Appendix — Philip Morris USA Inc. v. United States

Supreme Court US.

FILE

Nos. 99-976 FEB 19 2010

IN THE OFFICE OF THE CLERK

Supreme Court of the United States

PHILIP MorRIS USA INC. (f/k/a Philip Morris, Inc.),

Petitioner,

Vv.

UNITED STATES OF AMERICA,

Respondent.

R.J. REYNOLDS TOBACCO COMPANY and

BROWN & WILLIAMSON HOLDINGS, INC.,

Petitioners,

Ve

UNITED STATES OF AMERICA,

Respondent.

LORILLARD TOBACCO COMPANY,

Petitioner,

se

UNITED STATES OF AMERICA,

Respondent.

BRITISH AMERICAN TOBACCO (INVESTMENTS) LIMITED,

Petitioner,

V+

UNITED STATES OF AMERICA,

Respondent.

ALTRIA GROUP, INC.,

Petitioner,

Vv.

UNITED STATES OF AMERICA,

Respondent.

APPENDIX TO PETITIONS FOR

WRITS OF CERTIORARI

VOLUME 1 of 5

(Pages 1a-447a)

MICHAEL A. CARVIN

Counsel of Record

ROBERT F. MCDERMOTT, JR.

MICHAEL S. FRIED

NOEL J. FRANCISCO

SHAY DVORETZKY

HASHIM M. MOOPPAN

JOHN M. GORE

JONES Day

51 Louisiana Avenue, N.W.

Washington, D.C. 20001

(202) 879-3939

macarvin@jonesday.com

Counsel for R.J. Reynolds

Tobacco Company

MICHAEL B. MINTON

Counsel of Record

BRUCE D. RYDER

JASON A. WHEELER

THOMPSON COBURN LLP

One US Bank Plaza

St. Louis, MO 63101

(314) 552-6000

mminton@thompsoncoburn.com

Counsel for Lorillard Tobacco

Company

GUY MILLER STRUVE

Counsel of Record

CHARLES S. DUGGAN

DAVIS POLK & WARDWELL

LLP

450 Lexington Avenue

New York, New York 10017

(212) 450-4192

guy.struve@davispolk.com

Counsel for Altria Group, Inc.

MIGUEL A. ESTRADA

Counsel of Record

AMIR C. TAYRANI

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) $55-8500

mestrada@gibsondunn.com

Counsel for Philip Morris USA

Inc.

ALAN UNTEREINER

Counsel of Record

Roy T. ENGLERT, JR.

MARK STANCIL

EVA A. TEMKIN

ROBBINS, RUSSELL, ENGLERT,

ORSECK, UNTEREINER & SAUBER

LLP

1801 K Street, N.W.

Suite 411

Washington, D.C. 20006

(202) 775-4500

auntereiner@robbinsrussell.com

Counsel for British American

Tobacco (Investments) Ltd.

DOUGLAS G. SMITH, P.C.

Counsel of Record

RENEE D. SMITH

KIRKLAND & ELLIS LLP

300 N. LaSalle

Chicago, IL 60654

(312) 862-2000

douglas.smith@kirkland.com

Counsel for Brown & Williamson

Holdings, Inc.

TABLE OF CONTENTS

Opinion of the United States Court of Appeals

for the District of Columbia Circuit

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Opinion of the United States District Court for

the District of Columbia (Aug. 17, 2006)......... 101a

Order of the United States Court of Appeals

for the District of Columbia Circuit

Denying Rehearing En Banc

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Order of the United States Court of Appeals

for the District of Columbia Circuit

Denying Panel Rehearing (Sept. 22, 2009) ...2184a

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APPENDIX A

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 14, 2008 Decided May 22, 2009

No. 06-5267

UNITED STATES OF AMERICA, UNITED STATES

DEPARTMENT OF JUSTICE, ET AL..,

APPELLEES

Vv.

PHILIP MORRIS USA INC., FORMERLY KNOWN AS PHILIP

MORRIS INCORPORATED, ET AL.,

APPELLEES

BRITISH AMERICAN TOBACCO (INVESTMENTS) LTD.,

DIRECTLY AND AS SUCCESSOR TO BRITISH-AMERICAN

TOBACCO COMPANY, LTD.,

APPELLANT

THE COUNCIL FOR TOBACCO RESEARCH-USA, INC.,

ET AL..,

APPELLEES

Consolidated with 06-5268, et al.

Appeals from the United States District Court

for the District of Columbia

(No. 99cv-02496)

2a

Michael A. Carvin and Miguel A. Estrada argued

the causes for appellants. With them on the briefs

were David S. Eggert, Guy Miller Struve, Charles S.

Duggan, David M. Bernick, Robert F. McDermott, Jr.,

Peter J. Biersteker, Michael S. Fried, John K.

Crisham, Michael B. Minton, Bruce D. Ryder, Bruce

G. Sheffler, Alan E. Untereiner, Joseph Kresse, and

Deborah Israel. Murray R. Garnick, Timothy M.

Broas, James A. Goold, Gene E. Voigts, Clausen Ely

Jr., Leonard A. Feiwus, James W. Newbold, Ed-

ward C. Schmidt, Arnon D. Siegel, Keith A. Teel,

Theodore Y. Wells, Jr., and Dan K. Webb entered ap-

pearances.

Alan E. Untereiner and Bruce G. Sheffler were on

the briefs for appellant British American Tobacco

(Investments) Limited.

David S. Eggert, Guy Miller Struve, and

Charles S. Duggan were on the briefs for appellant

Altria Group, Inc.

Daniel J. Popeo, Paul D. Kamenar, Andrew G.

McBride, and Thomas R. McCarthy were on the brief

for amici curiae National Association of Manufactur-

ers and the Washington Legal Foundation urging re-

versal.

Scott A. Sinder was on the brief for amicus curiae

National Association of Convenience Stores in sup-

port of appellants.

Robin S. Conrad, Amar D. Sarwal, Theodore B.

Olson, and Matthew D. McGill were on the brief for

amicus curiae Chamber of Commerce of the United

States of America in support of appellants urging re-

versal.

3a

Mark B. Stern, Attorney, U. S. Department of

Justice, argued the cause for appellees. With him on

the brief were Michael F. Hertz, Deputy Assistant

Attorney General, Jonathan F. Cohn, Deputy Assis-

tant Attorney General, and Alisa B. Klein, Mark R.

Freeman, Sarang Vijay Damle, Melissa N. Patterson,

and Christopher J. Walker, Attorneys.

Howard M. Crystal argued the cause for interve-

nors Tobacco-Free Kids Action Fund, et al. With him

on the briefs were Katherine A. Meyer and G. Robert

Blakey.

Michael D. Hausfeld and Victoria S. Nugent were

on the brief for amici curiae American College of Oc-

cupational and Environmental Medicine, et al. in

support of appellee urging affirmance.

William C. Lieblich, Talis J. Colberg, Attorney

General, Attorney General’s Office of the State of

Alaska, Terry Goddard, Attorney General, Attorney

General’s Office of the State of Arizona, Dustin

McDaniel, Attorney General, Attorney General, At-

torney General’s Office of the State ui Arkansas,

Edmund G. Brown, Jr., Attorney General, Attorney

General, Attorney General’s Office of the State of

California, Richard Blumenthal, Attorney General,

Attorney General’s Office of the State of Connecticut,

Joseph R. “Beau” Biden III, Attorney General, Attor-

ney General’s Office of the State of Delaware, Bill

McCollum, Attorney General, Attorney General’s Of-

fice of the State of Florida, Mark J. Bennett, Attorney

General, Attorney General’s Office of the State of

Hawaii, Lawrence Wasden, Attorney General, Attor-

ney General’s Office of the State of Idaho, Lisa

Madigan, Attorney General, Attorney General’s Of-

fice of the State of Dlinois, Paul Morrison, Attorney

General, Attorney General’s Office of the State of

4a

Kansas, Greg Stumbo, Attorney General, Attorney

General’s Office of the State of Kentucky, Charles

Foti, J7., Attorney General, Attorney General’s Office

of the State of Louisiana, G. Steven Rowe, Attorney

General, Attorney General’s Office of the State of

Maine, Douglas F. Gansiler, Attorney General, Attor-

ney General’s Office of the State of Maryland, Mar-

tha Coakley, Attorney General, Attorney General’s

Office of the Commonwealth of Massachusetts, Mi-

chael A. Cox, Attorney General, Attorney General’s

Office of the State of Michigan, Lori Swanson, Attor-

ney General, Attorney General’s Office of the State of

Minnesota, Jim Hood, Attorney General, Attorney

General’s Office of the State of Mississippi, Jeremiah

W. (Jay) Nixon, Attorney General, Attorney Gen-

eral’s Office of the State of Missouri, Mike McGrath,

Attorney General, Attorney General’s Office of the

State of Montana, Catherine Cortez Masto, Attorney

General, Attorney General’s Office of the State of

Nevada, Kelly A. Ayotte, Attorney General, Attorney

General’s Office of the State of New Hampshire,

Anne Milgram, Attorney General, Attorney General’s

Office of the State of New Jersey, Gary King, Attor-

ney General, Attorney General’s Office of the State of

New Mexico, Andrew M. Cuomo, Attorney General,

Attorney General’s Office of the State of New York,

Marc Dann, Attorney General, Attorney General’s

Office of the State of Ohio, W. A. Drew Edmondson,

Attorney General, Attorney General’s Office of the

State of Oklahoma, Hardy Myers, Attorney General,

Attorney General’s Office of the State of Oregon, and

Tom Corbett, Attorney General, Attorney General’s

Office of the Commonwealth of Pennsylvania, Pat-

rick C. Lynch, Attorney General, Attorney General’s

Office of the State of Rhode Island, Robert E. Cooper,

Jr., Attorney General, Attorney General’s Office of

5a

the State of Tennessee, William H. Sorreil, Attorney

General, Attorney General’s Office of the State of

Vermont, Robert M. McKenna, Attorney General, At-

torney General’s Office of the State of Washington,

Darrell V. McGraw, Attorney General, Attorney

General’s Office of the State of West Virginia, Bruce

A. Salzburg, Attorney General, Attorney General’s

Office of the State of Wyoming, and Vincent F. Fra-

zer, Attorney General, Attorney General’s Office of

the Territory of the United States Virgin Islands,

were on the brief for amici curiae States in support of

appellee.

Allison M. Zieve and Brian Wolfman were on the

brief for amici curiae Public Citizen, Inc., e¢ al. in

support of appellee urging affirmance.

Christopher N. Banthin and Stephen M. Kohn

were on the brief for amici curiae American Medical

Association and Others in support of appellee.

David C. Vladeck was on the brief for amicus cu-

riae Tobacco Control Legal Consortium in support of

appellee urging affirmance.

Harvey Kurzweil and Alexander M. Kayne were

on the brief of amicus curiae the Citizens’ Commis-

sion to Protect the Truth in support of appellee and

supporting partial reversal.

Kerry S. Lane, appearing pro se, was on the brief

as amicus curiae.

Before: SENTELLE, Chief Judge, TATEL and

BROWN, Circuit Judges.

Opinion for the Court filed PER CURIAM.

PER CURIAM: Defendants in this action, cigarette

manufacturers and trade organizations, appeal from

the district court’s judgment finding them liable for

conducting the affairs of their joint enterprise

6a

through a pattern of mail and wire fraud in a scheme

to deceive American consumers. They also appeal

from the district court’s remedial order, which im-

poses numerous negative and affirmative duties on

Defendants. The government and intervenors cross-

appeal from the district court’s denial of additional

requested remedies. After considering all of the par-

ties’ arguments, we affirm in large part the finding of

liability, remanding only for dismissal of the trade

organizations. We also largely affirm the remedial

order, including the denial of additional remedies,

but vacate the order with regard to four discrete is-

sues, remanding for further proceedings as directed

in this opinion.

I. BACKGROUND

The United States initiated this civil action un-

der the Racketeer Influenced and Corrupt Organiza-

tions Act (“RICO”), 18 U.S.C. §§ 1961-1968, in 1999.

The government alleged that nine cigarette manufac-

turers and two tobacco-related trade organizations

violated section 1962(c) and (d) of the Act. Those

subsections make it unlawful for “any person em-

ployed by or associated with any enterprise engaged

in, or the activities of which affect, interstate or for-

eign commerce, to conduct or participate, directly or

indirectly, in the conduct of such enterprise’s affairs

through a pattern of racketeering activity” or to con-

spire to do so. 18 U.S.C. § 1962(c), (d). The eleven De-

fendants were Philip Morris, Inc., now Philip Morris

USA, Inc. (“Philip Morris”); R.J. Reynolds Tobacco

Company, now Reynolds American (“Reynolds”);

Brown & Williamson Tobacco Company, now part of

Reynolds (“Brown & Williamson”); Lorillard Tobacco

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

(“Liggett”); American Tobacco Company, which

merged with Brown & Williamson and is now part of

7a

Reynolds (“American”); Philip Morris Companies,

now Altria (“Altria”); British American Tobacco (In-

vestments) Ltd. (“BATCo”); B.A.T. Industries p.l.c.,

now part of BATCo (“BAT Industries”); The Council

for Tobacco Research—USA, Inc. (“CTR”); and The

Tobacco Institute, Inc. (“TT”). The last two entities

are trade organizations the cigarette manufacturers

created; they do not manufacture or sell tobacco

products. The district court dismissed BAT Indus-

tries from the case for lack of personal jurisdiction.

The government alleged that Defendants vio-

lated and continued to viclate RICO by joining to-

gether in a decades-long conspiracy to deceive the

American public about the health effects and addic-

tiveness of smoking cigarettes. Specifically, the gov-

ernment alleged that Defendants fraudulently de-

nied that smoking causes cancer and emphysema,

that secondhand smoke causes iung cancer and en-

dangers children’s respiratory and auditory systems,

that nicotine is an addictive drug and Defendants

manipulated it to sustain addiction, that light and

low tar cigarettes are not less harmfu. than full fla-

vor cigarettes, and that Defendants intentionally

marketed to youth. United States v. Philip Morris

USA, Inc., 449 F. Supp. 2d 1, 27 (D.D.C. 2006). In

addition, the government alleged that Defendants

concealed evidence and destroyed documents to hide

the dangers of smoking and protect themselves in

litigation. Jd. The government identified 148 racket-

eering acts of mail and wire fraud Defendants alleg-

edly committed in furtherance of their scheme. Al-

though the district court did not allow the govern-

ment to prove 650 additional racketeering acts due to

their late disclosure, the court did permit the gov-

ernment to introduce evidence supporting those acts

to prove other RICO elements, such as the continuity

8a

and pattern of racketeering activity, the RICO en-

terprise and conspiracy, and Defendants’ participa-

tion in the enterprise.

After years of pretrial proceedings and discovery,

the case went to trial in September 2004. The bench

trial lasted nine months and included live testimony

from 84 witnesses, written testimony from 162 wit-

nesses, and almost 14,000 exhibits in evidence. The

government presented evidence that the presidents

of Philip Morris, Reynolds, Brown & Williamson,

Lorillard, and American assembled together in 1953

to strategize a response to growing public concern

about the health risks of smoking and jointly re-

tained a public relations firm to assist in the en-

deavor. Id. at 37. From the beginning they agreed

that no cigarette manufacturer would “seek a com-

petitive advantage by inferring to its public that its

product is less risky than others”; they would make

no “claims that special filters or toasting, or expert

selection of tobacco, or extra length in the butt, or

anything else, makes a given brand less likely to

cause you-know-what.” Jd. (quoting public relations

firm’s Planning Committee Memorandum). Acting on

this agreement, the cigarette manufacturers jointly

issued “A Frank Statement to Cigarette Smokers,”

published as a full-page advertisement in newspa-

pers across the country on January 4, 1954. Id. at 39.

“The Frank Statement set forth the industry’s ‘open

question’ position that it would maintain for more

than forty years—that cigarette smoking was not a

proven cause of lung cancer; that cigarettes were not

injurious to health; and that more research on smok-

ing and health issues was needed.” Jd. All of the De-

fendant manufacturers eventually joined this collec-

tive effort.

9a

The government presented evidence from the

1950s and continuing through the following decades

demonstrating that the Defendant manufacturers

were aware—increasingly so as they conducted more

research—that smoking causes disease, including

lung cancer. Evidence at trial revealed that at the

same time Defendants were disseminating adver-

tisements, publications, and public statements deny-

ing any adverse health effects of smoking and pro-

moting their “open question” strategy of sowing

doubt, they internally acknowledged as fact that

smoking causes disease and other health hazards. Id.

at 146, 164, 168-69. Although the manufacturers

conducted th>ir own research and public relations

regarding health and other issues, they also relied in

part on a series of jointly-created entities. Among

these entities were Defendants TI and CTR (formerly

the Tobacco Industry Research Committee). The De-

fendant manufacturers created TI and CTR, com-

posed their membership, staffed their boards of di-

rectors with executives from the manufacturers, and

maintained frequent communication between high-

level manufacturer and joint-entity officials. Jd. at

4344, 63. Evidence at trial showed that TI and CTR

conducted the manufacturers’ joint public relations

through false and misleading press releases and pub-

lications, trained representatives from the manufac-

turers regarding their coordinated industry message,

conducted some cigarette testing for the manufactur-

ers, and funded “special projects” to produce favor-

able research results and witnesses specifically for

use in litigation and for support of industry public

statements. Id. at 66, 82, 86, 87, 91.

In addition to the health hazards of smoking, the

government presented evidence that Defendants in-

timately understood the addictiveness of nicotine

10a

and manipulated nicotine delivery in cigarettes to

create and sustain addiction. Evidence showed that

Defendants undertook extensive research into the

physiological impact of nicotine, how it operates

within the human body, and how the physical and

chemical design parameters of cigarettes influence

the delivery of nicotine to smokers. Jd. at 208, 308—

09. As a result of this research, they recognized and

internally acknowledged that smoking and nicotine

are addictive and they engineered their products

around creating and sustaining this addiction. Evi-

dence at trial suggested that despite this internal

knowledge, for decades Defendants publicly denied

and distorted the truth about the addictive nature of

their products, suppressed research revealing the

addictiveness of nicotine, and denied their efforts to

control nicotine levels and delivery. Id. at 209, 309.

The government also presented evidence tending

to show that Defendants marketed and promoted

their low tar brands to smokers—who were con-

cerned about the health hazards of smoking or con-

sidering quitting—as less harmful than full flavor

cigarettes despite either lacking evidence to substan-

tiate their claims or knowing them to be false. Jd. at

430. Internal industry documents introduced at trial

revealed that by the late 1960s and early 1970s, De-

fendants were aware that lower tar cigarettes are

unlikely to provide health benefits because they do

not actually deliver the low levels of tar and nicotine

advertised. Id. at 430-31. Defendants researched

and understood the phenomenon whereby smokers of

low tar cigarettes, to satisfy their addiction, modify

their smoking behavior to compensate for the re-

duced nicotine yields by “taking more frequent puffs,

inhaling smoke more deeply, holding smoke in their

lungs longer, covering cigarette ventilation holes

lla

with fingers or lips, and/or smoking more cigarettes.”

Id. at 431. As a result of this nicotine-driven behav-

ior, smokers of low tar cigarettes boost their intake of

tar, so that lower tar cigarettes do not result in lower

tar intake and therefore do not yield the touted

health benefits or serve as a step toward quitting

smoking. Jd. Evidence at trial suggested that Defen-

dants understood this concept—for some time, better

than the public health community or government

regulators—while they promoted lower tar cigarettes

as “health reassurance” brands.

Regarding secondhand smoke, the government

presented evidence suggesting that Defendants be-

came aware that secondhand smoke poses a health

risk to nonsmokers but made misleading public

statements and advertisements about secondhand

smoke in an attempt to cause the public to doubt the

evidence of its harmfulness. Jd. at 692. At trial, in-

ternal industry documents revealed that Defendants

believed the public perception of secondhand smoke

could determine the industry’s survival and that sec-

ondhand smoke research by the cigarette manufac-

turers was a sensitive issue due to the absence of

“objective science” supporting their position and the

risk that their own research would lead to unfavor-

able results. Jd. at 733. As a result, the manufactur-

ers jointly created the Center for Indoor Air Research

(“CLAR”) to coordinate and fund their secondhand

smoke research with the appearance of independ-

ence. Id. at 119, 735. The evidence also showed that

they “created, controlled, used, or participated in ” a

vast array of foreign or international entities to con-

duct their sensitive secondhand smoke research,

generate “marketable science” to use for public rela-

tions purposes, and coordinate their shared objec-

tives and message. Jd. at 119—20, 759.

12a

In additicn to these topics, the government also

presented evidence to the district court regarding

Defendants’ targeted marketing to youth under

twenty-one years of age and their denials of such

marketing, id. at 561, 672, as well as evidence con-

cerning Defendants’ employees and attorneys de-

stroying documents relevant to their public and liti-

gation positions and suppressing or concealing scien-

tific research, id. at 801, 832.

During the trial, this court rendered a decision

on Defendants’ interlocutory appeal from the denial

of summary judgment on the government’s claim for

a disgorgement remedy under RICO section 1964(a).

We reversed the district court and held that dis-

gorgement is not an available remedy in civil RICO

cases. United States v. Philip Morris USA, Inc. (“Dis-

gorgement Opinion”), 396 F.3d 1190 (D.C. Cir. 2005).

In response, the district court granted the govern-

ment leave to reformulate its proposed remedies. Af-

ter the liability phase of the trial, the district court

held a fourteen-day remedies trial. At the close of the

remedies phase, several organizations moved to in-

tervene in the litigation to assert their interests in

the proposed remedies. The district court granted the

American Cancer Society, the American Heart Asso-

ciation, the American Lung Association, Americans

for Nonsmokers’ Rights, the National African Ameri-

can Tobacco Prevention Network, and the Tobacco-

Free Kids Action Fund leave to intervene solely on

the subject of remedies.

The district court entered final judgment against

Defendants on August 17, 2006, finding that they

maintained an illegal racketeering enterprise and

each Defendant participated in the conduct, man-

agement, and operation of the enterprise in violation

of section 1962(c), and that they explicitly and im-

13a

plicitly agreed to do so, in violation of section

1962(d). Philip Morris, 449 F. Supp. 2d at 851, 901.

The court found that Defendants engaged in a

scheme to defraud smokers and potential smckers by

(1) falsely denying the adverse health effects of

smoking, id. at 854; (2) falsely denying that nicotine

and smoking are addictive, id. at 856; (3) falsely de-

nying that they manipulated cigarette design and

composition so as to assure nicotine delivery levels

that create and sustain addiction, id. at 858; (4)

falsely representing that light and low tar cigarettes

deliver less nicotine and tar and therefore present

fewer health risks than full flavor cigarettes, id. at

859; (5) falsely denying that they market to youth,

id. at 861; (6) falsely denying that secondhand smoke

causes disease, id. at 864; and (7) suppressing docu-

ments, information, and research to prevent the pub-

lic from learning the truth about these subjects and

to avoid or limit liability in litigation, id. at 866. The

court concluded that the government failed to prove

that Defendants deliberately chose not to utilize or

market feasibie designs or product features that

could produce less hazardous cigarettes. Id. at 384.

Before granting injunctive relief against Defen-

dants the district court assessed whether they pre-

sented a “reasonable likelihood of further violation(s)

in the future.” Jd. at 909 (quoting SEC v. Savoy In-

dus., Inc., 587 F.2d 1149, 1168 (D.C. Cir. 1978)). The

court concluded that Philip Morris, Reynolds, Brown

& Williamson, Lorillard, American, Altria, and

BATCo were reasonably likely to commit future

RICO violations unless enjoined because they con-

tinued to make false and misleading statements at

the time of trial, their businesses presented continu-

ing opportunities to commit RICO violations, and

their corporate leadership continued to consist of

l4a

veteran employees with longstanding ties to the

companies. Jd. at 910-13. Defendants argued that no

injunction was necessary because their Master Set-

tlement Agreement with forty-six states and the Dis-

trict of Columbia and their individual settlements

with four states already sufficiently restrained them.

The district court rejected this argument, concluding

that the Master Settlement Agreement did not obvi-

ate the need for injunctive relief because Defendants

had not fully complied with the agreement, parts of

the agreement began expiring in 2006, the states

could not vigorously enforce all aspects of the agree-

ment, and BATCo and Altria were not subject to the

settlement agreement. Jd. at 913— 15.

The district court found that three Defendants—

CTR, TI, and Liggett—did not present a reasonable

likelihood of future RICO violations, therefore the

court did not order injunctive remedies against them.

CTR and TI, the court found, now exist solely for the

limited purpose of winding up their activities and

each retains only one adviser to support its litigation

defense and handle any remaining administrative

matters. Jd. at 915-18. The court found that Liggett

withdrew from the RICO conspiracy by admitting

that smoking causes cancer and is addictive, by vol-

untarily restricting its advertising and including dis-

closures on its packages, and by cooperating with the

United States and state attorneys general in their

claims against other tobacco companies. Jd. at 906—

07, 918-19. The district court concluded that Liggett

was not reasonably likely to commit future RICO vio-

lations based on this withdrawal, its continued inde-

pendence from the other Defendants, and its limited

opportunity for future violations by virtue of its dis-

count cigarette market and lack of traditional con-

sumer advertising. Id. at 918-19.

15a

Pursuant to section 1964, the district court im-

posed injunctive remedies against the other seven

manufacturer Defendants. Specifically, the court or-

dered Defendants (1) to refrain from any acts of

racketeering relating to the manufacturing, market-

ing, promotion, health consequences, or sale of ciga-

rettes in the United States; (2) not to participate in

the management or control of CTR, TI, or CLAR, and

not to reconstitute the form or function of those enti-

ties; (3) to refrain from making any material false,

misleading, or deceptive representation concerning

cigarettes that is disseminated to the United States

public; (4) to cease using any express or implied

health message or health descriptor for any cigarette

brand, such as light or low tar; (5) to make corrective

disclosures about addiction, the adverse health ef-

fects of smoking and secondhand smoke, their ma-

nipulation of cigarette design and composition, and

light and low tar cigarettes; (6) to create document

depositories providing the government and the public

access to all industry documents disclosed in litiga-

tion; and (7) to provide their disaggregated market-

ing data to the government according to the schedule

on which they provide it to the Federal Trade Com-

mission. Jd. at 938-45. The court also limited the

sale and transfer of Defendants’ brands, product

formulas, and businesses to entities that either are

subject to the injunctive order or will sell the brand,

use the formula, or conduct the business exclusively

outside the United States. Id. at 945.

The district court denied the remainder of the

government’s requested injunctive relief, including

its proposed national smoking cessation program,

public education and counter-marketing campaign,

and youth smoking reduction plan. Jd. at 933-34,

936-37. The court also denied the government's re-

16a

quests that it appoint a monitor to investigate and

restructure the Defendant companies, id. at 935, and

that it order Defendants to make public all “health

and safety risk information” about their products in

their own files, id. at 929.

All Defendants except Liggett appealed, raising

numerous challenges to the finding of liability and

the remedies imposed. The government and the in-

tervenors filed a cross-appeal regarding the remedies

that the district court denied. On Defendants’ motion

we stayed the remedial injunction pending appeal.

We review the district court’s conclusions of law

de novo. SEC v. Wash. Inv. Network, 475 F.3d 392,

399 (D.C. Cir. 2007). To the extent it is not based on

legal error, we review the district court’s decision to

issue aD injunction for abuse of discretion. Jd. We

may not set aside the district court’s findings of fact

unless they are clearly erroneous, giving due regard

to the court’s opportunity to judge the witnesses’

credibility. Jd. (citing FED. R. Civ. P. 52(aX6)). This

standard applies even when the district court adopts

a party's proposed findings verbatim. Anderson v.

City of Bessemer City, 470 U. S. 564, 572 (1985).

To establish RICO liability, the government had

to prove the necessary elements of RICO itself—

including the existence of an enterprise and a pat-

tern of racketeering activity, 18 U.S.C. § 1962(c)—as

well as the elements of the underlying conduct con-

stituting the racketeering acts, here, numerous in-

stances of mail and wire fraud under 18 U.S.C.

§§ 1341 and 1343. Defendants challenge the district

court’s findings regarding both RICO and the under-

lying fraud, as well as the remedies the court im-

posed. We address Defendants’ challenges to RICO

liability in Part II, their general challenges to fraud

17a

liability in Part III, their challenges to specific as-

pects of the fraudulent scheme and the liability of

specific Defendants in Part IV, their challenges to

the finding that they are likely to commit future vio-

lations and therefore should be enjoined in Part V,

and their challenges to particular remedies the court

imposed in Part VI.

Ii. Challenges to RICO Liability

A. RICO Enterprise

RICO makes it unlawful for “any person ... as-

sociated with any enterprise ... to conduct or par-

ticipate, directly or indirectly, in the conduct of such

enterprise’s affairs through a pattern of racketeering

activity.” 18 U.S.C. § 1962(c). Thus, in a section

1962(c) suit, the defendants are the “persons” who

conduct the “enterprise’s” affairs through racketeer-

ing activity. Because RICO defines “person” as in-

cluding “any individual or entity capable of holding a

legal or beneficial interest in property,” id. § 1961(3),

corporations as well as individuals can be liable if

they conduct an enterprise’s affairs through a pat-

tern of racketeering activity. In language central to

the issue before us, section 1961(4) states:

“enterprise” includes any individual, part-

nership, corporation, association, or other le-

gal entity, and any union or group of indi-

viduals associated in fact although not a le-

gal entity.

Id. § 1961(4). The enterprise as such generally faces

no section 1962(c) RICO liability; indeed it may be

the innocent vehicle through which unlawful activity

is carried out, see Cedric Kushner Promotions, Ltd. v.

King, 533 U.S. 158, 164 (2001) (“RICO both protects

a legitimate ‘enterprise’ from those who would use

unlawful acts to victimize it, and also protects the

18a

public from those who would unlawfully use an ‘en-

terprise’ (whether legitimate or illegitimate) as a ‘ve-

hicle’ through which ‘unlawful . . . activity is commit-

ted.” (quoting United States v. Turkette, 4652 U. S.

576, 591 (1981), and Natl Org. for Women, Inc. v.

Scheidler, 510 U.S. 249, 259 (1994))). When the en-

terprise is an association-in-fact, members of the as-

sociation may be both part of the “enterprise” and

liable as “persons” under RICO if they conduct the

enterprise’s affairs through racketeering activity.

See, e.g., United States v. Richardson, 167 F.3d 621,

626 (D.C. Cir. 1999) (upholding conviction of defen-

dant member of association-in-fact enterprise).

Here, defining the RICO enterprise as “a group of

business entities and individuals associated-in-fact,

including Defendants to this action, their agents and

employees, and other organizations and individuals,”

the district court held that the Defendant cigarette

manufacturers and trade organizations had violated

section 1962(c) by participating in the conduct of the

enterprise’s affairs through multiple acts of mail and

wire fraud. Philip Morris, 449 F. Supp. 2c at 851,

867. Defendants challenge the district court’s accep-

tance of a RICO enterprise made up of individuals

and corporations, arguing that the statute provides

an exclusive list of possible enterprises that covers

groups of individuals associated in fact, nc nixed

groups of individuals and corporations associated in

fact.

In United States v. Perholtz, 842 F.2d 343 (D.C.

Cir. 1988), however, we squarely rejected this precise

argument. There, we held that a group of seven indi-

viduals and eleven corporations and partnerships as-

sociated in fact may constitute a RICO “enterprise.”

Id. at 351 n.12, 353. We explained: “[RICO] defines

‘enterprise’ as including the various entities speci-

19a

fied; the list of entities is not meant to be exhaus-

tive.” Id. at 353. As such, a group of individuals, cor-

porations, and partnerships associated in fact can

qualify as a RICO “enterprise,” even though section

1961(4) nowhere expressly mentions this type of as-

sociation.

In so holding, we jomed several other circuits

that had reached the same conclusion. Perholiz, 842

F.2d at 358 (citing the Second, Third, Seventh, and

Eleventh Circuits, as well as Fifth Circuit Unit B).

Indeed, both prior to and since Perholiz, every circuit

to consider the question has likewise held that corpo-

rations may be part of an association-in-fact enter-

prise. See United States v. London, 66 F.3d 1227,

1243—44 (1st Cir. 1995) (holding that corporations

can be part of an association-in-fact enterprise be-

cause section 1961(4)’s list is not exhaustive); United

States v. Huber, 603 F.2d 387, 394 (2d Cir. 1979)

(same); United States v. Aimone, 715 F.2d 822, 828

(3d Cir. 1983) (same); United States v. Thevis, 665

F.2d 616, 625—26 (5th Cir. Unit B 1982) (same), su-

perseded on other grounds by FED. R. EvID. 804(b)(6)

(1997); United States v. Masters, 924 F.2d 1362, 1366

(7th Cir. 1991) (same); Atlas Pile Driving Co. v. Di-

Con Fin. Co., 886 F.2d 986, 995 n.7 (8th Cir. 1989)

(same); see, also Dana Corp. v. Blue Cross & Blue

Shield Mut. of N. Ohio, 900 F.2d 882, 887 (6th Cir.

1990) (reaching same outcome and citing Huber, 603

F.2d at 393—94); United States v. Navarro-Ordas, 770

F.2d 959, 969 n.19 (1ith Cir. 1985) (same); United

States v. Feldman, 853 F.2d 648, 655-56 (9th Cir.

1988) (reaching same outcome based on different

statutory analysis); United States v. Nayar, 300 F.3d

466, 484 (4th Cir. 2002) (upholding without discus-

sion RICO convictions involving an association-in-

fact enterprise that included corporations). The

20a

judges of these circuits are equally unanimous, for

not one has dissented from the proposition that an

association-in-fact enterprise may include corpora-

tions.

Defendants argue that Perholtz has no applica-

bility where, as here, the defendants are corpora-

tions. Because the Perholtz defendants were individ-

ual members of the enterprise, not its corporate

members, Defendants here claim that Perholtz ap-

plies only when individuals, not corporations, are the

RICO defendants. As Defendants see, it, Perholtz

merely ensures that individuals are unable to escape

liability simp!y by including corporations in their en-

terprise; Perholiz, they argue, does not mean that

the associated-in-fact corporations can themselves

incur RICO liability.

But nothing in Perholiz is so limited. Quoting the

Supreme Court’s statement in United States uv.

Turkette that “[t]here is no restriction upon the asso-

ciations embraced by the definition [of enterprise] ,”

452 U.S. at 580, Perholtz sets forth its holding in

broad terms: “We therefore follow those courts that

have held that individuals, corporations, and other

entities may constitute an association-in-fact,” 842

F.2d at 353. Nowhere does Perholtz suggest that the

rule varies depending on the identity of the defen-

dants. Indeed, two of the cases Perholiz relies on in-

volved corporate defendants. Id. (citing Thevis, 665

F.2d at 625-26 (upholding RICO convictions for one

individual and one corporate defendant), and Bunker

Ramo Corp. v. United Bus. Forms, Inc., 713 F.2d

1272, 1285 (7th Cir. 1983) (upholding RICO charges

against one individual and one corporation)). Many

other decisions have similarly upheld RICO allega-

tions involving cerporate defendants who were also

members of the association-in-fact enterprise. See,

2la

e.g., City of N.Y. v. Smokes-Spirits.com, Inc., 541

F.3d 425, 450—51 (2d Cir. 2008); Odom v. Microsoft

Corp., 486 F.3d 541, 553 (9th Cir. 2007); Najjar, 300

F.3d at 484; United States v. Goldin Indus., Inc., 219

F.3d 1271, 1274 (1ith Cir. 2000); Dana Corp., 900

F.2d at 887; Shearin v. E.F. Hutton Group, Inc., 885

F.2d 1162, 1165—66 (3d Cir. 1989), overruled on other

grounds by Beck v. Prupis, 529 U. S. 414, 506 (2000);

Atlas Pile Driving, 886 F.2d at 995; Ocean Energy II,

Inc. v. Alexander & Alexander Inc., 868 F.2d 740,

748—49 (5th Cir. 1989).

Moreover, Defendants’ proposed limitation on

Perholiz is contrary to the statute’s language. As

“persons” under section 1961(3), corporations may be

RICO defendants regardless of the kind of enterprise

charged. See 18 U.S.C. § 1962(c) (“It shall be unlaw-

ful for any person ... associated with any enterprise

... to conduct or participate, directly or indirectly, in

the conduct of such enterprise’s affairs through a

pattern of racketeering activity.” (emphases added)).

Defendants cite not a single case lending even a

shred of support to the idea that the meaning of “en-

terprise” can fluctuate depending on whom the gov-

ernment or the plaintiff chooses to name as the de-

fendant. Perholtz’s interpretation of section 1961(4)

thus applies regardless of whether the RICO defen-

dants are individual “persons” er corporate “per-

sons.” To hold otherwise would require us to rewrite

section 1962(c).

In a further attempt to evade Perholiz, Defen-

dants argue that even if Perholtz was correct when

decided, it has been eroded by the Supreme Court’s

2001 decision in Cedric Kushner Promotions, Lid. v

King, 533 U.S. 158 (2001). Defendants’ argument be-

gins with the premise that at the time we decided

Perholtz, RICO presented a potential loophole: be-

22a

cause the RICO defendant must be distinct from the

RICO enterprise, Yellow Bus Lines, Inc. v. Drivers,

Chauffeurs & Helpers Local Union 639, 839 F.2d

782, 790 (D.C. Cir. 1988) (“[O]ne entity may not

serve as the enterprise and the person associated

with it ....”), vacated on other grounds, 492 U. S.

914 (1989), a sole shareholder who used his alter-ego

corporation for racketeering might evade RICO li-

ability because he wouldn’t be sufficiently distinct

from the alter-ego corporation “enterprise.” Defen-

dants rely on Perholiz’s suggestion that a definition

of “enterprise” that excluded associations-in-fact of

corporations would lead to “the bizarre result that

only criminals who failed to form corporate shells to

aid their illicit schemes could be reached by RICO.”

842 F.2d at 353. According to Defendants, we were

motivated in Perholitz by the underlying concern

“that a criminal defendant conducting the affairs of

an ‘enterprise’ that was his own closely held corpora-

tion, would be so closely tied to the enterprise that he

would escape RICO liability.” Defs. Br. 37. Given

that the Supreme Court has subsequently eliminated

this concern—holding in Cedric Kushner that an in-

dividual sole shareholder is sufficiently distinct from

his alter-ego corporation to sustain RICO liability,

533 U.S. at 160—Defendants assert that Perholiz no

longer represents binding authority.

We do not read Perholiz as motivated by the con-

cerns addressed in Cedric Kushner. In contrast to

Cedric Kushner, the enterprise in Perholtz involved

multiple individuals and numerous corporations,

with no indication that the corporations were either

all closely held by the individual defendants or in

any other way insufficiently distinct. 842 F.2d at 351

n.12. Indeed, at least some of the Perholiz corporate

enterprise members were not closely held. For exam-

23a

ple, enterprise member International Business Ser-

vices, Inc. (IBS) existed in its own right prior to the

scheme and was related to the defendants through

employment relationships that would not have de-

feated RICO’s distinctness requirement: Perholtz

himself was a consultant to IBS, and the other RICO

defendant, Franklin Jackson, was an IBS project

manager. Id. at 348. Similarly, enterprise member

Remote Computer Services Corporation, although

formed expressly for the purpose of the scheme, was

jointly held in equal shares by three individuals—

Perholtz and two other individual members of the

enterprise, id. at 350—and thus would have been

sufficiently distinct from each of those non-sole

shareholders. The enterprise also included two sepa-

rate real estate companies both of which apparently

existed independently of the scheme and were not

otherwise affiliated with the individuals. Jd. at 351

n.12. At least one individual enterprise member,

John Gentile, worked for the Postal Service and ap-

parently had no formal stake in the corporate enter-

prise members. Jd. at 346, 351 n.12. In Perholiz, we

held that all these corporations-—not just those

closely held or created solely for the scheme—could

be part of an association-in-fact enterprise. Indeed,

only after so holding did we turn to Perholtz’s en-

tirely separate argument that he, as an individual,

was insufficiently distinct from the enterprise. Far

from basing our holding on this argument, we simply

noted that we had “no occasion to consider the sepa-

rateness requirement” because Perholtz associated

not with himself but with others. Jd. at 353.

Given the structure of the Perholtz enterprise

and the court’s acknowledgement that distinctness

was not at issue, we think Perholtz reflected a differ-

ent concern, namely that a group of sophisticated

24a

racketeers who would otherwise constitute an asso-

ciation-in-fact might evade RICO’s grasp by virtue of

their ability to operate through corporations and es-

tablish complex networks of companies, kickbacks,

and contracts to achieve their elicit ends. Indeed,

immediately following its reference to “corporate

shells,” Perholtz emphasized Congress’s desire that

RICO serve “as a weapon against the sophisticated

racketeer as well as (and perhaps more than) the art-

less.” Id. Perholtz itself presented just such a situa-

tion: the defendants worked through their own com-

panies and multiple outside corporations in an iatri- .

cate web of shared commissions to game the bidding

process for government contracts. The success of the

scheme required the participation of companies to

serve as contractors and subcontractors. “This rela-

tionship of individuals and corporations is precisely

what section 1962(c) was designed to attack.” Id. at

364.

Moreover, in asserting their Cedric Kushner ar-

gument, Defendants fail to explain how Perholtz’s

interpretation would even solve the hypothetical

problem they posit. According to Defendants, in or-

der to preserve RICO liability for a sole shareholder

who would be insufficiently distinct from his alter-

ego corporation, the Perholtz court held that an “in-

dividual and his shell corporation could together ...

constitute an association-in-fact enterprise.” Defs.

Reply Br. 16. In Defendants’ view, the sole share-

holder would then be liable under RICO for conduct-

ing the affairs of this association-in-fact enterprise.

Yet if an individual is insufficiently distinct from his

alter-ego corporation, we seriously doubt he would

suddenly be sufficiently distinct from an enterprise

consisting of his alter-ego corporation and himself. If

25a

Perholiz had been concerned with distinctness, its

purported “solution” would make little sense.

Further seeking to justify their reliance on

Cedric Kushner, Defendants say that the government

cites only one post—Cedric Kushner case—United

States v. Najjar, 300 F.3d 466 (4th Cir. 2002)—that

upheld an association-in-fact enterprise of corpora-

tions. The relevance of this is hard to grasp, as other

post—Cedric Kushner cases not cited by the govern-

ment accept association-in-fact enterprises com-

prised of corporations. See Smokes-Spirits.com, 541

F.3d at 450—51 (holding that the plaintiff adequately

pleaded an association-in-fact enterprise consisting

of two corporations); Odom, 486 F.3d at 553 (holding

that plaintiffs had sufficiently alleged an association-

in-fact enterprise of two corporations); United States

v. Cianci, 378 F.3d 71, 83 (1st Cir. 2004) (“It is un-

controversial that corporate entities, including mu-

nicipal and county ones, can be included within asso-

ciation-in-fact RICO enterprises.”); Living Designs,

Inc. v. EI. DuPont de Nemours & Co., 431 F.3d 353,

361 (9th Cir. 2005) (“[Tlhere is no question that Du-

Pont [corporation] and the law firms together can

constitute an ‘associated in fact’ RICO enterprise.”).

And as we noted above, no circuit has ever held the

opposite.

Cedric Kushner thus undermines neither the

unanimous judicial view that association-in-fact en-

terprises may include corporations nor Perholtz’s

binding effect on this case. Defendants’ argument

that we should read section 1961(4) as an exhaustive

list of possible RICO enterprises is therefore unavail-

ing. Not only is it foreclosed by Perholiz, it is unper-

suasive on its own terms. As Perholiz and many

other circuits explain, the use o. che word “includes”

indicates that RICO’s list of “enterprises” is non-

26a

exhaustive. Indeed, section 1961 makes the non-

exhaustive nature of “includes” clear by alternating

between the words “means” and “includes” to intro-

duce the section’s various definitions. Specifically,

five of section 1961’s ten subsections introduce defi-

nitions with the word “means.” For example, section

1961(1) defines “racketeering activity,” explaining

that the term “means” any of a list of specific state

and federal crimes. Section 1961(2) likewise intro-

duces a definitional list with the term “means”:

“State’ means any State of the United States, the

District of Columbia, the Commonwealth of Puerto

Rico, any territory or possession of the United States,

any political subdivision, or any department, agency,

or instrumentality thereof.” 18 U.S.C. § 1961(2); see,

also id. § 1961(6), (7), (8) (introducing definitions of

“unlawful debt,” “racketeering investigator,” and

“racketeering investigation” with the term “means’”).

Section 1961(4), by contrast, says “enterprise’ in-

cludes any individual, partnership, corporation, as-

sociation, or other legal entity, and any union or

group of individuals associated in fact although not a

legal entity.” Id. § 1961(4) (emphasis added). By

switching between “means” and “includes” in the

same definitional provision, Congress signaled its

intent to distinguish between exhaustive and non-

exhaustive lists. See Helvering v. Morgan’s, Inc., 293

U.S. 121, 126 n.1 (1934) (describing a statute that

introduced three definitions with the word “includes”

and seven definitions with the word “means” and

noting that “[t}he natural distinction would be that

where ‘means’ is employed, the term and its defini-

tion are to be interchangeable equivalents, and that

the verb ‘includes’ imports a general class, some of

whose particular instances are those specified in the

definition”).

27a

That Congress provided an exhaustive list of /e-

gai entity enterprises by adding the phrase “or other

legal entity” hardly converts the list of non-legal en-

tity enterprises into an exhaustive list. Had Con-

gress wanted to limit non-legal entity associations to

those expressly listed, the most obvious way to do so

would have been the way Congress wrote the five

clearly exhaustive definitions in the same section: it

could have said “enterprise’ means any individual,

partnership, corporation, association, or other legal

entity, or any union or groxp of individuals associ-

ated in fact although not a legal entity.” But Con-

gress chose to say “enterprise’ includes” the listed

entities. Defendants think that the phrase “or other

legal entity” would have been unnecessary if the list

were otherwise non-exhaustive. Not so. Adding “or

other legal entity” serves to ensure that all legal enti-

ties are covered while retaining the possibility that

some additional non-legal entities beyond those

listed are also covered.

Nor does the use of the phrase “including, but not

limited to ” to indicate a non-exhaustive list in a dif-

ferent section of RICO, section 1964(a), demonstrate

that the sole word “includes” in section 1961(4) must

introduce an exhaustive list. Section 1964, which es-

tablishes civil remedies for RICO violations, lacks

section 1961’s juxtaposition of the non-exhaustive

term “includes” with the exhaustive term “means”;

adding “but not limited to ” helps to emphasize the

non-exhaustive nature of section 1964(a)’s list of

remedies. Section 1961 needed no such clarification

because it employed the contrasting terms “means”

and “includes” to distinguish exhaustive from non-

exhaustive definitions.

Contrary to Defendants’ argument, nothing

about this interpretation renders the definition of

28a

“enterprise” devoid of meaning. Although encompass-

ing non-enumerated enterprises, section 1961(4)’s

list defines “enterprise,” in part, by listing the kinds

of entities Congress had in mind. Indeed, the Su-

preme Court has acknowledged this meaning by re-

quiring enterprises to exhibit common purpose, or-

ganization, and continuity. Turkette, 452 U.S. at 583;

see also Richardson, 167 F.3d at 625.

In sum, as Perholiz clearly holds, because RICO’s

“list of entities is not meant to be exhaustive,” “indi-

viduals, corporations, and other entities may consti-

tute an association-in-fact.” 842 F.2d at 353. This

binding precedent—confirmed by the statute’s lan-

guage, buttressed by the unanimity among our sister

circuits, and undiminished by Defendants’ efforts to

escape it—requires that we affirm the district court’s

holding that the government properly alleged a

RICO enterprise of individuals, cigarette manufac-

turers, and trade organizations.

We also reject Defendants’ additional challenges

to the district court’s findings regarding the exis-

tence of a RICO enterprise and their participation in

its affairs. The district court found—permissibly in

our view—that the enterprise had the common pur-

pose of obtaining cigarette proceeds by defrauding

existing and potential smokers, Philip Morris, 449 F.

Supp. 2d at 869; possessed the requisite structure

both through informal association and through the

formation of several formal organizations, id. at 870—

71; functioned as a continuous unit despite personnel

changes, id. at 871-72; and constituted a separate

entity distinct from each Defendant, id. at 875. De-

fendants give us neither any basis for concluding

that the district court’s factual findings were clearly

erroneous nor any reason to think them legally insuf-

ficient. The district court also found—again permis-

29a

sibly—that despite competing in some aspects of

their business, Defendants jointly committed fraud

and so participated in the conduct of not just their

own affairs but the enterprise’s as well, id. at 875—

78, and also that they conspired to do so, id. at 903—

05. Accordingly, we affirm the district court’s find-

ings that an enterprise existed and that Defendants

participated in the conduct of its affairs and con-

spired to do so.

B. Identifying Racketeering Acts

Defendants complain that the district court

failed to identify the racketeering acts that support

the finding of liability. While it is true the district

court’s opinion provided no single, discrete list of

specific racketeering acts, the comprehensive find-

ings— detailing over one-hundred racketeering

acts—are sufficient to warrant affirmance. Defen-

dants raise numerous challenges to the correctness of

the district court’s findings that they committed

racketeering acts, which we take up in Parts HI and

IV. In this section, however, we are concerned only

with the existence of these findings, not their valid-

ity.

By statutory definition, any violation of the mail

or wire fraud statutes can qualify as “racketeering

activity.” 18 U.S.C. § 1961(1). To prove a violation of

the mail and wire fraud statutes, the government

must show (1) a scheme or artifice to defraud and (2)

a mailing or wire transmission in furtherance

thereof. Id. §§ 1341, 1343. “Where one scheme in-

volves several mailings, the law is settled that each

mailing constitutes a violation of the statute.” Han-

rahan v. United States, 348 F.3d 363, 366 (D.C. Cir.

1965). Where, as here, the mail and wire fraud stat-

utes serve as the predicate offenses for a RICO viola-

30a

tion, each racketeering act must be a mailing or wire

transmission made in furtherance of a “scheme or

artifice to defraud.” 18 U.S.C. §§ 1341, 1343. Thus, in

order to identify the racketeering acts, the district

court must first have found a scheme to defraud,

then concluded the alleged mailings or wire trans-

missions were in furtherance of such scheme. See

Philip Morris, 449 F. Supp. 2d at 852-54.

Although Defendants question whether the dis-

trict court clearly found a scheme to defraud, the

finding on this question is explicit: “The Government

has proven that the Enterprise knowingly and inten-

tionally engaged in a scheme to defraud smokers and

potential smokers, for purposes of financial gain, by

making false and fraudulent statements, representa-

tions, and promises.” Jd. at 852. The district court

explains, in great detail, the seven components of the

scheme to defraud. Jd. At 852-67.

The court also held that “each of the alleged

mailings and wire transmissions was in furtherance

of the overarching scheme to defraud.” Jd. at 881.

Thus it follows that any mailing or wire transmission

found to have been made was found to have been a

mail or wire fraud offense and therefore a racketeer-

ing act.

Seventy-nine of the alleged acts were established

by Defendants’ own stipulations and admissions. Id.

at 882 (enumerating 79 racketeering acts). Alto-

gether, the court enumerated 108 racketeering acts

in the opinion, as well as six others which it excluded

on First Amendment grounds. See id. at 882, 884,

885 n.62, 887. This total does not include the many

other findings which may be tied to other racketeer-

ing acts, but for which the district court did not pro-

vide a specific list. See, e.g., id. at 883 (“[I]t is clear

3la

beyond any question that Defendants caused the

mailings and wire transmissions underlying the 30

Racketeering Acts involving the news media’s dis-

semination of Defendants’ press releases and adver-

tisements to their subscribers.”).

The RICO statute requires “a pattern of racket-

eering activity” on the part of each defendant. 18

U.S.C. § 1962(c). “[A]t least two acts of racketeering

activity” are necessary to form a pattern. H.J., Inc. v.

Nw. Beil Tel. Co., 492 U.S. 229, 237 (1989) (quoting

18 U.S.C. §1961(5)). The district court found the

requisite pattern committed by each Defendant,

Philip Morris, 449 F. Supp. 2d at 889-91, and this

finding is not erroneous. A brief sampling of the 108

enumerated racketeering acts makes the point:

Philip Morris, Reynolds, Brown & Williamson, Loril-

lard, American, and TI committed racketeering acts

24, 132, and 133 by mailing press releases containing

false statements about the addictiveness and health

consequences of smoking. Jd. at 194, 282—83. Philip

Morris, Reynolds, Brown & Williamson, Lorillard,

American, Liggett, and CTR committed racketeering

acts 66, 73, and 88 by mailing letters regarding fund-

ing of CTR’s “special projects” to create data support-

ing their fraudulent claims. Jd. at 101, 882, 972, 976.

BATCo and Brown & Williamson committed racket-

eering acts 30, 50, 51, 53, and 63 through their mail-

ings to each other concerning the enterprise’s posi-

tion on the health effects and addictiveness of smok-

ing as well as smoker compensation and nicotine. Jd.

at 253-54, 301, 882, 965, 969. Altria committed

racketeering acts 71, 72, 74, and 75 in its efforts to

coordinate Defendants’ public positions and fund

CTR research projects to support their fraudulent

claims. Jd. at 295, 813, 884, 974. As these examples

demonstrate, the district court found each Defendant

32a

engaged in a “pattern of racketeering activity,” and

that finding is not erroneous. See infra Parts III, IV.

The 108 enumerated acts give us ample basis to

review the district court’s finding. Although the dis-

trict court may have concluded other racketeering

acts were proven as well, we need look no further.

Defendants correctly argue we must ensure the rem-

edy imposed is tailored to “the violation found,”

United States v. Microsoft, 253 F.3d 34, 105 (D.C.

Cir. 2001); the voluminous findings detailing the con-

tours of the scheme to defraud are more than suffi-

cient to allow this review, see,, e.g., Philip Morris,

449 F. Supp. 2d at 852-67. Given that a mailing or

wire transmission need not itself be fraudulent, the

remedy needs to be tailored to the scheme to defraud,

not the specific use of the mail or wires.

For similar reasons, we need not resolve Defen-

dants’ challenges to the racketeering acts involving

denials of marketing to youth. As the district court

imposed no remedies specifically relating to youth

marketing, our assessment whether the remedies are

tailored to the violation found is unaffected by the

associated racketeering acts. The remaining racket-

eering acts are fully sufficient to support the district

court’s finding of a pattern of racketeering activity as

to each Defendant. Because these challenges have no

impact on the outcome of this appeal, we decline to

address them. The district court set forth findings

sufficient to allow our review of its verdict of liability

and imposition of sanction.

Il. General Challenges to Fraud Liability

A. Specific Intent

The predicate acts of racketeering in this case

were all acts of mail or wire fraud, which require

specific intent to defraud. Post v. United States, 407

33a

F.2d 319, 329 (D.C. Cir. 1968). Defendants challenge

the district court’s conclusion that they acted with

specific intent, arguing that the district court applied

an impermissible “collective intent” standard and

that the government did not present any evidence to

support a finding of specific intent under the correct

formulation.

Corporations may be held liable for specific in-

tent offenses based on the “knowledge and intent” of

their employees. N.Y. Cent. & Hudson River R.R. Co.

v. United States, 212 U.S. 481, 495 (1909); see,

United States v. A & P Trucking Co., 358 U.S. 121,

125 (1958). Because a corporation only acts and wills

by virtue of its employees, the proscribed corporate

intent depends on the wrongful intent of specific em-

ployees. See Saba v. Compagnie Nationale Air

France, 78 F.3d 664, 670 (D.C. Cir. 1996). Thus, to

determine whether a corporation made a false or

misleading statement with specific intent to defraud,

we look to the state of mind of the individual corpo-

rate officers and employees who made, ordered, or

approved the statement. Southland Sec. Corp. v. IN-

Spire Ins. Solutions Inc., 365 F.3d 353, 366 (5th Cir.

2004).

A person’s state of mind is rarely susceptible of

proof by direct evidence, so specific intent to defraud

may be, and most often is, inferred from the totality

of the circumstances, including indirect and circum-

stantial evidence. United States v. Alston, 609 F.2d

531, 538 (D.C. Cir. 1979); United States v. Reid, 533

F.2d 1255, 1264 (D.C. Cir. 1976). We refer to this in-

ference when, in the common law fraud context, we

say that the factfinder “is permitted to impute

knowledge of the falsity of the statements to the ac-

cused, not as a matter of law but as a consequence of

inferences reasonably drawn from the facts shown.”

34a

United States v. Avant, 275 F.2d 660, 653 (D.C. Cir.

1960).

Here, the district court concluded that the chief

executive officers and other highly placed officials in

the Defendant corporations made or approved state-

ments they knew to be false or misleading, evincing

their specific intent to defraud consumers. In some

instances, the court found by direct evidence that

representatives of the Defendant companies “will-

fully stat[ed] something which they knew to be un-

true.” Philip Morris, 449 F. Supp. 2d at 895. For ex-

ample, the court found that, in a televised interview

in 1971, Philip Morris President Joseph Cullman III

denied that cigarettes posed a health hazard to preg-

nant women or their infants, “contradict[ing] the in-

formation Helmut Wakeham, Philip Morris’s Vice

President for Corporate Research and Development,

had given him two years earlier.” Id. at 193—94. In

the main, however, the district court relied on indi-

rect and circumstantial evidence indicating that the

senior corporate officials knew that their public

statements, and those that they approved for their

corporations, were false or misleading.

In the majority of instances, the authors of

the fraudulent statements alleged as Racket-

eering Acts were executives, including high

level scientists—CEOs, Vice Presidents,

Heads of Research & Development, not entry

level employees—at each of the Defendant

companies who would reasonably be expected

to have knowledge of the company’s internal

research, public positions, and long term

strategies.

Id. at 897. The court reasoned:

35a

[I]t is absurd to believe that the highly-

ranked representatives and agents of these

corporations and entities had no knowledge

that their public statements were false and

fraudulent. The Findings of Fact are replete

with examples of C.E.O.s, Vice-Presidents,

and Directors of Research and Development,

as well as the Defendants’ lawyers, making

statements which were inconsistent with the

internal knowledge and practice of the corpo-

ration itself.

Id. at 853. The district court did not commit legal er-

ror by imputing to Defendants’ executives knowledge

of the falsity of their statements based on inferences

reasonably drawn from the facts shown, and suffi-

cient evidence supported these inferences.

The government presented decades of evidence

that scientists within the Defendant corporations

and outside scientists hired by the corporations and

their joint entities were continually conducting re-

search and reviewing the research of other scientists

regarding cigarettes and health, addiction, nicotine

and tar manipulation, and secondhand smoke. The

evidence at trial demonstrated that the results of

this research—essential to the core of Defendants’

operations, including strategic planning, product de-

velopment, and advertising—were weil known, ac-

knowledged, and accepted throughout the corpora-

tions. These results established that cigarette smok-

ing causes disease, that nicotine is addictive, that

light cigarettes do not present lower health risks

than regular cigarettes due to smoker compensation,

and that secondhand smoke is hazardous to health.

Dr. William Farone, a scientist who worked at Philip

Morris for eighteen years and whom the district

court found to be “impressive and credible as both a

36a

fact and expert witness,” id. at 186, testified about

the understanding within Philip Morris on the ques-

tion of whether cigarette smoking is a cause of lung

cancer and other diseases:

There was widespread acceptance that smok-

ing caused disease. I never talked with a sci-

entist at Philip Morris who said that smoking

doesn’t cause disease. [This was based on

the] compelling epidemiology such as that re-

counted in the Surgeon’s [sic] General’s re-

ports, and our knowledge about the chemi-

cals that were created by cigarettes and what

was delivered to the smoker, hundreds of

times per day on average.

Id. at 187 (quoting Farone testimony). When asked

whether, in his discussions with Philip Morris execu-

tives, any of them challenged the validity of the sci-

entific evidence that smoking causes disease, Farone

answered,

No. Their comments generally focused on

how the company could or should respond,

not to whether the scientific evidence was

valid. Remember, a main reason why they

hired me in 1976 was to help develop a less

hazardous cigarette. It seemed to me at the

time I was hired, and certainly was the case

during my entire time there, that hiring me

for that job was itself implicit recognition

that the cigarettes that were out there being

sold were causing disease.

Id. (quoting Farone testimony).

The Defendant corporations documented the re-

sults of the studies regarding disease, nicotine addic-

tion, and smoker compensation in numerous memo-

randa and reports; the evidence at trial, including

37a

internal corporate documents, demonstrated that the

executives crafted their corporate priorities and

strategies in reeponse to these findings. See, e.g., id.

at 165, 180, 218, 219, 232, 240, 258-59, 270, 336,

720. Defendants’ own documents also support the in-

ference that Defendants’ executives were aware that

their public relations strategy of creating the impres-

sion of an “open question” about the link between

smoking and disease did not square with their own

knowledge about the established link between the

two. For example, William Kloepfer, Vice President

of Public Relations for the Tobacco Institute, wrote to

Earle Clements, President of the Tobacco Institute,

admitting that “{o]ur basic position in the cigarette

controversy is subject to the charge, and may be sub-

ject to a finding, that we are making false or mislead-

ing statements to promote the sale of cigarettes.” Jd.

at 855. Other documents demonstrate that Defen-

dants’ top officials were directly informed of negative

research results. For example, in 1977 Philip Morris

Assistant General Counsel Alexander Holtzman sent

a “warning” to the company’s President, Joseph

Cullman, informing him that a research project

jointly sponsored by a group of the Defendant com-

panies had concluded that exposure to cigarette

smoke causes emphysema. Jd. at 183.

The government presented similar evidence re-

garding the other aspects of Defendants’ scheme,

such as addiction and nicotine. A few examples can-

not adequately present the volumes of evidence un-

derlying the district court’s findings of fact, but the

following provide a fair sample: A 1991 Reynolds Re-

search and Development report acknowledged that

“[wje are basically in the nicotine business.” Jd. at

237. Dr. Farone testified that during his time at

Philip Morris there was “widespread acceptance in-

38a

ternally throughout the company—among execu-

tives, scientists, and marketing people” that nicotine

was primarily responsible for addiction to smoking.

Id. at 868. Indeed, the district court found that “in-

ternal documents and testimony from former com-

pany employees affirmed that within their corporate

walls, Defendants openly recognized the addictive-

ness of cigarettes.” Id. Regarding light cigarettes, in-

ternal research reports and memoranda at the De-

fendant companies revealed that they understood the

phenomena of smoker compensation and studied how

to manipulate it in order to make their light brands

appealing to addicted smokers while continuing to be

able to advertise the brands as low tar. For example,

a 1978 BATCo memorandum about that company’s

internal research acknowledged that “a majority of

habitual smokers compensate for changed delivery”

and explained that if smokers “choose [a] lower de-

livery brand .. . than their usual brand” they “will in

fact increase the amounts of tar and gas phase that

they take in, in order to take in the same amount of

nicotine.” Id. at 861. Dr. Farone testified that Defen-

dants’ superior knowledge of compensation (com-

pared to that of scientists outside the industry, in-

cluding the government) was closely held within

Philip Morris and the tobacco industry and there was

an “effort on the part of [his] co-workers at Philip

Morris, including [his] supervisors, to restrict any

public acknowledgment on the part of Philip Morris

of the phenomena of compensation.” Id.

As these examples and hundreds more findings

in the district court’s opinion demonstrate, the court

had before it sufficient evidence from which to con-

clude that Defendants’ executives, who directed the

activities of the Defendant corporations and their

joint entities, knew about the negative health conse-

39a

quences of smoking, the addictiveness and manipula-

tion of nicotine, the harmfulness of secondhand

smoke, and the concept of smoker compensation,

which makes light cigarettes no less harmful than

regular cigarettes and possibly more. The govern-

ment presented evidence indicating that specific

high-ranking corporate officials were directly in-

formed about these matters, as well as evidence of

pervasive knowledge and acceptance of these propo-

sitions throughout the Defendant organizations. The

overwhelming indirect and circumstantial evidence

was sufficient to allow the district court to reasona-

bly infer that the high level executives, including

“CEOs, Vice Presidents, [and] Heads of Research &

Development” for Defendants knew about their re-

spective companies’ “internal research, public posi-

tions, and long term strategies,” id. at 897, that is,

the “internal knowledge and practice” of the com-

pany, id. at 853. These executives then made, caused

to be made, and approved public statements contrary

to this knowledge. See, e.g., id. at 190 (Philip Morris

Vice President and General Counsel declaring

“[njobody has yet been able to find any ingredient as

found in tobacco or smoke that causes human dis-

ease”); id. at 166, 201 (28 years after Reynolds scien-

tists declared the presence of carcinogenic com-

pounds in cigarettes was “now well established,” a

Reynolds press release and newspaper advertise-

ment declared the connection between smoking and

disease “an open controversy”); id. at 772 (TI pub-

lished booklet declaring that secondhand smoke had

not been shown to be a heaith hazard to nonsmox-

ers); id. at 796 (Lorillard general counsel testified at

trial that the company’s public position has always

been and continues to be that secondhand smoke is

not a proven health hazard); id. at 273 (President

40a

and CEO of Philip Morris quoted in TIME magazine

from deposition testimony claiming that cigarettes

are not addictive unless a similar attachment to

Gummi Bears is an addiction); id. at 285 (TTs Vice

President for Public Affairs on television programs

flatly denying that nicotine is addictive, stating the

attachment is like being a “news junkie” or “choco-

holic”).

Specific intent to defraud may be inferred where,

as here, there is a pattern of corporate research re-

vealing a particular proposition, for example, that

smoking is addictive; an ensuing pattern of memo-

randa within the corporation acknowledging that

smoking is addictive, even though the memoranda

may or may not have gone directly to the executive

who makes the contrary statement; and the corpo-

rate CEO or other official of high corporate status

then makes a public statement stating that smoking

is not addictive, contrary to the knowledge within

the corporation. Based on this sort of evidence and

the inferences reasonably drawn from it, a factfinder

could permissibly infer that the speaker harbored

specific intent to defraud at the time he or she made

the false or misleading statement. Moreover, such

pervasive knowledge throughout the organizations

demonstrates that Defendants’ executives at least

acted with reckless disregard for the truth or falsity

of their statements. As the district court correctly

held, such reckless disregard suffices to demonstrate

the requisite intent. Jd. at 897. The law then imputes

this specific intent to the corporation.

Defendants argue that, even if the previous dis-

cussion presents a correct statement of the law, it is

not the standard that the district court applied here.

Rather, Defendants assert that the district court re-

lied on an impermissible “collective intent” theory to

4la

find specific intent based on public statements con-

tradicting the “collective knowledge” of the Defen-

dant corporations without finding that any employee

harbored specific intent to defraud. Like Defendants

and other courts, we are dubious of the legal sound-

ness of the “collective intent” theory. Saba, 78 F.3d

at 670 n.6 “corporate knowledge of certain facts [can

be] accumulated from the knowledge of various indi-

viduals, but the proscribed intent (willfulness) de-

pend([s] on the wrongful intent of specific employ-

ees”); see,, e.g., Southland Sec. Corp., 365 F.3d at

366; Nordstrom, Inc. v. Chubb & Son, Inc., 54 F.3d

1424, 1435 (9th Cir. 1995); United States v. Bank of

New Eng., N.A., 821 F.2d 844, 855 (1st Cir. 1987);

Woodmont, Inc. v. Daniels, 274 F.2d 132, 137 (10th

Cir. 1960); First Equity Corp. v. Standard & Poor's

Corp., 690 F. Supp. 256, 260 (S.D.N.Y. 1988). We

need not pass on the merits of such a standard here,

however, because the district court relied on a per-

missible view of specific intent. Although at times

the court articulated a “collective intent” standard,

see, Philip Morris, 449 F. Supp. 2d at 895-97, it also

based its holding on a proper view of specific intent,

see, id. at 853, 897, and we are satisfied that the

court’s conclusions based on the proper standard are

sufficient to uphold its judgment.

B. Materiality

In their next general challenge to fraud lability,

Defendants argue that their false and misleading

statements about the health effects of smoking can-

not, as a legal matter, be fraudulent because their

statements were not material. This argument is

based on a flawed understanding of the materiality

requirement.

42a

In order for a faise or misleading statement to

qualify as mail or wire fraud, it “must concern a ma-

terial or important fact or matter.” United States v.

Winstead, 74 F.3d 1313, 1320 (D.C. Cir. 1996). This

materiality requirement is met if the matter at issue

is “of importance to a reasonable person in making a

decision about a particular matter or transaction.”

Id. Materiality does not require proof that any spe-

cific person (or number of people) purchased ciga-

rettes as a result of the false statements. Nor does it

require Defendants’ false statements to be the cause,

reason, or sufficient condition of any person’s deci-

sion to purchase cigarettes. Moreover, no subjective

evidence regarding any particular person is required;

the test is only whether a reasonable person would

consider the matter to be of importance regarding

the transaction.

The false statemen’s identified by the district

court would be important to a reasonable person

purchasing cigarettes. For example, statements

about the adverse health effects of smoking, see,

Philip Morris, 449 F. Supp. 2d at 146—208, would be

a matter of importance to a reasonable person decid-

ing to purchase cigarettes. The fact that Defendants

continually denied any link between smoking and

cancer, see, e.g., id. at 204, suggests they themselves

considered the matter material. So, too, regarding

Defendante’ false statements on other topics, includ-

ing statements concerning: whether smoking is ad-

dictive, id. at 208-308, whether Defendants manipu-

lated their cigarettes to control nicotine delivery, id.

at 308—84, whether “light” cigarettes were less harm-

ful than other cigarettes, id. 430-561, whether sec-

ondhand smoke is hazardous to non-smokers, id. at

692-801, and whether Defendants concealed scien-

43a

tific research and destroyed documents, id. at 801—

39.

Each of these topics is an important considera-

tion for a reasonable person because each concerns

direct and significant consequences of smoking.

When deciding whether to smoke cigarettes, tobacco

consumers must resolve initial reservations (or lin-

gering qualms) about the potential for cancer, the

risk of addiction, or the hazardous effects of second-

hand smoke for friends, family, and others who may

be exposed. Defendants’ prevarications about each of

these issues suggests full awareness of this obvious

fact; reasonable purchasers of cigarettes would con-

sider these statements important.

Defendants further argue that, because the sci-

entific community had reached a consensus regard-

ing the severely adverse health consequences of

smoking, their statements to the contrary would not

be believed. See Defs. Br. 98 (arguing that “the public

was aware of smoking’s adverse health consequences

and thus any inconsistent assertion by defendants

could not be material to a reasonable person”). The

question, however, is not whether a reasonable per-

son would have believed Defendants’ false state-

ments, but only whether a reasonable person would

have considered the issue “of importance,” and the

issues considered by the district court clearly met the

materiality threshold.

C. First Amendment

In their final general challenge to fraud liability,

Defendants claim at least a portion of their state-

ments qualify as protected activity under the First

Amendment. Of course, it is well settled that the

First Amendment does not protect fraud. See McIn-

tyre v. Ohio Elections Comm’n, 614 U.S. 334, 357

44a

(1995) (stating that the government “may, and does,

punish fraud directly”). Recognizing this fact, Defen-

dants argue their statements were not fraudulent,

but those arguments are discussed and rejected

elsewhere in this opinion. See supra Part III.A—B;

infra Part IV.

Defendants next claim protection under the No-

err-Pennington doctrine—a doctrine, rooted in the

Petition Clause of the First Amendment, that pro-

tects “an attempt to persuade the legislature or the

executive to take particular action with respect to a

law....” E. R.R. Presidents Conference v. Noerr Mo-

tor Freight, Inc., 365 U.S. 127, 136 (1961). The pro-

tection does not “cover activity that was not genu

inely intended to influence government action.” Al-

lied Tube & Conduit Corp. v. Indian Head, 486 U.S.

492, 508 n.10 (1998).

Defendants’ attempt to invoke Noerr-Pennington

as protection fails because the doctrine does not pro-

tect deliberately false or misleading statements.

“(Nleither the Noerr-Pennington doctrine nor the

First Amendment more generally protects petitions

predicated on fraud or deliberate misrepresentation.”

Edmondson & Gallagher v. Alban Towers Tenants

Ass’n, 48 F.3d 1260, 1267 (D.C. Cir. 1995) (describing

the holding in Whelan v. Abell, 48 F.3d 1247 (D.C.

Cir. 1995)); see, also McDonald v. Smith, 472 U.S.

479, 485 (1985) (finding the Petition Clause does not

have “special First Amendment status” and that pe-

titions are not entitled to “greater constitutional pro-

tection” than “other First Amendment expressions”);

Whelan, 48 F.3d at 1255 (“However broad the First

Amendment right to petition may be, it cannot be

stretched to cover petitions based on known false-

hoods.”). The district court’s valid findings of fraud in

this case take Defendants’ statements out of the No-

45a

err-Pennington context because they were clearly

and deliberately false. The district court provided

countless examples of deliberately false statements

by Defendants: “Cigarette smoking causes disease,

suffering, and death. Despite internal recognition of

this fact, Defendants have publicly denied, distorted,

and minimized the hazards of smoking for decades,”

Philip Morris, 449 F. Supp. 2d at 146; “Defendants

have researched and recognized, decades before the

scientific community did, that nicotine is an addic-

tive drug .... Notwithstanding the understanding

and acceptance of each Defendant that smoking and

nicotine are addictive, Defendants have publicly de-

nied and distorted the truth as to the addictive na-

ture of their products for several decades,” id. at

208-09; “Defendants have designed their cigarettes

to precisely control nicotine delivery levels and pro-

vide doses of nicotine sufficient to create and sustain

addiction. At the same time, Defendants have con-

cealed much of their nicotine-related research, and

have continuously and vigorously denied their efforts

to control nicotine levels and delivery,” id. at 309;

“Defendants have known for decades that filtered

and low tar cigarettes do not offer a meaningful re-

duction of risk, and that their marketing which em-

phasized reductions in tar and nicotine was false and

misleading,” id. at 860; “Despite their internal ac-

knowledgment of the hazards of secondhand smoke,

Defendants have fraudulently denied that [second-

hand smoke] causes disease,” id. at 864.

Were these statements false, but not deliberately

so, Defendants would have a better argument. But

Defendants knew of their falsity at the time and

made the statements with the intent to deceive.

Thus, we are not dealing with accidental falsehoods,

or sincere attempts to persuade; Defendants’ liability

46a

rests on deceits perpetrated with knowledge of their

falsity. Where statements are deliberately false or

misleading, Noerr-Pennington does not apply. See

Alban Towers, 48 F.3d at 1267. Indeed, if Defen-

dants’ statements had not been made with fraudu-

lent intent, there would be no basis for RICO liability

in the first place.

The district court found six alleged acts protected

by Noerr-Pennington and based its holding on the

remaining racketeering activity. Philip Morris, 449

F. Supp. 2d at 887. All six excluded acts were in-

stances of testimony to Congress and, given the

wealth of unprotected racketeering acts, we need not

reach the question whether the district court cor-

rectly excluded these acts. The remaining acts were

intended to defraud consumers, so Noerr-Pennington

protection does not apply.

IV. Specific Challenges to Fraud Liability

A. “Light” Cigarettes

The first specific fraud finding Defendants chal-

lenge relates to their marketing of “light” cigarettes.

The district court found: “As their internal docu-

ments reveal, Defendants engaged in massive, sus-

tained, and highly sophisticated marketing and pro-

motional campaigns to portray their light brands as

less harmful than regular cigarettes.” Philip Morris,

449 F. Supp. 2d at 860. The court concluded “Defen-

dants have known for decades that filtered and low

tar cigarettes do not offer a meaningful reduction of

risk, and that their marketing which emphasized re-

ductions in tar and nicotine was false and mislead-

ing.” Id.

Defendants contend they should be immune from

liability because the Federal Trade Commission

(“FTC”) has blessed their use of labels such as “light”

47a

and “low tar. ” This argument is entirely foreclosed

by the Supreme Court’s recent decision in Altria v.

Good, 129 S. Ct. 538 (2008), concluding the FTC has

never condoned the use of “light” or “low tar ” de-

scriptors. Id. at 550. Defendants point to a 1966 in-

dustry guidance letter from the FTC stating that “a

factual statement of the tar and nicotine content (ex-

pressed in milligrams) of the mainstream smoke

from a cigarette,” as measured by the Cambridge Fil-

ter Method, was permissible under the FTC Act. Id.

at 549. The “Commission made clear, however, that

the guidance applied only to factual assertions of tar

and nicotine yields and did not invite any ‘collateral

representations ... made, expressly or by implica-

tion, as to reduction or elimination of health haz-

ards.” Id.

Despite Defendants’ argument to the contrary,

“the FTC has in fact never required that cigarette

manufacturers disclose tar and nicotine yields, nor

has it condoned representations of those yields

through the use of ‘light’ or ‘low tar’ descriptors.” Id.

at 550. Although the FTC never prevented Defen-

dants from using misleading descriptors, “agency

nonenforcement of a federal statute is not the same

as a policy of approval.” Jd. As the Supreme Court

held, “neither the handful of industry guidances and

consent orders on which petitioners rely nor the

FTC’s inaction with regard to ‘light’ descriptors even

arguably justifies the pre-emption” argument ad-

vanced by Defendants. Jd. at 551. For the same rea-

sons, these actions fail to constitute FTC authoriza-

tion of the descriptors that could defeat a finding of

specific intent to defraud.

It is also worth noting that the district court in

this case did not find liability solely based on the use

of descriptors such as “light” and “low tar. ” The

48a

court found Defendants orchestrated “highly sophis-

ticated marketing and promotional campaigns to

portray their light brands as less harmful than regu-

lar cigarettes.” Philip Morris, 449 F. Supp. 2d at 860.

In addition to the misleading use of descriptors, the

district court found “[Defendants’] public statements

are blatantly false” in relation to the marketing of

“light” cigarettes. Jd. at 861. The district court went

on to find that “[aJs part of the Enterprise’s scheme

to defraud smokers, Defendants withheld and sup-

pressed their extensive knowledge and understand-

ing of nicotine-driven smoker compensation.” Jd.

These findings reveal that fraudulent activity sur-

rounding “light” cigarettes was not merely limited to

the use of misleading descriptors. In addition to the

fact that the descriptors were not authorized by the

FTC, the district court relied on other fraudulent ac-

tivity by Defendants.

Independent of their FTC-authorization argu-

ment, Defendants also insist terms such as “light

cigarettes” are not misleading to the public. They

analogize “light” cigarettes to sodas which are “low

caffeine” and cookies which are “low fat.” According

to Defendants, the public knows that drinking many

“low caffeine” sodas can result in higher levels of caf-

feine consumption, and eating many “low fat ” cook-

ies can result in higher levels of fat consumption. De-

fendants thus analogize to “light” cigarettes, main-

taining that it is obvious that smoking many “light”

cigarettes can result in higher levels of nicotine and

tar consumption. But the analogy to “light ciga-

rettes” is inapt. Unlike drinking sodas and eating

cookies, tae factors behind compensation in “light”

cigarettes are largely subconscious: “the smoker will

subconsciously adjust his puff volume and frequency,

and smoking frequency, so as to obtain and maintain

49a

his per hour and per day requirement for nicotine.”

Philip Morris, 449 F. Supp. 2d at 467 (citing internal

tobacco company documents). Not only is smoker

compensation subconscious, but factors such as puff

volume and frequency are not even tied to the num-

ber of “light” cigarettes smoked. The analogy to sodas

and cookies fails; the subconscious nature of smoker

compensation enabled Defendants to mislead the

public about the health effects of “light” cigarettes.

Finally, Defendants argue their descriptors were

simply verbal representations of numerical ratings

authorized by the FTC, and thus were literally true.

Even leaving aside the fact that literally true state-

ments may nevertheless constitute fraud, this claim

founders on the district court’s finding that “there

are lights of certain brands with higher tar levels

than regulars of other brands from the same com-

pany, and there are also lights and regulars of the

same brands that have the same FTC tar rating.” Id.

at 861. This finding, which Defendants do not at-

tempt to show is clearly erroneous, reveals the de-

scriptors were not simply representations of numeri-

cal ratings and thus were not “literally true.”

B. Secondhand Smoke

We turn next to Defendants’ claim that the dis-

trict court erred in finding that they fraudulently

denied the adverse health effects of secondhand

smoke. Federal Rule of Civil Procedure 52 obliges us

to uphold the district court’s findings of fact unless

they are “clearly erroneous.” FED R. Civ. P. 52(aX6).

Under this highly deferential standard, we may dis-

turb the district court’s findings only if we are “left

with the definite and firm conviction that a mistake

has been committed.” E.g., Boca Investerings P’ship

v. United States, 314 F.3d 625, 630 (D.C. Cir. 2003)

50a

(quotation marks omitted). This is so even if we

“would have decided the case differently,” as “[w]here

there are two permissible views of the evidence, the

factfinder’s choice between them cannot be clearly

erroneous.” Anderson, 470 U. S. at 574.

Defendants contend that their statements dis-

puting the health hazards of secondhand smoke were

merely good-faith expressions of opinion. But the dis-

trict court found to the contrary—that Defendants’

representations were fraudulent and not in good

faith. Philip Morris, 449 F. Supp. 2d at 853, 864—65.

Under Rule 52, then, the question for us is whether

this finding was clearly erroneous.

The district court criticized Defendants’ state-

ments regarding secondhand smoke as contrary to

the scientific consensus. Defendants object, empha-

sizing that the district court found no scientific con-

sensus emerged until the issuance of the Surgeon

General’s 1986 report determining secondhand

smoke to be hazardous. Moreover, they point to evi-

dence of selected post-1986 scientific opinions casting

doubt on the dangers of secondhand smoke, arguing

that even then they possessed some basis for disput-

ing the consensus.

Defendants’ objections are beside the point. The

district court based its finding of fraudulent intent

not just on the existence of a consensus but also on

evidence of Defendants’ own knowledge. Philip Mor-

ris, 449 F. Supp. 2d at 864-65. Specifically, the dis-

trict court found that dating back to the 1970s, De-

fendants’ own research and analysis revealed the

hazards of secondhand smoke. For example, the dis-

trict court found that in 1980 a Philip Morris scien-

tist reviewed a paper concluding that secondhand

smoke caused “significant damage to airway func-

5la

tion” in exposed nonsmokers, and found “little to

criticize,” deeming the paper “an excellent piece of

work which could be very damaging” to the industry.

Id. at 709 (quotation marks omitted). In 1982, a

Philip Morris—sponsored research facility concluded

that the “side stream” smoke composing the bulk of

secondhand smoke is “more irritating and/or toxic”

than the “main stream” smoke inhaled by smokers.

Id. at 710 (quotation marks omitted). And several TI

advertisements and press releases claimed that an

independent 1981 study showing “a significant corre-

lation between lung cancer and secondhand smoke”

suffered from a statistical flaw, id. at 715, yet the

district court found that industry consultants told TI,

Reynolds, and Brown & Williamson that TI knew at

the time not only that the statistical error did not ex-

ist, but also that the study was in fact correct. Id. at

717-18.

In addition to these and other findings providing

relatively direct evidence that Defendants were

aware of the health risks of secondhand smoke, the

district court found that Defendants concealed their

role in making statements regarding secondhand

smoke. While it may be true that purveyors of con-

sumer products, without fraudulent intent, fre-

quently engage in concealed support of positive re-

search in their industries, the concealment of iden-

tity by Defendants over so long a period on a subject

of such intense controversy is at the very least con-

sistent with knowledge of the falsity of their state-

ments.

Although Defendants insist they had no knowl-

edge of the misleading character of their public

statements, they nowhere challenge the accuracy of

these or any of the district court’s other findings sug-

gestive of their knowledge. Instead, they argue that

52a

such findings reveal only facts that were known to

the public and that had not, at the time, given rise to

a scientific consensus. Again Defendants miss the

point. The question is not whether other individuals

knew that Defendants’ claims were false or mislead-

ing; the question is whether Defendants did. Regard-

less of whether a scientific consensus existed at any

point, Defendants may be liable for fraud if they

made statements knowing they were false or mis-

leading. Based on voluminous evidence, including

that summarized above, the district court circum-

stantially inferred that Defendants did in fact pos-

sess such fraudulent intent. Given these unchal-

lenged findings, we have no basis for saying that the

district court clearly erred in drawing that conclu-

sion.

C. Addiction

Defendants also claim that the district court

clearly erred in finding their representations disput-

ing the addictiveness of cigarettes to be intentionally

misleading. We analyze the district court’s factual

finding as to the misleading character of Defendants’

commercial statements for clear error. E.g., FTC v.

Brown & Williamson Tobacco Corp., 778 F.2d 35, 41—

42 &n.3 (D.C. Cir. 1985). We find none.

Defendants claim that their statements regard-

ing addiction were not intentionally misleading be-

cause the term “addiction” is ambiguous. Pointing to

the district court’s findings that the meaning of the

term “addiction” in the scientific community changed

over time, Defendants insist that their statements

merely clung to the earlier, narrower, definitions of

the term, and claim that the district court errone-

ously converted a semantic dispute into a fraud case.

But the district court did not find only that Defen-

53a

dants insisted on retaining an earlier definition of

addiction. It found that they did so as part of a con-

certed effort to misrepresent the difficulty of quitting

smoking. Philip Morris, 449 F. Supp. 2d at 208-09,

308, 857-59. Defendants fail to demonstrate that

this finding was clearly erroneous.

To begin with, Defendants never challenge the

district court’s findings documenting the impact of

nicotine on the body and, more importantly, Defen-

dants’ understanding of its effects. Jd. at 209-11,

216-71. As early as 1963, Brown & Williamson’s

general counsel wrote a confidential memorandum

stating: “We are, then, in the business of selling nico-

tine, an addictive drug effective in the release of

stress mechanisms.” Jd. at 259 (quotation marks

omitted). Further, the district court found that De-

fendants were aware that cigarette dependence was

stronger than mere habit formation. In 1974, a

Philip Morris scientist told the company’s president

that it was “simply not an adequate explanation to

say that smoking is a habit, or that it is social behav-

ior.” Id. at 223 (quotation marks omitted). In 1981, a

Philip Morris executive wrote in an article: “Ciga-

rettes are not just habit forming—the body builds up

a requirement for them.” Jd. at 228 (quotation marks

omitted). Although several industry attorneys ex-

pressed dismay at the publication of the article, none

disagreed with it. Jd. In 1985, Philip Morris’s top

management was informed that research showed

that “the majority of smokers wished they did not

smoke.” Jd. at 229 (quotation marks omitted). These

and numerous other findings—a!l unchallenged—

support the district court’s conclusion that Defen-

dants were aware that nicotine creates a chemical

dependency far stronger than a mere habit.

54a

The district court found that despite their know!l-

edge Defendants made numerous statements trivial-

izing and outright denying the dependence cigarettes

cause. For example, in 1982 TI issued a press release

summarizing testimony that smoking caused an “at-

tachment” comparable to that produced by “tennis,

jogging, candy, rock music, Coca-cola, members of

the opposite sex and hamburgers.” id. at 281 (quota-

tion marks omitted). In 1997, Philip Morris’s CEO

testified, “If [cigarettes] are behaviorally addictive or

habit forming, they are much more like ... Gummi

Bears, and I eat Gummi Bears, and I don’t like it

when I don’t eat my Gummi Bears, but I’m certainly

not addicted to them.” Jd. at 273 (quotation marks

omitted). In a 1994 television interview, a TI official

claimed that there was “no chemical addiction” to

nicotine and stated, “[S]lometimes we use the word

‘addiction’ in very broad terms. We talk about being,

you know, news junkies. We talk about being choco-

holics. ” Jd. at 285 (quotation marks omitted). A 1988

TI press release declared that “it has been impossible

to establish that the feelings persons have upon giv-

ing up smoking are anything but that which would

be expected when one is frustrated by giving up any

desired habit.” Id. at 283 (quotation marks omitted,

emphases added). Most directly, the district court

found that Defendants had their representatives tes-

tify that nicotine “did not cause addiction or depend-

ence,” id. at 281 (emphasis added), rendering any

supposed ambiguities in the word “addiction” beside

the point.

The district court concluded that these and other

findings reflected a campaign of statements intended

to mislead the public into believing that giving up

smoking is not markedly more difficult than giving

up everyday habits. Although not every statement

55a

Defendants made was literally false, even partially

true statements can be actionable fraud if intention-

ally misleading as to facts. See, e.g., Emery v. Am.

Gen. Fin., Inc., 71 F.3d 1343, 1348 (7th Cir. 1995) (“A

half truth, or what is usually the same thing a mis-

leading omission, is actionable as fraud, including

mail fraud if the mails are used to further it, if it is

intended to induce a false belief and resulting action

to the advantage of the misleader and the disadvan-

tage of the misled.”). The district court concluded

that Defendants’ statements regarding addiction

were misleading in this way, and given the above un-

challenged factual findings we are not “left with the

definite and firm conviction that a mistake has been

committed.” Boca Investerings, 314 F.3d at 630.

D. Altria

In addition to the challenges to fraud liability

raised by all Defendants, two Defendants—Altria

and BATCo—make a number of arguments specific

to them. We begin with Defendant Altria, the holding

company owner of Defendant Philip Morris, which

raises several challenges to the district court’s find-

ing of liability.

As an initial matter, Altria claims that the dis-

trict court erred in finding that it used the mails in

five of the nine predicate acts it allegedly committed

directly. The district court specifically found, based

on Defendants’ routine mailing practices, that at

least two of those five predicate acts were committed

through use of the mails. See Philip Morris, 449 F.

Supp. 2d at 884 (Racketeering Acts 69, 80). We need

not decide whether thie circumstantial inference

amounted to clear error, as the other four predicate

acts the district court found Altria committed are

themselves sufficient to constitute a pattern of rack-

56a

eteering activity. See id. (Racketeering Acts 71-72,

74—75).

Altria’s central argument is that mailings sent

by lawyers could not possibly be mailings in further-

ance of a scheme or artifice to defraud, citing several

out-of-circuit cases largely standing for the proposi-

tion that ordinary litigation mailings containing false

matter typically do not themselves constitute a

scheme or artifice to defraud. See United States v.

Pendergraft, 297 F.3d 1198, 1209 (11th Cir. 2002);

Nolan v. Galaxy Scientific Corp., 269 F. Supp. 2d

635, 643 (E.D. Pa. 2003); Morin v. Trupin, 711

F. Supp. 97, 105-06 (S.D.N.Y. 1989); Paul S. Mullin

& Assocs., Inc. v. Bassett, 632 F. Supp. 532, 540

(D. Del. 1986); Spiegel v. Cont] Ill. Natl Bank, 609 F.

Supp. 1083, 1088-90 (N.D. Ill. 1985). Whatever the

merit of that proposition, it has nothing to do with

the question before us. Altria makes a very different

claim—that mailings sent in furtherance of a sepa-

rately-proven scheme to defraud somehow fall out-

side the mail fraud statute’s coverage because they

are drafted and physically sent by lawyers who

themselves have no fraudulent intent. This claim is

without merit. Nothing in the mail fraud statute re-

quires a mailing to be fraudulent at all, as long as

the mailing is in furtherance of a fraudulent scheme.

See 18 U.S.C. § 1341 (specifying that the mailing can

be “any matter or thing whatever to be sent or deliv-

ered” as long as it is in furtherance of “any scheme cr

artifice to defraud”). Moreover, the statute looks to

the intent of the individual who caused the mailing,

not the individual who drafted or physically mailed

it. See United States v. Diggs, 613 F.2d 988, 998

(D.C. Cir. 1979) (“[A] defendant ‘causes’ the use of

the mails where he does an act with knowledge that

the use of the mails will follow in the ordinary course

57a

of business, or where such use can reasonably be

foreseen, even though not actually intended.” (quota-

tion marks omitted)). Given that the district court

permissibly inferred the corporate Defendants’ intent

from the intent of numerous high-level executives,

Philip Morris, 449 F. Supp. 2d at 897, and given that

it found that Defendants “caused” the mailings in or-

der to further the scheme to defraud, id. at 881, the

fact that attorneys participated in the actual drafting

and mailing provides no immunity. Thus, we con-

clude that the district court properly found Altria li-

able for its direct participation in the conduct of the

affairs of the enterprise, leaving it unnecessary for

us to consider Altria’s objections to the findings that

it participated through its control of Philip Morris.

Finally, Altria claims that the district court

clearly erred in finding that the company joined a

RICO conspiracy. We disagree. The district court’s

findings of fact regarding Altria’s actions in further-

ance of the goals of the enterprise, both directly and

through Philip Morris, see, id. at 907—08, as well as

the voluminous findings of concerted action and ex-

plicit agreement by Defendants, amply support the

circumstantial inference that Altria conspired with

the other Defendants to violate RICO. See, e.g.,

United States v. Mellen, 393 F.3d 175, 191 (D.C. Cir.

2004) (“[A] conspiracy can be inferred from a combi-

nation of close relationships or knowing presence and

other supporting circumstantial evidence.” (quota-

tion marks omitted)).

E. BATCo

Defendant BATCo claims that the district court

erred in imposing liability on the basis of its conduct

outside the United States. Noting that the district

court found that its “activities and statements took

58a

place outside of the United States,” Philip Morris,

449 F. Supp. 2d at 873, BATCo claims that it enjoys

immunity from RICO liability because the statute

has no extraterritorial reach. We need not decide to-

day whether RICO has true extraterritorial reach—

that is, whether it could reach foreign conduct with

no impact on the United States—because the district

court found BATCo liable on the theory that its con-

duct had substantial domestic effects. Id. Because

conduct with substantial domestic effects implicates

a state’s legitimate interest in protecting its citizens

within its borders, Congress’s regulation of foreign

conduct meeting this “effects” test is “not an extrater-

ritorial assertion of jurisdiction.” Laker Airways Lid.

v. Sabena, Belgian World Airlines, 731 F.2d 909, 923

(D.C. Cir. 1984). Thus, when a statute is applied to

conduct meeting the effects test, the presumption

against extraterritoriality does not apply. See Enuvitl.

Def. Fund, Inc. v. Massey, 986 F.2d 528, 531 (D.C.

Cir. 1993) (noting that “the presumption [against ex-

traterritoriality] is generally not applied where the

failure to extend the scope of the statute to a foreign

setting will result in adverse effects within the

United States,” citing Laker Airways).

BATCo argues that the effects test is inapplica-

ble because the United States had no obligation to

prove that Defendants’ conduct had any effects

whatsoever. Although BATCo attributes this to the

fact that 18 U.S.C. § 1964(a) does not require the

government to prove that it has been injured, we

think it better explained by the fact that the mail

and wire fraud statutes punish “the scheme, not its

success.” Pasquantino v. United States, 544 U.S. 349,

371 (2005). That said, BATCo’s point has nothing to

do with the case at hand. Here the district court

found that BAT'Co’s conduct “had substantial direct

59a

effects on the United States.” Philip Morris, 449

F. Supp. 2d at 873. The fact that some other defen-

dant might commit some other offense without ef-

fects in the United States hardly renders BATCo

immune from liability for the domestic effects it did

cause. Someone whe fires a rifle from Canada into

the United States and wounds his victim can plainly

be convicted of attempted murder. See Laker Air-

ways, 731 F.2d at 922 (“[Wlhen a malefactor in State

A shoots a victim across the border in State B, State

B can proscribe the harmful conduct.”). This is so

even though in general the government may prove

attempted murder without establishing that the at-

tempt had any effect whatsoever. Similarly, the fact

that effects are not elements of mail and wire fraud

offenses or associated RICO violations provides no

immunity to those, like BATCo, whose fraud and

racketeering has substantial and direct domestic ef-

fects

Thus, we need decide only whether the district

court erred in applying the effects test—which asks

whether conduct has a substantial, direct, and fore-

seeable effect within the United States, see, Consol.

Gold Fields PLC v. Minorco, S.A., 871 F.2d 252, 261—

62 (2d Cir. 1989) (describing substantial effect as di-

rect and foreseeable)—to the facts of this case. We

see no error. The district court found that as part of

the overall scheme to defraud, BATCo conducted

sensitive nicotine research for Brown & Williamson

abroad and secretly shared the results with Brown &

Williamson in the United States. Philip Morris, 449

F. Supp. 2d at 298-304. It further found that BATCo,

in concert with other Defendants, founded, funded,

and actively participated in various international or-

ganizations, which Defendants themselves saw as

instrumental to their efforts to perpetuate what the

60a

district court found to be their fraudulent scheme in

the United States. See id. at 119-23. In one example,

TI admitted that “the back-wash from events and at-

tacks affecting the industry in smaller countries

comes back powerfully to the USA, ” id. at 140 (quo-

tation marks omitted), and praised INFOTAB, an in-

ternational organization of which BATCo was a

founding member, id. at 132, for “help[ing] the in-

dustry to unite in trying to combat the attacks,” id.

at 140 (quotation marks omitted). Notwithstanding

BATCo’s demands for a nearly unattainable level of

specificity, these unchallenged findings, together

with the findings of the tremendous domestic effects

of the fraud scheme generally, see, e.g., id. at 209,

307—08, make clear that the district court committed

no error in finding that BATCo’s participation had

substantial, direct, and foreseeable effects in the

United States. Cf. Laker Airways, 731 F.2d at 925—

26 (finding allegations that the anticompetitive

elimination of a foreign airline increased domestic

air fares adequate to support antitrust action with-

out demanding further specificity).

VY. Challenges to Likelihood of Future Viola-

tions

Having found Defendants’ challenges to liability

unavailing, we move on to the district court’s deter-

mination that they are likely to commit future RICO

violations if not enjoined. Ail Defendants challenge

this finding on a number of common bases, and four

Defendants—Altria, BWH, CTR, and Ti—also bring

separate challenges to the court’s findings regarding

them. We address each in turn.

A. Likelihood of Future Violations

Section 1964(a) grants district courts jurisdiction

“to prevent and restrain” RICO violations. 18 U.S.C.

6la

§ 1964(a). Hence, before a district court may order

remedies under RICO it must find the defendant ex-

hibits a reasonable likelihood of committing future

violations of the Act. Disgorgement Opinion, 396 F.3d

at 1198.

Here, the district court found a reasonable likeli-

hood that Defendants would commit future RICO

violations. Philip Morris, 449 F. Supp. 2d at 908—15.

Defendants attack this finding, asserting: (1) the dis-

trict court applied an erroneous legal standard, (2)

the Master Settlement Agreement (“MSA”) makes

future violations unlikely, and (3) Defendants’ busi-

ness practices and public positions alone preclude

future violations. We conclude the district court ap-

plied the correct legal standard and its factual con-

clusions were not clearly erroneous.

In the mid-1990s, the attorneys general of sev-

eral states brought suit against the major tobacco

companies for the reimbursement of state costs asso-

ciated with smoking. Five Defendants, Philip Morris,

Reynolds, Brown & Williamson, Lorillard, and Lig-

gett entered into a settlement agreement, the MSA,

with forty-six states and the District of Columbia.

The MSA prohibited, inter alia, youth marketing,

any material misrepresentations regarding the

health consequences of tobacco use, agreements be-

tween manufacturers to limit either competition or

the distribution of information about the health ef-

fects associated with smoking, and other specific

marketing techniques (e.g., cartoon characters and

billboards). The MSA specifically required the disso-

lution of CTR, TI, and CLAR. The National Associa-

tion of Attorneys General and the individual states’

attorneys general enforce the MSA, which requires

informal dispute resolution before any enforcement

action commences whenever possible.

62a

To obtain equitable remedies, the government

must demonstrate a “reasonable likelihood of further

violation[s] in the future.” Savoy Indus., Inc., 587

F.2d at 1168 (quotation marks omitted). Considered

under the totality of the circumstances, three factors

determine whether a reasonable likelihood exists:

“whether a defendant’s violation was isolated or part

of a pattern, whether the violation was flagrant and

deliberate or merely technical in nature, and

whether the defendant’s business will present oppor-

tunities to violate the law in the future.” SEC uv. First

City Fin. Corp., 890 F.2d 1215, 1228 (D.C. Cir. 1989).

The district court applied this standard—a standard

both sides agree is appropriate. Philip Morris, 449 F.

Supp. 2d at 909; Defs. Br. 39-40; Gov. Br. 182.

Defendants quibble with two aspects of the dis-

trict court’s application. First, Defendants assert the

district court could not rely on “inferences drawn

from past conduct alone” because the MSA “already

proscribes future violations” and “imposes a legal

barrier to the repetition of such conduct in the fu-

ture.” Defs. Br. 40. This is an odd argument, suggest-

ing a tort settlement automatically limits the reme-

dial options in a RICO suit. Notably, the first two

factors of the First City test focus entirely on infer-

ences arising from past conduct. 890 F.2d at 1228.

And, as the district court correctly found, “[t}he like-

lihood of future wrongful acts is frequently estab-

lished by inferences drawn from past conduct.”

United States v. Philip Morris USA, 316 F. Supp. 2d

6, 10 n.3 (D.D.C. 2004) (quotation marks omitted);

see also SEC v. Bilzerian, 29 F.3d 689, 695 (D.C. Cir.

1994) (inferring a likelihood of future violations

based on the nature of past conduct); SEC v. Gruen-

berg, 989 F.2d 977, 978 (8th Cir. 1993); First City,

890 F.2d at 1228-29. Defendants attempt to bolster

63a

their position by claiming the MSA precludes the

need for injunctions by fully addressing their prior

misconduct. As discussed infra, future violations re-

main likely notwithstanding the MSA. Therefore,

Defendants’ argument fails.

Also, Defendants deftly mischaracterize the dis-

trict court’s opinion. Based on a single footnote in the

opinion’s section discussing the MSA’s failure to alter

Defendants’ conduct and concluding remedies in this

case were appropriate, Philip Morris, 449 F. Supp.

2d at 913 n.82, Defendants accuse the trial court of

impermissibly “shift[ing] the burden to defendants to

prove that RICO violations will not occur in the fu-

ture ... under the ‘absolutely clear’ test.” Defs. Br.

42. Contrary to Defendants’ fears, the district court

obviously did not intend to announce a new standard

or alter the reigning standard via footnote. The First

City standard was carefully articulated at the start

of the discussion addressing future violations and

conscientiously applied. Philip Morris, 449 F. Supp.

2d at 908-09, 911-13. The footnote, regarding volun-

tary termination of illegal conduct, appears much

later in the opinion where the court sought to em-

phasize the suspension of disbelief necessary to agree

with Defendants, noting the court must assume “De-

fendants have complied with and will continue to

comply with the terms of the MSA, and that the MSA

has adequate enforcement mechanisms” in order to

conclude “the MSA obviates the need for injunctive

relief.” Id. at 913 (quotation marks omitted). This is

a far cry from altering the legal standard. Indeed,

the district court found, under the correct standard,

that Defendants continued to commit violations even

after 1999, well after the execution of the MSA. Id. at

910-11.

64a

Since the district court applied the standard

enunciated in Savoy and First City and gave appro-

priate weight to the inferences drawn from Defen-

dants’ past conduct, we uphold the district court’s

decision to order remedies.

The district court concluded the MSA “alone

[could not] remove the reasonable likelihood of De-

fendants’ future RICO violations.” Id. Defendants

contend the MSA effectively prevents prospective

RICO violations because it prohibits them from par-

ticipating in an “enterprise” or committing any

“predicate acts.” The district court, however, found

Defendants began to evade and at times even violate

the MSA’s prohibitions almost immediately after

signing the agreement and, consequently, concluded

the MSA did not limit the court’s ability to order

“[a]ppropriate [rlemedies. ” Jd. The court’s factual

findings are not clearly erroneous.

Defendants assert the MSA prevents their par-

ticipation in a RICO enterprise because the organi-

zations that allowed for joint activity no longer exist,

and neither the government nor the district court

identified any “joint activity” between Defendants

after 1998, the start of the MSA. Defendants’ post-

agreement activities belie these statements. For ex-

ample, though the MSA required Defendants to dis-

solve CIAR, only two days after signing the MSA

Lorillard’s general counsel wrote Philip Morris, Rey-

nolds, and Brown & Williamson asking to “discuss

the status of the plan to reinstate CIAR. ” Id. at 798

(quotation marks omitted). Shortly thereafter, Cov-

ington & Burling LLP informed the CIAR contractors

“(t]he members of CIAR have decided to create a new

organization to continue the work . .. . The members

of CLAR that will be members of the new organiza-

tion intend to continue to fund the research.” Gov.

65a

Ex. 75,412, at 2. Subsequently, in 2000, Philip Mor-

ris initiated a new research program that had the

same offices, phone numbers, and board as CIAR and

many of the same employees, management, re-

searchers, peer reviewers, and grantees. Philip Mor-

ris, 449 F. Supp. 2d at 798-99.

CIAR is not the lone example of Defendants’ or-

ganizations poised to circumvent the MSA’s prohibi-

tions against joint activities or participation in an

enterprise. The district court found, with the excep-

tion of CTR and TI, “all of the other organizations

either still exist or can be readily re-activated.” Id. at

871. For example, even at the time of trial Defen-

dants continued to participate in the Center for Co-

operation in Scientific Research Relative to Tobacco

(“CORESTA”), “a non-profit making association with

objectives to enhance the scientific cooperation for

research on tobacco” perceived as “unique and very

valuable” because it enjoys the perception of “being

objective, technical and independent.” Gov. Ex.

21,788, at 1.

Defendants presume the MSA’s prohibition

against joint activity is effective. The record, how-

ever, demonstrates the tobacco companies retain

both the ability and the desire to continue joint ac-

tivities. Accordingly, the district court did not com-

mit clear error when it determined the MSA could

not effectively prevent Defendants’ participation in

an enterprise.

Defendants next assert the MSA’s “scores of in-

junctions and related prohibitions” prevent “repeti-

tion of the core wrongdoing.” Defs. Br. 48. The dis-

trict court determined the MSA does not prevent De-

fendants’ commission of future racketeering acts be-

cause: (1) Defendants have not fully complied with

66a

the MSA, (2) the States could not be relied upon “to

vigorously enferce the MSA, ” see Br. For Amici Cu-

riae States 7-11, (3) some provisions of the MSA

have and will expire, and (4) BATCo and Altria are

not subject to the agreement. Philip Morris, 449

F. Supp. 2d at 913-15.

As evidence of the MSA’s failures and pitfalls,

the district court noted that despite the MSA Defen-

dants still fraudulently denied the dangers of sec-

ondhand smoke, marketed “low tar” cigarettes as a

healthier alternative to quitting, and falsely denied

manipulating nicotine delivery and marketing to

youth. Jd. at 910. Defendants offer no rebuttal to

these factual findings, but instead argue “failure to

comply with all the details or the ‘spirit’ of the MSA

does not even begin to approach a RICO violation.”

Defs. Br. 50. Obviously. But as the district court

rightly recognized, Defendants cannot hide behind

the MSA to avoid the imposition of RICO remedies

when they do not comply with the agreement. Philip

Morris, 449 F. Supp. 2d at 913. Therefore, the dis-

trict court did not commit clear error when it deter-

mined the MSA does not adequately prevent or re-

strain Defendants’ future racketeering activities and

did not abuse its discretion by ordering equitable re-

lief.

Defendants claim they have “admitted for years”

that “smoking causes lung cancer” and other serious

diseases, “smoking is addictive,” and “low tar ciga-

rettes may not be safer.” Defs. Br. 53—54, 56. They

insist their positions on these issues “preclude future

RICO violations.” Jd. at 53. The district court ac-

knowledged Defendants’ varying degrees of lip ser-

vice to these facts, but disagreed that these admis-

sions translated into a guarantee against later viola-

tions.

67a

According to the district court, “Defendants’ es-

sential position on the relationship of smoking and

health remains virtually unchanged” from the

fraudulent positions it first took in the 1950s. Philip

Morris, 449 F. Supp. 2d at 204; see also id. at 204—08

(citing corporate statements and statements from

Defendants’ executives). The district court con-

demned Defendants for failing to embrace the Sur-

geon General’s definition of addiction, to admit nico-

tine specifically creates and sustains addiction, or to

“acknowledge([] ... the reason quitting smoking is so

difficult, and not simply a function of individual will

power, is because of its addictive nature.” Id. at 286;

see also id. at 284—88. Finally, examples in the re-

cord of Defendants’ marketing campaigns and inter-

nal documents amply support the district court’s

conclusion that Defendants “continue to make[] false

and misleading statements regarding low tar ciga-

rettes in order to reassure smokers and dissuade

them from quitting.” Jd. at 507-08. While we may

not have reached all the same conclusions as the dis-

trict court, under the highly deferential clearly erro-

neous standard the district court’s factual findings

have sufficient evidentiary support; its decision to

order equitable relief was not an abuse of discretion.

B. Altria

Altria urges, based on its status as a holding

company, no factual basis exists for finding it would

violate RICO in the future. According to the district

court, though, despite Altria’s holding company

status it “effectively and actively controls the activi-

ties of all of its subsidiaries, including Defendant

Philip Morris.” Philip Morris, 449 F.Supp. 2d at

203—04 n.12. The record establishes that Altria man-

agement oversees subsidiary policies and operations,

id. at 907-08, and Altria does not dispute its control

68a

over Philip Morris. Moreover, Altria itself “partici-

pated directly” in the RICO enterprise and conspir-

acy. Id. at 907. With direct culpability and this level

of plenary power over its subsidiaries, Altria clearly

remains capable of future RICO violations. There-

fore, we uphold the district court’s issuance of reme-

dies against Altria.

C. BWH

BWH makes an argument similar to that of Al-

tria. In 2004, Brown & Williamson merged all do-

mestic tobacco operations with Reynolds and was re-

constituted into Brown & Williamson Holdings

(“BWH”). The district court made no factual findings

specific to BWH. Rather, the district court focused

throughout its opinion on Brown & Williamson.

Philip Morris, 449 F. Supp. 2d at 31 n.4 (describing

Brown & Williamson as “now part of Reynolds

American”). The entire rest of the opinion refers to

“Brown & Williamson” without any mention of the

reconstituted holding company.

Based on BWH’s status as a “passive holding

company,” BWH argues the district court erred in

finding it is likely to commit future RICO violations.

As discussed in relation to Altria, a company’s status

as a holding company by itself does not preclude

RICO liability. Where a holding company, such as

Altria, participates directly in the original violations

and retains control over subsidiary tobacco opera-

tions, it remains capable of repeating its misconduct.

BWH could not have participated in this RICO

enterprise as it did not then exist. Nonetheless, if it

exercises plenary control over the tobacco operations

of its subsidiaries, then, like Altria, it could commit

later violations. Because the district court failed to

make any findings about the extent of BWH’s control

69a

over tobacco operations, we cannot know the com-

pany’s current capabilities. Therefore, we cannot de-

termine whether a reasonable likelihood exists that

BWH will commit future RICO violations. Accord-

ingly, we remand this issue for further fact finding

and clarification.

D. Mootness as to CTR and TI

CTR and TI argue that the district court’s find-

ings relating to the likelihood they will commit fu-

ture violations render the case against them moot.

We agree. The MSA demanded the dissolution of

both organizations. At the time of trial, CTR and TI

only existed to wind up their respective affairs. The

district court found “no reasonable likelihood of fu-

ture violations” on the part of TI or CTR and conse-

quently ordered no remedies against them. Philip

Morris, 449 F. Supp. 2d at 915. The court actually

encouraged the government to reconsider proceeding

against these entities as they “seem to have no ac-

tual ability to continue alleged past RICO viola-

tions.” Jd. at 916 (quotation marks omitted).

“Federal courts lack jurisdiction to decide moot

cases because their constitutional authority extends

only to actual cases or controversies.” Larsen v. U.S.

Navy, 525 F.3d 1, 4 (D.C. Cir. 2008) (quotatien

marks omitted). A case is moot when “the challenged

conduct ceases such that there is no reasonable ex-

pectation that the wrong will be repeated” in circum-

stances where “it becomes impossible for the court to

grant any effectual relief whatever to the prevailing

party.” City of Erie v. Pap’s A.M., 529 U.S. 277, 287

(2000) (quotation marks omitted). For both CTR and

TI these requirements have been met. The govern-

ment nowhere disputes Defendants’ claim that CTR

and TI no longer exist. They cannot possibly commit

70a

future RICO violations. Accordingly, we vacate the

judgment as to CTR and TI and remand with direc-

tions to dismiss.

VIL. Challenges to Remedies

Finally, as to those Defendants the district court

properly found likely to commit future RICO viola-

tions, we address their challenges to particular

remedies the district court imposed. We also address

the cross-appeal seeking additional remedies the dis-

trict court denied.

A. Subsidiaries

First, Defendants object to the inclusion of their

subsidiaries among the persons bound by the reme-

dial order. Rule 65 of the Federal Rules of Civil Pro-

cedure indicates that an injunction binds only the

parties; their “officers, agents, servants, employees,

and attorneys”; and “other persons who are in active

concert or participation with” the aforementioned

persons. FED R. Civ. P. 65(dX2). The rule derives

from the common law doctrine that an injunction

“not only binds the parties defendant but also those

identified with them in interest, in ‘privity with

them, represented by them or subject to their con-

trol”—any person or entity through whom the defen-

dants might carry out enjoined activity and so nullify

the order. Regal Knitwear Co. v. NLRB, 324 US. 9,

14 (1945). A subsidiary corporation is in privity with

its parent “in respect to the common corporate busi-

ness” to the extent it is “so identified in interest with

[the parent] that [it] represents precisely the same

legal right in respect to the subject matter involved”

in the injunction. Jefferson Sch. of Soc. Sci. v. Sub-

versive Activities Control Bd., 331 F.2d 76, 83 (D.C.

Cir. 1963).

7la

The term “subsidiaries” in the remedial order

cannot expand the scope of the injunction beyond

that defined by Rule 65(d); however, subsidiaries of

Defendants may be personally bound by the order to

the extent that they are agents of or in privity with

Defendants in the common corporate business of

manufacturing, designing, marketing, or selling

cigarettes. (Like any person with actual notice of the

injunction, subsidiaries that act in concert with De-

fendants to violate the order would also be subject to

contempt.) The record on appeal does not reveal facts

sufficient for us to evaluate over which subsidiaries,

if any, Defendants exercise sufficient control or with

which they so identify in interest regarding ciga-

rettes that they would legitimately fall within the

purview of the injunction order. We therefore vacate

the order to the extent that it binds all Defendants’

subsidiaries and remand to the district court for pro-

ceedings to determine whether inclusion of Defen-

dants’ subsidiaries, and which subsidiaries, satisfies

Rule 65(d).

B. General Injunctions

The district court permanently enjoined Defen-

dants “from committing any act of racketeering, as

defined in 18 U.S.C. § 1961(1), relating in any way to

the manufacturing, marketing, promotion, health

consequences or sale of cigarettes in the United

States,” and from

making, or causing to be made in any way,

any material false, misleading, or deceptive

statement or representation, or engaging in

any public relations or marketing endeavor

that is disseminated to the United States

public and that misrepresents or suppresses

information concerning cigarettes. Such ma-

72a

terial statements include, but are not limited

to, any matter that: (a) involves health,

safety, or other areas with which a reason-

able consumer or potential consumer of ciga-

rettes would be concerned; (b) a reasonable

consumer or potential consumer would at-

tach importance to in determining whether to

purchase or smoke cigarettes; or (c) the De-

fendant, Covered Person or Entity making

the representation knows or has reason to

know that its recipient regards or is likely to

regard as important in determining whether

to purchase cigarettes or to smoke cigarettes,

even if a reasonable person would not so re-

gard it.

Philip Morris, 449 F. Supp. 2d at 938. Defendants

assert that, “in the face of more than 1,600 pages of

findings,” these injunctions do not sufficiently specify

the acts restrained, in violation of Rule 65(d), due

process, and the First Amendment. Defs. Br. 137.

Rule 65(d) requires every order granting an in-

junction to “state its terms specifically [and] describe

in reasonable detail—and not by referring to the

complaint or other document—the act or acts re-

strained or required.” FED. R. Civ. P. 65(d)(1KB){C).

“The Rule was designed to prevent uncertainty and

confusion on the part of those faced with injunctive

orders.” Schmidt v. Lessard, 414 U.S. 473, 476

(1974). Because an injunction “prohibits conduct un-

der threat of judicial punishment, basic fairness re-

quires that those enjoined receive explicit notice of

precisely what conduct is outlawed.” Jd. Under this

standard, we have held injunctions to be too vague

when they enjoin all violations of a statute in the ab-

stract without any further specification, or when

they include, as a necessary descriptor of the forbid-

73a

den conduct, an undefined term that the circum-

stances of the case do not clarify. See Wash. Inv.

Network, 475 F.3d at 407 (order enjoined all future

violations of the applicable statutes, without clarify-

ing the acts restrained); Gulf Oil Corp. v. Brock, 778

F.2d 834, 843 (D.C. Cir. 1985) (order enjoined “sub-

stantially similar” conduct without further specifica-

tion in a case that provided no examples of what is

“similar”); Common Cause v. NRC, 674 F.2d 921,

926-27 (D.C. Cir. 1982) (order enjoined conduct

“similar in nature” without further specification in a

case that provided no examples of what is “similar”);

SEC v. Savoy Indus., Inc., 665 F.2d 1310, 1318-19

(D.C. Cir. 1981) (defendant enjoined not “to engage

in any act, practice or course of business which oper-

ates or would operate as a fraud or deceit upon any

person”); see also Schmidt, 414 U.S. at 476 (enjoined

“the present Wisconsin scheme”). Even if it tracks

statutory language, a general injunction is not too

vague if it relates the enjoined violations to the con-

text of the case. See Savoy Indus., Inc., 665 F.2d at

1316-17 (tracking language of the statute in context

of defendant’s relationship with issuers of securities).

Indeed, we must always apply the fair notice re-

quirement “in the light of the circumstances sur-

rounding (the injunction’s) entry: the relief sought by

the moving party, the evidence produced at the hear-

ing on the injunction, and the mischief that the in-

junction seeks to prevent.” Common Cause, 674 F.2d

at 927 (quotation marks omitted).

The two injunctions at issue here sufficiently

specify the activities enjoined as to provide Defen-

dants with fair notice of the prohibited conduct. The

district court did not abstractly enjoin Defendants

from violating RICO or making false statements, but

instead specified the matters about which Defen-

74a

dants are to avoid making false statements or com-

mitting racketeering acts: the manufacturing, mar-

keting, promotion, health consequences, and sale of

cigarettes, along with related issues that Defendants

have reason to know are of concern to cigarette con-

sumers. This is not a generalized injunction to obey

the law, especially when read in the context of the

district court’s legal conclusions and 4,088 findings of

fact about fraud in the manufacture, promotion, and

sale of cigarettes. These injunctions may be broad,

but breadth is warranted “to prevent further viola-

tions where[, as here,} a proclivity for unlawful con-

duct has been shown.” Savoy Indus. Inc., 665 F.2d at

1317 (quoting McComb v. Jacksonville Paper Co.,

336 U.S. 187, 192 (1949) (holding that the “record of

continuing and persistent violations of the [statute]

would indicate that that kind of a [general] decree

was wholly warranted in this case”)). Defendants

complain that the volume of findings in this case ac-

tually make understanding the injunctions more dif-

ficult and chill speech because some of the district

court’s findings present “express prohibitions”

whereas others, like the use of white filter paper for

cigarettes, “simply reflect the district court’s disap-

proval” of aspects of Defendants’ business practices

without finding the conduct fraudulent. Defs. Br.

137. This objection answers itself, as the plain terms

of the injunctions prohibit only conduct that would

constitute a racketeering act or a “material false,

misleading, or deceptive statement or representa-

tion,” not all activities the court mentioned in its

findings.

C. Extraterritorial Effect

Paragraph four of the injunction prohibits the

use of “any express or implied health message or

health descriptor for any cigarette brand.” Philip

75a

Morris, 449 F. Supp. 2d at 938. The government con-

cedes that this prohibition “should not be read to

govern overseas activities with no domestic effect.”

Gov. Br. 215-16. But because paragraph four con-

tains no such limiting language, see Philip Morris,

449 F. Supp. 2d at 938, we vacate that provision and

remand for the district court to reformulate it so as

to exempt foreign activities that have no substantial,

direct, and foreseeable domestic effects. See supra

Part IV.E.

D. Corrective Statements

As part of the remedial order, the district court

ordered Defendants to disseminate “corrective

statements” concerning the topics about which they

had previously misled consumers. The court will de-

termine the precise content of the statements at a

future date after receiving proposals from the par-

ties, but ordered that they must address five topics:

(1) the adverse health effects of smoking; (2) the ad-

dictiveness of smoking and nicotine; (3) the lack of

any significant health benefit from smoking light

cigarettes; (4) the manufacturers’ manipulation of

cigarette design and composition to ensure optimum

nicotine delivery; and (5) the adverse health effects

of exposure to secondhand smoke. Philip Morris, 449

F. Supp. 2d at 938-39. The remedial order sets out

schedules for the manufacturer Defendants to follow

in disseminating the corrective statements in ciga-

rette package onserts, retail point-of-sale displays,

newspapers, television, and their company websites.

Id. at 939-41. Defendants object to the corrective

statements as a whole on the grounds that they did

not receive adequate notice of and opportunity to re-

spond to the government’s proposed remedy and that

the remedy extends beyond the court’s jurisdiction

under RICO. Regarding the specific means of dis-

76a

seminating the statements, Defendants argue that

cigarette package onserts violate the Labeling Act,

that the point-of-sale displays are duplicative and

impose severe burdens on retailers, and that requir-

ing Defendants to make corrective statements in

various media apart from existing advertising vio-

lates the First Amendment.

Notice

Defendants argue that because the government

did not disclose its final corrective statements pro-

posal until its post-trial proposed remedial order, the

district court denied Defendants due process by or-

dering a version of that remedy without providing

Defendants adequate notice and an opportunity to

respond. Although Defendants purport to press this

objection in a general fashion “with respect to many

other remedies imposed by the district court,” they

state it with sufficient specificity for our considera-

tion only with regard to corrective statements. Defs.

Br. 135. The exact content of the statements is yet to

be determined and so is not before us at this stage.

The sequence of events surrounding the remedies

phase of the trial did not deprive Defendants of the

process they were due. Defendants received the gov-

ernment’s prugeee" remedies, including a general

corrective sta°~meets proposal, two months before

the remedies phase of the trial began. They partici-

patea in a fourteen-day, fully briefed remedies trial,

at which thirteen witnesses testified and were sub-

ject to cross-examination, including at least one gov-

ernment witness who testified about corrective

statements. Philip Morris, 449 F. Supp. 2d at 923. In

its post-trial propcsed remedial order, the govern-

ment specified the five categories of corrective

statements (which correspond to the subjects about

77a

which the district court found Defendants committed

fraud) and the details of its recommended publica-

tion campaign. Defendants responded to the govern-

ment’s proposed order in their own post-trial brief

and raised numerous legal objections to the propriety

of the corrective statements remedy, which the dis-

trict court considered and resolved in its final opin-

ion and order. See id. at 921-23. Defendants have

not demonstrated any prejudice from this sequence

of events. In their offer of proof to the district court

they asserted only that if they had known more “spe-

cifics” of the government’s proposed remedy before

the hearing, they would have retained, and might

have offered testimony from, one or more experts ad-

dressing the proposal. See Defs. Offer of Proof at 9—

10. Even on appeal, Defendants suggest no testimony

they would have offered, no lines of cross-

examination inquiry they would have pursued, and

no factual dispute they would have addressed.

This case bears no resemblance to United States

v. Microsoft Corp., 253 F.3d 34 (2001), as Defendants

attempt to suggest. In Microsoft, the district court

ordered the break-up and restructuring of Microsoft

into two companies without holding any evidentiary

hearing to resolve the numerous disputed fact ques-

tions surrounding the remedy. Jd. at 101-02. Micro-

soft submitted two offers of proof identifying serious

unresolved issues of fict and included 53 pages of

submissions specifying the evidence it would intro-

duce to challenge the government’s representations.

Id. at 103. Microsoft gives us no reason to believe De-

fendants in this case—who enjoyed pre-trial notice

and a lengthy remedies trial, and have shown no

prejudice—suffered a denial of due process.

78a

Section 1964

A district court that finds a defendant civilly li-

able for violating RICO has jurisdiction “to prevent

and restrain violations of [RICO] by issuing appro-

priate orders ....” 18 U. S.C. § 1964(a). Congress

limited relief under section 1964(a) to forward-

looking remedies aimed at preventing and restrain-

ing future RICO violations. Disgorgement Opinion,

396 F.3d at 1198, 1200. Earlier in this litigation, we

held that the statute does not authorize disgorge-

ment because it is “both aimed at and measured by

past conduct”: “[iJt is measured by the amount of

prior unlawful gains and is awarded without respect

to whether the defendant will act unlawfully in the

future.” Jd. at 1198. Defendants argue that corrective

statements are similarly “focused on remedying the

effects of past conduct,” id., because they seek to cor-

rect Defendants’ campaign of deceptive marketing.

The government urges that the corrective state-

ments are a forward-looking remedy authorized un-

der section 1964(a) because future advertising that

“may not contain any statements which are them-

selves false or deceptive” nevertheless inevitably

builds upon Defendants’ previous false statements

and, if uncorrected, “continues the deception, albeit

implicitly rather than explicitly,” rendering those

advertisements “part of the continuing deception of

the public.” Warner-Lambert Co. v. FTC, 562 F.2d

749, 769 (D.C. Cir. 1977); see Novartis Corp. v. FTC,

223 F.3d 783, 787 (D.C. Cir. 2000). We do not doubt

that consumers may “continue to make purchasing

decisions based on the false belief” created by a

manufacturer’s false advertising even when that ad-

vertising ceases, Novartis Corp., 223 F.3d at 787

(quoting Warner-Lambert Co., 562 F.2d at 762), but

it is less clear whether, and in what circumstances,

7Sa

continuing consumer confusion created by uncor-

rected but truthful advertising would amount to a

knowing fraud. Section 1964(a) authorizes only

remedies that prevent and restrain future RICO vio-

lations, not all future effects of past RICO violations,

Disgorgement Opinion, 396 F.3d at 1198, or all fu-

ture unseemly business practices.

We need not consider this question, however, be-

cause as the district court observed and the interve-

nors here argue, requiring Defendants to issue cor-

rective statements will “prevent and restrain them

from making fraudulent public statements on smok-

ing and health matters in the future.” Philip Morris,

449 F. Supp. 2d at 926. Defendants will be impaired

in making false and misleading assurances about, for

instance, smoking-related diseases or the addictive-

ness of nicotine—as the district court found they con-

tinue to do, id. at 925—-26—if they must at the same

time communicate the opposite, truthful message

about these matters to consumers. Requiring Defen-

dants to reveal the previously hidden truth about

their products will prevent and restrain them from

disseminating false and misleading statements,

thereby violating RICO, in the future.

Package onserts

One of the vehicles for the corrective statements

is a cigarette package onsert, which the district court

ordered Defendants to “affix to cigarette packaging,

either on the outside of or within the outer cello-

phane wrapping around the package .. . in the same

manner as certain Defendants, such as Philip Morris

and Brown & Williamson, have utilized package on-

serts in the past.” Philip Morris, 449 F. Supp. 2d at

939. Defendants object that the onserts violate the

Federal Cigarette Labeling and Advertising Act

80a

(“Labeling Act”), which provides that “[n]o statement

relating to smoking and health, other than the

statement required by section 1333 of this title, shall

be required on any cigarette package.” 15 U.S.C.

§ 1334(a).

The Labeling Act defines a “package” as “a pack,

box, carton, or container of any kind in which ciga-

rettes are offered for sale, sold, or otherwise distrib-

uted to consumers.” Id. § 1332(4). A package onsert

is “[a] communication affixed to but separate from an

individual cigarette pack and/or carton purchased at

retail by consumers, such as a miniature brochure

included beneath the outer cellophane wrapping or

glued to the outside of the cigarette packaging.”

Philip Morris, 449 F. Supp. 2d at 948; see Schwab uv.

Philip Morris USA, Inc., 449 F. Supp. 2d 992, 1084—

85 (E.D.N.Y. 2006) (defining onserts as “pamphlets

attached to the outside of cartons or packs of ciga-

rettes”), rev'd on other grounds by McLaughlin v.

Am. Tobacco Co., 522 F.3d 215 (2d Cir. 2008);

United States v. Star Scientific, Inc., 205 F. Supp. 2d

482, 484 (D. Md. 2002) (defining onsert as “a type of

external package label”).

These definitions show that the corrective state-

ments in an onsert are not “statement(s] ... on [a]

package,” 15 U.S.C. § 1334(a), but rather statements

in a brochure attached to or included with a package,

and thus are not prohibited by the plain language of

the Labeling Act. See Philip Morris, 449 F. Supp. 2d

at 928 n.89. Congress could have used more expan-

sive language to reach statements in onserts had it

chosen to do so, but it chose only to preempt the re-

quiring of alternative statements about smoking and

health “on any cigarette package.” Moreover, the dis-

trict court and the parties appear to have recognized

the distinction between packages and onserts

8la

throughout the trial. See id. at 206 (“Philip Morris

has never told its customers on its cigarette packag-

ing or in onserts that it agrees that smoking causes

cancer and other diseases in smokers.”), 288 (“Philip

Morris replaced the pre-existing package labels with

onserts.”), 424 (“[Brown &Williamson} began a new

test market ... using its redesigned packaging and

onsert. ... Star Scientific .. . added an informational

‘onsert’ attached to the package.”); Trial Tr., Jan. 10,

2005 (Philip Morris senior vice president distinguish-

ing between cigarette pack and onsert). We therefore

conclude that the onsert remedy does not violate the

Labeling Act.

Poi —

The district court ordered each Defendant with a

retail merchandising program—whereby retailers

agree to use the manufacturer's in-store advertis-

ing—to design countertop and header displays con-

taining the corrective statements and “require retail-

ers who participate in such program” to display them

for two years. Philip Morris, 449 F. Supp. 2d at 939—

40. The freestanding countertop displays must be at

least. thirty inches high and eighteen inches wide,

and retailers must place them on their counters

“within the line-of-sight of any customer who is

standing in line for the register.” Jd. at 946. The

header displays must be of at least equivalent size to

Defendants’ other brand advertising headers and

placed “in an equivalent position with any other

brand advertising header” at the top of the cigarette

display case. Id. at 939—40, 947. Under the injunctive

order, each Defendant must “suspend from its Retail

Merchandising Program for a period of one year any

retailer that fails to comply with this provision.” /d.

at 940.

82a

Retailers affected by this order—none of whom

were involved in the litigation in any way—did not

receive notice of this remedy or an opportunity to

present evidence or arguments to the district court

regarding the impact the injunction would have on

their businesses. Nor does it appear that the district

court independently considered the impact of this

program on affected retailers. In their appellate brief

as amicus curiae and in affidavits filed with Defen-

dants’ motion for a stay of final judgment pending

appeal, the National Association of Convenience

Stores represents that this injunction will cost re-

tailers substantial revenue. The convenience stores

indicate that countertop space is the most important

space within a convenience store, and the loss of one

square foot of countertop space can cost the industry

$82 million in sales per year. Yet if the retailers

choose not to carry the countertop displays, Defen-

dants must suspend them from their retail merchan-

dising program for one year, which one retailer as-

serted would cost ten to fifteen percent of his conven-

ience stores’ annual profits. See Hartman Aff. at 2.

Section 1964(a) explicitly cautions that in craft-

ing an injunctive remedy the court must “mak[e] due

provision for the rights of innocent persons.” 18

U.S.C. § 1964(a). We believe that the district court

exceeded its authority by failing to consider the

rights of retailers and crafting an injunction that

works a potentially serious detriment to innocent

persons not parties to or otherwise heard in the dis-

trict court proceedings. Even though not explicitly

bound by the terms of an injunction on pain of con-

tempt, third parties may be so adversely affected by

an injunction as to render it improper. See, e.g., Cook

Inc. v. Boston Scientific Corp., 333 F.3d 737, 744 (7th

Cir. 2003).

83a

We therefore vacate the order regarding point-of-

sale displays and remand for the district court to

evaluate and “mak[e] due provision for the rights of

innocent persons,” either by abandoning this part of

the remedial order or by crafting a new version re-

flecting the rights of third parties. 18 U.S.C.

§ 1964(a). Of course, any such remedy the district

court imposes on remand can only affect contracts

entered after the injunctive order issues. See Nat'l

Wildlife Fed’n v. Burford, 835 F.2d 305, 315 (D.C.

Cir. 1987) (explaining an injunction’s validity due to

the fact that it “does not affect the contractual rights

of third parties”). In addition, we agree with Defen-

dants that the injunction appears to order each De-

fendant separately to require the same retail store to

display substantively identical, but separate, signs.

The government concedes that, despite the language

of the order, the district court could not have in-

tended to require the burden of multiple duplicative

displays at each retail store. We therefore direct the

district court, if it concludes that some form of a

point-of-sale display injunction is still appropriate

after considering the rights of third parties and exist-

ing contracts, to clarify that its order does not re-

quire duplicative displays.

First Amendment

The district court also ordered each Defendant to

publish the corrective statements on its corporate

website, as a one-time full-page advertisement in

thirty-five major newspapers, and as at least ten ad-

vertisements on a major television network over the

course of one year. Philip Morris, 449 F. Supp. 2d at

939-41. The court chose these media in order to

“structure a remedy which uses the same vehicles

which Defendants have themselves historically used

to promulgate false smoking and health messages.”

84a

Id. at 928. The court concluded compelled corrective

advertising is permissible under the commercial

speech doctrine. Jd. at 926—28.

The First Amendment protects against govern-

ment infringement on “the right to speak freely and

the right to refrain from speaking at all. ” Wooley v.

Maynard, 430 U.S. 705, 714 (1977). This holds true

whether applied to individuals, see W. Va. State Bd.

of Educ. v. Barnette, 319 U.S. 624, 642 (1943), or to

companies, see Pac. Gas & Elec. Co. v. Pub. Utils.

Com., 475 U.S. 1, 16 (1986) (“For corporations as for

individuals, the choice to speak includes within it the

choice of what not to say.”). In limited circumstances,

however, courts have upheld the government’s abil-

ity to dictate the content of mandatory speech. This

largely occurs in the commercial context.

Under the commercial speech doctrine, the gov-

ernment’s “power to regulate commercial transac-

tions justifies its concomitant power to regulate

commercial speech that is ‘linked inextricably’ to

those transactions.” 44 Liquormart v. Rhode Island,

517 U.S. 484, 499 (1996). Thus, the government may

require commercial speech to “appear in such a form,

or include such additional information, warnings,

and disclaimers, as are necessary to prevent its being

deceptive.” Va. Bd. of Pharmacy v. Va. Citizens Con-

sumer Council, Inc., 425 U.S. 748, 762 (1976). Be-

cause commercial speech receives a lower level of

protection under the First Amendment, burdens im-

posed on it receive a lower level of scrutiny from the

courts. Zauderer v. Office of Disciplinary Counsel of

Supreme Court, 471 U.S. 626, 637 (1985); Cent. Hud-

son Gas & Elec. Corp. v. Pub. Serv. Comm’n, 447

U.S. 557, 562-64 (1980). Although the standard for

assessing burdens on commercial speech has varied,

Bd. of Trs. v. Fox, 492 U.S. 469, 476—78 (1989) (de-

85a

scribing the diverse levels of scrutiny applied in vari-

ous cases, including Central Hudson, 447 U.S. at

566, In re R. M. J., 455 U.S. 191, 203 (1982), and

Zauderer, 471 U.S. at 644), the Supreme Court’s bot-

tom line is clear: the government must affirmatively

demonstrate its means are “narrowly tailored” to

achieve a substantial government goal, id. at 480.

Defendants object that the “freestanding” correc-

tive statements violate the First Amendment be-

cause they are not connected to existing advertising

and, therefore, cannot be considered commercial

speech. That being the case, Defendants contend the

less rigorous commercial speech standard does not

apply. Alternatively, Defendants argue that, even if

these statements are commercial speech, the correc-

tive statements do not directly and materially ad-

vance a substantial government interest. See Cent.

Hudson, 447 U.S. at 566. Defendants’ arguments

misunderstand the commercial speech doctrine and

misstate the commercial speech standard.

Defendants’ first argument, that the stand-alone

corrective statements do not fall within the commer-

cial speech doctrine because they are not attached to

advertisements, is a red herring. The context of the

corrective statements does not dictate the level of

scrutiny; rather, the level of scrutiny depends on the

nature of the speech that the corrective statements

burden. Riley v. Natl Fed’n of Blind, 487 U.S. 781,

796 (1988) (“Our lodestars in deciding what level of

scrutiny to apply to a compelled statement must be

the nature of the speech taken as a whole and the

effect of the compelled statement thereon.”). Here,

the district court clearly imposed these statements

as a burden on Defendants’ current and future com-

mercial speech. Philip Morris, 449 F. Supp. 2d at

926—28 (justifying ordering the freestanding correc-

86a

tive statements under the commercial speech doc-

trine).

Commercial speech is defined as “expression re-

lated solely to the economic interests of the speaker

and its audience” or “speech proposing a commercial

transaction.” Cent. Hudson, 447 U.S. at 561-62. In

addition to information related to proposing a par-

ticular transaction, such as price, it can include ma-

terial representations about the efficacy, safety, and

quality of the advertiser's product, and other infor-

mation asserted for the purpose of persuading the

public to purchase the product. See, e.g., Zauderer,

471 U.S. at 637 & n.7, 639—40 (information and legal

advice about a defective product and the possibility

of suing were commercial); Bolger v. Youngs Drug

Prods. Corp., 463 U.S. 60, 66-68 (1983) (informa-

tional brochures discussing “important public issues

such as venereal disease and family planning” dis-

tributed by contraceptives manufacturer were com-

mercial); Brown & Williamson Tobacco Corp., 778

F.2d at 3 8, 43 (claims that cigarettes contained one

milligram of tar and were “99% tar free” were com-

mercial); Nat’l Comm’n on Egg Nutrition v. FTC, 570

F.2d 157, 159, 163 (7th Cir. 1977) (holding egg trade

association’s advertisements about the relationship

between eggs and heart disease were commercial

speech). Defendants’ various claims—denying the

adverse effects of cigarettes and nicotine in relation

to health and addiction—constitute commercial

speech. Defendants disseminate their fraudulent

representations about the safety of their products,

both in formats that do and those that do not explic-

itly propose a particular commercial transaction, in

attempts to persuade the public to purchase ciga-

rettes.

87a

The fact that some—but certainly not all—of

these advertisements involve Defendants as a group

joined in advertising their common product, discuss

cigarettes generically without specific brand names,

or link cigarettes to an issue of public debate, does

not change the commercial nature of the speech. Bol-

ger, 463 U.S. at 66 0.13, 67-68; Nat’?! Comm’n on Egg

Nutrition, 570 F.2d at 163. Moreover, the reality that

these corrective statements may tangentially burden

noncommercial speech does not render the state-

ments unconstitutional. A burden on commercial

speech, whether it be suppression or mandatory dis-

closure, only triggers a higher level of scrutiny if the

commercial speech is “inextricably intertwined” with

fully protected speech. Riley, 487 U.S. at 796

(“[S]peech [does not] retain[] its commercial charac-

ter when it is inextricably intertwined with other-

wise fully protected speech.”). Here, Defendants’ past

participation in the public controversy surrounding

smoking and health may have been inextricably in-

tertwined with their marketing efforts, but the in-

tentionally fraudulent character of the noncommer-

cial public statements undermines any claim for

more exacting scrutiny. See McIntyre, 514 US. at

357. Moreover, because the injunctive order cannot

retroactively burden Defendants’ past communica-

tions, to determine the constitutionality of the cor-

rective statements we must look to the future and

evaluate whether the district court’s order targeting

commercial speech cuts too broad a swath.

The issue of corrective advertising’s possible pe-

ripheral impact on protected speech does not affect

the character of the burdened speech, but rather

bears on whether the remedy is sufficiently narrowly

tailored to achieve a substantial government inter-

est—in this case, preventing Defendants from com-

88a

mitting future RICO violations. We have no reason

to think it is not. The district court found that, for

over fifty years, Defendants violated RICO by mak-

ing false and fraudulent statements to consumers

about their products. Philip Morris, 449 F. Supp. 2d

at 26-27. The court also found Defendants reasona-

bly likely to commit similar violations in the future,

id. at 908-15, and concluded the corrective state-

ments were necessary to counteract these a

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