The First Amendment Does Not Protect Defendants' False and

The First Amendment Does Not Protect Defendants' False and

Misleading Public Statements Defendants argue that all of their public statements denying nicotine manipulation, the

¶addictiveness of cigarettes, and youth marketing are statements of opinion, made in the course of petitioning the government, and, therefore, deserve the full protection of the First Amendment.

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¶Defs.' Corrected Post-Trial Brief at 82, 87.28 Specifically, Defendants rely upon the Noerr- Pennington doctrine to immunize all of their public statements under the First Amendment. Id. Defendants also allege that the Government must prove by "a heightened 'clear and convincing' standard of proof," rather than a "preponderance of the evidence" standard, that all their statements were intentionally fraudulent. Id.

¶The Court finds that only those statements Defendants made directly to legislative bodies merit Noerr-Pennington immunity. However, to be clear, it must be remembered that the vast majority of Defendants' statements were made with the primary purpose of influencing smokers, potential smokers, and the general public and are, therefore, not protected by the Noerr-Pennington doctrine. As to the latter category, the Court finds that the Government has met its burden of proof to show that those statements were fraudulent.

a. Noerr-Pennington Protects Only Those Defendants' Statements Made in the Course of Petitioning the Legislature; It Does Not Immunize Statements Made with the Purpose of Influencing Smokers, Potential Smokers, and the General Public The Noerr-Pennington doctrine was developed as a direct application of the Petition Clause

¶of the First Amendment.29 See Falise v. American Tobacco Co., 94 F. Supp. 2d 316, 350 (E.D.N.Y. 2000) (quoting Kottle v. Northwest Kidney Centers, 146 F.3d 1056, 1059) (9th Cir. 1998)). The doctrine holds that "the Sherman Act does not prohibit . . . persons from associating together in an

¶In particular, Defendants single out the testimony of their CEOs at the Waxman hearings and a May, 1994 letter from Phillip Morris to Rep. Waxman expressing the view that nicotine is not addictive, to show that Defendants were primarily engaged in influencing governmental action. Defs. Corrected Post-Trial Brief at 82, 87.

¶"Congress shall make no law respecting . . . the right of the people peaceably to assemble, and to petition the government for a redress of grievances." U.S. Const. Amend. 1.

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¶attempt to persuade the legislature or the executive to take particular action with respect to a law that would produce a restraint or a monopoly." E. R.R. Presidents Conference v. Noerr Motor Freight,

¶Inc., 365 U.S. 127, 136 (1961); accord United Mine Workers v. Pennington, 381 U.S. 657 (1965).30

¶Clearly, not every public relations campaign qualifies under Noerr-Pennington as "petitioning the government;"31 if that were the case, the Noerr-Pennington doctrine would extend to virtually all activities. Here, the majority of the racketeering acts alleged as part of the addiction and manipulation sub-schemes do not constitute petitioning activity before the Congress, or the executive branch. On the contrary, most of those acts are simply press releases or advertisements aimed at influencing smokers, potential smokers, and the public, and do not constitute "attempt[s] to persuade the legislature or the executive to take particular action," Noerr Motor Freight, 365 U.S. at 136. See e.g., Racketeering Acts Nos. 15, 25, 37, 39, 53, 56, 58, 60, 63, 71, 72, 74, 75, 79, 81, 103, 104, 116,

¶Noerr-Pennington immunity is not absolute. It allows a "sham" exception for "situations in which persons use the governmental process -- as opposed to the outcome of that process -- as a . . . weapon. A classic example is the filing of frivolous objections to the license application of a competitor, with no expectation of achieving denial of the license but simply in order to impose expense and delay." City of Columbia v. Omni Outdoor Advertising, 499 U.S. 365, 380 (1991) (emphasis in original) (internal citations omitted).

¶See Falise, 94 F. Supp. 2d at 351-352, where plaintiffs alleged that defendant tobacco manufacturers had historically invested RICO racketeering funds in a "scorched earth litigation strategy" designed to intimidate them into not suing defendants. Defendants had argued that the Noerr-Pennington doctrine immunized their earlier litigation strategies.

¶The Falise court held that the Noerr-Pennington doctrine did not apply because the challenged conduct had nothing to do with petitioning. "Defendants, having been hailed into court in the earlier litigation, were clearly not exercising their right to petition the government." Instead, Defendants' right to utilize the tools of the adversarial process "invoke[d] issues of procedural due process under the Fifth and Fourteenth Amendments, rather than the First Amendment right to petition the government." Id.

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¶132, and 133. Consequently, these acts do not fall under the protective umbrella of the Noerr- Pennington doctrine.

¶Six Racketeering Acts remain. They are comprised of the CEOs' testimony before the Waxman Subcommittee and the letter from Philip Morris to Rep. Waxman and fall into a different category. Unlike Defendants' many statements that target smokers, potential smokers, and the general public, the remaining six acts constitute direct attempts to persuade government officials. The Court finds that these six acts merit Noerr-Pennington immunity as "petitioning activity" and are therefore not actionable.

b. The Government Has Met the Necessary Standard of Proof to Show that Defendants' Actions Are Fraudulent "[T]he First Amendment does not shield fraud." Moreover, as the Supreme Court has

¶recently ruled, "simply labeling an action one for 'fraud' . . . will not carry the day." Illinois ex rel. Madigan v. Telemarketing Assocs., 538 U.S. 600, 612, 617 (2003).32 Generally, a plaintiff must prove five elements by "clear and convincing evidence" to prevail on a fraud claim. See e.g., Armstrong v Accrediting Council Continuing Educ. & Training, Inc., 961 F. Supp. 305, 309 (D.D.C. 1997). They are: (1) a false representation, (2) in reference to a material fact, (3) made with the knowledge of its falsity, (4) with the intent to deceive, and (5) on which action is taken in reliance upon the representation. Id.

¶The Government claims that a "clear and convincing" standard of proof does not apply here, arguing that "fraudulent representations are judged by the same standard of proof -- preponderance

¶Fraudulent statements are entitled to a lesser level of protection than other speech because "the intentional lie [does not] materially advance society's interest in uninhibited, robust, and wide-open debate on public issues." Gertz v. Robert Welch, Inc., 418 U.S. 323, 340 (1974).

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¶of the evidence – applicable to the United States' civil RICO and RICO conspiracy claims." Defendants, on the other hand, cite a number of Supreme Court opinions, such as Madigan, for the proposition that a clear and convincing standard of proof is required. Defs.' Corrected Post-Trial Brief at 27.

¶Defendants are correct that Madigan provides at least some support for a clear and convincing standard of proof requirement in cases of fraudulent representation involving speech. See 538 U.S. at 619-21. Madigan held that "[a]s restated in Illinois case law, to prove a defendant liable for fraud, the complainant must [show that defendant's actions satisfy the five requirements for fraud and] these showings must be made by clear and convincing evidence." Id. at 620 (emphasis added) (citations omitted). Moreover, "[e]xacting proof requirements of this order . . . have been held to provide sufficient breathing room for protected speech." Id. at 620-21 (citing New York Times Co. v. Sullivan, 376 U.S. 254, 279-80 (1964)); Bose Corp. v. Consumers Union of United States, Inc., 466 U.S. 485, 502 (1984)). This Court has previously noted that because Madigan was applying Illinois state law, which did mandate the use of a clear and convincing standard of proof, that the Supreme Court did not hold that that standard was necessarily mandated in all federal cases involving fraud. See Mem. Op. to Order # 624 at 3.

¶In this case, the evidence of Defendants' fraud is so overwhelming that it easily meets the clear and convincing standard of proof.33 The Findings of Fact lay out in exhaustive detail the

¶As this Court previously stated, "the standard of proof required to show that speech is fraudulent . . . is a thorny issue," where case law is not settled. Mem. Op. To Order #624 at 3 n.1. The Court need not decide this issue here because there is ample proof of Defendants' fraud under any standard that could be applied. The Government's evidence is sufficient to satisfy both a preponderance of the evidence standard and a clear and convincing evidence standard. Accordingly, the Court finds it unnecessary to make a broad statement concerning which standard of proof is myriad ways in which Defendants made public statements, often directly to consumers, which were flatly contradicted by their internal correspondence, knowledge, and understanding. Thus, whichever standard of proof is required to show fraud, the Court finds that the Government has met its burden.

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3. Defendants Engaged in a Pattern of Racketeering Activity in Furtherance of the Scheme to Defraud a. Each Defendant Committed at Least Two Racketeering Acts, the Last One of Which Occurred Within Ten Years from the Commission of the Prior Racketeering Act To establish the commission of a pattern of racketeering activity,¹⁸¹⁸ Defendants assert that the statements of their C.E.O.s before the Waxman Subcommittee in 1994 constitutes petitioning activity protected from any imposition of liability under the Noerr-Pennington doctrine. See, Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) and United Mine Workers v. Pennington, 381 U.S. 657 (1965). This legal issue is addressed fully in the Conclusions of Law. The facts, as recounted herein, speak for themselves. -637-Show full note U.S.C. §§ 1961(5) and

¶1962(c) require that each defendant commit at least two acts of racketeering, "the last of which occurred within ten years . . . after the commission of a prior" racketeering act. H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 237 (1989). Because each Defendant has committed two or more Racketeering Acts within ten years of each other, that standard is clearly met in this case. See generally Findings of Fact.

¶Defendants assert, without citing any authority or offering any analysis, that the United States must prove that each Defendant committed two or more racketeering acts within ten years of each other as to each aspect of the over-arching scheme to defraud. Defs.' Corrected Trial Brief at 114. Defendants are wrong. The requirement of two racketeering acts pertains to the pattern of racketeering activity, which in this case is the overall scheme to defraud itself, and not the hundreds of individual discrete predicate activities that comprise it.¹⁸¹⁸ Defendants assert that the statements of their C.E.O.s before the Waxman Subcommittee in 1994 constitutes petitioning activity protected from any imposition of liability under the Noerr-Pennington doctrine. See, Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) and United Mine Workers v. Pennington, 381 U.S. 657 (1965). This legal issue is addressed fully in the Conclusions of Law. The facts, as recounted herein, speak for themselves. -637-Show full note U.S.C. § 1961(5) establishes that a "pattern of racketeering activity requires at least two acts of racketeering activity, one of which occurred after October 15, 1970 (the date on which the

¶33 required in cases involving alleged intentionally fraudulent statements.

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¶RICO statute was enacted) and the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity." The Supreme Court has concluded that in light of the "very relaxed limits of the pattern concept fixed in § 1961(5) . . . Congress intended to take a flexible approach, and envisaged that a pattern might be demonstrated by reference to a range of different ordering principles or relationships between predicates," H.J., Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239 (1989); see also Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 486-490 (1985). Furthermore, the Court explained that "RICO's legislative history reveals Congress' intent that to prove a pattern of racketeering activity a plaintiff or prosecutor must show that the racketeering predicates are related, and that they amount to or pose a threat of continued criminality." Id.

¶The Supreme Court has explained that "criminal conduct forms a pattern if it embraces criminal acts that have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events. . . . We find no support . . . that predicate acts of racketeering may form a pattern only when they are part of separate illegal schemes." H.J., Inc. at 236. Under this reasoning, it is clear that the predicate acts of racketeering need not relate to separate illegal schemes, nor must they relate to each aspect of the over-arching scheme to defraud. Rather, the evidence cited in the Findings of Fact demonstrates that each Defendant has therefore committed more than two Racketeering Acts with respect to the Enterprise's overall scheme to defraud.

b. The Racketeering Acts Are Related and Continuous The Supreme Court has stated that "to prove a pattern of racketeering activity a plaintiff or

¶prosecutor must show that the racketeering predicates are related," and that they either extended over

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¶"a substantial period of time," "or pose a threat of continued criminal activity." H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 239, 242 (1989). This requirement is commonly referred to as the "continuity plus relationship test." Defendants' activities easily meet the test for "a pattern of racketeering activity" articulated by the Supreme Court.

(1) The Racketeering Acts Are Related As already noted, the requisite relationship is established when the racketeering acts "have

¶the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events." Id. at 240. "Congress intended to take a flexible approach, and envisaged that a pattern might be demonstrated by reference to a range of different ordering principles or relationships between predicates, within the expansive bounds set." Id. at 238.

¶The federal courts of appeals have repeatedly held that the predicate racketeering acts under RICO need not be similar or directly related to each other. Rather, it is sufficient that the racketeering acts be related in some way to the affairs of the Enterprise, including furthering its goals or benefitting it in some way. See, e.g., United States v. Polanco, 145 F.3d 536, 541 (2d Cir. 1998); United States v. White, 116 F.3d 903, 925 n.7 (D.C. Cir. 1997) (stating in jury instructions that in order to show a pattern of racketeering activity, the government must prove that "the racketeering acts had the same or similar purposes, results, participants, victims or methods of commission or were otherwise interrelated by distinguishing characteristics and were not isolated events"); United States v. Eufrasio, 935 F.2d 553, 566 (3d Cir. 1991); United States v. Gonzalez, 921 F.2d 1530, 1540 (11th Cir. 1991); United States v. Angiulo, 897 F.2d 1169, 1180 (1st Cir. 1990); United States v. Indelicato, 865 F.2d 1370, 1382-84 (2d Cir. 1989) (en banc); United States v. Qaoud, 777 F.2d 1105,

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¶1115 (6th Cir. 1985); United States v. Provenzano, 688 F.2d 194, 200 (3d Cir. 1982); United States v. Lee Stoller Enter., Inc., 652 F.2d 1313, 1319 (7th Cir. 1981); United States v. Elliott, 571 F.2d 880, 899 (5th Cir. 1978).

¶Defendants' Racketeering Acts are related. While Defendants argue that a "multiplicity of mailings does not necessarily translate into a 'pattern' of racketeering activity," Lipin Enters., Inc. v. Lee, 803 F.2d 322, 325 (7th Cir. 1986) (Cudahy, J., concurring), the evidence in this case demonstrates far more than a mere multiplicity of mailings. All the Racketeering Acts have the same or similar purposes and methods of commission: they each involve mailings or wire transmissions by Defendants to carry out the Enterprise's overarching scheme to defraud consumers and potential consumers of cigarettes. Moreover, all the predicate Racketeering Acts furthered the goals and purposes of the Enterprise to sustain and maximize profits, to avoid costly liability judgments, and to frustrate attempts to make smoking socially unacceptable.

(2) The Racketeering Acts Have Been Continuous Many forms of proof may establish the required "continuity." H.J. Inc., 492 U.S. at 240-43.

¶By way of illustration, the Supreme Court approved several alternative methods for meeting the "continuity" requirement, stating:

[1] A party alleging a RICO violation may demonstrate continuity over a closed period by proving a series of related predicates extending over a substantial period of time. ... [2] A RICO pattern may surely be established if the related predicates themselves involve a distinct threat of long-term racketeering activity, either implicit or explicit. ...

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[3] The continuity requirement is likewise satisfied where it is shown that the predicates are a regular way of conducting defendant's ongoing legitimate business (in the sense that it is not a business that exists for criminal purposes), or of conducting or participating in an ongoing and legitimate RICO "enterprise."

¶Id. at 242-243. Following H.J. Inc., our Circuit has also adopted a flexible approach to determine whether "continuity" has been proven. United States v. Richardson, 167 F.3d 621, 626 (D.C. Cir. 1999).

¶In addition, as the Supreme Court, the D.C. Circuit and other courts have ruled, the requisite continuity may be shown by the overall nature of the Enterprise and its members, considered in their entirety, including uncharged unlawful activities. H.J. Inc., 492 U.S. at 242-43; Richardson, 167 F.3d at 626.

¶Here, Defendants' 145 racketeering acts occurred over a period of 45 years, which surely constitutes a "substantial period" of time. Moreover, these racketeering acts "are a regular way of conducting defendant's ongoing legitimate business," H.J. Inc., 492 U.S. at 243. Because Defendants are in a position to continue their fraudulent activity, "the racketeering acts themselves include a specific threat of repetition extending indefinitely into the future." Id. at 242. Thus, the requisite pattern of racketeering activity has been established.