Seafarers Welfare Plan v. Philip Morris

• Decision Date: 13 July 1998
• Docket Number: Civil Action No. MJG-97-2127.
• Citation: 27 F.Supp.2d 623
• Parties: SEAFARERS WELFARE PLAN, et al., Plaintiffs, v. PHILIP MORRIS, et al., Defendants.
• Court: U.S. District Court — District of Maryland

27 F.Supp.2d 623

SEAFARERS WELFARE PLAN, et al., Plaintiffs, v. PHILIP MORRIS, et al., Defendants.

Civil Action No. MJG-97-2127.

United States District Court, D. Maryland.

July 13, 1998.

COPYRIGHT MATERIAL OMITTED

John McNeill Broaddus, Connerton & Ray, Washington, DC, Michael C. Spencer, Kenneth J. Vianale, Milberg Weiss Bershad Hynes & Lerach LLP, New York City, Steven E. Fineman, Weitz & Luxenberg, New York City, for Seafarers Welfare Plan, et al.

George A. Nilson, Piper & Marbury, Baltimore, MD, Kenneth N. Bass, Karen M. DeSantis, Kirkland & Ellis, Washington, DC, for Brown & Williamson Tobacco Corp., as successor to American Tobacco Co., Brown & Williamson Corp., and R.J. Reynolds Tobacco Co.

Anne E. Cohen, Steven S. Michaels, R. Townsend Davis, Jr., New York City, for Tobacco Research-USA, Inc.

Peter Woolson, Robinson, Woolson O'Connell, LLC, Baltimore, MD, for Liggett Group, Inc.

James E. Gray, Andrew Gendron, Goodell, DeVres, Leech & Gray, LLP, Baltimore, MD, for Lorillard Tobacco Co.

David S. Eggert, Arnold & Porter, Washington, DC, for Philip Morris, Inc.

William F. Ryan, Jr., Whiteford, Taylor & Preston, LLP, Baltimore, MD, for Tobacco Institute, Inc.

James P. Ulwick, Kramon & Graham, P.A., Baltimore, MD, for U.S. Tobacco Co.

F. Ford Loker, Jr., Church & Houff, P.A., Baltimore, MD, Bruce Ginsberg, Marc Rachman, Davis & Gilbert, New York City, for Hill and Knowlton, Inc.

Gregg L. Bernstein, Kimberly Dunn Spelman, Martin, Junghans, Snyder & Bernstein, P.A., Baltimore, MD, Mark G. Cunha, Adam I. Stein, Kevin D. Lewis, Simpson, Thacher & Bartlett, New York City, for B.A.T. Industries, P.L.C.

Barry S. Schaevitz, Jacobs, Nedinger & Finnegan, LLP, New York City, for Smokeless Tobacco Council, Inc.

GARBIS, District Judge.

The Court has before it the motions entitled "Certain Defendants' Motion to Dismiss the First Amended Complaint" and "Certain Defendants' Alternative Motion to Dismiss for Failure to Join Necessary Parties." These motions have been adopted by all Defendants.¹ The Court also has before it the materials submitted by the parties relating to the motions. The Court finds that a hearing is unnecessary.

As discussed herein, the Court concludes that the motions to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) should be granted. Accordingly, it is unnecessary to consider the alternative motion to dismiss under Federal Rule of Civil Procedure 12(b)(7).

I. BACKGROUND

The Plaintiffs in this case are five non-profit labor-management trust funds operating in the State of Maryland (collectively referred to "Plaintiffs" or "the Funds").² The Funds are established through collective bargaining and pursuant to the Labor-Management ("Taft-Hartley") Act. They are also employee benefit plans and multi-employer plans within the meaning of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 ("ERISA").

The Funds provide health care benefits to union workers, their families, and retirees (referred to as "participants" and "beneficiaries"). The Funds are financed through contributions from the employers of covered workers, the amounts of which are negotiated in collective bargaining between the workers' unions and the employers. The Funds are governed by boards of trustees and are legal entities under ERISA. 29 U.S.C. § 1132(d). As such, the Funds hold the Funds' assets in trust for the purpose of providing benefits to participants and their beneficiaries.

The Defendants are this country's leading tobacco companies³ and their lobbying and public relations agents.⁴

The Funds bring this suit on their own behalf and on behalf of a proposed class of similarly situated funds. As described by the Plaintiffs, "[t]his is an action to recover funds expended by the Plaintiff Funds to provide medical treatment and other benefits and services to their participants and beneficiaries suffering from smoking-related illnesses and to seek appropriate injunctive relief against the Defendants' continuing illegal and outrageous conduct." Compl. ¶ 5. In essence, Plaintiffs allege that, for many years, the Defendants have misrepresented the dangers of smoking cigarettes and the addictiveness of nicotine. They further allege that the Defendants have purposefully inhibited the development of safer tobacco products. As a result, a great many smokers have suffered a variety of serious health problems allegedly stemming from tobacco use.

In their highly detailed and lengthy seventeen⁵ count Complaint, which purports to catalogue, among other things, virtually the entire history of the marketing of cigarettes in this country, Plaintiffs assert claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962 ("RICO"), federal and Maryland antitrust statutes, the Maryland Consumer Protection Act,⁶ and under Maryland common law for unjust enrichment, breach of voluntarily undertaken duty, fraud, negligent misrepresentation, and conspiracy.⁷

Plaintiffs do not seek to bring subrogation claims for the medical expenses of individual smokers which the Funds paid. Rather, they assert "independent" or "direct" claims to recover such expenses. Defendants now move to dismiss Plaintiffs' entire Complaint for failure to state a claim upon which relief may be granted.

II. LEGAL STANDARD

The Court must deny a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure unless 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). "The question is whether in the light most favorable to the Plaintiff, and with every doubt resolved in his behalf, the Complaint states any valid claim for relief." 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure 2d § 1357 (1990). The Court, when deciding a motion to dismiss, must consider well-pled allegations in a complaint as true and must construe those allegations in favor of the plaintiff. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Jenkins v. McKeithen, 395 U.S. 411, 421-22, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1969). Further, the Court must disregard the contrary allegations of the opposing party. See A.S. Abell Co. v. Chell, 412 F.2d 712, 715 (4th Cir.1969).

III. DISCUSSION

In this Court's view, Plaintiffs' entire Complaint suffers from the fundamental flaw that the Funds themselves, as opposed to their participants or the pertinent employers, have not suffered any cognizable damages.

As the Plaintiffs point out, the Funds are established and maintained as nonprofit, tax-exempt trusts. The Funds' assets are held in trust "for the exclusive purpose of providing benefits to participants in the [trust] and their beneficiaries." 29 U.S.C. § 1103(c)(1). The Funds are financed by contributions from the Funds' members' employers which are negotiated through the collective bargaining process.

Plaintiffs contend that although the payments to the Funds are deemed employer contributions for tax purposes, the reality is that these monies are substitute wages for the covered workers. As stated by Plaintiffs, "Instead of receiving these monies in their paychecks, the workers, through their unions, negotiate to have their employers contribute to the Funds to finance health coverage for themselves and their families." Pls.' Opp'n at 9. It is from these monies that the medical bills of Fund participants are paid. In addition, to the extent a fund chooses to provide benefits through the purchase of insurance, the premiums on the insurance which covers the workers are also paid from these contributions.

This Court agrees with the view expressed by Judge Fullam of the United States District Court for the Eastern District of Pennsylvania in Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., No. 97-5344, 1998 WL 212846 (E.D.Pa. Apr.22, 1998) that the Plaintiff Funds themselves have not suffered any cognizable damages. As Judge Fullam held,

[W]hether the contributions are properly attributed to the employer or the participating workers, it is clear that plaintiffs' [the Funds'] own economic interests were not affected by the payments. The fact that the medical costs paid out of these funds increased because of defendants' wrongdoing caused no harm to plaintiffs [the Funds]; it merely meant that the unions negotiated a greater level of contributions from the employers.

Steamfitters, 1998 WL 212846 at *2. Furthermore, "[i]f the Fund[s] recover[] in this lawsuit, [they] would not reimburse contributing employers for their overpayments because [they are] statutorily prohibited from doing so." Southeast Florida Laborers Dist. Health and Welfare Trust Fund v. Philip Morris, No. 97-8715-CIV, 1998 WL 186878 at *1 (S.D.Fla. Apr.13, 1998) (citing 29 U.S.C. § 1103(c)(1)). As Judge Fullam noted, unlike the various suits now pending brought by state attorneys general or other governmental entities, the Plaintiffs in the instant case are not the entities which actually paid the increased medical costs from their own assets. Rather, in the instant case, "plaintiffs are merely handling the payments with money provided by others, and have no genuine stake in the matter." Steamfitters, 1998 WL 212846 at *2. Finally, Judge Fullam "noted that a reduction of the medical costs payable by plaintiffs [the Funds] would not inure to plaintiffs' [the Funds'] benefit. The money in their hands can only be used to pay benefits on behalf of others, and, since all are non-profit entities, plaintiffs [the Funds] cannot claim to have suffered any economic loss in the form of lost profits."⁸ Id. at *3.

In addition to money damages, Plaintiffs in the instant case also seek injunctive and declaratory relief requiring Defendants to, inter alia, publish all of their research pertaining to issues of smoking and health, fund a corrective education campaign...