Service Employees Int'L Union v. Philip Morris, CIV.A 98-704 GK.

• Citation: 83 F.Supp.2d 70
• Decision Date: 21 December 1999
• Docket Number: No. CIV.A. 98-1569 GK.,No. CIV.A 98-704 GK.,No. CIV.A. 98-1716 GK.,CIV.A 98-704 GK.,CIV.A. 98-1569 GK.,CIV.A. 98-1716 GK.
• Parties: SERVICE EMPLOYEES INT'L UNION HEALTH AND WELFARE FUND, et al., Plaintiffs, v. PHILIP MORRIS INC., et al., Defendants. S.E.I.U. Local 74 Welfare Fund, et al., Plaintiffs, v. Philip Morris Inc., et al., Defendants. Michael H. Holland, Trustee of the United Mine Workers of America Combined Benefit Fund, et al., Plaintiffs, v. Philip Morris Inc., et al., Defendants.
• Court: U.S. District Court — District of Columbia

83 F.Supp.2d 70

SERVICE EMPLOYEES INT'L UNION HEALTH AND WELFARE FUND, et al., Plaintiffs, v. PHILIP MORRIS INC., et al., Defendants.

S.E.I.U. Local 74 Welfare Fund, et al., Plaintiffs, v. Philip Morris Inc., et al., Defendants.

Michael H. Holland, Trustee of the United Mine Workers of America Combined Benefit Fund, et al., Plaintiffs, v. Philip Morris Inc., et al., Defendants.

No. CIV.A 98-704 GK.

No. CIV.A. 98-1569 GK.

No. CIV.A. 98-1716 GK.

United States District Court, District of Columbia.

December 21, 1999.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Jonathan Watson Cuneo, the Cuneo Law Group, P.C., Washington, DC, Michael C. Spencer, Milberg, Weiss, Bershard, Hynes & Lerach, LLP, New York, NY, for Plaintiffs.

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

Paul Sommer Ryerson, Jones, Day, Reavis & Pogue, Washington, DC, for RJR Nabisco, Inc.

Kenneth N. Bass, Kirkland & Ellis, Washington, DC, for Defendant Brown & Williamson Tobacco Corp.,

Kenneth N. Bass, Kirkland & Ellis, Washington, DC, Robert John Cynkar, Cooper, Carvin & Rosenthal, P.L.L.C., Washington, DC, for Defendant B.A.T. Industries, P.L.C.

Michael Broughton MacWilliams, Goodell, Devries, Leech & Gray, L.L.P, Baltimore, MD, for Defendant Lorillard Tobacco Company.

MEMORANDUM OPINION

KESSLER, District Judge.

Plaintiffs, numerous labor union health and welfare trust funds,¹ have brought suit against the Defendant tobacco companies and two of their ancillary organizations to recoup economic damages they allege are the result of Defendants' conduct. Plaintiffs claim these damages were caused by what they allege to be the deceptive, fraudulent, and wrongful manner in which the Defendant companies targeted the marketing of their tobacco products to children, deceived the American public about the addictive and harmful nature of nicotine, suppressed and concealed industry-sponsored research, manipulated nicotine levels in their tobacco products so as to make them more addictive, and successfully discouraged development and manufacture of less addictive tobacco products.

The matter is now before the Court on the motions to dismiss filed by seven of the eight tobacco companies,² the Council for Tobacco Research — U.S.A., Inc., and the Tobacco Institute, Inc. No other pleadings have been filed nor any discovery undertaken. It should be noted at the outset that motions to dismiss for failure to state a claim upon which relief can be granted are generally viewed with disfavor and rarely granted. Doe v. U.S. Dep't of Justice, 753 F.2d 1092, 1102 (D.C.Cir.1985) (citing 2A James Wm. Moore et al., Moore's Federal Practice § 12.08 (2d ed. 1948 & Supp.1984)).

The law is clear that at this early stage, "a complaint should not be dismissed for failure to state a claim 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) (emphasis added); Davis v. Monroe County Bd. of Educ., 526 U.S. 629, 119 S.Ct. 1661, 1676, 143 L.Ed.2d 839 (1999). Moreover, the law is equally clear that "we must accept as true all of the material allegations in the plaintiffs' complaint... Defendants' factual allegations, if in agreement with plaintiffs', only reinforce plaintiffs' case; if in disagreement, they must be ignored. Thus, at this stage of the proceedings, the only relevant factual allegations are the plaintiffs'." Ramirez de Arellano v. Weinberger, 745 F.2d 1500, 1506 (D.C.Cir.1984), vacated on other grounds, 471 U.S. 1113, 105 S.Ct. 2353, 86 L.Ed.2d 255 (1985); Shear v. National Rifle Ass'n of Am., 606 F.2d 1251, 1253 (D.C.Cir.1979). Despite the sweeping breadth and seriousness of Plaintiffs' assertions, their validity is not for this Court to judge at this time.

Upon consideration of the motions, oppositions, replies, the applicable case law, the arguments presented at the oral hearing, and the entire record herein, for the reasons discussed below, Defendants' motions to dismiss for failure to state a claim [98-704: # 9; 98-1569: # 5; 98-1716: # 10] are denied as to the RICO claims, granted as to the fraud claim although Plaintiffs will be given an opportunity to correct the deficiency in their pleadings, and granted as to all other claims. Defendants' motions to dismiss for failure to join necessary parties [98-704: # 10; 98-1716: # 11] are denied. Defendants' Motion to Dismiss for Insufficiency of Service of Process [98-1569: # 7] is denied.

I. Plaintiffs' Factual Allegations

The Plaintiffs (or "Funds") are non-profit, multi-employer, labor union health and welfare trust funds, and trustees of the United Mine Workers of America Combined Benefit Fund. They were created by their respective parent labor unions to provide health insurance coverage to union members and their families ("participants"). Contributions to the Funds are made by employers pursuant to collective bargaining agreements. See, e.g., Compl.³ at ¶¶ 12-21.

The Funds are governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461. Some of the Funds self-insure (i.e., pay for medical expenses directly out of their own coffers), while others contract with third-party health insurance companies (e.g., Blue Cross Blue Shield) to provide health insurance coverage to their participants. Some Funds have self-insured in the past but now contract with third-party insurance companies, and vice versa.

Defendants are eight major United States and British tobacco manufacturers, as well as the Council for Tobacco Research and the Tobacco Institute, two organizations created and funded by the tobacco companies. Compl. at ¶¶ 22-33.

Plaintiffs have filed a 151-page complaint describing in considerable detail what is alleged to be a four-decade long conspiracy, dating from at least 1953, to intentionally and willfully deceive and mislead the American public as well as the Funds and their participants about the medically harmful nature of tobacco products, the addictive nature of nicotine, and the possibility of manufacturing and marketing safer and less addictive tobacco products. Compl. at ¶ 3, 4.

A summary of Plaintiffs' allegations is necessary to fully convey the scope of their claims as well as the nature of the injuries they claim to have suffered.

Plaintiffs commence their complaint with an outline of what they allege to be the "staggering loss of life, premature disability, disease, illness and economic loss, attributable in part to the increased medical costs attributable to cigarettes and smokeless tobacco." Compl. at ¶ 7. In addition to causing more than 85% of all lung cancer, smoking is responsible for at least 30% of all deaths from cancer. Smoking is also the cause of more than 80% of deaths from pulmonary diseases such as emphysema and bronchitis, and is responsible for thousands of deaths annually from cardiovascular disease, including stroke, heart attack, peripheral vascular disease, and aortic aneurysm. According to the Federal Centers for Disease Control and Prevention, each year cigarette smoking kills more than 400,000 Americans, exceeding the combined deaths caused by automobile accidents, AIDS, alcohol use, use of illegal drugs, homicide, suicide, and fires. This figure of 400,000 deaths per year exceeds the total number of American lives lost in all the wars this country has fought in this century. Compl. at ¶¶ 7, 38-41.

Nicotine has been recognized as an addictive drug by the Food and Drug Administration ("FDA"), the U.S. Surgeon General, the World Health Organization, the American Medical Association, and other major medical organizations. They all acknowledge that tobacco use is a form of drug dependence that causes severe adverse health consequences and increased medical costs. Compl. at ¶ 43.

Plaintiffs allege that until January of 1998, the tobacco industry denied the addictive and lethal nature of their products. Plaintiffs cite to the sworn testimony given in 1994 by the chief executive officers of the Defendant companies, before the House of Representatives Subcommittee on Health and Environment (which is part of the Committee on Energy and Commerce), stating that cigarette smoking is not addictive and that the companies did not manipulate or increase the level of nicotine in cigarettes. Compl. at ¶¶ 44, 61-63, 65-68.

Plaintiffs allege that Defendant companies, which control virtually 100% of the cigarette market in the United States, have conspired to deceive and mislead the American public about the danger of their products in order to maintain their profits, to shield themselves from having to pay the healthcare costs of tobacco-related diseases, and to shift those costs to others. Compl. at ¶¶ 47, 50. This conspiracy adopted two strategies: to falsely represent to the public that the tobacco companies were creating a new and unbiased organization to provide trustworthy research and information about smoking and health, and to then rely on the public's acceptance of these representations to suppress, distort, and confuse the facts about the health dangers of tobacco products and nicotine addiction. Compl. at ¶ 50.

Plaintiffs allege that Defendants' plan was set in motion in 1954, as several scientific studies were issued that sounded warnings about the health hazards of cigarettes. Compl. at ¶ 71-72. The Defendant tobacco companies created a joint research organization, the Tobacco Institute Research Committee ("TIRC"), which in 1964 changed its name to the Council for Tobacco Research — USA ("CTR"). On January 4, 1954, as a result of a December 1953 hotel meeting of the chief executive officers of the leading cigarette manufacturers, all the companies, except Liggett, issued full page newspaper advertisements throughout the country, asserting that there was no proof that cigarette smoking was one of the causes of lung...