Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc.

Citation171 F.3d 912
Decision Date29 March 1999
Docket NumberNo. 98,No. 21,No. 98-1426,No. 592,H,21,98,592,98-1426
Parties1999-1 Trade Cases P 72,479, RICO Bus.Disp.Guide 9672, 23 Employee Benefits Cas. 1141 STEAMFITTERS LOCAL UNION NO. 420 WELFARE FUND; International Brotherhood of Painters and Allied Trades, District CouncilWelfare Fund; International Brotherhood of Electrical Workers, Local Unionealth & Welfare Fund; Composition Roofers Union Local 30 Combined Health & Welfare Fund; Laborers' District Council Building and Construction Health and Welfare Fund; Carpenters Health & Welfare Fund of Philadelphia and Vicinity; Cement Mason's Union Local, on behalf of themselves and all others similarly situated, Appellants v. PHILIP MORRIS, INC.; R.J. Reynolds Tobacco Company; Brown & Williamson Tobacco Corporation; B.A.T. Industries P.L.C.; Lorillard Tobacco Company, Inc.; Liggett & Myers Inc.; The American Tobacco Company; United States Tobacco Company; The Council for Tobacco Research--U.S.A., Inc.; The Tobacco Institute, Inc.; Smokeless Tobacco Council, Inc.; Hill & Knowlton, Inc.
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Melvyn I. Weiss, Michael C. Spencer (Argued), Kenneth J. Vianale, Beth A. Kaswan, Joan T. Brown, Milberg, Weiss, Bershad, Hynes & Lerach, LLP, New York, N.Y; Richard B. Sigmond, Thomas H. Kohn, Sagot, Jennings & Sigmond, P.C., Philadelphia, PA; Robert J. Connerton, James R. Ray, John McN. Broaddus, Connerton & Ray, Washington, DC; Perry Weitz, Robert L. Gordon, Jerry Kristal, Mitchell Breit, Karen J. Sabine, Weitz & Luxenberg, P.C., Cherry Hill, NJ; Of Counsel: Professor G. Robert Blakey Professor Einer Elhauge, for Appellants.

Herbert Wachtell (Argued), Steven M. Barna, Peter C. Hein, Stephen R. Blacklocks, Wachtell, Lipton, Rosen & Katz, New York, N.Y., Mary A. McLaughlin, David M. Howard, Aline J. Fairweather, Andrew S. Miller, Kathy E. Ochroch, Dechert, Price & Rhoads, Philadelphia, PA; David S. Eggert, James Rosenthal, Arnold & Porter, Washington, DC, for Appellee Philip Morris Incorporated.

Robert H. Klonoff, Paul S. Ryerson, Paul Reichert, Jones, Day, Reavis & Pogue, Washington, DC; John D. Goetz, Maureen T. Taylor, Jones, Day, Reavis & Pogue, Pittsburgh, PA, for Appellee R.J. Reynolds Tobacco Company.

Edward W. Warren, Kenneth N. Bass, Kirkland & Ellis, Washington, DC, for Appellee Brown & Williamson Tobacco Corporation (including as successor by merger to The American Tobacco Company).

William J. O'Brien, Howard M. Klein, Conrad, O'Brien, Gellman & Rohn, P.C., Philadelphia, PA; Jeffrey S. Nelson, Joseph A. Lanahan, Shook, Hardy, & Bacon, LLP, Kansas City, MO, for Appellee Lorillard Tobacco Company.

J. Kurt Straub, Obermayer, Rebman, Maxwell & Hippel, LLP, Philadelphia, PA, for Appellee Liggett & Myers, Inc. Stephen J. Imbriglia, Hecker, Brown, Sherry & Johnson, Philadelphia, PA, for Appellee United States Tobacco Company.

Patrick W. Kittredge, Glenn E. Davis, Kittredge, Donley, Elson, Fullem & Embick, LLP, Philadelphia, PA; Steven Klugman, R. Townsend Davis, Jr. Debevoise & Plimpton, New York, N.Y., for Appellee The Council for Tobacco Research-USA, Inc.

William J. O'Brien, Howard M. Klein, Conrad, O'Brien, Gellman & Rohn, P.C., Philadelphia, PA, for Appellee The Tobacco Institute.

Wilbur L. Kipnes, Schnader, Harrison, Segal & Lewis, LLP, Philadelphia, PA, for Appellee Smokeless Tobacco Council, Inc.

Richard L. Kremnick, Blank, Rome, Comisky & McCauley, LLP, Philadelphia, PA; Bruce M. Ginsberg, Marc Rachman, Davis & Gilbert, New York, N.Y., for Appellee Hill & Knowlton, Inc.

Stephanie W. Kanwit, Groom Law Group Chartered, Washington, DC; David Allen, Corina Trainer, UMWA Health & Retirement Fund, Washington, DC; Daniel B. Edelman, Yablonski, Both & Edelman, Washington, DC, for Amicus Curiae United Mine Workers of America Combined Benefit Fund.

Kenneth S. Geller, John J. Sullivan, Mayer, Brown & Platt, Washington, DC; Stephen A. Bokat, Robin S. Conrad, National Chamber Litigation Center, Inc., Washington, DC, for Amicus Curiae Chamber of Commerce of the United States.

Carl R. Schenker, Jr., John H. Beisner, Teresa Kwong, O'Melveny & Myers, LLP, Washington, DC; Hugh F. Young, Jr., Product Liability Advisory Council, Inc., Reston, VA, for Amicus Curiae Product Liability Advisory Council, Inc.

Jan S. Amundson, General Counsel National Association of Manufacturers, Washington, DC, for Amicus Curiae National Association of Manufacturers.

Before: BECKER, Chief Judge, SCIRICA and ROSENN, Circuit Judges.

OPINION OF THE COURT

BECKER, Chief Judge.

This is one of a vast number of cases filed in state and federal courts all over the nation seeking to hold tobacco companies liable for the smoking-related costs incurred by union health and welfare funds. The plaintiff funds allege that they were defrauded by the defendants--tobacco companies and related industry organizations--into paying for their participants' smoking-related illnesses, as well as prevented by these defendants from informing the funds' participants about safer smoking and smoking-cessation products. The defendants allegedly conspired to prevent the funds from obtaining and using information that would have reduced the incidence of smoking--and therefore of illness--among the funds' participants. The fraud and conspiracy charges are the underpinnings of plaintiffs' federal statutory claims, which are brought under the antitrust laws and the civil RICO statute. Plaintiffs also assert state common-law claims based on supplemental jurisdiction.

The District Court dismissed plaintiffs' complaint under Federal Rule of Civil Procedure 12(b)(6), on the ground that the claimed injuries of the plaintiff funds were too remote from any wrongdoing of the defendants to be redressable under either federal or state law. The correctness of that conclusion is the primary issue on this appeal. Put another way, we are called upon to determine whether plaintiffs have alleged a compensable injury proximately caused by defendants' allegedly fraudulent and conspiratorial conduct sufficient to avoid dismissal under Rule 12(b)(6). This basic proximate cause inquiry, drawn from tort law, is complicated by the allegations of intentional tort, the packaging of plaintiffs' claims in RICO and antitrust terms, and the addition of state-law claims based on fraud, special duty, unjust enrichment, negligence, strict liability, and breach of warranty. In the end, we conclude that the District Court correctly dismissed all of plaintiffs' primary claims as being too remote from any alleged wrongdoing of defendants, and the other claims as concomitantly lacking in merit; hence, we affirm the dismissal of the complaint in its entirety.

I. Background
A. Facts and Procedural History

This suit was brought by seven Pennsylvania-based union health and welfare funds (the "Funds") as a putative class action on behalf of all such similarly-situated funds against eight tobacco companies and certain industry organizations (collectively, the "tobacco companies") 1 to recover for the Funds' costs of treating their participants' smoking-related illnesses. The suit is patterned after similar suits brought by state attorneys general, which were recently settled with the tobacco companies for more than $200 billion. 2 See Barry Meier, Remaining States Approve the Pact on Tobacco Suits, N.Y. Times, Nov. 21, 1998, at A1. 3 In the present case, the Funds have brought federal claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962, and the antitrust laws, 15 U.S.C. § 1. Their complaint also includes, under the supplemental jurisdiction statute, 28 U.S.C. § 1367, state law claims for misrepresentation, breach of special duty, unjust enrichment, negligence, strict liability, and breach of warranty. The Funds seek both damages and extensive injunctive relief requiring the defendants to disclose any research on smoking that they have concealed, engage in a public education campaign to reduce smoking, cease advertising their products to minors, and fund smoking-cessation programs.

The Funds allege, inter alia, that the tobacco companies conspired to suppress research on safer tobacco products, defrauded health care providers and payers by informing them that the companies' tobacco products were safe, and caused smokers to become ill by preventing the dissemination of smoking-reduction and smoking-cessation information. All of these actions allegedly caused the costs of smoking-related illnesses to be shifted from their proper source, the tobacco companies, to the plaintiff Funds (and others). This shift in costs purportedly was accomplished through the intentional and fraudulent actions of the tobacco companies, directed at both smokers and the Funds themselves.

Seeking to recover for these costs, the Funds filed suit in the District Court for the Eastern District of Pennsylvania in August 1997. Shortly thereafter, the defendants moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), and, in an order accompanied by an unpublished opinion, the District Court granted the motion. See Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., No. CIV.A.97-5344, 1998 WL 212846 (E.D.Pa. Apr. 22, 1998). The Court relied on two general grounds to dismiss the entire complaint, and invoked a number of additional rationales to reject the Funds' specific claims. First, it held that plaintiffs did not state a claim because of "the general rule [that] has long been established that one who pays the medical expenses of an injured party does not have a direct claim against the tortfeasor who caused the injury." Id. at * 1. The District Court decided, however, that it "need not dwell upon this issue," as the Funds' claims "suffer from an even more fundamental flaw, namely, the fact that plaintiffs have not suffered any cognizable damages." Id. at * 2. The District Court reasoned that the Funds' increased costs for...

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