Appendix — Philip Morris USA Inc. v. United States

‘\ Supreme Court, U.S.

prams Court, U.S

‘7, 99-978 FEB 19 2010

No. OEEICE Ob Tile Chins

Jn the Supreme Court of the Anited States

UNITED STATES OF AMERICA, PETITIONER

Vv.

PHILIP MORRIS USA, INC., ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

APPENDIX TO THE

PETITION FOR A WRIT OF CERTIORARI

(VOLUME 1)

ELENA KAGAN

Solicitor General

Counsel of Record

TONY WEST

Assistani Attorney General

EDWIN S. KNEEDLER

MICHAEL R. DREEBEN

Deputy Solicitors General

ANTHONY A. YANG

Assistant to the Solicitor

General

MARK B. STERN

ALISA B. KLEIN

MARK R. FREEMAN

GREGORY C.J. LISA

Attorneys

Department of Justice

Washington, D.C. 20530-0001

SupremeCtBriefs@usdoj.gov

(202) 514-2217

Appendix A

Appendix B

Appendix C

Appendix D

Appendix E

Appendix F

Appendix G

Appendix H

Appendix I

Appendix J

TABLE OF CONTENTS

Volume 1

Court of appeals opinion (May 22,

District court memorandum

opinion (May 21, 2004)

Court of appeals memorandum

opinion (Sept. 28, 2000)

Court of appeals order (Sept. 22,

Volume 2

Excerpt of district court final

opinion (Aug. 17, 2006)

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Nos. 06-5267, 06-5268

UNITED STATES OF AMERICA, UNITED STATES

DEPARTMENT OF JUSTICE, ET AL., APPELLEES

v.

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

Decided: May 22, 2009

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 through a pattern of mail and

wire fraud in a scheme to deceive American consumers.

They also appeal from the district court’s remedial or-

der, which imposes numerous negative and affirmative

(1a)

2a

duties on Defendants. The government and intervenors

cross-appeal from the district court’s denial of additional

requested remedies. After considering all of the parties’

arguments, we affirm in large part the finding of liabil-

ity, remanding only for dismissal of the trade organiza-

tions. We also largely affirm the remedial order, includ-

ing the denial of additional remedies, but vacate the or-

der with regard to four discrete issues, remanding for

further proceedings as directed in this opinion.

I. Background

The United States initiated this civil action under the

Racketeer Influenced and Corrupt Organizations Act

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

ment alleged that nine cigarette manufacturers and two

tobacco-related trade organizations violated section

1962(c) and (d) of the Act. Those subsections make it

unlawful for “any person employed by or associated with

any enterprise engaged in, or the activities of which af-

fect, interstate or foreign commerce, to conduct or par-

ticipate, directly or indirectly, in the conduct of such en-

terprise’s affairs through a pattern of racketeering

activity” or to conspire to do so. 18 U.S.C. § 1962(c), (d).

The eleven Defendants were Philip Morris, Inc., now

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

Tobacco Company, now Reynolds American (“Rey-

nolds”); 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 Reynolds

(“American”); Philip Morris Companies, now Altria

(“Altria”); British American Tobacco (Investments) Ltd.

(“BATCo”); B.A.T. Industries p.].c., now part of BATCo

3a

(“BAT Industries”); The Council for Tobacco Re-

search—USA, Inc. (“CTR”); and The Tobacco Institute,

Inc. (“TI”). The last two entities are trade organizations

the cigarette manufacturers created; they do not manu-

facture or sell tobacco products. The district court dis-

missed BAT Industries from the case for lack of per-

sonal jurisdiction.

The government alleged that Defendants violated

and continued to violate RICO by joining together in a

decades-long conspiracy to deceive the American public

about the health effects and addictiveness of smoking

cigarettes. Specifically, the government alleged that

Defendants fraudulently denied that smoking causes

cancer and emphysema, that secondhand smoke causes

lung cancer and endangers 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 harmful than full

flavor cigarettes, and that Defendants intentionally mar-

keted 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 evi-

dence and destroyed documents to hide the dangers of

smoking and protect themselves in litigation. 7d. The

government identified 148 racketeering acts of mail and

wire fraud Defendants allegedly committed in further-

ance of their scheme. Although the district court did not

allow the government to prove 650 additional racketeer-

ing acts due to their late disclosure, the court did permit

the government to introduce evidence supporting those

acts to prove other RICO elements, such as the continu-

ity and pattern of racketeering activity, the RICO enter-

prise and conspiracy, and Defendants’ participation in

the enterprise.

4a

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 witness-

es, and almost 14,000 exhibits in evidence. The govern-

ment presented evidence that the presidents of Philip

Morris, Reynolds, Brown & Williamson, Lorillard, and

American assembled together in 1953 to strategize a re-

sponse to growing public concern about the health risks

of smoking and jointly retained a public relations firm to

assist in the endeavor. Jd. at 37. From the beginning

they agreed that no cigarette manufacturer would “seek

a competitive 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 se-

lection of tobacco, or extra length in the butt, or any-

thing 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 newspapers across the

country on January 4, 1954. Jd. at 39. “The Frank

Statement set forth the industry’s ‘open question’ posi-

tion 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 smoking and health issues was

needed.” Jd. All of the Defendant manufacturers even-

tually joined this collective effort.

The government presented evidence from the 1950s

and continuing through the following decades demon-

strating that the Defendant manufacturers were aware

—increasingly so as they conducted more research—

5a

that smoking causes disease, including lung cancer. Evi-

dence at trial revealed that at the same time Defendants

were disseminating advertisements, publications, and

public statements denying any adverse health effects of

smoking and promoting 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 their own research and public relations re-

garding health and other issues, they also relied in part

on a series of jointly-created entities. Among these enti-

ties were Defendants TI and CTR (formerly the Tobacco

Industry Research Committee). The Defendant manu-

facturers created TI and CTR, composed their member-

ship, staffed their boards of directors with executives

from the manufacturers, and maintained frequent com-

munication between high-level manufacturer and joint-

entity officials. Jd. at 43-44, 63. Evidence at trial

showed that TI and CTR conducted the manufacturers’

joint public relations through false and misleading press

releases and publications, trained representatives from

the manufacturers regarding their coordinated industry

message, conducted some cigarette testing for the man-

ufacturers, and funded “special projects” to produce

favorable research results and witnesses specifically for

use in litigation and for support of industry public state-

ments. /d. at 66, 82, 86, 87, 91.

In addition to the health hazards of smoking, the gov-

ernment presented evidence that Defendants intimately

understood the addictiveness of nicotine and manipu-

lated nicotine delivery in cigarettes to create and sustain

addiction. Evidence showed that Defendants undertook

extensive research into the physiological impact of nico-

tine, how it operates within the human body, and how

6a

the physical and chemical design parameters of ciga-

rettes influence the delivery of nicotine to smokers. /d.

at 208, 308-09. As a result of this research, they recog-

nized and internally acknowledged that smoking and

nicotine are addictive and they engineered their prod-

ucts around creating and sustaining this addiction. Evi-

dence at trial suggested that despite this internal know!l-

edge, for decades Defendants publicly denied and dis-

torted the truth about the addictive nature of their prod-

ucts, suppressed research revealing the addictiveness of

nicotine, and denied their efforts to control nicotine lev-

els and delivery. /d. at 209, 309.

The government also presented evidence tending to

show that Defendants marketed and promoted their low

tar brands to smokers—who were concerned about the

health hazards of smoking or considering quitting—as

less harmful than full flavor cigarettes despite either

lacking evidence to substantiate their claims or knowing

them to be false. Jd. at 480. Internal industry docu-

ments introduced at trial revealed that by the late 1960s

and early 1970s, Defendants were aware that lower tar

cigarettes are unlikely to provide health benefits be-

cause they do not actually deliver the low levels of tar

and nicotine advertised. Jd. at 430-31. Defendants re-

searched and understood the phenomenon whereby

smokers of low tar cigarettes, to satisfy their addiction,

modify their smoking behavior to compensate for the

reduced nicotine yields by “taking more frequent puffs,

inhaling smoke more deeply, holding smoke in their

lungs longer, covering cigarette ventilation holes with

fingers or lips, and/or smoking more cigarettes.” Jd. at

431. As aresult of this nicotine-driven behavior, smok-

ers of low tar cigarettes boost their intake of tar, so that

lower tar cigarettes do not result in lower tar intake and

7a

therefore do not yield the touted health benefits or serve

as a step toward quitting smoking. Jd. Evidence at trial

suggested that Defendants 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 pre-

sented evidence suggesting that Defendants became

aware that secondhand smoke poses a health risk to non-

smokers but made misleading public statements and

advertisements about secondhand smoke in an attempt

to cause the public to doubt the evidence of its harmful-

ness. /d. at 6$2. At trial, internal industry documents

revealed that Defendants believed the public perception

of secondhand smoke could determine the industry’s

survival and that secondhand smoke research by the

cigarette manufacturers was a sensitive issue due to the

absence of “objective science” supporting their position

and the risk that their own research would lead to unfa-

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

ers jointly created the Center for Indoor Air Research

(“CIAR”) to coordinate and fund their secondhand

smoke research with the appearance of independence.

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

“created, controlled, used, or participated in” a vast ar-

ray of foreign or international entities to conduct their

sensitive secondhand smoke research, generate “mar-

ketable science” to use for public relations purposes, and

coordinate their shared objectives and message. /d. at

119-20, 759.

In addition to these topics, the government also pre-

sented evidence to the district court regarding Defen-

dants’ targeted marketing to youth under twenty-one

8a

years of age and their denials of such marketing, zd. at

561, 672, as well as evidence concerning Defendants’ em-

ployees and attorneys destroying documents relevant to

their public and litigation positions and suppressing or

concealing scientific research, id. at 801, 832.

During the trial, this court rendered a decision on

Defendants’ interlocutory appeal from the denial of sum-

mary judgment on the government’s claim for a dis-

gorgement remedy under RICO section 1964(a). We re-

versed the district court and held that disgorgement is

not an available remedy in civil RICO cases. United

States v. Philip Morris USA, Inc. (“Disgorgement

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

the district court granted the government leave to refor-

mulate its proposed remedies. After the liability phase

of the trial, the district court held a fourteen-day reme-

dies trial. At the close of the remedies phase, several

organizations moved to intervene in the litigation to as-

sert their interests in the proposed remedies. The dis-

trict court granted the American Cancer Society, the

American Heart Association, the American Lung Associ-

ation, Americans for Nonsmokers’ Rights, the National

African American 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 main-

tained an illegal racketeering enterprise and each De-

fendant participated in the conduct, management, and

operation of the enterprise in violation of section

1962(c), and that they explicitly and implicitly agreed to

do so, in violation of section 1962(d). Philip Morris, 449

F. Supp. 2d at 851, 901. The court found that Defen-

9a

dants engaged in a scheme to defraud smokers and po-

tential smokers by (1) falsely denying the adverse health

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

nicotine and smoking are addictive, zd. at 856; (3) falsely

denying that they manipulated cigarette design and

composition so as to assure nicotine delivery levels that

create and sustain addiction, id. at 858; (4) falsely repre-

senting that light and low tar cigarettes deliver less nic-

otine 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 documents, information, and research to

prevent the public from learning the truth about these

subjects and to avoid or limit liability in litigation, zd. at

866. The court concluded that the government failed to

prove that Defendants deliberately chose not to utilize

or market feasible designs or product features that

could produce less hazardous cigarettes. Jd. at 384.

Before granting injunctive relief against Defendants

the district court assessed whether they presented a

“reasonable likelihood of further violation(s) in the

future.” Id. at 909 (quoting SEC v. Savoy Indus., Inc.,

587 F.2d 1149, 1168 (D.C. Cir. 1978)). The court con-

cluded that Philip Morris, Reynolds, Brown & William-

son, Lorillard, American, Altria, and BATCo were rea-

sonably likely to commit future RICO violations unless

enjoined because they continued to make false and mis-

leading statements at the time of trial, their businesses

presented continuing opportunities to commit RICO

violations, and their corporate leadership continued to

consist of veteran employees with longstanding ties to

the companies. /d. at 910-13. Defendants argued that

no injunction was necessary because their Master Set-

10a

tlement Agreement with forty-six states and the District

of Columbia and their individual settlements with four

states already sufficiently restrained them. The district

court rejected this argument, concluding that the Mas-

ter Settlement Agreement did not obviate the need for

injunctive relief because Defendants had not fully com-

plied with the agreement, parts of the agreement began

expiring in 2006, the states could not vigorously enforce

all aspects of the agreement, and BATCo and Altria

were not subject to the settlement agreement. /d. 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 can-

cer and is addictive, by voluntarily restricting its adver-

tising and including disclosures on its packages, and by

cooperating with the United States and state attorneys

general in their claims against other tobacco companies.

Id. at 906-07, 918-19. The district court concluded that

Liggett was not reasonably likely to commit future

RICO violations based on this withdrawal, its continued

independence from the other Defendants, and its limited

opportunity for future violations by virtue of its discount

cigarette market and lack of traditional consumer adver-

tising. Jd. at 918-19.

lla

Pursuant to section 1964, the district court imposed

injunctive remedies against the other seven manufac-

turer Defendants. Specifically, the court ordered Defen-

dants (1) to refrain from any acts of racketeering relat-

ing to the manufacturing, marketing, promotion, health

consequences, or sale of cigarettes in the United States;

(2) not to participate in the management or control of

CTR, TI, or CIAR, and not to reconstitute the form or

function of those entities; (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 effects of

smoking and secondhand smoke, their manipulation 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 litigation; and (7) to provide

their disaggregated marketing data to the government

according to the schedule on which they provide it to the

Federal Trade Commission. /d. 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 out-

side the United States. Jd. at 945.

The district court denied the remainder of the govern-

ment’s requested injunctive relief, including its pro-

posed national smoking cessation program, public edu-

cation and counter-marketing campaign, and youth

smoking reduction plan. /d. at 933-34, 936-37. The

court also denied the government’s requests that it ap-

12a

point a monitor to investigate and restructure the De-

fendant companies, zd. at 936, and that it order Defen-

dants to make public all “health and safety risk infor-

mation” about their products in their own files, id. at

929.

All Defendants except Liggett appealed, raising nu-

merous challenges to the finding of liability and the rem-

edies imposed. The government and the intervenors

filed a cross-appeal regarding the remedies that the dis-

trict 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 an

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 op-

portunity to judge the witnesses’ credibility. Jd. (citing

FED. R. Civ. P. 52(a)(6)). This standard applies even

when the district court adopts a party’s proposed find-

ings verbatim. Anderson v. City of Bessemer City, 470

U.S. 564, 572, 105 S. Ct. 1504, 84 L. Ed. 2d 518 (1985).

To establish RICO liability, the government had to

prove the necessary elements of RICO itself—including

the existence of an enterprise and a pattern of racke-

teering activity, 18 U.S.C. § 1962(c)—as well as the ele-

ments of the underlying conduct constituting the racke-

teering acts, here, numerous instances 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 underlying fraud, as well as the remedies

the court imposed. We address Defendants’ challenges

13a

to RICO liability in Part II, their general challenges to

fraud liability in Part III, their challenges to specific

aspects of the fraudulent scheme and the liability of spe-

cific Defendants in Part IV, their challenges to the find-

ing that they are likely to commit future violations and

therefore should be enjoined in Part V, and their chal-

lenges to particular remedies the court imposed in Part

VI.

II. Challenges to RICO Liability

A. RICO Enterprise

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

ated with any enterprise . . . to conduct or participate,

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 “enter-

prise’s” affairs through racketeering activity. Because

RICO defines “person” as including “any individual or

entity capable of holding a legal or beneficial interest in

property,” zd. § 1961(3), corporations as well as individ-

uals can be liable if they conduct an enterprise’s affairs

through a pattern of racketeering activity. In language

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

“enterprise” includes any individual, partnership,

corporation, association, or other legal entity, and

any union or group of individuals associated in fact

although not a legal entity.

Id.§ 1961(4). The enterprise as such generally faces no

section 1962(c) RICO liability; indeed it may be the inno-

cent vehicle through which unlawful activity is carried

out, see Cedric Kushner Promotions, Lid. v. King, 533

U.S. 158, 164, 121 S. Ct. 2087, 150 L. Ed. 2d 198 (2001)

14a

(“RICO both protects a legitimate ‘enterprise’ from

those who would use unlawful acts to victimize it, and

also protects the public from those who would unlawfully

use an ‘enterprise’ (whether legitimate or illegitimate)

as a ‘vehicle’ through which ‘unlawful . . . activity is

committed.’” (quoting United States v. Turkette, 452

U.S. 576, 591, 101 S. Ct. 2524, 69 L. Ed. 2d 246 (1981),

and Natl Org. for Women, Inc. v. Scheidler, 510 U.S.

249, 259, 114 S. Ct. 798, 127 L. Ed. 2d 99 (1994))). When

the enterprise is an association-in-fact, members of the

association may be both part of the “enterprise” and

liable as “persons” under RICO if they conduct the enter-

prise’s affairs through racketeering activity. See, e.g.,

United States v. Richardson, 167 F.3d 621, 626 (D.C.

Cir. 1999) (upholding conviction of defendant member of

association-in-fact enterprise).

Here, defining the RICO enterprise as “a group of

business entities and individuals associated-in-fact, in-

cluding Defendants to this action, their agents and em-

ployees, and other organizations and individuals,” the

district court held that the Defendant cigarette manu-

facturers and trade organizations had violated section

1962(¢c) by participating in the conduct of the enter-

prise’s affairs through multiple acts of mail and wire

fraud. Philip Morris, 449 F. Supp. 2d at 851, 867. De-

fendants challenge the district court’s acceptance of a

RICO er. 2r%rtse made up of individuals and corpora-

tions, arguing that the statute provides an exclusive list

of possible enterprises that covers groups of individuals

associated in fact, not mixed 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 argu-

15a

ment. There, we held that a group of seven individuals

and eleven corporations and partnerships associated in

fact may constitute a RICO “enterprise.” Jd. at 351

n.12, 353. We explained: “[RICO] defines ‘enterprise’

as including the various entities specified; the list of

entities is not meant to be exhaustive.” Jd. at 353. As

such, a group of individuals, corporations, and partner-

ships associated in fact can qualify as a RICO “enter-

prise,” even though section 1961(4) nowhere expressly

mentions this type of association.

In so holding, we joined several other circuits that

had reached the same conclusion. Perholtz, 842 F.2d at

353 (citing the Second, Third, Seventh, and Eleventh

Circuits, as well as Fifth Circuit Unit B). Indeed, both

prior to and since Perholtz, every circuit to consider the

question has likewise held that corporations may be part

of an association-in-fact enterprise. 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 because section 1961(4)’s list is not exhaus-

tive); 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), super-

seded 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. DiCon

Fin. C»., 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 (11th Cir. 1985) (same); United States v. Feld-

man, 853 F.2d 648, 655-56 (9th Cir. 1988) (reaching

16a

same outcome based on different statutory analysis);

United States v. Najjar, 300 F.3d 466, 484 (4th Cir.

2002) (upholding without discussion RICO convictions

involving an association-in-fact enterprise that included

corporations). The judges of these circuits are equally

unanimous, for not one has dissented from the proposi-

tion that an association-in-fact enterprise may include

corporations.

Defendants argue that Perholiz has no applicability

where, as here, the defendants are corporations. Be-

cause the Perholtz defendants were individual members

of the enterprise, not its corporate members, Defen-

dants here claim that Perholtz applies only when indi-

viduals, not corporations, are the RICO defendants. As

Defendants see it, Perholtz merely ensures that individ-

uals are unable to escape liability simply by including

corporations in their enterprise; Perholtz, they argue,

does not mean that the associated-in-fact corporations

can themselves incur RICO liability.

But nothing in Perholtz is so limited. Quoting the

Supreme Court’s statemeut in United States v. Turkette

that “[t}]here is no restriction upon the associations em-

braced by the definition [of enterprise],” 452 U.S. at 580,

101 S. Ct. 2524, Perholtz sets forth its holding in broaa

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. No-

where does Perholtz suggest that the rule varies de-

pending on the identity of the defendants. Indeed, two

of the cases Perholtz relies on involved corporate defen-

dants. /d. (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.

17a

Forms, Inc., 713 F.2d 1272, 1285 (7th Cir. 1983) (uphold-

ing RICO charges against one individual and one corpo-

ration)). Many other decisions have similarly upheld

RICO allegations involving corporate defendants who

were also members of the association-in-fact enterprise.

See, 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 (11th 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. 494, 506, 120 S. Ct. 1608, 146

L. Ed. 2d 561 (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 Per-

holtz is contrary to the statute’s language. As “persons”

under section 1961(8), corporations may be RICO defen-

dants regardless of the kind of enterprise charged. See

18 U.S.C. § 1962(c) (“It shall be unlawful 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 “enterprise” can fluctuate depend-

ing on whom the government or the plaintiff chooses to

name as the defendant. Perholtz’s interpretation of sec-

tion 1961(4) thus applies regardless of whether the

RICO defendants are individual “persons” or corporate

“persons.” To hold otherwise would require us to re-

write section 1962(c).

18a

In a further attempt to evade Perholtz, Defendants

argue that even if Perholtz was correct when decided, it

has been eroded by the Supreme Court’s 2001 decision

in Cedric Kushner Promotions, Ltd. v. King, 533 U.S.

158, 121 S. Ct. 2087, 150 L. Ed. 2d 198 (2001). Defen-

dants’ argument begins with the premise that at the

time we decided Perholiz, RICO presented a potential

loophole: because the RICO defendant must be distinct

from the RICO enterprise, Yellow Bus Lines, Inc. v.

Drivers, Chauffeurs & Helpers Locai 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, 109

S. Ct. 3235, 106 L. Ed. 2d 583 (1989), a sole shareholder

who used his alter-ego corporation for racketeering

might evade RICO liability because he wouldn’t be suffi-

ciently distinct from the alter-ego corporation “enter-

prise.” Defendants rely on Perholtz’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 shelis to

aid their illicit schemes could be reached by RICO.” 842

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

vated in Perholtz by the underlying concern “that a

criminal defendant conducting the affairs of an ‘enter-

prise’ that was his own closely held corporation, 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— hold-

ing in Cedric Kushner that an individual sole share-

holder 7s sufficiently distinct from his alter-ego corpora-

tion to sustain RICO liability, 533 U.S. at 160, 121 S. Ct.

2087—Defendants assert that Perholtz no longer repre-

sents binding authority.

19a

We do not read Perholtz as motivated by the con-

cerns addressed in Cedric Kushner. In contrast to Ced-

ric Kushner, the enterprise in Perholtz involved multi-

ple individuals and numerous corporations, with no indi-

cation that the corporations were either all closely held

by the individual defendants or in any other way insuffi-

ciently distinct. 842 F.2d at 351 n.12. Indeed, at least

some of the Perholtz corporate enterprise members

were not closely held. For example, enterprise member

International Business Services, Inc. (IBS) existed in

its own right prior to the scheme and was related to the

defendants through employment relationships that

would not have defeated RICO’s distinctness require-

ment: Perholtz himself was a consultant to IBS, and the

other RICO defendant, Franklin Jackson, was an IBS

project manager. /d. at 348. Similarly, enterprise mem-

ber 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 enter-

prise, 7d. at 350—and thus would have been sufficiently

distinct from each of those non-sole shareholders. The

enterprise also included two separate real estate compa-

nies 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 en-

terprise member, John Gentile, worked for the Postal

Service and apparently had no formal stake in the corpo-

rate enterprise members. /d. at 346, 351 n.12. In Per-

holtz, we held that all these corporations—anot 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 entirely sepa-

rate argument that he, as an individual, was insuffi-

20a

ciently distinct from the enterprise. Far from basing

our holding on this argument, we simply noted that we

had “no occasion to consider the separateness require-

ment” because Perholtz associated not with himself but

with others. Jd. at 3538.

Given the structure of the Perholiz enterprise and

the court’s acknowledgement that distinctness was not

at issue, we think Perholtz reflected a different concern,

namely that a group of sophisticated racketeers who

would otherwise constitute an association-in-fact might

evade RICO’s grasp by virtue of their ability to operate

through corporations and establish complex networks of

companies, kickbacks, and contracts to achieve their il-

licit ends. Indeed, immediately following its reference

to “corporate shells,” Perholtz emphasized Congress’s

desire that RICO serve “as a weapon against the sophis-

ticated racketeer as well as (and perhaps more than) the

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

tion: the defendants worked through their own compa-

nies and multiple outside corporations in an intricate

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 con-

tractors and subcontractors. “This relationship of indi-

viduals and corporations is precisely what section

1962(c) was designed to attack.” Jd. at 354.

Moreover, in asserting their Cedric Kushner argu-

ment, Defendants fail to explain how Perholtz’s inter-

pretation would even solve the hypothetical problem

they posit. According to Defendants, in order to pre-

serve RICO liability for a sole shareholder who would be

insufficiently distinct from his alter-ego corporation, the

Perholtz court held that an “individual and his shell cor-

2la

poration could together . . . constitute an association-

in-fact enterprise.” Defs. Reply Br. 16. In Deferdants’

view, the sole shareholder would then be liable under

RICO for conducting the affairs of this association-in-

fact enterprise. Yet if an individual is insufficiently dis-

tinct from his alter-ego corporation, we seriously doubt

he would suddenly be sufficiently distinct from an enter-

prise consisting of his alter-ego corporation and himself.

If Perholitz 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 associa-

tion-in-fact enterprise of corporations. The relevance of

this is hard to grasp, as other post-Cedric Kushner cases

not cited by the government accept association-in-fact

enterprises comprised of corporations. See Smokes-

Spirits.com, 541 F.3d at 450-51 (holding that the plain-

tiff adequately pleaded an association-in-fact enterprise

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

(holding that plaintiffs had sufficiently alleged an associ-

ation-in-fact enterprise of two corporations); United

States v. Cianci, 378 F.3d 71, 83 (ist Cir. 2004) (“It is

uncontroversial that corporate entities, including munic-

ipal and county ones, can be included within associa-

tion-in-fact RICO enterprises.”); Living Designs, Inc. v.

E.I. Dupont de Nemours & Co., 431 F.3d 358, 361 (9th

Cir. 2005) (“[T]here is no question that DuPont [corpo-

ration] 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.

22a

Cedric Kushner thus undermines neither the unani-

mous Judicial view that association-in-fact enterprises

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 unavailing. Not only is it fore-

closed by Perholtz, it is unpersuasive on its own terms.

As Perholtz and many other circuits explain, the use of

the word “includes” indicates that RICO’s list of “enter-

prises” is non-exhaustive. Indeed, section 1961 makes

the non-exhaustive nature of “includes” clear by alter-

nating between the words “means” and “includes” to in-

troduce the section’s various definitions. Specifically,

five of section 1961’s ten subsections introduce defini-

tions 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 fed-

eral crimes. Section 1961(2) likewise introduces a defini-

tional 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 posses-

sion 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) (intro-

ducing definitions of “unlawful debt,” “racketeering

investigator,” and “racketeering investigation” with the

term “means”). Section 1961(4), by contrast, says “‘en-

terprise’ includes any individual, partnership, corpora-

tion, association, or other legal entity, and any union

or group of individuals associated in fact although

not a legal entity.” 7d. § 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.

23a

See Helvering v. Morgan’s, Inc., 293 U.S. 121, 126 n.1,

55 S. Ct. 60, 79 L. Ed. 232 (1934) (describing a statute

that introduced three definitions with the word “in-

cludes” and seven definitions with the word “means” and

noting that “[tJhe natural distinction would be that

where ‘means’ is employed, the term and its definition

are to be interchangeable equivalents, and that the verb

‘includes’ imports a general class, some of whose partic-

ular instances are those specified in the definition”).

That Congress provided an exhaustive list of legal

entity enterprises by adding the phrase “or other legal

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

prises into an exhaustive list. Had Congress 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 tlhe five clearly exhaustive defi-

nitions in the same section: it could have said “ ‘enter-

prise’ means any individual, partnership, corporation,

association, or other legal entity, or any union or group

of individuals associated in fact although not a legal

entity.” But Congress chose to say “ ‘enterprise’ .7-

cludes” the listed entities. Defendants think that the

phrase “or other legal entity” would have been unneces-

sary if the list were otherwise non-exhaustive. Not so.

Adding “or other legal entity” serves to ensure that al)

legal entities 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 different

section of RICO, section 1964(a), demonstrate that the

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

an exhaustive list. Section 1964, which establishes civil

24a

remedies for RICO violations, lacks section 1961’s juxta-

position 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 “enter-

prise” devoid of meaning. Although encompassing non-

enumerated enterprises, section 1961(4)’s list defines

“enterprise,” in part, by listing the kinds of entities

Congress had in mind. Indeed, the Supreme Court has

acknowledged this meaning by requiring enterprises to

exhibit common purpose, organization, and continuity.

Turkette, 452 U.S. at 583, 101 S. Ct. 2524; see also Rich-

ardson, 167 F.3d at 625.

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

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

uals, corporations, and other entities may constitute

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

precedent—confirmed by the statute’s language, but-

tressed 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 manufacturers, and trade organi-

zations.

We also reject Defendants’ additional challenges to

the district court’s findings regarding the existence of a

RICO enterprise and their participation in its affairs.

The district court found—permissibly in our view—that

25a

the enterprise had the common purpose of obtaining

cigarette proceeds by defrauding existing and potential

smokers, Philip Morris, 449 F. Supp. 2d at 869; pos-

sessed 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, zd. at 871-72; and consti-

tuted a separate entity distinct from each Defendant, zd.

at 875. Defendants give us neither any basis for con-

cluding that the district court’s factual findings were

clearly erroneous nor any reason to think them legally

insufficient. The district court also found—again per-

missibly—that despite competing in some aspects of

their business, Defendants jointly committed fraud and

so participated in the conduct of not just their own af-

fairs but the enterprise’s as well, id. at 875-78, and also

that they conspired to do so, 7d. at 903-05. Accordingly,

we affirm the district court’s findings that an enterprise

existed and that Defendants participated in the conduct

of its affairs and conspired 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 pro-

vided no single, discrete list of specific racketeering

acts, the comprehensive findings—detailing over one-

hundred racketeering acts—are sufficient to warrant af-

firmance. Defendants raise numerous challenges to the

correctness of the district court’s findings that they com-

mitted racketeering acts, which we take up in Parts III

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

with the existence of these findings, not their validity.

26a

By statutory definition, any violation of the mail or

wire fraud statutes can qualify as “racketeering activ-

ity.” 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. Jd. §§ 1341,

1343. “Where one scheme involves several mailings, the

law is settled that each mailing constitutes a violation of

the statute.” Hanrahan v. United States, 348 F.2d 363,

366 (D.C. Cir. 1965). Where, as here, the mail and wire

fraud statutes serve as the predicate offenses for a

RICO violation, each racketeering act must be a mailing

or wire transmission made in furtherance of a “scheme

or artifice to defraud.” 18 U.S.C. §§ 1841, 13843. 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 transmissions

were in furtherance of such scheme. See Philip Morris,

449 F. Supp. 2d at 852-54.

Although Defendants question whether the district

court clearly found a scheme to defraud, the finding on

this question is explicit: “The Government has proven

that the Enterprise knowingly and intentionally en-

gaged in a scheme to defraud smokers and potential

smokers, for purposes of financial gain, by making false

and fraudulent statements, representations, and prom-

ises.” Jd. at 852. The district court explains, in great

detail, the seven components of the scheme to defraud.

Id. at 852-67.

The court also held that “each of the alleged mailings

and wire transmissions was in furtherance of the over-

arching scheme to defraud.” /d. at 881. Thus it follows

that any mailing or wire transmission found to have

27a

been made was found to have been a mail or wire fraud

offense and therefore a racketeering act.

Seventy-nine of the alleged acts were established by

Defendants’ own stipulations and admissions. Jd. at 882

(enumerating 79 racketeering acts). Altogether, the

court enumerated 108 racketeering acts in the opinion,

as well as six others which it excluded on First Amend-

ment 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 racketeering acts, but for which the

district court did not provide a specific list. See, e.g., id.

at 883 (“[T]t is clear beyond any question that Defen-

dants caused the mailings and wire transmissions under-

lying the 30 Racketeering Acts involving the news me-

dia’s dissemination of Defendants’ press releases and

advertisements to their subscribers.”).

The RICO statute requires “a pattern of «acketeer-

ing activity” on the pari 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. Bell

Tel. Co., 492 U.S. 229, 237, 109 S. Ct. 2893, 106 L. Ed. 2d

195 (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, Lorillard,

American, and TI committed racketeering acts 24, 132,

and 133 by mailing press releases containing false state-

ments about the addictiveness and health consequences

of smoking. /d. at 194, 282-83. Philip Morris, Reynolds,

Brown & Williamson, Lorillard, American, Liggett, and

CTR committed racketeering acts 66, 73, and 88 by mail-

28a

ing letters regarding funding of CTR’s “special pro-

jects” to create data supporting their fraudulent claims.

Id. at 101, 882, 972, 976. BATCo and Brown & William-

son committed racketeering acts 30, 50, 51, 53, and 63

through their mailings to each other concerning the en-

terprise’s position on the health effects and addictive-

ness of smoking as well as smoker compensation and

nicotine. Jd. at 253-54, 301, 882, 965, 969. Altria com-

mitted 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. /d.

at 295, 818, 884, 974. As these examples demonstrate,

the district court found each Defendant 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 re-

view the district court’s finding. Although the district

court may have concluded other racketeering acts were

proven as well, we need look no further. Defendants

correctly argue we must ensure the remedy imposed is

tailored to “the violation found,” United States v. Micro-

soft, 253 F.3d 34, 105 (D.C. Cir. 2001); the voluminous

findings detailing the contours of the scheme to defraud

are more than sufficient to allow this review, see, e..,

Philip Morris, 449 F. Supp. 2d at 852-67. Given that a

mailing or wire transmission need not itself be fraudu-

lent, 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 Defendants’

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

29a

violation found is unaffected by the associated racke-

teering acts. The remaining racketeering acts are fully

sufficient to support the district court’s finding of a pat-

tern of racketeering activity as to each Defendant. Be-

cause 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.

III. General Challenges to Fraud Liability

A. Specific Intent

The predicate acts of racketeering in thiis case were

all acts of mail or wire fraud, which require specific in-

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

offenses based on the “inowledge and intent” of their

employees. N.Y. Cent. & Hudson River R.R. Co. v. Uni-

ted States, 212 U.S. 481, 495, 29 S. Ct. 304, 53 L. Ed. 613

(1909); see United States v. A & P Trucking Co., 358

U.S. 121, 125, 79 S. Ct. 203, 3 L. Ed. 2d 165 (1958). Be-

cause a corporation only acts and wills by virtue of its

employees, the proscribed corporate intent depends on

the wrongful intent of specific employees. See Saba v.

Compagnie Nationale Air France, 78 F.3d 664, 670

(D.C. Cir. 1996). Thus, to determine whether a corpora-

tion made a false or misleading statement with specific

intent to defraud, we look to the state of mind of the in-

30a

dividual corporate officers and employees who made, or-

dered, or approved the statement. Southland Sec. Corp.

v. INSpire 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 cir-

cumstances, including indirect and circumstantial evi-

dence. United States v. Alston, 609 F.2d 531, 538 (D.C.

Cir. 1979); United States v. Reid, 5383 F.2d 1255, 1264

(D.C. Cir. 1976). We refer to this inference 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 accused, not as a matter of law but as

a consequence of inferences reasonably drawn from the

facts shown.” United States v. Avant, 275 F.2d 650, 653

(D.C. Cir. 1960).

Here, the district court concluded that the chief exec-

utive officers and other highly placed officials in the De-

fendant corporations made or approved statements they

knew to be false or misleading, evincing their specific

intent to defraud consumers. I[n some instances, the

court found by direct evidence that representatives

of the Defendant companies “willfully statled] some-

thing which they knew to be untrue.” Philip Morris,

449 F. Supp. 2d at 895. For example, the court found

that, in a televised interview in 1971, Philip Morris Pres-

ident Joseph Cullman III denied that cigarettes posed

a health hazard to pregnant women or their infants,

“contradict[ing] the information Helmut Wakeham,

Philip Morris’s Vice President for Corporate Research

and Development, had given him two years earlier.” Jd.

at 193-94. In the main, however, the district court relied

3la

on indirect and circumstantial evidence indicating that

the senior corporate officials knew that their public

statements, and those that they approved for their cor-

porations, were false or misleading.

In the majority of instances, the authors of the frau-

duient statements alleged as Racketeering 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:

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

resentatives and agents of these corporations and

entities had no knowledge that their public state-

ments were false and fraudulent. The Findings

of Fact are replete with examples of C.E.0.s, Vice-

Presidents, and Directors of Research and Develop-

ment, as well as the Defendants’ lawyers, making

statements which were inconsistent with the internal

knowledge and practice of the corporation itself.

Id. at 853. The district court did not commit legal error

by imputing to Defendants’ executives knowledge of the

falsity of their statements based on inferences reason-

ably drawn from the facts shown, and sufficient 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 enti-

ties were continually conducting research and reviewing

the research of other scientists regarding cigarettes and

32a

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 plan-

ning, product development, and advertising—were well

known, acknowledged, and accepted throughout the cor-

porations. These results established that cigarette

smoking 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 fact and expert wit-

ness,” id. at 186, testified about the understanding with-

in Philip Morris on the question of whether cigarette

smoking is a cause of lung cancer and other diseases:

There was widespread acceptance that smoking

caused disease. I never talked with a scientist at

Philip Morris who said that smoking doesn’t cause

disease. [This was based on the] compelling epidemi-

ology such as that recounted in the Surgeon’s [sic]

General’s reports, and our knowledge about the

chemicals 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 scientific

evidence that smoking causes disease, Farone answered,

33a

No. Their comments generally focused on how the

company could or should respond, not to whether the

scientific evidence was valid. Remember, a main rea-

son 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 results

of the studies regarding disease, nicotine addiction, and

smoker compensation in numerous memoranda and re-

ports; the evidence at trial, including internal corporate

documents, demonstrated that the executives crafted

their corporate priorities and strategies in response 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 inference that Defendants’ executives

were aware that their public relations strategy of creat-

ing the impression 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, ad-

mitting that “[oJur basic position in the cigarette contro-

versy is subject to the charge, and may be subject to a

finding, that we are making false or misleading state-

ments to promote the sale of cigarettes.” /d. at 855.

Other documents demonstrate that Defendants’ top offi-

cials were directly informed of negative research re-

sults. For example, in 1977 Philip Morris Assistant Gen-

34a

eral 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 companies had concluded that expo-

sure to cigarette smoke causes emphysema. /d. at 183.

The government presented similar evidence regard-

ing the other aspects of Defendants’ scheme, such as

addiction and nicotine. A few examples cannot ade-

quately present the volumes of evidence underlying the

district court’s findings of fact, but the following provide

a fair sample: A 1991 Reynolds Research and Develop-

ment report acknowledged that “[w]e are basically in

the nicotine business.” Id. at 237. Dr. Farone testified

that during his time at Philip Morris there was “wide-

spread acceptance internally throughout the company—

among executives, scientists, and marketing people”

that nicotine was primarily responsible for addiction to

smoking. Jd. at 858. Indeed, the district court found

that “internal documents and testimony from former

company employees affirmed that within their corporate

walls, Defendants openly recognized the addictiveness

of cigarettes.” Jd. Regarding light cigarettes, internal

research reports and memoranda at the Defendant com-

panies revealed that they understood the phenome-

non of smoker compensation and studied how to manipu-

late it in order to make their light brands appeal-

ing 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 inter-

nal research acknowledged that “a majority of habitual

smokers compensate for changed delivery” and ex-

plained that if smokers “choose [a] lower delivery brand

. . than their usual brand” they “will in fact increase

3ba

the amounts of tar and gas phase that they take in, in

order to take in the same amount of nicotine.” Z/d. at

861. Dr. Farone testified that Defendants’ superior

knowledge of compensation (compared to that of scien-

tists outside the industry, including the government)

was closely held within Philip Morris and the tobacco

industry and there was an “effort on the part of [his]

coworkers at Philip Morris, including [his] supervisors,

to restrict any public acknowledgment on the part of

Philip Morris of the phenomena of compensation.” /d.

As these examples and hundreds more findings in the

district court’s opinion demonstrate, the court had be-

fore it sufficient evidence from which to conclude that

Defendants’ executives, who directed the activities of

the Defendant corporations and their joint entities,

knew about the negative health consequences of smok-

ing, the addictiveness and manipulation 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 government presented evidence indicating that spe-

cific high-ranking corporate officials were directly in-

formed about these matters, as well as evidence of per-

vasive knowledge and acceptance of these propositions

throughout the Defendant organizations. The over-

whelming indirect and circumstantial evidence was suffi-

cient to allow the district court to reasonably infer that

the high level executives, including “CEOs, Vice Presi-

dents, [and] Heads of Research & Development” for De-

fendants knew about their respective companies’ “inter-

nal research, public positions, and long term strategies,”

id. at 897, that is, the “internal knowledge and practice”

of the company, zd. at 853. These executives then made,

caused to be made, and approved public statements con-

36a

trary to this knowledge. See, e.g., zd. at 190 (Philip Mor-

ris Vice President and General Counsel declaring “[n]o-

body has yet been able to find any ingredient as found in

tobacco or smoke that causes human disease”); id. at

166, 201 (28 years after Reynolds scientists declared the

presence of carcinogenic compounds in cigarettes was

“now well established,” a Reynolds press release and

newspaper advertisement declared the connection be-

tween smoking and disease “an open controversy”); id.

at 772 (TI published booklet declaring that secondhand

smoke had not been shown to be a health hazard to non-

smokers); 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); zd. at 273 (President and CEO

of Philip Morris quoted in TIME magazine from deposi-

tion testimony claiming that cigarettes are not addictive

unless a similar attachment to Gummi Bears is an addic-

tion); 1d. at 285 (TI’s Vice President for Public Affairs

on television programs flatly denying that nicotine is

addictive, stating the attachment is like being a “news

junkie” or “chocoholic”).

Specific intent to defraud may be inferred where, as

here, there is a pattern of corporate research revealing

a particular proposition, for example, that smoking is

addictive; an ensuing pattern of memoranda 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 state-

ment; and the corporate 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 factfind-

37a

er 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 perva-

sive knowledge throughout the organizations demon-

strates that Defendants’ executives at least acted with

reckless disregard for the truth or falsity of their state-

ments. As the district court correctly held, such reck-

less disregard suffices to demonstrate the requisite in-

tent. Id. at 897. The law then imputes this specific in-

tent to the corporation.

Defendants argue that, even if the previous discus-

sion 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 relied on an im-

permissible “collective intent” theory to find specific in-

tent based on public statements contradicting the “col-

lective knowledge” of the Defendant corporations with-

out finding that any employee harbored specific intent

to defraud. Like Defendants and other courts, we are

dubious of the legal soundness of the “collective intent”

theory. Saba, 78 F.3d at 670 n.6 (“corporate knowledge

of certain facts [can be] accumulated from the knowl-

edge of various individuals, but the proscribed intent

(willfulness) depend[s] on the wrongful intent of specific

employees”); 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 Eq-

uity 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 permissible view of specific intent. Al-

though at times the court articulated a “collective in-

38a

tent” standard, see Philtp Morris, 449 F. Supp. 2d at

895-97, it also based its holding on a proper view of spe-

cific 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 liability, De-

fendants argue that their false and misleading state-

ments about the health effects of smoking cannot, as a

legal matter, be fraudulen! because their statements

were not material. This argument is based on a flawed

understanding of the materiality requirement.

In order for a false or misleading statement to qual-

ify as mail or wire fraud, it “must concern a material or

important fact or matter.” United States v. Winstead,

74 F.3d 1313, 1820 (D.C. Cir. 1996). This materiality re-

quirement is met if the matter at issue is “of importance

to a reasonable person in making a decision about a par-

ticular matter or transaction.” Jd. Materiality does not

require proof that any specific person (or number of

people) purchased cigarettes as a result of the false

statements. Nor does it require Defendants’ false state-

ments to be the cause, reason, or sufficient condition of

any person’s decision 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 statements identified by the district court

would be important to a reasonable person purchas-

ing cigarettes. For example, statements about the ad-

verse health effects of smoking, see Philip Morris,

39a

449 F. Supp. 2d at 146-208, would be a matter of impor-

tance to a reasonable person deciding to purchase ciga-

rettes. The fact that Defendants continually denied any

link between smoking and cancer, see, e.g., id. at 204,

suggests they themselves considered the matter mate-

rial. So, too, regarding Defendants’ false statements on

other topics, including statements concerning: whether

smoking is addictive, id. at. 208-308, whether Defendants

manipulated their cigarettes to control nicotine delivery,

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

ful than other cigarettes, id. at 430-561, whether second-

hand smoke is hazardous to non-smokers, id. at 692-801,

and whether Defendants concealed scientific research

and destroyed documents, id. at 801-39.

Each of these topics is an important consideration 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 lingering qualms) about

the potential for cancer, the risk of addiction, or the haz-

ardous effects of secondhand smoke for friends, family,

and others who may be exposed. Defendants’ prevarica-

tions about each of these issues suggests full awareness

of this obvious fact; reasonable purchasers of cigarettes

would consider these statements important.

Defendants further argue that, because the scientific

community had reached a consensus regarding the se-

verely 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 smok-

ing’s adverse health consequences and thus any incon-

sistent assertion by defendants could not be material to

a reasonable person”). The question, however, is not

40a

whether a reasonable person would have believed Defen-

dants’ false statements, 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, De-

fendants claim at least a portion of their statements

qualify as protected activity under the First Amend-

ment. Of course, it is well settled that the First Amend-

ment does not protect fraud. See McIntyre v. Ohio Elec-

tions Comm’n, 514 U.S. 334, 357, 115 S. Ct. 1511, 131

L. Ed. 2d 426 (1995) (stating that the government “may,

and does, punish fraud directly”). Recognizing this fact,

Defendants argue their statements were not fraudulent,

but those arguments are discussed and rejected else-

where in this opinion. See supra Part III.A-B; infra

Part IV.

Defendants next claim protection under the Noerr-

Pennington doctrine—a doctrine, rooted in the Petition

Clause of the First Amendment, that protects “an at-

tempt to persuade the legislature or the executive to

take particular action with respect toalaw. ...”

E. R.R. Presidents Conference v. Noerr Motor Freight,

Inc., 365 U.S. 127, 136, 81 S. Ct. 528, 5 L. Ed. 2d 464

( 1961). The protection does not “cover activity that was

not genuinely intended to influence government action.”

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

492, 508 n.10, 108 S. Ct. 1931, 100 L. Ed. 2d 497 (1988).

Defendants’ attempt to invoke Noerr-Pennington as

protection fails because the doctrine does not protect de-

liberately false or misleading statements. “[Njeither the

4ia

Noerr-Pennington doctrine nor the First Amendment

more generally protects petitions predicated on fraud or

deliberate misrepresentation.” Edmondson & Galia-

gher 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, 105 S. Ct. 2787, 86 L. Ed. 2d

384 (1985) (finding the Petition Clause does not have

“special First Amendment status” and that petitions are

not entitled to “greater constitutional protection” 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 falsehoods.”). The district court’s valid

findings of fraud in this case take Defendants’ state-

ments out of the Noerr-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 recogni-

tion of this fact, Defendants have publicly denied, dis-

torted, and minimized the hazards of smoking for dec-

ades,” Philip Morris, 449 F. Supp. 2d at 146; “Defen-

dants have researched and recognized, decades before

the scientific community did, that nicotine is an addictive

drug. . . . Notwithstanding the understanding and ac-

ceptance of each Defendant that smoking and nicotine

are addictive, Defendants have publicly denied and dis-

torted the truth as to the addictive nature of their prod-

ucts for several decades,” id. at 208-09; “Defendants

have designed their cigarettes to precisely control nico-

tine delivery levels and provide doses of nicotine suffi-

cient to create and sustain addiction. At the same

time, Defendants have concealed much of their nicotine-

42a

related research, and have continuously and vigorously

denied their efforts to control nicotine levels and deliv-

ery,” id. at 309; “Defendants have known for decades

that filtered and low tar cigarettes do not offer a mean-

ingful reduction of risk, and that their marketing which

emphasized reductions in tar and nicotine was false and

misleading,” zd. at 860; “Despite their internal acknowl-

edgment of the hazards of secondhand smoke, Defen-

dants have fraudulently denied that [secondhand smoke]

causes disease,” id. at 864.

Were these statements false, but not deliberately so,

Defendants would have a better argument. But Defen-

dants 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 at-

tempts to persuade; Defendants’ liability rests on de-

ceits 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 Defendants’ statements had not been

made with fraudulent 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 remain-

ing racketeering activity. Philip Morris, 449 F. Supp.

2d at 887. All six excluded acts were instances of testi-

mony to Congress and, given the wealth of unprotected

racketeering acts, we need not reach the question

whether the district court correctly excluded these acts.

The remaining acts were intended to defraud consum-

ers, so Noerr-Pennington protection does not apply.

43a

IV. Specific Challenges to Fraud Liability

A. “Light” Cigarettes

The first specific fraud finding Defendants challenge

relates to their marketing of “light” cigarettes. The dis-

trict court found: “As their internal documents reveal,

Defendants engaged in massive, sustained, and highly

sophisticated marketing and promotional campaigns to

portray their light brands as less harmful than regular

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

court concluded “Defendants have known for decades

that filtered and low tar cigarettes do not offer a mean-

ingful reduction of risk, and that their marketing which

emphasized reductions in tar and nicotine was false and

misleading.” Jd.

Defendants contend they should be immune from

liability because the Federal Trade Commission (“FTC”)

has blessed their use of labels such as “light” and “low

tar.” This argument is entirely foreclosed by the Su-

preme Court’s recent decision in Altria v. Good, — U.S.

—, 129S. Ct. 588, 172 L. Ed. 2d 398 (2008), concluding

the FTC has never condoned the use of “light” or “low

tar” descriptors. /d. at 550. Defendants point to a 1966

industry 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 Filter Meth-

od, 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 implication, as to reduction

or elimination of health hazards.’” Jd.

44a

Despite Defendants’ argument to the contrary, “the

FTC has in fact never required that cigarette manufac-

turers disclose tar and nicotine yields, nor has it con-

doned representations of those yields through the use of

‘light’ or ‘low tar’ descriptors.” Jd. at 550. Although the

FTC never prevented Defendants from using misleading

descriptors, “agency nonenforcement of a federal stat-

ute 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 F'TC’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 authorization

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 des-

criptors such as “light” and “low tar.” The court found

Defendants orchestrated “highly sophisticated market-

ing and promotional campaigns to portray their light

brands as less harmful than regular cigarettes.” Philip

Morris, 449 F. Supp. 2d at 860. In addition to the mis-

leading use of descriptors, the district court found “{De-

fendants’] public statements are blatantly false” in rela-

tion to the marketing of “light” cigarettes. Jd. at 861.

The district court went on to find that “[a]s part of the

Enterprise’s scheme to defraud smokers, Defendants

withheld and suppressed their extensive knowledge and

understanding of nicotine-driven smoker compensation.”

Id. 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,

45a

the district court relied on other fraudulent activity by

Defendants.

Independent of their FTC-authorization argument,

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 re-

sult in higher levels of caffeine consumption, and eating

many “low fat” cookies can result in higher levels of fat

consumption. Defendants thus analogize to “light” ciga-

rettes, maintain‘ng that it is obvious that smoking many

“light” cigarettes can result in higher levels of nicotine

and tar consumption. But the analogy to “light cigar-

ettes” is inapt. Unlike drinking sodas and eating cook-

ies, the factors behind compensation in “light” cigarettes

are largely subconscious: “the smoker will subcon-

sciously adjust his puff volume and frequency, and

smoking frequency, so as to obtain and maintain 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 fre-

quency are not even tied to the number of “light” ciga-

rettes smoked. The analogy to sodas and cookies fails;

the subconscious nature of smoker compensation en-

abled Defendants to mislead the public about the health

effects of “light” cigarettes.

Finally, Defendants argue their descriptors were

simply verbal representations of numerical ratings au-

thorized by the FTC, and thus were literally true. Even

leaving aside the fact that literally true statements may

nevertheless constitute fraud, this claim founders on the

46a

district court’s finding that “there are lights of certain

brands with higher tar levels than regulars of other

brands from the same company, and there are also lights

and regulars of the same brands that have the same

FTC tar rating.” Jd. at 861. This finding, which Defen-

dants do not attempt to show is clearly erronesus, re-

veals the descriptors were not simply representations of

numerical ratings and thus were not “literally true.”

B. Secondhand Smoke

We turn next to Defendants’ claim that the district

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 dis-

trict court’s findings cf fact unless they are “clearly

erroneous.” FED. R. CIv. P. 52(a)(6). Under this highly

deferential standard, we may disturb the district court’s

findings only if we are “left with the definite and firm

conviction that a mistake has been committed.” £.¢.,

Boca Investerings P’ship v. United States, 314 F.3d 625,

630 (D.C. Cir. 2003) (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 evi-

dence, the factfinder’s choice between them cannot be

clearly erroneous.” Anderson, 470 U.S. at 574, 105

S. Ct. 1504.

Defendants contend that their statements disputing

the health hazards of secondhand smoke were merely

good-faith expressions of opinion. But the district 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

47a

question for us is whether this finding was clearly erro-

neous.

The district court criticized Defendants’ statements

regarding secondhand smoke as contrary to the scien-

tific consensus. Defendants object, emphasizing that the

district court found no scientific consensus emerged un-

til the issuance of the Surgeon General’s 1986 report de-

termining secondhand smoke to be hazardous. More-

over, they point to evidence of selected post-1986 scien-

tific opinions casting doubt on the dangers of second-

hand smoke, arguing that even then they possessed

some basis for disputing the consensus.

Defendants’ objections are beside the point. The dis-

trict court based its finding of fraudulent intent not just

on the existence of a consensus but also on evidence of

Defendants’ own knowledge. Philip Morris, 449 F.

Supp. 2d at 864-65. Specifically, the district court found

that dating back to the 1970s, Defendants’ own research

and analysis revealed the hazards of secondhand smoke.

For example, the district court found that in 1980 a

Philip Morris scientist reviewed a paper concluding that

secondhand smoke caused “significant damage to airway

function” in exposed nonsmokers, and found “little to

criticize,” deeming the paper “an excellent piece of work

which could be very damaging” to the industry. Jd. 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. Jd. at 710 (quotation marks

omitted). And several TI advertisements and press re-

leases claimed that an independent 1981 study showing

“a significant correlation between lung cancer and sec-

48a

ondhand smoke” suffered from a statistical flaw, id. at

715, yet the district court found that industry consul-

tants told TI, Reynolds, and Brown & Williamson that

TI knew at the time not only that the statistical error

did not exist, but also that the study was in fact correct.

Id. at 717-18.

In addition to these and other findings providing rel-

atively 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 consumer products, without

fraudulent intent, frequently engage in concealed sup-

port of positive research in their industries, the conceal-

ment of identity by Defendants over so long a period on

a subject of such intense controversy is at the very least

consistent with knowledge of the falsity of their state-

ments.

Although Defendants insist they had no knowledge

of the misleading character of their public statements,

they nowhere challenge the accuracy of these or any of

the district court’s other findings suggest:ve of their

knowledge. Instead, they argue that such findings re-

veal 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 misleading; the question is whether Defen-

dants did. Regardless 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 circumstantially

49a

inferred that Defendants did in fact possess such fraud-

ulent intent. Given these unchallenged findings, we

have no basis for saying that the district court clearly

erred in drawing that conclusion.

C. Addiction

Defendants also claim that the district court clearly

erred in finding their representations disputing the ad-

dictiveness of cigarettes to be intentionally misleading.

We analyze the district court’s factual finding as to the

misleading character of Defendants’ commercial state-

ments for clear error. E.g., FTC v. Brown & William-

son Tobacco Corp., 778 F.2d 35, 41-42 & n.3 (D.C. Cir.

1985). We find none.

Defendants claim that their statements regarding

addiction were not intentionally misleading because 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, Defen-

dants insist that their statements merely clung to the

earlier, narrower, definitions of the term, and claim that

the district court erroneously converted a semantic dis-

pute into a fraud case. But the district court did not find

only that Defendants insisted on retaining an earlier

definition of addiction. It found that they did so as part

of a concerted 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 dis-

trict court’s findings documenting the impact of nicotine

on the body and, more importantly, Defendants’ under-

standing of its effects. Jd. at 209-11, 216-71. As early as

50a

1963, Brown & Williamson’s generai counsel wrote a

confidential memorandum stating: “We are, then, in the

business of selling nicotine, an addictive drug effective

in the release of stress mechanisms.” Jd. at 259 (quota-

tion marks omitted). Further, the district court found

that Defendants 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 behavior.” /d. at

223 (quotation marks omitted). In 1981, a Philip Morris

executive wrote in an article: “Cigarettes are not just

habit forming—the body builds up a requirement for

them.” Jd. at 228 (quotation marks omitted). Although

several industry attorneys expressed dismay at the pub-

lication 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.” /d. at 229 (quotation marks omit-

ted). These and numerous other findings—all unchal-

lenged—support the district court’s conclusion that De-

.fendants were aware that nicotine creates a chemical

dependency far stronger than a mere habit.

The district court found that despite their knowledge

Defendants made numerous statements trivializing and

outright denying the dependence cigarettes cause. For

example, in 1982 TI issued a press release summarizing

- testimony that smoking caused an “attachment” compa-

rable to that produced by “tennis, jogging, candy, rock

music, Coca-cola, members of the opposite sex and ham-

burgers.” Jd. at 281 (quotation 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,

5la

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 (quota-

tion marks omitted). In a 1994 television interview, a TI

official claimed that there was “no chemical addiction”

to nicotine and stated, ‘(Slometimes we use the word

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

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

ics.” 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 giving 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 testify that nicotine “did not

cause addiction or dependence,” zd. 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 Defendants made

was literally false, even partially true statements can be

actionable fraud if intentionally misleading as to facts.

See, e.g., Emery v. Am. Gen. Fin., Inc., 71 F.3d 13438,

1348 (7th Cir. 1995) (“A half truth, or what is usually the

same thing a misleading 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 disadvantage

of the misled.”). The district court concluded that Defen-

dants’ statements regarding addiction were misleading

in this way, and given the above unchallenged factual

52a

findings we are not “left with the definite and firm con-

viction that a mistake has been committed.” Boca Inves-

terings, 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 be-

gin with Defendant Altria, the holding company owner

of Defendant Philip Morris, which raises several chal-

lenges to the district court’s finding of liability.

As an initial matter, Altria claims that the district

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 this circum-

stantial inference amounted to clear error, as the other

four predicate acts the district court found Altria com-

mitted are themselves sufficient to constitute a pattern

of racketeering 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 furtherance of

a scheme or artifice to defraud, citing several out-of-

circuit cases largely standing for the proposition that

ordinary litigation mailings containing false matter typi-

cally 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

53a

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); Spiege! v. Cont’l Ill. Nat'l Bank, 609

F. Supp. 10838, 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 separately-

proven scheme to defraud somehow fall outside 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 requires a mailing to be fraudu-

lent 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 delivered” as long as it is in furtherance of

“any scheme or 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 of busi-

ness, or where such use can reasonably be foreseen,

even though not actually intended.” (quotation marks

omitted)). Given that the district court permissibly in-

ferred 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 Defen-

dants “caused” the mailings in order 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 conclude that the district court

properly found Altria liable for its direct participation in

54a

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 con-

spiracy. We disagree. The district court’s findings of

fact regarding Altria’s actions in furtherance of the

goals of the enterprise, both directly and through Philip

Morris, see id. at 907-08, as well as the voluminous find-

ings of concerted action and explicit agreement by De-

fendants, amply support the circumstantial inference

that Altria conspired with the other Defendants to vio-

late RICO. See, e.g., United States v. Mellen, 393 F.3d

175, 191 (D.C. Cir. 2004) (“{A] conspiracy can be in-

ferred from a combination of close relationships or

knowing presence and other supporting circumstantial

evidence.” (quotation 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 place out-

side 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 extraterrito-

rial reach. We need not decide today 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 conduct had substantial domestic

effects. Jd. Because conduct with substantial domestic

55a

effects implicates a state’s legitimate interest in protect-

ing its citizens within its borders, Congress’s regulation

of foreign conduct meeting this “effects” test is “not

an extraterritorial assertion of jurisdiction.” Laker Azr-

ways Lid. v. Sabena, Belgian World Airlines, 731 F.2d

909, 923 (D.C. Cir. 1984). Thus, when a statute is ap-

plied to conduct meeting the effects test, the presump-

tion against extraterritoriality does not apply. See

Envtl. Def. Fund, Inc. v. Massey, 986 F.2d 528, 531

(D.C. Cir. 1993) (noting that “the presumption [against

extraterritoriality] 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 inapplicable

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 ex-

plained 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, 125 S. Ct. 1766, 161

L. Ed. 2d 619 (2005). That said, BATCo’s point has

nothing to do with the case at hand. Here the district

court found that BATCo’s conduct “had substantial di-

rect effects on the United States.” Philip Morris, 449

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

might commit some other offense without effects in the

United States hardly renders BATCo immune from lia-

bility for the domestic effects it did cause. Someone who

fires a rifle from Canada into the United States and

wounds his victim can plainly be convicted of attempted

murder. See Laker Airways, 731 F.2d at 922 (“[WJhen

o6a

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

attempt had any effect whatsoever. Similarly, the fact

that effects are not elements of mail and wire fraud of-

fenses or associated RICO violations provides no immu-

nity to those, like BATCo, whose fraud and racketeering

has substantial and direct domestic effects.

Thus, we need decide only whether the district court

erred in applying the effects test—which asks whether

conduct has a substantial, direct, and foreseeable effect

within the United States, see Consol. Gold Fields PLC

v. Minorco, S.A., 871 F.2d 252, 261-62 (2d Cir. 1989) (de-

scribing substantial effect as direct and foreseeable)—

to the facts of this case. We see no error. The district

court found that as part of the overall scheme to de-

fraud, 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 in-

ternational organizations, which Defendants themselves

saw as instrumental to their efforts to perpetuate what

the 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 attacks

affecting the industry in smaller countries comes back

powerfully to the USA,” id. at 140 (quotation marks

omitted), and praised INFOTAB, an international orga-

nization of which BATCo was a founding member, 2d. at

132, for “help[ing] the industry to unite in trying to com-

bat the attacks,” id. at 140 (quotation marks omitted).

57a

Notwithstanding BATCo’s demands for a nearly unat-

tainable 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 substan-

tial, direct, and foreseeable effects in the United States.

Cf. Laker Airways, 731 F.2d at 925- 26 (finding allega-

tions that the anticompetitive elimination of a foreign

airline increased domestic air fares adequate to support

antitrust action without demanding further specificity).

V. Challenges to Likelihood of Future Violations

Having found Defendants’ challenges to liability un-

availing, we move on to the district court’s determina-

tion that they are likely to commit future RICO viola-

tions if not enjoined. All Defendants challenge this find-

ing on a number of common bases, and four Defendants

—Altria, BWH, CTR, and TI—also bring separate chal-

lenges to the court’s findings regarding them. We ad-

dress 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.

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

edies under RICO it must find the defendant exhibits a

reasonable likelihood of committing future violations of

the Act. Disgorgement Opinion, 396 F.3d at 1198.

Here, the district court found a reasonable likelihood

that Defendants would commit future RICO violations.

Philip Morris, 449 F. Supp. 2d at 908-15. Defendants

attack this finding, asserting: (1) the district court ap-

58a

plied an erroneous legal standard, (2) the Master Settle-

ment Agreement (“MSA”) makes future violations un-

likely, and (3) Defendants’ business practices and public

positions alone preclude future violations. We conclude

the district court applied the correct legal standard and

its factual conclusions were not clearly erroneous.

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

states brought suit against the major tobacco companies

for the reimbursement of state costs associated with

smoking. Five Defendants, Philip Morris, Reynolds,

Brown & Williamson, Lorillard, and Liggett entered in-

to a settlement agreement, the MSA, with forty-six

states and the District of Columbia. The MSA prohib-

ited, inter alia, youth marketing, any material misrepre-

sentations regarding the health consequences of tobacco

use, agreements between manufacturers to limit either

competition or the distribution of information about the

health effects associated with smoking, and other spe-

cific marketing techniques (e.g., cartoon characters and

billboards). The MSA specifically required the dissolu-

tion of CTR, TI, and CIAR. The National Association of

Attorneys General and the individual] states’ attorneys

general enforce the MSA, which requires informal dis-

pute resolution before any enforcement action commenc-

es whenever possible.

To obtain equitable remedies, the government must

demonstrate a “reasonable likelihood of further viola-

tion[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 de-

fendant’s violation was isolated or part of a pattern,

whether the violation was flagrant and deliberate or

59a

merely technical in nature, and whether the defendant’s

business will present opportunities to violate the law in

the future.” SEC v. 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 appropri-

ate. Philtp Morris, 449 F. Supp. 2d at 909; Defs. Br.

39-40; Gov. Br. 182.

Defendants quibble with two aspects of the district

court’s application. First, Defendants assert the district

court could not rely on “inferences drawn from past con-

duct alone” because the MSA “already proscribes future

violations” and “imposes a legal barrier to the repetition

of such conduct in the future.” Defs. Br. 40. This is an

odd argument, suggesting a tort settlement automati-

cally limits the remedial options in a RICO suit. Nota-

bly, the first two factors of the First City test focus en-

tirely on inferences arising from past conduct. 890 F.2d

at 1228. And, as the district court correctly found, “(t]he

likelihood 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. Gruenberg, 989 F.2d 977, 978 (8th

Cir. 1993); First Coty, 890 F.2d at 1228-29. Defendants

attempt to bolster their position by claiming the MSA

precludes the need for injunctions by fully addressing

their prior misconduct. As discussed infra, future viola-

tions remain likely notwithstanding the MSA. There-

fore, Defendants’ argument fails.

60a

Also, Defendants deftly mischaracterize the district

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

ion’s section discussing the MSA’s failure to alter Defen-

dants’ 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 future . . . under the

‘absolutely clear’ test.” Defs. Br. 42. Contrary to Defen-

dants’ fears, the district court obviously did not intend

to announce a new standard or alter the reigning stan-

dard via footnote. The First City standard was carefully

articulated at the start of the discussion addressing fu-

ture violations and conscientiously applied. Philip Mor-

ris, 449 F. Supp. 2d at 908-09, 911-13. The footnote, re-

garding voluntary termination of illegal conduct, ap-

pears much later in the opinion where the court sought

to emphasize the suspension of disbelief necessary to

agree with Defendants, noting the court must assume

“Defendants 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 con-

clude “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 Defen-

dants continued to commit violations even after 1999,

well after the execution of the MSA. /d. at 910-11.

Since the district court applied the standard enunci-

ated in Savoy and First City and gave appropriate

weight to the inferences drawn from Defendants’ past

conduct, we uphold the district court’s decision to order

remedies.

6la

The district court concluded the MSA “alone [could

not] remove the reasonable likelihood of Defendants’

future RICO violations.” Jd. Defendants contend

the MSA effectively prevents prospective RICO viola-

tions because it prohibits them from participating 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 [rjemedies.” /d.

The court’s factual findings are not clearly erroneous.

Defendants assert the MSA prevents their participa-

tion in a RICO enterprise because the organizations 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 example, though the MSA required De-

fendants to dissolve CIAR, only two days after signing

the MSA Lorillard’s general counsel wrote Philip Mor-

ris, Reynolds, and Brown & Williamson asking to “dis-

cuss 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 CIAR that will be members of the new organization

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

75,412, at 2. Subsequently, in 2000, Philip Morris initi-

ated a new research program that had the same offices,

phone numbers, and board as CIAR and many of the

same employees, management, researchers, peer re-

62a

viewers, and grantees. Philip Morris, 449 F. Supp. 2d

at 798-99.

CIAR is not the lone example of Defendants’ organi-

zations poised to circumvent the MSA’s prohibitions

against joint activities or participation in an enterprise.

The district court found, with the exception of CTR and

TI, “all of the other organizations either still exist or can

be readily re-activated.” Jd. at 871. For example, even

at the time of tria] Defendants continued to participate

in the Center for Cooperation in Scientific Research

Relative to Tobacco (““CORESTA”), “a nonprofit making

association with objectives to enhance the scientific co-

operation 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, however, demon-

strates the tobacco companies retain both the ability and

the desire to continue joint activities. Accordingly, the

district court did not commit clear error when it deter-

mined the MSA could not effectively prevent Defen-

dants’ participation in an enterprise.

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

tions and related prohibitions” prevent “repetition of the

core wrongdoing.” Defs. Br. 48. The district court de-

termined the MSA does not prevent Defendants’ com-

mission of future racketeering acts because: (1) Defen-

dants have not fully complied with the MSA, (2)

the States could not be relied upon “to vigorously en-

force the MSA,” see Br. For Amici Curiae States 7-11,

(3) some provisions of the MSA have and will expire, and

63a

(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 Defendants

still fraudulently denied the dangers of secondhand

smoke, marketed “low tar” cigarettes as a healthier al-

ternative to quitting, and falsely denied manipulating

nicotine delivery and marketing to youth. /d. 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 ap-

proach a RICO violation.” Defs. Br. 50. Obviously. But

as the district court rightly recognized, Defendants can-

not 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 district court did not commit clear error

when it determined the MSA does not adequately pre-

vent or restrain Defendants’ future racketeering activi-

ties and did not abuse its discretion by ordering equita-

ble relief.

Defendants claim they have “admitted for years”

that “smoking causes lung cancer” and other serious dis-

eases, “smoking is addictive,” and “low tar cigarettes

may not be safer.” Defs. Br. 53-54, 56. They insist their

positions on these issues “preclude future RICO viola-

tions.” Jd. at 53. The district court acknowledged De-

fendants’ varying degrees of lip service to these facts,

but disagreed that these admissions translated into a

guarantee against later violations.

According to the district court, “Defendants’ essen-

tial position on the relationship of smoking and health

remains virtually unchanged” from the fraudulent posi-

64a

tions it first took in the 1950s. Philip Morris, 449

F. Supp. 2d at 204; see also id. at 204-08 (citing corpo-

rate statements and statements from Defendants’ execu-

tives). The district court condemned Defendants for

failing to embrace the Surgeon General’s definition of

addiction, to admit nicotine specifically creates and sus-

tains 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 na-

ture.” Id. at 286; see also id. at 284-88. Finally, exam-

ples in the record of Defendants’ marketing campaigns

and internal 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 district court,

under the highly deferential clearly erroneous standard

the district court’s factual findings have sufficient evi-

dentiary support; its decision to order equitable relief

was not an abuse of discretion.

B. Altria

Altria urges, based on its status as a holding com-

pany, 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 “ef-

fectively and actively controls the activities of all of its

subsidiaries, including Defendant Philip Morris.” Philip

Morris, 449 F. Supp. 2d at 203-04 n.12. The record es-

tablishes that Altria management oversees subsidiary

policies and operations, id. at 907-08, and Altria does

not dispute its control over Philip Morris. Moreover,

Altria itself “participated directly” in the RICO enter-

65a

prise and conspiracy. /d. at 907. With direct culpability

and this level of plenary power over its subsidiaries,

Altria clearly remains capable of future RICO violations.

Therefore, we uphold the district court’s issuance of

remedies against Altria.

C. BWH

BWH makes an argument similar to that of Altria.

In 2004, Brown & Williamson merged all domestic to-

bacco operations with Reynolds and was reconstituted

into Brown & Williamson Holdings (“BWH”). The dis-

trict 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 com-

pany,” 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 operations, it remains capable

of repeating its misconduct.

BWH could not have participated in this RICO enter-

prise as it did not then exist. Nonetheless, if it exercises

plenary control over the tobacco operations of its subsid-

iaries, then, like Altria, it could commit later violations.

Because the district court failed to make any findings

about the extent of BWH’s control over tobacco opera-

66a

tions, we cannot know the company’s current capabili-

ties. Therefore, we cannot determine whether a reason-

able likelihood exists that BWH will commit future

RICO violations. Accordingly, 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 findings

relating to the likelihood they will commit future viola-

tions render the case against them moot. We agree.

The MSA demanded the dissolution of both organiza-

tions. At the time of trial, CTR and TI only existed to

wind up their respective affairs. The district court

found “no reasonable likelihood of future violations” on

the part of TI or CTR and consequently ordered no rem-

edies 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 actual ability to continue alleged past

RICO violations.” Id. at 916 (quotation marks omitted).

“Federal courts lack jurisdiction to decide moot cas-

es because their constitutional authority extends only to

actual cases or controversies.” Larsen v. U.S. Navy, 525

F.3d 1, 4 (D.C. Cir. Z008) (quotation marks omitted). A

case is moot when “the challenged conduct ceases such

that there is no reasonable expectation that the wrong

will be repeated” in circumstances 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, 120 S. Ct. 1882, 146 L. Ed. 2d

265 (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 future

67a

RICO violations. Accordingly, we vacate the judgment

as to CTR and TI and remand with directions to dismiss.

VI. Challenges to Remedies

Finally, as to those Defendants the district court

properly found likely to commit future RICO violations,

we address their challenges to particular remedies the

district court imposed. We also address the cross-

appeal seeking additional remedies the district court

denied.

A. Subsidiaries

First, Defendants object to the inclusion of their sub-

sidiaries among the persons bound by the remedial or-

der. Rule 65 of the Federal Rules of Civil Procedure in-

dicates that an injunction binds only the parties; their

“officers, agents, servants, employees, and attorneys”;

and “other persons who are in active concert or partici-

pation with” the aforementioned persons. FED. R. CIv.

P. 65(d)(2). The rule derives from the: common law doc-

trine that an injunction “not only binds the parties de-

fendant but also those identified with them in interest,

in ‘privity with them, represented by them or subject to

their control”—any person or entity through whom the

defendants might carry out enjoined activity and so nul-

lify the order. Regal Knitwear Co. v. NLRB, 324 U.S. 9,

14, 65 S. Ct. 478, 89 L. Ed. 661 (1945). A subsidiary cor-

poration is in privity with its parent “in respect to the

common corporate business” to the extent it is “so iden-

tified 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.

Scw. v. Subversive Activities Control Bd., 331 F.2d 76, 83

(D.C. Cir. 1963).

68a

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 “hat they

are agents of or in privity with Defendants in the com-

mon corporate business of manufacturing, designing,

marketing, or selling cigarettes. (Like any person with

actual notice of the injunction, subsidiaries that act in

concert with Defendants 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 sub-

sidiaries, if any, Defendants exercise sufficient control

or with which they so identify in interest regarding ciga-

rettes that they would legitimately fall within the pur-

view of the injunction order. We therefore vacate the

order to the extent that it binds all Defendants’ subsid-

iaries and remand to the district court for proceedings

to determine whether inclusion of Defendants’ subsid-

iaries, and which subsidiaries, satisfies Rule 65(d).

B. General Injunctions

The district court permanently enjoined Defendants

“from committing any act of racketeering, as defined in

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

turing, marketing, promotion, health consequences or

sale of cigarettes in the United States,” and from

making, or causing to be made in any way, any mate-

rial false, misleading, or deceptive statement or rep-

resentation, or engaging in any public relations or

marketing endeavor that is disseminated to the Uni-

ted States public and that misrepresents or sup-

presses information concerning cigarettes. Such ma-

terial statements include, but are not limited to, any

69a

matter that: (a) involves health, safety, or other ar-

eas with which a reasonable consumer or potential

consumer of cigarettes would be concerned; (b) a

reasonable consumer or potential consumer would

attach importance to in determining whether to pur-

chase or smoke cigarettes; or (c) the Defendant, Cov-

ered Person or Entity making the representation

knows or has reason to know that its recipient re-

gards or is likely to regard as important in determin-

ing whether to purchase cigarettes or to smoke ciga-

rettes, even if a reasonabie person would not so re-

gard it.

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

sert 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 pro-

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

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

tion to “state its terms specifically [and] describe in rea-

sonable detail—and not by referring to the complaint or

other document—the act or acts restrained or required.”

FED. R. CIv. P. 65(d)(1)(B)-(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. 478, 476, 94S. Ct. 713, 38 L. Ed. 2d 661 (1974).

Because an injunction “prohibits conduct under threat

of judicial punishment, basic fairness requires 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 viola-

tions of a statute in the abstract without any further

specification, or when they include, as a necessary

descriptor of the forbidden conduct, an undefined term

70a

that the circumstances 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 clari-

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

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

tially similar” conduct without further specification 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” with-

out further specification in a case that provided no ex- ©

amples of what is “similar”); SEC v. Savoy Indus., Inc.,

665 F.2d 1310, 1318-19 (D.C. Cir. 1981) (defendant en-

joined not “to engage in any act, practice or course of

business which operates or would operate as a fraud or

deceit upon any person”); see also Schmidt, 414 U.S. at

476, 94 S. Ct. 713 (enjoined “the present Wisconsin

scheme”). Even if it tracks statutory language, a gen-

eral injunction is not too vague if it relates the enjoined

violations to the context of the case. See Savoy Indus.,

Inc., 665 F.2d at 1316-17 (tracking language of the stat-

ute in context of defendant’s relationship with issuers of

securities). Indeed, we must always apply the fair notice

requirement “in the light of the circumstances surround-

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

moving party, the evidence produced at the hearing on

the injunction, and the mischief that the injunction 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 Defendants 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 mat-

ters about which Defendants are to avoid making false

Tla

statements or committing racketeering acts: the manu-

facturing, marketing, promotion, health consequences,

and sale of cigarettes, along with related issues that De-

fendants have reason to know are of concern to cigarette

consumers. This is not a generalized injunction to obey

the law, especially when read in the context of the dis-

trict 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 violations where[, as

here,] a proclivity for unlawful conduct has been shown.”

Savoy Indus. Inc., 665 F.2d at 1317 (quoting McComb v.

Jacksonville Paper Co., 336 U.S. 187, 192, 69 S. Ct. 497,

93 L. Ed. 599 (1949) (holding that the “record of continu-

ing and persistent violations of the [statute] would indi-

cate that that kind of a [general] decree was wholly war-

ranted in this case”)). Defendants complain that the vol-

ume of findings in this case actually make understanding

the injunctions more difficult 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

disapproval” of aspects of Defendants’ business prac-

tices without finding the conduct fraudulent. Defs. Br.

137. This objection answers itself, as the plain terms of

the injunctions prohibit only conduct that would consti-

tute a racketeering act or a “material false, misleading,

or deceptive statement or representation,” not all activi-

ties 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 des-

criptor for any cigarette brand.” Philip Morris, 449

72a

F. Supp. 2d at 938. The government concedes that this

prohibition “should not be read to govern overseas activ-

ities with no domestic effect.” Gov. Br. 215-16. But be-

cause paragraph four contains no such limiting lan-

guage, 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 or-

dered Defendants to disseminate “corrective state-

ments” concerning the topics about which they had pre-

viously misled consumers. The court will determine the

precise content of the statements at a future date after

receiving proposals from the parties, but ordered that

they must address five topics: (1) the adverse health

effects of smoking; (2) the addictiveness 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 en-

sure 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 cig-

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

newspapers, television, and their company websites. /d.

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

ments as a whole on the grounds that they did not re-

ceive adequate notice of and opportunity to respond to

the government’s proposed remedy and that the remedy

extends beyond the court’s jurisdiction under RICO.

73a

Regarding the specific means of disseminating the state-

ments, 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 requiring Defendants to make corrective state-

ments in various media apart from existing advertising

violates the First Amendment.

Notice

Defendants argue that because the government did

not disclose its final corrective statements proposal until

its post-trial proposed remedial order, the district court

denied Defendants due process by ordering a version of

that remedy without providing Defendants adequate

notice and an opportunity to respond. Although Defen-

dants 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 consideration only with regard to corrective state-

ments. Defs. Br. 135. The exact content of the state-

ments 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 pro-

cess they were due. Defendants received the govern-

ment’s proposed remedies, including a general correc-

tive statements proposal, two months before the reme-

dies phase of the trial began. They participated in a

fourteen-day, fully briefed remedies trial, at which thir-

teen witnesses testified and were subject to cross- exam-

ination, including at least one government witness who

testified about corrective statements. Philip Morris,

449 F’. Supp. 2d at 923. In its post-trial proposed reme-

dial order, the government specified the five categories

74a

of corrective statements (which correspond to the sub-

jects about which the district court found Defendants

committed fraud) and the details of its recommended

publication campaign. Defendants responded to the gov-

ernment’s proposed order in their own post-tria! brief

and raised numerous legal objections to the propriety of

the corrective statements remedy, which the district

court considered and resolved in its final opinion and

order. See id. at 921-23. Defendants have not demon-

strated 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 “specifies” of the gov-

ernment’s proposed remedy before the hearing, they

would have retained, and might have offered testimony

from, one or more experts addressing the proposal. See

Defs. Offer of Proof at 9-10. Even on appeal, Defen-

dants suggest no testimony they would have offered, no

lines of cross-examination inquiry they would have pur-

sued, 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 at-

tempt to suggest. In Microsoft, the district court or-

dered the break-up and restructuring of Microsoft into

two companies without holding any evidentiary hearing

to resolve the numerous disputed fact questions sur-

rounding the remedy. /d. at 101-02. Microsoft submit-

ted two offers of proof identifying serious unresolved is-

sues of fact and included 53 pages of submissions speci-

fying the evidence it would introduce to challenge the

government’s representations. Jd. at 103. Microsoft

gives us no reason to believe Defendants in this case—

who enjoyed pre-trial notice and a lengthy remedies

trial, and have shown no prejudice—suffered a denial of

due process.

75a

Section 1964

A district court that finds a defendant civilly liable

for violating RICO has jurisdiction “to prevent and re-

strain violations of [RICO] by issuing appropriate or-

ders. ...” 180U.S.C. § 1964(a). Congress limited re-

lief under section 1964(a) to forward-looking remedies

aimed at preventing and restraining future RICO viola-

tions. Disgorgement Opinion, 396 F.3d at 1198, 1200.

Earlier in this litigation, we held that the statute does

not authorize disgorgement 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 correc-

tive 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 statements

are a forward-looking remedy authorized under section

1964(a) because future advertising that “may not contain

any statements which are themselves false or deceptive”

nevertheless inevitably builds upon Defendants’ previ-

ous false statements and, if uncorrected, “continues the

deception, albeit implicitly rather than explicitly,” ren-

dering those advertisements “part of the continuing de-

ception 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 manufac-

turer’s false advertising even when that advertis-

ing ceases, Novartis Corp., 223 F.3d at 787 (quoting

Warner-Lambert Co., 562 F.2d at 762), but it is less

76a

clear whether, and in what circumstances, continuing

consumer confusion created by uncorrected but truthful

advertising would amount to a knowing fraud. Section

1964(a) authorizes only remedies that prevent and re-

strain future RICO violations, not all future effects of

past RICO violations, Disgorgement Opinion, 396 F.3d

at 1198, or all future unseemly business practices.

We need not consider this question, however, be-

cause as the district court observed and the intervenors

here argue, requiring Defendants to issue corrective

statements will “prevent and restrain them from making

fraudulent public statements on smoking 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 addictiveness of nicotine—as the

district court found they continue to do, id. at 925-26—if

they must at the same time communicate the opposite,

truthful message about these matters to consumers. Re-

quiring Defendants 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 or-

dered Defendants to “affix to cigarette packaging, either

on the outside of or within the outer cellophane wrap-

ping around the package .. . in the same manner as

certain Defendants, such as Philip Morris and Brown &

Williamson, have utilized package onserts in the past.”

Philip Morris, 449 F. Supp. 2d at 939. Defendants ob-

ject that the onserts violate the Federal Cigarette La-

77a

beling and Advertising Act (“Labeling Act”), which pro-

vides that “[nJjo statement relating to smoking and

health, other than the statement required by section

1333 of this title, shall be required on any cigarette pac-

kage.” 15 U.S.C. § 1334(a).

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

box, carvon, or container of any kind in which cigarettes

are offered for sale, sold, or otherwise distributed to

consumers.” Jd. § 1332(4). A package onsert is “[a]

communication affixed to but separate from an individ-

ual cigarette pack and/or carton purchased at retail by

consumers, such as a miniature brochure included be-

neath the outer cellophane wrapping or glued to the out-

side of the cigarette packaging.” Philip Morris, 449

F. Supp. 2d at 948; see Schwab v. Philip Morris USA,

Inc., 449 F. Supp. 2d 992, 1084-85 (E.D. N.Y. 2006) (de-

fining onserts as “pamphlets attached to the outside of

cartons or packs of cigarettes”), 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

k’. 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 La-

beling Act. See Philip Morris, 449 F. Supp. 2d at 928

n.89. Congress could have used more expansive lan-

guage to reach statements in onserts had it chosen to

do so, but it chose only to preempt the requiring of alter-

native statements about smoking and health “on any

cigarette package.” Moreover, the district court and the

78a

parties appear to have recognized the distinction be-

tween packages and onserts throughout the trial. See

id . at 206 (“Philip Morris has never told its custo-

mers on its cigarette packaging or in onserts that it

agrees that smoking causes cancer and other diseases in

smokers.”), 288 (“Philip Morris replaced the pre- exist-

ing package labels with onserts.”), 424 (“[Brown & Wil-

liamson] began a new test market .. . using its rede-

signed packaging and onsert. . . . Star Scientific .. .

added an informational ‘onsert’ attached to the pac-

kage.”); Trial Tr., Jan. 10, 2005 (Philip Morris senior

vice president distinguishing between cigarette pack

and onsert). We therefore conclude that the onsert rem-

edy does not violate the Labeling Act.

Point-of-sale displays

The district court ordered each Defendant with a

retail merchandising program—whereby retailers agree

to use the manufacturer’s in-store advertising—to de-

sign countertop and header displays containing the cor-

rective statements and “require retailers who partici-

pate in such program” to display them for two years.

Philip Morris, 449 F. Supp. 2d at 939-40. The free-

standing 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.”

Id. 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 ciga-

rette display case. Jd. at 939-40, 947. Under the injunc-

tive order, each Defendant must “suspend from its Re-

tail Merchandising Program for a period of one year any

79a

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

940.

Retailers affected by this order—none of whom were

involved in the litigation in any way—did not receive no-

tice 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 consid-

ered the impact of this program on affected retailers. In

their appellate brief as amicus curiae and in affidavits

filed with Defendants’ motion for a stay of final judg-

ment pending appeal, the National Association of Conve-

nience Stores represents that this injunction will cost re-

tailers substantial revenue. The convenience stores in-

dicate 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 mil-

lion in sales per year. Yet if the retailers choose not to

carry the countertop displays, Defendants must suspend

them from their retail merchandising program for one

year, which one retailer asserted would cost ten to fif-

teen percent of his convenience stores’ annua! profits.

See Hartman Aff. at 2.

Section 1964(a) explicitly cautions that in crafting 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 district court proceedings. Even though not explic-

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

tempt, third parties may be so adversely affected by an

80a

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

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

20038).

We therefore vacate the order regarding point-of-

sale displays and remand for the district court to evalu-

ate 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 reflecting 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 va-

lidity due to the fact that it “does not affect the contrac-

tual rights of third parties”). In addition, we agree with

Defendants that the injunction appears to order each

Defendant 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 intended to re-

quire 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 in-

junction is still appropriate after considering the rights

of third parties and existing contracts, to clarify that its

order does not require 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 advertise-

ments on a major television network over the course of

one year. Philip Morris, 449 F. Supp. 2d at 939-41. The

8la

court chose these media in order to “structure a remedy

which uses the same vehicles which Defendants have

themselves historically used to promulgate false smok-

ing and health messages.” /d. at 928. The court con-

cluded compelled corrective advertising is permissible

under the commercial speech doctrine. Jd. at 926-28.

The First Amendment protects against government

infringement on “the right to speak freely and the right

to refrain from speaking at all.” Wooley v. Maynard,

430 U.S. 705, 714, 97S. Ct. 1428, 51 L. Ed. 2d 752 (1977).

This holds true whether applied to individuals, see

W. Va. State Bd. of Educ. v. Barnette, 319 U.S. 624, 642,

63 S. Ct. 1178, 87 L. Ed. 1628 (1943), or to companies,

see Pac. Gas & Elec. Co. v. Pub. Utils. Com., 475 U.S. 1,

16, 106 S. Ct. 903, 89 L. Ed. 2d 1 (1986) (“For corpora-

tions as for individuals, the choice to speak includes

within it the choice of what not to say.”). In limited cir-

cumstances, however, courts have upheld the govern-

ment’s ability to dictate the content of mandatory

speech. This largely occurs in the commercial context.

Under the commercial speech doctrine, the govern-

ment’s “power to regulate commercial transactions justi-

fies its concomitant power to regulate commercial

speech that is ‘linked inextricably’ to those transac-

tions.” 44 Liquormart v. Rhode Island, 517 U.S. 484,

499, 116 S. Ct. 1495, 134 L. Ed. 2d 711 (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. Citi-

zens Consumer Council, Inc., 425 U.S. 748, 762, 96 S. Ct.

1817, 48 L. Ed. 2d 346 (1976). Because commercial

speech receives a lower level of protection under the

82a

First Amendment, burdens imposed 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, 105 S. Ct. 2265, 85 L. Ed. 2d 652 (1985); Cent.

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

447 U.S. 557, 562-64, 100 S. Ct. 2343, 65 L. Ed. 2d 341

(1980). Although the standard for assessing burdens

on commercial speech has varied, Bd. of Trs. v. Foz,

492 U.S. 469, 476-78, 109 S. Ct. 3028, 106 L. Ed. 2d

388 (1989) (describing the diverse levels of scrutiny ap-

plied in various cases, including Central Hudson, 447

U.S. at 566, 100 S. Ct. 2343, In re R.M. J., 455 U.S. 191,

203, 102 S. Ct. 929, 71 L. Ed. 2d 64 (1982), and Zaw-

derer, 471 U.S. at 644, 105 S. Ct. 2265), the Supreme

Court’s bottom line is clear: the government must affir-

matively demonstrate its means are “narrowly tailored”

to achieve a substantial government goal, id. at 480, 109

S. Ct. 3028.

Defendants object that the “freestanding” corrective

statements violate the First Amendment because they

are not connected to existing advertising and, therefore,

cannot be considered commercial speech. That being

the case, Defendants contend the less rigorous commer-

cial speech standard does not apply. Alternatively, De-

fendants argue that, even if these statements are com-

mercial speech, the corrective statements do not directly

and materially advance a substantial government inter-

est. See Cent. Hudson, 447 U.S. at 566, 100 S. Ct. 2343.

Defendants’ arguments misunderstand the commercial

speech doctrine and misstate the commercial! speech

standard.

Defendants’ first argument, that the stand-alone cor-

rective statements do not fall within the commercial

83a

speech doctrine because they are not attached to adver-

tisements, is a red herring. The context of the correc-

tive 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.

Nat'l Fed’n of Blind, 487 U.S. 781, 796, 108 S. Ct. 2667,

101 L. Ed. 2d 669 (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 commercial

speech. Philip Morris, 449 F. Supp. 2d at 926-28 (justi-

fying ordering the freestanding corrective statements

under the commercial speech doctrine).

Commercial speech is defined as “expression related

solely to the economic interests of the speaker and its

audience” or “speech proposing a commercial transac-

tion.” Cent. Hudson, 447 U.S. at 561-62, 100 S. Ct. 2343.

In addition to information related to proposing a partic-

ular transaction, such as price, it can include material

representations about the efficacy, safety, and quality of

the advertiser’s product, and other information 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, 105 S. Ct. 2265 (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, 103 S. Ct. 2875, 77 L. Ed. 2d 469

(1983) (informational brochures discussing “important

public issues such as venereal disease and family plan-

ning” distributed by contraceptives manufacturer were

commercial); Brown & Williamson Tobacco Corp., 778

F.2d at 38, 43 (claims that cigarettes contained one milli-

S4a

gram of tar and were “99% tar free” were commercial);

Natl 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). Defen-

dants’ various claims—denying the adverse effects of

cigarettes and nicotine in relation to health and addic-

tion—constitute commercial speech. Defendants dis-

seminate their fraudulent representations about the

safety of their products, both in formats that do and

those that do not explicitly propose a particular commer-

cial transaction, in attempts to persuade the public to

purchase cigarettes.

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 ciga-

rettes to an issue of public debate, does not change the

commercial nature of the speech. Bolger, 463 U.S. at 66

n.13, 67-68, 103 S. Ct. 2875; Nat’l Comm’n on Egg Nu-

trition, 570 F.2d at 163. Moreover, the reality that

these corrective statements may tangentially burden

noncommercial speech does not render the statements

unconstitutional. A burden on commercial speech, whe-

ther it be suppression or mandatory disclosure, only

triggers a higher level of scrutiny if the commercial

speech is “inextricably intertwined” with fully protec-

ted speech. Riley, 487 U.S. at 796, 108 S. Ct. 2667

(“[{S]peech [does not] retain[ ] its commercial character

when it is inextricably intertwined with otherwise fully

protected speech.”). Here, Defendants’ past participa-

tion in the public controversy surrounding smoking and

health may have been inextricably intertwined with

their marketing efforts, but the intentionally fraudulent

85a

character of the noncommercial public statements un-

dermines any claim for more exacting scrutiny. See

McIntyre, 514 U.S. at 357, 115 S. Ct. 1511. Moreover,

because the injunctive order cannot retroactively bur-

den Defendants’ past communications, to determine the

constitutionality of the corrective 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 periph-

eral impact on protected speech does not affect the char-

acter of the burdened speech, but rather bears on whe-

ther the remedy is sufficiently narrowly tailored to

achieve a substantial government interest—in this case,

preventing Defendants from committing 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 making false and fraudulent state-

ments to consumers about their products. Philip Mor-

ris, 449 F. Supp. 2d at 26-27. The court also found De-

fendants reasonably likely to commit similar violations

in the future, id. at 908-15, and concluded the corrective

statements were necessary to counteract these antici-

pated violations, see id. 2t 927 (“The injunctive relief

sought here is narrowly tailored to prevent Defendants

from continuing to disseminate fraudulent public state-

ments and marketing messages by requiring them to

issue truthful communications.”). Thus, contrary to De-

fendants’ argument, the publication of corrective state-

ments addressing Defendants’ false assertions is ade-

quately tailored to preventing Defendants from deceiv-

ing consumers.

86a

The district court has not yet determined the content

of the corrective statements. Jd. at 928. As the validity

of its order relies on the commercial nat ire of the

speech it burdens, the court must ensure the corrective

disclosures are carefully phrased so they do not imper-

missibly chill protected speech. Zauderer, 471 U.S. at

651, 105 S. Ct. 2265. Consequently, the court must con-

fine the statements to “purely factual and uncontrover-

sial information,” id., geared towards thwarting pro-

spective efforts by Defendants to either directly mislead

consumers or capitalize on their prior deceptions by con-

tinuing to advertise in a manner that builds on consum-

ers’ existing misperceptions. Warner-Lambert Co., 562

F.2d at 769 (concluding, due to Listerine’s fifty year

history of false advertisements, “advertising which fails

to rebut the prior claims . . . [would] inevitably build[]

upon those claims; continued advertising continues the

deception, albeit implicitly rather than explicitly”). As-

suming the corrective advertising once drafted meets

these requirements, it is a permissible restraint on De-

fendants’ commercial speech.

E. Intervention

Tobacco-Free Kids Action Fund and five other public

health organizations intervened in both the trial and ap-

peal in order to advocate additional remedies against

Defendants. Defendants assert that the intervenors are

not properly before the court because they do not have

standing and do not have the ability to pursue remedies

for RICO violations under the statute. Not surprisingly,

the intervenors disagree. Before we address the merits

of the intervenors’ cross-appeal we must resolve the pro-

priety of their intervention.

87a

Section 1964(b) authorizes the Attorney General to

“institute proceedings under” section 1964(a) for equita-

ble remedies. 18 U.S.C. § 1964(b). Private parties, on

the other hand, may seek relief under section 1964(c),

which allows suits for damages. The statutory scheme

does not directly provide private parties with a cause of

action for equitable remedies. Jd. § 1964(c). According

to Defendants, the inability to bring an action under sec-

tion 1964(a) precludes private intervention in a RICO

suit instituted by the government under subsection (a)

and permitting private intervenors would contravene

congressional intent. Jd. § 1964(a), (c).

Defendants are wrong. Under Federal Rule of Civil

Procedure 24(a)(2), “the question is not whether the ap-

plicable law assigns the prospective intervenor a cause

of action[, but] [rJather . . . whether the individual

may intervene in an already pending cause of action.”

Jones v. Prince George's County, 348 F.3d 1014, 1018

(D.C. Cir. 2003). Therefore, intervention of right only

requires “an ‘interest’ in the litigation—not a ‘cause of

action’ or ‘permission to sue.’” /d. (citing FED. R. CIv.

P. 24(a)(2)). Section 1964(b) reserves for the govern-

ment the ability to “institute” a cause of action for equi-

table remedies, but does not bar a private person with a

sufficient interest under Rule 24(a)(2) from intervening.

Likewise, section 1964(c) designates that private parties

may bring a cause of action to pursue damages for RICO

violations, but does not prevent them from intervening

in a governmental action seeking to “prevent and re-

strain” future violations. Even where Congress has ex-

plicitly excluded private persons from 1 particular statu-

tory cause of action they may, if not demonstrably con-

trary to congressional intent, still intervene if (1) they

satisfy standing and Rule 24(a) requirements and (2)

88a

their intervention is “limited to the claims of illegality

presented by the [government].” Trbovich v. United

Mine Workers of Am., 404 U.S. 528, 537, 92 S. Ct. 630,

30 L. Ed. 2d 686 (1972) (finding a statute forbidding a

particular party from bringing a cause of action may

only be read to prohibit intervention by that party if in-

tervention would frustrate Congress’s reasons for bar-

ring that party from initiating the litigation in the

first place). Outside the text of the statute, which is at

best silent on this subject, Defendants offer no evidence

Congress intended to prevent private organizations

from intervening in section 1964(a) actions. Moreover,

the intervenors assert no novel “claims of illegality,” but

merely seek to expand the remedies sought by the gov-

ernment.

Two considerations are left: whether the intervenors

satisfy standing and Rule 24(a) requirements. In this

circuit, because an intervenor “participates on equal

footing with the original parties to a suit,” a prospective

intervenor must satisfy Article III standing require-

ments. Bldg. & Constr. Trades Dep't v. Reich, 40 F.3d

1275, 1282 (D.C. Cir. 1994); see also Fund for Animals,

Inc. v. Norton, 322 F.3d 728, 732-33 (D.C. Cir. 2003). In

Lujan v. Defenders of Wildlife, 504 U.S. 555, 112 S. Ct.

2130, 119 L. Ed. 2d 351 (1992), the Supreme Court enun-

ciated a three-part test for standing: (1) injury-in-fact,

(2) causation, and (3) redressability. Jd. at 560-61, 112

S. Ct. 2130; Transp. Workers Union of Am. v. Transp.

Sec. Admin., 492 F.3d 471, 474 (D.C. Cir. 2007). On ap-

peal, Defendants claim the intervenors fail on the first

two prongs: injury and causation. According to Defen-

dants, the intervenors’ alleged injuries are “purely con-

jectural” and no causal connection exists between their

injuries and possible ongoing or future RICO violations.

89a

We conclude the intervenors present sufficient inju-

ries directly caused by Defendants’ RICO violations.

The membership organizations aver, under the umbrella

of associational standing, see UAW v. Brock, 477 U.S.

274, 281-82, 106 S. Ct. 2528, 91 L. Ed. 2d 228 (1986),

their members suffered injury because Defendants ex-

posed their children to predatory and misleading adver-

tisements intended to entice the children to smoke. “[A]

person who received ‘a misrepresentation made unlawful

under [statute] has suffered injury in precisely the form

the statute was intended to guard against.’” Public Cit-

izen v. FTC, 869 F.2d 1541, 1548 (D.C. Cir. 1989) (quot-

ing Havens Realty Corp. v. Coleman, 455 U.S. 363, 373,

102 S. Ct. 1114, 71 L. Ed. 2d 214 (1982)). As we have

discussed at length, through their deceptive marketing,

Defendants committed various racketeering acts in or-

der to defraud consumers, incl

This text is long and has been trimmed here. Open the source document for the complete record.