Lead Opinion
Opinion for the Court filed by Circuit Judge SENTELLE.
Concurring opinion filed by Senior Circuit Judge WILLIAMS.
Dissenting opinion filed by Circuit Judge TATEL.
A grоup 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”), 18 U.S.C. §§ 1961-68. The relevant section of RICO, 18 U.S.C. § 1964(a), provides the District Courts jurisdiction only for forward-looking remedies that prevent and restrain violations of the Act. Because disgorgement, a remedy aimed at past violations, does not so prevent or restrain, we reverse the decision below and grant partial summary judgment for the Appellants.
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”), 42 U.S.C. §§ 2651-53, and the Medicare Secondary Payer (“MSP”) provisions of the Social Security Act, 42 U.S.C. § 1395y to recover health-care related costs Appellants allegedly caused. The United States also claimed that Appellants engaged in a criminal enterprise to effect this cover-up, and sought equitable relief under RICO, including injunctive relief and disgorgement of proceeds from Appellants’ allegedly unlawful activities. The Government sought this relief under 18 U.S.C. § 1964(a), which gives the District Court jurisdiction
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; of ordering dissolution or reorganization of any enterprise ....
18 U.S.C. § 1964(a).
■ 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.,
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,
The case proceeded, and the Government sought disgorgement of $280 billion that it traced to proceeds from Appellants’ cigarette 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 § 1964(a), (2) even if disgorgement were available, the Government’s model fails the Carson test for permissible disgorgement that will “prevent and restrain” future violations, and (3) even if disgorgement were available, the Government’s proposed model is impermissible because it includes both legally and illegally obtained profits in violation of SEC v. First City Financial Corp.,
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. Waud, 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 Disgоrgement 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,
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,
We find .no history of such a general pplicy 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 thаt 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 fhat 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 mem-oranda. 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,
We review an order denying summary judgment de novo. Cicippio-Puleo v. Islamic Republic of Iran,
B. The Availability of Disgorgement
The Government argues that § 1964 contains a grant of equitable jurisdiction that must be read broadly to permit disgorgement in light of Porter v. Warner Holding Co.,
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 America,
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 á 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 § 1964(a). We further note that the Court in Porter was ordering restitution, under a statute designed to combat inflation. Restitution of overcharge works a direct remedy of past inflation, directly effecting the goal of the statute. The Court in Porter set forth two theories under which “[a]n order for the recovery and restitution of illegal rents may be considered a proper ‘other order’ ” under the applicable statute.
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 quintessential^ backward-looking remedy focused on remedying the effects, of past conduct to restore the status quo. See, e.g., Tull v. United States,
The Government would have us interpret § 1964(a) instead to be a plenary grant of equitable jurisdiction, effectively ignoring the words “to prevent and restrain” altogether. This not only nullifies the plain meaning of the terms and violates our canon of statutory construction that we should strive to give meaning to every word, see, e.g., Murphy Explor. &
Mitchell v. DeMario Jewelry,
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 enter- prise; 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 ....
18 U.S.C. § 1964(a) (emphasis added). The order of disgorgement is not within the terms of that statutory grant, nor any necessary implication of the language of the statute.
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 stаtute, as Congress has done with RCRA and CERCLA, “it cannot be assumed that Congress intended to authorize by implication additional judicial remedies
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,
The remedies available under § 1964(a) are also limited by those explicitly included in the statute. The. words “including, but not limited to” introduce a non-exhaustive list that sets out specific examples of a general principle. See Dong v. Smithsonian Inst,
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 other remedies that it simply forgot to incorporate expressly.” Great-West Life & Annuity Ins. Co. v. Knudson,
Congress’ intent when it drafted RICO’s remedies would be circumvented by the Government’s broad . reading of its § 1964(a) remedies. . The disgorgement requested here is 'Similar in effect to the relief mandated under the criminal forfeiture provision, § 1963(a), without requiring the inconvenience of meeting the addi
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 18 U.S.C. § 1961). This clause may warn us against taking an overly narrow view of the statute, but “it is not an invitation to apply RICO to new purposes that Congress never intended.” Reves v. Ernst & Young,
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 tо fund or promote the illegal conduct, or constitute capital available for that purpose.” Carson,
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.,
III. Conclusion -
Because we hold that the District Court erred when it found that disgorgement was an available remedy under 18 U.S.C. § 1964(a), we reverse the District Court and grant summary judgment in favor of Appellants as to the Government’s disgorgement claim.
Notes
. While the Carson language may appear to be dicta, the Second Circuit remanded for determination of which disgorgement amounts were sufficiently directed to prevention and restraint to qualify under § 1964(a), thus treating the language on availability of disgorgement as essential to the outcome of the case, and therefore a holding. Some other courts have followed Carson. See, e.g., Richard v. Hoechst Celanese Chem. Group, Inc.,
. United States Memorandum in Opposition to Defendants' Motion for Partial Summary Judgment Dismissing the Government's Disgorgement Claim, Appellee's Appendix at 813-14. Although Appellee's Appendix was filed under seal, the expert testimony presented to the court has also been posted by the government on its website.
Concurrence Opinion
concurring.
I join the opinion for the court. I write separately to emphasize problems with the government’s fallback interpretation of 18 U.S.C. § 1964(a), under which the government could obtain disgorgement for purposes of reducing the defendant’s ability to commit future RICO violations, with the amount accordingly limited to assets “being used to fund or promote the illegal conduct, or [that] constitute capital available for that purpose.” United States v. Carson, 52 F.3d 1173, 1182 (2d Cir.1995). This superficially appealing interpretation in fact creates a kind of pushmi-pullyu, a beast that Congress is most unlikely to have ordained.
I.
The statute gives district courts- “jurisdiction to prevent and restrain- [RICO] violations.” 18 U.S.C. § 1964(a). Reasoning that pure deterrence was an impermissible objective of orders under § 1964(a), the Second Circuit went on to find that disgorgement could “prevent and restrain” if limited to the amount of ill-gotten gains that were. “being used to fund or promote the illegal conduct, or constitute capital available for that purpose.” Id. at 1182. Because money is fungible, as indeed are virtually all resources when viewed as enablers of future criminal conduct, the government here refines its Carson-derived fallback position, quite sensibly rejecting any limitation to “ill-gotten gains” in the form of specific money or resources so gained. Such a limit, we have said (applying a different statute), would lead to. absurd results. SEC v. Banner Fund International,
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 net 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-alloeate 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 imрoverished 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. Such 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 § 1964(a) to “prevent and restrain” future violations, has before it the history of the defendant, including his past wrongs. It can decree relief targeted to his plausible future behavior. It can define the conditions bearing directly on that behavior. It can, for example, establish schedules of draconian contempt penalties for future violations, and impose transparency requirements so that future violations will be quickly and easily identified.
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 § 1964(a) disgorgement remedy, on top of those explicitly authorized, would provide only a trivial incremental effect (the reverse of the pardon granted once in a million), and would not qualify. Nor would disgorgement aimed at reducing the defendant’s crime-enabling resources, a factor linked only crudely to his future tendency toward criminality.
Once we (1) accept the proposition that § 1964(a) limits the equity court to forward-looking remedies, as even the dissent appears to do with respect to the government’s narrower argument, see Dissent at 1224-25 (“I also share the Second Circuit’s apparent conclusion ... that disgorgement may be ordered only to prevent and restrain a defendant from future RICO, violations.”), and (2) reject the supposition that “whatever hurts a civil RICO violator necessarily serves to ‘prevent and restrain’ future violations,” Carson,
Because disgorgement under § 1964(a) so evidently lacks that tendency, the dissent relies on Porter and on the government’s experts. Porter indeed includes the twice cited phrase suggesting that “[fjuture compliance may be more definitely assured if one is compelled to restore one’s ill-gotten gains.” Dissent at 1223, 1224. But the statute at issue in Porter gave district courts power to issue orders “enforcing compliance” and thus didn’t seem to narrow the grant to forward-looking remedies. Indeed the Porter dissent never suggests such a limit; nor, so far as appears, did the defendant firm. For construing § 1964(a), Porter is of remarkably little help.
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 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.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 wоuld 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 § 1964(a) equitable relief) have disappeared. And the district court can amplify the spotlight with transparency-enhancing and prior-approval measures. The real question is whether the imposition of this extra remedy on the defendants before the court — backward-looking civil disgorgement in favor of the government — would materially alter their readiness to persist in violations, in the face of all RICO’s explicit remedies, and a forward-looking schedule of penalties for even minute infractions, made doubly effective by compulsory disclosure and approval measures. The government’s experts simply did not address that question. This court’s own analysis provides a clear answer that the extra “remedy” would not do so.
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 Western, Inc.,
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 § 1964(a) creates unlimited discretion to order disgorgement) and its fallback position (that it provides authority to award crime-enabling disgorgement) — requires the court to plumb the meaning of § 1964(a). The issues in this case, all turning on the interpretation of § 1964(a)’s lone sentence, are so thoroughly enmeshed thаt we needn’t explore the court’s language limiting § 1292(b) jurisdiction to issues “logically interwoven” with the explicitly identified issue. Maj. Op. at 1196. The dissent’s hypotheticals as to what might be covered, see Dissent at 1212, plainly depend on an astonishingly broad notion of either logic or weaving. Having analyzed § 1964(a) and having found the order in conflict with its terms, the court must reverse.
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 proceedsamount, 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 con- ' firms 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.’ Tliese 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)
Dissenting Opinion
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,
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.,
I.
Under 28 U.S.C. § 1292(b), if a district court “shall be of the opinion that [an] order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation,” it may certify the order for interlocutory review, and the court of appeals “may thereupon, in its discretion, permit an appeal to be taken from such order.” Section 1292(b) establishes a “two-tiered arrangement.” Swint v. Chambers County Comm’n,
A.
In 2000, the tobacco eompanie,s^-usually referred to in this opinion as “Philip Morris”- — -filed a motion to dismiss, arguing (among other things) that “disgorgemépt ... is never available under a civil RICO count.” See United States v. Philip Morris Inc.,
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 unavailable 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 20 (quoting United States v. Carson,
The district court rejected both arguments and denied summary judgment to Philip Morris. United States v. Philip Morris USA, Inc.,
Philip Morris then asked the district court to certify its 2004 order under section 1292(b). In its certification request, Philip Morris did not reassert its legal argument from 2000. Instead, it stated that “[wjhether the Carson standard applies to the Government’s disgorgement claim is clearly a controlling question of law.... If the Government is wrong, and Carson applies, nothing is left of its claim in this case.” Defs Br. Supp. Mot. Certify Order # 550 for Interloc. App. at 4.
The district court agreed that a controlling question of law existed as to whether “the disgorgement allowed under 18 U.S.C. § 1964(a) is limited to those ill-gotten gains which are ‘being used to fund or promote the illegal conduct or constitute capital available for that purpose.’ ” United States v. Philip Morris USA, Inc., No. 99-2496, slip op. at 2-4,
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 section 1964(a). Instead, Philip Morris focused on the narrower issue actually raised in its 2004 motion for summary judgment, arguing that the district court had erred in rejecting Carson’s interpretation of section 1964(a) and claiming that “[i]f this Court agrees with the Second Circuit in Carson, its decision on appeal would dispose of the Government’s disgorgement claim.” Emergency Pet. for Permission to Appeal an Order at 9. The government opposed Philip Morris’s section 1292(b) petition, arguing that a host of factual issues would require resolution regardless of whether this court adopted Carson’s or the district court’s interpretation of section 1964(a) and thus that “interlocutory appeal would not materially advanсe the termination of this litigation.” Resp. in Opp’n to Emergency Pet. at 15.
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 interlocutoryappeal 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 correct 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 th.e 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 section 1292(b).” Appellee’s Br. at 45-46.
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 section 1292(b) petition before this court, and (6) decided in an entirely different order which Philip Morris could at any time have аsked the district court to certify. This presents serious questions on.two separate fronts: our jurisdiction over this appeal under section 1292(b), and our general policy of declining to.consider arguments not made to the district court in the motion leading to the order.under appeal. Unlike the court, I cannot brush these concerns aside.
Regarding our jurisdiction under section 1292(b), the Supreme Court has made clear that an appellate court can review “any issue fairly included within the certified order” because “[a]s the text of § 1292(b) indicates, appellate jurisdiction applies to the order certified to the court of appeals, and is not tied to the particular question formulated by the district court.” Yamaha Motor Corp., USA v. Calhoun,
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, Inc.,
The court’s approach is problematic in several respects. Most significantly, it curtails the district court’s section 1292(b) certification role. In this case, the district court had neither an opportunity to exercise “first line discretion to "allow interlocutory appeal[ ],” Swint,
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,
My approach, moreover, respects the Court’s instruction in Stanley that we should “not consider matters that were ruled upon in other orders.”
In addition to resting on a dubious interpretation of section 1292(b), the court’s decision to review the broader issue runs counter to this circuit’s general rules regarding waiver. Parties may raise here only .those arguments they presented to the district court in their papers seeking (and opposing) the order undеr review, since only in exceptional circumstances will we consider an argument not made to the district court. See United States v. British Am. Tobacco (Invs.) Ltd.,
In sum, whether viewed in terms of jurisdiction or waiver, only Philip Morris’s narrower challenge is properly before 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 rear-gued 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 сourt 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 section 1292(b) gatekeeping function. Taking neither approach, Philip Morris instead not only jumped the fence at the district court level, but also circumvented our own screening process by waiting until after the government’s opposition to raise the broader issue with the motions panel. This court should not be rewarding such tactics by exercising its discretion to hear this appeal. ¡
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 section 1292(b)’s integrity and discouraging the kind of litigating tactics reflected in this record far outweigh the efficiency that hearing this interlocutory appeal might produce in this concededly complex case.
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,
n.
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, § 1964(c), authorizes injured persons to sue RICO violators for treble damages and to recover attorneys’ fees. Finally, Congress directed that RICO “shall be liberally construed to effectuate its remedial purposes,” Pub.L. No. 91-452, § 904(a), 84 Stat. 922, 947 (1970) (codified, in a note following 18 U.S.C. § 1961) — a provision that, if it “is to be applied anywhere,, [should be applied] in § 1964, where RICO’s remedial purposes are most evident,” Sedima, S.P.R.L. v. Imrex Co.,
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
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.,
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
[wjhenever 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.
Id. § 205(a),
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,”
[sjuch 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.... [Tjhe 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,
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,
The court’s opinion today sounds a lot like the Porter dissent. The court observes that the language of section 1964(a) — a court has “jurisdiction to prevent and restrain-violations” — does not explicitly open the door to all of equity, but neither did EPCA section 205(a) (a court may issue orders “enjoining” violations or “enforcing compliance”). The court asserts that* reading full equitable. jurisdiction into RICO- will render section 1964(a)’s lаnguage largely meaningless, but Porter rejected just this concern with regard to EPCA section 205(a). The court emphasizes that RICO “already -provides for a comprehensive set of remedies,” majority op. at 1200, but the EPCA had at least as comprehensive a remedial structure. The court further points out that should restitution be available, the government could obtain duplicative = recovery (given RICO’s criminal forfeiture provisions) and also escape the applicable statutes of limitations, but the Porter majority dismissed similar concerns,
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 section 17 of the Fair Labor Standards Act (FLSA), 29 U.S.C. § 217 (1960). Relying on Porter, the Court concluded that where the statute provided that “the district courts are given jurisdiction ... for cause shown, to restrain violations” of the act, 29 U.S.C. § 217, district courts had full equitable powers,
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.,
Instead of following Porter and Mitchell, the court relies on a later Supreme Court decision, Meghrig v. KFC Western, Inc.,
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,
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 “ines-capabl[y]” provides to the contrary. Cf. Renegotiation Bd. v. Bannercraft Clothing Co.,
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 dix-ectly controls, leaving to this Court the prerogative of overruling its own decisions.” Rodriguez de Quijas v. Shearson/Am. Express, Inc.,
In my view, Porter and Mitchell, not Meghrig, “directly control” this case. Several reasons support this conclusion, and nothing points thе 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.,
Finally, while Congress modeled section 1964(a) on the antitrust laws, see 115 Cong. Rec. 9567 (1969) (statement of Sen. McClellan); see also 15 U.S.C. § 4 (the “district courts ... are invested with jurisdiction to prevent and restrain violations”); accord 15 U.S.C. § 25, I disagree with Philip Morris that the Supreme Court’s antitrust decisions provide useful guidance as to, whether the phrase “prevent and restrain”, limits the equitable remedies available to district courts. On the one hand, the Court once ignored, though did not explicitly reject, an invitation by Justice Douglas to apply Porter to antitrust actions. See United States v. Nat’l Lead Co.,
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,
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 section 1964(a)’s plain language and ignores Supreme Court precedent recognizing the equitable flexibility of district courts.
Under section 1964(a), district courts may issue “appropriate orders” to prevent and restrain” RICO violations. “Prevent” has many meanings. The first nonarchaic one listed in Webster’s Third New International Dictionary (1961) is “to deprive of power or hope of acting, operating, or succeeding in a purpose.” “Restrain” can mean “to hold (as a person) back from some action, procedure, or course: prevent from doing something (as by physical or moral , force or social pressure)” and “to limit or restrict to or in respect to a particular action or course: keep within bounds or under .control.” Webster’s Third New International Dictionary (1961).
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 section 1964(a). Instead, the court offers several unpersuasive reasons for its cоnclusion that as a matter of statutory interpretation disgorgement is not a permissible remedy under section 1964(a).
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,
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 noscitwr a sociis and ejusdem generis. See majority op. at 1200; cf. United States v. Thomas,
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 section 1964(a), e.g., divestment, or available as other “appropriate orders.” Discussing RICO, the Supreme Court has observed that “Congress has provided civil remedies for use when the circumstances so warrant. It is untenable to argue that their existence limits the scope of the criminal provisions.” United States v. Turkette,
Of course, that disgorgement may sometimes serve to prevent and restrain defendants from committing RICO viоlations 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 section 1964(a) because, in its view, they will always adequately prevent past lawbreakers from committing future violations, particularly given the threat of heavy contempt penalties. Refining this point, the concurrence finds it “almost inconceivable” that disgorgement can change the incentives governing a defendant’s future behavior given RICO’s other provisions. See , sep. op. .at 1204 (Williams, J., concurring). -The concurrence thus concludes that as a matter of law, Congress intended to ex- > elude disgorgement from those remedies appropriate to prevent and restrain RICO i violations. See id. at 1204-05. I think this approach is flawed in several respects.
To begin with,, as noted above, Porter ' indicated that disgorgement may encour- : age 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.”
■ Moreover, Philip Morris’s suggestion "that only injunctions provide “appropriate” relief under section 1964(a) not only cuts against the statute’s plain language — Congress would hardly have included divestment in its list of sample remedies if it thought injunctions alone would be adequate — but also ignores the equitable flexibility the statute was designed to preserve, seé, e.g., 115 Cong. Rec. 9567 (1969) (statement of Sen. McClellan). Indeed, nothing in the statute requires courts to prefer contempt penalties (not explicitly named in section 1964(a)) to disgorgement (also not explicitly named). Rather, no single remedy is always appropriate. “The essence of equity jurisdiction has been the power of the Chancellor to do equity and to mold each decree to the necessities of the particular case. Flexibility rather than rigidity has distinguished it.” Swann v. Charlotte-Mecklenburg Bd. of Educ.,
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.,
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, “[Requiring dеfendants 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 Health & Human Servs.,
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 аpproach 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 section 1964(a)’s plain language.
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 court decided this issue in the certified order, it .is — unlike the issue the court does resolve — properly before us. See Yamaha,
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,
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 Ap-pellee’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,”