RICO Convictions of Major Tobacco Companies Affirmed

by Ronald A. Goodbread, Legal Editor

In a punishing affirmance, the D.C. Circuit Court of Appeals has issued a 92-page per curiam opinion upholding the judgment issued by D.C. District Court Judge Gladys Kessler in August 2006, in which she found eleven of America’s major Tobacco Companies and related entities guilty of nearly 150 counts of mail and wire fraud in a continuing “pattern of racketeering activity” with the “specific intent to defraud” under the Racketeer Influence Corrupt Organizations (RICO) Act. The panel consisted of two Republicans, Chief Judge David B. Sentelle, of the tobacco state of North Carolina, a Reagan appointee, and Janice R. Brown, a George W. Bush appointee, together with David S. Tatel, appointed by President Clinton. The familiar names include Philip Morris, R.J. Reynolds, Brown & Williamson, Lorillard, Liggett, British American, and the Tobacco Institute.

The Appellate Court’s opinion, dated May 22^nd, is all the more astonishing in view of its magnitude. No fewer than 39 attorneys entered appearances on behalf of the Tobacco Companies urging reversal, while 59 lawyers, including the Attorneys General of 37 States, entered appearances in favor of affirming the convictions. Names were dropped on both sides, including former U.S. Solicitor General Theodore B. Olson for the Tobacco Companies and G. Robert Blakey for the Appellees. Weighing in on behalf of various States whose health care systems are being increasingly burdened by tobacco-related maladies were such luminaries as Attorneys General Edmund G. Brown, Jr. of California, Joseph R. Biden III of Delaware, Lisa Madigan of Illinois, Douglas F. Gansler of Maryland, and Andrew Cuomo of New York.

Brought in the last year of the Clinton Administration, the case charged that the Tobacco Companies had for decades engaged in “a pattern of racketeering activity” geared to “deceive the American public about the health effects and addictiveness of smoking cigarettes.” The trial lasted nine months, included live testimony from 84 witnesses, documentary evidence from 162 more, and produced almost 14,000 exhibits. The District Court had granted leave to intervene as to proposed remedies to the American Cancer Society, the American Heart Association, the American Lung Association, and Americans for Nonsmokers’ Rights, the National African-American Tobacco Prevention Network, and the Tobacco-Free Kids Action Fund.

After a review of all the evidence the Trial Court concluded that the Tobacco Companies had engaged in a decades-long scheme to defraud actual and potential smokers by falsely denying the adverse health effects of smoking; that nicotine and smoking are addictive; that the Companies had manipulated cigarette design and composition so as to assure nicotine delivery levels that create and sustain addiction; had falsely represented that light and low tar cigarettes deliver less nicotine and tar and therefore present fewer health risks than full flavor cigarettes; engaged in an invidious marketing campaign to youth; had falsely denied that secondhand smoke causes disease; and throughout it all had suppressed and destroyed documents, information, and research to prevent the public from learning the truth about these subjects and to avoid or limit liability in litigation.

The Court of Appeals pulled no punches, engaging in none of the niceties of appellate nomenclature in drawing on the record below to document its ruling.

The Baby Boom Plume. The Government adduced evidence that traversed almost the entire lifetime of the Baby Boom Generation, starting in 1953, when four of the major tobacco giants joined together to strategize a response to an emerging public concern about health risks associated with smoking. Their initial public response was that any health hazards attributable to smoking constituted “an open question.” Their first ploy was the publication on January 4, 1954, in over 400 newspapers throughout the country, of an advertisement entitled “A Frank Statement to Cigarette Smokers” in which they asserted “[t]hat there is no proof that cigarette smoking is one of the causes” of lung cancer and “[t]hat statistics purporting to link cigarette smoking with the disease could apply with equal force to any one of many other aspects of modern life.” Hearkening back to the time of John Rolfe, they assuringly concluded that “[f]or more than 300 years tobacco has given solace, relaxation, and enjoyment to mankind.” They pledged, however, to keep an eye on emerging research to monitor any health hazards to smokers.

Nicotine Addiction. What the Trial Court found, however, was that the Tobacco Companies, in fact, engaged in “disseminating advertisements, publications, and public statements denying any adverse health effects of smoking” in “promoting their … strategy of sowing doubt” when they knew full well “that smoking causes cancer and emphysema, that secondhand smoke causes lung cancer and endangers children’s respiratory and auditory systems, [and] that nicotine is an addictive drug.” The “research group” that they had promised to set up pursuant to their 1954 statement conducted its own “extensive research into the physiological impact of nicotine, how it operates within the human body, and how the physical and chemical design parameters of cigarettes influence the delivery of nicotine to smokers.” In the end it presented them with evidence early on that, in fact, showed the highly addictive nature of nicotine. As early as 1963, Brown & Williamson’s General Counsel wrote in a confidential memorandum, “We are … in the business of selling nicotine, an addictive drug ….” In 1981, a Philip Morris executive wrote, “Cigarettes are not just habit-forming – the body builds up a requirement for them.” Similarly, by 1991, an R.J. Reynolds report bluntly concluded, “We are basically in the nicotine business.” As a result of their own internal research, the Trial Court found, they “recognized and internally acknowledged that smoking and nicotine are addictive.” Thus, the Court of Appeals concluded “that Defendants were aware that nicotine creates a chemical dependency far stronger than mere habit.”

Suppressing Evidence. Yet, the Court found, “despite this internal knowledge, for decades … [the Tobacco Companies] denied and distorted the truth about the addictive nature of their products, suppressed research revealing the addictiveness of nicotine, and denied their efforts to control nicotine levels and delivery.” R.J. Reynolds ran a commercial in the mid-1950’s asserting that more doctors smoke unfiltered Camels – one of the most virulent of the carcinogen delivery devices – than any other brand because they “agree with your throat.” In one of the most pernicious examples of fraudulently misleading the public, in a 1971 CBS “Face the Nation” interview, the President of Philip Morris denied “that cigarettes posed a health hazard to pregnant women or their infants,” despite the fact that he had been notified to the contrary by his company’s own internal research division. He conceded that while it is true that "babies born to women who smoke are smaller, they're just as healthy as babies born to women who do not smoke,” adding grimly that "some women would prefer having smaller babies." Six years later one of his vice-presidents notified him of the results of a joint study with other Tobacco Companies which concluded “that exposure to cigarette smoke causes emphysema” but he never changed his public position. He was but one of the numerous executives, CEO’s Vice-Presidents, scientists, and heads of R&D divisions at each of the major Companies who had engaged in similar public conduct. The Court pointed out an assertion by a Philip Morris Vice-President that “[n]obody has yet been able to find any ingredient as found in tobacco or smoke that causes human disease.” Twenty-eight years after Reynolds scientists had conceded that the presence of carcinogenic compounds was “now well established,” a company press release continued to declare the subject “an open controversy.”

Moreover, the Tobacco Companies’ employees and attorneys were also involved in “destroying documents relevant to their pubic and litigation positions and suppressing or concealing scientific research” which contravened their public position. Indeed, these numerous false statements led the Court of Appeals to conclude that “[t]he fact that Defendants continually denied any link between smoking and cancer … suggested that they themselves consider the matter material,” thus providing one of the elements of fraud.

The industry seldom lost an opportunity to trivialize the allegations of nicotine addiction, likening it to “attachments” such as tennis, jogging, candy, rock music, Coca-Cola, girl-watching, and hamburgers – each an All-American custom. In one of the more absurd analogies, the CEO of Philip Morris was quoted in Time Magazine in 1997, as saying that cigarettes were no more addictive than his fondness for Gummi Bears, while a vice-president for public affairs at the Tobacco Institute analogized the putative addiction to being a “chocoholic.”

On such a record, Judge Kessler had found, “[i]t is absurd to believe that the[se] highly-ranked representatives and agents of these corporations and entities had no knowledge that their public statements were false and fraudulent.” The truth was, the Court of Appeals also found, that for decades those in control of the Tobacco Companies had known “that cigarette smoking causes disease, that nicotine is addictive, that light cigarettes do not present lower health risks … and that secondhand smoke is hazardous to health.”

Engineering Addiction. Worse yet, knowing that their products were already indiscriminately addictive, while denying that fact at every turn; the cigarette manufacturers actually “engineered their product around creating and sustaining this addition.” At the outset of the 1980’s, they began to spike the nicotine content by as much as 1.6%. The overwhelming evidence showed that they “designed their cigarettes to precisely control nicotine delivery levels and provide doses of nicotine sufficient to create and sustain addiction.” A 1988 Report by the U.S. Surgeon General concluded that "[c]igarettes are highly efficient delivery devices and are as addictive as drugs such as heroin or cocaine." Thus, while publicly denying that fact, what the Tobacco Companies did for decades was to engage in a process which they actually deliberately “manipulated it to sustain addiction.”

Having this knowledge clearly in mind, however, did not stop the Tobacco Companies from continuing to proclaim their denials and disbelief of the plain and compelling evidence. In one of the most notorious incidents, on April 14, 1994, the CEO's of Philip Morris, R.J. Reynolds, U.S. Tobacco, Lorillard, Liggett, Brown & Williamson, and American Tobacco, the seven largest Tobacco Companies in the country, appeared under subpoena before a subcommittee of the House Committee on Energy and Commerce and in response to inquiries from then Congressman (now Senator) Ron Wyden of Oregon each stated under oath that he "believe[d] that nicotine is not addictive.”

Low Tar Cigarettes. Beyond that, the Tobacco Companies’ creating and marketing an “alternative” to heavy-duty smoking was also a pernicious ploy. The District court had found that the companies “engaged in massive sustained and highly sophisticated marketing and promotional campaigns to portray their light brands as less harmful than regular cigarettes.” They “marketed and promoted their low tar brands to smokers – who were concerned about the health hazards of smoking or considering quitting – as less harmful than full flavor cigarettes despite either lacking evidence to substantiate their claims or knowing them to be false.” Following the simple analogies of some of their executives, the Companies analogized their light and low tar cigarettes to low caffeine sodas and low fat cookies.

The truth, the Trial Court found, was that they had “known for decades that filtered and low tar cigarettes do not offer a meaningful reduction risk, and that their marketing which emphasized reductions in tar and nicotine was false and misleading.” By the beginning of the 1970’s, the Tobacco Companies “were aware that lower tar cigarettes are unlikely to provide health benefits because they do not actually deliver the low levels of tar and nicotine as advertised.” This is because habitual smokers would modify their smoking behavior with these brands by taking more frequent puffs, inhaling more deeply, holding the smoke in their lungs longer, or simply by smoking more cigarettes. As early as 1978, the British-American Tobacco Company was informed in a report that longtime smokers who switched to the low-tar brand “will in fact increase the amounts of tar and gas phase that they take in, in order to take in the same amount of nicotine.” As a result of this “nicotine-driven behavior,” any benefits of these low-tar brands were lost. Beyond that, those who used the low-tar brand were smoking more packs, thus increasing their purchases, and enhancing company profits into the bargain.

The Court of Appeals concluded that the hundreds of example of such evidence provided “sufficient evidence from which to conclude that Defendants’ executives, who directed the activities of the Defendant corporations and their joint entities, knew about the negative health consequences of smoking, the addictiveness and manipulation of nicotine, the harmfulness of secondhand smoke, and the concept of smoker compensation, which makes light cigarettes no less harmful than regular cigarettes and possibly more” so since they result in increased attempts at nicotine maintenance.

Secondhand Smoke. The Court further found that “internal industry documents revealed that … [the Tobacco Companies] believed the public perception of secondhand smoke would determine the industry’s survival and that secondhand smoke research by the cigarette manufacturers was a sensitive issue due to the absence of ‘objective science’ supporting their position and the risk that their own research would lead to unfavorable results.” The Tobacco Companies then set up a scientific front organization euphemistically styled the Center for Indoor Air Research to feign “independence” whose assignment was to generate “marketable science” to “use for public relations purposes.” As early as the 1970s, their own research revealed the lethal hazards of secondhand smoke. A Philip Morris scientist forwarded with approval an outside report which concluded that secondhand smoke caused “significant damage to airway function” in exposed nonsmokers. Two years later the company’s own research concluded that it is “more irritating and/or toxic … than main stream smoke inhaled by the smokers” themselves. At about the same time in the early 1980,s the Tobacco Institute nevertheless criticized an independent study showing a strong correlation between secondhand smoke and lung cancer as “suffering from a statistical flaw” when the evidence showed that the Institute “knew at the time not only that the statistical error did not exist, but also that the study was in fact correct.”

Review of Remedies. The District Court imposed no fines but found that Philip Morris, Reynolds, Lorillard, American, and British-American were likely to commit future RICO violations, rejecting their argument that the injunction was unnecessary in light of their obligations under the Master Settlement Agreement emanating from the nationwide tobacco litigation in the mid-1990’s, because these Defendants were still not in full compliance with it. Liggett alone was excluded from the District Court’s general injunction because it had voluntarily withdrawn from the RICO conspiracy, admitted that smoking is addictive and causes cancer, voluntarily restricted its advertising, and cooperated with the Government in its case against the other Tobacco Companies. The other seven Companies and their subsidiaries were enjoined them from false and misleading statements and advertising and from committing further RICO violations, from setting up false research fronts such as the Tobacco Institute, were ordered to cease using any express or implied health benefit claims regarding light or low tar cigarettes; required to grant the Government and the public access to all industry documents disclosed in the litigation and to provide additional data to the Government; and were prohibited from selling or transferring their brands, product formulas, and business entities to others who were subject to the injunction, or to conduct such business outside the United States.

The District Court denied the remainder of the Government’s requests for the imposition of a national smoking cessation program, with a special provision for young smokers; a public education and counter-marketing campaign; appointment of a special monitor to restructure the Tobacco Companies themselves; and to make public all internally-developed health and safety risk information about their products.

On appeal, the Court independently assessed whether each company presented a “reasonable likelihood of further violations” and found that the general prohibitory injunction against future RICO violations and against making future false and misleading statements were sufficiently specific to withstand challenge. The Tobacco Companies were successful, however, in reversing the application of the general injunctive relief as to their “subsidiaries” because the record did not disclose the degree of control that the Companies had over various such entities. In addition, the District Court’s proscription against making health claims on low tar products was remanded for modification to limit it to instances which had no domestic effect.

The Tobacco Companies also challenged the mandatory injunction that they initiate a public program to inform present and prospective smokers of the addictiveness and major health dangers of cigarettes in general and the lack of any significant health benefit from light/low tar cigarettes, on the grounds that these requirements were imposed on them without sufficient notice and therefore amounted to a denial of due process of law. The Court of Appeals rejected this argument, finding that the massive nature of the litigation amply provided the Defendants with the scope of potential remedies. “Requiring Defendants to reveal the previously hidden truth about their products,” the Court found, “will prevent and restrain them from disseminating false and misleading statements, thereby violating RICO, in the future.”

As one of the methods for issuing corrective information, the District Court had required the Companies to affix an “onsert” to each pack of cigarettes disclosing the issues of addictiveness and the link to cancer and other diseases. The Court rejected the Companies’ argument that this did not comply with the requirement of Cigarette Labeling Act that such warnings be “on” the package, not affixed to it. At the same time, however, the Court of Appeals found that the District Court’s requirement of point-of-sale counter displays was too intrusive on uninvolved retailers such as convenience stores, and vacated that requirement with instructions on remand for the District Court to reconsider its point-of-sale injunction with the rights of retailers in mind.

Finally, the Court of Appeals swept aside the Tobacco Companies’ First Amendment argument as to protected commercial speech with the simple statement that “it is well settled that the First Amendment does not protect fraud” and that “[h]owever broad the First Amendment … may be, it cannot be stretched to cover … known falsehoods.”

It is rare to find a more excoriating appellate review of a defendant’s failed case, especially at the hand of Judges whose backgrounds might otherwise have led one to predict a less scathing, if not altogether different, result. The case is United States v. Philip Morris USA, Inc., et al., U.S.App.D.C. No. 06-5267 (May 22, 2009) and it the full text may be found and downloaded at HYPERLINK "http://www.cadc.uscourts.gov/bin/opinions/allopinions.asp"http://www.cadc.uscourts.gov/bin/opinions/allopinions.asp.

Marion Barry's Probation Extended for 2 More Years

By Ronald A. Goodbread, Legal Editor

In the continuing epic saga of “Marion Agonistes,” former Mayor and current Council Member Marion S. Barry, Jr., who has cast his shadow over the Capital of the Free World for nearly 40 years now, presented U.S. Magistrate Judge Deborah Robinson with the task of once again wrestling with the turgid problem of whether to pull the plug on him and send him to jail or to continue to meter out measured responses to his various defaults. According to her, the Government made her decision much easier.

Barry, whose political decline makes that of the late Generalissimo Francisco Franco (who was reported as “dying” from 1969 to 1975) seem like a sudden death syndrome, pled guilty in 2005, to one count each of willful failure to file a federal and a local tax return and to pay all taxes due for the tax year 2000. Judge Robinson continued Barry’s sentencing so that he could make arrangements to file all past due returns and pay all back taxes, interest, and penalties. In March 2006, she sentenced him to three years concurrent probation, one of the general terms of which was that Barry would “not commit another federal, state or local crime,” with a special condition that he would “comply with the directives of the federal and local tax authorities regarding payment of taxes, and provide verification to the United States Probation Office upon request.”

In January of this year, Barry’s Probation Officer informed Judge Robinson that the former Eagle Scout had failed to comply with his directive to produce proof of filing of his 2007 federal tax return and of his payment of taxes due for that year, which was not part of the original charges against him. Alleging that, in other words, Barry had committed a federal new tax offense, the Government then filed an unusual Motion to Revoke Probation and incarcerate him or, alternatively, to extend his probation for two years. The Probation Officer requested a hearing on the issue at which the Government also asked that Barry be ordered to provide proof of filing and payment. Before the Court could act, however, Barry’s lawyer represented that he had since filed federal and local tax returns for both 2007 and 2008, and pointed out that the Government was requesting revocation even though Barry’s Probation Officer was not.

Barry’s excuse for his tardiness was that his declining health condition had led him to the point where he “was simply overwhelmed by the medical/health issues that confronted him” and could not focus on his tax obligations. He had given a similar excuse years earlier when he was Mayor and suspected using of illegal drugs, protesting in response to repeated questions by the media, that he could not give a urine sample because of health problems. This was prior to the infamous FBI “she set me up” video sting in January 1990, which caught him in the act of using crack cocaine with a former girlfriend in an upscale local hotel room. To be fair to Barry, though, in 1995 he was successfully treated for prostate cancer and in February of this year he was the recipient of a kidney transplant from a female admirer and, given his age (73), he had a better argument this time around, particularly on the issue of whether he “willfully” failed to file the tax return. The Government pointed out, however, that his putatively poor state of health had not kept him from running a successful re-election campaign against five opponents in November of last year, vacationing recently in Jamaica, and continuing to represent Ward 8 on the City Council. A sharecropper’s son born in Itta Bena, Mississippi, Barry’s intellect has too often been underestimated by his detractors, usually to their great dismay. He is not only a 1958 graduate of LeMoyne-Owen College in Memphis, with a B.S. in chemistry, but in 1960, he also earned a Master of Science degree in organic chemistry from Fiske University in Nashville, the first back college to earn a Phi Beta Kappa chapter. He was three years into a Ph.D. program in chemistry at the University of Tennessee when his involvement in the heady activities of the Civil Rights Era eclipsed his studies.

At the revocation hearing, the Government did not call any witnesses but moved into evidence five exhibits relating to the failure to file and had alleged in its motion that Barry was behind on his tax payment agreement with the District. Pressed by the Court, the Assistant U.S. Attorney assigned to the case suggested that after Barry’s probation was revoked he should be required to spend one month’s incarceration for each violation, to be served in a halfway house facility or, alternatively, on weekends at the D.C. Jail.

Hedging his bet, Barry’s lawyer reiterated his argument that his client’s Probation Officer was not asking for revocation and requested continuing the current term until it expired or, at most, a one year extension. The Probation Officer testified that Barry’s overall compliance to date had been “satisfactory” and did not dispute Counsel’s representations that Barry was now current on all his tax filings. He added, that should Barry be revoked and incarcerated, in view of his recent transplant surgery, the nearest available federal institution with adequate medical care facilities was on the Eastern Shore in Kent County, Maryland. After this testimony, the Prosecutor withdrew the Government’s request for any incarceration in favor of a two-year extension of probation and a thirty-day home detention with electronic monitoring.

The Court noted that the Government had not seriously pressed the case for incarceration, relying entirely on the already-known paper record and failing to call a single witness at the hearing who might have pushed the proof of “willfulness” over the preponderance of the evidence line– an element to the offense of “failure to file” which the Court ruled was “an essential element” of the charge. In conclusion, the Court pointed out that, to its knowledge, not only was Barry’s the only case in which the Government itself sought revocation, instead of relying on a request by a probation officer, but also that it then “failed to even attempt to prove” its allegation as to “new violations” against the probationer. Accordingly, finding that Barry’s brief violation fell into the “Grade C” category, the Court ruled that it would follow the recommendation of Barry’s Probation Officer and extend his probation for another two years, nunc pro tunc to March 8, 2009 – which will be two days after Barry’s 75th birthday, still leaving him more than a year to plan his next political campaign for the 2012 citywide election.

Judge Robinson’s Memorandum Opinion and Order, dated May 22, 2009, may be found on the District Court opinions website at https://ecf.dcd.uscourts.gov/cgi-bin/Opinions.pl?2009.

ANOTHER JUDGE EXCORIATES DEPARTMENT OF THE INTERIOR OVER INDIAN LANDS TRUST CASE

By Ronald A. Goodbread, Legal Editor

In a 165-page opinion, issued on January 30th, Judge James Robertson of the U.S. District Court here took up where his controversial colleague, Judge Royce Lamberth, left off two years ago in excoriating the Interior Department over its handling of billions of dollars in Native-American land claims stemming from a long-standing class-action lawsuit against it.

The suit, sounding in equity, sought an accounting for billions of dollars in revenues from timber, oil, and gas revenues deriving from lands held in trust for the various Indian tribes since the implementation of the Dawes Act of 1887, a brazen enactment designed “to erase reservation boundaries and force assimilation of Indians into society at large” via a policy of “coercive assimilation.” The Government retained title to the lands and administered the concessions for their natural resources, the proceeds of which were supposed to be distributed among over 300,000 trust beneficiaries. In 1996, Elouise Cobell, a member of the Blackfoot tribe of Montana, filed suit to require the Government, which waived sovereign immunity, to conduct an accounting and report the results. After 11 years of litigation, simply put, there are no results.

Judge Lamberth, the original judge in the case, once termed the DOI’s handling of the matter “the gold standard for federal government mismanagement for more than a century.” The acrimony between Judge Lamberth and representatives of the Interior Department became so intense, prompting numerous citations for contempt, that the U.S. Court of Appeals reversed several of his findings and ordered the case re-assigned in December 2006. Taking up what he termed his predecessor’s “heroic stewardship” of this mammoth litigation, Judge Robertson’s issued a written opinion — the 20th in the case so far— which not only found that the DOI had committed “an irreparable breach of fiduciary duty,” but also concluded that it had made such a mess of things, whether purposely or through incompetence, that “it is now clear that completion of the required accounting is an impossible task.”

In an agonizing recounting of DOI’s repeated attempts and failures to locate, organize, and catalog the records, the Court related that innumerable volumes of those records had been routinely destroyed over the years as a matter of the Government’s storage policy, other transactions had not even been recorded since the early 1930’s, and still others were impossible to trace because there had been so much “fractionation” of the lands due to multiple inheritances and escheatments. Interior’s own estimates are that over 775,000 fractionalized land interests escheated to the detriment of trust beneficiaries as of 1997.

Even so, the massive accumulation of records that were discovered is daunting, consisting of over 10,000 cubic feet of documents which, if shelved end-to-end, would reach an estimated 43 miles. In attempting to organize these records DOI has been through minimum of seven “electronic organization programs” since 1992, all of which have been resounding failures. One inspector termed them large “islands of information without a ferry in between.” It is estimated that the latest program, started in 2003, alone would cost $2.71 million to complete, with no guarantee of success. To bring the entire project to any kind of meaningful fruition would take nearly $3 billion, according to another estimate. Judge Robertson frankly concluded that “[t]aking cost into account, Interior’s 2007 Historical Accounting Plan will not result in an adequate accounting that is compliant with the … [law], prior Cobell opinions, and other precedent.”

In March of last year, the Federal Government offered $7 billion dollars to settle the suit, which claims $100 billion in losses. Senator Byron Dorgan, D-N.D., Chairman of the Senate Committee on Indian Affairs (which includes current Republican presidential front-runner Senator John McCain of Arizona) vowed to conduct hearings on the matter. Thus far, however, with a full knowledge of the conduct of this litigation and the morass of claims attendant to the issue, Congress has repeatedly refused to appropriate additional funds to resolve the problem. Judge Robertson’s ruling has been the only progress made since.

On this record, Judge Robertson found that the DOI “has an abysmal record of failing to prioritize the maintenance and preservation of trust documents.” At the same time, however, he bluntly stated that “it would indeed be ‘nuts’ to spend several billion dollars to account for a trust fund worth around the same amount,” given the limits that Congress has already placed on the project. Nevertheless, the Judge expressly declined to rule that “such an accounting is hopeless” but concluded instead “that a remedy must be found for the Department’s unrepaired, and irreparable, breach of its fiduciary duty over the last century.” A further hearing on the matter has been scheduled for early March.

The case is Cobell v. Norton/Kempthorne, C.A. No. 96-1285 (Jan. 30, 2008) and may be located and downloaded from the Court’s web site at https://ecf.dcd.uscourts.gov/cgi-bin/Opinions.pl?2008.

Printed in the February 20, 2008 edition of the DWLR.

CAVEAT CAUSIDICUS: LAWYER BEWARE

Rule 11 is Alive and Well in the D.D.C.

by Ronald A. Goodbread, Legal Editor

In a long, over-pled case consisting of a concatenation of work-related complaints by numerous D.C. employees that ended up before Judge Colleen Kollar-Kotelly, Counsel for the Plaintiffs recently received a stern admonition from this genteel, but no-nonsense jurist. The U.S. District Court here does not list the lawyers involved in cases in which it posts its memorandum opinions, and although the Daily Washington Law Reporter has identified the lawyer in question, it demurs publication thereof because it is the “lesson of the day,” rather than the identity of the unfortunate lawyer, that is newsworthy. The Reporter believes in informing the practicing litigation bar about such matters so that similar “pitfalls” may be avoided in the future.

Judge Kollar-Kotelly is a veteran of 13 years on the D.C. Superior Court and was appointed by President Clinton to the U.S. District Court in 1997. Among her many other noteworthy cases, she inherited the massive Microsoft anti-trust litigation and was appointed in by the late Chief Justice Rehnquist in 2002, to be Presiding Judge of the super-secret Foreign Intelligence Surveillance Court. There, she adopted a strict stance in as to the use of information gathered from warrantless searches and recently reversed the Bush Administration’s position on archival secrecy, ruling that President Bush’s Executive Order delaying release of the papers of former Presidents was “arbitrary, capricious, an abuse of discretion, and not in accordance with law.” It was to this type of Judge that the complaint in McManus v. District of Columbia, C.A. No. 07-252 (Dec. 21, 2007) was assigned.

The single case consisted of the claims of 15 male and female employees alleging such variegated complaints as work-related neck, back, wrist, and ankle injuries, air pollution in the workplace (including at least four Plaintiffs who failed to specify any injury at all), wage and hour violations, refusal to pay medical insurance claims, allegedly unjustified traffic citations, wrongful termination, conspiracy between various labor unions and the District Government to violate collective bargaining laws, together with what the Court termed numerous other “boilerplate allegations.” The Court found several counts on the complaint to be “more properly described as prayers for relief than causes of action,” including allegations of Section 1983 civil rights violations without identifying relevant underlying constitutional rights abrogated, misplaced reliance upon the due process clause of the Fourteenth, rather than the Fifth, Amendment in the District of Columbia, a request for a declaratory judgment that the Defendants “are engaging in criminal and civil wrongdoing,” and injunctive relief pertinent thereto. This scattershot fusillade of charges, which would likely have taken at least a brigade of lawyers to prosecute, was filed against 12 Defendants, including the District of Columbia, the American Federation of State, County and Municipal Employees, the Washington Teachers Union, Teamsters Union, the Fraternal Order of Police, the D.C. Department of Corrections, several individuals, and at least three healthcare facilities. Three of the named Defendants were never served at all. The docket sheets in the case consist of 14 pages and 90 entries.

Ruling on various Motions to Dismiss pursuant to Rule 12(b)(1), (5) & (6), Judge Kollar-Kotelly was 51 pages into her memorandum opinion when she concluded “that each of the Plaintiffs’ claims lacks merit and … Plaintiffs’ Amended Complaint must therefore be dismissed in its entirety.” It was all downhill from there for the Plaintiffs and their lawyer. The Judge then set forth the essence of Rule 11(c), which is to ensure that lawyers would not make any filings with the Court “for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation,” that any such submissions “are warranted by existing law or by a non-frivolous argument for extending modifying, or reversing existing law or for establishing new law,” and that “the factual contentions [therein] have evidentiary support.” Finally, the Court noted that the case law”is replete with precedents granting to a trial judge “the widest possible latitude under the law” in the discretionary imposition of sanctions under the rule.

Then the deluge. The Judge found that “Plaintiffs’ filings in this action are universally deficient,” that even its Amended Complaint “is entirely devoid of merit,” that Plaintiffs’ opposition to the various Defendants’ motions not only “fail[ed] to address the majority of arguments” contained therein, but also that they “provide a dearth of legal support for Plaintiffs’ positions.” In a stinging conclusion, the Judge adjured Plaintiffs’ Counsel that “[t]he Court certainly does not condone the type of slipshod filing presented in this case.”

The most egregious fault attributed to Plaintiff’s lawyer in this matter was the Court’s finding that, even though he had received notice from the putative agent for receiving service of process for one of the named Defendant entities that this agent did not represent that Defendant, he nevertheless “knowingly filed” what the Court termed “an inaccurate or false Return of Service indicating that … [this] defendant had been personally served with process in this action,” in facial violation of Rule 11(b)(3). The Court thereupon imposed a serious compensatory sanction on Plaintiffs’ Counsel.

The news was not all bad, however. Despite the urgings of several Defendants that Plaintiffs’ Counsel be sanctioned for numerous other alleged violations of Rule 11, Judge Kollar-Kotelly exercised her discretion in declining to do so, concluding that, however unlikely it might appear to the complainants, giving him “the greatest benefit of the doubt, it is possible that he believed he could invoke this Court’s jurisdiction over all of Plaintiffs’ claims by virtue of Plaintiffs’ constitutional claim,” even though, the Court held, “[t]he problem, of course, is that Plaintiffs’ constitutional claim (and the other federal law claims) is entirely devoid of merit and therefore cannot withstand a motion to dismiss pursuant to Rule 12(b)(6).”

In the end, the Court ordered that Plaintiffs’ Counsel pay all “reasonable attorneys’ fees and expenses” associated with the Defendant on whose behalf the service of process issue had been adjudicated as violative of Rule 11.”Thus the lesson is learned anew: If there is any forum in the world where it is inadvisable to play fast and loose with the law, it’s a U.S. District Court. As early as 1959, it was Sonny Curtis (who took over for recently-demised Buddy Holly) and the Crickets who taught us what happened when they “fought the law” — and, well, you know who won.

Printed in the February 12, 2008 edition of the DWLR

FEDERAL COURT AWARDS MULTI-BILLION DOLLAR TERRORIST JUDGMENT AGAINST LIBYA

Ronald A. Goodbread, Legal Editor

U.S. District Court Judge Henry H. Kennedy, Jr. recently issued a judgment in the principal amount of $1.7 billion against the Social People's Libyan Republic and six high-ranking Libyan government officials, including the brother-in-law of Libyan leader Muammar Kaddafi. The judgment was granted on behalf of the families of seven U.S. citizens who perished, along with 163 others, in the 1989 in-flight explosion of Flight 772, operated by a major French airline, over the Sahara Desert in Niger. Later investigation found that the explosion had been caused by a suitcase bomb planted aboard the aircraft. The Islamic Jihad organization claimed responsibility for the terrorist act while others attributed it to Libya as retribution for France's support of Chad during Libya's expansionist activities against that country.

In 2004, the Libyan Government issued a public "statement of responsibility" for the actions of its officials after a French court had awarded damages for all passengers, many of whom also accepted a settlement from Libya; the average award was slightly over $1,000,000. The families of the seven Americans, however, rejected both and pursued their remedies in U.S. District Court here under the "terrorist exception" to the Foreign Service Immunities Act, 28 U.S.C. Section 1605(a)(7).

As a result of that local litigation, one family was awarded actual and compensatory damages of $112,335,000, including lost wages, benefits, retirement pay over the victim's life expectancy, as well as an award for pain and suffering. The extended family of a naturalized U.S. citizen, originally from Romania, received a similar award of $109,044,000, and the family of a former U.S. Ambassador, whose wife was killed in the crash, was awarded $74,483,000 on the same basis. In addition, all seven families, and the airline itself, were granted treble damages, together with pre-judgment interest. One source projects the total to reach $6 billion.

At 104 pages, the length and detail of Judge Kennedy's opinion dramatically describing the deaths of the falling passengers, the long-term impact of their loved ones' horrific deaths on the victims' spouses, children, grandchildren, parents, siblings, and extended families, culminating in many instances in physiological disorders, drug and alcohol dependency, and even several suicides precludes the DWLR from publishing the Court's Findings of Facts and Conclusions of Law. But the document makes dramatic and informative reading on various legal topics, including aviation law, diplomatic law, terrorism, tort law, and damages. The official citation is Pugh, et al. v. the Social People's Libyan Jamahiriya, C.A. No. 02-0206 (Jan. 23, 2008), the full text of which may be reviewed and downloaded in PDF format from the U.S. District Court's web site at https://ecf.dcd.uscourts.gov.

Published on January 31, 2008 in the DWLR.