. Freeman, Sarang Vijay Damle,Melissa N. Patterson, and Christopher J.Walker, Attorneys.


Howard M. Crystal argued the cause forintervenors Tobacco–Free Kids ActionFund, et al. With him on the briefs wereKatherine A. Meyer and G. Robert Blakey.

Michael D. Hausfeld and Victoria S. Nu-gent were on the brief for amici curiaeAmerican College of Occupational and En-vironmental Medicine, et al. in support ofappellee urging affirmance.

William C. Lieblich, Talis J. Colberg,Attorney General, Attorney General’s Of-fice of the State of Alaska, Terry Goddard,Attorney General, Attorney General’s Of-fice of the State of Arizona, DustinMcDaniel, Attorney General, AttorneyGeneral’s Office of the State of Arkansas,Edmund G. Brown, Jr., Attorney General,Attorney General’s Office of the State ofCalifornia, Richard Blumenthal, AttorneyGeneral, Attorney General’s Office of theState of Connecticut, Joseph R. ‘‘Beau’’Biden III, Attorney General, AttorneyGeneral’s Office of the State of Delaware,Bill McCollum, Attorney General, Attor-ney General’s Office of the State of Flori-da, Mark J. Bennett, Attorney General,Attorney General’s Office of the State ofHawaii, Lawrence Wasden, Attorney Gen-eral, Attorney General’s Office of the Stateof Idaho, Lisa Madigan, Attorney General,Attorney General’s Office of the State ofIllinois, Paul Morrison, Attorney General,Attorney General’s Office of the State ofKansas, Greg Stumbo, Attorney General,Attorney General’s Office of the State ofKentucky, Charles Foti, Jr., Attorney Gen-eral, Attorney General’s Office of the Stateof Louisiana, G. Steven Rowe, AttorneyGeneral, Attorney General’s Office of theState of Maine, Douglas F. Gansler, Attor-ney General, Attorney General’s Office ofthe State of Maryland, Martha Coakley,Attorney General, Attorney General’s Of-fice of the Commonwealth of Massachu-setts, Michael A. Cox, Attorney General,Attorney General’s Office of the State of

Michigan, Lori Swanson, Attorney Gener-al, Attorney General’s Office of the Stateof Minnesota, Jim Hood, Attorney General,Attorney General’s Office of the State ofMississippi, Jeremiah W. (Jay) Nixon, At-torney General, Attorney General’s Officeof the State of Missouri, Mike McGrath,Attorney General, Attorney General’s Of-fice of the State of Montana, CatherineCortez Masto, Attorney General, AttorneyGeneral’s Office of the State of Nevada,Kelly A. Ayotte, Attorney General, Attor-ney General’s Office of the State of NewHampshire, Anne Milgram, Attorney Gen-eral, Attorney General’s Office of the Stateof New Jersey, Gary King, Attorney Gen-eral, Attorney General’s Office of the Stateof New Mexico, Andrew M. Cuomo, Attor-ney General, Attorney General’s Office ofthe State of New York, Marc Dann, Attor-ney General, Attorney General’s Office ofthe State of Ohio, W.A. Drew Edmondson,Attorney General, Attorney General’s Of-fice of the State of Oklahoma, HardyMyers, Attorney General, Attorney Gener-al’s Office of the State of Oregon, and TomCorbett, Attorney General, Attorney Gen-eral’s Office of the Commonwealth ofPennsylvania, Patrick C. Lynch, AttorneyGeneral, Attorney General’s Office of theState of Rhode Island, Robert E. Cooper,Jr., Attorney General, Attorney General’sOffice of the State of Tennessee, WilliamH. Sorrell, Attorney General, AttorneyGeneral’s Office of the State of Vermont,Robert M. McKenna, Attorney General,Attorney General’s Office of the State ofWashington, Darrell V. McGraw, AttorneyGeneral, Attorney General’s Office of theState of West Virginia, Bruce A. Salzburg,Attorney General, Attorney General’s Of-fice of the State of Wyoming, and VincentF. Frazer, Attorney General, AttorneyGeneral’s Office of the Territory of theUnited States Virgin Islands, were on thebrief for amici curiae States in support ofappellee.


Allison M. Zieve and Brian Wolfmanwere on the brief for amici curiae PublicCitizen, Inc., et al. in support of appelleeurging affirmance.

Christopher N. Banthin and Stephen M.Kohn were on the brief for amici curiaeAmerican Medical Association and Othersin support of appellee.

David C. Vladeck was on the brief foramicus curiae Tobacco Control Legal Con-sortium in support of appellee urging affir-mance.

Harvey Kurzweil and Alexander M.Kayne were on the brief of amicus curiaethe Citizens’ Commission to Protect theTruth in support of appellee and support-ing partial reversal.

Kerry S. Lane, appearing pro se, was onthe brief as amicus curiae.

Before: SENTELLE, Chief Judge,TATEL and BROWN, Circuit Judges.

Opinion for the Court filed PERCURIAM.

PER CURIAM:

Defendants in this action, cigarettemanufacturers and trade organizations,appeal from the district court’s judgmentfinding them liable for conducting the af-fairs of their joint enterprise through apattern of mail and wire fraud in a schemeto deceive American consumers. Theyalso appeal from the district court’s reme-dial order, which imposes numerous nega-tive and affirmative duties on Defendants.The government and intervenors cross-ap-peal from the district court’s denial of ad-ditional requested remedies. After con-sidering all of the parties’ arguments, weaffirm in large part the finding of liability,remanding only for dismissal of the tradeorganizations. We also largely affirm theremedial order, including the denial of ad-ditional remedies, but vacate the orderwith regard to four discrete issues, re-

manding for further proceedings as direct-ed in this opinion.

I. Background

The United States initiated this civil ac-tion under the Racketeer Influenced andCorrupt Organizations Act (‘‘RICO’’), 18U.S.C. §§ 1961–1968, in 1999. The gov-ernment alleged that nine cigarette manu-facturers and two tobacco-related trade or-ganizations violated section 1962(c) and (d)of the Act. Those subsections make it un-lawful for ‘‘any person employed by orassociated with any enterprise engaged in,or the activities of which affect, interstateor foreign commerce, to conduct or partici-pate, directly or indirectly, in the conductof such enterprise’s affairs through a pat-tern of racketeering activity’’ or to con-spire to do so. 18 U.S.C. § 1962(c), (d).The eleven Defendants were Philip Morris,Inc., now Philip Morris USA, Inc. (‘‘PhilipMorris’’); R.J. Reynolds Tobacco Compa-ny, now Reynolds American (‘‘Reynolds’’);Brown & Williamson Tobacco Company,now part of Reynolds (‘‘Brown & William-son’’); Lorillard Tobacco Company (‘‘Loril-lard’’); The Liggett Group, Inc. (‘‘Lig-gett’’); American Tobacco Company, whichmerged with Brown & Williamson and isnow part of Reynolds (‘‘American’’); PhilipMorris Companies, now Altria (‘‘Altria’’);British American Tobacco (Investments)Ltd. (‘‘BATCo’’); B.A.T. Industries p.l.c.,now part of BATCo (‘‘BAT Industries’’);The Council for Tobacco Research—USA,Inc. (‘‘CTR’’); and The Tobacco Institute,Inc. (‘‘TI’’). The last two entities are tradeorganizations the cigarette manufacturerscreated; they do not manufacture or selltobacco products. The district court dis-missed BAT Industries from the case forlack of personal jurisdiction.

The government alleged that Defen-dants violated and continued to violateRICO by joining together in a decades-


long conspiracy to deceive the Americanpublic about the health effects and addic-tiveness of smoking cigarettes. Specifical-ly, the government alleged that Defen-dants fraudulently denied that smokingcauses cancer and emphysema, that sec-ondhand smoke causes lung cancer andendangers children’s respiratory and audi-tory systems, that nicotine is an addictivedrug and Defendants manipulated it tosustain addiction, that light and low tarcigarettes are not less harmful than fullflavor cigarettes, and that Defendants in-tentionally marketed to youth. UnitedStates v. Philip Morris USA, Inc., 449F.Supp.2d 1, 27 (D.D.C.2006). In addition,the government alleged that Defendantsconcealed evidence and destroyed docu-ments to hide the dangers of smoking andprotect themselves in litigation. Id. Thegovernment identified 148 racketeeringacts of mail and wire fraud Defendantsallegedly committed in furtherance of theirscheme. Although the district court didnot allow the government to prove 650additional racketeering acts due to theirlate disclosure, the court did permit thegovernment to introduce evidence support-ing those acts to prove other RICO ele-ments, such as the continuity and patternof racketeering activity, the RICO enter-prise and conspiracy, and Defendants’ par-ticipation in the enterprise.

After years of pretrial proceedings anddiscovery, the case went to trial in Septem-ber 2004. The bench trial lasted ninemonths and included live testimony from84 witnesses, written testimony from 162witnesses, and almost 14,000 exhibits inevidence. The government presented evi-dence that the presidents of Philip Morris,Reynolds, Brown & Williamson, Lorillard,and American assembled together in 1953to strategize a response to growing publicconcern about the health risks of smokingand jointly retained a public relations firmto assist in the endeavor. Id. at 37. Fromthe beginning they agreed that no ciga-

rette manufacturer would ‘‘seek a competi-tive advantage by inferring to its publicthat its product is less risky than others’’;they would make no ‘‘claims that specialfilters or toasting, or expert selection oftobacco, or extra length in the butt, oranything else, makes a given brand lesslikely to cause you-know-what.’’ Id. (quot-ing public relations firm’s Planning Com-mittee Memorandum). Acting on thisagreement, the cigarette manufacturersjointly issued ‘‘A Frank Statement to Ciga-rette Smokers,’’ published as a full-pageadvertisement in newspapers across thecountry on January 4, 1954. Id. at 39.‘‘The Frank Statement set forth the indus-try’s ‘open question’ position that it wouldmaintain for more than forty years—thatcigarette smoking was not a proven causeof lung cancer; that cigarettes were notinjurious to health; and that more re-search on smoking and health issues wasneeded.’’ Id. All of the Defendant manu-facturers eventually joined this collectiveeffort.

The government presented evidencefrom the 1950s and continuing throughthe following decades demonstrating thatthe Defendant manufacturers wereaware—increasingly so as they conductedmore research—that smoking causes dis-ease, including lung cancer. Evidence attrial revealed that at the same time De-fendants were disseminating advertise-ments, publications, and public statementsdenying any adverse health effects ofsmoking and promoting their ‘‘open ques-tion’’ strategy of sowing doubt, they inter-nally acknowledged as fact that smokingcauses disease and other health hazards.Id. at 146, 164, 168–69. Although themanufacturers conducted their own re-search and public relations regardinghealth and other issues, they also relied inpart on a series of jointly-created entities.Among these entities were Defendants TIand CTR (formerly the Tobacco Industry


Research Committee). The Defendantmanufacturers created TI and CTR, com-posed their membership, staffed theirboards of directors with executives fromthe manufacturers, and maintained fre-quent communication between high-levelmanufacturer and joint-entity officials.Id. at 43–44, 63. Evidence at trial showedthat TI and CTR conducted the manufac-turers’ joint public relations through falseand misleading press releases and publica-tions, trained representatives from themanufacturers regarding their coordinatedindustry message, conducted some ciga-rette testing for the manufacturers, andfunded ‘‘special projects’’ to produce fa-vorable research results and witnessesspecifically for use in litigation and forsupport of industry public statements.Id. at 66, 82, 86, 87, 91.

In addition to the health hazards ofsmoking, the government presented evi-dence that Defendants intimately under-stood the addictiveness of nicotine and ma-nipulated nicotine delivery in cigarettes tocreate and sustain addiction. Evidenceshowed that Defendants undertook exten-sive research into the physiological impactof nicotine, how it operates within the hu-man body, and how the physical and chem-ical design parameters of cigarettes influ-ence the delivery of nicotine to smokers.Id. at 208, 308–09. As a result of thisresearch, they recognized and internallyacknowledged that smoking and nicotineare addictive and they engineered theirproducts around creating and sustainingthis addiction. Evidence at trial suggestedthat despite this internal knowledge, fordecades Defendants publicly denied anddistorted the truth about the addictive na-ture of their products, suppressed re-search revealing the addictiveness of nico-tine, and denied their efforts to controlnicotine levels and delivery. Id. at 209,309.

The government also presented evidencetending to show that Defendants marketedand promoted their low tar brands tosmokers—who were concerned about thehealth hazards of smoking or consideringquitting—as less harmful than full flavorcigarettes despite either lacking evidenceto substantiate their claims or knowingthem to be false. Id. at 430. Internalindustry documents introduced at trial re-vealed that by the late 1960s and early1970s, Defendants were aware that lowertar cigarettes are unlikely to providehealth benefits because they do not actual-ly deliver the low levels of tar and nicotineadvertised. Id. at 430–31. Defendants re-searched and understood the phenomenonwhereby smokers of low tar cigarettes, tosatisfy their addiction, modify their smok-ing behavior to compensate for the re-duced nicotine yields by ‘‘taking more fre-quent puffs, inhaling smoke more deeply,holding smoke in their lungs longer, cover-ing cigarette ventilation holes with fingersor lips, and/or smoking more cigarettes.’’Id. at 431. As a result of this nicotine-driven behavior, smokers of low tar ciga-rettes boost their intake of tar, so thatlower tar cigarettes do not result in lowertar intake and therefore do not yield thetouted health benefits or serve as a steptoward quitting smoking. Id. Evidence attrial suggested that Defendants under-stood this concept—for some time, betterthan the public health community or gov-ernment regulators—while they promotedlower tar cigarettes as ‘‘health reassur-ance’’ brands.

Regarding secondhand smoke, the gov-ernment presented evidence suggestingthat Defendants became aware that sec-ondhand smoke poses a health risk tononsmokers but made misleading publicstatements and advertisements about sec-ondhand smoke in an attempt to cause thepublic to doubt the evidence of its harm-fulness. Id. at 692. At trial, internal in-


dustry documents revealed that Defen-dants believed the public perception ofsecondhand smoke could determine the in-dustry’s survival and that secondhandsmoke research by the cigarette manufac-turers was a sensitive issue due to theabsence of ‘‘objective science’’ supportingtheir position and the risk that their ownresearch would lead to unfavorable re-sults. Id. at 733. As a result, the manu-facturers jointly created the Center forIndoor Air Research (‘‘CIAR’’) to coordi-nate and fund their secondhand smoke re-search with the appearance of indepen-dence. Id. at 119, 735. The evidence alsoshowed that they ‘‘created, controlled,used, or participated in’’ a vast array offoreign or international entities to conducttheir sensitive secondhand smoke re-search, generate ‘‘marketable science’’ touse for public relations purposes, and co-ordinate their shared objectives and mes-sage. Id. at 119–20, 759.

In addition to these topics, the govern-ment also presented evidence to the dis-trict court regarding Defendants’ targetedmarketing to youth under twenty-oneyears of age and their denials of suchmarketing, id. at 561, 672, as well as evi-dence concerning Defendants’ employeesand attorneys destroying documents rele-vant to their public and litigation positionsand suppressing or concealing scientific re-search, id. at 801, 832.

During the trial, this court rendered adecision on Defendants’ interlocutory ap-peal from the denial of summary judgmenton the government’s claim for a disgorge-ment remedy under RICO section 1964(a).We reversed the district court and heldthat disgorgement is not an available rem-edy in civil RICO cases. United States v.Philip Morris USA, Inc. (‘‘DisgorgementOpinion’’), 396 F.3d 1190 (D.C.Cir.2005).In response, the district court granted thegovernment leave to reformulate its pro-posed remedies. After the liability phase

of the trial, the district court held a four-teen-day remedies trial. At the close ofthe remedies phase, several organizationsmoved to intervene in the litigation to as-sert their interests in the proposed reme-dies. The district court granted theAmerican Cancer Society, the AmericanHeart Association, the American Lung As-sociation, Americans for Nonsmokers’Rights, the National African American To-bacco Prevention Network, and the Tobac-co–Free Kids Action Fund leave to inter-vene solely on the subject of remedies.

The district court entered final judg-ment against Defendants on August 17,2006, finding that they maintained an ille-gal racketeering enterprise and each De-fendant participated in the conduct, man-agement, and operation of the enterprisein violation of section 1962(c), and thatthey explicitly and implicitly agreed to doso, in violation of section 1962(d). PhilipMorris, 449 F.Supp.2d at 851, 901. Thecourt found that Defendants engaged in ascheme to defraud smokers and potentialsmokers by (1) falsely denying the adversehealth effects of smoking, id. at 854; (2)falsely denying that nicotine and smokingare addictive, id. at 856; (3) falsely deny-ing that they manipulated cigarette designand composition so as to assure nicotinedelivery levels that create and sustain ad-diction, id. at 858; (4) falsely representingthat light and low tar cigarettes deliverless nicotine and tar and therefore presentfewer health risks than full flavor ciga-rettes, id. at 859; (5) falsely denying thatthey market to youth, id. at 861; (6) false-ly denying that secondhand smoke causesdisease, id. at 864; and (7) suppressingdocuments, information, and research toprevent the public from learning the truthabout these subjects and to avoid or limitliability in litigation, id. at 866. The courtconcluded that the government failed toprove that Defendants deliberately chosenot to utilize or market feasible designs or


product features that could produce lesshazardous cigarettes. Id. at 384.

Before granting injunctive relief againstDefendants the district court assessedwhether they presented a ‘‘reasonablelikelihood of further violation(s) in the fu-ture.’’ Id. at 909 (quoting SEC v. SavoyIndus., Inc., 587 F.2d 1149, 1168 (D.C.Cir.1978)). The court concluded that PhilipMorris, Reynolds, Brown & Williamson,Lorillard, American, Altria, and BATCowere reasonably likely to commit futureRICO violations unless enjoined becausethey continued to make false and mislead-ing statements at the time of trial, theirbusinesses presented continuing opportu-nities to commit RICO violations, andtheir corporate leadership continued toconsist of veteran employees with long-standing ties to the companies. Id. at910–13. Defendants argued that no in-junction was necessary because their Mas-ter Settlement Agreement with forty-sixstates and the District of Columbia andtheir individual settlements with fourstates already sufficiently restrained them.The district court rejected this argument,concluding that the Master SettlementAgreement did not obviate the need forinjunctive relief because Defendants hadnot fully complied with the agreement,parts of the agreement began expiring in2006, the states could not vigorously en-force all aspects of the agreement, andBATCo and Altria were not subject to thesettlement agreement. Id. at 913–15.

The district court found that three De-fendants—CTR, TI, and Liggett—did notpresent a reasonable likelihood of futureRICO violations, therefore the court didnot order injunctive remedies againstthem. CTR and TI, the court found, nowexist solely for the limited purpose ofwinding up their activities and each retainsonly one adviser to support its litigationdefense and handle any remaining admin-istrative matters. Id. at 915–18. The

court found that Liggett withdrew fromthe RICO conspiracy by admitting thatsmoking causes cancer and is addictive, byvoluntarily restricting its advertising andincluding disclosures on its packages, andby cooperating with the United States andstate attorneys general in their claimsagainst other tobacco companies. Id. at906–07, 918–19. The district court con-cluded that Liggett was not reasonablylikely to commit future RICO violationsbased on this withdrawal, its continuedindependence from the other Defendants,and its limited opportunity for future viola-tions by virtue of its discount cigarettemarket and lack of traditional consumeradvertising. Id. at 918–19.

Pursuant to section 1964, the districtcourt imposed injunctive remedies againstthe other seven manufacturer Defendants.Specifically, the court ordered Defendants(1) to refrain from any acts of racketeeringrelating to the manufacturing, marketing,promotion, health consequences, or sale ofcigarettes in the United States; (2) not toparticipate in the management or controlof CTR, TI, or CIAR, and not to reconsti-tute the form or function of those entities;(3) to refrain from making any materialfalse, misleading, or deceptive representa-tion concerning cigarettes that is dissemi-nated to the United States public; (4) tocease using any express or implied healthmessage or health descriptor for any ciga-rette brand, such as light or low tar; (5) tomake corrective disclosures about addic-tion, the adverse health effects of smokingand secondhand smoke, their manipulationof cigarette design and composition, andlight and low tar cigarettes; (6) to createdocument depositories providing the gov-ernment and the public access to all indus-try documents disclosed in litigation; and(7) to provide their disaggregated market-ing data to the government according tothe schedule on which they provide it tothe Federal Trade Commission. Id. at


938–45. The court also limited the saleand transfer of Defendants’ brands, prod-uct formulas, and businesses to entitiesthat either are subject to the injunctiveorder or will sell the brand, use the formu-la, or conduct the business exclusively out-side the United States. Id. at 945.

The district court denied the remainderof the government’s requested injunctiverelief, including its proposed nationalsmoking cessation program, public edu-cation and counter-marketing campaign,and youth smoking reduction plan. Id. at933–34, 936–37. The court also denied thegovernment’s requests that it appoint amonitor to investigate and restructure theDefendant companies, id. at 935, and thatit order Defendants to make public all‘‘health and safety risk information’’ abouttheir products in their own files, id. at 929.

All Defendants except Liggett appealed,raising numerous challenges to the findingof liability and the remedies imposed. Thegovernment and the intervenors filed across-appeal regarding the remedies thatthe district court denied. On Defendants’motion we stayed the remedial injunctionpending appeal.

[1, 2] We review the district court’sconclusions of law de novo. SEC v. Wash.Inv. Network, 475 F.3d 392, 399 (D.C.Cir.2007). To the extent it is not based onlegal error, we review the district court’sdecision to issue an injunction for abuse ofdiscretion. Id. We may not set aside thedistrict court’s findings of fact unless theyare clearly erroneous, giving due regard tothe court’s opportunity to judge the wit-nesses’ credibility. Id. (citing FED. R. CIV.

P. 52(a)(6)). This standard applies evenwhen the district court adopts a party’sproposed findings verbatim. Anderson v.City of Bessemer City, 470 U.S. 564, 572,105 S.Ct. 1504, 84 L.Ed.2d 518 (1985).

To establish RICO liability, the govern-ment had to prove the necessary elementsof RICO itself—including the existence of

an enterprise and a pattern of racketeer-ing activity, 18 U.S.C. § 1962(c)—as wellas the elements of the underlying conductconstituting the racketeering acts, here,numerous instances of mail and wire fraudunder 18 U.S.C. §§ 1341 and 1343. Defen-dants challenge the district court’s findingsregarding both RICO and the underlyingfraud, as well as the remedies the courtimposed. We address Defendants’ chal-lenges to RICO liability in Part II, theirgeneral challenges to fraud liability in PartIII, their challenges to specific aspects ofthe fraudulent scheme and the liability ofspecific Defendants in Part IV, their chal-lenges to the finding that they are likely tocommit future violations and thereforeshould be enjoined in Part V, and theirchallenges to particular remedies the courtimposed in Part VI.

II. Challenges to RICO Liability

A. RICO Enterprise

[3] RICO makes it unlawful for ‘‘anyperson TTT associated with any enterpriseTTT to conduct or participate, directly orindirectly, in the conduct of such enter-prise’s affairs through a pattern of racke-teering activity.’’ 18 U.S.C. § 1962(c).Thus, in a section 1962(c) suit, the defen-dants are the ‘‘persons’’ who conduct the‘‘enterprise’s’’ affairs through racketeeringactivity. Because RICO defines ‘‘person’’as including ‘‘any individual or entity capa-ble of holding a legal or beneficial interestin property,’’ id. § 1961(3), corporations aswell as individuals can be liable if theyconduct an enterprise’s affairs through apattern of racketeering activity. In lan-guage central to the issue before us, sec-tion 1961(4) states:

‘‘enterprise’’ includes any individual,partnership, corporation, association, orother legal entity, and any union orgroup of individuals associated in factalthough not a legal entity.


Id. § 1961(4). The enterprise as such gen-erally faces no section 1962(c) RICO liabili-ty; indeed it may be the innocent vehiclethrough which unlawful activity is carriedout, see Cedric Kushner Promotions, Ltd.v. King, 533 U.S. 158, 164, 121 S.Ct. 2087,150 L.Ed.2d 198 (2001) (‘‘RICO both pro-tects a legitimate ‘enterprise’ from thosewho would use unlawful acts to victimize it,and also protects the public from thosewho would unlawfully use an ‘enterprise’(whether legitimate or illegitimate) as a‘vehicle’ through which ‘unlawful TTT activ-ity is committed.’ ’’ (quoting United Statesv. Turkette, 452 U.S. 576, 591, 101 S.Ct.2524, 69 L.Ed.2d 246 (1981), and Nat’l Org.for Women, Inc. v. Scheidler, 510 U.S. 249,259, 114 S.Ct. 798, 127 L.Ed.2d 99 (1994))).When the enterprise is an association-in-fact, members of the association may beboth part of the ‘‘enterprise’’ and liable as‘‘persons’’ under RICO if they conduct theenterprise’s affairs through racketeeringactivity. See, e.g., United States v. Rich-ardson, 167 F.3d 621, 626 (D.C.Cir.1999)(upholding conviction of defendant mem-ber of association-in-fact enterprise).

Here, defining the RICO enterprise as‘‘a group of business entities and individu-als associated-in-fact, including Defendantsto this action, their agents and employees,and other organizations and individuals,’’the district court held that the Defendantcigarette manufacturers and trade organi-zations had violated section 1962(c) by par-ticipating in the conduct of the enterprise’saffairs through multiple acts of mail andwire fraud. Philip Morris, 449 F.Supp.2dat 851, 867. Defendants challenge the dis-trict court’s acceptance of a RICO enter-prise made up of individuals and corpora-tions, arguing that the statute provides anexclusive list of possible enterprises thatcovers groups of individuals associated infact, not mixed groups of individuals andcorporations associated in fact.

[4] In United States v. Perholtz, 842F.2d 343 (D.C.Cir.1988), however, wesquarely rejected this precise argument.There, we held that a group of seven indi-viduals and eleven corporations and part-nerships associated in fact may constitutea RICO ‘‘enterprise.’’ Id. at 351 n. 12, 353.We explained: ‘‘[RICO] defines ‘enter-prise’ as including the various entitiesspecified; the list of entities is not meantto be exhaustive.’’ Id. at 353. As such, agroup of individuals, corporations, andpartnerships associated in fact can qualifyas a RICO ‘‘enterprise,’’ even though sec-tion 1961(4) nowhere expressly mentionsthis type of association.

In so holding, we joined several othercircuits that had reached the same conclu-sion. Perholtz, 842 F.2d at 353 (citing theSecond, Third, Seventh, and Eleventh Cir-cuits, as well as Fifth Circuit Unit B).Indeed, both prior to and since Perholtz,every circuit to consider the question haslikewise held that corporations may bepart of an association-in-fact enterprise.See United States v. London, 66 F.3d 1227,1243–44 (1st Cir.1995) (holding that corpo-rations can be part of an association-in-factenterprise because section 1961(4)’s list isnot exhaustive); United States v. Huber,603 F.2d 387, 394 (2d Cir.1979) (same);United States v. Aimone, 715 F.2d 822,828 (3d Cir.1983) (same); United States v.Thevis, 665 F.2d 616, 625–26 (5th Cir. UnitB 1982) (same), superseded on othergrounds by FED.R.EVID. 804(b)(6) (1997);United States v. Masters, 924 F.2d 1362,1366 (7th Cir.1991) (same); Atlas PileDriving Co. v. DiCon Fin. Co., 886 F.2d986, 995 n. 7 (8th Cir.1989) (same); seealso Dana Corp. v. Blue Cross & BlueShield Mut. of N. Ohio, 900 F.2d 882, 887(6th Cir.1990) (reaching same outcome andciting Huber, 603 F.2d at 393–94); UnitedStates v. Navarro–Ordas, 770 F.2d 959,969 n. 19 (11th Cir.1985) (same); UnitedStates v. Feldman, 853 F.2d 648, 655–56


(9th Cir.1988) (reaching same outcomebased on different statutory analysis);United States v. Najjar, 300 F.3d 466, 484(4th Cir.2002) (upholding without discus-sion RICO convictions involving an associ-ation-in-fact enterprise that included cor-porations). The judges of these circuitsare equally unanimous, for not one hasdissented from the proposition that an as-sociation-in-fact enterprise may includecorporations.

Defendants argue that Perholtz has noapplicability where, as here, the defen-dants are corporations. Because the Per-holtz defendants were individual membersof the enterprise, not its corporate mem-bers, Defendants here claim that Perholtzapplies only when individuals, not corpora-tions, are the RICO defendants. As De-fendants see it, Perholtz merely ensuresthat individuals are unable to escape liabil-ity simply by including corporations intheir enterprise; Perholtz, they argue,does not mean that the associated-in-factcorporations can themselves incur RICOliability.

But nothing in Perholtz is so limited.Quoting the Supreme Court’s statement inUnited States v. Turkette that ‘‘[t]here isno restriction upon the associations em-braced by the definition [of enterprise],’’452 U.S. at 580, 101 S.Ct. 2524, Perholtzsets forth its holding in broad terms: ‘‘Wetherefore follow those courts that haveheld that individuals, corporations, andother entities may constitute an associa-tion-in-fact,’’ 842 F.2d at 353. Nowheredoes Perholtz suggest that the rule variesdepending on the identity of the defen-dants. Indeed, two of the cases Perholtzrelies on involved corporate defendants.Id. (citing Thevis, 665 F.2d at 625–26 (up-holding RICO convictions for one individu-al and one corporate defendant), andBunker Ramo Corp. v. United Bus.Forms, Inc., 713 F.2d 1272, 1285 (7th Cir.1983) (upholding RICO charges against

one individual and one corporation)).Many other decisions have similarly up-held RICO allegations involving corporatedefendants who were also members of theassociation-in-fact enterprise. See, e.g.,City of N.Y. v. Smokes–Spirits.com, Inc.,541 F.3d 425, 450–51 (2d Cir.2008); Odomv. Microsoft Corp., 486 F.3d 541, 553 (9thCir.2007); Najjar, 300 F.3d at 484; UnitedStates v. Goldin Indus., Inc., 219 F.3d1271, 1274 (11th Cir.2000); Dana Corp.,900 F.2d at 887; Shearin v. E.F. HuttonGroup, Inc., 885 F.2d 1162, 1165–66 (3dCir.1989), overruled on other grounds byBeck v. Prupis, 529 U.S. 494, 506, 120S.Ct. 1608, 146 L.Ed.2d 561 (2000); AtlasPile Driving, 886 F.2d at 995; Ocean En-ergy II, Inc. v. Alexander & AlexanderInc., 868 F.2d 740, 748–49 (5th Cir.1989).

Moreover, Defendants’ proposed limita-tion on Perholtz is contrary to the statute’slanguage. As ‘‘persons’’ under section1961(3), corporations may be RICO defen-dants regardless of the kind of enterprisecharged. See 18 U.S.C. § 1962(c) (‘‘Itshall be unlawful for any person TTT asso-ciated with any enterprise TTT to conductor participate, directly or indirectly, in theconduct of such enterprise’s affairsthrough a pattern of racketeering activity.’’(emphases added)). Defendants cite not asingle case lending even a shred of supportto the idea that the meaning of ‘‘enter-prise’’ can fluctuate depending on whomthe government or the plaintiff chooses toname as the defendant. Perholtz’s inter-pretation of section 1961(4) thus appliesregardless of whether the RICO defen-dants are individual ‘‘persons’’ or corporate‘‘persons.’’ To hold otherwise would re-quire us to rewrite section 1962(c).

In a further attempt to evade Perholtz,Defendants argue that even if Perholtzwas correct when decided, it has beeneroded by the Supreme Court’s 2001 deci-sion in Cedric Kushner Promotions, Ltd.


v. King, 533 U.S. 158, 121 S.Ct. 2087, 150L.Ed.2d 198 (2001). Defendants’ argu-ment begins with the premise that at thetime we decided Perholtz, RICO presenteda potential loophole: because the RICOdefendant must be distinct from the RICOenterprise, Yellow Bus Lines, Inc. v. Driv-ers, Chauffeurs & Helpers Local Union639, 839 F.2d 782, 790 (D.C.Cir.1988)(‘‘[O]ne entity may not serve as the enter-prise and the person associated with itTTTT’’), vacated on other grounds, 492 U.S.914, 109 S.Ct. 3235, 106 L.Ed.2d 583(1989), a sole shareholder who used hisalter-ego corporation for racketeeringmight evade RICO liability because hewouldn’t be sufficiently distinct from thealter-ego corporation ‘‘enterprise.’’ Defen-dants rely on Perholtz’s suggestion that adefinition of ‘‘enterprise’’ that excluded as-sociations-in-fact of corporations wouldlead to ‘‘the bizarre result that only crimi-nals who failed to form corporate shells toaid their illicit schemes could be reachedby RICO.’’ 842 F.2d at 353. According toDefendants, we were motivated in Perholtzby the underlying concern ‘‘that a criminaldefendant conducting the affairs of an ‘en-terprise’ that was his own closely heldcorporation, would be so closely tied to theenterprise that he would escape RICO lia-bility.’’ Defs. Br. 37. Given that the Su-preme Court has subsequently eliminatedthis concern—holding in Cedric Kushnerthat an individual sole shareholder is suffi-ciently distinct from his alter-ego corpora-tion to sustain RICO liability, 533 U.S. at160, 121 S.Ct. 2087—Defendants assertthat Perholtz no longer represents bindingauthority.

We do not read Perholtz as motivated bythe concerns addressed in Cedric Kushner.In contrast to Cedric Kushner, the enter-prise in Perholtz involved multiple individ-uals and numerous corporations, with noindication that the corporations were ei-ther all closely held by the individual de-fendants or in any other way insufficiently

distinct. 842 F.2d at 351 n. 12. Indeed, atleast some of the Perholtz corporate enter-prise members were not closely held. Forexample, enterprise member InternationalBusiness Services, Inc. (IBS) existed in itsown right prior to the scheme and wasrelated to the defendants through employ-ment relationships that would not havedefeated RICO’s distinctness requirement:Perholtz himself was a consultant to IBS,and the other RICO defendant, FranklinJackson, was an IBS project manager. Id.at 348. Similarly, enterprise member Re-mote Computer Services Corporation, al-though formed expressly for the purposeof the scheme, was jointly held in equalshares by three individuals—Perholtz andtwo other individual members of the enter-prise, id. at 350—and thus would havebeen sufficiently distinct from each ofthose non-sole shareholders. The enter-prise also included two separate real estatecompanies both of which apparently exist-ed independently of the scheme and werenot otherwise affiliated with the individu-als. Id. at 351 n. 12. At least one individu-al enterprise member, John Gentile,worked for the Postal Service and appar-ently had no formal stake in the corporateenterprise members. Id. at 346, 351 n. 12.In Perholtz, we held that all these corpora-tions—not just those closely held or creat-ed solely for the scheme—could be part ofan association-in-fact enterprise. Indeed,only after so holding did we turn to Per-holtz’s entirely separate argument that he,as an individual, was insufficiently distinctfrom the enterprise. Far from basing ourholding on this argument, we simply notedthat we had ‘‘no occasion to consider theseparateness requirement’’ because Per-holtz associated not with himself but withothers. Id. at 353.

Given the structure of the Perholtz en-terprise and the court’s acknowledgementthat distinctness was not at issue, we thinkPerholtz reflected a different concern,


namely that a group of sophisticated rack-eteers who would otherwise constitute anassociation-in-fact might evade RICO’sgrasp by virtue of their ability to operatethrough corporations and establish com-plex networks of companies, kickbacks,and contracts to achieve their illicit ends.Indeed, immediately following its refer-ence to ‘‘corporate shells,’’ Perholtz em-phasized Congress’s desire that RICOserve ‘‘as a weapon against the sophisticat-ed racketeer as well as (and perhaps morethan) the artless.’’ Id. Perholtz itself pre-sented just such a situation: the defen-dants worked through their own compa-nies and multiple outside corporations inan intricate web of shared commissions togame the bidding process for governmentcontracts. The success of the scheme re-quired the participation of companies toserve as contractors and subcontractors.‘‘This relationship of individuals and corpo-rations is precisely what section 1962(c)was designed to attack.’’ Id. at 354.

Moreover, in asserting their CedricKushner argument, Defendants fail to ex-plain how Perholtz’s interpretation wouldeven solve the hypothetical problem theyposit. According to Defendants, in orderto preserve RICO liability for a sole share-holder who would be insufficiently distinctfrom his alter-ego corporation, the Per-holtz court held that an ‘‘individual and hisshell corporation could together TTT consti-tute an association-in-fact enterprise.’’Defs. Reply Br. 16. In Defendants’ view,the sole shareholder would then be liableunder RICO for conducting the affairs ofthis association-in-fact enterprise. Yet ifan individual is insufficiently distinct fromhis alter-ego corporation, we seriouslydoubt he would suddenly be sufficientlydistinct from an enterprise consisting ofhis alter-ego corporation and himself. IfPerholtz had been concerned with distinct-ness, its purported ‘‘solution’’ would makelittle sense.

Further seeking to justify their relianceon Cedric Kushner, Defendants say thatthe government cites only one post-CedricKushner case—United States v. Najjar,300 F.3d 466 (4th Cir.2002)—that upheldan association-in-fact enterprise of corpo-rations. The relevance of this is hard tograsp, as other post-Cedric Kushner casesnot cited by the government accept associ-ation-in-fact enterprises comprised of cor-porations. See Smokes–Spirits.com, 541F.3d at 450–51 (holding that the plaintiffadequately pleaded an association-in-factenterprise consisting of two corporations);Odom, 486 F.3d at 553 (holding that plain-tiffs had sufficiently alleged an association-in-fact enterprise of two corporations);United States v. Cianci, 378 F.3d 71, 83(1st Cir.2004) (‘‘It is uncontroversial thatcorporate entities, including municipal andcounty ones, can be included within associ-ation-in-fact RICO enterprises.’’); LivingDesigns, Inc. v. E.I. Dupont de Nemours& Co., 431 F.3d 353, 361 (9th Cir.2005)(‘‘[T]here is no question that DuPont [cor-poration] and the law firms together canconstitute an ‘associated in fact’ RICO en-terprise.’’). And as we noted above, nocircuit has ever held the opposite.

Cedric Kushner thus undermines nei-ther the unanimous judicial view that asso-ciation-in-fact enterprises may include cor-porations nor Perholtz’s binding effect onthis case. Defendants’ argument that weshould read section 1961(4) as an exhaus-tive list of possible RICO enterprises istherefore unavailing. Not only is it fore-closed by Perholtz, it is unpersuasive on itsown terms. As Perholtz and many othercircuits explain, the use of the word ‘‘in-cludes’’ indicates that RICO’s list of ‘‘en-terprises’’ is non-exhaustive. Indeed, sec-tion 1961 makes the non-exhaustive natureof ‘‘includes’’ clear by alternating betweenthe words ‘‘means’’ and ‘‘includes’’ to intro-duce the section’s various definitions.Specifically, five of section 1961’s ten sub-


sections introduce definitions with theword ‘‘means.’’ For example, section1961(1) defines ‘‘racketeering activity,’’ ex-plaining that the term ‘‘means’’ any of alist of specific state and federal crimes.Section 1961(2) likewise introduces a defi-nitional list with the term ‘‘means’’:‘‘ ‘State’ means any State of the UnitedStates, the District of Columbia, the Com-monwealth of Puerto Rico, any territory orpossession of the United States, any politi-cal subdivision, or any department, agency,or instrumentality thereof.’’ 18 U.S.C.§ 1961(2); see also id. § 1961(6), (7), (8)(introducing definitions of ‘‘unlawful debt,’’‘‘racketeering investigator,’’ and ‘‘racke-teering investigation’’ with the term‘‘means’’). Section 1961(4), by contrast,says ‘‘ ‘enterprise’ includes any individual,partnership, corporation, association, orother legal entity, and any union or groupof individuals associated in fact althoughnot a legal entity.’’ Id. § 1961(4) (empha-sis added). By switching between‘‘means’’ and ‘‘includes’’ in the same defini-tional provision, Congress signaled its in-tent to distinguish between exhaustive andnon-exhaustive lists. See Helvering v.Morgan’s, Inc., 293 U.S. 121, 126 n. 1, 55S.Ct. 60, 79 L.Ed. 232 (1934) (describing astatute that introduced three definitionswith the word ‘‘includes’’ and seven defini-tions with the word ‘‘means’’ and notingthat ‘‘[t]he natural distinction would bethat where ‘means’ is employed, the termand its definition are to be interchangeableequivalents, and that the verb ‘includes’imports a general class, some of whoseparticular instances are those specified inthe definition’’).

That Congress provided an exhaustivelist of legal entity enterprises by addingthe phrase ‘‘or other legal entity’’ hardlyconverts the list of non-legal entity enter-prises into an exhaustive list. Had Con-gress wanted to limit non-legal entity asso-ciations to those expressly listed, the mostobvious way to do so would have been the

way Congress wrote the five clearly ex-haustive definitions in the same section: itcould have said ‘‘ ‘enterprise’ means anyindividual, partnership, corporation, associ-ation, or other legal entity, or any union orgroup of individuals associated in fact al-though not a legal entity.’’ But Congresschose to say ‘‘ ‘enterprise’ includes ’’ thelisted entities. Defendants think that thephrase ‘‘or other legal entity’’ would havebeen unnecessary if the list were otherwisenon-exhaustive. Not so. Adding ‘‘or oth-er legal entity’’ serves to ensure that alllegal entities are covered while retainingthe possibility that some additional non-legal entities beyond those listed are alsocovered.

Nor does the use of the phrase ‘‘includ-ing, but not limited to’’ to indicate a non-exhaustive list in a different section ofRICO, section 1964(a), demonstrate thatthe sole word ‘‘includes’’ in section 1961(4)must introduce an exhaustive list. Section1964, which establishes civil remedies forRICO violations, lacks section 1961’s juxta-position of the non-exhaustive term ‘‘in-cludes’’ with the exhaustive term ‘‘means’’;adding ‘‘but not limited to’’ helps to em-phasize the non-exhaustive nature of sec-tion 1964(a)’s list of remedies. Section1961 needed no such clarification becauseit employed the contrasting terms ‘‘means’’and ‘‘includes’’ to distinguish exhaustivefrom non-exhaustive definitions.

Contrary to Defendants’ argument,nothing about this interpretation rendersthe definition of ‘‘enterprise’’ devoid ofmeaning. Although encompassing non-enumerated enterprises, section 1961(4)’slist defines ‘‘enterprise,’’ in part, by listingthe kinds of entities Congress had in mind.Indeed, the Supreme Court has acknowl-edged this meaning by requiring enterpris-es to exhibit common purpose, organiza-tion, and continuity. Turkette, 452 U.S. at


583, 101 S.Ct. 2524; see also Richardson,167 F.3d at 625.

In sum, as Perholtz clearly holds, be-cause RICO’s ‘‘list of entities is not meantto be exhaustive,’’ ‘‘individuals, corpora-tions, and other entities may constitute anassociation-in-fact.’’ 842 F.2d at 353.This binding precedent—confirmed by thestatute’s language, buttressed by the una-nimity among our sister circuits, and undi-minished by Defendants’ efforts to escapeit—requires that we affirm the districtcourt’s holding that the government prop-erly alleged a RICO enterprise of individu-als, cigarette manufacturers, and trade or-ganizations.

We also reject Defendants’ additionalchallenges to the district court’s findingsregarding the existence of a RICO enter-prise and their participation in its affairs.The district court found—permissibly inour view—that the enterprise had the com-mon purpose of obtaining cigarette pro-ceeds by defrauding existing and potentialsmokers, Philip Morris, 449 F.Supp.2d at869; possessed the requisite structureboth through informal association andthrough the formation of several formalorganizations, id. at 870–71; functioned asa continuous unit despite personnelchanges, id. at 871–72; and constituted aseparate entity distinct from each Defen-dant, id. at 875. Defendants give us nei-ther any basis for concluding that the dis-trict court’s factual findings were clearlyerroneous nor any reason to think themlegally insufficient. The district court alsofound—again permissibly—that despitecompeting in some aspects of their busi-ness, Defendants jointly committed fraudand so participated in the conduct of notjust their own affairs but the enterprise’sas well, id. at 875–78, and also that theyconspired to do so, id. at 903–05. Accord-ingly, we affirm the district court’s find-ings that an enterprise existed and that

Defendants participated in the conduct ofits affairs and conspired to do so.

B. Identifying Racketeering Acts

[5] Defendants complain that the dis-trict court failed to identify the racketeer-ing acts that support the finding of liabili-ty. While it is true the district court’sopinion provided no single, discrete list ofspecific racketeering acts, the comprehen-sive findings—detailing over one-hundredracketeering acts—are sufficient to war-rant affirmance. Defendants raise numer-ous challenges to the correctness of thedistrict court’s findings that they commit-ted racketeering acts, which we take up inParts III and IV. In this section, however,we are concerned only with the existenceof these findings, not their validity.

[6] By statutory definition, any viola-tion of the mail or wire fraud statutes canqualify as ‘‘racketeering activity.’’ 18U.S.C. § 1961(1). To prove a violation ofthe mail and wire fraud statutes, the gov-ernment must show (1) a scheme or arti-fice to defraud and (2) a mailing or wiretransmission in furtherance thereof. Id.§§ 1341, 1343. ‘‘Where one scheme in-volves several mailings, the law is settledthat each mailing constitutes a violation ofthe statute.’’ Hanrahan v. United States,348 F.2d 363, 366 (D.C.Cir.1965). Where,as here, the mail and wire fraud statutesserve as the predicate offenses for a RICOviolation, each racketeering act must be amailing or wire transmission made in fur-therance of a ‘‘scheme or artifice to de-fraud.’’ 18 U.S.C. §§ 1341, 1343. Thus, inorder to identify the racketeering acts, thedistrict court must first have found ascheme to defraud, then concluded the al-leged mailings or wire transmissions werein furtherance of such scheme. See PhilipMorris, 449 F.Supp.2d at 852–54.

Although Defendants question whetherthe district court clearly found a scheme to


defraud, the finding on this question isexplicit: ‘‘The Government has proven thatthe Enterprise knowingly and intentionallyengaged in a scheme to defraud smokersand potential smokers, for purposes of fi-nancial gain, by making false and fraudu-lent statements, representations, andpromises.’’ Id. at 852. The district courtexplains, in great detail, the seven compo-nents of the scheme to defraud. Id. at852–67.

The court also held that ‘‘each of thealleged mailings and wire transmissionswas in furtherance of the overarchingscheme to defraud.’’ Id. at 881. Thus itfollows that any mailing or wire transmis-sion found to have been made was found tohave been a mail or wire fraud offense andtherefore a racketeering act.

Seventy-nine of the alleged acts wereestablished by Defendants’ own stipula-tions and admissions. Id. at 882 (enumer-ating 79 racketeering acts). Altogether,the court enumerated 108 racketeeringacts in the opinion, as well as six otherswhich it excluded on First Amendmentgrounds. See id. at 882, 884, 885 n. 62,887. This total does not include the manyother findings which may be tied to otherracketeering acts, but for which the dis-trict court did not provide a specific list.See, e.g., id. at 883 (‘‘[I]t is clear beyondany question that Defendants caused themailings and wire transmissions underly-ing the 30 Racketeering Acts involving thenews media’s dissemination of Defendants’press releases and advertisements to theirsubscribers.’’).

The RICO statute requires ‘‘a pattern ofracketeering activity’’ on the part of eachdefendant. 18 U.S.C. § 1962(c). ‘‘[A]tleast two acts of racketeering activity’’ arenecessary to form a pattern. H.J., Inc. v.Nw. Bell Tel. Co., 492 U.S. 229, 237, 109S.Ct. 2893, 106 L.Ed.2d 195 (1989) (quot-ing 18 U.S.C. § 1961(5)). The districtcourt found the requisite pattern commit-

ted by each Defendant, Philip Morris, 449F.Supp.2d at 889–91, and this finding isnot erroneous. A brief sampling of the108 enumerated racketeering acts makesthe point: Philip Morris, Reynolds, Brown& Williamson, Lorillard, American, and TIcommitted racketeering acts 24, 132, and133 by mailing press releases containingfalse statements about the addictivenessand health consequences of smoking. Id.at 194, 282–83. Philip Morris, Reynolds,Brown & Williamson, Lorillard, American,Liggett, and CTR committed racketeeringacts 66, 73, and 88 by mailing letters re-garding funding of CTR’s ‘‘special pro-jects’’ to create data supporting theirfraudulent claims. Id. at 101, 882, 972,976. BATCo and Brown & Williamsoncommitted racketeering acts 30, 50, 51, 53,and 63 through their mailings to each oth-er concerning the enterprise’s position onthe health effects and addictiveness ofsmoking as well as smoker compensationand nicotine. Id. at 253–54, 301, 882, 965,969. Altria committed racketeering acts71, 72, 74, and 75 in its efforts to coordi-nate Defendants’ public positions and fundCTR research projects to support theirfraudulent claims. Id. at 295, 813, 884,974. As these examples demonstrate, thedistrict court found each Defendant en-gaged in a ‘‘pattern of racketeering activi-ty,’’ and that finding is not erroneous. Seeinfra Parts III, IV.

The 108 enumerated acts give us amplebasis to review the district court’s finding.Although the district court may have con-cluded other racketeering acts were prov-en as well, we need look no further. De-fendants correctly argue we must ensurethe remedy imposed is tailored to ‘‘theviolation found,’’ United States v. Micro-soft, 253 F.3d 34, 105 (D.C.Cir.2001); thevoluminous findings detailing the contoursof the scheme to defraud are more thansufficient to allow this review, see, e.g.,Philip Morris, 449 F.Supp.2d at 852–67.


Given that a mailing or wire transmissionneed not itself be fraudulent, the remedyneeds to be tailored to the scheme todefraud, not the specific use of the mail orwires.

For similar reasons, we need not resolveDefendants’ challenges to the racketeeringacts involving denials of marketing toyouth. As the district court imposed noremedies specifically relating to youthmarketing, our assessment whether theremedies are tailored to the violation foundis unaffected by the associated racketeer-ing acts. The remaining racketeering actsare fully sufficient to support the districtcourt’s finding of a pattern of racketeeringactivity as to each Defendant. Becausethese challenges have no impact on theoutcome of this appeal, we decline to ad-dress them. The district court set forthfindings sufficient to allow our review of itsverdict of liability and imposition of sanc-tion.

III. General Challengesto Fraud Liability

A. Specific Intent

The predicate acts of racketeering inthis case were all acts of mail or wirefraud, which require specific intent to de-fraud. Post v. United States, 407 F.2d319, 329 (D.C.Cir.1968). Defendants chal-lenge the district court’s conclusion thatthey acted with specific intent, arguingthat the district court applied an impermis-sible ‘‘collective intent’’ standard and thatthe government did not present any evi-dence to support a finding of specific in-tent under the correct formulation.

[7, 8] Corporations may be held liablefor specific intent offenses based on the‘‘knowledge and intent’’ of their employees.N.Y. Cent. & Hudson River R.R. Co. v.United States, 212 U.S. 481, 495, 29 S.Ct.304, 53 L.Ed. 613 (1909); see UnitedStates v. A & P Trucking Co., 358 U.S.121, 125, 79 S.Ct. 203, 3 L.Ed.2d 165

(1958). Because a corporation only actsand wills by virtue of its employees, theproscribed corporate intent depends on thewrongful intent of specific employees. SeeSaba v. Compagnie Nationale Air France,78 F.3d 664, 670 (D.C.Cir.1996). Thus, todetermine whether a corporation made afalse or misleading statement with specificintent to defraud, we look to the state ofmind of the individual corporate officersand employees who made, ordered, or ap-proved the statement. Southland Sec.Corp. v. INSpire Ins. Solutions Inc., 365F.3d 353, 366 (5th Cir.2004).

A person’s state of mind is rarely sus-ceptible of proof by direct evidence, sospecific intent to defraud may be, and mostoften is, inferred from the totality of thecircumstances, including indirect and cir-cumstantial evidence. United States v. Al-ston, 609 F.2d 531, 538 (D.C.Cir.1979);United States v. Reid, 533 F.2d 1255, 1264(D.C.Cir.1976). We refer to this inferencewhen, in the common law fraud context, wesay that the factfinder ‘‘is permitted toimpute knowledge of the falsity of thestatements to the accused, not as a matterof law but as a consequence of inferencesreasonably drawn from the facts shown.’’United States v. Avant, 275 F.2d 650, 653(D.C.Cir.1960).

[9] Here, the district court concludedthat the chief executive officers and otherhighly placed officials in the Defendantcorporations made or approved statementsthey knew to be false or misleading, evinc-ing their specific intent to defraud consum-ers. In some instances, the court found bydirect evidence that representatives of theDefendant companies ‘‘willfully stat[ed]something which they knew to be untrue.’’Philip Morris, 449 F.Supp.2d at 895. Forexample, the court found that, in a tele-vised interview in 1971, Philip MorrisPresident Joseph Cullman III denied thatcigarettes posed a health hazard to preg-


nant women or their infants, ‘‘contra-dict[ing] the information Helmut Wake-ham, Philip Morris’s Vice President forCorporate Research and Development, hadgiven him two years earlier.’’ Id. at 193–94. In the main, however, the districtcourt relied on indirect and circumstantialevidence indicating that the senior corpo-rate officials knew that their public state-ments, and those that they approved fortheir corporations, were false or mislead-ing.

In the majority of instances, the authorsof the fraudulent statements alleged asRacketeering Acts were executives, in-cluding high level scientists—CEOs,Vice Presidents, Heads of Research &Development, not entry level employ-ees—at each of the Defendant compa-nies who would reasonably be expectedto have knowledge of the company’s in-ternal research, public positions, andlong term strategies.

Id. at 897. The court reasoned:[I]t is absurd to believe that the highly-ranked representatives and agents ofthese corporations and entities had noknowledge that their public statementswere false and fraudulent. The Find-ings of Fact are replete with examplesof C.E.O.s, Vice–Presidents, and Di-rectors of Research and Development,as well as the Defendants’ lawyers, mak-ing statements which were inconsistentwith the internal knowledge and practiceof the corporation itself.

Id. at 853. The district court did notcommit legal error by imputing to Defen-dants’ executives knowledge of the falsityof their statements based on inferencesreasonably drawn from the facts shown,and sufficient evidence supported these in-ferences.

The government presented decades ofevidence that scientists within the Defen-dant corporations and outside scientistshired by the corporations and their joint

entities were continually conducting re-search and reviewing the research of otherscientists regarding cigarettes and health,addiction, nicotine and tar manipulation,and secondhand smoke. The evidence attrial demonstrated that the results of thisresearch—essential to the core of Defen-dants’ operations, including strategic plan-ning, product development, and advertis-ing—were well known, acknowledged, andaccepted throughout the corporations.These results established that cigarettesmoking causes disease, that nicotine isaddictive, that light cigarettes do not pres-ent lower health risks than regular ciga-rettes due to smoker compensation, andthat secondhand smoke is hazardous tohealth. Dr. William Farone, a scientistwho worked at Philip Morris for eighteenyears and whom the district court found tobe ‘‘impressive and credible as both a factand expert witness,’’ id. at 186, testifiedabout the understanding within PhilipMorris on the question of whether ciga-rette smoking is a cause of lung cancer andother diseases:

There was widespread acceptance thatsmoking caused disease. I never talkedwith a scientist at Philip Morris whosaid that smoking doesn’t cause disease.[This was based on the] compelling epi-demiology such as that recounted in theSurgeon’s [sic] General’s reports, andour knowledge about the chemicals thatwere created by cigarettes and what wasdelivered to the smoker, hundreds oftimes per day on average.

Id. at 187 (quoting Farone testimony).When asked whether, in his discussionswith Philip Morris executives, any of themchallenged the validity of the scientific evi-dence that smoking causes disease, Faroneanswered,

No. Their comments generally focusedon how the company could or shouldrespond, not to whether the scientific


evidence was valid. Remember, a mainreason why they hired me in 1976 was tohelp develop a less hazardous cigarette.It seemed to me at the time I was hired,and certainly was the case during myentire time there, that hiring me for thatjob was itself implicit recognition thatthe cigarettes that were out there beingsold were causing disease.

Id. (quoting Farone testimony).The Defendant corporations document-

ed the results of the studies regardingdisease, nicotine addiction, and smokercompensation in numerous memorandaand reports; the evidence at trial, includ-ing internal corporate documents, demon-strated that the executives crafted theircorporate priorities and strategies in re-sponse to these findings. See, e.g., id. at165, 180, 218, 219, 232, 240, 258–59, 270,336, 720. Defendants’ own documentsalso support the inference that Defen-dants’ executives were aware that theirpublic relations strategy of creating theimpression of an ‘‘open question’’ aboutthe link between smoking and disease didnot square with their own knowledgeabout the established link between thetwo. For example, William Kloepfer, VicePresident of Public Relations for the To-bacco Institute, wrote to Earle Clements,President of the Tobacco Institute, admit-ting that ‘‘[o]ur basic position in the ciga-rette controversy is subject to the charge,and may be subject to a finding, that weare making false or misleading statementsto promote the sale of cigarettes.’’ Id. at855. Other documents demonstrate thatDefendants’ top officials were directly in-formed of negative research results. Forexample, in 1977 Philip Morris AssistantGeneral Counsel Alexander Holtzman senta ‘‘warning’’ to the company’s President,Joseph Cullman, informing him that a re-search project jointly sponsored by agroup of the Defendant companies hadconcluded that exposure to cigarettesmoke causes emphysema. Id. at 183.

The government presented similar evi-dence regarding the other aspects of De-fendants’ scheme, such as addiction andnicotine. A few examples cannot ade-quately present the volumes of evidenceunderlying the district court’s findings offact, but the following provide a fair sam-ple: A 1991 Reynolds Research and Devel-opment report acknowledged that ‘‘[w]eare basically in the nicotine business.’’ Id.at 237. Dr. Farone testified that duringhis time at Philip Morris there was ‘‘wide-spread acceptance internally throughoutthe company—among executives, scien-tists, and marketing people’’ that nicotinewas primarily responsible for addiction tosmoking. Id. at 858. Indeed, the districtcourt found that ‘‘internal documents andtestimony from former company employ-ees affirmed that within their corporatewalls, Defendants openly recognized theaddictiveness of cigarettes.’’ Id. Regard-ing light cigarettes, internal research re-ports and memoranda at the Defendantcompanies revealed that they understoodthe phenomenon of smoker compensationand studied how to manipulate it in orderto make their light brands appealing toaddicted smokers while continuing to beable to advertise the brands as low tar.For example, a 1978 BATCo memorandumabout that company’s internal research ac-knowledged that ‘‘a majority of habitualsmokers compensate for changed delivery’’and explained that if smokers ‘‘choose [a]lower delivery brand TTT than their usualbrand’’ they ‘‘will in fact increase theamounts of tar and gas phase that theytake in, in order to take in the sameamount of nicotine.’’ Id. at 861. Dr. Far-one testified that Defendants’ superiorknowledge of compensation (compared tothat of scientists outside the industry, in-cluding the government) was closely heldwithin Philip Morris and the tobacco in-dustry and there was an ‘‘effort on thepart of [his] coworkers at Philip Morris,


including [his] supervisors, to restrict anypublic acknowledgment on the part of Phil-ip Morris of the phenomena of compensa-tion.’’ Id.

As these examples and hundreds morefindings in the district court’s opinion dem-onstrate, the court had before it sufficientevidence from which to conclude that De-fendants’ executives, who directed the ac-tivities of the Defendant corporations andtheir joint entities, knew about the nega-tive health consequences of smoking, theaddictiveness and manipulation of nicotine,the harmfulness of secondhand smoke, andthe concept of smoker compensation, whichmakes light cigarettes no less harmfulthan regular cigarettes and possibly more.The government presented evidence indi-cating that specific high-ranking corporateofficials were directly informed aboutthese matters, as well as evidence of per-vasive knowledge and acceptance of thesepropositions throughout the Defendant or-ganizations. The overwhelming indirectand circumstantial evidence was sufficientto allow the district court to reasonablyinfer that the high level executives, includ-ing ‘‘CEOs, Vice Presidents, [and] Headsof Research & Development’’ for Defen-dants knew about their respective compa-nies’ ‘‘internal research, public positions,and long term strategies,’’ id. at 897, thatis, the ‘‘internal knowledge and practice’’of the company, id. at 853. These execu-tives then made, caused to be made, andapproved public statements contrary tothis knowledge. See, e.g., id. at 190 (PhilipMorris Vice President and General Coun-sel declaring ‘‘[n]obody has yet been ableto find any ingredient as found in tobaccoor smoke that causes human disease’’); id.at 166, 201 (28 years after Reynolds scien-tists declared the presence of carcinogeniccompounds in cigarettes was ‘‘now wellestablished,’’ a Reynolds press release andnewspaper advertisement declared theconnection between smoking and disease‘‘an open controversy’’); id. at 772 (TI

published booklet declaring that second-hand smoke had not been shown to be ahealth hazard to nonsmokers); id. at 796(Lorillard general counsel testified at trialthat the company’s public position has al-ways been and continues to be that sec-ondhand smoke is not a proven healthhazard); id. at 273 (President and CEO ofPhilip Morris quoted in TIME magazinefrom deposition testimony claiming thatcigarettes are not addictive unless a simi-lar attachment to Gummi Bears is an ad-diction); id. at 285 (TI’s Vice President forPublic Affairs on television programs flatlydenying that nicotine is addictive, statingthe attachment is like being a ‘‘news junk-ie’’ or ‘‘chocoholic’’).

[10] Specific intent to defraud may beinferred where, as here, there is a patternof corporate research revealing a particu-lar proposition, for example, that smokingis addictive; an ensuing pattern of memo-randa within the corporation acknowl-edging that smoking is addictive, eventhough the memoranda may or may nothave gone directly to the executive whomakes the contrary statement; and thecorporate CEO or other official of highcorporate status then makes a public state-ment stating that smoking is not addictive,contrary to the knowledge within the cor-poration. Based on this sort of evidenceand the inferences reasonably drawn fromit, a factfinder could permissibly infer thatthe speaker harbored specific intent todefraud at the time he or she made thefalse or misleading statement. Moreover,such pervasive knowledge throughout theorganizations demonstrates that Defen-dants’ executives at least acted with reck-less disregard for the truth or falsity oftheir statements. As the district courtcorrectly held, such reckless disregard suf-fices to demonstrate the requisite intent.Id. at 897. The law then imputes thisspecific intent to the corporation.


Defendants argue that, even if the previ-ous discussion presents a correct state-ment of the law, it is not the standard thatthe district court applied here. Rather,Defendants assert that the district courtrelied on an impermissible ‘‘collective in-tent’’ theory to find specific intent basedon public statements contradicting the‘‘collective knowledge’’ of the Defendantcorporations without finding that any em-ployee harbored specific intent to defraud.Like Defendants and other courts, we aredubious of the legal soundness of the ‘‘col-lective intent’’ theory. Saba, 78 F.3d at670 n. 6 (‘‘corporate knowledge of certainfacts [can be] accumulated from the knowl-edge of various individuals, but the pro-scribed intent (willfulness) depend[s] onthe wrongful intent of specific employ-ees’’); see, e.g., Southland Sec. Corp., 365F.3d at 366; Nordstrom, Inc. v. Chubb &Son, Inc., 54 F.3d 1424, 1435 (9th Cir.1995); United States v. Bank of New Eng.,N.A., 821 F.2d 844, 855 (1st Cir.1987);Woodmont, Inc. v. Daniels, 274 F.2d 132,137 (10th Cir.1960); First Equity Corp. v.Standard & Poor’s Corp., 690 F.Supp. 256,260 (S.D.N.Y.1988). We need not pass onthe merits of such a standard here, howev-er, because the district court relied on apermissible view of specific intent. Al-though at times the court articulated a‘‘collective intent’’ standard, see PhilipMorris, 449 F.Supp.2d at 895–97, it alsobased its holding on a proper view ofspecific intent, see id. at 853, 897, and weare satisfied that the court’s conclusionsbased on the proper standard are suffi-cient to uphold its judgment.

B. Materiality

In their next general challenge to fraudliability, Defendants argue that their falseand misleading statements about thehealth effects of smoking cannot, as a legalmatter, be fraudulent because their state-ments were not material. This argument

is based on a flawed understanding of themateriality requirement.

[11–13] In order for a false or mislead-ing statement to qualify as mail or wirefraud, it ‘‘must concern a material or im-portant fact or matter.’’ United States v.Winstead, 74 F.3d 1313, 1320 (D.C.Cir.1996). This materiality requirement ismet if the matter at issue is ‘‘of importanceto a reasonable person in making a deci-sion about a particular matter or transac-tion.’’ Id. Materiality does not requireproof that any specific person (or numberof people) purchased cigarettes as a resultof the false statements. Nor does it re-quire Defendants’ false statements to bethe cause, reason, or sufficient condition ofany person’s decision to purchase ciga-rettes. Moreover, no subjective evidenceregarding any particular person is re-quired; the test is only whether a reason-able person would consider the matter tobe of importance regarding the transac-tion.

[14] The false statements identified bythe district court would be important to areasonable person purchasing cigarettes.For example, statements about the ad-verse health effects of smoking, see PhilipMorris, 449 F.Supp.2d at 146–208, wouldbe a matter of importance to a reasonableperson deciding to purchase cigarettes.The fact that Defendants continually de-nied any link between smoking and cancer,see, e.g., id. at 204, suggests they them-selves considered the matter material. So,too, regarding Defendants’ false state-ments on other topics, including state-ments concerning: whether smoking is ad-dictive, id. at 208–308, whether Defendantsmanipulated their cigarettes to control nic-otine delivery, id. at 308–84, whether‘‘light’’ cigarettes were less harmful thanother cigarettes, id. at 430–561, whethersecondhand smoke is hazardous to non-smokers, id. at 692–801, and whether De-


fendants concealed scientific research anddestroyed documents, id. at 801–39.

Each of these topics is an importantconsideration for a reasonable person be-cause each concerns direct and significantconsequences of smoking. When decidingwhether to smoke cigarettes, tobacco con-sumers must resolve initial reservations(or lingering qualms) about the potentialfor cancer, the risk of addiction, or thehazardous effects of secondhand smoke forfriends, family, and others who may beexposed. Defendants’ prevaricationsabout each of these issues suggests fullawareness of this obvious fact; reasonablepurchasers of cigarettes would considerthese statements important.

Defendants further argue that, becausethe scientific community had reached aconsensus regarding the severely adversehealth consequences of smoking, theirstatements to the contrary would not bebelieved. See Defs. Br. 98 (arguing that‘‘the public was aware of smoking’s ad-verse health consequences and thus anyinconsistent assertion by defendants couldnot be material to a reasonable person’’).The question, however, is not whether areasonable person would have believed De-fendants’ false statements, but only wheth-er a reasonable person would have consid-ered the issue ‘‘of importance,’’ and theissues considered by the district courtclearly met the materiality threshold.

C. First Amendment

[15] In their final general challenge tofraud liability, Defendants claim at least aportion of their statements qualify as pro-tected activity under the First Amend-ment. Of course, it is well settled that theFirst Amendment does not protect fraud.See McIntyre v. Ohio Elections Comm’n,514 U.S. 334, 357, 115 S.Ct. 1511, 131L.Ed.2d 426 (1995) (stating that the gov-ernment ‘‘may, and does, punish fraud di-rectly’’). Recognizing this fact, Defen-

dants argue their statements were notfraudulent, but those arguments are dis-cussed and rejected elsewhere in this opin-ion. See supra Part III.A–B; infra PartIV.

Defendants next claim protection underthe Noerr–Pennington doctrine—a doc-trine, rooted in the Petition Clause of theFirst Amendment, that protects ‘‘an at-tempt to persuade the legislature or theexecutive to take particular action withrespect to a lawTTTT’’ E. R.R. PresidentsConference v. Noerr Motor Freight, Inc.,365 U.S. 127, 136, 81 S.Ct. 523, 5 L.Ed.2d464 (1961). The protection does not ‘‘coveractivity that was not genuinely intended toinfluence government action.’’ AlliedTube & Conduit Corp. v. Indian Head, 486U.S. 492, 508 n. 10, 108 S.Ct. 1931, 100L.Ed.2d 497 (1988).

[16, 17] Defendants’ attempt to invokeNoerr–Pennington as protection fails be-cause the doctrine does not protect delib-erately false or misleading statements.‘‘[N]either the Noerr–Pennington doctrinenor the First Amendment more generallyprotects petitions predicated on fraud ordeliberate misrepresentation.’’Edmondson & Gallagher v. Alban TowersTenants Ass’n, 48 F.3d 1260, 1267(D.C.Cir.1995) (describing the holding inWhelan v. Abell, 48 F.3d 1247 (D.C.Cir.1995)); see also McDonald v. Smith, 472U.S. 479, 485, 105 S.Ct. 2787, 86 L.Ed.2d384 (1985) (finding the Petition Clausedoes not have ‘‘special First Amendmentstatus’’ and that petitions are not entitledto ‘‘greater constitutional protection’’ than‘‘other First Amendment expressions’’);Whelan, 48 F.3d at 1255 (‘‘However broadthe First Amendment right to petition maybe, it cannot be stretched to cover peti-tions based on known falsehoods.’’). Thedistrict court’s valid findings of fraud inthis case take Defendants’ statements outof the Noerr–Pennington context because


they were clearly and deliberately false.The district court provided countless ex-amples of deliberately false statements byDefendants: ‘‘Cigarette smoking causesdisease, suffering, and death. Despite in-ternal recognition of this fact, Defendantshave publicly denied, distorted, and mini-mized the hazards of smoking for dec-ades,’’ Philip Morris, 449 F.Supp.2d at146; ‘‘Defendants have researched andrecognized, decades before the scientificcommunity did, that nicotine is an addic-tive drugTTTT Notwithstanding the under-standing and acceptance of each Defendantthat smoking and nicotine are addictive,Defendants have publicly denied and dis-torted the truth as to the addictive natureof their products for several decades,’’ id.at 208–09; ‘‘Defendants have designedtheir cigarettes to precisely control nico-tine delivery levels and provide doses ofnicotine sufficient to create and sustainaddiction. At the same time, Defendantshave concealed much of their nicotine-re-lated research, and have continuously andvigorously denied their efforts to controlnicotine levels and delivery,’’ id. at 309;‘‘Defendants have known for decades thatfiltered and low tar cigarettes do not offera meaningful reduction of risk, and thattheir marketing which emphasized reduc-tions in tar and nicotine was false andmisleading,’’ id. at 860; ‘‘Despite their in-ternal acknowledgment of the hazards ofsecondhand smoke, Defendants havefraudulently denied that [secondhandsmoke] causes disease,’’ id. at 864.

Were these statements false, but notdeliberately so, Defendants would have abetter argument. But Defendants knew oftheir falsity at the time and made thestatements with the intent to deceive.Thus, we are not dealing with accidentalfalsehoods, or sincere attempts to per-suade; Defendants’ liability rests on de-ceits perpetrated with knowledge of theirfalsity. Where statements are deliberatelyfalse or misleading, Noerr–Pennington

does not apply. See Alban Towers, 48F.3d at 1267. Indeed, if Defendants’statements had not been made with fraud-ulent intent, there would be no basis forRICO liability in the first place.

The district court found six alleged actsprotected by Noerr–Pennington and basedits holding on the remaining racketeeringactivity. Philip Morris, 449 F.Supp.2d at887. All six excluded acts were instancesof testimony to Congress and, given thewealth of unprotected racketeering acts,we need not reach the question whetherthe district court correctly excluded theseacts. The remaining acts were intended todefraud consumers, so Noerr–Penningtonprotection does not apply.

IV. Specific Challengesto Fraud Liability

A. ‘‘Light’’ Cigarettes

The first specific fraud finding Defen-dants challenge relates to their marketingof ‘‘light’’ cigarettes. The district courtfound: ‘‘As their internal documents re-veal, Defendants engaged in massive, sus-tained, and highly sophisticated marketingand promotional campaigns to portraytheir light brands as less harmful thanregular cigarettes.’’ Philip Morris, 449F.Supp.2d at 860. The court concluded‘‘Defendants have known for decades thatfiltered and low tar cigarettes do not offera meaningful reduction of risk, and thattheir marketing which emphasized reduc-tions in tar and nicotine was false andmisleading.’’ Id.

Defendants contend they should be im-mune from liability because the FederalTrade Commission (‘‘FTC’’) has blessedtheir use of labels such as ‘‘light’’ and ‘‘lowtar.’’ This argument is entirely foreclosedby the Supreme Court’s recent decision inAltria v. Good, ––– U.S. ––––, 129 S.Ct.538, 172 L.Ed.2d 398 (2008), concluding theFTC has never condoned the use of ‘‘light’’


or ‘‘low tar’’ descriptors. Id. at 550. De-fendants point to a 1966 industry guidanceletter from the FTC stating that ‘‘a factualstatement of the tar and nicotine content(expressed in milligrams) of the main-stream smoke from a cigarette,’’ as meas-ured by the Cambridge Filter Method, waspermissible under the FTC Act. Id. at 549.The ‘‘Commission made clear, however,that the guidance applied only to factualassertions of tar and nicotine yields anddid not invite any ‘collateral representa-tions TTT made, expressly or by implica-tion, as to reduction or elimination ofhealth hazards.’ ’’ Id.

[18] Despite Defendants’ argument tothe contrary, ‘‘the FTC has in fact neverrequired that cigarette manufacturers dis-close tar and nicotine yields, nor has itcondoned representations of those yieldsthrough the use of ‘light’ or ‘low tar’ des-criptors.’’ Id. at 550. Although the FTCnever prevented Defendants from usingmisleading descriptors, ‘‘agency nonen-forcement of a federal statute is not thesame as a policy of approval.’’ Id. As theSupreme Court held, ‘‘neither the handfulof industry guidances and consent orderson which petitioners rely nor the FTC’sinaction with regard to ‘light’ descriptorseven arguably justifies the pre-emption’’argument advanced by Defendants. Id. at551. For the same reasons, these actionsfail to constitute FTC authorization of thedescriptors that could defeat a finding ofspecific intent to defraud.

It is also worth noting that the districtcourt in this case did not find liabilitysolely based on the use of descriptors suchas ‘‘light’’ and ‘‘low tar.’’ The court foundDefendants orchestrated ‘‘highly sophisti-cated marketing and promotional cam-paigns to portray their light brands as lessharmful than regular cigarettes.’’ PhilipMorris, 449 F.Supp.2d at 860. In additionto the misleading use of descriptors, thedistrict court found ‘‘[Defendants’] public

statements are blatantly false’’ in relationto the marketing of ‘‘light’’ cigarettes. Id.at 861. The district court went on to findthat ‘‘[a]s part of the Enterprise’s schemeto defraud smokers, Defendants withheldand suppressed their extensive knowledgeand understanding of nicotine-drivensmoker compensation.’’ Id. These findingsreveal that fraudulent activity surrounding‘‘light’’ cigarettes was not merely limited tothe use of misleading descriptors. In ad-dition to the fact that the descriptors werenot authorized by the FTC, the districtcourt relied on other fraudulent activity byDefendants.

[19] Independent of their FTC-author-ization argument, Defendants also insistterms such as ‘‘light cigarettes’’ are notmisleading to the public. They analogize‘‘light’’ cigarettes to sodas which are ‘‘lowcaffeine’’ and cookies which are ‘‘low fat.’’According to Defendants, the public knowsthat drinking many ‘‘low caffeine’’ sodascan result in higher levels of caffeine con-sumption, and eating many ‘‘low fat’’ cook-ies can result in higher levels of fat con-sumption. Defendants thus analogize to‘‘light’’ cigarettes, maintaining that it isobvious that smoking many ‘‘light’’ ciga-rettes can result in higher levels of nico-tine and tar consumption. But the analo-gy to ‘‘light cigarettes’’ is inapt. Unlikedrinking sodas and eating cookies, the fac-tors behind compensation in ‘‘light’’ ciga-rettes are largely subconscious: ‘‘thesmoker will subconsciously adjust his puffvolume and frequency, and smoking fre-quency, so as to obtain and maintain hisper hour and per day requirement fornicotine.’’ Philip Morris, 449 F.Supp.2dat 467 (citing internal tobacco companydocuments). Not only is smoker compen-sation subconscious, but factors such aspuff volume and frequency are not eventied to the number of ‘‘light’’ cigarettessmoked. The analogy to sodas and cook-


ies fails; the subconscious nature ofsmoker compensation enabled Defendantsto mislead the public about the health ef-fects of ‘‘light’’ cigarettes.

[20] Finally, Defendants argue theirdescriptors were simply verbal representa-tions of numerical ratings authorized bythe FTC, and thus were literally true.Even leaving aside the fact that literallytrue statements may nevertheless consti-tute fraud, this claim founders on the dis-trict court’s finding that ‘‘there are lightsof certain brands with higher tar levelsthan regulars of other brands from thesame company, and there are also lightsand regulars of the same brands that havethe same FTC tar rating.’’ Id. at 861.This finding, which Defendants do not at-tempt to show is clearly erroneous, revealsthe descriptors were not simply represen-tations of numerical ratings and thus werenot ‘‘literally true.’’

B. Secondhand Smoke

[21] We turn next to Defendants’ claimthat the district court erred in finding thatthey fraudulently denied the adversehealth effects of secondhand smoke. Fed-eral Rule of Civil Procedure 52 obliges usto uphold the district court’s findings offact unless they are ‘‘clearly erroneous.’’FED.R.CIV.P. 52(a)(6). Under this highlydeferential standard, we may disturb thedistrict court’s findings only if we are ‘‘leftwith the definite and firm conviction that amistake has been committed.’’ E.g., BocaInvesterings P’ship v. United States, 314F.3d 625, 630 (D.C.Cir.2003) (quotationmarks omitted). This is so even if we‘‘would have decided the case differently,’’as ‘‘[w]here there are two permissibleviews of the evidence, the factfinder’schoice between them cannot be clearly er-roneous.’’ Anderson, 470 U.S. at 574, 105S.Ct. 1504.

Defendants contend that their state-ments disputing the health hazards of sec-

ondhand smoke were merely good-faith ex-pressions of opinion. But the districtcourt found to the contrary—that Defen-dants’ representations were fraudulent andnot in good faith. Philip Morris, 449F.Supp.2d at 853, 864–65. Under Rule 52,then, the question for us is whether thisfinding was clearly erroneous.

The district court criticized Defendants’statements regarding secondhand smokeas contrary to the scientific consensus.Defendants object, emphasizing that thedistrict court found no scientific consensusemerged until the issuance of the SurgeonGeneral’s 1986 report determining second-hand smoke to be hazardous. Moreover,they point to evidence of selected post–1986 scientific opinions casting doubt onthe dangers of secondhand smoke, arguingthat even then they possessed some basisfor disputing the consensus.

[22] Defendants’ objections are besidethe point. The district court based itsfinding of fraudulent intent not just on theexistence of a consensus but also on evi-dence of Defendants’ own knowledge.Philip Morris, 449 F.Supp.2d at 864–65.Specifically, the district court found thatdating back to the 1970s, Defendants’ ownresearch and analysis revealed the hazardsof secondhand smoke. For example, thedistrict court found that in 1980 a PhilipMorris scientist reviewed a paper conclud-ing that secondhand smoke caused ‘‘signifi-cant damage to airway function’’ in ex-posed nonsmokers, and found ‘‘little tocriticize,’’ deeming the paper ‘‘an excellentpiece of work which could be very damag-ing’’ to the industry. Id. at 709 (quotationmarks omitted). In 1982, a Philip Mor-ris—sponsored research facility concludedthat the ‘‘side stream’’ smoke composingthe bulk of secondhand smoke is ‘‘moreirritating and/or toxic’’ than the ‘‘mainstream’’ smoke inhaled by smokers. Id. at710 (quotation marks omitted). And sev-


eral TI advertisements and press releasesclaimed that an independent 1981 studyshowing ‘‘a significant correlation betweenlung cancer and secondhand smoke’’ suf-fered from a statistical flaw, id. at 715, yetthe district court found that industry con-sultants told TI, Reynolds, and Brown &Williamson that TI knew at the time notonly that the statistical error did not exist,but also that the study was in fact correct.Id. at 717–18.

In addition to these and other findingsproviding relatively direct evidence thatDefendants were aware of the health risksof secondhand smoke, the district courtfound that Defendants concealed their rolein making statements regarding second-hand smoke. While it may be true thatpurveyors of consumer products, withoutfraudulent intent, frequently engage inconcealed support of positive research intheir industries, the concealment of identi-ty by Defendants over so long a period ona subject of such intense controversy is atthe very least consistent with knowledge ofthe falsity of their statements.

Although Defendants insist they had noknowledge of the misleading character oftheir public statements, they nowherechallenge the accuracy of these or any ofthe district court’s other findings sugges-tive of their knowledge. Instead, they ar-gue that such findings reveal only factsthat were known to the public and that hadnot, at the time, given rise to a scientificconsensus. Again Defendants miss thepoint. The question is not whether otherindividuals knew that Defendants’ claimswere false or misleading; the question iswhether Defendants did. Regardless ofwhether a scientific consensus existed atany point, Defendants may be liable forfraud if they made statements knowingthey were false or misleading. Based onvoluminous evidence, including that sum-marized above, the district court circum-stantially inferred that Defendants did in

fact possess such fraudulent intent. Giventhese unchallenged findings, we have nobasis for saying that the district courtclearly erred in drawing that conclusion.

C. Addiction

Defendants also claim that the districtcourt clearly erred in finding their repre-sentations disputing the addictiveness ofcigarettes to be intentionally misleading.We analyze the district court’s factual find-ing as to the misleading character of De-fendants’ commercial statements for clearerror. E.g., FTC v. Brown & WilliamsonTobacco Corp., 778 F.2d 35, 41–42 & n. 3(D.C.Cir.1985). We find none.

[23] Defendants claim that their state-ments regarding addiction were not inten-tionally misleading because the term ‘‘ad-diction’’ is ambiguous. Pointing to thedistrict court’s findings that the meaningof the term ‘‘addiction’’ in the scientificcommunity changed over time, Defendantsinsist that their statements merely clungto the earlier, narrower, definitions of theterm, and claim that the district courterroneously converted a semantic disputeinto a fraud case. But the district courtdid not find only that Defendants insistedon retaining an earlier definition of addic-tion. It found that they did so as part ofa concerted effort to misrepresent the dif-ficulty of quitting smoking. Philip Mor-ris, 449 F.Supp.2d at 208–09, 308, 857–59.Defendants fail to demonstrate that thisfinding was clearly erroneous.

To begin with, Defendants never chal-lenge the district court’s findings docu-menting the impact of nicotine on the bodyand, more importantly, Defendants’ under-standing of its effects. Id. at 209–11, 216–71. As early as 1963, Brown & William-son’s general counsel wrote a confidentialmemorandum stating: ‘‘We are, then, inthe business of selling nicotine, an addic-tive drug effective in the release of stress


mechanisms.’’ Id. at 259 (quotation marksomitted). Further, the district court foundthat Defendants were aware that cigarettedependence was stronger than mere habitformation. In 1974, a Philip Morris scien-tist told the company’s president that itwas ‘‘simply not an adequate explanationto say that smoking is a habit, or that it issocial behavior.’’ Id. at 223 (quotationmarks omitted). In 1981, a Philip Morrisexecutive wrote in an article: ‘‘Cigarettesare not just habit forming—the bodybuilds up a requirement for them.’’ Id. at228 (quotation marks omitted). Althoughseveral industry attorneys expressed dis-may at the publication of the article, nonedisagreed with it. Id. In 1985, Philip Mor-ris’s top management was informed thatresearch showed that ‘‘the majority ofsmokers wished they did not smoke.’’ Id.at 229 (quotation marks omitted). Theseand numerous other findings—all unchal-lenged—support the district court’s conclu-sion that Defendants were aware that nico-tine creates a chemical dependency farstronger than a mere habit.

The district court found that despitetheir knowledge Defendants made numer-ous statements trivializing and outright de-nying the dependence cigarettes cause.For example, in 1982 TI issued a pressrelease summarizing testimony that smok-ing caused an ‘‘attachment’’ comparable tothat produced by ‘‘tennis, jogging, candy,rock music, Coca-cola, members of the op-posite sex and hamburgers.’’ Id. at 281(quotation marks omitted). In 1997, PhilipMorris’s CEO testified, ‘‘If [cigarettes] arebehaviorally addictive or habit forming,they are much more like TTT GummiBears, and I eat Gummi Bears, and I don’tlike it when I don’t eat my Gummi Bears,but I’m certainly not addicted to them.’’Id. at 273 (quotation marks omitted). In a1994 television interview, a TI officialclaimed that there was ‘‘no chemical addic-tion’’ to nicotine and stated, ‘‘[S]ometimeswe use the word ‘addiction’ in very broad

terms. We talk about being, you know,news junkies. We talk about being choco-holics.’’ Id. at 285 (quotation marks omit-ted). A 1988 TI press release declaredthat ‘‘it has been impossible to establishthat the feelings persons have upon givingup smoking are anything but that whichwould be expected when one is frustratedby giving up any desired habit.’’ Id. at283 (quotation marks omitted, emphasesadded). Most directly, the district courtfound that Defendants had their represen-tatives testify that nicotine ‘‘did not causeaddiction or dependence,’’ id. at 281 (em-phasis added), rendering any supposedambiguities in the word ‘‘addiction’’ besidethe point.

The district court concluded that theseand other findings reflected a campaign ofstatements intended to mislead the publicinto believing that giving up smoking is notmarkedly more difficult than giving up ev-eryday habits. Although not every state-ment Defendants made was literally false,even partially true statements can be ac-tionable fraud if intentionally misleadingas to facts. See, e.g., Emery v. Am. Gen.Fin., Inc., 71 F.3d 1343, 1348 (7th Cir.1995) (‘‘A half truth, or what is usually thesame thing a misleading omission, is ac-tionable as fraud, including mail fraud ifthe mails are used to further it, if it isintended to induce a false belief and result-ing action to the advantage of the mislead-er and the disadvantage of the misled.’’).The district court concluded that Defen-dants’ statements regarding addictionwere misleading in this way, and given theabove unchallenged factual findings we arenot ‘‘left with the definite and firm convic-tion that a mistake has been committed.’’Boca Investerings, 314 F.3d at 630.

D. Altria

In addition to the challenges to fraudliability raised by all Defendants, two De-


fendants—Altria and BATCo—make anumber of arguments specific to them.We begin with Defendant Altria, the hold-ing company owner of Defendant PhilipMorris, which raises several challenges tothe district court’s finding of liability.

As an initial matter, Altria claims thatthe district court erred in finding that itused the mails in five of the nine predicateacts it allegedly committed directly. Thedistrict court specifically found, based onDefendants’ routine mailing practices, thatat least two of those five predicate actswere committed through use of the mails.See Philip Morris, 449 F.Supp.2d at 884(Racketeering Acts 69, 80). We need notdecide whether this circumstantial infer-ence amounted to clear error, as the otherfour predicate acts the district court foundAltria committed are themselves sufficientto constitute a pattern of racketeering ac-tivity. See id. (Racketeering Acts 71–72,74–75).

[24, 25] Altria’s central argument isthat mailings sent by lawyers could notpossibly be mailings in furtherance of ascheme or artifice to defraud, citing sever-al out-of-circuit cases largely standing forthe proposition that ordinary litigationmailings containing false matter typicallydo not themselves constitute a scheme orartifice to defraud. See United States v.Pendergraft, 297 F.3d 1198, 1209 (11thCir.2002); Nolan v. Galaxy ScientificCorp., 269 F.Supp.2d 635, 643 (E.D.Pa.2003); Morin v. Trupin, 711 F.Supp. 97,105–06 (S.D.N.Y.1989); Paul S. Mullin &Assocs., Inc. v. Bassett, 632 F.Supp. 532,540 (D.Del.1986); Spiegel v. Cont’l Ill.Nat’l Bank, 609 F.Supp. 1083, 1088–90(N.D.Ill.1985). Whatever the merit of thatproposition, it has nothing to do with thequestion before us. Altria makes a verydifferent claim—that mailings sent in fur-therance of a separately-proven scheme todefraud somehow fall outside the mailfraud statute’s coverage because they are

drafted and physically sent by lawyerswho themselves have no fraudulent intent.This claim is without merit. Nothing inthe mail fraud statute requires a mailingto be fraudulent at all, as long as themailing is in furtherance of a fraudulentscheme. See 18 U.S.C. § 1341 (specifyingthat the mailing can be ‘‘any matter orthing whatever to be sent or delivered’’ aslong as it is in furtherance of ‘‘any schemeor artifice to defraud’’). Moreover, thestatute looks to the intent of the individualwho caused the mailing, not the individualwho drafted or physically mailed it. SeeUnited States v. Diggs, 613 F.2d 988, 998(D.C.Cir.1979) (‘‘[A] defendant ‘causes’ theuse of the mails where he does an act withknowledge that the use of the mails willfollow in the ordinary course of business,or where such use can reasonably be fore-seen, even though not actually intended.’’(quotation marks omitted)). Given thatthe district court permissibly inferred thecorporate Defendants’ intent from the in-tent of numerous high-level executives,Philip Morris, 449 F.Supp.2d at 897, andgiven that it found that Defendants‘‘caused’’ the mailings in order to furtherthe scheme to defraud, id. at 881, the factthat attorneys participated in the actualdrafting and mailing provides no immuni-ty. Thus, we conclude that the districtcourt properly found Altria liable for itsdirect participation in the conduct of theaffairs of the enterprise, leaving it unnec-essary for us to consider Altria’s objec-tions to the findings that it participatedthrough its control of Philip Morris.

Finally, Altria claims that the districtcourt clearly erred in finding that the com-pany joined a RICO conspiracy. We dis-agree. The district court’s findings of factregarding Altria’s actions in furtherance ofthe goals of the enterprise, both directlyand through Philip Morris, see id. at 907–08, as well as the voluminous findings ofconcerted action and explicit agreement by


Defendants, amply support the circum-stantial inference that Altria conspiredwith the other Defendants to violateRICO. See, e.g., United States v. Mellen,393 F.3d 175, 191 (D.C.Cir.2004) (‘‘[A] con-spiracy can be inferred from a combinationof close relationships or knowing presenceand other supporting circumstantial evi-dence.’’ (quotation marks omitted)).

E. BATCo

[26] Defendant BATCo claims that thedistrict court erred in imposing liability onthe basis of its conduct outside the UnitedStates. Noting that the district courtfound that its ‘‘activities and statementstook place outside of the United States,’’Philip Morris, 449 F.Supp.2d at 873, BAT-Co claims that it enjoys immunity fromRICO liability because the statute has noextraterritorial reach. We need not decidetoday whether RICO has true extraterrito-rial reach—that is, whether it could reachforeign conduct with no impact on theUnited States—because the district courtfound BATCo liable on the theory that itsconduct had substantial domestic effects.Id. Because conduct with substantial do-mestic effects implicates a state’s legiti-mate interest in protecting its citizenswithin its borders, Congress’s regulation offoreign conduct meeting this ‘‘effects’’ testis ‘‘not an extraterritorial assertion of ju-risdiction.’’ Laker Airways Ltd. v. Sabe-na, Belgian World Airlines, 731 F.2d 909,923 (D.C.Cir.1984). Thus, when a statuteis applied to conduct meeting the effectstest, the presumption against extraterrito-riality does not apply. See Envtl. Def.Fund, Inc. v. Massey, 986 F.2d 528, 531(D.C.Cir.1993) (noting that ‘‘the presump-tion [against extraterritoriality] is general-ly not applied where the failure to extendthe scope of the statute to a foreign settingwill result in adverse effects within theUnited States,’’ citing Laker Airways ).

BATCo argues that the effects test isinapplicable because the United States had

no obligation to prove that Defendants’conduct had any effects whatsoever. Al-though BATCo attributes this to the factthat 18 U.S.C. § 1964(a) does not requirethe government to prove that it has beeninjured, we think it better explained by thefact that the mail and wire fraud statutespunish ‘‘the scheme, not its success.’’ Pas-quantino v. United States, 544 U.S. 349,371, 125 S.Ct. 1766, 161 L.Ed.2d 619(2005). That said, BATCo’s point hasnothing to do with the case at hand. Herethe district court found that BATCo’s con-duct ‘‘had substantial direct effects on theUnited States.’’ Philip Morris, 449F.Supp.2d at 873. The fact that someother defendant might commit some otheroffense without effects in the UnitedStates hardly renders BATCo immunefrom liability for the domestic effects it didcause. Someone who fires a rifle fromCanada into the United States and woundshis victim can plainly be convicted of at-tempted murder. See Laker Airways, 731F.2d at 922 (‘‘[W]hen a malefactor in StateA shoots a victim across the border inState B, State B can proscribe the harmfulconduct.’’). This is so even though in gen-eral the government may prove attemptedmurder without establishing that the at-tempt had any effect whatsoever. Similar-ly, the fact that effects are not elements ofmail and wire fraud offenses or associatedRICO violations provides no immunity tothose, like BATCo, whose fraud and racke-teering has substantial and direct domesticeffects.

[27] Thus, we need decide only wheth-er the district court erred in applying theeffects test—which asks whether conducthas a substantial, direct, and foreseeableeffect within the United States, see Consol.Gold Fields PLC v. Minorco, S.A., 871F.2d 252, 261–62 (2d Cir.1989) (describingsubstantial effect as direct and foresee-able)—to the facts of this case. We see no


error. The district court found that aspart of the overall scheme to defraud,BATCo conducted sensitive nicotine re-search for Brown & Williamson abroadand secretly shared the results with Brown& Williamson in the United States. PhilipMorris, 449 F.Supp.2d at 298–304. It fur-ther found that BATCo, in concert withother Defendants, founded, funded, andactively participated in various internation-al organizations, which Defendants them-selves saw as instrumental to their effortsto perpetuate what the district court foundto be their fraudulent scheme in the Unit-ed States. See id. at 119–23. In one exam-ple, TI admitted that ‘‘the back-wash fromevents and attacks affecting the industryin smaller countries comes back powerfullyto the USA,’’ id. at 140 (quotation marksomitted), and praised INFOTAB, an inter-national organization of which BATCo wasa founding member, id. at 132, for‘‘help[ing] the industry to unite in trying tocombat the attacks,’’ id. at 140 (quotationmarks omitted). Notwithstanding BAT-Co’s demands for a nearly unattainablelevel of specificity, these unchallengedfindings, together with the findings of thetremendous domestic effects of the fraudscheme generally, see, e.g., id. at 209, 307–08, make clear that the district court com-mitted no error in finding that BATCo’sparticipation had substantial, direct, andforeseeable effects in the United States.Cf. Laker Airways, 731 F.2d at 925–26(finding allegations that the anticompeti-tive elimination of a foreign airline in-creased domestic air fares adequate tosupport antitrust action without demand-ing further specificity).

V. Challenges to Likelihoodof Future Violations

Having found Defendants’ challenges toliability unavailing, we move on to thedistrict court’s determination that they arelikely to commit future RICO violations ifnot enjoined. All Defendants challenge

this finding on a number of common bases,and four Defendants—Altria, BWH, CTR,and TI—also bring separate challenges tothe court’s findings regarding them. Weaddress each in turn.

A. Likelihood of Future Violations

[28] Section 1964(a) grants districtcourts jurisdiction ‘‘to prevent and re-strain’’ RICO violations. 18 U.S.C.§ 1964(a). Hence, before a district courtmay order remedies under RICO it mustfind the defendant exhibits a reasonablelikelihood of committing future violationsof the Act. Disgorgement Opinion, 396F.3d at 1198.

Here, the district court found a reason-able likelihood that Defendants wouldcommit future RICO violations. PhilipMorris, 449 F.Supp.2d at 908–15. Defen-dants attack this finding, asserting: (1) thedistrict court applied an erroneous legalstandard, (2) the Master SettlementAgreement (‘‘MSA’’) makes future viola-tions unlikely, and (3) Defendants’ busi-ness practices and public positions alonepreclude future violations. We concludethe district court applied the correct legalstandard and its factual conclusions werenot clearly erroneous.

In the mid–1990s, the attorneys generalof several states brought suit against themajor tobacco companies for the reim-bursement of state costs associated withsmoking. Five Defendants, Philip Morris,Reynolds, Brown & Williamson, Lorillard,and Liggett entered into a settlementagreement, the MSA, with forty-six statesand the District of Columbia. The MSAprohibited, inter alia, youth marketing,any material misrepresentations regardingthe health consequences of tobacco use,agreements between manufacturers to lim-it either competition or the distribution ofinformation about the health effects associ-ated with smoking, and other specific mar-


keting techniques (e.g., cartoon charactersand billboards). The MSA specifically re-quired the dissolution of CTR, TI, andCIAR. The National Association of Attor-neys General and the individual states’attorneys general enforce the MSA, whichrequires informal dispute resolution beforeany enforcement action commences when-ever possible.

[29] To obtain equitable remedies, thegovernment must demonstrate a ‘‘reason-able likelihood of further violation[s] in thefuture.’’ Savoy Indus., Inc., 587 F.2d at1168 (quotation marks omitted). Consid-ered under the totality of the circum-stances, three factors determine whether areasonable likelihood exists: ‘‘whether adefendant’s violation was isolated or partof a pattern, whether the violation wasflagrant and deliberate or merely technicalin nature, and whether the defendant’sbusiness will present opportunities to vio-late the law in the future.’’ SEC v. FirstCity Fin. Corp., 890 F.2d 1215, 1228(D.C.Cir.1989). The district court appliedthis standard—a standard both sides agreeis appropriate. Philip Morris, 449F.Supp.2d at 909; Defs. Br. 39–40; Gov.Br. 182.

[30] Defendants quibble with two as-pects of the district court’s application.First, Defendants assert the district courtcould not rely on ‘‘inferences drawn frompast conduct alone’’ because the MSA ‘‘al-ready proscribes future violations’’ and‘‘imposes a legal barrier to the repetitionof such conduct in the future.’’ Defs. Br.40. This is an odd argument, suggesting atort settlement automatically limits the re-medial options in a RICO suit. Notably,the first two factors of the First City testfocus entirely on inferences arising frompast conduct. 890 F.2d at 1228. And, asthe district court correctly found, ‘‘[t]helikelihood of future wrongful acts is fre-quently established by inferences drawnfrom past conduct.’’ United States v.

Philip Morris USA, 316 F.Supp.2d 6, 10 n.3 (D.D.C.2004) (quotation marks omitted);see also SEC v. Bilzerian, 29 F.3d 689, 695(D.C.Cir.1994) (inferring a likelihood of fu-ture violations based on the nature of pastconduct); SEC v. Gruenberg, 989 F.2d 977,978 (8th Cir.1993); First City, 890 F.2d at1228–29. Defendants attempt to bolstertheir position by claiming the MSA pre-cludes the need for injunctions by fullyaddressing their prior misconduct. As dis-cussed infra, future violations remain like-ly notwithstanding the MSA. Therefore,Defendants’ argument fails.

Also, Defendants deftly mischaracterizethe district court’s opinion. Based on asingle footnote in the opinion’s section dis-cussing the MSA’s failure to alter Defen-dants’ conduct and concluding remedies inthis case were appropriate, Philip Morris,449 F.Supp.2d at 913 n. 82, Defendantsaccuse the trial court of impermissibly‘‘shift[ing] the burden to defendants toprove that RICO violations will not occurin the future TTT under the ‘absolutelyclear’ test.’’ Defs. Br. 42. Contrary toDefendants’ fears, the district court obvi-ously did not intend to announce a newstandard or alter the reigning standard viafootnote. The First City standard wascarefully articulated at the start of thediscussion addressing future violations andconscientiously applied. Philip Morris,449 F.Supp.2d at 908–09, 911–13. Thefootnote, regarding voluntary terminationof illegal conduct, appears much later inthe opinion where the court sought to em-phasize the suspension of disbelief neces-sary to agree with Defendants, noting thecourt must assume ‘‘Defendants have com-plied with and will continue to comply withthe terms of the MSA, and that the MSAhas adequate enforcement mechanisms’’ inorder to conclude ‘‘the MSA obviates theneed for injunctive relief.’’ Id. at 913(quotation marks omitted). This is a farcry from altering the legal standard. In-


deed, the district court found, under thecorrect standard, that Defendants contin-ued to commit violations even after 1999,well after the execution of the MSA. Id. at910–11.

Since the district court applied the stan-dard enunciated in Savoy and First Cityand gave appropriate weight to the infer-ences drawn from Defendants’ past con-duct, we uphold the district court’s deci-sion to order remedies.

The district court concluded the MSA‘‘alone [could not] remove the reasonablelikelihood of Defendants’ future RICO vio-lations.’’ Id. Defendants contend the MSAeffectively prevents prospective RICO vio-lations because it prohibits them from par-ticipating in an ‘‘enterprise’’ or committingany ‘‘predicate acts.’’ The district court,however, found Defendants began to evadeand at times even violate the MSA’s prohi-bitions almost immediately after signingthe agreement and, consequently, conclud-ed the MSA did not limit the court’s abilityto order ‘‘[a]ppropriate [r]emedies.’’ Id.The court’s factual findings are not clearlyerroneous.

Defendants assert the MSA preventstheir participation in a RICO enterprisebecause the organizations that allowed forjoint activity no longer exist, and neitherthe government nor the district court iden-tified any ‘‘joint activity’’ between Defen-dants after 1998, the start of the MSA.Defendants’ post-agreement activities beliethese statements. For example, thoughthe MSA required Defendants to dissolveCIAR, only two days after signing theMSA Lorillard’s general counsel wrotePhilip Morris, Reynolds, and Brown &Williamson asking to ‘‘discuss the status ofthe plan to reinstate CIAR.’’ Id. at 798(quotation marks omitted). Shortly there-after, Covington & Burling LLP informedthe CIAR contractors ‘‘[t]he members ofCIAR have decided to create a new organ-ization to continue the workTTTT The mem-

bers of CIAR that will be members of thenew organization intend to continue tofund the research.’’ Gov. Ex. 75,412, at 2.Subsequently, in 2000, Philip Morris initi-ated a new research program that had thesame offices, phone numbers, and board asCIAR and many of the same employees,management, researchers, peer reviewers,and grantees. Philip Morris, 449F.Supp.2d at 798–99.

CIAR is not the lone example of Defen-dants’ organizations poised to circumventthe MSA’s prohibitions against joint activi-ties or participation in an enterprise. Thedistrict court found, with the exception ofCTR and TI, ‘‘all of the other organiza-tions either still exist or can be readily re-activated.’’ Id. at 871. For example, evenat the time of trial Defendants continuedto participate in the Center for Coopera-tion in Scientific Research Relative to To-bacco (‘‘CORESTA’’), ‘‘a nonprofit makingassociation with objectives to enhance thescientific cooperation for research on to-bacco’’ perceived as ‘‘unique and very valu-able’’ because it enjoys the perception of‘‘being objective, technical and indepen-dent.’’ Gov. Ex. 21,788, at 1.

Defendants presume the MSA’s prohibi-tion against joint activity is effective. Therecord, however, demonstrates the tobaccocompanies retain both the ability and thedesire to continue joint activities. Accord-ingly, the district court did not commitclear error when it determined the MSAcould not effectively prevent Defendants’participation in an enterprise.

Defendants next assert the MSA’s‘‘scores of injunctions and related prohibi-tions’’ prevent ‘‘repetition of the corewrongdoing.’’ Defs. Br. 48. The districtcourt determined the MSA does not pre-vent Defendants’ commission of futureracketeering acts because: (1) Defendantshave not fully complied with the MSA, (2)the States could not be relied upon ‘‘to


vigorously enforce the MSA,’’ see Br. ForAmici Curiae States 7–11, (3) some provi-sions of the MSA have and will expire, and(4) BATCo and Altria are not subject tothe agreement. Philip Morris, 449F.Supp.2d at 913–15.

As evidence of the MSA’s failures andpitfalls, the district court noted that de-spite the MSA Defendants still fraudulent-ly denied the dangers of secondhandsmoke, marketed ‘‘low tar’’ cigarettes as ahealthier alternative to quitting, and false-ly denied manipulating nicotine deliveryand marketing to youth. Id. at 910. De-fendants offer no rebuttal to these factualfindings, but instead argue ‘‘failure to com-ply with all the details or the ‘spirit’ of theMSA does not even begin to approach aRICO violation.’’ Defs. Br. 50. Obviously.But as the district court rightly recog-nized, Defendants cannot hide behind theMSA to avoid the imposition of RICO rem-edies when they do not comply with theagreement. Philip Morris, 449 F.Supp.2dat 913. Therefore, the district court didnot commit clear error when it determinedthe MSA does not adequately prevent orrestrain Defendants’ future racketeeringactivities and did not abuse its discretionby ordering equitable relief.

Defendants claim they have ‘‘admittedfor years’’ that ‘‘smoking causes lung can-cer’’ and other serious diseases, ‘‘smokingis addictive,’’ and ‘‘low tar cigarettes maynot be safer.’’ Defs. Br. 53–54, 56. Theyinsist their positions on these issues ‘‘pre-clude future RICO violations.’’ Id. at 53.The district court acknowledged Defen-dants’ varying degrees of lip service tothese facts, but disagreed that these ad-missions translated into a guaranteeagainst later violations.

According to the district court, ‘‘Defen-dants’ essential position on the relationshipof smoking and health remains virtuallyunchanged’’ from the fraudulent positionsit first took in the 1950s. Philip Morris,

449 F.Supp.2d at 204; see also id. at 204–08 (citing corporate statements and state-ments from Defendants’ executives). Thedistrict court condemned Defendants forfailing to embrace the Surgeon General’sdefinition of addiction, to admit nicotinespecifically creates and sustains addiction,or to ‘‘acknowledge[ ] TTT the reason quit-ting smoking is so difficult, and not simplya function of individual will power, is be-cause of its addictive nature.’’ Id. at 286;see also id. at 284–88. Finally, examplesin the record of Defendants’ marketingcampaigns and internal documents amplysupport the district court’s conclusion thatDefendants ‘‘continue to make[ ] false andmisleading statements regarding low tarcigarettes in order to reassure smokersand dissuade them from quitting.’’ Id. at507–08. While we may not have reachedall the same conclusions as the districtcourt, under the highly deferential clearlyerroneous standard the district court’s fac-tual findings have sufficient evidentiarysupport; its decision to order equitablerelief was not an abuse of discretion.

B. Altria

[31] Altria urges, based on its statusas a holding company, no factual basisexists for finding it would violate RICO inthe future. According to the district court,though, despite Altria’s holding companystatus it ‘‘effectively and actively controlsthe activities of all of its subsidiaries, in-cluding Defendant Philip Morris.’’ PhilipMorris, 449 F.Supp.2d at 203–04 n. 12.The record establishes that Altria manage-ment oversees subsidiary policies and op-erations, id. at 907–08, and Altria does notdispute its control over Philip Morris.Moreover, Altria itself ‘‘participated di-rectly’’ in the RICO enterprise and con-spiracy. Id. at 907. With direct culpabili-ty and this level of plenary power over itssubsidiaries, Altria clearly remains capableof future RICO violations. Therefore, we


uphold the district court’s issuance of rem-edies against Altria.

C. BWH

BWH makes an argument similar tothat of Altria. In 2004, Brown & William-son merged all domestic tobacco opera-tions with Reynolds and was reconstitutedinto Brown & Williamson Holdings(‘‘BWH’’). The district court made no fac-tual findings specific to BWH. Rather, thedistrict court focused throughout its opin-ion on Brown & Williamson. Philip Mor-ris, 449 F.Supp.2d at 31 n. 4 (describingBrown & Williamson as ‘‘now part ofReynolds American’’). The entire rest ofthe opinion refers to ‘‘Brown & William-son’’ without any mention of the reconsti-tuted holding company.

Based on BWH’s status as a ‘‘passiveholding company,’’ BWH argues the dis-trict court erred in finding it is likely tocommit future RICO violations. As dis-cussed in relation to Altria, a company’sstatus as a holding company by itself doesnot preclude RICO liability. Where aholding company, such as Altria, partici-pates directly in the original violations andretains control over subsidiary tobacco op-erations, it remains capable of repeatingits misconduct.

[32] BWH could not have participatedin this RICO enterprise as it did not thenexist. Nonetheless, if it exercises plenarycontrol over the tobacco operations of itssubsidiaries, then, like Altria, it could com-mit later violations. Because the districtcourt failed to make any findings about theextent of BWH’s control over tobacco op-erations, we cannot know the company’scurrent capabilities. Therefore, we cannotdetermine whether a reasonable likelihoodexists that BWH will commit future RICOviolations. Accordingly, we remand thisissue for further fact finding and clarifica-tion.

D. Mootness as to CTR and TI

[33] CTR and TI argue that the dis-trict court’s findings relating to the likeli-hood they will commit future violationsrender the case against them moot. Weagree. The MSA demanded the dissolu-tion of both organizations. At the time oftrial, CTR and TI only existed to wind uptheir respective affairs. The district courtfound ‘‘no reasonable likelihood of futureviolations’’ on the part of TI or CTR andconsequently ordered no remedies againstthem. Philip Morris, 449 F.Supp.2d at915. The court actually encouraged thegovernment to reconsider proceedingagainst these entities as they ‘‘seem tohave no actual ability to continue allegedpast RICO violations.’’ Id. at 916 (quota-tion marks omitted).

[34] ‘‘Federal courts lack jurisdictionto decide moot cases because their consti-tutional authority extends only to actualcases or controversies.’’ Larsen v. U.S.Navy, 525 F.3d 1, 4 (D.C.Cir.2008) (quota-tion marks omitted). A case is moot when‘‘the challenged conduct ceases such thatthere is no reasonable expectation that thewrong will be repeated’’ in circumstanceswhere ‘‘it becomes impossible for the courtto grant any effectual relief whatever tothe prevailing party.’’ City of Erie v.Pap’s A.M., 529 U.S. 277, 287, 120 S.Ct.1382, 146 L.Ed.2d 265 (2000) (quotationmarks omitted). For both CTR and TIthese requirements have been met. Thegovernment nowhere disputes Defendants’claim that CTR and TI no longer exist.They cannot possibly commit future RICOviolations. Accordingly, we vacate thejudgment as to CTR and TI and remandwith directions to dismiss.

VI. Challenges to Remedies

Finally, as to those Defendants the dis-trict court properly found likely to commitfuture RICO violations, we address their


challenges to particular remedies the dis-trict court imposed. We also address thecross-appeal seeking additional remediesthe district court denied.

A. Subsidiaries

[35] First, Defendants object to the in-clusion of their subsidiaries among thepersons bound by the remedial order.Rule 65 of the Federal Rules of Civil Pro-cedure indicates that an injunction bindsonly the parties; their ‘‘officers, agents,servants, employees, and attorneys’’; and‘‘other persons who are in active concert orparticipation with’’ the aforementionedpersons. FED. R. CIV. P. 65(d)(2). Therule derives from the common law doctrinethat an injunction ‘‘not only binds the par-ties defendant but also those identifiedwith them in interest, in ‘privity’ withthem, represented by them or subject totheir control’’—any person or entitythrough whom the defendants might carryout enjoined activity and so nullify theorder. Regal Knitwear Co. v. NLRB, 324U.S. 9, 14, 65 S.Ct. 478, 89 L.Ed. 661(1945). A subsidiary corporation is inprivity with its parent ‘‘in respect to thecommon corporate business’’ to the extentit is ‘‘so identified in interest with [theparent] that [it] represents precisely thesame legal right in respect to the subjectmatter involved’’ in the injunction. Jeffer-son Sch. of Soc. Sci. v. Subversive Activi-ties Control Bd., 331 F.2d 76, 83 (D.C.Cir.1963).

The term ‘‘subsidiaries’’ in the remedialorder cannot expand the scope of the in-junction beyond that defined by Rule65(d); however, subsidiaries of Defendantsmay be personally bound by the order tothe extent that they are agents of or inprivity with Defendants in the commoncorporate business of manufacturing, de-signing, marketing, or selling cigarettes.(Like any person with actual notice of theinjunction, subsidiaries that act in concertwith Defendants to violate the order would

also be subject to contempt.) The recordon appeal does not reveal facts sufficientfor us to evaluate over which subsidiaries,if any, Defendants exercise sufficient con-trol or with which they so identify in inter-est regarding cigarettes that they wouldlegitimately fall within the purview of theinjunction order. We therefore vacate theorder to the extent that it binds all Defen-dants’ subsidiaries and remand to the dis-trict court for proceedings to determinewhether inclusion of Defendants’ subsidiar-ies, and which subsidiaries, satisfies Rule65(d).

B. General Injunctions

The district court permanently enjoinedDefendants ‘‘from committing any act ofracketeering, as defined in 18 U.S.C.§ 1961(1), relating in any way to the man-ufacturing, marketing, promotion, healthconsequences or sale of cigarettes in theUnited States,’’ and from

making, or causing to be made in anyway, any material false, misleading, ordeceptive statement or representation,or engaging in any public relations ormarketing endeavor that is disseminatedto the United States public and thatmisrepresents or suppresses informationconcerning cigarettes. Such materialstatements include, but are not limitedto, any matter that: (a) involves health,safety, or other areas with which a rea-sonable consumer or potential consumerof cigarettes would be concerned; (b) areasonable consumer or potential con-sumer would attach importance to indetermining whether to purchase orsmoke cigarettes; or (c) the Defendant,Covered Person or Entity making therepresentation knows or has reason toknow that its recipient regards or islikely to regard as important in deter-mining whether to purchase cigarettesor to smoke cigarettes, even if a reason-able person would not so regard it.


Philip Morris, 449 F.Supp.2d at 938. De-fendants assert that, ‘‘in the face of morethan 1,600 pages of findings,’’ these injunc-tions do not sufficiently specify the actsrestrained, in violation of Rule 65(d), dueprocess, and the First Amendment. Defs.Br. 137.

[36, 37] Rule 65(d) requires every or-der granting an injunction to ‘‘state itsterms specifically [and] describe in reason-able detail—and not by referring to thecomplaint or other document—the act oracts restrained or required.’’ FED.R.CIV.P.65(d)(1)(B)-(C). ‘‘The Rule was designedto prevent uncertainty and confusion onthe part of those faced with injunctiveorders.’’ Schmidt v. Lessard, 414 U.S.473, 476, 94 S.Ct. 713, 38 L.Ed.2d 661(1974). Because an injunction ‘‘prohibitsconduct under threat of judicial punish-ment, basic fairness requires that thoseenjoined receive explicit notice of preciselywhat conduct is outlawed.’’ Id. Under thisstandard, we have held injunctions to betoo vague when they enjoin all violations ofa statute in the abstract without any fur-ther specification, or when they include, asa necessary descriptor of the forbiddenconduct, an undefined term that the cir-cumstances of the case do not clarify. SeeWash. Inv. Network, 475 F.3d at 407 (or-der enjoined all future violations of theapplicable statutes, without clarifying theacts restrained); Gulf Oil Corp. v. Brock,778 F.2d 834, 843 (D.C.Cir.1985) (orderenjoined ‘‘substantially similar’’ conductwithout further specification in a case thatprovided no examples of what is ‘‘similar’’);Common Cause v. NRC, 674 F.2d 921,926–27 (D.C.Cir.1982) (order enjoined con-duct ‘‘similar in nature’’ without furtherspecification in a case that provided noexamples of what is ‘‘similar’’); SEC v.Savoy Indus., Inc., 665 F.2d 1310, 1318–19(D.C.Cir.1981) (defendant enjoined not ‘‘toengage in any act, practice or course ofbusiness which operates or would operateas a fraud or deceit upon any person’’); see

also Schmidt, 414 U.S. at 476, 94 S.Ct. 713(enjoined ‘‘the present Wisconsinscheme’’). Even if it tracks statutory lan-guage, a general injunction is not toovague if it relates the enjoined violations tothe context of the case. See Savoy Indus.,Inc., 665 F.2d at 1316–17 (tracking lan-guage of the statute in context of defen-dant’s relationship with issuers of securi-ties). Indeed, we must always apply thefair notice requirement ‘‘in the light of thecircumstances surrounding (the injunc-tion’s) entry: the relief sought by the mov-ing party, the evidence produced at thehearing on the injunction, and the mischiefthat the injunction seeks to prevent.’’Common Cause, 674 F.2d at 927 (quotationmarks omitted).

[38] The two injunctions at issue heresufficiently specify the activities enjoinedas to provide Defendants with fair noticeof the prohibited conduct. The districtcourt did not abstractly enjoin Defendantsfrom violating RICO or making false state-ments, but instead specified the mattersabout which Defendants are to avoid mak-ing false statements or committing racke-teering acts: the manufacturing, market-ing, promotion, health consequences, andsale of cigarettes, along with related issuesthat Defendants have reason to know areof concern to cigarette consumers. This isnot a generalized injunction to obey thelaw, especially when read in the context ofthe district court’s legal conclusions and4,088 findings of fact about fraud in themanufacture, promotion, and sale of ciga-rettes. These injunctions may be broad,but breadth is warranted ‘‘to prevent fur-ther violations where[, as here,] a proclivi-ty for unlawful conduct has been shown.’’Savoy Indus. Inc., 665 F.2d at 1317 (quot-ing McComb v. Jacksonville Paper Co.,336 U.S. 187, 192, 69 S.Ct. 497, 93 L.Ed.599 (1949) (holding that the ‘‘record ofcontinuing and persistent violations of the


[statute] would indicate that that kind of a[general] decree was wholly warranted inthis case’’)). Defendants complain that thevolume of findings in this case actuallymake understanding the injunctions moredifficult and chill speech because some ofthe district court’s findings present ‘‘ex-press prohibitions’’ whereas others, likethe use of white filter paper for cigarettes,‘‘simply reflect the district court’s disap-proval’’ of aspects of Defendants’ businesspractices without finding the conductfraudulent. Defs. Br. 137. This objectionanswers itself, as the plain terms of theinjunctions prohibit only conduct thatwould constitute a racketeering act or a‘‘material false, misleading, or deceptivestatement or representation,’’ not all activi-ties the court mentioned in its findings.

C. Extraterritorial Effect

Paragraph four of the injunction prohib-its the use of ‘‘any express or impliedhealth message or health descriptor forany cigarette brand.’’ Philip Morris, 449F.Supp.2d at 938. The government con-cedes that this prohibition ‘‘should not beread to govern overseas activities with nodomestic effect.’’ Gov. Br. 215–16. Butbecause paragraph four contains no suchlimiting language, see Philip Morris, 449F.Supp.2d at 938, we vacate that provisionand remand for the district court to refor-mulate it so as to exempt foreign activitiesthat have no substantial, direct, and fore-seeable domestic effects. See supra PartIV.E.

D. Corrective Statements

As part of the remedial order, the dis-trict court ordered Defendants to dissemi-nate ‘‘corrective statements’’ concerningthe topics about which they had previouslymisled consumers. The court will deter-mine the precise content of the statementsat a future date after receiving proposalsfrom the parties, but ordered that theymust address five topics: (1) the adverse

health effects of smoking; (2) the addic-tiveness of smoking and nicotine; (3) thelack of any significant health benefit fromsmoking light cigarettes; (4) the manufac-turers’ manipulation of cigarette designand composition to ensure optimum nico-tine delivery; and (5) the adverse healtheffects of exposure to secondhand smoke.Philip Morris, 449 F.Supp.2d at 938–39.The remedial order sets out schedules forthe manufacturer Defendants to follow indisseminating the corrective statements incigarette package onserts, retail point-of-sale displays, newspapers, television, andtheir company websites. Id. at 939–41.Defendants object to the corrective state-ments as a whole on the grounds that theydid not receive adequate notice of andopportunity to respond to the govern-ment’s proposed remedy and that the rem-edy extends beyond the court’s jurisdictionunder RICO. Regarding the specific meansof disseminating the statements, Defen-dants argue that cigarette package onsertsviolate the Labeling Act, that the point-of-sale displays are duplicative and imposesevere burdens on retailers, and that re-quiring Defendants to make correctivestatements in various media apart fromexisting advertising violates the FirstAmendment.

Notice

Defendants argue that because the gov-ernment did not disclose its final correctivestatements proposal until its post-trial pro-posed remedial order, the district courtdenied Defendants due process by order-ing a version of that remedy without pro-viding Defendants adequate notice and anopportunity to respond. Although Defen-dants purport to press this objection in ageneral fashion ‘‘with respect to many oth-er remedies imposed by the district court,’’they state it with sufficient specificity forour consideration only with regard to cor-rective statements. Defs. Br. 135. The


exact content of the statements is yet to bedetermined and so is not before us at thisstage.

[39] The sequence of events surround-ing the remedies phase of the trial did notdeprive Defendants of the process theywere due. Defendants received the gov-ernment’s proposed remedies, including ageneral corrective statements proposal,two months before the remedies phase ofthe trial began. They participated in afourteen-day, fully briefed remedies trial,at which thirteen witnesses testified andwere subject to cross-examination, includ-ing at least one government witness whotestified about corrective statements.Philip Morris, 449 F.Supp.2d at 923. Inits post-trial proposed remedial order, thegovernment specified the five categories ofcorrective statements (which correspond tothe subjects about which the district courtfound Defendants committed fraud) andthe details of its recommended publicationcampaign. Defendants responded to thegovernment’s proposed order in their ownpost-trial brief and raised numerous legalobjections to the propriety of the correc-tive statements remedy, which the districtcourt considered and resolved in its finalopinion and order. See id. at 921–23. De-fendants have not demonstrated any preju-dice from this sequence of events. Intheir offer of proof to the district courtthey asserted only that if they had knownmore ‘‘specifics’’ of the government’s pro-posed remedy before the hearing, theywould have retained, and might have of-fered testimony from, one or more expertsaddressing the proposal. See Defs. Offerof Proof at 9–10. Even on appeal, Defen-dants suggest no testimony they wouldhave offered, no lines of cross-examinationinquiry they would have pursued, and nofactual dispute they would have addressed.

This case bears no resemblance to Unit-ed States v. Microsoft Corp., 253 F.3d 34(2001), as Defendants attempt to suggest.

In Microsoft, the district court ordered thebreak-up and restructuring of Microsoftinto two companies without holding anyevidentiary hearing to resolve the numer-ous disputed fact questions surroundingthe remedy. Id. at 101–02. Microsoftsubmitted two offers of proof identifyingserious unresolved issues of fact and in-cluded 53 pages of submissions specifyingthe evidence it would introduce to chal-lenge the government’s representations.Id. at 103. Microsoft gives us no reason tobelieve Defendants in this case—who en-joyed pre-trial notice and a lengthy reme-dies trial, and have shown no prejudice—suffered a denial of due process.

Section 1964

A district court that finds a defendantcivilly liable for violating RICO has juris-diction ‘‘to prevent and restrain violationsof [RICO] by issuing appropriate or-dersTTTT’’ 18 U.S.C. § 1964(a). Congresslimited relief under section 1964(a) to for-ward-looking remedies aimed at prevent-ing and restraining future RICO violations.Disgorgement Opinion, 396 F.3d at 1198,1200. Earlier in this litigation, we heldthat the statute does not authorize dis-gorgement because it is ‘‘both aimed atand measured by past conduct’’: ‘‘[i]t ismeasured by the amount of prior unlawfulgains and is awarded without respect towhether the defendant will act unlawfullyin the future.’’ Id. at 1198. Defendantsargue that corrective statements are simi-larly ‘‘focused on remedying the effects ofpast conduct,’’ id., because they seek tocorrect Defendants’ campaign of deceptivemarketing.

The government urges that the correc-tive statements are a forward-looking rem-edy authorized under section 1964(a) be-cause future advertising that ‘‘may notcontain any statements which are them-selves false or deceptive’’ nevertheless in-evitably builds upon Defendants’ previous


false statements and, if uncorrected, ‘‘con-tinues the deception, albeit implicitly rath-er than explicitly,’’ rendering those adver-tisements ‘‘part of the continuing deceptionof the public.’’ Warner–Lambert Co. v.FTC, 562 F.2d 749, 769 (D.C.Cir.1977); seeNovartis Corp. v. FTC, 223 F.3d 783, 787(D.C.Cir.2000). We do not doubt that con-sumers may ‘‘continue to make purchasingdecisions based on the false belief’’ createdby a manufacturer’s false advertising evenwhen that advertising ceases, NovartisCorp., 223 F.3d at 787 (quoting Warner–Lambert Co., 562 F.2d at 762), but it is lessclear whether, and in what circumstances,continuing consumer confusion created byuncorrected but truthful advertising wouldamount to a knowing fraud. Section1964(a) authorizes only remedies that pre-vent and restrain future RICO violations,not all future effects of past RICO viola-tions, Disgorgement Opinion, 396 F.3d at1198, or all future unseemly business prac-tices.

We need not consider this question,however, because as the district court ob-served and the intervenors here argue,requiring Defendants to issue correctivestatements will ‘‘prevent and restrain themfrom making fraudulent public statementson smoking and health matters in the fu-ture.’’ Philip Morris, 449 F.Supp.2d at926. Defendants will be impaired in mak-ing false and misleading assurances about,for instance, smoking-related diseases orthe addictiveness of nicotine—as the dis-trict court found they continue to do, id. at925–26—if they must at the same timecommunicate the opposite, truthful mes-sage about these matters to consumers.Requiring Defendants to reveal the previ-ously hidden truth about their productswill prevent and restrain them from dis-seminating false and misleading state-ments, thereby violating RICO, in the fu-ture.

Package onserts

One of the vehicles for the correctivestatements is a cigarette package onsert,which the district court ordered Defen-dants to ‘‘affix to cigarette packaging, ei-ther on the outside of or within the outercellophane wrapping around the packageTTT in the same manner as certain Defen-dants, such as Philip Morris and Brown &Williamson, have utilized package onsertsin the past.’’ Philip Morris, 449F.Supp.2d at 939. Defendants object thatthe onserts violate the Federal CigaretteLabeling and Advertising Act (‘‘LabelingAct’’), which provides that ‘‘[n]o statementrelating to smoking and health, other thanthe statement required by section 1333 ofthis title, shall be required on any ciga-rette package.’’ 15 U.S.C. § 1334(a).

The Labeling Act defines a ‘‘package’’as ‘‘a pack, box, carton, or container ofany kind in which cigarettes are offeredfor sale, sold, or otherwise distributed toconsumers.’’ Id. § 1332(4). A packageonsert is ‘‘[a] communication affixed tobut separate from an individual cigarettepack and/or carton purchased at retail byconsumers, such as a miniature brochureincluded beneath the outer cellophanewrapping or glued to the outside of thecigarette packaging.’’ Philip Morris, 449F.Supp.2d at 948; see Schwab v. PhilipMorris USA, Inc., 449 F.Supp.2d 992,1084–85 (E.D.N.Y.2006) (defining onsertsas ‘‘pamphlets attached to the outside ofcartons or packs of cigarettes’’), rev’d onother grounds by McLaughlin v. Am. To-bacco Co., 522 F.3d 215 (2d Cir.2008);United States v. Star Scientific, Inc., 205F.Supp.2d 482, 484 (D.Md.2002) (definingonsert as ‘‘a type of external package la-bel’’).

[40] These definitions show that thecorrective statements in an onsert are not‘‘statement[s] TTT on [a] package,’’ 15U.S.C. § 1334(a), but rather statements in


a brochure attached to or included with apackage, and thus are not prohibited bythe plain language of the Labeling Act. SeePhilip Morris, 449 F.Supp.2d at 928 n. 89.Congress could have used more expansivelanguage to reach statements in onsertshad it chosen to do so, but it chose only topreempt the requiring of alternative state-ments about smoking and health ‘‘on anycigarette package.’’ Moreover, the districtcourt and the parties appear to have rec-ognized the distinction between packagesand onserts throughout the trial. See id.at 206 (‘‘Philip Morris has never told itscustomers on its cigarette packaging or inonserts that it agrees that smoking causescancer and other diseases in smokers.’’),288 (‘‘Philip Morris replaced the pre-exist-ing package labels with onserts.’’), 424(‘‘[Brown & Williamson] began a new testmarket TTT using its redesigned packagingand onsertTTTT Star Scientific TTT addedan informational ‘onsert’ attached to thepackage.’’); Trial Tr., Jan. 10, 2005 (PhilipMorris senior vice president distinguishingbetween cigarette pack and onsert). Wetherefore conclude that the onsert remedydoes not violate the Labeling Act.

Point-of-sale displays

The district court ordered each Defen-dant with a retail merchandising pro-gram—whereby retailers agree to use themanufacturer’s in-store advertising—todesign countertop and header displayscontaining the corrective statements and‘‘require retailers who participate in suchprogram’’ to display them for two years.Philip Morris, 449 F.Supp.2d at 939–40.The freestanding countertop displays mustbe at least thirty inches high and eighteeninches wide, and retailers must place themon their counters ‘‘within the line-of-sightof any customer who is standing in line forthe register.’’ Id. at 946. The headerdisplays must be of at least equivalent sizeto Defendants’ other brand advertisingheaders and placed ‘‘in an equivalent posi-

tion with any other brand advertisingheader’’ at the top of the cigarette displaycase. Id. at 939–40, 947. Under the in-junctive order, each Defendant must ‘‘sus-pend from its Retail Merchandising Pro-gram for a period of one year any retailerthat fails to comply with this provision.’’Id. at 940.

Retailers affected by this order—noneof whom were involved in the litigation inany way—did not receive notice of thisremedy or an opportunity to present evi-dence or arguments to the district courtregarding the impact the injunction wouldhave on their businesses. Nor does itappear that the district court independent-ly considered the impact of this programon affected retailers. In their appellatebrief as amicus curiae and in affidavitsfiled with Defendants’ motion for a stay offinal judgment pending appeal, the Nation-al Association of Convenience Stores rep-resents that this injunction will cost retail-ers substantial revenue. The conveniencestores indicate that countertop space is themost important space within a conveniencestore, and the loss of one square foot ofcountertop space can cost the industry $82million in sales per year. Yet if the retail-ers choose not to carry the countertopdisplays, Defendants must suspend themfrom their retail merchandising programfor one year, which one retailer assertedwould cost ten to fifteen percent of hisconvenience stores’ annual profits. SeeHartman Aff. at 2.

[41] Section 1964(a) explicitly cautionsthat in crafting an injunctive remedy thecourt must ‘‘mak[e] due provision for therights of innocent persons.’’ 18 U.S.C.§ 1964(a). We believe that the districtcourt exceeded its authority by failing toconsider the rights of retailers and craft-ing an injunction that works a potentiallyserious detriment to innocent persons notparties to or otherwise heard in the dis-


trict court proceedings. Even though notexplicitly bound by the terms of an injunc-tion on pain of contempt, third parties maybe so adversely affected by an injunctionas to render it improper. See, e.g., CookInc. v. Boston Scientific Corp., 333 F.3d737, 744 (7th Cir.2003).

We therefore vacate the order regardingpoint-of-sale displays and remand for thedistrict court to evaluate and ‘‘mak[e] dueprovision for the rights of innocent per-sons,’’ either by abandoning this part ofthe remedial order or by crafting a newversion reflecting the rights of third par-ties. 18 U.S.C. § 1964(a). Of course, anysuch remedy the district court imposes onremand can only affect contracts enteredafter the injunctive order issues. SeeNat’l Wildlife Fed’n v. Burford, 835 F.2d305, 315 (D.C.Cir.1987) (explaining an in-junction’s validity due to the fact that it‘‘does not affect the contractual rights ofthird parties’’). In addition, we agree withDefendants that the injunction appears toorder each Defendant separately to re-quire the same retail store to display sub-stantively identical, but separate, signs.The government concedes that, despite thelanguage of the order, the district courtcould not have intended to require theburden of multiple duplicative displays ateach retail store. We therefore direct thedistrict court, if it concludes that someform of a point-of-sale display injunction isstill appropriate after considering therights of third parties and existing con-tracts, to clarify that its order does notrequire duplicative displays.First Amendment

The district court also ordered each De-fendant to publish the corrective state-ments on its corporate website, as a one-time full-page advertisement in thirty-fivemajor newspapers, and as at least tenadvertisements on a major television net-work over the course of one year. PhilipMorris, 449 F.Supp.2d at 939–41. The

court chose these media in order to ‘‘struc-ture a remedy which uses the same vehi-cles which Defendants have themselveshistorically used to promulgate false smok-ing and health messages.’’ Id. at 928.The court concluded compelled correctiveadvertising is permissible under the com-mercial speech doctrine. Id. at 926–28.

[42] The First Amendment protectsagainst government infringement on ‘‘theright to speak freely and the right torefrain from speaking at all.’’ Wooley v.Maynard, 430 U.S. 705, 714, 97 S.Ct. 1428,51 L.Ed.2d 752 (1977). This holds truewhether applied to individuals, see W. Va.State Bd. of Educ. v. Barnette, 319 U.S.624, 642, 63 S.Ct. 1178, 87 L.Ed. 1628(1943), or to companies, see Pac. Gas &Elec. Co. v. Pub. Utils. Com., 475 U.S. 1,16, 106 S.Ct. 903, 89 L.Ed.2d 1 (1986)(‘‘For corporations as for individuals, thechoice to speak includes within it thechoice of what not to say.’’). In limitedcircumstances, however, courts have up-held the government’s ability to dictate thecontent of mandatory speech. This largelyoccurs in the commercial context.

[43] Under the commercial speech doc-trine, the government’s ‘‘power to regulatecommercial transactions justifies its con-comitant power to regulate commercialspeech that is ‘linked inextricably’ to thosetransactions.’’ 44 Liquormart v. RhodeIsland, 517 U.S. 484, 499, 116 S.Ct. 1495,134 L.Ed.2d 711 (1996). Thus, the govern-ment may require commercial speech to‘‘appear in such a form, or include suchadditional information, warnings, and dis-claimers, as are necessary to prevent itsbeing deceptive.’’ Va. Bd. of Pharmacy v.Va. Citizens Consumer Council, Inc., 425U.S. 748, 762, 96 S.Ct. 1817, 48 L.Ed.2d346 (1976). Because commercial speechreceives a lower level of protection underthe First Amendment, burdens imposed onit receive a lower level of scrutiny from the


courts. Zauderer v. Office of DisciplinaryCounsel of Supreme Court, 471 U.S. 626,637, 105 S.Ct. 2265, 85 L.Ed.2d 652 (1985);Cent. Hudson Gas & Elec. Corp. v. Pub.Serv. Comm’n, 447 U.S. 557, 562–64, 100S.Ct. 2343, 65 L.Ed.2d 341 (1980). Al-though the standard for assessing burdenson commercial speech has varied, Bd. ofTrs. v. Fox, 492 U.S. 469, 476–78, 109 S.Ct.3028, 106 L.Ed.2d 388 (1989) (describingthe diverse levels of scrutiny applied invarious cases, including Central Hudson,447 U.S. at 566, 100 S.Ct. 2343, In re R.M.J., 455 U.S. 191, 203, 102 S.Ct. 929, 71L.Ed.2d 64 (1982), and Zauderer, 471 U.S.at 644, 105 S.Ct. 2265), the SupremeCourt’s bottom line is clear: the govern-ment must affirmatively demonstrate itsmeans are ‘‘narrowly tailored’’ to achieve asubstantial government goal, id. at 480,109 S.Ct. 3028.

Defendants object that the ‘‘freestand-ing’’ corrective statements violate the FirstAmendment because they are not connect-ed to existing advertising and, therefore,cannot be considered commercial speech.That being the case, Defendants contendthe less rigorous commercial speech stan-dard does not apply. Alternatively, Defen-dants argue that, even if these statementsare commercial speech, the correctivestatements do not directly and materiallyadvance a substantial government interest.See Cent. Hudson, 447 U.S. at 566, 100S.Ct. 2343. Defendants’ arguments misun-derstand the commercial speech doctrineand misstate the commercial speech stan-dard.

Defendants’ first argument, that thestand-alone corrective statements do notfall within the commercial speech doctrinebecause they are not attached to advertise-ments, is a red herring. The context ofthe corrective statements does not dictatethe level of scrutiny; rather, the level ofscrutiny depends on the nature of thespeech that the corrective statements bur-

den. Riley v. Nat’l Fed’n of Blind, 487U.S. 781, 796, 108 S.Ct. 2667, 101 L.Ed.2d669 (1988) (‘‘Our lodestars in deciding whatlevel of scrutiny to apply to a compelledstatement must be the nature of thespeech taken as a whole and the effect ofthe compelled statement thereon.’’). Here,the district court clearly imposed thesestatements as a burden on Defendants’current and future commercial speech.Philip Morris, 449 F.Supp.2d at 926–28(justifying ordering the freestanding cor-rective statements under the commercialspeech doctrine).

[44, 45] Commercial speech is definedas ‘‘expression related solely to the eco-nomic interests of the speaker and its au-dience’’ or ‘‘speech proposing a commercialtransaction.’’ Cent. Hudson, 447 U.S. at561–62, 100 S.Ct. 2343. In addition toinformation related to proposing a particu-lar transaction, such as price, it can in-clude material representations about theefficacy, safety, and quality of the advertis-er’s product, and other information assert-ed for the purpose of persuading the publicto purchase the product. See, e.g., Zau-derer, 471 U.S. at 637 & n. 7, 639–40, 105S.Ct. 2265 (information and legal adviceabout a defective product and the possibili-ty of suing were commercial); Bolger v.Youngs Drug Prods. Corp., 463 U.S. 60,66–68, 103 S.Ct. 2875, 77 L.Ed.2d 469(1983) (informational brochures discussing‘‘important public issues such as venerealdisease and family planning’’ distributedby contraceptives manufacturer were com-mercial); Brown & Williamson TobaccoCorp., 778 F.2d at 38, 43 (claims that ciga-rettes contained one milligram of tar andwere ‘‘99% tar free’’ were commercial);Nat’l Comm’n on Egg Nutrition v. FTC,570 F.2d 157, 159, 163 (7th Cir.1977) (hold-ing egg trade association’s advertisementsabout the relationship between eggs andheart disease were commercial speech).


Defendants’ various claims—denying theadverse effects of cigarettes and nicotinein relation to health and addiction—consti-tute commercial speech. Defendants dis-seminate their fraudulent representationsabout the safety of their products, both informats that do and those that do notexplicitly propose a particular commercialtransaction, in attempts to persuade thepublic to purchase cigarettes.

[46] The fact that some—but certainlynot all—of these advertisements involveDefendants as a group joined in advertis-ing their common product, discuss ciga-rettes generically without specific brandnames, or link cigarettes to an issue ofpublic debate, does not change the com-mercial nature of the speech. Bolger, 463U.S. at 66 n. 13, 67–68, 103 S.Ct. 2875;Nat’l Comm’n on Egg Nutrition, 570 F.2dat 163. Moreover, the reality that thesecorrective statements may tangentiallyburden noncommercial speech does notrender the statements unconstitutional. Aburden on commercial speech, whether itbe suppression or mandatory disclosure,only triggers a higher level of scrutiny ifthe commercial speech is ‘‘inextricably in-tertwined’’ with fully protected speech.Riley, 487 U.S. at 796, 108 S.Ct. 2667(‘‘[S]peech [does not] retain[ ] its commer-cial character when it is inextricably inter-twined with otherwise fully protectedspeech.’’). Here, Defendants’ past partic-ipation in the public controversy surround-ing smoking and health may have beeninextricably intertwined with their market-ing efforts, but the intentionally fraudulentcharacter of the noncommercial publicstatements undermines any claim for moreexacting scrutiny. See McIntyre, 514 U.S.at 357, 115 S.Ct. 1511. Moreover, becausethe injunctive order cannot retroactivelyburden Defendants’ past communications,to determine the constitutionality of thecorrective statements we must look to thefuture and evaluate whether the district

court’s order targeting commercial speechcuts too broad a swath.

[47] The issue of corrective advertis-ing’s possible peripheral impact on pro-tected speech does not affect the characterof the burdened speech, but rather bearson whether the remedy is sufficiently nar-rowly tailored to achieve a substantial gov-ernment interest—in this case, preventingDefendants from committing future RICOviolations. We have no reason to think itis not. The district court found that, forover fifty years, Defendants violated RICOby making false and fraudulent statementsto consumers about their products. PhilipMorris, 449 F.Supp.2d at 26–27. Thecourt also found Defendants reasonablylikely to commit similar violations in thefuture, id. at 908–15, and concluded thecorrective statements were necessary tocounteract these anticipated violations, seeid. at 927 (‘‘The injunctive relief soughthere is narrowly tailored to prevent Defen-dants from continuing to disseminatefraudulent public statements and market-ing messages by requiring them to issuetruthful communications.’’). Thus, con-trary to Defendants’ argument, the publi-cation of corrective statements addressingDefendants’ false assertions is adequatelytailored to preventing Defendants from de-ceiving consumers.

The district court has not yet deter-mined the content of the corrective state-ments. Id. at 928. As the validity of itsorder relies on the commercial nature ofthe speech it burdens, the court must en-sure the corrective disclosures are careful-ly phrased so they do not impermissiblychill protected speech. Zauderer, 471 U.S.at 651, 105 S.Ct. 2265. Consequently, thecourt must confine the statements to‘‘purely factual and uncontroversial infor-mation,’’ id., geared towards thwartingprospective efforts by Defendants to eitherdirectly mislead consumers or capitalize on


their prior deceptions by continuing to ad-vertise in a manner that builds on consum-ers’ existing misperceptions. Warner–Lambert Co., 562 F.2d at 769 (concluding,due to Listerine’s fifty year history of falseadvertisements, ‘‘advertising which fails torebut the prior claims TTT [would] inevita-bly build[ ] upon those claims; continuedadvertising continues the deception, albeitimplicitly rather than explicitly’’). Assum-ing the corrective advertising once draftedmeets these requirements, it is a permissi-ble restraint on Defendants’ commercialspeech.

E. Intervention

Tobacco–Free Kids Action Fund andfive other public health organizations in-tervened in both the trial and appeal inorder to advocate additional remediesagainst Defendants. Defendants assertthat the intervenors are not properly be-fore the court because they do not havestanding and do not have the ability topursue remedies for RICO violations un-der the statute. Not surprisingly, the in-tervenors disagree. Before we addressthe merits of the intervenors’ cross-appealwe must resolve the propriety of theirintervention.

Section 1964(b) authorizes the AttorneyGeneral to ‘‘institute proceedings under’’section 1964(a) for equitable remedies. 18U.S.C. § 1964(b). Private parties, on theother hand, may seek relief under section1964(c), which allows suits for damages.The statutory scheme does not directlyprovide private parties with a cause ofaction for equitable remedies. Id.§ 1964(c). According to Defendants, theinability to bring an action under section1964(a) precludes private intervention in aRICO suit instituted by the governmentunder subsection (a) and permitting pri-vate intervenors would contravene con-gressional intent. Id. § 1964(a), (c).

[48] Defendants are wrong. UnderFederal Rule of Civil Procedure 24(a)(2),‘‘the question is not whether the applicablelaw assigns the prospective intervenor acause of action[, but] [r]ather TTT whetherthe individual may intervene in an alreadypending cause of action.’’ Jones v. PrinceGeorge’s County, 348 F.3d 1014, 1018(D.C.Cir.2003). Therefore, intervention ofright only requires ‘‘an ‘interest’ in thelitigation—not a ‘cause of action’ or ‘per-mission to sue.’ ’’ Id. (citing FED.R.CIV.P.24(a)(2)). Section 1964(b) reserves for thegovernment the ability to ‘‘institute’’ acause of action for equitable remedies, butdoes not bar a private person with a suffi-cient interest under Rule 24(a)(2) fromintervening. Likewise, section 1964(c)designates that private parties may bringa cause of action to pursue damages forRICO violations, but does not preventthem from intervening in a governmentalaction seeking to ‘‘prevent and restrain’’future violations. Even where Congresshas explicitly excluded private personsfrom a particular statutory cause of actionthey may, if not demonstrably contrary tocongressional intent, still intervene if (1)they satisfy standing and Rule 24(a) re-quirements and (2) their intervention is‘‘limited to the claims of illegality present-ed by the [government].’’ Trbovich v.United Mine Workers of Am., 404 U.S.528, 537, 92 S.Ct. 630, 30 L.Ed.2d 686(1972) (finding a statute forbidding a par-ticular party from bringing a cause of ac-tion may only be read to prohibit interven-tion by that party if intervention wouldfrustrate Congress’s reasons for barringthat party from initiating the litigation inthe first place). Outside the text of thestatute, which is at best silent on thissubject, Defendants offer no evidence Con-gress intended to prevent private organi-zations from intervening in section 1964(a)actions. Moreover, the intervenors assertno novel ‘‘claims of illegality,’’ but merely


seek to expand the remedies sought by thegovernment.

[49] Two considerations are left:whether the intervenors satisfy standingand Rule 24(a) requirements. In this cir-cuit, because an intervenor ‘‘participateson equal footing with the original partiesto a suit,’’ a prospective intervenor mustsatisfy Article III standing requirements.Bldg. & Constr. Trades Dep’t v. Reich, 40F.3d 1275, 1282 (D.C.Cir.1994); see alsoFund for Animals, Inc. v. Norton, 322F.3d 728, 732–33 (D.C.Cir.2003). In Lujanv. Defenders of Wildlife, 504 U.S. 555, 112S.Ct. 2130, 119 L.Ed.2d 351 (1992), theSupreme Court enunciated a three-parttest for standing: (1) injury-in-fact, (2)causation, and (3) redressability. Id. at560–61, 112 S.Ct. 2130; Transp. WorkersUnion of Am. v. Transp. Sec. Admin., 492F.3d 471, 474 (D.C.Cir.2007). On appeal,Defendants claim the intervenors fail onthe first two prongs: injury and causation.According to Defendants, the intervenors’alleged injuries are ‘‘purely conjectural’’and no causal connection exists betweentheir injuries and possible ongoing or fu-ture RICO violations.

[50] We conclude the intervenors pres-ent sufficient injuries directly caused byDefendants’ RICO violations. The mem-bership organizations aver, under the um-brella of associational standing, see UAWv. Brock, 477 U.S. 274, 281–82, 106 S.Ct.2523, 91 L.Ed.2d 228 (1986), their mem-bers suffered injury because Defendantsexposed their children to predatory andmisleading advertisements intended to en-tice the children to smoke. ‘‘[A] personwho received ‘a misrepresentation madeunlawful under [statute] has suffered inju-ry in precisely the form the statute wasintended to guard against.’ ’’ Public Citi-zen v. FTC, 869 F.2d 1541, 1548 (D.C.Cir.1989) (quoting Havens Realty Corp. v.Coleman, 455 U.S. 363, 373, 102 S.Ct. 1114,71 L.Ed.2d 214 (1982)). As we have dis-

cussed at length, through their deceptivemarketing, Defendants committed variousracketeering acts in order to defraud con-sumers, including acts that violated mailand wire fraud statutes. Intervenor mem-bership organizations, therefore, sufferedan injury-in-fact at the hands of Defen-dants every time Defendants intended todeceive a member or a member’s child.As only one intervenor must have standingfor us to consider their additional proposedremedy, we need not decide the standingissue as to the remaining intervening pub-lic health organizations. McConnell v.FEC, 540 U.S. 93, 233, 124 S.Ct. 619, 157L.Ed.2d 491 (2003).

Intervenors fulfill the Rule 24(a) re-quirements if they: (1) submitted a timelyapplication to intervene, (2) ‘‘have an inter-est relating to the property or transactionwhich is the subject of the action,’’ (3) are‘‘so situated that the disposition of theaction may, as a practical matter, impair orimpede [their] ability to protect that inter-est,’’ and (4) have an interest that theexisting parties would not adequately rep-resent. Bldg. & Constr. Trades Dep’t, 40F.3d at 1282. The intervenors easily satis-fy the first two prongs. Defendants do notcontest the timeliness of the intervenors’application. And, by demonstrating Arti-cle III standing, the intervenors adduce asufficient interest. Fund for Animals, 322F.3d at 735. The latter prongs are alsomet. We agree with the district court thatthe intervenors needed to intercede to pro-tect their interests as the government‘‘substantially altered the scope of theremedies it [sought]’’ and ‘‘no longershare[d] the views of Intervenors as tohow extensive the appropriate remediesshould be.’’ United States v. Philip Mor-ris USA Inc., No. 99–2496, 2005 WL1830815, at *5, 2005 U.S. Dist LEXIS16196, at *24–*25 (D.D.C.2005). Accord-


ingly, we conclude intervention was prop-er.

F. Cross–AppealThe government and the intervenors

bring a cross-appeal challenging the dis-trict court’s denial of additional remediesthey sought against Defendants. Specifi-cally, they appeal from the district court’srefusal of their proposed counter-market-ing campaign, national smoking cessationprogram, youth smoking reduction plan,and monitoring scheme. They also appealfrom the denial of their request for dis-gorgement, which we affirm as the law ofthe case. See Disgorgement Opinion, 396F.3d 1190.

[51] We review de novo the districtcourt’s legal conclusion that the govern-ment’s proposed counter-marketing, smok-ing cessation, and youth smoking reductionremedies were beyond its authority to or-der. Under section 1964(a), the districtcourt may craft only forward-looking rem-edies aimed at preventing and restrainingfuture RICO violations. Id. at 1198.Remedies ‘‘focused on remedying the ef-fects of past conduct’’ or ‘‘awarded withoutrespect to whether the defendant will actunlawfully in the future’’ are beyond thecourt’s statutory jurisdiction. Id.

As the government suggests, the pro-posed counter-marketing and smoker ces-sation programs are closely related: theyshare the goal of reducing the number ofsmokers in America. The former would‘‘requir[e] Defendants to fund a long-term,extensive, culturally-competent public edu-cation and counter-marketing campaignTTT aimed at diluting both the impact ofDefendants’ fraudulent statements and atundermining the efficacy of Defendants’marketing efforts towards youth.’’ PhilipMorris, 449 F.Supp.2d at 936. The dis-trict court concluded that the counter-mar-keting campaign would ‘‘serve to reducethe number of youth smokers, reduce thenumber of addicted adult smokers in thefuture, and thereby potentially reduce theeconomic incentives for Defendants to con-

tinue their fraud.’’ Id. Similarly, thesmoker cessation program would requireDefendants to fund a media campaign ‘‘toencourage smokers to seek assistance toquit smoking,’’ a ‘‘national tobacco quitlinenetwork’’ to provide access to counselingand medication for quitting smoking, andresearch to improve ‘‘tobacco dependenceinterventions and physician and cliniciantraining and education.’’ Id. at 933. Thegovernment and intervenors offer two ra-tionales for these programs.

[52] First, they argue that each futuresale of cigarettes to a smoker who becameaddicted in the past due to Defendants’fraud is a continuing effect of the pastfraud, due to the nature of addiction. Thegovernment and intervenors urge that,even if the court cannot order recovery ofpast profits gained by past deception, itcan deny Defendants the continuing futureprofits flowing from their past misconduct;that is, the court may remedy the continu-ing effects of past illegal conduct becausesuch a remedy is forward-looking and notmeasured by past conduct. This argumentoverlooks the explicit instruction of section1964(a) that district courts may only orderremedies ‘‘to prevent and restrain viola-tions of [RICO].’’ 18 U.S.C. § 1964(a).Future cigarette sales, even to addictedsmokers, are not by themselves RICO vio-lations. The proposed remedies attemptto prevent and restrain future effects ofpast RICO violations, not future RICOviolations, therefore they are outside thedistrict court’s authority under section1964(a).

Even those courts that would allow someversion of disgorgement under section1964(a) recognize that the statute is limit-ed to preventing future violations and doesnot extend to future effects flowing frompast violations. See, e.g., Richard v.Hoechst Celanese Chem. Group, Inc., 355F.3d 345, 355 (5th Cir.2003) (‘‘Section1964(a) establishes that equitable remedies


are available only to prevent ongoing andfuture conduct.’’); United States v. Car-son, 52 F.3d 1173, 1182 (2d Cir.1995)(‘‘[T]he jurisdictional powers in § 1964(a)serve the goal of foreclosing future viola-tions, and do not afford broader redress.’’).Nor do the government’s examples fromantitrust lend support to their argument.See, e.g., Ford Motor Co. v. United States,405 U.S. 562, 573, 92 S.Ct. 1142, 31L.Ed.2d 492 (1972) (‘‘The relief in an anti-trust case must be effective to redress theviolations and to restore competition.’’(quotation marks omitted)); United Statesv. E.I. du Pont de Nemours & Co., 353U.S. 586, 607, 77 S.Ct. 872, 1 L.Ed.2d 1057(1957) (ordering the district court to deter-mine ‘‘the equitable relief necessary andappropriate TTT to eliminate the effects ofthe acquisition offensive to the statute’’).The condition of monopolization is itself aviolation of the Sherman Act, 15 U.S.C.§§ 2, 3, therefore district courts may orderremedies to cure the monopolizing effectsof the forbidden anticompetitive combina-tion or acquisition so as to prevent thecontinuing violation, id. § 4. The same isnot true of RICO or the fraud statutes,under which any future violation wouldhave to result from ongoing acts, not ongo-ing conditions.

The intervenors suggest that remediesaimed at helping addicted smokers quitwould ‘‘divest’’ Defendants of the ‘‘fruits of[their] ill-gotten gains,’’ which are addictedsmokers and the money they continue topay for Defendants’ cigarettes. Turkette,452 U.S. at 585, 101 S.Ct. 2524 (describingthe civil RICO remedies as a whole, includ-ing treble damages). This rhetoric simplydisguises the same argument about con-tinuing effects of past violations. The veryauthorities upon which the intervenors relyestablish only the statute’s authorization to‘‘order any person to divest himself of anyinterest TTT in any enterprise,’’ 18 U.S.C.§ 1964(a), by separating the RICO defen-dant from the RICO enterprise in order to

prevent future violations. See, e.g., UnitedStates v. Local 560 of Int’l Bhd. of Team-sters, 780 F.2d 267, 295 (3d Cir.1985) (re-moval of a union’s corrupt executive boardwas an act of divestiture).

Second, the intervenors argue that theproposed counter-marketing and smokingcessation campaigns would eliminate De-fendants’ incentive to market their prod-ucts fraudulently by shrinking Defendants’customer base. It may be, as one experttestified, that ‘‘remov[ing] from the mar-ketplace a population of consumers andpotential consumers of defendants’ prod-ucts, namely children’’ and addictedsmokers (the targets of the counter-mar-keting and smoking cessation campaigns),would eliminate rather than heighten De-fendants’ incentive to market to thesegroups. Bazerman Written Direct Exami-nation at 65. But marketing to thesegroups is not in itself a RICO violation.Certainly, if Defendants have no incentiveto advertise their products then they haveno incentive to do so with fraudulentstatements, but we reject general deter-rence remedies aimed so wide of the stat-utorily-ordained mark. DisgorgementOpinion, 396 F.3d at 1200 (rejecting dis-gorgement even though it ‘‘may act to‘prevent and restrain’ future violations bygeneral deterrence insofar as it makesRICO violations unprofitable’’). Underthe intervenors’ theory, any remedy thatreduces Defendants’ potential customerbase in any manner would prevent andrestrain RICO violations because Defen-dants would have less incentive to markettheir products and therefore potentiallymarket with fraudulent statements. Asthe Second Circuit observed, this argu-ment goes too far: a remedy ‘‘may not bejustified simply on the ground that what-ever hurts a civil RICO violator necessari-ly serves to ‘prevent and restrain’ futureRICO violations. If this were adequatejustification, the phrase ‘prevent and re-strain’ would read ‘prevent, restrain and


discourage,’ and would allow any remedythat inflicts pain.’’ Carson, 52 F.3d at1182. Such a remedy reaches beyond thebounds of section 1964(a), which author-izes the district court to order injunctionsto prevent and restrain fraudulent state-ments about smoking and health and ad-diction, not to prevent Defendants frommarketing and selling their products at all.

We note that in its brief the governmentoffhandedly mentions an alternative nar-rower smoking cessation program thatwould be ‘‘calculated to address the num-ber of smokers who would become addict-ed after the judgment, as a result of futurefraud,’’ and suggests this program wouldbe a viable option even if we affirm thedistrict court’s denial of the original pro-gram. Gov. Br. 225. The district courtdid not address this alternative, and thegovernment does not further describe it ordirect us to where we may find it in therecord, so we do not consider it.

Only the intervenors appeal from thedistrict court’s denial of the government’sproposed ‘‘youth smoking reduction tar-gets’’ plan. Under that proposal, the courtwould require Defendants to reduce youthsmoking by six percent each year for sev-en years, and if Defendants fail to meet anannual target, the court would assess thema $3,000 fine for each youth above thetarget who continues to smoke, a figurerepresenting the ‘‘lifetime proceeds a De-fendant could expect to earn from makingits brands appealing’’ to youth. PhilipMorris, 449 F.Supp.2d at 933–34. Thedistrict court denied this injunction be-cause it was not tailored to prevent andrestrain future RICO violations for at leasttwo reasons. First, the RICO violationthe court found with relation to youth mar-keting was not Defendants’ ‘‘continuing ef-forts to market to youth but rather theirfalse denials of those efforts.’’ Id. at 932n. 91. The youth smoking reduction pro-posal was not aimed at preventing Defen-

dants from denying their youth marketingefforts but rather at restraining Defen-dants from marketing and selling to youth.Second, the court agreed with expert testi-mony that the youth smoking reductionplan was an ‘‘outcome-based’’ remedy that‘‘tie[s] financial assessments to the out-come of youth smoking TTT rates[, which]may increase or decrease due to inputfactors beyond Defendants’ control.’’ Id.at 934. An injunction that would holdDefendants responsible for outcomes theycould not control regardless of modifica-tions in their behavior would not serve toprevent or restrain Defendants from com-mitting future RICO violations.

[53] The intervenors’ argument in fa-vor of the youth smoking reduction pro-posal is based on the incorrect assumptionthat the underlying RICO violation to beprevented and restrained is Defendants’youth marketing, rather than their falsedenials of their efforts to market to youth.As noted above, we need not decide wheth-er such denials amounted to RICO viola-tions. Even if they did, the district courtcorrectly concluded that an injunctionaimed solely at reducing youth smokingrates does not address the section 1964goal of preventing and restraining the un-derlying RICO violation. The intervenors’argument is unavailing.

Finally, the district court denied thegovernment’s proposed monitoring schemepursuant to Cobell v. Norton, 334 F.3d1128 (D.C.Cir.2003), because the schemewould ‘‘require delegation of substantialjudicial powers to non-judicial personnel inviolation of Article III of the Constitution.’’Philip Morris, 449 F.Supp.2d at 935. InCobell, we held that the district courtlacked authority to appoint a monitorcharged with ‘‘wide-ranging extrajudicialduties’’ to fill ‘‘an investigative, quasi-inqui-sitorial, quasi-prosecutorial role that is un-known to our adversarial legal system.’’Cobell, 334 F.3d at 1142. Although we


acknowledged that a monitor may reporton a defendant’s ‘‘compliance with the dis-trict court’s decree and TTT help imple-ment that decree,’’ we held that the courtcould not invest the monitor with authorityto direct a defendant ‘‘to take or to refrainfrom taking any specific action to achievecompliance’’ with the court’s order or toadjudicate violations of the order as ‘‘aroving federal district court.’’ Id. at 1143(citations omitted). Our decision did notturn, as intervenors suggest, on the lack ofa complex decree for the monitor to en-force. See id.

[54] The government does not chal-lenge the district court’s legal conclusionthat the government’s proposed monitorpossessed impermissibly broad powers.Rather, the government argues that thedistrict court should have sua sponte cre-ated a modified version of the govern-ment’s monitoring scheme that would notviolate the principles of Cobell. In sup-port, the government merely demonstratesthat courts possess authority to appointmonitors (a proposition the district courtdid not dispute), and argues that a monitoris necessary in this case because of thecomplexity of the injunction and the in-transigence of Defendants. These asser-tions do not demonstrate that the districtcourt abused its discretion by deciding notto create its own monitoring scheme toreplace the government’s inappropriateproposal.

We therefore affirm the district court’sdenial of the government’s proposed coun-ter-marketing campaign, smoking cessa-tion program, youth smoking reductionplan, and monitoring scheme.

* * *

For the foregoing reasons, we affirm thedistrict court’s judgment of liability in itsentirety except as to CTR and TI, withregard to which we vacate the judgmentand remand with directions to dismiss

them from the suit. We also largely af-firm the remedial order, including the de-nial of additional remedies sought oncross-appeal, and remand to the districtcourt regarding only four discrete issues.First, because we have no factual findingsspecific to BWH, we cannot determinewhether it is reasonably likely to commitfuture violations; therefore, we remandthat issue for further fact finding and clari-fication. Second, to the extent that itbinds all Defendants’ subsidiaries, we va-cate the remedial order and remand to thedistrict court for proceedings to determinewhether inclusion of the subsidiaries, andwhich ones, satisfies Rule 65(d). Third, wevacate the prohibition on the use of healthmessages or descriptors and remand forthe district court to reformulate that in-junction so as to exempt foreign activitiesthat have no substantial, direct, and fore-seeable domestic effects. Finally, we alsovacate the remedial order as it regardspoint-of-sale displays and remand for thedistrict court to make due provision for therights of innocent third parties and clarifythat the order, if reinstated in any form,does not require duplicative displays.

,

Philomena AFFUM, Doing Businessas Asafo Market, Appellant

v.

UNITED STATES of America andThomas J. Vilsack, Secretary of

Agriculture, Appellees.

No. 08–5189.

United States Court of Appeals,District of Columbia Circuit.

Argued Feb. 20, 2009.

Decided May 26, 2009.Background: Grocery store ownerbrought action challenging Food and Nu-

Documents

U.S. v. PHILIP MORRIS USA INC. 1095 · 2010-04-28 · U.S. v. PHILIP MORRIS USA INC. 1097 Cite as 566 F.3d 1095 (D.C. Cir. 2009) 11. Postal Service O35(11.1) Telecommunications O1014(9)