Opinion ID: 187362
Heading Depth: 1
Heading Rank: 6

Heading: Challenges to Remedies

Text: Finally, as to those Defendants the district court properly found likely to commit future RICO violations, we address their challenges to particular remedies the district court imposed. We also address the cross-appeal seeking additional remedies the district court denied.
First, Defendants object to the inclusion of their subsidiaries among the persons bound by the remedial order. Rule 65 of the Federal Rules of Civil Procedure indicates that an injunction binds only the parties; their officers, agents, servants, employees, and attorneys; and other persons who are in active concert or participation with the aforementioned persons. FED. R. CIV. P. 65(d)(2). The rule derives from the common law doctrine that an injunction not only binds the parties defendant but also those identified with them in interest, in `privity' with them, represented by them or subject to their controlany person or entity through whom the defendants might carry out enjoined activity and so nullify the order. Regal Knitwear Co. v. NLRB, 324 U.S. 9, 14, 65 S.Ct. 478, 89 L.Ed. 661 (1945). A subsidiary corporation is in privity with its parent in respect to the common corporate business to the extent it is so identified in interest with [the parent] that [it] represents precisely the same legal right in respect to the subject matter involved in the injunction. Jefferson Sch. of Soc. Sci. v. Subversive Activities Control Bd., 331 F.2d 76, 83 (D.C.Cir. 1963). The term subsidiaries in the remedial order cannot expand the scope of the injunction beyond that defined by Rule 65(d); however, subsidiaries of Defendants may be personally bound by the order to the extent that they are agents of or in privity with Defendants in the common corporate business of manufacturing, designing, marketing, or selling cigarettes. (Like any person with actual notice of the injunction, subsidiaries that act in concert with Defendants to violate the order would also be subject to contempt.) The record on appeal does not reveal facts sufficient for us to evaluate over which subsidiaries, if any, Defendants exercise sufficient control or with which they so identify in interest regarding cigarettes that they would legitimately fall within the purview of the injunction order. We therefore vacate the order to the extent that it binds all Defendants' subsidiaries and remand to the district court for proceedings to determine whether inclusion of Defendants' subsidiaries, and which subsidiaries, satisfies Rule 65(d).
The district court permanently enjoined Defendants from committing any act of racketeering, as defined in 18 U.S.C. § 1961(1), relating in any way to the manufacturing, marketing, promotion, health consequences or sale of cigarettes in the United States, and from making, or causing to be made in any way, any material false, misleading, or deceptive statement or representation, or engaging in any public relations or marketing endeavor that is disseminated to the United States public and that misrepresents or suppresses information concerning cigarettes. Such material statements include, but are not limited to, any matter that: (a) involves health, safety, or other areas with which a reasonable consumer or potential consumer of cigarettes would be concerned; (b) a reasonable consumer or potential consumer would attach importance to in determining whether to purchase or smoke cigarettes; or (c) the Defendant, Covered Person or Entity making the representation knows or has reason to know that its recipient regards or is likely to regard as important in determining whether to purchase cigarettes or to smoke cigarettes, even if a reasonable person would not so regard it. Philip Morris, 449 F.Supp.2d at 938. Defendants assert that, in the face of more than 1,600 pages of findings, these injunctions do not sufficiently specify the acts restrained, in violation of Rule 65(d), due process, and the First Amendment. Defs. Br. 137. Rule 65(d) requires every order granting an injunction to state its terms specifically [and] describe in reasonable detailand not by referring to the complaint or other documentthe act or acts restrained or required. FED.R.CIV.P. 65(d)(1)(B)-(C). The Rule was designed to prevent uncertainty and confusion on the part of those faced with injunctive orders. Schmidt v. Lessard, 414 U.S. 473, 476, 94 S.Ct. 713, 38 L.Ed.2d 661 (1974). Because an injunction prohibits conduct under threat of judicial punishment, basic fairness requires that those enjoined receive explicit notice of precisely what conduct is outlawed. Id. Under this standard, we have held injunctions to be too vague when they enjoin all violations of a statute in the abstract without any further specification, or when they include, as a necessary descriptor of the forbidden conduct, an undefined term that the circumstances of the case do not clarify. See Wash. Inv. Network, 475 F.3d at 407 (order enjoined all future violations of the applicable statutes, without clarifying the acts restrained); Gulf Oil Corp. v. Brock, 778 F.2d 834, 843 (D.C.Cir.1985) (order enjoined substantially similar conduct without further specification in a case that provided no examples of what is similar); Common Cause v. NRC, 674 F.2d 921, 926-27 (D.C.Cir.1982) (order enjoined conduct similar in nature without further specification in a case that provided no examples of what is similar); SEC v. Savoy Indus., Inc., 665 F.2d 1310, 1318-19 (D.C.Cir.1981) (defendant enjoined not to engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person); see also Schmidt, 414 U.S. at 476, 94 S.Ct. 713 (enjoined the present Wisconsin scheme). Even if it tracks statutory language, a general injunction is not too vague if it relates the enjoined violations to the context of the case. See Savoy Indus., Inc., 665 F.2d at 1316-17 (tracking language of the statute in context of defendant's relationship with issuers of securities). Indeed, we must always apply the fair notice requirement in the light of the circumstances surrounding (the injunction's) entry: the relief sought by the moving party, the evidence produced at the hearing on the injunction, and the mischief that the injunction seeks to prevent. Common Cause, 674 F.2d at 927 (quotation marks omitted). The two injunctions at issue here sufficiently specify the activities enjoined as to provide Defendants with fair notice of the prohibited conduct. The district court did not abstractly enjoin Defendants from violating RICO or making false statements, but instead specified the matters about which Defendants are to avoid making false statements or committing racketeering acts: the manufacturing, marketing, promotion, health consequences, and sale of cigarettes, along with related issues that Defendants have reason to know are of concern to cigarette consumers. This is not a generalized injunction to obey the law, especially when read in the context of the district court's legal conclusions and 4,088 findings of fact about fraud in the manufacture, promotion, and sale of cigarettes. These injunctions may be broad, but breadth is warranted to prevent further violations where[, as here,] a proclivity for unlawful conduct has been shown. Savoy Indus. Inc., 665 F.2d at 1317 (quoting McComb v. Jacksonville Paper Co., 336 U.S. 187, 192, 69 S.Ct. 497, 93 L.Ed. 599 (1949) (holding that the record of continuing and persistent violations of the [statute] would indicate that that kind of a [general] decree was wholly warranted in this case)). Defendants complain that the volume of findings in this case actually make understanding the injunctions more difficult and chill speech because some of the district court's findings present express prohibitions whereas others, like the use of white filter paper for cigarettes, simply reflect the district court's disapproval of aspects of Defendants' business practices without finding the conduct fraudulent. Defs. Br. 137. This objection answers itself, as the plain terms of the injunctions prohibit only conduct that would constitute a racketeering act or a material false, misleading, or deceptive statement or representation, not all activities the court mentioned in its findings.
Paragraph four of the injunction prohibits the use of any express or implied health message or health descriptor for any cigarette brand. Philip Morris, 449 F.Supp.2d at 938. The government concedes that this prohibition should not be read to govern overseas activities with no domestic effect. Gov. Br. 215-16. But because paragraph four contains no such limiting language, see Philip Morris, 449 F.Supp.2d at 938, we vacate that provision and remand for the district court to reformulate it so as to exempt foreign activities that have no substantial, direct, and foreseeable domestic effects. See supra Part IV.E.
As part of the remedial order, the district court ordered Defendants to disseminate corrective statements concerning the topics about which they had previously misled consumers. The court will determine the precise content of the statements at a future date after receiving proposals from the parties, but ordered that they must address five topics: (1) the adverse health effects of smoking; (2) the addictiveness of smoking and nicotine; (3) the lack of any significant health benefit from smoking light cigarettes; (4) the manufacturers' manipulation of cigarette design and composition to ensure optimum nicotine delivery; and (5) the adverse health effects of exposure to secondhand smoke. Philip Morris, 449 F.Supp.2d at 938-39. The remedial order sets out schedules for the manufacturer Defendants to follow in disseminating the corrective statements in cigarette package onserts, retail point-of-sale displays, newspapers, television, and their company websites. Id. at 939-41. Defendants object to the corrective statements as a whole on the grounds that they did not receive adequate notice of and opportunity to respond to the government's proposed remedy and that the remedy extends beyond the court's jurisdiction under RICO. Regarding the specific means of disseminating the statements, Defendants argue that cigarette package onserts violate the Labeling Act, that the point-of-sale displays are duplicative and impose severe burdens on retailers, and that requiring Defendants to make corrective statements in various media apart from existing advertising violates the First Amendment.