Rhode Island Laborers' Health v. Philip Morris

• Citation: 99 F.Supp.2d 174
• Decision Date: 01 June 2000
• Docket Number: No. 97-500L.,97-500L.
• Court: United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Rhode Island
• Parties: RHODE ISLAND LABORERS' HEALTH & WELFARE FUND, by and through its TRUSTEES, on behalf of all other similarly situated Health & Welfare Funds in the State of Rhode Island, Plaintiff, v. PHILIP MORRIS, INC.; R.J. Reynolds Tobacco Company; Brown & Williamson Tobacco Corporation; B.A.T. Rillard Tobacco Company; Liggett Group, Inc.; The American Tobacco Company; The Council for Tobacco Research-U.S.A.; The Tobacco Institute, Inc.; and Hill & Knowlton, Inc., Defendants.

99 F.Supp.2d 174

RHODE ISLAND LABORERS' HEALTH & WELFARE FUND, by and through its TRUSTEES, on behalf of all other similarly situated Health & Welfare Funds in the State of Rhode Island, Plaintiff, v. PHILIP MORRIS, INC.; R.J. Reynolds Tobacco Company; Brown & Williamson Tobacco Corporation; B.A.T. Rillard Tobacco Company; Liggett Group, Inc.; The American Tobacco Company; The Council for Tobacco Research-U.S.A.; The Tobacco Institute, Inc.; and Hill & Knowlton, Inc., Defendants.

No. 97-500L.

United States District Court, D. Rhode Island.

June 1, 2000.

COPYRIGHT MATERIAL OMITTED

Amato A. DeLuca, DeLuca & Weizenbaum, Ltd., Providence, RI, Peter N. Wasylyk, Providence, RI, Wood Roberson Foster, Jr., Jordan Matthew Lewis, Siegel, Brill, Greupner & Duffy, Milwaukee, WI, for Plaintiffs.

Steven E. Snow, Brian Clifford Newberry, Partridge, Snow & Hahn, Providence, RI, for Defendants.

OPINION AND ORDER

LAGUEUX, District Judge.

This matter is before the Court on plaintiff's objection to Magistrate Judge Robert W. Lovegreen's Report and Recommendation opining that this Court should grant the motions of defendants to dismiss the complaint in its entirety. The underlying issue in this matter is whether the alleged injury to plaintiff, Rhode Island Laborers' Health and Welfare Fund (the "Fund"), resulting from the defendants' alleged wrongdoing is proximate enough to permit the bringing of a class action against the tobacco companies and their lobbying and public relations agents for alleged violations of the federal and state Racketeer Influenced and Corrupt Organizations Act ("RICO"), federal and state antitrust laws, state common law relating to fraud, and failure to perform a special duty, and the Rhode Island Unfair Trade Practice Act ("RIUTPA"). Simply put, the issue is one of causation: did the defendants' alleged wrongdoing proximately cause the Fund to make medical payments on behalf of smokers to redress their smoking related injuries. The Fund argues that the magistrate judge erred in recommending that defendants' motions to dismiss be granted. For the reasons briefly set forth below, this Court adopts the thoughtful Report and Recommendation of the Magistrate Judge after briefly discussing the cases decided on this point since its issuance.

I. Standard of Review

In reviewing a Magistrate's Judge's Report and Recommendation,

"[a] judge of the court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made. A judge of the court may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate. The judge may also receive further evidence, or recommit the matter to the magistrate judge with instructions."

28 U.S.C. § 636(b)(1)(C)(1994); see also Fed.R.Civ.P. 72(b). In reviewing a Magistrate Judge's recommendations, the district court must actually weigh the evidence presented to the Magistrate Judge, and not merely rely on the Magistrate Judge's Report and Recommendation. See United States v. Raddatz, 447 U.S. 667 675, 100 S.Ct. 2406, 65 L.Ed.2d 424 (1980); Gioiosa v. United States, 684 F.2d 176, 178 (1st Cir.1982).

Defendants' underlying motion was for dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6). In ruling on a motion to dismiss, the Court construes the complaint in the light most favorable to plaintiff, taking all well pleaded allegations as true and giving plaintiff the benefit of all reasonable inferences. See Figueroa v. Rivera, 147 F.3d 77, 80 (1st Cir.1998). Dismissal under Rule 12(b)(6) is appropriate only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); see Hishon v. King and Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); 5A Wright and Miller, Federal Practice and Procedure § 1357 (1990). However, "minimal requirements are not tantamount to nonexistent requirements." Gooley v. Mobil Oil Corp., 851 F.2d 513, 514 (1st Cir.1988). The standard "does not mean ... that a court must (or should) accept every allegation made by the complainant, no matter how conclusory or generalized. `[E]mpirically unverifiable' conclusions, not `logically compelled, or at least supported, by the stated facts,' deserve no deference." United States v. AVX Corp., 962 F.2d 108, 115 (1st Cir. 1992) (citations omitted).

II. Discussion

The Court referred these motions to the Magistrate Judge for his preliminary review, findings and recommended disposition. See 28 U.S.C. § 636(b)(1); D.R.I.Loc.R. 32(c). After careful consideration, Magistrate Judge Lovegreen agreed with the reasoning set forth in the Circuit Court opinions and a large number of District Court decisions that have rejected similar health care trust fund claims. He concluded that the alleged loss suffered by these funds is too remote to justify direct recovery for any alleged antitrust, RICO violations, or state law violations committed by the tobacco companies. At the time of the issuance of the Report and Recommendation three Circuit Courts had rejected similar complaints filed around the country by other health care trust funds. See Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., 191 F.3d 229, 239 (2nd Cir.1999), cert. denied, ___ U.S. ___, 120 S.Ct. 799, 145 L.Ed.2d 673 (2000); Oregon Laborers-Employers Health & Welfare Trust Fund v. Philip Morris, Inc., 185 F.3d 957, 966 (9th Cir.1999), cert. denied, ___ U.S. ___, 120 S.Ct. 789, 145 L.Ed.2d 666 (2000); Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912, 932-34s (3rd Cir.1999), cert. denied, ___ U.S. ___, 120 S.Ct. 844, 145 L.Ed.2d 713 (2000). Since that time two more Circuit Courts have dismissed almost identical claims. See Texas Carpenters Health Benefit Fund v. Philip Morris, Inc., 199 F.3d 788, 789 (5th Cir.2000); International Brotherhood of Teamsters, Local 734 Health and Welfare Trust Fund v. Philip Morris, Inc., 196 F.3d 818, 823-24 (7th Cir.1999). In addition, the United States Supreme Court denied certiorari in these cases. Therefore, it is clear that at this time the federal appellate courts are unanimous in ruling that the principles of proximate cause and remoteness of injury preclude health funds from recovering damages for injuries which are wholly dependent upon the actions of more directly injured parties.

At oral argument, in support of its objection to the Magistrate Judge's report and in its subsequent submissions with this Court, plaintiff primarily relies upon a recent district court case which permitted the RICO claims to go forward. Since that time another District Court has made a similar holding. Therefore, this Court believes it should discuss these two recent decisions that have bucked the trend. See Service Employees Int'l Union Health and Welfare Fund v. Philip Morris, Inc., 83 F.Supp.2d 70, 88 (D.D.C.1999); The National Asbestos Workers Medical Fund v Philip Morris, Inc., 74 F.Supp.2d 221, 228 (E.D.N.Y.1999).

In National Asbestos Workers, Judge Weinstein decided not to dismiss the direct RICO claims against the tobacco companies because the plaintiffs in that case "also amended their complaint to state a valid, alternate basis for recovery under RICO." 74 F.Supp.2d at 228. They added "RICO causes of action under a theory of subrogation." Id. The holding in National Asbestos has little, if any, relevance to the present case for two reasons. First, plaintiff in this case has not amended its complaint to include a RICO cause of action under a subrogation theory. More importantly, this Court disagrees with the reasoning and result in National Asbestos. Indeed, the Court there recognized that "dismissal of the plaintiffs' [direct] RICO claims might arguably be warranted" because there existed controlling precedent on this precise issue decided by the Second Circuit Court of Appeals only months previously. Id. (discussing Laborers Local 17, 191 F.3d at 239). In fact, the Seventh Circuit Court of Appeals, in its decision to dismiss such third-party insurer claims, noted that the National Asbestos decision "is a thinly disguised refusal to accept and follow the second circuit's holding." Int'l Brotherhood of Teamsters, 196 F.3d at 827. In short, this writer does not find the National Asbestos case to be persuasive.

The decision in Service Employees does not fare any better. The Court there misapplies the Supreme Court's three factor test for determining if there is proximate cause for RICO standing which was set forth in Holmes v. Securities Investor Protection, Corp., 503 U.S. 258, 268-70, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992)(adopting the proximate cause analysis for standing in antitrust cases set forth in Associated General Contractors of Cal., Inc. v. California State Council of Carpenters, 459 U.S. 519, 540, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983) and Blue Shield of Virginia v. McCready, 457 U.S. 465, 473-75, 102 S.Ct. 2540, 73 L.Ed.2d 149(1982) for RICO cases). As with antitrust actions, since standing under RICO is determined by common law principles of proximate cause and remoteness of injury, the following three factors as established in Holmes apply: (1) Are there more directly injured plaintiffs?; (2) Will there be difficulty in ascertaining plaintiff's damages?; and (3) Is there a possibility of multiple recoveries so that a court would have to fashion complex rules apportioning damages? See Holmes, 503 U.S. at 269-70, 112 S.Ct. 1311.

In its discussion of the first factor, the Service Employees Court reasoned that the health care trust funds were the only parties "who can bring suit on behalf of the trust assets." 83 F.Supp.2d at 86. While it is unclear whether the fund participants could bring a RICO claim themselves, but see Int'l Brotherhood of Teamsters, 196 F.3d at 825-26 (stating that...