National Asbestos Medical Fund v. Philip Morris

• Citation: 86 F.Supp.2d 137
• Decision Date: 03 March 2000
• Docket Number: No. 98 CV 1492(JBW).,98 CV 1492(JBW).
• Parties: The NATIONAL ASBESTOS WORKERS MEDICAL FUND, et al., Plaintiffs, v. PHILIP MORRIS, INC., et al., Defendants.
• Court: U.S. District Court — Eastern District of New York

86 F.Supp.2d 137

The NATIONAL ASBESTOS WORKERS MEDICAL FUND, et al., Plaintiffs, v. PHILIP MORRIS, INC., et al., Defendants.

No. 98 CV 1492(JBW).

United States District Court, E.D. New York.

March 3, 2000.

Law Offices of Peter G. Angelos, P.C., Baltimore, MD, by H. Russell Smouse, E. David Hoskins, Kenneth D. Pack, for Plaintiffs.

Simpson Thacher & Bartlett, New York City, by Joseph M. McLaughlin, Patrick D. Bonner, Jr., David M. Moss, for Defendants.

AMENDED MEMORANDUM AND ORDER

WEINSTEIN, Senior District Judge.

I. INTRODUCTION

A number of self-insured building trades health and welfare plans have brought suit against the tobacco industry under the Racketeer Influenced and Corrupt Organizations Act ("RICO") seeking to recover millions of dollars expended in connection with tobacco-related illnesses of their members. B.A.T. Industries, p.l.c. ("BAT"), the British holding company parent of defendant Brown & Williamson Tobacco Corporation ("B & W"), has moved for judgment on the pleadings on the ground of lack of personal jurisdiction. Because service on BAT was not authorized by RICO's nationwide service provision, personal jurisdiction must be based on either New York law or, in the event BAT is not subject to the jurisdiction of the courts of New York or any other state, on Rule 4(k)(2) of the Federal Rules of Civil Procedure, the federal long arm provision.

In a similar motion in a related case, Simon v. Philip Morris, Inc., 86 F.Supp.2d 95 (E.D.N.Y. 2000), evidence of BAT's participation in an industry-wide conspiracy with significant links to New York supported the exercise of personal jurisdiction under CPLR 302(a)(2). CPLR 301 and 302(a)(3)(ii) afforded additional jurisdictional bases. Personal jurisdiction over BAT was held to comport with the Due Process Clause of the Fourteenth Amendment. The same conclusion is required in the instant case. Federal long arm jurisdiction is unavailable.

II. PROCEDURAL HISTORY

Suit was filed in February 1998 asserting RICO and various pendent state law claims. In June 1998 BAT filed a motion to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure. Almost simultaneously a similar motion filed by BAT in Falise v. American Tobacco Co. was denied as unripe for decision because of the need for further discovery on the personal jurisdiction issue. See No. 97 CV 7640, 1998 WL 372401 (E.D.N.Y. July 2, 1998). A discovery scheduling order was entered. See Order dated July 21, 1998. Guided by these two orders, in August 1996, BAT and the National Asbestos plaintiffs stipulated that BAT would withdraw its 12(b)(2) motion, file an answer preserving its jurisdictional defense, and provide plaintiffs with information in accordance with the Falise order.

BAT renewed its personal jurisdiction motion in February, 1998 pursuant to Rule 12(c). That Rule permits conversion of a motion for judgment on the pleadings into one for summary judgment under Rule 56 when matters outside the pleadings are presented for the court's consideration.

In view of the extensive materials submitted and considered, BAT's Rule 12(c) motion was converted into a summary judgment motion. See generally 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1371 (2d ed.1990). It was denied by order of July 19, 1999. This memorandum explains the reasons for the denial.

III. FACTS

Substantially the same jurisdictional facts are alleged here as in Simon. See 86 F.Supp.2d at 99-119. Essentially the same documents are relied upon by the plaintiffs in both cases. As in Simon, supplementation of the record with tobacco industry documents posted on the website of the University of California at San Francisco's Library and Center for Knowledge Management is warranted. See http://www.library.ucsf.edu/tobacco. The findings in Simon are adopted and made a part of this memorandum.

IV. LAW AND ITS APPLICATION

A. Federal Rules of Civil Procedure

Rule 4(k) of the Federal Rules of Civil Procedure governs amenability to suit in a federal district court. It specifies the circumstances in which service of process confers personal jurisdiction over a defendant, providing for service authorized by state law (Rule 4(k)(1)(A)) or by federal law (Rules 4(k)(1)(D) and Rule 4(k)(2)). Insofar as pertinent, the Rule, denominated "Territorial Limits of Effective Service" reads:

(1) Service of a summons or filing a waiver of service is effective to establish jurisdiction over the person of a defendant

(A) who could be subjected to the jurisdiction of a court of general jurisdiction in the state in which the district court is located, or

....

(D) when authorized by a statute of the United States.

(2) If the exercise of jurisdiction is consistent with the Constitution and laws of the United States, serving a summons or filing a waiver of service is also effective, with respect to claims arising under federal law, to establish personal jurisdiction over the person of any defendant who is not subject to the jurisdiction of the courts of general jurisdiction of any state.

Fed.R.Civ.P. 4(k).

For the reasons discussed below in more detail, because BAT was not served with process in accordance with RICO's nationwide service provision, Rule 4(k)(1)(D) does not afford a basis for jurisdiction; the personal jurisdiction of New York's (and most likely other states') courts renders Rule 4(k)(2) inapplicable. The same basis as in Simon is provided by Rule 4(k)(1)(A). See Simon, 86 F.Supp.2d at 119-26.

B. RICO Jurisdiction

Section 1965 of title 18 of the United States Code contains RICO's broad venue and nationwide service provisions. They provide:

(a) Any civil action or proceeding under this chapter against any person may be instituted in the district court of the United States for any district in which such person resides, is found, has an agent, or transacts his affairs.

(b) In any [civil RICO] action ... in any district court of the United States in which it is shown that the ends of justice require that other parties residing in any other district be brought before the court, the court may cause such parties to be summoned, and process for that purpose may be served in any judicial district of the United States by the marshal thereof.

18 U.S.C. § 1965(a), (b) (1994).

Under the generous venue prerequisites of section 1965(a), a civil RICO suit can be instituted in any district which has minimum contacts with at least one defendant. See PT United Can Co. v. Crown Cork & Seal Co., 138 F.3d 65, 71 (2d Cir.1998).

Section 1965(b) provides for nationwide service of process on co-defendants residing outside the forum should the "ends of justice" so require. See id. The "ends of justice" qualification includes situations in which, absent section 1965(b), it would be impracticable to bring all co-defendants together in a single action because no district court could exercise personal jurisdiction over all of them. See, e.g., Daly v. Castro Llanes, 30 F.Supp.2d 407, 413 (S.D.N.Y.1998); cf. PT United Can Co., 138 F.3d at 71 n. 5 (not reaching the issue since appellant had not challenged trial court's holding that ends of justice did not require it to assert jurisdiction).

By its terms the section applies to parties "residing in any other district." This language appears to limit the section's coverage to United States residents. Despite this restriction, some courts have exercised RICO jurisdiction over foreign individuals and entities who may have resided outside the United States. See, e.g., Herbstein v. Bruetman, 768 F.Supp. 79, 81 (S.D.N.Y. 1991) (exercising personal jurisdiction over Argentinian corporation under RICO section 1965); Nagoya Venture Ltd. v. Bacopulos, No. 96 Civ. 9317, 1998 WL 307079, at *4 (S.D.N.Y. June 11, 1998) (exercising RICO jurisdiction over Canadian corporations); Madanes v. Madanes, 981 F.Supp. 241, 260 (S.D.N.Y.1997) (exercising RICO jurisdiction over Argentinian citizen and resident and corporation organized under laws of Isle of Man).

The Second Circuit's recent interpretation of 1965(b) as providing for jurisdiction over additional parties "not residing in the district" if the ends of justice require, see PT United Can Co., 138 F.3d at 71, would seem to permit the assertion of personal jurisdiction over RICO defendants residing abroad. Nevertheless, such defendants must be served with process within the United States. See, e.g., Biofeedtrac, Inc. v. Kolinor Optical Enters. & Consultants, S.R.L., 817 F.Supp. 326, 331-32 (E.D.N.Y.1993) (RICO does not provide for extraterritorial service on persons outside the United States); Stauffacher v. Bennett, 969 F.2d 455, 460-61 (7th Cir.) (same), cert. denied, 506 U.S. 1034, 113 S.Ct. 814, 121 L.Ed.2d 686 (1992); Brink's Mat Ltd. v. Diamond, 906 F.2d 1519, 1521-22 (11th Cir.1990) (same); see also, Herbstein, 768 F.Supp. at 81 (exercising RICO jurisdiction over Argentinian corporation whose director was served in Illinois); cf. Nagoya Venture Ltd., 1998 WL 307079, at *4 & n. 5 (exercising RICO jurisdiction over Canadian corporations; court satisfied that service was adequate to provide notice to all defendants); Madanes, 981 F.Supp. at 260 (exercising RICO jurisdiction over Argentinian individual and Isle of Man corporation; specifics of service not provided).

BAT, a British holding company which maintains no offices in the United States, was served in London by registered mail. Since such service is not authorized by RICO, plaintiffs must rely on other jurisdictional bases provided by Rule 4(k).

C. Jurisdiction Under New York Law

1. CPLR

The extensive evidence supporting jurisdiction over BAT was set forth in detail in Simon, 86 F.Supp.2d at 99-119. It demonstrates, for jurisdictional purposes only, that BAT participated in a tobacco industry conspiracy to mislead and addict the American public by committing such acts as adopting the fraudulent position that the link between...