Simon v. Philip Morris, Inc.

• Decision Date: 03 March 2000
• Docket Number: No. 99 CV 1988(JBW).,99 CV 1988(JBW).
• Citation: 86 F.Supp.2d 95
• Parties: Ellis SIMON et al., Plaintiffs v. PHILIP MORRIS, INC. et al., Defendants.
• Court: U.S. District Court — Eastern District of New York

Page 95

86 F.Supp.2d 95

Ellis SIMON et al., Plaintiffs v. PHILIP MORRIS, INC. et al., Defendants.

No. 99 CV 1988(JBW).

United States District Court, E.D. New York.

March 3, 2000.

COPYRIGHT MATERIAL OMITTED

Lieff, Cabraser, Heimann & Bernstein, LLP, New York City, by Steven E. Fineman, Robert J. Nelson, for Plaintiffs.

Simpson, Thacher & Bartlett, New York City, by Joseph M. McLaughlin, Ronald M. Neumann, Michael P. Panagrossi, for Defendants.

AMENDED MEMORANDUM AND ORDER

WEINSTEIN, Senior District Judge.

                                              TABLE OF CONTENTS
                  I. INTRODUCTION ....................................................................98
                 II. STANDARD OF PROOF ...............................................................98
                III. FACTS ...........................................................................99
                     A. BAT's Organization............................................................99
                     B. The 1976 "Scheme of Arrangement" ............................................100
                     C. BAT's New York Contacts .....................................................100
                     D. Tobacco Industry Conspiracy .................................................100
                     E. New York as a Situs of the Tobacco Industry Conspiracy ......................106
                     F. BAT's Tortious Conduct in Furtherance of the Conspiracy .....................107
                       1. Perpetuation of False Smoking and Health Scientific "Controversy" .........107
                       2. Suppression of Safer Cigarette ............................................113
                       3. Manipulation of Nicotine ..................................................114
                       4. Acting in Concert with B & W to Hide Information...........................116
                     G. BAT's Extensive Participation in the Marketing and in Research and
                         Development of Cigarettes ..................................................118
                 IV. NEW YORK STATUTORY BASES FOR JURISDICTION ......................................119
                     A. Conspiracy Theory of Jurisdiction ...........................................119
                       1. Law .......................................................................119
                       2. Application of Law to Facts ...............................................120
                           a. Prima Facie Showing of Conspiracy .....................................122
                           b. BAT's Relationship to the Tobacco Conspiracy and the New
                               York Acts of its Co-Conspirators......................................123
                     B. Other Theories of Personal Jurisdiction .....................................124
                       1. CPLR 302(a)(3)(ii) ........................................................124
                       2. CPLR 301 ..................................................................125
                  V. DUE PROCESS ...................................................................126
                     A. Law ........................................................................126
                       1. Minimum Contacts .........................................................127
                          a. Membership in a Conspiracy ............................................127
                          b. Intentional Tortious Acts Aimed at the Forum ..........................128
                

                       2. Reasonableness ............................................................128
                       3. Adaptation of Due Process to Mass Tort Context ............................129
                     B. Application of Law to Facts .................................................132
                       1. Minimum Contacts ..........................................................132
                       2. Reasonableness ............................................................133
                       3. Mass Torts Due Process Standard ...........................................137
                  VI. Conclusion ....................................................................137
                

I. INTRODUCTION

This case poses the question: can a foreign national holding company always shield itself against a mass tort suit in New York? In this instance it cannot. It may not hide behind narrow jurisdictional concepts created for another day when its own acts and those of its co-conspirators have allegedly caused great harm in this state.

Plaintiffs sue various tobacco companies and affiliated organizations in a nationwide smoker personal injury class action. They allege that for decades the tobacco industry, in the face of what it knew was overwhelming evidence of the addictiveness of nicotine and of the adverse health consequences of smoking, has conspired to deceive the American public, including the plaintiffs.

B.A.T. Industries, p.l.c. ("BAT"), the British holding company parent of United States defendant, Brown & Williamson Tobacco Corp. ("B & W"), has moved to dismiss for lack of personal jurisdiction. It claims that it is a passive stockholding parent corporation with no connection to the fraud and conspiracy alleged by the plaintiffs. BAT's motion was denied by order dated July 19, 1999. This amended memorandum explains the basis for the denial.

BAT is a quintessential example of a sophisticated holding company presiding over a multinational corporate empire whose operations span the globe. Through the promulgation of binding company-wide policies and long distance active participation in the large-scale marketing, research, and development of cigarettes, it is regnant in the cigarette industry in the United States and throughout the world. Its sway is an aspect of today's global technological-commercial community, in which the click of a mouse may affect events unfolding thousands of miles away and concepts of sovereignty for jurisdictional purposes have eroded. BAT's conduct has supranational effects. It must accept the price of its international ascendancy by defending suits here in the United States, where it has allegedly been responsible for massive damage.

II. STANDARD OF PROOF

Predicating subject matter jurisdiction on diversity of citizenship, plaintiffs' Amended Complaint alleges causes of action sounding in negligence, strict product liability, fraudulent concealment and civil conspiracy.

The instant motion challenging personal jurisdiction was filed pursuant to Rule 12(b)(2). Plaintiffs presented over five hundred exhibits from prior litigations in opposition. BAT responded with more documents. Given the voluminousness of the submissions, the motion was converted to one for summary judgment with the parties' consent.

The burden of establishing personal jurisdiction is on the plaintiffs. The extent of this obligation depends both upon whether discovery has taken place and upon the nature of the jurisdictional challenge. See Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.), cert. denied, 498 U.S. 854, 111 S.Ct. 150, 112 L.Ed.2d 116 (1990). "Prior to discovery, a plaintiff challenged by a jurisdiction testing motion may defeat the motion by pleading in good faith legally sufficient allegations of jurisdiction." Id. (citation omitted). Where relevant discovery has been extensive, the plaintiff's allegations must be supported by "an averment of facts that if credited by the trier, would suffice to establish jurisdiction over the defendant." Id.

If personal jurisdiction is, as here, contested via a summary judgment motion, "the court proceeds, as with any summary judgment motion, to determine if undisputed facts exist that warrant the relief sought." Id.; see also Fed.R.Civ.P. 56. Ultimately, the plaintiff bears the burden of establishing personal jurisdiction over the defendant by a preponderance of the evidence, either at an evidentiary hearing or at trial. See, e.g., Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 154 (2d Cir.1999); CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir.1986). Short of such a hearing or a trial, plaintiff's burden remains to establish a prima facie case. See Tilyou v. Carroll, No. 92 CV 0750, 1992 WL 170916, at *3 (E.D.N.Y. July 2, 1992).

Since there has been neither a factual hearing nor a trial, but discovery has been substantial, plaintiffs must establish a factually supported prima facie case of jurisdiction. They have done so, as the following discussion demonstrates.

III. FACTS

A. BAT's Organization

BAT is a holding company based in London, England and incorporated under the laws of England and Wales. Its existence dates to 1976, when it became the controlling parent corporation of the British American Tobacco Company, Ltd. ("BATCo"). BAT currently has over five hundred subsidiaries in some forty countries primarily engaged in the tobacco and financial services businesses. The majority of its revenues derive from its tobacco-related activities. See, e.g., Pls.' Ex. 165 at 14 (BAT Directors' Report and Accounts 1995).

BAT bills itself as "the world's most international cigarette manufacturer" owning the leading cigarette brand in over thirty different markets. See, e.g., Pls.' Ex. 167 at 2 (Facts and Figures 1996). In 1995, it sold 670 billion cigarettes, achieving a 12.4 percent share of the world market. See id. A substantial percentage of these cigarettes were purchased by United States smokers.

In public filings and promotional documents, BAT sometimes refers to itself as the "BAT Group," the "B.A.T. Industries Group," or "the Group." This term is used by BAT to collectively describe the entire family of its affiliated companies.

BATCo is a United Kingdom-based corporation that sells tobacco products and conducts tobacco-related scientific research. From 1902 until its 1976 acquisition by BAT, it was the controlling parent company of the BAT Group, which consisted of hundreds of tobacco subsidiaries. It acquired the stock of B & W in 1927. At the time of its acquisition by BAT, BATCo produced over 300 cigarette brands worldwide and produced the leading cigarette in forty countries. See Pls.' Ex. 25 at 15. Its most profitable area of operation was North America. Id. BATCo also "devote[d] considerable resources to research and...