Insolia v. Philip Morris, Inc.

Decision Date14 December 1998
Docket NumberNo. 97-C-0347-C.,97-C-0347-C.
Citation31 F.Supp.2d 660
PartiesVincent INSOLIA and Karen Insolia, Billy Mays and Phyllis Mays, Maureen Lovejoy and Lee Lovejoy, Charles Caldwell, personal representative of Charles Caldwell, Jr., Deceased, on behalf of themselves and as representatives of a class of all others similarly situated, Physicians Plus Insurance Corporation, Wal-Mart Group Associates, Insurance, Champus, parties joined pursuant to Wis.Stat. sec. 803.03, Plaintiffs, v. PHILIP MORRIS INCORPORATED; R.J. Reynolds Tobacco Company; Brown & Williamson Tobacco Corporation; B.A.T. Industries P.L.C.; Lorillard Tobacco Company; Liggett Group Inc.; The Council for Tobacco Research — U.S.A., Inc.; and the Tobacco Institute Inc., Defendants.
CourtU.S. District Court — Western District of Wisconsin

James A. Olson, Lawton & Cates, S.C., Madison, WI, for Insolia, Vincent, Insolia, Karen.Thomas J. Basting, Sr., Brennan, Steil, Basting & MacDougall, Janesville, WI, for State of Wisconsin. Richard Schmidt, Boardman, Suhr, Curry & Field, Madison, WI, for Physicians Plus Ins.

Michael T. Graham, Jackson, Lewis, Schnitzler and Krupman, Chicago, IL, for Associates' Health and Welfare.

Michael L. Zaleski, Quarles & Brady, Madison, WI, for Philip Morris Incorporated.

James Clark, Foley & Lardner, Milwaukee, WI, for R.J. Reynolds Tobacco Company.

Donald R. Peterson, Peterson, Johnson & Murray, S.C., Milwaukee, WI, for Brown & Williamson Tobacco Corp.

Ralph A. Weber, Reinhart, Boerner, Van Deuren Norris & Rieselbach, S.C., Milwaukee, WI, for B.A.T. Industries P.L.C.

Bruce A. Schultz, Coyne, Niess, Schultz, et al., Madison, WI, for Lorillard Tobacco Company.

Robert B. Raschke, Lindquist & Vennum, Minneapolis, MN, for Liggett Group Inc.

James F. Gebhart, Madison, WI, for Hill & Knowlton, Inc.

John H. Schmid, Axley Brynelson, Madison, WI, for The Council for Tobacco Research.

John Koeppl, Madison, WI, for The Tobacco Institute, Inc.

OPINION AND ORDER No. 1

CRABB, District Judge.

This is a civil action for declaratory and monetary relief brought by a group of individuals on behalf of a proposed class of Wisconsin residents, all of whom began smoking before 1964, consumed at least one package of cigarettes a day for twenty years and have been diagnosed with lung cancer. The defendants are the leading manufacturers of tobacco products in this country as well as two industry trade groups, the Council for Tobacco Research and the Tobacco Institute. One of these defendants, the Brown & Williamson Tobacco Corporation, is the indirect subsidiary of defendant B.A.T. Industries P.L.C., an English corporation. This court has jurisdiction over plaintiffs' state law claims of negligence, strict liability, intentional exposure to a hazardous substance and civil conspiracy under the diversity of citizenship statute. 28 U.S.C. § 1332.

The case is before the court on the motion of defendant B.A.T. to dismiss for lack of personal jurisdiction. B.A.T. maintains that it is not amenable to jurisdiction in Wisconsin because it has never transacted business in the state. Although B.A.T.'s indirect subsidiary, defendant Brown & Williamson, has sold cigarettes to Wisconsin residents, B.A.T. asserts that it does not manufacture or sell any products or services; it is only a holding company. For this reason, B.A.T. argues, it does not fall within the sweep of Wisconsin's long-arm statute and does not have the necessary minimum contacts with this state to satisfy the due process clause of the Fourteenth Amendment. Plaintiffs contend that documents created by defendant B.A.T. reveal that it is in fact a manufacturer of tobacco products, not a mere holding company. In the alternative, plaintiffs argue that jurisdiction is appropriate because defendant Brown & Williamson is either the "alter ego" or the agent of B.A.T. Finally, plaintiffs assert that the court may exercise jurisdiction over defendant B.A.T. even though it has no direct contacts with Wisconsin because defendant participated in an alleged conspiracy to create a phony scientific controversy about the link between smoking and disease.

I conclude that defendant B.A.T. is not amenable to jurisdiction under Wisconsin's long-arm statute or under the due process clause of the United States Constitution. References to tobacco products produced by "BAT" and "the Group" in documents created by defendant B.A.T. are not concessions that B.A.T. manufactures cigarettes. These references are either to another one of B.A.T.'s subsidiaries, non-party British American Tobacco Corporation, or are a collective term used to describe all of the companies owned by B.A.T. Though defendant B.A.T. sets the general policies followed by Brown & Williamson, there is no indication that this control extends to the subsidiary's daily operations. In the absence of other indicia that would support piercing B.A.T.'s veil of limited liability, the degree of control demonstrated by plaintiffs is insufficient to permit the conclusion that Brown & Williamson is the alter ego of B.A.T. Plaintiffs have adduced no evidence that Brown & Williamson is the actual or apparent agent of defendant B.A.T. Even if Wisconsin courts would hold that the long-arm statute supported the exercise of personal jurisdiction over a non-resident defendant on basis of the nonresident's participation in a conspiracy, defendant B.A.T. has no contacts with Wisconsin, much less the minimum amount necessary to satisfy due process. Because the conspiratorial acts allegedly engaged in by B.A.T. have not been directed at Wisconsin, it is not possible to conclude that B.A.T. could have anticipated being haled into court in this state.

On a motion to dismiss for lack of personal jurisdiction, the burden of proof rests on the party asserting jurisdiction. See Nelson v. Park Industries, Inc., 717 F.2d 1120, 1123 (7th Cir.1983). That party must make a prima facie showing that personal jurisdiction exists. See id. In deciding whether the party has made the necessary showing, the court may rely on the allegations of the complaint and also may receive and weigh affidavits submitted by the parties. See id. The court is to resolve all disputes concerning the relevant facts in favor of the party asserting personal jurisdiction. See id.

FACTS
A. The Group

The genealogy of all the corporate entities relevant to the disposition of this motion is rather complex. That virtually all of these entities are referred to colloquially as some combination of the letters B, A, and T does not help matters.

Defendant Brown & Williamson Tobacco Corporation manufactures and distributes tobacco products in Wisconsin; it is incorporated under the laws of Delaware. It is an indirectly owned subsidiary of defendant B.A.T. Industries, a public limited company incorporated under the laws of England and Wales in 1928. Before July 23, 1976, defendant B.A.T. was an investment company named Tobacco Securities Trust Company Limited. No entity known as B.A.T. Industries existed before this date. Neither B.A.T. nor its predecessor has ever manufactured, marketed, packaged, sold, distributed or advertised tobacco products or any other goods in the Wisconsin or anywhere else. Also on July 23, 1976, defendant B.A.T. became the sole ordinary shareholder in the British American Tobacco Company Limited, an English company that owns a number of subsidiaries engaged in the manufacture and marketing of tobacco products, including defendant Brown & Williamson. These subsidiaries also conduct research related to tobacco products. The British American Tobacco Company, or "BATCo," has been in continuous existence since its incorporation in 1902. It acquired the stock of defendant Brown & Williamson in 1927. Before July 23, 1976, BATCo was a publicly owned and traded company in which no shareholder held a controlling interest. Following the July 1976 transaction, BATCo continued its operations and retained its separate corporate existence and identity. Aside from changing its name from the Tobacco Securities Trust Company, defendant B.A.T. also retained its separate corporate existence and identity.

In 1978, BATUS, Inc. was incorporated under Delaware law as an indirect subsidiary and intermediate holding company of defendant B.A.T. BATUS became the direct holding company for defendant B.A.T.'s American subsidiaries. In 1950, Gimbel Brothers, Inc. formed a company under Wisconsin law named Esco Beverage Corporation. In 1980, BATUS acquired Esco and renamed it BATUS-Wisconsin, Inc. In 1990, as part of a corporate restructuring plan, BATUS, Inc. changed its named to BATUS Holdings, Inc. At the same time, BATUS-Wisconsin took the name BATUS, Inc. Despite this swap, BATUS Holdings is not the successor to BATUS-Wisconsin. As a result of this restructuring, BATUS Holdings and its parent, defendant B.A.T., divested themselves of all holdings in the United States retail and paper business, including Marshall Fields and Appleton Papers, Inc., two businesses with operations in Wisconsin.1

Defendant B.A.T. has never employed more than 185 people, all of whom have been engaged in managing the company's investment interests. Presently, defendant B.A.T. has more than 500 subsidiaries. Collectively, defendant B.A.T. and its subsidiaries are known as the B.A.T. Group or simply the Group. "BAT" is a descriptive phrase used to refer either to defendant B.A.T. or to its subsidiary, BATCo. Since the 1976 transaction, defendant B.A.T. and defendant Brown & Williamson have maintained separate offices, employees, directors, officers, accounts, records and minutes. Defendant B.A.T. is neither licensed nor qualified to do business in Wisconsin. It pays no taxes, maintains no office and does not own, lease or control any real or personal property in Wisconsin.

B. Tobacco Industry Trade Groups

Defendant Council for Tobacco Research, a non-profit corporation, is the successor in interest to...

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