Cigarette makers lose appeal in landmark case

WASHINGTON — A federal appeals court on Friday agreed with the major elements of a 2006 landmark ruling that found the nation's top tobacco companies guilty of racketeering and fraud for deceiving the public about the dangers of smoking.

A three-judge panel of the U.S. Court of Appeals in Washington unanimously upheld requirements that manufacturers change the way they market cigarettes. The requirements, which have been on hold pending appeal, would ban labels such as "low tar," ''light," ''ultra light" or "mild," since such cigarettes have been found no safer than others.

Throughout the 10 years the case has been litigated, tobacco companies have denied committing fraud. The companies argued the ban on labels like "light" would cost them hundreds of millions of dollars.

Philip Morris USA and its parent company, Altria Group Inc., said they will appeal to the Supreme Court.

"The court's conclusions are not supported by the law or the evidence presented at trial, and we believe the exceptional importance of these issues justifies further review," Altria attorney Murray Garnick said in a statement.

Matthew L. Myers, president of the Campaign for Tobacco-Free Kids, one of six health advocacy groups that participated in the lawsuit, said the appeals decision "represents a dramatic victory for public health and an emphatic condemnation of the tobacco industry and its behavior."

The government filed the civil case under a 1970 racketeering law commonly known as RICO, used primarily to prosecute mobsters in cases in which there has been a group effort to commit fraud.

The suit was first filed in 1999 during the Clinton administration and pursued by the Bush administration after unsuccessful attempts to settle.

The nine-month trial heard by U.S. District Judge Gladys Kessler without a jury included live and written testimony from 246 witnesses and almost 14,000 exhibits in evidence. Prosecutors said the companies secretly agreed not to compete over whose products were the least hazardous to smokers to ensure they didn't have to publicly address the harm caused by smoking.

"The government presented evidence from the 1950s and continuing through the following decades demonstrating that the defendant manufacturers were aware — increasingly so as they conducted more research — that smoking causes disease, including lung cancer," the appeals court wrote in a 92-page opinion.

The government also argued the manufacturers lied about the dangers of secondhand smoke, manipulated cigarettes to maintain addiction, intentionally marketed to youth and destroyed documents to hide the dangers and protect themselves in litigation.

Internal documents introduced at trial showed industry researchers found smokers compensate for reduced nicotine in "low-tar" cigarettes by taking more frequent puffs and inhaling more deeply to satisfy their addiction. Yet they continued to market those cigarettes as less harmful.

The government had asked Kessler to make the companies pay $10 billion for a national smoking cessation program, but Kessler said that wasn't within her legal authority. The government appealed that decision but the appeals court upheld it.

Besides Philip Morris and Altria, other manufacturers who were defendants in the lawsuit were: R.J. Reynolds Tobacco Co.; Brown & Williamson Tobacco Corp.; British American Tobacco Ltd.; Lorillard Tobacco Co. and Liggett Group Inc.

Liggett was excluded from the ruling because the judge said the company came forward in the 1990s to admit smoking causes disease and is addictive and cooperated with government investigators.

The appeals court ruled that two other defendants who were included in the District Court ruling — Counsel for Tobacco Research-U.S.A. and the now-defunct Tobacco Institute — be dismissed from the suit. Both are trade organizations for the cigarette manufacturers, but they did not manufacture or sell tobacco products.

R.J. Reynolds said it was also considering appeal. "R.J. Reynolds strongly believes that neither the evidence presented at trial nor the legal standards justify a finding of liability," said company attorney Martin L. Holton III.

Justice Department spokesman Charles Miller said lawyers there were reviewing the decision.