407 F.3d 125 (2nd Cir. 2005), 03-7140, In re Simon II Litigation

Docket Nº:Docket Nos. 03-7140, 03-7141.
Citation:407 F.3d 125
Party Name:In Re SIMON II LITIGATION. Simon II Litigation, Plaintiffs-Appellees, v. Philip Morris USA Inc. (formerly known as Philip Morris Incorporated), R.J. Reynolds Tobacco Co., Brown and Williamson Tobacco Corp. (individually and as successor by merger to The American Tobacco Co.), Lorillard Tobacco Company, and Liggett Group, Inc., Defendants-Appellants
Case Date:May 06, 2005
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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407 F.3d 125 (2nd Cir. 2005)


Simon II Litigation, Plaintiffs-Appellees,


Philip Morris USA Inc. (formerly known as Philip Morris Incorporated), R.J. Reynolds Tobacco Co., Brown and Williamson Tobacco Corp. (individually and as successor by merger to The American Tobacco Co.), Lorillard Tobacco Company, and Liggett Group, Inc., Defendants-Appellants.

Docket Nos. 03-7140, 03-7141.

United States Court of Appeals, Second Circuit

May 6, 2005

Argued Nov. 20, 2003.

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(Murray R. Garnick, David S. Eggert, Heather A. Pigman, Eric Suter, and Arnold & Porter, Washington, D.C.), for Defendant-Appellant Philip Morris USA Inc.

Theodore M. Grossman, Cleveland, OH (Robert H. Klonoff, Michael S. Fried, Washington, DC; Harold K. Gordon, George Kostolampros, New York, NY; and Jones Day, of counsel), for Defendant-Appellant R.J. Reynolds Tobacco Company.

(Peter A. Bellacosa and Kirkland & Ellis, LLP, New York, NY), for Defendant-Appellant Brown & Williamson Tobacco Corporation, individually and as successor by merger to The American Tobacco Company.

(Alan E. Mansfield, Stephen L. Saxl, and Greenberg Traurig, LLP, New York, NY), for Defendant-Appellant Lorillard Tobacco Company.

(Aaron H. Marks, New York, NY, Leonard A. Feiwus and Kasowitz, Benson, Torres & Friedman, LLP), for Defendant-Appellant, Liggett Group, Inc.

Elizabeth J. Cabraser, New York, N.Y. (Richard M. Heimann, Steven E. Fineman, Lieff Cabraser Heimann & Bernstein, LLP; Samuel Issacharoff, New York, NY; Perry Weitz, John M. Broaddus, Weitz &

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Luxenberg, P.C., New York, NY; M. Frederick Pritzker, Gregory T. Arnold, Brown Rudnick Freed & Gesmer, P.C., Boston, MA; Dianne M. Nast, Roda & Nast, P.C., Lancaster, PA; Norwood Wilner, Spohrer Wilner Maxwell & Matthews, P.A., Jacksonville, FL; and Stanley M. Chesley and Waite, Schneider, Bayless & Chesley Co., Cincinnati, OH, of counsel), for Plaintiffs-Appellees.

(Kenneth S. Geller, Miriam R. Nemetz, Carl J. Summers, Mayer, Brown, Rowe & Maw, LLP, Washington, DC; and Robin S. Conrad, National Chamber Litigation Center, Inc., of counsel, Washington, DC), for Amicus Curiae Chamber of Commerce of the United States, in support of Defendants-Appellants.

(Daniel J. Popeo, Richard A. Samp, and Washington Legal Foundation, Washington, DC), for Amici Curiae Washington Legal Foundation and The National Association of Manufacturers, in support of Defendants-Appellants.

(Jeffrey R. White, Center for Constitutional Litigation, Washington, DC; Mary E. Alexander, President, The Association of Trial Lawyers of America, Washington, DC, of counsel), for Amicus Curiae The Association of Trial Lawyers of America, in support of Defendants-Appellants.

(John H. Beisner, Jonathan D. Hacker, Shannon M. Pazur, O'Melveny & Myers, LLP, Washington, DC; and Hugh F. Young, Jr., Product Liability Advisory Council, Inc., Reston, VA, of counsel), for Amicus Curiae Product Liability Advisory Council, Inc., in support of Defendants-Appellants.

(David C. Vladeck, Georgetown University Law Center, Washington, DC; and Richard A. Daynard, Northeast University Law School, Boston, MA, of counsel), for Amici Curiae American Cancer Society, American Heart Association, American Lung Association, National Center for Tobacco-Free Kids, Tobacco Control Resource Center, Center for a Tobacco Free New York, Tobacco Control Legal Consortium, and Dr. C. Everett Koop, in support of neither party.

Before OAKES, POOLER and WESLEY, Circuit Judges.

OAKES, Senior Circuit Judge.

Defendant-appellant tobacco companies appeal from the September 19, 2002, order and October 22, 2002, supplemental memorandum and order of the United States District Court for the Eastern District of New York, Jack B. Weinstein, Judge, which certified a nationwide non-opt-out class of smokers seeking only punitive damages under state law for defendants' alleged fraudulent denial and concealment of the health risks posed by cigarettes. Having granted permission to appeal pursuant to Federal Rule of Civil Procedure 23(f), we must decide whether the district court properly certified this class under Rule 23(b)(1)(B).

Defendant-appellants challenge the propriety of certifying this action as a limited fund class action pursuant to a "limited punishment" theory. The theory postulates that a constitutional limit on the total punitive damages that may be imposed for a course of fraudulent conduct effectively limits the total fund available for punitive awards.

We hold that the order certifying this punitive damages class must be vacated because there is no evidence by which the district court could ascertain the limits of either the fund or the aggregate value of punitive claims against it, such that the postulated fund could be deemed inadequate to pay all legitimate claims, and thus plaintiffs have failed to satisfy one of the presumptively necessary conditions for

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limited fund treatment under Ortiz v. Fibreboard Corp., 527 U.S. 815, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999).

While we expressly limit our holding to the conclusion that class certification is incompatible with Ortiz, the circumstances warrant some discussion of whether the order is incompatible with the Supreme Court's intervening decision in State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003). As we discuss in Part II, Section F, of this opinion, it appears that the order fails to ensure that a potential punitive award in this action would bear a sufficient nexus, and be both reasonable and proportionate, to the harm or potential harm to the plaintiff class and to the general damages to be recovered, as required by State Farm.

Based on our holding, we vacate the district court's certification order and remand for further proceedings.



The district court certified the class proposed by the Third Amended Consolidated Class Action Complaint and an accompanying motion for class certification, both filed on July 26, 2002. The district court's September 19, 2002, order and the supplemental memorandum and order of October 22, 2002, are published together at In re Simon II Litigation, 211 F.R.D. 86, 96, 101 (E.D.N.Y.2002), and will be referred to collectively as the "Certification Order."

Plaintiffs sought certification to determine defendants' fraudulent course of conduct and total punitive damages liability to a class consisting of those who suffered from, or had died from, diseases caused by smoking. Plaintiffs did not seek a class-wide determination or allocation of compensatory damages or seek certification of subclasses. The certification followed extensive briefing and argument, not to mention numerous iterations of both the complaint and the proposed class.

An abbreviated history of the course of the litigation is outlined below. Additional procedural history of the cases related to this litigation appears in the district court's Certification Order. See 211 F.R.D. at 131-38.


The industry conspiracy prompting this litigation is described briefly in the allegations of the Third Amended Complaint and in considerable detail in the Certification Order. See 211 F.R.D. at 114-26. We will simply excerpt a relevant portion of the district court's description of the allegations:

Plaintiffs allege, and can provide supporting evidence, that, beginning with a clandestine meeting in December 1953 at the Plaza Hotel in New York City among the presidents of Philip Morris, R.J. Reynolds, American Tobacco, Brown & Williamson, Lorillard and U.S. Tobacco, tobacco companies embarked on a systematic, half-century long scheme to ...:(a) stop competing with each other in making or developing less harmful cigarettes; (b) continue knowingly and willfully to engage in misrepresentations and deceptive acts by, among other things, denying knowledge that cigarettes caused disease and death and agreeing not to disseminate harmful information showing the destructive effects of nicotine and tobacco consumption; (c) shut down research efforts and suppress medical information that appeared to be adverse to the Tobacco Companies' position that tobacco was not harmful; (d) not compete with respect to making any claims relating to

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the relative health-superiority of specific tobacco products; and (e) to confuse the public about, and otherwise distort, whatever accurate information about the harmful effects of their products became known despite their "[efforts to conceal such information.]"

211 F.R.D. at 114 (quoting ¶ 104 of the complaint in Blue Cross & Blue Shield of New Jersey, Inc. v. Philip Morris, Inc., 178 F.Supp.2d 198 (E.D.N.Y.2001) (alteration in original), and citing Falise v. Am. Tobacco Co., 94 F.Supp.2d 316, 329-33 (E.D.N.Y.2000), to which the Simon II Third Amended Complaint refers for description of the fraudulent conduct).

In 1999, a group of cigarette smokers filed a class action captioned Simon v. Philip Morris Inc., No. 99 CV 1988(JBW) (" Simon I "), on behalf of 20-pack-year smokers. They sought a determination of both compensatory and punitive damages for personal injury or wrongful death caused by lung cancer. Plaintiffs limited the class to 20-pack-year smokers because their medical and scientific experts had determined that, for that class, general and specific causation merged, and both could be proved class-wide without individual trials.

The Simon I class moved for certification in April 2000. Without ruling on the certification motion, the district court issued an order on April 18, 2000, consolidating Simon I and seven other tobacco-related suits pending before it "for purposes of settlement and for no other purpose."...

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