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.

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.

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

¶(continued...)

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¶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.