Intern. Broth. of Loc. 734 v. Phillip Morris, Inc.

• Decision Date: 01 December 1998
• Docket Number: No. 97 C 8113.,No. 97 C 8114.,97 C 8113.,97 C 8114.
• Citation: 34 F.Supp.2d 656
• Parties: INTERNATIONAL BROTHERHOOD OF TEAMSTERS LOCAL 734 HEALTH AND WELFARE TRUST FUND, Plaintiff, v. PHILLIP MORRIS, INCORPORATED, et al., Defendants. Central States Joint Board Health and Welfare Trust Fund, Plaintiff, v. Phillip Morris Incorporated, et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

34 F.Supp.2d 656

INTERNATIONAL BROTHERHOOD OF TEAMSTERS LOCAL 734 HEALTH AND WELFARE TRUST FUND, Plaintiff, v. PHILLIP MORRIS, INCORPORATED, et al., Defendants.

Central States Joint Board Health and Welfare Trust Fund, Plaintiff, v. Phillip Morris Incorporated, et al., Defendants.

No. 97 C 8113.

No. 97 C 8114.

United States District Court, N.D. Illinois, Eastern Division.

December 1, 1998.

COPYRIGHT MATERIAL OMITTED

Katharine Crane Byrne, Michael Daniel Mulvihill, Cooney & Conway, Chicago, IL, for Intern. Broth. of Teamsters Local 734 Health and Welfare Trust Fund.

David Bruce Love, Thomas James Frederick, Dan K. Webb, Lawrence R. Desideri, Winston & Strawn, Chicago, IL, for Philip Morris, Inc.

Michael T. Hannafan, Cory A. Johnson, Mark Alan Cisek, Michael T. Hannafan & Associates, Ltd., Chicago, IL, for B.A.T. Industries P.L.C.

Dawn Eileen Gard, Grippo & Elden, Chicago, IL, for Lorillard Tobacco Co., Inc.

Paul J. Walsen, Bell, Boyd & Lloyd, Chicago, IL, Harold C. Wheeler, James A. Morsch, Butler, Rubin, Saltarelli & Boyd, Chicago, IL, for Liggett & Myers, Inc.

Edward Michael Crane, Mark Edward Rakoczy, Deborah G. Solmor, Skadden, Arps, Slate, Meagher & Flom, Chicago, IL, for U.S. Tobacco Co.

Paul L. Price, Michael Gerard Bruton, Price, Tunney, Loughnane, Reiter & Bruton, Chicago, IL, Larry E. Hepler, Burroughs, Hepler, Broom, MacDonald & Hebrank, Edwardsville, IL, for Tobacco Institute, Inc.

Frank L. Butler, Shaw, Fairweather & Geraldson, Chicago, IL, for Smokeless Tobacco Council Inc.

Deborah Lynn Kuhn, Altheimer & Gray, Chicago, IL, for Hill and Knowlton, Inc.

Michael A. Pope, McDermott, Will & Emery, Chicago, IL, Michael Anthony Glackin Foley & Lardner, Chicago, IL, for Adams Apple Dist. Management Corp.

MEMORANDUM OPINION AND ORDER

MANNING, District Judge.

I. Introduction

The court is addressing a question of first impression in the Seventh Circuit: whether health and welfare funds may bring an action for economic damages incurred due to increased medical costs stemming from their members' consumption of tobacco products. The plaintiffs International Brotherhood of Teamsters Local 734 Health & Welfare Trust Fund and Central States Joint Board Health & Welfare Trust Fund (the Funds) are "employee welfare benefit plans" and "employee benefit plans" as defined under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1002(1) et seq. They have brought this instant action against the defendants—cigarette manufacturers, retailers, advertisers, and assorted trade associations —claiming, inter alia, that the defendants engaged in a nationwide conspiracy to:

• conceal the addictiveness and harmfulness of tobacco products;

• misrepresent the harmfulness and addictiveness of tobacco products;

• knowingly disseminate false statements regarding the addictiveness and harmfulness of tobacco products;

• not compete based on claims as to the health or safety of tobacco products;

• suppress the development and marketing of safer, less-addictive cigarettes;

• manipulate the nicotine content and potency to maintain and assure addiction.

The defendants¹ move to dismiss this action pursuant to Fed.R.Civ.P. 12(b)(6), claiming the Funds have failed to state a cause of action for which relief can be granted. The Funds' ten-count complaints² raise claims for: (1) violations of federal and state antitrust law (count I); (2) violation of a special duty (count IV); (3) strict liability (count V); (4) negligence (count VI); (5) breach of express and implied warranties (count VII); (6) consumer fraud and misrepresentation (counts II, III, and IX); (7) unjust enrichment (count VIII); and (8) conspiracy (X). Alternatively, the defendants move to dismiss this action pursuant to Fed.R.Civ.P. 12(b)(7) for failure to join indispensable parties—the individual union members who were allegedly injured, in fact, by the defendants' tobacco products. For the reasons set forth below, the defendants' motion to dismiss is granted and the case is hereby dismissed with prejudice. The court declines to address the defendants' joinder argument as it is moot.

II. Background

In their complaints, the Funds allege that the tobacco industry and its related public relations consultants, trade associations, and research committees have engaged in a nationwide conspiracy dating back to the 1940s, when tobacco researchers allegedly discovered, but concealed, evidence indicating a causal relationship between tobacco products and lung cancer. The Funds allege that the tobacco industry denied the allegations, dismissing them as being part of a "health scare" and then expressly warranted to the public, through direct advertising campaigns, that cigarettes and tobacco products had no adverse effects on consumers' health. The alleged conspiracy gathered full steam in 1953 after the so-called "Big Scare" caused by the publication of the Dr. Ernest L. Wynder's report which indicated that the lung cancer was more common among smokers and that there was a direct correlation between the risk of lung cancer and those who smoked.

Due to the growing negative publicity, the Funds allege that the tobacco industry created the Tobacco Industry Research Committee (TIRC) which was responsible for perpetrating a nationwide propaganda campaign which falsely misrepresented the health effects of cigarette products and intentionally concealed the allegedly lethal effects of tobacco products. As part of its alleged campaign, TIRC published a "Frank Statement to Cigarette Smokers" ("The Frank Statement"), appearing in 448 newspapers nationwide. The Frank Statement denied the reports which linked smoking to lung cancer and thereby, according to the Funds, assumed a special duty to the public by promising to engage in medical research "into all phases of tobacco use and health."

The Funds claim that, notwithstanding its arguable pledge to protect consumer health, the tobacco industry continued its campaign for profit at the expense of consumer protection and the public health by agreeing to suppress market research into safer alternative products while simultaneously manipulating tobacco's nicotine content to hook new consumers.

III. Standard of Review for a Motion to Dismiss

In ruling on a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), the court must assume the truth of all facts alleged in the complaint, construing the allegations liberally and viewing them in the light most favorable to the plaintiff. See e.g. McMath v. City of Gary, 976 F.2d 1026, 1031 (7th Cir.1992); Gillman v. Burlington N. R. Co., 878 F.2d 1020, 1022 (7th Cir.1989). Dismissal is properly granted only if it is clear that no set of facts which the plaintiff could prove consistent with the pleadings would entitle the plaintiff to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Kunik v. Racine County, Wis., 946 F.2d 1574, 1579 (7th Cir.1991), citing Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984).

The court will accept all well-pled factual allegations in the complaint as true. Miree v. DeKalb County, 433 U.S. 25, 27 n. 2, 97 S.Ct. 2490, 53 L.Ed.2d 557 (1977). In addition, the court will construe the complaint liberally and will view the allegations in the light most favorable to the nonmoving party. Craigs, Inc. v. General Elec. Capital Corp., 12 F.3d 686, 688 (7th Cir.1993). However, the court is neither bound by the plaintiffs' legal characterization of the facts, nor required to ignore facts set forth in the complaint that undermine the plaintiffs' claims. Scott v. O'Grady, 975 F.2d 366, 368 (7th Cir.1992), cert. denied, 508 U.S. 942, 113 S.Ct. 2421, 124 L.Ed.2d 643 (1993).

IV. Analysis

A. Proximate Cause³/Standing

The defendants move to dismiss, arguing that the Funds' cannot recover in a direct action for remote and derivative injuries allegedly caused by the tobacco industry. That is, since the Funds' economic losses stem from alleged personal injuries inflicted by the tobacco industry upon Fund members, the Funds have suffered no direct injury and thus, are barred from bringing this action. In response, the Funds assert that the tobacco industry has proximately caused its economic losses and therefore have a viable cause of action in light of a recent decision in State of Illinois v. Philip Morris et al., No. 96 L 13146, slip op. (Ill. Cir. Ct.).

While the Seventh Circuit has yet to address this specific issue, the court is not writing on a clean slate. The recent wave of state and federal tobacco litigation has compelled numerous courts to consider the legal and policy ramifications of similar derivative tort suits like this one. See generally Texas Carpenters Health & Ben. Fund v. Philip Morris, Inc., No. 97 C 625, 1998 WL 685364 (E.D.Tx. Aug.31, 1998); Laborers Lo. 17 Health & Ben. Fund v. Philip Morris, Inc., 7 F.Supp.2d 294 (S.D.N.Y.1998); Oregon Laborers-Employers Health & Wel. Trust Fund v. Philip Morris, No. 97-1051-MA, 1998 WL 544305 (D.Or. Aug.24, 1998); Steamfitters Lo. 420 Wel. Fund v. Philip Morris, Inc., No. 97-5344, 1998 WL 212846 (E.D.Pa. Apr.22, 1998); Iowa v. Philip Morris, 577 N.W.2d 401 (Iowa 1998) (dismissing tort and antitrust claims in their entirety); but see Iron Workers Lo. No. 17 v. Philip Morris, Inc., No. 97 C 1422, 1998 WL 602033 (N.D.Ohio Sept.10, 1998) (denying motion to dismiss).

As can be seen, the trend has been to dismiss these claims on the basis that welfare funds or similar third parties have suffered no direct harm stemming from the tobacco industry's alleged misconduct. Overwhelming precedent compels the court to conclude the same. As the Supreme Court set forth in Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 532, n. 25, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983):

[w]here the plaintiff sustains injury from the defendant's conduct to a third person, it is too remote, if the plaintiff sustains no...