Saturday, February 5, 2005

DC Circuit Rejects Government Disgorgement Claim Against Tobacco Companies

The D.C. Circuit issued an opinion on Feb. 4 (here) rejecting the government's disgorgement claim under RICO against the leading tobacco companies (U.S. v. Philip Morris USA et al.).  The court's 2-1 decision reverses the district court, which had permitted the government's claim to go forward in seeking disgorgement of $280 billion (which would be real money even to Everett Dirksen).  The court held "The relevant section of RICO, 18 U.S.C. ยง 1964(a), provides the District Courts jurisdiction only for forward-looking remedies that prevent and restrain violations of the Act. Because disgorgement, a remedy aimed at past violations, does not so prevent or restrain, we reverse the decision below . . . "

Not surprisingly, the shares of the tobacco companies rose rather sharply in response to the news.  It wouldn't be surprising either if the government appealed to the Supreme Court. (ph)

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