February 05, 2005

Yesterday a divided panel of the U.S. Court of Appeals for the District of Columbia Circuit rejected the U.S. Government's RICO-based theory of recovery in its lawsuit against cigarette manufacturers. The majority opinion (PDF file here), written by Judge David Sentelle, explains that

The relevant section of RICO, 18 U.S.C. 1964(a), provides the Disctrict Courts jurisdiction only for forward-looking remedies that prevent and restrain violations of the Act. Because disgorgement, a remedy aimed at past violations, does not so prevent or restrain, we reverse the decision below and grant partial summary judgment for the Appellants.

Judge Stephen Williams wrote a separate concurrence; Judge David Tatel dissented.

Assuming it survives en banc review, of course, the ruling will, as pointed out by the New York Times, eliminate

the government's biggest potential financial threat to the tobacco industry from the case. That is the government's calculation of $280 billion in profits it estimates that the industry garnered from cigarettes smoked from 1971 to 2000. Lawyers for the tobacco companies had contended that being forced to disgorge so great a sum could have driven some companies into bankruptcy.