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Hello all,

A major decision on big-time disgorgement (to adopt Lionel Smith's description) in the US was handed down by the Court of Appeals for the DC Circuit last Friday. In US v Phillip Morris, the US Department of Justice argued that the Federal Government was entitled to disgorgement of tobacco companies’ profits.

They won at first instance, but failed on appeal.

After the States’ Attorneys General had reached their settlements with Big Tobacco in 1999, the Department of Justice (DoJ) decided to get in on the act. They launched this suit, which is still ongoing. In one of many procedural skirmishes, the DoJ argued that a provision of RICO ( the Racketeer Influenced and Corrupt Organizations Act) (18 U.S.C 1964(a) and (b)) which gives the Attorney General has the power “institute proceedings” to ask a Federal District Court to issue “appropriate orders ... to prevent and restrain” violations of RICO, allowed the AG to ask the Court to enjoin Big Tobacco to disgorge all of its profits from 1954 onwards. And Judge Kessler at first instance agreed, holding that the relevant section of RICO not only allowed the government to prevent future wrongdoing, it also allowed it to seek remedies to prevent unjust enrichment. The Court of Appeals has now reversed. Judge Santelle took the view that the forward-looking preventative language of the statute did not support backward-looking disgorgement remedies at all (not only over-ruling Kessler J but also disapproving of a more limited civil-RICO disgorgement remedy in an earlier case in a Court of Appeals in another Circuit); Judge Williams concurred, adding law-and-economics reasons in support; Judge Tatel dissented, for reasons very similar to Kessler J in the Court below.

It is unclear whether the DoJ will apply to the DC Circuit for the Court of Appeals to rehear the appeal en banc, or further appeal to the Supreme Court. But the Court of Appeals decisions make for very interesting reading, not only for the narrow statutory interpretation point on which the case actually turns, but also for what they say about the mechanics of disgorgement claims.

All the best,

Eoin.

For those who want to follow this up, here are some links:

The Court of Appeals decision can be found in various places, including: here, here and here. (all .pdf, I’m afraid; I couldn’t find html or .doc versions, though I’m sure they must be out there somewhere in the vastness of www in the US).

The matter is making some media waves even on this side of the Atlantic: here and here.

An excellent legal-news perspective can be found at: here (on the recent appeal) and here and here (both on the first instance decision).

The text of the relevant statute (the Racketeer Influenced and Corrupt Organizations Act (RICO)) can be found here.

The first instance decision is similarly widely available in .pdf, including here and here (both parts) (again, both .pdf; I couldn’t find html or .doc versions).

For anoraks of the interminable procedure of big US cases, the US DoJ maintains a comprehensive website devoted to the legal procedures behind this case here. The first instance judgments on this aspect of the case are on that site here and here, but the Court of Appeals judgment doesn’t seem to be up yet.

All the best,

Eoin.

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Dr Eoin O’Dell Fellow Trinity College Dublin 2 Ireland	voicemail: +353-1-608 1178 Law School: +353-1-608 1125 mobile: +353-87-2021120 fax: +353-1-677 0449
============================================== (All opinions are personal. No legal responsibility whatsoever is accepted.) ==============================================