Group Health Plan, Inc. v. Philip Morris Inc.

• Decision Date: 11 January 2001
• Docket Number: No. C6-00-377.,C6-00-377.
• Parties: GROUP HEALTH PLAN, INC., et al., Plaintiffs, Medica, a subsidiary of Allina Health System, Plaintiff, v. PHILIP MORRIS INCORPORATED, R.J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corporation, British-American Tobacco Company Limited, et al., Lorillard Tobacco Company, Liggett Group, Inc., United States Tobacco Company, Hill & Knowlton, Inc., The Council for Tobacco Research—U.S.A., Inc., The Tobacco Institute, Inc., Smokeless Tobacco Council, Inc., Defendants.
• Court: Minnesota Supreme Court

621 N.W.2d 2

GROUP HEALTH PLAN, INC., et al., Plaintiffs, Medica, a subsidiary of Allina Health System, Plaintiff, v. PHILIP MORRIS INCORPORATED, R.J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corporation, British-American Tobacco Company Limited, et al., Lorillard Tobacco Company, Liggett Group, Inc., United States Tobacco Company, Hill & Knowlton, Inc., The Council for Tobacco Research—U.S.A., Inc., The Tobacco Institute, Inc., Smokeless Tobacco Council, Inc., Defendants.

No. C6-00-377.

Supreme Court of Minnesota.

January 11, 2001.

Lawrence T. Hofmann, Richard M. Hagstrom, Michell K. Enright, Tricia M. Whitehill, Zelle, Hofmann, Voelbel & Gette, L.L.P., Minneapolis, for Plaintiffs Group Health Plan, Inc., and HealthPartners, Inc.

Lewis A. Remele, Jr., Charles E. Lundberg, Gregory P. Bulinski, Bassford, Lockhart, Truesdell & Briggs, P.A., Minneapolis, for Plaintiff Medica.

Peter W. Sipkins, Dorsey & Whitney, L.L.P., Minneapolis, for Defendants.

Heard, considered, and decided by the court en banc.

OPINION

PAGE, Justice.

Before the court are two consolidated federal court actions by appellants, three nonprofit Minnesota health maintenance organizations, Group Health Plan, Inc., HealthPartners, Inc., and Medica (collectively "the HMOs"), against several cigarette manufacturers and affiliated organizations, respondents Philip Morris Incorporated, et al.¹ (collectively "the tobacco companies"). The HMOs seek to recover costs for increased health care services they provided to their members as a result of tobacco-related illnesses. The United States District Court for the District of Minnesota certified two questions to this court. First, must a private plaintiff be a purchaser of the defendant's products in order to properly plead a claim under Minnesota's misrepresentation in sales statutes, Minn.Stat. §§ 325F.67, 325F.69, subd. 1, 325D.13 (2000), and Minn.Stat. § 8.31, subd. 3a (2000)? Second, must a private plaintiff plead and prove reliance on the defendant's statements or conduct in order to be eligible for relief in the form of damages under the aforementioned statutes?

Based on the broad language of the four statutes and the legislative intent that the statutes create remedies broader than those available in an action for common law fraud, we conclude that the HMOs are not required to be purchasers of the defendants' products in order to properly plead a claim under these statutes. For the same reasons, we conclude that it is not necessary for plaintiffs to plead reliance by individual purchasers of defendants' products in order to properly plead a claim under these statutes. It will be necessary, however, for plaintiffs to prove a causal nexus between the conduct alleged to violate Minn.Stat. §§ 325F.67, 325F.69, subd. 1, and 325D.13 and the damages claimed.

The HMOs brought these actions against the tobacco companies seeking to recover costs of increased health-care services incurred as a result of their members' tobacco-related illnesses. The HMOs contend that they were directly and indirectly injured by the tobacco companies' conspiracy to mislead the public and the health-care industry regarding the effects of tobacco use. They allege that they were directly injured by the tobacco companies' deceptive statements urging them not to engage in tobacco education programs that could have prevented or decreased the occurrence of tobacco-related illnesses among their members. The HMOs allege that they were indirectly injured by the tobacco companies' deceptive conduct because of the costs for increased medical services incurred by their members that the HMOs were contractually obligated to assume.

The HMOs' first amended complaint asserted nine counts, alleging violations of Minnesota's antitrust statutes and Minnesota's statutes prohibiting misrepresentation in sales, as well as conspiracy, breach of a special duty, and unjust enrichment. The federal district court dismissed the statutory misrepresentation in sales counts without prejudice for failure to plead the necessary elements of the claim. The breach of a special-duty claim was dismissed with prejudice.

Second amended complaints were filed re-alleging violations of the antitrust statutes and the misrepresentation in sales statutes, conspiracy, unjust enrichment, and two new counts under the federal Racketeer Influenced and Corrupt Organizations Act (RICO). The tobacco companies moved to dismiss the misrepresentation in sales, unjust enrichment, and RICO counts under Fed.R.Civ.P. 12(b)(6) for failure to state claims upon which relief could be granted, and under Fed.R.Civ.P. 12(b)(7) and 19 for failure to join necessary parties. The HMOs moved to certify to this court the question of whether they can properly plead a claim under Minnesota's misrepresentation in sales statutes when they are not purchasers of the tobacco companies' products.

The federal district court dismissed the HMOs' unjust-enrichment claim with prejudice because the HMOs have an adequate remedy at law in the form of a subrogation action and because their members did not possess the necessary indicia of membership to qualify the HMOs for associational standing. The court dismissed the HMOs' RICO claims with prejudice because their RICO theory was highly speculative and their injuries were derivative and too remote to satisfy the requirements for a RICO claim. The court granted the motion to certify the "purchaser" question to this court and added an additional question about the need to plead and prove reliance. The court reserved judgment on the motion to dismiss the misrepresentation in sales counts until this court responds to the certified questions.

The certification order presents the following two questions, which we have modified slightly pursuant to our authority under Minn.Stat. § 480.065, subd. 4 (2000):(1) must plaintiffs be purchasers of defendants' products in order to properly plead a claim under Minn.Stat. §§ 325F.67, 325F.69, subd. 1, 325D.13, and 8.31, subd. 3a; and (2) must these private plaintiffs plead and prove individual purchaser reliance on the defendants' statements or conduct in order to be eligible for relief in the form of damages under Minn.Stat. §§ 325F.67, 325F.69, subd. 1, 325D.13, and 8.31, subd. 3a?

I.

The certified questions call upon us to determine the scope of statutory claims for relief under the specified Minnesota statutes, first, as to who may bring a claim and, second, as to the nature of the pleading and proof that is necessary to such a claim. Because the claims at issue are creations of statute, our function, as in all statutory interpretation, is to discern as best we can the legislative intent. See Minn.Stat. § 645.16 (2000); Current Technology Concepts, Inc. v. Irie Enters., Inc., 530 N.W.2d 539, 543 (Minn.1995). Our starting point is the language of the statutes in question. See, e.g., State v. Gorman, 546 N.W.2d 5, 8 (Minn.1996)

.

Three substantive statutes define the prohibited conduct, Minn.Stat. §§ 325F.67, 325F.69, subd. 1, and 325D.13. Section 325F.67 provides:

Any person, firm, corporation, or association who, with intent to sell or in anywise dispose of merchandise * * * makes, publishes, disseminates, circulates, or places before the public, or causes, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in this state, in a newspaper or other publication, or in the form of a book, notice, handbill, poster, bill, label, price tag, circular, pamphlet, program, or letter, or over any radio or television station, or in any other way, an advertisement of any sort regarding merchandise * * * which advertisement contains any material assertion, representation, or statement of fact which is untrue, deceptive, or misleading, shall, whether or not pecuniary or other specific damage to any person occurs as a direct result thereof, be guilty of a misdemeanor, and any such act is declared to be a public nuisance and may be enjoined as such.

The duty of a strict observance and enforcement of this law and prosecution for any violation thereof is hereby expressly imposed upon the attorney general, and it shall be the duty of the county attorney of any county wherein a violation of this section shall have occurred, upon complaint being made, to prosecute any person violating any of the provisions of this section.

Section 325F.69, subdivision 1, provides:

The act, use, or employment by any person of any fraud, false pretense, false promise, misrepresentation, misleading statement or deceptive practice, with the intent that others rely thereon in connection with the sale of any merchandise, whether or not any person has in fact been misled, deceived, or damaged thereby, is enjoinable as provided herein.

The third substantive statute, section 325D.13, states: "No person shall, in connection with the sale of merchandise, knowingly misrepresent, directly or indirectly, the true quality, ingredients or origin of such merchandise."

The fourth statute at issue provides remedies that may be pursued by private parties for violation of these substantive statutes. This remedial statute is Minn. Stat. § 8.31, subd. 3a (2000). Section 8.31 provides the attorney general authority to investigate and enforce the statutes designated in subdivision 1 that regulate "unfair, discriminatory, and other unlawful practices in business, commerce, or trade," including the statutes at issue here. Minn. Stat. § 8.31, subd. 1. Subdivision 3a of section 8.31 creates private remedies for violations of the statutes enumerated in subdivision 1:

In addition to the remedies otherwise provided by law, any person injured by a violation of any of the laws referred to in subdivision 1 may bring a civil action and recover damages, together with costs and disbursements, including costs of investigation and reasonable attorney's fees, and receive other equitable relief as determined by the court.

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