Laborers Local 17 Health & Ben. v. Philip Morris, 97 Civ. 4550(SAS).

• Citation: 7 F.Supp.2d 277
• Decision Date: 25 March 1998
• Docket Number: No. 97 Civ. 4676.,No. 97 Civ. 8462.,No. 97 Civ. 4550(SAS).,Nos. 97 Civ. 9395-9402.,No. 97 Civ. 7346.,97 Civ. 4550(SAS).,97 Civ. 4676.,97 Civ. 7346.,97 Civ. 8462.,s. 97 Civ. 9395-9402.
• Court: United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
• Parties: LABORERS LOCAL 17 HEALTH & BENEFIT FUND and The Transport Workers Union New York City Private Bus Lines Health Benefit Trust, Plaintiffs, v. PHILIP MORRIS, INC., R.J. Reynolds Tobacco Co., Brown & Williamson Tobacco Corp., B.A.T. Indus. P/L/C/. Lorillard Tobacco Co., Inc., Liggett & Myers Inc., The American Tobacco Co., United States Tobacco Co., The Council for Tobacco Research-USA, Inc., The Tobacco Institute, Inc., Smokeless Tobacco Council, Inc., and Hill & Knowlton, Inc., Defendants.

7 F.Supp.2d 277

LABORERS LOCAL 17 HEALTH & BENEFIT FUND and The Transport Workers Union New York City Private Bus Lines Health Benefit Trust, Plaintiffs, v. PHILIP MORRIS, INC., R.J. Reynolds Tobacco Co., Brown & Williamson Tobacco Corp., B.A.T. Indus. P/L/C/. Lorillard Tobacco Co., Inc., Liggett & Myers Inc., The American Tobacco Co., United States Tobacco Co., The Council for Tobacco Research-USA, Inc., The Tobacco Institute, Inc., Smokeless Tobacco Council, Inc., and Hill & Knowlton, Inc., Defendants.

No. 97 Civ. 4550(SAS).

No. 97 Civ. 4676.

No. 97 Civ. 7346.

No. 97 Civ. 8462.

Nos. 97 Civ. 9395-9402.

United States District Court, S.D. New York.

March 25, 1998.

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Perry Weitz, Arthur M. Luxenberg, Steven E. Fineman, Karen J. Mandel, Weitz & Luxenberg, P.C., New York City, Melvyn I. Weiss, David J. Bershad, Michael C. Spencer, Kenneth J. Vianale, Milberg Weiss Bershad Hynes & Lerach LLP, New York City, William S. Lerach, Patrick J. Coughlin, Allen M. Mansfield, Milberg Weiss Bershad Hynes & Lerach LLP, San Diego, CA, Robert J. Connerton, James S. Ray, John McN. Broaddus, Connerton & Ray, Washington, D.C., Stephen Gordon, Joel Spivak, Mirkin & Gordon, Great Neck, NY, for plaintiffs in the Laborers Local 17 (97 Civ. 4550) and UFT (97 Civ. 4676) Actions.

Michael A. Ciaffa, G. Oliver Koppell, Meyer, Suozzi, English & Klein, P.C., Mineola, NY, Robert S. Schachter, Natalie Blaney, Zwerling, Schachter & Zwerling, LLP, New York City, Levy, Ratner & Behroozi, p.c., New York City, for plaintiffs in Puerto Rican ILGWU (97 Civ. 8462) and Later-filed Actions (97 Civ. 9395 through 97 Civ. 9402).

David Paul Horowitz, Law Office of David Paul Horowitz, New York City, for plaintiffs in cases 97 Civ. 9399 and 97 Civ. 9401 only.

Peter C. Hein, Barbara Robbins, Wachtell, Lipton, Rosen & Katz, New York City, Paul K. Stecker, Paul F. Jones, Phillips, Lytle, Hitchcock, Blaine & Huber, Buffalo, New York, for defendant Philip Morris Incorporated.

Marjorie Press Lindblom, Peter A. Bellacosa, Kirkland & Ellis, New York City, David M. Bernick, Kirkland & Ellis, Chicago, IL, Kenneth N. Bass, Paul B. Taylor, Kirkland & Ellis, Washington, DC, for defendant Brown & Williamson Tobacco Corporation, including as successor by merger to defendant The American Tobacco Company.

Robert W. Gaffey, Michael S. Chernis, Jones, Day, Reavis & Pogue, New York City, Robert F. McDermott, Jr., Donald B. Ayer, Jones, Day, Reavis & Pogue, Washington, DC, for defendant R.J. Reynolds Tobacco Company, RJR Nabisco Holdings Corp. and RJR Nabisco, Inc.

Mark Cunha, Adam Stein, Simpson Thacher & Bartlett, New York City, for defendant B.A.T Industries p.l.c. in all cases and attorneys for defendant British-American Tobacco Company Ltd. in all cases except 97 Civ. 9395-9398, 97 Civ. 9400 and 07 Civ 9402.

Thomas J. McCormack, Robert Pruyne, Chadbourne & Parke, New York City, for defendant British-American Tobacco Company Ltd. in cases 97 Civ.9395-9398, 97 Civ. 9400 and 97 Civ. 9402.

Alan E. Mansfield, Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, New York City, Robert E. Northrip, Bruce R. Tepikian, Samuel B. Sebree, Shook, Hardy & Bacon, L.L.P., Kansas City, MO, for defendant Lorrilard Tobacco Company.

Peter J. McKenna, Eric S. Sarner, Mark S. Cheffo, Skadden, Arps, Slate, Meagher & Flom LLP, New York City, for defendants United States Tobacco Company.

Anthony Mansfield, Seward & Kissel, New York City, for defendant The Tobacco Institute, Inc.

Steven Klugman, Debevoise & Plimpton, New York City, for defendant The Council for Tobacco Research-U.S.A., Inc.

Michael M. Fay, Kasowitz, Benson, Torres & Friedman, New York City, for defendant Liggett Group, Inc.

Bruce M. Ginsberg, Michael C. Lasky, Davis & Gilbert, New York City, for defendant Hill & Knowlton, Inc. Barry S. Schaevitz, Jacob, Medinger & Finnegan, LLP, New York City, for defendant Smokeless Tobacco Council, Inc.

OPINION AND ORDER

SCHEINDLIN, District Judge.

I. Background

Plaintiffs are labor union health and welfare trust funds (the "Funds") that supplement employers' basic medical benefits by providing death, disability and prescription drug benefits and related services. Defendants are tobacco companies and tobacco public relations firms. Plaintiffs allege that defendants have engaged in a conspiracy to deceive the general public, including plaintiffs, as to the health risks associated with smoking, the addictiveness of nicotine, and the levels of nicotine in their products. As a result, plaintiffs allege, they have spent millions of dollars more than they otherwise would have to provide medical benefits to health plan participants. The Funds have brought this action "to recover money expended ... to provide medical treatment to their participants and beneficiaries who have suffered and are suffering from tobacco-related illnesses and to obtain appropriate injunctive relief." Class Action Complaint and Demand for Jury Trial ¶ 7, Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., No. 97 Civ. 4550 (S.D.N.Y. filed June 19, 1997) [hereinafter Compl.].¹ Plaintiffs allege RICO and antitrust violations, and assert common law claims for fraud, breach of special duty, and unjust enrichment.

Defendants have moved to dismiss the action under Fed.R.Civ.P. 12(b)(6) for failure to state a claim. They contend that plaintiffs have no direct claim against defendants for three reasons: 1) as a matter of law, the chain of causation between plaintiffs' injuries and defendants' alleged acts is too attenuated to support a verdict for plaintiffs, because the alleged injuries are only remotely connected to defendants' alleged acts, 2) plaintiffs' sole remedy is by subrogation to their participants' claims, and 3) the federal Cigarette Labeling and Advertising Act preempts all of plaintiffs' common law claims. Defendants also raise additional count-specific objections to each of plaintiffs' claims.

II. Jurisdiction

This Court has subject matter jurisdiction over the action pursuant to 28 U.S.C. §§ 1331, 1337 (1994) because Counts I-III of the complaint raise questions of federal law. Supplemental jurisdiction over the state claims raised in Counts IV-X is asserted because the federal and state claims both derive from "a common nucleus of operative fact." United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966); Promisel v. First Am. Artificial Flowers, Inc., 943 F.2d 251, 254 (2d Cir. 1991); 28 U.S.C. § 1367(a) (1994).

III. Legal Standard for Motion to Dismiss

In deciding a motion to dismiss under Rule 12(b)(6), the court must accept all material facts alleged in the complaint as true and must draw all reasonable inferences in the nonmovant's favor. See Kaluczky v. City of White Plains, 57 F.3d 202, 206 (2d Cir.1995). The court may not grant the motion merely because recovery seems remote or unlikely. Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir.1996) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)). A complaint should not be dismissed for failure to state a claim unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id. (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).

IV. Discussion

In recent months, state and federal courts have seen an explosion of civil actions arising from the use, marketing or sale of tobacco products. To date over forty states have filed suit, as have cities, counties, and private third-party payors, all attempting to recover the cost of treating tobacco-related diseases. See Proposed Tobacco Industry Settlement, Preamble, ¶ 22 (June 20, 1997). All of these cases address common questions: If in fact the tobacco industry is liable for the cost of tobacco-related disease, to whom should it be held responsible?

As the contents of the tobacco industry's internal research and marketing documents become increasingly available to the general public, some have become convinced that the tobacco industry should be held liable for the entire cost of tobacco-related disease, however that cost was incurred.² Whether an industry should be penalized for successfully marketing a legal product is certainly an interesting question, but it is beyond the scope of any single lawsuit. Policymaking on such a scale is ordinarily left to the legislature; in fact, there are various proposals before Congress that would "mandate a total reformation and restructuring of how tobacco products are manufactured, marketed, and distributed in this country." Proposed Tobacco Industry Settlement, Preamble ¶ 1.³ The issue addressed here, in contrast, is much more limited: to determine whether and how defendants should be held responsible to these particular plaintiffs.

As a result, allegations that the defendants have marketed their products to children, that these products are unreasonably dangerous, or that they have inflicted harm on individual smokers are not relevant here. Nor are claims of harm to society or to plaintiffs as members of the general public. Rather, as fundamental principles of proximate cause dictate, plaintiffs may only recover for injuries that they have suffered. If those injuries were caused by defendants, then defendants should indeed be held responsible. But plaintiffs have no standing to vindicate the public's rights. When stripped to the basics, the issues in this litigation are relatively simple: To the extent that plaintiffs have alleged that defendants have harmed them directly, they have stated a claim on which relief may be granted.

A. Do plaintiffs have a direct claim against defendants?

Because the issue of proximate cause is central to the disposition of this case, I will discuss it in some detail before addressing plaintiffs' state and federal claims individually.

1. Proximate Cause

Defendants'...