USA v. PHILIP MORRIS USA, et al

Filing 6524

OPINION explaining the Court's reasons for concluding, after notice and hearing, that the 6522 Fourth Superseding Consent Order Implementing the Corrective-Statements Remedy at Point of Sale should be entered. See Opinion for further information. Signed by Judge Paul L. Friedman on January 19, 2023. (lcjr)

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 1 of 18

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
____________________________________
)
UNITED STATES OF AMERICA,
)
)
Plaintiff,
)
)
v.
)
)
PHILIP MORRIS USA INC. et al.,
)
)
Defendants.
)
____________________________________)

Civil Action No. 99-2496 (PLF)

OPINION
On December 6, 2022, the Court granted the parties’ Joint Motion to Enter Fourth
Superseding Consent Order Implementing the Corrective-Statements Remedy at Point of Sale
(“Settlement Mot.”) [Dkt. No. 6507] and entered the parties’ proposed Fourth Superseding
Consent Order Implementing the Corrective-Statements Remedy at Point of Sale [Dkt.
No. 6520]. See Order #128-Remand [Dkt. No. 6521]; Order #129-Remand, Fourth Superseding
Consent Order Implementing the Corrective-Statements Remedy at Point of Sale (“POS Consent
Order”) [Dkt. No. 6522].1 The Court’s order stated that an opinion explaining the Court’s

1

The parties are the United States and the Public Health Intervenors (collectively,
“plaintiffs”); Philip Morris USA Inc., Altria Group, Inc., and R.J. Reynolds Tobacco Company
(individually, as successor in interest to Brown & Williamson Tobacco Corporation, and as
successor to Lorillard Tobacco Company) (collectively, “defendants”); and ITG Brands, LLC,
Commonwealth Brands, Inc., and Commonwealth-Altadis, Inc. (collectively, the “remedies
parties”). Defendants and the remedies parties are collectively referred to as the
“manufacturers.” The nonparty national retailer groups – the National Association of
Convenience Stores (“NACS”) and the National Association of Tobacco Outlets (“NATO”) – are
collectively referred to as the “retailer groups.”

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 2 of 18

reasons for concluding, after notice and hearing, that the POS Consent Order should be entered
would follow in due course. See Order #128-Remand at 2.
After careful consideration of the parties’ proposed consent order, the views of
participating retailers both opposing and supporting the proposed consent order, and the basis for
the D.C. Circuit’s limited remand to the district court “to make due provision for the rights of
innocent third parties,” United States v. Philip Morris, 566 F.3d 1095, 1150 (D.C. Cir. 2009) (per
curiam) – and after conducting a POS Settlement Hearing on July 28, 2022 – the Court entered
the POS Consent Order for the following reasons.2

I. BACKGROUND
Litigation in this matter has persisted for over two decades. While the facts and
procedural history of the case have been extensively laid out in previous opinions and orders of
both this Court and the court of appeals, see, e.g., United States v. Philip Morris USA Inc., 566
F.3d at 1105-10, the Court will briefly set forth the most pertinent details below.

A. The Remedial Order
After a nine-month bench trial concluding in 2006, Judge Gladys Kessler
determined that the defendant manufacturers had conspired to and did in fact violate the
substantive provisions of the Racketeer Influenced and Corrupt Organizations Act (“RICO”),
18 U.S.C. § 1962. See United States v. Philip Morris USA, Inc., 449 F. Supp. 2d 1, 27

A participating retailer is defined as “a retailer that is a party to a Participating
Retailer Contract.” POS Consent Order at ¶ Z. A Participating Retailer Contract “means a
contract with a retailer that permits the Manufacturer (i) to choose the placement of Covered
Brands of cigarettes in or on a Merchandising Set related to Covered Brands or (ii) to approve,
place, remove, or require the placement or removal of advertising, marketing, promotional or
other informational material that advertises, markets, or promotes its Covered Brands in a Store.”
Id. at ¶ AA.
2

2

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 3 of 18

(D.D.C. 2006). In accordance with that finding, Judge Kessler issued a remedial order that set
forth remedies tailored to prevent and restrain future RICO violations by the defendant tobacco
manufacturers, including an injunction that required the defendants to issue “corrective
statements.” United States v. Philip Morris USA, Inc., 449 F. Supp. 2d at 27; 938-41 (setting
forth Order #1015 Final Judgment and Remedial Order [Dkt. No. 5733]); see also 18 U.S.C.
§ 1964 (vesting courts with “jurisdiction to prevent and restrain [RICO violations] by issuing
appropriate orders . . . making due provision for the rights of innocent persons”).
Judge Kessler determined that such an injunction “[wa]s appropriate and
necessary to prevent and restrain [defendants] from making fraudulent public statements on
smoking and health matters in the future.” United States v. Philip Morris USA, Inc., 449 F.
Supp. 2d at 926. One requirement, known as the “Point-of-Sale” or “POS remedy,” ordered
retailers participating in the defendants’ Retail Merchandising Program to display signs with
corrective statements at the retail point of sale of tobacco products. See id. at 939-40; United
States v. Philip Morris USA Inc., 566 F.3d at 1141. Under the Retail Merchandising Program,
participating retailers enter into contracts with the defendants to display the manufacturers’
in-store advertising. Id.
On appeal, the D.C. Circuit largely affirmed Judge Kessler’s findings,
conclusions, and injunctive order, but “vacate[d] the remedial order as it regard[ed] point-of-sale
displays and remand[ed] for the district court to make due provision for the rights of innocent
third parties.” United States v. Philip Morris USA Inc., 566 F.3d at 1150. The court of appeals
reasoned that the retailers affected by the POS remedy “did not receive notice of th[e] remedy or
an opportunity to present evidence or arguments to the district court regarding the impact the

3

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 4 of 18

injunction would have on their businesses,” nor did the district court “independently consider[]
the impact of th[e] [remedy] on affected retailers,” as required by Section 1964(a). Id. at 1141.
To adequately resolve this issue on remand, this Court determined that an
evidentiary hearing would be necessary to allow the parties to present their legal and factual
arguments concerning the implementation of the POS remedy and to allow third party retailers
the opportunity to air their concerns. See Order #86-Remand [Dkt. No. 6283]. And on
December 20, 2019, the Court clarified the scope of the evidentiary hearing. See United States
v. Philip Morris USA Inc., 436 F. Supp. 3d 1 (D.D.C. 2019) (Opinion and Order #92-Remand
[Dkt. No. 6308]). The Court concluded that the only remaining question for adjudication at the
evidentiary hearing was “whether this Court can craft a new proposal to implement the POS
remedy that makes due provision for retailers’ rights.” Id. at 7. In order to sufficiently make
“due provision” for retailers’ rights, the Court further concluded that it would consider evidence
to determine
(1) whether the plaintiffs’ 2018 proposal for implementing the
POS remedy will have an adverse impact on the retailers’ rights; if
so, (2) whether that proposal (or some modification thereof) is
sufficiently tailored to minimize the impact on retailers; and
(3) even if tailored to minimize the impact on the retailers’ rights,
whether it nevertheless interferes with those rights to such an
extent as to make any implementation of the POS remedy
improper.
United States v. Philip Morris USA Inc., 436 F. Supp. 3d at 9.

B. The Settlement and Consent Order
On May 3, 2022, the parties informed the Court that “[a]fter extensive, monthslong discussions and negotiations, [they] ha[d] reached an agreement in principle to settle the
point-of-sale messaging portion of the corrective-statements remedy.” Joint Motion for Status

4

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 5 of 18

Conference and Stay of Deadlines [Dkt. No. 6496] at 1. In light of the parties’ representations
regarding an agreement in principle, the Court vacated the evidentiary hearing. See Order #122Remand [Dkt. No. 6497]. The Court instead scheduled a “POS Settlement Hearing” to
“determine whether any proposed settlement is ‘fair, adequate, and reasonable,’ to consider the
rights of retailers, and to hear any objections to the proposed settlement raised by any affected
retailers, who will be notified of the parties’ proposed settlement.” Order #123-Remand [Dkt.
No. 6498] at 1 (citing United States v. Philip Morris USA Inc., 566 F.3d at 1141-42).
On June 28, 2022, the Court set forth the procedures for the POS Settlement
Hearing. See Order #125-Remand (“Procedures Order”) [Dkt. No. 6503]. This order included
procedures for (1) notice of the proposed settlement to all “participating retailers”; (2) written
submissions from participating retailers for those who wished to express their views either
opposing or supporting the proposed settlement; and (3) the consideration of oral objections from
participating retailers during the hearing. See id.; see also Minute Order (July 1, 2022)
(regarding final approval of the notice to participating retailers). On July 15, 2022, the parties
filed a joint motion seeking the Court’s approval of their proposed settlement agreement. See
Settlement Mot. And that same day, the parties notified the Court that notice of the proposed
settlement and procedures for the POS Settlement Hearing had been provided to all participating
retailers. See Notice of Distribution of Notice Regarding Corrective-Statements Remedy at
Point of Sale [Dkt. No. 6508].
Before the POS Settlement Hearing, the Court received nine written submissions
from participating retailers. See Notice (“Retailer Notice”) [Dkt. No. 6523] at Exs. A-I. Four
submissions supported the parties’ proposed consent order, see id. at Exs. F-I, two submissions
opposed the proposed consent order, see id. at Exs. B-C, and three submissions failed to

5

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 6 of 18

substantively respond to the terms and conditions of the proposed consent order, instead
addressing unrelated matters, see id. at Exs. A, D, E. After the POS Settlement Hearing, the
Court received two additional submissions from one of the participating retailers. See id. at
Exs. J-K.
The retailer groups – which collectively represent over 100,000 of participating
retailers – also filed submissions expressing their support of the parties’ settlement. See
Response to the Parties’ Consent Motion to Approve Consent Order on Retail Point of Sale
Remedy by National Association of Tobacco Outlets (“NATO Resp.”) [Dkt. No. 6509]; see also
National Association of Convenience Stores’ Response to the Parties’ Joint Motion to Enter
Fourth Superseding Consent Order Implementing the Corrective-Statements Remedy at Point of
Sale (“NACS Resp.”) [Dkt. No. 6510]. The retailer groups stated that they had participated
substantially in the parties’ negotiations and “[did] not object to the Court’s acceptance of the
parties’ proposed Settlement Agreement and Consent Order.” NATO Resp. at 1-2; see also
NACS Resp. at 1-2.
During the July 28, 2022 POS Settlement Hearing, the parties explained the terms
of the settlement and implementation of the proposed consent order. The Court asked numerous
questions seeking to better understand how the proposed consent order made due provision for
the rights of participating retailers. In addition, the parties responded to the relevant written
statements that had been submitted by participating retailers, and the Court heard from one
participating retailer, John Galvan, who spoke in opposition to the proposed settlement. No
other participating retailers asked to speak at the POS Settlement Hearing.

6

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 7 of 18

II. DISCUSSION
The Court’s task in approving the parties’ settlement was to ensure that the POS
Consent Order “makes due provision for retailers’ rights” and adequately accounts for the issues
raised by the D.C. Circuit in its decision vacating the POS remedy. United States v. Philip
Morris USA Inc., 436 F. Supp. 3d at 7; see also United States v. Philip Morris USA Inc., 566
F.3d at 1141 (noting that initially retailers “did not receive notice of th[e] remedy or an
opportunity to present evidence or arguments to the district court regarding the impact the
injunction would have on their businesses,” nor did the district court “independently consider[]
the impact of th[e] [remedy] on affected retailers,” as required by Section 1964(a)). As this
Court has previously stated, if the POS remedy is found to have “an adverse impact on the
retailers' rights,” the Court must decide whether it is “sufficiently tailored to minimize the impact
on the retailers; and [] even if tailored to minimize the impact on the retailers’ rights, whether it
nevertheless interferes with those rights to such an extent as to make any implementation of the
POS remedy improper.” United States v. Philip Morris USA Inc., 436 F. Supp. 3d at 9.
The Court concludes that the POS Consent Order, entered by order of the Court
on December 6, 2022, adequately addresses these concerns for four reasons. First, two trade
associations, or “retailer groups,” representing over 100,000 retailers participated in negotiating
the settlement. Second, the Court assured that the parties and the retailer groups provided
adequate notice of the proposed settlement to all participating retailers impacted by the
settlement. Third, the Court considered all written and oral statements by participating retailers
in response to the proposed settlement. And fourth, the parties revised the proposed consent
order in response to questions raised by the Court following the POS Settlement Hearing. These
considerations are addressed in turn.

7

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 8 of 18

A. Retailer Groups
Two retailer groups – NATO and NACS – played an especially significant role in
the success of the POS settlement negotiations through their collaboration with the parties on
drafting and approving the terms of the POS Consent Order. NATO is “a domestic retail trade
association with some 65,000+ tobacco stores, convenience stores, gasoline stations, grocery
stores, liquor stores and other retailers that sell cigarettes.” NATO Resp. at 1. And NACS is “an
international trade association representing the convenience industry . . . [representing] more
than 148,000 convenience stores [in the United States].” NACS Resp. at 1.
In 2011, after the court of appeals vacated the POS remedy, Judge Kessler
required the parties to identify third parties that should be invited to file briefs on the impact of
POS displays and invited eight retailer associations to participate in the litigation. See
Order #19-Remand [Dkt. No. 5916]. NATO and NACS accepted Judge Kessler’s invitation and
submitted responsive briefs on this issue. See NATO Brief Regarding Retailers Affected by the
Retail Display Component of the Court's Corrective Statement Remedy [Dkt. No. 5933];
NACS’s Submission Concerning Order #1015's Point of Sale Display Requirements [Dkt.
No. 5934].
Following vacatur of the evidentiary hearing, NATO and NACS represented that
they had “participated in the parties’ negotiations regarding the Settlement Agreement and the
Consent Order” and had “no objection to the Court entering the proposed Consent Order.”
NATO Resp. at 1; NACS Resp. at 2. They stated that “[i]n light of the unique facts and history
of the manufacture and sale of cigarettes as well as the particular circumstances of this litigation,
the Settlement Agreement and Consent Order fulfill the District Court’s responsibilities as
described in the D.C. Circuit’s decision in United States v. Philip Morris USA Inc., 566

8

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 9 of 18

F.3d 1095, 1142 (D.C. Cir. 2009) (per curiam).” NATO Resp. at 1; NACS Resp. at 2 (same). At
the POS Settlement Hearing, representatives from NATO and NACS reiterated their support for
the proposed POS Consent Order and urged the Court to accept the settlement. These two
retailer groups “adequately represent the shared interests and rights of third party retailers for
purposes of determining whether an injunction can be crafted under Section 1964(a) ‘making due
provision for the rights of innocent persons.’” United States v. Philip Morris USA Inc., 436 F.
Supp. 3d at 15 (quoting 18 U.S.C. § 1964(a)). Their involvement therefore has provided
assurance to the Court that the retailers belonging to these retailer groups – over 65,000 retailers
for NATO and 148,000 for NACS – were represented at the negotiation table, and that the
settlement made “due provision” for their interests. Id.

B. Notice
In addition to the input from NATO and NACS, the parties and the retailer groups
provided notice and an opportunity to comment on the proposed settlement to all participating
retailers. On June 28, 2022, as part of the Court’s Procedures Order, the Court ordered that
“[t]he manufacturers shall prepare a proposed notice regarding the Proposed Point-of-Sale
Consent Order (the ‘Proposed Notice’) that, when finalized, shall be sent, along with this
[Procedures] Order, to all participating retailers . . . in accordance with any applicable provisions
in participating retailer contracts and consistent with how the manufacturers regularly
communicate with their participating retailers and participating retail locations.” Procedures
Order at 2. The Court further instructed that “[t]he Proposed Notice shall include instructions for
how the participating retailers may submit written statements to the Court with their views
opposing or supporting the Proposed Point-of-Sale Consent Order, as well as details about how
to attend the Point-of-Sale Settlement Hearing.” Id.

9

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 10 of 18

On July 12, 2022, following input from the plaintiffs and the Court, the
manufacturers filed the Proposed Notice on the public docket. See Notice of Filing of Final
Notice [Dkt. No. 6504]; see also “Final Notice” [Dkt. No. 6504-1]. And on July 15, 2022, the
manufacturers confirmed that “on July 15, 2022 the Defendants and Remedies Parties provided
copies of the Final Notice (Dkt. No. 6504-1), Order #125-Remand, and the Proposed Point-ofSale Consent Order to all participating retailers consistent with how the Defendants and
Remedies Parties regularly communicate with their participating retailers and participating retail
locations.” Notice of Distribution of Notice Regarding Corrective-Statements Remedy at Point
of Sale [Dkt. No. 6508] at 1-2.
The Final Notice provided a short summary of the history of the litigation, the
POS remedy, and a copy of the POS Consent Order to all participating retailers. See Final
Notice at 1. The Final Notice further explained that the proposed POS Consent Order would
bring the following changes for participating retailers:
•

The Manufacturers will be required to display corrective
statement signs containing court ordered messages about
cigarettes and smoking at the point of sale in all retail locations
under contract with one or more of the Manufacturers for a
period of 21 months following a posting period.

•

The Manufacturers will amend or supplement their agreements
to require the retailer to agree to placement of the signs and
compliance audits as required by the court order. If a retailer
does not want to accept such amendment or supplement for the
duration of the display period, the retailer can terminate the
agreement pursuant to its terms.

•

The amended agreements will include a graduated scale of
consequences for repeatedly not complying with the sign
placement requirements, beginning with the placement of
additional signs, then the loss of promotional funds, and
ultimately suspension from the programs for a period of 17
weeks.

10

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 11 of 18

•

The Manufacturers will not offer new cigarette retail program
agreements without these terms for the duration of the display
period.

Final Notice at 1.
The Final Notice also provided instructions on how participating retailers could
submit comments both in writing and orally to the Court, either opposing or supporting the
settlement. See Final Notice at 1-2. Pursuant to the Court’s Procedures Order, participating
retailers were instructed that “[w]ritten comments and requests to address the court during the
hearing” should be submitted to a specific email address that was created exclusively to receive
comments regarding the proposed POS Consent Order. Id. at 2. Participating retailers were
given ten days to submit written comments. See id.

C. Submissions from Participating Retailers
The Court received nine written submissions from participating retailers in
advance of the POS Settlement Hearing. See Retailer Notice at Exs. A-I.3 Of the nine
submissions, four expressed support for the settlement. See id. Exs. F-I. These statements were
submitted by the following entities:
•

Sheetz, Inc., “a family-owned business which has more than
650 Sheetz store locations throughout Maryland, North
Carolina, Ohio, Pennsylvania, Virginia, and West Virginia.”
Retailer Notice at Ex. F at 2;

3

Three of the written submissions failed to substantively respond to the terms and
conditions of the proposed consent order. See Retailer Notice at Exs. A, D, E. The first email
was completely blank with the subject line “Sing.” Id. at Ex. A. The second email contained the
subject line “flavored cigar ban,” and stated: “Won’t do what it is suppose to do, they use them
for marijuana. And they just made that legal, does NOT discourage Tobacco smoking by any
means, to me at least.” Id. at Ex. D. The third email contained the subject line “New contract,”
and stated: “This is eternal vape & tobacco. . . They took me off the contract and the said i was
suppose to get a new contract on 7/4/2022 But no one contacted me.” Id. at Ex. E.
11

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 12 of 18

•

United Pacific, which “operates more than 500 convenience
stores in California, Colorado, Oregon, and Washington.” Id.
at Ex. G at 2;

•

Cigaret Shopper Stores, “a 21-store chain of tobacco stores
located in the State of Maine.” Id. at Ex. H at 2; and

•

Blue Ridge Tobacco Stores, which “operate[s] seven tobacco
stores with some stores in Virginia and others located in North
Carolina.” Id. at Ex. I at 2.

These four retailers urged the Court to adopt the settlement and enter the proposed POS Consent
Order. One retailer expressed the view that “the new settlement agreement terms are reasonable
and [the participating retailer] can comply with the signage display requirements.” Retailer
Notice at Ex. I at 2. Another stated that it was in support of the settlement “[a]fter understanding
where the signs would be hung in our stores and the length of time the signs would be
displayed.” Id. at Ex. H at 2. The Court considered these submissions in determining that the
POS Consent Order made “due provision for retailers’ rights.” United States v. Philip Morris
USA Inc., 436 F. Supp. 3d at 7.
The Court also received two submissions from participating retailers who opposed
the settlement. See Retailer Notice at Exs. B-C. The first submission was from Scott A.
Sadownikow, a “Managing Member” at Wisconsin Convenience Store Management, LLC. See
id. at Ex. B. Mr. Sadownikow raised three points in opposition to the settlement. First, he stated
that he did not receive timely communication of the settlement, and asserted that “[i]f [the
manufacturers] were unable to follow the first steps of the settlement, who will be there to
‘police’ them for the remainder of the journey?” Id. Second, Mr. Sadownikow expressed his
fear that “this court order will only expand the cigarette manufacturer's power over the retailers,”
explaining that “[s]ingle store/independent retailers currently have zero power when attempting
to negotiate with the large tobacco manufacturers.” Id. And third, he argued that the POS

12

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 13 of 18

remedy would exacerbate his frustration that the manufacturers use his shelf space for
advertising and marketing, stating that “[t]his is my shelf space that will be utilized.” Id.
The second objection was submitted by John Galvan, a “Category Manager” at
Hutchinson Oil Company / Hutch’s C‐Store. See Retailer Notice at Ex. C.4 Mr. Galvan’s
submission in advance of the hearing stated:
I do have one issue with the order and that will be the placement of
the sign. We strive to keep a “clean” look in our stores, no window
signs, no hanging signs and no outdoor advertising. I would
suggest that the Tobacco companies are forced to use their retail
space to place the signs. Two of these manufacturers control the
tobacco sets and freely place signs in their “contracted” space. I
would suggest having the sign placed in either the “header”
location or on one of the flip signs in the product area. Our stores
should not have to clutter ourselves up to satisfy judgements
against these companies.
Retailer Notice at Ex. C. Mr. Galvan reiterated these concerns orally at the POS Settlement
Hearing, during which he focused his presentation on the requirement that signs must be placed
in the areas surrounding the cigarette Merchandising Set (the “tobacco set”).5 He argued that the
requirement that the signs be hung outside the tobacco set – as opposed to within the tobacco set
where manufacturers place their advertisements – would impede the views of consumers and
employees in the store. He advocated for the signs being placed in the “headers” of the tobacco

4

At the POS Settlement Hearing, Mr. Galvan explained that Hutchinson Oil
Company is a medium-size chain with twenty-one stores in western Oklahoma.
The POS Consent Order defines a “Merchandising Set” as “any rack, shelving,
display, or fixture at a Store, including any canopy or header, used in whole or in part to
merchandise one or more Covered Brands of cigarettes that are visible to customers.” POS
Consent Order at ¶ S. The consent order requires participating retailers (other than Kiosk Stores)
“to post a 348-square-inch POS Corrective-Statement Sign that is attached to and above, or hung
above, the main cigarette Merchandising Set in the store. . . If that placement is not possible
given the existing placement of the cigarette Merchandising Set in a particular store, the sign
may be placed in one of several alternative, highly visible locations.” Settlement Mot. at 3.
5

13

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 14 of 18

sets or on a “flip sign” in the product area. Counsel for the manufacturers and for the
government responded to these concerns and this suggestion at the POS Settlement Hearing.
After the POS Settlement Hearing, the Court received two additional emails from
Mr. Galvan. See Retailer Notice at Exs. J-K. The first email thanked the Court for allowing him
to speak at the POS Settlement Hearing and stated that “everything the Tobacco Companies said
about the cigarette sets, headers and flip signs is not factual.” Id. at Ex. J. The second email
reiterated Mr. Galvan’s position that the POS signs should be placed in headers or flip signs in
the tobacco sets, not on top of the tobacco sets. See id. at Ex. K. Mr. Galvan also enclosed a
photograph of the “Plan O Gram” in his store to illustrate sections of the tobacco set display
mentioned in his objection. See id.
The Court has carefully considered the objections raised by Mr. Sadownikow and
Mr. Galvan and concludes that none of their arguments merit modification or rejection of the
POS Consent Order. To start, the Court does not believe that these two objectors sufficiently
demonstrate that the POS remedy will have “an adverse impact on the retailers’ rights.” United
States v. Philip Morris USA Inc., 436 F. Supp. 3d at 9. To the contrary, the vast majority of
participating retailers provided no comment, and the submissions the Court did receive from
participating retailers weigh in favor of entering the POS Consent Order. Counsel for the
manufacturers represented at the POS Settlement Hearing that the manufacturers provided notice
of the settlement and a copy of the proposed POS Consent Order to hundreds of thousands of
retailer locations. NATO and NACS also separately sent notice to their entire membership lists.
Out of the hundreds of thousands of retailers that were notified, only two objected to the
settlement, a miniscule number.

14

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 15 of 18

Furthermore, the POS Consent Order is “sufficiently tailored” and does not
“interfere[] with [retailers’] rights to such an extent as to make any implementation of the POS
remedy improper.” United States v. Philip Morris USA Inc., 436 F. Supp. 3d at 9. First, with
regard to Mr. Sadownikow, the Court believes that Mr. Sadownikow’s comments essentially
amount to a rejection of the POS remedy at large, not an objection to the terms of the settlement.
As this Court has already noted, “the Court's task is not to determine whether the POS
remedy . . . is an appropriate remedy under Section 1964(a). . . The only question [] is whether
this Court can craft a new proposal to implement the POS remedy that makes due provision for
retailers’ rights.” United States v. Philip Morris USA Inc., 436 F. Supp. 3d at 7. Mr.
Sadownikow’s comments therefore are inapposite.
Second, with regard to Mr. Galvan, the Court does not believe that requiring
retailers to position the POS signs above the tobacco sets “interferes with [retailers’] rights to
such an extent as to make any implementation of the POS remedy improper.” United States v.
Philip Morris USA Inc., 436 F. Supp. 3d at 9. Moreover, Mr. Galvan fails to provide a workable
alternative to the terms laid out in the POS Consent Order. In fact, both counsel for the
government and the manufacturers explained at the POS Settlement Hearing the reasons why flip
signs and headers were considered and rejected as a part of the POS remedy. Counsel for the
government stated that the parties intentionally steered away from flip signs because several
retailers expressed opposition to them, citing safety concerns and potential issues with flip signs
breaking and/or needing maintenance. Although the Court understands Mr. Galvan’s frustration
that retail “stores should not have to clutter [themselves] up to satisfy judgements against these
companies,” the parties persuasively articulated why the terms in the POS Consent Order are the
most workable solution for implementing the POS remedy. Retailer Notice at Ex. C. Neither

15

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 16 of 18

Mr. Galvan’s nor Mr. Sadownikow’s objections persuaded the Court to reject the POS
Consent Order.

D. Questions Raised by the Court
The Court’s final consideration relates to revisions made to the POS Consent
Order in response to questions raised by the Court at and after the POS Settlement Hearing. On
August 18, 2022, after carefully reviewing certain provisions of the proposed consent order and
having interviewed Judge Richard Levie and Ms. Linda Singer as proposed candidates for
appointment as Adjudicator of the Working Group, the Court raised several questions with the
parties via email. See Notice [Dkt. No. 6515]. These questions pertained specifically to the
roles of various individuals in and working with the Working Group.6 The parties responded to

6

The POS Consent Order includes the following relevant definitions:
•

“Working Group” means a group consisting of ten individuals: three
individuals appointed by the Department of Justice, two individuals appointed
by the Public Health Intervenors, one individual appointed by each of
(i) Altria Group, Inc., or Philip Morris USA Inc. (ii) R.J. Reynolds Tobacco
Company and (iii) ITG Brands, LLC, and one individual appointed by each of
the two Retailer Groups.

•

“Adjudicator” means a third-party engaged to expeditiously hear appeals from
(i) Working Group decisions on Noncompliance Appeals in the circumstances
provided in Section V. 7, below; and (ii) tie breaking decisions of the
Mediator. The Adjudicator's costs and fees shall be paid for by Manufacturers.

•

“Mediator” – a role added at the urging of the Court after the POS Settlement
Hearing – means a third-party engaged to assist in expeditiously resolving
disputes of the Working Group and to cast a tie breaking vote in the event of a
tie of the Working Group. The Mediator's costs and fees shall be paid for by
Manufacturers.

POS Consent Order at ¶¶ ZZ, B, R.
16

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 17 of 18

the Court’s questions on September 12, 2022. See Joint Response to August 31, 2022 Notice
(D.N. 6515) [Dkt. No. 6516].
Following receipt of the parties’ responses, the Court had further discussions with
Judge Levie and Ms. Singer, resulting in additional email correspondence with the parties and a
status conference “to discuss the status of the [Settlement Motion] and potential amendments to
the pending motion.” Minute Order (Nov. 22, 2022). At the November 30, 2022 status
conference, the Court summarized the status of the pending Settlement Motion and read into the
record an email sent by the Court to counsel on October 28, 2022. The email stated that
[the undersigned] has concluded that he will appoint Judge Levie
as the Adjudicator and Ms. Singer as the Mediator/Facilitator for
the Working Group, with the understanding that they may, when
circumstances necessitate, fill in for one another at a given
time. As the Mediator, Ms. Singer will attend Working Group
meetings to facilitate discussion and, when necessary, to break tie
votes. It is agreed that it is important to have the Mediator at
Working Group sessions to facilitate informal resolution of issues
when possible. Like all decisions of the Working Group, any
tiebreaks decided by Ms. Singer will be appealable to Judge Levie
as the Adjudicator. And to the extent a law clerk or some other
individual is needed to aid with Noncompliance Appeals, Ms.
Singer and Judge Levie have agreed to hire just one individual.
Email from the Court’s Chambers to Counsel (Oct. 28, 2022). The parties represented that they
were in the process of finalizing a revised consent order to account for the Court’s appointment
of both Judge Levie as Adjudicator and Ms. Singer as Mediator.
On December 2, 2022, the parties filed a revised consent order. See Proposed
Fourth Superseding Consent Order Implementing the Corrective-Statements Remedy at Point of
Sale [Dkt. No. 6520]. The revised version accounted for the issues raised by the Court in its
questions to counsel and alleviated any concerns the Court may have had about the function of
the Adjudicator, the need for a Mediator, and the role of the Working Group. The Court entered

17

Case 1:99-cv-02496-PLF Document 6524 Filed 01/19/23 Page 18 of 18

the POS Consent Order on December 6, 2022, resolving decades of litigation and the last
remaining piece of Judge Kessler’s historic remedial order.
SO ORDERED.

Digitally signed by
Paul L. Friedman
Date: 2023.01.19
09:32:35 -05'00'
_______________________________
PAUL L. FRIEDMAN
United States District Judge

DATE: January 19, 2023

18