Tobacco Cos. Eye Appeals in Judge's Ruling

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Tobacco Cos. Eye Appeals in Judge's Ruling

By Melissa Kress, Convenience Store News - 06/02/2011

WASHINGTON, D.C. -- A federal judge has denied a request to dismiss the federal government's 1999 racketeering case against tobacco companies, but at least one defendant told CSNews Online it is planning to appeal.

U.S. District Judge Gladys Kessler ruled yesterday, June 1, that her authority over the case did not end with the 2009 law giving the Food and Drug Administration the power to monitor the industry and establish restrictions on the sale, promotion and distribution of tobacco products.

The ruling will trigger at least one appeal, as a spokesman for R.J. Reynolds told CSNews Online that the company is planning an appeal. In addition, a spokesman for PM USA told CSNews Online "the company continues to believe the FDA is the appropriate agency to regulate the tobacco industry and is considering its appellate options."

A Lorillard spokesman declined to comment at this time.

Kessler's ruling came in response to Philip Morris USA's bid to dismiss the 1999 federal case against the cigarette maker, which is owned by Altria Group Inc., and other tobacco companies, namely Reynolds American Inc.'s R.J. Reynolds Tobacco and Lorillard Inc.'s Lorillard Tobacco.

In its Motion for Vacatur filed in March, PM USA argued that when Congress enacted the Family Smoking Prevention and Tobacco Control Act in 2009, it created "a far-reaching federal regulatory program governing the design, manufacturing, marketing and distribution of tobacco products and the public dissemination of information about the health effects and addictiveness of smoking."

Furthermore, the motion said, "this newly established federal regulatory framework extinguishes the court's jurisdiction over this case in whole (or, at least, in significant part)."

In addition, PM USA noted that since the Family Smoking Prevention and Tobacco Control Act removes any threat from the tobacco companies to commit any future joint racketeering activity, the court has no jurisdiction and should dismiss the case. As the motion stated, "Under Article III of the Constitution and Section 1964 (a) of the Racketeer Influenced and Corrupt Organizations Act (RICO), this court possesses jurisdiction to issue injunctive relief only where there is a 'realistic threat' the challenged activity will recur in the 'reasonably near future' and where the relief will 'prevent and restrain' likely RICO violations. Neither of these jurisdictional requirements is satisfied here because the extensive federal regulatory program established and funded by the ACT eliminates any reasonable likelihood the defendants will engage in future joint racketeering activity of the type this court found and on which it premised its forward-looking injunctive relief."

In her ruling, Kessler cited the cigarette makers' continued challenge to the 2009 law granting the FDA regulation over the industry. If they win that challenge, Kessler said "it will be all the more necessary for them to be restrained by this court from any future violations" of the RICO Act, according to a report by Bloomberg.