Perry v. American Tobacco Co., Inc.

• Decision Date: 08 April 2003
• Docket Number: No. 01-5715.,01-5715.
• Citation: 324 F.3d 845
• Parties: Gregory Bennett PERRY and Steve Lloyd Champion, on behalf of themselves and all others similarly situated in the State of Tennessee, Plaintiffs-Appellants, v. THE AMERICAN TOBACCO COMPANY, INC.; Brown & Williamson Tobacco Corporation; Lorillard Tobacco Company, Inc.; Philip Morris USA Inc.; R.J. Reynolds Tobacco Company; BAT Industries PLC; Hill & Knowlton, Inc.; The Council For Tobacco Research-U.S.A., Inc.; Tobacco Institute, Inc.; U.S. Smokeless Tobacco Company, formerly known as United States Tobacco Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 845

324 F.3d 845

Gregory Bennett PERRY and Steve Lloyd Champion, on behalf of themselves and all others similarly situated in the State of Tennessee, Plaintiffs-Appellants, v. THE AMERICAN TOBACCO COMPANY, INC.; Brown & Williamson Tobacco Corporation; Lorillard Tobacco Company, Inc.; Philip Morris USA Inc.; R.J. Reynolds Tobacco Company; BAT Industries PLC; Hill & Knowlton, Inc.; The Council For Tobacco Research-U.S.A., Inc.; Tobacco Institute, Inc.; U.S. Smokeless Tobacco Company, formerly known as United States Tobacco Company, Defendants-Appellees.

No. 01-5715.

United States Court of Appeals, Sixth Circuit.

Argued: February 5, 2003.

Decided and Filed: April 8, 2003.

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Gordon Ball (argued and briefed), Knoxville, TN, for Plaintiff-Appellant.

Barry Goheen (briefed), King & Spalding, Atlanta, GA, Marcia M. Eason (briefed), Miller & Martin, Chattanooga, TN, John W. Wheeler (briefed), Hodges, Doughty & Carson, Knoxville, TN, Jerome R. Doak (briefed), Jones Day Reavis & Pogue, Dallas, TX, Patricia H. Moskal, Boult, Cummings, Conners & Berry, Nashville, TN, Mary E. McGarry, Simpson, Thacher & Bartlett, New York, NY, William E. Godbold III (briefed), Leitner, Williams, Dooley & Napolitan, Chattanooga, TN, William S. Lockett, Jr. (briefed), Rebecca B. Murray (briefed), Kennerly, Montgomery & Finley, Knoxville, TN, Thomas H. Peebles III (briefed), Kara E. Shea, Mark T. Seitz, Miller & Martin, Nashville, TN, Robert G. McDowell (briefed), Baker, Donelson, Bearman & Caldwell, Nashville, TN, John A. Lucas (briefed), Hunton & Williams, Knoxville, TN, Murray R. Garnick (argued and briefed), Arnold & Porter, Washington, DC, David S. Eggert (briefed), Heather A. Pigman (briefed), Arnold & Porter, Washington, DC, for Defendants-Appellees.

Before SILER, DAUGHTREY, and COLE, Circuit Judges.

OPINION

COLE, Circuit Judge.

Plaintiffs, Gregory Perry and Steve Champion, are citizens of Coffee County, Tennessee, who are individual subscribers of Blue Cross/Blue Shield health insurance ("BCBS"). They seek to represent the putative class of subscribers of BCBS in the State of Tennessee, who they allege have paid increased insurance premiums due to the presence of smokers in the insurance pool, in this suit against various tobacco companies and organizations. Specifically, the subscribers pay premiums to BCBS, a third-party payor, which uses the premiums to pay for medical care, including the costs of treating smoking-related illnesses. Plaintiffs contend that the smoking-related illnesses were caused by the conduct of the defendant tobacco manufacturers and trade organizations ("Defendants").¹ Plaintiffs brought the current action in the Eastern District of Tennessee, asserting causes of action against Defendants under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961, et seq. (2000); the Tennessee Consumer Protection Act of 1977, Tenn.Code Ann. § 47-18-101, et seq. (2001) ("TCPA"); and the Tennessee Trade Practices Act, Tenn.Code Ann. § 47-25-101, et seq. (2001) ("TTPA"); and asserting state law claims for breach of special duty, conspiracy, negligence, fraudulent concealment and unjust enrichment/restitution.

Defendants sought dismissal for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). The district court granted Defendants' motion after determining that proximate causation was a threshold issue with respect to all of Plaintiffs' claims, and that Plaintiffs had failed to demonstrate proximate causation because their alleged injury was too remote. Plaintiffs now appeal the district court's dismissal of their claims. Because we agree with the district court that Plaintiffs' claimed injuries were not proximately caused by Defendants' conduct, we AFFIRM the district's court dismissal of their claims.

The district court's grant of a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) is a question of law subject to de novo review. See Pfennig v. Household Credit Serv., Inc., 295 F.3d 522, 525 (6th Cir.2002). We must review the complaint in the light most favorable to Plaintiffs, accept their factual allegations as true, and determine whether Plaintiffs "undoubtedly can prove no set of facts in support of [their] claims that would entitle [them] to relief." Bibbo v. Dean Witter Reynolds, Inc., 151 F.3d 559, 561 (6th Cir.1998). We need not accept as true "legal conclusions or unwarranted factual inferences." Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir. 1987).

In order to have standing to bring suit under RICO, a plaintiff must demonstrate proximate cause between the alleged injury and the defendant's injurious conduct. See Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992); Pik-Coal Co. v. Big Rivers Elec. Corp., 200 F.3d 884, 889 (6th Cir.2000). The Supreme Court has explained that common law principles of proximate causation are incorporated into the RICO statute. Holmes, 503 U.S. at 267-68, 112 S.Ct. 1311; see also Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 532-33, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983) (general common law principles of proximate cause are incorporated into federal antitrust provisions). A central element of proximate cause is the requirement of a direct injury. Holmes, 503 U.S. at 269, 112 S.Ct. 1311; Associated Gen. Contractors, 459 U.S. at 532-33 & n. 25, 103 S.Ct. 897. At common law, "a plaintiff who complained of harm flowing merely from the misfortunes visited upon a third person by the defendant's acts was generally said to stand at too remote a distance to recover." Holmes, 503 U.S. at 268-69, 112 S.Ct. 1311; see also Pik-Coal Co., 200 F.3d at 889.

The district court dismissed Plaintiffs' claims because they failed to satisfy this proximate cause requirement. According to the district court, because Plaintiffs' injuries "are purely contingent on harm to the third-party smokers, these injuries are clearly indirect." Perry v. Amer. Tobacco Co., Inc., No. 00-CV-97, 2001 WL 686812, *3 (E.D.Tenn. April 12, 2001). In other words, the alleged injuries were too remote to afford standing under any of the asserted causes of action. We agree.

While this is an issue of first impression before this Court, eight other federal circuit courts of appeals have addressed similar cost-recovery claims against the tobacco industry, by which plaintiffs have sought to recover the increased costs of health-related expenses due to smoking. These courts uniformly have concluded that such claims must fail because the alleged injuries are too remote. See Serv. Employees Int'l Union Health & Welfare Fund v. Philip Morris Inc., 249 F.3d 1068 (D.C.Cir.), cert. denied, 534 U.S. 994, 122 S.Ct. 463, 151 L.Ed.2d 380 (2001); United Food & Commercial Workers Unions, Employers Health & Welfare Fund v. Philip Morris Inc., 223 F.3d 1271 (11th Cir.2000); Tx. Carpenters Health Benefit Fund v. Philip Morris Inc., 199 F.3d 788 (5th Cir.2000); Lyons v. Philip Morris Inc., 225 F.3d 909 (8th Cir. 2000); Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris Inc., 171 F.3d 912 (3d Cir.1999); Int'l Bhd. of Teamsters, Local 734 Health & Welfare Trust Fund v. Philip Morris Inc., 196 F.3d 818 (7th Cir.1999); Or. Laborers-Employers Health & Welfare Trust Fund v. Philip Morris Inc., 185 F.3d 957 (9th Cir.1999); Laborers Local 17 Health & Benefit Fund v. Philip Morris Inc., 191 F.3d 229 (2d Cir.1999). These decisions have recognized that the plaintiffs' claims are inherently contingent on injury to third-party smokers. See, e.g., Laborers Local, 191 F.3d at 239 (finding trust funds' damages entirely derivative of the harm to smokers, and noting that because they were "purely contingent on harm to third parties, these injuries are indirect"); see also Serv. Employees, 249 F.3d at 1076 (finding dismissal proper because the plaintiffs' claims were "too remote, contingent, derivative, and indirect to survive") (citations omitted).

Urging this Court to "become the first federal circuit to properly analyze the issue of proximate causation in the context of tobacco litigation," Plaintiffs now ask us to reverse the district court's decision and to reject the reasoning of our sister circuits. We decline to do so. We agree with the essential holdings of the other circuits and, given the comprehensive discussion of the issues by those courts, we find it unnecessary to provide in-depth discussion of the remoteness issue once again.

We note, however, that the relationship between Plaintiffs' alleged injuries and Defendants' alleged misconduct is even more removed than in other cost-recovery cases brought against tobacco companies. In previous cases, the plaintiffs had actually paid for the medical services at issue. For example, the plaintiffs were union health funds and other third-party payors of health care services, see, e.g., Laborers Local, 191 F.3d 229, or were hospitals seeking to recover the costs of health care provided to non-paying patients, see, e.g., Allegheny Gen. Hosp. v. Philip Morris, Inc., 228 F.3d 429 (3d Cir.2000). In this case, Plaintiffs are subscribers to a third-party payor who allege that BCBS has passed along to them at least some of the increased costs of treating smoking-related injuries in the form of higher insurance premiums. Plaintiffs' claims, therefore, not only are contingent on harm to a third party, but also on BCBS's increasing their premium amounts due to smoking-related medical costs. As the district court properly recognized, Plaintiffs do not have standing to bring this action.

We reject Plaintiffs' claim that standing to bring a RICO claim is not always limited to parties who are directly injured. Plaintiffs argue that the district court failed to consider National Organization for Women, Inc. v. Scheidler, 510 U.S. 249, 114 S.Ct. 798, 127 L.Ed.2d 99 (1994), in which the Supreme Court held...