Big Tobacco Loses in Appeals Court
Judges Uphold 2006 Ruling That Firms Lied About Risks

By Del Quentin Wilber
Washington Post Staff Writer
Saturday, May 23, 2009

A federal appeals court dealt a blow to cigarette makers yesterday by upholding a landmark 2006 ruling that the companies lied for decades about the dangers of smoking.

In a 93-page opinion, a three-judge panel cleared the way for new restrictions on how cigarette companies market and sell their products. Under the decision, the manufacturers will no longer be allowed to label brands "light" or "low tar" and will have to purchase ads on television and in major newspapers that explain the health dangers and addictiveness of their products.

Tobacco companies indicated that they will appeal the decision to the Supreme Court, a process that would probably put compliance with the ruling on hold for at least several months.

The decision is the latest juncture in a legal odyssey that began when the Justice Department under President Bill Clinton filed a lawsuit in 1999 against nine cigarette makers and two tobacco-related trade groups. The government alleged that the companies and organizations conspired for decades to deceive Americans about the consequences of smoking.

The Justice Department issued a statement late yesterday that called the decision "a victory for the American people."

Chuck D. Connor, president and chief executive of the American Lung Association, said the decision "is almost everything we could have hoped for," adding: "It's a very sweeping and tremendous indictment against the industry."

Philip Morris USA and its parent company, Altria Group, issued a statement saying that the manufacturers "continue to believe that the court's conclusions are not supported by the law or the evidence presented at trial, and we believe the exceptional importance of these issues justifies further review."

R.J. Reynolds Tobacco issued a statement expressing disappointment in the decision. "R.J. Reynolds strongly believes that neither the evidence presented at trial nor the legal standards justify" the findings, said Martin L. Holton III, a senior vice president and the general counsel at the company.

Representatives from other tobacco firms involved in the suit, including British American Tobacco and Lorillard Tobacco, did not respond to phone messages seeking comment.

Yesterday's ruling largely upheld a 1,653-page opinion issued by U.S. District Judge Gladys Kessler that found the companies engaged in a massive civil racketeering scheme that defrauded the public about smoking's hazards.

Kessler found that the companies "marketed and sold their lethal product with zeal, with deception, with a single-minded focus on their financial success and without regard for the human tragedy or social costs that success exacted."

The judge ordered the companies to stop delivering misleading or deceptive statements about smoking. And she directed them to strip marketing material and cigarette packaging of "low tar," "light," "ultra light," "mild," "natural" or any other term that may lead consumers to think the product is less hazardous than other brands. The industry had known for years, for example, that consumers often smoked more "light" cigarettes to meet their nicotine needs, Kessler found.

Kessler ruled that the companies must also publish "corrective statements" describing the hazards of smoking in newspapers, on television and on their Web sites.

The government had asked Kessler to impose a $130 billion penalty, eventually scaled back to $14 billion, against the cigarette companies. But Kessler declined, writing that she was precluded from imposing monetary penalties by a separate 2005 appeals court ruling. Kessler's orders were put on hold while the tobacco companies appealed her ruling.

The manufacturers argued the judge went too far in finding that they had engaged in civil racketeering. In court papers, their attorneys wrote that most people did not believe their assertions about smoking because the scientific community had reached a consensus about its dangers. The attorneys also argued that some of their statements about smoking were protected under the First Amendment.

The three-judge appeals panel disagreed. "The district court found -- permissibly in our view -- that the enterprise had the common purpose of obtaining cigarette proceeds by defrauding existing and potential smokers," according to the unanimous opinion by Chief Judge David B. Sentelle and Judges David S. Tatel and Janice Rogers Brown of the U.S. Court of Appeals for the D.C. Circuit.

The judges added that the government presented persuasive evidence that the companies were well aware of the scientific research showing smoking's hazards.

"The evidence at trial demonstrated that the results of this research -- essential to the core of Defendants' operations, including strategic planning, product development, and advertising -- were well known, acknowledged, and accepted throughout the corporations," the judges wrote. "These results established that cigarette smoking causes disease, that nicotine is addictive, that light cigarettes do not present lower health risks than regular cigarettes . . . and that secondhand smoke is hazardous to health."

Though the appeals court backed most of Kessler's findings, it did order the judge to reconsider orders dealing with the companies' subsidiaries, labeling on products sold overseas and "corrective statement" displays at retail shops. It also rejected an appeal by the government and interest groups that Kessler erred in refusing to order the cigarette makers to finance anti-smoking campaigns and a smoking cessation program.

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