Group Health Plan, Inc. v. Philip Morris Usa, Inc., No. 02-1684.

CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)
Writing for the CourtMorris Sheppard Arnold
Citation344 F.3d 753
PartiesGROUP HEALTH PLAN, INC., a nonprofit Minnesota Health Maintenance Organization; Healthpartners, Inc., a nonprofit Minnesota Health Maintenance Organization, Appellants, v. PHILIP MORRIS USA, INC.; R.J. Reynolds Tobacco Company; Brown & Williamson Tobacco Company, suing as Brown & Williamson Tobacco Corporation; Lorillard Tobacco Company, Inc.; Liggett Group, Inc.; Hill & Knowlton, Inc.; Council for Tobacco Research USA, Inc.; The Tobacco Institute, Inc.; Smokeless Tobacco Council, Inc., Appellees. Medica, a nonprofit Minnesota Health Maintenance Organization, and subsidiary of Allina Health System, Appellant, v. Philip Morris USA, Inc.; R.J. Reynolds Tobacco Company; Brown & Williamson Tobacco Company, suing as Brown & Williamson Tobacco Corporation; Lorillard Tobacco Company, Inc.; Liggett Group, Inc.; Hill & Knowlton, Inc.; Council for Tobacco Research USA, Inc.; The Tobacco Institute, Inc., Appellees.
Decision Date16 September 2003
Docket NumberNo. 02-1684.,No. 02-1688.
344 F.3d 753
GROUP HEALTH PLAN, INC., a nonprofit Minnesota Health Maintenance Organization; Healthpartners, Inc., a nonprofit Minnesota Health Maintenance Organization, Appellants,
v.
PHILIP MORRIS USA, INC.; R.J. Reynolds Tobacco Company; Brown & Williamson Tobacco Company, suing as Brown & Williamson Tobacco Corporation; Lorillard Tobacco Company, Inc.; Liggett Group, Inc.; Hill & Knowlton, Inc.; Council for Tobacco Research USA, Inc.; The Tobacco Institute, Inc.; Smokeless Tobacco Council, Inc., Appellees.

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Medica, a nonprofit Minnesota Health Maintenance Organization, and subsidiary of Allina Health System, Appellant,
v.
Philip Morris USA, Inc.; R.J. Reynolds Tobacco Company; Brown & Williamson Tobacco Company, suing as Brown & Williamson Tobacco Corporation; Lorillard Tobacco Company, Inc.; Liggett Group, Inc.; Hill & Knowlton, Inc.; Council for Tobacco Research USA, Inc.; The Tobacco Institute, Inc., Appellees.
No. 02-1684.
No. 02-1688.
United States Court of Appeals, Eighth Circuit.
Submitted: May 15, 2003.
Filed: September 16, 2003.

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Lawrence T. Hofmann, argued, Minneapolis, MN (Richard M. Hagstrom, Lewis

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A. Remele, Jr., Charles E. Lundberg, Gregory P. Bulinski, on the brief), for appellant.

Murray R. Garnick, argued, Washington, DC (Robert A. McCarter and J. Benjamin King, Washington, DC, Alan C. Kohn and Robert F. Murray, St. Louis, MO, on the brief), for appellee.

Before MORRIS SHEPPARD ARNOLD and HANSEN, Circuit Judges, and READE,1 District Judge.

MORRIS SHEPPARD ARNOLD, Circuit Judge.


For the purposes of the summary judgment motion that we review today, several tobacco companies (Tobacco) conceded that they conspired to mislead the public as to the health risks of smoking. As the district court2 did, we consider whether three Minnesota nonprofit health maintenance organizations (HMOs) have presented sufficient evidence of causation of harm and damages to recoup certain health-care costs of their members that resulted from tobacco use. For the reasons expressed below, we affirm the summary judgment entered in favor of Tobacco on the HMOs' damages claims, but we remand for further consideration of the HMOs' suit for injunctive relief.

I.

This case involves the question of what a plaintiff must show to prove causation of harm, injury in fact, and damages under three Minnesota misrepresentation statutes (unlawful trade practices, see Minn. Stat. § 325D.13, false statement in advertising, see Minn.Stat. § 325F.67, and prevention of consumer fraud, see Minn.Stat. § 325F.69, subd. 1) and under Minnesota's antitrust statutes (Minn.Stat. § 325D.49-.66). We have the advantage of some recent guidance from the Minnesota Supreme Court on the question.

Following Tobacco's motion to dismiss for failure to state a claim upon which relief can be granted, see Fed. R. Civ. Proc. 12(b)(6), the district court certified two questions to the Minnesota Supreme Court. Only the second question is currently relevant, namely, whether the HMOs must "prove individual purchaser reliance on the defendants' statements or conduct in order to be eligible for relief in the form of damages under [the misrepresentation statutes]," Group Health Plan, Inc. v. Philip Morris Inc., 621 N.W.2d 2, 5 (Minn.2001). The Minnesota Supreme Court responded that although proof of "traditional common law reliance" was not necessary for a private plaintiff to recover damages, "causation remains an element of such a claim." Id. at 13. Although the Minnesota Supreme Court declined to delineate exactly what constituted proof of causation, it stated that the relevant statutes require "some legal nexus between the injury and the defendants' wrongful conduct" before a recovery may be had, id. at 14 (internal quotation omitted), and that it was the HMOs' burden to prove that nexus, id. at 15. The court also directed the district court to look to cases under the Lanham Act, 15 U.S.C. § 1125(a), for guidance, because those cases, in its view, "reflect the appropriate sensitivity to the remedial goals of the statute that are paralleled in the [misrepresentation] statutes at issue here." Id. at 15 n. 11.

As the district court recognized, the requisite proof of the "legal nexus between

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the injury and the defendants' wrongful conduct" to recover damages entails proof of causation of harm, injury in fact, and damages resulting from Tobacco's conceded actions. The district court held that the HMOs' evidence of causation and damages was insufficient to raise a genuine issue of material fact and thus granted Tobacco summary judgment on the damages claims. See Group Health Plan, Inc. v. Philip Morris Inc., 188 F.Supp.2d 1122, 1126 (D.Minn.2002). We affirm this part of the judgment of the district court because we conclude that the HMOs have not made out a submissible case on the issue of damages.

II.
A.

To determine what evidence will support an award of damages under the Minnesota misrepresentation statutes, we look to Lanham Act cases, as the Minnesota Supreme Court has indicated we should. We have held that before a case under that act can proceed to a jury, the district court "`must ensure that the record adequately supports all items of damages claimed and establishes a causal link between the damages and the defendant's conduct, lest the award become speculative or violate section 35(a)'s prohibition against punishment.'" Porous Media Corp. v. Pall Corp., 110 F.3d 1329, 1336 (8th Cir.1997) (quoting ALPO Petfoods, Inc. v. Ralston Purina Co., 913 F.2d 958, 969 (D.C.Cir. 1990)); see also Xoom, Inc. v. Imageline, Inc., 323 F.3d 279, 286 (4th Cir.2003). A damage figure set "arbitrarily or through pure guesswork is impermissible." Broan Mfg. Co. v. Associated Distribs., Inc., 923 F.2d 1232, 1236 (6th Cir.1991) (internal quotations omitted); see also BASF Corp. v. Old World Trading Co., 41 F.3d 1081, 1095 (7th Cir.1994). Before damages are awarded, we require "`substantial evidence in the record to permit a factfinder to draw reasonable inferences and make a fair and reasonable assessment of the amount of damages.'" Broan, 923 F.2d at 1236 (quoting Grantham & Mann, Inc. v. American Safety Prods., Inc., 831 F.2d 596, 602 (6th Cir.1987)); see BASF, 41 F.3d at 1095; cf. Cardinal Consulting Co. v. Circo Resorts, Inc., 297 N.W.2d 260, 267 (Minn.1980).

As for the proof required for an award of damages under Minnesota antitrust law, we observe that "Minnesota courts have consistently held that Minnesota antitrust law is to be interpreted consistently with the federal courts' construction of federal antitrust law." State by Humphrey v. Alpine Air Prods., 490 N.W.2d 888, 894 (Minn.Ct.App.1992), aff'd 500 N.W.2d 788 (Minn.1993). As we have indicated with respect to federal antitrust law, "`[o]nce causation of damages has been established, the amount of damages may be determined by a just and reasonable estimate as long as the jury verdict is not the product of speculation or guess work.'" Amerinet, Inc. v. Xerox Corp., 972 F.2d 1483, 1494 (8th Cir.1992), cert. denied, 506 U.S. 1080, 113 S.Ct. 1048, 122 L.Ed.2d 356 (1993) (quoting MCI Communications Corp. v. AT & T Co., 708 F.2d 1081, 1161 (7th Cir.1983), cert. denied, 464 U.S. 891, 104 S.Ct. 234, 78 L.Ed.2d 226 (1983)); see also Admiral Theatre Corp. v. Douglas Theatre Co., 585 F.2d 877, 893 (8th Cir. 1978). We believe that a "fair and reasonable" estimate and a "just and reasonable" one amount to one and the same thing, and thus we hold that the required showings under the misrepresentation statutes and the antitrust statutes are identical.

B.

As the district court noted, the HMOs "have only one expert, Dr. [Jeffrey] Harris, who purports to provide the necessary

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causal link between Defendants' alleged misconduct and Plaintiffs' claimed damages." Group Health Plan, 188 F.Supp.2d at 1130. The district court, however, excluded Dr. Harris's testimony as inadmissible under Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), because it was "speculative, inconsistent, and therefore unreliable." Group Health Plan, 188 F.Supp.2d. at 1131. We review the application of Daubert for an abuse of discretion. United States v. Bahena, 223 F.3d 797, 809 (8th Cir.2000), cert. denied, 531 U.S. 1181, 121 S.Ct. 1163, 148 L.Ed.2d 1023 (2001).

The HMOs' allegations of conspiracy are of two sorts: Tobacco conspired to conceal the truth about the adverse health effects of smoking, and Tobacco conspired to refrain from developing safer tobacco products. Dr. Harris, an economics professor at the Massachusetts Institute of Technology and a treating physician at Massachusetts General Hospital, postulated a "counterfactual" world in which smoking would have been safer and fewer people would have smoked because Tobacco would not have so conspired. He utilized "the well-accepted doctrine of attributional-risk theory" to calculate what the HMOs' health care expenditures attributable to smoking would have been in this counterfactual world. See Group Health Plan, 188 F.Supp.2d. at 1132. The damages to the HMOs would equal the difference between current expenditures attributable to smoking and those that would have occurred in the counterfactual world.

To measure how much safer smoking would have become, Dr. Harris sought to determine the rate at which Tobacco's introduction of less hazardous products would have increased absent the alleged misconduct, something he calls the "retardation-of-innovation effect." To measure how many fewer people would have smoked, Dr. Harris sought to determine how the prevalence of smoking rates would have changed over time if there had been no concealment of health-related information, both in terms of the rate at which individuals began smoking (initiation rates) and of the rate at which they quit (quit rates), something he calls the "disinformation effect." The overall decline in the HMOs' expenditures attributable to...

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