Association of Wash. Public Hosp. v. Philip Morris

• Decision Date: 13 December 1999
• Docket Number: No. C98-1675Z.,C98-1675Z.
• Citation: 79 F.Supp.2d 1219
• Parties: ASSOCIATION OF WASHINGTON PUBLIC HOSPITAL DISTRICTS, a Washington unincorporated association, et al., Plaintiffs, v. PHILIP MORRIS INCORPORATED, et al., Defendants.
• Court: U.S. District Court — Western District of Washington

79 F.Supp.2d 1219

ASSOCIATION OF WASHINGTON PUBLIC HOSPITAL DISTRICTS, a Washington unincorporated association, et al., Plaintiffs, v. PHILIP MORRIS INCORPORATED, et al., Defendants.

No. C98-1675Z.

United States District Court, W.D. Washington, at Seattle.

December 13, 1999.

Bradley J. Berg, Christopher Kane, Roger D. Mellem, Michael K Vaska, Foster Pepper & Shefelman, Seattle, WA, for Association of Washington Public Hospital Districts, Grays Harbor County Public Hosp. Dist. No 1, King County Public Hosp. dist. No 1, Okanogan County public Hosp. Dist. No 4, plaintiffs.

Christopher Kane, Foster Pepper & Shefelman, Seattle, WA, for Adams County Public Hospital Dist. No 2, Adams County Public Hospital Dist. No 3, Affiliated Health Services, Chelan County Public Hospital Dist. No 1, Chelan County Public Hospital Dist. No 2, Clallam County Public Hospital Dist. No 1, Clallam County Public Hospital Dist. No 2, Douglas Grant Lincoln Okanogan Counties Public Hospital Dist. No 6, Ferry County Public Hospital Dist. No 1, Garfield County Public Hospital District, Grant County Public Hospital Dist. No 1, Grant County Public Hospital Dist. No 2, Jefferson County Public Hospital Dist. No 2, Kennewick Public Hospital Dist., King County Public Hospital Dist. No 2, Kittitas County Public Hospital Dist. No 1, Lewis County Public Hospital District No 1, Lincoln County Public Hospital District No 1, Mason County Public Hospital District No 1, Okanogan County Public Hospital District No 3, Okanogan and Douglas Counties Public Hospital District No 1, Pacific County Public Hospital District No 2, Pacific County Public Hospital District No 3, Pend Oreille County Public Hospital District No 1, Skagit Co Public Hosp., Skagit County Public Hospital Dist. No 2, Skagit and Whatcom Counties Public Hospital Dist. No 304, Snohomish County Public Hospital Dist. No 1, Snohomish County Public Hospital Dist. No 2, Snohomish County Public Hospital Dist. No 3, Whitman County Public Hospital Dist. No

1-A, Whitman County Public Hospital Dist. No 3, plaintiffs.

Michael K Vaska, Foster Pepper & Shefelman, Seattle, WA, for Grant County Public Hospital Dist. No 3, Prosser Public Hospital Dist., plaintiffs.

John Wentworth Phillips, Heller Ehrman White & McAuliffe, Seattle, WA, for Philip Morris Inc, defendant.

Bradley S. Keller, Byrnes & Keller, Seattle, WA, Peter J Busch, Howard, Rice, Nemerovski, Canady, Falk & Rabkin, San Francisco, CA, for RJ Reynolds Tobacco Company, defendant.

John Arthur Tondini, Byrnes & Keller, Seattle, WA, for Brown & Williamson Tobacco Corp, defendant.

Stephen Murray Todd, Mark Robert Koenig, Todd & Wakefield, Seattle, WA, for Bat Industries PLC, defendant.

Delbert D Miller, Miller Bateman LLP, Seattle, WA, for United States Tobacco Co, defendant.

Patrick S Davies, Covington & Burling, Washington, DC, for Tobacco Institute Inc, defendant.

John D. Wilson, Jr., Wilson, Smith, Cochran & Dickerson, Seattle, WA, for Smokeless Tobacco Council Inc, defendant.

Bradley S. Keller, Byrnes & Keller, Seattle, WA, for RJ Reynolds Tobacco Company, defendant.

Michael P Panagrossi, David Moss, Adam I Stein, Mary Elizabeth McGarry, Simpson Thacher & Bartlett, New York City, Stephen Murray Todd, Mark Robert Koenig, Todd & Wakefield, Seattle, WA, for British American Tobacco P.L.C. fka B.A.T. Industries, defendant.

John G. Bergmann, Robert N Gellatly, Jr., Helsell Fetterman LLP, Seattle, WA, for Liggett Group Inc, Liggett & Myers Inc, defendants.

ORDER

ZILLY, District Judge.

Plaintiffs are Public Hospital Districts in counties throughout Washington State, and the trade association of these hospital districts (collectively, the "plaintiffs"). Defendants are tobacco companies and related entities associated with the tobacco manufacturers (collectively, the "defendants"). Plaintiffs have brought federal and state claims against defendants for the unreimbursed health care costs associated with treating patients with smoking-related illnesses. This matter comes before the Court on the defendants' motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), docket no. 34. The Court heard oral argument on October 15, 1999, and took the matter under advisement. The Court has considered the briefs of the parties and the oral argument of counsel and now GRANTS defendants' motion to dismiss for the reasons stated in this order.

BACKGROUND

Plaintiffs, political subdivisions of the State of Washington, are required by law to provide medical care and services for the residents of their districts. RCW 70.44.003. Each plaintiff alleges that it was required by law to provide unreimbursed health care services to patients who have suffered from tobacco-related diseases. Second Amended Complaint ("SAC"), ¶¶ 1 and 17; RCW 70.170.060. Plaintiffs allege that defendants engaged in deceptive acts and conspired to perpetuate smoking and nicotine addiction in the United States. Plaintiffs further allege that the tobacco companies have forced the public hospitals and others to bear the cost of such care. Plaintiffs seek to recover the unreimbursed portion of this cost, SAC at ¶¶ 1-10, as well as other equitable and injunctive relief.

Plaintiffs seek recovery under various legal theories including federal antitrust violations, RICO violations, fraudulent misrepresentation, fraudulent concealment, breach of a special duty to disclose health hazards, unjust enrichment, conspiracy, violations of the Washington Consumer Protection Act, and public nuisance. Defendants have moved pursuant to Fed. R.Civ.P. 12(b)(6) to dismiss plaintiffs' claims for several reasons, including, but not limited to: (1) plaintiffs' claims are too remote and wholly derivative of injuries to unnamed smoker-patients; and (2) plaintiffs' losses are in fact expenses which the plaintiffs had a duty to incur. Defendants' memo in supp., docket no. 35, at 1.

Plaintiffs here bring claims similar to other plaintiffs who have unsuccessfully sought recovery for injuries that derive from the treatment of smokers' illnesses. In Oregon Laborers-Employers Health & Welfare Trust Fund v. Philip Morris, Inc., 185 F.3d 957 (9th Cir.1999), petition for cert. filed, 68 U.S.L.W. 3274 (U.S. Oct. 12, 1999) (No. 99-642) the Ninth Circuit affirmed the dismissal of the plaintiff union trusts' claims for failure to state a claim. In that case, the Court concluded that plaintiffs' claims were "too remote" from defendants' alleged wrongdoing to allow recovery. Id. at 964. In other words, there was no showing of a direct link between the alleged misconduct of many of the same defendant tobacco companies and the alleged damage to the union trusts. Three other Circuits have reached the same result. See Laborers Local 17 Health and Benefit Fund v. Philip Morris, Inc., 191 F.3d 229 (2d Cir.1999), petition for cert. denied, ___ U.S. ___, 120 S.Ct. 799, ___ L.Ed.2d ___ (1999); Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912 (3d Cir.1999), petition for cert. filed, 68 USLW 3251 (U.S. Jan. 10, 2000); Int'l Bhd. of Teamsters, Local 734 Health & Welfare Trust Fund v. Philip Morris, Inc., 196 F.3d 818 (7th Cir.1999). This Court has dismissed similar derivative actions by third party payors of medical costs. Regence Blueshield v. Philip Morris, Inc., 40 F.Supp.2d 1179 (W.D.Wash.1999), appeal docketed, No. 99-35204 (9th Cir. March 1, 1999); see also Int'l Bhd. of Teamsters, 196 F.3d 818 (dismissing claims by Blue Cross and Blue Shield, consolidated with trust fund suits). Plaintiffs in these cases asserted the same federal, state statutory, and common law claims now alleged in the present case.

The issue presented in this case is whether plaintiffs' claims are different than the previous unsuccessful claims of the union trusts and third party insurance providers. For the reasons stated in this order, the Court concludes that they are not; the rationale of Oregon Laborers is fatal to plaintiffs' claims and this case must be dismissed. As in Oregon Laborers, plaintiffs' claims in this case are derivative of the harm suffered by non-party smokers and the defendants did not proximately cause the injuries alleged.

ANALYSIS

(A) Rule 12(b)(6) Standard

On a motion to dismiss under Rule 12(b)(6) the Court must accept as true all plaintiffs' allegations and construe those allegations in the light most favorable to plaintiffs. NOW v. Scheidler, 510 U.S. 249, 256, 114 S.Ct. 798, 127 L.Ed.2d 99 (1994); Nelson v. City of Irvine, 143 F.3d 1196, 1200 (9th Cir.), cert. denied, ___ U.S. ___, 119 S.Ct. 444, 142 L.Ed.2d 399 (1998). Thus, the complaint should be dismissed for failure to state a claim only if plaintiffs can prove no set of facts which would entitle them to relief.

For purposes of this motion, the Court assumes that the following facts alleged by plaintiffs are true. Tobacco use is harmful to the user's health. See SAC ¶¶ 73-82. The defendants had evidence of this fact for many years and have conspired to withhold this information from the public, including the public health care industry. See id. ¶¶ 87-163. This lack of information prevented plaintiffs from properly informing its patients about the dangers of tobacco use and delayed the implementation of programs to reduce tobacco use. See id. ¶¶ 17-18, 317-319. The defendants conspired to suppress the research and development of less harmful tobacco products. See id. ¶¶ 204-234, 304-310. The absence of less harmful tobacco products prevented public health officials from encouraging patients to utilize safer products. See id. ¶¶ 317-319, 401. Plaintiffs have incurred costs associated with the unreimbursed health care treatment of tobacco-related illnesses. See id. ¶¶ 1-3. Had the defendants not withheld information and suppressed research into less harmful products, fewer patients would have used the more harmful products. See id. ¶¶ 4-10. Consequently, fewer patients would have developed a tobacco-related illness and the public hospitals'...