Arkansas Blue Cross and Blue Sh. v. Philip Morris, 98 C 2612.
| Decision Date | 06 April 1999 |
| Docket Number | No. 98 C 2612.,98 C 2612. |
| Citation | 47 F.Supp.2d 936 |
| Parties | ARKANSAS BLUE CROSS AND BLUE SHIELD, a Mutual Insurance Company, and its affiliate HMO partners, Inc.; Health Care Service Corp., a Mutual Legal Reserve Company, (dba Blue Cross Blue Shield of Illinois (aka HMO Illinois)), and its subsidiary, BCI HMO, Inc.; Anthem Insurance Companies, Inc., and its subsidiaries, Anthem Blue Cross Blue Shield, Anthem Blue Cross Blue Shield of Connecticut, Southeastern Group, Inc., Southeastern United Medgroup, Inc., and Community Insurance Company; Blue Cross and Blue Shield of Missouri, Inc., and its subsidiaries, RightChoice Managed Care, Inc. (dba Alliance Blue Cross Blue Shield), Healthy Alliance Life Insurance Company, HMO Missouri, Inc. (dba BlueChoice), and RightChoice Insurance Company; Blue Cross and Blue Shield of Kansas City; Nordian Mutual Insurance Company (dba Blue Cross Blue Shield of North Dakota), and its affiliate, Lincoln Mutual Life and Casualty Insurance Company, and Wellmark, Inc., and its subsidiaries, Wellmark of South Dakota, Inc., Wellmark Community Insurance, Inc., and Wellmark Health Plan of Iowa, Inc., Plaintiffs, v. PHILIP MORRIS, INC.; R.J. Reynolds Tobacco Company; Brown & Williamson Tobacco Corporation; B.A.T. Industries, P.L.C.; British American Tobacco company, Ltd.; Lorillard Tobacco Company; Liggett Group, Inc.; Liggett & Myers, Inc.; United States Tobacco Company; The Tobacco Institute, Inc; The Smokeless Tobacco Council, Inc.; The Council for Tobacco Research-U.S.A. Inc.; Hill and Knowlton, Inc., and Unknown Corporations A-Z, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
James R. Carroll, Caesar A. Tabet, William Robert Quinlan, Quinlan & Crisham, P.C., Chicago, IL, for Arkansas Blue Cross
and Blue Shield, Health care Service Corp., Anthem Ins. Companies, Inc., Blue Cross and Blue Shield of Missouri, Inc., Blue Cross and Blue Shield of Kansas City, Nordian Mut. Ins. Co. and Wellmark, Inc., plaintiffs.
David Bruce Love, Thomas James Frederick, Dan K. Webb, Jeffrey Mark Wagner, Joseph J. Zaknoen, Andrew John Schaefer, Winston & Strawn, Chicago, IL, for Philip Morris, Incorporated, defendant.
Michael A. Pope, Cathy McNeil Stein, McDermott, Will & Emery, Chicago, IL, Thomas F. Gardner, Thomas P. McNulty, Jones, Day, Reavis & Pogue, Chicago, IL, Martin R. Glick, Howard, Rice, Nemerovski, Canady, Robertson & Falk, San Francisco, CA, for R.J. Reynolds Tobacco Company, defendant.
Fred A. Smith, III, Cathleen M. Jareczek, Sedgwick, Detert, Moran & Arnold, Chicago, IL, Kevin J. Dunne, Shelley L. Brittman, Nicholas W. Heldt, Sedgwick, Detert, Moran & Arnold, San Francisco, CA, for Brown & Williamson Tobacco Corporation, defendant.
Michael T. Hannafan, Cory A. Johnson, Mark Alan Cisek, Michael T. Hannafan & Associates, Ltd., Chicago, IL, Kathleen L Turland, Joseph M McLaughlin, Patrick D Bonner, Jr, Simpson, Thacher & Bartlett, New York City, for B.A.T. Industries P.L.C., defendant.
Michael T. Hannafan, Cory A. Johnson, Mark Alan Cisek, Chicago, IL,, for British American Tobacco Company, Ltd., defendant.
Gary Michael Elden, Gregory Campbell Jones, George Robert Dougherty, Tina M. Bagby, Grippo & Elden, Chicago, IL, for Lorillard Tobacco Company, defendant.
Harold C. Wheeler, James A. Morsch, Butler, Rubin, Saltarelli & Boyd, Chicago, IL, for Liggett & Myers, Inc., defendant.
Edward Michael Crane, Mark Edward Rakoczy, Deborah G. Solmor, Skadden, Arps, Slate, Meagher & Flom, Chicago, IL, for United States Tobacco Company, defendant.
Paul L. Price, Price, Tunney, Loughnane, Reiter & Bruton, Chicago, IL, Amy Kathleen Collingnon, Daniel W Farroll, Larry E Hepler, Borroughs, Hepler, Broom, MacDonald & Hebrank, Edwardsville, IL, for Tobacco Institute, Inc., defendant.
Royal B. Martin, Jr., Robert S. Grabemann, Martin, Brown & Sullivan, Ltd., Chicago, IL, for The Council for Tobacco Research - U.S.A., Inc., defendant.
George G. Argionis, Clausen Miller P.C., Chicago, IL, Michael T. Trucco, Stamos & Trucco, Chicago, IL, for The Smokeless Tobacco Research Council, Inc., defendant.
Deborah Lynn Kuhn, Altheimer & Gray, Chicago, IL, for Hill and Knowlton, Inc., defendant.
Harold C. Wheeler, James A. Morsch, Chicago, IL, for Unknown Corporations, A-Z, Liggett Group, Inc., defendant.
This action is one of three essentially identical actions brought by various Blue Cross and Blue Shield medical providers against numerous tobacco companies and others, alleging violations of federal RICO and antitrust laws, with pendent claims alleging violations of state law. Defendants seek dismissal under Rule 12(b)(6), Fed.R.Civ.P., for failure to state a claim. Similar motions were brought in the other two cases. The motion in the Western District of Washington was granted by Judge Rothstein. The motions in the Eastern District of New York case have been denied by Judge Weinstein.
The parties before me have extensively briefed the issues. There have also been numerous decisions addressing similar actions in addition to the opinions by Judge Weinstein and Judge Rothstein. This opinion will attempt to avoid repeating everything that has already been said on this subject and will be limited to an explanation of why I agree with Judge Weinstein's conclusion that plaintiffs have stated a claim for relief.
The facts alleged in plaintiffs' amended complaint may be summarized as follows: The plaintiffs are seven independent, mainly not-for-profit Blue Cross or Blue Shield Plans ("Blue Cross"). Blue Cross provides 68 million Americans with health plan financing, including benefits for tobacco related illnesses. Blue Cross has incurred billions of dollars in costs attributable to illnesses related to the use of tobacco. Its injury is economic. The defendant tobacco companies intentionally caused its injury through a continuing conspiracy that began in 1953. The conspiracy's purpose was to addict millions of Americans, including members of Blue Cross plans, to smoking cigarettes and other tobacco products. Their success has resulted in lung, throat and other cancers, heart disease, stroke, emphysema and other diseases. Smoking related illnesses are the leading cause of premature death in the United States. Non-smokers exposed to tobacco smoke are also affected. The conspiracy involved intentional misrepresentations about the safety of nicotine and its addictive properties, marketing efforts targeting children, and agreements not to produce or market safer cigarettes.
The basic argument made by defendants in these motions is that any injury to plaintiffs is indirect and too remote in terms of proximate cause to be legally redressable in this action. This argument has been accepted by some courts. Thus, in Regence Blueshield v. Philip Morris, Inc., et al., 40 F.Supp.2d 1179, 1999 U.S. Dist. LEXIS 1820 (W.D.Wash.1999), the court concluded that plaintiffs' injuries were "derivative" of personal injuries to smokers because it would be impossible to separate the smokers' injuries from that of the insurers and there would thus be a possibility of duplicative recovery. Id. at 1184. That conclusion has been rejected by the Seventh Circuit, however, which (in a somewhat different but still applicable context) has held that Blue Cross has an interest that is separate from that of its insureds for which it may seek recovery in appropriate cases. Blue Cross & Blue Shield United of Wisconsin v. Marshfield Clinic, 65 F.3d 1406 (7th Cir.1995). See also United States v. Aetna Casualty & Surety Co., 338 U.S. 366, 379, 70 S.Ct. 207, 94 L.Ed. 171 (1949). The Ninth Circuit has also reached the opposite conclusion in holding that an insured could not sue under RICO for money paid by his insurance company because only the insurance company has suffered the economic loss. Steele v. Hospital Corp. of America, 36 F.3d 69 (9th Cir.1994). Indeed, as Judge Weinstein noted in Blue Cross and Blue Shield of New Jersey, Inc. v. Philip Morris, Inc., 36 F.Supp.2d 560 (E.D.N.Y.1999) (slip op.) ("Blue Cross and Blue Shield"), it is unlikely that persons covered by Blue Cross plans could obtain reimbursement from Blue Cross for any damages paid in this case because they never paid the amounts that Blue Cross is seeking to recover. At 571.
Thus, the injury suffered by plaintiffs in this case is not derivative. It is the plaintiffs' own economic injury. Defendants' additional argument is that any wrong is not the proximate cause of Blue Cross' injury. Whether a plaintiff has sufficiently alleged facts from which proximate cause may be found is governed by Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992). In that case the Supreme Court held that SIPC could not bring a RICO action because it could not show that defendant's actions were the proximate cause of its injuries. Judge Weinstein, in the companion case to this one, has explained that under the Holmes analysis, proximate cause is sufficiently alleged in the complaints in these cases. First, the Holmes court was concerned that if an injury were too indirect, it might be too difficult to determine whether the plaintiff's injuries are due to defendant's conduct or to intervening third causes. Holmes, 503 U.S. at 269, 112 S.Ct. 1311. But in the present tobacco cases, Judge Weinstein noted that plaintiffs may well be able to bring reliable statistical and expert evidence to show the percentage of damage caused by defendants' actions. In addition, they will not have to be concerned with contributory negligence because the torts alleged are intentional. Blue Cross and Blue Shield, at 575-76. The Holmes court was also concerned about the apportionment of damages among various claimants. As noted above, however, and by Judge Weinstein, id. at 576, the damages claimed in this case are separate from the damages suffered by smokers. Plaintiffs "seek recovery only for the economic...
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