Glover v. Philip Morris Usa

• Decision Date: 26 July 2005
• Docket Number: No. 3:04-CV-403-J-32MMH.,3:04-CV-403-J-32MMH.
• Citation: 380 F.Supp.2d 1279
• Parties: Geneva GLOVER and James Gillins, as private attorneys general, Plaintiffs, v. PHILIP MORRIS USA, and Liggett Group, Inc., Defendants.
• Court: U.S. District Court — Middle District of Florida

380 F.Supp.2d 1279

Geneva GLOVER and James Gillins, as private attorneys general, Plaintiffs, v. PHILIP MORRIS USA, and Liggett Group, Inc., Defendants.

No. 3:04-CV-403-J-32MMH.

United States District Court, M.D. Florida, Jacksonville Division.

July 26, 2005.

COPYRIGHT MATERIAL OMITTED

Chan P. Townsley, Deborah B. McIlhenny, Derek S. Casey, Mark B. Hutton, Hutton & Hutton, Wichita, KS, Charles J. Fitzpatrick, Egan, Fitzpatrick, Malsch & Cynkar, PLLC, McLean, VA, Robert J. Cynkar, Joseph R. Egan, Egan, Fitzpatrick, Malsch & Cynkar, PLLC, Vienna, VA, Charles L. Richardson, Fred Stoops, Gary L. Richardson, Richardson, Stoops, Richardson & Ward, Tulsa, OK, Daniel M. Cohen, Jonathan W. Cuneo, The Cuneo Law Group, Washington, DC, Mark Rowan Miller, Ford, Miller & Wainer, P.A., Norwood Sherman Wilner, Stephanie J. Hartley, Spohrer, Wilner, Maxwell & Matthews, P.A., Jacksonville, FL, for Plaintiffs.

Dana G. Bradford, II, David Scott Brecher, Smith, Gambrell & Russell, LLP, Charles Cook Howell, III, Howell & O'Neal, P.A., Jacksonville, FL, Daniel F. Molony, Shook, Hardy & Bacon, L.L.P., Tampa, FL, Murray R. Garnick, Robert Alexander McCarter, Arnold & Porter, Washington, DC, for Defendants.

ORDER

CORRIGAN, District Judge.

This case is before the Court on Defendants' Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), (Doc. 57), and plaintiffs' response (Doc. 66). The Honorable Charles E. Grassley, United States Senator, filed an amicus curiae memorandum in opposition to defendants' motion. (Doc. 72). Defendants, with leave of the Court, filed a reply. (Doc. 77). The Court heard oral argument on defendants' motion, the proceedings of which are hereby incorporated by reference. (Doc. 89).

I. Motion to Dismiss Standard

When considering a motion to dismiss under Rule 12(b)(6) a court must accept the allegations of the plaintiff's complaint as true and construe the allegations in the light most favorable to the plaintiff. Hill v. White, 321 F.3d 1334, 1335 (11th Cir.2003). A complaint may not be dismissed under Rule 12(b)(6) "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." Lopez v. First Union Nat'l Bank, 129 F.3d 1186, 1189 (11th Cir.1997) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). Rule 12(b)(6) authorizes a court to dismiss a complaint on a dispositive issue of law. Marshall County Bd. of Educ. v. Marshall County Gas Dist., 992 F.2d 1171, 1174 (11th Cir.1993).

II. Background

The Medicare Secondary Payer statute ("MSP"), which was enacted to reduce federal health care costs, "makes Medicare the secondary payer for medical services provided to Medicare beneficiaries whenever payment is available from another primary payer." Cochran v. United States Health Care Fin. Admin., 291 F.3d 775, 777 (11th Cir.2002). "This means that if payment for covered services has been or is reasonably expected to be made by someone else, Medicare does not have to pay." Id. "Consequently, Medicare is empowered to recoup from the rightful primary payer (or from the recipient of such payment) if Medicare pays for a service that was, or should have been, covered by the primary insurer." United States v. Baxter Int'l, Inc., 345 F.3d 866, 875 (11th Cir.2003). The MSP also contains a private cause of action which gives private citizens an incentive to aid the government in recovering "funds erroneously paid by Medicare." Manning v. Utilities Mut. Ins. Co., 254 F.3d 387, 397 n. 8 (2d Cir.2001). The Eleventh Circuit has noted that while the "MSP's function is straightforward," the "statute is structurally complex — a complexity that has produced considerable confusion among courts attempting to construe it." Baxter, 345 F.3d at 875.

Plaintiffs Geneva Glover and James Gillins filed this action as private attorneys general under the MSP to recover expenditures Medicare made in Florida after May 26, 1998, for the treatment of diseases attributable to cigarette smoking. (Doc. 42, ¶ 1). According to the First Amended Complaint, defendants Philip Morris USA and Liggett Group, Inc. have long known that the nicotine in cigarettes is addictive. (Id., ¶ 62). Defendants, however, allegedly denied and attempted to conceal the addictive nature of their cigarettes. (Id., ¶ 64). The addictiveness of cigarettes, plaintiffs allege, causes their prolonged use which in turn increases the risk of a smoker contracting a disease attributable to smoking. (Id., ¶¶ 57, 59). Thus, plaintiffs contend that exposing persons to the nicotine in cigarettes is a harmful or offensive contact with those persons constituting a common law battery by defendants. (Id., ¶¶ 57-69). Plaintiffs claim that, as a result of this battery, defendants are liable for the victims' medical expenses attributable to cigarette smoking. (Id., ¶ 71). Some of these victims became Medicare beneficiaries and Medicare has paid for their smoking related medical expenses. (Id., ¶ 72).

Based on these allegations, plaintiffs bring a cause of action under the MSP. (Id., ¶ 74). Plaintiffs allege that defendants, as a result of their battery, have the responsibility to reimburse Medicare for the medical costs of Medicare beneficiaries' smoking related diseases. (Id.). Neither defendant has paid such costs, (Id., ¶ 76), while Medicare continues to pay medical expenses for diseases associated with the smoking of defendants' cigarettes. (Id., ¶ 77). Plaintiffs allege that, under the MSP's private cause of action, they are entitled to sue as private attorneys general for damages totaling double the amount Medicare has paid in medical expenses for its Florida beneficiaries' diseases attributable to smoking cigarettes. (Id., ¶ 79). Plaintiffs' First Amended Complaint limits their claim to post May 26, 1998, medical expenses paid by Medicare on behalf of its Florida beneficiaries. (Id., ¶ 1). Even with these limitations, at oral argument, plaintiffs estimated their damages claim to be in the billions of dollars.

Defendants have now moved to dismiss plaintiffs' First Amended Complaint. (Doc. 57). Defendants argue that plaintiffs' claims are barred by collateral estoppel, are duplicative of those brought by the United States in a different forum, and fail to state a claim because the MSP does not provide a private cause of action against an alleged tortfeasor, meaning a defendant accused of a tort that has not yet been found liable, against which no judgment has been entered and as to which no settlement or compromise has been reached. (Id.).

III. Discussion

A. Collateral Estoppel

Defendants argue that the Court should dismiss the First Amended Complaint because plaintiffs are collaterally estopped from arguing that defendants are "required or responsible" to reimburse Medicare under the MSP. (Doc. 58 at 15). That issue, according to defendants, has been fully litigated by the government in federal court in the District of Columbia and by private attorney general plaintiffs in federal court in New York. (Id. at 15-20). Plaintiffs respond that collateral estoppel is inapplicable here because there has been an intervening change in the MSP, plaintiffs are not in privity with the plaintiffs in the other lawsuits, and the public interest mandates that the prior adjudications not be given conclusive effect. (Doc. 66 at 17-18).

1. The Lawsuit Brought by the United States

Defendants first argue that plaintiffs' claims are collaterally estopped based upon the claims brought by the United States in the District of Columbia. See United States v. Philip Morris Inc., 116 F.Supp.2d 131 (D.D.C.2000) (Philip Morris I); United States v. Philip Morris Inc., 156 F.Supp.2d 1 (D.D.C.2001) (Philip Morris II). In Philip Morris I and Philip Morris II, the United States sued eleven tobacco entities (including defendants in this case) to recover health care expenditures for tobacco-related illnesses. Philip Morris I, 116 F.Supp.2d at 134. The government's claims were based on three statutes: the MSP, the Medical Care Recovery Act ("MCRA"), and the Racketeer Influenced and Corrupt Organizations Act ("RICO"). The government's theory under the MSP was that the defendants were "primary plans" as defined by the MSP because they "themselves assumed the liability stemming from tobacco-related tort suits and, therefore, as `self-insured' entities, [could] be sued under MSP." Id. at 145. The Philip Morris I court dismissed the government's MSP count because it lacked "any allegation that [the companies] have established a `plan' or `arrangement' under which they would be considered self-insured entities subject to MSP's reach." Id. at 146.

The government subsequently amended its MSP claim, Philip Morris II, 156 F.Supp.2d at 2, alleging that the companies "recognized the risks associated with their manufacture, sale, and promotion of tobacco products, considered the possibility of insuring against such risks through contract, agreement, or arrangement with one another, and/or, third party insurers, and made the business decision to obtain partial third party insurance and/or to self-insure, in whole or in part, against those risks." Id. at 4-5. However, the court again granted defendants' motion to dismiss, reasoning that the amended complaint failed to allege the requirements of a "self-insured plan" as used in the MSP, including "the existence of reserves or procedures for establishing and calculating them; of claims-handling procedures; of a fiduciary (or other independent body) to perform these tasks; or written documents allocating legal responsibilities and obligations." Id. at 6.

Defendants argue that the holdings in Philip Morris I and Philip Morris II that they were not "required or responsible" under the MSP to reimburse Medicare precludes that issue from being revisited here. According to defendants, plaintiffs, as private attorneys general, are in privity with the federal government,...