Federal Court Refuses to Give Judge Gladys Kessler's Tobacco RICO Decision Issue Preclusive Effect in Light Cigarettes Litigation
It's the question a defense lawyer seldom actually confronts head-on, but one that is always at the front of his or her mind: how can the judgment against my client in one case be used to bind it in other cases?
Or, for you law review types: will the findings of fact and conclusions of law in this case subject the client to non-mutual collateral estoppel in a subsequent case?
Where there are multiple lawsuits, there is always a risk that someone may take the defendant's loss in one case and try to bar the defendant from presenting evidence on the issue in the next case, arguing that what was already found by a court once should hold true in the later action. That is called "collateral estoppel" or, more simply, "issue preclusion." The fact that the plaintiff in the second action is different from the plaintiff in the first action means that it is "non-mutual." The plaintiffs are different, but the defendant remains the same.
Some people can make it sound awfully efficient and useful to have one court's judgment bind a defendant on certain issues in subsequent trials. But the fact remains that -- particularly in mass tort litigation, where there are hundreds or thousands of such claims -- prematurely binding a defendant to one particular outcome deprives us of the benefit of a robust number of trials to see how patterns of liability or non-liability may develop. It's the American way to allow juries in different states to hear evidence and apply their own law to the facts and reach a conclusion, rather than having one trial decide everything. And it can seem downright un-American to prematurely cut-off a defendant's right to present a defense and hold it to a single jury's determination of an issue.
Recently, the question of issue preclusion was presented to a federal court in Maine that was presiding over a multidistrict litigation involving cases alleging fraud and unjust enrichment against Philip Morris and Altria for their allegedly fraudulent promotion of "light" cigarettes as being safer than ordinary cigarettes. See In re: Light Cigarettes Marketing Sales Practices Litigation, MDL Docket No. 1-09-MD-2068 (D. Me. Mar. 5, 2010).
In 2006, a federal judge in the District of Columbia -- the Honorable Gladys Kessler -- had issued a mammoth final judgment in a civil RICO case that had been brought by the Department of Justice against the entire tobacco industry. See United States v. Philip Morris USA, Inc., 449 F. Supp. 2d 1 (D.D.C. 2006), aff'd in part and vacated in part, 566 F.3d 1095 (D.C. Cir. 2009), petition for cert. filed (Feb. 19, 2010). That landmark case had proceeded for more than 7 years. It was tried to the judge; there was no jury. Judge Kessler had issued some 4,088 separate factual findings, and found the industry liable for a variety of alleged schemes to defraud.
The plaintiffs in the MDL pending in Maine wanted to use more than a thousand of Judge Kessler's findings of fact to bind Philip Morris and its parent, Altria, in the subsequent civil class action cases brought by individual smokers under state consumer protection laws and for unjust enrichment. Chief Judge John A. Woodcock, Jr., who is presiding over the Light Cigarettes MDL, thus was confronted with whether to impose non-mutual collateral estoppel on the defendants.
There are four basic requirements for issue preclusion generally: (1) the issues in the earlier and later cases must be identical, (2) the issues must have been actually litigated in the prior action, (3) the prior judgment must be final, and (4) the issue must have been essential to the final judgment, not merely incidental or collateral to it.
Chief Judge Woodcock determined that there was no doubt that the issues plaintiffs sought preclusion on were actually litigated before Judge Kessler, so requirement 2 was definitely met. And her judgment was properly considered final, even though a certiorari petition is pending before the United States Supreme Court, so requirement 4 was met, too.
But Chief Judge Woodcock had many doubts about whether the identity of issues requirement was met. Many of Judge Kessler's findings referred to the "Defendants" and were not specific to Philip Morris or Altria. He reasoned that it would be unfair to hold those two companies liable for the collective wrongful acts of all tobacco companies. Moreover, the "light cigarette" scheme was only one of six that Judge Kessler had held the industry liable for in her opinion, and it was unclear how heavily if at all, her judgment relied on the specific actions of Philip Morris and Altria regarding light cigarettes.
In addition, the period of time relevant to Judge Kessler had been fifty years. In contrast, many of the suits pending in Maine had much shorter proposed class periods that began near the time of Judge Kessler's opinion. Thus, the overlap of time may not be identical.
Chief Judge Woodcock acknowledged that there were some findings -- particularly relating to Philip Morris's knowledge about the health risks of light cigarettes -- that might be identical. But Chief Judge Woodcock was concerned that "because of the small number of findings related to light cigarettes, the Court is not convinced that they were central to [Judge Kessler's] conclusion of light cigarette fraud on the part of the enterprise." Slip op. at 15.
Indeed, the court concluded that the sheer volume of the findings plaintiffs wanted to use -- 1,083 -- proved that they could not possibly have been central to Judge Kessler's holding. As the court explained: "Judge Kessler included the lengthy findings so that readers could 'fully appreciate how massive the case is against the Defendants,' not necessarily because the facts were critical to her conclusion." Slip op. at 14 (citation omitted).
Ultimately, Chief Judge Woodcock applied the Supreme Court's decision in Parklane Hosiery Co. v. Shore, 439 U.S. 329 (1979) to decide against giving Judge Kessler's findings issue-preclusive effect in the cases before him. In Parklane Hosiery, the Supreme Court had counseled that where issue preclusion is being used by someone who was not a party to the prior suit, certain public policy and fairness factors also must be considered. Slip op. at 3.
Weighing those factors, Chief Judge Woodcock noted that the defendants had been deprived of a jury trial before Judge Kessler, whereas they would be entitled to one in the actions pending before him. He also expressed the very practical concern about "the possibility for jury confusion and the lack of efficiency." Id. at 15. Indeed, given the sheer number of factual conclusions that plaintiffs wanted to use (more than 1,000), the court noted that they would likely confuse the jury without presenting some background and clarifying testimony -- but that would defeat the whole efficiency purpose being used to justify issue preclusion. Id. at n.17. Moreover, the Supreme Court recently has admonished that punitive damages may not be used to punish a defendant for injuries it inflicted on people other than the plaintiffs; but using findings of fact from a prior trial necessarily would run afoul of that rule and would require potentially confusing corrective instructions. Id. at 15-16. In addition, the court concluded, little efficiency would be achieved because individual plaintiffs still would need to prove that they relied on the defendants' alleged misrepresentations and that they were actually deceived. Id. at 16.
Interestingly, Chief Judge Woodcock did not seem to take a position on one of the defendants' arguments that I found most logical and compelling: namely, that applying issue preclusion would be unfair under Parklane Hosiery because the defendants routinely had won jury verdicts in cases involving light cigarettes, and thus Judge Kessler's findings did not stand uncontradicted and could not be given preclusive effect without arbitrarily favoring one judgment over another. Id. at 7-8.
Ultimately, Chief Judge Woodcock's order is the third one that has refused to give issue-preclusive effect to Judge Kessler's behemoth 2006 order. Its careful reasoning is instructive and should give any court faced with mass tort litigation pause before artificially depriving a defendant of its right to present evidence to contest a claim.
