United States v. Philip Morris USA Inc.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 17, 2004 Decided February 4, 2005

Reissued March 30, 2005

No. 04-5252

UNITED STATES OF AMERICA,

APPELLEE

v.

PHILIP MORRIS USA INC., ET AL., f/k/a PHILIP MORRIS

INCORPORATED ,

APPELLANTS

PHARMACIA CORPORATION AND

PFIZER INC.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 99cv02496)

Michael A. Carvin argued the cause for appellants. With

him on the briefs were Robert F. McDermott, Jr., Peter J.

Biersteker, Jonathan M. Redgrave, Allyson N. Ho, Timothy M.

Broas, Dan K. Webb, Kenneth N. Bass, Edward C. Schmidt,

Matthew D. Schwartz, Gene E. Voigts, Richard L. Gray, Bruce

G. Sheffler, James A. Goold, Theodore V. Wells, Jr., Murray

Garnick, David Eggert, David M. Bernick, J. William Newbold,

Michael B. Minton, Richard P. Cassetta, Steven Klugman, and

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Leonard A. Feiwus.

Robin S. Conrad, Jan S. Amundson, Quentin Riegel, and

Beth S. Brink mann 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.

Before: SENTELLE and TATEL, Circuit Judges, and

WILLIAMS, Senior Circuit Judge.

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”), 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

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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; or 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

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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 1882. The portion of Carson relied upon by the District

Court in the present controversy suggested that disgorgement

might “serve the goal of ‘preventing and restraining’ future

violations,” but flatly held that the remedy would not do so

“unless there is a finding that the gains are being used to fund or

promote the illegal conduct, or constitute capital available for

that purpose.”1 Id. at 1182. The Second Circuit went on to

1

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., 355 F.3d 345, 354 (5th Cir.

2003) (observing that “the Second Circuit noted that disgorgement is

generally available under § 1964”); United States v. Private Sanitation

Indus. Ass'n, 914 F. Supp. 895, 901 (E.D.N.Y. 1996) (“[T]he

disgorgement in this case is clearly directed towards the prevention of

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caution that disgorgement would be better justified under this

analysis where the “gains [were] ill-gotten relatively recently.”

Id. The District Court accepted the Second Circuit’s suggested

holding that the appropriateness of disgorgement depends on

whether the proceeds are available for the continuing of the

criminal enterprise, but ruled that the question was premature,

and denied the motion for dismissal on the RICO-disgorgement

claim. Philip Morris, 116 F. Supp. 2d at 151-52. Neither party

sought leave to file an interlocutory appeal of that ruling.

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., 890 F.2d 1215 (D.C. Cir.

1989). The District Court denied this motion in a memorandum

order designated “#550.” United States v. Philip Morris USA,

Inc., 321 F. Supp. 2d 72 (D.D.C. 2004). On motion of the

defendants, the District Court certified Order #550 for

interlocutory appeal pursuant to 28 U.S.C. § 1292(b). That

section provides for interlocutory appeal where a district judge

future illegal conduct, and is therefore a permissible remedy for civil

RICO violations under the limitations imposed by Carson.”).

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has certified that “an order not otherwise appealable . . . 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 litigation . . . .” Under § 1292(b), the Court of Appeals may

then decide whether to permit the appeal to be taken from such

order. In the present case, we allowed the appeal.

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 theory that the

order on appeal–that is the memorandum order denying

“defendants’ motion for partial summary judgment dismissing

the Government’s disgorgement claim”–was reiterating a prior

order on the general question of availability of disgorgement.

Further, the Government argues, the order spoke anew only to

the measure of disgorgement, assuming such disgorgement to be

otherwise available. In support of its proposed limitation of our

review, the Government relies upon Yamaha Motor Corp., USA

v. Calhoun, 516 U.S. 199 (1996). In Yamaha, the Supreme

Court dealt with the breadth of review properly conducted by a

court of appeals under 28 U.S.C. § 1292(b). Id. at 204. The

Government selectively quotes from Yamaha the sentence that,

“The court of appeals may not reach beyond the certified order

to address others made in the case.” Id. at 205. Based on this

sentence, the Government then argues that because the first

order denying a motion to dismiss had dealt with the question of

the availability of disgorgement, this certified interlocutory

review of the subsequent summary judgment order is restricted

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to the new theory considered by the court on that occasion–that

the disgorgement the Government pursued exceeded the

standard available for such disgorgement as set by the Second

Circuit in Carson.

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

FED . R. C IV. P. 56(c)). Significantly, the court further noted that

“Defendants argue that any disgorgement which might be

ordered upon a finding of liability must be limited by both the

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text of Section 1964(a) itself and the holding in United States v.

Carson . . . interpreting that section.” Philip Morris, 321 F.

Supp. 2d at 74 (emphasis added). Thus the court clearly implied

the possibility that none might be ordered, and that statutory

issues outside Carson were before the court.

Our dissenting colleague argues that the availability of the

disgorgement claim vel non is not before us because Appellants

did not fully restate their earlier arguments in their motion, but

only expressed their reservation in a footnote referencing the

District Court’s prior rejection of their position. While it is true,

as our colleague reminds us, that we have held that a “litigant

does not properly raise an issue by addressing it in a ‘cursory

fashion,’ with only ‘bare-bones arguments,’” Cement Kiln

Recycling Coalition v. EPA, 255 F.3d 855, 869 (D.C. Cir. 2001)

(per curiam), our prior holdings on that subject have been in

very different contexts. In Cement Kiln, for example, and in

Wash. Legal Clinic for the Homeless v. Barry, 107 F.3d 32, 39

(D.C. Cir. 1997), relied upon by the dissent, we were

determining whether an issue was properly before us that had

been raised in no other fashion. In the present case, we are

reviewing a summary judgment decision, presumably according

to the standards set forth by the Supreme Court in such decisions

as Yamaha, and the issue in question was clearly decided by the

District Court in the first rejection of the motion to dismiss. The

issue was called to the attention of the court as a necessary

antecedent in the second summary judgment order, now under

direct review, and expressly pointed out in the footnote which

our colleague disdains. Furthermore, the motion leading to the

order presently before us sought summary judgment of dismissal

of the disgorgement claim, not simply a limitation to such

disgorgement as might have been supported by the Carson test

or other factors. Given the Supreme Court’s plain teaching in

Yamaha, particularly its adoption from a learned treatise of the

language “it is the order that is appealable, and not the

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controlling question identified by the district court,” Yamaha,

516 U.S. at 205 (see other authorities, supra), Cement Kiln and

Barry have no applicability. Yamaha controls. We therefore

proceed to review the denial of summary judgment, under the

usually applicable standards, not simply the sole question to

which the Appellees and the dissent would restrict us.

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 7. 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. 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.2d 130, 135-36 (D.C. Cir. 2002)), cited

by Dissent at 11, 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 § 1292(b). Neither it

nor Hylton dealt in any fashion with the breadth of interlocutory

review, nor was establishing any standard for the papers in

which an argument must have been raised. Each rejected an

attempt by an appellant to raise a new ground for the first time

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on appeal. Appellants before us raised and preserved their

argument as set forth in the text above. We read nothing in

British American Tobacco or Hylton to suggest a general policy

barring our review under the Yamaha standard.

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 10. We

understand the law to be, as suggested in Yamaha, that issues are

not decided in memoranda at all, but rather in orders. Therefore,

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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 10. 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 (1987), is

to the contrary. The passage relied upon by our dissenting

colleague to the effect that courts considering interlocutory

appeals under § 1292(b) should “not consider matters that were

ruled upon in other orders,” id. at 677, did not address a

situation like the one before us. Here the order appealed from

reiterated, and totally depended upon, an issue fairly

encompassed within the motion before that court and the order

now before us. In Stanley, the court of appeals undertook

interlocutory review of an order dealing with one claim of a

multi-claim complaint. In that order, the district court had

refused to dismiss a claim asserted under the authority of Bivens

v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388 (1971).

On appeal, the court of appeals not only affirmed the district

court’s conclusion as to the Bivens claim, but reached back in

the record to order the district court to reinstate another claim

for relief asserted under the Federal Tort Claims Act, 28 U.S.C.

§ 2671 et seq. In the present case, the disputed “prior order” had

denied judgment of dismissal on the disgorgement claim. The

order concededly before us denied judgment of dismissal on the

same disgorgement claim. We see nothing in Stanley

inconsistent with the later instruction in Yamaha recognizing our

jurisdiction to “address any issue fairly included within the

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certified order.” Yamaha, 516 U.S. at 205. We therefore

proceed, obedient to our understanding of Yamaha, to review the

order before us denying summary judgment.

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 § 1964(a) and the

comprehensive remedial scheme of RICO preclude

disgorgement as a possible remedy in this case.

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., 328 U.S.

395 (1946), and its progeny. The Porter Court considered

reimbursement awards under the Emergency Price Control Act

of 1942 (“EPCA”) and concluded that where a statute grants

general equitable jurisdiction to a court, “all the inherent

equitable powers . . . are available for the proper and complete

exercise of that jurisdiction.” Porter, 328 U.S. at 398. This

grant is only to be limited when “a statute in so many words, or

by a necessary and inescapable inference, restricts the court’s

jurisdiction.” Id. In this case the text and structure of the statute

provide just such a restriction.

As the Supreme Court has repeatedly observed: “Federal

courts are courts of limited jurisdiction. They possess only that

13

power authorized by Constitution and statute, which is not to be

expanded by judicial decree.” Kokkonen v. Guardian Life Ins.

Co. of America, 511 U.S. 373, 377 (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 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.

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

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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. 328 U.S. at 399. First, the recovery of the illegal

payment by the victim tenant “may be considered as an

equitable adjunct to the injunction decree,” as it effects “the

recovery of that which has been illegally acquired and which has

given rise to the necessity for injunctive relief.” Id. (noting that

“such a recovery could not be obtained through an independent

suit in equity if an adequate legal remedy were available.”). The

equitable jurisdiction of the Court having been properly

invoked, the Court then had the power “to decide all relevant

matters in dispute and to award complete relief . . . .” Id. Also,

and more to the point, the Court was authorized “in its

discretion, to decree restitution of excessive charges in order to

give effect of the policy of Congress.” Id. at 400. The policy of

Congress under the EPCA was to prevent overcharges with

inflationary effect. The goal of the RICO section under which

the government seeks disgorgement here is to prevent or restrain

future violations. We therefore must consider the forward-

looking nature of the remedy in a way not applicable to a

different remedy in Porter for the accomplishment of a different

goal under a different 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

15

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 (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 § 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. & Production

Co. v. United States Dept. of the Interior, 252 F.3d 473, 481

(D.C. Cir. 2001), but also neglects Supreme Court precedent. In

Meghrig v. KFC Western, Inc., 516 U.S. 479, 488 (1996), the

Court held that compensation for past environmental cleanup

was ruled out by the plain language of the Resource

Conservation and Recovery Act which authorized actions “to

restrain” persons who were improperly disposing of hazardous

waste. If “restrain” is only aimed at future actions, “prevent” is

even more so.

Mitchell v. DeMario Jewelry, 361 U.S. 288 (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

16

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 (quoting

Porter, 328 U.S. at 398). 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, 18 U.S.C. § 1964(a), granted

only the jurisdiction which we set forth above. The District

Court, so far as is relevant to actions under that section, has

jurisdiction only

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 . . . .

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

17

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 (quoting Middlesex County Sewerage Auth.

v. Nat’l Sea Clammers Ass’n, 453 U.S. 1, 14 (1981)).

In RICO, as in RCRA and in CERCLA, Congress has laid

out elaborate enforcement proceedings. One of those

proceedings is a government action brought under § 1964(a).

That one does not provide for disgorgement. That one provides

only for orders which “prevent or restrain” future violations.

Disgorgement does not do that.

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 § 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., 125 F.3d 877, 880 (D.C. Cir. 1997).

Applying the canons of noscitur a sociis and ejusdem generis,

18

we will expand on the remedies explicitly included in the statute

only with remedies similar in nature to those enumerated. See

Wash. State Dep't of Soc. & Health Servs. v. Guardianship

Estate of Keffeler, 537 U.S. 371, 384 (2003). The remedies

explicitly granted in § 1964(a) are all directed toward future

conduct and separating the criminal from the RICO enterprise to

prevent future violations. Disgorgement is a very different type

of remedy aimed at separating the criminal from his prior ill-

gotten gains and thus may not be properly inferred from §

1964(a).

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, 534

U.S. 204, 209 (2002) (quoting Mertens v. Hewitt Associates, 508

U.S. 248, 251, 254 (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. 18 U.S.C. § 1963(a). In a civil case the Government may

request limited equitable relief under § 1964(a). Individual

plaintiffs are made whole and defendants punished through

treble damages under 18 U.S.C. § 1964(c). This

“comprehensive and reticulated” scheme, along with the plain

meaning of the words themselves, serves to raise a “necessary

and inescapable inference,” sufficient under Porter, 328 U.S. at

19

398, that Congress intended to limit relief under § 1964(a) to

forward-looking orders, ruling out disgorgement.

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 additional procedural safeguards that attend

criminal charges, including a five-year statute of limitations, 18

U.S.C. § 3282, notice requirements, 18 U.S.C. § 1963(l), and

general criminal procedural protections including proof beyond

a reasonable doubt. Further, on the Government’s view it can

collect sums paralleling–perhaps exactly–the damages available

to individual victims under § 1964(c). Not only would the

resulting overlap allow the Government to escape a statute of

limitations that would restrict private parties seeking essentially

identical remedies, see Agency Holding Corp. v. Malley-Duff &

Assoc., Inc., 483 U.S. 143, 156 (1987), but it raises issues of

duplicative recovery of exactly the sort that the Supreme Court

said in Holmes v. Securities Investor Protection Corp., 503 U.S.

258, 269 (1992), constituted a basis for refusing to infer a cause

of action not specified by the statute. Permitting disgorgement

under § 1964(a) would therefore thwart Congress’ intent in

creating RICO’s elaborate remedial scheme.

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, 507 U.S. 170, 183

(1993). The text and structure of RICO indicate that those

20

remedial purposes do not extend to disgorgement in civil cases.

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,

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 § 1964(a). The language of the

statute explicitly provides three alternative ways to deprive

RICO defendants of control over the enterprise and protect

against future violations: divestment, injunction, and dissolution.

We need not twist the language to create a new remedy not

contemplated by the statute.

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 23 (quoting Rodriguez

de Quijas v. Shearson/American Express, Inc., 490 U.S. 477,

484 (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.

21

However, the Rodriguez de Quijas language is not particularly

helpful when no precedent of the Supreme Court “has direct

application,” as in the present case. There is not a Supreme

Court case dealing with the jurisdiction of a district court to

order disgorgement under RICO § 1964(a). There is not a

Supreme Court case discussing that question. There is, in short,

no Supreme Court case having direct application. With no

Supreme Court case having direct application, it is our duty to

construe the statute. That is what we have done.

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.

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 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, 211 F.3d 602, 617

(D.C. Cir. 2000). There the defendant proposed to confine

disgorgement to the “actual assets” unjustly received. We

said that what mattered was not the specific assets but the

amount by which the defendant was unjustly enriched; the

alternative would allow a defendant to escape liability by

2

spending ill- gotten gains while husbanding other assets. Id. at

617. Thus the government’s proposal is that the amount of

the ill- gotten gains should set a ceiling on the disgorgement

recovery, subject to the further limit mentioned above—

essentially purporting to limit the disgorgement to crime-

enabling resources, broadly construed.

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, as resources can be used for criminal purposes even

if offset by company debt. Subject to the bankruptcy laws,

nothing in the logic of the crime-enablement theory clearly

calls for stopping at confiscation of the shareholders’

interests; why not the bondholders’ as well?

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.

3

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 “prevent[ing]” 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. Such an exception to the rules

would have no detectible effect on the commission of torts or

breaching of contracts. Even the lucky defendant who

4

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, not merely a

random extra penalty. But the question would be its

incremental effect, on top of (1) RICO’s explicit provisions

for criminal penalties (including disgorgement and

imprisonment under § 1963(a)) and for victim recoveries

(trebled) under § 1964(c), and (2) the whole available panoply

of genuinely forward-looking remedies—express controls

over substantive conduct, transparency-enhancing orders, and

contempt penalties for violations. It seems almost

inconceivable that many aspiring criminals would find the

incremental risk decisive. I find it hard to imagine a waffling

villain—already in court for RICO violations—saying to

himself: “Well, my chances of escaping § 1963(a) forfeiture

and imprisonment because of the statute of limitations and the

burden of proof, and of escaping treble damages under

§ 1964(c), and contempt penalties for violating the court’s

orders, still leave RICO violations attractive on a net basis;

5

but that implied disgorgement under § 1964(a)—wow! Too

much. It tilts me over the line.”

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 31 (“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, 52 F.3d at

1182, the court must try to draw lines between equitable

remedies that merely “hurt” the defendant and ones that have

a genuine tendency to “prevent and restrain” his future

violations.

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 “[f]uture compliance may be more

6

definitely assured if one is compelled to restore one’s ill-

gotten gains.” Dissent at 28, 32. 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 33, 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 run riot, I attach an appendix containing all of the

expert testimony that the government saw fit to offer on the

point in the summary judgment motion. The crux is Dr.

Franklin Fisher’s statement:

[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,

7

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 § 1964(a) equitable relief) have

disappeared. And the district court can amplify the spotlight

1

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.

8

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 27, 33-34; see

also id. at 28 (noting that in Meghrig v. KFC Western, Inc.,

516 U.S. 479 (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 “facts” hypothesized by

the dissent are unrelated to the real world faced by RICO

defendants—already arraigned for their past offenses and

subject to a battery of new disincentives on top of all RICO’s

conventional explicit remedies. Statutory interpretation

shouldn’t turn on factual hypotheticals such as, “What if pigs

had wings.”

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

9

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 that

we needn’t explore the court’s language limiting § 1292(b)

jurisdiction to issues “logically interwoven” with the

explicitly identified issue. Maj. Op. at 10. The dissent’s

hypotheticals as to what might be covered, see Dissent at 8-9,

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 2. 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 becaus e

RICO doesn’t explicitly preclude it), we would create no less

of a split between this circuit and the Second.

10

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:

11

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

12

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.

13

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 calcula ted them, would in fact act to

prevent and restrain future RICO violations.” Declaration of

14

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 (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 rampant racketeering violations within the tobacco

industry. Specifically, the government offers voluminous

evidence, which we must view in the light most favorable to it,

see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)

(stating that at summary judgment the “evidence of the non-

movant is to be believed, and all justifiable inferences are to be

drawn in [its] favor”), that Philip Morris, Altria Group, R.J.

Reynolds, Brown & Williamson, Lorillard, BATCo, and Liggett

have engaged in a half century of deceptive practices to the

detriment of the health—and lives—of their customers. Acting

both individually and in concert through collective agreements

and jointly funded organizations like the Council for Tobacco

Research and the Tobacco Institute (also defendants), these

companies publicly defended smoking as both harmless and

nonaddictive despite knowing from internal research that it was

neither. In their advertising campaigns the companies targeted

young people, who “often lack the experience, perspective, and

judgment to recognize and avoid choices that could be

detrimental to them,” Bellotti v. Baird, 443 U.S. 622, 635

(1979), despite publicly claiming otherwise.

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

2

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 (1946). Because under a fair application

of Supreme Court precedent, see id. at 398-403, 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,” 18

U.S.C. § 1964(a), limits the district court’s equitable

jurisdiction, I would still uphold the denial of summary

judgment because the government has presented evidence that

disgorgement will accomplish just that purpose in this case.

3

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, 514 U.S.

35, 47 (1995). Congress “chose to confer on district courts first

line discretion to allow interlocutory appeals,” id., and “even if

the district judge certifies the order under § 1292(b), the

appellant still has the burden of persuading the court of appeals

that exceptional circumstances justify a departure from the basic

policy of postponing appellate review until after the entry of a

final judgment,” Coopers & Lybrand v. Livesay, 437 U.S. 463,

475 (1978) (internal quotation marks and citation omitted). In

accepting this interlocutory appeal, this court not only (at the

least) pushes the bounds of its jurisdiction, but also exercises its

discretion on behalf of defendants whose litigating tactics leave

much to be desired.

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 18 U.S.C. § 1964(a), but did not address whether

disgorgement would be available in this particular case. See id.

at 150-52. Philip Morris never sought certification of that order,

though it could have done so at any time after the order’s

4

issuance. See Fed. R. App. P. 5(a)(3) (providing that the time

for filing an appeal runs from when the district court amends the

order to include certification, not from the issuance of the actual

order); 16 Wright, Miller & Cooper, Federal Practice and

Procedure § 3929 (2d. ed. 1996) (“This latitude [in Rule 5(a)]

makes it possible to employ § 1292(b) with some precision,

deferring the question of appeal until it is clear that prompt

appeal is apt to be useful.”).

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 5, 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, 52 F.3d 1173, 1182 (2d

Cir. 1995)), Philip Morris claimed that 18 U.S.C. § 1964(a)

“limits disgorgement to the amount of ill-gotten gains that

remain available to defendants to fund future RICO violations,”

id. Philip Morris further argued that “the Government

deliberately has refused to develop the proof properly required

under Carson” and this in turn “requires dismissal of the

Government’s disgorgement claim.” Id. at 25. Second, Philip

Morris asserted that the government’s disgorgement model fails

as a matter of law to reasonably approximate the defendants’ ill-

gotten gains.

5

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 section 1964(a) more broadly than had the Second

Circuit, the court concluded that it could order disgorgement in

situations besides those identified in Carson. Id. at 77-79.

Unsurprisingly, the district court did not revisit its 2000

decision, observing only (in a footnote) that this decision had

held “that disgorgement is a permissible remedy under Section

1964(a).” Id. at 76 n.7. The district court also rejected Philip

Morris’s contention regarding the government’s disgorgement

model. Id. at 81-82.

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 “[w]hether 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.” Def’s 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 (D.D.C. June 25,

2004) (quoting Carson, 52 F.3d at 1182). Although in its 2004

order the district court had rejected Carson’s interpretation of

section 1964(a), it found substantial ground for difference of

opinion on this issue, explaining that “it is obvious that the

arguments to the contrary in Carson are neither insubstantial nor

frivolous,” and certified the 2004 order. Id. at 4, 7.

In its initial petition urging this court to accept the

interlocutory appeal, Philip Morris never raised the broader

6

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 advance 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 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

7

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 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 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 asked 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

8

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, 516 U.S. 199, 205

(1996) (holding that where the district court decided two issues

in the certified order but identified only the damages issue as the

controlling question of law, the court of appeals could

nonetheless address the other issue). But the “court of appeals

may not reach beyond the certified order to address other orders

made in the case.” Id.; see also United States v. Stanley, 483

U.S. 669, 677 (1987) (holding that the court of appeals erred in

addressing a claim not raised in the certified order though

closely related to it). Both “[c]ommentators and courts have

consistently observed that ‘the scope of the issues open to the

court of appeals is closely limited to the order appealed from

[and] [t]he court of appeals will not consider matters that were

ruled upon in other orders.’” Stanley, 483 U.S. at 677 (quoting

16 Wright, Miller, Cooper & Gressman, Federal Practice and

Procedure § 3929 (1977)) (second and third alterations in

original).

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 10. 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

9

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., 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 8-9 (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 7. 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 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, 514 U.S. at 47, on the broader

issue resolved in its 2000 order nor notice that Philip Morris

would raise this issue with us. In future cases, district courts

will lose their flexibility to certify discrete issues for review,

since the certification of one order may give this court

jurisdiction over all sorts of prior orders. Today’s situation

illustrates this: under the court’s theory, we have jurisdiction in

this interlocutory appeal to review at a minimum two prior

orders, neither of which Philip Morris sought to certify.

10

Moreover, by reducing the opportunity for tailored review, the

court’s jurisdictional theory threatens this circuit with

interlocutory overload. Parties who persuade us to accept an

interlocutory appeal may feel encouraged to raise any or even all

issues decided in prior orders that fall within our newfound

jurisdiction especially since, according to the court, issues raised

in prior orders are “preserved” for section 1292(b) purposes, see

majority op. at 10, and not simply for the purpose of appeal after

final judgment.

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. 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 (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

11

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 one 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 section 1292(b) to refuse to

permit the interlocutory appeal altogether—a point this court

overlooks.

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

under 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., 387 F.3d 884, 887-88

(D.C. Cir. 2004) (finding waiver based on a party’s failure to

appear and defend a privilege claim in the proceedings resulting

in the interlocutory appeal, even though the party had asserted

the privilege in a related proceeding in the same case); see also

id. at 892 (refusing to consider argument not raised below)

(citing United States v. Hylton, 294 F.3d 130, 135-36 (D.C. Cir.

2002)). Here, as discussed earlier, Philip Morris never argued

the broader issue in the relevant pleadings; a sentence-long

footnote stating “respectful disagreement” is not an argument,

particularly when offered in such a cursory fashion. Cf., e.g.,

Cement Kiln Recycling Coalition v. EPA, 255 F.3d 855, 869

(D.C. Cir. 2001) (per curiam) (observing that a “litigant does not

12

properly raise an issue by addressing it in a ‘cursory fashion’

with only ‘bare-bones arguments’”); Wash. Legal Clinic for the

Homeless v. Barry, 107 F.3d 32, 39 (D.C. Cir. 1997) (declining

to address argument made in a footnote). Although it is true, as

the court points out, that in the two just-cited cases the issues

were apparently never raised at an earlier stage, here we are

reviewing not the entire case but only the certified 2004 order,

which sets the bounds of both our jurisdiction and waiver

doctrine. Moreover, while we sometimes make exceptions to

our waiver rules, I would not do so here given Philip Morris’s

questionable tactics. Even under my colleagues’ jurisdictional

theory, only by exercising our discretion to accept an argument

not raised in the district court—and further exercising our

discretion to accept the interlocutory appeal—does the broader

issue stand before us.

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 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 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

13

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,

539 U.S. 244, 291 (2003) (Souter, J., dissenting); Arizona v.

Evans, 514 U.S. 1, 18 (1995) (Stevens, J., dissenting); Larson v.

Valente, 456 U.S. 228, 258 (1982) (White, J., dissenting).

II.

Like my colleagues, I begin with the structure and language

of RICO’s remedial provisions. RICO authorizes criminal

penalties and civil remedies against those engaging in patterns

of racketeering behavior. 18 U.S.C. § 1963 sets out the criminal

penalties: guilty persons shall “be fined under this title or

imprisoned . . . or both, and shall forfeit to the United States”

any illegally acquired interest. Section 1964 provides for the

civil remedies. At issue in this case is subsection (a), which

states:

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;

14

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., 473 U.S. 479, 491 n.10 (1985).

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

15

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 (1946), and Mitchell v. Robert

DeMario Jewelry, Inc., 361 U.S. 288 (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 side, injured individuals

could sue for treble damages plus attorneys’ fees, and if they

were not entitled to sue or the statutory period for their suit had

passed, the Administrator could sue for the same remedy on

behalf of the United States. Id. § 205(e), 56 Stat. at 34, as

amended by Stabilization Extension Act of 1944, § 108(b), 58

Stat. 632, 640-41. The Administrator could also sue to suspend

a violator’s license. Id. § 205(f)(2), 56 Stat. at 35.

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.

16

Id. § 205(a), 56 Stat. at 33. Although this section clearly

authorized injunctions aimed at future behavior, it made no

express provision for restitution and did not, contrary to my

colleagues’ suggestion, explicitly “grant[] general equitable

jurisdiction” to the district courts, see majority op. at 12.

Indeed, in Porter, the Eighth Circuit had held that district courts

were without authority to order restitution as a remedy for

violations of the EPCA. Bowles v. Warner Holding Co., 151

F.2d 529, 532 (8th Cir. 1945) (concluding that the district court

had no authority to order restitution because “[i]t is well settled

‘That where a statute creates a right and provides a special

remedy, that remedy is exclusive’”) (citations omitted).

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, 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

17

scope of that jurisdiction is to be recognized and applied.

Id. at 398 (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; see also Mitchell, 361 U.S. at 291 (discussing

Porter).

Indeed, the Court further suggested that restitution could be

considered an “other order” to enjoin or enforce compliance

within section 205(a) in either of two ways. First, it could be

“considered as an equitable adjunct to an injunction decree”

since “where, as here, the equitable jurisdiction of the district

court has properly been invoked for injunctive purposes, the

court has the power to decide all relevant matters in dispute and

to award complete relief even though the decree includes that

which might be conferred by a court of law.” 328 U.S. at 399.

Second, restitution could “be considered as an order appropriate

and necessary to enforce compliance with the Act” since

“[f]uture compliance may be more definitely assured if one is

compelled to restore one’s illegal gains.” Id. at 400. The Court

then remanded for the district court to “exercise the discretion

that belongs to it” and decide whether to order restitution. Id. at

403.

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, 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. “[E]ven courts of

equity may not grant relief in disregard of the remedies

18

specifically defined by Congress.” Id. at 408.

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 language 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 18, 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, 328 U.S. at 401-02; see also id. at 406-08 (Rutledge,

J., dissenting). Finally, the court attempts to distinguish Porter

on the grounds that the EPCA had a different policy goal than

RICO (preventing inflation rather than seeking to eradicate

organized crime), but this has no effect on Porter’s essential

holding that “the court may go beyond the matters immediately

underlying its equitable jurisdiction . . . and give whatever other

relief may be necessary under the circumstances,” see id. at 398.

In sum, the court offers no basis for concluding that RICO’s

structure and language get the statute past Porter’s high bar for

finding by a “necessary and inescapable inference” that

Congress intended to empower district courts to order only

limited equitable relief.

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 broad

19

remedial provisions for reform of corrupted organizations.

Although certain remedies are set out, the list is not exhaustive,

and the only limit on remedies is that they accomplish the aim

set out of removing the corrupting influence and make due

provision for the rights of innocent persons.” S. Rep. No. 91-

617, at 160 (1969); accord H. Rep. No. 91-1549, at 57 (1970).

The second part of this “limit”—requiring due provision for the

rights of innocent persons—poses no concern, for it describes

equity rather than constricts it. See, e.g., Holly v. Domestic &

Foreign Missionary Soc’y, 180 U.S. 284, 295 (1901) (“[A] court

of equity will not transfer a loss that has already fallen upon one

innocent party to another party equally innocent.”). But the first

part of this “limit”—that remedies should accomplish the aim of

removing the corrupting influence—does more than simply

restate an equitable principle. Suggesting that the remedies must

remove the corrupting influence, it allows one to infer that

remedies may accomplish only this aim. But that inference is,

to use Porter’s words, neither “necessary” nor “inescapable.”

One could also infer that remedies must accomplish this aim as

a lower limit (i.e., no corrupting influence may remain), but may

also accomplish other aims—just as remedies must make due

provision for the rights of the innocent, but may presumably do

much more. Indeed, this reading comports with how RICO’s

sponsor, Senator McClellan, described the bill when he

introduced it: the “ability of our chancery courts to formulate a

remedy to fit the wrong is one of the greatest benefits of our

system of justice. This ability is not hindered by the bill.” 115

Cong. Rec. 9567 (1969).

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

20

shown, to restrain violations” of the act, 29 U.S.C. § 217, district

courts had full equitable powers, 361 U.S. at 291-95; see also id.

at 289. Reaffirming Porter’s strong presumption in favor of

finding equitable relief fully available, the Court stated: “When

Congress entrusts to an equity court the enforcement of

prohibitions contained in a regulatory enactment, it must be

taken to have acted cognizant of the historic power of equity to

provide complete relief in the light of statutory purposes. As

this Court long ago recognized, ‘there is inherent in the Courts

of Equity a jurisdiction to . . . give effect to the policy of the

legislature.’” Id. at 291-92 (quoting Clark v. Smith, 38 U.S. (13

Pet.) 195, 203 (1839)) (omission in original); see also Califano

v. Yamasaki, 442 U.S. 682, 704-06 (1979) (using the Porter

presumption to conclude that district courts could order

injunctive relief not explicitly authorized by the Social Security

Act). The Mitchell Court thought it insignificant that because

both the aggrieved employees and the Secretary could seek lost

wages in actions at law under FLSA section 16, 29 U.S.C. § 216

(1960), duplicative recovery might occur. 361 U.S. at 292-93.

But see id. at 303 (Whittaker, J., dissenting) (concluding that the

statutory scheme “seems plainly to show that Congress intended

by s 16(c) to allow recovery of unpaid minimum wages and

overtime compensation at the instance of the Secretary only in

an action at law, brought under that subsection, and triable by a

jury”).

Mitchell reinforces the proposition that district courts may

order any equitable relief in civil RICO suits brought by the

government. My colleagues suggest that in “the RICO Act,

Congress provided a statute granting jurisdiction defined with

the sort of limitations not present in the FLSA.” Majority op. at

16. The only jurisdictional hook in the FLSA’s text, however,

was its language: “the district courts are given jurisdiction . . .

for cause shown, to restrain violations” of the act, 29 U.S.C. §

217. If this language opens the door to all equitable relief, then

RICO’s language—“[t]he district courts . . . shall have

21

jurisdiction to prevent and restrain violations”—certainly does

the same. And if the possibility of duplicative recovery did not

circumscribe the district court’s equitable authority under the

FLSA, then neither should that possibility under RICO do so.

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), 15 U.S.C. §

78u(d)-(e) (1989), which provide that the district courts “shall

have jurisdiction to issue writs of mandamus, injunctions, and

orders commanding” compliance with the act and regulations

made under it. See 890 F.2d at 1230 (relying on Porter and

Mitchell). “Disgorgement, then, is available simply because the

relevant provisions of the Securities Exchange Act of 1934,

sections 21(d) and (e) . . . vest jurisdiction in the federal courts.”

Id.; see also SEC v. Tome, 833 F.2d 1086, 1096 (2d Cir. 1987);

SEC v. Wash. County Util. Dist., 676 F.2d 218, 227 (6th Cir.

1982). Other circuits have reasoned similarly in interpreting

other acts. See, e.g., FTC v. Gem Merch. Corp., 87 F.3d 466,

468-70 (11th Cir. 1996) (applying Porter in holding that courts

may order restitution as a remedy for violations of the Federal

Trade Commission Act); ICC v. B&T Transp. Co., 613 F.2d

1182, 1183-86 (1st Cir. 1980) (applying Porter in holding that

courts may order restitution as a remedy for violations of the

Motor Carrier Act, though noting that “[i]f we were writing on

a blank slate, we might agree with the district court that the

language of the Motor Carrier Act cannot justify” the remedy of

restitution); CFTC v. Hunt, 591 F.2d 1211, 1221-23 (7th Cir.

1979) (applying Porter in holding that courts may order

disgorgement as a remedy for violations of the Commodity

Exchange Act).

Instead of following Porter and Mitchell, the court relies on

22

a later Supreme Court decision, Meghrig v. KFC Western, Inc.,

516 U.S. 479 (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.*

(quoting 42 U.S.C. § 6972(a)). The Court held that it was

“apparent from the two remedies described . . . that RCRA’s

citizen suit provision is not directed at providing compensation

for past cleanup efforts.” Id. at 484. While not explicitly

defining the limits of the two remedies described, the court

suggested that these remedies should be equated with

prohibitory and mandatory injunctions. Id. Moreover, relying

in part on the fact that an analogous statute expressly authorized

damages, the Court concluded that “neither remedy . . .

contemplates the award of past cleanup costs, whether these are

denominated ‘damages’ or ‘equitable restitution.’” Id. at 484-

85. According to the Court, it “is an elemental canon of

statutory construction that where a statute expressly provides a

particular remedy or remedies, a court must be chary of reading

others into it.” Id. at 488 (quoting Middlesex County Sewerage

Auth. v. Nat’l Sea Clammers Ass’n, 453 U.S. 1, 14-15 (1981)).

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. 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

23

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 (2000); see also United

States v. Oakland Cannabis Buyers’ Co-op, 532 U.S. 483, 496

(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 (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 (1989);

see also Agostini v. Felton, 521 U.S. 203, 237 (1997)

(reaffirming this requirement).

24

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 RCRA had a closely related statute on which the

Court in Meghrig relied heavily. Second, as in both Porter and

Mitchell, the government brought the suit rather than a private

party like the Meghrig plaintiff, and Porter makes clear that

district courts may have “even broader and more flexible”

equitable powers where the public interest is involved, 328 U.S.

at 398. This point has particular traction if the government is

the only party that may seek equitable relief under RICO. See

Religious Tech. Ctr. v. Wollersheim, 796 F.2d 1076, 1083-89

(9th Cir. 1986) (holding that equitable relief under RICO is

available only to the government). But see Nat’l Org. for

Women, Inc. v. Scheidler, 267 F.3d 687, 695-700 (7th Cir. 2001)

(holding that private plaintiffs can seek equitable relief under

RICO), rev’d on other grounds, 537 U.S. 393 (2003). Finally,

Meghrig’s suggestion that “restrain” in the RCRA refers only to

prohibitory injunctions cannot apply to section 1964(a), since

that section explicitly authorizes other remedies—e.g.,

divestment—to “prevent and restrain” RICO violations. For

these reasons, in determining whether the phrase “prevent and

restrain” limits the district court’s equitable powers, I think it

makes more sense to look to Porter and Mitchell, not Meghrig.

The court “[r]ead[s] Porter in light of” the statement in

Kokkonen v. Guardian Life Insurance Co., 511 U.S. 375, 377

(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 12-13. 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 (1998) (citation

omitted). Kokkonen simply makes the unremarkable point that

25

federal courts have subject-matter jurisdiction over cases only

if the Constitution or Congress so provides, 511 U.S. at 377, 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.

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., 332 U.S.

319, 366-67 (1947) (Douglas, J., dissenting in part); cf. United

States v. Oregon State Med. Soc’y, 343 U.S. 326, 333 (1952)

(emphasizing that in antitrust actions the purpose of injunctive

relief is to “forestall future violations”); Texas Indus., Inc. v.

Radcliff Materials, Inc., 451 U.S. 630, 639-47 (1981) (declining

to fashion and apply a common law right of contribution in the

antitrust context). On the other hand, some antitrust cases

suggest that courts may impose equitable remedies beyond those

intended merely to stop future violations from occurring. E.g.,

United States v. Crescent Amusement Co., 323 U.S. 173, 189

(1944) (although the district court ordered a remedy said to

“exceed any reasonable requirement for prevention of future

violations,” the “Court has quite consistently recognized in this

type of Sherman Act case that the government should not be

confined to an injunction against further violations. . . . Those

who violate the Act may not reap the benefits of their

violations”); cf. United States v. U.S. Steel Corp., 251 U.S. 417,

452 (1920) (observing that the Sherman Act is “clear in its

26

direction that the courts of the nation shall prevent and restrain

[monopolies] (its language is ‘to prevent and restrain violations

of’ the act); but the command is necessarily submissive to the

conditions which may exist and the usual powers of a court of

equity to adapt its remedies to those conditions”); Schine Chain

Theatres v. United States, 334 U.S. 110, 128 (1948) (suggesting

that “[l]ike restitution,” divestment “merely deprives a

defendant of the gains from his wrongful conduct” and

upholding it as a remedy under the Sherman Act), overruled on

other grounds by Copperweld Corp. v. Indep. Tube Corp., 467

U.S. 752, 763 n.8, 777 (1984). As these cases illustrate, antitrust

precedent offers little reason to doubt the applicability of Porter

and Mitchell to the case at hand.

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.

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,

27

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).

The government offers expert testimony to the effect that a

disgorgement order will deter the tobacco companies from

violating RICO in the future—in the dictionary’s language, it

will deprive them of the hope of succeeding in benefiting from

future RICO violations and hold them back from committing

such violations. In essence, the government claims that the

tobacco companies, having engaged in a persistent pattern of

deceptive representations over decades, will be less likely to

continue this illegal behavior if they must surrender their past

ill-gotten profits. Treating the government’s expert testimony

as correct, as we must at this stage of the litigation, see

Anderson, 477 U.S. at 255, I think it enough to forestall

summary judgment in Philip Morris’s favor. Indeed, the

Supreme Court has accepted just this theory of deterrence,

28

stating in Porter that restitution “could be considered as an order

appropriate and necessary to enforce compliance with the Act”

since “[f]uture compliance may be more definitely assured if

one is compelled to restore one’s illegal gains.” 328 U.S. at 400.

If restitution helps enforce compliance, then we should have

little doubt that disgorgement helps prevent and restrain

violations.

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 conclusion 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 15.

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 (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), 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, and

Meghrig nowhere rejects Porter’s conclusion that a

disgorgement order can impact future conduct—indeed, there

was no evidence in Meghrig that the defendants were likely to

commit future RCRA violations, and in any event, as discussed

supra at 23-24, 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

29

application of the canons noscitur a sociis and ejusdem generis.

See majority op. at 17; 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 (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”).

More important, I doubt the canons apply here at all. While

the canons can prove useful where there is otherwise “no general

principle in sight,” Dong v. Smithsonian Inst., 125 F.3d 877, 880

(D.C. Cir. 1997); see also Wash. State Dep’t of Health Servs. v.

Guardianship Estate of Keffeler, 537 U.S. 371, 384 (2003)

(applying the canons in interpreting the last listed term of

“execution, levy, attachment, garnishment, or other legal

process”), here the statute provides the general principle of

preventing and restraining violations. Indeed, the Supreme

Court declined to use these canons altogether in interpreting a

statute which gave the EEOC the power of enforcement

“through appropriate remedies, including reinstatement or hiring

of employees with or without back pay,” 42 U.S.C. § 2000e-

16(b). See West , 527 U.S. at 218 (stating that the “word

‘including’ makes clear that ‘appropriate remedies’ are not

limited to the examples that follow that word”); cf. Harrison v.

PPG Indus., Inc., 446 U.S. 578, 588-89 (1980) (declining to

apply ejusdem generis canon where Congress used “expansive

language”). I see no reason why we should do otherwise here,

especially since section 1964(a) uses the even more expansive

language: “including, but not limited to.” Finally, noscitur a

sociis and ejusdem generis should not be used to limit the types

30

of equitable relief available to district courts given Congress’s

instruction that RICO “shall be liberally construed to effectuate

its remedial purposes,” see supra at 14, one of which is

preventing and restraining future violations—an aim that, far

from being a “new purpose[] that Congress never intended,” see

majority op. at 19 (quoting Reves v. Ernst & Young, 507 U.S.

170, 183 (1993)), expressly appears in the statute’s text. If an

equitable remedy achieves this goal, then the statute authorizes

it.

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 19. To be sure, such concerns are relevant in

considering whether to infer additional causes of action. As

discussed earlier, supra at 18, 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, 452 U.S. 576, 585 (1981). The converse

should hold as well. If an equitable remedy prevents and

restrains RICO violations—one of the remedial purposes which

we should liberally construe the statute to effectuate—it is

untenable to claim that the existence of criminal provisions

renders this remedy nonetheless beyond the scope of district

court authority.

31

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 that the defendants are likely to commit future RICO

violations. 321 F. Supp. 2d at 75-76. This is not a foregone

conclusion. In Carson, for example, while the Second Circuit

recognized that disgorgement can sometimes serve to prevent

and restrain RICO violations, it was rightly skeptical that

disgorgement of the “gains ill-gotten long ago by a retiree” who

had long since left the union position that he had abused in

accepting kickbacks would accomplish this purpose. 52 F.3d at

1182. Assuming district courts are limited to remedies that

prevent and restrain, but see supra Part II.A, 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, see 52 F.3d at 1182. But see Richard v.

Hoechst Celanese Chem. Group, 355 F.3d 345, 355 (5th Cir.

2003) (leaving open the possibility that disgorgement might be

ordered solely to deter other possible offenders). Because any

remedy imposed for a solely exemplary purpose (i.e., to

dissuade others from committing RICO violations) would

amount to punishment, it goes beyond what Congress intended,

see S. Rep. No. 91-617, at 81, as well as pushes the boundaries

of what equity permits, cf. Tull, 481 U.S. at 422. In this case,

however, the government offers evidence that the defendant

companies themselves are likely to commit future RICO

violations by misleading the public about the health

consequences of smoking and the addictive effects of nicotine,

as well as by persisting in marketing to young people.

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

32

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 4 (Williams, J.,

concurring). The concurrence thus concludes that as a matter of

law, Congress intended to exclude disgorgement from those

remedies appropriate to prevent and restrain RICO violations.

See id. at 4-5. I think this approach is flawed in several respects.

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. 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 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, see,

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., 402 U.S. 1, 15 (1971)

(quoting Hecht Co. v. Bowles, 321 U.S. 321, 329-30 (1944)).

Sometimes injunctive relief alone will make the most sense;

other times, different equitable remedies or combinations of

equitable remedies, perhaps including disgorgement, might

prove as or more effective.

33

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 (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 (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 3-5, 7-8. 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 7-8. Perhaps so, but “on

summary judgment, the evidence should be viewed in favor of

34

the nonmoving party, not,” as the concurrence would have it,

“the other way around.” Langon v. Dep’t 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); see 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 judgment under Rule 56 in the

nature of the evaluation made by the court”); see also 9A Wright

& Miller, Federal Practice and Procedure § 2585 (2d. ed. 1994)

(noting that under Rule 52 a reviewing court need not view the

evidence in the light most favorable to the appellee).

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 9 (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,

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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, 516 U.S. at 205.

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

36

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 proved that all increases in the stock’s value stemmed

from the violation, we rejected the defendants’ argument that

because the increase in price may have depended on other

factors, disgorgement of all profits was “simplistic, quite

unrealistic, and so de facto punitive.” See id. at 1231. Noting

that “[r]ules for calculating disgorgement must recognize that

separating legal from illegal profits exactly may at times b e a

near-impossible task,” we held that “the government’s showing

of appellants’ actual profits on the tainted transactions at least

presumptively satisfied” its “burden of persuasion that its

disgorgement figure reasonably approximates the amount of

unjust enrichment.” Id. at 1231-32. Although recognizing that

this might result in “actual profits becoming the typical

disgorgement measure,” we observed that “the risk of

uncertainty should fall on the wrongdoer whose illegal conduct

created that uncertainty.” Id. at 1232; see also SEC v. Banner

Fund Int’l, 211 F.3d 602, 617 (D.C. Cir. 2000).

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

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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.