WASHINGTON - A federal judge killed parts of the federal government's sweeping lawsuit against the cigarette companies yesterday but kept alive a broad claim that might yet force the industry to forfeit billions of dollars in profits.
U.S. District Judge Gladys Kessler, in a 55-page opinion, ruled that the government had put forth a strong enough claim of a possible violation of anti-racketeering law to justify going forward on that part of the case.
Specifically, she decided that the government could pursue its theory that as long as the companies remain in the tobacco business, "they will have countless opportunities and temptations to take unlawful actions, just as it is alleged they have done since 1953."
Each side said it was pleased with parts of the ruling, and each pledged to press ahead with its arguments.
David W. Ogden, an assistant attorney general, said the Justice Department is gratified "that we can go forward with this important case" and looks toward "holding the tobacco companies accountable" for fraud against the public.
The cigarette companies praised the ruling, too, calling it "a big step in the right direction," in the words of the industry leader, Philip Morris. The companies expect the case to be dismissed later, after both sides gather evidence, said William S. Ohlemeyer, vice president and associate general counsel of Philip Morris.
Before the lawsuit moves further in Kessler's court, the industry can ask her for permission for an immediate pretrial appeal, to a federal appeals court, to challenge the part of her ruling that went against the companies.
It is unclear whether the industry will try that or whether the Justice Department will seek to appeal the part of the case it lost.
With the settlement of lawsuits by many states - including Maryland - against the companies, a Supreme Court ruling this year barring direct government regulation of tobacco products and uncertain prospects in individual smokers' lawsuits against the companies, the Justice Department lawsuit remains the strongest legal threat to the cigarette makers.
The lawsuit accuses the industry of causing harm to Americans' health and billions of dollars in financial injury to the federal treasury. Since 1953, the suit says, the industry has engaged in fraud to cover up the hazards of smoking and to mislead people into believing that nicotine was not addictive.
The lawsuit sought to recover unspecified billions of dollars that the government had spent to treat smoking-related illnesses of Medicare patients, military personnel, veterans, Native Americans and federal employees. Two federal laws provide medical benefits for each of those groups.
That is the part of the case the judge killed, the two counts that were based on this theory and that sought recovery of federal benefits money.
Congress, Kessler found, did not intend that the federal medical benefit laws would be used to recover government payments to patients or that those laws would be used against the tobacco industry.
She said it was "simply inconceivable" that the government has possessed for many years a power that had never been used. Kessler added that Congress never hinted that it wanted that power to be used to recover government funds.
The second half of the government's lawsuit demands that the industry turn over unspecified billions in profits that it derived from its alleged fraud-driven conspiracy. The government claimed that the alleged conspiracy would violate the federal anti-racketeering law.
The judge allowed that part of the case - the two remaining counts - to continue.
That decision does not mean, Kessler said, that the government has proved any wrongdoing or that it will be able to win on that claim. It means only that the judge was rejecting half of the industry's plea to dismiss all parts of the suit now.
"The government has stated a claim for relief; whether the government can prove it remains to be seen," she wrote.
Kessler said the government is free to pursue its demand that the industry surrender all of the profits it made during an alleged racketeering plot dating back nearly five decades and allegedly continuing. The judge said the government must prove that it is entitled to that remedy, an issue she did not decide yesterday.
Several months ago, the judge estimated that the case might not be ready to go to trial until January 2003.
If Republican George W. Bush is elected president, the case could be scuttled. In a newspaper interview last month, Bush indicated that his administration would drop the case. "The lawyers I talk to don't feel they [the Justice Department] have a case," he said.
Because the Clinton administration is committed to the lawsuit and has fought efforts in Congress to kill the case, Vice President Al Gore would be unlikely to move to end it if elected president.
At least three attempts have been made in Congress to deny the Justice Department funds to continue the case, but no such measure has emerged.