National Asbes. Workers Med. Fund v. Philip Morris, 98 CV 1492.

Citation74 F.Supp.2d 221
Decision Date07 September 1999
Docket NumberNo. 98 CV 3287.,No. 98 CV 1492.,98 CV 1492.,98 CV 3287.
PartiesTHE NATIONAL ASBESTOS WORKERS MEDICAL FUND, et al., Plaintiffs, v. PHILIP MORRIS, INC., et al., Defendants. Blue Cross and Blue Shield of New Jersey, Inc., et al., Plaintiffs, v. Philip Morris, Incorporated, et al., Defendants.
CourtUnited States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)

Law Offices of Peter G. Angelos, P.C. by E. David Hoskins, David L. Palmer, Kenneth D. Pack, Baltimore, MD, O'Donoghue & O'Donoghue by Sally M. Tedrow, Louis P. Malone, Washington, D.C., for Plaintiffs the National Asbestos Workers Medical Fund, et al.

Dewey Ballantine LLP, by Paul J. Bschorr, Vincent R. Fitzpatrick, Jr., Michael C. Hefter, Heather K. McDevitt, Robert J. Morrow, New York, NY, for Plaintiffs Blue Cross & Blue Shield of N.J., Inc., et al.

Wachtell, Lipton, Rosen & Katz by Herbert M. Wachtell, Steven M. Barna, Michael A. Charish, Peter C. Hein, New York, NY, Winston & Strawn, by Jeffrey M. Wagner, Chicago, IL, for Defendant Philip Morris, Incorporated.

Kirkland & Ellis by Marjorie Press Lindblom, New York, NY, Sedgwick, Detert, Moran & Arnold by David M. Covey, New York, NY, for Defendant Brown & Williamson Tobacco Corporation.

Greenberg Traurig, LLP by Alan Mansfield, New York, NY, Shook, Hardy & Bacon, L.L.P., by Gary R. Long, Kansas City, MO, for Defendants Lorillard Tobacco Company, Lorillard, Inc., and Loews Corp.

Debevoise & Plimpton by Harry Zirlin, Anne E. Cohen, New York, NY, for Defendant Council for Tobacco Research, U.S.A., Inc.

Jacob, Medinger & Finnegan, LLP by David R. Crittenden, New York, NY, for Defendant Smokeless Tobacco Council, Inc.

Howard, Rice, Nemerovski, Canady, Falk & Rabkin by Peter J. Busch, San Francisco, CA, Riker, Danzig, Scherer, Hyland & Perretti, LLP, by Alan E. Kraus, Morristown, NJ, for Defendants R.J. Reynolds Tobacco Co., and RJR Nabisco, Inc.

Simpson Thacher & Bartlett, by Joseph M. McLaughlin, Michael P. Panagrossi, New York, NY, for Defendant British American Tobacco (investments) limited (formerly known as British-American Tobacco Company Limited).

Davis & Gilbert, LLP, by Bruce M. Ginsberg, Marc J. Rachman, New York, NY, for Defendant Hill & Knowlton, Inc.

MEMORANDUM AND ORDER

WEINSTEIN, Senior District Judge.

                                         TABLE OF CONTENTS
                  I. INTRODUCTION ...................................................223
                
                 II. FACTS ..........................................................223
                     A. Plaintiffs' Original Claims .................................223
                     B. Procedural Background .......................................224
                     C. Amendments To Plaintiffs' Original Complaints ...............224
                III. ANALYSIS OF CLAIMS .............................................224
                     A. "Direct" RICO ...............................................224
                        1. Proximate Causation Generally ............................225
                        2. Laborers Local ..................................225
                        3. Application Of Law To Blue Cross And National Asbestos ...226
                     B. Subrogation .................................................228
                        1. RICO Claims ..............................................228
                        2. Pecuniary Losses Associated With Personal Injuries .......229
                           a. Statutory Language ....................................229
                           b. Legislative Purpose ...................................230
                           c. Case Law ..............................................231
                           d. RICO Limitations In Other Circuits ....................234
                           e. Laborers Local 17 ............................237
                     C. Aggregation Of Claims .......................................238
                     D. State Claims ................................................239
                  IV. CONCLUSION ....................................................240
                
I. INTRODUCTION

Defendants moved to dismiss the complaints in these two cases on the theory that a decision in Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., ("Laborers Local 17"), 191 F.3d 229 (2d Cir.1999), superseding 172 F.3d 223 (2d Cir.1999), blocks the plaintiffs' federal causes of action and requires dismissal of all state law claims. The motions were denied. See Preliminary Memorandum And Order, August 2, 1999. This memorandum and order explains that decision.

Laborers Local 17 held that the plaintiffs' injuries in that case were too remote —i.e., were not proximately caused — to support a cause of action under RICO. As observed in an opinion issued prior to Laborers Local 17, and as Laborers Local 17 itself recognized, the legal concept of proximate causation is a normative, flexible, and highly fact specific doctrine which requires individualized inquiry in each case. See Blue Cross & Blue Shield of N.J., Inc. v. Philip Morris, Inc., 36 F.Supp.2d 560, 579 (E.D.N.Y.1999) ("This determination [of proximate cause] is primarily one of policy, requiring a highly flexible and case specific approach."); see also Laborers Local 17, 191 F.3d at 235 ("Proximate cause is an elusive concept, one `always to be determined on the facts of each case upon mixed considerations of logic, common sense, justice, policy and precedent.'" (quoting W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 42, at 279 (5th ed.1984) (quoting 1 Street, Foundations of Legal Liability 110 (1906)))).

There are differences between the parties and circumstances in the present cases and those in Laborers Local 17 relevant to the proximate cause inquiry and providing grounds to distinguish the two litigations. Laborers Local 17 does not preclude the instant cases' complaints. Even if the plaintiffs' federal causes of action, as originally stated, are ultimately found to be barred by Laborers Local 17, neither of the present actions can be dismissed at the pleading stage. The plaintiffs in both cases have amended their complaints to state valid, alternative theories of liability.

II. FACTS
A. Plaintiffs' Original Claims

Both cases involve claims by medical providers to be compensated for the economic injuries they have allegedly sustained as a result of the treatment of tobacco related illnesses. In both cases the defendants are the major tobacco manufacturers and related entities.

In Blue Cross & Blue Shield of New Jersey, Inc., et al. v. Philip Morris, Inc., et al. ("Blue Cross"), the plaintiffs are medical provider plans ("The Blues") claiming violations of both federal and state law. The federal causes of action are brought under the Racketeer Influenced and Corrupt Organizations Act (RICO) and antitrust statutes. The pendent state law claims are asserted under various state statutes and under common law theories such as fraudulent misrepresentation, fraudulent concealment, breach of special duty, unjust enrichment, and conspiracy.

In The National Asbestos Workers Medical Fund, et al. v. Philip Morris, Inc., et al. ("National Asbestos"), the plaintiffs are self-insured ERISA trust funds which provide health care benefits to union workers in the building trades. The plaintiffs state claims under federal RICO and under federal common law on theories of unjust enrichment, restitution, indemnity, and breach of assumed duty. See Blue Cross, 36 F.Supp.2d 560 (E.D.N.Y.1999) (setting out original allegations in detail); National Asbestos Workers Medical Fund v. Philip Morris, Inc., 23 F.Supp.2d 321 (E.D.N.Y.1998).

B. Procedural Background

On October 19, 1998, defendants' Rule 12(b)(6) motion in National Asbestos was denied. See National Asbestos, 23 F.Supp.2d at 323. Given the expansive public policies of RICO, the comprehensive preemptive force of ERISA, and the conflicting decisions regarding the sufficiency of similar claims, a dismissal based on the pleadings was inappropriate.

On March 30, 1999, the defendants' motion to dismiss in Blue Cross was denied. See Blue Cross, 36 F.Supp.2d at 564. The RICO allegations contained in the Blues' complaint were sufficiently consonant with Supreme Court precedent, modern tort law's conception of proximate causation, and the statutory design and policy of RICO to withstand a motion directed at the complaint.

Ten days after the Blue Cross opinion was issued and approximately six months after the National Asbestos opinion, the court of appeals of the Second Circuit decided an interlocutory appeal in a case involving RICO allegations against the tobacco industry by union trust fund-insurers. See Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., 172 F.3d 223 (2d Cir.1999), withdrawn and superseded by 191 F.3d 229 (2d Cir.1999). The court in Laborers Local 17 found the claims of plaintiff trust funds to be compensated for tobacco related expenditures to be too "indirect." See id., 191 F.3d at 238-40. The defendants then renewed their motions to dismiss the complaints in both Blue Cross and National Asbestos on the grounds that both suits are controlled by Laborers Local 17.

C. Amendments To Plaintiffs' Original Complaints

In June 1999 plaintiffs in both Blue Cross and National Asbestos moved to amend their complaints to add new claims and to restate, in the alternative, the original federal and state claims under subrogation; they continued to press all their original claims. They were permitted to amend their complaints pursuant to the liberal standards of Rule 15 of the Federal Rules of Civil Procedure. Decision was reserved on whether the amended complaints stated valid causes of action.

III. ANALYSIS OF CLAIMS
A. "Direct" RICO

Defendants contend that Laborers Local 17 bars plaintiffs' original RICO claims. In contrast, plaintiffs argue that there are important factual and pleading distinctions between Laborers Local 17 and Blue Cross and National Asbestos which distinguish the cases.

1. Proximate Causation Generally

The legal concept of proximate causation mandates a multi-faceted and highly fact specific inquiry. Proximate cause analysis is driven by considerations of policy, fairness, and...

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