Republic of Panama v. American Tobacco Company, C.A. No. 05C-07-181-RRC (Del. Super. 6/23/2006), C.A. No. 05C-07-181-RRC.

• Decision Date: 23 June 2006
• Docket Number: C.A. No. 05C-07-181-RRC.,C.A. No. 05C-07-180-RRC.
• Parties: REPUBLIC OF PANAMA, Plaintiff, v. THE AMERICAN TOBACCO COMPANY, et al. Defendants. THE STATE OF SAO PAULO, BRAZIL, Plaintiff, v. THE AMERICAN TOBACCO COMPANY, et al. Defendants.
• Court: Delaware Superior Court

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REPUBLIC OF PANAMA, Plaintiff, v. THE AMERICAN TOBACCO COMPANY, et al. Defendants.

THE STATE OF SAO PAULO, BRAZIL, Plaintiff, v. THE AMERICAN TOBACCO COMPANY, et al. Defendants.

C.A. No. 05C-07-181-RRC.

C.A. No. 05C-07-180-RRC.

Superior Court of Delaware, New Castle County.

Submitted: April 7, 2006.

Decided: June 23, 2006.

Modified: July 13, 2006.

On "Certain Defendants' Motions to Dismiss."

GRANTED.

Randall E. Robbins, Esquire, and Richard D. Heins, Esquire, Ashby & Geddes, Wilmington, Delaware, Michael X. St. Martin, Esquire, and Conrad

S.P. Williams, III, Esquire, St. Martin & Williams, Houma, Louisiana, George J. Fowler, III, Esquire, and Jon W. Wise, Esquire, Fowler, Rodriguez & Chalos, New Orleans, Louisiana, Calvin C. Fayard, Jr., Esquire, Fayard and Honeycutt, Denham Springs, Louisiana, Attorneys for Plaintiffs.

Donald E. Reid, Esquire, Morris, Nichols, Arsht & Tunnell, Wilmington, Delaware, Kenneth J. Parsigian, Esquire, Goodwin Procter, LLP, Boston, Massachusetts, Attorneys for Phillip Morris USA, Inc.

Bonnie Glantz Fatell, Esquire, and Steven L. Caponi, Esquire, Blank Rome LLP, Wilmington, Delaware, Robert. F. McDermott, Jr., Esquire, and Paul S. Ryerson, Esquire, Jones Day, Washington, D.C., Attorneys for R.J. Reynolds Tobacco Company; R.J. Reynolds Tobacco Holdings, Inc. (f/k/a RJR Nabisco, Inc.); Brown & Williamson Tobacco Corp. (individually and as successor by merger to The American Tobacco Company); BATUS Retail Services, Inc. (individually and as successor by merger to BATUS, Inc.); BATUS Holdings, Inc.; and Fortune Brands, Inc. (f/k/a American Brands, Inc.).

Paul J. Lockwood, Esquire, Skadden, Arps, Slate, Meagher & Flom, LLP, Wilmington, Delaware, Attorney for U.S. Smokeless Tobacco Co. (f/k/a United States Tobacco Co.), and UST, Inc.

John E. James, Esquire, Potter, Anderson & Corroon, LLP, Wilmington, Delaware, Attorney for Liggett Group, Inc., and Liggett & Myers, Inc.

MEMORANDUM OPINION

COOCH, J.

I. INTRODUCTION

Pending before this Court is Moving Defendants'¹ Motion to Dismiss for failure to state a claim upon which relief can be granted.² Plaintiffs, the Republic of Panama and the State of São Paulo, Brazil (collectively "the Foreign Governments") seek to recover medical expenses they say they have incurred for decades in treating their citizens' health problems, allegedly caused by their citizens' consumption of Moving Defendants' tobacco products. In their own words, the Foreign Governments "do not seek damages for personal injuries suffered by smokers; [we] seek damages for separate injuries to plaintiffs' property and national patrimony that is wholly distinct from the harms suffered by individuals."³

To that end, the Republic of Panama pleads negligence, strict liability, and unjust enrichment under Panamanian civil law.⁴ The State of Sã Paulo Brazil claims breach of public health obligations, strict liability, and unjust enrichment under Brazilian civil law.⁵ Also, both Foreign Governments appear to assert negligence, breach of voluntary undertaking, unjust enrichment, fraud, and civil conspiracy under Delaware law.

The issue in the pending motion to dismiss is whether the Foreign Governments have sufficiently pled, as a matter of law, that the particular allegations concerning Moving Defendants' manufacture and distribution of tobacco products were potentially a proximate cause of the Foreign Governments' economic injuries. The Court further finds that Delaware law will apply to the claims made by the Foreign Governments. Accepting, on this motion to dismiss, the Foreign Governments' facts as true, this Court concludes that the Foreign Governments cannot, as a matter of law, establish proximate causation of their injury. Therefore, Moving Defendants' Motion to Dismiss is granted.

II. FACTS AND PROCEDURAL BACKGROUND

The relevant facts of this case are excerpted from the Foreign Governments' complaint and, for the purposes of this motion, accepted as true.⁶ Moving Defendants are the primary manufacturers, distributors, and marketers of tobacco products in Panama and the State of São Paulo, Brazil.⁷ Human consumption of tobacco causes cardiovascular disease, lung and other cancers, emphysema, complications to pregnancy, low birth weight in newborn children of smoking mothers, and many other health problems regardless of the manner or method of consumption. The World Health Organization, the United States Surgeon General's Office, the Delaware Department of Health and Social Services, the American Medical Association, and numerous other governmental, medical, and public health entities recognize that tobacco is both harmful to the user's health, harmful to non-users breathing second-hand smoke, and addictive. The Foreign Governments fund nonprofit health care systems that are responsible for providing health care to their citizens. Consequently, the Foreign Governments pay for the medical care of their citizens who have acquired illnesses resulting from their tobacco consumption. Treatment for these illnesses can take many years and is very costly.

For many years, the complaint alleges, Moving Defendants worked in collusion with each other in order to conceal accurate medical evidence, which proved that tobacco is harmful to a user's health and can be potentially fatal. At the same time, the Foreign Governments assert, Moving Defendants intentionally misled consumers about the true nature of the health consequences to tobacco.⁸ Allegedly, Moving Defendants had the ability to manufacture and distribute safer cigarettes, but chose not to, for the sake of preserving stability within the industry.⁹ Also, the Foreign Governments allege that Moving Defendants intentionally manipulated the quantity and quality of nicotine in their products in order to maximize its addictive properties, making it difficult for their citizens to quit using tobacco.¹⁰ The Foreign Governments also assert that Moving Defendants intentionally misled the public by denying the addictive nature of their products.¹¹

This litigation apparently began in 1998 in the Civil District Court for the Parish of Orleans, State of Louisiana.¹² The Louisiana court dismissed the case based upon forum non conveniens principles. However, prior to that dismissal, the parties stipulated to venue in the State of Delaware. The Foreign Governments then filed their complaint against Moving Defendants in this Court in July 2005. The instant motion to dismiss soon followed.

In opposition to Moving Defendants' motion to dismiss, the Foreign Governments submitted two affidavits to the Court. One affiant was Camillo Alleyne Marshall, the acting Minister of Health in the Republic of Panama, and the other affiant was Luiz Roberto Barradas Barata, the acting Secretary of Public Care of the State of São Paulo. Neither of the Foreign Governments' purported experts on Panamanian or Brazilian law are lawyers or law professors. However, both affiants stated, inter alia, that under Panamanian and Brazilian law, the Foreign Governments have respectively stated valid causes of action.

In response, and in support of their motion to dismiss, Moving Defendants submitted two affidavits to the Court seeking to establish the substance of Panamanian and Brazilian law as that law applies in support of their motion. One affiant was Narciso Jose Arellano Moreno, the Dean of Universidad Santa Maria La Antiqu, a Panamanian law school. The other affiant was Luis Roberto Barroso, a law professor at the State University of Rio de Janeiro. Both affiants stated, inter alia, that under Panamanian and Brazilian law, the Foreign Governments have not stated valid causes of action.

III. STANDARD OF REVIEW

When deciding a motion to dismiss, "all factual allegations of the complaint are accepted as true."¹³ A complaint will not be dismissed under Superior Court Civil Rule 12(b)(6) "unless it appears to a certainty that under no set of facts which could be proved to support the claim asserted would the plaintiff be entitled to relief."¹⁴ Therefore, the Court must determine "whether a plaintiff may recover under any reasonably conceivable set of circumstances susceptible of proof under the complaint."¹⁵

IV. CONTENTIONS OF THE PARTIES

A. Moving Defendants' Contentions

The gravamen of Moving Defendants' argument is that the Foreign Governments' claims are too "remote" and indirect to provide any legal basis to justify recovery. Moving Defendants advise the Court that:

[The Foreign Governments] do not dispute that thirty-four identical suits by other foreign governments have been dismissed, and that all twenty appellate courts that have considered such claims by foreign governments, hospitals, insurers, union health and welfare funds, and even United States' states have ruled that the claims are barred because the alleged losses are too remote and indirect.¹⁶

Moving Defendants claim that in this lawsuit, the Foreign Governments are acting as nothing more than third party payors of medical expenses and should seek subrogation claims on behalf of actual citizens. Since, however, the Foreign Governments are not seeking subrogation claims, Moving Defendants argue that the Foreign Governments' claims should be dismissed pursuant to the common law doctrine of proximate cause. Moving Defendants argue that the Foreign Governments have failed to establish, as a matter or law, that their actions, even if true, could be the proximate cause of the Foreign Governments' injury. Further, Moving Defendants argue that any potential damages arising from the Foreign Governments' claims would be so speculative that the Court could not accurately calculate them, apportion the damages between the plaintiffs, nor prevent the possibility of duplicative recovery. Moving Defendants also assert that the "Master Settlement Agreement" the tobacco companies entered into with forty six United States' states and most United States territories, is not evidence of liability...