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The rule of law prevails

October 19, 2005

BECAUSE TOBACCO COMPANIES are not the most popular defendants, courts must be especially vigilant against an erosion of the rule of law in cases brought against them. So the Supreme Court's rejection of the government's attempt to seek $280 billion in damages from the tobacco industry is heartening.

The court on Monday denied the federal government's appeal of a lower court ruling that it could not seek the damages. The Justice Department's effort to recoup the industry's past profits in a civil suit brought under the Racketeer Influenced Organizations Act was a classic example of overreach.

This case was first brought against cigarette makers in 1999 by the Clinton administration, claiming that the industry had misled the public over the decades about the dangers of smoking. The case was tried this year, and a decision is still pending from U.S. District Judge Gladys Kessler in Washington. It is not at all clear that the government proved its case of massive fraud, given Washington's long-standing involvement in regulating and taxing the cigarette business.

But the issue addressed by the appeals court, which the Supreme Court let stand without comment, was the appropriate remedy if the tobacco companies were to lose on the merits. RICO laws make it easier for prosecutors to systematically take on organized crime. More recently, however, prosecutors have relied on RICO in cases involving legitimate businesses.

Congress clearly meant for the so-called disgorgement of ill-gotten gains to be a remedy available to the prosecution only in criminal RICO cases, where the government has to prove its case beyond a reasonable doubt before a jury. In its civil case against the cigarette makers, the government faces a lower burden of proof.

As the appellate court rightly ruled, under the RICO law, remedies in civil cases are limited to forward-looking behavior. So the government can seek billions from the tobacco companies to fund new smoking cessation programs, for example, but it cannot attempt to recover past profits.

In this case, the government was trying to have the best of both worlds: bringing the easier civil case but seeking the payoff it would have been entitled to had it won the harder criminal case. The Supreme Court was right not to let the feds get away with it.

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