National Asbestos Workers v. Philip Morris, Inc.
| Decision Date | 02 August 1999 |
| Docket Number | No. 98 CV 3287.,No. 98 CV 1492.,98 CV 1492.,98 CV 3287. |
| Citation | 74 F.Supp.2d 213 |
| Parties | THE 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. |
| Court | U.S. District Court — Eastern District of New York |
Melvyn I. Weiss, Milberg, Weiss, Bershad, Hynes & Lerach, L.L.P., New York City, for Painters Dist. Counsel No. 58 Health and Welfare Fund.
Barbara Robbins, Steven M. Barna, Wachtell, Lipton, Rosen & Katz, New York City, Robert McCarter, Arnold & Porter, Washington, DC, Paul F. Stecker, Phillips, Lytle, Hitchcock, Blaine & Huber, L.L.P., Buffalo, NY, Jeffrey M. Wagner, Thomas J. Frederick, Dan K. Webb, Jerome W. Pope, Winston & Strawn, Chicago, IL, Ben M. Germana, Wachtell Lipton Rosen & Katz, New York City, Paul F. Jones, Phillips, Lytle, Hitchcock, Blaine & Huber, L.L.P., Buffalo, NY, Peter C. Hein, Wachtell, Lipton, Rosen & Katz, New York City, Kenneth N. Bass, Kirkland & Ellis, New York City, Stephen R. Blacklocks, Wachtell, Lipton, Rosen & Katz, New York City, Thomas John Quigley, Winston & Strawn, New York City, Murray R. Garnick, Arnold & Porter, Washington, DC, for Philip Morris Inc. and Philip Morris Companies, Inc.
Alan E. Kraus, Riker, Danzig, Scherer, Hyland & Perretti, Morristown, NJ, Keith W. Vaughan, Robert D. Burton, Thomas Schroeder, Womble, Carlyle, Sandridge & Rice, P.L.L.C., Winston-Salem, NC, Kenneth N. Bass, Kirkland & Ellis, New York City, for Reynolds Tobacco Co. and RJR Nabisco, Inc.
Peter A. Bellocasa, Kirkland & Ellis, New York City, Kenneth N. Bass, Kirkland & Ellis, Washington, DC, Marjorie Press Lindblom, Jennifer G. Gardner, Kirkland & Ellis, New York City, for Brown & Williamson Tobacco Corp., Batus Holdings Inc. and American Brands, Inc.
Donald I. Strauber, David A. Wallace, Chadbourne & Parke, LLP, New York City, Kenneth N. Bass, Kirkland & Ellis Washington, DC, for British American Tobacco Co.
Joseph M. McLaughlin, Simpson, Thacher & Bartlett, New York City, Kenneth N. Bass, Kirkland & Ellis, Washington, DC, for B.A.Y. Industries P.L.C.
Gary Long, Shannon L. Spangler, William L. Allinder, Donald J. Kemna, Shook, Hardy & Bacon, L.L.P., Kansas City, MO, Alan Mansfield, Greenberg Traurig, New York City, Kenneth N. Bass, Kirkland & Ellis, Washington, DC, for Lorillard Tobacco Co. and Loews Corp.
Michael Matthew Fay, Aaron H. Marks, Nancy E. Struab, Kasowitz, Benson, Torres & Friedman, LLP, New York City, Kenneth N. Bass, Kirkland & Ellis, Washington, DC, for Liggett Group Inc., Liggett & Myers, Inc. and Brooke Group, Ltd.,
Bruce M. Ginsberg, Kenneth N. Bass, Kirkland & Ellis, New York City, Davis & Gilbert, New York City, for Hill & Knowlton, Inc.
Anne E. Cohen, Debevoise & Plimpton, Harry Zirlin, New York City, for Council for Tobacco Research USA Inc.
Anne E. Cohen, Debevoise & Plimpton, New York City, Anthony R. Mansfield, Seward & Kissel, New York City, Kenneth N. Bass, Kirkland & Ellis, Washington, DC, for Tobacco Institute, Inc.
PRELIMINARY MEMORANDUM AND ORDER
Defendants' motions to dismiss the complaints in these two cases are denied. A more extensive memorandum will follow this preliminary memorandum and order as soon as work permits. See 74 F.Supp.2d 221 (E.D.N.Y.1999).
These two 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 e 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 Blue Cross plans ("The Blues") who allege violations of both federal and state law. The federal causes of action are brought under the Racketeer Influenced and Corrupt Organizations Act (RICO) and the antitrust statutes. The pendent state law claims are asserted under various state statutes and under common law theories of fraudulent misrepresentation, fraudulent concealment, breach of special duty, unjust enrichment, and conspiracy.
In 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.
The plaintiffs' original allegations are set out in greater detail in the court's published memoranda. See Blue Cross, 36 F.Supp.2d 560 (E.D.N.Y.1999); National Asbestos, 23 F.Supp.2d 321 (E.D.N.Y. 1998).
On October 19, 1998, defendants' 12(b)(6) motion in National Asbestos was denied. See 23 F.Supp.2d 321, 323 (E.D.N.Y.1998). Given the expansive public policies of RICO, the comprehensive preemption force of ERISA law, 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 36 F.Supp.2d 560, 564 (E.D.N.Y.1999). The RICO allegations contained in the Blues' complaint was found to be consonant with Supreme Court precedent, modern tort law's conception of proximate causation, and the statutory design and policy of RICO.
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) ("Laborers Local 17"). The court in Laborers Local 17 found the claims of plaintiff trust funds to be compensated for tobacco related expenditures to be too "indirect." 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.
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 continue 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.
Defendants argue that Laborers Local 17 bars federal claims in both Blue Cross and National Asbestos. Yet, even if the plaintiffs' "direct" RICO theory, discussed in this court's Blue Cross and National Asbestos memoranda denying motions to dismiss, were barred by Laborers Local 17, neither of these actions can be dismissed at the pleading stage because the amended complaints state valid subrogated and other claims.
While it may not be commonplace for RICO claims to be asserted by a subrogee, such a claim is consistent both with the policies of RICO and the purposes of the modern equitable doctrine of subrogation. It is advisable to develop a full factual record in this and other issues (see infra, part II.D) in order to provide a more complete and accurate basis for possible appellate review.
Defendants contend that Laborers Local 17 bars plaintiffs' original complaints because the injuries are not sufficiently "direct." By contrast, plaintiffs argue that there are important factual and pleading distinctions between Laborers Local 17 and Blue Cross and National Asbestos which could lead to different results.
There are differences between the Blues and the plaintiffs in Laborers Local 17 which are relevant to the standing and proximate cause analysis. The Blues are not simply a traditional insurer which passively receives premiums for the purpose of allocating risk. As was recognized in Blue Cross, the Blues play a far more active and direct role in the provision of health care to its populations:
Today subscribers often rely on organizations such as the Blues not only to allocate risk, but also to help establish and administer networks of hospitals and physicians to make health care more affordable. The Blues are the largest provider of such managed are programs in the country. Some 45 million individuals are enrolled in some type of managed care administered by the Blues. Through these managed care programs plaintiffs take an active and leading role in shaping the delivery of health care in this country. Directly and indirectly, medical insurers-providers such as the Blues decide what medical procedures will be offered, to whom they will be offered and when and how they will be offered.
Blue Cross, 36 F.Supp.2d at 586.
Despite the fact that the memoranda in Blue Cross and National Asbestos were rendered prior to the court of appeals' decision in Laborers Local 17, and despite the fact that, according to the defendants, the...
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