New Jersey Carpenters Health Fund v. Philip Morris

• Decision Date: 26 August 1998
• Docket Number: No. CIV. A. 97-4728 (MTB).,CIV. A. 97-4728 (MTB).
• Citation: 17 F.Supp.2d 324
• Parties: NEW JERSEY CARPENTERS HEALTH FUND, et al., Plaintiffs, v. PHILIP MORRIS, INC., et al., Defendants.
• Court: U.S. District Court — District of New Jersey

17 F.Supp.2d 324

NEW JERSEY CARPENTERS HEALTH FUND, et al., Plaintiffs, v. PHILIP MORRIS, INC., et al., Defendants.

No. CIV. A. 97-4728 (MTB).

United States District Court, D. New Jersey.

August 26, 1998.

COPYRIGHT MATERIAL OMITTED

Milberg, Weiss, Bershad, Hynes & Lerach by Michael C. Spencer, New York, NY, Tomar, Simonoff, Adourian, O'Brien, Kaplan, Jacoby & Graziano by David Jacoby, G. Robert Blakey, Einer Elhauge, Cherry Hill, NJ, Connerton & Ray by James S. Ray, Washington, D.C., for Plaintiffs.

McCarter & English by James F. Hammill, Cherry Hill, Arnold, Day & Porter by David S. Eggert, Washington, D.C., for Defendants.

Greenbaum, Rowe, Smith, Ravin, Davis & Himmel by Alan S. Naar, Woodbridge, NJ, for Defendant Liggett-Myers.

OPINION

BARRY, District Judge.

Plaintiffs, six multi-employer health and welfare trust funds operating in New Jersey (the "Funds")¹ and providing comprehensive health care benefits to union workers, to their families, and to covered retirees (collectively "participants"), have filed this action against the leading tobacco companies² and their lobbying and public relations agents³ (collectively as "defendants").

In their behemoth 124-page, 350-paragraph complaint, the Funds set forth virtually the entire history of the marketing of cigarettes and allege that for decades the defendants have collectively engaged in systematic and calculated misconduct, including, among other things: fraudulently failing to disclose accurate information as to the health risks of smoking, intentionally misrepresenting the addictiveness of nicotine, secretly manipulating and controlling nicotine, levels to assure addiction, and purposefully inhibiting the development and marketing of safer, less-addictive cigarettes. Compl. ¶ 4. Defendants' falsehoods and misrepresentations, it is alleged, resulted in an increase in tobacco-related injuries suffered by participants and heightened health care costs for which the Funds were responsible.

The Funds are pursuing claims of fraud (Count VI), federal RICO (Counts I and II), federal and state antitrust (Count III and IV), as well as claims of undertaking and failing to perform a special duty (Count VII), and unjust enrichment (Count XI).⁴ They seek to recover damages presumably in the multi-millions of dollars, including but not limited to the health care costs they paid allegedly because of defendants' activities — the big ticket item, to be sure. They also seek, among other things, injunctive relief requiring the defendants to disclose research and information, fund corrective public education, fund cessation programs for dependent smokers, disclose nicotine yields in their cigarettes, and cease advertising and promoting smoking to minors. Prayer for Relief, Compl. at 121-122. Aside from common law and statutory claims specific to a particular state, the virtually identical complaint has been filed by the relevant Funds in about forty states. The success of these actions thus far has been less than ringing.⁵

Defendants now move to dismiss the complaint, pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim and, in the alternative, pursuant to Fed.R.Civ.P. 12(b)(7), for failure to join necessary parties.⁶

I. Defendants' 12(b)(6) Motion

The recent explosion of litigation and proposed legislation centering around the tobacco industry has brought many issues to the forefront of public debate. The most fundamental issue, at least in this court's view, is whether smokers should be responsible for their own behavior or whether that behavior should be excused — or at least explained — by supposedly wicked forces beyond the control of these malleable and helpless victims, such as advertising. Somewhat related thereto is the issue of whether, as long as tobacco is legal, the tobacco industry should be liable for successfully marketing its legal products. Other issues surface more regularly in the burgeoning litigation. When did the tobacco industry became aware of the health risks of tobacco and the addictiveness of nicotine? Did the tobacco industry knowingly conspire to mislead the public into wrongfully believing that a link between cancer and tobacco use was still an "open question"? Are the risks associated with tobacco products so well-known as to foreclose any claim of justifiable reliance? Would public health organizations and consumers have acted any differently had they been given full disclosure by the tobacco industry? These issues, and more, raise questions which are both complex and important. At this juncture, however, this court must look only to the complaint and decide whether, as alleged, each count of the Funds' complaint states a claim upon which relief can be granted.

Defendants' motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) can be granted only if defendants demonstrate "beyond a doubt that plaintiff[s] can prove no set of facts in support of [their] claim which would entitle [them] to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). This court must accept as true all well-pleaded allegations of the complaint, see Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079, 31 L.Ed.2d 263 (1972), and all reasonable inferences must be drawn in plaintiffs' favor. See Schrob v. Catterson, 948 F.2d 1402, 1405 (3d Cir.1991).

This is a very tough standard. Only because it is so tough will a limited portion of the complaint — a very limited portion — survive, at least for now. A word of caution, however. Let not the length of this opinion suggest that this court has much confidence that the discrete parts of the three counts which it is compelled to hold in now are going anywhere beyond now. See, e.g., nn. 12-14, infra. Indeed, even the Funds apparently do not have much confidence in what will remain given their responses at oral argument to more than one of the court's rather pointed and somewhat cynical questions as to how, if at all, they could prove these claims: "We're entitled to get by under Rule 12" (Tr. 82);⁷ "you're talking about evidence," id. at 95; "[t]his is a Rule 56 issue," id.; "[t]his is Rule 12," id.

Given the fact that the predominant motion before the court is a 12(b)(6) motion and because there are a handful of "well-pleaded allegations" in the complaint by virtue only of the reasonable inferences which at this juncture must be drawn in favor of the Funds, allegations and inferences only slightly amplified in little more than one page of the Funds' brief, the motion to dismiss will be granted in part and denied in part.

A. Fraud Claim

Count VI of the complaint alleges that defendants intentionally engaged in fraudulent misrepresentations and concealment of the health hazards of smoking and its addictiveness which induced participants to smoke and continue to smoke, causing the Funds to incur increased health care costs. Compl. ¶¶ 297-311. Defendants make two arguments in support of their motion to dismiss Count VI. First, defendants argue that the fraud claim fails because the Funds' injuries, if any, are too remote from defendants' alleged misconduct. Specifically, defendants assert that any fraudulent misrepresentations or concealment by defendants and any injuries or damages incurred because of that misconduct were directed at and suffered by smokers and potential smokers, not the health and welfare funds bringing suit here. Second, defendants argue that, aside from what has come to be referred to as "remoteness," the Funds' fraud claim has not been pled with particularity, as required by Fed. R.Civ.P. 9(b).

1. Remoteness

To effectively analyze the issue of remoteness, it is imperative to recognize that the Funds allege misconduct essentially directed at two different groups: participants who smoked and the Funds themselves. Although seeking relief for fraud perpetrated by the defendants against both groups, it is the fraud allegedly directed at the Funds themselves which is the supposed "focus" of the Funds' fraud claim (Tr. 5). Thus, the argument goes, the tobacco defendants aimed misconduct directly at the Funds as providers of health care services to "shield themselves from having to pay the health care costs of tobacco-related diseases and to shift those costs to others, including [p]laintiffs. ..." Compl. ¶ 307. By virtue of this misconduct, the Funds were prevented from restructuring their health care programs to discourage or reduce tobacco use by their participants. See Compl. at ¶ 304 (as a result of defendants' misconduct, the Funds "relied on false or incomplete information in taking or not taking actions to discourage and reduce tobacco use by [p]laintiffs' participants"); Compl. at ¶ 309 (by relying on defendants' misrepresentations and nondisclosures, the Funds' "failed to take or would have taken sooner actions to more appropriately treat tobacco-related injuries and diseases as well as to discourage and reduce cigarette and smokeless tobacco use, and the costs associated therewith").

The Funds' "alternative and distinctly secondary claim" (Tr. at 5) is to recover their increased health care costs due to defendants' fraudulent acts "directed at the [participants as] users of tobacco products." Pl. Opp. Br. at 29. See, e.g., Compl. at ¶ 310 ("participants, and the general public, also relied on the nondisclosures of material facts about tobacco use and health, and were thereby induced to purchase, smoke (or chew) and become addicted to Defendants' deadly and defective products, to the detriment of Plaintiffs and members of the Class"); Compl. at ¶ 307 ("[d]efendants' fraudulent statements, concealment and conduct ... was a substantial cause persuading ... participants to purchase and use a deadly and addictive product"); Compl. at ¶ 308 ("[t]he facts concealed by Defendants about tobacco use, health and addiction were material in that a reasonable consumer would have considered them important in deciding whether to purchase and smoke cigarettes")....