Laborers Health Fund v. Philip Morris, Inc.

Citation191 F.3d 229
Decision Date01 August 1998
Docket NumberRESEARCH-U
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)
Parties(2nd Cir. 1999) LABORERS LOCAL 17 HEALTH AND BENEFIT FUND; TRANSPORT WORKERS UNION NEW YORK CITY PRIVATE BUS LINES HEALTH BENEFIT TRUST, on behalf of themselves and all others similarly situated; UNITED FEDERATION OF TEACHERS WELFARE FUND; COMMUNICATIONS WORKERS OF AMERICA LOCAL 1180 SECURITY BENEFITS FUND; INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL 891 WELFARE FUND and SOCIAL SERVICE EMPLOYEES UNION LOCAL 371 WELFARE FUND, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees, v. PHILIP MORRIS, INC.; R.J. REYNOLDS TOBACCO COMPANY; BROWN & WILLIAMSON TOBACCO CORPORATION, USA; B.A.T. INDUSTRIES, P.L.C.; LORILLARD TOBACCO CO.; LIGGETT & MYERS, INC.; AMERICAN TOBACCO COMPANY; UNITED STATES TOBACCO COMPANY; COUNCIL FOR TOBACCOS.A., INC.; TOBACCO INSTITUTE, INC.; SMOKELESS TOBACCO COUNCIL, INC. and HILL & KNOWLTON, INC., Defendants-Appellants

HERBERT M. WACHTELL, New York, New York (Peter C. Hein, Wachtell, Lipton, Rosen & Katz, New York, New York; Paul K. Stecker, Paul F. Jones, Charles R. Chase, Phillips, Lytle, Hitchcock, Blaine & Huber LLP, Buffalo, New York; David S. Eggert, James M. Rosenthal, Arnold & Porter, Washington, D.C., for Defendant-Appellant Philip Morris, Inc.; Robert W. Gaffey, Michael S. Chernis, Jones, Day, Reavis & Pogue, New York, New York; Robert F. McDermott, Jr., Donald B. Ayer, Jones, Day, Reavis & Pogue, Washington, D.C., for Defendant-Appellant R.J. Reynolds Tobacco Co.; Marjorie Press Lindblom, Peter A. Bellacosa, Kirkland & Ellis, New York, New York; David M. Bernick, Kirkland & Ellis, Chicago, Illinois; Kenneth N. Bass, Jennifer Gardner, Paul B. Taylor, Kirkland & Ellis, Washington, D.C., for Defendant-Appellant Brown & Williamson Tobacco Corp. (including as successor by merger to Defendant-Appellant The American Tobacco Co.); Alan E. Mansfield, Greenberg Traurig, New York, New York; Robert E. Northrip, Bruce R. Tepikian, Samuel B. Sebree, Shook, Hardy & Bacon, L.L.P., Kansas City, Missouri, for Defendant-Appellant Lorillard Tobacco Co.; Michael M. Fay, Kasowitz, Benson, Torres & Friedman, New York, New York, for Defendant-Appellant Liggett & Myers, Inc.; Peter J. McKenna, Eric S. Sarner, Mark S. Cheffo, Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, for Defendant-Appellant United States Tobacco Co.; Steven Klugman, Debevoise & Plimpton, New York, New York, for Defendant-Appellant The Council for Tobacco Research-U.S.A., Inc.; Anthony Mansfield, Seward & Kissel, New York, New York, for Defendant-Appellant The Tobacco Institute, Inc.; Barry S. Schaevitz, Jacob, Medinger & Finnegan, LLP, New York, New York, for Defendant-Appellant Smokeless Tobacco Council, Inc.; Bruce M. Ginsberg, Michael C. Lasky, Davis & Gilbert, New York, New York, for Defendant-Appellant Hill & Knowlton, Inc.), of counsel and on the joint brief for Defendants-Appellants.

MICHAEL C. SPENCER, New York, New York (Melvyn I. Weiss, Kenneth J. Vianale, Beth A. Kaswan, Joan T. Brown, Milberg Weiss Bershad Hynes & Lerach LLP, New York, New York; Robert J. Connerton, James R. Ray, John McN. Broadus, Connerton & Ray, Washington, D.C.; Perry Weitz, Robert J. Gordon, Jerry Kristal, Mitchell Breit, Karen J. Sabine, Weitz & Luxenberg, P.C., New York, New York; Christopher P. O'Hara, Colleran, O'Hara & Mills, Garden City, New York; Stephen F. Gordon, Joel Spivak, Mirkin & Gordon, P.C., Great Neck, New York Professor G. Robert Blakey, Notre Dame Law School, Notre Dame, Indiana; Professor Einer Elhauge, Harvard Law School, Cambridge, Massachusetts, of counsel), for Plaintiffs-Appellees.

Carl R. Schenker, Jr., Washington, D.C. (John H. Beisner, Teresa Kwong, O'Melveny & Myers LLP, Washington, D.C.; Hugh F. Young, Jr., Product Liability Advisory Council, Inc., Reston, Virginia; Jan S. Amundson, General Counsel, National Association of Manufacturers, Washington, D.C.), of counsel and on the brief for Amici Curiae Product Liability Advisory Council, Inc. and National Association of Manufacturers in Support of Defendants-Appellants.

Laurence J. Cohen, Sherman, Dunn, Cohen, Leifer & Yellig, Washington, D.C., for Amicus Curiae National Coordinating Committee for Multiemployer Plans in Support of Plaintiffs-Appellees.

Before: CARDAMONE, CABRANES, and STRAUB Circuit Judges

Defendants Philip Morris, Inc. and other tobacco companies appeal from an order entered March 26, 1998 in the United States District Court for the Southern District of New York (Scheindlin, J.), denying, in part, their motion under Fed. R. Civ. P. 12(b)(6) to dismiss the complaint of plaintiffs Laborers Local 17 Health and Benefit Fund, et al., on grounds, inter alia, that the harm plaintiffs complain to have suffered from defendants' alleged tortious acts is too remote to sustain a recovery.

CARDAMONE, Circuit Judge:

Plaintiffs Laborers Local 17 Health & Benefit Fund and the Transport Workers Union New York City Private Bus Lines Health Benefit Trust are labor union health and welfare trust funds established pursuant to the Taft-Hartley Act and the Employee Retirement Income Security Act, 29 U.S.C. §§1002(1), 1002(3), 1003(a) (1994) (ERISA), for the purpose of supplementing employees' basic medical benefits by providing death, disability, and related services. Plaintiffs United Federation of Teachers Welfare Fund, Communications Workers of America Local 1180 Security Benefits Fund, International Union of Operating Engineers Local 891 Welfare Fund, and Social Service Employees Union Local 371 Welfare Fund are not-for-profit trusts which were established to supplement public-sector employees' basic medical benefits. We refer to all of the plaintiffs collectively as plaintiffs or Funds.1

The Funds brought suit on June 19, 1997 in the United States District Court for the Southern District of New York (Scheindlin, J.) alleging that defendants, major tobacco companies2 and their agents (defendants, tobacco companies, or appellants), had engaged in a conspiracy to deceive the general public, and to deceive plaintiffs specifically, with respect to the health risks associated with smoking, in order to shift the health-related costs of smoking to plaintiff Funds.

Defendants moved to dismiss the complaint for failure to state a claim, which the district court denied in part in an opinion and order dated March 25, 1998. See Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., 7 F. Supp. 2d 277 (S.D.N.Y. 1998) (Laborers Local 17). After obtaining certification from the district court pursuant to 28 U.S.C. §1292(b), defendants took an interlocutory appeal to this Court.

BACKGROUND
A. Plaintiffs' Complaint

Plaintiffs' complaint sets forth the following factual allegations, which we assume, for purposes of the motion to dismiss, are true. Over the past several decades, in response to medical indictments of smoking, the defendant tobacco companies engaged in an advertising campaign designed to mislead the public, and plaintiffs specifically, as to the true extent of the dangers that smoking poses to good health. Defendants actively concealed information that would have demonstrated the actual health risks, the addictiveness of nicotine, the effectiveness of various treatments for smoking addiction, and defendants' own ability to manufacture less addictive products. Moreover, plaintiffs and plan participants had no knowledge - until very recently - of defendants' wrongdoing. As a result, thousands of participants in plaintiffs' health care Funds became ill and/or died from smoking cigarettes produced and sold by defendant tobacco companies. Plaintiffs spent tens of millions of dollars to provide medical services for participants suffering from cigarette smoking-related diseases.

On the basis of these allegations, plaintiffs' complaint asserts ten causes of action (I to X) and seeks both monetary damages and injunctive relief requiring defendants to take appropriate corrective action. Specifically, the complaint seeks past and future damages to recover for "money expended ... to provide medical treatment to [plaintiffs'] participants and beneficiaries who have suffered and are suffering from tobacco-related illnesses." As interpreted by the district court, the complaint also seeks damages inflicted on the Funds' infrastructure independent of the harm suffered by plan participants. These latter damages, alleged to be separate and wholly distinct from participants' medical costs, consist of losses suffered due to the Funds' inability to control costs, to promote the use of safer alternative products, and to establish programs to educate their participants not to use tobacco products.

Ordinarily, plaintiffs' right to sue for damages would be subrogated to the rights of those individual smokers for whom they provided health care benefits. In other words, plaintiffs would stand in the shoes of the injured participants and recoup damages from defendants, as tortfeasors, only to the extent defendants were liable to the participants themselves. But the Funds have not asserted such a subrogation action in this complaint. Instead, they have sued in their own right for the money spent for plan participants and, in addition, for injuries and damages they insist were separate from...

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