UNITED STATES оf America, Appellee v. PHILIP MORRIS USA INC., et al., f/k/a Philip Morris Incorporated, Appellants
No. 04-5252
United States Court of Appeals, District of Columbia Circuit
Argued Nov. 17, 2004. Decided Feb. 4, 2005.
396 F.3d 1190
As to the rest of the evidence bearing on lack of candor, the record as a whole demonstrates ample support for the Commission‘s conclusions. The affidavit and the pleading were false and misleading. Kay, in the pleading, and Sobel, in his affidavit, denied that Kay had any “interest” in Sobel‘s licenses and stations. As the evidence relating to transfer of control shows, Kay had a very substantial interest in Sobel‘s stations. Kay and Sobel testified that when they used the word “interest” they meant an ownership interest and that their statements were therefore accurate because Sobel retained ownership of his licenses. But what of the stations? According to their testimony, they meant to refer only to ownership of Sobel‘s radio station licenses, not the stations themselves. Excerpts from July 29, 1997 Hearing Transcripts in WT Docket No. 97-56, reprinted in JA 532 (testimony of Marc Sobel); Excerpts from Jan. 19, 1999 Trial Transcript in WT Docket No. 94-147, reprinted in JA 1043 (testimony of James Kay). The Commission was entitled to reject that testimony. At the least, the Commission could find that the statements they filed were misleading and intentionally so. The sheer implausibility of their explanations; their motive to divert the Bureau‘s investigation, which threatened to uncover the unauthorized transfer of control; the fact that they discussed the meaning of the word “interest” before they filed the pleading and affidavit; the fact that Kay told Sobel the word meant “a direct financial stake,” which describes Kay‘s relationship to Sobel‘s stations—all this, and more, convince us that substantial evidence supported the Commission‘s findings of lack of candor. In other respects the Commission found the statements filed in January 1995 misleading, but it is unnecessary to discuss why we find substantial evidence to support those findings. It is enough to point out that “the Commission must rely heavily on the completeness and accuracy of the submissions made to it, and its applicants in turn have an affirmative duty to inform the Commission of the facts it needs in order to fulfill its statutory mandate.” RKO Gen., Inc. v. FCC, 670 F.2d 215, 232 (D.C.Cir.1981). The Commission reasonably concluded that Kay and Sobel intentionally failed to perform their affirmative duty in their attempt to remove Sobel‘s licenses and stations from the original hearing on Kay‘s fitness to be a licensee.
Affirmed.
Robin S. Conrad, Jan S. Amundson, Quentin Riegel, and Beth S. Brinkmann were on the brief for amici curiae Chamber of Commerce of the United States of America, et al. in support of appellant.
Michael R. Dreeben, Attorney, U.S. Department of Justice, argued the cause for appellee. On the brief were Peter D. Keisler, Assistant Attorney General, Mark B. Stern and Alisa B. Klein, Attorneys, Sharon Y. Eubanks, Director, Stephen D. Brody, Deputy Director, and Frank J. Marine, Senior Litigation Counsel.
Opinion for the Court filed by Circuit Judge SENTELLE.
Concurring opinion filed by Senior Circuit Judge WILLIAMS.
Dissenting opinion filed by Circuit Judge TATEL.
SENTELLE, Circuit Judge.
A group of cigarette manufacturers and related entities (“Appellants“) appeal from a decision of the District Court denying summary judgment as to the Government‘s claim for disgorgement under the Racketeer Influenced and Corrupt Organizations Act (“RICO” or “the Act“),
I. Background
In 1999 the United States brought this claim against appellant cigarette manufacturers and research organizations, claiming that they engaged in a fraudulent pattern of covering up the dangers of tobacco use and marketing to minors. The Government sought damages under the Medical Care Recovery Act (“MCRA“),
to prevent and restrain violations of [RICO] by issuing appropriate orders, including, but not limited to: ordering any person to divest himself of any interest, direct or indirect, in any enterprise; imposing reasonable restrictions on the future activities or investments of any person, including, but not limited to, prohibiting any person from engaging in the same type of endeavor as the enterprise engaged in, the activities of which affect interstate or foreign commerce; or ordering dissolution or reorganization of any enterprise ....
Appellants moved to dismiss the complaint in 2000. The District Court did dismiss the MCRA and MSP claims, but allowed the RICO claim to stand. United States v. Philip Morris, Inc., 116 F.Supp.2d 131, 134 (D.D.C.2000).
Section 1964(a) conferred jurisdiction on the District Court only to enter orders “to prevent and restrain violations of the statute.” In considering whether disgorgement came within this jurisdictional grant, the court relied on a decision of the Second Circuit, the only circuit then to have considered “whether disgorgements ... are designed to ‘prevent and restrain’ future conduct rather than to punish past conduct.” United States v. Carson, 52 F.3d 1173, 1182 (2d Cir.1995) (emphasis in original). After noting that “RICO has a broad purpose [and] the legislative history of § 1964 indicates that the equitable relief available under RICO is intended to be ‘broad enough to do all that is necessary,‘” id. at 1181, the Carson court went on to observe that it did not see how it could “serve[] any civil RICO purpose to order disgorgement of gains ill-gotten long ago ....” Id. at 1182. The portion of Carson relied upon by the District Court in the present controversy suggested that disgorgement might “serve the goal of ‘pre-
The case proceeded, and the Government sought disgorgement of $280 billion that it traced to proceeds from Appellants’ cigаrette sales to the “youth addicted population” between 1971 and 2001. This population includes all smokers who became addicted before the age of 21, as measured by those who were smoking at least 5 cigarettes a day at that age.
After discovery, Appellants moved for summary judgment on the disgorgement claim arguing that (1) disgorgement is not an available remedy under
II. Analysis
A. Scope of Review
At the outset, the Government urges that our review should be limited to the narrow question of whether the disgorgement it seeks is consistent with the standards of Carson, not whether disgorgement vel non is an available remedy under civil RICO. The Government bases this argument on the theo-
Unfortunately for the Government‘s position, the Yamaha opinion did not end with the sentence upon which the Government relies. The Supreme Court went on to say in the same paragraph: “But the appellate court may address any issue fairly included within the certified order because it is the order that is appealable, and not the controlling question identified by the district court.” Id. (emphasis in original) (quoting 9 J. MOORE & B. WARD, MOORE‘S FEDERAL PRACTICE § 110.25[1] at 300 (2d ed.1995) and citing 16 C. WRIGHT, A. MILLER, E. COOPER, & E. GRESHMAN, FEDERAL PRACTICE & PROCEDURE § 3929 at 144-45 (1977)). Appellants’ motion below was for “Summary Judgment Dismissing the Government‘s Disgorgement Claim,” and granting this motion would have resulted in complete dismissal of the Government‘s claim for disgorgement with prejudice. See Appellee‘s App. at 19, 79. Thus the District Court‘s denial was on the question of whether disgorgement would be allowed at all, and we may review it as such regardless of the grounds the District Court gave for its decision. In the memorandum accompanying its denial of this motion, evidencing an accurate understanding of the summary judgment standard provided by Rule 56 of the Federal Rules of Civil Procedure, the District Court noted that “summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Philip Morris, 321 F.Supp.2d at 74 (citing
Our dissenting colleague argues that the availability of the disgorgement claim vel non is not before us because
Our dissenting colleague suggests that we are limited by “our general policy of declining to consider arguments not made to the district court in the motion leading to the order under appeal.” Dissent at 1211. We know of no such “general policy” that the particular issue addressed has to have been raised in the particular motion. Rather, we understand our general policy to be following the instructions of the Supreme Court that we are to “address any issue fairly included within the certified order.” Yamaha, 516 U.S. at 205, 116 S.Ct. 619. Insofar as our colleague‘s differing understanding rests on United States v. British Am. Tobacco (Invs.) Ltd., 387 F.3d 884, 892 (D.C.Cir.2004) (citing United States v. Hylton, 294 F.3d 130, 135-36 (D.C.Cir.2002)), cited by Dissent at 1213, we do not read that case as supporting a general policy that limits consideration to those arguments raised in the particular motion leading to the certified order, as opposed to being “fairly included” within that order, or even to address the point. The court in British American Tobacco held only that an intervenor that had raised a privilege issue with respect to an entire collection of documents at one stage of the litigation, but that failed to participate at all in later proceedings focused on one of the documents, despite having notice, had not adequately preserved its objection as to that single document. 387 F.3d at 887-88. It had nothing to do with the scope of review on an interlocutory appeal under
We find no history of such a general policy that would bar us from considering questions logically antecedent and essential to the order under review. Especially is this so given the Supreme Court‘s instructions in Yamaha that we are to “address any issue fairly included within the certified order.” That must include at least issues that are logically interwoven with the explicitly identified issue and which were properly presented by the appellant. Even ignoring the apparent allusion to the broader issue of summary judgment preserved in the caption of the motion, the relief sought, and the footnote provided above, it is difficult to see how we could establish such a policy that would cause us to affirm a decision denying summary judgment when a ground compelling its grant is fairly encompassed within the order. Our colleague‘s interpretation of general policy would seem to compel us to return for trial a case before us for review of a denial of summary judgment, no matter how plain the absence of substantial question of material fact, on the grounds that the denial of summary judgment had been based on rejection of some other reasoning in a previous motion, even though the trial court had earlier erred in denying the first motion to dismiss—even when the appellant had called that denial to the court‘s attention in the caption of its motion, and a proposed order accompanying the second motion.
Our dissenting colleague finds in Yamaha support for the proposition that “the only issues ‘fairly included’ within a certified order are those decided in the district court‘s accompanying memorandum ....” Dissent at 1213. We understand the law to be, as suggested in Yamaha, that issues are not decided in memoranda at all, but rather in orders. Therefore, consistent with Yamaha, we review orders, not memoranda. Our colleague asserts that in Yamaha the Court “found ‘fairly included’ an issue that the district court had resolved in the same opinion in which it decided the issue identified as the controlling question of law.” Dissent at 1213. While this may well be the case, the Supreme Court not only did not stress that circumstance, it did not even mention it. Indeed, we note that our colleague had to repair to the unpublished opinion of the District Court to discover the truth of his proposition. We seriously doubt that the Supreme Court intended to establish a precedent that difficult to discover, let alone apply.
Nothing in United States v. Stanley, 483 U.S. 669, 107 S.Ct. 3054, 97 L.Ed.2d 550 (1987), is to the contrary. The passage relied upon by our dissenting colleague to the effect that courts considering interlocutory appeals under
We review an order denying summary judgment de novo. Cicippio-Puleo v. Islamic Republic of Iran, 353 F.3d 1024, 1031 (D.C.Cir.2004). Obedient to Yamaha, we will review Order #550 denying summary judgment applying anew the standards of Rule 56, and will not simply review that part of the District Court‘s thinking directed to the applicability of the Carson standard or the consistency of the Government‘s proffers with that standard. Therefore, we must address the issue, logically prior to the Carson question, of whether disgorgement is available at all. We hold that the language of
B. The Availability of Disgorgement
The Government argues that
As the Supreme Court has repeatedly observed: “Federal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute, which is not to be expanded by judicial decree.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) (citations omitted). Reading Porter in light of this limited jurisdiction we must not take it as a license to arrogate to ourselves unlimited equitable power. We will not expand upon our equitable jurisdiction if, as here, we are restricted by the statutory language, but may only assume broad equitable powers when the statutory or Constitutional grant of power is equally broad.
As our dissenting colleague correctly notes, the Court in Porter was considering whether a district court acting under the authority granted in the EPCA had the authority to order restitution for overcharges. The implication of broad equitable authority in Porter came from a statute which empowered the district court to grant “a permanent or temporary injunction, restraining order, or other order.” EPCA § 205(a), 56 Stat. 23, 33 (1942). The action before the Court in Porter was brought under a section providing that “the Administrator” could bring action against persons engaged in overcharges for “an order enjoining such acts or practices, or for an order enforcing compliance
The Supreme Court did not have to make much of a stretch to determine that the phrase “enforcing compliance with such provision,” and expressly referring to “a permanent or temporary injunction, restraining order, or other order,” would include restitution for amounts collected exceeding the ceilings determined under the statute. The Government in the present case asks us to work a far greater expansion of the statutory grant enabling the District Court in a civil RICO action brought by the Government under
Section 1964(a) provides jurisdiction to issue a variety of orders “to prevent and restrain” RICO violations. This language indicates that the jurisdiction is limited to forward-looking remedies that are aimed at future violations. The examples given in the text bear this out. Divestment, injunctions against persons’ future involvement in the activities in which the RICO enterprise had been engaged, and dissolution of the enterprise are all aimed at separating the RICO criminal from the enterprise so that he cannot commit violations in the future. Disgorgement, on the other hand, is a quintessentially backward-looking remedy focused on remedying the effects of past conduct to restore the status quo. See, e.g., Tull v. United States, 481 U.S. 412, 424, 107 S.Ct. 1831, 95 L.Ed.2d 365 (1987). It is measured by the amount of prior unlawful gains and is awarded without respect to whether the defendant will act unlawfully in the future. Thus it is both aimed at and measured by past conduct.
The Government would have us interpret
Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288, 80 S.Ct. 332, 4 L.Ed.2d 323 (1960), relied on by the Government, is not to the contrary. The Mitchell case was brought under the Fair Labor Standards Act of 1938, 29 U.S.C. § 215, 52 Stat. 1060 (1938) (“FLSA“). In that action, the Government was invoking the court‘s jurisdiction to restrain violations of a section making it unlawful for a covered employer to discharge or discriminate against employees who had filed complaints or instituted actions under the FLSA. The Court reviewed the whole breadth of that broad Act to conclude that the available remedies included not only injunction against further discrimination and mandatory injunctions of reinstatement, but also a “make whole” reimbursement for lost wages because of the discriminatory discharge. As in Porter, the Court reiterated that in equitable jurisdiction “[u]nless otherwise provided by statute, all the inherent equitable powers of the District Court are available for the proper and complete exercise of that jurisdiction.” Mitchell, 361 U.S. at 291, 80 S.Ct. 332 (quoting Porter, 328 U.S. at 398, 66 S.Ct. 1086). In the RICO Act, Congress provided a statute granting jurisdiction defined with the sort of limitations not present in the FLSA or the EPCA. The statute under which the Government sued Appellants,
to prevent and restrain violations of [RICO] by issuing appropriate orders, including, but not limited to: ordering any person to divest himself of any interest, direct or indirect, in any enterprise; imposing reasonable restrictions on the future activities or investments of any person, including, but not limited to, prohibiting any person from engaging in the same type of endeavor as the enterprise engaged in, the activities of which affect interstate or foreign commerce; or ordering dissolution or reorganization of any enterprise ....
In considering the broad language from Porter upon which our dissenting colleague relies for the proposition that we should find disgorgement available because Congress has not taken it away, we note that the Supreme Court considered a similar argument in Meghrig. The High Court nonetheless limited the available remedies under CERCLA to those provided in the statute, declaring that
where Congress has provided “elaborate enforcement provisions” for remedying the violation of a federal statute, as Congress has done with RCRA and CERCLA, “it cannot be assumed that Congress intended to authorize by implication additional judicial remedies ....”
516 U.S. at 487-88, 116 S.Ct. 1251 (quoting Middlesex County Sewerage Auth. v. Nat‘l Sea Clammers Ass‘n, 453 U.S. 1, 14, 101 S.Ct. 2615, 69 L.Ed.2d 435 (1981)).
It is true, as the Government points out, that disgorgement may act to “prevent and restrain” future violations by general deterrence insofar as it makes RICO violations unprofitable. However, as the Second Circuit also observed, this argument goes too far. “If this were adequate justification, the phrase ‘prevent and restrain’ would read ‘prevent, restrain, and discourage,’ and would allow any remedy that inflicts pain.” Carson, 52 F.3d at 1182.
The remedies available under
The structure of RICO similarly limits courts’ ability to fashion equitable remedies. Where a statute has a “comprehensive and reticulated” remedial scheme, we are reluctant to authorize additional remedies; Congress’ care in formulating such a “carefully crafted and detailed enforcement scheme provides strong evidence that Congress did not intend to authorize оther remedies that it simply forgot to incorporate expressly.” Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 209, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002) (quoting Mertens v. Hewitt Associates, 508 U.S. 248, 251, 254, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993)) (internal quotations omitted) (emphasis in original). RICO already provides for a comprehensive set of remedies. When Congress intended to award remedies that addressed past harms as well as those that offered prospective relief, it said as much. In a criminal RICO action the defendant must forfeit his interest in the RICO enterprise and unlawfully acquired proceeds, and may be punished with fines, imprisonment for up to twenty years, or both.
Congress’ intent when it drafted RICO‘s remedies would be circumvented by the Government‘s broad reading of its
A note appended to the statute stating that RICO “shall be liberally construed to effectuate its remedial purposes” does not effect this structural inference. Organized Crime Control Act of 1970, Pub.L. No. 91–452, § 904(a), 84 Stat. 947 (codified in a note following
The Second Circuit in Carson has interpreted “prevent and restrain” not to eliminate the possibility of disgorgement altogether, but to limit it to cases where there is a finding “that the gains are being used to fund or promote the illegal conduct, or constitute capital available for that purpose.” Carson, 52 F.3d at 1182. The Fifth Circuit adopted this interpretation in a case holding that disgorgement after the defendant had ceased production of an allegedly defective product would be inappropriately punitive rather than directed toward future violations. See Richard v. Hoechst Celanese Chemical Group, Inc., 355 F.3d 345, 355 (5th Cir.2003). While we avoid creating circuit splits when possible, in this case we can find no justification for considering any order of disgorgement to be forward-looking as required by
Our colleague reminds us that the Supreme Court has instructed “[i]f a precedent of this Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to this Court the prerogative of overruling its own decisions.” Dissent at 1220 (quoting Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 484, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989)). This would be most devastating to one side of the case or the other if we were in fact attempting to overrule a Supreme Court precedent. That is, if there were a Supreme Court case that had direct application to the facts before us, we would be required to follow it, and that would be the end of the matter. We would not need to consider any other line of cases. However, the Rodriguez de Quijas language is not particularly helpful
III. Conclusion
Because we hold that the District Court erred when it found that disgorgement was an available remedy under
WILLIAMS, Senior Circuit Judge, concurring.
I join the opinion for the court. I write separately to emphasize problems with the government‘s fallback interpretation of
I.
The statute gives district courts “jurisdiction to prevent and restrain [RICO] violations.”
In Carson itself the court ruled that this prevented the government from forcing disgorgement of funds, ill-gotten in the distant past, from a RICO defendant by then retired from the RICO enterprise itself (a union). In the context of corporate defendants such as those before us, a possible limit would be the entire nеt worth of the companies (a good deal less than the $280 billion that the government claims to have been ill-gotten gains). But perhaps not. Even that limit is arbitrary,
On the other side, it might be plausible under the Carson theory to exempt firm resources now devoted to non-tobacco enterprises. It is probably about as difficult for these defendants to re-allocate resources from the businesses of cheese and crackers, for example, to criminality in the sale of cigarettes, as for the union in Carson to lure Carson and his funds back from retirement to union criminality.
In short, Carson and the government‘s fallback position send the court off on a virtually metaphysical quest to draw lines based on the likelihood that particular resources will be devoted to crime.
II.
It is hardly surprising that there are only gossamer lines between drastic disgorgement (destruction of bondholder as well as shareholder wealth) and relatively mild disgorgement (cordoning off resources in non-tobacco subsidiaries). The plain fact is that wealth deprivation is an extremely crude device for “preventing” criminal behavior. Granted, a criminal miscreant with a billion dollars is potentially more dangerous than an impoverished criminal miscreant. But ordinarily the forces most affecting the likelihood of criminal action are, besides the actors’ ethical standards and sense of shame, truly forward-looking conditions: the returns to crime versus the possible costs, all adjusted for risk (such as the risk of getting caught).
Confusion arises from an ambiguity in our understanding that, in the civil context, such remedies as damage awards and restitution “deter,” and thus in a sense “prevent” commission of torts, breaches of contract, and other civil wrongs. It is quite true that a rule or practice of awarding such remedies deters, and thus prevents, such wrongs. Indeed, under one viewpoint that is the primary or even sole purpose of awarding such remedies. See William M. Landes & Richard A. Posner, THE ECONOMIC STRUCTURE OF TORT LAW (1987). But it is the rule or practice that creates the incentive. To make the rule credible, of course, the awards must be made; but no individual award has a material deterrent effect.
To evaluate that last statement consider a society that empowered some deus ex machina to randomly excuse one damage judgment in a million. Suсh an exception to the rules would have no detectable effect on the commission of torts or breaching of contracts. Even the lucky defendant who enjoyed the benefit of the pardon wouldn‘t—unless a complete fool—materially alter his future conduct because of that manna from heaven.
The equity court, empowered under
In assessing the likelihood that Congress intended an additional disgorgement remedy, it makes sense to inquire into the tendency of such an implied remedy to “prevent and restrain” future violations by the defendant. Of course the rule the government seeks here would be a rule,
The weakness of that scenario supports the inference that for the defendant who winds up before the equity court, Congress intended the words “prevent and restrain” to authorize only a tailored, forward-looking remedy. Penalties for violations of the court‘s decree, and transparency-enhancing measures meet that standard. A purported
Once we (1) accept the proposition that
Because disgorgement under
The expert testimony offered by the government for the proposition that backward-looking disgorgement will “prevent and restrain’ defendants from committing future RICO violations,” see Dissent at 1226, serves no better. Obviously such testimony cannot alone resolve the issue, turning legal analysis of the statute into a fact battle among experts. Thus the experts’ testimony is valuable for its analytic quality, not its utterance by a PhD.
The dissent‘s genuflection before the experts leaves the reader to imagine some supporting analysis. Lest the imagination
[Defendants’ experts] have also suggested that enjoining Defendants from future illegal behavior and threatening them with the possibility of financial penalties would be more effective as future deterrents than would be disgorgement. Professor Weil, for example, suggests that “the Court could establish now a schedule of fines or punishments that it would levy should the Defendants engage in prohibited behavior.” These experts forget that laws prohibiting this behavior alreаdy exist and that, despite these laws and their associated remedies, the Defendants allegedly chose to engage in the illegal behavior. In this context, it is important to note that requiring Defendants to pay proceeds would strengthen the credibility of existing laws and thus provide additional economic incentives to deter future misconduct.1
While it is a nice rhetorical move to point out that the defendants violated RICO (as we must assume) despite existing sanctions, Fisher offers no analysis as to why the presence of a civil disgorgement remedy in favor of the government would have reduced the likelihood of violations. (Indeed, on the government‘s theory—that the statute actually creates such a remedy—the defendants would have taken that into account in deciding to proceed with violations.) More important, Fisher looks at the wrong setting. Before this (or any) RICO litigation against a particular defendant, that defendant would have operated without the spotlight of the lawsuit itself. (That may explain why the government let the statute of limitations run for decades, and why the victims failed to seek treble damages.) Now the spotlight is on, and the plausible explanations for non-application of the explicit remedies (other than
The dissent‘s use of the government‘s experts is part of its effort (in its qualified endorsement of the government‘s fallback position) to transform an issue of statutory interpretation into one of fact. See Dissent at 1222-23, 1227-28; see also id. at 1223 (noting that in Meghrig v. KFC W., Inc., 516 U.S. 479, 116 S.Ct. 1251, 134 L.Ed.2d 121 (1996), there was no affirmative evidence that the defendants were likely to commit future RCRA violations, and thus suggesting that the case was something other than pure statutory interpretation). But the “faсts” hypothesized by the dissent are unrelated to the real world faced by RICO defendants—already arraigned for their past offenses and sub-
III.
The above analysis seems to me to confirm what intuition suggests about the jurisdictional issue in this case. Even the most narrowly formulated question about the validity of the district court‘s order—the choice between the government‘s primary position (that
One final note. The dissent chides the court for creating a circuit split. See Dissent at 1208. But if we confined ourselves to what the dissent acknowledges to be properly before us, and adopted the dissent‘s preferred position (that disgorgement is available like any other equitable remedy, regardless of its likely effects on a defendant‘s future behavior, simply because RICO doesn‘t explicitly preclude it), we would create no less of a split between this circuit and the Second.
Appendix
Excerpt from United States Memorandum in Opposition to Defendants’ Motion for Partial Summary Judgment Dismissing the Government‘s Disgorgement Claim, Appellee‘s Appendix at 812–14.
B. Disgorgement Provides Economic Incentives That Will Prevent Further RICO Violations
172. Despite the fact that it is not necessary for the United States to prove this, disgorgement will prevent and restrain further bad acts.
173. Drs. Fisher and Kothari have both stated in their expert reports and deposition testimony, that disgorgement of the proceeds calculated by Dr. Fisher would in fact act to prevent and restrain future RICO violations. Dr. Fisher directly addressed this point in his rebuttal report in which he states:
Defendants’ experts have suggested that disgorgement of ill-gotten gains such as the proceeds sought in this matter will not serve the goal of preventing or restraining the defendants from engaging in similar bad acts in the future. For example, Professor Carlton argues, “Having to disgorge past proceeds, by itself, would not affect a defendant‘s incentives to engage in misconduct in the future because it would not affect the returns (if any) from future misconduct.” I address these criticisms with well-known economic principles. What Professor Carlton and the other defendants’ experts who espouse this view fail to recognize is that requiring defendants to pay proceeds will affect their expectations (and those of others contemplating malfeasance) about the returns from future misconduct. As a matter of economic principle, the higher the proceeds
amount, the lower the expected returns from future misconduct and the greater the desired effect of deterrence.
Expert Rebuttal Report of Franklin Fisher, United States v. Philip Morris, (R. 1450; filed July 24, 2002) at 4-5 ¶ 12.
174. Dr. Kothari‘s expert report confirms Dr. Fisher‘s conclusion:
Requiring the defendants to pay ill-gotten proceeds is relevant. The economic incentive for illegal behavior is higher (for defendants and onlookers) if defendants are not required to pay the proceeds. While payment of proceeds has some of the features of sunk cost, it is not identical to a sunk cost because it will affect future decisions or behavior. The higher the proceeds paid the greater the economic incentive to avoid illegal behavior in the future.
Expert Report of S.P. Kothari, United States v. Philip Morris, (R. 1451; filed July 24, 2002) at 3-4, ¶ 8.
175. Dr. Fisher expressly states in his expert report:
[Defendants’ experts] have also suggested that enjoining Defendants from future illegal behavior and threatening them with the possibility of financial penalties would be more effective as future deterrents than would be disgorgement. Professor Weil, for example, suggests that “the Court could establish now a schedule of fines or punishments that it would levy should the Defendants engage in prohibited behavior.” These experts forget that laws prohibiting this behavior already exist and that, despite these laws and their associated remedies, the Defendants allegedly chose to engage in the illegal behavior. In this context, it is important to note that requiring Defendants to pay proceeds would strengthen the credibility of existing laws and thus provide additional economic incentives to deter future misconduct.
Expert Rebuttal Report of Franklin Fisher, United States v. Philip Morris, (R. 1450; filed July 24, 2002) at 5-6, ¶ 14.
176. Dr. Fisher has repeatedly confirmed the preventative benefit of disgorgement. At his deposition he stated:
Q. ... the idea is that disgorgement prevents and restrains future violations by altering the defendants’ expectations about the returns they might receive from future misconduct. Is that right?
A. ... I believe that to be correct.
Q. Does disgorgement prevent and restrain future RICO violations in any other way?
A. Well, it removes at least some, and possibly all, of the assets with which to engage in future illegal activities.
Deposition of Franklin Fisher, United States v. Philip Morris, September 12, 2002, 828:4-19 (Exhibit 77).
177. “[A]s I have repeatedly and clearly stated in my report and deposition testimony, disgorgement of Defendants’ proceeds, as I have calculated them, would in fact act to prevent and restrain future RICO violations.” Declaration of Franklin Fisher, United States v. Philip Morris, at 7, ¶ 16 (Master Rule 7.1/56.1 St. Exhibit 5)
TATEL, Circuit Judge, dissenting.
Congress passed the Organized Crime Control Act of 1970, which included RICO, “to seek the eradication of organized crime in the United States ... by providing enhanced sanctions and new remedies to deal with the unlawful activities of those engaged in organized crime.” United States v. Turkette, 452 U.S. 576, 589, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981) (quoting Pub.L. No. 91-452, 84 Stat. 922, 923 (1970)). Through this lawsuit, the United States seeks to end what it perceives as
The government alleges that during the course of this behavior, the defendants committed over ninety racketeering violations between RICO‘s 1970 effective date and the government‘s 1999 complaint. Significantly for this appeal, the government further claims that absent court intervention and despite the master settlement agreement between the tobacco companies and the states, the companies are likely to continue their deceptive practices and commit further racketeering violations in the future. The government‘s claim regarding likely future conduct rests not only on the companies’ alleged history of deceptive activities, but also on record evidence that the companies continue making their misleading statements about both the health consequences of smoking and the addictive nature of nicotine, as well as persisting in their marketing efforts aimed at young people. The government asks the district court to enjoin the tobacco companies from future unlawful conduct and to order them to disgorge the profits they have earned due to their racketeering violations since RICO‘s effective date—profits the government estimates amount to $280 billion.
In now holding that district courts may never order disgorgement as a remedy for RICO violations, this court ignores controlling Supreme Court precedent, disregards Congress‘s plain language, and creates a circuit split—all in deciding an issue not properly before us. Because the tobacco companies ask us to address an issue not fairly included in the certified order and not presented at that time to the district court, I would dismiss this interlocutory appeal. Were it appropriate to reach the merits, I would uphold the district court‘s denial of summary judgment on either of two grounds. First, unless “a statute in so many words, or by a necessary and inescapable inference, restricts the court‘s jurisdiction in equity,” district courts may grant any equitable relief. Porter v. Warner Holding Co., 328 U.S. 395, 398, 66 S.Ct. 1086, 90 L.Ed. 1332 (1946). Because under a fair application of Supreme Court precedent, see id. at 398-403, 66 S.Ct. 1086, no such inference can be drawn about RICO, I would conclude that the district court has authority to order disgorgement. Alternatively, even if RICO‘s phrase “prevent and restrain violations,”
I.
Under
A.
In 2000, the tobacco companies—usually referred to in this opinion as “Philip Morris“—filed a motion to dismiss, arguing (among other things) that “disgorgement ... is never available under a civil RICO count.” See United States v. Philip Morris Inc., 116 F.Supp.2d 131, 150 (D.D.C.2000). Denying that motion, the district court held that disgorgement could be available under
In 2004, Philip Morris sought summary judgment regarding the government‘s request for disgorgement in this case. Contrary to the court‘s statement, see majority op. at 1193, Philip Morris neither reargued the position it took in 2000 nor asked the district court to revisit its 2000 decision. Philip Morris‘s only reference to its prior position came in a one-sentence footnote: “As noted previously, Defendants respectfully disagree with the Court and maintain that disgorgement in any fashion is not available to the Government in a civil RICO action.” Defs.’ Br. in Supp. Mot. Partial Summ. J. at 6 n.4. Instead, Philip Morris urged the court to grant its motion for summary judgment for two primary reasons. First, relying on United States v. Carson, where the Second Circuit held that district courts may order disgorgement as a RICO remedy only where the gains “are being used to fund or promote the illegal conduct, or constitute capital available for that purpose,” id. at 1182, Philip Morris claimed
After the district court denied the summary judgment motion, Philip Morris moved for certification under
The district court rejected both arguments and denied summary judgment to Philip Morris. United States v. Philip Morris USA, Inc., 321 F.Supp.2d 72 (D.D.C.2004). Interpreting
Philip Morris then asked the district court to certify its 2004 order under
The distriсt court agreed that a controlling question of law existed as to whether “the disgorgement allowed under
In its initial petition urging this court to accept the interlocutory appeal, Philip Morris never raised the broader question the district court had addressed in 2000, i.e., whether disgorgement is ever available under
Responding to the government‘s opposition, Philip Morris suddenly changed tack and brought in play the issue decided in 2000. Philip Morris wrote:
The district court rejected [the government‘s] argument [that an interlocutory
appeal would not materially advance the litigation‘s termination] as a reason not to permit an appeal, and this Court should as well. First, and most obviously, if this Court reverses the district court‘s ruling that ‘disgorgement is a permissible remedy under
section 1964(a) ,’ (Summary Judgment Order at 8 n.7), then the Government‘s $280 billion claim is precluded as a matter of law.
Reply to Emergency Pet. for Permission to Appeal an Order at 5. This entirely disingenuous statement conveyed the impression that the district court had ruled on this broader issue in the certified 2004 order rather than simply mentioning its 2000 decision. Moreover, by placing this statement under the heading “The District Court Properly Determined That an Appeal From Its Order Would Materially Advance This Litigation,” id., Philip Morris insinuated that the district court had certified this issue to this court as opposed to the narrower question actually resolved in the 2004 order. The government, of course, had no opportunity to сorrect these misrepresentations, and a motions panel accepted Philip Morris‘s appeal, expressly leaving the merits panel free to reconsider and dismiss the appeal. In re Philip Morris USA, Inc., No. 04-8005 (D.C.Cir. July 15, 2004).
Philip Morris‘s opening brief on the merits reveals the scope of its bait and switch. The brief devotes forty pages to the issue decided in the 2000 order and only seven to the issues decided in the certified 2004 order. In response, the government urges us to dismiss the appeal entirely, suggesting that we lack jurisdiction over the issue decided in the 2000 order and observing that “Defendants’ tactics subvert the mechanism for appeal established by
B.
As the foregoing discussion indicates, Philip Morris asks us—and the court now agrees—to decide an issue (1) not briefed in the motion leading up to the certified order, (2) not decided in the district court‘s opinion accompanying the certified order, (3) not raised by Philip Morris in its request for certification, (4) not discussed in the order granting certification, (5) not raised by Philip Morris in its
Regarding our jurisdiction under
This case falls near the intersection of these commands. For all intents and purposes, Philip Morris asks us to address the 2000 order. Today‘s decision overturns that order. This court has jurisdiction to do this under Yamaha only if the issue addressed in the 2000 order is “fairly included within the certified order.” Taking a broad view of “fairly included,” the court concludes that because the 2004 order denies dismissal of the government‘s disgorgement claim, we may review (at a minimum) any basis for summary judgment that is “logically interwoven with the explicitly identified issue.” See majority op. at 1196. This approach not only gives us jurisdiction over the issue decided by the district court in the 2000 order, but also over the district court‘s 2002 determination, made in denying Philip Morris‘s motion for a jury trial, that disgorgement is an equitable remedy rather than a legal one, United States v. Philip Morris USA, Inc., 273 F.Supp.2d 3, 8-11 (D.D.C.2002). Indeed, although the concurrence apparently does not share this approach, see sep. op. at 1206 (Williams, J., concurring), the majority opinion suggests that any issue which would result in “complete dismissal of the Government‘s claim for disgorgement with prejudice” lies within our jurisdiction “regardless of the grounds the District Court gave for its decision,” see majority op. at 1194. By this logic, we may also have interlocutory jurisdiction to review the district court‘s denial of the tobacco companies’ 2000 motion to dismiss, where they claimed that the government has not “adequately alleged that Defendants’ racketeering activity will continue into the future,” 116 F.Supp.2d at 147-50, and even the district court‘s denial of Liggett‘s 2000 motion to dismiss, where the company argued that (as to it) the government could not show two elements required for a RICO claim, id. at 152-53. Because victory for the tobacco companies on the first issue (and, for Liggett, victory on the second) could also trigger dismissal of the government‘s disgorgement claims, under the court‘s theory our interlocutory jurisdiction may extend to these issues as well.
The court‘s approach is problematic in several respects. Most significantly, it curtails the district court‘s
By contrast, no harm of consequence would result from holding, as I would, that the only issues “fairly included” within a certified order are those decided in the district court‘s accompanying memorandum—exactly the situation with the issue reached by the Supreme Court in Yamaha, 516 U.S. at 203-05, 116 S.Ct. 619. There, the Court found “fairly included” an issue that the district court had resolved in the same opinion in which it decided the issue identified as the controlling question of law, see Calhoun v. Yamaha Motor Corp., USA, No. 90-4295, 1993 WL 216238 (E.D.Pa. June 22, 1993). While the Court did not explicitly rely on this point, it is relevant to determining whether Yamaha‘s “fairly included” language stands for the proposition that appellate courts have interlocutory jurisdiction over all possible bases for reversing a summary judgment denial (as my colleagues read it) or only over bases which the district court considered and resolved in this denial (as I read it).
My approach, moreover, respects the Court‘s instruction in Stanley that we should “not consider matters that were ruled upon in other orders.” 483 U.S. at 677, 107 S.Ct. 3054 (citation omitted); cf. Briggs v. Goodwin, 569 F.2d 10, 25 (D.C.Cir.1977) (noting that any possible justification for addressing “all other issues relevant to the result reached by [a certified] order” would “be substantially diminished . . . where the order certified for appeal is a separate order from the one [containing the other issues]“); Dinsmore v. Squadron, Ellenoff, Plesent, Sheinfeld & Sorkin, 135 F.3d 837, 840 (2d. Cir.1998) (finding that the certified order referred to rather than incorporated a prior order and concluding that no interlocutory jurisdiction existed over the issue decided in the prior order). It is thus hardly surprising that the court today points to no case in which an appellate court has exercised interlocutory jurisdiction over an issue decided in a different order from the onе under certification. True, under my approach a party seeking an interlocutory appeal on a matter split across two orders would need to seek certification of both orders to bring the matter fully to this court. But that seems a small burden. If the party fails to make this effort (as in this case) and we conclude that it would be inappropriate to address only the issues raised in the certified order (as I would here), then we have discretion under
In addition to resting on a dubious interpretation of
In sum, whether viewed in terms of jurisdiction or waiver, only Philip Morris‘s narrower challenge is properly befоre us. True, this means we should dismiss the appeal altogether, as it makes little sense to decide the narrower question at this time when the broader question might be appealed later. But Philip Morris itself created this problem. It had several ways it could properly have brought the broader issue to our attention. In its 2004 motion for summary judgment, it could have reargued the broader question and asked the district court to reconsider its decision; the district court‘s denial of reconsideration would have brought the issue fairly into the challenged order. Even more appropriately, Philip Morris could have asked the district court to certify both the 2000 and 2004 orders and candidly explained that it wished this court to review the earlier order as well. Either way, the district court, having fair notice that Philip Morris wanted to raise both issues with us, could have performed its
I would therefore dismiss the interlocutory appeal. I reach this conclusion reluctantly because I certainly understand how hearing this interlocutory appeal could be helpful to Judge Kessler, who is presiding over a long and difficult trial. In my view, however, preserving
But the court disagrees with my position. The appeal stands before us, so in the following sections I exercise a dissenter‘s prerogative to address the merits. See, e.g., Gratz v. Bollinger, 539 U.S. 244, 291, 123 S.Ct. 2411, 156 L.Ed.2d 257 (2003) (Souter, J., dissenting); Arizona v. Evans, 514 U.S. 1, 18, 115 S.Ct. 1185, 131 L.Ed.2d 34 (1995) (Stevens, J., dissenting); Larson v. Valente, 456 U.S. 228, 258, 102 S.Ct. 1673, 72 L.Ed.2d 33 (1982) (White, J., dissenting).
II.
Like my colleagues, I begin with the structure and language of RICO‘s remedial provisions. RICO authorizes criminal
The district courts of the United States shall have jurisdiction to prevent and restrain violations of
section 1962 of this chapter by issuing appropriate orders, including, but not limited to: ordering any person to divest himself of any interest, direct or indirect, in any enterprise; imposing reasonable restrictions on the future activities or investments of any person, including, but not limited to, prohibiting any person from engaging in the same type of endeavor as the enterprise engaged in, the activities of which affect interstate or foreign commerce; or ordering dissolution or reorganization of any enterprise, making due provision for the rights of innocent persons.
Another subsection,
The government argues that district courts have authority to order any remedy, including disgorgement, within their inherent equitable powers. More narrowly, the government argues that assuming the district courts may only impose equitable remedies for the purpose of keeping defendants from committing RICO violations, disgorgement—by reducing the incentives for the tobacco companies to violate RICO in the future—will accomplish that purpose in this case. These two distinct arguments present very different consequences for district courts: under the first theory, courts may order disgorgement any time they find the remedy necessary to ensure complete relief, while under the second theory courts may order disgorgement only to prevent ongoing or future violations. In this case, the district court accepted only the second argument. See 321 F.Supp.2d at 74-80. The court today rejects both.
A.
In dismissing the argument that district courts may impose any equitable remedy for RICO violations, the court distinguishes—unconvincingly, in my view—the two Supreme Court cases relied on by the government, Porter v. Warner Holding Co., 328 U.S. 395, 66 S.Ct. 1086, 90 L.Ed. 1332 (1946), and Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288, 80 S.Ct. 332, 4 L.Ed.2d 323 (1960). I believe these two cases control this case and compel the conclusion that district courts may impose any equitable remedy for RICO violations.
In Porter, the Supreme Court considered whether a district court had authority to order restitution in a suit brought by the Price Control Administrator against a landlord who had violated the Emergency Price Control Act (EPCA) by charging too much rent. The act contained no specific provision for restitution or disgorgement, but—like RICO—authorized a broad array of other remedies, both criminal and civil. On the criminal side, offenders could be fined and imprisoned. EPCA, § 205(b)-(c), 56 Stat. 23, 33 (1942). On the civil
In the section most at issue in Porter, the act further provided that
[w]henever in the judgment of the Administrator any person has engaged or is about to engage in [violations of the act], he may make application to the appropriate court for an order enjoining such acts or practices, or for an order enforcing compliance with such provision, and upon a showing by the Administrator that such person has engaged or is about to engage in any such acts or practices a permanent or temporary injunction, restraining order, or other order shall be granted without bond.
The Supreme Court reversed. Discussing “the jurisdiction of the District Court to enjoin acts and practices made illegal by the Act and to enforce compliance with the Act,” 328 U.S. at 397-98, 66 S.Ct. 1086, the Court concluded—and I quote at length since the language is so critical to the disposition of this case—that
[s]uch a jurisdiction is an equitable one. Unless otherwise provided by statute, all the inherent equitable powers of the District Court are available for the proper and complete exercise of that jurisdiction. And since the public interest is involved in a proceeding of this nature, those equitable powers assume an even broader and more flexible character than when only a private controversy is at stake. . . . [T]he court may go beyond the matters immediately underlying its equitable jurisdiction and decide whatever other issues and give whatever other relief may be necessary under the circumstances. Only in that way can equity do complete rather than truncated justice.
Moreover, the comprehensiveness of this equitable jurisdiction is not to be denied or limited in the absence of a clear and valid legislative command. Unless a statute in so many words, or by a necessary and inescapable inference, restricts the court‘s jurisdiction in equity, the full scope of that jurisdiction is to be recognized and applied.
Id. at 398, 66 S.Ct. 1086 (citations omitted). The Court concluded that because the EPCA, despite the very detailed and specific nature of the authorized remedies, did not rule out restitution by a “necessary and inescapable inference,” the district court could order restitution even if not expressly authorized by the statute. See id. at 398-400, 66 S.Ct. 1086; see also Mitchell, 361 U.S. at 291, 80 S.Ct. 332 (discussing Porter).
Porter was not unanimous. “It is not excessive to say that perhaps no other legislation in our history has equaled the Price Control Acts in the wealth, detail, precision and completeness of its jurisdictional, procedural and remedial provisions,” id. at 404, 66 S.Ct. 1086, wrote Justice Rutledge in dissent. “The scheme of enforcement was highly integrated, with the parts precisely tooled and minutely geared.” Id. “Congress could not have been ignorant of the remedy of restitution. It knew how to give remedies it wished to confer.” Id. at 405, 66 S.Ct. 1086. “[E]ven courts of equity may not grant relief in disregard of the remedies specifically defined by Congress.” Id. at 408, 66 S.Ct. 1086.
The court‘s opinion today sounds a lot like the Porter dissent. The court observes that the language of
Nor does Philip Morris point to anything in RICO‘s legislative history that creates such a “necessary and inescapable inference.” Only one remark even gives me pause. The Senate Committee report stated, “Subsection [1964](a) contains
Mitchell, the second Supreme Court decision the government relies on, considered whether district courts could order restitution of wages lost from unlawful discharge in suits brought by the Secretary of Labor under
Not surprisingly, in the wake of Mitchell and Porter, circuit courts including this one have read general equitable jurisdiction into a variety of statutes that fail to provide explicitly for it. In SEC v. First City Financial Corp., 890 F.2d 1215 (D.C.Cir.1989), we held that district courts may order disgorgement under the Security Exchange Act‘s sections 21(d) and (e),
Instead of following Porter and Mitchell, the court relies on a later Supreme Court decision, Meghrig v. KFC Western, Inc., 516 U.S. 479, 116 S.Ct. 1251, 134 L.Ed.2d 121 (1996). In Meghrig, the Supreme Court considered whether private citizens could seek restitution under the Resource Conservation and Recovery Act (RCRA) for the cost of having cleaned up a prior landowner‘s toxic waste. The statute provided that the “district court shall have jurisdiction . . . to restrain any person who has contributed or who is contributing” to waste problems, “to order such person to take such other action as may be necessary, or both.” Id. at 482 n. *, 116 S.Ct. 1251 (quoting
The Meghrig Court noted that in arguing that the district court had inherent authority to award equitable remedies, the plaintiffs relied on Porter and its progeny. Id. at 487, 116 S.Ct. 1251. Without expressly distinguishing those cases, the Court explained that “the limited remedies described in [RCRA], along with the stark differences between the language of that section and the cost recovery provisions [of the analogous statute], amply demonstrate that Congress did not intend for a private citizen to be able to undertake a cleanup and then proceed to recover its costs under RCRA.” Id. Notably for our purposes, Meghrig did not overrule Porter. Indeed, even after Meghrig, the Supreme Court has cited Porter for the proposition that “we should not construe a statute to displace courts’ traditional equitable authority absent . . . an ‘inescapable inference’ to the contrary.” Miller v. French, 530 U.S. 327, 340, 120 S.Ct. 2246, 147 L.Ed.2d 326 (2000); see also United States v. Oakland Cannabis Buyers’ Co-op., 532 U.S. 483, 496, 121 S.Ct. 1711, 149 L.Ed.2d 722 (2001).
At one level, reconciling Meghrig with Porter and Mitchell is difficult. Meghrig suggests that “to restrain” only authorizes prohibitory injunctions. By contrast, Mitchell holds that this language imposes no limit on the district court‘s full equitable powers. Meghrig, relying on a version of the canon expressio unius est exclusio alterius, observes that courts should be “chary” in reading remedies into a statute which expressly provides for other remedies. By contrast, Porter indicates that in the context of equity jurisdiction, the general expressio unius canon gets inverted, meaning that district courts possess all equitable powers unless the statute “inescapabl[y]” provides to the contrary. Cf. Renegotiation Bd. v. Bannercraft Clothing Co., 415 U.S. 1, 18-20, 94 S.Ct. 1028, 39 L.Ed.2d 123 (1974) (discussing these competing canons).
These tensions cannot be dealt with simply by dismissing Porter and Mitchell. Meghrig not only left both cases intact, but also suggested that the “limited remedies” in RCRA, together with the “stark differences” between RCRA and the analogous statute, explain the different outcomes. Given this, our responsibility is to follow the Supreme Court‘s oft-cited instruction that “[i]f a precedent of this Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to this Court the prerogative of overruling its own decisions.” Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 484, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989); see also Agostini v. Felton, 521 U.S. 203, 237, 117 S.Ct. 1997, 138 L.Ed.2d 391 (1997) (reaffirming this requirement).
In my view, Porter and Mitchell, not Meghrig, “directly control” this case. Several reasons support this conclusion, and nothing points the other way. First, RICO‘s statutory scheme resembles the EPCA more than the RCRA. Both RICO and the EPCA stand alone in grappling with a broad social issue, whereas the
The court “[r]ead[s] Porter in light of” the statement in Kokkonen v. Guardian Life Insurance Co., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994), that “[f]ederal courts are courts of limited jurisdiction” and “‘possess only that power authorized by Constitution and statute, which is not to be expanded by judicial decree.‘” Majority op. at 1197. But “‘[j]urisdiction,’ it has been observed, ‘is a word of many, too many, meanings.‘” Steel Co. v. Citizens for a Better Env‘t, 523 U.S. 83, 90, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) (citation omitted). Kokkonen simply makes the unremarkable point that federal courts have subject-matter jurisdiction over cases only if the Constitution or Congress so provides, 511 U.S. at 377, 114 S.Ct. 1673, and the Supreme Court has since clarified that it is “unreasonable” to apply subject-matter jurisdiction principles where a statute uses the term jurisdiction “merely [in] specifying the remedial powers of the court,” Steel Co., 523 U.S. at 90, 118 S.Ct. 1003.
Finally, while Congress modeled
To sum up, Porter and Mitchell rather than Meghrig control this case, and no “necessary and inescapable inference” limits the district court‘s jurisdiction in equity. If the district court concludes that the government has shown that the tobacco companies have committed RICO violations by advertising to youth despite assertions to the contrary and by falsely disputing smoking‘s addictive, unhealthy effects, then it may order whatever equitable relief it deems appropriate. Of course, the court must work within the bounds of equitable doctrines, recognizing defenses like laches and unclean hands, paying due regard for the rights of the innocent, and generally exercising its discretion. With these principles in mind, the district court can “do complete rather than truncated justice,” Porter, 328 U.S. at 398, 66 S.Ct. 1086.
B.
In addition to rejecting the government‘s argument that district courts may impose any equitable remedy on RICO violators, the court rejects the government‘s alternative, narrower argument—that even if district courts may order only remedies that “prevent and restrain” RICO violations, disgorgement can appropriately accomplish that purpose. Because the court‘s analysis of this argument is as flawed as its analysis of the government‘s broader argument, I add this discussion of the issue. In my view, the court transforms what should be a question of fact—what remedies appropriately prevent and restrain future violations—into a question of statutory interpretation in a way that disregards
Under
This court does not conclude that disgorgement can never have a restraining effect on future conduct of the defendants—the only conclusion that could justify a holding that district courts can never order disgorgement under
First, the court states that disgorgement “is a quintessentially backward-looking remedy.” Majority op. at 1198. Although I agree that a court sitting in equity cannot order disgorgement that exceeds a defendant‘s past ill-gotten profits, see Tull v. United States, 481 U.S. 412, 424, 107 S.Ct. 1831, 95 L.Ed.2d 365 (1987) (observing that “[r]estitution is limited to ‘restoring the status quo and ordering the return of that which rightfully belongs to the purchaser or tenant‘“) (quoting Porter, 328 U.S. at 402, 66 S.Ct. 1086), this does not mean disgorgement is always backward-looking and can never have a forward-looking effect on the defendants. The Supreme Court made this clear in Porter, 328 U.S. at 400, 66 S.Ct. 1086, and Meghrig nowhere rejects Porter‘s conclusion that a disgorgement order can impact future conduct—indeed, therе was no evidence in Meghrig that the defendants were likely to commit future RCRA violations, and in any event, as discussed supra at 1220-21, Porter and Mitchell are the cases most directly on point for our purposes.
Second, the court concludes that district courts are limited not merely by the words “prevent and restrain,” but also “by those [three remedies] explicitly included in the statute” by application of the canons noscitur a sociis and ejusdem generis. See majority op. at 1200; cf. United States v. Thomas, 361 F.3d 653, 659 (D.C.Cir.2004) (defining these canons). Even assuming we should apply these canons, however, they spell out nothing more than what everyone agrees on: that the only “appropriate” orders under this section are equitable ones. See West v. Gibson, 527 U.S. 212, 225-26, 119 S.Ct. 1906, 144 L.Ed.2d 196 (1999) (Kennedy, J., dissenting) (observing that these canons “suggest the appropriate remedies authorized by [a statute using the word ‘including‘] are remedies of the same nature as reinstatement, hiring, and backpay—i.e., equitable remedies” and noting that “the phrase ‘appropriate remedies,’ furthermore, connotes the remedial discretion which is the hallmark of equity“).
Third, the court suggests that disgorgement should be unavailable because it allows the government to achieve relief “similar in effect” to criminal forfeiture, raising concerns that the government can achieve duplicative recovery and evade the procedural safeguards girding the forfeiture provision. See majority op. at 1200-01. To be sure, such concerns are relevant in considering whether to infer additional causes of action. As discussed earlier, supra at 1217, however, given the Supreme Court‘s explicit rejection of similar concerns in Porter and Mitchell, they cannot carry the day. Nor should such concerns stop a court from issuing equitable orders that accomplish the express statutory purpose of preventing and restraining RICO violations, whether the remedies are specifically listed in
Of course, that disgorgement may sometimes serve to prevent and restrain defendants from committing RICO violations does not mean that it will always accomplish that purpose. As the district court here recognized, a court must first find
According to Philip Morris, only injunctions are “appropriate orders” under
To begin with, as noted above, Porter indicated that disgorgement may encourage guilty defendants to obey the law in the future. Interpreting a statute replete (like RICO) with other remedies, the Court concluded that “[f]uture compliance may be more definitely assured if one is compelled to restore one‘s illegal gains.” 328 U.S. at 400, 66 S.Ct. 1086. We are without license to ignore the Supreme Court‘s views on this point.
Moreover, Philip Morris‘s suggestion that only injunctions provide “appropriate” relief under
To be sure, given RICO‘s comprehensive remedial scheme, disgorgement orders may prove appropriate in preventing and restraining future violations only in rare circumstances. But “[i]n equity, as nowhere else, courts [should] eschew rigid absolutes,” Franks v. Bowman Transp. Co., 424 U.S. 747, 777 n. 39, 96 S.Ct. 1251, 47 L.Ed.2d 444 (1976) (internal quotation marks and citation omitted), and precisely what remedy or combination of remedies, within the bounds of the equitable doctrines discussed earlier, will serve to prevent and restrain defendants from committing RICO violations is an issue of fact, not statutory interpretation. For these determinations, we must rely in the first instance not on what we appellate judges can or cannot imagine will “prevent or restrain,” but on tried and true methods of fact-finding before district courts—including cross-examination and presentation of contrary evidence. Cf. id. at 780, 96 S.Ct. 1251 (noting district courts’ “‘keener appreciation’ of peculiar facts and circumstances“) (citation omitted).
Finally, and again as noted earlier, record evidence in this case suggests that disgorgement will in fact “prevent and restrain” defendants from committing future RICO violations. As one of the government‘s experts stated, “[R]equiring defendants to pay proceeds will affect their expectations . . . about the returns from future misconduct.” Appellee‘s App. at 813. The expert added that, even if coupled with an injunction laden with contempt penalties, disgorgement will “provide additional economic incentives to deter future misconduct” by “strengthen[ing] the credibility of existing laws” which the defendants have allegedly violated in the past. Id. at 814. Disagreeing, the concurrence offers its own “expert opinion” of the incentives driving the behavior of past RICO violators. See sep. op. at 1203-05, 1205-06. According to the concurrence, the most appropriate deterrence will stem from the “spotlight of the lawsuit,” if properly “amplif[ied]” by “transparency-enhancing and prior-approval measures.” Id. at 1205. Perhaps so, but “on summary judgment, the evidence should be viewed in favor of the nonmoving party, not,” as the concurrence would have it, “the other way around.” Langon v. Dep‘t of Health & Human Servs., 959 F.2d 1053, 1059 (D.C.Cir.1992) (reversing district court grant of summary judgment where that court disregarded admissible expert testimony); seе also Sears, Roebuck & Co. v. Gen. Servs. Admin., 553 F.2d 1378, 1381-83 (D.C.Cir.1977) (holding that district court inappropriately granted summary judgment where experts disagreed about whether certain data constituted a “trade secret” from which an intelligent competitor could gain information). At this stage of the litigation, then, we must assume that the government expert is correct and that disgorgement will “prevent and restrain” future RICO violations. Should Philip Morris offer expert testimony along the lines suggested by the concurrence, then it will be up to the district court to evaluate the competing evidence and make appropriate findings of fact. Should either party appeal, this court, unrestrained by the inferences required at summary judgment, would then review that factual determination pursuant to Rule 52‘s clear error standard. See Fed.R.Civ.P. 52 advisory committee‘s note (observing that judgment under this standard “differs from a summary judg-
C.
In sum, were this case properly before us, I would hold, in accordance with Porter and Mitchell, that district courts have authority to order any remedy, including disgorgement, necessary to ensure complete relief. As the concurrence points out, sep. op. at 1206 (Williams, J., concurring), my approach would create a circuit split, since Carson did not apply Porter and Mitchell to RICO (and, indeed, the parties do not appear to have brought these cases to the Second Circuit‘s attention). Even if, as Carson holds, district courts may only impose equitable remedies for the purpose of keeping defendants from committing RICO violations, I would still affirm the denial of summary judgment, leaving it to the district court to determine, on the basis of a fully developed record, whether disgorgement will help accomplish this purpose. I disagree with my colleagues’ conclusions not because they have created a circuit split of their own by rejecting Carson‘s holding that disgorgement may prevent and restrain RICO violations, but because they have done so by accepting an interlocutory appeal that we should not hear and by disregarding both Supreme Court precedent and
III.
This leaves one final, distinct issue. Philip Morris claims that the government‘s disgorgement model fails as a matter of law to measure the tobacco companies’ ill-gotten profits. Because the district сourt decided this issue in the certified order, it is—unlike the issue the court does resolve—properly before us. See Yamaha, 516 U.S. at 205, 116 S.Ct. 619.
In calculating disgorgement, the government first identifies what it calls the “Youth Addicted Population” (YAP), namely, all people who were smoking an average of at least 5 cigarettes a day at the time they turned 21. The government next calculates that from RICO‘s effective date in 1970 to 2001, the tobacco companies earned profits of $280 billion through sales to these people. The government arrives at this calculation by (1) determining the gross revenue from these total sales minus the direct costs (excluding overhead and taxes) and (2) adjusting for the time value of money. Philip Morris asserts that the government has failed to show that these profits are attributable to the companies’ alleged RICO violations, relying on admissions by government experts that it would be “highly unlikely” to say that “nobody under the age of 21 would have ever smoked regularly . . . but for the defendants’ alleged RICO violations.”
Philip Morris cannot prevail on this issue at summary judgment because the government need not show that nobody under 21 would have smoked but for the RICO violations. As we held in First City Financial, 890 F.2d at 1229, “disgorgement need only be a reasonable approximation of profits causally connected to the violation.” In First City Financial, we found that the district court appropriately ordered disgorgement of all profits on a stock sale where the defendants failed to make a material disclosure, purchased stock whose value would likely have already risen had the disclosure been made, and then sold the stock for a killing after the undisclosed news broke. See id. at 1229-32. Although the government never
Disentangling the tobacco companies’ legal and illegal profits might also be a “near-impossible task.” The government offers evidence that the tobacco companies not only fraudulently suggested that smoking was harmless and nonaddictive, but did so through a comprehensive, decades-long pattern of deliberate behavior. The government further offers evidence that advertising is a “very substantial influence on young people starting to smoke,” see Appellee‘s App. at 783, and that the tobacco companies committed RICO violations in advertising to young people while publicly denying that they were doing so. Under First City Financial, then, the government‘s calculations serve as a reasonable approximation: just as we permit actual profits in insider trading cases to serve as a proxy for ill-gotten gains, so too can actual profits from sales to the YAP meet the government‘s initial burden of reasonably approximating the tobacco companies’ unlawful gains. The burden would thus shift to Philip Morris to “demonstrate that the disgorgement figure was not a reasonable approximation,” 890 F.2d at 1232, and the district court would have to sort out who is right.
ST. ELIZABETH‘S MEDICAL CENTER OF BOSTON, INC., Appellant v. Tommy G. THOMPSON, in his official capacity as Secretary of the U.S. Department of Health and Human Services, Appellee
No. 04-5092.
United States Court of Appeals, District of Columbia Circuit.
Argued Dec. 7, 2004.
Decided Feb. 4, 2005.