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R.J. Reynolds defends massive RICO case brought by U.S. government against tobacco manufacturers

2005

In September 1999, the United States Department of Justice sued Jones Day client R.J. Reynolds Tobacco Company, its major competitors, and others seeking (a) recovery of alleged excess health care insurance costs under the Medical Care Recovery Act and the Medicare Secondary Payer provisions of the Social Security Act; and (b) relief under the civil provisions of the Racketeer Influenced Corrupt Organizations Act ("RICO"). The monetary relief sought totaled several hundred billion dollars. The District Court dismissed the insurance reimbursement claims, but permitted the civil RICO claim to proceed. United States v. Philip Morris Inc., 116 F. Supp. 2d 131 (D.D.C. 2000).

The scope and extent of discovery, which began in late 2000 and continued through 2004, was unprecedented. The United States' litigation effort was supported by more than $100 million in budgeted funding. Jones Day served as liaison counsel for all defendants, with responsibility for coordinating discovery, case management, and trial preparation. Jones Day also coordinated R.J. Reynolds' massive defensive discovery effort and, along with its co-counsel, sought and obtained equally massive discovery from the United States.

Shortly before trial, Jones Day, on behalf of all defendants, moved for summary judgment on the Department of Justice's demand that defendants "disgorge" roughly $280 billion in past profits and imputed interest because the civil RICO statute does not permit backward-looking remedies such as disgorgement. The District Court denied the motion. The Court of Appeals accepted an interlocutory appeal and reversed, agreeing with defendants that § 1964(a) authorizes courts to award only forward-looking relief and that, as such, disgorgement is not an available remedy under this provision because it "is a quintessentially backward-looking remedy focused on remedying the effects of past conduct to restore the status quo." United States v. Philip Morris USA, Inc., 2005 WL 2679487, at *7.

Jones Day represented R.J. Reynolds in the nine-month bench trial, which involved live testimony from over 70 fact or expert witnesses. Jones Day attorneys had lead responsibility for numerous fact and expert witnesses, including witnesses who testified regarding complex statistical issues.

United States v. Philip Morris USA, Inc., 396 F.3d 1190 (D.C. Cir.), cert denied, 126 S. Ct. 478 (2005)

For additional information about this matter, please contact: Peter J. Biersteker, Michael A. Carvin

Client(s): R.J. Reynolds Tobacco Company