Appendix — United States v. Philip Morris USA Inc.

lla

had called that denial to the court’s attention in the

caption of its motion, and a proposed order

accompanying the second motion.

Our dissenting colleague finds in Yamaha support for

the proposition that “the only issues ‘fairly included’

within a certified order are those decided in the district

court’s accompanying memorandum. . . .” Dissent at

1213. We understand the law to be, as suggested in

Yamaha, that issues are not decided in memoranda at

all, but rather in orders. Therefore, consistent with Ya-

nuuha, we review orders, not memoranda, Our col-

league asserts that in Yamaha the Court “found ‘fairly

included’ an issue that the district court had resolved in

the same opinion in which it decided the issue identified

as the controlling question of law.” Dissent at 1213.

While this may well be the case, the Supreme Court not

only did not stress that circumstance, it did not even

mention it. Indeed, we note that our colleague had to

repair to the unpublished opinion of the District Court

to discover the truth of his proposition. We seriously

doubt that the Supreme Court intended to establish a

precedent that difficult to discover, let alone apply.

Nothing in United States v. Stanley, 483 U.S. 669, 107

S. Ct. 3054, 97 L. Ed. 2d 550 (1987), is to the contrary.

The passage relied upon by our dissenting colleague to

the effect that courts considering interlocutory appeals

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

ruled upon in other orders,” id. at 677, 107 S. Ct. 3054,

did not address a situation like the one before us. Here

the order appealed from reiterated, and totally de-

pended 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-

12a

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

US. 388, 91 S. Ct. 1999, 29 L. Ed. 2d 619 (1971). On

appeal, the court of appeals not only affirmed the dis-

trict 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 seg. 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 dis-

missal on the same disgorgement claim. We see noth-

ing in Staniey inconsistent with the later instruction in

Yamaha recognizing our jurisdiction to “address any

issue fairly included within the certified order.” Ya-

maha, 516 U.S. at 205, 116 S. Ct. 619. 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, 1081 (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, logi-

cally prior to the Carson question, of whether disgorge-

ment 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.

18a

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, 66 S. Ct. 1086, 90 L. Ed. 1332

(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, 66 S. Ct. 1086.

This grant is only to be limited when “a statute in so

many words, or by a necessary and inescapable infer-

ence, restricts the court’s jurisdiction.” Jd. 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 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. 375, 377, 114 S. Ct. 1678, 128 L. Ed. 2d 391 (1994)

(citations omitted). Reading Porter in light of this

limited jurisdiction we must not take it as a license to

arrogate to ourselves unlimited equitable power. We

will not expand upon our equitable jurisdiction if, as

here, we are restricted by the statutory language, but

may only assume broad equitable powers when the

statutory or Constitutional grant of power is equally

broad.

As our dissenting colleague correctly notes, the

Court in Porter was considering whether a district

court acting under the authority granted in the EPCA

14a

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. 28, 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 Admi-

nistrator 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.” Jd.

The Supreme Court did not have to make much of a

stretch to determine that the phrase “enforcing compli-

ance 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 en-

abling the District Court in a civil RICO action brought

by the Government under § 1964(a). We further note

that the Court in Porter was ordering restitution, under

a statute designed to combat inflation. Restitution of

overcharge works a direct remedy of past inflation,

directly effecting the goal of the statute. The Court in

Porter set forth two theories under which “{a]n order

for the recovery and restitution of illegal rents may be

considered a proper ‘other order’ “ under the applicable

statute. 328 U.S. at 399, 66 S. Ct. 1086. First, the

recovery of the illegal payment by the victim tenant

15a

“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.” Jd. (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. . . .” Jd. 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, 66 S.

Ct. 1086. 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 for-

ward-looking nature of the remedy in a way not applica-

ble to a different remedy in Porter for the accomplish-

ment of a different goal under a different statute.

Section 1964(a) provides jurisdiction to issue a vari-

ety of orders “to prevent and restrain” RICO viola-

tions. This language indicates that the jurisdiction is

“limited to forward-looking remedies that are aimed at

future violations. The examples given in the text bear

this out. Divestment, injunctions against persons’

future involvement in the activities in which the RICO

enterprise had been engaged, and dissolution of the

enterprise are all aimed at separating the RICO crimi-

nal 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

16a

restore the status quo. See, e.g., Tull v. United States,

481 U.S. 412, 424, 107 S. Ct. 1881, 95 L. Ed. 2d 365

(1987). It is measured by the amount of prior unlawful

gains and is awarded without respect to whether the

defendant will act unlawfully in the future. Thus it is

both aimed at and measured by past conduct.

The Government would have us interpret § 1964(a)

instead to be a plenary grant of equitable jurisdiction,

effectively ignoring the words “to prevent and restrain”

aitogether. This not only nullifies the plain meaning of

the terms and violates our canon of statutory construc-

tion 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 pre-

cedent. In Meghrig v. KFC Western, Inc., 516 U.S. 479,

488, 116 S. Ct. 1251, 184 L. Ed. 2d 121 (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 dis-

posing of hazardous waste. If “restrain” is only aimed

at future actions, “prevent” is even more so.

Mitchell v. DeMario Jewelry, 361 U.S. 288, 80 S. Ct.

332, 4 L. Ed. 2d 323 (1960), relied on by the Govern-

ment, 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 juris-

diction to restrain violations of a section making it un-

lawful for a covered employer to discharge or discrimi-

nate against employees who had filed complaints or

instituted actions under the FLSA. The Court re-

viewed the whole breadth of that broad Act to conclude

17a

that the available remedies included not only injunction

against further discrimination and mandatory injunc-

tions of reinstatement, but also a “make whole” reim-

bursement for lost wages because of the discriminatory

discharge. As in Porter, the Court reiterated that in

equitable jurisdiction “[uJnless otherwise provided by

statute, all the inherent equitable powers of the District

Court are available for the proper and complete

exercise of that jurisdiction.” Mitchell, 361 U.S. at 291,

80 S. Ct. 332 (quoting Porter, 328 U.S. at 398, 66 S. Ct.

1086). In the RICO Act, Congress provided a statute

granting jurisdiction defined with the sort of limitations

not present in the FLSA or the EPCA. The statute

under which the Government sued Appellants, 18

U.S.C. § 1964(a), granted only the jurisdiction which we

set forth above. The District Court, so far as is rele-

vant to actions under that section, has jurisdiction only

to prevent and restrain violations of [RICO] by issu-

ing appropriate orders, including, but not limited to:

ordering any person to divest himself of any inter-

est, 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

18a

that we should find disgorgement available because

Congress has not taken it away, we note that the Su-

preme Court considered a similar argument in Meghrig.

The High Court nonetheless limited the available reme-

dies under CERCLA to those provided in the statute,

declaring that

where Congress has provided “elaborate enforce-

ment provisions” for remedying the violation of a

federai statute, 4s Congress has done with RCRA

and CERCLA, “it cannot be assumed that Congress

intended to authorize by implication additional judi-

cial remedies. . . .”

516 U.S. at 487-88, 116 S. Ct. 1251 (quoting Middlesex

County Sewerage Auth. v. Nat’l Sea Clammers Ass’n,

453 US. 1, 14, 101 S. Ct. 2615, 69 L. Ed. 2d 435 (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 dis-

gorgement. 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 dis-

gorgement 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 discour-

age,’ 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

19a

words “including, but not limited to” introduce a non-

exhaustive list that sets out specific examples of a

general principle. See Dong v. Smithsonian Iust., 125

F.3d 877, 880 (D.C. Cir. 1997). Applying the canons of

noscitur a sociis and eyusdem generis, 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, 123

S. Ct. 1017, 154 L. Ed. 2d 972 (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. Dis-

gorgement 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; Con-

gress’ care in formulating such a “carefully crafted and

detailed enforcement scheme provides strong evidence

that Congress did not intend to authorize other reme-

dies that it simply forgot to incorporate expressly.”

Great-West Life & Annuity Ins. Co. v. Knudson, 534

U.S. 204, 209, 122 S. Ct. 708, 151 L. Ed. 2d 635 (2002)

(quoting Mertens v. Hewitt Associates, 508 U.S. 248,

251, 254, 113 S. Ct. 2063, 124 L. Ed. 2d 161 (1993))

(internal quotations omitted) (emphasis in original).

RICO already provides for a comprehensive set of

remedies. When Congress intended to award remedies

that addressed past harms as well as those that offered

prospective relief, it said as much. In a criminal RICO

action the defendant must forfeit his interest in the

20a

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 398, 66 S. Ct. 1086, 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 re-

quested here is similar in effect to the relief mandated

under the criminal forfeiture provision, § 1963(a), with-

out requiring the inconvenience of meeting the addi-

tional procedural safeguards that attend criminal

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

U.S.C. § 8282, notice requirements, 18 U.S.C. § 1963(1 ),

and general criminal procedural protections including

proof beyond a reasonable doubt. Further, on the Gov-

ernment’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. 148, 156, 107 S. Ct.

2759, 97 L. Ed. 2d 121 (1987), but it raises issues of du-

plicative recovery of exactly the sert that the Supreme

Court said in Holmes v. Securities Investor Protection

2la

Corp., 503 U.S. 258, 269, 112 S. Ct. 1311, 117 L. Ed. 2d

532 (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, 113 S. Ct. 1163, 122 L. Ed. 2d 525

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

those remedial purposes do not extend to disgorgement

in civil cases.

The Second Circuit in Carson has interpreted “pre-

vent 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 Cela-

nese 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 re-

22a

quired by § 1964(a). The language of the statute explic- -

itly 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 1220 (quoting Rodriguez de

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

477, 484, 109 S. Ct. 1917, 104 L. Ed. 2d 526 (1989)). This

would be most devastating to one side of the case or the

other if we were in fact attempting to overrule a Su-

preme Court precedent. That is, if there were a Su-

preme Court case that had direct application to the

facts before us, we would be required to follow it, and

that would be the end of the matter. We would not

need to consider any other line of cases. However, the

Rodriguez de Quijas language is not particularly help-

ful 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.

23a

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 Appel-

lants 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 as-

sets “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 pre-

vent and restrain [RICO] violations.” 18 U.S.C. §

1964(a). Reasoning that pure deterrence was an imper-

missible objective of orders under § 1964(a), the Second

Circuit went on to find that disgorgement could “pre-

vent 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.” /d. 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

24a

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 amownt by

which the defendant was unjustly enriched; the alter-

native would allow a defendant to escape liability by

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 con-

strued.

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

25a

difficult for these defendants to re-allocate resources

from the businesses of cheese and crackers, for exam-

ple, 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 parti-

cular resources will be devoted to crime.

II.

It is hardly surprising that there are only gossamer

lines between drastic disgorgement (destruction of

bondholder as well as shareholder wealth) and rela-

tively mild disgorgement (cordoning off resources in

non-tobacco subsidiaries). The plain fact is that wealth

deprivation is an extremely crude device for “prevent-

fing}’ 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 under-

standing that, in the civil context, such remedies as

damage awards and restitution “deter,” and thus in a

sense “prevent” commission of torts, breaches of con-

tract, 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.

26a

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 deter-

rent effect.

To evaluate that last statement consider a society

that empowered some deus ex machina to randomly

excuse one damage judgment in a million. Such an

exception to the rules would have no detectable effect

on the commission of torts or breaching of contracts.

Even the lucky defendant who enjoyed the benefit of

the pardon wouldn’t—unless a complete fool—materi-

ally 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 sched-

ules of draconian contempt penalties for future viola-

tions, 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 defen-

dant. 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) RICQO’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 genu-

27a

inely 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; but that im-

plied 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 stan-

dard. A purported § 1964(a) disgorgement remedy, on

top of those explicitly authorized, would provide only a

trivial incremental effect (the reverse of the pardon

granted once in a million), and would not qualify. Nor

would disgorgement aimed at reducing the defendant’s

crime-enabling resources, a factor linked only crudely

to his future tendency toward criminality.

Once we (1) accept the proposition that § 1964(a)

limits the equity court to forward-looking remedies, as

even the dissent appears to do with respect to the

government’s narrower argument, see Dissent at 1224-

25 (“I also share the Second Circuit’s apparent con-

clusion. . . that disgorgement may be ordered only to

prevent and restrain a defendant from future RICO

28a

violations.”), and (2) reject the supposition that “what-

ever 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 definitely assured if one is compelled to

restore one’s ill- gotten gains.” Dissent at 1223, 1224.

But the statute at issue in Porter gave district courts

power to issue orders “enforcing compliance” and thus

didn’t seem to narrow the grant to forward-looking

remedies. Indeed the Porter dissent never suggests

such a limit; nor, so far as appears, did the defendant

firm. For construing § 1964(a), Porter is of remarkably

little help.

The expert testimony offered by the government for

the proposition that backward-looking disgorgement

will “‘prevent and restrain’ defendants from commit-

ting future RICO violations,” see Dissent at 1226, ser-

ves 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.

29a

The dissent’s genuflection before the experts leaves

the reader to imagine some supporting analysis. Lest

the imagination run riot, I attach an appendix con-

taining 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 finan-

cial 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 reme-

dies, 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. '

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

1 United States Memorandum in Opposition to Defendants’

Motion for Partial Summary Judgment Dismissing the Govern-

ment’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 gov-

ernment on its website.

30a

the government would have reduced the likelihood of

violations. (Indeed, on the government’s theory—that

the statute actually creates such a remedy—the defen-

dants 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 liti-

gation 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 with transpar-

ency-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 for-

ward-looking schedule of penalties for even minute

infractions, made doubly effective by compulsory disclo-

sure and approval measures. The government’s ex-

perts 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 gov-

ernment’s fallback position) to transform an issue of

statutory interpretation into one of fact. See Dissent at

1222-23, 1227-28; see also id. at 1223 (noting that in

Meghrig v. KFC Western, Inc., 516 U.S. 479, 116 S. Ct.

1251, 134 L. Ed. 2d 121 (1996), there was no affirmative

+

3la

evidence that the defendants were likely to commit

future RCRA violations, and thus suggesting that the

case was something other than pure statutory interpre-

tation). 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 interpreta-

tion 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 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 en-

meshed that we needn’t explore the court’s language

hmiting § 1292(b) jurisdiction to issues “logically inter-

woven” with the explicitly identified issue. Maj. Op. at

1196. The dissent’s hypotheticals as to what might be

covered, see Dissent at 1212, plainly depend on an

astonishingly broad notion of either logic or weaving.

Having analyzed § 1964(a) and having found the order

in conflict with its terms, the court must reverse.

One final note. The dissent chides the court for

creating a circuit split. See Dissent at 1208. But if we

confined ourselves to what the dissent acknowledges to

be properly before us, and adopted the dissent’s

> ae

preferred position (that disgorgement is available like

any other equitable remedy, regardless of its likely

effects on a defendant’s future behavior, simply because

RICO doesn’t explicitly preclude it), we would create

no less of a split between this circuit and the Second.

Appendix

Excerpt from United States Memorandum in Opposi-

tion to Defendants’ Motion for Partial) Summary Judg-

ment 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 dis-

gorgement of the proceeds calculated by Dr. Fisher

would in fact act to prevent and restrain future RICO

violations. Dr. Fisher directly addressed this point in

his rebuttal report in which he states:

Defendants’ experts have suggested that dis-

gorgement of ill-gotten gains such as the proceeds

sought in this matter will not serve the goal of pre-

venting or restraining the defendants from engag-

ing 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

33a

Carlton and the other defendants’ experts who

espouse this view fail to recognize is that requiring

defendants to pay proceeds will affect their expecta-

tions (and those of others contemplating malfea-

sance) 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

45912. |

174. Dr. Kothari’s expert report confirms Dr.

Fisher’s conclusion:

Requiring the defendants to pay ill-gotten proceeds

is relevant. The economic incentive for illegal

behavior is higher (for defendants and onlookers) if

~ defendants are not required to pay the proceeds.

While payment of proceeds has some of the features

of sunk cost, it is not identical to a sunk cost because

it will affect future decisions or behavior. The

higher the proceeds paid the greater the economic

incentive to avoid illegal behavior in the future.

Expert Report of S.P. Kothari, United States v.

Philip Morris, (R. 1451; filed July 24, 2002) at 3-4, ¥ 8.

175. Dr. Fisher expressly states in his expert report:

[Defendants’ experts] have also suggested that

enjoining Defendants from future illegal behavior

and threatening them with the possibility of finan-

cial penalties would be more effective as future

deterrents than would be disgorgement. Professor

Weil, for example, suggests that ‘the Court could

34a

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 reme-

dies, the Defendants allegedly chose to engage in

the illegal behavior. In this context, it is important

to note that requiring Defendants to pay proceeds

would strengthen the credibility of existing laws

and thus provide additional economic incentives to

deter future misconduct.

Expert Rebuttal Report of Franklin Fisher, United

States v. Philip Morris, (R. 1450; filed July 24, 2002) at

5-6, ¢ 14.

176. Dr. Fisher has repeatedly confirmed the pre-

ventative benefit of disgorgement. At his deposition he

stated:

Q. . . . the idea is that disgorgement prevents

and restrains future violations by altering the defen-

dants’ 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).

35a

177. “[A]s I have repeatedly and clearly stated in my

report and deposition testimony, disgorgement of De-

fendants’ proceeds, as I have calculated them, would in

fact act to prevent and restrain future RICO viola-

tions.” Declaration of Franklin Fisher, United States v.

Philip Morris, at 7, 4 16 (Master Rule 7.1/56.1 St.

Exhibit 5)

TATEL, Circuit Judge, dissenting.

Congress passed the Organized Crime Control Act of

1970, which included RICO, “to seek the eradication of

organized crime in the United States . . . by providing

enhanced sanctions and new remedies to deal with the

unlawful activities of those engaged in organized

crime.” United States v. Turkette, 452 U.S. 576, 589,

101 S. Ct. 2524, 69 L. Ed. 2d 246 (1981) (quoting Pub. L.

No. 91-452, 84 Stat. 922, 923 (1970)). Through this law-

suit, the United States seeks to end what it perceives

as rampant racketeering violations within the tobacco

industry. Specifically, the government offers volumi-

nous evidence, which we must view in the light most

favorable to it, see Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986)

(stating that at summary judgment the “evidence of the

non-movant is to be believed, and all justifiable infer-

ences are to be drawn in [its] favor”), that Philip

Morris, Altria Group, R.J. Reynolds, Brown & William-

son, Lorillard, BATCo, and Liggett have engaged in a

half eentury of deceptive practices to the detriment of

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

individually and in concert through collective agree-

ments and jointly funded organizations like the Council

for Tobacco Research and the Tobacco Institute (also

defendants), these companies publicly defended smok-

ing as both harmless and nonaddictive despite knowing

36a

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, 99 S. Ct. 3035, 61 L. Ed. 2d 797 (1979), despite :

licly 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. Signifi-

cantly 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 racketeer-

ing violations in the future. The government’s claim

regarding likely future conduct rests not only on the

companies’ alleged history of deceptive activities, but

also on record evidence that the companies continue

making their misleading statements about both the

health consequences of smoking and the addictive na-

ture 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

37a

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 interlocutery 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 nec-

essary and inescapable inference, restricts the court’s

jurisdiction in equity,” district courts may grant any

equitable relief. Porter v. Warner Holding Co., 328

U.S. 395, 398, 66 S. Ct. 1086, 90 L. Ed. 1332 (1946). Be-

cause under a fair application of Supreme Court prece-

dent, see id. at 398-403, 66 S. Ct. 1086, no such inference

can be drawn about RICO, I would conclude that the

district court has authority to order disgorgement. Al-

ternatively, even if RICO’s phrase “prevent and re-

strain 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 accom-

plish just that purpose in this case.

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, 115 S. Ct. 1208, 131 L. Ed. 2d

60 (1995). Congress “chose to confer on district courts

38a

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 persuad-

ing 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 judg-

ment,” Coopers & Lybrand v. Livesay, 487 U.S. 463,

475, 98 S. Ct. 2454, 57 L. Ed. 2d 351 (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 dis-

miss, 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 dis-

trict 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 certifi-

eation of that order, though it could have done so at any ©

time after the order’s 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.”).

39a

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 1198, Philip Morris neither reargued the

position it took in 2000 nor aske 1 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 previousiy, 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 6n.4. Instead, Philip Morris urged the court to grant

its motion for summary judgment for two primary rea-

sons. 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 1178, 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,” 7d. Philip Morris further

argued that “the Government deliberately has refused

to develop the proof properly required under Carson”

and this in turn “requires dismissai of the Govern-

ment’s disgorgement claim.” Jd. at 25. Second, Philip

Morris asserted that the government’s disgorgement

model fails as a matter of law to reasonably approxi-

mate the defendants’ ill-gotten gains.

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

40a

broadly than had the Second Circuit, the court con-

cluded that it could order disgorgement in situations

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

prisingly, the district court did not revisit its 2000 deci-

sion, 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. /d. 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 argu-

ment from 2000. Instead, it stated that “[wJhether the

Carson standard applies to the Government’s disgorge-

ment claim is clearly a controlling question of law. .

If the Government is wrong, and Carson applies, noth-

ing 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, 2004 WL 1514215 (D.D.C.

June 25, 2004) (quoting Carson, 52 F.3d at 1182). Al-

though 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. Jd. at 4, 7.

In its initial petition urging this court to accept the

interlocutory appeal, Philip Morris never raised the

4la

broader question the district court had addressed in

2000, i.e., whether disgorgement is ever available under

section 1964(a). Instead, Philip Morris focused on the

narrower issue actually raised in its 2004 motion for

summary judgment, arguing that the district court had

erred in rejecting Carson,’s interpretation of section

1964(a) and claiming that “[ilf 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 “inter-

locutory appeal would not materially advance the ter-

mination of this litigation.” Resp. in Opp’n to Emer-

gency 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] argu-

ment [that an interlocutory appeal would not mate-

rially advance the litigation’s termination] as a rea-

son 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),’ (Sum-

mary Judgment Order at 8 n.7), then the Govern-

ment’s $280 billion claim is precluded as a matter of

law.

42a

Reply to Emergency Pet. for Permission to Appeal an

Order at 5. This entirely disingenuous statement con-

veyed the impression that the district court had ruled

on this broader issue in the certified 2004 order rather

than simply mentioning its 2000 decision. Moreover, by

placing this statement under the heading “The District

Court Properly Determined That an Appeal From Its

Order Would Materially Advance This Litigation,” id.,

Philip Morris insinuated that the district court had

certified this issue to this court as opposed to the

narrower question actually resolved in the 2004 order.

The government, of course, had no opportunity to

correct these misrepresentations, and a motions panel

accepted Philip Morris’s appeal, expressly leaving the

merits panel free to reconsider and dismiss the appeal.

In re Philip Morris USA, Inc., No. 04-8005 (D.C. Cir.

July 15, 2004).

Philip Morris’s opening brief on the merits reveals

the scope of its bait and switch. The brief devotes forty

pages to the issue decided in the 2000 order and only

seven to the issues decided in the certified 2004 order.

In response, the government urges us to dismiss 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.

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

43a

discussed in the order granting certification, (5) not

raised by Phiiip 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

Supreme Court has made clear that an appellate court

can review “any issue fairly included within the certi-

fied 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 partieular

question formulated by the district court.” Yamaha

Motor Corp., USA v. Calhoun, 516 U.S. 199, 205, 116 S.

Ct. 619, 133 L. Ed. 2d 578 (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.” /d.; see also

United States v. Stanley, 483 U.S. 669, 677, 107 S. Ct.

3054, 97 L. Ed. 2d 550 (1987) (holding that the court of

appeals erred in addressing a claim not raised in the

certified order though closely related to it). Both

“{cjommentators 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][{tJhe

court of appeals will not consider matters that were

44a .

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

107 S. Ct. 3054 (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 com-

mands. For all intents and purposes, Philip Morris asks

us to address the 2000 order. Today’s decision over-

turns 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 re-

view (at a minimum) any basis for summary judgment

that is “logically interwoven with the explicitly identi-

fied issue.” See majority op. at 1196. This approach not

only gives us jurisdiction over the issue decided by the

district court in the 2000 order, but also over the

district court’s 2002 determination, made in denying

Philip Morris’s motion for a jury trial, that disgorge-

ment 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). I ndeed, although the concurrence

_ apparently does not share this approach, see sep. op. at

1206 (Williams, J., concurring), the majority opinion

suggests that any issue which would result in “complete

dismissal of the Government’s claim for disgorgement

with prejudice” lies within our jurisdiction “regardless

of the grounds the District Court gave for its decision,”

see majority op. at 1194. By this logic, we may also

have interlocutory jurisdiction to review the district

court’s denial of the tobacco companies’ 2000 motion to

dismiss, where they claimed that the government has

not “adequately alleged that Defendants’ racketeering

45a

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 juris-

diction may extend to these issues as well.

The court’s approach is problematic in several re-

spects. Most significantly, it curtails the district court’s

section 1292(b) certification role. In this case, the dis-

trict court had neither an opportunity to exercise “first

line discretion to allow interlocutory appeal[ J,” Swint,

514 U.S. at 47, 115 S. Ct. 12038, 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. 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 eur newfound jurisdiction especially since,

according to the court, issues raised in prior orders are

“preserved” for section 1292(b) purposes, see majority

46a

op. at 1196, 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, 116 S.

Ct. 619. There, the Court found “fairly included” an

issue that the district court had resolved in the same

opinion in which it decided the issue identified as-the

controlling question of law, see Calhoun v. Yamaha

Motor Corp., USA, No. 90-4295, 1993 WL 216238 (E.D.

Pa. June 22, 1993). While the Court did not explicitly

rely on this point, it is relevant to determining whether

’ Yamaha’s “fairly included” language stands for the

proposition that appellate courts have interlocutory

jurisdiction over all possible bases for reversing a sum-

mary 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 instruc-

tion in Stanley that we should “not consider matters

that were ruled upon in other orders.” 483 U.S. at 677,

107 S.-Ct. 3054 (citation omitted); cf. Briggs v. Goodwin,

569 F.2d 10, 25 (D.C. Cir. 1977) (noting that any possi-

ble justification for addressing “all other issues relevant

to the result reached by [a certified] order” would “be

substantially diminished . . . where the order certified

for appeal is a separate order from the one [containing

the other issues]”); Dinsmore v. Squadron, Ellenoff,

Plesent, Sheinfeld & Sorkin, 135 F.3d 837, 840 (2d Cir.

1998) (finding that the certified order referred to rather

than incorporated a prior order and concluding that no

47a -

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 certifi-

cation. 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 disagree-

48a

ment” 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 prop-

erly 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 foot-

note). 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 atten-

tion. 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

49a

appropriately, Philip Morris could have asked the dis-

trict 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 govern-

ment’s opposition to raise the broader issue with the

motions panel. This court should not be rewarding such

tactics by exercising its discretion to hear this appeal.

I would therefore dismiss the interlocutory appeal. I

reach this conclusion reluctantly because I certainly

understand how hearing this interlocutory appeal could

be helpful to Judge Kessler, who is presiding over a

long and difficult trial. In my view, however, preserv-

ing 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, 123 S. Ct.

2411, 156 L. Ed. 2d 257 (2003) (Souter, J., dissenting);

Arizona v. Evans, 514 US. 1, 18, 115 S. Ct. 1185, 131 L.

Ed. 2d 34 (1995) (Stevens, J., dissenting); Larson v.

Valente, 456 U.S. 228, 258, 102 S. Ct. 1678, 72 L. Ed. 2d

33 (1982) (White, J., dissenting).

50a

Il.

Like my colleagues, I begin with the structure and

language of RICO’s remedial provisions. RICO author-

izes 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; imposing reasonable

restrictions on the future activities or investments

of any person, including, but not limited to, pro-

hibiting any person from engaging in the same type

of endeavor as the enterprise engaged in, the

activities of which affect interstate or foreign com-

merce; or ordering dissolution or reorganization of

any enterprise, making due provision for the rights

of innocent persons.

Another subsection, § 1964(c), authorizes injured per-

sons 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

5la

remedial purposes are most evident,” Sedima, S.P.R.L.

v. Imrex Co., 473 U.S. 479, 491 n.10, 105 S. Ct. 3275, 87

L. Ed. 2d 346 (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 any equitable remedy for RICO violations, the

court distinguishes—unconvincingly, in my view—the

two Supreme Court cases relied on by the government,

Porter v. Warner Holding Co., 328 U.S. 395, 66 S. Ct.

1086, 90 L. Ed. 1332 (1946), and Mitchell v. Robert

DeMario Jewelry, Inc., 361 U.S. 288, 80 S. Ct. 332, 4 L.

Ed. 2d 323 (1960). I believe these two cases control this

case and compe! 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

52a

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 con-

tained no specific provision for restitution or disgorge-

ment, but-—like RICOQ—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 Ad-

ministrator could sue for the same remedy on behalf

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

amended by Stabilization Extension Act of 1944, 7 §

108(b), 58 Stat. 6382, 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]Jhenever 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 compli-

ance 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 per-

manent or temporary injunction, restraining order,

or other order shall be granted without bond.

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

53a

“grant[] general equitable jurisdiction” to the district

courts, see majority op. at 1197. 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]jt 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 juris-

diction of the District Court to enjoin acts and practices

made illegal by the Act and to enforce compliance with

the Act,” 328 U.S. at 397-98, 66 S. Ct. 1086, the Court

concluded—and I quote at length since the language is

so critical to the disposition of this case—that

[such 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 juris-

diction. 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 im-

mediately underlying its equitable jurisdiction and

decide whatever other issues and give whatever

other relief may be necessary under the circum-

Stances. 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 ab-

sence of a clear and valid legislative command. Un-

54a

less a statute in so many words, or by a necessary

and inescapable inference, restricts the court’s juris-

diction in equity, the full scope of that jurisdiction is

to be recognized and applied.

Id. at 398, 66 S. Ct. 1086 (citations omitted). The Court

concluded that because the EPCA, despite the very

detailed and specific nature of the authorized remedies,

did not rule out restitution by a “necessary and inescap-

able inference,” the district court could order restitu-

tion even if not expressly authorized by the statute.

See id. at 398-400, 66 S. Ct. 1086; see also Mitchell, 361

U.S. at 291, 80 S. Ct. 332 (discussing Porter ).

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 prop-

erly 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, 66 S. Ct. 1086. Second, restitu-

tion could “be considered as an order appropriate and

necessary to enforce compliance with the Act” since

“{fjuture compliance may be more definitely assured if

one is compelled to restore one’s illegal gains.” Jd. at

400, 66 S. Ct. 1086. The Court then remanded for the

district court to “exercise the discretion that belongs to

it” and decide whether to order restitution. Jd. at 403,

66 S. Ct. 1086.

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,

55a

precision and completeness of its jurisdictional,

procedural and remedial provisions,” 2d. at 404, 66 S.Ct.

1086, wrote Justice Rutledge in dissent. “The scheme of

enforcement was highly integrated, with the parts

precisely tooled and mninutely geared.” Id. “Congress

could not have been ignorant of the remedy of

restitution. It knew how to give remedies it wished to

confer.” Jd. at 405, 66 S. Ct. 1086. “[E]ven courts of

equity may not grant relief in disregard of the remedies

specifically defined by Congress.” Jd. at 408, 66 S. Ct.

1086.

The court’s opinion today sounds a lot like the Porter

dissent. The court observes that the language of sec-

tion 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 “en-

forcing 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 pro-

vides for a comprehensive set of remedies,” majority

op. at 1200, but the EPCA had at least as comprehen-

sive a remedial structure. The court further points out

that should restitution be available, the government

could obtain duplicative recovery (given RICO’s crimi-

nal forfeiture provisions) and also escape the applicable

statutes of limitations,-but the Porter majority dis-

missed similar concerns, 328 U.S. at 401-02, 66 S. Ct.

1086; see also zd. at 406-08, 66 S. Ct. 1086 (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

56a

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, 66 S. Ct. 1086. In sum, the court offers no

basis for concluding that RICO’s structure and langu-

age 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, “Subsec-

tion [1964](a) contains broad 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 per-

sons—poses no concern, for it describes equity rather

than constricts it. See, e.g., Holly v. Domestic & For-

eign Missionary Soc’y, 180 U.S. 284, 295, 21 S. Ct. 395,

45 L. Ed. 531 (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. Sug-

gesting that the remedies must remove the corrupting

57a

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, Sena-

tor 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 justite. This ability is not hindered by

the bill.” 115 Cong. Rec. 9567 (1969).

Mitchell, the second Supreme Court decision the gov-

ernment relies on, considered whether district courts

could order restitution of wages lost from unlawful

discharge in suits brought by the Secretary of Labor

under section 17 of the Fair Labor Standards Act

(FLSA), 29 U.S.C. § 217 (1960). Relying on Porter, the

Court concluded that where the statute provided that

“the district courts are given jurisdiction . . . for.

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

§ 217, district courts had full equitable powers, 361 U.S.

at 291-95, 80 S. Ct. 332; see also id. at 289, 80 S. Ct. 332.

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

58a

the legislature.’” Id. at 291-92, 80 S. Ct. 332 (quoting

Clark v. Smith, 38 U.S. (13 Pet.) 195, 203, 10 L. Ed. 123

(1839)) (omission in original); see also Califano v.

Yamasaki, 442 U.S. 682, 704-06, 99 S. Ct. 2545, 61 L.

Ed. 2d 176 (1979) (using the Porter presumption to

conclude that district courts could order injunctive

relief not explicitly authorized by ine Social Security

Act). The Mitchell Court thought it insignificant that

because both the aggrieved employees and the Sec-

retary 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, 80 S. Ct. 332.

But see id. at 303, 80 S. Ct. 382 (Whittaker, J., dis-

senting) (concluding that the statutory scheme “seems

plainly to show that Congress intended by § 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 sug-

gest that in “the RICO Act, Congress provided a sta-

tute granting jurisdiction defined with the sort of

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

1199. The only jurisdictional hook in the FLSA’s text,

however, was its language: “the district courts are

given jurisdiction . . . for cause shown, to restrain vio-

lations” of the act, 29 U.S.C. § 217. If this language

opens the door to all equitable relief, then RICO’s lan-

guage—“[t)he district courts . . . shall have jurisdic-

tion to prevent and restrain violations”—-certainly does

the same. And if the possibility of duplicative recovery

did not circumscribe the district court’s equitable

- 59a

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 dis-

trict courts “shall have jurisdiction to issue writs of

mandamus, injunctions, and orders commanding” com-

pliance with the act and regulations made under it. See

890 F.2d at 1230 (relying on Porter and Mitchell ). “Dis-

gorgement, then, is available simply because the rele-

vant 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.

Mst., 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); JCC v. B & T Transp.

Co., 618 F.2d 1182, 1183-86 (Ist Cir. 1980) (applying

Porter in holding that courts may order restitution as a

remedy for violations of the Motor Carrier Act, though

noting that “(iJf 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

60a

order disgorgement as a remedy for violations of the

Commodity Exchange Act).

Instead of following Porter and Mitchell, the court

relies on a later Supreme Court decision, Meghrig v.

KFC Western, Inc., 516 U.S. 479, 116 S. Ct. 1251, 134 L.

Ed. 2d 121 (1996). In Meghrig, the Supreme Court con-

sidered 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

others action as may be necessary, or both.” /d. at 482

n.*, 116 S. Ct. 1251 (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.” Jd. at 484, 116 S. Ct. 1251. 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. Jd. More-

over, relying in part on the fact that an analogous sta-

tute expressly authorized damages, the Court con-

cluded that “neither remedy . . . contemplates the

award of past cleanup costs, whether these are denomi-

nated ‘damages’ or ‘equitable restitution.’” Jd. at 484-

85, 116 S. Ct. 1251. 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 cthers into

it.” Jd. at 488, 116 S. Ct. 1251 (quoting Middlesex

County Sewerage Auth. v. Nat'l Sea Clammers Ass'n,

6la

453 U.S. 1, 14- 15, 101 S. Ct. 2615, 69 L. Ed. 2d 435-

(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. Jd. at 487, 116 S.Ct. 1251. Without expressly

distinguishing those cases, the Court explained that

“the limited remedies described in [RCRA], along with

the stark differences between the language of that sec-

tion and the cost recovery provisions [of the analogous

statute], amply demonstrate that Congress did not

intend for a private citizen to be able to undertake a

cleanup and then proceed to recover its costs under

RCRA.” Id. Notably for our purposes, Meghrig did not

overrule Porter. Indeed, even after Meghrig, the Su-

preme Court has cited Porter for the proposition that

“we should not construe a statute to displace courts’

traditional equitable authority absent . . . an

‘inescapable inference’ to the contrary.” Miller v.

French, 530 U.S. 327, 340, 120 S. Ct. 2246, 147 L. Ed. 2d

326 (2000); see also United States v. Oakland Cannabis

Buyers’ Co-op., 532 U.S. 483, 496, 121 S. Ct. 1711, 149 L.

Ed. 2d 722 (2001).

At one level, reconciling Meghrig with Porter and

Mitchell is difficult. Meghrig suggests that “to re-

strain” 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 ex-

pressly provides for other remedies. By contrast,

Porter indicates that in the context of equity jurisdic-

tion, the general expressio wnius canon gets inverted,

62a a

meaning that district courts possess all equitable

powers unless the statute “inescapabl[y]” provides to

the contrary. Cf. Renegotiation Bd. v. Bannercraft

Clothing Co., 415 U.S. 1, 18-20, 94 S. Ct. 1028, 39 L. Ed.

2d 123 (1974) (discussing these competing canons).

These tensions cannot be dealt with simply by dis-

missing Porter and Mitchell. Meghrig not only left both

cases intact, but also suggested that the “limited reme-

dies” 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

“[ilf a precedent of this Court has direct application in a

case, yet appears to rest on reasons rejected in some

other line of decisions, the Court of Appeals should

follow the case which directly controls, leaving to this

Court the prerogative of overruling its own decisions.”

Rodriguez de Quijas v. Shearson/Am. Express, Inc.,

490 U.S. 477, 484, 109 S. Ct. 1917, 104 L. Ed. 2d 526

(1989); see also Agostini v. Felton, 521 U.S. 203, 237,

117 S. Ct. 1997, 188 L. Ed. 2d 391 (1997) (reaffirming

this requirement).

In my view, Porter and Mitchell, not Meghrig, “di-

rectly 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

63a

where the public interest is involved, 328 U.S. at 398, 66

S. Ct. 1086. This point has particular traction if the

government is the only party that may seek equitable

relief under RICO. See Religious Tech. Ctr. v. Woller-

sheim, 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, 123 S. Ct.

1057, 154 L. Ed. 2d 991 (2003). Finally, Meghrig’s sug-

gestion that “restrain” in the RCRA refers only to pro-

hibitory 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 “[{rjead[s} Porter in light of’ the statement

in Kokkonen v. Guardian Life Insurance Co., 511 U.S.

375, 377, 114 S. Ct. 1673, 128 L. Ed. 2d 391 (1994), that

“‘(fjederal courts are courts of limited jurisdiction’” and

“‘possess only that power authorized by Constitution

and statute, which is not to be expanded by judicial

decree.”” Majority op. at 1197. But “‘{jJurisdiction,’ it

has been observed, ‘is a word of many, too many, mean-

ings.’” Steel Co. v. Citizens for a Better Env’t, 523 U.S.

83, 90, 118 S. Ct. 1003, 140 L. Ed. 2d 210 (1998) (citation

omitted). Kokkonen simply makes the unremarkable

point that federal courts have subject-matter jurisdic-

tion over cases only if the Constitution or Congress so

provides, 511 U.S. at 377, 114 S. Ct. 1673, and the

Supreme Court has since clarified that it is “unrea-

. 64a

sonable” to apply subject-matter jurisdiction principles

where a statute uses the term jurisdiction “merely [in]

specifying the remedial powers of the court,” Steel Co.,

523 U.S. at 90, 118 S. Ct. 1003.

Finally, while Congress modeled 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, 67 S. Ct. 1634, 91

L.Ed. 2077 (1947) (Douglas, J., dissenting in part); ef.

United States v. Oregon State Med. Soc’y, 343 U.S. 326,

333, 72 S. Ct. 690, 96 L. Ed. 978 (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, 101 S. Ct.

2061, 68 L. Ed. 2d 500 (1981) (declining to fashion and

apply a common law right of contribution in the anti-

trust 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 Amuse-

ment Co., 323 U.S. 173, 189, 65 S. Ct. 254, 89 L. Ed. 160

(1944) (although the district court ordered a remedy

said to “exceed any reasonable requirement for preven-

tion of future violations,” the “Court has quite consis-

tently recognized in this type of Sherman Act case that

65a

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, 40

S. Ct. 293, 64 L. Ed. 343 (1920) (observing that the

Sherman Act is “clear in its 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 condi-

tions”); Schine Chain Theatres v. United States, 334

US. 110, 128, 68 S. Ct. 947, 92 L. Ed. 1245 (1948) (sug-

gesting that “[ljike restitution,” divestment “merely

deprives a defendant of the gains from his wrongful

conduct” and upholding it as a remedy under the Sher-

man Act), overruled on other grounds by Copperweld

Corp. v. Indep. Tube Corp., 467 U.S. 752, 763 n.8, 777,

104 S. Ct. 2731, 81 L. Ed. 2d 628 (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 govern-

ment has shown that the tobacco companies have

committed RICO violations by advertising to youth

despite assertions to the contrary and by falsely dis-

puting smoking’s addictive, unhealthy effects, then it

may order whatever equitable relief it deems appropri-

ate. 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

66a

the innocent, and generally exercising its discretion.

With these principles in mind, the district court can “do

complete rather than truncated justice,” Porter, 328

USS. at 398, 66S. Ct. 1086. _

B.

In addition to rejecting the government’s argument

that district courts may impose any equitable remedy

on RICO violators, the court rejects the government’s

alternative, narrower argument—that even if district

courts may order only remedies that “prevent and re-

strain” RICO violations, disgorgement can appropri-

ately 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 discus-

sion of the issue. In my view, the court transforms

what should be a question of fact—what remedies ap-

propriately prevent and restrain future violations—intc

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 “ap-

propriate orders” to prevent and restrain” RICO vio-

lations. “Prevent” has many meanings. The first non-

archaic 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.” “Re-

strain” can mean “to hold (as a person) back from some

action, procedure, or course: prevent from doing some-

thing (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).

67a

The government offers expert testimony to the effect

that a disgorgement order will deter the tobacco com-

panies 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 com-

panies, having engaged in a persistent pattern of decep-

tive 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, 106 S. Ct.

2505, I think it enough to forestall summary judgment

in Philip Morris’s favor. Indeed, the Supreme Court

has accepted just this theory of deterrence, stating in

Porter that restitution “could be considered as an order

appropriate and necessary to enforce compliance with

the Act” since “(fJuture compliance may be more defi-

nitely assured if one is compelled to restore one’s illegal

gains.” 328 U.S. at 400, 66 S. Ct. 1086. 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 disgorge-

ment 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

68a

op. at 1198. Although I agree that a court sitting in

equity cannot order disgorgement that exceeds a defen-

dant’s past ill-gotten profits, see Tull v. United States,

481 U.S. 412, 424, 107 S. Ct. 1831, 95 L. Ed .2d 365

(1987) (observing that “[rJestitution is limited to

‘restoring the status quo and ordering the return of

that which rightfully belongs to the purchaser or

tenant’”) (quoting Porter, 328 U.S. at 402, 66 S.Ct.

1086), this does not mean disgorgement is always

backward-looking and can never have a forward-

looking effect on the defendants. The Supreme Court

made this clear in Porter, 328 U.S. at 400, 66 S.Ct. 1086,

and Meghrig nowhere rejects Porter’s conclusion that a

disgorgement order can impact future conduct—indeed,

there was no evidence in Meghrig that the defendants

were likely to commit future RCRA violations, and in

any event, as discussed supra at 1220-21, Porter and

Mitchell are the cases most directly on point for our

purposes.

Second, the court concludes that district courts are

limited not merely by the words “prevent and restrain,”

but also “by those [three remedies] explicitly included

in the statute” by application of the canons noscitur a

sociis and ejusdem generis. See majority op. at 1200; cf.

United States v. Thomas, 361 F.3d 653, 659 (D.C. Cir.

2004) (defining these canons). Even assuming we

should apply these canons, however, they spell out

nothing more than what everyone agrees on: that the

only “appropriate” orders under this section are equit-

able ones. See West v. Gibson, 527 U.S. 212, 225-26, 119

S- Ct. 1906, 144 L. Ed. 2d 196 (1999) (Kennedy, J., dis-

senting) (observing that these canons “suggest the

appropriate remedies authorized by [a statute using the

word ‘including’} are remedies of the same nature as re-

69a

instatement, hiring, and backpay—z.e., equitable reme-

dies” and noting that “the phrase ‘appropriate reme-

dies,’ 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 other-

wise “no general principle in sight,” Dong v. Smith-

sonian Inst., 125 F.3d 877, 880 (D.C. Cir.1 997); see also

Wash. State Dep’t of Health -Servs.v. Guardianship

Estate of Keffeler, 537 U.S. 371, 384, 128 S. Ct. 1017, 154

L. Ed. 2d 972 (2003) (applying the canons in inter-

preting the last listed term of “execution, levy, attach-

ment, 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 enforce-

ment “through appropriate remedies, including rein-

statement or hiring of émployees with or without back

pay,” 42 U.S.C. § 2000e-16(b). See West, 527 U.S. at 218,

119 S. Ct. 1906 (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, 100 S. Ct. 1889, 64 L.

Ed. 2d 525 (1980) (declining to apply ejusdem generis

canon where Congress used “expansive language”). I

see no reason why we should do otherwise here, espe-

cially since section 1964(a) uses the even more expan-

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

noscitur a sociis and ejusdem, generis should not be

used to limit the types 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 1215, one of which is preventing

70a

and restraining future violations—an aim that, far from

being a “new purpose[ | that Congress never intended,”

see majority op. at 1201 (quoting Reves v. Ernst &

Young, 507 U.S. 170, 183, 113 S. Ct. 1163, 122 L. Ed. 2d

525 (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 dupli-

cative recovery and evade the procedural safeguards

girding the forfeiture provision. See majority op. at

1200-01. To be sure, such concerns are relevant in

considering whether to infer additional causes of action.

As discussed earlier, supra at 1217, however, given the

Supreme Court’s explicit rejection of similar concerns

in Porter and Mitchell, they cannot carry the day. Nor

should such concerns stop a court from issuing equit-

able 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 “appro-

priate orders.” Discussing RICO, the Supreme Court

has observed that “Congress has provided civil reme-

dies 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, 101 S. Ct. 2524, 69 L. Ed. 2d 246

(1981). The converse should hold as well. If an equit-

able remedy prevents and restrains RICO violations

—one of the remedial purposes which we should liber-

ally construe the statute to effectuate—it is untenable

to claim that the existence of criminal provisions

Tla

renders this remedy nonetheless beyond the scope of

district court authority.

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 recog-

nized that disgorgement can sometimes serve to pre-

vent 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 posi-

tion 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 defen-

dant 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 possibil-

ity 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, 107 S. Ct. 1831. In this case, however, the govern-

ment offers evidence that the defendant companies

themselves are likely to commit future RICO violations

by misleading the public about the health consequences

72a

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, particu-

larly given the threat of heavy contempt penalties.

Refining this point, the concurrence finds it “almost in-

conceivable” that disgorgement can change the incen-

tives governing a defendant’s future behavior given

RICO’s other provisions. See sep. op. at 1204 (Williams,

J., concurring). The concurrence thus concludes that as

a matter of law, Congress intended to exclude disgorge-

ment from those remedies appropriate to prevent and

restrain RICO violations. See id. at 1204-05. I think

this approach is flawed in several respects.

To begin with, as noted above, Porter indicated that

disgorgement may encourage guilty defendants to obey

the law in the future. Interpreting a statute replete

(like RICO) with other remedies, the Court concluded

that “[fluture compliance may be more definitely as-

sured if one is compelled to restore one’s illegal gains.”

328 U.S. at 400, 66 S. Ct. 1086. We are without license

to ignore the Supreme Court’s views on this point.

Moreover, Philip Morris’s suggestion that only in-

junctions provide “appropriate” relief under section

1964(a) not only cuts against the statute’s plain lan-

guage—Congress would hardly have included divest-

ment in its list of sample remedies if it thought injunc-

tions alone would be adequate—but also ignores the

equitable flexibility the statute was designed to pre-

serve, see, €.g., 115 Cong. Rec. 9567 (1969) (statement of

Sen. McClellan). Indeed, nothing in the statute re-

quires courts to prefer contempt penalties (not explic-

73a

itly 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

US. 1, 15, 91 S. Ct. 1267, 28 L. Ed. 2d 554 (1971) (quot-

ing Hecht Co. v. Bowles, 321 U.S. 321, 329-30, 64 S. Ct.

587, 88 L. Ed. 754 (1944)). Sometimes injunctive relief

alone will make the most sense; other times, different

equitable remedies or combinations of equitable reme-

dies, perhaps including disgorgement, might prove as

or more effective.

To be sure, given RICO’s comprehensive remedial

scheme, disgorgement orders may prove appropriate in

preventing and restraining future violations only in

rare circumstances. But “[i]n equity, as nowhere else,

courts [should] eschew rigid absolutes,” Franks v.

Bowman Transp. Co., 424 U.S. 747, 777 n.39, 96 S. Ct.

1251, 47 L. Ed. 2d 444 (1976) (internal quotation marks

and citation omitted), and precisely what remedy or

combination of remedies, within the bounds of the equi-

table doctrines discussed earlier, will serve to prevent

and restrain defendants from committing RICO viola-

tions 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—includ-

ing cross-examination and presentation of contrary

evidence. Cf. id. at 780, 96 S. Ct. 1251 (noting district

courts’ “ ‘keener appreciation’ of peculiar facts and cir-

cumstances”) (citation omitted).

74a

Finally, and again as noted earlier, record evidence in

this case suggests that disgorgement will in fact “pre-

vent and restrain” defendants from committing future

RICO violations. As one of the government’s experts

_ stated, “[Rjequiring 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 “pro-

vide additional economic incentives to deter future mis-

conduct” by “strengthen[ing] the credibility of existing

laws” which the defendants have allegedly violated in

the past. Jd. at 814. Disagreeing, the concurrence of-

fers its own “expert opinion” of the incentives driving

the behavior of past RICO violators. See sep. op. at

1203-05, 1205-06. According to the concurrence, the

most appropriate deterrence will stem from the “spot-

light of the lawsuit,” if properly “ampliflied]” by “trans-

parency-enhancing and prior-approval measures.” Jd.

at 1205. Perhaps so, but “on summary judgment, the

evidence should be viewed in favor of the nonmoving

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

other way around.” Langon v. Dep’t Health & Human

Servs., 959 F.2d 1058, 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

75a

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 ap-

peal, this court, unrestrained by the inferences required

at summary judgment, would then review that factual

determination pursuant to Rule 52’s clear error stan-

dard. 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 re-

viewing court need not view the evidence in the light

most favorable to the appellee).

Cc.

In sum, were this case properly before us, I would

hold, in accordance with Porter and Mitchell, that

district courts have authority to order any remedy,

including disgorgement, necessary to ensure complete

relief. As the concurrence points out, sep. op. at 1206

(Williams, J., concurring), my approach would create a

circuit split, since Carson did not apply Porter and

Mitchell to RICO (and, indeed, the parties do not

appear to have brought these cases to the Second Cir-

cuit’s attention). Even if, as Carson holds, district

courts may only impose equitable remedies for the

purpose of keeping defendants from committing RICO

violations, I would still affirm the denial of summary

judgment, leaving it-to the district court to determine,

on the basis of a fully developed record, whether dis-

gorgement will help accomplish this purpose. I

disagree with my colleagues’ conclusions not because

they have created a circuit split of their own by

16a

_

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.

Hil.

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, 116 S. Ct. 619.

In calculating disgorgement, the government first

identifies what it calls the “Youth Addicted Population”

(YAP), namely, all people who were smoking an aver- -

age of at least 5 cigarettes a day at the time they turned

21. The government next calculates that from RICO’s

effective date in 1970 to 2001, the tobacco companies

earned profits of $280 billion through sales to these

people. The government arrives at this calculation by

(1) determining the gross revenue from these total sales

minus the direct costs (excluding overhead and taxes)

and (2) adjusting for the time value of money. Philip

Morris asserts that the government has failed to show

that these profits are attributable to the companies’

alleged RICO violations, relying on admissions by

government experts that it would be “highly unlikely”

to say that. “nobody under the age of 21 would have

ever smoked regularly . . . but for the defendants’

alleged RICO violations.”

Philip Morris cannot prevail on this issue at summary

judgment because the government need not show that

77a

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 ap-

proximation 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. Al-

though 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 “[rJules for calculating disgorgement must

recognize that separating legal from illegal profits

exactly may at times be 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.” Jd. at 1231-32. Al-

though 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.” Jd. 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

78a

not only fraudulently suggested that smoking was

harmless and nonaddictive, but did so through a

comprehensive, decades-long pattern of deliberate

behavior. The government further offers evidence that

advertising is a “very substantial influence on young

people starting to smoke,” see Appellee’s App. at 783,

and that the tobacco companies committed RICO

violations in advertising to young people while publicly

denying that they were doing so. Under First City

Financial, then, the government’s calculations serve as

a reasonable approximation: just as we permit actual

profits in insider trading cases to serve as a proxy for

ill-gotten gains, so too can actual profits from sales to

the YAP meet the government’s initial burden of rea-

sonably approximating the tobacco companies’ unlawiul

gains. The burden would thus shift to Philip Morris te

“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.

79a

APPENDIX B

UNITED STATES COURT OF APPEALS

DISTRICT OF COLUMBIA CIRCUIT

No. CIV.A.99-2496 GK

UNITED STATES OF AMERICA, PLAINTIFF

v.

PHILIP MORRIS INCORPORATED, ET AL.,

DEFENDANTS

Sept. 28, 2000

MEMORANDUM OPINION

KESSLER, District Judge.

I. Introduction

Plaintiff, the United States of America (“the Gov-

ernment”), brings suit against eleven tobacco-related

entities (“Defendants”)'’ to recover health care

expenditures the Government has paid for or will pay

' The eleven Defendants are: Philip Morris, Inc. (“Philip

Morris”), R.J. Reynolds Tobacco Co. (“R.J.Reynolds”), Brown &

Williamson Tobacco Co. (“Brown & Williamson”), Lorillard To-

bacco Company (“Lorillard”), The Liggett Group, Inc. (“Liggett”),

American Tobacco Co. (“American Tobacco”), Philip Morris Cos.,

B.A.T. Industries p.l.c. (“BAT Ind.”), British American Tobacco

(Investments) Ltd., The Council] for Tobacco Research—U.S.A.,

Inc. (“CTR”), and The Tobacco Institute, Inc. (“TI”). The latter

two entities do not manufacture or sell tobacco products, but are

alleged to be co-conspirators in Defendants’ tortious activities.

80a

for to treat tobacco-related illnesses allegedly caused

by Defendants’ tortious conduct. The Government also

asks this Court to enjoin Defendants from engaging in

fraudulent and other unlawful conduct and to order

Defendants to disgorge the proceeds of their past

unlawful activity.

The Government makes four claims against Defen-

dants under three statutes. The first statute, the

Medical Care Recovery Act (“MCRA”), 42 U.S.C. §§

2651-2653, provides the Government with a cause of

action to recover certain specified health care costs it

pays to treat individuals injured by a third-party’s tor-

tious conduct (Count 1). The second statute is a series

of amendments referred to as the Medicare Secondary

Payer provisions (“MSP”), 42 U.S.C. § 1895y, which

provides the Government with a cause of action to

recover Medicare expenditures when a third-party

caused an injury requiring treatment and a “primary

payer” was obligated to pay for the treatment (Count

2). The third statute is the Racketeer Influenced and

Corrupt Organizations Act (“RICO”), 18 U.S.C. §§

1961-1968 (Counts 3 and 4), which provides parties with

a cause of action to recover treble damages due to in-

juries they received from a defendant’s unlawful rack-

eteering activity, and to seek other equitable remedies

to prevent future unlawful acts.

This matter is now before the Court on Defendants’

motions to dismiss for failure to state a claim.” Upon

consideration of the motions, oppositions, replies, the

applicable case law, the arguments presented at the

* Defendant BAT Ind.’s motion to dismiss for lack of personal

jurisdiction is addressed in a separate Memorandum Opinion

issued the same day as this Opinion.

8la

motions hearing, and the entire record herein, for the

reasons discussed below, the Non-Liggett Defendants’

motion to dismiss for failure to state a claim [# 72] is

granted as to the MCRA claim (Count 1), granted as to

the MSP claim (Count 2), and denied as to the RICO

claims (Counts 3 and 4). Liggett’s separate motion to

dismiss for failure to state a claim [# 70] is denied.

Summary of Legai Conclusions

The United States Government has brought this

massive civil action against the tobacco industry,

seeking billions of dollars in damages for what it alleges

to be a lengthy unlawful conspiracy to deceive the

American public about the health effects of smoking

and the addictiveness of nicotine. In order to prevail on

these allegations, the Government has offered three

distinct legal theories of liability. Two of these theories

are being rejected, and therefore, Counts 1 and 2 of the

Complaint will be dismissed. A significant portion of

the Government’s case, however, will go forward,

namely its claims under RICO for disgorgement of all

profits Defendants derived from activities, beginning in

1953 and continuing to the present, related to the

alleged pattern of racketeering activity. Consequently,

Counts 3 and 4 of the Complaint will proceed. In sum,

while the Government’s theories of liability have been

limited, the extent of Defendants’ potential liability

remains, in the estimation of both parties, in the billions

of dollars. The scope and complexity of this case will

continue to pose significant challenges to the parties

and to the Court.

1. The Government’s Medical Care Recovery Act

claim will be dismissed. The congressional intent in

enacting MCRA in 1962—at which time Medicare did

nat exist and the Federal Employees Health Benefits

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Act (“FEHBA”) was still in its infancy—was to

provide a means for the Government to recover from

third-party tortfeasors‘ medical expenses it had

furnished for (primarily military) employees. Applying

the principles from a recent U.S. Supreme Court

decision, FDA v. Brown & Williamson Tobacco Corp.,

529 U.S. 120, 120 8. Ct. 1291, 146 L. Ed. 2d 121 (2000),

this Court concludes that Congress did not intend that

MCRA be used as a mechanism to recover Medicare or

FEHBA costs. The Court reaches this conclusion after

examining the broad context in which MCRA has

existed for 38 years—including its legislative history,

the construction given it by those agencies charged

with its interpretation, a body of iong- standing state

and federal case law, and its total non-enforcement by

the Department of Justice for thirty-seven of those

thirty-eight years.

2. The Government’s Medicare Secondary Payer

claim will also be dismissed. MSP permits the Govern-

ment to seek reimbursement from insurance entities,

when Medicare has paid for health care expenses for

which those entities should have paid. Although MSP

also allows the Government to bring suit against non-

insurance entities required to pay for health care costs

under a “self-insured plan,” the Government’s Com-

plaint contains no allegation that Defendants have at

any time maintained a “self-insured plan,” as that term

is defined by MSP and the relevant regulations. Fur-

ther, it is clear that Congress did not intend MSP to be

used as an across-the-board procedural vehicle for

3 FEHBA is codified at 5 U.S.C. § 8901 et seq.

4 A “tortfeasor” is an individual or entity that commits a civil

wrong for which a remedy, usually monetary damages, may be

obtained. See Black’s Law Dictionary (7th ed. 1999).

83a

suing tortfeasors, which is precisely how the Govern-

ment attempts to use the statute in this case.

3. The Government’s Racketeer Influenced and Cor-

- rupt Organization Act claims will be permitted to go

forward. The Government has adequately alleged,

which is all it must do at this early stage in the

litigation, the necessary elements of a RICO claim: that

Defendants formed an “enterprise” which engaged in

the requisite “pattern of racketeering activity.” In ad-

dition, given the nature and scope of Defendants’ al-

leged prior misconduct, the Government has adequately

pleaded its basis for requesting injunctive relief,

including the specific remedy of disgorgement.°

II. Standard of Review

A “complaint should not be dismissed for failure to

state a claim unless it appears beyond doubt that the

plaintiff can prove no set of facts in support of his claim

which would entitle him to relief.” Conley v. Gibson,

355 U.S. 41, 45-46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957); see

also Davis v. Monroe County Bd. of Educ., 526 U.S.

629, 654, 119 S. Ct. 1661, 148 L. Ed. 2d 839 (1999). At

the motion to dismiss stage, “the only relevant factual

allegations are the plaintiffs’,” and they must be pre-

sumed to be true. Ramirez de Arellano v. Weinberger,

745 F.2d 1500, 1506 (D.C. Cir. 1984), vacated on other

grounds, 471 U.S. 1113, 105 S. Ct. 2353, 86 L. Ed. 2d 255

(1985); Shear v. National Rifle Ass’n of Am., 606 F.2d

1251, 1253 (D.C. Cir. 1979).--Despite the sweeping

breadth and seriousness of the Government’s allega-

5 “Disgorgement” is defined as the “act of giving up something

(such as profits illegally obtained) on demand or by legal com-

pulsion.” See Black’s Law Dictionary (7th ed.1999).

84a

tions, their validity is not for this Court to judge at this

time.

III. Statement of Facts

The Government’s Complaint describes in detail

what it alleges to be a four-decade long conspiracy,

dating from at least 1953, to intentionally and willfully

‘deceive and mislead the American public about, among

other things, the harmful nature of tobacco products,

the addictive nature of nicotine, and the possibility of

manufacturing safer and less addictive tobacco pro-

ducts. Complaint (“Compl.”) at 4 3. Defendants’ con-

spiratorial activity includes making numerous “false

and deceptive” statements and concealing documents

and research in an attempt. to cover-up their deceit.

Compl. at 4 5. According to the Government, Defen-

dants continue to “prosper and profit” from their

actions and will continue to do so into the future, unless

restrained by this Court. Compl. at § 6. The specifics

of the alleged conspiracy are described below.

“In the 1940’s and early 1950’s, scientific researchers

published findings that indicated a relationship be-

tween cigarette smoking and diseases, including lung

cancer.” Compl. at 4 30. Tobacco companies “closely

monitored” this research, conscious that if the public

became aware of these findings, the companies’ profits

would likely decline and they would “face the prospect

of civil liability and government regulation.” Compl. at

{ 31. To combat these possibilities, the chief executives

of Defendants American Tobacco, Brown & Williamson,

Lorillard, Philip Morris, and R.J. Reynolds met in late

1953 in New York City, where they devised a concerted

strategy to preserve and expand the market for, and

profits from, cigarettes. Compl. at { 32.

85a

According to the Government, the underlying strat-

egy Defendants adopted was simple: to deny that

smoking caused disease and to consistently maintain

that whether smoking caused disease was an “open

question.” Compl. at J 34. To maintain and further this

strategy, Defendants issued deceptive press releases,

published false and misleading articles, destroyed and

concealed documents which indicated that there was in

fact a correlation between smoking and disease, and

aggressively targeted children as potential new

smokers. Compl. at ¥ 36.

One of the first major steps Defendants took was to

announce the formation of an entity initially known as

the Tobacco Industry Research Committee (“TIRC”)

and which later became known as the Council for

Tobacco Research (“CTR” or “Council”).° This entity,

which Defendarts publicized widely as an objective

research body, published in January 1954 a full-page

statement that ran in 448 newspapers throughout the

United States. Titled “A Frank Statement to Cigarette

Smokers,” the statement asserted that, according to

“distinguished authorities,” “there is no proof that

cigarette smoking is one of the causes” of lung cancer.

Compl. at { 37. Defendants further stated: “We be-

lieve the products we make are not injurious to health”

—even though Defendants’ own employees had by this

time “identified the carcinogenic substances in tobacco

smoke.” Compl. at ¥ 9 37, 38. Promising to aid and

assist research into all phases of tobacco use and health

and to provide complete information to the public, the

publication stated that the newly formed Council would

® According to the Government, Defendant Liggett did not join

the Council until 1964. Compl. at 4 41.

86a

perform independent, objective, and reliable research

about the allegations against smoking. Compl. at 4 37.’

According to the Government, CTR was not inde-

pendent, objective or reliable. Its purpose was not to

research issues of concern to the public, but rather to

serve as a “front” or “cover” for Defendants’ conspiracy

to conceal the truth about smoking’s health risks.

Compl. at { 60. Defendants used CTR to fund “Special

Projects” that were devised to counter evidence of

smoking’s adverse health effects by providing alter-

native explanations for tobacco-related diseases.

Compl. at 4 65.

The Government alleges that these projects were

designed largely to generate research data and wit-

nesses for use in defending lawsuits and opposing

tobacco regulation, rather than to ascertain or improve

the safety of Defendants’ products. To accomplish this

objective, Defendants put attorneys in control of the

Council’s research and devised strategies to withhold

from civil discovery critical information about the

health effects of cigarette smoking by improperly

invoking the attorney-client privilege and work-product

doctrine. Jd. If CTR research ever “threatened to

confirm the link between smoking and disease,” Defen-

dants exerted pressure on the scientists conducting the

research, so as to alter the results, terminate the

research, and/or conceal the findings. Compl. at 4 67.

7 Defendants also established a Scientific Advisory Board

(“SAB”), which they claimed was an independent research arm of

the CTR. Compl. at § 61. The Government disputes this, alleging

that the SAB was “closely controlled” by Defendants to prevent it

from approving research that suggested any link between smoking

and disease. Compl. at ¥ 62.

87a

In 1958, Defendants created another entity, the

Tobacco Institute (“TI”), a “public relations organi-

zation” whose function was to keep the public, the

medical establishment, the media and the government

in the dark about tobacco’s health risks, especially the

“connection between smoking and disease.” Compl. at

q 42.

Defendants also entered into what they termed a

“gentleman’s agreement” not to perform in-house

research on smoking, health, or the development of

“safe” cigarettes. Compl. at 4 45. Each Defendant

enforced this agreement—a central tenet of the con-

spiracy—by obstructing research efforts by any other

company. Even when individual companies performed

limited in-house research, the fundamental understand-

ing remained intact: information that would tend to

establish the harm caused by cigarette smoking would

be suppressed and concealed. Compl. at ¥ 48.

The Government alleges that over the course of the

conspiracy, Defendants have made numerous misstate-

ments concerning one item in particular: nicotine.

Defendants continually denied that nicotine is addic-

tive, even in the face of overwhelming evidence to the

contrary. Compl. at J { 71-72. For example, Defendant

Brown & Williamson acknowledged internally in 1963

that “we are . . . in the business of selling nicotine, an

addictive drug.” Comp. at | 72. Researchers hired by

Philip Morris in the 1980’s concluded that “in terms of

addictiveness, ‘nicotine looked like heroin’.” Compl. at

{ 73. Instead of making these results public, however,

Defendant Philip Morris threatened the researchers

with legal action, killed the lab animals, removed the

lab equipment and closed the lab down entirely. Jd.

88a

And in 1963, Defendant Brown & Williamson deliber-

ately withheld from the Surgeon General research on

the addictiveness of nicotine. Compl. at { 74. When the

Surgeon General finally concluded, based on indepen-

dent research, that nicotine is in fact addictive, TI at-

tacked and criticized the report as “an unproven

attempt to find some way to differentiate smoking from

other behaviors.” Jd. Defendants have engaged in

these and numerous other acts of deception because

they recognize that “getting smokers addicted to

nicotine is what preserves the market for cigarettes

and ensures their profits.” Compl. at 4 71.

Not only have Defendants denied the addictive

powers of nicotine, but it is alleged that they have also

taken non-public actions to increase its potency and

make cigarettes even more addictive. Despite having

used “highly sophisticated technologies,” including the

selective breeding and cultivation of tobacco plants, to

manipulate and increase the potency of nicotine in their

cigarettes, Compl. at | 77, Defendants have repeatedly

denied that they manipulated the level of nicotine in

their products. Compl. at ¢ 79. A 1994 R.J. Reynolds

advertisement, for example, states: “We do not increase

the level of nicotine in any of our products in order to

addict smokers.” Compl. at § 81. Defendants also mar-

keted “light” or “low tar/low nicotine” cigarettes as

being less hazardous to smokers, Compl. at 4 86, even

though individuals who smoke such cigarettes are “not

appreciably reducing their health risk.” Compl. at { 88.

The Government also alleges that Defendants sup-

pressed research regarding less hazardous cigarettes.

Phillip Morris, for example, conducted research which

concluded that a “medically acceptable low-carcinogen

cigarette may be possible,” but this finding was never

- 89a

released to the public. Compl. at { 105. Indeed, Defen-

dants have refused to acknowledge the possibility of

such a cigarette. Compl. at 74 108, 109.

The Government charges that Defendants have

“aggressively targeted their campaigns to children.”

Compl. at | 96. R.J. Reynolds’ Joe Camel campaign is

just one of the most well-known examples of such

tactics. Compl. at { 97. Defendants have advertised in

stores near high schools, promoted brands heavily

during spring and summer breaks, given away ciga-

rettes at places where young persons congregate, paid

for product placement in movies with youth audiences,

placed advertisements in magazines with high youth

readership, and sponsored sporting events, rock con-

certs, and other events of interest to children. Compl.

at ¢ 96. Defendants have consistently made false and

misleading statements that their expenditures on

advertising and marketing were directed exclusively at

convincing current smokers to switch brands, not at

enticing children. Compl. at ¥ 100.

The Government maintains that all the above mis-

statements, and fraudulent and conspiratorial activity

are ongoing. Although Defendants have now admitted

that there is “a substantial body of evidence which

supports the judgment that cigarette smoking plays a

causal role in the development of lung cancer and other

diseases in smokers,” Compl. at J 116, and have

conceded that cigarettes are “addictive,” as that term is

used by the public at large. Compl. at 4 120, Defen-

dants still market their products in deceptive and

unlawful ways; they conceal documents relating to the

health effects of cigarettes, nicotine and the true nature

of CTR; and they continue to pose a threat “to the

90a

heaith and well-being of the American public.” Compl.

at ¥ 124.

The Government alleges that the harm caused by the

Defendants’ decades-long conspiracy has compelled

numerous entities, including the government, to expend

immense resources to treat, alleviate and minimize the

resulting disease and devastation. Compl. at 4 6. In

this action, the Government seeks to recover some or

all of the “$20 billion annually” it has spent to treat the

“injuries and diseases caused by defendants’ products.”

Compl. at ¥ 5. It also seeks various forms of equitable

relief, including the disgorgement of Defendants’ pro-

fits, to deter Defendants and others from engaging in

similar conduct in the future.

IV. Defendants’ Motion To Dismiss®

A. The Government’s Medical Care Recovery Act

Claim

In 1962, Congress enacted the Medical Care Recov-

ery Act (“MCRA”), which provides in pertinent part:

In any case in which the United States is authorized

or required by law to furnish [or pay for} hospital,

medical, surgical, or dental care and treatment .. .

to a person who is injured or suffers a disease, . . .

under circumstances creating a tort liability upon

some third person . . . to pay damages therefore,

the United States shall have a right to recover

(independent of the rights of the injured or diseased

8 Section IV specifically addresses arguments raised by the

Non-Liggett Defendants but applies equally to Liggett, which has

joined in this Motion.

® The bracketed language was added by a 1996 amendment.

See Pub.L. No. 104-201, § 1075, 110 Stat. 2442, 2663 (1996).

9la

person) from said third person, or that person’s in-

surer, the reasonable value of the care and treat-

ment so furnished, to be furnished, paid for, or to be

paid for and shall, as to this right be subrogated to

any right or claim that the injured or diseased

person . . . has against such third person. . .

42 U.S.C. § 2651(a), Pub. L. No. 87-693, § 1, 76 Stat. 593

(1962).

At first blush, MCRA’s language might seem quite

clear. The statute generally provides the Government

with a means to recover from tortfeasors the health

care costs it has expended on behalf of victims of tor-

tious conduct. If the Government has “paid for” or

“furnished” such care, it may seek reimbursement from

the individual or entity that caused the injury. The

statute is broadly worded: Congress could have re-

stricted the Government’s ability to obtain reimburse-

ment in any number of ways, both substantively and

procedurally, but it did not.

However, the specific question before this Court—

and it is a difficult one the resolution of which has

enormous ramifications—is whether MCRA, a statute

enacted in 1962 and amended in a minor fashion in 1996,

covers, or was intended by Congress to cover, pay-

ments made by the United States Government under

Medicare and the Federal Employees Health Benefits

Act (“FEHBA”)” to treat tobacco-related illnesses al-

legedly caused by Defendants’ tortious conduct.

Only a few months ago, the Supreme Court grappled

with an equally difficult issue of statutory interpre-

tation in FDA v. Brown & Williamson Tobacco Corp.,

© FEHBA is codified at 5 U.S.C. § 8901 et sey.

92a

529 U.S. 120, 120 S. Ct. 1291, 146 L. Ed. 2d 121 (2000), a

case in which it had to decide whether the Food and

Drug Administration possessed authority to regulate

tobacco products as customarily marketed. While this

Court fully recognizes that the present case, unlike

Brown & Williamson, does not involve “an admini-

strative agency’s construction of a statute,” thereby

triggering the two-step Chevron analysis," 120 S. Ct. at

1300 (citing Chevron U.S.A. Inc. v. Natural Resources

Defense Council, Inc., 467 U.S. 837, 104 S. Ct. 2778, 81

L. Ed. 2d 694 (1984)), the general analytical approach

followed in Brown & Williamson as it relates to statu-

tory construction and congressional intent is never-

theless instructive and illuminating. Like the Supreme

Court in Brown & Williamson, this Court’s obligation

is to ascertain congressional intent by viewing a parti-

cular statute in the context of relevant congressional

action taken during and subsequent to its enactment.

Accordingly, there are significant principles articulated

by the Brown & Williamson Court that speak to how

the instant case should be resolved.

One such principle is that subsequent legislative

action may shed light on congressional intent. “At the

time a statute is enacted, it may have a range of plausi-

ble meanings. Over time, however, subsequent acts can

'' Even assuming that the Department of Justice should be

considered an “agency” for purposes of Chevron analysis, it is en-

titled to no deference for its interpretation of MCRA, FEHBA or

Medicare, because it is not the agency entrusted to administer

those statutes. “[W]hen an agency interprets a statute other than

that which it has been entrusted to administer, its interpretation is

not entitled to deference.” Jilinois Nat'l Guard v. Federal Labor

Relations Authority, 854 F.2d 1396, 1400 (D.C. Cir. 1988) (citations

and internal quotations omitted).

93a

shape or focus those meanings.” 1205S. Ct. at 1306.” In

adopting subsequent statutes, Congress is presumed to

act “against the backdrop” of agency statements re-

garding the parameters of the agency’s authority to act

under the original statute. Jd. at 1306-07.

Another such principle is that agency “interpreta-

tions and practices” should be given “considerable

weight where they involve the contemporaneous con-

struction of a statute and where they have been in long

use.” Davis v. United States, 495 U.S. 472, 484, 110 S.

Ct. 2014, 109 L. Ed. 2d 457 (1990). In fact, congres-

sional action (or inaction) can, in certain circumstances,

be viewed by courts as having “effectively ratified” an

agency’s long-standing position. 120 S. Ct. at 1307.”

A final principle announced by the Supreme

Court—and one which has more concrete application in

the instant case—is that Congress, “for better or for

worse, has created a distinct regulatory scheme for

tobacco products.” 120 S.Ct. at 1315. In conjunction

with this scheme, “Congress has persistently acted to

“To the extent that the Government contends that the

question presented can be resolved by resort to MCRA’s language

alone, see Govt’s Opp’n at 14-15, its argument is flatly inconsistent

with Brown & Williamson’s requirement that statutes like MCRA

be viewed in the context of “subsequent acts.”

'3 Brown & Williamson was certainly not the first occasion in

which the Supreme Court expressed such a view. In FTC v. Bunte

Bros, 312 U.S. 349, 352, 61 S. Ct. 580, 85 L. Ed. 881 (1941), the

Court stated: “just as established practice may shed light on the

extent of power conveyed by general statutory language, so the

want of assertion of power by those who presumably would be

alert to exercise it, is equally significant in determining whether

such power was actually conferred.” See also Bankamerica Corp.

v. United States, 462 U.S. 122, 130, 108 S. Ct. 2266, 76 L. Ed .2d 456

(1983).

94a

preclude a meaningful role for any administrative

agency in making policy on the subject of tobacco and

health.” Jd. at 1313; see also id. at 1309 (Congress’

intent was to “preclude any administrative agency from

exercising significant policymaking authority on the

subject of smoking and health”); id. at 1315 (Congress

has “repeatedly acted to preclude any agency from

exercising significant policymaking authority in the

area”’).

The principles delineated above lead this Court to the

conclusion that Congress did not intend MCRA to cover

Medicare or FEHBA expenses.

1. Legislative History

Recourse to MCRA’s legislative history cannot by

itself answer the question presented (7.e., whether

MCRA applies to Medicare and FEHBA expenses),

since the record relating to the statute’s enactment is

virtually non-existent. Nevertheless, even the sliver of

legislative history that does exist provides the Court

with “guidance” in understanding how Congress meant

MCRA to be interpreted. See National Wildlife Fed-

eration v. Snow, 561 F.2d 227, 237 (D.C. Cir. 1976);

American Soc’y of Travel Agents v. Blumenthal, 566

F.2d 145, 166 (D.C. Cir. 1977) (“Legislative history can

be and often is an important instrument in the deter-

mination of congressional intent.”) (Bazelon, C.J., dis-

senting).

The parties agree, and the legislative history con-

firms, that MCRA was enacted in response to a 1947

Supreme Court decision, United States v. Standard Oil

Co., 332 U.S. 301, 67 S. Ct. 1604, 91 L. Ed. 2067 (1947),

which held that the Government lacked a common law

cause of action to recover from tortfeasors expenses the

95a

Government had incurred in treating military personnel

under its health care programs. Jd. at 314-16, 67 S. Ct.

1604. Standard Oil narrowly construed the Govern-

ment’s authority to recover such expenditures and

directed Congress to enact appropriate legislation if it

wished to provide the Government with more expan-

sive authority. Id. at 315-16, 67 S. Ct. 1604.

For over a decade, Congress apparently ignored

Standard Oil and did nothing to provide the Govern-

ment with a statutory cause of action to recover the

medical expenses resulting from care it had provided.

Finally, in 1960, thirteen years after Standard Oil was

handed down, the Comptroller General of the United

States submitted a Report to Congress entitled “Re-

port On Review Of The Government’s Rights And

Practices Concerning Recovery Of The Cost Of Hos-

pital And Medical Services In Negligent Third-Party

Cases.” See Govt’s Opp’n, Appendix (“App.”) at 5. The

Report’s purpose was to “ascertain the extent, ade-

quacy, and consistency of the rights and practices of the

Government to recover” the costs of health care it

furnished to tort victims. Jd. In particular, the Report

reviewed the ability of four government agencies to

recover their medical costs: the Department of Defense,

the Veterans Administration, the Department of

Health Education and Welfare’s Public Health Service,

and the Labor Department’s Bureau of Employees’

Compensation. Jd. at 6.

The Report explicitly referred to Standard Oil and

what the Comptroller Gerieral determined the con-

sequence of that decision to be, namely, that “each year

the Government is not recovering several million

dollars of costs in negligent third-party cases.” Id. ai

14. The Report labeled this outcome “inequitable” and

96a

declared that “the Government should have the right in

all cases to recover its costs of treating those injured as

a result of the negligence of third parties.” Jd. at 10.

The Comptroller General therefore recommended that

Congress adopt one of two options for remedying the

problem: enact législation “in the form of either a

general bill” or amend the statutes governing “the

specific agencies involved.” Jd. at 10, 20-21. It should

be remembered that Medicare, enacted in 1965, did not

exist when the Comptroller General issued his report,

in 1960, but FEHBA did.

In response to the Comptroller General’s Report,

Congress chose the alternative of enacting “a general

bill” rather than amending statutes agency by agency.

According to the Senate Report on MCRA, the stat-

ute’s “purpose” was to

provide for the recovery by the United States from

negligent third persons for the cost of hospital,

medical, surgical, or dental care and treatment fur-

nished by the United States, pursuant to authority

or requirement of law, to a person who is injured or

suffers a disease under circumstances creating a

tort liability upon such third person.

S. Rep. No. 87-1945 (1962), reprinted in 1962

U.S.C.C.A.N. 2637, 2637 (under heading “Purpose”).

Both the House and Senate Reports state tha: MCRA

would enable the Government to recover expenses

under “[s]tatutes providing for care by the Department

of Defense to military personnel and their dependents,

the Public Health Service to Coast Guard personnel and

other classes of persons, and the Veterans’ Admini-

stration to veterans.” Id. at 2639; H. Rep. No. 87-1534,

at 5 (1962).

97a

While this language would, by itself, suggest an

intent to limit MCRA to the cost of health care pro-

vided to members of the military, the very next para-

graph of the Senate Report discusses the manner in

which the Government would be able to recover pay-

ments made under the Federal Employees’ Compen-

sation Act (“FECA”)." Since that statute covers civi-

lian employees, it is clear that MCRA was not meant to

be restricted to the military.

The three documents described above (the Com-

ptroller General’s Report, the Senate Report and the

House Report) constitute MCRA’s entire legislative

history. However, even more significant than what the

legislative history does contain (very little) is what it

does not. Despite the fact that the Comptroller Gen-

eral’s Report expressly refers to FECA—which both

parties agree is covered under MCRA—nowhere in the

Report is any mention made of FEHBA, the wide-

ranging civilian health insurance program which had

been enacted several years earlier, and which the

Government now claims is also covered by MCRA. Nor

did the Senate or House Reports refer to FEHBA,

even in passing. These omissions are, if not in direct

conflict, at least in sharp tension with the Government’s

position that MCRA applies to FEHBA. Surely, Con-

gress knew of FEHBA’s existence, especially since that

statute had been enacted only five years before MCRA.

Although the legislative history, and particularly

Congress’ failure to make any mention of FEHBA after

specifically mentioning other programs covered by the

statute, would by itself suggest that MCRA was not

4 FECA is codified at 5 U.S.C. § 8132, and provides_for un-

employment compensation benefits.

98a

meant to apply to FEHBA, the paucity of legislative

history necessitates a review of other considerations

relating to congressional intent.”

2. Agency Interpretations

Another tool for ascertaining congressional intent is

to examine the statements, rulings and interpretations

of government agencies—particularly those agencies

entrusted to administer the relevant statute. Because

the Health Care Financing Administration (“HCFA”) is

the agency charged with administering MCRA, its ap-

proach to enforcing that statute should be given special

attention.

As an initial matter, it cannot be overlooked that

HCFA has issued no MCRA-specific regulations pro-

' % The Government contends that there is an additional piece of

legislative history relating to Medicare, not MCRA, which sup-

ports its interpretation of MCRA. The Senate Report accom-

panying the original Medicare Act states that Medicare will not

pay “for any item or service furnished an individual if neither the

individual nor any other person (such as a prepayment plan) has a

legal obligation to pay for or provide the services,” and that under

such a circumstance, “the third-party liability statute 42 U.S.C. §§

2651-2653 [{MCRA] would not apply.” S. Rep. No. 89-404, at 48

(1965), reprinted in 1965 U.S.C.C.A.N. 1943, 1989. Although the

Government argues that this is a clear indication that Congress

intended MCRA to apply to Medicare expenses, Govt’s Opp’n at

17, the Court finds this “oblique reference” to the MCRA statute

inconclusive at best, especially when it is evaluated in the larger

context of near total! congressional silence concerning any connec-

tion between MCRA and the mammoth Medicare program. See

Regular Common Carrier Conference v. United States, 820 F.2d

1323, 1328 (D.C. Cir. 1987) (finding that “it strains credulity to

suggest . . . that [a] Senate Report’s oblique reference” to a

certain exemption “reflects an otherwise unarticulated intent” to

apply that exemption in a way never otherwise mentioned in the

legislative history).

99a

viding for recovery of Medicare or FEHBA costs. In

- contrast, agencies that do have, and have always had,

an undisputed and established right to recovery under

MCRA, such as those governing the armed services, do

have such regulations in place. See 32 C.F.R. § 199.12

(Civilian Health and Medical Program of the Uniformed

Services (““CHAMPUS”) MCRA regulations); 32 C.F.R.

§§ 842.115-842.125 (Air Force MCRA regulations); 32

C.F.R. § § 757.11-757.20 (Navy MCRA regulations); 33

C.F.R. § 25.131 (Coast Guard MCRA regulations). No

16 For example, the regulations governing MCRA-recovery of

expenses incurred under CHAMPUS require any person furnished

care and treatment under CHAMPUS ‘

(i) To provide complete information regarding the circum-

stances surrounding an injury as a condition precedent to the

processing of a CHAMPUS claim involving possible third-

party liability.

(ii) To assign in writing to the United States his or her claim

or cause of action against the third person to the extent of the

reasonable value of the care and treatment furnished, or to be

furnished, or any portion thereof;

(iii) To furnish such additional information as may be

requested concerning the circumstances giving rise to the

injury or disease for which care and treatment are being given

and concerning any action instituted or to be instituted by or

against a third person;

(iv) To notify the responsible recovery judge advocate, the-

CHAMPUS fiscal intermediary or General Counsel, OCHAM-

PUS, or other officer who is representing the interests of the

government at the time, of a settlement with, or an offer of

settlement from a third person; and,

(v) To cooperate in the prosecution of all claims and actions

by the United States against such third person.

100a

such structure has ever been established by HCFA to

collect Medicare or FEHBA expenses under the gen-

eral MCRA framework.

Moreover, several agencies have explicitly concluded

that MCRA does not provide the Government with a

cause of action to recover Medicare costs. First, in

1968, the General Counsel of the Federal Bureau of

Health Insurance (which administered Medicare at that

time) issued an Opinion to that effect, stating that

Medicare payments are “insurance benefits,” as dis-

tinguished from the health care “provided directly by

the federal government” to which MCRA clearly ap-

plied. See Subrogation Rights Under Medicare, For the

Defense, Apr. 1970, at 44 (Defs.’ Mem., App. J at 67).

Second, in 1979, HCFA issued a ruling that, in cases in

which the Government was liable for an injury under

the Federal Tort Claims Act (“FTCA”) and Medicare

paid the medical expenses, the victim could retain all

payments the Government made to her under the

FTCA. See HCFA Ruling 79-4 (1979), reprinted in 52

Fed. Reg. 26,088, 26,090 (1987). The rationale underly-

ing this ruling (that Medicare was not to receive any

reimbursement for the care it had provided to the

injured person) was that Medicare was “in the nature of

social insurance.” Id. 3

Since MCRA’s enactment in 1962, neither HCFA nor

any other administrative agency has ever indicated, or

_ even suggested, that MCRA applies to Medicare or

FEHBA expenses. These agency statements and si-

lences, taken in conjunction with the absence of regula-

32 C.F.R. § 199.12(e)(2). None of the above mentioned actions is

required of recipients of health care under Medicare or the

FEHBA program.

10la

tions that would formalize and facilitate the Govern-

ment’s recovery of Medicare or FEHBA costs under

MCRA, lend further credence to Defendants’ position

that MCRA was never meant to apply to Medicare or

FEHBA expenses.

3. Application of the Brown & Williamson Prin-

ciples .

Having considered both the legislative history and

agency interpretations of MCRA, the Court’s final task

is to apply the Brown & Williamson principles enunci- .

ated in Section

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