U.S. Appeals Court: Tobacco Companies Lied

May 22, 2009 — -- A federal court Friday agreed with the major elements of a 2006 landmark ruling that found the nation's top tobacco companies guilty of racketeering and fraud for deceiving the public about the dangers of smoking.

The appellate court's ruling affirms a lower court judgment that found cigarette companies engaged in a broad conspiracy to commit fraud against the American people.

The U.S. Court of Appeals for the District of Columbia found that tobacco companies' own research showed nicotine was addictive and that smoking and secondhand smoke cause a variety of diseases, including cancer.

Despite that knowledge, the tobacco companies engaged in a massive advertising campaign "denying any adverse health effects" from smoking, the 92-page ruling said. The court wrote that the companies "made the statements with the intent to deceive. We are not dealing with accidental falsehoods."

Today's decision upholds a 2006 lower court ruling against big tobacco companies.

The appellate decision falls short of requiring any monetary damages, but some legal scholars believe the implications could be far-reaching. If the ruling is upheld, the tobacco companies would be required to take out ads and post messages on their Web sites correcting the record and admitting they have lied to consumers. Tobacco companies also would be banned from advertising cigarettes as "mild," "light," or "low tar."

"Never has there been such a sweeping condemnation of an industry like you see in this ruling," said Matthew Myer of Tobacco-Free Kids, an anti-smoking advocacy group.

The cigarette companies, who have argued that such a marketing ban would severely damage their business, vowed to appeal. Philip Morris USA and its parent company, Altria Group Inc., said in a statement: "The court's conclusions are not supported by the law or the evidence presented at trial, and we believe the exceptional importance of these issues justifies further review."

Other companies appealing the ruling were the R.J. Reynolds Tobacco unit of Reynolds American Inc., Lorillard Inc., Vector Group Ltd.'s Liggett Group, British American Tobacco Plc. and its Brown & Williamson unit.

Throughout the 10 years the case has been litigated, tobacco companies have denied committing fraud.

Since the 2006 ruling against them, the companies have continued to aggressively advertise their product. In those three years, more than a million young people joined the smoking ranks and 1.2 million died from smoking-related illnesses, government figures show.

Despite today's finding, the tobacco companies have managed to avoid major monetary penalties in the case that originally was filed by the Clinton administration in 1999 and sought $289 billion in damages. During the trial, which began in 2004, lawyers for the Justice Department under the Bush administration scaled back the monetary demands to $14 billion for anti-smoking campaigns.

The appeals court was highly critical of the tobacco companies, rejecting their arguments that they had never advertised "light" cigarettes as less dangerous. The court also pointed to evidence that the companies knew that secondhand smoke was dangerous, dismissing their assertions that there was no "scientific consensus."

"Again, defendants miss the point," the ruling said. "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 misleading."