Texas Carpenters Health Ben. Fund v. Morris, Inc.

• Decision Date: 31 August 1998
• Docket Number: No. 1:97CV625(TH).,1:97CV625(TH).
• Citation: 21 F.Supp.2d 664
• Parties: TEXAS CARPENTERS HEALTH BENEFIT FUND, IBEW-NECA Southwestern Health and Benefit Fund and North Texas Laborers' Health and Welfare Fund, on Behalf of Themselves and on Behalf of all Others Similarly Situated, Plaintiffs, v. PHILIP MORRIS, INC.; RJ Reynolds Tobacco Co.; Brown & Williamson Tobacco Co.; B.A.T. Industries P.L.C.; Lorillard Tobacco Co.; Liggett Group, Inc.; the American Tobacco Co.; United States Tobacco Co.; the Council for Tobacco Research — U.S.A., Inc.; Smokeless Tobacco Council, Inc.; the Tobacco Institute, Inc. and Hill & Knowlton, Inc.; Defendants.
• Court: U.S. District Court — Eastern District of Texas

Page 664

21 F.Supp.2d 664

TEXAS CARPENTERS HEALTH BENEFIT FUND, IBEW-NECA Southwestern Health and Benefit Fund and North Texas Laborers' Health and Welfare Fund, on Behalf of Themselves and on Behalf of all Others Similarly Situated, Plaintiffs, v. PHILIP MORRIS, INC.; RJ Reynolds Tobacco Co.; Brown & Williamson Tobacco Co.; B.A.T. Industries P.L.C.; Lorillard Tobacco Co.; Liggett Group, Inc.; the American Tobacco Co.; United States Tobacco Co.; the Council for Tobacco Research — U.S.A., Inc.; Smokeless Tobacco Council, Inc.; the Tobacco Institute, Inc. and Hill & Knowlton, Inc.; Defendants.

No. 1:97CV625(TH).

United States District Court, E.D. Texas, Beaumont Division.

August 31, 1998.

Windle Turley, Dallas, TX, John Broaddus, Washington, D.C., Robert J. Connerton, Washington, D.C., Robert Blakey, Notre Dame, IN, Jonathan S. Massey, Washington, D.C., for plaintiff.

Jack E. McClard, Richmond, VA, Maya Eckstein, Richmond, VA, Lawrence Louis, Germer, Beaumont, TX, Sydney Bosworth McDole, Dallas, TX, Jerome Richard Doak, Dallas, TX, Jill E. Tananbaum, Dallas, TX, Walter Joshua Crawford, Jr., Beaumont, TX, Jennifer Gardner, Washington, D.C., Kenneth N. Bass, Washington, D.C., Tanner Truett Hunt, Jr., Beaumont, TX, Melody G. Thomas, Beaumont, TX, John J. Kenney, New York, NY, Gerald E. Hawxhurst, New York, NY, Brian C. Lake, New York, NY, Robert A. Gwinn, Dallas, TX, Ellen B. Malow, Houston, TX, Michael M. Fay, New York, NY, Jack Potter Carroll, Beaumont, TX, Robert E. Dodson, Texarkana, TX, Mark E. Lowes, Houston, TX, William Key Wilde, Houston, TX, Dennis Hranitzky, New York, NY, Steven Klugman, New York, NY, Lipscomb Norvell, Jr., Beaumont, TX, Jacqueline

M. Stroh, Beaumont, TX, Lea F. Courington, Dallas, TX, Scott William MacLaren, Dallas, TX, Benton Jordan Barton, Dallas, TX, Edward John ("Jack") O'Neill, Jr., Houston, TX, Byron Charles Keeling, Houston, TX, Bruce Ginsberg, New York, NY, and Marc J. Rachman, New York, NY, for defendant.

MEMORANDUM OPINION AND ORDER

HEARTFIELD, District Judge.

Before the Court is Defendants' Motion to Dismiss [19]. The Court heard argument on the motion May 6, 1998. Having considered the arguments of counsel, the papers submitted, the applicable law and the record in this case, the Court is of the opinion that the motion should be GRANTED.

I. Background

Plaintiffs are three union trust funds¹ (Funds) which provide comprehensive health care benefits to employees, retirees and their dependents (Participants) through welfare benefit plans. Compl., ¶ 1. The Funds are governed by the Employment Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., and the Labor Management Relations Act (Taft-Hartley), 29 U.S.C. § 141 et seq. The Funds are financed by withholding employee wages at amounts negotiated through collective bargaining. The Funds are set up as non-profit trusts, with all assets held for the purpose of providing healthcare benefits to Participants. See ERISA, § 1103(a). The Funds are administered by a board of trustees, drawn equally from representatives of both labor and management. Tr., Hr'g on Mot. to Dismiss, at 19-20. The trustees are fiduciaries, meaning that they must discharge their Fund-related duties in the best interest of Participants, subordinating their own interests to those of the Participants. See ERISA § 1104(a). This standard mandates that trustees "ensure that a plan receives all funds to which it is entitled, so that those funds can be used on behalf of participants and beneficiaries." Cent. States, Southeast & Southwest Areas Pension Fund v. Cent. Transport, Inc., 472 U.S. 559, 571-72, 105 S.Ct. 2833, 86 L.Ed.2d 447(1985). This is the basis upon which the Funds filed suit.

Defendants are tobacco companies² and their lobbying and public relations agents³ (Tobacco).

The Funds generally allege that Tobacco assumed a duty to protect the public health with the publication in 1954 of "A Frank Statement to Cigarette Smokers." Compl., ¶¶ 83-86, 335. Through this publication, the Funds contend, Tobacco undertook a special duty to ascertain and disclose "objective and unbiased research regarding smoking and health." Compl., ¶ 83. The Funds maintain that Tobacco, with its collective eye on the bottom line, conspired to breach this duty in a concerted effort to externalize costs attendant to smoking upon other sectors of the economy, including benefit plans such as the Funds. Compl., ¶¶ 239, 282, 288, 314. Specifically, the Funds contend Tobacco:

• manipulated the nicotine content in cigarettes;

• misrepresented, concealed and suppressed information regarding the health consequences of smoking and the addictive properties of nicotine;

• restrained the trade of information relating to the feasibility of manufacturing less dangerous cigarettes; and

• targeted cigarette sales at minors. Compl., ¶ 15.

The Funds further allege that they relied upon Tobacco's "materially false, incomplete and misleading representations" regarding smoking, and, as a result, were unable to recognize the need to discourage and reduce tobacco use by Participants. Compl., ¶¶ 311, 316, 337, 342. The Funds contend that this failure to adopt measures designed to curb tobacco use resulted in increased medical care costs attributable to tobacco. Compl., ¶ 276. It is these costs the Funds seek to recoup.

On October 31, 1997, the Funds filed an eighteen count⁴ complaint against Tobacco, alleging:

• violation of the Federal Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962 et seq. (COUNTS I-III);

• violation of the Sherman Act, 15 U.S.C. § 1 et seq. (COUNT IV);

• violation of the Texas Free Enterprise and Antitrust Act, TEX. BUS. & COM. CODE § 15.01 et seq. (COUNT V);

• fraud and misrepresentation (COUNT VI);

• negligent misrepresentation (COUNT VII);

• innocent misrepresentation (COUNT VIII);

• intentional breach of special duty (COUNT IX);

• negligent breach of special duty (COUNT X);

• breach of express and implied warranties, Tex. Bus. & Com.Code §§ 2.313, 2.314. (COUNT XI);

• simple and gross negligence (COUNT XII);

• conspiracy and concert of action (COUNT XIV);

• aiding and abetting liability (COUNT XV);

• restitution to prevent unjust enrichment (COUNT XVI);

• violation of the Texas Deceptive Trade Practices and Consumer Protection Act (DTPA), TEX. BUS. & COM. CODE § 17.41 et seq. (COUNT XVII); and

• vicarious liability (COUNT XVIII). Compl., ¶¶ 225-406.

Based upon these allegations, the Funds seek, on behalf of themselves and all similarly situated funds in the State of Texas, to recover a portion of the costs expended treating Participants' tobacco-related illnesses. Compl., ¶¶ 5, 391. The Funds also request injunctive relief in three forms, requiring Tobacco to: (1) disclose all research relating to the deleterious effects of tobacco; (2) fund a remedial public education campaign on the health consequences of smoking; and (3) implement smoking cessation programs for nicotine-dependent Participants. Compl., ¶ 5.

By motion filed February 2, 1998, certain defendants⁵ seek dismissal of the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) on the ground that the Funds failed to state a claim upon which relief may be granted. For the reasons which follow, the motion is GRANTED.

II. Jurisdiction

This Court has subject matter jurisdiction over Counts I-IV because such claims arise under federal law. 28 U.S.C. § 1331. District courts have original jurisdiction over civil actions arising under RICO and the Sherman Act. 18 U.S.C. § 1964(a); 28 U.S.C. § 1337(a). Supplemental jurisdiction over the state law claims alleged in Counts V-XVIII exists because these claims are so related to the claims within the Court's original jurisdiction that they form part of the same case or controversy. 28 U.S.C. § 1367(a). This is so because all the claims derive from "a common nucleus of operative fact." United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966); Walker v. Cadle Co., 51 F.3d 562, 571 (5th Cir.1995).

III. Legal Standard — Motion to Dismiss

Dismissal of an action is appropriate where the complaint fails to state a claim upon which relief may be granted. Fed.R.Civ.P. 12(b)(6). Several well settled principles guide the 12(b)(6) inquiry.

When considering a motion to dismiss, the Court must construe the complaint in the light most favorable to the plaintiff, accepting as true the material allegations in the complaint as well as any reasonable inferences to be drawn therefrom. Kaiser Aluminum & Chemical Sales v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir.1982). Rule 12(b)(6) does not countenance dismissal of an action based upon a judge's disbelief in the veracity of the pleaded facts. Neitzke v. Williams, 490 U.S. 319, 327, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989). The 12(b)(6) methodology requires the Court to determine whether the facts — which are admitted as true for the purposes of the motion — state a valid claim for relief. Crowe v. Henry, 43 F.3d 198, 203 (5th Cir.1995). This is not to say that the Court should consider all pleaded facts, as neither conclusory allegations nor unwarranted deductions are admitted as true. Guidry v. Bank of LaPlace, 954 F.2d 278, 281 (5th Cir.1992).

General allegations suffice at the pleading stage since it is presumed that general allegations embrace those specific facts necessary to support the claim. Nat'l Org. for Women v. Scheidler, 510 U.S. 249, 256, 114 S.Ct. 798, 127 L.Ed.2d 99 (1994). The Federal Rules do not compel the plaintiff to set out in detail the facts upon which the claim is based. Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). To the contrary, the rules contemplate notice pleading, requiring nothing more than a "short and plain statement of the claim" sufficient to give the defendant fair notice of the claim and the grounds upon which it rests. Id. (quoting Fed.R.Civ.P. 8(a)(2)).

As a...