Or. Laborers-Employers Health v. Philip Morris

• Decision Date: 24 August 1998
• Docket Number: No. Civ. 97-1051-MA.,Civ. 97-1051-MA.
• Parties: OREGON LABORERS-EMPLOYERS HEALTH & WELFARE TRUST FUND, et al., Plaintiffs, v. PHILIP MORRIS, INC., et al., Defendants.
• Court: Oregon Supreme Court

17 F.Supp.2d 1170

OREGON LABORERS-EMPLOYERS HEALTH & WELFARE TRUST FUND, et al., Plaintiffs, v. PHILIP MORRIS, INC., et al., Defendants.

No. Civ. 97-1051-MA.

United States District Court, D. Oregon.

August 24, 1998.

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N. Robert Stoll, Steve D. Larson, Jodi R. Lazar, Scott A. Shorr, Stoll Stoll Berne Lokting & Shlachter P.C., Portland, OR, Morton H. Zalutsky, Zalutsky & Klarquist, P.C., Portland, OR, Robert J. Connerton, John McN. Broaddus, Connerton & Ray, Washington, DC, for Oregon Laborers-Employers Health & Welfare Trust Fund.

James L. Dumas, Roy Pulvers, Lindsay, Hart, Neil & Weigler, LLP, Portland, OR, for Philip Morris, Inc., R.J. Reynolds Tobacco Co.

John W. Phillips, Daniel A. Zariski, Heller, Ehrman, White & McAuliffe, Seattle, WA, for Philip Morris Inc.

H. Joseph Escher, III, Peter J. Busch, Howard, Rice Nemerovski, Canady, Falk & Rabkin, P.C., San Francisco, CA, for R.J. Reynolds Tobacco Co.

Austin W. Crowe, Jr., Paul O. Ostroff, Paul S. Bierly, Bogle & Gates, PLLC, Portland, OR, for Brown & Williamson, American Tobacco Co.

John C. Monica, David W. Smith, Shook Hardy & Bacon, LLP, Kansas City, MO, George L. Kirklin, David G. Hosenpud, Lane Powell Spears Lubersky, LLP, Portland, OR, for Lorillard Tobacco Co.

Lisa M. Umscheid, Garvey, Schubert & Barer, Portland, OR, for U.S. Tobacco Co.

John Nyhan, Suzanne Cate Jones, Chadbourne & Parker, LLP, Los Angeles, CA, Stephen F. English, Bullivant Houser Bailey P.C., Portland, OR, for British-American Tobacco Co.

Yvonne Look, Davis & Gilbert, New York City, Thomas J. Brewer, Wickwire, Greene, Crosby, Brewer & Seward, Seattle, WA, Stephen F. Crew, O'Donnell, Ramis, Crew, Corrigan & Bachrach, Portland, OR, for Hill & Knowlton.

Bruce Merritt, Debevoise & Plimpton, New York City, James R. Hermsen, Miller, Nash, Weiner, Hager & Carlsen LLP, Seattle, WA, Steven O. Rosen, Rosen & Assoc., Salem, OR, for Council for Tobacco Research.

Chester J. Wrobleski, Barry S. Schaevitz, Jacob Medinger & Finnegan, New York City, John D. Wilson, Jr., David M. Jacobi, Wilson Smith Cochran & Dickerson, Seattle, WA, for Smokeless Tobacco Council.

Paul Fortino, Perkins Coie, Portland, OR, for Tobacco Institute.

Marc E. Kasowitz, Aaron Marks, Kasowitz, Benson, Torres, Friedman, LLP, New York City, Jonathan M. Hoffman, Douglas G. Pickett, Martin, Bischoff, Templeton, Langslet & Hoffman, Portland, OR, for Liggett Group, Inc.

OPINION & ORDER

MARSH, District Judge.

Plaintiffs are six employee health and welfare benefit plans created to provide comprehensive health care benefits to participants who are employed under various collective bargaining agreements. Plaintiffs are either self-insured or purchase insurance from insurance companies and pay for the health care benefits or insurance premiums from contributions made by participants and their employers. Plaintiffs filed this action against eight tobacco companies, three non-profit public relations/lobbying/research councils and one public relations firm seeking to recover expenditures plaintiffs have incurred for medical assistance allegedly due to the use of tobacco by plaintiffs' participants and beneficiaries. Plaintiffs claim that their "infrastructure" has been damaged because of medical claims it has paid for tobacco-related illnesses. During oral argument, plaintiffs clarified that the alleged damage to their infrastructure is limited to the diminishment of the trusts' corpus based upon the payment of medical claims. Plaintiffs do not contend that their administration or management has suffered any independent harm.

Plaintiffs generally allege that, since the early 1950s, defendants have engaged in a conspiracy to thwart and delay public entity efforts to restrict cigarette use and limit cigarette sales. Plaintiffs further allege that defendants assumed a duty to the public to research the health impacts of tobacco use and then failed to release that research and misrepresented what they knew about the health dangers of tobacco use, nicotine addiction and the industry's ability to manipulate nicotine levels. Plaintiffs also allege that defendants conducted research into the development of "safer" cigarettes but refused to utilize such research and discouraged each other from pursuing such a course for fear that such products would constitute an admission of liability. Finally, plaintiffs contend that defendants researched youth smoking habits and specifically targeted underaged smokers through extensive advertising, knowing that children who smoke are more likely to become addicted, long term smokers.

Plaintiffs assert twelve claims for relief: (1) federal RICO, (2) Oregon RICO; (3)-(4) violations of the Sherman Act; (5)-(6) violations of Oregon's antitrust Act; (7) violations of Oregon's Unfair Trade Practices Act (UTPA); (8) fraudulent misrepresentation and concealment; (9) unjust enrichment; (10) negligent breach of a special assumed duty; (11) civil conspiracy and (12) indemnity. Defendants¹ move for judgment on the pleadings against each claim, and alternatively, seek dismissal for failure to join necessary parties. For the reasons which follow, defendants' motion is granted.

Standard

"A judgment on the pleadings is properly granted when, taking all the allegations in the pleadings as true, the moving party is entitled to judgment as a matter of law." Nelson v. City of Irvine, 143 F.3d 1196, 1199 (9th Cir.1998).

Discussion

Defendants seek judgment on the pleadings against all claims based upon the remote nature of the asserted injury to the defendants' allegedly wrongful actions. Defendants also point out individual defects with plaintiffs' claims and seek judgment on the pleadings on those alternative grounds as well.

The threshold question presented with most of the claims is that of proximate causation. Proximate causation involves two distinct elements: (1) a policy element that encompasses concepts of equity and standing (where a plaintiff stands in relation to a defendant's harmful conduct); and (2) foreseeability. Although sometimes referred to as the "remoteness" doctrine or standing, the first element limits relief to those most directly injured by a defendant's conduct. The second element of foreseeability requires that a harm be a reasonably anticipated consequence of the defendant's actions. For purposes of this motion, there is no question that any harm plaintiffs may have suffered was a reasonably foreseeable consequence of their participants' use of tobacco products. Thus, the primary issue I must resolve is whether plaintiffs' claims are too remote from the defendants' allegedly wrongful activities under the policy element of the proximate causation doctrine.

Both parties have submitted copies of numerous unpublished decisions from other jurisdictions which address many of the same issues presented here in cases filed against these same defendants. These decisions demonstrate that the complaint in this case is not unique. They also show, in part, how and why the complaint was carefully drafted to respond to the deficiencies noted in the numerous dismissal orders. This action is clearly part of a national effort to utilize recent disclosures about the tobacco industry's research and development, marketing practices and statements to the FDA and Congress as the basis for shifting health care and other related costs to the tobacco industry.

Tobacco related decisions from other jurisdictions break down into four groups: (1) cases filed by states; (2) cases filed by individuals; (3) cases filed by insurers; and (4) cases filed by pension funds. Although some of the holdings bear some guidance on the issues presented here, the threshold question of remoteness or, what is in reality a question of proximate causation, varies greatly depending upon the party prosecuting the action. Thus, for example, the cases filed by State Attorneys General materially differ on the issue of proximate causation given the state's unique role relative to protection of its citizens, statutes governing Medicaid recoupment and certain state statutes that expressly permit states to maintain actions on behalf of their citizenry. It is for this reason that I find those decisions involving other pension funds more persuasive than decisions involving states or individuals.

While proximate causation is a dispositive issue for the antitrust, RICO and fraud claims, other claims face comparable but unique barriers to relief. The following is a count by count analysis of those claims.

Antitrust

Plaintiffs allege that defendants have conspired to restrain trade in violation of Section 1 of the Sherman Act by keeping safer tobacco alternatives out of the market, artificially inflating the price of tobacco products and causing millions to purchase tobacco products when they would not have otherwise done so but for defendants' conspiracy. Plaintiffs assert that this conspiracy was undertaken with the "express purpose" of imposing health care costs upon the plaintiffs. Plaintiffs also allege a conspiracy to monopolize the tobacco market in violation of Section 2 of the Sherman Act by stifling entry of new competitors and suppressing new product development. Plaintiffs assert that they are in the "target area" of defendants' unlawful conduct because "the market for tobacco products and the market for health care are inextricably intertwined."

Section 1 of the Sherman Act provides: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal." To sustain a claim under Section 1, plaintiffs must allege: (1) an agreement or conspiracy; (2) resulting in an unreasonable restraint of trade; and (3) causing antitrust injury. Hahn v. Oregon Physicians Service, 868 F.2d 1022, 1026 (9th Cir.1988), cert. denied, 493 U.S. 846, 110 S.Ct. 140, 107...