Source: http://www.tobacco-on-trial.com/2006/09/20/schwab-class-warfare/
Timestamp: 2017-04-26 09:43:49
Document Index: 731559855

Matched Legal Cases: ['§1291', '§1962', '§ 132', '§ 13', '§15', '§ 16', '§ 4433', '§ 132', '§ 13', '§1291', '§ 1291', '§ 4433', '§ 4433', '§ 16', '§ 4433', '§ 13', '§15', '§ 4433', '§ 1962', '§ 1962']

Tobacco On Trial » Blog Archive » SCHWAB: CLASS WARFARE
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SCHWAB: CLASS WARFARE
September 20, 2006 10:37 am by Gene Borio
Garnick Exhibits, September 13, 2006 Plaintiff Slide Presentation, September 13, 2006 CERTIFICATION TRUMPS ESTOPPEL?
The war between the parties now consists of whether Collateral Estoppel as applied to the DOJ case should even be considered until Judge Weinstein rules first on class certification and summary judgement.
Plaintiffs have filed a strong memorandum in support of accepting Judge Kessler’s findings of fact on lights as elements that are settled and need not be re-litigated.
Plaintiffs argue that The Court should consider issues of collateral estoppel concurrently with the other pending motions consistent with its previously announced intention.
Plaintiffs’ memorandum concludes:
On the basis of “overwhelming” evidence gathered, presented and considered over many years, the DOJ Court recently found that the Defendants violated-and continue to violate–RICO by intentionally misleading consumers about the relative health risks of low tar cigarettes, conveying a message that “light” cigarettes are less dangerous despite their knowledge that these cigarettes did not deliver less risk. These are the central issues in the present case. For the reasons stated above, Defendants should be collaterally estopped from re-litigating these issues here.
–PLAINTIFFS’ MEMORANDUM OF LAW IN SUPPORT OF PRECLUDING DEFENDANTS FROM RELITIGATING ISSUES DECIDED IN UNITED STATES V PHILIP MORRIS, September 15, 2006 (Plaintiffs have not posted any additional material on how to scientifically determine the class and/or damages.)
Defense thinks the critical issues here are reliance, causation, injury, damages, and statute of limitations. These are issues, Defense claims in a Sept. 18 letter to Judge Weinstein, that the DOJ judgement did not address (Plaintiffs justifiably dispute this). So Defense urges Judge Weinstein to prioritize his actions, ruling first on class certification and summary judgement and ignoring the estoppel issue altogether.
We further note that the issue of collateral estoppel may be mooted depending on how this Court decides the summary judgment and class certification motions.
–Defense Letter on Collateral Estoppel, September 18, 2006
In response, plaintiffs have fired off their own letter, noting that the scheduled arguments on Collateral Estoppel were not heard at the Sept. 12 hearing, but both parties have now filed major briefs on the issue.
Defendants’ proposal is unnecessary and disingenuous. The Court issued a very timely Order setting out a logical procedure for addressing the collateral estoppel effects of United Slates v Philip [Morris]. . . . Now, after both sides have submitted lengthy briefing and the Court has already begun to consider these issues, which directly bear on the other pending motions, Defendants also ask that ‘briefing on that motion be deferred.” This bizarre request should he denied. . . .
The Court should consider issues of collateral estoppel concurrently with the other pending motions consistent with its previously announced intention.
–Plaintiff Letter on Collateral Estoppel, September 19, 2006 **———————————————————
PLAINTIFFS’ MEMORANDUM OF LAW IN SUPPORT OF PRECLUDING DEFENDANTS FROM RELITIGATING ISSUES DECIDED IN UNITED STATES V PHILIP MORRIS, September 15, 2006 Defense Letter on Collateral Estoppel, September 18, 2006
Plaintiff Letter on Collateral Estoppel, September 19, 2006 **———————————————————
PLAINTIFFS’ MEMORANDUM OF LAW IN SUPPORT OF PRECLUDING DEFENDANTS FROM RELITIGATING ISSUES DECIDED IN UNITED STATES V PHILIP MORRIS, September 15, 2006 UNITED STATES DISTRICT COURT
BARBARA SCHWAB et a!., individually and on behalf of all others similarly situated,
PLAINTIFFS’ MEMORANDUM OF LAW IN SUPPORT OF PRECLUDING DEFENDANTS FROM RELITIGATING ISSUES DECIDED IN UNITED STATES V PHILIP MORRIS
ARGUMENT 5 Collateral Estoppel Generally 5
II. The Verdict In The DOJ Case Precludes Defendants From Religitating The Same Issues In This Action 6 A. The Facts Establishing Defendants’ RICO Violation In This Case Are Identical To Those Found In The DOJ Case 6 1. Most Issues in This Case Were Resolved in the DOJ Case 8 a. Defendants’ Conspiracy 9 b. Damages 9 c. Quitting 11
d. Compensation 12
c. Consumer Perception of “Lights” 13
f. Defendants Misrepresentations Concerning “Lights” 14
g. Reliance and Causation 14
2. The “Differences” Defendants Claim Between the DOJ Opinion and This Case are Both Inaccurate and Insignificant 15
B. The DOJ Court’s Findings Regarding the “Lights” Fraud Were Necessary To Its Judgment 17
C. The DOJ Decision Is “Final” For Collateral Estoppel Purposes 19
1. The DOJ Court’s Decision Satisfies All Of The Finality Factors 21
2. This Case is Presents the Paradigm Situation in Which Applying Collateral Estoppel Best Serves the Policies Supporting That Doctrine 23
III. Collateral Estoppel Would Not Be Unfair To Defendants 23
A. Prior Decisions Do Not Demonstrate That It Would Be Unfair to Estop the Defendants After the More Recent, Specific, and Extensive Findings in the DOJ Decision 24
1. Defendants’ Argument that the Court Should Accord Equal Weight To Older Verdicts Violates the Second Circuit’s “Last in Time” Rule 24
2. The Blue Cross Jury Verdict Does Not Conflict With the DOJ Court’s Explicit Findings Whatsoever and That Jury Was Expressly Prohibited From Considering the Conclusions of Monograph 13 25
3. Defendants Other “Inconsistent’ Cases Are Inapposite 27
B. The DOJ Opinion Applied to Liggett and Liggett’s Withdrawal From the Conspiracy Should Not Alter the Collateral Estoppel Effect On Other Parties 29
TABLE OF AUTHORITIES FEDERAL CASES Aaron Basha Corp v. Felix B. Vollman, Inc., 88 F. Supp. 2d 226 (S.D.N.Y. 2000) 21 Alfadda v. Fenn, 966 F. Supp. 1317 (S.D.N.Y. 1997), aff’d 159 F.3d 41 (2d Cit. 1998) 5 Blue Crass and Blue Shield of NJ., Inc. v. Philip Morris USA Inc., 344 F.’ 3d 211 (2d Cir. 2003) 26
Coleco Inds. v, Universal City Studios, Inc., 637 F. Supp. 148 (S.D.N.Y. 1986) 20, 20,22 Colon v. Cough/in, 58 F.3d 865 (2d Cit. 1995) 21 Deposit Bank v. Frankfort, 191 U.s. 499 (1903) 20
Envtl. Def v. E.P.A., 369 F.3 d 193 (2d Cit. 2004) 5
Fireman’s Fund Ins. Co. v. Stites, 258 F.3d 1016 (9th Cir. 2001) 7 Kreinik v. Showbran Photo, Inc., 400 F. Supp. 2d 554 (S.D.N.Y. 2005),. 6
Lummus Co. v. Commonwealth Oil Refining Co., 297 F.2d 80 (2d Cit. 1961), cert. denied, 368 U.S. 986 (1962) 20
Mac Wade v. Kelly, F.3d_, 2006 WL. 2328723 (2dCir. Aug. 11, 2006) 22 Metromedia Co. v. Fugazy, 983 F.2d 350 (2dCir. 1992) 5,20, 21,24 Montana v. United States, 440 U.S. 147 (1979) 27
Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979) 5,6
Pharmacia & Upjohn Co. v. Mylan Pharmaceuticals, Inc., 170 F.3d 1373 (Fed. Cir. 1999) 20 Sherman v, Jacobson, 247 F. Supp. 261 (S.D.N.Y. 1965) 20 Standefer v. United States, 447 U.S. 10 (1980) 21 United States v. Int’l Bhd. of Teamsters, 905F.2d610(2dCir. 1990) 20
Blue Cross & Blue Shield of New Jersey, Inc. v. Philip Morris, Inc., (E. D. N. Y.), (No. 98 Civ. 3287) 3, 25 Henley v. Philip Morris, Inc., No. 995172 (Ca, Super Ct., San Francisco) 23
Iron Workers Local Union No. 17 Insurance Fund v. Philip Morris, Inc., No. 1:97-CV-1422 (N.D. Ohio) 28 Longden v. Philip Morris USA Inc., No. 00-C-442 (N.H. Super. Ct.) 28 Tune v. Philip Morris Inc., No. 97-4678 (Flit. Cir. Ct.) 28 United States v. Philip Morris, Inc, (D.D.C. Aug. 17, 2006) (No. 99 Civ, 2496) (Kessler, J.) passim Vandenburg v. Brown & Williamson Tobacco, No. 03CV237238 (Mo. Cir. Ct., Jackson County) 28
28 U.S.C. §1291 (1988) 20
18 U.S.C. §1962(c) 29
18 James Wm. Moore et at. § 132.02(2) (3d ed. 1997) 7,8
Restatement (Second) of Judgments, § 13 (1982) 20,23 Restatement (Second) of Judgments §15 24 Restatement (Second) of Judgments § 16 22
18A Fed. Prac. & Proc. Juris. 2d § 4433 passim
On August 17, 2006, after years of discovery, nine months of trial, and over a year of deliberation, the United States District Court for the District of Columbia (the “DOJ Court”) issued a 1683-page landmark decision (the “DOJ Decision”) finding that Defendants violated RICO by, among other things, misrepresenting the health risks of light cigarettes.’ As Defendants have conceded, most of the allegations in the present case are identical to a subset of the allegations of the DOJ Case. 2 The DOJ Case was litigated concurrently with this litigation,
1 United States v. Philip Morris, Inc., (D.D.C. Aug. 17, 2006) (No. 99 Civ. 2496) (Kessler, J.) (”DOJ Case”). Citations to DOJ Op. are to the Final Opinion in that case.
2 See infra, pp. 6-17. In addition to whether the Defendants violated RICO by conspiring and forming an enterprise that violated the federal wire and mail fraud statute in deceiving smokers about the relative health risks of “light” cigarettes, the DOJ Court also
involved the same basic legal theory, and relied upon many of the same documents and same witnesses.
In painstaking detail, including a 231 page recitation of the evidence relating to the “lights” fraud, see DOJ Op. at pp. 740-971, the DOJ Court found that the United States had proven many of the same allegations at issue here, including: 1) that Defendants violated RICO by intentionally engaging in a complex, decades-long fraud to mislead consumers about the relative health risks of “light” and low tar cigarettes; 2) that Defendants fraudulently labeled cigarettes as “lights” to convey a message of health reassurance despite their knowledge that such cigarettes did not deliver less risk; 3) that “Defendants’ conduct relating to low tar was intended to further their overarching economic goal: to keep smokers smoking; to stop smokers from quitting; to encourage people, especially young people, to start smoking; and to maintain or increase corporate profits,” Ed. at ¶ 2028 (emphasis added); 4) that consumers reasonably relied to their detriment on those misrepresentations in their purchase of “light” cigarettes; and 5) that the fraud was so successful that, even today, consumers’ false belief that “lights” are less harmful is “pervasive and longstanding,” Ed. at 1631.
Collateral estoppel prevents Defendants from attempting to re-litigate those issues in front of this Court. Applying that doctrine requires a court to weigh the extent to which the parties had a full and fair opportunity to litigate the issue in the prior proceeding. The parties in the multiyear DOJ Case had the extremely rare opportunity to do so. This exhaustive examination of the issues by the DOJ Court provided Defendants a most full and fair opportunity.
considered such issues as nicotine addiction, youth smoking and marketing, and broader questions of disease causation.
Application of collateral estoppel also requires that the prior findings be necessary to the final judgment. In the DOJ Case, the Court’s findings were absolutely critical to support its judgment enjoining Defendants from marketing its cigarettes as “lights.” The Court explicitly held that if smokers had not reasonably relied on Defendants’ misrepresentations regarding the relative health risks of “light” cigarettes, they would not have been “material” and could not support the government’s RICO action. See DOJ Op. 1504-05, 1584-87. Furthermore, the Court explicitly held that, if smokers were not continuing to reasonably rely on the health representation in purchasing “lights,” the fraud would not be “continuing” and could not support an award of injunctive relief. See DOJ Op. at 1609. Thus, the Court’s findings to which collateral estoppel would apply in this case were not only necessary, but central to the Court’s judgment that the government had proven a continuing RICO violation.
Defendants’ argument that collateral estoppel cannot apply to the judgment because it is subject to appeal is wrong as a matter of law. It is black letter law that parties are not shielded from the preclusive effects of an opinion simply by appealing the judgment and arguing that the opinion is therefore “tentative.” The Second Circuit has spoken clearly and unequivocally on this point. See infra Section II.C. District courts are instructed to consider a number of factors in determining finality - factors which, as discussed below, clearly establish that the DOJ opinion is “final” for collateral estoppel purposes.
Finally, Defendants complain that application of collateral estoppel against them here would be unfair. Yet there is nothing unfair about the application of collateral estoppel in this case and against these Defendants. Defendants argue that a series of earlier, conflicting jury verdicts permanently immunize the industry from any application of collateral estoppel. They place the most emphasis on Blue Cross & Blue Shield of New Jersey, Inc. v. Philip Morris, Inc., 3
(E.D.N.Y.) (No. 98 Civ. 3287), a case before this Court in which where a jury returned a verdict for Plaintiffs on their state deceptive business practices claims, but did not find liability on the Plaintiffs’ alternative federal RICO claims. However, none of the cases cited by Defendants, including Blue Cross, involved an identical legal theory to the present case and the DOJ Case. Moreover, significant information has come to light since Blue Cross regarding Defendants’ conduct and the safety benefits of ‘light” cigarettes, on which the DOJ Court relied, including the National Cancer Institute’s Monograph 13 and the 2004 Surgeon General’s Report. 3 Defendants cannot avoid the specific conclusions in the DOJ Court’s exhaustive opinion by pointing to mere verdict forms in previous cases, none of which reveal their bases, and subjectively interpreting them as prior judicial acquittal of fraud and conspiracy. Indeed, none of the specific findings to which Plaintiffs would ask that collateral estoppel apply conflict with any specific findings in any cited verdict form or any published decision. The DOJ Court’s opinion stands alone in terms of its relevancy, timeliness, detailed reasoning and evidentiary support. Accordingly, this is a prototypical situation for the application of collateral estoppel.4
3 As discussed infra, the Blue Cross Court explicitly instructed the jury that it could not consider the conclusions of Monograph 13, which had not been subjected to peer review at the time. Since that decision, Monograph 13 has not only been published, but its conclusions explicitly have been adopted by many of the world’s other leading public health authorities. This fact, along with others described below, places this case and the DOJ Case in a different factual framework than Blue Cross and other prior cases.
4 Defendants’ argument that the DOJ Court’s finding as to Liggett somehow immunizes the other Defendants from the application of collateral estoppel is without merit. See infra Section III.B.
ARGUMENT I. Collateral Estoppel Generally
In cases involving federal claims, trial courts have broad discretion to determine when collateral estoppel should be applied. Parklane Hosiery Co. v, Shore, 439 U.S. 322, 331 (l979), generally stated:
The doctrine of collateral estoppel … bars a party from relitigating in a second proceeding an issue of fact or law that was litigated and actually decided in a prior proceeding, if that party had a full and fair opportunity to litigate the issue in the prior proceeding and the decision of the issue was necessary to support a valid and final judgment on the merits. Metromedia Co. v. Fugazy, 983 F,2d 350, 365 (2d Cir. 1992) (bankruptcy court’s determination that debtor’s principal committed bankruptcy fraud by transferring assets in violation of the automatic stay conclusively determined that issue for purposes of later RICO suit against him). 6
The Parklane court noted that certain circumstances might justify a court’s refusal to apply collateral estoppel offensively, including where (a) a defendant has little incentive to defend vigorously, (b) the second action affords the defendant procedural opportunities not available in the first action that could cause a different result, (c) “if the judgment relied upon as
5 Where federal claims are involved, federal courts apply federal principles of issue
preclusion. Alfadda v. Fenn, 966 F. Supp. 1317, 1327 (S.D.N.Y. 1997), aff’d 159 F.3d41 (2d Cir. 1998).
6 Defendants incorrectly assert that “collateral estoppel does not apply to conclusions of law.” Defendants’ Brief In Response To The Court’s August 18, 2006 Order and in Opposition to Collateral Estoppel Based on United States v. Philip Morris” (’Defendants’ Brief in Response to the Court’s August 18, 2006 Order and in Opposition to Collateral Estoppel Based on United States v. Philip Morris (”Def. Br”) at 3. As the Supreme Court stated in Parklane, collateral estoppel “bars a party from relitigating … an issue of factor law” 439 U.S. at 331 (emphasis added). The case that Defendants cite, EnvtL Def v. E.P.A., 369 F.3d 193, 203 (2d Cir. 2004), does not support the broad proposition that conclusions of law are not subject to collateral estoppel. That court simply declined to apply collateral estoppel for public policy reasons not present in the instant dispute.
a basis for the estoppel is itself inconsistent with one or more previous judgments in favor of the defendant, and (d) the plaintiff in the later case could have joined the earlier one. 439 U.S. at 329-31. As the Parklane court emphasized, even when one or more of these factors exist, “the preferable approach for dealing with these problems … is not to preclude the use of offensive collateral estoppel, but to grant trial courts broad discretion to determine when it should be applied.” Id at 331. Here, factors (a), (b) and (d) above plainly do not apply. Similarly, as discussed herein, factor (c) should not preclude the application of collateral estoppel here.
II. The Verdict In The DOJ Case Precludes Defendants From Religitating The Same Issues In This Action.
Applying the legal principles set forth above, Defendants should be precluded from relitigating the issues decided in the DOJ Case. First, given the DOJ Court’s exhaustive findings and conclusions, there can be no dispute that Defendants had a bill and fair opportunity to litigate the issues, or that that facts contained in that decision were, in fact, litigated and actually decided in the DOJ Case, and that those findings were necessary to the court’s decision. 7
A. The Facts Establishing Defendants’ RICO Violation In This Case Are Identical To Those Found In The DOJ Case.
In order for collateral estoppel to be appropriate, the issues sought to be precluded must be “identical” in both cases. That does not mean, however, that there can be no differences between the issues; it only means they must be substantially the same. As the court explained in Kreinik v. Showbran Photo, Inc., 400 F. Supp. 2d 554 (S.D.N.Y. 2005):
[T]he Court is aware that although certain issues ‘may bear the same label,” they “are nonetheless not identical if the standards governing them are significantly different.” Jim Beam [Brands Co. v. Beamish & Crawford Ltd.], 937 F.2d [729] 734 [(2d Cir. 1991)]. But the identity element does not require that the issues be
7 Def. Br. does not suggest any limitations on their ability to litigate the issues. 6
exactly identical, and courts instead have held that two issues may be identical for estoppel purposes if they are substantially or essentially the same . . . . [S]ee also … 18 James Wm. Moore et al., § 132.02(2)(j)(i) (3d ed. 1997) (’no two issues are ever completely identical in every procedural, factual and legal respect. . . . [T]he question will be whether a legal question that arises in cases involving different claims or causes of action is substantially the same, given the governing law.”).
Id. at 562-63 (emphasis in original) (collecting cases and holding that a prior jury’s determination that the plaintiff was not an “employee’ under New York common law collaterally estopped him from claiming that he was an employee for purposes of his ERISA claims); see also Fireman’s Fund Ins. Co. v. Stiles, 258 F.3d 1016, 1021 (9th Cir. 2001) (criminal RICO conviction given collateral estoppel effect to establish four elements of civil RICO claim even though fifth element was not required in the criminal action).
Defendants’ implication that no issues can be given collateral estoppel effect if any aspect of the earlier case is less than identical is incorrect.8 Collateral estoppel-or “issue preclusion”-is not an all-or-nothing doctrine.9 There need not be identity of all issues for the doctrine to apply-rather, it applies to those issues that are identical, regardless of whether there is identity with respect to other issues. Accordingly, Defendants should be precluded from relitigating those identical issues resolved by the DOJ decision. Issues which are not identical will not be precluded.
8 See Defs.’ Br. at 19 (concluding, after identifying only two issues that they claim are not identical that, “this is another reason why plaintiffs cannot establish that the issues are identical.”)
9 For this reason, it is important that the Court not make a general finding that collateral estoppel either will or will not apply for the entirety of the DOJ Court’s opinion. The Court must examine each relevant issue to determine whether collateral estoppel is warranted. 7
1. Most Issues in This Case Were Resolved in the DOJ Case.
There can be no valid dispute that virtually all of the issues resolved in the DOJ case concerning Defendants’ fraudulent conduct with respect to “light” cigarettes are identical to the issues in this case. A simple comparison between the DOJ Court’s findings (at pages 740 through 969) and the Second Amended Complaint in this case demonstrates the overwhelming identity of issues.
Defendants themselves previously explained the identity between the issues in the two cases in an effort to persuade the Court that the DOJ Case should have put Plaintiffs on notice of their claims:
[I]n September 1999, the US. Government asserted RICO claims against the same defendants in this case. Just as plaintiffs here alleged nearly five years later, the government alleged that “the Cigarette Companies deliberately designed these [light] cigarettes in a way that, as actually smoked by most cigarette smokers, they typically do not deliver less tar and nicotine.” Compl. & 86 (”Gov’t Compl.”), United States v. Philip Morris, No. 1: 99CV02496 (D.D.C.). The government also alleged, as plaintiffs do here, that “smokers unconsciously tend to ‘compensate’ for lower nicotine yield, either by inhaling more deeply or taking more puffs”; that “[b]y advertising ‘light’ . .. cigarettes, the Cigarette Companies have lulled smokers into believing that they can reduce the health risk created by cigarette smoking by switching to these ‘light’ products”; and that the “Cigarette Companies” have used “misleading advertising.” Govt Compl. ¶¶ 87, 90-91. Moreover, like the plaintiffs in this case, the government alleged that defendants were part of a decades-long, association-in-fact “Enterprise” and “acted in concert with each other to further their fraudulent scheme.” Id. & 4.
See Defendants’ Brief In Support of Their Motion for Summary Judgment on Statute of Limitations Grounds (Doe. 431) at 20-21, citing Ex. 7 to the Declaration of Todd R. Geremia. In view of this admission, Defendants cannot not now be heard to argue that there is any meaningful difference between the issues in the two cases.
Plaintiffs have prepared a topical index identifying findings and conclusions in the DOJ
Case that directly bear on particular issues raised in this case. This index, attached as Appendix
A, also identifies where Plaintiffs have raised such identical issues in this litigation. By way of
example only, those issues include:’ 0
a. Defendants’ Conspiracy
• Findings at pp. 15 through 212 regarding Defendants conspiracy, which the DOJ Court characterized as “set[ting forth in enormous detail the intricate, interlocking, and overlapping web of national and international organizations, committees, affiliations, conferences, research laboratories, funding mechanisms, and repositories for smoking and health information which Defendants established, staffed, and funded in order to accomplish the following goals: counter the growing scientific evidence that smoking causes cancer and other illnesses, avoid liability verdicts in the growing number of plaintiffs’ personal injury lawsuits against Defendants, and ensure the future economic viability of the industry.” (DOJ Op. at p. 15)
• “Each defendant agreed to commit a substantive RICO offense with the knowledge that other members of the Enterprise were also conspiring to commit racketeering activity. All Defendants coordinated significant aspects of their public relations, scientific, legal, and marketing activity in furtherance of the shared objective — to use mail and wire transmissions to maximize industry profits by preserving and expanding the market for cigarettes through a scheme to deceive the public. Defendants executed the scheme by using several different strategies including … (4) disseminating advertising for light and low tar cigarettes suggesting they were less harmful than full flavor ones ….” Id. at p. 1594.
• “Defendants have made many efforts and have used many different scientific approaches, over the last forty years, to develop and market less hazardous cigarettes. These Defendants knew that there was an enormous market for such cigarettes and an enormous profit to be made by whichever company was first to achieve success.” Id. at ¶ 1764 (emphasis added).
10 Plaintiffs have created an index of the key issues and relevant citations. This index is not intended to be exclusive or exhaustive. Given the length and detail of the DOJ Courts findings and conclusions, it is likely that there are additional overlapping issues and findings.
• ‘The extensive, detailed Findings of Fact set forth above, establishoverwhelmingly-that Defendants devised a scheme to defraud and used mailings and wire transmissions for the purpose of furthering it. The purpose of the scheme was to obtain, from smokers and potential smokers money, i.e., the cost of cigarettes, to fill the coffers of the corporate Defendants.” Id. at 1500 (emphasis added).
• “[Defendants] distorted the truth about low tar and light cigarettes so as to discourage smokers from quitting, and they abused the legal system in order to achieve their goal — to make money with little, if any, regard for individual illness and suffering, soaring health costs, or the integrity of the legal system.” Id. at 1500-01 (emphasis added).
• “All Defendants coordinated significant aspects of their public relations, scientific, legal, and marketing activity in furtherance of the shared objective — to use mail and wire transmissions to maximize industry profits by preserving and expanding the market for cigarettes through a scheme to deceive the public. Defendants executed the scheme by using several different strategies including: … (4) disseminating advertising for light and low tar cigarettes suggesting they were less harmful than full flavor ones.” Id. at 1594 “emphasis added).
• “By engaging in this deception, Defendants dramatically increased their sales of low tar/Light cigarettes, assuaged fears of smokers, and sustained corporate revenues in the face of mounting evidence about the health,’ Id. at ¶ 2629 (emphasis added).
• “Defendants’ conduct relating to low tar cigarettes was intended to further their overarching economic goal: to keep smokers smoking; to stop smokers from quitting; to encourage people, especially young people, to start smoking; and to maintain or increase corporate profits.” Id. at 2028 (emphasis added).
• “In sum, the Enterprise consisted of individual Defendants working together to coordinate significant activities for over 50 years through TIRC/CTR, the Tobacco Institute, and an array of other overlapping entities. Their activities were calculated to serve their shared objectives, including their primary goal of maximizing profits by preserving and expanding the market for cigarettes.” Id. at 1536 (emphasis added).
• “[OJne can only wonder just why Defendants were spending millions upon millions of dollars in advertising every year if they thought no one — smoker, potential smoker, or member of the public — was going to believe it and rely on it. . . . For Defendants to now deny that the ‘disinformation’ they were spending millions on to deceive the public would not have been of import to a reasonable
person in determining his or her choice of action is the height of disingenuousness.’ Id. at 158586.
• “[A]ll Defendants continue to market ‘low tar’ cigarettes to consumers seeking to reduce their health risks or quit.” Id. at 1604.
• “The trial record overwhelmingly demonstrates that Defendants developed and marketed low tar and nicotine brands in order to dissuade smokers from quitting smoking …. Defendants know that health concerns are the primary motivation for smokers’ attempts to quit. They have conducted extensive research on quitting to help them identify, understand and deter potential quitters. Defendants’ internal documents show that they were confident that if they could convince potential quitters that low tar cigarettes were a healthier choice and an acceptable alternative to quitting, they could keep their sales from declining.” Id. at 1628-29 (emphasis added).
• “For several decades, Defendants have marketed and promoted their low tar brands as being less harmful than conventional cigarettes. That claim is false, as these Findings of Fact demonstrate. By making these false claims, Defendants have given smokers an acceptable alternative to quitting smoking, as well as an excuse for not quitting.” Id. at 2023 (emphasis added).
• “Since the 1970s, Defendants have also used so-called brand descriptors such as ‘light’ and ‘ultra light’ to communicate reassuring messages that these are healthier cigarettes and to suggest that smoking low tar cigarettes is an acceptable alternative to quitting.” Id. at ¶ 2024 (emphasis added).
• “[B]ecause of the misleading nature of the advertising for low tar cigarettes, smokers who might have quit have refrained from doing so in the belief that such cigarettes reduced their health risks.” Id. at ¶ 2145 (emphasis added).
• “As demonstrated below, Defendants conducted extensive research on quitting to help them identify and understand potential quitters (i.e., smokers who were “concerned” and “uncomfortable” with the fact that they smoke) and design marketing that would dissuade them from quitting. Defendants’ internal documents demonstrate their recognition that smokers interested in quitting smoking were instead switching to low tar cigarettes under the mistaken belief that doing so would either help them quit or be better for their health.” Id. at ¶ 2234 (emphasis added).
• “Defendants made, and continue to make, false and misleading statements regarding low tar cigarettes in order to reassure smokers and dissuade them from quitting.” Id. at 2377 (emphasis added).
• “The evidence shows that even though low tar smokers may have a greater desire to quit, the misperception of increased safety associated with low tar cigarettes persuades them to avoid quitting. Research shows that most low tar cigarette smokers have made a greater number of quit attempts than smokers of full flavor cigarettes, or were more likely to have considered quitting.” Id. at 2230 (emphasis added).
• ‘Over the last five decades, Philip Morris has conducted extensive consumer research to perfect the delivery of its ‘light’ and low tar cigarette brand marketing message to ensure it provided smokers with health reassurance and offered an alternative to quitting.” Id. at 2415 (emphasis added).
• “Many smokers who were concerned about the risks of smoking responded by switching to low tar cigarettes instead of quitting.’ Id. at 2231 (emphasis added).
d. Compensation”
• “Defendants have known since at least the 1950s that the central component that drives the smoking habit is nicotine, an addictive substance. Accordingly, Defendants also have long been aware that the reason people smoke cigarettes is to obtain a sufficient “dose” of nicotine to sustain their addiction.” Id. at ¶ 2173
• “Defendants also have known since the 1960s and 1970s that, because smokers smoke to obtain the desired effects of nicotine, smokers of lower-yield cigarettes tend to adjust their smoking behavior to titrate (i.e., control) their nicotine intake of nicotine to achieve the necessary levels of nicotine. That adjustment or titration of nicotine levels is called compensation. Defendants’ internal understanding of compensation was decades ahead of that of employees and scientists of the Government and the scientific community. See Section V(B)(2)(b), supra.
11 Judge Kessler’s findings establish that Defendants’ fraud extended to lying about compensation and, more generally, addiction. As such, Defendants must be estopped from arguing that class members suffered no economic damages because they would have smoked Defendants’ regular cigarettes (at the same prices) in the absence of “lights.” This defense rests entirely on Defendants having successfully addicted the class on their products. Accepting such an argument would permit Defendants an additional defense unavailable to other RICO conspirators because their fraud extended to and resulted in addiction. This would permit a license to defraud without consequence and allow Defendants to profit from their RICO fraud because other aspects of the same fraud fraud immunize them from liability. Judge Kessler’s findings and their resulting equitable ramifications thus provide further support for Plaintiffs’ previous argument that there is no precedent for a defense to a fraud action premised upon the supposition that Plaintiffs may have given the money to the same industry for a different product. See Pl’s Opp. to Def’s Mot. for SJ on Causation, Injury, and Damages at 18-21.
According to Dr. William Farone, Philip Morris employee from 1976 to 1984, who served as Director of Applied Research, and was accepted as an expert in ‘the chemistry and biochemistry of alkaloids and addictive drugs, the chemistry and physics of cigarette smoke, cigarette design and technology, and the chemistry and biochemistry of toxic substances and how they interact with living systems,” during his employment at Philip Morris, the company had “a greater understanding of compensation than the outside scientific community,” and, in his expert opinion, “the same is true for the other tobacco company Defendants.” In 1966, when the FTC was considering the FTC Method, Defendants knew “that smokers smoked for nicotine” and “that smokers alter their smoking behavior to get nicotine.” Id. at ¶ 2174.
• “Internally, Defendants Had an Extensive and Sophisticated Understanding of Smoker Compensation.” Id. at 794.
• “Because each smoker smokes to obtain his or her own particular nicotine quota, smokers end up inhaling essentially the same amount of nicotine-and tar-from so-called ‘low tar and nicotine’ cigarettes as they would inhale from regular, ‘full flavor’ cigarettes. This referred to as ‘complete’ compensation. Virtually all smokers, over 95%, compensate for nicotine.” Id. at ¶ 2072.
• “The amount of nicotine that smokers need to sustain their nicotine addiction does not change over time. Therefore, compensation for reduced deliveries is permanent, and occurs for as long as the smoker smokes the low tar product.” Id. at 12073.
• “Because compensation is essentially complete, low tar cigarette smokers inhale essentially the same amount of tar and nicotine as they would from full flavor cigarettes, thereby eliminating any purported health benefit from low tar cigarettes. In short, ‘light and ultralight cigarettes’ do not, in actuality, ‘reduce the risk of smoking.” Id. at 2074.
• “Compensation behavior is distinct from ‘individual smoker variation.” Id. at ¶ 2077.
e. Consumer perception of “Lights”
• “Defendants also have used so-called brand descriptors such as “light” and “ultra-light” to communicate reassuring messages that these are healthier cigarettes and to suggest that smoking low tar cigarettes is an acceptable alternative to quitting.” Id, at 12024.
• “In addition to making explicit health claims, since the 1970s Philip Morris has used brand descriptors such as “light” and “ultra light” to communicate that certain brands of cigarettes are low in tar and nicotine.” Id. at ¶ 2401.
• “Contrary to their public statements … Defendants’ internal marketing documents establish that Defendants have known for decades that even though consumers prefer the taste of regular cigarettes to low tar cigarettes, they are willing to forgo them and smoke low tar cigarettes, which are less enjoyable and have a less appealing taste, because they believe low tar cigarettes are better for their health. Id. at 2239.
f. Defendants’ Misrepresentations Concerning “Lights”
• “Defendants made, and continue to make, false and misleading statements regarding low tar cigarettes in order to reassure smokers and dissuade them from quitting and with full knowledge that consumers interpret “light” to convey reduced risk.” Id. at ¶ 2377.
• “Defendants extensively-and success fully-marketed and promoted their low tar/light cigarettes as less harmful.” Id. at 11 2628.
g. Reliance and Causation
• ‘As a general rule, deceptive advertising or claims permit an inference ‘that the deception will constitute a material factor in a purchaser’s decision to buy.” (citing FTC v. Colgate-Palmolive Co.) Id, at p. 1584.
• “Relatively few people understand that smoking low tar or light cigarettes can be - and often is - just as dangerous (70% believe low tar cigarettes decrease daily intake of tar; fewer than 10% believed one light cigarette had as much tar as one regular cigarette).” Id. at ¶2390.
• Smokers responded to 1950s low tar advertising by switching “in droves.” Id. at ¶¶ 2036-37.
• “Low Tar cigarettes have captured an enormous share of the market, growing from 2% in 1968 to 81.9% in 1998.” Id. at ¶ 2378.
• “Defendants recognized that smokers choose Light/Low Tar cigarettes for a perceived health benefit.” Id. at 822.
• “Health was the most important driver of consumer trends.” Id. at ¶ 2272.
• “Because compensation is essentially complete, low tar cigarette smokers inhale essentially the same amount of tar and nicotine as they would from full flavor cigarettes, thereby eliminating any purported health benefit from low tar cigarettes.” Id. at ¶ 2074 (emphasis added).
“Defendants “dramatically increased their sales of low tar/light cigarettes, assuaged fears of smokers about the health risks of smoking, and sustained corporate revenues in the face of mounting evidence about the health dangers of smoking.” Id. at ¶ 2629.
2. The “Differences” Defendants Claim Between the DOJ Opinion and This Case are Both Inaccurate and Insignificant.
In an effort to manufacture differences between the DOJ case and this one, Defendants point to two issues that they claim were dealt with differently in this case than in the DOJ Casethe distinction between the descriptor “lights” and low tars generally and the issue of compensation. Defendants arguments are meritless.
First, Defendants argued, that the alleged predicate acts at issue in DOJ dealt only with low tar cigarettes — and not the light cigarettes at issue here.” Def. Br. at 17. This is blatantly untrue. Not only did the DOJ Court expressly, unambiguously and repeatedly held that Defendants fraud involved “light” cigarettes, but the opinion included 606 findings spanning 231 pages of the opinion specifically addressing Defendants’ “lights” fraud. See DOJ Op. at ¶2023-2629; see also e.g., DOJ Op. at 1514 (”Defendants Falsely Represented that Light and Low Tar Cigarettes Deliver Less Nicotine and Tar and, Therefore, Present Fewer Health Risks than FullFlavor Cigarettes”), 1634 (”this [injunction] remedy directly addresses the ongoing fraud Defendants commit every day with their marketing of “light” cigarettes and the virtually certain continuation of such fraud in the future in the absence of such a ban”).
Moreover, Defendants’ argument flies in the face of the DOJ Court’s specific finding that “Defendants use these so-called brand descriptors such as ‘light,’ ‘medium,’ and ‘mild’ to market their brand extensions as low in tar with full knowledge that a substantial number of smokers interpret these descriptors as indicating a less harmful cigarette. See DOJ Op. at 1517.
Not only is Defendants’ claim that the DOJ court did not address “lights” specifically disingenuous, but so too is their attempt to distinguish “lights” from low tar cigarettes. Defendants have already conceded in this very litigation that “lights” are merely a subset of low tar cigarettes and that both “lights” and low tar cigarettes convey the identical health message to
There is no question but that lights to Isic] equal less tar. Less tar, less harmful. That is a further predicate. And from those alone it is self-evident that lights are less harmful. That is not a new step. That is not a new representation. It is explicit in the first two. Put differently, the lights equals less harmful flows directly from, it is a part of the fact that lights have less tar and less tar cigarettes have been held for many, many years to be less harmful. That is the representation. [Transcript at 135:10-19. 121
[Defendants] come out with lights. What are lights? Lights are low tar, just like the syllogism says. That means that lights being low tar cigarettes, people will infer to be less hazardous. That is the syllogy. So lights are basically a name, an advertising theme. Don’t call it low tar, just call it light. And this appeals to the market and the market starts to shift towards these brands. [Transcript at 152:15-23.] (emphasis added).
In other words, “lights” is a subcategory of “low tar,” and all findings relating to “low tar” cigarettes apply equally to “lights.” Defendants’ suggestion that the DOJ Court’s reference to “low tar” cigarettes renders its decision “irrelevant” to this case is specious.
Equally specious is Defendants’ second argument: that the DOJ Court’s findings with respect to compensation are somehow inconsistent with the evidence in this case. This convoluted argument is built on Defendants’ inaccurate foundational assertion that the DOJ
12 Citations are to the Transcript of the Hearing Before Judge Weinstein held
Court did not examine whether compensation is “complete on a per cigarette basis.”" Such a claim is belied by both the general findings of the court regarding compensation and, moreover, by its specific finding that smokers do compensate on a per cigarette basis:
Because compensation is essentially complete, low tar cigarette smokers inhale essentially the same amount of tar and nicotine as they would from full flavor cigarettes, thereby eliminating any purported health benefit from low tar cigarettes. DOJ Op. & 2074. The court further explained compensation as follows:
Defendants have known since the 1960s that individuals smoke to obtain the desired effects of nicotine, and that smokers of lower nicotine yield cigarettes tend to adjust their smoking behavior to titrate (i.e., control) their intake of nicotine to achieve desired levels. This behavioral adaptation is referred to as smoker “compensation.” By puffing lower yield cigarettes more frequently and/or more intensively, by blocking ventilation holes in the cigarette filter, and/or by smoking more cigarettes in a day, smokers are able to “compensate” for the lower nicotine deliveries of low nicotine/low tar cigarettes. Id. & 1515 at p. 571 (emphasis added). The DOJ court plainly considered compensation in all its forms, and found unequivocally that for virtually all smokers, compensation is permanent and complete, just as Plaintiffs’ have alleged in this case. 14
B. The DOJ Court’s Findings Regarding the “Lights” Fraud Were Necessary To Its Judgment
The necessity of the DOJ court’s findings with respect to the “lights” fraud-including findings that bear on consumer reliance on Defendants’ misrepresentations’ and the economic injury to consumers as a result-is evidenced most clearly by one of the remedies the Court
13 Def. Br. at 18-19.
14 Even if Defendants’ argument was not, it would not amount to a substantial difference between the two cases sufficient to undermine the application of collateral estoppel.
15 Defendants argue in their Reply in Support of Summary Judgment as to causation that the DOJ court’s findings relating to causation and reliance should not be given collateral estoppel effect because “those issues were not elements of the federal government’s claim against defendants.”
imposed-an injunction against using the lights” descriptor. In the portion of its opinion supporting the Final Order issuing the injunction, the DOJ Court found:
Contrary to their internal documents, Defendants also continue to deny that low tar cigarettes are just as hazardous to smokers as full-flavor cigarettes, in part because of smoker compensation. In 1998, Philip Morris, RJR, B&W, and Lorillard jointly stated to the FTC that compensation was so “weakly documented” that the FTC should not require disclosure warnings to alert consumers, and that they were “unaware of evidence,” other than that presented in Monograph 7, 520842199-2295 at 2243, 2289 (US 88618), that consumers viewed lowtar cigarettes as safer. Defendants are well aware from their own research that a majority of smokers believe that low-tar cigarettes are healthier, are willing to buy them for precisely that reason, and are willing to sacrifice taste for what they believe to be less harmful cigarettes. Nonetheless, to this day, Defendants still deny that, as Monograph 13 found, low-tar cigarettes are just as dangerous as full-flavor cigarettes. These RICO violations are likely to continue.
DOJ Op. at 1609 (emphasis added). The court also found, under the subheading “Specific Remedies” “Prohibition of Brand Descriptors”:
[T]he only way to restrain Defendants from their longstanding and continuing fraudulent efforts to deceive smokers, potential smokers, and the American public about “light” and “low tar” cigarettes is to prohibit them from using any descriptor which conveys a health message. It is not sufficient to forbid Defendants from misrepresenting the health effects of “tight” and “tow tar” cigarettes. By using descriptors such as “lights” and “low tar,” Defendants knowingly convey the false impression that cigarettes with those labels are less harmful than other cigarettes. Consumers’ false belief is so pervasive and longstanding, and has been exploited and promoted by Defendants for so long, that preventing and restraining Defendants’ future fraud requires a ban on any future use of descriptors which convey a health message.
As the National Cancer Institute concluded in Monograph 13, descriptors are inherently deceptive. US 58700 at 0611, 0646. Similarly, the WHO Scientific Advisory Committee on Tobacco concluded that descriptors are inherently misleading, and recommended that “misleading health and exposure claims should be banned …. Banned terms should include light, ultra-light, mild
and low tar, and may be extended to other misleading terms.” US 86658 at 0695. As set out above, Defendants’ own documents, including consumer research, and testimony demonstrate that Defendants both knew and intended to use brand descriptors to convey a false perception of reduced harm. See Findings of Fact Sections V(E)(3, 5). The Court will therefore order a ban on any cigarette descriptors that convey implicit health claims. Prohibition of Defendants’ future use of deceptive descriptors is forward looking and narrowly tailored to prevent and restrain their future fraudulent conduct relating to the marketing of low tar cigarettes. Indeed, this remedy directly addresses the ongoing fraud Defendants commit every day with their marketing of “light” cigarettes and the virtually certain continuation of such fraud in the future in the absence of such a ban. Accordingly, beginning January 1, 2007, Defendants are prohibited from using any descriptors indicating lower tar delivery — including, but not limited to, “low tar,” “light,” “mild,” “medium” and “ultra light” -which create the false impression that such cigarettes are less harmful to smokers. Id. at 1631-32 (emphasis added). For Defendants to argue that the very findings supporting the court’s final order are unnecessary to the judgment defies both reality and common sense. Defendants’ argument simply ignores the fact that the DOJ Court held that the entire tobacco industry has operated as a RICO conspiracy, with the ‘lights’ fraud an integral and essential component.
Accordingly, since the court’s findings concerning the “lights” fraud — including that [clonsumers’ false belief is so pervasive and longstanding,” and that the descriptors are “inherently misleading” — were plainly the basis for the court’s judgment that Defendants’ RICO violation justified banning descriptors conveying a health message should be imposed, Defendants’ argument that these findings were not “necessary’ to her decision should be rejected.
C. The DOJ Decision Is “Final” For Collateral Estoppel Purposes.
Defendants’ contention that this Court, in its discretion, should deny preclusive effect to the DOJ decision because the case is subject to appeal is unpersuasive. See Def. Br. at 21. It is 19
well-established that the prospect or pendency of an appeal does not preclude collateral estoppel. See United States v, Int’l Bhd. of Teamsters, 905 F.2d 610 (2d Cir. 1990) (criminal appeal does not deprive a judgment of its preclusive effect). 16
For purposes of collateral estoppel, “final judgment’ includes any prior adjudication of an issue in another action that is determined to be sufficiently firm to be accorded conclusive effect.” Restatement (Second) of Judgments, § 13 (1982). In Metromedia, the court distinguished between “finality” for purposes of appeal and “finality” for purposes of collateral estoppel, and set out factors for the court to consider the latter:
As to the need for finality of decision, collateral estoppel, unlike appealability under 28 U.S.C. §1291 (1988) does not require a judgment ‘which ends the litigation… and leaves nothing for the court to do but execute the judgment.” [Citations omitted.] Rather the concept of finality for collateral estoppel purposes “includes many dispositions which, though not final in that sense, have nevertheless been fully litigated.” … Whether a judgment that is not final within the meaning of § 1291 “ought nevertheless be considered ‘final’ in the sense of precluding further litigation of the same issue, turns upon such factors as the nature of the decision (i.e., that it was not avowedly tentative), the adequacy of the hearing, and the opportunity for review.” Lummus Co. v. Commonwealth Oil Refining Co., 297 F.2d 80, 89 (2d Cir. 1961), cert. denied, 368 U.S. 986 … (1962).
983 F.2d at 366 (emphasis added).
16 See also Sherman v. Jacobson, 247 F. Supp. 261, 268 (S.D.N.Y. 1965) (judgment may be final for purposes of collateral estoppel even if an appeal is pending); Coleco Inds, v. Universal City Studios, Inc., 637 F. Supp. 148, 150 (S.D.N.Y. 1986) (”The mere pendency of an appeal does not affect the collateral estoppel or res judicata effect of the judgment rendered”); Pharmacia & Upjohn Co. v. Mylan Pharmaceuticals, Inc., 170 F. 3d 1373, 138081 (Fed. Cir. 1999) (the “vast weight of case law” allows giving issue-preclusive effect to a judgment that is on appeal); Wright, Miller & Cooper, 18A Fed. Prac. & Proc. Juris. 2d § 4433 (”The Supreme Court long ago seemed to establish the rule that a final judgment retains all of its res judicata consequences pending decision of the appeal, apart from the virtually nonexistent situation in which the “appeal” actually involves a full trial de novo.”) (citing Deposit Bank v, Frankfort, 191 U.S. 499 (1903).
1. The DOJ Court’s Decision Satisfies All Of The Finality Factors
Applying the factors listed in Metromedia, the DOJ decision is entitled to collateral estoppel effect in the instant case. First, there is nothing “tentative” about Judge Kessler’s decision, or any of her findings. The final opinion contains exhaustive findings of fact supported by volumes of evidence and is accompanied by a “Final Judgment and Remedial Order.” 17
Importantly, Defendants have “the burden of showing the absence of a full and fair opportunity to litigate in the prior proceeding.” Colon v, Cough/in, 58 F.3d 865 (2d Cir. 1995). Defendants have made no effort to nor could they meet that burden. The DOJ Court’s findings were based on an extensive record generated during a nine-month trial. The duration of the trial and volume of evidence presented leaves no doubt that Defendants were afforded the fullest opportunity to present their case possible.
Further, Defendants may seek appellate review of the Court’s decision in the DOJ case. Even if there were some such restriction, it would not necessarily hinder this Court’s ability to collaterally estop Defendants from relitigating issues decided in the DOJ case here. As the court in Standefer v. United States, 447 U.S. 10 (1980) explained:
This is not to suggest that the availability of appellate review is always an essential predicate of estoppel. [Citations omitted.] The estoppel doctrine … is premised upon an underlying confidence that the result achieved in the initial litigation was substantially correct.
447 U.S. at 23 n.18; see also Wright, Miller & Cooper, 18A Fed. Prac. & Proc. Juris. 2d § 4433. Confidence in the DOJ Decision is warranted as a result of the in-depth and exhaustive analysis of the evidence that its detailed, well-documented opinion demonstrates; by the final injunctive
17 Rulings which Second Circuit courts have found not sufficiently final to be given collateral estoppel effect include, for example, decisions on motions for preliminary injunctions. See Aaron Basha Corp v. Felix B. Vollman, Inc., 88 F. Supp. 2d 226, 229-30 (S.D.N.Y. 2000). 21
relief it awarded; and by its refusal to grant a motion by the Defendants for an immediate stay. See, Minute Entry denying Defendants’ Emergency Motion for Stay of Judgment Pending Resolution of Defendants’ Motion for Stay of Judgment Pending Appeal, entered Aug. 25 2006.
The finality of the DOJ Decision for collateral estoppel purposes is further supported by the fact that, even if Defendants were avail themselves of their right to appeal successfully, the preclusive effect of the DOJ court’s findings in this case can still apply. The question of whether a subsequent reversal of findings accorded collateral cstoppel effect has a bearing on the case in which relitigation of those issues has been precluded has been considered in the Restatement and applied in the case law:
A judgment based on an earlier judgment is not nullified automatically by reason of the setting aside, or reversal on appeal, or other nullification of that earlier judgment; but the latter judgment may be set aside, in appropriate proceedings, with provision for any suitable restitution of benefits received under it. Restatement (Second) of Judgments § 16. This principle was applied in Coleco Industries. v. Universal Studios, in which the Court noted that “[t]he mere pcndency of an appeal does not affect the collateral estoppel or res judicata effect of the judgment” 637 F. Supp. 148, 150 (S.D.N.Y. 1986); see also Wright, Miller & Cooper, 18A Fed. Prac. & Proc. Juris. 2d § 4433 (suggesting devices that might be used to avoid problems with the reversal of the first judgment). Accordingly, the unlikely possibility that Defendants will be able to meet the difficult burden of showing that the DOJ Court’s well-supported factual findings were clearly erroneous 18 and should be overturned by an appellate court need not and should not prevent this Court from giving the DOJ Court’s findings collateral estoppel effect in this case.
18 See, MacWade v. Kelly, F. 3d , 2006 WL 2328723 at *6 (2d Cir. Aug. 11, 2006) (appellate court reviews district court’s findings of fact for !clear error”).
2. This Case Presents the Paradigm Situation in Which Applying Collateral Estoppel Best Serves the Policies Supporting That Doctrine.
The reasoning underlying the very purpose of giving collateral estoppel effect to decisions which are still subject to appeal at all is precisely implicated in this case. As explained in Comment g to Section 13 of the Restatement:
[T] hold invariably that that kind of carry-over is not to be permitted until a final judgment in the strict sense has been reached in the first action can involve hardship — either needless duplication of effort and expense in the second action to decide the same issue, or, alternatively, postponement of decision of the issue in the second action for a possibly lengthy period of time until the first action has gone to a complete finish. In particular circumstances, the wisest course is to regard the prior decision of the issue as final for the purpose of issue preclusion without awaiting the end judgment. Restatement (Second) of Judgments § 13, comment (g). Given the volume of evidence in the DOJ case relating to the “lights” fraud, as well as the number of witnesses and experts, it is obvious that the effort and expense of duplication would be enormous for both the Court and the parties. Furthermore, given the comprehensiveness of the DOJ courts decision, there is no good reason to impose the hardship of a lengthy delay. III. Collateral Estoppel Would Not Be Unfair To Defendants.
Defendants argue that it would be unfair to preclude them from re-litigating the same issues they lost in the DOJ Case, noting that this Court earlier refused to collaterally estop Defendants on the basis of Henley v. Philip Morris, Inc., No. 995172 (Ca. Super Ct., San Francisco). See Docket No. 762. However, a review of the Court’s reasoning in that decision reinforces the notion that Defendants should now be estopped by the DOJ Decision. In its earlier opinion, the Court identified four factors which, in the Courts view, made it unfair to apply collateral estoppel at that time. (1) that the jury might be confused by the fact that only one of 23
the defendants present here was a party to Henley; (2) the difference between the issues and tactics in a RICO class action and a “single plaintiff-defendant controversy based on state substantive personal injury law;” (3) the fact that Defendants have won many tobacco cases; and (4) “disquiet about the relationship between the federal RICO-mail fraud substantive rules and state consumer fraud law.” Of these four factors, three of them are entirely inapplicable here, since all of the Defendants in this action were parties to the DOJ case, and the same substantive RICO statutes governs liability in both cases. The single factor Defendants rely on -the existence of prior verdicts favorable to Defendants - offers Defendants no cover, because those verdicts involve materially different facts and law, do not expressly conflict with any specific findings of Judge Kessler, and are not the most relevant judgments for collateral estoppel purposes under the Second Circuit’s “last in time” rule. Similarly, the finding that Liggett recently withdrew from the conspiracy does not immunize the entire industry from the collateral estoppel effects of the opinion.
A. Prior Decisions Do Not Demonstrate That It Would Be Unfair to Estop the Defendants After the More Recent, Specific, and Extensive Findings in the DOJ Decision.
1. Defendants’ Argument that the Court Should Accord Equal Weight To Older Verdicts Violates the Second Circuit’s “Last in Time” Rule.
In Metromedia v. Fugazy, the Second Circuit recognized and adopted the majority rule, set forth in the Restatement (Second) of Judgments §15, that, “[w]hen two lawsuits have resulted in inconsistent final decisions of the same issue, the general rule is that ‘it is the later, not the earlier, judgment that is accorded conclusive effect in a third action.” 983 F,2d at 366. See also Wright, Miller & Cooper, 18A Fed. Prac. & Proc. Juris. § 4433 (opining that despite “the awkward juxtaposition between the question of preclusion pending appeal and the rule that
preclusion is controlled by the last judgment in time,’ ‘[a]s in other settings, it seems better to accept the second trial-court judgment as binding for purposes of the last-in-time rule). The DOJ decision is not even a month old and it is based on the most comprehensive and recent evidence available, particularly with regard to the scientific evidence at the heart of this case. Therefore, in evaluating whether conflicting findings would make application of Collateral Estoppel unfair, the Court must consider the temporal significance of the DOJ Court’s opinion.
2. The Blue Cross Jury Verdict Does Not Conflict With the DOJ Court’s Explicit Findings Whatsoever and That Jury Was Expressly Prohibited From Considering the Conclusions of Monograph 13. Defendants place heavy reliance on Blue Cross & Blue Shield of New Jersey, inc. v. Philip Morris USA, Inc., No. 98 Civ. 3287 (E.D.N.Y.), for the proposition that “conflicting” jury verdicts exist on the relevant issues. However, such reliance is unavailing. Although the jury found for Defendants on the RICO claim, it returned a multi-million dollar verdict for the plaintiffs on their claim under the New York consumer protection statute, finding that the plaintiff had proven its claim for deceptive practices. Kouba Decl., Ex. 1. When the tobacco companies appealed the verdict contending, among other things, that there was insufficient evidence of causation and damages for purposes of the state statute, the Second Circuit observed that the tobacco companies had not argued that they had not made misrepresentations during the relevant time period, and noted that:
The district court found that there were “more than sufficient examples of post-1980 misconduct to support [the] verdict.” Blue Cross Ii, 178 F. Supp. 2d [198] at 269 [(E.D.N.Y. 2001)]. The district court cited numerous examples of post- 1980 misrepresentations. For example, even after 1980, Appellants represented to the public that it had not been established that smoking causes disease, that smoking was not addictive, and that they did not have internal research suggesting otherwise. Id, at 269-270. The district court found that “these communications
were part of a general policy for the 1980s and beyond.” Id. at 270. Blue Cross and Blue Shield of NJ, Inc. v. Philip Morris USA Inc., 344 F.3d 211, 222 n.7 (2d Cir. 2003). Thus, whatever the reason for the jury’s defense verdict on the RICO claim, it was not because the jury thought there was no fraud.
More saliently for purposes of collateral estoppel, the Blue Cross jury did not make any specific findings with respect to the “lights” fraud at issue in the present case, 19 The basis for the jury’s decision with respect to the RICO claim is unclear. By contrast, the DOJ decision contains exhaustive findings of fact with respect to individual elements of RICO and specifically the application of RICO to the “lights” fraud at issue here. Thus, there is no explicit conflict between the verdict form of the Blue Cross jury and the specific findings to which the Court will be asked to apply collateral estoppel.
Finally, and perhaps most compelling, the Blue Cross verdict was rendered June 4, 2001, before the official release of Monograph 13. Indeed, the Court specifically instructed the jury to disregard any mention of Monograph 13, as well as any testimony relying on it, because the study and report were still under review:
[T]his witness mentioned a draft of a report of Dr. Burns analyzing smoking data to determine the safety of so-called low tar cigarettes. The defendants were not permitted to see that report, although they asked for it before trial, because the study and report is still under review. We would like to allow the scientists some time to germinate and think about it before they publish. The opinion of this witness cannot be buttressed by that report.
19 A copy of the Verdict Form was attached as Exhibit 1 to the Declaration of David
Kouba in Support of Defendants’ Brief in Response to the Court’s August IS, 2006 Order and in Opposition to Collateral Estoppel Based on United States v. Philip Morris (Kouba Decl.). 26
Therefore, because the defendants could not use it on cross examination, his reliance on the report you cannot consider. 20
Monograph 13 is, arguably, the most important piece of evidence supporting the DOJ Court’s conclusions with respect to the “lights” fraud, and it is a central piece of evidence in this case as well. Along with the 2004 Surgeon General’s Report, which had not come into existence at the time of the Blue Cross trial, Monograph 13 provides powerful evidence of the central issue in the case, See DOJ Op. at ¶ 2116 (”The conclusions of Monograph 13 and the 2004 Surgeon General’s Report-that lower tar cigarettes do not provide a health benefit–’represent[] the consensus view of the scientific community on this issue.” See generally, DOJ Op. at ¶ 211121 at 769-74. The Blue Cross jury reached its verdict without the benefit of this critical scientific evidence. 21
3. Defendants’ Other “Inconsistent” Cases Are Inapposite.
Like the Blue Cross case, none of the other cases on which defendants rely weighs
against the application of collateral estoppel. First, each of these cases involved general jury
verdicts which do not reveal the bases for the decision and do not conflict with the DOJ Court’s detailed individual findings. 22 Specifically, unlike the DOJ Court’s extensive findings as to the “lights” fraud, none of the verdict forms even suggests that the jury considered (much less
20 See Defendants’ Memorandum in Support of Protective Order Precluding Discovery of Ongoing Scientific Research Data (Document 124) at pp. 18-19, citing Blue Cross trial transcript (at 1512), attached as Exhibit 1 to Declaration of Judith Bernstein-Gaeta filed therewith.
21 The Supreme Court has recognized, in a related context, that a prior decision loses some of its force when there has been a significant change in the controlling facts. Montana v. United States, 440 U.S. 147, 155 (1979) (holding that, where the controlling facts and legal principles had not changes since a prior decision, the later decision on the same issues should be given collateral estoppel effect).
22 See Exhibits 9, 11, 13, 15, and 17 to the Declaration of David Kouba in Support of Defendants’ Brief in Response to the Court’s August 18, 2006 Order and in Opposition to Collateral Estoppel Based on United States v. Philip Morris (”Kouba Decl.”). 27
rejected) allegations concerning “lights.”23 There is certainly no hint that the juries concluded that light cigarettes are in fact safer than regular cigarettes nor that Defendants did not engage in a conspiracy to deceive the public about the safety of “light” cigarettes as compared to regular cigarettes.
Moreover, each of the cases Defendants cite is easily distinguishable based on the nature of the claims asserted, the parties asserting them, and/or the damages allegedly incurred:
• Iron Workers Local Union No. 17 Insurance Fund v. Philip Morris, Inc., No. 1:97-CV-1422 (ND. Ohio) involved a plaintiff class of employee benefit plans seeking damages under RICO for an indirect injury based on their subscribers’ medical costs;
• Longden v. Philip Morris USA Inc., No. OO-C-442 (N.H. Super. Ct.) involved a claim for common law fraud and products liability under state law seeking damages relating to the plaintiffs wrongful death;
• Tune v. Philip Morris Inc., No. 97-4678 (Fla. Cir. Ct.) involved products liability and common law conspiracy and fraud under state law seeking damages for medical costs and other personal injury.
• Kimball v. RI Reynolds Co., No. CVO3-0664 (W.D. Wash) involved products liability claims under state law.
• Vandenburg v. Brown & Williamson Tobacco, No. 03CV237238 (Mo. Cir. Ct., Jackson County) involved personal injury claims under state law. 24
Defendants should not be permitted to overcome the collateral estoppel effect of the DOJ decision — which resolved in exhaustive detail the precise legal and factual issues involved in
23 Defendants cite to the complaints in each of these cases which contain general averments about “light” and/or low tar cigarettes and the FTC measurements. See Def. Br. at 1112. Defendants then cite to the verdict forms in each of these cases in which Defendants were absolved of liability and argue that the verdicts were contrary to the verdict in the DOJ case. Id. Yet, Defendants have provided no evidence that the lights issues were actually litigated in these cases.
24 None of the cases Defendants cite in footnote 11 of their Brief (at 12) is any more applicable. All of them involved state law claims and personal injury damages, and none of the verdict forms Defendants submit as exhibits suggest that issues relating to “light” cigarettes were actually litigated or considered by the jury.
this case - by submitting a laundry list of other cases that they won, but which involved different claims decided on uncertain grounds and without the benefit of a central piece of evidence. Accordingly, these cases do not support Defendants’ contention that giving the DOJ Case collateral estoppel effect in this case would be unfair.
B. The DOJ Opinion Applied to Liggett and Liggett’s Withdrawal From the Conspiracy Should Not Alter the Collateral Estoppel Effect On Other Parties.
Defendants final argument is that it would be unfair to apply collateral estoppel because “the DOJ court concluded that the final judgment did not apply to Liggett.” Def. Br. at 19. On that basis, they contend that Liggett could not be precluded from relitigating the issues in that case and, therefore, that collaterally estopping the other defendants would not conserve any judicial resources. This argument is disingenuous at best.
Although the DOJ court found that Liggett was not subject to an injunctive remedy because it had withdrawn from the conspiracy and was not likely to continue the fraud in the future, the decision made it very clear that Liggett had indeed committed the RICO violation charged:
Withdrawal does not preclude liability even in criminal prosecutions involving substantive mail and wire fraud offenses. . . . “A party’s ‘withdrawal’ from a scheme is [] no defense to the crime because membership in the scheme is not an element of the offense. [The defendant] is liable for mail fraud as a principal or as an aider and abettor, not a conspirator.” Accordingly, Liggett’ s withdrawal from the RICO conspiracy does not preclude its liability under 18 U.S.C. § 1962(c) for the substantive mail and wire fraud offenses that underlie the civil RICO lawsuit for equitable relief brought by the United States. DOJ Op, at 1599-1600 (citations omitted); see also id at ¶¶2172, 2345, 2624, 2625.
Thus, as to many, if not most, of the specific findings to which Plaintiffs would seek estoppel, the inclusion of Liggctt would be appropriate and would not involve wasteful relitigation of the issue. Moreover, even if the Court is disinclined to impose any estoppel effect on Liggett whatsoever, there are various tools available to the Court to ensure that Liggett is protected from any unfair application of collateral estoppel at trial, including the use of limiting instructions or severance of claims under Rule 21. Alternatively, if the Court were persuaded that Liggett’s belated withdrawal from the conspiracy negates, either partially or entirely, the collateral estoppel effect of Judge Kessler’s opinion as to all parties, Plaintiffs request the opportunity to consider dismissing their claims against Liggett in this proceeding before a final determination of these issues on the record.
/s/ Michael D Hausfeld Herbert E. Milstein Michael D. Hausfeld Lisa M. Mezzetti Paul T. Gallagher William P. Butterfield Douglas J. MeNamara (DM #6069) Benjamin D. Brown James J. Pizzirusso Brent W. Landau Andrea L. Hertzfeld Hilary K. Ratway COHEN, MILSTEThJ, HAUSFELD & TOLL, P.L.L.C. 1100 New York Avenue, N.W. Suite 500, West Tower Washington, D.C. 20005 Phone: (202) 408-4600 Fax: (202) 408-4699
Burton H. Finkeistein Richard M. Volin FINKELSTEIN, THOMPSON & LOUGHRAN 1050 30th Street, NW. Washington, DC 20007 Phone: (202) 337-8000 Fax: (202) 337-8090 LEAD ATTORNEYS FOR PLAINTIFFS
Jonathan Alpert THE ALPERT LAW FIRM 5920 River Terrace Tampa, FL 33604 Phone: (813) 223-4131 Fax: (813) 228-9612 David F. Sorenson
BERGER & MONTAGUE, P.C. 1622 Locust Street Philadelphia, PA 19103 Phone: (215) 8755705 Fax: (215) 875-4604
Van Bunch BONNETT, FAIRBOURN, FRIEDMAN & BALINT, P.C. 57 Carriage Hill Signal Mountain, TN 37377 Phone: (423) 886-9736 Fax: (602) 274-1199 Gary M. Farmer, Jr., FREEDLAND, FARMER, RUSSO & SHELLER 2665 Executive Park Dr., Suite 3 Weston. FL .33331)j Phone: (954) 467-6400 Fax: (954) 670-2530
G. Martin Meyers LAW OFFICES OF G. MARTIN MEYERS 35 West Main Street, Suite 106 Denville, NJ 07834 Phone: (973) 625-0838 Fax: (973) 625-5350
Lisa J. Rodriguez TRUJILLO, RODRIGUEZ & RICHARDS, LLC 8 Kings Highway West Haddonfield, NJ 08033 Phone: (856) 795-9002 Fax: (856) 795-9887
Thomas V. Urmy, Jr. Edward F. Haber SHAPIRO, HABER & URMY, LLP 53 State Street Boston, MA 02109 Phone: (617) 439-3939 Fax: (617) 439-0134
Stephen Sheller SHELLER, LUDWIG & BADEY 1528 Walnut Street, 3rd Floor Philadelphia, PA 19102 Phone: (215) 790-7300 Fax: (215) 546-0942
Russell Smith R. Bryan Nace A. RUSSELL SMITH LAW OFFICE 503 Key Building 159 5. Main Street Akron, Ohio 44308 Phone: (330) 434-7167 Fax: (330)4′)4-1795
Gerson Smoger SMOGER & ASSOCIATES, L.L.P. 3175 Monterey Blvd., Suite 3 Oakland, CA 94602 Phone: (510) 531-4529 Fax: (510) 531-4377
Esther Berezofsky WILLIAMS, CUKER & BEREZOFSKY 210 Lake Drive East, Suite 101 Cherry Hill, NJ 08002 Phone: (856) 667-0500 Fax: (856) 667-5133
BARBARA SCHWAB, et a!., individually, and on behalf of all other similarly situated,
PHILIP MORRIS USA, INC., et a!.,
The following is an index of factual findings and conclusions of law from the court’s opinion in United States v. Philip Morris, Inc., No. 99-CV-2496 (D.D.C. Aug. 17, 2006), which Plaintiffs submit should be given collateral estoppel effect in this case. The paragraph numbers below correspond to the District Court’s numbered Findings of Fact. Plaintiffs cite page numbers for the District Court’s Conclusions of Law, which were not numbered.
I. CREATION AND OPERATION OF AN ENTERPRISE
Findings of Fact: ¶¶66-20, 21-107, 108-212, 213-313, 314-344, 345-358, 364-393, 403-476
Conclusions of Law: 1528-1536
II. DEFENDANTS ENGAGED IN A SCHEME TO DEFRAUD SMOKERS AND POTENTIAL SMOKERS
Findings of Fact; & 509-1762, 2023-2629, 3863-4035
Conclusions of Law: 15081518,1526-1528,1628-1630
A. Defendants Falsely Denied the Health Effects of Smoking
Findings of Fact: ¶¶ 509-827
Conclusions of Law: 1505-1508
B. Defendants Falsely Denied Nicotine and Smoking are Addictive
Findings of Fact: &1J 828-1365
Conclusions of Law: 1508-1512
C. Defendants Falsely Denied they Manipulated Cigarette Design so as to Assure Nicotine Delivery Levels Which Create and Sustain Addiction
Findings of Fact: ¶¶1366-1762
Conclusions of Law: 1512-1514
D. Defendants Falsely Marketed and Promoted Lights as Less Harmful than Regular Cigarettes in order to keep People Smoking and Sustain Corporate Revenues
1. Lights Offer No Clear Health Benefit Over Regular Cigarettes
Findings of Fact: ¶¶2022-2145
Conclusions of Law: 1514-1515, 1630-1631
2. Based On Their Sophisticated Understanding of Compensation, Defendants Internally Recognized That Lights Offer No Clear Health Benefit
a. Defendants internally recognized that Lights are not less harmful than regular cigarettes
Findings of Fact: ¶¶ 2146-2172
Conclusions of Law: 1515-1516
b. Internally, defendants has an extensive and sophisticated understanding of compensation
Findings of Fact: ¶¶ 2173-2330
3. Smokers Switched To Lights Rather than Quit Because
Smokers Relied On Defendants’ Misrepresentations Regarding Health
a. Defendants recognized that smokers chose Lights for a perceived health benefit
Findings of Fact: ¶¶ 2231-2293, 1628-1629
b. Defendants recognized that smokers rely on the health claims made about Lights as an excuse for not quitting
Findings of Fact: ¶¶ 2294-2345
Conclusions of Law: 1515-1516, 1628-1629
4. Despite Their Internal Knowledge, Defendants Publicly Denied That Compensation Is Complete And That The FTC Method Is Flawed
Findings of Fact: ¶¶ 2346-2376
Conclusions of Law: 1515-1517
5. Despite Internal Knowledge, Defendants’ Marketing and Public Statements Suggested That Lights Were Less Harmful Than Regular Cigarettes
Findings of Fact: ¶¶2377-2629
Conclusions of Law: 1516-1517
E. Defendants Suppressed Documents, Information, and Scientific Research
1. Defendants Suppressed and Concealed Scientific Research
Findings of Fact: ¶¶ 3865-3928
Conclusions of Law: 1526-1527
2. Defendants Destroyed Documents To Shield Themselves From Litigation
Findings of Fact: ¶¶ 3929-4000
Conclusions of Law: 1526-1528
3. Attorneys Participated in Scientific Research Decisions To Protect Defendants From Litigation
Findings of Fact: ¶¶ 165-166, 929, 940, 948-950, 951, 953, 981, 1143, 1144, 1287-1288, 1294,1302, 1315, 1329-1334, 1339, 1345-1346, 1350-1352, 2358,3866,3871,3872,3873,3874,3877-3882,3887,3888. 3889,3890,3899,3897,3898,3899,3905,3924,3925,3928, 3933, 3935, 3944, 3946, 3949, 3950, 3956, 3958, 3961, 3962, 3966, 3967, 3968, 3969, 3972, 3981, 3989, 3992, 3996, 3997, 3998
Conclusions of Law: 1528
4. Defendants Improperly Invoked Privileges To Avoid The Production Of Documents In Litigation
Findings of Fact: ¶¶ 4001-4035
III. THE ENTERPRISE ENGAGED IN AND ITS ACTIVITIES AFFECTED INTERSTATE COMMERCE
Findings of Fact: ¶¶486-494
Conclusions of Law: 1536-1538
IV. EACH DEFENDANT WAS ASSOCIATED WITH BUT DISTINCT FROM THE ENTERPRISE
Conclusions of Law: 1539-1542
V. DEFENDANTS PARTICIPATED IN THE CONDUCT OF THE AFFAIRS OF THE ENTERPRISE
Findings of Fact: ¶¶ 6-20, 21-107, 108-212, 213-313, 314-344, 345-358, 364-393,403476,509827, 828-1365, 1366-1762, 2023-2629, 3863-4035 Conclusions of Law: 1542-1548
VI. EACH DEFENDANT ENGAGED IN A PATTERN OF MAIL AND WIRE FRAUD IN FURTHERANCE OF THE CONSPIRACY
¶¶ 42-44,90, 101-102, 104,121,137,142-144,150-152,157,164,167-168,169170, 205, 272-273; 340, 497, 499, 500, 501-502, 504, 506-507, 7087-715, 718, 719, 723-24, 728-746, 751-759, 762, 764-770, 772, 774-80, 781-782, 784, 785791, 1149-1150, 1152-1153, 1155-1156, 1160-1161, 1168-1169, 1172, 1175-1177, 1183-1184, 1188-1191, 1196, 1198, 1207, 12101211, 1213-1214, 1217-1223, 1225-1231, 1233-1238, 1242, 1247-1250, 1254, 1295, 1298, 1299, 1306, 1314-1316,1318,1333, 13-16,1344,1395,1415, 17311735, 1737-1743,1747, 1749-1753, 2346, 2358, 2360, 2369, 2371-2372, 2392, 2400, 2420, 2422, 2436, 2456-2457, 2472-2473, 2480-2482, 2484, 2486-2487, 2489, 2491, 2494-2495, 2513-2515, 2525, 2541, 2551, 2555, 2579, 2580, 2587, 2589-2590, 2593-2596, 2605-2506, 2509, 2511 Conclusions of Law1548-1562, 15671588
VII. DEFENDANTS HAVE VIOLATED 18 U.S.C. § 1962(d)
Findings of Fact: ¶¶ 6-20, 21-107, 108-212, 213-313, 314-344, 345-358, 364-393,403-476, 509827, 828-1365, 1366-1762, 2023-2629, 3863-4035
Conclusions of Law: 1588-1597, 1600-1602
VIII. BATCO PARTICIPATED IN CONDUCT OF THE AFFAIRS OF THE ENTERPRISE AND CONSPIRACY
¶¶ 35-37, 195, 367, 378, 379, 383, 386, 388, 391-392, 403, 404-405, 407, 409, 412-414, 420-421, 427-428, 432, 434-435, 438-439, 441-443, 456, 464, 697-699, 701, 803-804, 988-1079,1097,1102,1115-1116,118-11192,1306-1-111, 1317-1325, 1328,1329-1334,1350,1355,13951399,1452,1454-1455,1458-1467, 1503, 1545-1547, 1549, 1649-1652, 1661, 1663, 1667-1668, 1670-1671, 1675-1677, 2168-2170, 2212-2224, 2280-2285, 2330-2339, 2373, 2558-2574, 3930-3997 Conclusions of Law: 1614
IX. LOSS CAUSATION DOES NOT PRECLUDE DAMAGES IN THIS CASE
976, 1048-1049,1057-1058,1097,1125,1132, 1412, 1512, 1515, 2026, 2062, 2066, 2072, 2073, 2074, 2075, 2077, 2081, 2082, 2083, 2091, 2092, 2098, 2100, 2101, 2103,2112,2122,2123,2124,2125,2126,2127,2145,2163,2173-2229, 2627, 2237,
Conclusions of Law: 1505-1502, 1515, 1630
X. DEFENDANTS’ FAILURE TO DISCLOSE THEIR SUPERIOR
KNOWLEDGE TOLLS THE STATUTE OF LIMITATIONS
Findings of Fact: ¶¶ 2146-2172, 2173-2330, 2346-2376, 2390 Conclusions of Law:
1508,1515-1517,1628
I, Andrea L. Hertzfeld, hereby certify that a true and correct copy of the foregoing
Plaintiffs’ Memorandum Of Law In Support of Precluding Defendants From Relitigating Issues
Decided In United States v. Philip Morris was served upon the counsel listed on the attached
Service List via e-mail.
/s Andrea L Hertzfeld
Harold K. Gordon Steven P. Harte Jones Day 222 East 41st Street New York, NY 100 17-6702 212/326-3939 fax: 212/755-7306
Mark Belasic mabe1asicjonesday.com Theodore M. Grossman Jones Day 901 Lakeside Ave., North Point Cleveland, OH 44114-1190
216/586-3939 fax: 216/579-0212
Guy Miller Struve Matthew Stewart Davis Polk & Wardwell 450 Lexington Avenue New York, NY 10017 212/450-4000 fax: 212/450-3800 Guy.struvedpw.com Counsel for Altria Group Inc.
Philip Pfeffer Ppfeffer@chadbourne.com Joseph Falcone jfalcone@chadboume.com Chadbourne & Parke, LLP 30 Rockefeller Plaza NewYork, NY 10 112 212/408-5100 fax: 212/5415369
Alan Mansfield mansfieldagtlaw.com Stephen L. Saxl Greenberg Traurig, LLP MetLife Building 200 Park Avenue New York, NY 10166 212/801-2100 fax: 212/801-6400
Judith Bernstein-Gaeta Brian T. Edmunds Arnold & Porter 555 12th Street, NW, Washington, D.C. 20004 202/942-5493 fax: 202/942-5999 judith_gaeta-bemsteinaporter.com
Counsel for Philip Morris USA Inc.
William L. Allinder Shook, Hardy & Bacon L.L.P. 2555 Grand Blvd. Kansas City, MO 641082613 816/474-6550 fax: 816/421-2708 wallinder@shb.com
Peter A. Bellacosa Kirkland & Ellis LLP Citigroup Center 153 East 53rd Street New York, NY 10022-4611 212/446-4800 fax: 212/446-4900 pbellacosa@kirkland.com
Leonard A. Feiwus Julie R. Fischer (JF-7755) Kasowitz, Benson, Tones & Friedman LLP 1633 Broadway New York, NY 10019 212/506-1785 fax: 212/506-1800 jfisc/ier@kasowitz. corn
Counsel for The Liggeti Group, Inc.
Defense Letter on Collateral Estoppel, September 18, 2006
Murray R, Garnick MurrayGarnick@aporter.com
202942.5716 2029425999 Fax
BY ELECTRONIC FILING AND TELECOPY
United States District Judge United States District Court Eastern District of New York 225 Cadman Plaza East Brooklyn. New York 11201
Re: Schwab, et al. v. Philip Morris USA Inc., et al.
No 04 Civ 1945 (JBW (SMG)
Defendants are in receipt of plaintiffs’ belated “Motion Precluding Defendants From Relitigating Issues Decided in United States v. Philip Morris.” We write to request that the Court defer briefing on plaintiffs’ motion until this Court decides the summary judgment and class certification motions already fully briefed and argued at the September 13, 2006 hearing.
This Court has already addressed the issue of collateral estoppel twice. Last year, when plaintiffs sought collateral estoppel based on an Illinois case and the prospective DOJ case, the Court rejected such an application:
I have tentatively decided not to apply collateral estoppel even though an argument can be made based on the Illinois case and possibly what will come down from the Washington, D.C. case in view of the very extensive cigarette litigation, much of which has been won by the defendants and because the material supporting other judgments will possibly need to come before the jury as evidence in connection with possible damages anyway. So 1 don’t believe I’m going to find favorably to the plaintiffs on that issue.
Aug. 12, 2005 Hr’g Tr. at 37-38.
September 18, 2006 Page 2
Then at the September 13, 2006, hearing, the Court expressed its disinclination to give collateral estoppel effect to the DOJ opinion, explaining that there are “a variety [of] reasons, among those in the last brief filed by the defendants, and by Liggett particularly” for the Court not to accord preclusive effect to the DOJ court’s findings and conclusions. Sept. 13, 2006 Hr’g Tr. at 31.
We further note that the issue of collateral estoppel may be mooted depending on how this Court decides the summary judgment and class certification motions. Indeed, those motions focus on issues of reliance, causation, injury, damages, and statute of limitations - none of which was at issue in DOJ.
In light of this Court’s prior statements relating to collateral estoppel and in light of the pending motions that may moot plaintiffs’ motion, we ask that briefing on that motion be deferred.
Murray R. (Garnick
cc: Magistrate Judge Gold All Parties
Plaintiff Letter on Collateral Estoppel, September 19, 2006 Benjamin D. Brown
(202) 589-2288 bbrown@cmht.eom
HON. JACK B. WEINSTEIN U. S. District Court Eastern District of New York 225 Cadman Plaza East Brooklyn, New York 11201
Re: Barbara Schwab et al., v Philip Morris USA, et al No. 04 Civ 1945 (JBW) (SMG,?
Plaintiffs write to oppose Defendants’ requests of September 18 for further briefing on collateral estoppel issues and a postponement of any rulings on that issue. On August 18, 2006, the day after the opinion issued in United States v Philip Morris, et al., No. 99-2496, the Court specifically ordered that, [a]t the hearing scheduled for September 13, 2006, all parties shall address whether any of these. . . findings of fact and conclusions of law should collaterally estop defendants from re-litigation of the issues in the present suit.” See August 18, 2006 Order (emphasis added). Without seeking leave from the Court, Defendants elected to file a full brief on this subject on September 8, 2006. Defendants did not inform Plaintiffs in advance or consult on a briefing schedule. The Court did not ultimately hear argument on collateral estoppel at the September 13 hearing.
Defendants’ proposal is unnecessary and disingenuous. The Court issued a very timely Order setting out a logical procedure for addressing the collateral estoppel effects of United Slates v Philip. Defendants chose to jump the gun by filing a brief out of turn without informing the Court or opposing counsel of its plans. Remarkably, after Plaintiffs have similarly placed a brief on record, Defendants characterize it as “belated” and urge that it not be considered. Now, after both sides have submitted lengthy briefing and the Court has already begun to consider these issues, which directly bear on the other pending motions, Defendants also ask that ‘briefing on that motion be deferred.” This bizarre request should he denied. There is no need for further **———————————————————
HON. JACK B. WEINSTEIN September 19, 2006
briefing. The Court should consider issues of collateral estoppel concurrently with the other pending motions consistent with its previously announced intention.
Plaintiff Letter on Collateral Estoppel, September 19, 2006 This entry was posted
on Wednesday, September 20th, 2006 at 10:37 am	and is filed under Schwab, Court Filings, News Items, Notes.