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Index of Pleadings Case Name: Steamfitters Local Union No. 614 V. PM, Et Al. Circuit Court of Tennessee for the 13th Judicial District at Memphis Case No: 92260-2

Date: 04 Oct 1999 (est.)
Length: 414 pages
82518914-82519327
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82518912/82519329/Litigation Steamfitters Local 614 V. PM. Et Al. Court Papers Volume I
82518913/82519328/Steamfitters Local 614 (Tenn) V. Philip Morris, Et Al. Court Papers - Volume I Opened 980115
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PM, Philip Morris
Steamfitters Local Union No 614
Tn Circuit Court 13th Judicial District
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82518915
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a Knoxville, Tennessee 37902 Counsel for The Council for Tobacco Research - USA, Inc. Saul C. Be1z, Esq. (BPR 4346) Waring Cox, PLC Morgan Keegan Tower 50 North Front Street, Suite 1300 Memphis, Tennessee 38103-1190 Counsel for The Tobacco Institute, Inc. Bruce M. Ginsberg, Esq. Marc 1. Rachman, Esq. Davis & Gilbert 1740 Broadway New York, New York 10019 Gary K. Smith, Esq. (BPR 8124) Smith, Sabbatini & McLeary, PLLC 119 South Main Street Fifth Floor P. 0. Box 3582 Memphis, Tennessee 38173 Counsel for Hill and Knowlton, Inc. Robert G. McDowell, Esq. (BPR 961) Baker, Donelson, Bearman & Caldwell, PC 1700 Nashville City Center 51 Union Street P. O. Box 190613 Nashville, Tennessee 37219 Counsel for United States Tobacco Company \D
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i INDEX OF PLEADINGS CASE NAME: STEAMFITTERS LOCAL UNION NO. 614 V. PM, ET AL. COURT; CIRCUIT COURT OF TENNESSEE FOR THE 13TH JUDICIAL DISTRICT CASE NO: AT MEMPHIS 92260-2 VOLUME I T A 8 PARTY PLEADING ' FILED (F) SERVED (S) DATED D 1. PLAINTIFF COMPLAINT 1-7-98 2. LTC SUMMONS 1-7-98 3. LTC SERVICE OF PROCESS 1-14-98 4. DEFENDANT BRIEF IN SUPPORT OF DEFS' MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 4-20-98 5. COURT ORDER ON MOTION TO AMEND COMPLAINT 6-26-98 6. PLAINTIFF AMENDED CLASS ACTION COMPLAINT AND DEMAND FOR JURY TRIAL 7-31-98 7. DEFENDANT AMENDED MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 8-17-98 S. PLAINTIFF SUPPLEMENTAL BRIEF IN OPPOSITION TO DEFS' MOTION TO DISMISS FOR FAILURE TO STATE A CLAIMS 11-24-98 ' 9. DEFENDANT REPLY BRIEF TO PLS' BRIEF IN OPPOSITION TO DEFS' MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 12-1-98 10. DEFENDANT SUBMISSION' OF SUPPLEMENTAL AUTHORITY IN SUPPORT OF MOTION TO DISMISS UNDATED 11. COURT OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFS' MOTION TO DISMISS 1-29-99 12. COURT ORDER GRANTING PERMISSION TO APPEAL THIS COURT'S 1 29 99 ORDER TO. TENNESSEE COURT OF APPEALS 5-6-99 13. COURT JOINT RULE 9 IS GRANTED 6-15-99 14. DEFENDANT BRIEF 8-23-99 15. PLAINTIFF BRIEF 9-15-99 16. DEFENDANT REPLY BRIEF 9-30-99 17. DEFENDANT SUBMISSION OF SUPPLEMENT TO EXHIBIT B TO DEFS. REPLY BRIEF 10-4-99 1S. 19.
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Kenneth N. Bass, Esq. Jennifer Gardner, Esq. Kirkland & Ellis 655 Fifteenth Street, NW, Suite 1200 Washington, DC 20005 Lee J. Chase, Esq. (BPR 8443) Glankler Brown, PLLC Suite 1700 One Commerce Square Memphis, Tennessee 38103 Counsel for Brown & Williamson Tobacco Corporation (individually and as successor by merger of The American Tobacco Company) Jeffrey S. Nelson, Esq. Richard L. Gray, Esq. Shook, Hardy & Bacon, L.L.P. One Kansas City Place 1200 Main Street Kansas City, Missouri 64105-21'18 -Roger Dickson, Esq. (BPR 1933) Marcia Eason, Esq. • (BPR 11374 Miller & Martin Suite.1000 Volunteer Building 832 Georgia Avenue Chattanooga, Tennessee 37402 Counsel for Lorillard Tobacco Company Harry Zirlin, Esq. Debevoise & Plimpton 875 Third Avenue New York, New York 10022 William S. Lockette, Jr., Esq. (BPR 10257) Rebecca B. Murray, Esq. (BPR 11622) Kennerly, Montgomery & Finley, PC 550 Main Street, 4th Floor
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Jack R, McGiaA Cheryl G Ralpdale Cyrtthia S. . Ceoil 8rimn Y'. C9taca Maya A'I. Eakstein Him[an & Wi]Gams auvertFnnt Plaza, LastTawer 951 BastEyrd Streat Riohaaond, VA 23Z 19-4a'74 (904) 7$B-S20O . Mwtthew J. {'alvert Hunron & W1lliarns NBtiona [iank P1aaa, Saita 41d0 600 poaohtree Street, riCIE Attlsnoa, 4A 3 0317 8-22 1 d (404) 885-4000 "I Counse~tnr &Lilip iViurdr Incorporated Bxvice Nf. c3lnabesE T]®vii & fiiltrmt 1740 $YatldSVay Na+w Yarlti NY 10019 (212) 468-4S00 ['aeensefl for Bill & ICnawltan pahn S. Rood dtidlay M. Saridid>ge, Jr. Rax1 Waitkarap SoheU gs'Viou, PLLC 2400 Citiarns pluza LouiAvillq 1€Y 40202 (502) 589~1060 Consl6c!'for ilnitcd 5ta$ao Tubac®a Cnmpiiy Cheriea S. Csaeis WlitstoriA Ad'iller Brnven, Todd & Ht.ybumALLC 400 W. Markat Stteet, 32"d Flutlr 1.oui5vllie,ICY 40202-3363 (502) 5B9S400 JchlW .Y, Jades Seotd C, Walker
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0 CERTIFICATE OF SERVICE We hereby certify that on October 6, 1999 a true copy of the foregoing was mailed, first class, postage prepaid, to the following counsel of record: Deborah Godwin, Esq. Timothy Taylor, Esq. Florence M. Johnson, Esq. Agee, Allen, Godwin, Morris, Laurenzi & Hamilton, P.C. 200 Jefferson Avenue, Suite 1400 Memphis, Tennessee 38103 John A. McReynolds, Jr., Esq. Baker, McReynolds, Byrne, O'Kane Shea & Townsend 607 Market Street, 11th Floor Knoxville, Tennessee 37901-1708 Counsel for Liggett Group, Inc. Louis L. Robein, Esq. Robert H. Urann, Esq. William Lurye, Esq. Nancy Picard, Esq. 2540 Severn Avenue, Suite 400 Metairie, LA 70009-6768 Robert J. Connerton, Jr., Esq. , John Boaddus, Esq. Connerton & Ray 1920 L. Street, NW, 4th Floor Washington, DC 20036-5004 o. Counsel for Plaintiffs Mary Elizabeth McGarry, Esq. Adam I. Stein, Esq. Kathy L. McFarland, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017-3954 Counsel for B.A.T. Industries, PLC Edward Bearman, Esq. Branson & Bearman 44 North Second Street, Suite 701 Memphis, Tennessee 38103-2266 Counsel for Smokeless Tobacco Council, Inc. 5
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Respectfully submitted, m-5 LedlBearman, Jr., Esq. (BPR 8363) Jill M. Steinberg, Esq. (BPR 11063) Baker, Donelson, Bearman & Caldwell 165 Madison Avenue, 20th Floor Memphis, Tennessee 38103 Kenneth J. Parsigian, Esq. Christopher D. Moore, Esq. Goodwin Procter & Hoar LLP Exchange Place Boston, MA 02109 Jack E. McClard, Esq. Stacy Colvin Taylor, Esq. Hunton & Williams Riverfront Plaza 951 East Byrd Street, East Tower Richmond, Virginia 23219 Counsel for Philip Morris Incorporated, and for purposes of this Brief only, on behalf of defendants listed below: Jeff Jones, Esq. Scott C. Walker, Esq. Elizabeth P. Kessler, Esq. Jones, Day, Reavis-& Pogue 1900 Huntington Center Columbus, Ohio 43215 Albert C. Harvey, Esq. (BPR 7955) Daniel F. B. Peel, Esq. (BPR 19245) Thomason, Hendrix, Harvey, Johnson & Mitchell 2900 One Commerce Square 40 South Main Street Memphis, Tennessee 38103 tb Counsel for R. J. Reynolds Tobacco Company N 2 -' co ~ N-7
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4 Bfu! d. Pf"aak, V4 WaRz &.1,uxaahaC. P.C. tgt) IHA7denT,.anr, I?"'Fftsar Nrt+.r Ynek, NY 1 DQ38 , ph4I1L': (:Ziz 559-5700 Fox: (212) 341-5Ad1 &,bart aI enuarnru,, Erq. Jahn Itd¢iy'. BrddClus, Esg. CotutsttarJ & RzY 1401 ATaep YaMC AVMIpe, NW, IG1° FlorR w;r1wrm,, nC 20005 F6nnt: g3M! %7,15oD Pa: (2u27 ssW95$ Huban Y.. $4421. p1®. kwia l;i. Catlar, dr., xaq. Lladal. WaRboiaa, S4• Segal* ulea. 5tammn, CwIcr& Tillm7ul d1O4wrmLaai Praze 325 W®UIwlAsuaOt LaU[tYA1e, KY 402024251 8huan ($C3) $6&56U4 PAs: (5021981•1437 4
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TABLE OF CONTENTS ut TABLE OF AUTHORITIES .......................................... ~" INTRODUCTION AND SUMMARY OF ARGUMENT ........................ 1 ARGUMENT .....................................................4 EVERY CLAIM ASSERTED BY THE FUNDS IS BARRED BY THE REMOTENESS DOCTRINE BECAUSE THE FUNDS' ALLEGED INJURIES ARE DERIVATIVE OF PERSONAL INJURIES SUFFERED BY SMOKERS ................... 4 A. The Policy Concerns Set Forth In Holmes And AGC Require Dismissal. ...... 4 1. Speculative Causal Theories ............................... 5 2. Apportionment of Damages/Risk of Duplicative Recovery ........... 6 3. Vindication of the Law ......... : ................... : . . . . 7 B. The Funds Fail To Offer Any Reason For This Court To Undermine The Remoteness Doctrine In Tennessee By Departing From The Soundly Reasoned, "Overwhelming" Majority Of Decisions Directly On Point. ....... 8 C. The Funds' Unprecedented Argument For A Defendant-Specific Public Policy Should Be Rejected Out Of Hand . ...................... 9 CONCLUSION .................................................. 10 ii
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C®umlog fnr The Tab;mccu gngtitute ~ Mn4gFU~nt 9, IGcaam Greanabaum, Doll & UcDonaid 3300 Natianat City Tcwei' I,auigville, K'Y 40202 Counar.l fnr8rqoke9ass Teliacca Cpitlacit, ina ivl'ury Etizabcth M oC'ratry Adam L Strin Kathy McFarlttnd Sirnpsoii,ltaoher & Aarttett 42S Lesaagton AvhauC New Y®9'k, N®w Yark 10017-3954 Chsrle® H. Caesis 7ahn d. Mc1'.augUtin, SSI t7oldberg & Simpson 3000 A(stiQaol City Tower iouisvit~n, KY 40202 Cauneel for R.A„ T. datduattlea, $'LC R'TxEfi~[ F 5IEIdtrI CE, I.reby ooctifp th+w a trua wpy ®rthe tixagntrig was m3iled, pnsCaSt prepaid, this rhe + ,d~+afQotdher, 1999,ta; W89SR & Etd91~ P.S.C. Denyl W. Aiu'kust q 2700 PrbVtdiqn Cbnttx 400 West Matkot8trect ILotuiville, li:ettttlCkq 40202 (50a) 589•2200 143arie V. Saartncrocs Michael M. Pay %nacwttz, H®nson, Torras & Friedman C.[.Y" : 1301 Rve3iua f)f 1$e Amarlcau Naw Xurdy New Vcrk 10019-d0'22 Cwuusel for 3rlnntt GITueTp Ynr. A&Ll~ d
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whether defendants' alleged wrongful conduct proximately caused the Funds' payment of increased medical expenses is, in the words of the Second Circuit, "incredibly speculative." Laborers Local 17, 1999 U.S. App. LEXIS 19576, at *30-31. The Funds allege, in essence, that if only they had known the truth about the dangers of smoking earlier they "might have" undertaken a variety of anti-smoking measures, which might have resulted in less smoking by their participants, which might have led to reduced medical expenditures by the Funds. P1. Br. at 15. As the Third Circuit concluded, "[t]he tortured path that one must follow from the tobacco companies' alleged wrongdoing to the Funds' increased expenditures demonstrates that the plaintiffs' claims are precisely the type of indirect claims that the proximate cause requirement is intended to weed out." Steamfitters, 171 F.3d at 930. See Def. Br. at 19-20 & n.12. 2. Apportionment of Damages/Risk of Duplicative Recovery. The Funds argue there is no threat of duplicative recovery and no need to apportion damages because individual smokers will sue for "personal" injuries while the Funds are suing for the cost of treating those injuries. Pl. Br. at 16. This supposed distinction has no basis in Tennessee law. In Tennessee, as in most states, suits for personal injury may include the costs of treating that injury, and the fact that a private third party bore those costs is inadmissible under the Collateral Source Rule. See, e.g., Fye v. Kennedy, 991 S.W.2d 754, 763 (Tenn. Ct. App. 1998). Furthermore, even if individual smokers were to seek recovery for "personal" injuries exclusive of their medical expenses, the fact that the Funds' claims are entirely derivative of those injuries would still require courts to adopt complex rules apportioning damages between CO N <n 6 1 CO ~ -p 0)
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Jones, Ciay. Reavis & Yoguo 1'~00 Htmtington Cennter Colvrahus, ®E7 43215 (614) 4 64.1103C Cu+aase.l for 13.,L Ittpctoldm'Tobacco Compxn7 ~ LdwnYtl~7. 5tophmr Biichard V. Evans Banbl, Stdpher & oravee F=rnvldian Cesncr, 5uite Z9o0 400 Waat Market Streex 1Gouicviila, KY 40202a35'4 (502) 589-5980 Y.fFmy S. Neraon Chtisfuta L. McDanioi 8hadk, Yiardy & Badon L,L.P. ®no Xansaa criy i'laoe 1200 Main Streat Kanmaa ctty, MO 64105-2118 (816)474-6550 Cnunsel for Lmrlllard 'Ibbuccm Company Jack FtiFuchs ThompB®m d•}'usc & BJprg Li..t} 312 Wsl" 9trmes, Suttt 1400 Oticinpati, CkI A5202j1029 (513) 3$2.6700 Steven Klugman Iiarry Zirha r7hbevo7se ~t Plimptim" 873 "f7a1*Q Avonue New'SPerk, N'Y 10022 (212)`709-6000 Cownsd fpr'T4e Counclt fasr Tabeccu Iteaarab-U+9.a., Inc. John T. gnllartino ogdeu, lYewell &_Welah 1200 ®nn Rivcrfmnt Plaza Louievilln, KY 40202 ~ ./s
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the Funds and the individuals because the Funds intend to rely on statistical models without ever identifying which individual smokers' medical expenses are part of their requested recovery. Finally, as the Second Circuit observed, even if one discounts the risk of duplicative recoveries by smokers, there is still a serious risk of duplicative recoveries by "other remote payors like the employers or health insurers with whom the Funds may contract." Laborers Local 17, 1999 U.S. App. LEXIS 19576, at *33. The Funds fail to address this risk or its exacerbation by the Funds' proposed method of aggregated statistical proof. 3. Vindication of the Law. As defendants argued in their opening brief (and as numerous courts have recognized), enforcing the remoteness doctrine here does not undermine vindication of the law because participants may sue under a variety of theories and the Funds may sue in subrogation. See Def. Br. at 22-24. The Funds do not dispute this point; rather, they claim only to be the plaintiffs best "suited to sue." PI. Br. at 16. Whatever this means-- e.g., whether they are the best-fnnded plaintiffs--it is immaterial because the salient question is whether others may vindicate the law's interest in deterring wrongful conduct. See Holmes, 503 U.S. at 269-270 ("the need to grapple with these problems [i.e., speculation and apportionment of damages] is simply unjustified by the general interest in deterring injurious conduct, since directly injured victims can generally be counted on to vindicate the law as . private attorneys general without any of the problems attendant upon suits by plaintiffs injured more remotely"). In view of the lawsuits (including a putative class action) pending against W N U'l ~ 7 CO ~ -P ~
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AGRLED TC9r 02&c,~ c.xart.c S. cagsss wlnsdan E. A9iiler Brawn Todd dc Pieybuta PLLC 400 We$ Marltet Straat, 3204 Yluor 6.ouisvilim, K? 402m2-3363 (502) 589-54017 WiU9am a Beans 2450 Htown A Vu'iiGaftott Tawor 4a15. Twrth Strat Lauiseille, ECY 40203 (502)584-2021 Konnath PL aao Eurbara ARaaBc Hard4 7ean't£r.r d3ltrdner Kitk3aud & 131113 659 t+iftc4ath 9trC4h N4Td', Suita 1200 WaslrisAgt,qt7, D{:2daa5 (202) 87}•5000 , L. 8egai Ic,xfin H, Cutlar, Jr. adz J. Wsilhaum Sdget, Sales, Stewart Cutler & Tillman 210a Watecfrotrt Plaaa , a2S wasc Main sar~ Lauisvil1q Kentucky 40202-4251 (302)559-5600 Pau17, Feanoclc AQ1tChtl1I IM. 8roit 1Weitc & Luseaberg P.C. ' t ea Maideu Lane, 17w 1:'1ot+r New York, New Yurk 10038 {212) 558-550Q Itebeee J. Connetton Iahn 1VI eN.l3rbadcias ConneYtnn & itap laai New YurkAvcuue,lVtV 1ai° Fl 1W'syhingkan,taC 0005 (102) 737-19000 Micbee3. &avm*&z. Bath Ka,94van . .. . . . a . M1bEEg wC269 13CY9118d I'hltte4 a$1.BmC$ I PetmsylvaniaFlaxa Novr Ynrl;~Nl' 10119 Caanael for Defendrutm, Brawr A Cnunsel for Ylaintirih @dilliamsan TubaeCa Cmrparation Indivitttttlly xlsd as suexeasar by Meraer to the riuteriran'Y'abxcmu t=ompntty, and far the pnrpa.es of tWls ®rdar, r'agA$tolr, ®tt 8rabM4'oPthe ivllawtetgs Witliam D. Gtttbbs David T. 9ohaoPer '4Voadward, gobsnn & BUthon,lLd..P.25C0 2500 Natlartkl City Tawrr LovisviAa,1C.'Y 462i12-3l75 s
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s Kenneth N. Bass, Esq. Jennifer Gardner, Esq. Kirkland & Ellis 655 Fifteenth.Street, NW, Suite 1200 Washington, DC 20005 Lee J. Chase, Esq. (BPR 8443) Glankler Brown, PLLC Suite 1700 One Commerce Square Memphis, Tennessee 38103 Counsel for Brown & Williamson Tobacco Corporation (individually and as successor by merger of The American Tobacco Company) Jeffrey S. Nelson, Esq. Richard L. Gray, Esq. Shook, Hardy & Bacon, L.L.P. One Kansas City Place 1200 Main Street Kansas City, Missouri 64105-2118 Roger Dickson, Esq. (BPR 1933) Marcia Eason, Esq. (BPR 11374 Miller & Martin Suite 1000 Volunteer Building 832 Georgia Avenue Chattanooga, Tennessee 37402 Counsel for Lorillard Tobacco Company Harry Zirlin, Esq. Debevoise & Plimpton 875 Third Avenue New York, New York 10022 William S. Lockette, Jr., Esq. (BPR 10257) Rebecca B. Murray, Esq. (BPR 11622) Kennerly, Montgomery & Finley, PC 550 Main Street, 4th Floor Knoxville, Tennessee 37902 12
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e
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Counsel for The Council for Tobacco Research - USA, Inc. Saul C. Belz, Esq. (BPR 4346) Waring Cox, PLC Morgan Keegan Tower 50 North Front Street, Suite 1300 Memphis, Tennessee 38103-1190 Counsel for The Tobacco Institute, Inc. Bruce M. Ginsberg, Esq. Marc J. Rachman, Esq. Davis & Gilbert 1740 Broadway New York, New York 10019 Gary K. Smith, Esq. (BPR 8124) Smith, Sabbatini & McLeary, PLLC 119 South Main Street Fifth Floor P. 0. Box 3582 Memphis, Tennessee 38173 Counsel for Hill and ifnodvlton, Inc. Robert G. McDowell, Esq. (BPR 961) Baker, Donelson, Bearman & Caldwell, PC 1700 Nashville City Center 51 Union Street P. 0. Box 190613 Nashville, Tennessee 37219 Counsel for United States Tobacco Company 13
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The Funds do not suggest why a different result should obtain under the law of Tennessee. Indeed, the Funds themselves point out that the "age-old tort principle" of remoteness, as set forth in Doe v. Linder Construction Co., 845 S.W.2d 173 (Tenn. 1992) and Smith v. Gore, 728 S.W.2d 738 (Tenn. 1987), "is hardly a novel or unique concept." pl. Br. at 10-13. Faced with an array of hostile precedent and a trial court whose reasoning they find "irrelevant" (P1. Br. at 20), the Funds are left to acknowledge that "[t]his Court may find the majority's conclusions persuasive, or it may not" and urge this Court to "review minority holdings, as did the lower court, and determine at this juncture that the latter are more compelling." P1. Br. at 18. Such a determination would be unwarranted. As noted above, the number of "minority holdings" cited by the Funds not dismissed or currently on interlocutory appeal has dwindled to three. Supra 2-3. Moreover, in stark contrast to the consistent reasoning of the nineteen decisions dismissing private third-party payor lawsuits, the "minority holdings" are not uniformly reasoned, nor are they all consistent with the arguments advanced here by the Funds.s Finally, the Funds' suggestion that the court below relied on each of these "minority holdings" (Pl. Br. at 18) is inaccurate. Three of the 5 For example, in National Asbestos Workers, the district court denied defendants' motion to dismiss based upon the "public policy objectives" of ERISA and RICO and the "unsettled state of the law," citing what was at that time an equal number of decisions going both ways on the question of dismissal; 23 F. Supp. 2d at 323. The Funds admit that the law is not now in equipoise on the remoteness issue, and they do not (and could not) offer any basis in ERISA or RICO for affuming the trial court's decision. And in Blue Cross and Blue Shield of New Jersey, the same court based its decision, inter alia, on "the role plaintiffs play in today's society" and the plaintiffs' "parens patriae relationship with their insureds." 36 F. Supp. 2d at 581; see also id. at 586. 9
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ARGUMENT EVERY CLAIM ASSERTED BY THE FUNDS IS BARRED BY THE REMOTENESS DOCTRINE BECAUSE THE FUNDS' ALLEGED INJURIES ARE DERIVATIVE OF PERSONAL INJURIES SUFFERED BY SMOKERS. A. The Policy Concerns Set Forth In Holmes And AGC Require Dismissal. The Funds argue, in conclusory fashion, that a loose application of the so-called "case- specific factors" enumerated in Holmes and AGC--(i) avoiding speculative theories of causation, (ii) preventing the intractable problem of apportioning damages among direct and indirect claimants and avoiding the risk of duplicative recovery, and (iii) encouraging vindication of the law by persons directly injured by alleged wrongdoing--supports affirmance of the decision below. P1. Br. at 16-17. But there is no need to resort to such an ad hoc policy inquiry because more than 150 years of settled precedent and a mountain of recent case law directly on point--none of which the Funds dispute--make clear that one who pays another's medical expenses does not have a "direct" cause of action against an alleged tortfeasor. Def. Br. at 11-18. Although the Funds suggest this principle is the recent brainchild of the tobacco industry (P1. Br. at 5, 10), the Second Circuit noted in Laborers Local I7that "this concept is not new." 1999 U.S. App. LEXIS 19576, at *22.3 Because this case, like the other union fund cases dismissed around the country, plainly falls within this common-law bar against recovery for indirect, derivative injuries, there is no need to go 3 See also Great American Ins. Co. v. United States, 575 F.2d 1031, 1033 (2d Cir. 1978) ("[t]here is not a single reported case in American jurisprudence cited by appellant or discovered by this court which holds that upon an insurance carrier's payment to its insured, the insurer becomes vested with a claim arising out of an implied contract of indemnity with the tortfeasor who caused the damage necessitating payment by the carrier to the insured"). 4
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TABLE OF AUTHORITIES--continued Page Southeast Florida Laborers Dist. Health & Welfare Trust Fund v. Philip Morris, Inc., No. 97-8715-CIV-RYSKAMP, 1998 WL 186878 (S.D. Fla. April 13, 1998) ........... 5 Stationary Engineers Local 39 Health & Welfare Trust Fund v. Philip Morris, Inc., No. C-97-01519 DL7, 1998 WL 476265 (N.D. Cal. Apri130, 1998) ................ 5 Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912 (3d Cir. 1999) ...................................... 2, 5, 6 Utah Laborers Health & Welfare Trust Fund v. Philip Morris, Inc., No. 2:96-CV-829B (D. Utah March 31, 1999) ............................ 2,9 STATE CASES Doe v. Linder Constr. Co., 845 S.W.2d 173 (Tenn. 1992) ......................................... 8 Fye v. Kennedy, 991 S.W.2d 754 (Tenn. Ct. App. 1998) ................................... 6 In re Estate of Jennings, 212 Tenn. 107, 368 S.W.2d 289 (Tenn. 1963) .............................. 8 Smith v. Gore, 728 S.W.2d 738 (Tenn. 1987) ......................................... 8 iv
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INTRODUCTION AND SUMMARY OF ARGUMENT The trial court acknowledged that its "treatment of the remoteness doctrine ... is uniquely different from that of other trial courts from around the country," and therefore authorized this interlocutory appeal "to determine whether Tennessee's common law remoteness limits are uniform with those of other jurisdictions." Rule 9 Order, at 4 (R. 377). Plaintiffs (the "Funds") apparently agree with defendants, however, that Tennessee remoteness law is not "novel or unique." Brief of Plaintiffs/Appellees ("P1. Br. ") at 10. Indeed, the Funds' remoteness analysis relies solely on authority from other jurisdictions. Id. at 10-18. But the Funds do not want this Court to look too closely at the remoteness law from other jurisdictions for obvious reasons: three federal courts of appeals--the only appellate courts to rule in these union fund cases--and seventeen state and federal trial courts have dismissed virtually identical lawsuits by union funds or other third-party payors of medical expenses on remoteness grounds. See Brief of Defendants/Appellants ("Def. Br. ") at 6 & nn.4, S(collecting cases); Arkansas Carpenters Health & Welfare Fund v. Philip Morris, Inc., No. LR-C-97-754, slip op. (E.D. Ark. Sept. 28, 1999) (dismissal with prejudice) (Exhibit A). Implicitly conceding that the trial court's analysis cannot withstand scrutiny, either on its own terms or in light of this overwhelming body of contrary authority, the Funds urge this Court to disregard what they term the trial court's "irrelevant" reasonine (P1. Br. at 19-20) but nevertheless to affirm its decision for three reasons, none of which was even mentioned by the court below. First, the Funds argue that determining whether an injury is too remote requires a court to conduct an ad hoc balancing of the policy considerations discussed in Holmes v. Securities Investor CO N CJ't Protection Corp., 503 U.S. 258 (1992), and Associated General Contractors of California v. , co '~D ~ ~
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-0 California State Council of Carpenters, 459 U.S. 519 (1983) ("AGC"). P1. Br. at 15-16. Naturally, the Funds argue that their claims pass muster under this supposed test. But no such "balancing" is required here because the law has been clear for more than 150 years that the payment of someone else's medical expenses is a remote and indirect loss that cannot support a direct cause of action. See Holmes, 503 U.S. at 268-269; AGC, 459 U.S. at 532 n.25. In any event, even if such a balancing of policy factors were required, each of the so-called "case-specific factors" weighs in favor of dismissal. Indeed, the Funds ignore the unanimous decisions by the Second, Third, and Ninth Circuits, where each court analyzed the Holmes/AGC "factors" at length before dismissing all claims on the ground that the funds' claimed injuries were "purely derivative" of the injuries to participants and therefore "too remote as a matter of law." Laborers Local 17 Health & Benefit Fund v: Philip Morris, Inc., No. 98-7944, 1999 U.S. App. LEXIS 19576, at *44-45 (2d Cir. Aug. 18, 1999); accord Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912 (3d Cir. 1999); Oregon Laborers-Employers Health & Welfare Trust Fund v. Philip Morris, Inc.,--- F.3d --- (9th Cir. 1999). See Def. Br. at 18-24. Second, the Funds encourage this Court to follow a disparate minority of courts that have denied motions to dismiss similar complaints.in other jurisdictions in whole or in part. Id. at 17-18. As an initial matter, even this small minority of decisions is largely evaporating. Of the six decisions cited by the Funds (Pi. Br. at 17-18), one is now on interlocutory appeal to the Seventh Circuit (Arkansas Blue Cross), one has been certified for interlocutory appeal to the.Tenth Circuit (Utah Laborers), and in Kentucky Laborers, following the avalanche of dismissals elsewhere, the plaintiffs have filed papers indicating their intent to seek a voluntary dismissal. See Exhibit B. A careful review of the remaining three decisions--two of which are 2
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LII`IITEID BTAM DISTRICT COURT Fl `d».E, D FdR = WESTERN DT$TR1CT OF KEN9 T1CiC~c~~c1' A, lq:~cr : i. ,:: rk LQtSISVI1.LE PtTVCSIUN T4ENTUC'ICY LABOItERS DI$'CRICx COLIAICIL J rMALTfa AvD WELFARE TRVST Hnvn, ET Ai.., qp behxiFof thammlvrs an on boha7f cf all othero simiiarly altu9laxd, ALAlIVTIFFS. vs. PFTiLi:P MO,RRIS, INC., E.T AL,, i7EFEND•ANTS. 0Gi G r 1>:: r : ~ G'3T?1!i'" 0aaFT M`tJ i Ji..KY CASE NO.: 't-97•394.H AG ~O%9 ~'- Q?itOER t~uraueat to Fer,ierel Ru1e ef Clvil Ptticcdure 41, the plniatiffa, K,ontuclcy Labarera Aiatrict Counra7 H®alth and Wedfaro Tnlst Futad, PluraSera & Stcam6tta8 Lnagl Unlun Ne. 452 Health and UVnlfnre Plan & Truat Fpnd, Nlucnhaa & S1;*,ur£tt= Gacal Ureivn SVo, 2a® Htahh and 9 ti5'®St$re Truaz Fbuu1, I°ipafittora Local Union No. 522 Hoapital, A4edica) & Ldfo 8tncdt'?und; . Shoct IvPataf bVozkars I.aoal 110 Welftre ltund, Electrleal Woreerp Loca1359 Er,ttaFit Fund, end tntzraat9anal 47aion of flperating Engineara E.qost 181, 320 and TVA Health & Welfare Fund C'tha Plaiutiffs"), and Defcndantn, Browa & Wiluam5on Tdbaaw Corporation (indlviduaisy and aa suceasaor by mergex to the Americau Tabaccn Compnq9): Ftilt do Kno.vlton, tne.; Philip Marras lncorporatad; Lorillmd Tvbaccn Cornpany; Tbn Cooaoil tttr Tobacco R9anarcl3 - USA, Inc.; R,J, Raynolda Tobacco Company; The Tobacco Ins.tiqrte, inc., iJniterl 5tates Tobacco Cnmpartx 6,A.T, IttdustiiCs, p.Lc., Counoll for Toba= Researdt- iT.S.A., Tnn,, an& Smnkelems Tobacco
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Respectfully submitted, :" o Bearman, Jr., Esq. cG (BPR 8363) Jill M. Steinberg, Esq. (BPR 11063) Baker, Donelson, Bearman & Caldwell 165 Madison Avenue, 20th Floor Memphis, Tennessee 38103 Kenneth J. Parsigian, Esq. Christopher D. Moore, Esq. Goodwin Procter & Hoar LLP Exchange Place Boston, MA 02109 Jack E. McClard, Esq. Stacy Colvin Taylor, Esq. Hunton & Williams Riverfront Plaza 951 East Byrd Street, East Tower Richmond, Virginia 23219 Counsel for Philip Morris Incorporated, and for purposes of this Brief only, on behalf of defendants listed below: Jeff Jones, Esq. ' Scott C. Walker, Esq. Elizabeth P. Kessler, Esq. Jones, Day, Reavis & Pogue 1900 Huntington Center Columbus, Ohio 43215 Albert C. Harvey, Esq. (BPR 7955) Daniel F. B. Peel, Esq. (BPR 19245) Thomason, Hendrix, Harvey, Johnson & Mitchell 2900 One Commerce Square 40 South Main Street Memphis, Tennessee 38103 Counsel for R. J. Reynolds Tobacco Company 11
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0 six decisions cited by the Funds (Arkansas Blue Cross, Blue Cross and Blue Shield of New Jersey, and Utah Laborers) issued after the trial court entered its opinion on January 29, 1999. C. The Funds' Unprecedented Argument For A Defendant-Specific Public Policy Should Be Rejected Out Of Hand. In a final act of desperation, the Funds argue that their injuries are not too remote because the defendants' alleged wrongful conduct is so bad. Specifically, they claim that by joining numerous other states in suing the defendants to recover Medicaid expenditures, the State of Tennessee effectively "declared" a public policy against the tobacco companies, and that this Court should adhere to that policy by allowing the claims to proceed. P1. Br. at 18- 19. Not surprisingly, they cite no authority for this frontal assault on the rule of law. At bottom, the Funds ask this Court to eviscerate a tort law doctrine that the parties agree has a long-settled place in the common law and to create in Tennessee courts a haven for all manner of "cost recovery" lawsuits against whatever industries attract some modicum of political unpopularity. Thus, contrary to the Funds' assertion, public policy considerations support dismissal. As the Ninth Circuit emphasized, "[t]o allow plaintiffs to maintain actions thatare entirely dependent upon the harm suffered by others threatens chaos for the judicial system." Oregon Laborers-Employers, --- F.3d at ---, 1999 WL 493306, at *10. CONCLTJSION This Court should reverse the decision of the trial court and order the Complaint dismissed in its entirety. 10
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0 '6Villiam C. Boone 24.50 5town & Willlamaon Tawer 401 S. Fourth 3trw.et Loaisv7le, KY 40202 (502) 589-2021 KenncthN, Bass Barbara A4aek Harding Jeosdfar (3ar4agr .Kirkl" & Lv1la 65# Fltl'aarth Streat, NWi Suite 1200 Wasflir,gton,l3C 20005 (202)879-5000 Ce®naeZ for dl®d'eadanti, Brum & VYi919goasoet To6ace® t±nrpara#dqpa dndividuatiy and aN NucCC9amr by ptener to the tDnter7cN» `lbhacpb Cumpxny, and for the pnrpamq uFthbl dSeder, iJgedps ®a heqx6feBdhernucnviqg: L 'IFJiU1Nm D: dmhhN David 7C. Ssitaefec 'Woodtvard, Hflbsca&Puiton, L.LP. 2500I4ationnl City Tower LouisaIlle, KY h0Z02•3175 (5o2) 5s1-ao0o, JaoflcB. Mcalasd Charyi 0, [tagsdato Cyasbia S. Cecil Briaii V. Otnta MayaM. Sckstcrtc Rurftn & wdu= 12(vcr&ont P1aee„ Fast Tosver 01 Hist Byrd Street itichmon4, VA z3219-4074 Paul Y. C'annnok tv[itchell M. 8reit Waltz & Luxen6atS, P,C, ]®d Maiden Lene,17' Floor Naw York, Ncw'Yorlc 14035 (312)558-5500 12obertl. Cannettpn dohn McN. Broaddus C.onnerton & Ray 1401 N ew V ork Avemme, NVV 104 Ft Wnahiagtorr, DC 20005 (202) 737-1900 M{ahnel Spaeaev B®th Kaswan Mliberg Waiss Berahad Idynes & LeracN 1 pennsylvania P(sza New York, NY 10119 Counaet for 1'IsiutMTa ~
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FEDERAL CASES 0 TABLE OF AUTHORITIES Page Arkansas Blue Cross & Blue Shield v. Philip Morris, Inc., No. 98C2612 (E.D. Ill. Aug. 2, 1999) .................................. 2,9 459 U.S. 519 (1983) ........................ . .................. 1, 2, 5 Blue Cross and Blue Shield of New Jersey, Inc. v. Philip Morris, Inc., 36 F. Supp. 2d 560 (E.D.N.Y. 1999) .................................. 3,9 Blue Shield of Virginia v. McCready, Arkansas Carpenters Health & Welfare Fund v. Philip Morris, Inc., No. LR-C-97-0754 (E.D. Ark. September 29, 1999) ........................ 1,8 Associated General Contractors of Cal., Inc. v. California State Council of Carpenters, 457 U.S. 465 (1982) ................................................ 5 Great American Insurance Co. u United States, 575 F.2d 1031 (2d Cir. 1978) ......................................... 4 Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (1992) ........................................... passim Iron Workers Local Union No. 17 v. Philip Morris, Inc., 23 F. Supp. 2d 771 (N.D. Ohio 1998) .................................... 3 Kentucky Laborers District Council Health & Welfare Fund v. Philip Morris, Inc., No. 3:97-CVO-394-H (W.D. Ky. Sept. 30, 1998) ............................. 2 Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., 1999 U.S. App. LEXIS 19576 (2d Cir. Aug. 18, 1999) ..................... passim National Asbestos Workers Med. Fund v. Philip Morris, Inc., 23 F. Supp. 2d 321 (E.D.N.Y. 1998) ........................ ........... 3,9 Oregon Laborers-Employers Health & Welfare Trust Fund v. Philip Morris, Inc., --- F.3d ----, 1999 WL 493306 (9th Cir. July 14, 1999) .................... 2, 5, 10 Seafarers Welfare Plan v. Philip Morris, Inc., 27 F. Supp. 2d 623 (D. Md. 1998) ..................................... .. 5 iii
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the defendants in Tennessee by a number of different plaintiffs, see Def. Br. at 20-21, 24 & n. 15, there can be no serious suggestion of a dearth of persons ready, willing, and able "to vindicate the law as private attorneys general." B. The Funds Fail To Offer Any Reason For This Court To Undermine The Remoteness Doctrine In Tennessee By Departing From The Soundly Reasoned, "Overwhelming" Majority Of Decisions Directly On Point. The Funds' sole attempt to distinguish the decisions by twenty state and federal courts dismissing lawsuits that are virtual carbon copies of this one is to point out that none originated from a Tennessee court. PI. Br. at 18; see Def. Br. at 6 nn.4, 5(collecting cases); Arkansas Carpenters (Exhibit A). But the plaintiffs themselves rely exclusively on remoteness cases from other jurisdictions, and the trial court observed that it "found no Tennessee authority" concerning the application of the remoteness doctrine in this context. Rule 9 Order, at 4(R. 377). Tennessee courts (like the courts of other states) often look to the laws of other jurisdictions in those situations where forum law has not yet developed a definitive answer. E.g., In reEstate of Jennings, 212 Tenn. 107, 112, 368 S.W.2d 289, 291 (Tenn. 1963). In each of the cases cited by defendants, as here, private third-party health care payors sought to shift their obligations to pay medical expenses of treating alleged "smoking-related" illnesses suffered by their participants and subscribers to the defendants. And in each case, the court dismissed the lawsuit because the funds' alleged losses were "too remote" as a matter of law. This impressive body of decision, described by one court as "overwhelming," is an unremarkable application of a 150 year-old doctrine with a distinguished pedigree supported by a sound rationale. See Def. Br. at 16-18. 8
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CERTIFICATE OF SERVICE We hereby certify that on September 30, 1999 a true copy of the foregoing was mailed, first class, postage prepaid, to the following counsel of record: Deborah Godwin, Esq. Timothy Taylor, Esq. Florence M. Johnson, Esq. Agee, Allen, Godwin,. Morris, Laurenzi & Hamilton, P.C. 200 Jefferson Avenue, Suite 1400 Memphis, Tennessee 38103 John A. McReynolds, Jr., Esq. Baker, McReynolds, Byrne, O'Kane Shea & Townsend 607 Market Street, 11th Floor Knoxville, Tennessee 37901-1708 Counsel for Liggett Group, Inc. Louis L. Robein, Esq. Robert H. Urann, Esq. William Lurye, Esq. Nancy Picard, Esq. 2540 Severn Avenue, Suite 400 Metairie, LA 70009-6768 Robert J. Connerton, Jr., Esq. John Boaddus, Esq. Connerton & Ray 1920 L. Street, NW, 4th Floor Washington, DC 20036-5004 Counsel for Pdaintiffs Mary Elizabeth McGarry, Esq. Adam I. Stein, Esq. Kathy L. McFarland, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017-3954 Counsel for B.A.T. Industries, PLC Edward Bearman, Esq. Branson & Bearman 44 North Second Street, Suite 701 Memphis, Tennessee 38103-2266 Counsel for Smokeless Tobacco Council, Inc. U~'Qs /M ~~cce 15
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Cauncti lV. {"Che DeteJldeats") enter inln this consent ordar for thn diamiseal without prejud;ce oz the instatzt°suic, Thiffi Consent thder is entemd into pursuant tn the provision5 af tha attuct>Ed Covennnt Nvt to Sue. 7udndictlon ef thim caae Is retained for the purpnse of enfarcernent of tltis Order. Any party to this Ceriseut orzier muy apply to this Caurt at any time fnr aucit furthet nrders and directiotts es •may be necessasy, or mpproprlmte tSr ths mnatnactinn and ettCureement e& tlila Ccnmmt C]rdcr, This Corosent t3rder ie not intended to be and ahaA not in ary event be consirtied as, ar deerned to be, an admisaion or ctlncassipn or evidenaa ofporsonal juriadictioa, service of proeeas, stffilciency afaerviee of prooe8s, ur any liability or unywranOdoing whataoever on the part of arry pArty w[iERHF®.RE it is ordered that the imtant enit is diatttisded witiwut prejstdicE, IoHI+1 G. gBYBURN U JUDGE, T1,S; LttaTkicr CoLfRT a d4-- harles S. Cas9is R'in9tmt E. Mil ler 8rown Tod4 & ideyburn PLLC 400 West Merket $trcet, 32'" Floor Latfimvtlle,;Wll' 40202-3363 (502) 369v400 ert L 5egu1 lrwin'hT. Cutler, Jr. Littda J'. Walibellm Sogal, Sales, Stewart, Ctttler & TIllman 2100 waterfrpnG Plaxs 323 West Main 61`trest Lanieville, Kentncky do202-4251 (502) 568-5600
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from the same court-and a comparison of those opinions with the overwhelming contrary authority reveals that these few cases are not persuasive and do not represent a. coherent body of law.' Finally, having invited the Court to engage in a public policy analysis, the Funds insist that the Court has no discretion to do even that because the State of Tennessee has already "declared its public policy" against the tobacco companies. P1. Br. at 19. But whether an injury is too remote does not and cannot turn on whether the defendants are politically unpopular. The Funds' attempt to establish a "hated defendant" exception to the remoteness doctrine only underscores their inability to explain how the decision below can be squared with Tennessee law, the numerous decisions dismissing similar lawsuits in other jurisdictions, or the jurisprudential policy considerations the Funds claim should guide this Court's analysis.z 'Iron Workers Local Union No. 17 v. Philip Morris, Inc., 23 F. Supp. 2d 771 (N.D. Ohio 1998), resulted in a directed verdict for defendants on the funds' federal RICO claim and a unanimous jury verdict rejecting the funds' only remaining claims--a unique state law RICO claim and a tag- along conspiracy claim. In Blue Cross and Blue Shield of New Jersey, Inc. v. Philip Morris, Inc., 36 F. Supp. 2d 560 (E.D.N.Y. 1999), and National Asbestos Workers Med. Fund v. Philip Morris, Inc., 23 F. Supp. 2d 321 (E.D.N.Y. 1998), which are before the same judge in the Eastern District of New York, the defendants filed petitions for writs of mandamus with the Second Circuit in light of the court's flagrant refusal to heed the controlling Second Circuit precedent of Laborers Local 17. Those petitions are pending. Z The Funds "express no opinion" regarding the trial court's alternative holding that, even if the Funds' losses are too remote and indirect, the Tennessee Consumer Protection Act ("TCPA") does not require a showing of proximate cause. See De£ Br. at 27-31. Because the Funds effectively concede that this holding contradicts two decisions by this Court, as well as the text, history, and purpose of the TCPA (see ibid.), there is no need for further comment. This aspect of the trial court's decision also should be reversed. 3
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• further. See Laborers Local 17, 1999 U.S. App. LEXIS 19576, at *26-27 ("the critical question posed by the direct injury test is whether the damages a plaintiff sustains are derivative of an injury to a third party. If so, then the injury is indirect; if not, it is direct"). Even if a"balancing" of HolmesIAGC policy considerations were required, however, that analysis would only reinforce the need for dismissal. Indeed, numerous state and federal courts have dismissed virtually identical union fund lawsuits after conducting the policy analysis that the Funds urge here. See Def. Br. at 18-24.4 1. Speculative Causal Theories. The Funds claim that because they paid their participants' medical expenses their "damages" are not speculative. P1. Br. at 15-16. But that entirely misses the point. The fact that the Funds paid money is not speculative; they did. But ' The Funds assert proximate cause is a case-specific inquiry and cite the Supreme Court's decision in Blue Shield of Virginia v. McCready, 457 U.S. 465 (1982), which they note is "conspicuously absent" in defendants' brief. P1. Br. at 14. As an initial matter, defendants do not disagree that a determination of proximate cause turns upon the facts (or allegations) of each particular case, and nowhere do defendants suggest otherwise. But as both the Third and Ninth Circuits have explained, McCready is inapposite because in that case the plaintiff was directly injured as a consumer in the market for psychotherapy services who herself was denied coverage for such services. Steamfitters, 171 F.3d at 922-923, 926 n.8; Oregon Laborers-Employers, -- F.3d at ---, 1999 WL 493306, at *8. Virtually every trial court that has considered McCready has found it inapposite, as well. E.g., Seafarers Wepre Plan v. Philip Morris, Inc., 27 F. Supp. 2d 623, 629 n.29 (D. Md. 1998) ("The Plaintiff funds a're not in an analogous position to the plaintiff in McCready"); Southeast Florida Laborers Dist. Health & Welfare Trust Fund v. Philip Morris, Inc., No. 97-8715-CIV-RYSKAMP, 1998 WL 186878, at *6 n.7 (S.D. Fla. April 13, 1998) (McCready "did not involve a derivative claim. On the contrary, it involved a purchaser's claim against an antitrust offender. In this case, the Fund[s have] not purchased any products from the defendants. Thus, [their] claim is wholly derivative"); Stationary Engineers Local 39 Health & Welfare Trust Fund v. Philip Morris, Inc., No. C-97-01519 DLJ, 1998 WL 476265, at *7 (N.D. Cal. Apri130, 1998) ("A complete reading of McCready reveals that it does not support plaintiffs' ciaim"). Moreover, the Supreme Court made clear in AGC that the holding in McCready rested on the fact that, unlike this case, the defendants' unlawful conduct'directlv injured the plaintiff. 459 U.S. at 529 & n.19. 5
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0 Edward H. 5topher IFlctzard V. Evan's Boeh[, Stupher & C3raves (°tav3dinn Centcr, Suita 2? 00 400 West ZvIerJtat 5tmut Loulsvipe, XY dt)202-3354 (102)589.2980 7effrey S. Ndsnn Christiae i: P4tcDenial Shoody F8®aO & 13acon T.,L.P, On® Kanaa$ City Place 1200 Mein 9treet TCattsa City, M(5.s41 as-zt l$ (815) 474-050 Camaaaal ibr•L®rlllurd Tobasca Company Jack F,1'uchs 147oadpaan Msc & Fltxy LLP 312 Wnlnut Btreet, 9uite 1400 Cinainnati, OH A5202•4029 (513) 352-6700 Steven Kiqgmsn Fiarry Zitiitt Dehavniae & Plimpton 875 Thu~dtiAr~iua New Yntit, tVY 10022 (212) 909-6000 Cnunze! 0sr'd'ha Cauncll forTohnec® $dpearols -i7,5,A., ins. 7oho T. Bsllanslaa ®gden, Atev.etl,9t Wctob ] 200 pne Riverfeont Plaxa Lunl®N ille, X'Y 4d7A2 Coustael for 37ie Tuleacto eLatituta . n
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9 ~AVSNsi~NdTTO 4;1E 0 gor pod and YsSWble aojWdteation. K:ame~y La'6wcm .dlauion Cosmcil klea{ch edd B7dtast! Tivst Etmd, P1nmb®rs & Sccanfimzs Lacal Unian Na. 02 Haaidl iqd Weltarc gldsf & 'huzt Ftmd, Plu:akwn kStasuvAcmtz Lass! Uatan {`lo. 3A6 Hcatth Nnd WclYkre Trust Fwsd, PtpeBuars Laest •vnica'No, a2a #iaspital, Medicsl dr Li12 Aaslo3Tt f rand, Sheet Mewt Watkere Laca17.10 Weifare F+au3, FlacRissl Warkocs 7.ncal 369 Bsaeiis Fend, nnd Iacernalioual [ic*= of C}gacsdng Fxlaitaars Latal 111, 320 an<l TVA Hsalth aptP Wetfem Fwtd, their Avstees ~ts, si~ItApta, egegt9, beneaai®rle4 aaddltg, attorrxye, etttplayces, axeaUmra, hesrs, affiCara, regre6eat3tives, aetvqHiBo,ubSIdimiel, sttd Auacwaex i"d- Fuadi°) do luxc6y #ovaaam wt to saa in any stare aoutt ~1'iH A Rdawltau, Inw, Finlip Maais lacorfwtxmd., R. J. Reyndid5 Toltdtca Campao,y, Bcown 4: Wp74enmoa Tobscra Cotpmviton (iudividwlly md as stucessar by mrrgu m eha rtimvdeaa 'Sa'bJlaeo Contpaztp}, B.A.T. klduap'!as p.7.c_, l.nrill=d Tobaaco ConWasy, UAited Stmse* To6aete Cou:pttty. The CCUnoSI Far Tabaua Ra*Arlr-U.S,R., iaa., Tha Tobmtssa Iaaisuu, Tric., apdPor Smoketesw Tob= Camuil, tnc. mnd tbeir xufntinisn-utors, NQtkdT*1, ajm% anlM 0ltarnqrs, dlrestors, employaosm oxeoato% bsia, dill,Rn, paam mpYp54I`e!, ib"~tC9eAWtidoY, $KSmS$r sUl0.'IWd7lCd. !i+*^"A^'m tlAdS7u5lftM clDG{Gn4lt7TS") WlT.lb Asty aaed all ®hima, d+meuids, dseqmSram dtlm4 kmss, matWlu4 cawea of uatiapu ywita aa 7sw or la ®gutr,p #Be liauft of any hdud or nattas wluznaver, whedur ctiimt or dcrivariv`, aqeregsicd, eonanseat er oterwim (ao3la;ivaty vleims"), caneerniag dlc ewaarrraies betucsn afu: Fwals wtd AafUatl*w imrolved ta or tvlir,ed to ¢hr caust of aatietn sryled as r
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0 Macgarot ffi. Keana Grxadsot7m, Doll & MeDoaald' 1300 Alational City Tnpter L0u18vUt6, KY 40202 Gounset for Smkmless Tabacr.a Cauaeil, Ytla. Mary Ei'rmbeth AdoCYatry Adam I. 3t®in KAtby adei%rtaad S3mpaon, T'baellar & Z3ardeti 425 texlagkan ntlenae New York, New York 10017•3554 Charlea H, Cassis JohaJ. MeSawahUn, tII flvldherg & Simpeon 3000 Netimit City Towtlr [,auisvMe, IC'Y 40202 Caunsel for BrO.T. Tndnatrlay PLC OMM~LCAO8' 8ao= I h'er.oby eertity that a tnto copy of tha fotegoit>S wns 'rnailed, poatage prepaid, thie tho of Oaeohor,1999, tn: AtWBm,* RU9B, P.S.C. . ,.. UartylW-IBOrhent 2700 providian Center 400 Weat Markvt 5ireet LWtisvlUq Kentuft49202 (Sl3S)599-220D Mazle V. Santuar6re MGc4ao1 M. Fap . Kasnwitz, 13 epacn, Totme & Friednun CJ,P 1301 Aitewe ®f TkC AmedCSx Now Yvrk, NaW York Y0019-6022 Counael fnr LigOtt Group Inc, e i
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0 s,. . VPIITED 9T;S'FRS d}[S'i'RTCT COURT ~ BOR TFIE WESTS&N bIST&YCC OF it,RI-PVCKY LOUYSVILu p]'V1SI011 P{ENTVCK9' [..4HORERS D35TRICT COUNCL ) 'FiBAi.'d'H AND WELFARE TRUST I:UAtU, ) t;T AL., on bebalf oFt1le=selves } an on behalf af 611 othcrs ) s"unilarly Situttted, ) ) PiAIAITSSFS, ) ) v®. ) PHlF1~ MOTtR78, INC, b°T' AL} ) YtFENDANT$. ) CASE NO.: s-97-354-Fi AgA7r,ED d8Dffia Caasistoat wlth thn Cavommt Nok to Sne 91ad in thig actiab, and by agreemont eE che gart3es, by couneaf, anI the Court beasg sufacientlgadvised; .Cd' IS FTER"EaS'' 0'itU$M tlmt the Motion ftar 5utnmary Iudgmcpt Elled by the €3afbndants, IDrawn & dV'aUisqsson Tabnew Corporatd®n; 11111 & Knowlttm, lno.; PhiliA Dd'a.xis, Tna; LorUtnrd Tbbmeea CemPany; Tha Amesican Tobrs= Compaqy; 'ft+e Conncit .. .. for Tebaeno ILesearah - USA, T.na.; R7. Reynelds, Tabaec,ro Cnmpxny;, and United Sqkes .._. , Tolmeoa Cocrapnny, on 5rpkembcr 13, 1999, bo, uM{ It as, wlthdrnwn frvm this atstion. : %hn G. Ftaybuels, IY, 7udge U: S. Oi ssrict Court
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825i8985
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~~..k.. t s}.n.,..e ninn;H. Mrmnit Didulih and~/ 1 m T'eu3t ~,nd. A~ i".V, il & Kflnwlt Tne.. jc at.. No.: 9-V•394,H (Wd].1C.y.) L"PtndinS Litigatian"~ T}k Fuqds end t7afendBaRa have aateed upoc the i'aAowiaa coasideratian: 1. Ths k`uads waiva theirriatuw file auyrloima. A9 &-w7lbad sbava, iu wsy.utraout>y ~- The Defcndauts wirlsh`ew their )te~ rstotian for muttm0rylqdgtuam; 3. The Fu=b nnd SFa !]e&edvatts wa;ex sh* sisht t0 Aopesi any arder cp[atsd ip ft Pend)n;g ladfatian; and 4. 'slu ynads and tlta DeICNIMM apaa ta anter taw 8 Coqsatrt ardtr disrnissinQ wirlwet e ptejvdica ths PendinI tsdgetie(a, RGd annh pvrty abHN bar iR9 avm coan, tzvsuES aud • utcraey'a ~a {eol7ectinly"assp"b ' 'Dc Ftmda ®am into thii CdvtWt Not ta Suo ibr thti awpeae of imttaung DafaMdanm w eaer satv a Copteut Crdor 'dPsqaimaial sho PandiU L3iipldoa wit2tout pt*dicc, ana tbe f'unds nclasawtedge ft this CovMint PIoe tn 5wa is a maaxiaW iiietnt trUed an by W)1 ISaCWRate in WNing ao the Camuc ®idea: The FunQa nlsa ttc~twwled¢s thst aew etfcat atthi3 Ca. caam A{ot sa Sum is w prahibir the FtmQ,Y tkotn sstWtl.ug any eioimm ae daectibed ahavb a0=t DefcndattCs i+t r»y sruecanrr. -,._. _ S)sonld thr FwXds viala tlte Vrms of thia Ctrvcaaut in aay raswt. DefatdWo ~f1 he T -_. . rnSklel to 5arE eni'aresmettiR of W Cavepw by = attief' Satn auy eettus uf ew»pviem JudsdiCSion. cawpel{ing the Funds' apacHtc puft=wt of ske tet:ras oF this Cnvm=t, 9AA ~ avraud)ng tdefendants theiraeaaanabla eo>Eca in qmt.AWps oucti ata ardc. T)da Cavaaam Not to Sue ybWll ba sronedued attd aai'ort:ad in bCSObW9Rer wisb rhe )rws af yGentueky. 7 T
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09y29-90 02:45pm From-HUNTON~ IAF1S ShSl1'~fiT ; . -' ' "" t1425 0 T-398 P.02 F-816 In ft Ubafted Stata Tlisixid Court for the Eastrm Aistrict of .Arl;tiansas western Division a" ARKANSAS CA&P$DPP£AS` H$AI-Tii.'k WELPARE BUIdD, oa bsWof itaclf aml 4a bdraif of 41 otbsts stmiiaxly spuaWd; .PTAltu~' .v. PMUP MORR[3II3C; R 3 RL+YNOLAS TOSACCO COA7PA.NY; HRI7WN lL Wii.l.TAbA55C3II•'T TOSACCO f:ORPORATlQN &AT iNDIIffTkI$S BLC; LOAlL4AR1] TOBACCO CmMPANY: I3S7OF'IT GROUP RdC; AME:R1CalP1 TOBACCO COWATVY; CC6INCA. BOR TO8!\CCO RI=SEARCEi BS.$.A.: TOBACCO 3NSTPPpTB, INC; - SXt3X8LFS5 TOBACW COI INCIE.. I IVC. fleJendM. Q&m in the mgm befm qte C®us4m the ptsituiff, a aaioa beatW =d wlfamauao fiuuL haa 6mugAe attc 'apwt samnl cag®ratTe .amafteusc>s aad telaad ewda9 ia which it saWm to Yesomc ro!m€sar m®aWa gxympts iUsas pai4 au to ita ticadciaties. It rwu teenvery aAd®e &eae[al Iapat tkea¢eea. inplud'iws violauaa of federal "RICO" 8w am.invas lawa ad a vaxim mf stare aramuuy aad rntmnon laws. g
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09_29-99 92e46pm Fmm-HUNTON IAbAS ~rws ot= ~" '" " +1425 ~ T-398 F.04/22 F-016 dotocace sotpontbIDn wbick maattfacture, b19TkA seA. 8t1d dicttibute tobacco ptroducta, inc7tlding ei$a[ma. 9epanux deferulaat Atoerscatt Tobacco Cautpaqy ;s a carporuien n'3th activiUCi 9iiG$iL t® &M nf elfa defeWams jp9t namod hut whit',$ G8e bGEO w0awd hyxcparaeedefeqdatlxBioVeam"C9Yi1liAmeoA Sepsrtcodofer+dea69.A.T.IndulRlCBA.L.C_ is aDTitiah comptwy wqic2a e89otRlay ovYmS AU0Rq1 &'@VmAUOn. ' Sepsext=defmdeatCrmnen 6arToisaeap Rssea[cb ("CTR") is aspecesrttrtoanother re5earch gotp. qte Tahacw hdqsuy 8eaeuctt Cammittee, aad bas aSapeA in tobacco rela" rescac9i. as bas aqattAta defetalant SnmkoLxa Tebxaco Catulcil ("STC"). &uh ara aosrqcofit Few Y®nc ootpWn6ccs. Separaae defeadamt The Tnhaoao Hpsppa®m. Imo. l"TP') is a no"cafu ce"radon w!1lch baa d®ea publi.c subdom wmrdt ft maay af thc ciotntta MUM*MjML TAa fiam of $Ii!! & 6ittotvlm4 3s aa ad apucy wiakh Uas bcen auliaaC by ft majut cigatatfe . m®uafacwfe[a and hma bma mepPbsq4d dy the plAiatiff In iw camplaau aa a dcfcadant. $oweves, th® f= wae uo6 sst out as aa defeq48nt Ynywlteic in tha atylc of plaiad.fPs coropBaint. Id. TThe G7aPma At ihe of tte~A claims ame fteo gRVUps of facutal assottioqs: (1) atttakil;g bw ®evom hwlth ti9Y9 Wttieh 11aea laag I=aa known to tus A.efand.nts, (2) the defemda= havc capViT% 0 E9iq7b41d 4biS 3nY0TaaatioA from tha cigstcata 6py*g rUpaa, aad in aoaue cases, w kwwhOy ard aEficawdvoly ptrseAt faJst: ovidep:e to me public 3
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T1kis COVd7WII 1vTUl ffi S{1q 9h0(1 TfaCObtti Efl"CC(YYC U{7an C7CeCiII.l9b af ii 17P%' parAC9n guesusian tlf ahie Coaapat kDeU aat be deemed as en Outissian by stq' party tbni iL hs antpect to ft }wisdicttan of the IlOd Swtes ENerriat Canrt 1'tis the Wostara ]Ximiot of 3:enrtcky, ot any caws w1YNdn the .Sta[e Ot'i6ettEUaW. EaCb Of ft dtfendtnts reerv2s ell zights. ubjerdvasm aad slaPau+es, 9ncludinR dafoaxs and otpzdaw W Bn Da~~u~,d3crinoc, urv3o. af Procasa, and eATc3cnay cY pmlse of pmeesn. 'Etve weaamtnn aOd Wiea ui thia Cn,ntaMs i+ sabjaes w, snd wishout wOhW at rA such defcMa9 sud ®b.iOiaam, '9mis cvwsaont Not msrea w #aen sazeinAy nad $141y 1k1d'by stx Fuuds 4atl pafOuiNRtb avus a>teir reVeetave soaneai. Tha Fuadti ®ra &"tO4 wlth to 40"aM hftin aoaMIrwd, shey riifly wulwsnd aud mcsapt eh® tums udd sdadiunn+a au=l hmrah thny lmra aipmd VG+e utcE as T71e1S n Wll $187 UtS WUd t{a3IS, Md 4lq 4aa FkAT i1 !}W1 bi bIIfd11Sg nPdn them 1n61 i3QOtt S}Mi'T muceas. a~ltalsaiasmroix aft5ata, pl{Mcs, braatiad®r" a„aiinz, altornays. d9ieciom employ.,ca, ekaauiare. h,eits, b.8aets, psrent sottipdm rapea~mmtve+. .nasngs, anba,dindea, ynaeFSaoss, A4d d7d96CCs Coune.t Bae the :Pardoa aiait tnaorse atad ptGGSela far enaY a Conxont brder wmtcampx=ausl,y witd Phe tlaGveey a€ibm Mp rcreMd Cavneni Nat to Sue. S:wh p+tsy sbal] bar iex owu aoss§ arNatir bua cit she Prrwiag L.tuIndw9 tawawW, ahauld t)ae Funda vsolu. thi9 .. . .._... _ ,., _: CoreaabY iil Any ta~peek A~llmdanty s1ul1 l,.va the aigr ta puesqa adlctment oPilgtt CavemNt 9Ad to A4 IR AoV1p'1) of dwk Cam in te p®ISdIn$ MdiliSfn ind 4Ay aCw m6Ci8iMd vr'stla the FWnd.' viclodoa ctahi® Cavenaa3= nAM, 6cCn'her P~ lggg pusu tLt'iwlu.tt attit, Esq. 3
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Sap-29-99 11:29am From-flUNTO LIAMS sap-8d-99 12:aTBa FroWrJapEs s, 1424 T-64T P.6T/32 F-565 -i}4-qgj-4jjq r-ric r.uo14i racn Seattle, WA 9s121-2157 208-~79 C~~ $-79b9 LAW pFFICF- Or LBMBHARD G. LEMa~~ . H0V,J~Id- 72W~~ d--Avenue, SuiTe ^1pS Seattle, W~A. 9$1t14 206I~-6~'4 {) -5296 T ~,A~s ~ i-Aw FFtaM l~x~wr~s c~~~ S3 ~Pvub~ ~ic Square Suite 1~4[1 ele~~hauc:~2~1~11 ~Qp~4 T 3I6/z41-3135 ~ ATEouieYs fmr Plainiffs-Appcllancs aud cross-Appeblees -2-
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SEP.22.1999 9:04AM Na.4433 P. 313! , IN THB COURT OF APPEALS OF TFNNESSEE WFSTERN SECTTON AT JACKSON STEAM FI'['1'ERS LOCAL UNION NO. 614 HEALTH ) ANX) WEIFARE FUND, by and thtoigh its Trustees, ) TENNESSEE CARPENTERS REGIONAL HEALTH ) AND WELFARE FUND (famurly Carpenters National ) Iiealth and Welfare Fund), by and through its Trustees, ) MmDJ.,B'kENNESSFFi'C.EAMSTF~.2S TRUST F[7NA, ) by and thtough its Trusrees, IRON WORKERS ) DISTRICT COUNSEL OF TIIYNF,SSEE VALLEY & ) VICINTPY WELFARE PLAN, by and through iEs ) e Tsnscees, and on behalf of themselves and al•1 others ) similarly situated, ) ) Flain@ffs, ) ) V. ) Case No. 02A01-9905-CY-OO l20 ) PHILIP MORRIS, INC., RJ. REYNOLDS TOBACCO ) COMPANY, BROWN & Wi[d.TAMSON TOBACCO ) CORPORATION, B.A_T. INDUSTRIES P.L.C., ) LORILLARD TOBACCO COMPANY, LIGGST'T ) GROUk', INC., TEiE AMFTtICAN TOBACCO ) COMP,ANY, THE COUNCIL FOR TOBACCO ) RS,SFARCH- U.S.A_, INC., TFE TOBACCO ) INSI1TUxE, INC., SMOKELBSS TOBACCb ) COTJN'CIi., INC., HILL & KNOWY.TON, INC., ) UNTIFsD STATES TOBACCO COMPANY, ) UNTTfiU STATES TOBACCO MANUFACTURING ) COMPANY, iNC,, GALLER WkIOLESALE; ) d/b/a PM GREEN & SONS, INC., TENN-MISS ) DISIRIDUTORS, ) a ) Defendants. ) BKiEF OF FLAINTIFFS/APPBLL.ELS STEAMFITTERS LOCAL UNtON NO. 614, ETAL
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~0, 22. 1999 9:o4A iVU, 441J r, qi 3 i TABLE OF CONTENTS TABLE OF CO1V-I-EIV'I'S ........... .................. ......... ........... .................... ........ ................................ ii ................. TABLE OF AUTHORITIES '~~ ........... ............. ....----- ................. ............... ..........•-•----°.ut STATEMENT OF THE ISSUE PRFSEN'['F.D FOR RBVIBW ........................... _..................,... I STATEMENT OF TIIE CASE ........................... ....... ......... ............................. ............... ............1 STATEMENT OF FACTS .................................................................................................... .....3 5 SCTbIIvlARY OF ARGUMENT ................... _........... ...,.,........... ......................... ,......... ..... ....... ARGL7MENT ............... ....... .................. ......... .............. .......... .............._............. :....................... 7 I. THE TRIAL COURT'S FAILURE TO DISMISS THE COMPLAINT WAS PROPER BECAUSE M FUl`TDS' INJURIPS ARE D]RECT...........................7 A. STANDARD OF R8VIEIY ............ .......................... _.......... .................... 7 B. THE "REMOTENESS DOCTRINE" DOES NOT $AR TI3E FUNDS' CIAIMS .................................................................................................. 8 1. nsjs$Le on AonSl . ............ ......................................................... . 8 2. The "RemocM+ess Doc 'nc" Does Not DenLndDiamis ............ 8 a. Tho CopeUt of PAroximate_ Cavse .................... .................. $ b. Emim?te Canc>and'12emotencss"........... ...........•.........10 c. Suareme Cou Authg7i:v on Pcoximate Ca sa/ "Remoteness.............. .............. ................ ..:................... 11 3. Othc;Case Saw .. .......................................................................17 4. Public Policy Points to R tion of c Acdon....• ........................... ! 8 II. THIS COURT SHOULD CONSIDBR ONLY THE LOWER COURT'S T(]DGMEhIT, NOT ITS REASONING.................................. ...... ....-................. 19 CONCLUSION ........................................................................... ......................................... 21 CERTIFICATE OF SERVICE ................ .....--------- ............ ........ ......... ........ ..... ................. ..._.... 26 rcL?IIx (mi)Ayy1B. R an 9.15.9 a e 4
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Y cp~ ~0.9-29-99 52;46pm Fram°NBNTON ~A~1S` ~3L4a e ~~ ~ . ... . e _. ±1425 ~ i-385 P.36/22 F-Bi6 Coa* 9- MFmi,an ®f ItlCO 71; plaiad£f SAc$ea RICO was viaiaood bY 4" the defeadaaq by ipveeriR,g Snco= frora raOcateeaia,g aaivity ia rha °acquisieioa ..., ebpblisluaas nr qpmstioa of, aay earespr'sae which a enqaQed iA ... iaaesasaw cosmnecca. ~ g19WN), 3'dc prediptt aara of rurtcwaing arc a]Icpd Irm bave bSea ft de8iberatg concealmtnc og ft mWtcai rJays adated fn nqwkiqq. ThC eraCipri6e ai alfestl al Gave keea a cotabustien of CTR aqd tpt Tobeoco Imtitute. caem Jld • WWkpi= 4f AdC® Bhs plaiat'sfP afltgGa vialaGtw af $$1p52ib) aad (4). Thaw two mb4wdM ~ pmv*= (b) h sbrlt be uctawtul fer eaY %9m+i Waco a pauam oP.iak~ activ4 or tkrau$h saUectfort of aa umlawfal dcbc ua aoqake or aoqiani a, dirtcay or iadisetely. Auy iattrest in or eeWU®H of aqqr puit[pCl9B wpiCit iw aoaaged in. or s&e accivftia oEwbirh affect, Wmmte couamaret or foreigs aaAWatec. CdD Ye Aant be ualawfifii ft anY psrsca to eaLSpira to vielado amy of du ptWVisicsas of spmacWOa iaD, ($3. or (c) of dwa stcsioa. Fbr ft puriw6ea of Uia som, rhe plaiat6@'f aUeges tlwe weh defeadm waa a °pt4a®4° @litLh ft w~a~ of ft Act aAd ft eAftrpr7= WerC PeteaW w{20¢aRaB. $oberm"sw eaacsaigatcaa. . ye&lapse®. aa5 segelarora coacamesY wids dse besltk 1'isics of . Tha raFumeip$ aciz wcre ¢haxs rekting 7o a pauera of dcceiv* mc pablk mid public affeemia abm<u eka uue daagas of 01ww=. 5
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se-28-89 11•2B F -BllNTON W p am rnm LLIAMS 1424 T-84T P / .64 32 F-665 Sup-28-98 12:47Pm Ftom-JOt1E ~ -814-d81-4• I^f4x r.umai r-ico Nos. 99-3774 and 99-3846 UIm1TBD SxA'T1iS COURT OF APl'EALS FQR THE ST#'fH CIRCUdT IRON WGRKM ]LOCAI. UN1QN NO. 1+7 IATStIRAIVCE ~ FUND and its'1Yustees, €t a.1., Plaintiffs-Aplsellarits attd f:'r+ass-Appellees, V8. PHILIP M(]RF.1S, l1+tL^.,., et aL, Aefeadants-Appellees and Cress-Appeliants. Appeal from the C1nit,ed Sxates Aistri.cII Court 1Jorst3ea.'u I7isiriei a#' Q~a ~~.~se No. l 97CV142 The iiaAOrable~Iames S. Gwin APSCT~1~p ~M%AGT A1~~T1'Ii~I~NGTA133 PG SIBi.1= 3 y . H~SS Y•lz~~,~ I~g'I P~ PA ~CK 7. C~QLIC'aFII Il`d MC A. ISAACSON .1viIC~zA.~~ J. DQW F'RANK 7y. MIA1VlEL , II3.. GQ~O~Weat Broadwa Suite 1800 San Diegu, CA. 9~~~l1 Telepho~e~ 619/231-1058 I6.6VIN F. TttDDDi' 355 South Graud Avenue Suite 417~ Los Ange es CA 90071 Telephozte: M3t517-90i17 Attotsteys for P1ainRffs-Appeila= and Cross-Appellecs jAddi[innal eounsel appear oaz sagata.ttit'e page.] ~•
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09 29-99 02:48pm From-HUNTON IAMS +1425 ~ i-399 P.06/22 F-916 SM liY-. 0, '. d~...•...»», whick miuimiaed ft ilqka of smqkiag, ®Ad (3) Gle cig&>m cpmpaoiea havc mpipWeted ft aQdkCa7ve 4rwa4ea of emae oT dae oluemicsls ia eigaiears, sucb as nieoaae, dnhpire Y>cing avr= of die davl$eraasaess of dwee eeemiepls.' Uese 6pcaual aiSCtum aTO Mula in suppur6 of Are faUpWiqg, legal cWtt3: ca+Rae d- Vbwea Af •RIL,p« Alaimaiff hae aWeBe4 a riolatPp of qlc Rwke[eer LnAnnseed and Caxsupt or8"intfou® Act (»R1CU'). aiaw9ficaliy 1B U.$.C. 1119m) 1uUp {d). by'die tobACCa ®wqaV tlefOMM Ailagedly, dae °`pesaaao' a+itbhf the meenlag af d1e AGt weee tpa aellueo eamgan= and ft 'cmerprlso" was dut pOblic aalRdoo wae9caad bagua eeisutifis_ eessatcb cmftated by dia C'Q'R and abe TQbaeen luetitWa. x"me aUvgod pe 4soax aaa of MakMorin inrtude caslD ®ffi au'ere fraud la vioIRft af 12 U.S.C. 511341 and 1343. T4ie piamltta have asgeadly baeA Wuc+od w dmlf b491Res8 gud piopeCly "6ecause PIi11Adm hfl1le bCBaTeqqITCd 12Y tWOStt $p,QAlfieiqtc4tlW A4d expCOBae adSb1101b1CtQ a1mAfCC` •tiNM.W Y6iPGB.9oo." AdWs CampMw at p. 83, 1230, "[ho %aWallQOws ®ca mucb taase dEMdtdtdM*ip CaoW3 a6mptsaiataery sUMts Flm pWqif!'deseqfta a ew4picccy detiag at kast is far 6.k xa dro oACiy 19501s dwiag +adtich lM1e t®iraooo co=p4aus aad shmit agaars dixevmc4 ehen witlrbdd fmm tGepublle, criiieal -'an~caaaaaboat t)x daa~sa ®Ftpbaepo wve Thcplainptf alstdcsqlbCS in d~Wlltdo BpGaa 1erSW to whidete 4dod= allep0y lied t® and udtsewisa doceiv«8 ebc publie, ac)nulnq aad gtsYw~ateut pcgulatpes F8®w®ver, ths Caut seas wa aad ia tepeasinga~car af tdat ia thlt Qrcia. 9'qe p®]nt nfdlis CmRt'n graati++g of ike 4iurnissd mcrcEaay as In tha w4e with t9te gtalM9 af mry. dismlasal mo4®nm is that evas iPafl strc allagaRCns are ~rc. the plainrif4Dws arevon4elvsa fait& to ~ee seiailSs 4
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SEP.22.1999 9:05AM N0.4433 P. 10131 between certain diseases and tobacco. Complaint qq 42-50 (R. 1 at 20-22). In addition, the Tobacco Companies were aware of methods of manufacturing and marketing safer and less addictive tobacco products. Complaint q'1 134-43 (R.1 at 45-47). The complaint also contains detailed allegations of the Tobacco Companies' course of willful and intentional misconduct over decades, and their conspiracy to engage in that misconduct. For example, the Tobacco Companies protnised to conduct objective research and to disclose accurate information on all aspects of smoking and health. Complaint if 90-93, 101- 10 (R. 1 at 31-33). They fraudulently concealed and misrepresented tobacco's addicuveness and harmfulness. Complaint qf 152-63 (R. 1 at 49-52). The Tobacco Companies also secrctiy and intentionally manipulated nicotine content to maintain addiction. Complaint qI 152-95 (R. 1 at 49 58) They suppressed the development and marketing of safer products. Complaint 'J($134-49 (R. i at 45-48). Additionally, the Tobacco Companies lied to Congress about their knowledge about the addictiveness and harmfulness of tobacco products. Complaint V 51-53 (R. 1 at 22-23), The Funds sought injunctive and declatatory relief, as well as damages, for harm suffered due to the Tobacco Companies' misconduct. Complaint Prayer TJ 1-7 (R.1 at 82-83). rmis3 (rN)AWiec rz a. e.1s.s 4 a .crmc:r., Nl1R^faNf1[l >I:aN</R'Qf1?1-1 ~iS'GS 66-[Z-d3$
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6 tN.'LZ, 1y99 9:05AM N0. 4433 fl. 7/3) STATF.MENT OF THE ISSUE PItESENTET) FOR REVIEW On January 29, 1999, the trial court granted in part and denied in part the tnotion to dismiss the class action complaint brought by Appellants Philip Motsis, er 4 (collectively, the Tobacco Companies). (R. 3 at 351-68). The couzt then granted the Tobacco Companies' application for permission to seek interlocutory review, which Appeilees Steanzfittets Local Union No, 614, er a!. (the Funds) had not opposed. (R. 3 at 374-81). This Court granted review of a single question on June 15, 1999. (R. 3 at 373). The only issue in this interlocutory appeal is the following: Whether the trial court should have dismissed all Plaintiffs' remaining claims (Count I, for alleged violations of Tennessee Consumer Protection Act; . Count V, for alleged fraud and deceit; Count'V't, for alleged negligent misreprcesentation; and Count Xl for alleged conspirgicy) on the grvtutds that econoimic injaries Incurred by a unloa health care trust fiuad are purely derivative of the physical. injuries which Its participants suffered, and are therefore too remote to permit recovery as a matter of law. STA'I'EMENC OF TWCASE A group of union health and welfare trust funds (the Funds), charged with providing medical benefits for their participants, brought this recoupment action in January 1998. As alleged in their original and amended complaints, the Funds sought to recover monics expended on smoldng-related medical benefits. (R. I at 2-83, 146-50). The complaints asserted that the Funds' econoimic damages arose frotn the Tobacco Companies' wrongful conduct directed at them. The Funds brought eleven common law and statutory counts. Among the counts in their complaints were claims asserted under the Tennessee Consumer Protection Act, §§ 47-18-101- TanA3 (1N~npp~ tY Grs 9.if.9
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SEP.22.1999 9;04AM 9 N0.4433 P. 6/31 National Asbestos Workers Med. Fund v. Philip Morris, Inc., 23 F. Supp.2d 321 (E.D.N.Y. 1998) ...... ................. ........................... ........... ............ ...................... .......... ........................... 18 Paisgraf v. Long Island R.R. Co., 248 N.Y. 339, 162 N.E. 99 (1928) ........................................10 Petiriom of Kinsman Transit Co.. 388 F.2d 821 (2d Cer.• 1968) .................................................10 Pursell v. First Am. NotZ Bank, 937 S.W.2d 838 (Tenn. 1996) ....................................................7 Scheuer v. ?thotles. 416 U.S. 232 (1974) ..................................................................................... 8 Smith v. Gore, 728 S.W.2d 738 (Tetn. 1987) .....................................................•......................19 Stein v. Davidson Hotel Co., 945 S.W.2d 714 ('Tenn. 1997) ........................................................7 Tennessee v. lrick, 906 S_W.2d 440 (Tenn. 1995) .............................. .................... ................. ..18 Unfo.n Carbide Corp. v. Huddleston, 854 S.W.2d 87 (Tenn.1993) ..............................................7 United Am. Bank of Memphis v_ Mylan Fin. Servs., Inc., 1997 Tenn. App.1.EX13 865 (Tenn. App. Dec. 8, 1997) ...................... .... .....:......................... .................................... ................... 21 Utah Laborers If'ealth and Welfare Trust Fund v. Philip Morris, Inc.. No. 2:96-CV-829-8 (D. Utah March 31. 1999) (App. B)3) ............ ................... ................. :....................................... ..18 Ward v. University of the South. 209 Tenn. 412, 354 S.W.2d 246 (1962) ....................................9 yVJtke v. Lawrence, 975 S.W.2d 525 (1'enn. App.1998) .. ........................................................10 STATUTES Employee Retirement Income Security Act, 29 U.S.C. §§ 1001 et seq. (ER1SA) ..... .................... 3 Tennessee Consumer Protec6on Acz~ §§ 47-18-101-102 (1988) (TCPA) ............................ pnssim RULES TEvrv. R. Ctv. P. 12_002(6) ........................................ ...................:.................................... 2, 5, 7 TENtv. R. APP_ P. 13(d)......................... .............................................. ................ ............... ........... O1Mxt REsrATEmFrrr (Sscorm) OFToRrs, §774(B) (1979) .................................................................17 W. Page Keeton, ex aL, PROSSaR AND KEETort oN rHE L.nw oF ToRTS § 42 (5th ed. 1984)........... 9 W_ Page Xeeton, et ol, PROSSER nt.D KEErON ON'rtffi LAw OFTORTS § 41 (5th ed. 1984).........10 ra..a8] (2T.+L.pp19rA ds 9.i5.9 C C nn.11 11.,7..YHQ
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1 T , 82519016 ~ ~.;
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O9°29-99 9Z:47p® Fram-HUNTO~LIAMS, .7C1tle ve° praducu% iaMMwAyaqislad sde puhlic abatu aame, and "lred withcach otbes w da so, are Cautti'aoaerthotess bnlds dw she plaiaufP 6as fatdedM to ssasr a ria#m upan wFiich telitf could be $tsRred,forp"IMI pacb of d:rplaiatifFr daiaos au#'ocs bam Ww vcrslaa af ths saa7e facal flaw: dlm aggrievq; perty or pactiea. ECggAy spakipg. in fteh of the ckiapi is Bo=as 4r 5o1a6 gruup other ftn ft plaiudFt. 7kc p1dhW8. in tNhor wnrds, as mo for removod itam tiu c3lalkmW batmfol conduct ao sucrMd ®a swy af rha lcvpal cltpe. Iastead, rhe plaicRiff aa;ves im cdairua frarm ffie dqiuft allego* aecuniag to adteta, i.c., swokers. WitlNmu aW lq~ *o aaearwz, ChmplaMuffwauAi awthavo iacenxed ®ay ofohe Wditaowl. saYNC}aq, selatedeaPagsaforwh$eh flismctw'as4iag=tMbw"MwL 71za~faee, uwraisned/nct 8iuk bessw.au die allepc4 ' aras ft deqWW ofwhlch 1he plaiptiifeoawplniw aad d:e dekad= d6d aat pivxatnaWy eauo eme iqjucies ro the phiasiif. TLjs 3eek of diru: cawsarfaa bevs= ft aAag®4 Impeapw Qen ®Y shn defeadaatt, aad ft asaiw iqiurias svffaed by the plaiaW w:74 bC dhomW inptMculer daal as shs Craaes sakes up cah of tl1e omm in nra. A. yYTLY7 and AeaeiaruwZ4atma Cat~ b. II, aad tJda,flh~mmplaiacaevutveaUegodviokdqpsufdtsbtiCt7 Actrnd Caaa: N~m a viola~aon of !bc Siiet~m Aco. Tbe iumcer providcs a privase right nf acaian far daaxs~~ Am3grw dxase ayFivldaal5 °Ea)ured'gab9s buaiaeas or prapetsy by reaaon of avaaladanoF$EC®'ssmbstanwepnnraaacans_9d[r.S.f<.§ d96i(c). Thelatresprovides 9.
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Sap-29-99 11:29am Feo®-NUNTOf~~L LIAMS 1424 - T-84T P.06/32 F-666 --614-461-41A~ T-T4r r uanl r-icu 3ap-a8-88 1Z:4TPa Ft~'a0NE5 >fAT T11biDT#IY }~'rGALLe1MR(tI058401) 616 ktmnd CQUrt Butldtn$ ~~~el~~e, ~,~ 4r~I1~-1S03 21615 ~R-1 s 14i (f'a.~c)~-1600 STRL~T'1 i;R KEfiSLn . W13%-A1Y &IIC#iAF-L E.W11'MX 1200 Marl~et P1ue TQwer 2025 ~irst Avenue Se;ttiie, WA 9$121 Tele~httue: 24fi8-1777 2 12131 812131(~asc) CcaNNB TQN & MY ~o~ ~RO~a~9p~us 1 1 ew ork Avenua, N.W. Oth Floor asp~tgton, DC 20005 ZR2 .~9-3q~58 (~c)7-1900 W1 IT2 & LLIXMMFACa, P.C. Si' K~RISTAL C~e'11;N7 QSad Suitc 160 - 077 60067-7778 (fs~x) Y+EI7PZ ec L1IXIrN13EF.Ci. P.C. PAUt. 7. PP-NNDCjS 1N I~_aidKn ir 17~ ~i~rtsr New Yoric, NY1 038 ~ 21q4~4-54611(f~58-10U38 XQN~Tl~~ ~~~ L. 301 F- 1sh Suite 250 Atua ctr. A~ 4810+1 73~ G2-0552(f~x)~r9252 NIS & WATI{.1N~a ML~~AN TGC1S ~ 2A~ ~PUst AVCnue, Suite ~e -1-
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~t y + ___ ±1425 ! T-398 P.14fZ2 P-B1& AB 29-89 62 4Apw Pram-HUNTAiVr IAMS ]t1Y1 DD • s ft plaiaB#' boSUD eat Fp>w3 we1C "e7ltetely derivao*re oF ft h1um Sufl'e.tw by ptan parvclpaats a a avsuls of >astag wbecso pmdacte.." Iabnnrs toea! I9, Td. atY9, aAd did ncK "pr0z$1>Stely Cauae" the ipjaties aikged by ft bmkll futWB. Tbm, dte inadd' cl#lWa brwrglu macz RICO nt fedars<l aawu>+o la+v wem diemisued iu Bwq1 of those casea TLao ebeSiSh>'hCltFai[ CMutofAppeaia baaawtyetpaatq4.nasNCh.amu, thie.e Cautu of Appeala, the SecmW,'yqlnd, ad Nm4d, mave eoasideced oaaaa sqlw[ely ml poitu widt ft Dne baSasn dtis trvuscadd iavaYmr.>g ft aauae defadaat mhm annpwdat being sard my vatieW heahn tmst fiuadr saaittt ia att seI&M Taspocte tu 66 PlaW ia diie ®asc_ 9aea Causs of nppeala bws vaaDlnacvaly pef+t s6at aoeh a pistindits clsipn are MOamam, wo dettadve to m,aWft a 1:IC.C1 or a>stiavat clafam aoars 1k= deYeadams. 171a* m®c biaft audwe6[y aa thie t:Aat, tlaue dsciaiDttw potmade abe Cm cAat 14e IECdC mid aAtirassst claima iu d+e caee ae bar ®brntl4lx diusil9ea} wi vrmp. B. Fraud Waxl ldflsrVrerantarloer 3® whet aha Calut fball aaies ta aa Coeat V. ft Fead aftCa rhat ft defend.W hspdulamdgr mwvmwmd tbe nc dang= ®f tha psadaets tbc oc6M wmwies wete °e]1In$ (D ft gpbise. Tbe plBiaslff aTpm Shit "AS a dlteeS ACd pta+musi4e CR6u1C of MOAflA ... e° *C Fmd b75 $flffow QKwI$CB.. Us Qa doln, ft plaf4dff aompis to avoid die appearaqre eef Eqn$ Wle dafesdaats becan®e of came iajusg~ 1nAisrcd va atdera, is°., ~®nkps- ,4s waa ~s caae wi[k t)tegon case. 13
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SEP, 22. 1999 9:04AM 0 TABLE OF .4.U1'FIORTTEES N0.4433 F. 5/31 CASES a Arkansas Blue Cross and Blue Shield v. Philip Morrls, Inc, 47 F. Supp.2d 936 (N.D. 111. 1999) ................. .....................................•---..........................---•--....-...----.,........... ............_..........17 Associated General Contractors, Inc. v. California State Council of Carpenters, 459 U.S. 519 (1983) .............. ........................... -•---........... --------- .............. .......................... :................. passim Barger v. Brack, 535 S-W..2d 337 (Tcnn. 1976) ........ ..................... ...•..-.•.............. ....•......-......... 18 Ring v. Balvrist Memorial Hosp.-Union City, 937 S. W.2d 922 (Tenn. App. 1996) ..................... 18 Blue Cross and Blue Shield of NJ., Inc. v Philip Morris, Inc., 36 F. Supp2d 560 (,a.D1V.Y. 1999) ........ .................................................................... ......................................... --............... 17 Blue Shield of Va, v. McCready, 457 U S. 465 (1982) .............. ........................................... 14, 16 Bohannon v. Wadsovia Bank & Trust Co„ 210 N.C. 679, 188 S.E. 390 (1936) .........................17 Chambers v. Chambers, 92 Tenn. 707,23 S.W. 67 (1893) ........................................................ 21 Continental Cas. Co_ v. Smith, 720 S. W.2d 48 (Tenn. 1986) .....................•............................... 21 Cook by Uithoven v. Spinnaker's of Rzvergate, 878 S.W.2d 934 (Tenn.1994) .............................7 Coulter v. Hendricks, 918 S_W.2d 424,426 (I'cnn. App. 1995), appeal denied, 1996 Tenn. LIDaS 158 (Tenn. Fcb. 26, 1996) . .................................................................... ....•....,..........7 , Doe v. Linder Consts Co., 845 S_W,2d 173 (Tenn. 1992) ........................................... .... 9,10 General Environmental Sclence Corp. v. Horsfall, 800 F. Supp. 1497, 1504 (N.D. Ohio 1992), affd in part without op. and vacated in pan without op-, 25 P.3d 1048 (6th C5r.1994) .........16 Gregory v. Brooks, 35 Conn.437 (1868) ......................... ......................................................•,.17 Grip-Pak, Inc. v. Illinois Tool Works, Inc., 694 F.2d 466 (7th Cir. 1982), cert- denied, 461 U.S. 958 (1986) ........... ................................................................................................... ............. Holmes v, Securities Investor Protection Cor,p.. 503 U.S. 258 (1992) .........................•....... passim Hopkins v. Hopkins, 572 S.W.2d 639 ('Ccnn.1978) ...................................................................21 Hughes v_ McDonough, 43 N.J.L. 459 (1881) -..- ..............................................................°......17 Iron Workers Local Union No. 17 v. Philip Morris. Inc., 23 F. Supp.2d 771(N.D. Ohio 1998). 13 J- Truetr Payne Co., Inc- v. ChryslerMotors Corp., 451 U.S. 557 (1981) ..................................16 Kentucky Laborers Dist. Council Health and We(fare Fund v. Hill & Knowlton, Inc., 24 F. Supp.2d 755 (W.D. Ky. 1999).... ......................................................................................• 17 Laborers Local 17 Health and $enefit Fund, et al- v. Philip Morris, Inc., et al., 1999 U.S. App. LEX1S 19576 *12 (2d Cir. Aug. 18, 1999)_........ ...................................................... ...._......... 9 . ~ McClenahnn v. Cooley, 806 S.W.2d 767 (Ycna, 1991) .................... ................................. •........... 9 N Mitchell v. Langley, 143 Cra_ 827,85 S.E. 1050 (1915) ...................... 17 co csi . Tu618J RN)Ayy16rFI ds 9.155 Ill ~ ~ CC)
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SEP.22.1999 9:06AM N0.4433 P. 12/3J ' increased smoking by Fund participants and the same depletion of Fund assets on tobacco- related medical care. When proximate cause principles are applied to the facts here, the court's judgment should be held correct and affirmed Authority on proximate cause teaches that the complained- of conduct and the injury need not be adjacent to each other to cause harm; they must only be sufficiently interrelated. Moreover, case law holds that conduct directed at a third party does not preclude a finding of proximate cause. I Admittedly, the majority of recent fund opinions reach conclusions contrary to that of the court below. However, a minority of courts considering similar facts and allegations have refused to dismiss actions at the Rule 12 stage. Because none of the authority the Tobacco Companies cite is from the state of Tennessee, this Court is not bound by it. Likewise, the Court is not bound to follow the lower court's reasoning. As long as the court's conciusion is correct, this Court should affirm its refusal to dismiss (phrased negatively in the certification question), notwithstanding that the judgment may have been rendered on different, incomplete, or erroneous grounds. ,Finally, public policy weighs in favor of affirming the lower coutt's judgment and allowing the action to proceed. The State of Tennessee was a plaintiff against the tobacco industry and is a participant in the settlemenG It has thus declared public policy concerning the tobacco industry and its conduct. That policy weighs in favor of allowing this action to proceed. Tat]13 R1`i)wpp~ FI trs 9.15.v 6 ! 4
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SEP.22.1999 9.06AM NO. 4433 P. i l/31 SUMMARY OF ARGUMENT In suing the Tobacco Companies the Funds claimed economic injury directly and proximately resulting from the Tobacco Companies' longstanding willful and intentionaI misconduct. The Tobacco Companies moved to dismiss on "remoteness` grounds, taking the position that the Funds' economic damages derived only from injuries to third parties, their participants. The court below declined to dismiss the entire action under TkNN. R. Ctv. P. 12.002(6). The so-called "remoteness doctrine"-a term attributed solely to the Tobacco Companies--is merely part of the common law tort concept of proximate cause. Proximate cause has never been a black-letter rule, as the Tobacco Companies imply it to be. Rather, it is simply a conclusion that the cotnplained-0f conduct and,injury are sufficiently rolated, which is reached from a fact-specific, case-by-case analysis of causation. Ultimately, proximate cause (or remoteness) is a policy argument concerning the reaches of tort liability. The trial court's judgment partially denying dismissal is cotrect under proximate cause authority from the U.S. Supreme Court, the State of Tetmessee, and the common law. The Funds' pleadings allege two causative chains. The same wrongful conduct of the Tobacco Companies resulted in economic injury to the Funds, under either theory of causation. The Funds' first theory arises from the Tobacco Companies' willful and intentional misconduct--concealment of information, -tnisrepresentaticns, and conspiracy concerning the harmful and addictive nature of tobacco. The wrongful conduct was directed at the Funds' trustees, and therefore at the Funds, and resulted in needless expenditure of Fund assets on tobacco-related medical expenses. The second theory alleges that identical misconduct was directed at the public, including the Funds' participants. The same wrongful acts resulted in Tae2B3 (7T])wpplae la en 9.15.9 5 4 u ....- - ..-,BC:nI 'JnC"T7bl1l1 c.c-..T-.v.~t-«
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U9-26-88 5Z:45pm Frvm-HUNTOt~L1AMS rslca ua• +1425 ~ 7-3H8 P.63/22 F-816 T9w defsesbnrs iiave enovud faC df82n1t5a1 of af1 cJaAns. 1FPr die veavuaa Ae[ ouc hetein6 the moaom ta diaeafsa are srantad. This Cqu[L eWeisem ytrrirdietion aver alus da9aas both on ucaupt of the cARpfeta divetsityufftqsaxfcs. Z8F]-$.C. 1133'3, aadthQyrcraeaeaaf4adetpi"oac,28 U.S.C. 11331, ~ x * a. rde A~t~ The pJAinritf is tbe Atkam®as (upeama FEo" sad y1'elftw 7fkwt PUad ("tbe Pma^y. It is not dlapaDed tat dee FWad is aI1 °mnployee wdPsre beneAt plan" aad au "=pWpee i=fft plan" within siu msaoim of lawna9e of ihe FWployeo. Redromem 1arame Seetirfisy Aca ("PM.6°)a 29 tJ.S.C. 11®O1, et seq. Aa sueq. it providw casmpre6M~asevC 6eaids caic bcmpCw so pardcipurp w+ho a:c eulpiopcd n»der varjm • soRectiv® 6a[llalwi.ag agrcq=% or taomd fc ewm suna. ead rbeir degoaasata. In ia clqae acdam complaiot, tbe Fucd sceb so rawver, for laielf and on hehalf of sl,acs similacty siwarnd, reimfwracmcnxs Eor wkoc it deerita aa toitacco ae]ared bewAt eomts iaeuMd wl= paying hsakh aad evdtaze elaims to ats plan panidpewm. It aFao aeas verlouc sud ~gltiralale eelie$ Ddbdim 1'h3ip A4Crb$s IocUtpcramd ("%ilip Adoceis"). $.7. >dcynotds Tobgeco Comgaay (°R3R'). Bmwe cklVilliaspsou SokieCoC~atimt ("8rowo & wiltiamaon°?. t.ordli$rd Tabarrm Compen9 ("LoriUazd."), wd lfim I,ig9ett Group. Inc. (-8.•iggea•) Are 2
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SEP. 22, 1999 9: lOAM N0. 4433 P. 28/37 Deborah Godwin, Fsq. Timothy Taylor. Esq. Ylorencc M. Johnson, Esq. Agee. Allen, Godwin. Moais, J,aurenzil & Hamilton, P.G 200 Je:ffmon Avenue, Suite 1400 Memphf, TN 38103 Louis L. Robein, Fsq. Robert H. Urann, hsq. William Lurye, Esq. Nancy Picerd, Esq. 2540 Sevem Avenue, Sm. 400 lvJetairie, LA 70009-6768 Robert J. Connerton, Jr., Esq. John Broaddus,Esq. Connerton & Ray 1920 L Street, N'W', .4th Floor Washington, D.C. 20036-5004 Counsel for Plaantiffs/Appeiiees
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Sep-29 99 11:29am From-NIAVTON ttILLfAMS 1424 _ T-B47 P.PB/32 F^666 SeP-28°99 12:4Apm Prwm-JONESo -6f&^46i-4 ~ T-T4Z N•NAO-if -~-rcc Y Acc®rdingly, I believe that we will be able Yo file the stigulatinta ta distuisS t]te appral ap.d crass-appeal wiehia the next week 6. 1 haw spntsen with cousssei fas defeudarst 1U'R Reynalds Tabacea Ccampany, ieffiey lcmes afJnnes, Aay, Reavis & Pope, who has bem Faardinaprig ccsuttrte~nisarionsoaahehalfasfcextaindef~ed~tata. FI~lzasinf~amsedmettaatdefeu+~anas do uor opgase at one-weelc extension of uinc for piaititiffs to Ma ftir first br'aef ar a stipulated disaflissaI. I declar* under penalxY ®fpetjtiuy under the laWs of rhe UWced Ststes tbat the farcgaing is xru.e arad eqrsges. Fxeeufed this 2'7tla day of Scpiembcr. 1999, as Sara j7iegn, Caiif®ra~'sx. ta ~SES u-7 cDAwcc.oq~iccxsap lic.ruY -4- co N CSt ~ co ~ CO W
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11EP, 22. 1999 9:05AM NO. 4433 P. 9,13 1 The trial court granted the Tobacco Companies' application for permission to seek interlocutory review limited to the remoteness issue. (R. 3 at 374-81). The present appeal follows this Court's grant of review. (R. 3 at373). STATEUENT OF FA.CTS The facts below detive from the Funds' original class action complaint, filed January 7, 1998. (R. I at 2-83) z The facts discuss events leading to the Funds' injuries, and thus are relevant to this Court's review of the remoteness issue. Steatnfitters Local Union No. 614 Health and Welfare Fund, by and through its trustees, as well as a number of other union health and welfare funds are the representatives of a putative class of multiemploycr funds providing medical benefits to their participants '(i_e., union errtployees and their dependents, and retirees). Complaint qq S6, 12-15, 36 (R.1 at 2, 7-9, 19). All funds are' lcgal entities under the Employee Retirement Income Security Act, 29 U.s_C. $§ 1001 er seq. (ERISA). As such the Funds are entitled to sue. Complaint 116(R. I at 7). The Funds sued the Tobacco Companies for damages as well as declaratory and injunctive relief. The complaint alleges that the Funds suffered economic injuries as a direct result of the Tobacco Companies' fraudulent acts and conduct over many years. Complaint IN 1-5, 8(a), (e), (f), (j), 57-65, 240, 276-93, 320-24, Prayer 12. (R. 1 at 6, 8-9, 11-12, 24-26, 75-77, 81), Their damages were incurred as a proximate result of being forced to provide medical benefirs to participants for sm.oldne-reiated disease. The expenditure of monies on such benefits resulted in a loss of Fund assets. For exaxnple, the Funds allege in their complaint that the Tobacco Companies knew of and concealed the addictive properties of nicotine, Complaint q 152-63 (R. 1 at 49-52). Further, the complaint asserts that the Tobacco Companies were aware for decades of the relationship = The atnende4 camplainc, which had addcd a paety, changcd the otiginal complaint's nuntbaina- (It. I at t4CrS0). Tob?83 (nVApyWF1As9.S3.9 .3 C 4 ...-.....+.rnn v.f„vn•IA/1Y/ 0%/CI G~'i-sY-.J94
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w®9-29-88 9Z:68am P,am-BUATO~L/ASiS . _.._.,,_..~..~--.,. ~ +1426 - 7-888 P.21/21 F-8/6 Qaqan LdborsMlsk4(aym, 1949 WL 03306 at •iQ. Yt Wiar.$IC ~ft'8 1C$8l Q61ijAkEaA fA jFSy tLC S4pqkst3, ,avt dx dofeodaum' o61i~uGrt. Widi mo 6eaefit davia$ bee{t caaveyW, tLe issuc ae wi6aftr it would be "u*at" faa ft6enda9x eo Suep mbt s bmfn 99 alRat. . , , For dte forFg®iqgmoomm, drc m®dnnr ofdeedefeadpat9 tnd'ISmix4 tltisAisucrwu7s Aequdiee [Dc7C #20, 29] are gsaaWd. Ths ateGnns ra diMisfi fat faAats wjala a Qatsy tudW Rute 19 innC q4i, 901, amt aav a6er pa,ft Ww+i=, .M deMa =nt. rr ts s® caatzM=. Sel,Mbu26, t99s 1"cQriwrrr affmoao` d=xET arrW ue aaMrwWCE ~ 65 ~R7aO)~' ® A ~ ~ 20 cn
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SEP. 22. ?999 9:06AM N0. 4433 P. 14/31 0 only this: was the tower court was correct in determining that the Funds are entitled to offer evidence to support claims alleged in their complaint, rather than ordering their claims dismissed because their injuries are derivative? See, e.g., Scheuer v. Rhodes, 416 YLS. 23,2, 236-37 (1974). B. THE "REMOTENESS DOCTRINE" DOES NOT BAR TIiE FLT,I•1DS' CLAIMS 1. The Issue on ARpeal In their brief in support of dismissal the Tobacco Companies concentrated first on the so- called "remoteness doctrine," which is dispositive of all claims. (R. 1 at 101"14). They took the position that any damages the Funds suffered were contingent upon personal injuries suffered by third parties, I.e., the Funds' participants_ Therefore, the Tobacco Companies asserted, because the Funds paid their panicipants' medical expenses, their injuries were indirect, derivative, or too "remote_" The Tobacco Companies then concluded that as a matter of law the Funds are barred from maintaining a direct action against them.3 Following the parties' briefing and a lengthy hearrrng, the court issued its opinion. (R. 3 at 351-68)_ At issue here is the court's overriding ruling that the remoteness doctrine did not act to bar the Funds' claims as a matter of law. Subsumed within that conclusion is its seoondary holding that the remoteness doctrine does not apply to the Tennessee Constuner Protection Act 2, Ths "Remot ness Doctrfn®" Does Not Demand Dismissal a The Cn+nopt of proacjmate Cats~e No meaningful discussion of the so-called "remoteness docttine" is possible without first addressing the common law ton concept of proximate cause-aptly termed an "elusive concept." See Laborers Local 17 Health and Benefit Fund, er al. v. Philip Morris, Inc., er al., 1999 U.S. J < co N ~ co ~ ' The Tobacco Companies also attackcd the Funds' othet claims. Their additional arguments are no[ the subject of ~ this irtteriocutory appcaL abh~3 (!,v>AVN6. R a 9..3.9 8 V ~.'1Cre,.nn v^JYHA:~.il~y~ QT:G\ GC.~17.-.1'~C
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58p-Z9-99 11:28am Sap-28-99 t2:4Tsm From-HUNT~ON WILLIANS Frem~l0NE~Y 1424 - 614 bfil-~ T-B4T P.86/81 F-666 T-(4z , r.ua/ar r-iac Flaintifffs-appellaiais ®zsd cross-appellees reespectfully reques that tats briefing schedule be beld in abeyance fur ®ne week peudim$ a possible resoluTion of [his appeal and cra3ss-appeai. This motion is based aa the attached Declaration of Stterl Pym IaA3'ED this 2,7ih day of September, 1999. ItespecsfRily submitted, E~{} W7EISS$ I3AA I~S & ~R.A.C T~' FA~ RICK .[. c4I JG 1N F,Uc A.. Is.A.ac o NdlcHA.91- ,i. nO ~~PYM E CE`-' AR- ~ 'J 1"Yl~ 600 West 8rmadway Suite 19QCl San P.~ego, CA p2i~1 blbl3h1 4 31{~~ 1-105~ M~I,Y ~~F~~tG Vd,ETSS BER~A LP I~EVil4T ~'. R~A~Y ~ I. 355 South Grand Avenae Suite 4170 LTos Aangele CA 90071 2131bh7-91$ 1( /~fil~?-9t1a7 W C? BIC~S CI.F ROGER N!. Rt~Ci Y~• ADEI:.MAN 1100 Cqainecticut Ave., N.W. Wa husgum, PC 20036 2a922n672z (~)2~6Q~ ~~T D A~N~A1R~,&IirR RQ2GQ4g) -a-
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SEP. 22. '999 9:10AM N0. 4433 P. 29/3 J 0 C.Fi'.RTIF7CATE, /,11F SEY`VI `(~', '1'his is to certify that a true and correct copy of the above and foregoing Brief of Plsintiffs/Appellees was served as described on this the 15th day of September, 1999, to all counsel of record named below via certified mail, return receipt requested: 1.eo Boarman. Jr_, Esq. (BPR 8363) Jill M. Steinberg, Esq. (BPR 11603) Baker, Donelson, Bearnnan & Caldwell 165 Madison Avenue, 24th Floor First Tennessee Building Memphis, Tennessee 38103 Kenneth 1. Parsigian, Esq. Christopher D, Moore, Esq. Goodwin Procter & Hoar L1.P Exchange Place Boston, MA 02109 Jack E. McClard, Esq. Stacy Colvin Taylor, Esq. Hunton & Williams ltivetfront Plaza 951 East Byrd Street, East Tower Richmond, Virginia 23219 Counsel for Phllip Morris Incorporated, and for purposes of this Brief only, on behalf of defendants listed below: Jeff Jones, Esq. Scott C. Walker, Fsq. Elizabeth P. Kessler, Esq. Jones, Day, Reavis & Pogue 1900 Huntington Center Columbus, Ohio 43215 Albert C. Harvey, Esq. (BPg 7955) Daniel F. B. Peel, Esq. (BPR 19?st5) Thomason,'Henddx. Harvey, Johnson & Mitchell 2900 One Commerce Square 40 South Main Street Memphis, Tennessee 38103 Counsel for R. J. Reynolds Tobacco Company
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SEP.22.1999 9:10AM U0.4433 P, 27/31 i If the lower court's judgment reaches the correct result, this Court may affirm, even if the judgment is rendered on "different," "incomplete," or "ettoncous" grounds. See Charnbers v. Chambers. 92 Tenn_ 707, 23 S.W. 67 (1893); Continental Cas. Co. v. Smith, 720 S.'W,2d 48 ('I'enn, 1986); Hopkins v. Hopkins, 572 S.W.2d 639 (Tenn. 1978); United Am. Bank of M, emphis v. Mylan Fiut. Servs., ,Cnc.,1997 Tenn. App. LEXfS 865 (Tenn. App..,bec. 8, 1997). Thercfore, the sole issue before the Court is whether the court below should have dismissed the Funds' remaining claims as being "too remote to permit recovery as a matter of law." The Funds respectfully request that the Court hold in the negative, concluding that at the Rule 12 stage the trial court properly declined to dismiss their claims, and affirming its judgment. CONCLUSION For all reasons set forth above, this Court should answer in the negative the single question certified to it. It should affirm the lower court's judgment failing to dismiss the Funds' remaining four statutory and common law claims, and allow the present action to pKoceed. Respectfully submitted, Sylvia X34vidow State Bar No. 05430551 D'Iisa R. Simmons State Bar No. 18367390 Fleming & Associates, L,L.P. 1330 Post Oak Boulevard, Suite 3030 ' llouston, Texas 77056 Telephone No.: (713) 621-7944 FAX No.: (713) 621-9638 Counsel for Plaintiffs/A,ppellees Steannfitters Local Union No. 614 Fiesltlt and Welfare Fuqd, et al. 4 4 TOL793 (il'7)A"Wr n7 Jn 9• 1.1.7 21
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IN THE COURT OF APPEALS OF TENNESSEE WESTERN SECTION AT JACKSON STEAM FITTERS LOCAL UNION NO. 614 HEALTH ) AND WELFARE FUND, by and through its Trustees, ) TENNESSEE CARPENTERS REGIONAL HEALTH ) AND WELFARE FUND (formerly Carpenters National ) Health and Welfare Fund), by and through its Trustees, ) MIDDLE TENNESSEE TEAMSTERS TRUST FUND, ) by and through its Trustees, IRON WORKERS ) DISTRICT COUNCIL OF TENNESSEE VALLEY & ) VICINITY WELFARE PLAN, by and through its Trustees, and on behalf of themselves and all others ) similarly situated, ) Plaintiffs, ) ) v. ) Case No. 02A01-9905-CV-00120 ) PHILIP MORRIS, INC. R.J. REYNOLDS TOBACCO ) COMPANY, BROWN & WILLIAMSON TOBACCO ) CORPORATION, B.A.T. INDUSTRIES P.L.C., ) LORILLARD TOBACCO COMPANY, LIGGETT ) GROUP, INC., THE AMERICAN TOBACCO ). COMPANY, THE COUNCIL FOR TOBACCO ) RESEARCH - U.S.A., INC., THE TOBACCO ) INSTITUTE, INC., SMOKELESS TOBACCO ) COUNCIL, INC., HILL & KNOWLTON, INC., ) UNITED STATES TOBACCO COMPANY, ) UNITED STATES TOBACCO MANUFACTURING ) COMPANY, INC., GALLER WHOLESALE, ) d/b/a P.M. GREEN & SONS, INC., TENN-MISS ) DISTRIBUTORS, ) Defendants. ) BRIEF OF DEFENDANTS/APPELLANTS
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SEP. 22. 1999 9:08Ai41 N(1, 4493 P, 14/31 459 U.S. 519 (1982). In AGC, an antitrust case, a number of unions alleged that a multiemploycr association and its members had coerced certaan third parties, as well as some of the assoeiation s members, to enter into business relationships with non-tution firtns. Id. at $20. The unions claimed further that the coercion harmed the trade of unionized fitms, which in tutn reduced the demand for labor of the union's members. Applying a multi-factor test, the Court concluded that any injuries to the unions were only an indirect result of whatever harm may have been suffered by certain construciion conaactors and subcontractors. Id. at 541. Therefore, it• found proximate cause lacking. 0 The earlier tcst in AGC provided the basis for the ,H'olmes test. As recited in AGC, the factors are the following: 1. The directness or indirectness of the asserted injury; 2. the speculativeaess of the injury; and . 3. the risk of duplication of damages or difficulty of apportionment of damagess Id. at 540-45. What can be gleaned from Holmes and AGC is, first, that proximate cause (or "remoteness") is not a rule of indcpcndent significance; it is merely a conelusion following from the balancing of case-specif:c factors. Second, at its essence, proximate cause is a policy issue dealing with the limitation of liability. See Holmes, 503 U.S. at 268 ("at bottom, the notion of proximate cause reflects 'ideas of what justice demands, or what is administratively possible and convenienf"); andAGC, 459 U.S. at 537 n. 34) ("What we do mean by the word'proxitnate' is, that because of convenience, of public policy, of rough sense of justice, the law arbitrarily declines to trace the series of events beyond a certain point ") (citations omitted). $ A fourth factor is irretevant, concerning as it does petsons who would be motivated to vindicau the public interest in andtrust enforcetnent. Tab2a3 (TN)npplBrF7ues 9.15.9 13 a . a,nn~nArn/l v7v.av. r.lnirx ~.1.: A+ aG- t 7.-.l~.G
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TABLE OF AUTHORITIES FEDERAL CASES Arkansas Blue Cross & Blue Shield v. Philip Morris, Inc., No.98C2612(E.D.Ill.Aug.2,1999) ....................................... 14 Associated General Contractors of CaL, Inc. v. California State Council of Carpenters, 459 U.S. 519 (1983) ...................................................17 Blue Cross Blue Shield of N.J., Inc v. Philip Morris, Inc., 36 F. Supp. 2d 560 (E.D.N.Y.)1999) .............................. 14, 21 Central States Joint Bd Health & Welfare Trust Fund v. Philip Morris, Inc., Nos. 99-1014 and 99-1197 (7th Cir.) ....................................... 6 Contractors, Laborers, Teamsters & Eng'rs Health & Welfare Plan v. Philip Morris, Inc., No. 8:98CV364 (D. Neb. Feb. 18,1999) .................................. 6,30 Conwed Corp. v R.J. Reynolds Tobacco Co., No. 98-1412 (PAh'l/JGL),1999 U.S. Dist. LEXIS 9634 (D. Minn. April 29,1999) .................. .. .................. 6 Hawaii Health & Welfare Trust Fund for Operating Eng'rs v. Philip Morris, Inc., No. 97-00833 (D. Haw. Jan. 25,1999) ...................................... 6 Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (1992) ............................................... passim International Bhd of Teamsters Local 734 Health & Welfare Trust Fund v. Philip Morris, Inc., 34 F. Supp. 2d 656 (N.D. III. 1998) ................................... passim Iron Workers Local Union No. 17 v. Philip Morris, Inc., 23 F. Supp. 2d 771, 779-780 (N.D. Ohio 1998) .............................. 14 Kentucky Laborers District Council Health & Welfare Fund v. Hill & Knowlton, Inc., No. 3:97-CV-394-H (W.D. Ky. Sept. 30,1998) .............................. 14 Laborers Local 17 Health & Benefit Fund v. Philip Morris, Ina, 7 F. Supp. 2d 277 (S.D.N.Y.1998) ........................................ 14 co Laborers Local 17Health & Benefit Fund v. Philip Morris, Inc., r\~ ~ ~ O \0
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„ 99-29-99 92:59pm FraorHUNTQ~[LLIAMS +1428 i T-399 R.20/22 F-818 E. [7njettt Eruichemsr >giuallg„Caura iX of d-. cwupJaiat ea a rlaiat far anjmst etaidbmeat aQai<Lst tfte dr&tdsnts° IA a mllairell. pl8isltitf aegues ehat ttie WAdical paymems it qas wada m ics pattk4aats ever ft years ftN sWliiaB tc3arsd groblvma ,9hapld have 6eas mado by zhe dctmlama. lbac plaiaeatf m9R1r rtaam easee4 pueaas the detem4aata bava recaived a 6mfit. i.a., floc defeodaata 4ave beaa "utUteidy mrirbcd." To mai®raia amh ad.iui, a plaiatiffmuataiww tbatthe defeadantaE[9fned abtaefa fxm The pla9apff to wbDeDs be was WE mcirkil tbtmtRb "saas opceative 496 9atetu, or 88Rudot1 m q181t& 6hC tNIGElf~OL ll~(p7f[ pew jC• TIUC QlTitt6 ea111 lpljl Iy A 31TO3i139P.^ to py for 9CCVm WAffy W11MW Mq We$v fEndead fII$6* F9R113pamaaA a1AltQSlEift psatY shoat aa mmusi®. a teamanh7c of~+eirRaYtuetu 9fY the paftl' taeocfseaxx." Spar&s Rotdmaai dlediew! Cneer v. Adarr. 993 Q-W-24 W}, 3D7 (AsJc. Ce.App.19DG]. PlaindKWts[ e=bli&h Ibat dcfeadaru raxivtx! mouoy "ta whiah ha was eat enuided and which be aheald eesmr® " Id. 7he Cautt &ds thae ahe a*=)asur seeaived wtipiag 91 vmhse. wWa die meaaiR of umjwat moe3dqaceaC anaiyais, Wiu:u ft plniuWff paid d1e smakiag saUtect bcat1t elaiM vrhied it [vas legeily ob1{aatbd to pay. [$]ecam Pbkdm had aa bdepcadeat oDi6ealaat rn pay tde aruoIcrs' mccflcat eapc>nsma, dwy camnat msban,in ao eeeiae for w4juae enei*Mene asalast Aafeu9ap[S jum[hCCauas wareW;idewcolEybemeflcced- seeResaaaptnesatof~Caau~aan v ®b {193fa) ('A petsos wlw, fadda>etaltY to tLe pet4'octn8rxe of hie own duty ... har- CUA*rnd a ba>eAs ®pa® asaodms, u ooe ahereby wcitlrsid to rApuibrsdon.'. 19
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9Bc29-99 62:49am From^HUHT4t~LIAlAS ,..... P ±1425 ~ T-398 P.19/22 F-B16 eoasidmlioas of why stu$ a elauu ahqu.ld na[ ke ahowcd. Siatpiy pu. plaiqqff cawpoe ehuw [kac debbd=W afllgai amndaec was Rte prazip9xoa causc af fu fujtRiCa. As aqoSezaad raecuitpusscUcmonc4, `Nlrnca, snalaVw prirwiPlra4o thox Wat dwmoalp6aimi(Ye =D caMafaadwn alwbmplaindffa' caplmanlaw freudaadspft3aW dnry gcdanm.° Eabarer7 Lxa! l7.1939 ®V5. d39M sa *13 (r Cit.1g99). P9A warr1um1eS CauneVAb"mQmi4s tboT=d''allaguiaps spRidm defeuA.ataLavaviatqtalaxpress aad weplied eres>P®ptses sua4s 0 dhe pnhlic, faslpdinE Ibe Pund aad ita paowipm. Flaweeae, a3leta f' qa WhIguion tiaz deEmrdaams ccar prwfded the piaial6(C wRh AR3r mast_ afpradeet9o ~1J~iRbtilede w~lldapply. Fu~duamosr, ebesv ismoaUe~re~4an tbat de ~atda' aay estpcesa warseatfos aW U,e &w ae oa a4ar Rmodut'.~lc er+Id. 9Vieb SeopsFS la 8>LV e18im o$baeech ofem faqu1W wattatd,y ®f ineawbannbilfty, ft •- Caaes fitse [®aka sa Aticaasas' etaf4tee. Aa impUlad waxxaqty clAiat eauqat be caaioMIX4 if ft gDods ac is=: (1) "paas wlahoat abjewon in the a9de updex Tbe caqauce dese[igdap:" (2} "eee of 0ie avc¢ape quaifty wiU 4be desczigdna;" (3) -are fit ft dle d&AMia. boa rh®ee doaqi sai®ts[ baVe bcew laesaoea Iwd ft FuadS Qdapted the maasuiq 0Hk8e4 •sa+dwxd BheRt acj cp adapt •!}ta e.otatplexitY wf rAex a1euwata nwkea tA- altita®ve qumeiaa ae damRq ~s~'eted bSrehe 8s~da vi:aeaAy faapqaltble oa detaanix. 4tda~d, tt6r wse s~sv4 to preseas SWM4Y etW eypc criatgr.r.ampt[WdWUVa dlaiuv ~u Harmra aad a-rsaa;arev G®Ae~a! Coarruapaasaclgbc Bo evaid. Lr<$oreeadarall7, 19911 WG 6aA1145 as'la C2^° CiL 1999). i2biS waa aeacbeream "CWaac 1R° in plaiatlYCs r;amplmim va gegs 143. 17
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-vY i TABLE OF CONTENTS PQe STATEMENT OF THE ISSUE PRESENTED FOR REVIEW .......................... 1 STATEMENT OF THE CASE ................................................... 1 STATEMENT OF FACTS ...................................................... 3 SUMMARY OF ARGUMENT ................................................... 6 ARGUMENT ................................................................11 I. BECAUSE THE FUNDS' LOSSES ARE ENTIRELY DERIVATIVE OF ALLEGED PHYSICAL INJURIES TO THIRD PARTIES, THE TRIAL COURT ERRED IN FAILING TO DISMISS THE COMPLAINT PURSUANT TO TENN. R. CIV. P. 12.02(6) . .......................... 11 A. Numerous State And Federal Courts Have Dismissed Virtually Identical Union Fund Lawsuits On Remoteness Grounds. ........... 11 B. Tennessee Recognizes The Longstanding Remoteness Doctrine, Which Bars All The Funds' Claims Here ......................... 16 C. Dismissal Of The Funds' Complaint Furthers Compelling Policy Goals ..................................................... 18 D. Tennessee Law Makes Clear That A Trial Court May Dismiss Claims That Are "Too Remote" On A Motion To Dismiss Pursuant To Rn1e12.02(6) ............................................ 24 II. THE REMOTENESS DOCTRINE APPLIES EQUALLY TO THE FUNDS' CLAIM UNDER THE TENNESSEE CONSUMER PROTECTION ACT .----.-• .......................................27 CONCLUSION .................... .......................................... 31 ii
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SEP, 22. 1999 9: 10AM NO, 44jj Y, jil/J 0 Kenneth N. Bass, Esq. Jennifer Gardner, Esq. Kirkland & Ellis 655 Fiftcenth Street, NW, Suite 1200 Washington,17.C. 20005 Lee J. Chase, Esq. (BPR 8443) Glankler Brown, PLLC_ Suite 1700 One Commerce Square Memphis, TN 38013 Counsel for Brown & Williamson Tobacco Corporation (individually and as successor by merger to The American Tobacco Company) Jeffrey S. Nelson, Esq. Richard L. Gray, Esq. Shook, Hardy, & Bacon L,L.P. One Kansas City Place 1200 Main Street Kansas City, Missouri 64105-2118 Roger Dickson, Esq. (BPR 1933) Marcia Eason, Esq. (BPR 11374) Miller & Martin Suite 1000 Volunteer Building 832 Georgia Avenue Chattanooga, Tennessee 37402 Counsel for Lorillard Tobacco Company Harry Zirlin, Esq. Debevoise & Plimpton 875 Third Avenue New York, New'Y'ork 10022 Williami S.1.ocketu:, Jr., Esq. (BPR 10257) Rebecca B. Murray, l:.isq. (BPR 11622) T{ennerly, Montgomery & T'-xnlcy, PC 550 Main Street, 4th Floor Knoxville, Tennessee 37902 Counsel for The Cosmcil for Tobacco Research - USA, Inc. Saul C. Belz, Psq. (BPR 4346) Waring Cox, PLC Morgan Keegan Tower 50 North 1'ront Street, Suite 1300 Memphis, Tennessee 38103-1190 Counsel for The Tobacco Institute, lnc Bruce M. Ginsberg, Esq. Marc J.'Rechman, Esq. Davis & Gilbert 1740 Broadway New York, New York 10019 Gary K. Smith, Esq. (BPR 8124) Smith, Sabbatini & McLeary, PLLC 119 South Main Street Fifth Floor P.O. Box 3582 Memphis, TN 38173 Counsel for 1';lill'and Knowlton, Inc.
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69-29^99 02:4Tpm Fram-HUNTOH~IAM4M SF]Vl' t5T : +1425 i T-388 P.08/22 F-616 8Be uLFrt fot aAPe.w 61rb.ER 901d BW CQASRRIeri p8 d0bnW, bCPOPdMW bICAoo ftjT LppliRd wer:.ptY ot>a>ersba&plbiliry boesuac tdeir products arr apt fic ior theit iatsq[isd putpCBeS." G'O1kpGiiJU at pp. Y09-4We 1514. Caant X- Iletluea lo"sneqt (OskeYaB bYplaistdfY aa C®ptR Vlp Ptaiterifts alao aliGgs ft hecauss ft dafeadaam bsve Wtxdwd tpe "ap=ial dtiuX• diamsed above, smd stu pwaa Iws bsd ta pay rmaui* me4icA1 aTeatxei. tqe plainuff has crrefwrod s bcneFic upo$ ec defcndama, i.a., it pas paid wu swn>: to iss pUux pr&q)ams v4ft ahmdd hsye 6ecubomo by *e de#epdauta. `17te delppdaot9 ahould siacfonbsve ea malcc rttdturmn w theplaintiffhY eeunbruxu4g iheptaindff Surtlu ptn4s_ thns px1A out. !!d, IRa#7isnarasaiA~odalr $e#a:m rhe Cauac m the pasprs' modaat so d6sndaa Po[ "La~lure tue atax a alaim," FjMv_Ftn.13(b)(5) [!W q+P20. 2D], aad "faiiama sa jWn a pntiyuuder Rule 1,9," Ride 1*}(Z) {D®C Wd2. 3®J. Ibe Caut aaeds only to mmaida qtv 12(b)(b) bqntaoAS. R heaa umitlown a moaian ro dismisr}, the Cwtrt aasurnaa dut a11 ft 4actual obl'agetbana coaasiae" b s6c eompla3ff ara uatn. Wettaars v O,wa9ra. 901 F.Zd 1426, 1484 (8a Or. d9M. A mcdon w diantsa wW te granw4 oaly if it ®ppears beyawl daub; aaat ihe glal®tEfd eati pMve ba aet of fats which wao9d eatitBo it m 2dK 7p the htsppt ea6e. svon afte Caaan a5srw= dru all of tbo dactual alBeg,a:tinps abont [he®efepdamg' aauvidw ass Ws, i.e., thaeTaee dsf Catew af ft mab(ea1 [JSics e9caciated wEtG 8heh•wbacFa a I
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stP.22.1999 9.07AM N0.4433 P. 16131 act go forward to etetttity, and the causes of an event go back to the dawn of human events, and beyond. But any attempt to impose responsibility upon such a basis would result in infinite liability _,,. The court continued by noting that (aJs a practical matter legal responsibility must be limitod to those causes which are so closely connected with the result and of such significance that the law is justified in imposing liability. Some boundary must be set.... Doe v. Linder Constr. Co., 845 S,W.2d at 181, quoting P1i0ssER AND REEeoN § 41 at 264. At bottom, then, proximate cause is simply a concept limiting liability. See also White v. Lawrence, 975 S.W.2d 525, 529 (Tenn. App. 1998) ("[P)roximate cause, or legal cause, concerns a determination of whether legal liability should be imposed where cause in fact has been established.") b. Prox(mate Cause and "fiemotenM". That the so-called "remoteness doctrine" appears to have taken on a life of its own must be credited to the Tobacco Companies, However, remoteness is hardly a novel or unique concept, nor is it in this case. The doctrine is merely the "age-old tort principle of remoteness of damages." It thus serves "practical goals of preventing duplicate* recovery of damages and proliferation of lawsuits." See Grip-Pnk, Inc. v. Illinois Tool Works, Inc., 694 F.2d 466, 473 (7th Cir. 1982), certt denied, 461 U.S. 938 (1986).' ' Two older cases are ofteo cited with respect to remoteness. See PaLsgraf v. Long Isltvul RR. Co..248 N.Y. 339, 16•2 N_E. 99 (1928); and Petitions oflffnsmanTraarft Co-, 388 P.2d 921 (2d Cir. 1968). Tee2ss mv>Appee Fr dn v. i s s 10 a 4 <-rnc>iic,mc.r,. NlIC73NdU ttSSfwB'Gla7.ld [Q%4f HH-lTi-d3S
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SEP.22.1999 9:05AM N0.4433 P. 8/3i ~ 102 (1988) (TCPA) , as well as common law claims for fraud, negligent misrepresentation and conspiracy.' (R. 1 at 2r83,146-50). On August 17, 1998, the Tobacco Companies moved to dismiss the complaint under 27E;taK- R. Civ. P. 12.002(6). They argued that all causes of action were baned as a matter of law because any damages the Funds suffered were indirect and derivative of injuries to their participants, or, in other words, too "remote." The Tobacco Compat»es also attacked the Funds' claims for additional specific reasons not at issue here. A hearing was hold on Decembcr 1.7, 1998, at the completion of the parties' briefing. (R. 4 at 1-179)_ At oral argument the Funds voluntarily non-suited seven of the eleven counts. (R. 4 at 10-11; 3 at 371-72). Therefore, only the following four counts rcmained for determination: violation of the "TCPA (Count I); fraud and deceit (Count V); negligent misrepresentation (Count VI); and conspiracy (Count XI). The trial court issued an opinion and order on January 29, 1999. QZ. 3 at 351-68)_ The court granted the Tobacco Companies' motion to dismiss the Funds' state antitrnst claim (Count 1i). However, it denied dismissai on claims brought under the TCPA, as well as on the remaining three common law claims (fraud and deceit, negligent misrepresentation, and conapiracy)_ In brief, the court concluded that the Funds' claims were direet, and thus not too remote to survive dismissal. The court held secondarily that the so-called "remoteness doetrine' did not apply to the Funds' TCPA claims. ' The claims included in ehe complaints were the following: Count I• Violatton of the Tennessee Consumer Protection Act; Count II- V iolation of'1'oaacssce Statumry Ptavisions Regulaiing Restraint of 1}ade; Count III - Restitution Based on Unjust Enrichmenr, Count IV -Breach of Voluntarily Undertaken Dutyi Count V - Fraud and Decoit: Count VI-Negligeat I~isropresentazion: Count VII-Bt'each of Exprrss Warranty: Count VIII-Breach of Express Warranty; CountlX-Negiigencc; Councyt-Violatioas of Tennessce Products Liability Act; and Count XT - Conspiraey. Not all claims are befoft the Court. Tub]Sa ['+Nf.wpylBr A dn 9.13.9 2 < s C ~m_rv-4ac
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DOCKETED CASES Elliott v. Philip Morris, Inc., No. 89029-2-TC (Shelby Cty. Cir. Ct.) ...................................... 24 Falcicchio v. R.J. Reynolds Tobacco Co., No. 94722-8-TD (Shelby Cty. Cir. Ct.) ..................................... 24 Gipson v. Brown and Wilfiamson Tobacco Corp., • No. 87886-5-TD (Shelby Cty. Cir. Ct.) ..................................... 24 Hanks v. Brown and 1Filliamron Tobacco Corp., No. 96332-5-TD (Shelby Cty Cir. Ct.) ..................................... 24 Jones v. Philip Morris, dnc., No. 93024 (Shelby. Cty. Cir. Ct.) .......................................... 24 Zaios v. R.J. Reynolds Tobacco Co., No. 94562-8-TD (Shelby Cty. Cir. Ct.) ..................................... 24 Newborn et aL v. Brown & Williamson Tobacco Corp., No. 97-2938-GV :................................................... 20-21 FEDERAL STATUTES ERISA, 29 U.S.C. § 1001 et seq .. ................................................. 3 STATE STATUTES Md. Code Ann. Com. L. § 13-408(a) (1998) ...................................... 30 10'lichigan Consumer Protection Act, Mich. Comp. Laws Ann. § 445.911 ........... 30-31 Oregon Unfair Trade Practices Act, O.R.S. § 646.638 (1998) ........................ 30 T.C.A. § 47-18-109 .......................................................... 28 RULES OF PROCEDURE Tenn. R Civ. P. 12.02(6) ...................................................... 12 Vlll
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StF. Z1. 1999 9:11AfN • Robert G. McDoweil, Esq. (BPR 961) Baker, Donelson, Bearman & Caldwell, PC 1700 Nashville City Center 51 Union Street P.O. Box 190613 Nashville, Tennessee 37219 Counsel for Udted States Tobacco Company Deborah Godwin, Fsq. Timothy•Taylor, Esq. Florence M. Johnson, Esq. Agee, Allen, Godwin, Morris, Laurenzi & Flamilton, P.C. 200 Jefferson Avenue, Suite 1400 Memphis, TN 38103 Louis L Robein, Esq. Robert & Urann, Esq. William l.urye, Esq. Nancy Picard, Bsq. 2540 Severn Avenue, Ste. 400 Metairie, LA 70009-6768 Robert J. Connerton, Jr., Esq. John Broaddus, Esq. Connerton & Ray 1920 L Street, NW, 4th Floor Washington, D.C. 20036-5004 . Counsel for PIaintltEc i9U. 44jj r. J 11J J • John A. McReynolds, Jr., Fsq. Baker, MoReynolds, Byrne, OWane, Shea & Townsend 607 Market Street,l1th Floor 1{noxville, TN 3•7901-1708 Counsel for Liggett Group, Inc. Mary Elizabeth McGarry, Esq. Adam 1. Stein, Esq. Kathy L. McFarland, Fsq. Simpson Thacher & Bartlett 425 T.exington Avenue New York, New York 10017-3954 Counsel for B.A.T. Industries PLC Bdward Beartnan, Esq. Branson & Bearman 44 North Second Street, Suite 701 Memphis, TN 38103-2266 Counsel for Smokeless Tobacco Council, Ina Tu67L3 (tNY.ppl6. Fl ~s9.IJ.9 25
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SEP.22 i999 9:07AM 0 N0.4433 P. 18/31 Holmes is more significant for the proximate cause factorial test the Court articulates, and for the Courz s reiteration of the necessity for a case-by-case analysis of causation. As the Couit stressed, no "black-letter rule" exists for proximate cause: As we said in Associated Genaral Conrractors, "the infinite variety of claims that may arise make it virtually impossible to announce a black" letter rule that will dictate the result in every casel' ..,. Thus, our use of the term "direct" should merely be understood as a reference to the proximate-cause enquiry that is informed by the concerns set out in the text. Id at 272 n.20_ Tn leading up to its discussion of proximate cause factors, the Court also emphasized that the common law concept was basically one of the policy behind liability limitation: Here we use "proximate cause" to label generically the judicial tools used to limit a person's responsibility for the consequences of that person's own acts_ At bottom the notion of proximate cause reflects "ideas of what justice demands, or of what is administratively possible and convenient." _. Accordingly, among the many shapes this concept took at common law __. was a demand for some direct relation between the injury asserted and the injurious conduct alleged. 1d at 268-69 (citations omitted). The Holmes Court then went on to elucidate three factors to be weighed in assessing proximate cause in a specific case; 1. The speculative character of damages suffered, i.e., the less direct an injury is, the more difficult it becomes to ascertain damages attributable to the vitolation; 2. the possibility of multiple recoveries or duplication of damages among plaintiffs different levels of injury; and 3. the presence of others better suited to sue. Id. at 269-70. J E ~ Holmes' three-pronged analysis grew from the Supreme Court's reasoning in an earlier ~ ~10 case, AGC. See Associated General Contractors, Inc. v. California Srare Council of Carpenters, 0 0 YCD~ (1"N)npplB, F( ar, 9.13.9 t2 ..nC~~..ni, v~VUPI/!/1]L} 7T.Pf PC.-TY.-ri'3S
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0L-29-99 02:80pm Fram-NUNT* LIAIdS +1425 • T-398 P.22/22 F-616 J.RB ft CJ14auY Sia4CA• a Court for the Fastern Diatrict of Arkansas l3i W $ i ~te~a P ~ta A M"-' ARKA,NSAS CARt+BNTSRS' 3i8AL't'fi & q'f~LpAit$ $°i1NA, an bedei8 mf itsdf and at bekrtf of a7t atdesa s4aularlY sifrXlted, Pkrl~t+r~8; . V. Pgi= DdORRIS IAiC; R 3 RSYNOWS TOBACCO CUMPANY; BROWN & VPa.LLABdSmA1 MAACC® CORP[DRATA{3M;!, BAT IDiISUSTKiE.4 PLC; IRSAiI.LARA TOBACCO CQD3&ANY; U~'a4ElT G1UDT7F YMC; AA9i'.3:3C..AAi'dOBACC® C®A$PAD1Y: ' CYS[rideTl. MR 'SOBbC'CD AF,SF.AItCH U_S.A.; T019ACGO t['i5'd'iTUTB, IIVC; SMOXELU TMAC?:;CB COt1NCYL,, 7NTC. I fAti/ertdAqr,f. IMQ= Ym accwsda= with dw Ordw CuecCd F$la sm 4m judpxnt ie w&ee4 9n favor of doa ftkadwo sad ft a19*mi OTd4F ptaiwm dGsmi"ed eva ptejudiea. UMPREt9 TM8 ?.e DAY OF 5999. °M VAA~ C-% r- -- ~ J7affg ~u4poP ~p A b ~A a~ d 9qady h7thxsCKET.J ~66 Y W ~ LTitd S1 Ai~t fity aBneasEesRuiB s~>~e~ds.~ uRa AND' 9Y prCP f [a
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0 No. 98-7944,1999 U.S. App. Lexis 19576 (2d Cir. Aug. 18,1999) ........... passim Laborers' & Operating Eng'rs' UtiL Agreement Health & Welfare Trust Fund v. Philip MorrEr, Inc., 42 F. Supp. 2d 943 (D. Ariz. 1999) ........................................ 6 Lyons v. Philip Morris, Inc., No. 98-515 (PAM/JGL) (D. Minn. April 29,1999) ............................ 6 Mobile Lffe Ins. Co. v. Brame, 95 U.S. 754 (1877) ..................................................... 17 Massachusetts Laborers' Health & Welfare Fund v. Philip Morris, Inc., No. 97-11552-GAO (Aug. 4, 1999) ......................................... 7 National Asbestos Workers Med Fund v. Philip Morris, Inc., 23 F. Supp. 2d 321 (E.D.N.Y.1998) .................................... 14, 21 New Jersey Carpenters Health Fund v. Philip Morris, Ina, No. 97-4728 (MTB) (D. N.J. May 12,1999) .............................. 6,14 Northwest Laborers-Employers Health & SeG Trust Fund v. Philip Morris, Ina, No. C97-849WD (W.D. Wash. July 22,1999) ............................. 6,30 Oregon Laborers-Employers Health & Welfare Trust Fund v. Philip Morris, Ina, 17 F. Supp. 2d 1170 (D. Or. 1998) ................................. 13, 25, 30 Oregon Laborers-Employers Health & Welfare Trust Fund v. Philip Morris, Inc., - F.3d -, No. 98-36024,1999 WL 493306 (9th Cir. July 14,1999) .............. passim Regence Blue Shield v. Philip Morris, Ina, 40 F. Supp. 2d 1179 (W.D. Wash. 1999) ................................ passim Rhode Island Laborers' Health & Welfare Fund v. Philip Morris, Inc., No. 97-500L (D.R.d. Aug. 11, 1999): ....................................... 7 Seafarers Welfare Plan v. Philip Morris, Inc., ' 27 F. Supp. 2d 623 (D. Md. 1998) .................................... passim Southeast Fla. Laborers IDist. Health & di'el,/'are Trust Fund v. Philip Morris, Inc., No. 97-8715-CIV-RYSKAMP,1998 WL 186878 (S.D. Fla. Apri113,1998) ..................................... 7, 20, 21, 23-24 iv
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Operating Eng'rs Local 12 Health & Welfare Trust Fund v. American Tobacco Co., No. B.C. 177968 (Cal. Sup. Ct. July 9, 1998) ............................... 14 Operating Eng'rs Local 324 Health Care Fund v. Philip Morris, Inc., No. 97-741291-CZ (Mich. Cir. Ct. Feb.12,1999) ......................... 7,30 Palsgraf x Long Island Railway, 248 N.Y.339,162 N.E. 99 (1928) ...................................... 12,14 Perry v. ,Sentry Insurance Co., 938 S.W.2d 404 (Tenn. 1996) ............................................ 28 Price by and through Bolton v. St. Thomas Hospital, 945 S.W.2d 731 (Tenn. Ct. App. 1996) ................................. 26-27 Screen Actors Guild-Producers Health Plan v. Philip Morris, Inc., No. 181603 (Cal. Sup. Ct. June 22,1998) .................................. 14 Smith v. Gore, 728 S.W.2d 738(Tenn.1987) .........................................17,18 Snyder v. McEwen, 148 Tenn. 423,256 S.W.2d 434 (Tenn.1923) ............................... 29 Steele v. Ft Sanders Anesthesia Group, P.C., 897 S.W.2d 270 (Tenn. Ct. App. 1994) .................................... 28 Stracener v. Swindle, No. 01A01-9502-C1I-00047,1995 WL 414873 ('1'enn. Ct. App. July 14,1995) ....................................... passim United Textile Workers of America v. Lear Siegler Seating Corp., 825 S.W.2d 83 (Tenn. Ct. App. 1990) .................................. 10, 22 Wyatt v. N'innebago Ind, Inc., 566 S.W.2d 276 (Tenn. Ct. App. 1977) .................................... 26 vii
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SEP.22.1999 9:06AM N0.4433 P. 13/3J . 4 A.R('xUMENT ANll AUTHORITIES 1. THE TRIAL COURT'S FAILT3RE TO DISMISS THE COMPI.e#Ii`Tl' WAS PROPER BECAUSE THE IrUNDS' INJUItIES ARE DIRECT. A. STANDARD OF REVIEW A motion to dismiss filed under TENN. R. Civ. P. 12.002(6) tests only the legal sufficiency of a complaint, not the strength of a plaintiffs proof. Stein v., Davidson Hotel Co., 945 S.W.2d 714,716 (Tenn. 1997). Accordingly, a motion to dismiss for failure to state a claim admits the truth of factual allcgations but asserts that such facts do not constitute a cause of action. ld.; Pursell v. First Am. Nat'l Bank, 937 S.W.2d 838, 839 (fenn. 1996). In ruling on a motion to dismiss, the court must construs the complaint liberally in favor of the plaintiff, taking all factual allegations as true. Stein v, Davidson Hotel Co_, 945 S.W.2d at id. See also Cook by Ilsthoven v. Spinnaker's of Rivergate, 878 S_W.2d 934, 938 (Tenn. 1994). In summary, a complaint should be dismissed only when it appears beyond doubt that a plaintiff can prove no set of facts supporting its claim for relief. See Coulter v. fl'endrleks, 918 S.W.2d 424,426 (Tenn. App.,1995), appeal denied, 1996 Tenn. LE3iZS 158 Ci'enn. Feb. 26. 1996). The lower court's opinion establishes its adherence to R. 12.002(6) standards. The ruling on dismissal was distinguished from a possible later ruling: Ittis is not to say that the Funds' complaint will necessarily survive a motion for summary judgment particularly on the issue of damages. once that aspeet is more fully developed_ While the question is close, this Court believes that Counts V and VI of the complaint (the fraud and deceit and negligent misrepresentation claims] should not be dismissed at this stage of the proceedings due to remoteness. A j (R. 3 at 357). In determining the single issue before it, this Court should review the trial court's conclusions de novo, with no presumption of cotrectness. TeNN. R. APP. P. 13(d); Union !V tn ~ Carbide Corp_ v. Huddleston, 854 S.W.2d 87, 91 (Penn- 1993). Accordingly, the issue concerns C.o \10 ~10 01\ TcD783 fTN)&pplB. FI ax 9,1SS 7 r.r_loc
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SEP.22.1999 9:07AM N0.4433 P. 1h/3i . App. LL.EXIS 19576 '12 (2d Cir. Aug. 18, 1999). As the Second Circuit noted, "no topic is subject to more disagreement or such confusion." Id However, dcspite the confusion and disagrccment, proximate cause jurisprudence is consistent on two issues: first, a proximate cause analysis is always case-specific: and, second, proximate cause, dealing with liability limitation, is a matter of policy. Proximate cause is thus "always to be determined on the facts of each case upon mixed consideration of logic, common sonse, justice, policy and precedent." Id, quoting W. Page Keeton, et aL, PreOssU r11vD KM-rox ON TEY- Lnw oFToRTS § 42 at 279 (5th cd. 1984) (PRossFR AND K,Z:EroN). The Tennessee Supreme Court's definition of proximate cause is no diffeient: An injury that is the natural and probable consequence of an act of negligence is actionable, and such an act is the proximate cause of the injury. But an injury which could not have been fotr.seen or reasonably anticipated as the probable result of an act of neoligence is not actionable and such an act is either the remote cause, or no cause whatever, of the injury. See Doe v. Litxder Consrr. Co., 845 S.W.2d 173, 181 (x'enn. 1992), quoting Ward v, Universtry of rhe South, 209 Tenn. 4'12, 354 S.W2d 2r;6, 250 (1962). T'he supreme court articulates a three-factor test for proximate cause: 1. The tortfeasor's conduct must have been a"substantial factor" bringing about the harm being complained of; 2. no rule or policy relieves the wrongdoer from liability because of the manner in which the negligence resulted in harm; and 3. the harm giving rise to the action could have reasonably been foreseen or been anticipated by a person of ordinary intelligence and prudence. 1KcClenahan v. Cooley, 806 S.W2d 767, 774 (Tenn. 1991) (citations omitted). Further, according to the supreme court, proximate cause a ~ ~ is merely the limitation which courts place upon the actor's responsibility ~ for the consequences of the actor's conduct. . . . the consequences of an ~10 90 rmzsa m•a..,P~s~ ef d, s_lsv 9 cqc744G,qR=(„ N/1S'TqNOO 213NaelWO2S3 20=9L E6-lZ-d95
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Cook by and through Uithoven v. Spinnaker's of Rivergate, Inc., 878 S.W.2d 934 (Tenn.1994) ............................................. 26 In re Deskins' Estates, 214 Tenn. 608, 381 S.W.2d 921 (1964) . ....................................29 Doe x Linder Construction Co., 845 S.W.2d 173 (Tenn. 1992) ........................................ passim Ennix v. Clay, 703 S.W.2d 137 ('1'enn.1986) ............................................ 29 Harbison v. Briggs Brothers Paint Manufacturing Co., 209 Tenn. 534,354 S.W.2d 464 (1962) ..................................... 29 Harvey x Ford Motor Credit Co., No. 03A01-9807-CV-00235,1999 WL 486894 (Tenn. Ct. App. July 13,1999) ..................................... 11, 28, 30 Iowa ex reL Miller v. Philip Morris, Inc., 577 N.W.2d 401(lowa1998) ................................... 10,13,22,25 ICtlpatrick v. Bryant, 868 S.W. 2d 594('1'enn.1993) ........................................... 29 Lancaster v. Montesi, 216 Tenn. 50,390 S.W.2d 217 (1965) ..................................... 25 Maddux v. Cargill, Inc., 777 S.W.2d 687 (Tenn. Ct. App. 1989) ..................................... 29 Marine Midland Bank, N.A. v. General Motors Acceptance Corp., No. 03A01-9502-CV-00060,1995 WL 417047 (Tenn. Ct. App. July 17,1995) .... 26 McClenahan v. Cooley, 806 S.W.2d 767,774 (Tenn. 1991) ........................................29 New Mexico & West Tex Multi-Craft Health & Welfare Trust Fund v. Philip Morris, Inc., No. CV-97-09118 (N.M. Dist. Ct. Dec. 24,1998) .......................... 7,30 Nicely v. Doe, No. 03A01-9810-CV-00322,1999 WL 235795 (Tenn. Ct. App. April 16,1999) .......................................... 5
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SEP.22. ~999 9:08AN1 N0. 4433 P. 20i31 Among the dozens of cases that the Tobacco Companies cite to this Court, a third Supreme Court opinion is conspicuously absent. See Blue Shield of Va. v. McCready, 457 U'.S, 465 (1982). Like AGC, Blue Shield is an antitrust case. It too relies heavily on the common law of proximate cause, as evidenced by the followingi The traditional principle of proximate cause suggests the use of words such as "remote," "tenuous," "fortuitous," "incidental;" or "consequentzal" to describe those injuries that will find no remedy at law _... and the use of such terms only emphasizes that the principle of proximats cause is hardly a rigorous analytie tool ....("What is a cause in a•legal sense, still more what is a proximate cause, depend in each cause upon many considerations . . . ."). Id at475 n. 13 (citations omitted)_ The facts in Blue Shield are straightforward. Although McCready was a Blue Shield subscriber, the plan would not reimburse her for psychological services on the grounds that her therapist was not supervised by a psychiatrist. McCready filed an antitrust class action against Blue Shield and the psychiatric society. She alleged the defendants engaged in an unlawful conspiracy to exclude clinical psychologists from receiving compensation under the insurance plan in order to restrain competition in the psyehothetapy market Id. at 465. The Court held that although the conspiracy was directed at psychologists in the psychotherapy market, McCready's injury was "inextricably intertwined" with the injury Blue Shield sought to inflict on the psychologists and the psychotherapy marker_ Id. at 483-84. Therefore, the Court found proximate cause: "[t]he harm to McCready and her class was clearly foreseeable; indeed, it was a necessary step in effecting the ends of the alleged illegal conspiracy." Id. at 479. The Funds allege causation sufficiently to satisfy Holmes. AGC and Blue Shield, as well 4 a as the Tennessee authority cited above. In summary, the Funds' pleadings allege two separate ~ 0 causative chains, both proximately resulting from the Tobacco Companies' wrongful conduct. 0 w T~] fTN)AONOr Fl En 9_t19 mc.c. ans+.a vmr>>ic,ac.ni 14 Nll9'73Nl1(T 2i8,Aes'biOx3 E0l9i 6B-LZ-dg9 a
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SEP. 22. 1999 9:07AM NO. 4433 P. 1 l/31 . However it is viewed, therefore, remoteness is merely a concept of liability limitation, and thus simply part of a proximate cause inquiry. Indeed, the court below recognized that fact; "AccordGng to all authorities remoteness is a component of any analysis with regard to proximate cause." (R. 3 at 35b)_ c. Supreme Court Auth on Pr4Xfjlnate Cause Two Supreme Court cases upon which the Tobacco Compl<tties rely heavily are instructive on the issue of proximate cause. See Holmes v_ SecuririesInvesrorProtection Corp., 503 U.S. 258 (1992); and Associated General Contractors, Inc. v, California Stare Council of Carpenters. 459 U.S. 519 (1983) (AGC) Of note is the fact that the term "retnoteness doctrine" eever appears in either opinion. In fact, even the term "remote" is found very rarely. The two cases involve statutory torts (RICt) and antitrust). However, because the Supreme Coutt relies heavily in both on the common law of proximate cause, they are relevant here. The later case. Halmes, concerned a stock manipulation scheme. Briefly, the facts are the following: the Securities Investor Protection Corporation (SIP.C) had sued Holmes under RICO, seeking to recover damages as a result of his allegedly illegal stock manipulations. After a brokerage house had bought and resold the stocks, their value plummeted. As a result the brokerage house was placed into receivership and SIPC was forced to advance money to it. SIpC sued Holmes directly to recover monies it had paid to those brokeraoe customers who had not purchased stock of any of the companies Holmes had manipulated (not those who had). The Court did not allow a direct action by the brokerage hause's nonpurchasing clients who sued for stock manipulation, based on its conclusion that proximate cause was lacking. However, the Court did leave open a possible suit under another theory: itUury to those clients due to stock "parking." See Holrnes, 503 U.S. at 272 n.19. ToGtB) (TT)AppIB/ F7 ErS 9,15.9 t t C a --.(nn lI/YV~I6IL/(11J Y/I:OI
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Application for Permission To Seek Interlocutory Review of this decision on March 1, 1999. (App. A). The trial court granted defendants' application on May 6, 1999, see Rule 9 Order (R. 374), and the parties jointly submitted an application for interlocutory review to this Court ' pursuant to Tenn. R. App. P. 9(c) on May 17, 1999. This Court granted that application on June 15, 1999. (R. 373.) STATEMENT OF FACTS Plaintiffs allege they are multi-employer health and welfare trust funds (the "Funds") regulated by ERISA, 29 U.S.C. § 1001 et seq., and funded by employer contributions under the terms of collective-bargaining agreements. Complaint ¶¶ 12-16 (R. 12-14, 148). The Funds further allege they are obligated to pay medical expenses for unionized employees and retirees, and their dependents (collectively the"participants"). Complaint 114, 6, 12-16 (R. 6-7, 12-14, 148). Now the Funds seek to shift that obligation to defendants by suing to recover the cost of treating alleged "smoking-related" illnesses suffered by the participants. Defendants maintain the Complaint should be dismissed in its entirety because the Funds' claimed economic injuries are wholly derivative of, and contingent upon, the physical injuries suffered by their participants and therefore "too remote" as a matter of law. Motion to Dismiss (R. 84); Def. Br., at 4-15 (R. 101-112). The Funds' Complaint sets forth a litany of alleged wrongdoing by defendants that mirrors the allegations made in numerous, virtually identical lawsuits filed by union funds against the tobacco companies in courts across the country. The Funds allege, in short, that defendants concealed information about the risks and addictiveness of smoking and manipulated nicotine levels in cigarettes. E.g., Complaint ¶¶ 151-195, 236-237, 278-282, 295, 289-293 (R. 3
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i Southern Pac. Co. v. DarneU-Taenzer Lumber Co., 245 U.S. 531 (1918) .................................................... 24 Stationary Eng'rs Local 39 Health & Welfare Trust Fund v. Philip Morris, Inc., No. C-97-01519 DLJ, 1998 WL 476 265 (N.D. Cal. Apri130,1998) ........... 7,14 Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc-, 171 F.3d 912 (3d Cir. 1999) .......................................... passim Sterling v. Yelsicol Chem. Corp., 855 F.2d 1188 (6th Cir. 1988) ............................................26 Texas Carpenters Health Benefit Fund v. Philip Morris, Inc., 21 F. Supp. 2d 664 (E.D. Tez.1998) ................................... passim United Food & Commercial Workers Unions and Employers Health and Welfare Fund v Philfp Morris, Inc., No. CV-97-P-3351-W (N.D. Ala. Aug. 11, 1999) ............................... 6 Utah Laborers Health & Welfare Trust Fund v. Philip Morris, Inc, No. 2:96-CV-829B (D. Utah March 31,1999) ............................... 14 West Yerginia l.U.®.E: (formerly West Virginia Laborers) v. Philip Morris, Inc., No. 3:97-0708 (S.D. W. Va. June 29,1999) ............................... 7,14 West Virginia-Ohio YalleyArea LB.E.W. Welfare Fund v. American Tobacco Co., No. 2:97-0978 (S.D. W. Va. July 26,1998) ................................ 7,14 Williams & Drake Co. v. American Tobacco Co., No. 98-553 (W.D. Pa. Dec. 21,1998) ....................................... 6 STATE CASES Anthony v. Slaid, 52 Mass. 290 (1846) ................................................. 17-18 Austin x State, 101 Tenn. 563,48 S.W. 305 (1898) ......................................... 9 Black v. Love & Amos Coal Co., 30 Tenn.App. 377, 206 S.W.2d 432 (1947) ............................... 7,16
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SEP. 22. 1999 9• 09AV N0. 4433 P. 22131 evidence adduced in tobacco litigation over the years, the causal relationship between smoking and illness is established. However, assuming without conceding that some speculation may be required to assess the extent or amount of the Funds' damages, a distinction must be drawtt between the fact of damagaand the extent or amount of damages. Holmes detnands only that the fact of damages not be speculatf ve. A lesser standard is applied with respect to proving the amount of damages. See, e.g.. J. Truert Payne Co., Inc. v. Chrysler Motors Corp., 451 U.S. 557, 566 (1981) (antitrust); General Environmental Science Corp. v. Horsfall, 800 F. Supp. 1497, 1504 (N.D, Ohio 1992), af}'d in part without op. and.vacated in pan wlthaat op., 25 F.3d 1048 (6th Cix. 1994) (RICO) (citation omitted). The second Holmes factor addresses duplication of damages, A possffiility of multiple recoveries or duplication of damages is not present here. At issue is an economic loss to the Funds' assets due to monies expended on tobacco-related illness. The participants upon whom the monies were expended for tobacco-rclated medical benefits have not suffered the satne damage as have the Funds. By the very fact of being covered by a union health and welfare plan, those participants have expended no monies on their own_ Therefore, any injury a Fund participant may have suffered is personal. Iakewise, the third Holmes factor is met No other plaintiffs are better suited to sue; only the funds have incurred the specific damage at issue here. In summary, whether the conduct and complained of injury are sufficiently related-not whether they are itnmediately adjacent-is detemlinative in a proximate cause inquiry. See Holmes, 503 U.S. at 268. Therefore, as Blue Shield holds, toztious conduct ditected at one party may proximately harm another when the conduet and injury ace ' znextricably intertwlned," See Blue Shield, 457 U.S. 465, Teb240 (7N)wyylSr iS Cn 9.15.9 16 C C C ..nn~+...n.+ \.7VNO:,.,nYJ C(w.Ot C.C~~>...]VS
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- STATEMENT OF THE ISSUE PRESENTED FOR REVIEW The trial court erred by denying defendants' motion to dismiss and ruling that a jury, not the court, must decide whether the plaintiff union funds' alleged injuries--medical expenses they paid for injuries suffered by their participants--are too remote and indirect to permit recovery.' Acknowledging that its "unique" holding conflicts with recent federal appeals court decisions that applied the remoteness doctrine to dismiss or affinn dismissal of virtually identical lawsuits by union trust funds, the trial court granted defendants permission to seek interlocutory review of the following question: Whether the trial court should have dismissed all Plaintiffs' remaining claims (Count I, for alleged violations of Tennessee Consumer Protection Act; Count V, for alleged fraud and deceit; Count VI, for alleged negligent misrepresentation; and Count XI for alleged conspiracy) on the grounds that economic injuries incurred by a union health care trust fund are purely derivative of the physical injuries which its participants suffered, and are therefore too remote to permit recovery as a matter of law. Order Granting Permission to Appeal this Court's January 29, 1999 Order to the Tennessee Court of Appeals Pursuant to Rule 9 of the Tennessee Rules of Appellate Procedure (May 6, 1999) ("Rule 9 Order"), at 5 (R. 378). STATEMENT OF THE CASE Plaintiffs filed their Complaint on January 7, 1998 and their Amended Complaint (hereinafter the "Complaint") on July 31, 1998 in the Circuit Court of Tennessee for the Thirtieth Judicial District at Memphis, Shelby County, alleging eleven counts of wrongful conduct by defendants under the common law, the Tennessee Consumer Protection Act, and the Tennessee I 00 N See Order Granting Permission to Appeal this Court's Jannary 29, 1999 Order to the Tennessee Court of ~ Appeals Pursuant to Rule 9 ofthe Tennessee Rules of Appellate Procedure (May 6, 1999), at 2(R. 375); Order 1~q Granting in Part and Denying in Part Defendants' Motion to Dismiss (Jan. 29, 1999), at 4-7 (R. 354-357). CD fV ~
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49-58, 67-68, 75-76, 77). As a result, the Funds claim, more participants smoked (or smoked more heavily) and suffered more "smoking-related" illnesses, which led, in turn, to increased medical care expenditures by the Funds. E.g., Complaint ¶¶ 1-5, 241, 284, 294 (R. 6-7, 69, 76, 77). Faced with these same allegations of misconduct and the same attenuated theory of injury, the United States Courts of Appeals for the Second, Third, and Ninth Circuits recently dismissed or affirmed dismissal of union fund lawsuits on the ground that the funds' claimed injuries were "purely derivative" of the injuries to participants and therefore "too remote as a matter of law." Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., No. 98-7944, 1999 U.S. App. LEXIS 19576, at *44-45 (2d Cir. Apri19, 1999) (as amended Aug. 18, 1999) (App. B) (dismissal ordered on interlocutory appeal), reh g denied (Aug 6, 1999) (App. C); Oregon Laborers-Employers Health & Welfare Trust Fund v. Philip Morris, Inc., -- F.3d --, No. 98-36024, 1999 WL 493306, at *4 (9th Cir. July 14, 1999) (affirming dismissal because injuries "`too remote' from defendants' alleged wrongdoing") (App. D), time for reh g passed; Steamfitters Local Union No. 420 bPelfare Fund v. Philip Morris, Inc., 171 F.3d 912,921 n.4 (3d Cir. 1999) (affirming dismissal because funds' injuries "too remote from any wrongdoing by the defendants"), reh g denied. Defendants moved to dismiss the entire Complaint pursuant to Tenn. R. Civ. P. 12.02(6) for precisely these reasons, but the trial court denied defendants' motion, holding that it is for the jury--not the court-to decide whether the remoteness doctrine bars the Funds' claims. Opinion and Order, at 6-7, (R. 356-357); Rule 9 Order, at 2(R. 375). The trial court further held that, in any event, the remoteness doctrine does not bar the Funds' claim under the Tennessee Consumer 4
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SEF, 22. 1999 9:09AM NO, 4433 A. 24/31 Morris, Inc_, No- 2:96-CV-829-B (D. Utah March 31, 1999) (App. BB); Iron Workers Local Union No. 17v. Philip Morras, Inc., 23 F_ Supp.2d 771 (N_D. Ohio 1998) (denying motion to dismiss), and 29 F. Supp. 801 (N.D. Ohio 1999) (partially granting summary judgment); Narionai Asbeslos Workers Med. Fund v. Philip Morris, Inc., 23 F. Snpp.2d 321 ($.D.N.Y_ 1998).° Furthermore, a review of the fund cases upon which the Tobacco Companies rely establishes that not one was decided by a Tennessee state or federal court. As an intc,rnxed"tate court, this Court is bound only by rulings of the Tennessee Supreme Court: (IJnferior courts must abide the orders, decrees, and precedents of higher courts, and may not entertain any action challenging the validity of any rule of the Supreme Court in the nature of aBilI of Review or to impeach a judgalent of that court. See Barger v Brock, 535 S_W.2d 337, 340 (Tenn. 1976). See also Tennessee v. Irick, 906 S.W.2d 440, 443 (Tenn. 1995) (citations omitted); Birtg v. Baptist Memorial Ilosp_ ilnfon Cizy, 937 S.W.2d 922, 925 (Tenn. App. 1996). This Court may find the majoz4ty's conclusions persuasive, or it may not. Flowever, thc Cotut is not bound to follow the majority. Instead, it may rbview minority holdings, as did the lower court, and determine at this junctutee that the latter are more compelfing. The Funds urge the Court to do so, and to permit this action to proceed beyond the Rule 12 stage. 4. Puhlic Policy Points to Retention of the Action . The Tobacco Companies argue vigorously that "public policy" goals demand tiisrnissal of this action. If not, they claitn, the "proverbial floodgates of litigation" will be opened in Tennessee. See Brief of Dcfendants/Appellants at 10, 18-19, 22. defendant for tooeaning the shoe of a horse olvued by a third party because the btacksmith'e trede aad,rcputadon were injured)_ ° In addition, of coursc, twenty of twcnty-onc state attorncys gcneral recoupment actions against the tobacco indusay proceeded beyond the Rule 12 stage. TW~ (SN)npp(Br Raro P.~ 59 I$
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SEP.22.1999 9:09AM N0.4433 P. 23/31 Likewise, common law jur7sprudence stands for the proposition that the conduct and injury at issue need not be "immediately adjacent " Consequently, a chain of causation running through third parties may allege proximate cause, See, e.g., Bohannon v. Wacfiovia Bank & Trusr Co., 210 N_C. 679, 188 S.E. 390 (1936) (if a testator is deceived into disinheriting an heir, the heir has claim for relief); accord RFSTATII.fi2rc (SECOND) OF TOR15, §774(B) (1979) (fraud on testator depriving a person of an inheritance gives rise to the disappointed heir s claim for relief); Mitchell v. Langley, 143 Qa. 827. 85 S.E. 1050 (1915) (if the holder of a life insurance policy is fraudulently induced to change the benefjciary, the disappointed beneficiary may sue the petpettator of the fraud) 6 3. Other Case Iaw. ' As the Tobacco Companies note. a majority of courts have dismissed fnnd actions based on lack of proximate cause (or "remoteness"). Because Ihe Tobacco Companies cite their supporting authority to the Court, the Funds need not repeat it here. It is important for the Court to be aware, however, that a minority of courts, having considered the same issues in other union (or Bluo Cross) fund recoupment cases, declined to dismiss actions at the Rule 12 stage. See Arkansas Blue Cross and Blue Shield v. Philip Morris, Inc., 47 F. Supp.2d 936 (N.D. 111. 1999), motion for cenificarion gronted, 1999 i3_S. Dist. LFMS 12096 (N.D.111. Aug. 2, 1999); Blue Cross and Blue Shield of N.J., Inc. v. Philip Morri:r. Inc., 36 F. Supp.2d 560 (E.D.N.Y. 1999); Kehruc/ry Laborers Dfst. Council Health and Welfare Fund v. HiI! & Knowlton, Inc., 24 F: Supp.2d 755 (W.D. Ky. 1999); Utah Laborers Health and Welfare Trust Fund v. Philip ° Nineteenth contury eommon law also permits recovery although the tnisconduet was diYCeted at a third party_ See Gregory v. Broofce. 35 Conn. 437 (1268). In the easem one wharf owner was held liable to another for econoonic damages msuldng from fraud pcrpevaazed upon a client of the wharf owner, 'Ibe defendant wharf owner had fnlsely represented to a barge owaer asat ho was the harbor master. ordhing bim to move his bsrge &om the wharf where it was docked. The barga ownePs compliance resulted in the p}aintiff wharf ownm's lose business. Although the fraud was perpctrated upon a third parry, the court found action by the plaintiff wharf oweer'etearly maintalna6lc.' dd. at 445. See alro Hughes v. Mc0onough, 43 NJ.C,. 459 (1881) (holding a htacl5mi,rh entitled to assert claims against a TcD283 ('+'N)wppBr Fl Gs 9.13.9 17 a < a ^If/['Y11/1..1n~/., 1.r.o~.Ow,~(, v'~V`Jn:[.[~ys S(A.C• FF-\7-~1FS
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11EP.22.1999 9:08AM NO. 4433 P. 201 First, it is obvious the Funds can only act by and through their trustees, The Tobacco Companies' misconduct prevented those trustees, and thus the Funds, from taking action to reduce or eliminate additional costs arising from tobacco-related medicai expenses. Had the Tobacco Companies not willfully and intentionally misrepresented and concealed tobacco- related information, and instead had disclosed the truth concerning the harmful effects of smoking and the addictive qualities of nieotine, the Funds' trustees would have taken action. As alleged in the Funds' complaint, some of the actions the tzustees might have taken to protect Fund assets from being dissipated by needless tobacco-related medical expenditures were the following: excluding smoking-related disease from coverage or imposino c~ps on smoking- re9ated disease: imposing cost-sharing requirements such as deductibles or co-payments on smokers; requiring smokers to participate in cessation programs; and/or or teqtutittg those at risac to participate in smoking prevention programs. Complaint 15, Prayer I I(xt. I at 7, 82). Likewise, had the Tobacco Companies not suppressed the manufacture and sale of less hatmful ("safer; j cigarettes, the Funds' trastees could have encouraged or required smokers to use them. The same intendonal and willful misconduct proxirnately resulted in losses to the Funds' assets, although the Tobacco Companies' acts were directed at the public, includi,ng Fund participants. Fund participants used tobacco more as a result of the same wrongful conduct in which the Tobacco Companies engaged for years. The Funds were forced to incur needless expenditures on tobacco-related illness, thus diminishing their assets. A review of the 1'iolmes/AGC factors outlined above establishes that they support causation in this case. The first factor deals with the speculative character of darraages suffered. Tn other words, the less direct an injury, the more difftcult it becomes to ascertain damages. The fact that the funds have suffered damages is not speculative in this case_ Given the wealth of 'rm98S RP:)ApyBrEl &, 915.9 9 15 a a 4 ~~.~y..~...~..,. ,,.nalaunrt ffA'uNg%WON3 b@'9t 68-1L-d3S
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ProtectiorrAct ("TCPA" or "Act") because the Act does not require any showing of proximate causation. Opinion and Order, at 5-6 (R. 355-356). In granting defendants permission to appeal pursuant to Tenn. R. App. P. 9(a), the trial court acknowledged that "many courts that have considered similar cases have dismissed substantially identical third party payor suits in their entirety as a matter of law on remoteness grounds," and that its "treatment of the remoteness doctrine as to all issues is uniquely different from that of other trial courts from around the country." Rule 9 Order, at 2, 4 (R. 375, 377). STANDARD OF REVIEW The trial court's decision to deny defendants' motion to dismiss the Complaint on remoteness grounds presents a pure question of law, which this Court reviews de novo with "no presumption of correctness" attached to the decision below. Nicely v. Doe, No. 03A01-9810- CV-00322, 1999 WL 235795, at *2 (Tenn. Ct. App. April 16, 1999) (App. E) (citing Stein v. Davidson Hotel Co., 945 S.W.2d 714,716 (Tenn. 1997)). 5
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Uniform Trade Practices Act. Complaint 1123 5-325 (R. 67-81)? Plaintiffs seek past and future compensatory damages, punitive damages, and injunctive and declaratory relie£ Id, Prayer for Relief (R. 82-83). Pursuant to Rule 12.02(6) of the Tennessee Rules of Civil Procedure, defendants moved to dismiss the Complaint on August 17, 1998 for failure to state a claim upon which relief can be granted. Defendants' Motion To Dismiss for Failure To State a Claim ("Motion to Dismiss") (R. 84). Defendants argued, inter alia, that the well-settled remoteness doctrine, which bars claims for indirect, derivative injuries, mandated dismissal of the entire Complaint as a matter of law. Defendants' Brief in Support of Defendants' Motion To Dismiss for Failure To State a Claim (Aug. 17, 1998) ("Def. Br."), at 4>15 (R. 101-112). Plaintiffs submitted their Opposition to Defendants' Motion To Dismiss for Failure To State a Claim on September 3, 1998 (R. 158), and defendants filed their Reply on December 11, 1998. (R. 193) Following oral argument on December 17, 1998, the Circuit Court (Hon. James F. Russell) issued its Opinion and Order Granting in Part and Denying in Part,Defendants' Motion To Dismiss ("Opinion and Order") on January 29, 1999. (R. 350,) In particular, the trial court declined to apply the remoteness doctrine to dismiss the Complaint. See Opinion and'Order, at 4-7 (R. 354-357).3 Pursuant to Tenn. R. App. P. 9(a), defendants submitted their timely 2 3 The Amended Complaint (R 146) incorporates paragraphs I through 15 of the original Complaint by reference, inserts a new paragraph 16, and incorporates by reference the remaining paragraphs renumbered successively beginning with paragraph 17. As a result, citation of paragraphs 17 through 325 of the Amended Complaint will by necessity refer to those pages of the record containing the corresponding paragraphs of the original Complaint. The court granted the motion to dismiss with respect to plaintiffs' claim under the Tennessee Uniform Trade Practices Act (Count Two) based on the absence of any antitrust injury. See Opinion and Order, at 13-15 (R. 363-365). At oral argument, the Funds announced they would take voluntary nonsuits of six counts of the Complaint See Order for Voluntary Nonsuit (March 16, 1999) (R. 371). The sole remaining counts allege violations of the Tennessee Consumer Protection Act (Count One), fraud and deceit (Count Five), negligent misrepresentation (Count Six), and conspiracy (Count Eleven). 2
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Sap-28-98 11;30am From-NONTON WILLIAMS Se'p-28-Y9 I?:$Spm Fram-4QNE0 1424 T-64r F.10/6Z F-666 _ 614-461-416 t'74G r war r,.r ~ ' ~~f ~TI(3~i ~F 9ERVICE B~ AdAib. f, The inadeasigned, declare: i. That decIarant is and was, at all tirnes 1weisa zuentioned, a ci.tizaa oftlte LTniied SBates and aresident ofthe Uattnty ofSan Aiego, overzhc age of 18 yeats, anw not a Iaarw io or interest in the wi4iin acdon; that declasalnt's business address is 600 West Rroadvray, Suite 1800, San I]ie,go, &:alif=ia 92101. 2- That on September 27, 1999, 'decl4rant se:ved rhhe .EPI'pLI AN7.'S` MOTION TO klOC.P BRIF'.FING SGiF-AUfF- IN A.1'3pYANC>: PBN].]IATCw gtdSS113.Lp SETTLEIvi1rN'f by depasiiing a Rrue copy thereof ina United Staies mailbox ap: San Diego, Califoa'nia in a sealed envelope witbh postage thereon fnAy prepaid and ad~tpssed ia >aae parTies listeal on the attached Service I,ist. 3_ 't7zat rktere is s regular con=unicatiun by mailbeFween [}w place of utaiiing and the places so addressed. I declare under penalty caf perjury ihat ihe fcsregoiaa$ is aue and carrect. lixecuted eltis 27fhh day raf Septesnher, , 1999, as San DiegqC4lifcarnia.
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~ 09wn I 9-99 82:48pm Frum°HIINTON iANS +1425 T-399 P.07/22 F-81B JGVI nt. L'Dp7{f $~ • $~'f.'i•A{OR 4d Tbe pl>iadff ba9 aDcPii thar the da&pdaqls violaVi tha Sbernmn Atd. 13 U.S.C. ~1.bYcclaapi[[ii~ra®i~aaompedrbntGrtheirprodlN=q iaU>aAraraiplace, whiahbad ft eff= of liptitia$ "4to di9samiauion of pmducr (afotnwuap msaudiug ft yualiQl, eatesy amicwmqrasirmo'fsigam andtol>=opsadvwd thesepyeAminaft ftrnntiva ptodueu taom ehe uw~xtr reaq'kdng cvnsurner c.fmlca, aod cauaw m®uenmees tn safyer ssaai€Ulg-selernd Illaeeses aae 6eaRh eaM auW." Cermpdmnr at p. 8o. q2S9. Coorss Y- Fiauaf aaxt Alisseprra.akiaeet (iabelad cu pbtiatrs aaaaptaiqr u Coppt iV) 'i$c glsinriit aUepes q1At IItk defCadaam b®d a dnry to d'16Etome 0 ft gRUIk,,, the plaiwiff a.ua! 9rt p7ru Pad*anta. aA ft mmrterid fec= elamu eho hsaarda of smokssg. bdWiag staaddmva cguaAtms of mpmm Plaindf =tai>ms dw defaqdaure kadw that duty by &mesluvouly misiapreACBSiWg ft Pewe d1wss ®Ythe Paaduois tte tob=o e=ganies wor® eelli% m rks pybl3s. Theptauaiffargpaa tda6 by ral9inp t68 iesue of smkang, sud by uratiA$ "it=ple9e' MWMM aa dIr spbjcctr t1>ey'avsrc abligatai ro reoaeaA asi ati»tial facta ILDM ft dangas of cigeredlrs. Tka pleindit a%ts=a di6t "da15 8 di[es-[ ;pd pPnxkm resmtc of 19efeadaatr . mwieelaaussn a~9 aative Ganr.eabptai. Phlndffs bavo. uffw'eab awd w9l1 mmm to ®uffrr enbseau" daJut6es and dalaagp ftaYbmh PwatitFa aae sPitdoA w =wesY, amd fat wbiob, Defenaanea ara ,jotnqy and savaaYly lieblo." CorapaUu ar g-99r 996. 6
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SEP. 22. 1999 9, 09AM N0. 4433 P. 25/31 This Court's role in declaring "public policy" is restricted_ See Smith v. Gore, 728 S.W.2d 738, 745-47 (Tenn_ 1987). Although the tetm is "vague and variable," Tennessee public policy is found in its "constitution, statutes, judicial decisions and applicable rules of common law." See id. at 747. Under its limited role, the judiciary may not establish "what its members believe to be the best policy for the state ...." Id at 746. The Court need not do so here, since actions taken by the State of Tennessee indicate public policy eoncerning the tobacco industry. It is undisputed that many states' attorneys general filed suit against the tobacco industry in recoupment actions similar to this. A national settlement of those suits was announced and finalized in the summer of 1998. Some months later the Tennessee Attorney General, John Knox Walkup, sued a number of tobacco defendants on behalf of the State. The State of. e i Tennessee is also part of the natJonal tobacco settlement. By filing suit and being part of the settlement Tennessee has already declared its public policy with respect to the Tobacco Companies' wrongful conduct. The identical conduct engaged in by the Tobacco Companies led to the filing of the present lawsuit. Therefore, the Court should disregard the Tobacco Companies' hyperbolic "floodgates" argument and allow the present action to be retained on the trial docket. II. THIS COURT SHOULD CONSIDER ONLY THE LOWER COURT'S TUDGMENC, NOT ITS REASONING. In partially denying the Tobacco Companies' motion to dismiss, the court below reached 0 4 a number of conclusions. The Tobacco Companies' brief devotes a good deal of effort to arguing that those conclusions were etroneous. The first lower court holding deals with remoteness. Citing the court's order at 6-7, the Tobacco Companies stated the followingt "The court below nevertheless held that it is the _cxa iv ..,:> ~ province of the jury-not the court-to determine whether the remoteness doctrine bars the ~ Funds' claims." See Brief of DefendandAppeIlants at 12. SaE283CfPt)ADDIHtPiet9J5.9 19 C;) CKJ
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EP.22.1999 9:10AM 0 N0.4433 P. 28/31 To put the lower court's holding in context, its rationale should be tracked. The court reasoned as follows: According to all authorities, remoteness is a component of any analysis with regard to proximate cause_ In Tennessee, the cases are legion in holding that proximate cause is always to be determined upon the facts of each case. Thus, proximate cause is ordinarily a question for the jury to decide unless the uncontroverted facts and inferences to be dtawn from them make it so clear that all reasonable persons must agree on the proper outcome. Such issues may be preempted by the trial judge only where evidence and reasonable inferences therefrom are so free of conflict that all reasonable minds would agree with the decision of the trial judge. At thic stage of the proceedings this Court is of the consldered opinion that, given the pLeadings a.nd factual assertions therein, it is more appropriate for a jury to dete»nlne the fssue of remoteness with proper inshusttons given due consideroteon to the issue of remoteness. (R. 3 at 357) (footnote citations omitted) (emphasis added). Therefore, contrary to the Tobacco Companies' assercion, the court held correctly that remoteness is part of a proximate cause inquiry. Further, the Tobacco Companies neglect to acknowledge that the court limited its refusal to dismiss solely to the Rule 12 stage, i.e., "this stage of the proceedings." (R. 3 at 357). The Tobacco Companies take issue as well with ihe lower court's conclusion concerning the relationship between proximate cause and the Tennessee Consumer Protection Act. In summary, the court concluded that the wording of the relevant statutory provision ("ja]ny person who suffers an ascertainable loss of money or property ._..") suggests that proximate cause is not a necessary element of a claim under the Act. See TCPA § 47-18-109(a)(1). (R. 3 at 355-56). The Funds express no opinion as to the trial court's reasoning. Suffice it to say that the rationale underlying the court's conclusion is irrelevant to rhis Court's review of the propriety of ' judgment rendered. TeD29J (SN)ApplHrFl Jn 9_1S.9 Z~
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Seu°20-88 11:28am Fram-HUNTON~jILiAMS 1424 _ T-84T P.08/82 F-585 5®p-28-6s 1Y:4TaA Frcm-JahE9~ -6t4-461-41s 1-14z ,r•Lr4% r-rca ®'AT a ERLP-YN I, SI-IF-Ri I'YK declare and state as fallows: 1. T eza a:zaetrtber afthe Bar of the STate of CaliforWa, and ft Bar of shis Court, and au:= associated with the law firt7a of MjlbM Weiss Bershad Hynes & Lerach U-P, one of ft law 1-arrms rrpresenting plaiutiffs-appolIanrs aad a'oss- appellees ("plaisttaffs"l in this appeal and crQss-appeal. I am.lcnowledgcable as to the maiters staied ~zereita and, if called upon, I could atad would competsntly testify tlsereio. 2, Plaintiffs' first brief is currendy deae an Septembar 27, 1999. 3. For the past few weeks, cout>sel for the paties to this appeall and cross- appeal have been negoriating a resolutiots [o the appeal and crnss-appeal. aased on my discussions and caarresp®ndenae withcssusasel for defendants-appellees and sross- appellmts ("def~iadarits°), I believe that unri3 late last wer.c aU paxties believed tAe stipulation ta distmiss the appeal and cscm-appeal would be filed with this Couzt by t®daY. 4. The resoltation of tbis appeal and cross-appeal is depettdent in. part on resolutiraa af a similar actian peudiTag an the United States District Court for ft Westem I3istri{at. of XentuclGy, Kentucky I-abarers Aiatract Council FIeaJah und Wedfstre Z'rust Ftcnd v Will & Knwbvltan, Inc.. er al., Civil Actioxn No. 3:97G: V-394-H. I learned today that tbcre has been an unanticipated delay in resolving that acdnn. °Plaus zlte pat~ies are uuable ro file the stipulation TO dismiss this appeal and cross- appeal by today as tlaey plan>:aed. 5. Based an my discussions with coetnsel for both sides in Keruucd.y Lcabareps, it is my undcrstandimg that aase will be resolved withinn the next few days, t4us cl.earing the way t® ftle The saiputatio a to di.smiss this appeal and cross-appcal. 00 PO -~- cn ~ CO ~10 a rv
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remedy is a suit in subrogation, where they would step into the participants' shoes and be required to plead and prove that defendants are legally liable to the participants--subject to the usual defenses, including assumption of the risk, lack of reliance, and awareness.s But the Funds have eschewed that remedy. The Funds attempt to circumvent the remoteness doctrine and the requirements of subrogation by recharacterizing their injuries as "direct" and not derivative of the injuries suffered by the participants. Eg., Plaintiffs' Brief in Opposition to Defendants' Motion To Dismiss for Failure to State a Claim (Sept. 3, 1998) ("PI. Opp'n"), at 3-4, 9 (R. 165-166, 171). They argue that defendants misled them about the risks of smoking and lulled the Funds into not implementing smoking cessation programs or limiting coverage for participants suffering from smoking-related diseases. P1. Opp'n, at 9 (R. 171). Even if one assumes that defendants intended to injure the Funds, however, the Funds' claimed losses remain the same--the payment of medical expenses for their participants' injuries. As one federal district court put it, "[n]o amount of semantic gymnastics can detract from the conclusion that [the Plans'] claims are completely derivative of the personal injuries to Plan members allegedly caused by the defendants' conduct." Regence Blue Shield, 40 F. Supp. 2d at 1184; accord Seafarers, 27 F. Supp. 2d at 630 ("the longstanding rule [barring claims for remote, derivative injuries by medical expense payors] bars the Plaintiffs' claims in this case, notwithstanding Plaintiffs' artful a For example, in a subrogation action the Funds would have to contend with the fact that, for at least a century, the public has been aware of the health risks of smoking: See Austin v. State, 101 Tenn. 563,566 48 S. W. 305, 306 (1898) (observing that the health risks of smoking were "so well and so generally Imown ...) that the courts are authorized to take judicial cognizance of the fact"). 9
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+1425 . T-388 P.88/22 f-818 09-2@-6D 02:47am Prom-HUNTOj~LLIAMS ^ dNl3 M. _ Cmant VI - ixr®xmmnal RYaaO ol*eda1 DW pabeied by p9aiatiff as C.cxwt V) Jna tepaxiameatwx, ipcpWMtiffFaW= timtallclatemiaats, beeausea4cYawiapnblic pta9iYion3 taM by Thdiw. b®v® "ascomed sSFWa1 dtuy to ptuext tix pet+lle heildt and a duty to iqOte wbp advxat* ft peblie bea&Es, 9achu9ing s4e Hea]qe apQ p(elFatg Tqa k4md." Comnp6aira at p. 100. 1299, PdainW elsepis ft it ead dwse simSlarip BnttatO neW in tmliam ou aoea iatete6nast mleteptsaoatians 8nd fiilad to sat as saan aA it cxi6fbt have to tsko at=enrm wbich would Wa tedacad salattandalfy its pay atus on stuakiAg relaai tJaimB. Caum VA • NtIi;geau Arsar&t+tMO" AN& A.Ielsd 6y PiabtqsY ae Cuuqt VA _ dit s relaped dt&diy. SA 8T110 64luat the plSlGUff 9Aegae i$a4 a{( ddMdaAls "Wmw OF Should haac 1iqmwA° da9tpFfl bad G lfili WmEd dCt,y wd a* f877EI~ t0 &ROrFise ly'ABart&ble C9te Bmd p9 deickYtF ibi9 41ty. CewttVPBP. ojA*nesraO$m+pYsedWarrw+tpler{"adbyplpmiffasCmtVI) 'dAe ptaimtiff alleges dtac Me u:pi= entapauy d"suur =le szpreae watruqika r® d3e publis ' spC safoty pi tlleir pRIdBe64;Ald Mfle fiutfia pmmitos m pnnvi4e abc public with ei=are ' aa to ft saTsty of t3etr [abaeco prafta, ft the pgeiREifCa and &ir plsmm Mled ®n ifiwe prcmaises, srtd tdai theae waCmift were hucbed by t6e Utaaaa campan9ss w}a:n tbey in A.ct providod wasaTe praducts am! oqialedftg hes1ih ipfoaTita,tiap. ThepleaatitP4su~era7le~sa qiattka "[dJefrnda~' ptmduetsareu>u~UCbpa+nbkaad - 7
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recharacterization of them"); Laborers Local 17, 1999 U.S. App. LEXIS 19576, at *29; Oregon Laborers-Employers, --- F.3d --, 1999 WL 493306, at *4. Courts have cautioned that enabling third-party payors to maintain lawsuits on the basis of such indirect injuries would foster a torrent of aggregated tort claims by union funds, employers, or insurers against an array of alleged tortfeasors for any economic losses emanating from injuries to their participants, employees, or policy holders. For example, in applying the remoteness doctrine to bar claims like those asserted here, the Iowa Supreme Court warned that "failure to apply the remoteness doctrine would permit unlimited suits to be filed" by third-party payors and health-care providers. Iowa ex rel. Miller v. Philip Morris, Inc., 577 N.W.2d 401, 407 (Iowa 1998). Likewise, the Second Circuit observed that failing to apply the remoteness doctrine in these cases "could lead to a potential explosion in the scope of tort liability," Laborers Loca117, 1999 U.S. App. LEXIS 19576, at *32, and the Ninth Circuit agreed that "allow[ing] plaintiffs to maintain actions that are entirely dependent upon the harm suffered by others threatens chaos for the judicial system...," Oregon Laborers-Employers, --- F.3d ---, 1999 WL 493306, at *10 (quoting decision below, 17 F. Supp. 2d 1170, 1183 (D. Or. 1998)). See also United Textile Workers ofAm. v. Lear Siegler Seating Corp., 825 S. W.2d 83, 85 (Tenn. Ct. App. 1990) (recognizing the bar against claims that are "indirect or are too remote" prevents "a mass of litigation which might very well overwhelm the courts") (internal quotation marks and citation omitted), applica#on for permission to appeal denied (Feb. 3, 1992). If Tennessee announces a contrary or "unique" rule permitting suits for remote, derivative injuries by private third-party payors of health care costs, it will quickly become a haven for such claims. 10
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09-29-99 02:d8pm From-HUNTON 0 AlAS gf191 133 ° +1425 • T-399 P.12/22 F-978 a dianpoc.w recavar. (CitmdpR OR111IcdJ. AUpaygbd6teemeas of selatiuaship is noc sde role requira=Rf Cf ayron A er cau9att3a. (fOoea,a¢ amiuwp R Gaa Aeen usx uf ira c.mual etaneuts.Assne(atad [eerrerat coWucrcra. 459 [J-3. ar $40. ... for a varizry of rersou9. Ffnpses. §031J.S. a68-69. InlttCb aAdanriasuca,dmbrouprhy 4ealql aad weifsreSsuaduads whicb. !]lcn sda pBaandff 6rt thc ia8m41 c89e. pravide bealdt me boncfit9 m ft[f pm*iqaars, a thrce paiuac rear Las arpelgr+d uo ;avga "ree»miemm ' To dCre[admme whet{!>Ar 81l i1*y IS "MO m,ilpr4" Qo B11WW rCCnvary udderAlCO aqd ft aotitnwt laevc, ae Coart ®gpliea de fallo+>rs6g tdfes-fdctor "[muxe40u" re&c (1) arbedier Were ara mnrc drKCC vle~ uf ibo 9ACged wranryful aarxfucc who can be c®mntsd an to vhqdica'e a6®1aw ae privsx aerorueYa SMXM: (M Wbcqler iC RriU Fx Ai48nult ao ascertaia ft aaswame oY die plnintitfs s1;mA$sa atuilmok tp defendslu's eurcm&fW coGdaele ad A) v+4edter the oaartt en7l !>«YO po atdqpc compAraced auTes Appm=uft dwmaBes au abvlax dic a9atc of muitlpie aecovaae9. See [8:fo7evus] sd269-70,132 $.Cr,1311 tRFf:'M;.4GC, i99 U.S. sr 945, lm3 9.4k. 89a (acti6cn4. Om,pe 1,®rrorars-Fatptayees .FfaoFe* d 3Yeffsre 3kusr Fwld v. 31d+ilEli 8lanis. 1999 Wt. 499906 (9" Cir. IuO,y 14, 19". dre applyln8 this_asar, the C.`o= of Appeals In Oregen L.ct6ar[or-FMptoqers. which invaivmi av®ry ans of do wlw= soffipanieo iav4ved in ft cau before this G7nut, demodoed dug: (1) =okers wko esrers parUClpem eo ft fn11d8 lu. Qmm4m were "mare 8lresr vnetima af d1e 9lle$ed wrqa6fal cASduc9' apd mu1d be s.ountecP on "po vuedka[e dle lqjpry caused by deffcmbnrs' ailegW wrasgfia coAdaor:" 11
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0 The Funds claim defendants misled them about the health risks of smoking and, as a result, that the Funds "incurred increased health care costs from smoking-related illnesses because they did not implement programs to encourage beneficiaries to use safer cigarettes, to educate fund participants and beneficiaries as to nicotine addiction, to institute smoking cessation efforts or take other steps to reduce the harms associated with tobacco." Pl. Opp'n, at 4 (R. 166). Yet in affirming dismissal of another union fund lawsuit involving the same allegations, the U.S. Court of Appeals for the Ninth Circuit explained that "all of plaintiffs' claims rely on alleged injury to smokers-without any injury to smokers, plaintiffs would not have incurred the additional expenses in paying for the medical expenses of those smokers." Oregon Laborers-Employers, --- F.3d --, 1999 WL 493306, at *4. Likewise, here, the Funds' losses are wholly contingent upon injuries to their participants and are "too remote" as a matter of law to sustain a claim on which relief can be granted. Tenn. R. Civ. P. 12.02(6). See, e.g., Laborers Local 17, 1999 U.S. App. LEXIS 19576, at *45; Steamfitters, 171 F.3d at 921. The court below nevertheless held that it is the province of the jury--not the court--to determine whether the remoteness doctrine bars the Funds' claims. Opinion and Order, at 6-7 (R. 356-357). In reaching this conclusion, the court cited no Tennessee authority but rather the famous case of Palsgraf v. Long Island Ry., 248 N.Y. 339, 162 N.E. 99 (1928).9 But Palsgraf did not involve a loss that was entirely derivative of a physical injury suffered by a third party. Rather, the question in Palsgrafwas whether a single injury, which occurred after a chain of 9 The court also cited the decision of a federal district judge in Ohio, who relied on Palsgrafin denying a motion to dismiss another union fund case. See Opinion and Order, at 5(R. 355) (relying on Iron Workers Local Union No. 77 v. Philip Morris, Inc, 23 F. Supp. 2d 771, 779-780 (N.D. Ohio 1998)). 12
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_+id26 ® T-39A P.16/22 F-616 ~- - ^ - p4»28-A9 02:d9pm From-HOHTON* IAW aCiVt A~' ' (Ale uaokera). 17tv slsiA6 noat M as a emaFC of law. ACCw4n1y, t16! C.aQrtnod IWt 9ddY@89 tlic dlfCAdam' SlICJnpie d0{tmC ibat olrop If mi0 ewere stsatb6 to du Ftwd oattl tho Fund ieHW no auch usiarepmstAmCpne. aayauchsdaameonwbsttheWbxeeocpmpauaiesztid Wottldbvelwnt aaraasata4te as a matpx of law. C, -5~ecyaf d3ury" L'auDts Vd& YdS aticpe bMU iqteatlanal end ~egligeus fadstte [0 disCh~i~C s"speciaJ cuay" it wd Bn q!e pD.intiff. Aa to tftG fR[wsr claiw, th4f Ccua ,a ILw= qi' aQ tbeorY r.u3gatzwd ua9« Arhnw law fas aalsim of `inuadoaal bt eadt^ of a`apesSat dwy. .'_ Aa ft a1Sdm lc04+WA eamplRi®tsBUSCAqlacmptttosax:badctUnt ddaisnathm aaotesmaaa seataw;mcnf qaa Fraud aadm3nepzvacaudan alaim. discowud ab®YC- it rab faT tnci08gdaAe. A8 tat "uP$!}g= bteuh' of a spesaA! dutg, the Faad ergues dult by aqaplqg ad ilkc du aa rsAad "Frank stateraeut " thadeta&da~rs touk aa a+tpaeial dasty or'sespwuikiW to act as a smsof paadian of Mepublia bw8dt wft aegqld ta vabaFCo pmdm. Tbo dsfwdanta mrerC *Crefcue abli@atal ta prauide w=te 8nd beW wkml& ' - Olq1i,t®6araG@pieduct6ip, aR14AgoftCS.$eakhESWtftd8'17YC1ho gitaiadff. St is arguM ttiaethe deffeWaW c®nq33racy to ®ieRibutediavsfm~ alxutttLe rstWantuldp bennmn attd sesw;a iamUd prab7amt was a fabue tn d4:ohuge tJtac do aW pmemtsd Bhc ptaiad8t fitam "undetta&Cu4; measurea 3aaes eo diacoraeage 15
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09-29-99 02:49am from-Hl1NTON •IAlAS • e..wa.W J $'^po°"- ^• wHN.i. ANW Pads ar-. NWNP, .YMY19 (4) ~swM... of cyar.U itlWi. quaUty $pd~C9~ty 1~{~R®aellit~ ~t aAl®A$ ill WA1iSiJSSO1YPd;° (S ) ~870 adeQllltCly WAt81114'L~, p®ckagCdt. aad talulcd;' mr9 (6) `confarm ra skm p:aaiFes or afArmationt of fiu-d taade on tde comaaucr or la6e1, if any. °Atk Cada Aau $4•2-3 Ut(2). F3aiadffbas autalk$ea rbatuueignrem marshcpircdand aaW by tUedefaadsntt fsUed I* mteet aay af tbe aiteria a®t wt at:ave. For aQmw1e,191eCe 18w Clmg,e dqt Ute c9garcm wee mint pmpusl,y takat.b w that tlw cngsrrssm smdmd try ft Fup4'S pyrdtapsuta wea~ af aa intctittir or at9plcal gradeimat tbase ueaapy said ar d,etthey tailoG ta lire up tm pcoudaea tvatlo an the epataiaef, On ft eauqpry. read ss a wbole- it Bc plaiaffs claata 66at g typicAl ciga[ette,llke oD eiga<ettp. is "pnetally defaaivo.' Tmas syge of eUegatsoa setwt 9arse a elaiw for broaa AfaqpGw warerary of nwtcWWfiaay- To tlts gxters plaimif8atrmwts to srars a cHadm €a a bnxuh 4f "liadd w,atranta+ of• ftass for a patdtular puapCsa. ttie CoUtt fspdn at fu7a as vodl. To acate a sucb a wu,asary, the adler ssuat have teaspat m kttnw (1) ft tAtyea''s pat6icuiar pupnae, and (2) d~at dre kaWer is sedying Wm.'rite seller'; skiii ar judgmTtnc ro adccc rae Cuaaisbt saitak)e gnWs.' Ask. Caft s1au. ld-2-315. In ir$ cmqwat tpe .PRnd uaade no alleaapam of aqy parciades pa tposo tor whieh Bt (or ata panie~te) basg4t ci$atetus. 9'ba.te is hDrewdee 81o allegatimt *At dre Fund or mea ssva ta» ft ds ®f Auy gWb Ued. A=dWY, tde pladndfl' &as bot prop681y steROd saclt a olaaw. ±1425 1-3aa P.1e/u r-cic is
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99-Z9-99 o2:49pm Fran-HUNTON OIAMS __ +]g,25 . T-399 P.13/22 F616 (2) "°Ibods~'ua+lryefaucmt~litCdamageidueibnt8blowdsfondawq'8llt~aiwiQUgfW cOdqut MA dDS vaMpiezity mvolved "sa cakaitabg tdeco damages weigd hKavll,y, if uo[ dagositiveDy. 9o fsvar af Wriug plraoaYfs' acqaaa.' Rl., 80 (3) ft sdi{i[y of SAi®1re6s ta sce& xeeovarp dimay umd'er vuiqqs 9tatC Jaw dtaoricc fur g®rsoual ~Jnrics a~ ihc arf8]ed ~i dtap - tbo samadamagma d1c plahGiffhqlth care du9u6s m.cm mwh3ag - Waold [equ9[e CuWi[S "to dldopr onsqplimad rqls apppr(iouiRs ds~es oasonS ploiaaffa as dirrls~ iavols of ayjq~q isup~ d~evioleqve mcps, w rrbvbse dta si9Y of anutd[sie zesDveram." 1d., eiamS 13oftes, rQ3 U.S. at 268. zueComofAppebr9o O.agmIsrbanass-Bmgr(qrerrcoaslada! IldB[ap ftoe pfdaef fiaoanra of ~e rea~t~ lest "®vcigh #p favor aff matriag pFriodfia' slanag. We ep~rettsrC hold MsegatoiaAf$s 8ac& mdiag tabt3ug oiWsra riIGCD at ®m sorsaoit c9a3m flor dxmagea." ®s~$uBd a~vners ~oysrs,1999 6VL 4933M 9 *d. Mris deasiop.by d1e Nial6 Cirraie• . was 9A bespiog mri[h dws® of two other Coumi of Appea19 pfsmeUted thdl RICO aadlat aorimrar raums 6zoagbt fpylxaidtaddwa(fara dustfuud®agaiactsomeo! Ril ofbse saoae mnbaa»c.ompadm: SYeornjrtreraLoeol UnianPdo. 43tfWeVaraFlodv. d"hilipb[®rrPa, lru.. 171 flr.3d 912 (8D°. Cir. 1959,(adattsaiwg BtdCC aAd AtldtYUSt) awd7a6vrers 3ocwl !7 Fleaielt & hd% Plsidp Afov.da,1999 ®lI-63996b CP' d:h. AoS.18.1S5Y9MCi7 am1y)•a Y4 ~~ die L~Ave Cam of App=b faaadtbutpc vkuWiqjntiep of °Tue Sunnd Ciewit4wd grzviau4 anscd rhis vpfaiar at 17Z F 3d aB3 but taquemad;o he virFu~aaSS fmm s6u yablished ®wictnvs. FseaumablY, ii will ~ puh6shmi Ia rIw varaiaa disvibuccd v4e Sb.Bdsw wbick ffi® Cinplrir a=mdAfler Wa paNies bal ramplcmd thNe tKicfiag in Dhe inap4rr 12 I
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In the face of this avalanche of recent dismissals in lawsuits virtually identical to this one, the trial court's contrary ruling calls into question, in the court's own words, "whether Tennessee's common law remoteness limits are uniform with those of other jurisdictions." Rule 9 Order, at 4(R. 377). They are. As the Court of Appeals has long held, an alleged tortfeasor is liable "not for all the harm that follows his wrong..., but only for its proximate consequences." Black v. Love & Amos Coal Co., 30 Tenn. App. 377, 383,206 S.W.2d 432,434 (1947) (emphasis added). The Tennessee Supreme Court has likewise made clear that "legal responsibility must be limited to those causes which are so closely connected with the result and of such significance that the law is justified in imposing liability." Doe v. Linder Construction Co., 845 S.W.2d 173, 181 (Tenn. 1992) (internal quotation marks and citation omitted). The Funds' payment of medical expenses for someone else's injuries cannot satisfy that test. The Second, Third, and Ninth Circuits applied the same fundamental principles of proximate causation and remoteness of injury recognized in Black and Doe in dismissing claims by union trust funds against the tobacco companies. On interlocutory review of a question nearly (...continued) Laborers Dfst. Health & Welfare Trust Fund v. Philip Morris, Inc., No. 97-8715-CIV-RYSKAMP, 1998 WL 186878 (S.D. Fla. April 13, 1998) (App. N); Operating Eng'rs Local 324 Health Care Fund v. Philip Morris, Inc., No. 97-741291-CZ (Mich. Cir. Ct. Feb. 12, 1999) (App. 0); New Merico & West Tex. Multi-Craft Health & Welfare Trust Fund v. Philip Morris, Inc., No. CV-97-09118 (N.M. Dist. Ct. Dec. 24, 1998) (App. P). See also Rhode Island Laborers' Health & Welfare Fund v. Philip Morris, Inc., No. 97-500L (D.R.I. Aug. 12, 1999) (magistrate's report recommending dismissal) (App. Q); Massachusetts Laborers' Health & Welfare Fund v. Philip Morris, Inc., No. 97-11552-GAO (Aug. 4, 1999) (dismissing all claims except for traditional subrogation) (App. R); Stationary Eng'rs Local 39 Health & Welfare Trust Fund v. Philip Morris, Inc., No. C-97-01519 DLJ, 1998 WL 476265 (N.D. Cal. April 30, 1998) (court dismissed all federal claims; plaintiffs voluntarily dismissed their remaining claims) (App. S); West Virginia-Ohio Valley Area LB.E W. Welfare Fund v. American Tobacco Co., No. 2:97-0978 (S.D. W. Va. July 26, 1998) (App. T) (voluntary dismissal); West Virginia l. U.O.E (formerly West Virginia Laborers) v. Philip Morris, Inc., No. 3:97-0708 (S.D. W. Va. June 29, 1999) (same) (App. U). 6 Teamsters, 34 F. Supp. 2d at 661. 7
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0 Doe. On interlocutory review of a question nearly identical to the question presented here, the Second Circuit reversed a decision denying a motion to dismiss and ordered dismissal of the union funds' lawsuit, holding that because the funds' alleged losses were "purely derivative" of the injuries to participants, they were "too remote as a matter of law." Laborers Local 17, 1999 U.S. App. LEXIS 19576, at *45. That decision followed the Third Circuit's affirmance of a district court's dismissal of a union fund lawsuit on the ground that the funds' alleged injuries "were too remote from any alleged wrongdoing of defendants." Steamfetters, 171 F.3d at 918. And in Oregon Laborers-Employers, the Ninth Circuit agreed with the Second and Third Circuits that "there is no direct link between the alleged misconduct of defendants and the alleged damage to plaintiffs" and that the funds' injuries were "`too remote' from defendants' alleged wrongdoing." - F.3d --, 1999 WL 493306, at *4. In its Rule 9 Order, the trial court acknowledged that "many courts that have considered similar cases have dismissed substantially identical third party payor suits in their entirety as a matter of law on remoteness grounds_" Rule 9 Order, at 2, 4 (R. 375, 377). In fact, those decisions have included dismissal of every claim asserted here by the Funds--viz., violations of state consumer fraud statutes (Count One), violations of state antitrust laws (Count Two), common-law fraud and misrepresentation (Counts Five and Six), and conspiracy (Count Eleven), in addition to other claims either dismissed by the court or voluntarily nonsuited by the Funds. The trial court concluded that "[e]arly resolution of this potentially case-dispositive issue through a Rule 9 interlocutory appeal will enable the appellate courts to determine whether Tennessee's common law remoteness limits are uniform with those of other jurisdictions." Rule 9 Order, at 4 (R. 377). Because Tennessee law recognizes the same legal doctrine barring claims for 15
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! -+J-42b T-398 P.11122 f-6/6 09-29-99 92 4Tpm FroerNUNTON~IAMSFH yy St7y'i' i5T : one fat''aayg+oaaw .-- iajumd ia hia basiness ot ptapany by oea+oa af enyqtit~ fotbiddea iuldeaA~atutlame-... 15U.sa.C.§19(a)• T7tcauailat3qr(ulan~tegoisatxcqipcidettml- T61e Suprcme Ctwa Laa aated deu "Caugxsa Mde4ed $1964Lc) on the civii-actinn pmvlsian of ft PodoPat atttii[pat Iatv ...-" dlabnsr v. SIPC, S03 U.S. ?.5a (1998). The 9angnage of madt atauaCa Iz.as 6n ioteM=esaa to luoit olat=M tn dttue wiia bav® sufferoa iajur;m -Pmiatatgy MMa" by ft alleled wtoA*". .uzocwad GtDfeTR1 CARi7a670TS v. CsBj{omia 57ats ChmtqW qJ C.Q1ptMIDS. 4!9 U.S. 329 ta9s93(~z9uwtD: r~o+arar~, ~oa u:s- azee petca~(a~+ta~"itl~e:~s tagaa~fwai ~raP) aPpairrsjass ns r~z11ly to ~)98a(s]. We mqy faialy aaedittmo 91•Conms. wUith„ apetcd RICph w'tth t{noSV9qg ft mwfprmm 6edetasl touets 4ati;ivep ft svatds otl)sr Gpagresse5 had aaed ...." )• YAe 3upseme Couec bas anncaw tba difawrlty of totarmluiag a'opm aiae fits a)i• defttina of paftnte cam9e witp9a tbe manrsxt of detamimg wpmtuer a pezdr haa etamiing to tsriag a slaia of ft t}" hut W mven6e)au eraplw9iud 4w "dlTOCpmtsa" of the bdusea dw oaaa7tct aa4 trie reaulting it4jpty- &le[e we a90 "gttaoftate tatt6e" tp 16hc1 gaet4`eUw'the jstdieia[ ma{a paat co 1'anic a pmm°a rt,aplwsIbt'licy fat ft eonwqaseacoa at thu pcrscp'a ttw2t atts. At botttap, 0 teadWta af ptwout® wuae m1x,ts "ideam of wh4t justiae domnnda, arr of wbat is y ptlasibla aarl coaveniant." [aimtiun orn#iedj , amottg ft maRy shdpes this conaap: sadt aa commott law, sea dss®ctotad Genera! 4bntractars. [4S9 II.9. at $32 S331, wat a demand for rotae dinct 8eladnnbosweep t~e dqiuty ass®a~19ua tare 9ajariRUS c~uctauegofl. 17tus, a p9amdff tvkn qtippla10®d of hatm 4)owipg ata cely froua tpe tpisPAtmues v64tted V= a thiccl parsoa by rbe def=daas's aors was VuerRlLy 8tlld io af ao d at uM rameie 10
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events, was reasonably foreseeable--typically a question for the jury. 284 N.Y. at 341-343; 162 N.E. at 99-100. Here, in contrast, the question is remoteness of injury-an entirely distinct aspect of the proximate cause inquiry. See Laborers Local 17, 1999 U.S. App. LEXIS 19576, at *16 ("foreseeability and direct injury (or remoteness) are distinct concepts"). Because the Funds' claimed losses are entirely derivative of the physical injuries suffered by the participants, they are too remote as a matter of law even if they were foreseeable. As the Iowa Supreme Court explained in dismissing similar claims, while foreseeability may be a jury question, remoteness "is not based upon a factual inquiry to determine whether the damages claimed were foreseeable or whether they were a proximate cause; rather, it is a legal doctrine e incorporating public policy considerations." Iowa ex rel. Miller, 577 N. W.2d at 406 (emphasis added) (quoting Kraft Chem. Co. v. IIlinois Bell Tel. Co., 608 N.E.2d 243, 245 (111. Ct. App. 1993)). Other courts have reached the same conclusion. See Regence Blue Shield, 40 F. Supp. 2d at 1183 (even assuming "that the injury alleged here was a foreseeable consequence of the defendants' actions," the funds' injuries are too. remote); Oregon Laborers-Employers, 17 F. Supp. 2d at 1177 ("foreseeability is distinct from the proximate causation policy of limiting actions to those situated most immediately to the alleged hatmful conducY'), affd, -- F.3d --, 1999 WL 493306. Neither the trial court nor the Funds have cited any authority from Tennessee or elsewhere rejecting the fundamental principle that remoteness of injury is a legal question for the court to resolve.10 In fact, Tennessee law is clear that where, as here, the facts are not in dispute, 0 The trial court cited the minority of private third-party payor cases against the tobacco companies that either allowed a few narrow claims to survive motions to dismiss or declined to apply the remoteness doctrine at all. (continued...) 13
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A9-29-flB 02:d®pm P~um HUNT017~LIAMS ,,,.,.. .- ~- +1425 • T-393 p.)5/22 F-8iS la®r 7ri 0e$oR IAbRrtIB-5WY4BerS. A7$8Q8a9 f+111Gq3 SGl.' R'9dlt~t1779~. 9cd pfwaalQ$. ttlle r~wt a plaiasUY'taay ttot tssnver ft fraud aad tnlmWreS=tit>a dlreeted to s ahird paty. T6e~e€are, phiaeifY7us arbtietl tliatmisrZpreseatafiaas wesc eaade by rLe deteadrntc to riw Fnad. However, It is meseopab3e dras u Pond's cla9ms sro direcdy 1fnha ta the aUage4 mis:Vreaesptioste fiede ta ft Htaad's potdcipaats whn omoBced, not to go Fetpd it®ep'. T9us is boaoe au by ahe fsst that ft 4aIDegea it eJsiste: is the sqptnant taC srpctlaag telared ate" claims A baa paid. In betriqg a viauaUy idanrical ®tairn lbr &aud 4t Gre6oc 8~bptrss,~g7oyeis. du N'utttf Cttwit oarlcludcti: plaiati€f0 seek oaly ta tecavrs medleal soett pausi pn pebaff of tExdr lmeacfacisrics. This s a eJaases clauq ios iadeplnityV aitb plsituo Aacmfmpg ari aaw.tvet dar thx ==Mk las9 dmy bave suffBred as a ttsWt Oftbe pbYm barTn eufksod by d*d patties - tbe su*cra. ... iI7bis claipt £as damWtCea is b+rted. MuswvsQ, fmr the amt: rtosoas Uut prnzimate muAe did otot exiat for plaisadff"s RICO aad =dttttst cla#aa, pro>drm cause bi lsetiag far r4eir iraust elsimt. aa.egoA s;abAren.Emp&+yers.1999 bYL 493300. 'thc Saaud am3 Mitrspresaaaadaa ctaims betote qAs Cnatt are ao difFerrat- En us w*SaEAt, ft SbAd taAC$e0 iTtat tlte de{zdaAlsl `ftOdu9CAi siqlGmts, cmCWn= iad cat*Get. ... Wae fBIC] a.9 W SBqse ABra<TSft Platpt34fa' BsE1lR/paPW pd 6ene~sati~sta~atxtosc~cigerama].° C~iri1®Jtuead3p2. IleapiteaUegatinnatbat the fratil was ®u the 8uad. obds is suaplY a case of a tbprd puy lrlae FuW) x® r®ecver oa ac=U vf a ffraod ailASIeUg Wng petpettater! an soateooe c3& 14
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0 Finally, the decision below also announces an equally starding and dangerous interpretation of the Tennessee Consumer Protection Act. The trial court held that, even if the remoteness doctrine did bar the Funds' claims as a matter of law, it would not apply to the Funds' TCPA claim because the Act does not require plaintiffs to make any showing of proximate causation. Opinion and Order, at 5-6 (R. 355-356). As an initial matter, this unprecedented holding conflicts with at least two decisions by the Tennessee Court of Appeals expressly stating that the Act ~e incorporate the common-law requirements of proximate cause. Harvey v. Ford Motor Credit Co., No. 03A01-9807-CV-00235, 1999 WL 486894, at *2 (Tenn. Ct. App. July 13, 1999) ("plaintiffs are required to show that the defendant's wrongfal conduct proximately caused their injury") (App. V); Stracener v. Swindle, No. 01A01-9502-CH-00047, 1995 WL 414873, at *3 (Tena Ct. App. July 14, 1995) ("proximate causation must be proven") (App. W). In addition, the trial court's reading of the TCPA defies the plain text of the Act, its common law pedigree, and decisions in other jurisdictions construing nearly identical wording in state consumer protection statutes to require that plaintiffs prove proximate cause. ARGUMENT L BECAUSE THE F'UNDS' L®SSES ARE ENTIRELY DERIVATIVE OF ALLEGED PHYSICAL INJURIES TO THIRD PARTIES, THE TRIAL COURT ERRED IN FAILING TO DISMISS THE COMPLAINT PURSUANT TO TENN. R. CIV. P. 12.02(6). A. Numerous State And Federal Courts Have Dismissed Virtually Identical Union Fund Lawsuits On Remoteness Grounds. In this lawsuit, as in virtually identical lawsuits pending in approximately 40 courts across the country, plaintiffs seek to recover the cost of "provid[ing] medical treatment and other benefits to their participants suffering from smoking-related illnesses." Complaint 15 (R 7). 11
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SUMMARY OF ARGUMENT The trial court's holding that a jury, not the court, must decide whether the Funds' economic losses are barred by the remoteness doctrine is at odds with the rulings of at least nineteen federal and state courts, including every appellate court to consider the question. Indeed, in the last four months alone, the United States Courts of Appeals for the Second, Third, and Ninth Circuits--the only appellate courts to have ruled in these union fund cases--have dismissed or affirmed dismissal of lawsuits indistinguishable from this one on the ground that the funds' alleged losses--the payment of medical expenses for injuries suffered by their participants- -are "too remote" as a matter of law." In addition, a total of sixteen state and federal trial courts have now dismissed lawsuits by union funds and other private third-party payors on remoteness grounds,s creating a body of precedent aptly described by one trial court as "overwhelming." 4 5 See Oregon Laborers-Employers Health & Welfare Trust Fund v. Philip Morris, Ina, - F.3d --, 1999 WL 493306 (9th Cir. July 14, 1999), time for reh'g passed; Laborers Local 17 Health & Benefit Fund v. Philip Morris, lnc, No. 98-7944, 1999 U.S. App. LEXIS 19576 (2d C'u. Apri19, 1999) (as amended Aug. 18, 1999), reh g denied (Aug. 6, 1999); Steamfitters Lacal Union No. 420 We,lfare Fund v. Philip Marris, Inc, 171 F.3d 912 (3d Cir. 1999), reh g denied. Plaintiffs voluntarily dismissed appeals in the Fourth and Eleventh Circuits, and appeals of dismissal are pending in the Fifth, Seventh, and Eighth Circuits, with additional appeals in the Ninth Circuit. United Food & Commercial Workers Unions and Employers Health and Welfare Fund v. Philip Morris, Inc., No- CV-97-P-3351-W (N.D. Ala Aug. 11, 1999) (App. F); Northwest Laborers-Employers Health & Sec. Trust Fund v. Philip Morris, Inc., No. C97-849WD (W.D. Wash. July 22, 1999) (App. G); New Jersey Carpenters Health Fund v. Philip Morris, Inc., No. 97-4728 (MTB) (D.N.J. May 12, 1999) (App. H); Lyons v Philip Morris, Inc., No. 98-515 (PAM/JGL) (D. Minn. Apri129, 1999) (App. 1); Canwed Corp. v. RJ. Reynolds Tobacco Co., No. 98-1412 (PAM/JGL), 1999 U.S. Dist. LEXIS 9634 (D. Minn. Apri129, 1999) (App. J); Contractors, Laborers, Teamsters & Eng'rs Health & Welfare Plan v Philfp Morris, Inc., No. 8:98C V364 (D. Neb. Feb. 18, 1999) (App. K); Laborers' & Operating Eng'rs' Util. Agreement Health & Welfare Trust Fund . v. Philip Morris, lnc., 42 F. Supp. 2d 943 (D. Ariz. 1999); Hawaii Health & Welfare Trust Fundfor Operating Eng'rs v. Philip Morris, Inc., No. 97-00833 (D. Haw. Jan. 21, 199,9) (App. L); Regence Blue Shield v. Philip Morris, Inc, 40 F. Supp. 2d 1179 (W.D. Wash. 1999); Williams & Drake Co. v. American Tobacco Co., No. 98-553 (W.D. Pa. Dec. 21, 1998) (App. M); International Bhd of Teamsters Local 734 Health & Welfare Trust Fund v. Philip Morris, Inc., 34 F. Supp. 2d 656 (N.D. Ill. 1998), appeal pending; Central States Joint Bd Health & Welfare Trust Fund v. Philip Morris, Inc., Nos. 99-1014 and 99-1197 (7th Cic) (argument set for Sept 21, 1999); Texas Carpenters Health Benefit Fund v. Philip Morris, Inc., 21 F. Supp. 2d 664 (E.D. Tex. 1998); Seafarers Welfare Plan v. Philip Morris, Inc., 27 F. Supp. 2d 623 (D. Md. 1998); Southeast Fla. (continued...) 6
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derivative-injuries that underlies the dismissal of private third-party payor claims across the country, this Court should reverse the decision below and order the Complaint dismissed because the Funds' derivative economic losses are "too remote" as a matter of law. B. Tennessee Recognizes The Longstanding Remoteness Doctrine, Which Bars All'She Funds' Claims Here. The common law has long barred claims for remote, derivative injuries. Often treated as an element of the proximate cause inquiry, the remoteness doctrine is a legal threshold that requires a "direct relation between the injury asserted and the injurious conduct alleged." Holmes v. Securities Investor Protection Corp., 503 U.S. 258,268 (1992). Recognizing that wrongful acts frequently cause "ripples of harm°" inflicting derivative injury beyond the person or entity directly injured, id at 266 n. 10, the law holds a tortfeasor liable "not for all the harm that follows his wrong, not for all its consequences, but only for its proximate consequences." Black 30 Tenn. App. at 383, 206 S.W.2d at 434. The Supreme Court of Tennessee has explained that the law does not, and cannot, afford a remedy to every person who suffers indirect injury along a tortured (and theoretically endless) chain of causation: In a philosophical sense, the consequences of an act go forward to eternity, and the causes of an event go back to the discovery of America and beyond.... As a practical matter, legal responsibility must be limited to those causes which are so closely connected with the result and of such significance that the law is justified in imposing liability. Some boundary must be set .... 16
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at 532 n.25. Anthony had contracted to care for all of a town's poor for a fixed fee. When the defendant's wife assaulted and injured a pauper, Anthony sued to recover the medical expenses he paid on behalf of the pauper_ The Massachusetts Supreme Judicial Court unanimously rejected Anthony's s claim, concluding that his injury-notwithstanding the intentional nature of the tort--was "too remote and indirect." 52 Mass. at 291. The principle underlying the holding in Anthony disposes of the Funds' claims, as one federal district judge reasoned in dismissing another union fund case: Just as in Anthony, the Funds [paid portions of ihe participants medical expenses] as a result of the contract through which the Funds undertook this obligation, as opposed to a direct relationship between the Funds and [defendants]. The Funds had a contractual duty to pay those expenses regardless of the genesis of the medical condition because payment of the Participants' medical expenses is the very purpose for which the plans were established. For the Funds to now attempt to recover such amounts from [defendants] in a direct action is inconsistent with the position the Funds occupy as healthcare benefit providers. Texas Carpenters, 21 F. Supp. 2d at 671; see also Seafarers, 27 F. Supp. 2d at 628 (applying Anthony v. Slard). And in Holmes, 503 U.S. at 268-269, the Supreme Court applied the remoteness doctrine to bar an alleged intentional tort under the federal R1CO statute, which is entirely consistent with Tennessee law that "legal responsibility must be limited to those causes which are so closely connected with the result and of such significance that the law is justified in imposing liability." Doe, 845 S.W.2d at 181 (internal quotation marks and citation omitted); Smith, 728 S. W.2d at 749 (same). C. Dismissal ®f'I'he Funds' Complaint Furthers Compelling Policy Goals. Dismissal of the Funds' Complaint is mandated not just by overwhelming precedent; it co also furthers compelling policy goals, emphasized by the Second and Ninth Circuits, of avoiding N cri ~ ~ 18 O .~ N
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Smith v. Gore, 728 S.W.2d 738, 749 (Tenn. 1987); see also Doe, 845 S.W.2d at 181." There is simply no authority for the proposition that "Tennessee's common law remoteness limits are [not] uniform with those of other jurisdictions" (R. 377), or that the remoteness doctrine should not bar third-party payor claims like those pressed here by the Funds. The United States Supreme Court has repeatedly affirmed the vitality of the remoteness principle recognized in Black, Smith, and Doe in a line of cases involving statutory and common- law claims for intentional torts. In 1877, the Court rejected an insurer's attempt to sue the murderer of its insured, ruling: The relation between the insurance company and [the insured] was created by a contract between them, to which [the murderer] was not a party. The injury inflicted by him was upon [the insured], against his personal rights; that it happened to injure the plaintiff was an incidental circumstance, a remote and indirect result, not necessarily or legitimately resulting from the act of killing. Mobile Life Ins. Co. v. Brame, 95 U.S. 754, 758 (1877). The Brame Court observed that it had not been "cited to any case in this country or Great Britain where a different doctrine has been held." Id at 759. In Associated Gen Contractors of Cal., Inc. v. California State Council of Carpenters, 459 U.S. 519 (1983), the Supreme Court applied the remoteness doctrine to dismiss antitrust claims notwithstanding allegations that the defendants specifically intended to injure the plaintif£s. See 459 U.S. at 537 & n.37. The Supreme Court illustrated the doctrine using the facts of Anthony v. Slaid, 52 Mass. 290 (1846) (App. CC)--a seminal remoteness case. 459 U.S. In dismissing federal RICO claims under the remoteness doctrine, the U.S. Supreme Court relied on this same fundamental statement of the law: In a philosophical sense, the consequences of an act go forward to eternity, and the causes of an event go backk to the dawn of human events, and beyond. But any attempt to impose responsibility upon such a basis would result in infinite liability for all wrongful acts, and would "set society on edge and fill the courts with endless litigation." Holmes, 503 U.S. at 266 n.10. 17
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1999 U.S. App. LEXIS 19576, at *30-31 (emphasis added). "The tortured path that one must follow from the tobacco companies' alleged wrongdoing to the Funds' increased expenditures demonstrates that the plaintiffs' claims are precisely the type of indirect claims that the proximate cause requirement is intended to weed out " Steamfitters, 171 F.3d at 930.12 The insuperable problem of apportioning damages among direct and indirect claimants is also fatal to the Funds' claims. The Supreme Court recognized that, were it not for the remoteness doctrine, "courts [would be forced] to adopt complicated rules apportioning damages among plaintiffs removed at different levels of injury from the violative acts, to obviate the risk of multiple recoveries." Holmes, 503 U.S. at 269 (citations omitted). In this particular case, there is a substantial risk of duplicative recovery posed by the simultaneous existence of this lawsuit by the Funds and at least one separate smoker class action suit pending in federal district court, where the class is defined to comprise "all individuals in the state of Tennessee who currently smoke or have in the past smoked cigarettes, and who have been diagnosed with an illness, injury, and/or death, as a result of smoking cigarettes." Newborn et al. v. Brown & 12 Numerous courts have reached the same conclusion in dismissing union fund complaints. See Oregon Laborers-Employers, - F.3d -, 1999 WL 493306, at *6 ("The difficulty of ascertaining the damages attributable to defendants' alleged wrongful conduct and the complexity involved in calculating these damages weigh heavily, if not dispositively, in favor of barring plaintiffs' actions"); Teamsters, 34 F. Supp. 2d at 662 ("even if the individual members' injuries could be imputed to the Funds, the court would have to assume the existence of far too many variables to conclude that they were proximately caused by the tobacco industry. For instance, the court would have to assume that the Funds' members['] injuries-cancer, emphysema, etc.-were, in fact, caused by the tobacco products, or assuming a safer alternative product had been available, that the Funds' members would, in fact, purchase it."); Seafarers, 27 F. Supp. 2d at 632 ("it would be extremely difficult, if not impossible, to determine the amount of damages attributable to the Defendants' conduct given the multitude of other factors that could affect Plaintiffs' smoking related damages"); Texas Carpenters, 21 F. Supp. 2d at 672 (same); Southeast Fla. Laborers, 1998 WL 186878, at *5 (union funds' claims would open a "Pandora's box of damage calculations") (App. N). 20
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whether an injury is "too remote" is a question for the court. E.g., Doe, 845 S. W.2d at 183 ("where the facts are not controverted, the question of proximate or intervening cause is for the trial court"); see infra, at 26-28. The trial court's holding is inconsistent with Tennessee law, as set forth in Doe, and runs directly contrary to the unanimous reasoning of the Second, Third, and Ninth Circuits in Laborers Local 17, Steamfitters, and Oregon Laborers-Employers, each of which relies on the bedrock principle of tort law barring claims for injuries that are indirect, remote consequences of alleged wrongdoing. When the trial court ruled, no appellate court had yet decided the remoteness question raised by the union trust fund cases filed around the country. Since then, however, three federal appellate courts have unanimously ruled that such claims must be dismissed as a matter of law, based on principles no different than those that animate Tennessee law, as set forth in Black and 10 (...continued) Rule 9 Order, at 3 nn.3, 4 (R. 378). These scattered decisions do not support the decision below, however, nor do they form a coherent body of law. As an initial matter, five of the thirteen cases cited by the trial court have been dismissed-either by the court or voluntarily-in the wake ofthe decisions by the Second, Third, and Ninth Circuits. Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., 7 F. Supp. 2d 277 (S.D.N.Y. 1998), rev'd 1999 U.S. App. LEXIS 19576 (2d Cir. Apri19, 1999) (as amended Aug. 18, 1999) (App. B); New Jersey Carpenters Health Fund, slip op. (App. H); West Virginia-Ohio Valley Area I.B.E.W. Welfare Fund, slip op. (App. T); West Virginia Laborers [now styled International Union ofOpoating Eng'rs v. Philip Morris, Inc.] slip op. (App. U); see also Stationary Eng'rs Loca139, 1998 WL 476265 (App. S). Two other courts have either invited dispositive motions following the federal appellate decisions, Kentucky Laborers Dist. Council Health & Welfare Fund v. Hill & Knowlton, Inc., No. 3:97-CV-394-H (W.D. Ky. July 30, 1999) (App. X), or certified the remoteness issue for interlocutory review, Arkansas Blue Cross & Blue Shield v. Philip Morris, Inc, No. 98C2612 (E.D. IIL Aug. 2, 1999) (App. Y). One California court declined to dismiss only two counts, based on its determination that California's remoteness law differs for intentional torts and because of unique provisions under the"state unfair practices statute. Operating Eng'rs Local 12 Health & Welfare Trust Fund v. American Tobacco Co., No. BC 177968 (Cal. Sup. Ct. July 9, 1998) (App. Z); Screen Actors Guild- Producers Health Plan v. Philip Morris, Inc., No. 181603 (Cal. Sup. Ct. June 22, 1998) (App. AA). Three of the remaining four courts are currently considering motions for certification. See Blue Cross Blue Shield of New Jersey, Inc. v Philip Morris, Inc., 36 F. Supp. 2d 560 (E.D.N.Y. 1999); National Asbestos Workers Med. Fund v. Philip Morris, Inc., 23 F. Supp. 2d 321 (E.D.N.Y. 1998); Utah Laborers Health & Welfare Trust Fund v. Philip Morris, Inc, No. 2:96-CV-829B (D. Utah March 31, 1999) (App. BB). And in the only case that has been allowed to proceed to trial, the court directed a veidict for defendants on the funds' federal RICO claim, and the jury unanimously rejected the funds' remaining state law RICO and conspiracy claims. Iron Workers Local Union No. 17 v. Philip Morris, Inc., 23 F. Supp. 2d 771 (N.D. Ohio 1998). 14
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0 speculative and duplicative theories of damages and the intractable problem of attempting to apportion damages among innumerable plaintiffs. Each of these objectives, which the Supreme Court approved in Holmes, militates against the Funds' claims here. The remoteness doctrine's settled place in American jurisprudence reflects the maxim that "the less direct an injury is, the more difficult it becomes to ascertain the amount of a plaintiff's damages attributable to the violation, as distinct from other, independent, factors." Holmes, 503 U.S. at 269 (citations omitted). Under the Funds' attenuated theory of injury, their losses derive entirely from alleged injuries to smokers: Under plaintiffs' direct theory, the tobacco companies' conduct aimed at the Funds induced the Funds to n~t take certain actions, which led to a greater incidence of smoking (and of smokers using more dangerous products), which led to more illness, which led to increased health care expenditures being borne by the plaintiffs. Steamfitters, 171 F.3d at 927 (emphasis added). The task of tracing actual injury and damages through all of the links in this tortured chain of causation is incurably speculative. As the Second Circuit held in Laborers Loca117: [T]he damage claims here are incredibly speculative. It will be virtually impossible for plaintiffs to prove with any certainty: (1) the effect any smoking cessation programs or incentives would have had on the number of smokers among the plan beneficiaries; (2) the countereffect that the tobacco companies' direct fraud would have had on the smokers, despite the best efforts of the Funds; and (3) other reasons why individual smokers would continue smoking, even after having been informed of the dangers of smoking and having been offered smoking cessation programs. On a fundamental level, these difficulties of proving damages stem from the agency of the individual smokers in deciding whether, and how frequently, to smoke. In this light, the direct injury test can be seen as wisely limiting standing to sue to those situations where the chain of causation leading to damages is not complicated by the intervening agency of third parties (here, the smokers) from whom the plaintiffs' injuries derive....[Ilt would be the sheerest sort of Veculation to determine how these damages might have been lessened had the Funds adopted the measures defendants allegedly induced them not to ado~t. 19
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• without a remedy. As third-party payors the Funds can seek to recover all of their expenses by way of subrogation, as noted by a number of courts that have dismissed similar union fund lawsuits, including the Second Circuit: The Funds may still bring a subrogation action to recover the medical costs paid out for the individual smokers, and the smokers themselves have sufficient independent incentive to pursue their own causes of action for such additional types of injuries as pain and suffering. [These claims] will remedy the harm done by defendants' alleged misconduct. Laborers Local 17, 1999 U.S. App. LEXIS 19576, at *35-36; see also Oregon Laborers- Employers, -- F.3d --, 1999 WL 493306, at *5 n.5 ("there is an alternative route for the trusts to recover the damages alleged in the present action-via subrogation in a non-RICO, non-antitrust action"). Subrogation avoids the risk of duplicative recoveries by participants and by the Funds for the same alleged injuries and also eliminates the complicated issues of causation that plague remote claims by indirectly injured parties. See Holmes, 503 U.S. at 269-70.14 Furthermore, as a number of courts have recognized, individual smokers are fully capable of challenging the misconduct alleged here by asserting a wide variety of other types of claims to recover both their medical expenses and other alleged injuries as well. See Seafarers, 27 F. Supp. 2d at 632 (pendency of smoker class actions "shows that there are 'ample private attorneys general' available to vindicate the Defendants' alleged wrongs"); Texas Carpenters, 21 F. Supp. 2d at 671 ("individual smokers do vindicate the law by ensuring that Tobacco's conduct is punished, albeit not under these statutory schemes [RICO and antitrust]"); Southeast Fda. The Funds plainly would prefer not to step into the shoes of each participant whose expenses are being claimed and pursue subrogation claims because the defendants would then have the ability to mount traditional defenses, like assumption of the risk, lack of reliance, and awareness. See Steamfitters, 171 F.3d at 920 ("Genetally, if an insurer wishes to recover from the wrongdoer, it must assert the same claim-by way of subrogation-that the insured could have asserted against the wrongdoer, as well as be subject to the same defenses that the wrongdoer could assert in defense of the claim"). 23
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0 comparative fault between victim who ingested poison and hospital who administered treatment prior to her entering a coma requires factual development). The court's reliance on these decisions reveals a misunderstanding of the important difference between injuries that lie on a direct causal chain of events precipitated by the alleged tort--the type of injury alleged in each of the cases cited by the trial court--and injuries that are derivative of, and contingent upon, some injury to a third person--the type of injury alleged here by the Funds. As the Second Circuit succinctly explained in Laborers Loca117, "the critical question posed by the direct injury test is whether the damages a plaintiff sustains are derivative of an injury to a third party. If so, then the injury is indirect; if not, it is direct " 1999 U.S. App_ LEXIS 19576, at #26-27. II. THE REMOTENESS d9OCTRaNE APPLIES EQUALLY TO THE FUNDS' CLAIM UNIDER THE TENNESSEE CONSUMER PROTECTION ACT. The trial court further held that, even if it were appropriate to apply the remoteness doctrine to the Funds' claims in the context of a Rule 12.02(6) motion to dismiss, the Funds' claim under the TCPA would be unaffected because "[t]here is nothing in the T.C.P.A. itself, nor is there any court decision, that would suggest proximate cause to be a necessary element of a cause of action under the Act " Opinion and Order, at 6 (R. 356). This holding contradicts two recent decisions by the Court of Appeals holding that the plain language of the Act incorporates the common-law requirements of proximate causation as necessary elements of a claim for relief. in addition, it conflicts with numerous decisions by state and federal trial courts dismissing union fund claims under identically-worded state consumer protection statutes on remoteness grounds. 27
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0 brought by union trust funds, employers, or insurers against third-party tortfeasors for any economic losses emanating like "ripples in a pond" from injuries to their participants, employees, or policy holders. The Iowa Supreme Court recognized this danger when in a recent cigarette "cost-recovery" case it warned against opening "the proverbial flood gates of litigation" to claims by third-party payors. Iowa ex rel. Miller, 577 N.W.2d at 407 (holding that the State of Iowa is not entitled to recover alleged smoking-related Medicaid costs at common law). In affirming the dismissal of a union fund lawsuit similar to the one filed here, the Ninth Circuit incorporated the following reasoning of the district court in its published opinion: However compelling [the allegations of wrongdoing alleged against the defendants] may be, there are very sound judicial policy reasons for limiting legal action to those parties most directly injured by the harmful conduct. These policies are not new and have lengthy historical roots in our jurisprudence. To allow plaintiffs to maintain actions that are entirely dependent upon the harm suffered by others threatens chaos for the judicial system, especially where others may (and have) filed their own actions and are capable of recovering a full range of damages, including the medical costs sought here. Oregon Laborers-Employers, --- F.3d ---, 1999 WL 493306, at * 10. Tennessee courts have voiced the same concern "that to permit recovery of damages in such cases would open the door to a mass of litigation which might very well overwhelm the courts." United Textile Workers, 825 S. W.2d at 85 (internal quotation marks and citation omitted). One can well imagine that if Tennessee suddenly adopted a unique rule counter to that of every other state, its courts would soon become a haven for similar "cost recovery" lawsuits against all kinds of defendants--auto manufacturers, pharmaceutical companies, distillers, or practically any other consumer product company. Moreover, there is no need for such a radical departure from settled law because application of the remoteness doctrine does not leave either the Funds or their participants 22
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. dismissal of the funds' complaint "as a matter of law" on remoteness grounds. Laborers Local 17,1999 U.S. App. LEXIS 19576, at *45. Tennessee law is consistent with this body of case law, as illustrated by several decisions by the Tennessee Supreme Court and the Court of Appeals. For example, in Wyatt v. Winnebago Ind, Inc., 566 S.W.2d 276, 279 (Tenn. Ct. App. 1977), the Court of Appeals expressly rejected the notion that "the summary judgment procedure is never a proper substitute for trial in determining the issue of proximate cause ...: That issue, like any other, may be determined on summary judgment if the test of Rule 56 is met with regard to it " See also Marine Midland Bank, N.A. v. General Motors Acceptance Corp., No. 03A01-9502-CV-00060, 1995 WL 417047, at *7 (Tenn. Ct. App. July 17, 1995) (same) (App. EE). These decisions illustrate that it is proper for a court to dismiss, as a matter of law, the "type of indirect claims that the proximate cause requirement is intended to weed out." Steamfitters, 171 F.3d at 930. In addition to Palsgraf, the trial court cited three decisions for the proposition that the Funds' claims arising from derivative injuries are inappropriate for disposition pursuant to Rule 12.02(6). But, like Palsgraf, each of the cited cases involved claims for direct injuries, and question was foreseeability-not remoteness. See Sterling v. Yelsicol Chem. Corp., 855 F.2d 1188 (6th Cir. 1988) (whether defendant's chemical contamination of drinking supply caused residents' injuries required factual development); Cook by and through Uithoven v. Spinnaker's ofRivergate, Inc., 878 S.W.2d 934 (Tenn. 1994) (where bar served underage driver who crashed while driving away and then sued bar, question of contributory negligence required development of facts regarding connection between bar's actions and underage driver's injuries); Price by and through Bolton v. St. Thomas Hosp., 945 S.W.2d 731 (Tenn. Ct. App. 1996) (issue of 26
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Williamson Tobacco Corp., No. 97-293 8-GV, Class Action Complaint 12. 1.1.1 (W.D. Tenn. filed Oct. 9, 1997) (App. DD).13 The threat of overlapping damages is heightened by the Funds' proposal to aggregate the expenses of thousands of unidentified participants, which would prevent both defendants and the courts from determining whether smokers who bring overlapping suits were among the participants whose expenses are included here. Moreover, the Second Circuit pointed out that even if one discounts the risk of duplicative recoveries by smokers, there is still a serious risk of duplicative recoveries by "other remote payors like the employers or health insurers with whom the Funds may contract." Laborers Loca117, 1999 U.S. App. LEXIS 19576, at *33. Those insurers may allege "that they ultimately bore the costs" claimed here by the Funds. Ibid Indeed, although as private third-party payors they face the same obstacles as the Funds here, health insurers contractually obligated to cover some or all of the funds' health-care obligations have sued the tobacco industry. E.g., Regence Blue Shield, 40 F. Supp. 2d 1179 (dismissal of all claims under the remoteness doctrine); Blue Cross & Blue Shield ofNew Jersey, 36 F. Supp. 2d 560 (motion for certification pending in light of Second Circuit's controlling opinion in Laborers Local 17); National Asbestos Workers, 23 F. Supp. 2d 321 (same). Furthermore, if claims like these were allowed to proceed, courts would face the specter of an overwhelming number of cases involving derivative losses styled as "direct" injuries 13 The risk of duplicative recoveries and inconsistent judgments also animates the decisions of numerous other courts dismissing similar union tund lawsuits on remoteness grounds. See Oregon Laborers-Employers, - F.3d -, 1999 WL 493306, at'6; Teamsters, 34 F. Supp. 2d at 662 ("an equally compelling basis for dismissal is the substantial risk of double recovery posed by class action suits which could be brought by the individual members based on their personal injuries"); Texas Carpenters, 21 F. Supp. 2d at 671 (allowing direct actions by union funds would create "the risk of duplicative liability for the same conducP'); Southeast Fla. Laborers, 1998 WL 186878, at *5 ("the risk of multiple recoveries is rear'). 21
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• wrongdoer's actions. See Lancaster v. Montesi, 216 Tenn. 50, 56, 390 S.W.2d 217, 220 (1965) ("The question whether damage in a given case is proximate or remote is one of great importance: It is a question of substantive law, and the determination of it determines a legal right"); Kilpatrick v. Bryant, 868 S.W.2d 594, 598 (Tenn. 1993) ("proximate cause, or legal cause, concerns a determination of whether legal liability should be imposed where cause in fact has been established"). These Tennessee decisions highlight the distinction between the threshold legal issue of remoteness and the foreseeability inquiry explained in Palsgraf-a distinction blurred in the holding below. See Laborers Loca117, 1999 U.S. App. LEXIS 19576, at'16 ("foreseeability and direct injury are distinct concepts"); id at * 18 ("substituting the foreseeability test, in place of finding the existence of a direct injury, is error. As a general rule, proximate cause requires that both be present"); Oregon Laborers-Employers, 17 F. Supp. 2d at 11.77 ("foreseeability is distinct from the proximate causation policy of limiting actions to those situated most immediately to the alleged harmful conduct"), aff'd, -- F.3d ---, 1999 WL 493306; Iowa ex rel. Miller, 577 N.W.2d at 406 (remoteness "is not based upon a factual inquiry to determine whether the damages claimed were foreseeable or whether they were a proximate cause; rather it is a legal doctrine incorporating public policy considerations") (internal quotation marks and citation omitted). The principle that a court, as opposed to a jury, should determine whether the relationship between a plaintiff s injuries and a defendant's actions is too attenuated to support liability underlies the numerous decisions by state and federal courts dismissing similar complaints by union funds discussed above. See supra, at 7 & n.5, 9-11, 16-17. For example, in addressing on interlocutory review the same question presented here, the Second Circuit ordered 25
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i It is a settled canon of statutory construction that courts must, first and foremost, give effect to the "natural and ordinary meaning of the language" of a statute. Steele v. Ft. Sanders Anesthesia Group, P.C, 897 S.W.2d 270, 280 (Tenn. Ct. App. 1994). The relevant provision of the Act provides as follows: [a]ny person who suffers an ascertainable loss of money or property, real personal or mixed, or any other article commodity, or thing of value wherever situated, as a result of the use or employment by another person of an unfair or deceptive act or practice declared to be unlawfal [under the TCPA] ... T.C.A. § 47-18-109(a)(1) (emphasis added). The requirement that the "ascertainable loss" occur "as a result" of an unfair or deceptive practice could not be clearer in requiring the traditional elements of causation. Where, as here, "the words of a statute are plain and unambiguous, the assumption is 'that the legislature intended what it wrote and meant what it said. "' Perry v. Sentry Ins. Co., 938 S.W.2d 404,406 (Tenn. 1996) (citations omitted). Indeed, contrary to the trial court's misreading of the statute, the Court of Appeals has held in two separate cases-one of which issued prior to the decision below--that the plain language of section 109(a) incorporates the common law elements of proximate causation. In Stracener v. Swindle, No_ 01A01-9502-CH-00047, 1995 WL 414873 (Tenn. Ct. App. July 14, 1993) (App. W), the Court of Appeals expressly held that "proximate causation must be proven [under Section 109(a)] whether the claim is based on fraud ... or on mere negligence." 1995 WI. 414873, at'3. And just last month, the decision in Harvey v. Ford Motor Credit Co., No. 03A01-9807-CV-00235,1999 WL 486894 (Tenn. Ct. App. July 13,1999) (App. V), reaffirmed that TCPA "plaintiffs are required to show that the defendant's wrongful conduct proximately caused their injury." 1999 WL 486894, at *2. Indeed, the Harvey decision upheld dismissal of a 28
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.. Jeff Jones, Esq. Scott C. Walker, Esq. Elizabeth P. Kessler, Esq. Jones, Day, Reavis & Pogue 1900 Huntington Center Columbus, Ohio 43215 Albert C. Harvey (BPR 7955) Daniel F. B. Peel,(BPR 19245) Thomason, Hendrix, Harvey, Johnson & Mitchell 2900 One Commerce Square 40 South Main Street Memphis, Tennessee 38103 Counsel for R..T. Reynolds Tobacco Company Kenneth N. Bass, Esq. Jennifer Gardner, Esq. Kirkland & Ellis 655 Fifteenth Street, NW, Suite 1200 Washington, DC 20005 Lee J. Chase, Esq. (BPR 8443) Glankler Brown, PLLC. Suite 1700 One Commerce Square Memphis, TN 38013 Counsel for Brown & Williamson Tobacco Corporation (individually and as successor by merger to The American Tobacco Company) 32
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L906[ 9?9
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Laborers, 1998 WL 186878, at *5 (`khere are ample 'private attorneys general' who will vindicate the alleged wrongs"). Indeed, there are a number of lawsuits by individual smokers pending in Tennessee, including at least six in the trial court below.15 Tennessee Law Makes Clear That A Trial Court May Dismiss Claims That Are "Too Remote" On A Motion To Dismiss Pursuant To Rule 12.02(6). ' In addition to undermining the rule that the law "does not attribute remote consequences to a defendant," Southern Pac. Co. v. Darnell-Taenzer Lumber Co., 245 U.S. 531, 533-534 (1918) (Holmes, J.), the trial court's holding suggests that the remoteness doctrine is not amenable to application by a court in the context of a motion to dismiss pursuant to Tenn. R. Civ. P. 12.02(6). But Tennessee law makes plain that where the alleged facts demonstrate that the plaintiffs' injuries are purely contingent upon harms suffered by third parties, and therefore incurably remote, the trial court can and should dismiss the complaint. There is simply no Tennessee authority for the proposition that a court should not, in the first instance, make a dispositive determination of whether a complaint clears the legal threshold erected by the proximate causation requirement. Indeed, the Supreme Court of Tennessee explained in Doe that, "where the facts are not controverted, [i.e., in the context of a motion to dismiss pursuant to Tenn. R. Civ. P. 12.02(6)], the question of proximate or intervening cause is for the trial court." Doe, 845 S. W.2d at 183. In other words, even assuming that the Funds were able to adduce evidence proving their allegations of defendants' role in causing their derivative injuries, it remains a question of law for the trial court whether liability should attach to the is E.g., Elliott v. Philip Morris, Inc, No. 89029-2-TC (Shelby Cty. Cir. CL); Falcicchio v. RJ. Reynolds Tobacco Ca., No. 94722-8-TD (Shelby Cty. Cir. Ct.); Gipson v. Brown and Williamson Tobacco Corp., No. 87886-5-TD (Shelby Cty. Cir. Ct.); Hanks v. Brawn and Williamson Tobacco Corp., No. 96332-5-TD (Shelby Cty Cir. Ct.); Jones v. Philip Morris, Inc, No. 93024 (Shelby Cry. Cir. Ct.); Laios v. R.J. Reynolds Tobacco Co., No. 94562- 8-TD (Shelby Cty. Cir. Ct.). 24
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RECEIVE SEP11999 T. P. DURHAM
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0 Protection-Act, Mich. Comp. Laws Ann. § 445.911, which provides a private cause of action for "a person who suffers a loss as a result of a violation of this act") (emphasis added) (App. 0). In short, the remoteness doctrine applies with full force under the TCPA and bars this claim, as well. CONCLUSION This Court should reverse the trial court's decision and order the Complaint dismissed in its entirety. Respectfully submitted, Ld'o Bearman, Jr., Esq. (BPR 8363) Jill M. Steinberg, Esq. (BPR 11603) Baker, Donelson, Bearman & Caldwell 165 Madison Avenue, 20th Floor First Tennessee Building Memphis, Tennessee 38103 Kenneth J. Parsigian, Esq. Christopher D. Moore, Esq. Goodwin Procter & Hoar LLP Exchange Place Boston, MA 02109 Jack E. McClard, Esq. Stacy Colvin Taylor, Esq. Hunton & Williams River&ont Plaza 951 East Byrd Street, East Tower Richmond, Virginia 23219 Counsel for Philip Morris Incorporated, and for purposes of this Brief only, on behalf of defendants listed below: 31
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a complaint.for failure to allege proximate cause. See ibid. The trial court's view that no "court decision ... suggest[s] proximate cause to be a necessary element of a cause of action under the Act" (R. 356) simply cannot be squared with Stracener and Harvey. Just as in Holmes, where the Supreme Court construed the federal RICO statute with reference to its common law underpinnings, 503 U.S. at 268-269, the Stracener court considered the TCPA's common-law antecedents, which-like their statutory descendant--incorporate a proximate causation requirement: See Stracener, 1995 WL 414873, at *3 (citing Maddux v. Cargill, Inc., 777 S.W.2d 687 (Tenn. Ct. App. 1989) (proximate cause applicable to fraud and intentional torts); McClenahan v. Cooley, 806 S.W.2d 767, 774 (Tenn. 1991) (proximate cause is an essential element of a negligence claim)). This inquiry into the Act's common law predecessors illustrates the settled practice in Tennessee of construing statutes with reference to the common law. E.g., Harbison v. Briggs Bros. Paint Mfg. Co., 209 Tenn: 534, 536, 354 S.W.2d 464, 470 (1962), overruled on other grounds, Ennix v. Clay, 703 S.W.2d 137 (Tenn. 1986); In re Deskins' Estates, 214 Tenn. 608, 610, 381 S.W.2d 921, 922 (1964). As the Court of Appeals held in Stracener, the common law required a showing of proximate cause for both intentional and negligent torts, 1995 WL 414873 at *3, and no statute should be presumed to change pre-existing law unless such a departure is explicitly indicated by its text. See In re Deskins' Estates, 214 Tenn. at 610, 381 S.W.2d at 922; Snyder v. McEwen, 148 Tenn. 423, 256 S.W.2d 434,436 (Tenn. 1923). The text of section 109(a)(1) of the TCPA plainly requires proximate cause, consistent with its common-law pedigree, and nowhere even hints at a departure from this requirement. co ND ~ ~ 29 0 U-i w
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, ±}425 • t 398 P.1t/ZZ F-81B qg-29-gg o2:b9pm Fram HUHT9N.1AU$ p Wb$mA t16e by MCl[ p8[IlCipdAtB AAd henGSCditiC6..'- CP7f1flO1a/ at VO- Tbjs> in fYtilr catued eheFa3toiacutgr4a.toCempeasos mtatagwpsYasgsawYia&reletcdhcaldtclsums. TYei9 CMurn finds no retUMM saan evctl esnm9ely su8gaadq thst one Caa assuUe dhn sart of "speCi81 CespaAeibtlisp° ptaln[fiT d=IM SiA1piY by pkejag BtWp[iW=qfi w dpWa* catforai9 s[6kpmE8lCb. FQtdiRtnaec, aqy mm t9f d¢tum imrol" negllpUCe ea)ait~ tiee e~ems¢u off p1+oAbqatr ssWge. 77ta acen~rin dcsctibai bp pi3iarif€bas maok tpa tc¢waaa a c.mal sanucceioatwwPpt the dthndAUp' aatoaa t,nd pSdiGtilTg itdarict for ft foaaor sp pe ape prax=ta cause of dte lertes. Hvan if aaa wnra to assume tba pr0...ur.°ctb' pOiHr QFJY4HQIwlI1< ®oadn.a.wMN.y~ W4td the 0'4fp1 (MW4g.b ft M1i - Wei® plamly msgetad wvYSSd constanaa), k 3a dtEfiaatt ca aBy Wkh ¢ny masu[+G of =rmtw. asuckS Iaea pcecisim. tow oteay of its p.rodpats qc ?¢ad mighe bave tcsp diasus9al ftpi ama&iug bw foc s'~e °S%Vmian at eeitW ipfigceiaticaa. Tbis iatk of ceetaumy a: ®a eaasatioa, tha pi~Cplty en 6zing ebe paniaat of p!slmqt~'s dauaagas whnch aee fairIY aluihaPebie ta defcpdaAr3' cmdace.' etc:, spa1c to thc practical 'Zh s uncestsinlY ~ w boPL caa:etiea aad deraagc~ w8s ~xi~aly t7u autt aYpatisy aaWderatioa dimcusmd by ft S®eatW Ciwvi¢ ia laburera 1ma117, ajbat in ft coatraa Gf cvaluatln$ ~rlaiie~ m brisga itICO c1et81fi Rbem eamscdm ircenanepwsicvia¢b' gok" iaacase, liicetpaptcaxot eoe, wpesc tim tgtuia dLt Awd 3a dcrieo aae aWY drap 4eYendsnts' at5aazmive mcacntidact htR alsf ftam olaiadfFa' ftwnl«tdy fadwxd inseaon. iTau is. it a eflm mmiat to ascrrtain tmo ~ceca abnttLzw froat ~tual, affimtative ennduca, qunso spccqldu whal demogas aflua iiom a pecty's faiFWe m acC. &a dw taRec aiwa¢ian, as in Rhe c~ec acbaad. ic ~camas difftail¢ BF diSGqgalsh amnng tka spoltftado agPacm¢S ~at ipig6t 9wva affoct~.~ItbC da4asges. }fe:~, f~.,mmpm, plaia¢iPIT aqeged diruagei miYhtbave dadvad 6topi aas~eieesriea ia stm Funds' mvn meoayememm as wdQ as fmat tlaei-sttwkla8 rofamd hea3th pMblMa suYfsttsl b9 ft saaokere, amd it woWd bc ede sheersst aort of spnculwiioit aa 1 16
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Jeffrey S. Nelson, Esq., Richard L. Gray, Esq. Shook, Hardy & Bacon L.L.P. One Kansas City Place 1200 Main Street Kansas City, Missouri 64 1 05-2 1 1 8 Roger Dickson, Esq. (BPR 1933) Marcia Eason, Esq. (BPR 11374) Miller & Martin Suite 1000 Volunteer Building 832 Georgia Avenue Chattanooga, Tennessee 37402 Counsel for Lorillard Tobacco Company Harry Zirlin, Esq. Debevoise & Plimpton 875 Third Avenue New York, New York 10022 William S. Lockette, Jr., Esq. (BPR 10257) Rebecca B. Murray, Esq. (B_PR (11622) Kennerly, Montgomery & Finley, PC 550 Main Street, 4th Floor Knoxville, Tennessee 37902 Counsel for The Council for Tobacco Research - USA, Inc. Saul C. Belz, Esq. (BPR 4346) Waring Cox, PLC Morgan Keegan Tower 50 North Front Street, Suite 1300 Memphis, Tennessee 3 81 03-1 190 Counsel for The Tobacco Institute, Inc. 33
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8251 9064 7 ~;
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a Bruce M. Ginsberg, Esq. Marc 7. Rachman, Esq. Davis & Gilbert 1740 Broadway New York, New York 10019 Gary K. Smith, Esq. (BPR 8124) Smith, Sabbatini & McLeary, PLLC 119 South Main Street Fifth Floor P.O. Box 3582 Memphis, TN 38173 Counsel for Hill and Knowlton, Inc. Robert G. McDowell, Esq. (BPR 961) Baker, Donelson, Bearman & Caldwell, PC 1700 Nashville City Center 51 Union Street P. ®. Box 190613 Nashville, Tennessee 37219 Counsel for United States Tobacco Company 34
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The trial court's reasoning that the terms "any person" and "ascertainable loss" manifest the Legislature's abrogation of the proximate causation requirement is also flawed. As an initial matter, neither phrase suggests a dilution of the statute's proximate causation requirement. Rather, both phrases should be construed in light of the qualifying "as a result" language, as recognized in Stracener and Harvey. So read, the unambiguous (and common sense) meaning of section 109(a)(1) is that "any person" can sue for an "ascertainable loss" providing that loss occurs "as a result of' acts or omissions proscribed by the TCPA, In addition, numerous courts have dismissed union fund claims under the virtually identically-worded consumer protection statutes of other states. tb For example, in Seafarers the trial court held the remoteness doctrine barred the funds' claims under Maryland's consumer protection act, which allows "anv person [to] bring an action to recover injury or loss sustained by him as the result of a" practice prohibited by the statute. Seafarers, 27 F. Supp. 2d at 634-35 quoting Md. Code Ann. Com. L. § 13-408(a) (1998)) (emphasis added). See also Oregon Laborers-Employers, 17 F. Supp. 2d at 1179-81 (holding that funds' claims under the Oregon Unfair Trade Practices Act, O.R. S. § 646.638 (1998), which provides a private cause of action for "any nerson who suffers anv ascertainable loss ... as a result of' an unlawful or deceptive trade practice, fail on remoteness grounds) (emphasis added), aff'd, - F.3d --, 1999 WL 493306; Operating Eng'rs Local 324, slip op. at 4, 8, 11 (dismissing funds' claims as too remote under the Michigan Consumer 16 In all, no fewer than eight separate state and federal district courts have recently dismissed union funds' claims under state consumer protection acts on remoteness grounds. See Northwest Laborers-Employers, slip op. at 5 (App. G); Contractors, Laborers, Teamsters & Eng'rs, slip op. at 6-7 (App. K); Teamsters, 34 F.,Supp. 2d 656; Texas Carpenters, 21 F. Supp. 2d at 677-78; Oregon Laborers-Employers, 17 F. Supp. 2d at 1179-81, affd, - F.3d -, 1999 WL 493306; Seafarers. 27 F. Supp. 2d at 634-35; Operating Eng'rs Loca1324, slip op. at 4, 8, 11 (App. 0); New Mexfco and West Tez Multi-Craft, slip op. at 2 (App. P). 30
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0 CER 4D E_OF_SERVJCE We hereby certify that on August 23, 1999 a true copy of the foregoing was mailed, first class, postage prepaid, to the following counsel of record: Deborah Godwin, Esq. Timothy Taylor, Esq. Florence M. Johnson, Esq. Agee, Allen, Godwin, Morris, Laurenzi & Hamilton, P.C. 200 Jefferson Avenue, Suite 1400 Memphis, TN 38103 John A. McReynolds, Jr., Esq. Baker, McReynolds, Byrne, O'Kane Shea & Townsend 607 Market Street, 11' Floor Knoxville, TN 37901-1708 Counsel for Liggett Group, Inc. Louis L. Robein, Esq. Robert H. Urann, Esq. William Lurye, Esq. Nancy Picard, Esq. 2540 Severn Avenue, Ste. 400 Metairie, LA 70009-6768 Robert J. Connerton, Jr., Esq. John Broaddus, Esq. Connerton & Ray 1920 L Street, NW, 4t° Floor Washington, DC 20036-5004 Counsel for Plaintiffs Mary Elizabeth McGany, Esq. Adam I. Stein, Esq. Kathy L. McFarland, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017-3954 Counsel for B.A.T Industries PLC Edward Bearman, Esq. Branson & Bearman 44 North Second Street, Suite 701 Memphis, TN 38103-2266 Counsel for Smokeless Tobacco Council, Inc. 3 5
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MAY. l. 1999 9:58AM, ND. 0490 P. J 7/11 e S4f~ifcatu,i,,f_}l,ryir.r. I Iterehy cenil'y thm a copy nr llm firce{;niag has hccn rncdlud vin 1 I. S. Mail, puxwgc prepafd, to tha Collowing, lhis _~?~ day uf M~ty. 179'1; Joscph M. McLnushlin, Esq. Adnm 1. Stein, Eaq. Micbael 1'. Punegmvsi, F.sq. Michnel J. Garvey, f:sq, Sitnpson, Thsclter & Dertlett 42S Lexmgton Avenue Ncw Ynrk,New York 10017-7954 Ii. Louis Crossley, Jr.,lisq. Long, Rngsdalc & wurers, P.c:. I 111 NonhShurc Drivc: N.W, Suite S700 ~ Knuxville, 7TI 37919-4074 Counral for A,p.T.lndnstries, hLC Edward M• Heann®n, Esq. Draneon & Acamtnn 44 North Second Street Stdle 701 Mcntphia,Tennesaee 3R103 Counsel for Smokelers Tobacao Council, Inc. ~~Cu..~y( e L1 3nVd EO£Z4LSL967 •a1 SlHaWBW •Wnw-r aa..•
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1;::bd1Y I6..Y " 1,Ld RECYCLEDPAPERMADEFROM20YPOSTCONRl1MERCONTENT 3406LSZ8
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RECEiVED ~ MAY 0 7 1999 T. P. DURHAM 0
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MAV. 7.1999 9,56AM , 0 IN T4lE CIRCUIT COURT OF TENNESSEE POR THE THIRTIETH JUDICIAL DISTRICT AT MEMPI I1S , STEAMFiTTERS LOCAL UNION NO. 6L4 AEALl71 AND WELFARP, FUND, by and through its Trvneca. TENNESSEE CARPENTERS REGIONAL HEALTH AND W eLFARE FUND (formerly Carpenters National Health and Welfare Fund), by and through its Trustees, MIDDLE TENNESSEE TEAMSTERS TRUST FUND, by and throvgh its Trustees, IRON WORKERS DISTRICT COUNCIL OF TFNNE~SEE VALLEY & VICINRY•WELFARE PLAN, by and dtrough its'Ilnntacs and on behalf of themsclves and all othera similertyaitueted. , NO. 0490 P. 3/P 1 Pleintiffi, 0 v- No. 92260-2 T.D. PHILIP MORRIS, INC.,1L]• REYNOLDS TOBACCO COMPANY, BROWN & WILLIAMSON TOBACCO CORPORATION, B.A.T. INDUSTRIES P.hC., LORILLARD TOBACCO COMPANY, LIOGETT GROUP, INC., THE AMERICAN TOBACCO COMPANY, THE COUNCIL FOR TOBACCO RESEARCH - U.S.A., INC., THE TOBACCO INSTITUTE, INC., SMOKELESS TOBACCO COUNCIL, INC., HILL & KNOWLTON, INC.. UNITED STATES TOBACCO MWW. U}Jl4IS §TAT6 TOBACCO MANUFACTURING COMPANY, INC., GALLER WHOLESALE, d/b/a P.M. GR$F,N & SONS, INC. and TENN-MISS DISTRIBUTORS, Defendants. a ORDER GRANTING PERMISSION TO APPEAL THIS COIJRT'S JANUARY 29, 1999 ORDER TO T1IE TENNLSSEE COURT OF APPEAL.S PURSUANT TO RULE 9 OF'I'HE 1-GNNESSBE RULES OF APPIiLI.ATN I'ROCEDURL•' This cuuse came on to be heard uron Defendants' ApPlicetiun For Pemdssioti To Seek Interlocutory Review OTThis Court's January 29, 1999 Opinioln and OnWr Denying In Part,
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MAY. 7.1999 9:58AM 0 c > (:ounocl for Lnritlwrd Tobacco Con(paay Plamy %irlin, Esq. Steven K1uQroon, Esq. .Uebevosa & Plimpton R75'fhird AvemVc New Yurk, New York 10022 William S. Lockeno, Ir_. r~sq. Itobecca /3. Mun•ay, Esq. Kennerly, Montgomery & Finley. !'C 550 Main Strcc(, 4(hFloor Knoxville,Tennessce 37902 Couneer for The Couicil for Tobocen Rcsenreh - USA, luc. tioul C. Ue1x, Esq. ~ Waring Cox, PLC Morgan Keegan To.ver 50 Norlh ('ront Street, 5uim 1300 Memphis, Tennccsce 3 8 1 03-1 100 Cnunrcl for Tha Tobacco Institute, Inc, tlntce M. Ginsberg, F.sq_ Marc J. Itachman, Esq. Uxvis & Gilbert 1740 Orondway Ncw York, New York (0019 Gnry K, Smith, E.yq. Smith, Sabbatini & ivlcLcary, PLLC 119 South MRil1 Sth Floor p.0. Aox 35R2 Mempttis, TN 38175 C.eunnel for I1i11 and Knowlton, lne. Robert G. Mcf)owell, L"rq. Hakcr,lMnelson, Dcarman k Cnldwell, PC 1700 Nashville City Center 51 Union Street p. U. Dox 190613 Noshvillc,Tennecsee 37219 Counecl for United States Tobacco Campany 9 N0.0490 A 10/11 01 3'Jtld EQfEZGLSto61 -fll S1HdW8N °WONd 9O•Ll 66-90-RHW
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1Urd. 17. 1999 1 Q: 23AMram-xusTON wILLIaNs 0 IVU. 70/ l r ti t-- 4T139 ~ T-123 P-04/06 F-935 ~~~~~ l^iur r uuut r-ino IN TNE COURT OF APPLAi.S OF TENNpSSEF AT JACKSON ST6A.MFITTERS LOCAL i1MON N0. 614 HFni.TH AND R+WAREFUNA, E'f AL, PlaintiWAppoUeea, C V. p1iMdP MAB>ftlS, INC., RI RG, fkfft*WAWUM OAnFA F i1.E D ~ JttN 151999 ~ tt ot 1 +Alun. A1o. OTAQl-990s-CV0013D (Wby Cucuit Ho. 922(0) Thia caWSe is 6eEocc do Caust aa du joiat Rate 9 T:Rw.P- applicsdan diod by the paatien hoteto. Upoa coasldcraaoa oflhe applicadoa apd sapportiag dawiaeuts& i[ afpats w tbs Cam do the aAplimiaa is wAYlekra ®ad tboutd ix Srented, Aaadin0r, tT !9 ARA)iAEA Qw dse jaiut Ru1e 9'C.R.A.P. applicadoa be ycoated. fiar ewo of adaaioigratia% do piainafFs heraa "l prooead as tba.ppalkns ad iho dafoadants shsU ptacoed as thc qpwftm ..~- a ~
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MAV. 7. 1999 9:57AM fUO. 0490 P. 8/t P r A 0 0 0 APPROVED FOR ENTRY: ~26q.ak yr.alWin-~a. .wN.. JrS Debnrati liodwin, Esq. "- Timnlhy Tnylur, F-sq. Flanrncu M. Johnson, Esq. AIIe,L, Codwin, Mnrris, l.aercnzi & Bloomficld, P.C. 200 Jeffetsort Avenue ' Snitu 1400 Mcmphis,Teonessce 38103 Rnbert J. Cormerion, Is9. John Llronddus, Esq. `t James S. Ray, Esq. 1~ Connenon & Ray 1920 L Sueet, N W, ath Flnnr Wnshinglon, DC 20036-$004 l.nuis L. Rnbcln, Jr., Esq. Rnhcn 1[. Urann, Gsq. WIl1imi Lulye, Esq. Nnnny picurd, Esq. 2540 Sevem Avenue, S(c. 400 P.O. Box 6768 Melairk, LA 70009-6768 Jules 13. LeBlonc, III, Esq. p. Gernld Mnples, Esq. Camcrun Waddelll rs9. L Burton f.e131ene, IV, Fcq. Lel)lanc, Maples & Waddell, LLC 5353 Essen Lene Suite 420 Anlon Ruugc, LA 70809 Oeorgc Matlhews Fleming D'Liea Simmons SIevBKCkentt "nll lqeming & Associales 1330 Post Oak Aonlevnrd Suite 3030 Nauelon, TX 77056-3019 Counanl for Vlainrirc. Julie IZ. Flscher, Hsq. Aaron Marks, Esq. Kasowiiz, Benson, Torres & Friedmon 1301 Avenue of the Americas New Yoik, New YorR 1001:1-602a John McRcyLLolds, Esq. Raker, McReynolds, Dynte, 0'Kant, Shca &'1'ownxunn 607 Market Slrcet, ! I th Floor Knoxville, TN 379A1-170R Cuunsel for Liggettl:ronp, Ine. 6 0 30bd EOCLLLSI06L 'OL SIHdW3W 'WObd 90'Lt BB-90-1\'aW
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REECElVE® Fe31 19M TERRiP.DURHAM
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MAV. 7.1999 9:57AM N0.0490 F. 9/11 "A 0 c e t.c~r Bt:anan, Jr., Esq, Jil M. Stainberg, Esq. Doker, Donelsun, Bcaman & Caldwell 165 Madivon Avenue 20th Floor McrnphiR,'fennessee 39103 Jack C:, McClartl, Esq. Stocy Colvin Taylor, Esq. Ilunlon & Williams Riverfront Pinza 451 f•,aa flyrd Street East Tower Ric]utmnd, Virginia 23119 Counecl for Philip Morrin [ncarpttrutcd, and for Pnrpo,rt~ nf Ihis ard,v Pmly, nn hehaIf nf dcfehdants listed below Jetl'Jones, Esq. Scott C. Walker, C•sq. Jones, Day, Renvis & Pogue 1900Hontington Cemcr c:o]uotbtts, Ohio 43215 Albert C. Harvey, Esq. nnniel F. A. Peel, Esq. Thomason, Ifendrix, Harvey, Johnson & Mitcheli 29th Floor One Commerce Square 40 SOnth Main SlrECt Memphis, Tennessee 3 R I 03 Counsal for R. J. Reynolds'Pobacco Company Kenncth N. Bass, Esq. Jennifer Gardner, Esq. Kirkland & FI1is 655 Fifleenth Street NW Suitc 1200 Washington, DC 20005 Counset for 8rown & Williamson Tobaceo Cnrpnratfon (individttally rutd na ytrccessor by merger to The American Tobacco Company) Jeffroy S. Ne{son, Esq, Aichard L_Cray, Esq. Shook, I tardy & Aacon LL.P. f)nc Kansas Ciry Place 1200 Moin Street Kansas Ciry, Missouri 6-010$•211 g Roger Dicksun. L•sq. Marcia Mercdith Eason, Ssq. biiller Rc Martin Suitc 1000 Voluntcor Auikling 832 Georgia Avenue ('hn/ IanonSa, Tennessce 37402 7 9 3DVd £0CL6LSl06r 'aT S[HdDr3W -ii02l3 S0'LL' 6S-9Ql-0.tlW
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DEC-11-98 16.12 FROM. HAKER DONELSON . ID= 9039772303 • IN THE CIRCUIT COURT OF TENNESSEE FOR THE THIRTIETH JUDICIAL DISTRI(9' AT MEMPHIS STEAMFITTERS LOCAL UNION NO. 614 ) HEALTH AND WELFARE FUND, by and ) through its Truetees, et al., , ) ) PlalntitG, ) Cate No. 92260-2 ) v. ) ) PHILIP MORRIS, INC., et a1., ) ) Defendauta. . ) PACE 4 DEFENDANTS' REPLY BRIEF TO PLAINTIFFS' RRIEF IN OPPOSITION TO DFFRNDANTS' MOTION TO DISMISS FOR FAH URE TO 5TA'PE A CLAIM
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co N U't ~ ~ ~ D D
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dY1AY. 7. }999 9;57AM NO. 0490 P• 7/21 tha rcxu(ts rcnehed al trial. An eacly ru.umal wili dispusc•nf thv litieutinn• 'Ihrralitrq .m intnrkx.utory oppcal iz in thc b~;,t intcrc.rta nf nll liri~ams innl the~INI1Cii~l :.y+h:m_ • Inturlncatnry revicw is ;Ilw warrnnrt•d bsewtec ccnnin I:CItIpY I1rtl5K1/IC11 hy (hls casd have nut yct been addresscd dircctly by ihc 'Ccnnosscc alq,clpilv cnvns. Pnr cxanlplc, nn rnhcr Tannwcu eoun has hnA nn nppanunily lo nile whvlltr•r Iba rrrunlrnds Juco'inc pnmludts Ihc Jircat ns9cnion of ennnnnn law aod stnnuury dairn., (inch+d7nt;'I'('1'A claim,) hy I:Ibur wtinu futttls anJ ofher silnilar third-party-pnynrs. In attdition, tdntoaLlh dle ('unir hua nut yet addrescA• 0 0 fho issue, piaintiffs xeck tn prnsrxuW thi.o casc as n ciasz action. 'I'hu., tbe mdcnma cnuld potentiany alTect n largei nurnbrr of 1nl>,ir nniun nmds. 71te (burl's .lnnutuy 29, 1'M9 dcci:tLut wilh raxpeer tn these-and tha other iwes 5et fbrth abovc ualld nL.n hnvc r,tmilicalinns fur n11N•r inJustricai such ns uun mannf:nalrcrs nnrl pltarnr,wetniral colnpnnius. Thu snnle rlmilicMinmt will be fell by the Tcnne.eaee cnnts. It is this Cnon's opinion, thcrofnn•, thut dUl'cnJanl.+' Applicalinn Hn I'crmirsiun lo Seck Interiocutory Re.icw td Ihiy Cnort's ]nnnary 29, 1940 hlJcr .hnulJ he C'ikAN'fl'iti. The Conn hereby 0Rf)1LRS that dclrn<htnls are gn)mcA pc•Intis>iult tn scek intcrluntqnry uppcnl, un%lcr Rulo 9 nf t(te Tennexscu Rules ufAppetlale PruceJivC, uf Ihc lidlnwing qnt:uliom: Wftcthcr Ihc trlal cottrt should huve Jisnlis.ud ;dl I'lainlill's' remaining eluimp (Counl I, fur n1lcr;eJ ~iulaliuus ul"I'unncasec CnnsWiter I'rotnction Act; CoNtt V, fer allugcJ fiauJ nnd dmceit; Count VI, for alleged negligcnt tnisrcptt:Ienulf,nn; nnd ('aiml XI for nllegeA epnspimcy) on t1x I;rnltntl:: that aenunmiC iniurias incurred by a union Itenhh care tru.<l fund wo purrl,v d,aivati~e nl' Illc physicad injurles whidt its panlt•Ipanis Sul'li!rud, and ;nc lherefnrc Ino rerrtole to permit recavery fls il mo(tcr of hw• PUrtlmnl ta Rule'1(n nf Ibe Tenncs.cc I'Zuh:¢ UI•Apimll:dc I'rnrl•iltln:, ori rctlnrrard by pltiintifls und ennsenterl to by dcfcndants, tbis Caurl hereby t)RI)IiRS Ihut nll prneecdin{la in tltc trial cnrm nrc he,,ehy stnyetl pen'Hdhtlt the (7onn of Appealt:' cun+idcr.uluu ni thin tnuacr. LNTCRthis ((l_('( _ddyof Mny, 1'Ah). : , •a• Ay_. ' ,y, unnylr. Moonr., 9 or ATEtUC COPY A17ES'f. ~!./'/ 4.•( 5 r 4nN.! E0SZG65L06e =Qi SIHdN8H 'NO2t3 b0'LL RFi-4O~-Awu
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FEB. 1. 1999 1i:51 p(20M. H EMF M IS NU 33UD Nte rD> 16075772303 PAGE 4 . ~~ • The Puuds Asrvu' saffcrcd and are suffciing d:urragcs by reason of fraud and misrcprescltlaliun by thc llefcrnfnnls and te;iwnabls rdfianco by Ihc plruelifTs. 6 • 'Ihr Fund,: wetc inlendcd and furt~seeuble viwinrs nf 1lofandents' unlawlitl und G:nrdulcw con.piiawy.:utd ar, it rvetdr;:uffered subslantial eerntumic lnjnriee. The eumphauL in additinn (n see:king nroncy eL•mtagus. idso secks ceRaut specific iqjluwlin rclief, as wdl os rucot'ory nf ouonrcy I'ce3 and litigalion cxpenses. t'. :I'huAvtio,u tu Uistuis YGc tlclGndanla ntuvc lu diswiss:tll clitimr fuc rha fallnwing rcasons: lrwb the cuutu!un L1w and swtulury elaims shnuld be disrnissod because tbe alleged iniw•iut;;Re t.n, Ninole. 2. 'I fu::,u>mtary cluims 3pnuld Ite tlismissed for adAilfopzl spcdfie reASOUs: (it) '1'Itc ('nuaurricr I'rutetAiun ncf c(ninr slN-nld be rlisluinscd Ixcxuse rhe Funds were nol ..cun.unwrs.'. (1>) '11K. Ami-rrnsl cldium atoldd bc dismissud because the plninl(ffe failed ro allege iut "a111i•Ira31 itll>i!y " ;Intl (lie cl4in!5, ;tcCUrdinb to 1(te cuinpl:lint, Ure itthetently itllcr-stule (tt cllandeL J_ 'fhc u) 1 niuon Inw ulainis!:Irould Ix: disrnisscd tbraddilinu,l spccifie reusonac (a) '1'hc Ccutd unt( ncR.lit}cnt misrcprewnruinn c(oims sttoulJ be diamissed becalue the Ptuid:t n+ay nui tua>vvc tiu iqjuries resuhiug frarn allcged iniarepresentntions to Ihird parlies; m,d thc l+uudv cunnnl cclalili.eh that Qtey justiiinbly relied u(xm dre detendants' alleged mi~rupscscntiNi~tn:;, (li) I'he cuu:ipiiyley ctlim alruuld (x Jism(syed as uuwt hecausc the underlying tortsand nllicr causes of:tctiun f;lil, • In (hu inix nn: 8r(;Unle!Il$ t1iLaIX1 upon t11C "IiCWlUrrlie IASS" r111C aild IhC doehinC nf "Feder0l Prccmpdnti' Iry d.>; Fcdcr,d (: igaretlc t.alx7Rng ssnd Miv.rl(sing nat, ),S$I1FS F41t IIF.WIUP/ 'I(lc 1!eUN15 t111is (x'e%entud IIIr tlCl'15iUn:no: (I) Whciher,linderlW:dncldncxnfrumutcntnss,Fedcrnlprccntptlonand/orllteEconnmic IRula thr;vc plniroi(7: aru pnxluJWd fium pw'souig mry clnim tinder iuly oE the lheories eet forth 3
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DEC-11-98 36=13 FROM: BAKER DOMELSON ID: 0025770303 e . PAGB .9 Statutes 28 U.S.(:, § 1292(6) .................................................................... ........................... ......................11) 30 (1.S,C. §§ 901-a5 .................................................................................................... ..................14 TCP,1 47-I H-102(4) ........................................................................................... ........................... ? 1 OIhCr AVLhuritieR. . ~ 2 Philip E:. Areuda & Ilerhr.rt Iluvenkamp, Antitmst Law J6•Ifnt 235-56 (rev, ed. I')'15)..... .'.: .Rcstntamcnt ('-I ufTorts. § 552 .......:........................................ ......................... . . . ..........14, ~u 00 N U'7 ~ ~ D v ~•
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DEC-11-98 16=13 FROM+ BAKER DONELSON ID= S@I5972303 PACB B Sleam/irlers Lucal Union No. 420 Welfare Fund v. Philip Alurri.r, 1998 WL 212846 (E.D. Pa. Apr. 22, 1998 .........................................................................1.(). 15 7a.rus Carpenlenv ffeullhldene/it Fund v. Phflip hlorrix (E.D. Ta, AuB. 311, 1998)..... ..,,,1. 2. 1, 15 United Textile Workers uJan+erica, AP'L-('fQ v, Lear Siegldr.l'MUling (-urp, 825 S.W.2d 83 (Tcna. Ct. App. 1990) .:................................................:............................... .. l I West Virginia Laborees' i'enrlwi Trust Fond v. Philip aVhuris, 6rc., ('iv, 3;97-11708 (S.D. W. Vn. Aug. 12. 1998) .............................................:............................................... I I West Virginia Ohio-Valleydrea Llf,C.W. We jare Fund v.Amaricun Tnhacru Civ.2:97•0978 (S.U. W. Va. Aug. 11, 1999) ........ ....................................... .....................I l 'lirklc v. C.fry ojKingsvon, 396 S.W,2d 356 (Tenn. 1965) ............................ ................................. 1:t O Un
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F E8. l. 1999 11 + 51 APlf oM' MEMPHIS ' 6J7.1.iLi N0, 3308---N• b/27 -- - ID, f9015772303 PACE 3 / ILI& t;{.t l'I:LtiR;ICt!Pn Ill \tllleh tile plain!iit:t mc unitw nrotti-impl.iycr hea{th and woifore utrst Iun.ln (16e '17rc I'nnds provide Itoxpital, Irhyxicilut. and o!her uledical eare and relutel !h•nrlit.N fnr mfiun w,lv):er::, their f:enillcs, ond retirccs. The Ptntds urc legld entitiee trndur !hc I3t11)IVycf 1tt'tin•nlCnt ItttbVllC SCCnrily Act (EItItiA), P18intiff$ Ilnve eY11CtRied frmd{ to )RUvide raedic:d trettbuctu :utd uJtcrl <ucPls tu Iheir Imnicipanls und Iknoficiarias vuffering fromlmo{:in6- talatcd illnuxxc~. . A• H)!!tun:uY-u,fS:utl)pI111)L Thc ptaituilfs ura ::ninu nte uuu,ms' !cading lul+aa<•,o curnpanicx, thcir lobbying azld public ea•I;tunns ;!gcutx, mtd 'a'vcnJ ur'1'onnclscc's whnlcmlv disVibutors o1'tab;lcco products to rcCOver tln• hr.Jth .:.uv v„-a, o.cpvnded I•y 9n Punds in tr.a! P;v!iciparus who Ituvt attffercd from tobaceo- rclutcd illuev.c~- '1 ht• c„mp4dnl alrcgex !h;n (1!c tlurcnJmns enllal;ud in a(hrce p,vt markeling plan irl wliich D¢li9dilwa ( I)?1y0)1rOBSCd tile dcvclUpmcnl of N SBfc eignruMlo, (Z) nlatlipainled nlcoline IcvcL,.and (1) mirri Pn'!~rnfvd tile Irrnh nboul Ihe aJvcrxe affecrs oPrubacco As A reslJl, qefendartts ahili.•d creuBSivi maliead cnslx fnr tubacco-ral:acd discaxs !n hc>•llh curc pR+vitkm such as !ltu Putltl+. '17,i. cau.ad tile I'onJa !o ,;tt('Icr IiunnchJ injury to their "iolhlmactt!ra." 1). ;~IICI!qSiS ?!U4L~~S'nlNl!ItUli Uf,!he P/nintifF'c ' Slkci6wally, Ihc pluinlifl>: nrc a(teg'rng• • 'Phr, pcfcndant:: vit,l;ncd thc'I'cnncsscc fonstuncr 1'rolectlun Act and tlle Plaintiffs in Ilreir :mn r;t;h! :+nd :L. repwaentuti vLK uf;t clnss, ;toi7cred ascenainahlo tlamages (theasnred by !1le incn:mrd Imrdth e:,re truv.:etrihuulblc tu (lte eontenteed u.o of k)ofondenrs' tohaeco pnntucts). . '1'Itc Pwldx hnve wf(cnsi iujuy !u their b!L+inexa buscd trn Uefendanls' anti-Irusl APIYIia11Y. 'Ily Prinr unlcr tho lllninliflk' complnint w;(y unfendul to include tlle Untied Pum$!ue Wt/rkef t I!mstllllltce Vund ms ur ndditintul party pluintiCf to the t!erion. 'Al thc uumnm,cenm.nt uforal nrgtnncnt, etnmftt for tbc plalntiffe nnnomleod to!hc 1.•o,tn thnr tile plnin+illv i(dcu4aJ tu enrer nn nrdcr uf volunlnry nun-soil nN to each of the lirllmving couur,: (tunnt Ill - I Injuxt fttorichmcnt, Coun( IV -1irt•nrh of n Voluntarily Undenakco I)uty, t'uuutr V II k VIII -11:ruoIt ol'r:vi-rt•s,ed und Implial Wtmrantic. respectively, Cotutt IX • Ncgligence, uttd t',tuat X fn,Jucta LI•lbillty. No erder M1as yet been untcred, 2
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`FEB. 1.1999 111S2AMZ~M• MSMPHr9 • iVO. 3308- 1'. ly/11-- - 1D• 7$07S772303 PACE 12 109, am yueted in the opinlon at page 17, has been changed.° Speci/ically, former'f.C.A. 47-18- lo9(e)(1) curntaincd toward Um end of the lust scntence the phrase "but not in a a:presentative cnpacity." A close read'ang of the existing §109 would reveal dwt tho Legislatute hardcletedthat (Ihrllse so thJt it nu\Y randS in part as fqllow&: "Any pcrsnn who sulTtts an oscertainahlc loss of tnoney ,., muy bring an action individuatly tu recover actual dtanages:' See T.C.A. 47-18- (09(n)(t). Uf couric the defudtions section. T.C.w. 47-18-103(7) detines "persmi' to metut specifically a"(rust" and "any othcr tegal or comtnereial entity however orAanized." The cardinal7ule of Tetmessce statutory eonstroction nod interpretmion is to a8certaht and gi ve efJeet to the intant and f purpose of the Legislature imrclmion to the subject iaatter of legisladon, a!1 ru1es ol'censtrwAion being but an aid tu that cnd. A statute must be construed so as lo asccrtaiu and give otfcct to ilke intent and purpose of the legisletion, considering the statute as a whole and giving wonls thcir cummon and onlinary mcnning. The Court shotdd assuroe that the Legislatare used each word in ihe staautc purposely and that dte use of thexe words conveyed sume intent and hud a meooing and purpose. Sce DJtri;e v. AbboJJlahnruurle.c Inc., 894 F. Supp. 327 (E.U.1'am. 1995). Indccd the sole purpose of eoustruing statutes is to ascertuin and to give the fullest possible clTn:t to the intentidns of the Ueneral Assembty in their cnucunent, See Tcwtesyer MmruJactured NousingAsxrnriariuM v. MaJropolirmt Guvernmem ojNurhviJJe, 798 S. W. 2d 254 (Tenn. App. 1990). lltc corollnry to Urm rule must be equally true. The fact Uiat the Tennessee Legislature removed Ihe phraac, "but not in a representative cepacity;" from §47-18-109(a)(1) speaks loudly as to the intent of the Legiylamre:in the face of Court dceiriotu, It ia clear to the Coun that thc lbnnessee Lcgislattue fully iritended that plaintiffs, such as the Funds here, should be pennitted to bring an action under the T,CGP.A, With regard to the defendants' argumcm that because the plalntiff Funds are not direct purchasen of thc dekndaNs' tobacco products and thue lack standing, the Court am firal no such requirement or restrictlons within the 1W) text of the Act. The defendnnts have cited no court deeisiop to suppor4 such a position and the Court has found none in its Independent rescorch Rather, refcrmlcing aguin amRh Coronu Corp. v. 1'eAJmn, lnc.. aupru- fuotnotc 25 at pugc 483. Ihe writer "The charqlc wea made in 1991. See Chapter No. 468, S.B_ No. 1207 enacted May 23, 1991; signed by quvcmor June ), 1991; ulid became effective ]uly 1, 1991. 11
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MAY. 7, 1999 9: 57AM N0. 0490 P. 6/t t Thi. Court roeognizc.r. d>vrcfore, thot n ucrrain porouti:d csisls thnt this Conrl's January 29. 1999 Order mLry bc reversed mL npixni. If this cuze prncevds 111rW1ip15 eL•tauf certifieation diacovery, n contested motiun to cenify a claxs, weriis Jixuuvery, prctriul mmlt»L¢, and triai. it will require a substantial invcslmcm of liliganl ond euurl resourovc. I/' duihndtmt.e rnnl odrer eourts across the cmudry are cmrcel dtnt plnimllTb' claim. -Nrn h:nral :w o m:qrer uf /nw herause they are roo mLnote, justice will not have heen servcd by rcquiring the pnnicx and du Tennesfce court system to mnke tllat investment bcibre ::ppcllule review of there ihrcshold issuee. Aecause a reversal of thls Conrl's decision with respcct m nce ai Plicttilnn of Ihe ° ' remotenesa dmrrine would result in dismissal nr the anrire r,nee, il i:: mors ellltaent tn seak appellate review Ixfore the perliel and the cotut en{;ago in Iwedksa. cxpenxive, uml ptnipamed iitigation. A_ Rule9(a)(j) Many couns applying the rcnmtcnesx ductrinu to labor union fund .rniln have deterrnined that remotcnesa is a di8poaitive issue msi Ihnt tlrese .:ose.q xhollld IM: dismiss<:d in their entirery es a matter of In:.' on rcmotcnesv gruands. This Cwu•l's uvmamenl ol' the remoleneas dootrins os to all imc9 ig uuiquely di(fcrait from ihin of otUcr Irial courts from oround Ihc country. lt ia panieutndy unique in its Irenlmrm with respcct ln Ihe 'fcnuo.ccc Cnnsnner Proteetion Act. This Court tbtmd no Tmmessee aulhority cnnt•oruinr applientinn or the remoteness limitation in dre cnntea of Tanncssee Consumer prntection Act and frnnd :mti misrepresctntation clnims. For lhe several nasnns sei out in this Cntht's apinion, thN f:ourfs e January 29, 1999, ruling disugrecs with decisions fnwt othor jud.diclions tintt tirc rarnotvacaz limitation is diapoaitive as a mailer of law in claims such us tho.se. Early resulalinn of lhia potentially case-disposirive issue through a llnle 9 inlel'Inentory appeal will enohlo the nppcllnic eourts to detennine whether TennessCe s BnnllnMr law Nmpteltl`Sa Iimin4 are rmil'urm wilh tho.e ofolherJurisdicrions and will avoid non-unifurm Ireaum,onl by uther'lbtmessuu ui.d scwns when faced with similar elaims. C. Other factors loading the court td e.cercire its AiscrcGon in favor of lxrrn iaing appuol 710 case will likely be appealcd ut some pninl reg:uJiesv ol' Ihe vuteome, An early aiYrmaneo will onhance the crcdihltiry of pre-trial procccdinl;:, nrtd lend rnoro ccrt:rinly in n e 4 =`Srf.i C0Et:6aSL8BI =4r 9[Hd118W =1tO2td bQllLl 68-90-7.V4r
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"FEB. 1• 1999 11;53AOM' MHMPHrS ,p. ,9u15,723N0. 3308 P. 22/22,t~s r~ ~ 4) ror the reasnnc stmed herein the Coutt is of the opinion that the doelrine of temolentxs, being applied sepuratcly to p~eh cnusc of uction, does not preclude either the cause of nctiun basud upon the fenncxcce Conxumrr Ihotection Act or dre csuses of action stated under Counts'/ and VI fur fraud mtd misreprcsuuation. Similarly. the Court is not persuaded that the causes of action arc prccluded by the doctrines of economic loss orprcemption, Por the reasons stnted, the mutiun of the defendants is granted as to the Anti-trust claims (Count 11). but detiledav to the cnuse of action stated in Count I(the Tennessee Consumer Protection Act), Coant V(Frayd mrd Deceil), uud Cotmt VI (Negligenl Misreprexenta6en). Uecnuqe rhe campluint clates a cpuse of action under the T.C.P.A. and for fraud and ndsrepresemallon, thc complnlnt must go forward with Count X] (Conspiracy) as well. The questiocts remnin with the Court insofar as the plaintif(s claim is coneorncd as to dnnm¢es. I•luwcver, a considetation in that regard would take the Court bcyund tho scopc of the plendiugs, :md mt+st await another day I'or consideration• Ald. OF WI IICli IS DrCIDLD, ORDERED. AD]UDG81) AND DGCRGED at Memphis, ShcYby Cuwuy,'fetDtessee in thu Tliutleth Judiciat District uf Tennessee this ~~ day of 11999. CON .L I.CI(1N COPY ATTEST it Z 24wlez~-- CrRTIrscA7j:or\!1C , I hereby certify dial a copy of the foregoiog docuwnent was moilcd by U. S. Mail, postage prepaid to counsel of record for the panies, on this the A 17 day of _ 1999. oQqc~'~rli / 18 6
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°JAM:-1.t3-99 IS•45 FROM+ MEMPHIS ID. 18015772303 PAGE 4 i 0 IN'1'I1G CIRCUIT CWRT OF TENNESSEE FOR TIIIi'{'IIIR'I'IETH JUDICIAL DISTRICT AT MEMPf11S S'r3iAM1;1'I'I'ERS LOC:AL. UNION NO. 614 I IEALTH AND W IsLPARF. FUND, by and tlirough its'frustccs, 'I'HNNIiSSL•'E CARI'RN'1'IiRS REGIONAL HEAL'1'H ANU WELFARIi FUND (formurly Carpenters National liealth and Wellitre Fund), by and through its Tntelees, MIDDLE 1'~NNIiSSNL'I'EAMS'I'LiRS ' IRUSI' FUND, by and through ita'I'nl:;tccx, IRON WORKERS DIS'I'RIC:T COUNCIL OF TIiNNIiSSHP. VALI.IiY & VICINI't'Y WI'iLPAICCi PLAN, by and through its'I'ntstccs and on behalf of themsclvcs and all others similarly situated. Ptaintiffa. v. No. 92260-2 T.D. PIIILIP MORRIS, INC:., It_.I. REYNOLDS TOBACCO COMPANY, BROWN & WILLIAMSON 1'OBACCO CORPORATION, E].A: I'. INUL/S'IRI}:S P.L.C., LORILLARD TOUACCO COMI'ANY, LIGGETL' GROl1P, INC., THI3 AMER[CAN TOBACCO COMPANY,'CHF. COt INCIL. FOIt TOBACCO RESEARCI I -1J.S,A., INC.. TIdE TOBACCO INSTITUTE, INC., SMOKELESS 'COBACCO COUNCU., INC., HILL & KNOWLTON, IN(:., -UNI'I'I{D S'I'ATES'['Ol1AC(:O COMPANY, UNITIiD S'I'A'['IfS TOBACCO MANUFAC'I'l1RING COMPANY, INC., C.ALLER WIIOLESALE, d/b/u P.M. GREEN & SONS, INC. and'!'FNN-MISS D[S'I'RIBU'fURS, Defendants. DEFENDANT;S° SUIIMISSION OF SUPPLEMENTAL ACITIIOktTY IN SUPPORT OF MOTION TO DISMISS _ The undersigned dcfcndants hereby submit the following decision as supplemental authority pcrtincnt to the panding mOtiwl to diffinlss: NAUti~ffUa,l twfvlao. nVIJi'N
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FEB. l. 1999 11:52AW®M= MEr'IPH/B 0 r p . 1901 5772dq.i jvv • 14onkly, du Cbutt fu~.~ uol follnd a grnl deal uf nssistancc froln tllc plaintiffs' brief and ;u f!umcrl( ou Ihis issuc ritbcr. thrdci Iht- ,altvw.d:mcc., Lhe Cvorl ean 111111 nn hnsis fur thc di<missal of nny oL'thu pl.iintillx claimx hapud ul>.,u appficnlinn nl' Ihe acurruntiu LoxS t ule. h w;r.. crlubflshed in Tennussee in t4c urso uf LS,rro,lYi•vUr 11'nrkr.r.rn/'qnrrricw, eru! r. Lenr ~ir.}tlenScrUirlgC'ur/,,, 825 5_W,2d Hl ('fenu. App. 1'140) Llsu Lhrrc r:m lie no nrnvury fiv purcly t'cunnmic lo;~e ubaenl physicai iqjury ar purpclLy tlaruat;~' n'~I/lling 1lnlrt ;t lIL'li•ntiolll'S oc~+llgcnCe. II) Lh:n case tile plalntlff union, in a cl:t~x actiun, Kuuyall 1u Iccuvcr wngbs hlSt hy dg elnpiaycc NCnlber9 a% a result Ofa propane gas Innk C luuk rusLurttiug ln a xhub,lua u1•1' Lho pbuu whcrc tile plairdilT:` ntarrrlqrs wnrkcd, ull as n resolt orthc dafulldnnlx' ucgliltunr hundlint: o f iu rrupanc gns tanks. The CI,T. W.A. argued thnt the defendant uwud a rhny Ln r;rka rcaxminbla mon.wrrLs iu iLN hmtdling aod storagc of propane gas to evoid the dsk nl'.:cunuutiu dumot;c tu tile hourly workers wilhin the industrial luak nnd thal the defendqnts' WilUrc tu adhcre Ln Ihar etand;nn er,nsiitutud u breach of ncc ditty e.v~d to thc hourly employees. The Court ul' Aplk,dx, lasLar n 3eeUnn. rcjcctcJ Ihat lhcnry optiug lu foltow Ihu nmjnrily rule that in a wr1 case Ihcrc cin he lit' rccnvr•ry fur purely Pr,nnornic loss nbsenl pbysical injury or propeny damage rcrnltiug liom o Jereudcuu'n nVqlli6ntec. . A:: liuulc,l hure. tlrc Pund.' cornl,laint Jucs nnl seek h., Auc n uuusu of action in ton based ntxln ne/;ligenca ItaLhca tile plainllff: here allege Llrat the Liuuduleot und intentional coarse of cundtwt of tile Lnl/.'teen inJll.i1ry pl'evunled Lbe Funds Ilumselves- noL the participants - from ralting natLinn Ln rerluce ur r.lilPinitc tLcir cuBL burdens frqrn tohaccn related disease. It Is the pWld3 eouG:nli.m Lhnl h:rJ Lhc dcfrndrmLN Jiscluced the trmb about the addiclivc qualitin ofnlcatlne and tile diseaxe r•auxin{l upbt•Ls orrunnki,r};, the lrlrnd,' trustoes could luvu taken aetion to protect the Pnnds fronl Ihc riuaucial hwdcn5 ur lolr,reco related diwise by excluding xmoking related diseaac frow corverngc. lirr cxautple, or by Iimidng cuwxlge of snxrking rolnLer) dissose orby imposing cost shnring mynirarnurtx, such ar- daduclible.c or co-paymenis, on Uteir panieipants who smoka It is the plaintilis' 1'ullher thr.r+ry ;wtl cumunGuu that this increasud ruudical uare burden adversely afl'ected nrn .wty iLx swnkinn mcmbcrs, bn1 irs non-snluking rncrpbcrr aia well_ In this contaxt, the Court is uf tile ..pinion that tile ecu,+arnic lasn nda is nur npplicabla It ia. rhena'uru, rhe eunsitlcred aplnion pf the Court tlurt mdecc and until the Court is lwtler 9 PAdE 70
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htB. l. 1999 11:53W or'' MEMPHIS rD. s902s77zNU•..jjV~ Y• LAGH se M r supponed by cvidctu:o that is bclieved by a jury, would sustain a cauzc of action for fraud and/or misrapresentation. •I'1re defcnd;utts nrgnc thm the plaimiffs can not estnblish justifiablc ruliance, which, of cnurse, is an estential element of a causa of action based in fraud nr misropresentation. To the cuntrary, tlte Funds allege in considerable detail the fruudulent sclteme.c and devices ol' the defcndattes. 'flrey stlcgc ruahcr that becaqse of such conduct they did nor take action to reduce or elhnknute their cost hurdena from tobacco related disease. Momover, they allege that if the dcteod;mtv hnd disdoscd dte truth nbuut thc addiutivc yualilies vf nlcutitn aad llie cOLvas of stnaking. the fundx could huvc timitetl eovctage, imposed cost shat'inb reyuiremenls and royuired their srrwking panicipanrs in involve themselves in ccnsatioo programs. (See plaintiffi brief at Pagcs7-4) . •Che Court tiuds ihai the del2ndants' rvgumcnts to dismiss the Fraud und Misrepresentation couitts to be speciuus at bcst. Accordingly, the motion is not well taken ond will be denied es to those counis. (5) CONSPIHACV In their brieis and in oral argument, the del'endants oddress the Ftutds' (:onspiracy count last, t he snle prcntise ot'tqe argumcnt is that "Becatuso of the lack of a viable undcrlying ton. the Funds' cmt.apirncy claim should be dismissed: '(Defend•,tnrs' Brief at Page 33) Intpliedly, the dcfendatns concedc that wttversety. if there is a viablc causa of waion, tiu conspiracy count has litb. Thus, becauso tttc Court luts dttided Ihut dte T.C.p.A. Cuunt atttl cite Fraud and MisraPrusenrution Counts should go forward, the Conspiracy Count must gu forward as well, The Court ia nut content to leave it there, however. The Conspiracy Count is broader iu xeupc mtd dceper ht itx muning and applicatiott. For cxatuplo, tlte T.C.P.A, couut is oot n enuse of ocunn H.~cw1 in Iort; rnther, it is smtmory. 7lteoroticatly, the defeadants ean "conspirc' to viotate it. 'therefore, even if the Fraud and Misrcpresonuuion Counia were dismissed, there is still room Grr conspiracy to violatd the'f.C.N,A. and vice versa. 7La Court is of the considered opinion that rho defendans' motion as to the conspimcy coutu is not well taken, und shutud be dettled. i7
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.JAN, 13-99 16a46 FROM. MEMPHIS ro. rB0u5vv2a03 i 0 this 6asist Thus, thosti gasos GnCing thataaio staws Wi0 state entities are not barccd by the remoteness doctrine for secking damages against tobacco industry defendants for harm to tobacco users are not relcvant precedents." Exh. A, at 12. Accordingly, the undcr?igecd detbndants submit the abovu (1ecision to the court in connection with the pending motion to dismiss, Respectfully submitted, o[k Bcarman,.Tr., Gs`a (8 ) Jill M. Steinberg (11603) Baker, Donelson, Benrmnn & Caldwell rirst Tennessee Building 165 Madison Avenue 20th Floor Memphis, Tennessee 38103 (901) 526-0000 OF COUNSEL Jack C, McClnrd, Isq. Stacy colvin'Yayler, lisq. I lunton & Williams Riverfront I'laza 951 East Byrd Street L'.ust'fowcr Richmond, Virginia 23219 John A. Lucaa. Esq. f luntan & Williams P. 0. Box 951. Knoxville,'femussee 37902 ATTORNEYS FOR PHILIP MORRIS INCORPORATED, AND FOR PURPOSES OF 'IYIIS SUDMISSION OF SUPPLEMENTAL AUTHORfI'Y ONLY, ON BEHALF OF DEFENDANTS LISTED BELOW; Jeff J. Jones, Esq. 1. 'fodd Kennard, Esq. Scott C. Walker, Esq. Jones, Day, Reavis & Pogue 19001iunlington Center Columbus, Ohio 43215 ATTORNBYS FOR R. J. REYNOLDS TOBACCO COMPANY Robert Klonoff, L•sq., JONES, DAY, REAVIS & POGUE 1450 G Street NW Wnshingtan, D. C. 20005 ATTORNEY FOR R.J. REYNOLDS TOBACCO COMPANY n.ani~n'viuw 4 PACB 9
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MAY. 7. 1999 9:56AM - N0. 0490 P. 4/ 1 9 0 Defendanls' Motion Tn Dismiss.t Defandan's' Appliontion wqs timely (iled on March 1, 1999, pursuant to Rule 9 of the Tennessee Rules of Appellnte Procedure. Although pluintiflv believe this CourCS Janunry 29, 1999 Onter was corrucAy decided, they ngree with defendnnlB that inlerlocutnry revtew of the Janttary 29. 1999 order is in tite interest of the parlics, Iha court, and judicial ccnnomy, liuving reviewed n1l the submissions from thc partle5 and heard ontl argument, this Court is of the npinion that defendants' Application should be granted based upon the tegal criteriaand fortttereasons set fonh below- Thc legal critcrla making tha 7anuery 29, 1999, thder appcalable undcr Rulc 9 arc (A) "the need to prevent heedless, expensive, and protracted IitigaQon. glving conslderaW,n to whether the challunged order wnuld be a basis' fur reversal upon cntry ot' o final jadYment, ilw probability of revcr.yal, and whether an interlocuroty appeal will result in a net reduction in the duration nnd expense of the litigation if the challenged order is reversed; " and (D) "the nccd to develop a uniform body of law, giving consideratibn to the existence of Inconsistent orders of other courts and whether the question presented by the challenged order will oat othctwisc be reviewnble upon entry ofGnaljadgnient:' Rule 9(a)(2) and (3) Tn. R, App, Pro. There nro other fuetor.t that also ledd this Court to exercise its diserction in favor of permitting appeul. In accordance with Itnle 9(b), rhe Court hereby stmes that the following fne(ore led the Coun to the opinion the criteria for granting an intedoattory appeal have becn rncl. A. Rule 9(a)(2) Atlhe bean ofdefandants' Application for Interlnnnnry Review is Iheir nssettioll that the remotenees doGrine is a lettol, not faetual, iasue and that it pervudce ull of Ihe Plnintifl's' theories of recovcry. In the Jenuary 29, 1999 Order this Court held it was a close question lRriiur pisinMV olgim im w tAmaoa. WN;li ik;k CAA Aront:lntleJ 16e appiicalion nt' Ilte remoteness doclrine is a jury questlon. the Court Is eware that many couns thet have cnnrldcted similar cases have dismissed subelantietly identical Ihird pmty pnyor auils in their cntirety, ns n matter of law on remoteness grounds. On April 9, 1999, thc United Stmes Court of Appeals t,'nr 1hG 56GOOd CItC111~ on initllOql(Ofq 9pp[fll, [CUCfSLd a 111 COU[I who daOlCd dlm11cS8I of Ill ~ 7his COUn denied dafendanu' modon in diamim as m.Cnum r-Vinlmimst urthe Tenndrec Conmmer Vnnccnon Ae4 COant V-rmud and Detetl, Conat VI-Negligent Misrepresenlatlon, and Count X4-Cunspimcy. 'rhle Coun grunted dePondnnls' mndnn In dismiss os /n Cnont II-Vjnlanon Of'I'cnneaxee Slatulory 14twinhtnt hegulnling Renraint Of 7Yade By Trust. Plefntigl have nansuited all rem.tning counts, gee'fraescript of ncecrnbar 19, 1999 heiring as 1n-t 11 Order olNon-suie dated March 16. 1999. ((o10Ku ... ) 2 b 9obd EOEZGGSIOBt -Qt SIHdW3W =WO21d Ee-6t B6-B0•-xtrW
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'FEB. 1. 1999 11 :50ANIeonf, memntats is NU. 3jUls r. ;)iee IA: 19015772303 PAC£ 2 IN THE CIRCUIT COURT OF TENNPSSRE FOR TiIE TNU(TIN:TII AUAICIAL DES'fRICT A'C MEMPRIS, s11ELBY COU NTY STliAM FI'I"I'CRti I.OCAI. UNION NO. 614 Hh;Ala'H ) AND WELftAI•iF. itUNU, by and through us 1'tustces, ) I'ENNBSSRF CAI1PIiMfGICS RBUIONAl.1IF•.'Af.TH ) AND WE?L.FAltti YUND (I'omuriy Carpemers National ) Healdl aiui Wclfarc Fund), by and through its 'E'rustccs. ) Mib1ULL'1'GNNEiSS1EF;'fEAMS'fCRSTRUST L'UN)). ) by and tluough it+'1'M1.vtees, IRON WOI(KIsRS ) DTSTR[C'1' COUNCIl. OF 'f[iNNESSISC VALLEY & ) VICINI'I'Y WELFARF. PLAN, by aMi tluough its ) Truslecs, and tin beholf of tllemselvos and all others ) simiinrly +ituatm6 ) ' ) S'lainliffs. ) ) v. ) I)ouhel 9 92260•2 ) PIIfUI' MOKRIS, INC, R,J, REYNOI.nS'fUBACC:n ) COMPANY, UROWN & WEI.LIAMSON TUBACCO ) CURI'ORA'IION, IL.A.T. INDUSTRII4S P.L.C., ) LORILLARF) TOI)AL'CU COMPANY, LIGOETT ) UIOUI',1Nt:-, THI: AMGWCAN'F'OIiACCU ) COMPANY, 7T18 COUNCIL FOR Tc)13ACCO ) RESEARCH •• U-S.A., INC.. TiEE TOBACCO ) INS'lTl'U Ia:, INC,. SMOKELESS TOBACGO ) COUNCIL, INC., I IfU. & KNOWT: E'UN, INC., ) UNITED S'I'ATk:S TOBACCO COMI'ANY. ) ttNlTtD STATESTOBACCO MANUFACTURING ) COMPANY. INC-, GALLI:R WHOLBSALfi, ) tVb/a/ P.M- 4RE?CN Qt SONS, INC.. TFNN•M1SS ) DIS'1'RFFlUI'ORS, ) ) Ucfcndaols. ) OPINION *ND ORDER i7LL4NTIN(S1N PART AND DENYIN41iN PAR'1' DEFRNDANTS' MOTION TO DISMISS Befure dte Court for decision is die motion to dismiss submined on belwlfofall defendants,' 'At the time ef nral argument it wna representcd to the Court dtat fho defondon4 Liggett tiroup, hu:, }har filed n separate moGun, but did not submit a ecparete brief- L)ggett adopted thc positiun ufdte mltuc,dcfcndunts and Jid not present oral arbuwunt. '!he rm» iun is purauant to Rule 12.02(6) of Ihc Teonessee Rule of Civi/ Procedure, nnd sceks to diamiss cneh euwf of the plainliffs' cnntplaint for failure to etato a claim upon which relief way be ganned. Oral argument was heatd on I)uucrpbcr 17, 1998- 'I he hrief, and uml argument by the pnrties were well crn(ied and utastecfully pwsauad. The hearing uccupin) the better part of n lidl d;ry withutd u luach brcak. Both the fitcual and Eogo{ issue8 present the Court with an incredibly interesting and intcll¢ctual cbaltenge. Included among the inotcrtnfs eubntiucd nre opinions frorn letuned tritd judgea both Stoic and Federol around the country, who have addressed and decided the seme isnuc,, all o{' wltiett rHa Coutvt liwnd enlightening and helpNl, amal for which the C'ourt is grntefal. I
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DEC-II-HH 16:12 FROM• BAXER DONELSON • Ca.tes ID. 3815772303 • Table of Aurhoritiea PAG$ B Agency jor Health C'are v. Associated /ndustrles, 678 So, 2d 1239 (F1a. 1996). cert, dcnied, 117 S.Ct. 1245 (1997) ................................................. ............................IS. I6 Allgood v. R.J. Reynolds Tobacco Co„ 80 F.3d 168 (5th Cie), cert denicd, 117 S.Ct. 300 (1996) .............................................. .... ................................................. 22,23 Anrhony v. Slatd, 52 Mess 290 (1846) .....................................................................................10, 13 Arcon Corp. v. Liberty Mutual Ins. Co., 591 F. Supp. 15 (M.D. Tn. 1983) .:................................13 Associated General Contractors v. California State Council ofC.'arpenter.r, 459 U.S. 519(1983) ..... ....... ................................................................. :............... 4, 7.20. 21 Austin v, Srate, 48 S, W. 305 (Tenn. 1898), ajfd as modified, 179 U.S. 3,43 (1900) .....................19 Blake v. AbbottLaborararies. lne., 1996 WL 134947 ('1'etin. App. Mur, 27. 1996) .............. 23.24 Blue Cross & Blue Shield United v. Masrlfeld Clinic, 65 F.3d 1406 (7° Cir. 1995) ...................20 Blue Shield of Virginia v. McCready, 457 U.S. 465 (1982) ......... ................................. 4,20.21.22 Browder v. Hite,.602 S.W.2d 489 (Tenn. Ct; App. 1980) ...... ::.....................................................12 BrunswickCorp. v. Pueblo Bow(-O-Mat. lnc., 429 U.S. 477 (1977) ..............:.............................20 Cantley v. Lorillard Tobaccy Co., 681 So, 2d 1057, 1061 (Ala. 1996) ............... ...:..:................... 23 Cipollone v. Liggett Group, Ino„ 505 U.S., 504 (1992) ................................. :......................... ?2. 23 Cipollone v. Liggett Group, Inc.. 683 F. Supp. 1487 (U.N.1. 1988) ..............................................19 G'annars v.. Tremont Mining Co., 835 F.2d 1028 (3d Cir. 1987) ......................................:............16 DaSilva v. Amerlcan Tobacco Co., 667 N,Y,S, 2d 653 (N.Y. Sup. Ct. Dac. 12, 1997) ..:.............21 Doe v. ,hinderConst Co., Incs, 845 S.W.2d 173 (Tenn. 1992) ............................................:........14 Dudley v. Unisys Corp., 852 S. W.2d 435 (Tenn. Ct. App. 1992) ............... :.................................. 13 Ganzevoot v. Russell, 949 S.W2d 293 (Tenn. 1997) ............................:..........:........................... 24 Glartter v. Shephard, 233 N.Y. 236 (Ct, App. N.Y. 1922) ............................................................13 Gunsalus v. Celotes Corp., 674 F. Supp, 1149 (E.D. Pa. 1987) ....................................................17 fTaverlah v. Memphis Aviption,, Inc., 674 S.W.2d 297 (Tenn.7[pp. 1984) ....................................24 H(ghfand Motor 7Yans`er Co. v. Heyburn Building Co., 35 S.Ci.2d 521 (Ky. 1931)...................... . 1 Hil( v. John Banks Bulck Inc., 875 S.W.2d 667 (Teon. Cr. App. 1993) ................ .......... ...••.•.....•••9 Holmesv.SecwltiesinvestorPrarecttonCarp,503U.S,258(1992) .....................................I3, t8 Hulsey v. American Brands. Inc., 1997 WL 211755 (S.D. Tx. Apr. 7, 1997) ...............................73 International Brotherhood ojTewnsrers Loca173a Health and Welfare Trust Fund v. Philip Morris, Inc„ slip op. (N.D, III. Dec. l, 1998) ....................,.............................,............... 7, 8 Iowa v. Philip Morris, Inc., 577 N.W.2d401 (Iowa 1998) .... ........................................ 2,14. 15, 18 Iro i wvr~rs ~aFei Nniert u: rrttnh vrac:rs: tasa t~ t~ii, §0±085 tf.i~: E3E 1.!t tq+iB1...........7,10 U
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F EB. l. 1999 11 : 51 ANRoM' MSHPH r S • 14U, jjUtl r. iti2[ -- ID. t9015772303 ~ in tha cumphdnt; and, (2) Whether thu plniutiffs stam a cause of acUnn undcr (a) the Tennosscc Consumer ('rncctiun Ael, (b) the Tennessec Anti•trust Act, dkUor (c) busex( upon fraud and misrcpmematimt: mrd, (3) Whetherthe plnintiffs' conspirary dreery is viable. 51.jNDARD FRRVI'W A nmtiuu pursu:mt to Rule 12.02(6) af the 1'emiessee Rules of Civil Procedure sccking dismissal ofa piainri(Cs cause ofeclion for litilurc to smlo a clairaupon which reliefmay be granted texts ihe legal sufGcioncy uf the uurrplaim, )t admits the rnqh of all relevant and material alleRntionr, but ns'dons tbat Sech facts do tW t conFntale a catl5e of action As a nlatter of law. R/gg.r v. Aur.cun, (linn. 1997) t/a 1 S. W.2d 44; .wd Purtcl( v. !'irri Auroricnw Nulh~nal Uunk,')77 S. W,2d 8)8 ('['enn- 1996). ')'hc baaia fur such n motion is Ihat all allegations ol'dre complaint, considered alune and taken u.ti true, ure inyuffkictn to state a lesal cause of action as a motler of law. ,Cnudr v %ir.rr ihr)on N~olutta/ Umr$ af7 ennessee, 956 S. W.2d I I J('1'cnn. Ayp. [997). Whcn tblcnoiniog wheilrer a aanplaint fails losrme a clnint upon which relicf ean be grNtrod thc trial court ruust cunstnic [he complaim tiberally in fuvor of the plaintiff nnd take all well pled a(le8ationa aa to faets es true. lYallnee v. National Bank of C'urnprerce, 9)H 5.W.2d 684 (rctm. 1996), 'lYmreforo, a cowplainr should be dumissed for failnre to state u clnim if it appears beyond doubt that the plainti(f can prove no sea of facta in xuppurt of its claim that would entitle Ure plaindlY to relief, r`anfrr.r v. Hcndric$r, 918 S,W,2t1424 (7cnn. App. 1995). AHet.ysIqAND LGCISION Tuc Cuurt will consider die issues of fraud and rnlsrepresentolion (Counts V apd VI) tu8odmr, h being the considered opinion of thc CoW that the sante legal principals apply gencrally to buth for purposes of this motion. Before discussing the particular substantive issues, the C:ourt will addre9s the illreslrold imaues of rinlolena6s, federal preemption, and the ecununuc )oti rule. PAG$ S (1) T1iCTfIR):SHOLDISSUL•S (a) lht;, 4'trin of Remotenecc C:oneiderable attendon hs been nivun by the Defendants both ia lheir briefing xnd at oral ~ d i i d l ' fJ U-1 ruyjWnenllo the 1n:lrine of renrotorwn. y cvery wr fhis Co1Vt has beCn furn she Wilh !irtunl uClt ~ 4 O
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DEC-11-96 16=20 FROM. HAKER DONELSON 1998 Exr,ra LEXIS 148, •1 1D. 3015772303 PACG .3 LEXSL:E 9. 'rtn_ L'Lali%:rll i.li(e co sr_aceclaims for criminal mischief and dec?pr.i.an. 11). 'I'h~a VLainCiiL f4ila r,q ytaCe a claim for ('21 pubiic nuisance. :1. TP~ DyPwnil.iut.c' Motion to Dismiss pursuant- w Ind,Trail. Rule L2(D) (61 ,;a Ultl)t;ti1;D Tlll:: z.lcd DAY OP TULY, 1998. St47NA'i'UIiF.), ,TUDGE,MARION .SUPERIOR COVRT'
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DEC-11-9H 16=28 FROM: BAKER DONSLSON . ID• 90]57723H2 • William S. Lockette,lr., Esq. Rebecca B. Murray, Esq. Kennerty, Montgomery & Finley, PC 550 Main Street, 4th Floor Knoxville, Tennessee 37902 w Counsel for The Council for Tobacco Research - USA. Inc. Saul C. Bdz, Esq. - Wuring Cux, PLC Morgan Keegan Tower 50 North Front Street, Suite 1300 Memphis, Tennessee 38103-I l'J0 Counsel for The Tobacco Institute, Inc. Bruce M. Ginsbcrg, Esq. Marc J. Rachman, Esq. , Davis & Gilbert 1740 Broadway New York, New York 100 ( 9 Counsel for Hill & Knowlton, Inc. Robert G. McDowell, Esq, Baker. Donelson, Bearman & Caldwell, PC 1700 Nashville City Center 51 Union Street . P. O. Box 190613 Nashville, TN 37219 ' - Counsel for United States Tubacco Company I.ee J: Chase, Esq.. . Glanker Drown Suite 1700. One Cnmmerce Square . Memphis, IN 38013 Counsel for Caller Wholesale and Tenn-Miss Distributors CF.RTIFICATE OF SERVICE ' VVa ~o.CSrhi+C I hereby certi I'y that on the a true c5py of the foregoing was mailed,{rrsFClaee; pestage -yxprid, to the litllnwing counxl of recordt Deborah Cmdwin, Esq. 'l'imwhy Taylor, Esq. Flnrencc M.Johnyon, £sq. . . Agee, Allen. Oodwin, Murris, Laurcnzi & Hamilton, P.C. 2001e1'tarson Avenue. Suite 1400 Nlentphis, '1'ennessec 39103 PA08 95 CO N U"7 ~ ~ ~ W N 26
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TEB. 1. 1999 11 ; 52Ahh'. nassP.rIe ~ N0.3308 N, Pb/ZY ID. 79015772.anJ PAGE 73 i therc puints out that the Icgislative nute to the 1989 Supplement to Suedon 47-18-)09 indicatcs that the 1989 nmcndtrtent added "ur other persons" alicr "annsunter" throughout the section.t' The IltWitinn uC the ItmL'uage "or otiter per.sonsi" n> the text of tho Act ullcr the word "Cunsunter;" whcrever that word appears is o clear indicauon that tthe i.egisiature iLlly Intended no rexnictians trs to who nrit;hl hnve swudinft w bring.m actiun. Thus, hy upcning Ihc field, any parsun or entity that can pruve an nacerwioablc loss suffered by reason of pruhibitcd behavior would have pmper standing to hring mt action. I lere; nccording to the general terms of dte allegatioau in tho Complaint, the pipinti(fs would nppear to conrc fblly win the scope of protemion afforded by the ~ Act wiqun the design of dle Legisttuurc, particularly in ligitt of dte legislative amendments. Put dirlcrvndy. the fact thnt the Funda.vcre nut direat purchascra or users of Defendants' products is of no cunscquencc. Thi+ argtuncnt sintilarly, therefure. ls found hy the Court to be whhout maril. With regard to rlte argument that the dcfendams hnve failed to ailegc the aufl'ering of an °asccrlainablc luss"the Court turns simply to an cxamination of the complaint itself. Taking the allcEutiotts of thr complaint .1s truc, which this Court ntust, Ihe plaintiff Funds allege au nicerlaionhie luss measurwl by the increased hcolth care eoata borne by the fltnd. (See parographs 4-5. 62, wtd 266 tluough 268.) Moreover, during tho cotrcse of oral argument. counsel lin the plaintiffs rupresented to the Court that nol only can such Ioxves be quantified but they can actually be proven wilh speciGciry, The strongth of thase nssettiuruti may be saved and tested anothor day. In auy event, the Court linds this argument likewise to be without ntarit at this point. In the (arger picturc the plaintiffs allege tlra{ the delcndanis deceptive praetices include that cigxrcltes havu charactcristica. ingredienu, uses or benefits that they do put have in viol:vimt of T.C.A. § 47•18-104(b)(5). (See paragraphs 235 .236 at pp.621I. of the Complaint) Indeed, the eemploint is replete with faeluei asaeRlons and allegatrons thnt would invoke the operative tsiu the brief submitted on behalf of the Defendants there appears a btnlant misehaeecterit'adorl orthe language of Section 47-18-109(a)(4), Specifrcplly, the quoted portion ovenly omi ty Ihe wmds "or other porson `after the word "conswner" wherever It appears in Ihat secdon as repteeented in fnutnutc 10 of the DefaNlacits' brieL Similarly the defendants have disingenunusly uroitted fmm the reference tu'I'.C.a, 41-18-I 10 the tirat clause of that section which auricx: "Any octinn commenced purstmnt to Secdon 47-1e.t09 shall be brought within une (1) year fntm a per8ulL'S ""- diecovcry uf the unlAwful actor practice." (emphasis addalf. Of eourae, "pcraon;' ax dcfined in the Act, includes "austd" such as the ptainlifts in t tis case. Such onniaaluna wer4 nti6lcading to the Coun and ntalte a very signtRuaut differenoe in the argumcnt advanaed by the d4fendants on this i4aue. 12
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.1AN-13-99 1S.Q6 FROM. MEMPHIS Io• t90ts7723a3 • 1 e e The Plans undoubtedly have felt the financial effect of I'lan members' tobacco use in the form of healtfh care costs for tobacco-related illncsses. This alone doos not give them a basis to recover damagcs against the defendants, however. No amount of semantic gymnastip can detract from the conclusion that their claims are completely derivative of the personal Injuries to Plan members allegedly caused by defendants' cnnduct...Because their claims rely entirely on injuries to third persons, they are too remote and the Plans, therefore, cannot establish proximate cause, a required element of their claims. Exh. A. at 7-8. 10-11 (emphasis added). Of additiooal note arc the court's conclusions that: ' The Remoteness Doctrine Is A Legal Not A Factual Inquiry. "Proximate cause involves two elements: (1) n poticy element encompassing "concepts of equity and standing" and (2) fnrt:cetability, (citation omittedj'lhe first is a legal Inquiry that examines the extent to which a defendattt can and should be hcld liable for the consequences of his conduct..: fhus, the dispositive issue is whether itte type and nature of damages the plaintiffs seek are recoverable as a matter of law and policy. The court concludes. as have themnjority of federal district courts that have considered this issue, that they are not." Exh. A, at 8. • There Is No Difference Between Blue Cross Plans And Union 't'rust Funds. "'fln: Court finds that the fact that the Plans are not union trust funds like the mqjority of the plaintiffs in the other fedemi suits is a distinction without a difference." Exh. A, nt 9. ' Detendants Face The Potential For Duplicative Recovery. '"flu policy basis for limiting a defendattt's liability to injuries proximately caused by his conduct Is apparent when considered against the backdrop of this case. Here, because of the italossibility of separating the plaintiffa' alleged injuries from those ot' plan members, the defendants would be faced with the potential of duplicative recovery for the sante tobacco-rciatcd injuries... And, because of the inseparability of the damages, it would be impossible for the plaintiffs to ever establish the precise amount of their damages." fexh. A. at 11. State Cost Recovery Suits Are Distinguishabte. "The cases on which the plaintitla rely were brought by state attorneys general who have either a statutory authority or a special Cb ubligation to protect the interests of the state and their citizens that N permits them to pursue claims ihm may involve damagcs to their U-I aitivsns...The Plans, as private litigants, cannot claim standing on ~ ~ 6nMwao.'mii.wr ~ (b
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rn. se157720e3 Respcctfiilly smitted, ,C.e ,(vuutawcfi. - ccl3 Leo Bearman, Jr.; Esq. Baker, Donelson, Bearman & Caldwetl 165 Madison Avenue, 20th Floor Memphis, Tennessee 38103 Jack E. McClard. Esq. Maya M. Eckstein. Esq. Huntan& Williams Riverfront Plara 951 East Byrd Street, East.Tower Richmond, Virginia 23219 John A. Lucas, Esq. Hunton & Williams P. 0. Box 951 Knoxville, Tennessee 37902 PAGE 34 Counsel for Philip Morris Incorporated, and lbr purposes of this reply memorandtun only, on behalf of defendants listed below: Jeff Jones, Esq. Matthew A. Kairis, Eeq. Melanie Fahey, Esq, Jones, Day, Reavis & Pogue 1900 Huntington Center Colttmbus, Ohio 432 15 Counsel for it. J. Reynolds Tobacco Company Kenneth N. Bass, Esq. Jennifer Gardner, Esq.. Kirkland & Ellis 655 Fifteendt Street, NW, Suite 1200 Washington, DC 20005 Counsel for Brown & Williamson Tobacco Corporation (individually and as successor by merger to The American Tobacco Company) Jeffrey S. Nelsun. P.sq. . Richard L. Gray, Esq. Shook, Hardy & Bacon L.L.P. One Kansa+City Place 1200 Main Street Kansas City, Missouri 64105-2118 Counsel for Lorillard Tobacco Company Harry Zirlin, Esq. - , Debevcise & Plimpton pp 975 Third Avenue - PO New York, New York 10022 ~ 110 ~ 25 w ~
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DEC-II-SB 16=20 FROM: BAKER DONELSON ID. 5015772303 Itoben 1. Cbruterton, Esq. John k3ruaddus, F.sq.. Conncrlun & Ray. 1920 I.. Strecr, NW, 4th Floor Washington, DC 20036-5004 Louis l., Ruhein, Jr., Gsq. - Robert I t. Ur,uvt, Esq. Williant I.urya, Esq. Ntmcy Pir,ud, Esq. 2540 Scvunl Avenue, Ste. 400 11.0. llux 6768 . . Matairie, LA 700f)9-6768 CUun%cl hl r P ltlintl ff3 Mwin V. tiantacruce, Esq. . Michttol FnY, Esq. Kusowiu,l3ensun. Torn:s & Friedmnm 1 ltll Avcnue of tlle Americas New Yurk, New York 10019-6022 Counwl kn t.iggctt Group, Inc.- Mary Iilvabeth McGarry, Esq. Adanl 1. Stoin, Gsq. . Kathy L. McFarland, Esq. SirnpeunTha:her& Bartlett , 425 Lcxington Avenue New York, New York 10017-3954 Cuunscl Ibr li.A.T IndutriesPLC: Aa~4~-`u"". Leo Deumtan, Esq. PAGP 36 1 27
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FEB. l. 1999 11:52AM~u~ HEMPH[5 ' . ro, raesr77zN(). j3UY1 0 educated, the defense arpument based upon the economic loss rule should be rejected and the+notion denied, We turn now (o A cntuiderotion of dte substatttive counts. (2) 1'11G'1'FNNL+SSGI CONSlJM4'R PROTtiCTION ACT ('I',C.P.A.), The Defcndures argue, both in their briefs and in oral azgument. thit the Consumer Protection Act claims should bc dlsmivw:d because the Funds were not "uol>ytatters." It is their thcory thnt ncC T.C.P.A. pcrntits reeovety only for "consumets" citing nnd rutying upon the deGnitiun of the term, "conamnur;':ss fuund in'f.C.A, A7-18•1f11(Z), In Ihat rcgard lhe dcfcnd:uus nrgue tltai.the plaintid' funds do not allegp in the r cumplaint, nor do ehey contend, that plaintiffa ever purchased dct[vulams' produets.ur that they suffenvl an sscertainablc loss. The argument Is funlter advanced tlad iflOrePver ahe pl0intifl:4 :{TO tlel "unturu{ pcruuns" and, there/inc, like cutporotions, have nu .rnnding to bring thi;acGun. A eoreful;ud closc reading uf tha Tennessee Consumer Protection Act ia its entirety as,well ns a caro(itl study of the cates cited and others fuund by the Ceun in its own rcnearch Iead thia Court to a coturary conclusion. In support ofdtcir position the defcndants citc and rely upun the unreported decision from iho L;vter4 Scction of Tho'fcnnu4ec Court of Appeals in thc w.cc of L, G C'. r;orpurotinn v. 8dxkin. Rohhhnr !cc Cream Company, at at, 1993 W,l._ 2796 (Term. App.) in which that Court cites and quotes with epprovnl frotn an opinion of the Western Section of'I'he Terulcasee Court of Appeals in the ense ofMnerlenn Buildings Carpany v. While, 640 S. W.2d 569 ('Cenn- App. 19g2). Theru thu Western Section Coun of Appeals had agreed with its brethren in the Fastem Section from yet amther utveporied;decision in Ibe case of Cblyer a Trew, (1982 WL 44t'1), which held that the remedy provided in §47-18-109(a) wea intended by Ibe 6egislature to be evoilable only to •'consumers" arrd does not include cnrporarions. Simply stated, Cntyer v. Trew, supro, and its progeny, including Amertcan 6uildlnkr Company v, Whlle, Ivpra, are no longer good Iaw. See 5mirh Corona Corp. v, PeUlmn, (M.U.:1'cnn. 1992) 784 F. Supp. 452 at 687. A careful reading of the Courl 'a ophtbn in L.bC. Corporaflun v, Ilw•kbr-RobbLt.r Ice ('rcren Cumpnqy, et al, supru, would reveal nta t the vcrsion ufT,C.A. 47-18- to Y. 14YLL PACS xr
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DEC-11-56 16:16 FROM: BAKER DONELSON ID: 60157723a3 PAG£ 21 . - , 2. . Unjust F.nrichmeot 'ftnn23sce law is clcar that to muintain a claim for unjuxt enrichmcnL plointiflv mrur allege a"bcncCt confarreil upon defendtnns" whereupon deliaJ:mts were cnriched "nt the loas and expense ol'tht plaintifl:" Oct Br, ai 21-22, titine 1'aseHulf's. lnc, v. Anaer, •tq7 S.W.?d I$0, 155 (fenn. 19G6); 8rowder v. Hite, 602 S.W.2d 489, 4)1 (Tcnn• Cl. App• 1981)). Ucspite plaintiffs''conclusory allegations to the wntnuy, dcfcndants recalved no ecnnntnic,hcnetit or uilier tixnt ot cnriuhmenl fcom the Fundi cxpendituies. ' Plainlitii ulsu huvc un nd~~pctlc remcdy` ut'law in subrnsatinn.7.Irkle v. C.'iry•.njKingsntn, 396 S. W.2tt 356 ~ fcnn, .] 9b5} IhuldinK thut il' th¢ remedy ut law is adeqUU0.:, cottrts shquld dismiss unjust cnrichntent claims). f)N: Hr. at :? 1. , For these reaaons; ptaintiffs' unjust enrichmant claims should bu disntisad. )'laintitli were unable to respond to Ihose nrgwnents in any manncr. . ..3. - Breach of Warranty . . The Funds brnuch of Warrcmty claims are tlclicient as a mntlcr of law hr e.uuu: pl:iintiffx have (l ) nvt cmd cannot allege that they ever purchascd or conaumcd bclcndam<' citiavcnes: /!) t:rilcd tu adequately cluim that dutbntlants' products wero unmcrchuntahla aud (l)lnilcd tu pruvide dolandants timely.noriccof the alleged breach. }g~ ihC lir. ttt )1-7J citing relov:ml authoriu: - , . . Plaintitts were unablu to respond to these urgumenix in any pianncr. )i
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DEC-11-59 1E.21 FROM. BAKER DONELSON SD= S01S772303 IN THE LINITED STATES DISTRICT COURT FOR THE NORTHERIY DISTRICT OF ILLINOIS EASTERN DIVISION Ii•1TERNATIONAL BROTHERHOOD OF ) TEAMSTERS LOCAL 734 HEALTH AND ) WELFARE TRUST FUND, ) Ptaiatiff, ) ) 97C8113 v_ ) 97 C 8114 ) Coneolidated Cases ) PHILLIP MORRIS, INCORPORATED, ) ct al., ) Defendants. ) . ) ) CENTRAL STATES JOINT BOARD ) HEALTH AND WELFARE TRUST Ft7ND, ) ~ O~~/f Plaintil~ ) U ) .. v. . . . . . ..)_ .. PHILLIP MORRIS INCORPORATED, ) ., et al., ) Defeudaots. ) ' MFMORANDUM OPINION AND ORDER I. Intraductfon PAGS 35 The court is addressing a question of fuat imptr.ssion in the Seventh Circuit: whether health and welfare funds may bring an aetioar foe economic damages usciurnd dae to increased mcdical costs stbtntaing frota their metnbers' consumption of tobacco products. The plawtiffs International Brotherhood of Teamsters Local 734 Health & Welfare Trust Fund and Central States Joint Board Health & WalFatn Trust Fund (the Funds) are "employee welfare benefit plans" and "cmpioyee benefit plans" as defined under the Employee Retirement Income Seeurity Act (ERISA), 29 U.S.C. §§ 1002(1) at seq. They have brought this instant action agninst the defendanu - ci8uctte maaufacturen, retailers, advextisas, and assorted ttade associations - w f7l
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DEC-11-99 16:12 FROM: BAKE:DONELSON ID: Be157723a3 PAGE 5 • .. Table of Contents I. Preliminary Statement ........ .......... ....... .............. ;..................... ,.......:....,,,........,.........................., ! 11. Arguments and Authorities ........................... ........................... ................................................... J A. Anslysis af Recent Court Decisions on Motions to Dismiss Similar Claims .................3 I. Decisions Dismissing ERISA Trust Fund Cases in Their F.mirety on .. Remoteness Grounds ..................................:........................................................J a. Texas Carye,trers ....................................................................:...............:J ,. .. 6. Urfgon Laborers ........................ ...................... ..............r.......,,...........,.,..4 Q,Seafq{grs. ............................. ............ .............................. ................. .5 . . ...: ... Q. Sourheyrt Fl,oflcla labaerl :................................. ................................... 6 e. Sreon{Jrrmry Loeal a1Q ...:..........:. n.................................. ....,..........,........6 F.TearnsftrtLtJap173a ........................... ...............................7 j, peoisions Gugely Grsattnj Motiaps to Ihsmtss ,,,,,:. ............... ,s ~ ~: Qecisiops Refwing tq Distatss M~odty oFClaltrty ..... 4..,:,,...,, : B• 9y Tlxlr gtlenco, Pl.nintttps ~Iave Aeyutesee~ in Uufeddan(s' Modtin Tit ,` s i ' [lismis Ali CJo pts;3an" by Tenncssoc s ~cchutptc Loss itult; A> N'ell . Ae Uajust En alynept, 8reaqh Of Wamtttty, uttii Jpet.(al pu,ty Llailn~ ::...... ...........} I ~~ LEconomicLors~ula ,.,,. .....::.:I ...r.•;...................... ?, Ury'ust ~rulehmett} :i::,. ,,,.::;,,:. .. . .......................... h ,;:: ~ ~n+ahar~powpwy„ .......... ...:....:.. ........... ,,.,......,... .,u C. 71to RgmWtlnB CW9tq Muw 1r tl.ismlaaoq M lvuli ...................... ............................ I} ~. PWntlifi~ MPttquqq ~1Pyinst 1]t+ }tanpwi~tss Uuaulpc An .InctTiettwl 13 ~ iuwwt,e Rocqvi~o 1hy ~= i 11ni~NNR1' Alloied",pecial ltililjionwhip° WithThalr Punicipitn~ Dco7 NotO1va pWritH~lt A Dir1Yl Avtion Ai;nlngt nefmti+.,ts............ 1 4 e. Plaintiffs' A1legattons of"Direet" Injury rail As A Matter Of [.z.. . s 2. Pta'tntiff,'s Completely Ignore Long-F,stablished Tennessce I aw t~ls D, ztngetsof smoking ............... :............ ................. ................ ....................... t . ~~ ~!!}lnflFfa ~atuttlMfll~y tM AIIfIUN1t i~MfYu~::,:,,.,...~ :::,,.:.,...,..,:,:,::7,U .. ,. 1~ i, I1~IPIitRe Csnnas Ewape Preemptlan ........... ........................ ................. ............. Valntiffs Cannot Ailegc A Claim Undcr the Tennessee Consumer ~'. ._...._r t ProtecttonAyt ........................ ............. .....:................................. ..:....................:,3 00 III. Conclusion .......:............................................................................................ ...........................2~t ~ i
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D£C-11-SH 16=20 PROM: SARER DONELSON IO= 0015772003 _ P•F: 2 r INSTITUTE, ;TNC.s Defendants _ Cause No, 49D04-9703-,CT-O0C236 "[1PIiR,*,OR COURT OF MARION COUNTY. INDIANA 19?8 Extra LEXIS 148 July 23, 1998, Filed r)Pnr.a; 4:cnn•~ nr.w c.h<, Uuf.+mdants, by counsel, having filed a Motion to Dismiss the l',r:ct nn.•en;i.xt Complnint• nnd Second~Amendment co Complaint (eollectivelly, che "r•oL1ur;u,1n;L t•o Ind.Trial Rule 12(B) (6), and the Court being duly ndvi•r-rrl in th••, p:•qw/:+c:, naw finds as folLowsr '1..T!,•- alnint•itr's :;tatucory subroqar.ion remedy pursuant to Ind.Code 8 ]7 L5°8•1 i.8.e:xitlu;ivn. ;. TEva PLatnrt`2eamtot recover damages alleqedly caused by the Defendants thu inju[i»s uru d?ribdtive and too remote. . , ,f -1'h•• PLaInrtfC la,-ks t.hri auchoriry to assert the common law claims brought in rlits :lr•,f•irott. a. 't'hc Plaintilt.fail, to state a claim for conspiracy. ,. •~. '1'hr: Plairut:i r•ri.la co stace an antitrust claim. n. '1'h.! CLnint.rtt c.,nnot claim any antitrust injury. ir.9'he Ptaini`.Lft is naithec r competitor of the Defendants nor a eonsu:aar of U-!(:r(1danL,' procLrr.rs. . . . ' . tf. Tnu E'laiutil,f feil5 to state a. claim for.unjust enrichment., 7. Thr• Ptaitu ~ct: rrtl:is tu scace a claim for indemnity. 8• 'ru,! PLainlJ.cC faiLS to state aclaint for intentional breach of assumed dut.y. l9°ut B:xtra LEXIS 148 printed in £UC•L formac. =-l~ (tecr:rn.to the Recent Tobacco Industry Cases TOC .......... _ ta.lff•IfI+.lfiljflff.flfffl. STATk; r)F LNDTANA ex rel. JefErey A. Modisecc, Attorney t:.an,-n.,L nr,' inriiana, Plaintiff V PNILIP MORRiS, INCORPORATED: R..t. hP:YNni.O~ TORACCO C0.1 RJ& NASISCO HOLDINGS CORP.; RJR NNtlar_);iNr:.7 AMtiRICAN TOBACCO CORP.f IdROWN 6WILLIMSON TqBAt;i:U CURP.; LLGGEI'T G MYERS, INC.:LORILLARD TOBACCO CU-, LNrC.: UNITEDSTA1'ES TOBACCO CO.; B.A.T. INDOSTRIES, P.L.C; BLttTLSN AMI[RiCAN'TOBACCO COMPANY; HILL & KNOWLTON, INC.; TRS COt1Nr,[L. FOR 'I'OnACCO RESEA0.CN-U.S.A., INC.: and THF TODACCO PAGE 37 F ~ ~ W -t:1
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DEC-11-9H 16=14 FROM. EAKEI~DONELSON ID: 901r5772303 Dismissing the action in its entirely with prejudiec tl[e court cnttcluded .' [Regardless of the allegations of wrongdoing alleged againxt Qtc defendants.] there are very soundjudicial policy re:isuns tix limiting legal actions lu.Utosc parties must directly iniur.d hy the - harmful conduct. These pulicies :vc not new and havc lengthy historical roots in ourjurisprudence. '1'o allow I the Iimdsj to maintain actiuns that are entirely dependent upon the Itann sul'!'crcd by others threatens chaos for thejudicial systcm. especially where others may (and have) filed their own actions und are c;tpablc ul' . recovering uFull ydnge ofdainages, including the mediualao,u: soughrhere. ' - f il, at •9. The sante rcasoning shouldd be aqually applicahle ia tlie ca,e ai bnr PAGE 14 This i{ecisiun is currently on appeal. c, Smjarrn The plaintiffs in S'caf'arers W'elftire.Plun v, Philip Morrix,'199N U.S. Ui.c6 I.likIS 11475 (D. Md. July 13. 1798), also brought suit, inleralia, under fcdend and suacantitrust .untnes. Ihe state cansurncr protection act, and under the common law (tx unjust vtvichment, breach of . voluntarily undertaken duty, fraud, negligent misreprescntatibn, and con.pirncy. Itclbrrinp favorably to other district courts : opinions, the court declared. In this Court's vicw,I'laintiEfs' entiiY Complaint snl'(i:rs lront the 1Lndamental fluw that tlte Funds themselves, as oppused lo their . participants or the pertinent cmployers, have nut sufl'ered any. cognizable damages... Altema[ively,even ifthc Funds have suffered ittjury, cach of the PlaintifFs' claims is subject tadismi;vd for uther reasuns. As discusscd herein, the Court canchrdus that . ~_ F!laintitl"s' injurics are too remotely causal by the Delcndauts tu . . gatiSly the requ(rcment.s of proximate cause, PlaintitTs huk . "antitrast standing ; and Pla(ntiffs have failed to statc a clxun 11:r r unjust enrichment. __ S ufitrar.e at 5-6, 9,JC)n rc1n01entss.groullds, the court specitically Ibund tltut ench ul'the - contmoa law and statutory claims was.harred because nf "the long standing conunan law rule ... , that one who pays tltcdical eupenscs on behalf of an injured third party dues not hnvc a dirc:•t action against, the turtfe:uur who caused the injury:' Ij at 17. The court rejected plaintil7s" -artl'ul re-char.u:terl•ratioti' urthcir derivative claims as direct claims, as well us their n4sertion that trust fltnds should be ontitled to att ezemption front traditional tort rules because u1'thcir "special relutionship" with thcirpart(cipantsr jd at 17 n.18, The court a(sorelcetcd 1'Iuintiflk' allegations of cogniiahle injury, noting that the plaintiff tntst lunds are mcrcly middlemen handlinq medical payments with rnoney provided by others. 'L 5
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F EB. 1~ 1999 11 :51 AM teoM = MEMPHeS rD= 7S07s772JnajUe opinion rendered by the various Iriol judges around the country - both State and Federal - wherc tht `0 s tmc i>.cuth on essutltishy the salnc fActs have been briefcd, argued, and decided. This Conn hus read eoch opinion with n certain degree of interest and ediGeation, 'I2ensc Gounx who hnvc accepttd ilte argumenl of the defendants with regard to the rumotenesss doctrine have writtcn eGpucntly aad lucidly in their analysis of tho doctrine and its application to the cuse sub Jtulice. Kegretlably tbose jurisdietions which have rcjected dre deferndutus' arguntent luave do4e so without an uunlysis or opinitur With the cxception ofJudgeJames S. Owin sining in the United States District Cuun fur the Northern Ulsuict of Ohiu! After a careful and general analysis of the remoteness d doettiuc covering its inceptiun in S7ode.' and, as applied In PuLagrtt/.'° Judge Gwio opined that ". . , dctennlruuions of proaimate causc- stotding, and remoteness an: particularly matters of policy. I'lointil7s bring difl'emnt causes of action with different eonsldemtlons forstatding. The Court finds that I'IaintifPs' standing to bring various actions must be individually judged. Accordingly, the defenduntz' blmJeet argument for dismissal on remoteness grounds fails; " This Court is in 11dl aewrd wirh Judgu Uwin. Unfortunately in the Ohio case the p6aiatiffs opted to not seek to state a cause ofxaiun for fraud attd misrcpresentntion with tho result that Judge Gwin did not address dta subjeet in Iltis eomexr, and ehe opinion is of liule further assistance. The Coutt has not found ntuch help in the pleimiffd bricf beyond that which states dte obvioua. Ibc remmcrreas issck, in the rnind of thls Court, is moot ae it would apply in connection with the tmd-wct claim discussed later in Uiis opinion inasmuch as the Court is diunissing tbst claim on other grounds, Similarly, the Court believes the docuine ro be inapplicable when measured against the claim +vlth respect to the Tennessee Consumer Protcetion Act. The cause of action thus establiahcd is a ereature of the Legislature. In the lenguage of T.C.A, 47-18-109(a)(l), "Any person who suffers an suenainable loss of money ... aa a result of tho use or employnient by another Y. 9/Ld PAGE S 'Sce opinion and order in Iron Workera' Lnral Union p171nsurance Fund and Ird Truslves, er a! e Phillip Morris Inc., cf a!, case 1Y1:97CV-1422. 'Anrhony v. .SfaJc, S2 Mass. (I I Md.) 290 (1846) in which a party contraeting to providc support to paupers made claim against a party who had tortiouesy caused injerry to an indigent resulting in a holding by the Massechuselts Supreme Judicial Coup that the damage was too remote mid indirect thue denying recovery. 'Pulxgraffv. Long Island Rui/roudCompuny.24gN,Y. 3 39 (192g). p 1\) rlronwarhrrs' Lnca6 Vnron 017 fnswance Fond and !r :r Trpsrers, supra at pegc 10, CS-~ ~ ~ 5 O ~ O
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DEC-11-98 16=14 FROM= EAKER DONELSON ID: 9e15772303 PAGE 15 After noticing an appeal, the liduciary plaindffs, represcntcJ by current pluintiffs' couuscI C'onncrmn & Ray, have voluntarily dismisscd this appeal. d. SouthecstFluridcLahorrrs In Southeaat F1oriJu Laborers qistrict Health and 1Vc,ljrire '!'rutr l Smd v. Philip ,llorris. et ul., Case NO.'77-8715-CIV-RYSKAMP (S.D. Fln. Apr. I7. 19')8); plaintilTs lilcd suit:rgainst several iobacco cnmpaniw alleging fraud, breach of special duiy, unjust eurichntcm, ;md leder,tl and state antitrust claimv: The cuurt rejectad all ofplaintilik' cumman law cluims un the ground1 of remutcness holding: . The Fund cannot escape lhr Fact that any economic injuries which it incurred are purely derivative of the physical injuries which its purticipanh sulTczed. '1'hc Fund cannut.us a mattcr uf {aw, .ustain a claim against the defend:aus without a closer uonuectiun tn dufendcutts. Id. at'4. The Court went on to dismiss tlte rest of plaintip's' claims, detemtitling flrai it cetdd nut'bvertum wcll-establishad cnmmun law mlas and wcll-scttled rncthods ot'slatuulry intdrpretation to permit recovcry where recovery would othenvisc he hurred." I,I at'G. After nutieing an appc,d• the Fduciaryy plaintiffs, rcpresentcd.by C'omtortun & Ray, hovc voluntarily dismissed lhis appcal. . . e. Sleamfitrer.r Local J:IJ In$rsamf)uers Local Urdon ND, 420 ts Philip Murri.r lneurppnned, 199y W I. 21 _'8dh (F..l). Pu. Apr. 22, 1498), union trust funds asserted federal rqnitruxt, 1'roud, brcnch uispcciul duty, and mtjustbnrichmcnt claimsf While acknowledging that "thc gcncral rule has long hccn cstahliAhed that one who pays the ni¢dical.cxpenses of:m injured party dues uul have a dircct claim against the tortfcasoi who caused dn injury;' the court ultimately dismi.sad Ihe plniniil'1's' claims becausc they did "not suffer(I any cognizable damages " ld. at' l a. '1'hc auurt ancdoyir.ed the case lo'that u Pa lilc insurance company.. No one waulil scriuusly .nt;gesl thut ,t life insurance company which pays the policy proceeds bccuate its insured wa, killad could successlidly sue a tortRasur liti cauing the dcath,'Ibis is not only hcc,tu,e atry such cluitu wnnld be entirely indirect and remote• but because the insurance company's premium vlructtut iu ul' populatinns; predicated upon actuarial assumptiuns and predictions concerning mortalily rates the death of individual policyhnldcrs is precisely the risk the cnntpany agreed tn nssuttte. A rnnfea.sorrannut beheld liable for meruly providing purtial rultilhncru rdektutui;d predictinne:' 111. nt2. . . ~ _ \C) ~ lltis decision is currently un appcal. ~ N
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RE~.:E! VEu DEC --219%, i ERR P. DURHAM
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9 VEE srfE~.;r DEC 1 i F RR4 F.
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DEC-11-98 16: 13 FROM. BAKER DONELSON ID: s81 5 7 72363 ~ brief,'plaintilF.ccomplctclyigrrorcdfmlrnl'tltem. •1'helilih,Sqnrhruril•'lnridrrLahorcrr, mcritcd only a scmtt criticiyul that "the court paid only lip Service tit the special relationship between those 1'unds and their participants" PI. Br. at 7-8. The taihue u+ mentiun thesu recuu decisiune is particularly notable because munsel of record fur plaintil7•s in the instant ensc (('urmcnon ,~ Ray) is also counsel of record for the plaintitl's in each uf the above caics. Additionally. adlrr noticittg.;m appeal in two oftltese dismissuls, the fiduchuy tntsiee plaintill: voluntarily dismissed rbe dppeuls, thus making the district court dismi.~L sals )inal. ti, ce Seu/iirrrs {{biJrrt• 1'Lur v!'lrilip M1lurrls, 1998 U.S. pist.l.F.XIJ 11875 (D. Md. July 13, ] 998) (appe;tI vulunmrily dismissed by the ptaintifFs); tiourlrer;u Florida Laborers Di.er. !(ealdt & WelJitro'!'rucr f Srn,( v Philip Morris, 1999 WL 186878 (S.D. hhr April 13, 1998) (snme). The other lhree ore currently on appcaL . . , . . ' . Even ifone ignores thy recent body of mure directly applicable pnwudent, the representation quoted above is I-actually wrnng. As of Septembur ?. 1998, the Indiana Auocnuy Creneral Medicaid reimburscment claim against the tobaccu industry had becu disnri,scd with prejudice on rentmaness grnunds,; and the inwaSitprame Court had allirmed the disnri.sed v.nh - prejudice of common law claims asserted by the State of iuwa in u cnst recavery Inwsuit un rarnotencss gruunds, holding "rhe State cannot recover deonayes jallcgedlyJ causr J by dctiutd:mt hcc,nt•re the injuries enm derivative and too remote." Iowa v. Plrilip LlqrrLr, lnc , 577 N.W 7,1 <i61, 406 ((owa 1998). ']'he only claims not dismissed were unique Iowa stuuuury .laims thut could have no relevance to the issues raised by the instant motiou to di,miss, phtintiff.ti brief is also notewonhy fur the number ol'dispnsiticu argmueul+ briclcd by defendmtts that wcre cumpletely. ignored. Byy their silence, plaitxil'fs have implicill,v - ucknuwlcdged thut (a) all of their claims except cutmts I;md 11 nrc btvred hy'I'cuucsscu'K wrll • established economic loss rulc: (h) their special duty claim (couru lV) mu.t ha scpnnrtcly disntissed fin failure to allege personal injury, (c) their breach af warranty and unjnst enrivhnrant claims (counts lil, VII, VII I) aro meritless, atrd (d) their allegations ul' ignaranca uf Qtc hcal Ih risk,e nf smoking must be rejected as unreasonable in light of one.c hundred yenrv nf judiei;d rnnicr of general public awareness. - ''11ra Teras Carpenrser decisinn wua handnl dpwn 00 August )0, 1998 • ei% dayY alter del'end.rtUS Itlnl rhvir Snpplemuoml Memorandum, but tiqee duye befnre plaintiffs lilcd their brief in uppu•,inon to the waunn lo diemis. . '$s SWre oflndiana v. PlnGp 6B:nir, Inc., Nu. 4') Uu7A7U1-CTt'-IIDU.'..t6, shp. up. tt tliid Snper. l'i p ~ ~g ~ y~!` ri` I~ luly' j]. I9~ /8) (holding "(rtHE "lainrif'f d:inilu[ mrnvcr Jamu ei all' Id•~.~+~ tm u•, ~ru dr.ria:ni:e 3Rd (88 tfH?,v!5•')• A s8)})' HII+tA~ N~'Nk88 f~ hYtil~he~lt~i@f7i :iF ):rYlir•,1' alii!: ilic iu 2
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~tG-11-9H 16.21 FROM• BAKER DONELSON • I0: 5035772303 r PAGE 4y which lin]ced smoking to lung cancer and thereby, according to the Funds, assumed a special duty to the public by prolilising to engage in medical research "into all phases of tobacco use and health." The Funds claim that, notwithstanding its arguablc pledge to protect consumer health, the (obacco indusrry.continued its eampaign forprofitat the expense ofconsumer protection and the public health by agreeing to suppress market research into safer alternative products while simultaneously manipulating tobacco's nicotine content to hook new consumers. IlT a dard of$cview /gf a Motion tn_Diy iss In ruling on a motion to dismiss ptustiatu to Fed. R. Civ. P_ 12 (b) (6), the court must assume the auth of all facts alleged in the complaint, construing the allegations liberally and viewing them in the light triost favorable to the plaintiff. See e.g. McMath v. Ciry ofCary, 976 F;2d 1026, 1031 (7th Cir. 1992); Gilman v. Burlingron 1K R.R. Co., 878 F,2d 1020, 1.022 (7th Cir. 1989). Dismissal is ptvperly gsanted only if it is clear that no set of facts which the plaintifi g could provtconsistent with the pleadings would entitle the plaintiff to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Kunik v. Rari,fe Counry, Wis., 946 F.2d 1574, 1579 (7th Cir. 1991), citing Hiskon v. Xing &.Spauldtng, 467 U.S. 69, 73 (1984). The court will accept all well-piad factual allegations in the cotttplaint as ttue. Miree v. DeKalb County, 433 U.S. 25, 27 n. 2(1977). in addition, the court will construe the complaint liberally and will view the allegations in the light most favorable to the nonrnoving party. Cralgs, Inc. v. General 61ec, Capital Corp., 12 F.3d 686, 688 (7th Cir. 1993)_ However, the court is neither bound by the plaintiffs' legal chatacteri2a.tion of the facts, nor required to ignore 4
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DEG-11-9H 16=22 FRON. HAKER DONSLSON . 10= 9015772303 0 dismissal. Here, the defendants claim that the court can dismiss this action as a matter of law under the rcmotcness doctrine and therefore need not address proximate cause or its fact intcnsive sub issue of cause in fact PAGE 45 As noted by the defendants, the remoteness doctrine involves public policy concerns which are determined as a matter of law, and not fact, completely unrelated to factual or proximatc causation. Kraft CAernical Ca, v. Illirto, is Bell TeL Ca., 240I1l.ApQ.3d 192, 608 N.E.2d 243 (1st Dist. 1992), citing Dundee, 712 F.2d at I t66; 8ee also State ojlowa ex rel. Miller v. Philip Marris, Inc., 577 N.W.2d 401 (Iowa 1998). Applying the rzmoteness doctrine is even more importane whete, as here, the prospective class of plaintiffs and injuries arc incalculable: The Funds have notalleged precisqly how many of their members wete smokers thereby precluding the court from accurately predicting the amount of increased costs absorbed by the Funds. Apart from Associated General, IfaGnes, and Dundee, the Funds face ari additional barrier to:rctovcry in light of Maarman Manuff v. National Tank Co., 91 Ill.2d 69, 435 N.E.2d 443 (1982). Under the so-called Monnpan docttine, plaintiffs, as a matter of law, are baned as . third partics hom recovering purely economie damages caused by a defendant's tortious conduct. There are three except9oas to Moorrnaa which permit i,xovery if the economic ioss: (1) was the . result of an intentional tort agaitut the plainti$; (2) is atttibutable to physical damage to propcrty; and (3) where there is a special relatiotvhip between the tortfeasor and victim. Dundee Cement , C.'n. v. C6emical Labr, Inc.. 712 F.2d at 1170. None of the exceptions apply to the Funds in that they were not the direct target of the cobacco indtutries' alleged conspiracy, suffered no physical harm, nor had any special co 7 N U-~ ~ ~ . ..-~] 'la
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DEC-11-99 15=12 FROM= BAKER DONELSON ID= 90267723H3 PACB 7 lron Workers Local Union No. 17 Insurance Fund and !1s Trustees v. !'hilip ,4lnrrix Incorporated, Memorandum Opinion, November 23, 1998 ....................................... ..... I tl ' Jmpcr aviuriun, Inc. v. bfcC:allum Aviation, lnc., 497 S. W. 2J 2d0('1'cnri. 1972) .... .................... 1 Jithn,blarlid C'o., Inc. v. Murse/Dhs¢l Inc., 819 S.W,2d 428 ('['cnn. 1991) ...........................19, 20 Kernucky Laborers District Council f unJ v. Hill & Knuwhom hic, 1')98 W l. 695299 (W.D.Ky. 1998) ........... :.......................................................................... ..........8, 9, 2/1, 21 Kilpatrick v. Bryant, 868 S.W.2d 594 (1993) ............ ............................................. ............... .....I,I Lahorers• Lrica117 v. Philip,llurri.s, 7 F. Supp. 2d 277 (S,D.N.Y. 1998) .................. .......A, 10. I I Lacey v. Larillurd Tobacco ('n., 956 b'. Supp. 956 (N,D. Ala. 1997) ..................................... .....2 2 hfandeville Island Furms, lnc., v. American Crysral Sugtrr Cn., 334 (1.S. 219 (19•48) ................. ^_ 1 ,Wubile Lije In.e C'u. v. Brame, 95 U.S. 754 (1878) .........................................', ....:....................... I I t4huris v. bfack :e Ured Ctrrs, 824 S. W,2d 538 ('fenn. 1992) ........................................................31 . Nutinnul,9sbestas Workers Medical Fund v. Philip Murri,v. htc., 1998 WI: 7J2911 (E.D.N,Y. October 19, 1998) ............ :............... ................. ........... ..'.................. ,................ I I Nrw.fcrreyC'arpenters Health FLnd v. Philip Mdrrtr, Inc,' 17 F. Supp 3„4 - (D.N.L 1998) ............................................... ......................................................... 8, `>, 15. 21 NiJiljer v. Clinrlfield Railroad Co., 600 S.W. 2d 242 (Cl. App.'fo. 1980).................................13 pperating Engineers Locir112 Health and Welfure Trust Fund v:Snreric•nu 7itbucco ('n,. No. 6C 177968, Notice of Cuurt's Order (Cal. Super. C't. .hily'). 1998) ...................... .. I II t7regorr Lahnrers-6mpluyere Health & Welfare'1'rust Fund v. Philip blorri.i•, 1998 W'1, 5-taln5 (D.Or. Aug 24,1998) ....... ............... ......................... ...................... ......... .....:... l. •1. 5. 13. ? 1 Pu.schull s, Inc. v. Dozier, 407 S.W.2d 150 (Tcnn. 196(>) .................................... ......... ................ 12 Riuer v. Sykes, 9)2 S.W.2d 128 (Tann. 1995) ............. ................................................... .:.............lu Ruysdon v, R:J. Rcynnldt T ubaccn Co., 849 F.2d 236 (6`h Cir. 1988) ........ .................................. .lM Screen,9crurs Guild-Pruducees Health Plan v. Philip Morris. Inc., No. UC I S l6(l,1, Nutice otCnurt's OrAer (Cal. Super. Ct. June 22, 1998) .................:.............:......... .........Iq Seafarers {l'elJirre Plan q, Philip MurrLs, 1998 U.S. Dist. I.BXIS I'187i (9. Md. July 13, 1998)1.1... ......................:............:.......... ......................... ......I. 2. 5, 15. 21 Suurheast Florida Laborers Di.st. Health & Welfare Trusr Fund v. Philip Alnrri.s, 1998 WL 186878 (S.D. Fla April t3; t998) .... ............ ............ ........ ........... f, 2, 6, 15, I6, 21 5'tate q/Gnlianu u Philip hfurris. Inc., No. 49 D07-9701-C'I'-00/1216, slip, op. . ~ ~.Qnt1,.Super;_Ctluly.23, 1998) ............................................................................................: 57ate njMaryland v: Philip Marris, Inc.. No. 961220717. 1997 WI. ,54tl911 (Md. ('ir. Ct. May 21, 1997) :...............................................................:....:.............................. ..........I5 ,}rare ofMinnesom v, Philip ;vlurri.s, Inc., 551 N.W. 2d 490 (Minn. 1996) ........ .................... 1.5. 16 .Srute nJWashington v.American Tobacco, No. 96-2-15(156-,8. sliP• op. (Wash. 5upcr Ct June6,1997) ..............................................,,,..,,........:............,..,..........,........... .... .... t Swtionuq• Bnglneers Guual 19 Ifyu11H & W~t r@ 7Pd.il P'ivn! m Phtfilt 1B11d'rLt ttoH ; id1HN II,M{. [7tst. LEXIS 8302 (N,U, , Apr, 3l), 19v6) ................... . ... ..::.:...._...H, '_ l iit
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82519156 i i,- ~fv1'-:n-;.cn~ 4fi~°~:2?Pfll-i=CMnH3dNdO3bA73F1 M» . I, i; /I11O:nf1
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DEC-11-90 16=24 FROM= BAKER DONELSON 9 ID2 9075772303 junsdictian without addressing the substantive claims. Howcver, in light of this tvling, their mutinns to dismiss for lack of personal jurisdiction are.moot. Assuming personal jurisdiction PAGB 53 over those two defendants is pmper, the substantive claims against them fail on the merits or are harrcd for lack of standing: Hence, rather than prolongthe inevitable, the court dismisses all claims against B.A.T; and the.Tobaeco Instituta with prejudice. Accordingiy, having resolvcd all claims against all parties, the clerk of the.court is diracted to enter a Rule 58 judgment in case numbers 97 C 8 L 13 and97C8114. H CFE M. MANNIN U.S. DISTRICT COURT JUDGE DATE: DEC 1 1998 F 16
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DEC-11-6H 16=24 FROM+ HAKER DONSLSON ID: H82SP723H3 have not alleged what, if any, benefit they have conferred upon the defendants, and failed to respond to the defendants', motion to dismiss this claim. Accordingly, the unjust enrichment PAGE 52 claim in count VIII is dismissed with prejudice as to all defendants for failure to state a claim, and alternatively, for the Funds' lack of standing. . F. Conspiracy In Illinois, to state a claim £or civil conspiracy the plaintiff tnust allege: (1) an agreement between two or more persons; (2) to participate inan unlawful act or a lawful act in an unlawful manner; (3) an injury caused by the defendants; and (4) the overt act was done in fiutiterance of the comman scheme. Adtock v. Bralregat, 247 Ill.App.3d 824 (4th Dist. 1993), aff d 164 IIL2d 54 (1995). Where, as here, the.plaintiffs have pled no uaderlying substantive claim, a conspiracy count fails as a matter of (aw., ld. Accordingly, the Funds' conspiracy claims are dismissed with prejudice as to ail defendants far failure to state a claim, and alternatively, for the Funds' lack of standing.. IV. CONCLUSION Whecfore, plaintiffs' (1) andttust claim in count t is:distnissed with prejudice; (2) tnn- related claims in counts II - VI are dismissed,with ptejudice; (3) mistspttsentation claim in count 1X is dismissed with prejttdice; (4) breach of wuranty claims in count VII arc dismissed with prej udice; (5) unjust enrichment claim in cosmt VIII is dismissed with prejudice; and (6) conspiracy claim in count X is dismissed with prejudicc. B.A.T. industries and the Tobacco Institute moved to dismiss far lack of personal is
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i direct victims of the alleged conspiracy who had standing to bring claims under the anti-trust law. The funds' allegations, that their tobacco-related health care costs were greatly increased by defendants' anti-competitive restriction on product choice and suppression of product information, were sufficient allegations of anti-trust conspiracy resulting in economic injury to plaintiffs' business or property. Slip op. p. 39. Finally, the Ohio court found that there were no more directly injured victims who could bring anti-trust claims than the plaintiffs because the anti-trust laws do not allow an action for personal injury and because the plaintiff funds were in a better position to make those claims. Slip op. p. 41. This economic injury to plaintiffs' business brought about by collusion to stop the introduction of safer cigarettes was again the type of injury that anti-trust laws were directed to remedy. Slip op. p. 40. Finally, the Ohio court rejected the defendants' argument that plaintiffs' conspiracy claims should be dismissed. Having found that plaintiffs' stated causes of action under federal and state anti-trust laws, the court concluded that plaintiffs had stated a cause of action for civil conspiracy. Slip op. pp. 44-45. While plaintiffs in this case have not pursued federal anti-trust claims, the Ohio court's analysis is pertinent to plaintiffs' state anti-trust claims. 2. Kentucky Laborers District Council Health and Welfare Trust Fund, et al v. Hill & Knowlton, Inc., et at, No. 3:97-CV-394-H (W.D. Kentucky, Sept. 30, 1998) attached as Exhibit 2. In Kentucky Laborers, the Court divided plaintiffs' claims into two categories. Category I consisted of the Funds' claim that defendants misled their participants about the dangers of smoking, causing the participants to develop smoking-related illnesses and the funds to incur the costs of medical treatment. Category 2 consisted of the Funds' claim that defendants' conspiracies, misrepresentations, and deceptions prevented the Funds from pursuing proactive measures such as smoking cessation programs and other educational efforts to reduce smoking among the participants, thereby preventing the Funds from reducing expenditures for smoking- related illnesses. Slip op. pp 3-4. While the Court concluded that the Category 1 claims were too "remote" for the Fund to pursue, it reached the opposite conclusion with Category 2 claims. Specifically, regarding plaintiffs intentional misrepresentation claims, the Court concluded that the complaint stated facts sufficient to establish the tort of deceit: that is, defendants m#de false statements or concealed the truth about material facts, and they lmew this to be the case. Slip op. p.25. Moreover, "[t]he Funds' factual allegations make it plain that the Funds were the -2-
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IS•24 FROM= HAKER D0NELSDN 9 Jn= 9015772303 • def'endants for failure to state a claim, and altematively, for the Funds' lack of standing, pACH 51 D. Breach of Warraaty The Funds allege breach of exptess warranty and implied warr,tnty.. The complaints fail to specify what type of implied warranty and the eourt construes the eomplaint as claiming a breach of implied watranty of mcrchantability. To state a claim for breach of express warranty, the buyer must allege that the selle.r made: (1) an affirmation of fact or proim'ssee madc to thee pfaintift; (2) relating to the goods; (3) which becomes part of the basis of the bargain; and (4) guarar,teeing that the goods will conform to the affirmatioti or promise. L.S Heath & Son v. AT&T Injo. Sys., 9 F.3d 561, 570 (7th Cir: 1993). Similarly; an implied warranty of merchantability exists only'between a merchant and the customer. See generally, Bethlehent Steel Corp.'v. Chicago Eas.tern Corp., 863 F.2d 508, 513 (7th Cir.1988). As noted above, the Funds neither allege that they purchased the tobacco products nor ever relied on any of the alleged representations regarding the defendants',products. Accordingly, count VTI is dismissed with prejudice for failure to state a claim, and alternatively, F for the Funds' lack of standing. )N:. Unjust Enricbmeat In Illinois, to stata a catue of action fbr unjus,t ettrichment the plaintiff must allege: (1) that the defendaats unjustly retained a benefit confexred by the plaintiff; and (2) that retention of that benefit violates thc fundamental principles of justioe, equi,ty, and good conscience. Stephen & Hayes Consr. v. MeaQowbrookHomes, 988 F.Supp. 1194,1200 (N.D. Ilt. 1997). The Funds 14
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DHC-11-9g 16.23 FROM. BAKER DONELSON ID= 9035772303 PAGE 49 0 quash markct competition which hurts aonsumers in a manner prohibited by the antitrust laws, In addition to the constitutional standing requirements, plaintiffs raising antitrust claims must specifically show that they have suffered an antitrust injury compensable by the antitrust Iiws.S'erfecz, 67 F.3dat 595-591; Saener v Board ofTrade ofthe Ciry ofChicaAo, 62 F.3d 918, 926 (7th Cir. 1995). Like theconstitutiottal standing analysis, antitrust standing focuses on whether the plaintifi has, in fact, suffered a direct and concrete "antitrust injury." Antitrust standing is limited to plaintifS whom Congress inrendet3 the antitrust laws to ptatcct. Standard C'~il, 405 U.S. a.t 263 n.14 (1972). Ta determine whether the plaintiff is the proper party to bring an antitrust claim, i.e.. has standing to proceed with an antittust claim, the court must consider: (I) thc causal connection between the antitrust viotation and the piaintiffs ittjuy; (2) the nature of the plaintiflF's injury and whether ir's the type of activity sought to be redtessed under the antitrost laws; and (3) the speculative nature of ehe plaintiffs claim for damages and the potential for duplicative recovery or complex apportionment of damages. AssocfaredGen. Conrraetors,,459 U.S. at 537-46. Application,of these factors has generally limited antitrust standing to market consumers and compditois. Serfers, 67-F.3d.a1596-597. As noted above; the Furtds never allege that they purchascd the defendants' ptoduct9, and the Ftutds obviously were not taarket competitors. Furthermore, the causal eonneetion between the Funds' injttty and the allcRed antitrust injury is riddled with rank speculation and thus barred by praxunate cause. Blue Shield of Virginia v. McCready, 457 U.S, 465, 477-478 (1982) (holding standing arises when antitrust injury is proximately caused by alleged violation). Accordingly, the Funds' antitrust claims are dismissed with prcjudioe for the Funds' lack of standing. 12
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DEG-11-56 16.23 PROM. BAKER DONELSON ID, 9015772303 PAGS 47 ILCS 10/1, which,'as a matter of law, must bc consuued in tandem with federal law when the Illinois statute is identicai to thefederal antitrust laws. See.740ILCS 10/11 (West t998); seer also Laughlin v. Evanston Hasp., 133111.2d 374, 550 N.fi.2d 986 (1990), ciling Miller V. Dep't of Registratian & Educ., 75 I11.2d 76, 387 N.E.2d 300 (1979). As such, the court shall look to fedcral ptrcedcnt in evaluating the merit of the Funds' complaints. Sec:tion I ofihe Shenman Antittust Act, 15 U.S.C. §1, forbids conspiracies to restrain intcrstate.trade by means of contract, combination, or trust. Section 4 of the Clayton Act,15 U.S.C § 1 S; confets a private right af actioa upon any person whose business or property has been injured by such antitrust activity. The defendants challenge the complaints, arguing that the Funds have not alleged a cognizable antitrust violation and, alternatively, that, they lack standing to vindicate the alleged antitrust violation. To state a cognizable antitrust violation, plaintiffs must allege facts demonstrating that they have suffered an "antittust injtny; " rather than an injttry sounding in tort which "might conceivably bc traced to an antitrust violation." .Nawaii v. Standard Oil Ca., 405 U.S. 251, 263 n.14(1p72).; Serfeer v. Je+r+el Food Stares, 67 F.3d 591 , 595 (7thCir. 1995). To determine whether the injury is covered by the antitrust Laws, the court must focus on whether the plaintiff has alleged facts from which the court can infer that, the plaintiffs have suffered direct hatrn caused by an injury stemming from conduct attributed to an injury of thc type prohibited by the antitrust lawi, Brunswick Corp. v: Bawl-O-Mat, Ino., 429 U.S. 477 (1977). Hatcc, to bring a claim under §4, a plaintiff must allege the ezistence of an antitrust violation.i.e. the type of anti- compctitive activity prohibited by the antitrust laws, which directly injured the plaintifPs business or property. See generally Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 10
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F EB. 1. 1999 11: J 1 AV/P`ON= MEMPHI S l9U, 3SUC Y, !1/lL ID; 19etS772303 PAGE 9 As lo the liaud amd nlisrepresentatinnclalm, lbe ('autt limlc tha1 lheptedicate IcWIl dtlly is n,iuty nnt lu decCivc. t(,Alibe c'1't(t6l It 1X ineallcClvAhle (hal placln6' vautirtE, L•d Kis on cig;ueue ptN:kages, in compliancc wiUl (tie F.C.1..AA.,would give <t ciYatvt(c maanliu:uuer licun.eu (o cammi! fraud• Aecunlinglri plniulilis` claims for )iclililtenl hreacb nf spacial duty :utd li-iwd and nlisrepresenhtiVa src nul prae(npled by 1he f,('.I,.A.A Id. ;n ,15. I'his ('unrt nuw juillti Jlltlge W icking iN lmldin6 that tlu: claimx ul'ihc Funds which remajn in this litigntiun are not prucml,led; nod Me Uofendnnl>'' motinn an tluN hunis will bc denied, (c! 711c 1ECUUutnLc Lt,SS Ruk 6 I hu thcary h,uzcd upon thc "fcanumic L.uss ktlle•' is perhups !he most uebnlous in dn: senxe tltul it hw hevn djl'licull fur this Coun to grasp thc concept and undarslnnd the issue Ihlts cu•wcd. Dcfcud;uns canccdv in lhair briaf pl Page 35 ,har thc rulc d,n+* nul apply lu tho Funds' (:nn:;unx•r Rowrtiun nrt nmi nnu-tn,.t claims. 1'hey do asscrt, howevur. that the rule wmtld prcclude n•c,+vury Iq lh.. Furolt uoder virnnlly n{1 bf their odxr rlniros. which would Inolude the Gtad :+nd mi~n:pregcnr:uinn.;b+im. 'I'hc dclcndtuNx cile and nrgue amung nthesy the enve of Ri(ter ('rnrlvm ('hrrnlr7Jr.+', rrir , 91 a S. W.2.1 128 ('I'ctm• 1995), ln lheir hriofand at ur(tl argunten( the t/ali•nJ:mtc h.wr Jiscu+xc~l lhc Hrlrrr c~.c u( cowc IcBg(h, This Cnun Atnply fails to sce Ihat Rluer :aands li+T Il1e prulSUSitiun fur •vhich it iy c11cJ or lhqt it SUppons the dc1'cnd~uds' position. In Rlrfer /he Sisth ('in:uit f'unU uf nl,pt•ula hnd ucnilicd lwo qucari,ms (o tllc Snpnmc Court of Tcnncv.ycc fnr dcelciuu. 'Ille 17nt wac whcllter Iha tort of rn:gPgcrN micreprusematiun h: limited lo profesaiunals or a,plir^ tn ,,,hct•, a,s wrll, mW 1hc sccoud was whteber'privity nrcoutrt,el is an u8sentinl elemem „u a ton ;aaian ol- ncl;lii;ctN ,ni3rr.prceen(ntlVll I'NSed On infaMlallnn M:igIi1(en(ly supplied for (he IIUiJ:mcc nf allmn:. 'fhu wprcrnu C:ourl answrnd dtnt thu lort o/'ncgligcnt atisruprCnumaGon is not litnit.d lu prafessionalr• ond privily ol' cuolrnl is nut csscnli:d to a totl action of negligenl n,i>a+presenu+am,, •nce de(rndunts nppcar,n hqvc Iakt:n a single sentcncatQ totally out ofconlexl :oid rniseon!:trucd tbc holding uf Lho Court. Morcuvcr, in Ril(cr the issqcs are all about products liahiliry, ro,J, „r,tIqu•nv% hvrc Ihe pl:rimi frs have ,rnwmtecd a voluntary nun-.oi( as to their produeas litd,ilily clainls. '"'fhe tpwred scmencc is: "'lbm,cx.ec lws jnitwd Illnre juris<Iiclians wluclt huld Ihat IiruNuct linhiliry elaiuts res,dlin{: in porc ecunamic tusx cm,he Iwuer rcaolved an theorins uU+er th+u,ncglign,cc:'rrlrlrrv CbainmCb:nda',dx.Inc,• iJatp.1t.1. B
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THE AMERICAN TOBACCO COMPANY 1500 Brown and Williamson Tower Louisville, KY 40202 and THE COUNCIL FOR TOBACCO RESEARCH - USA, INC. 900 3rd Avenue New York, NY 10022 and THE TOBACCO INSTITUTE, INC. 1875 I Street, N.W. Suite 800 Washington, D.C. 20006 and SMOKELESS TOBACCO COUNCIL, INC. 1627 K. Street, N.W. ' Washington, D.C. 20006 and HILL & KNOWLTON, INC. 420 Lexington Avenue New York, NY 10070 and UNITED STATE,IS TOBACCO COMPANY 100 Putnam Avenue ~ Greenwich, CT 06830 and UNITED STATES TOBACCO MANUFACTURING COMPANY, INC. 800 Harrison Street Nashville, TN 37202 and GALLER WHOLESALE, d/bla P.M. GREEN & SONS, INC. 656 Madison Avenue Memphis, TN 38103 and TENN-MISS DISiTRIBUTORS } 605 Scott Street ) Memphis, TN 38112 ) ) Defendants. ' ) 2
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IN THE CIRCUIT COURT OF TENNESSEE FOR THE THIRTIETH JUDICIAL DISTRICT AT MEMPHIS STEAMFITTERS LOCAL UNION NO. 614 ) HEALTH AND WELFARE FUND, by and ) through its Trustees, TENNESSEE ) CARPENTERS REGIONAL HEALTH AND) WELFARE FUND (formerly Carpenters ) National Health and Welfare Fund), by ) and through its Trustees, MIDDLE ) TENNESSEE TEAMSTERS TRUST FUND,) by and through its Trustees, IRON ) WORKERS DISTRICT COUNCIL OF ) TENNESSEE VALL EY & VlCINITY ) WELFARE PLAN, by and through its / Trustees and on behalf of themselves / and all others similarly situated, ) V. PHILIP MORRIS, INC. 120 Park Avenue New York, NY 10016 and Plaintiffs, ) Case No. 92260 TD 2 R.J. REYNOLDS TOBACCO COMPANY Fourth and Mair) Streets , Winston-Salem;r,NC 27102 and BROWN & WILLIAMSON TOBACCO CORPORATION 1500 Brown & Williamson Tower Louisville, Kentucky 40202 and B.A.T. INDUSTRIES, P.L.C. Windsor House Milbank, Knowle Green, Staines Middlesex, England TW18 1 DY and i LORILLARD TOBACCO COMPANY 1 Park Avenue i New York, NY 10016 and LIGGETT GROUP, INC. 700 West Main Street Durham, NC 27702 and 1) /
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i Albert C. Harvey, Esq. (BPR# 7955) Thomason, Hendrix, Harvey, Johnson & Mitchell 29th Floor, One Commerce Square Memphis, Tennessee 38103 Kenneth N. Bass, Esq. Jennifer Gardner, Esq. Kirkland & Ellis 655 Fifteenth Street, NW, Suite 1200 Washington, DC 20005 Jeffrey S. Nelson, Esq. Richard L. Gary, Esq. Shook, Hardy & Bacon, L.L.P. One Kansas City Place 1200 Main Street Kansas City, Missouri 64105-2118 Bruce M. Ginsberg, Esq. Marc J. Rachman, Esq. Davis & Gilbert 1740 Broadway New York, New York 10019 Robert G. McDowell, Esq. (#961) Baker, Donelson, Bearman & Caldwell PC 1700 Nashville City Center 51 Union Street P.O. Box 190613 Nashville, Tennessee 37219 CERTIFICATE OF SERVICE ' The undersigned hereby certifies that a copy of the foregoing has been forwarded, via U.S. mail, postage prepaid, on this Lay of August, 1998, to the following: Counsel for Plaintiffs Deborah Godwin, Esq. (# 9972) Timothy Taylor, Esq. (#15662) Florence M. Johnson, Esq. (#15499) Agee, Allen, Godwin, Morris, Laurenzi & Hamilton, P.C. 200 Jefferson Avenue, Suite 1400 ~ Memphis, Tennessee 38103 Robert J. Connerton, Esq. Connerton & Ray 1920 L Street, NW 4th Floor Washington, DC 20036-5004 t Counsel for Liggett Group, Inc. Michael Fay, Esq. Kassowitz, Benson, Torres & Friedman 1301 Avenue of the Americas New York, NY 10019-6022 ON O 4
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Counsel for B.A.T. Industries, PLC Mary Elizabeth McGarry, Esq. Adam I. Stein, Esq. Kathy L. McFarland, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017-3954 Counsel for The Tobacco Institute, Inc. Saul C. Belz, Esq. Waring Cox, PLC Morgan Keegan Tower 50 North Front Street, Suite 1300 Memphis, Tennessee 38103-1190 Smokeless Tobacco Council Barry S. Schaevitz, Esq. Jacob, Medinger & Finnegan, LLP 1270 Avenue of the Americas Rockefeller Center New York, New York 1 0020-1 7 00 1/V/+Ur _`JY-/( 1 E:\USERSVEANNLl1.RlBROWNWILISTEAMRNMOTI0N.D15 5
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UEC-11-98 16223 FROM: SAKER DONELSON 9 ZD• 9025772303 • PAGS gg 334 (1990); Asaociared General Contractors of California v. Carpeneers, 459 U.S. 519, 539-40 (1 983); Greater Rockford Energy & Tech. Corp. v. Shell Oil Co., 998 F,2d 391. 394-95 (1993). Here,the Funds claim that the tobacco industry conspired to effectuate an unreasonable restraint on trade by agreeing not to research or develop new and "safer" tobacco products thereby interfering with market competition, inflating tobacco prices, incerfering with product cnmpetition, and increasing health care costs. As noted by the Funds, the alleged conspiracy is the type of anti-competitive activity which was dccmed violativc of the antitsust laws in Allied Tube & Conduit Corp. v. Indian Nead. Inc., 486 CLS. 492, 50Q (1987). The Allied Tubs Court reasoned that where, as here, the dcfendants agree nat to manufacture, distribute, or purchase certain type of products, they engage in the type of acavity subject to antitrust scrutiny because icdeprives consumers of market cpmpetitioswhich is presumed to benefit the public interest. Allied Tube, 486 U.S. at 500. The court is hard-pressed to believe that, if true, the allegations of suppressing tobacco research and technology would not have aperniciotu effect on market competition. Basic economic principles dictate that research and development 'Irnproves product quality which in . _ .. . . .. .. .. . . . r . turn increase.s competition within the market: By making better products, manufaettutts obtain ncw customers at the expense of their competitors themby motivating the competition to alao --improve its products which.in turn spurs cornpetition and serves the consumer by producing better products ovenil It is simply ludierous to think thst eonsttmas would not want to ' purchase safer tobaceo produets. Indeed, it is common knowledge that to6acco products are often advertised as having lower tar or less nicot9ne in order to entice customers to try a particular product instead of another. Agreements to suppress alternative technology undeniably 11
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-JAN-]3-9m 15=46 FROM= MEMPHIS rD• 15015772303 PAGE 5 R{,gence Blee Shield In ReYcnec Y31uc+hield. et.,a!. v Plrilip Monis. Ine.. e(wal„ Nn. (:98-559R ( W.1). Wash. January 6, 1999),' the United States District Court for the Western District of Washingtnn became (he nintlt trial court to distniss in its entirety and with prejudice a third-party mcdical benefits payer case brought against various tobacco manufacturers.' Brought by IIficen Blue Cross and/or Blue Shield health care insurance plans operating in several different states, the ense involved legal iawue,c and factual nllegations substantially eimilar to Ote casse at bar, inclnding cluims under various states' consumer protection tu:ts, fraud. and conspiracy. Noting that "[b]enefit plans' efforts to recover damages from the tobacco industry in federal court can best be described as a resounding ftWtue," Gxh. A, at 5, ihe Court held: froxintate cause is a generic label for "tlte judiuiel tcx?Is" courts use "to lunit a person's responsibility fix the conseqnrnces of that pcrsoti s own acts." Ho_ lmegv. Sect>Cilies L~tvector Pmtecdinn Cnm., 503 U.S. 258, 268 (1992)...[Ijt is eotnnton ground that the law does not afford a remedy for "every conceivable harm that can be traced to alleged wrongdoing." IAssaCioted General Contractors of Califomia v. Ca1'fornia tilate Cowncil of Carnenters, 459 U.S. 519, 535-36 (I983)] ...[A]t a ntinimtun, the law demands "wme direct rclation between the injury asserted and the injurious conduct alleged." LjpJ)>r.% 503 U.S. al 268. As a result, a plainliftwho complains of "harm flowing merely Gont Ihe misfortunes visited upon a third person by the defendant's acts [is] generally said to stand at too remote a distance to reeover." Id. at 268-69. Under this principle, referred to as the "remoteness doctrine;'relief, and hence, standing, to recover fur tlamages is limited to those directly injured by a defendant's conduCt. SecOrqunn abor rs •.tn;tLQ= Heah_h Rc W J far 't'r +<t LOtld, No. 97-105 tOMA (D. Or. Aug. 3, 1998), slip op. at 6. ~ A copy of this opinion is attached hereto as Exhibit A. = As noted in defendants' prior submissions, the seven federal district courts and one state court which have dismissed such lawsuits in their entirety attd with prejudice are: Williarns & Dalcs Co.. Inc. v. Antetican Toha cn 'o t al Civ, Action No, 98-553 (W.D. Pa. Dee. 21, 1998); hmft Ltrotherhqod ofT +n,eters lt ual 734 FI . nh and Welfnre T,:t Fun t~v. I?hi(jn Morris, . t tT4•t 1998 WL 849528 (N.D. 111. December I, 1998); T:a• ,aq~, n~,ytere PTS10T ctil Fpnd v. F'hili Mnrri~ a_ Inc., 21 F. Supp- 2d 664 (E.D. Tex. Aug 31, 1998); fJrecon Laborcrc-pmotovecs r4enlth & Wclfere Tmst Fund v. Philip Morris Ine., 17 F. Supp. 2d 1170 (D. Or. Aug. 3, 1998); ;~titnrers Welfare Plan v Philip jNnrrie- Inc., 1998 WL 723158 (I), Md. July 14, 1998): cia ~mm7um 1998 W L 212846 (E.ll. Pa. Apt. 22, 1998): 9+ u/ he+rt Plnrida r:,hnrers I)i<_L F[calth K~ Walfine FunJ-y'Ehili orric fai,,, 1998 WI. 186878 (S.D. pl. Apr. 13. 1998); and New Mexico nn 1 W.et'f ex c M+lti• 'mll tteahh.l Wclf re Tptet Fund. et at. v. Philin Mn_rris_ Inc., No. CV-97-11911s, (Second Judicial Circuit of New Mexioo, December 24. 19')8). M/Mf~l)N1.1 7~ax.law oo~mn 2
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0 IN THE CIRCUIT COURT OF SHELBY COUNTY TENNESSEE FOR THE THIRTIETH JUDICIAL DISTRICT AT MEMPHIS STEAMFITTERS LOCAL UNION NO. 614 HEALTH AND WELFARE FUND b and , y through its Trustees, et al., V V ~yyY' Plaintiffs, Case No. 92260-2 R~ `j. v. PHILIP MORRIS, INC., et al., Defendants. PLAINTIFFS' SIIPPLEMENTAL BRIEF IN OPPOSITION TO DEFENDANTS' MOTION TO DI MIC FOR A. TRR TO STAT A CLAIM Since the submission of Plaintiffs' Opposition to Defendants' Motion to Dismiss for Failure to State a Claim, several courts considering identical motions have refused to dismiss Plaintiffs' claims for reimbursement of tobacco-related health care expenditures. Because these decisions are relevant to the issues now under consideration by this court, plaintiffs believe it is important to bring them to the court's attention. The cases are as follows: 1. IronWorkers Local Union No. 17 Insurance Fund and its Trustees, et al v. Philip Morris, Inc., et al No. 1: 97-CV-1422 (N.D. Ohio, Sept. 10, 1998) attached as Exhibit 1. In IronWorkers, the Ohio court declined to dismiss plaintiffs' claims on the generalized defense of "remoteness." The court explained, as plaintiffs have argued in the instant case, that "[t]he test for remoteness and proximate causation differ for the varied statutory, intentional tort, and equitable context in which plaintiffs' claims there arise"; therefore a more claims specific examination is needed. Slip op. pp. 6 & 13. The court noted for purposes of a Rule 12(b)(6) motion, that the proximate cause determination was a policy decision about who would bear the expense of extended damage, and the decision involved choosing between an innocent plaintiff and a defendant who was admittedly at fault. Slip op. p. 15. The Ohio court also rejected the defendants' argument that the plaintiffs had suffered no antitrust injury, lacked anti-trust standing, and failed to adequately allege anti-trust injury. The court explained that Congress intended the Sherman Act to protect against injury to the competitive process. Slip op. p. 36. Because plaintiffs' complaint alleged defendants' conspiracy to stop the development of safer cigarettes, plaintiffs' claim was just the type of stifling of competition in product quality that Congress designed the anti-trust laws to address. Slip op. p. 37. Nor would there be difficulty with apportionment of damages since the funds were the only
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DEC-11-e8 15-21 FROM= HAXER DONELSON ID: 9fl157723H3 PAGB 4] allegedly injured, in fact, by the defendants' tobacco products. For the rcasons set forth below, the defendants' motion to dismiss is grantcd and the case is hereby dismissed with prejudice. The court declines to address the defendants' joinder argument as it is moot. II.BACKGROUND In their complaints, the Funds allege that the tobacco industry and its related public relations consultants, trade associations, and researqh committees have engaged in a nationwide conspiracy dating back to the 1940s, when tobacco researchers allegedly discovered, but concealed, evidence indicating a causal relationship between tobacco products and lung cancer, 'ETie F'unds allege that the tobacco industry denied the allegations, dismissing thcm as being part of a"heatth scare" and then expressly warranted to the public, through direct advertising campaigns, that cigarettes aad tobacco products had no adverse effects on consumers' healtti. The alleged conspiracy gathered full steam in 1953 after the so-called "Big Scatn" caused by the publication of tho Dr. Ernest L. Wyttdor's report which indieated that the lung cancer was more common among smokets and that there was a direct correlation between the risk of lung cancer and those who smoked. Due to the growing ne;ative publici7, the Funds allege that the tobacco industry created the Tobacco Industry Research Comltrittee (TIRC~ whioh was responsible for perpetrating a ttationw+ids• propaganda campaigri whjeh f?Isglx t;tiareptrsented the health effects of cigarette products zxtd ititentionally cpncealed the alk,gadly lethal effects of tobacco products. As pan of its alleged campaign, TIRC published a"Frank Statement to Cigarette Smokers" ("The Frank CO K3 Statemcnt"), appcaring in 448 newspapets nationwide. The Frank Statement denied the reports ~ ~ 3 ~ w 00
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38-23 FROM. BAKER DONSLSON • ID, 90]S77,2303 • PACZ 50 C. Fraud In counts II, III, and IX, the Funds raise elaims for fraud under Illinois common law and hz_sed on the Illinois Consumer Eraud and Deceptive Business Practices Act ("Consumer Fraud Act"), 8.15 ILCS 505/l.. The defendants move to dismiss this claim pursuant to Fed. R, Civ. P. 12 (b), (6) and; alternatively,, under Fed..R. Civ: P. 9 (b) for failuro to plead fraud with sufficient particularity. - Under Illinois law, to plead a claim for cotnmon law fraud. the plaintiff must allege that the defendant knowingly made a.false statement ofmate.rial fact with the intent to induce the plaintiffs reliance an the truth of that.starement which causess the plaintiff to suffer damages.. Oriz Credit Alliance v.. Taylor lbfackine Workr, 125 F.3d 468, 479 n.S (7th Cir. 1997). To state a claim under the I1linois Consumer Fraud Act, the plaintiff must show; "(1) a deceptive act or practice; (2) an itttent by the defendant that the plainritF rely on the deception; ' and (3) that the deception occurred in the course of conduct involving a trade or commerz:e." rhacker v. Menard, Inc. er al., 105 F.2d 382,386 (7th Cir. I996), quoting Perona v. f/olkrwagen of Amenca, Inc., 276 i11.App.3d 609, 658 N.E2d 1349, 1352 (1995). The Funds' fraud claims are dismissed since they have failed to allege any facts showtiig that they relied on any rnateaal false snhmeat made by the defendants. At best, the Funds' aliegatiotu demoastrata that theiY smoking rnenabees relied on the allegedly false statements contained in the "Frank Statement" along with other allegedly false statements regarding the health effects of tobacco ptoduets. But nathing in the complaints cause this court to reasonably conclude that thc Funds ever relied on the defetuiants' factual representations concerning their products. Accordingly, the fraud claims raised in.cotmts lI. III, and IX ars dismissed as to all 13
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.. AUu211998 iEM^3P.L'-' ;;:..
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DEFENDANTS' AMENDED MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM Come now the undersigned Defendants and in response to the Plaintiffs'Amended Complaint filed in this cause, state as follows: 1. The Defendants do here and now incorporate herein by reference, as is set forth in full, the Defendants' original Motion to Dismiss for Failure to State a Claim filed in this cause on April the 20th, 1998. WH EREFOR E, the Defendants respectful ly move the Court for an Order Dismissing the Plaintiffs'Complaintand Amended Complaintwith prejudice pursuant to Rule 12.02(6) of the Tennessee Rules of Civil Procedure. Respectfully submitted: Lee J. ¢t ase, III (BPR# 8443) GLANKLER BROWN, PLLC One Commerce Square, Ste. 1700 Memphis, TN 38103 (901) 525-1322 (Telephone) (901) 525-2389 (Facsimile) Leo Bearman, Jr. Esq. (BPR# 8363) Baker, Donelson, Bearman & Caldwell 165 Madison Avenue, 20th Floor Memphis, Tennessee 38103 Jack E. McClard, Esq, Maya M. Eckstein, Esq. Hunton & Williams Riverfront Plaza 951 East Byrd Street, East Tower Richmond, Virginia 23219 i John A. Lucas, Esq. Hunton & Williams P.O. Box 951 Knoxville, Tennessee 37902 Jeffrey J. Jones, Esq. p Matthew A. Kairis, Esq. NO Melanie F. Fahey, Esq. (J~ Jones, Day, Reavis & Pogue ~ 1900 Huntington Center O Columbus, Ohio 43215 ~ -~ cr. 3 ~
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TEe. T. 1999 11:52AV oM. MBMPHtS NU, 99U8 r rii« ID= i9015772~w:i PAGE ]q • r pluvi8ion3 uf di0 TC1>ne99co COMUmcr ProtcCtiun Acl, If thcru is evidcnce to sup(wrt saclt claims, ond a jury ahould acecpt such cvidencc, (1te I'laiatiff Funds nny not only be entided to tnonetary d:Unage%, but extensive hpunqivc relicf asi well. Accordingly, the Ucl'endants' motion as it relates to the'fenncssce Consutner Pratectian Act i;t not well takcn wd wilE bc dericd. (3) '111G 1'GNNL•'5SIi1's UNIPCritM-r'AAUC• PRAC1'[CCS ACT("AN1l=fRUX T') CLAIMS. C:num 1! of tlu plsaintil'1's' ctmipluim asscns a causc of actian pnrsusnt tn T.C.A- §a7-25-t /1l cl seq. ( 77t. Terrnc.csac Antl-lrust Law). It is the plaintil'1's' thenry and conrantion that the dcicnduNS hnvc conspired tn resvpin trade and inhihh cnmpaition by suppremsing the dcvelnprncnt and murketing of sdfer, less addictive tohocco products. Specifically they have alleged in the complainr rhat the dcfendurns have cumbined and conspired to suppress the developmcnt and tunrketing of eigarencs Uwt present fewer adverse health consequences or safer nicotine delivery systemsand by agreding in furtlurance of ttie conspiracy to conceal the inforaaation concerning tho ncgativc lrcolth auributc of their products, (Sec Paragraphs 242 • 263 of the complaint at Pages (4 • 68.) It is the ptuW.v' further theory and cunumtiun that the Individual manufacturcrs agreed to not attempt to enpand liteir own market share by competing to produce a better quality produet; and as a result ofmreh cunduct thc competition in ile market for an altentative safer tobacco product has been restrniacd cousiatg the Funds to incur substantial costs to neat the tobx.co relMed illnesses o)' their nwmhurs. It is their fucthcr ttmory and contention that the defendants entered the health field by eeniblishing s}wm medicol tYeearch organizations thereby injuring the Pund.9 which they contend wcre consunrers of such medical research. (See Paragraphs 113 -) 33, 133 - 161, 253 • 264 uf the i coinplaint.) 1'his Cuurt simply is not so persuaded and it is unable to make the neeessary connection between tlre alleged violation and the injury daimed by the punds. 11Se allegations of Ihe complaint, if proven true, perhaps would be thought by some to be atrocious at best. Neverthaless such facts do not support a then,ry uf trade restraint such es would be contemplatcd by Ihe Anti.trust laws. The defendams argue that the plaintiffs have not alle{{ed and can not prove at1 "anli•truat° injttry. Whlle thu fpciual allugations on the subject may be thougbt by some to oonstilute hcinous co fV behavior, lite Cuun;ngrees with the defendmrts thnL such a)IeguGonn simply do not state a cause of CT'r ~ \-0 I3 O . ~ t~
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DEG-11-99 16.22 FROM. BAKER DONELSON ZD: 30157723e3 PAGE 43 facts set forth in the complaint that undennine the plaintiffs' claims, Scott v. p'Grady, 975 F'.Zd 366, 368, (7th Cir: 1.992), cert. denied, 548 U.S. 942 (1993). IV, n 1 is A. Proximate Caase? / Staudin$ The dafendants move t.o dismiss, atguing that the Funds' cannot recover in a direct action far remote and derivative injuries allegedly caused by the tobacco industry. That is, since the Funds' economic losses stem from alleged personal injuries inflicted by the tobacco industry upon Fund members, the Funds have suffered no direct injury and thus, are barred from bringing this action. In response, the Funds assert that the tobacco industry has proximately caused its economic losses and therefore have a viable cause of action in light of a recent decision in State of Illinois v. Philip Morris et al., No. 96 L 13146, slip op. ( Ill. Cir. Ct.). While the 5eventh Circuit has yet to address this specific issue, the coart is not writing on a clean slate. The recent wave of state and federal tobacco litigation has compelled numerous courts to consider the leYal and policy ramifications of similar derivative tart suits like this one. See generally Texas t:arpenters Pfaalth & Ben. Fund v. Philip Morris, Inc., No. 97 C 625, 1998 WL 685364 (E:A: Tx. Aug. 31,1998); Labo.ers' Lo.17 Health & Ben. Fund v. Philip Monas. Ine_, 7 F,Supp. 2d 294 (S-D.N.Y. 1998); Oregon laborers-Etnployers Health & iVel. Trust Eund v. Philip Morris, No. 97-I051-MA,.I998 WL 544305 (D. Or. Aug. 24, 1998); Stean,ftters Lo. 'For the sake of arYurnent and the purposes of this motion, the court shall asstutte that cigarettes arc dangerous and do, in fact, cause serious health problems. This usurnption is not, oo nor should it be,'construed as a finding of fact in this or any other tobacco litigation. rl-) CrI ~ 8. ~ a ~ Q
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110 6 rn cN
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DEC-11-B6 16•22 FROM: BAKER DONELSON • Z0= 0015772303 PAGB 46 alleged manipulation of the tobacco markei. The individual members, and not the Funds themselves, consumed tobacco products and relied on the defendants' allegedly false representations and product manipulation: Moreover, even if ttte individual members' injuries could be imputed to the.Funds, tha court would$ave to assume the existence of far too many variables to conclude that they were proximately caused by the tobacco industry. For instance, thc court would have to assume that the Funds' members injuries - cancer, emphysema, etc. - were, in fact, caused by the tobacco products, or assuming a safer alternative product had been available, rhat the Funds' members would, in fact, purchase it, Furthermore, the Funds could havc avoided the additional costs by assessing.higher health care conttibutions from its individual members who smoked. in .ddition to standing, an equally compelling basis for dismissal is, the substantial risk o F double recovery posed by c(ass action suits which could be brought by the individual members based on their personal injuries. In essence, the tobacco indusiry would be forced to pay for the same injury twice. This is a grave policy decision which is best left to Congress or the state legislatures instead of the courts: A balance must bp made between the need to compensate consumets who may have been misled with the need to avoid exposing manufacturers to crushing liability. Accotdingly, the court dismisses all of the tnrt-related claims raised in counts Ilv. V and VT with prejudice for lack of standing, and alternatively, for failure to state a cleim for which relief can be granted A. AOtitrust A1lC$atlon3 . The Fuads' complaints raise wttittust claims pussuant to the Illinois Antimtst Act, 740 9.
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DEC-11-HH 16.13 FROM; BAKER DONELSON I132 9015772303 . FAGE 10 i. ~ Preliminary Statcrttent . E'IaintitF.s' briefing uf tlie issucs raised in this mulion iu thsutis% ii a canthiuatinn of Irrislcading statements of tha recent deeisional law und sileuec un morn euuut-speailie adversc rLLlCS Vf I:IU•'. . . . . . On $eptember 3, 1998, plaintiR:liled their Briufin Opposition tu 11c1'cnd;mis' Mulinrn !a Ui,misa lbr Pailurc to State a Claim ("PI.13c") It contains this bold represcuuniunr Moreover, !'lttintiff's'.case is similar to reinthursament uctions brought by at least one major health insurcr,utd nuuwroas xraic attorneys general, In several of those cases, courts hnvu ;tddrl:,sed argument,e in support of motions to dismiw} similar tu lhusc rni.vrd by Defendants in this action. Although the courts have dismisvc•d ,, sorne o[the plaintil ts' efaims fur a Wtriety of rcasnlu (vtcludinµ :" :inatjecryiN`pfouding,.cuntrolling state law urjudicial iutuqm;taiiun . . oYCytmqlnrl6T stalutory law) none o[,t{ruse cn•urtx huvq VI7Yr~j,y.ved ..~9pfY'ttn ifPs-epi c un "'remotenktis" ernu;w,d~y. ' . PI. F9p, tt 13 la :O:mphovie adde(1)• This rcpnsennUion is both misluadint; anll liletudly i,nur(lv~ct .._ It [s}nuluaJin& bacauye it suggest~ tljsrc %vfY nli Jvyfyfort+,yltalynnl',, utd'ojlplying rcntutencns pnnaplco to ciaittis qY up LRiSA ,)ruyt funtl uVau)vt tlwlpbYeeu induetuy, tlius 1bFviny thts Cnun w lw,k tq ,Iriuinglae ln ht.Hlth ipyntt r clgl(1)+ Ind attcirpcrs grneral claims, f ly Sg jin:rnhvr 3 tktprC tVale a nttnthzr ut dtipysutiva dFx,q)t!h» uli rl.llni+uxsyrtqd by IiIdISA Irue! N(tds ugan+c }li [cl7accq inilu4try, I hvrc was only one dispasinvlj ruling nn r(ZI;3A lruit /'nn o chtipta wl1 n IldTgl{d !pl lik• 1 s «~ } tlwif 13rtuf tn Suppurc or pdundynts $w10/tut! tq (atsltllKB Yl1f I liltl[c tit'li111y I/ I n(yt f 11 1i}I 1 an Aprll 20, 1'1yH+ Suurlmml p7nrtrlG 1 r+horl rx AN/ {li<t(1~( ~ li"Vlft({~ /rlnt 1 lrA1fV /71!ll~t Mr~rr!•r• 1.994 W~ . (Ma87y (C 11• 41i1 Ap/ll 1j; I oya)11 ~hy C. ~s~lni~1 ~, I'll)NI w!lylll?Iau1!jl)ti 11hx! tqur hrltf. ijvq +cpyr~w ~untts hatl Il~snilsYw/ tyulClmtf uU« ptl claur~ prr.ut~yl hy ttiRltin uustlLnd,,lgolnstlhctuqucrtirnluzyYVqfvmVt~nit<i){rt>ljntly 1o)ux},'Krptnt.rs/Irnldl IlwleJlt Ftrntf v('hjGp 4funn ( li./~ ! K Au~•.3Q I'19R)t lJ,,rr kn(r 100 rlvl (•tliph;veus Ilanldl,e GV~Ifu!~ lrprr Funt/ v PGllqr Nlqrr7; ~c)9B 1~'( ;3~,1(1$ (I1 G1r M!y '•), I'J98j; .hwJurcrs iVcljira Plcrn v Ph(71p A(orrlv 1994 U 4 t21y1:1 FXlS I I N75 f1I 0 4. July 1}, 1 T1kt, Slrumlltran LoVx!! Unlu,t Nn 1711 H'a{fary F°ui+d v J'ry!/!p ,Mnrrrs, 1'r'IH W{, a I^-HdR (1S.U• I':1. Apr, 22. 199A); npcl SvarlrtiuRtFlnrick( LuhoiPrs, illtlr•J, "Althou-gti Ikfatdants bruught all bul ihc Co 'lexq.s C'arjwnrers ducisipn tu the (Nut1s' attention in their Supplemental Montnrahdurtt nl• No (J7 ~ Authorities in Suppurt of their Motion to Dismiss ("Det•. Supp, Br.") hc il • phtiatil'li liled their 11.0 O V
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DEC-II-BB 16:15 FROM: BAKER DONELSON ID9 S0IS772303 0 r. Tenmster.s Lucal7J4 The most rccent deeisiun dismissiog a labor union 11md cavein itN entiruty and witlt prejudicc on remoteness grounds is the December I, 1998, dccision in the cansulidated c:+.es of liuermnitinul Brotherhood nfTennu•turs l,nenl 734 fle<tGh and LYelfiire Trnxt 1•Smd v Philip 6(Urris, lnn., Na. 97 C 8113• and t.'ertrra( Swrar foint Uonrrll/aulth an:! 6VvlJlu-e '1'ruav f•iurd r. Philip:bforr&. Inc., No, 97 C. 8114, pending in the United States District ('uurt ll+r the Northern Di.strict of Illinois, tastem Diviaion° In Taurn.eiar! LUcal 7ja, plaintil'(:r rai"s¢d cL•tims. jUt.9r :}llu, for stau: mµl tedcr;tl ~atttitrtut viul;rtintis, breach of specinl duty. breach of exprc:s :utJ implied warranties. consunter liaud and misrepresentation, unjust enrichment, and cuuspiraay. e cuun coosiII~scd: [hzhulk of tht previously decided labor union enses - including the (C'un 16 urku v dvCh+on (tJtvCutisvd b htwj =-mtd qxpressly limnd that ttte trInd hau ~up lo dislpia3 thcao claims uo tht basis tlnu tYCR(6 fwtdn qt' yiml,Jar thirdli;utte4 h;tvc sttftettd nu Siroct hau•nt alu`inJning tNntlf} robt ~u t!!lustry s altegvd niizcunduc6 , Overwh+.lrnut~'lfxcudept 4umpqly tJatq ppurt tn coucludc tlre scunc. . . .,. .ye' _ . I nh jhit 11 at 6(lidtsmlbsln8 nll c.:ums witlt prejudtw^uo remutincss;;ruund,s the cutut li+und tll;u the plamutl(un4s suflcret} pu 4tracl pljuj7 truvublo ui tha dr 4nd:mts' cuuduct ond dtut tlu• fyin tti; qJlegud tn7tltY ~{ "l~t to mtenuat tI ~Fum tha ollcggd m tmpuLninn ul' ihe tubncc;+ ttS trkct:' LL tt 9.9. 1 he cnun, was ulsu dtsturbad b~ ihv "+uh+t.tntlill li+k of duuhto rueuvcq posed by vl Fvs wtlug suils whk[1 cu4lll .1-4 hroughl hy Itt4vi4tr tl qqtnlwl'K JttWeJ uu d.><ir . ~. .,' . .... : .'. A~ ....... , .,':..'. . .. s . , _ _ . putwnal nyurlps;' nnd detul}ttJ<pd thul rhid wqq ' t*r,ivp ptdn,y daettilon" hvsr I U bl t;Igy tpy.tatu Ioei,lalurcx In u t! uf tlt~ ~auva'` 1~'at The t.uurt qlut dwmtx* {hu vefluus cluutlN on utfQ{ii/Nt tl Sp!Htl uruuilSc h;t..ar. JI di,ml?f,ul tqc pntittyat clulntx y+rilh proJwlof !yn ihu gtJtlitlnn{a #NUnrlBllNt1 FbunlhT" WuN 40! tlm proper puni,:s to brm>} mt antltru>n claim undet Ar+ncfaldt~ f.n4u ry11'unlrut htr.t v. { StWut,t(It Sfuti C'uurrdtlufG'ttYpnprrs 459 U$ jl9 (1983)tJ1{¢4sYLt~ jt111p• 14 II)l~I llwy wVfv nw )Ihc!' ' . . . ~ ~_ .. . { s : .^ ,.'"~, •. . 4 ptarkti cunsutnem nor pumpcyih±is Taqrnsrara Lqcpr 7M il11 ° : ~..,. ... ~,.:,,; s.. ^.,,s. . .... . : [TJhe hunds never allege that they purchased thu delendant.s' products, and the Fund.4 obviously worc not markct cnmpetitots. -Furthermure. the causul connection between the Fund,' injury und . the alleged antitrust injury is riddled with rank specul;nion and thus . . : barred by proximate cause. jj,at 12. v a;vt6~~l~sh n h eaav~~~~~i~r 1G3triitlt it; \.o ~ ~ , cr~
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DEC-11-96 16.16 FROM. BAKER DONELaOM rD. B0f5'»2303 . 0 PAG2 23 • money in medical claims due to supposod smeiking injuries, then they may proceed with this litigation. Tothat en.d, plaintil7s conveniently ignore language in huUt Uni• und Ai)pulrirk which dernnnstrate tlhu the Tennessee Supretne C:nmt rccudnizrs and upplies the remutrnrss dr><lrinc. SecY.)oe v, l.inderl,'onxr. C'u, Jne, 1143 S.W.2d 173 (fenn. 1992) ("legal responsibility rttuat be limitcd to chosu cuuses which nre so closely cunnected with the result anJ are uP.utch signiticancc that the law isjustified in imposing liability. Some boundary must be sct...): .Cilprrnrck v. 1lryunt, 968 S. W.Zif 594 (1403) ("Once it is established that the dd'ernlattl's negligent conduct w;u, in point of fact, thu actual cause af'theplainlilT's injury or harm, the tocus then bccoities whether the pulicy di (he law will extend rospunsibiiity lirc tltal nugligunt conduct to the consuyucnces that have occurrcd;' "'fhe doctrine nt'prusimatc cau+u ancumpusxa+ the whole panoply of ru[es that Inay deny liability fnr ntherwisa aaiunuhld ciuues uf hnnn ) Ahhuugh reasonable Purc,eeability is unc clemcnt of pr,tximatc cmisaliun annl,vsis, it ulone is nnt sufficient. The har ugninst remok and dcrivative clairuc aqd the requiremenl of' rull.tianal'+Ie foroscuabifily are septuate and distincl rcyuimttmnts. .- (F]oreseeability is distinct from the pmsimate ctu;ntinn policy of lfmiting actions to thosc situatcd must immediately tu the olluccdiy harmful conduct. While pluintiR's may have alleged llutt nc,ir supposed harm was ('oreseoable, plaintifFs' injttry. if nny, is cntirdy dependent upoqthc injuries suffered by thcirparticitxmts and - .bene6ciurias, Plnintif ta are at Icast onc slep romuved fi•om the - allt:gedly hurtnful conduci and plaintiffa therulixc lack sumdin): tn , . maintain their antittnst cluim. Oregon Luhnrers-Employerk !leairh & Welfur¢ Trtt.rt Fiind v. I'hilip aGrrrfa, .1998 WWI. 54430% :It •b (U. Or, Aug 24, 1998), ccnrd louw v, Philip :Worria•, luc ,.577 N. W'd •{(11. dtlb (Inwa 1998) ("the rcnwteness doctrine is not based upon a factual inquiry ta dctenuinc wl7clhcr (h0, damages claims were lbresevahle or whether they werc a proxiutntc cause; rather it ie a hgal doctrine incorporating public policy cunsidcmtions"). plaintiCls simplY cnitnut uvcfcontc the ruk. that une who pays benefits to or fur tart victims has no direct rigltt nf action nptiust lhu ldh:ged tortfe:tsor. $M Det: Hr.at 7-13. h. Plyint'iffs' Alleged,"Special Relationship" With Thcir PYrtil'ifnllttA I)nl'Y NOI Give , Plaintiffs A Direct Action A,.inet Ilefendantx , On pages 5 through g of thcir brief, pluintifl's tL4surt that their ^~pccitJ rcluti"nshit~' ,t:+ non-profit fiduciaries governed by FRISA justifies tlte crcutiun of new righ[s aKttinsl thrrd partiox and distinguishes them from other insurors, employers or govermncnutl cnlilius.'" 'I'he crux ul' ° r,jB y4l}e 10 ®rplalellfl6' (9iief, haweven pli0@ufft df~Ik lH3! lii: Y•Iti! Ifi9! N~H:lIk "ut'} 'IHttlill: t;vlt<crl saxar.urvlvcd motions to dlsmiss ftlt IeNIt t® Hliq)-0Iyiflq!?5 plqNllill'Y~ ~ttlcgatiun that tBCy nn•'a , alnG~} }}~}!p (contnwcd ... 1 14
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EEB 1.1999 11i51AM20Mv MEMPHIS tn= ,se,s?7sNO. 3308 N• ~7/1po~c lu deeldn unless the tmcanlrovdrtcd fects and in(L•rena:s to bc drawn from them make it so clcar that a11 rcusunubh,r (>ersorl5 umst agrcu un the propcruulcomc. Such issues may be prcempscd hy the trial judge rrrtly whcru evidence mul reaxunuMe inferenws dtcrofram are so free of conflict Ntat oll taa,urtablc ntinds wuuW agrec with the dccisiun of lhc trial judgc.° r1t thiy .fage of the pnwcediitµs this Court is of the t:onsidured opinion thai, given the pleadings and factual asscrtions thereiu, il is more appropriate 1br• n jury to determine the issue of remoteness with proper insauetions giving due eumideratiun to thc issue nf rentoteness. Who, other than ajury of twelve people Qnnd and tnte, is to 3ay whuc the bright line of demnrention is.lu be drawn between tlm.e who stand at ton remote a distance to tnnintnin a cauec of action and those who ore connccted closely enough to maintain such an action? 'fbis Is not to say that the punde' cumplaint will necessarity sarvivc a motion lbr swunnuy judgnteat, panicuhvly on dic imue ofdanragam, once drat aspect Is more Nlly devcioped Whilc tlic yucstioa Is cluse, this Coun belicves thnt Counts V nnd VI of cho eomplaint should twt Ms dismissed at this stagc ol'rhe pruceedings due to reutoteness. (b) fsslsAl.Plsrrutllivn It is the dtcnry aRd eontentiun of the defendants tbat tlte Federal Cigarette Labeling and Advurtising Act. 15 U.S.C. ff 1331 of seq, preclude5 any claim. The defendnnrs cite and nrpuo the cax of C.ipollnne v Lrl,rgclr Croup, Inc•-, 505 U.S. 504 (1992) in support of their position. The defcndnnts' reliuncc on C:ipnllone is mieplaced in Ihe scnsc chat it ignores en exception that was ccuved out by thc Supreme Coun. Claims xuch as fraudutuu misreprescnuuimt mtd conspiracy wore not pnenmptad twease "such clahns are not pralicoted on a dtuy'bascd on smoking and heatth; but rolhor on a nrore g eneral obligation - the duty not to deceiva" See Cipollon¢, supra nt Pagus 528 • 529. Amung tlw triat C.tturts whioh have considered this question, perhaps Judge Richard Wicking v;ning in the Unitcd Stntns District Court for the Nunhera Uistrict of Californin stated it best in his opinion in 3rudunnry Fngineers l.ocal. et aI v. 1'hi7lip Morris. hrc_ er al, C-97-01519 frled /tpol 30, 199g, where he said; 'Scu Sterling e Velricof Chemicrr! CorMtr~rfnu, 855 1'. 2d I 18R (6th Cir. 1988); Cook by mrAtbrnrrg7r IJirhnven o, ~)rrnuukcr's njRrvcrRanc Inc., 878 S,WZd 934 ('feM. 1998); and 1'rirr Ly ond rhruaXh (lofr.,n v. 3Y. Vranus Hasp., 945 S,vV.2d 731 ( ferul. App- 1996) Pet, for Ccn. tp N C)'7 Dcn. - ~ ~ 7 0 e N
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-AUG. 5, 1998 4:47ft-oG-ss v 6108 PN MILLER & MARTIN FAX BIiQ23 765 N0. 0430 P. 3',OB aad TidB COiJNCII. FO& TOBACCO R88EARCEI - V.8.A,1NC. 900 3" Avesua Nnw Ywk,'NY ,10022 ;nd TF>fi TOBACCOIIdSTiTUTS INC, 18751 Svaee, N.W., Saite 800 Washiogt4a, D.C. 20006 and , i SMOK~LBSS TOBACCO COUNCII., IIVC. 16a71CSlYayN.W- Watlhiogton, D.C. snd HILL 8s l1alOWLTON, INC, 420 Lcgugtau Avenuo NeWYwrI4NY 10070 and UNiTBD STAT$S TOBACCO CO1vSPANY 100 FutBam Avenpe G7eenndcb, Ci 06830 ind UN317:D STATES TOBACCO MANCFACTURING COIeANY, Il1TC. 800 Harti®ou Sceet Nashvilfe, TN 37202 nnd GALLFR WIiOLESALB, Ws P.M GRE6N & SONS, IINC. 656 s~tlisoa Avenua Memphb, TN 3B103 N+d , , 18NN•bQlSS DIS'IIIIDETfORS 605 Sca1C SheM MaWp*TN 38112 DePeadata.
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'FEB. 1. 1999 11 :53AM:ot~. MENPHrS NQ 3308 r. 19~te ID• 19016772303 PAC£ 16 919, 926 (9th Cir. 1991). Consldering all of the factwl allegations of the complaint tAe Coon simply Is not pemtaded ebac the Funds have stated a cause of action under the aad-tmst theory. This is simply not en anG- truat ea.e. Accordingly, the Court finds the Defendants' mution to be well taken and the same will be gmnted as to Count [1 ofthe compleint. Having thus decided the ismse. it is ecn necessury to reach the issuc raised by the Defendants as to the imct-statdinva-state character o f the allegations in the complaint. Likewise, the Issue of remoteness ta moot. (4) FRAUD AND MISREPRESENTATIpN As earlier inificeted, the Court will consider the fraud and misrepresentation issues (Counts V & VI rcspeeuvely) together inasmuch ss the elements of proof with respect to both are similar. In Tennessee in order to susrr9n a cause of action for fraudulent misrepresentation, a plainpff must show Ihats (1) the defendant tttsde a representat3on of in existing or past fact; (2) the tepreaemedon was folsely made; (3) the teprasentafion was in regard to a matetiaf fact: (4) the false representation was tnade either knowingly or without belief in its nuth or recldessly: (5) plaindft'eeasonably relied upon the misrepresented material facts: and, (6) plaintiff su([ered damage es a result of mi~eptesnmteuon See Merropollron Covornmenr v. MeKinney. 852 S. W,2d 233 (fine, App. 1992) and cases therein cited. See also Tennessee Partern lrrsnvrrioru-3. Civil 8.36 "Intentlonal Misrepreseuation.'• Misrepresontation may also be accomplished by concealment and a cause of action thus Statcd. 71e elements am: (I) the defrndant conceded or suppleaaed a material feot, (2) thedefeodenc was under a duty to disclose the Act to the plaintiff, (3) the defendant gotentionally coneeeled or stppressed the fact with the intent to deceive the plaintiff, (4) the plaintiff was not awara of the tact and would have acted differently if the plaintiff knew of the concealed or suppressed fau and, (5) as a resalt of the concealment or suppression of the fact the plaintiff sustained damage. A party is subject to liability for misrepresentation for intentiona7ly concealing facts vrithin that party's knowledge such as lrnown defeets in a property, or for actively preventing investigatiun and discovery ofmatedal facts by the otherptuty If a party who ls under no duty to speah does so, that party mu57 speak noneauy and may not we misleading half-nuths or auppresa fiats that matelially limit or change the facts stated. (See Tenneane Pattern lrtsrroetlo7a •3, Civil 8.38 rs
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DEC-11-98 16=14 FROM. BAKEW ONELSON ID= 9015772303 • PAGE 13 Recognizing that plaintiffs could proceed in submgatiu4 tlte Court dismi.xsctl pLlintifli common law claims (haud, tnisreprusentatiotl, conspiracy, cle.) us tov temote. linJing. in parl• that: ...thu court cannot allow the Funds to masquerade cluints which - should properly be brought in subragation tu direct causes of action. Te allow such claims to go forward would tl,v ht the face nf the firrnly eslablish comnton law rule that one who pays tnedical . expenses on anOthcr's behalf does not have sr.mdiny to assert a direct action againsi the tolxfeasnr.,.ln the absence uf:tn ndeymuc - , showing of tegal cause, tha Texas common law chdms must hc dismissed. jqt at +17. Tha Cuun also dismissed the consumer protcction act cluum on simii:rr groonds. 1'tnaUy, the Court,r{iyrr/isscd plailStttYx uNUy(CtVichmcnt theory on gruunds al'rcntuteness :.. . .. . . J14ttJing lhnt "any such benolit tkna tln [ untls auempt tua~. Clairn murt.lt w'C9haeca's bonelil ix tuu q>,dui:c! nlnatc and spctulrtive (a suppVn rer,overy unJer {hiti thcory." IJ: nt • 14. .. . .. .; a.. , , ' ' . , . '11i}s dccisiqn ia curnncly nn aplical: Qregq~ ~A4pltlIS (n GreXt>n Guhwin ! nytrny¢rr ({tlulfh t~ IYelINCt 7Yuv Firq6/ Jt q/, v 1'hili{t S6urik, N ai., 1909 wl 544]05 (D ()ry AiugtWt 31094 plabuEl'!B YUrletl lWplvu vltlflus fnclittliug slalv ,Inrl (cdt.rtl antiRUii c{mnu IrallJu{ent mrt.ben{atinn qnJ on~e:lbttant unlu%t wuieluncm. ngligtint hrcach of a s:p4clal al!sumud duiy ,an.d clvil wp.(+irat,y JA I!+ ittcnlun,.ttjt• L nufl `. . , ....ei ..y~' ~ t~2.. w knr:..w{cJyed titat "Aw pnrs(try !w w f musi r~su{va ta whulfut~lntnl! fl:~ t( mnY Ijry luit t51!litlp , J f y tl .,. 1'n>m tllc t14nUd3' allagetlly wrun`141 µrtlyfties 4pQpr i(tg ~tnlwy n/vplpn{ q{ the p~qxtutlfE' ' cJqstiljrul 4aatll{ar." ~• Ot'l.,:4ralluwlno {h0 Vqwlil~j Itwisf,u/'aPti0'K~y141 Iwvti hyup vtikpd i/l :,. ,,. pvWuutt wntltu ctpnplallus tutd suhsrhtgru iiiably tu iMhYf di•~}riu vuurtq' upu11a1tn 11W kiitifl hnld rhpt the (unda did itot sutfyr'aay alignitllhla 4a.ft"ai iini/ Ihnr nl{ t>('Ihvir ~ I~tft twct~ al~llply trw rctnn,ta tu bc vllblt• jQ, at' 11 r . On rhe 5ntitrwt cla !!f n, i e w r(t lul ( that "plainti(f.a I:Ii1 to nieet the praximute tausmiuu (rcmn[meay) ntundgrd fet wnh it1 qutrJkluicYi 4t!rert,~ C'onJrtJCruis. Any injury plainlill:r su(lcred rv aUcnuAtad fmrn the ~fenttants' Wle~~d4y Wtucompctitive wnluct uud 6 highly ~ Sputiculaliv6 at hOSI 11 ~ WL al #4.t-Applying Iheretnoteness dilctrinU to the c0t$itWil law frn4d comn, thecourt found that "plahuiffs sufteretl no injury ittdependenl nl'thu injury sutYured by their participants and beneficiaries" Id, at •`1. • Like plaintiffs in die ea9e at hnr. pluinfifTY in OreJ'An Ltrdrirura rclicrl upnn IJNd BJucldnJ Ybgomr v ,LruCnmiy• 457 U.S. 465 (1981): The Oregon Luhwerx court round thul Ihix rellance'•wo.v mivplaecd••' urrgnn J...A...er.,. ar • 5. . . . Co N CTI I ~ ~ ~
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'FEB. l. 1999 11:'J2AM`OM• MEMPHIs aclitnt under lhc'fcmtcs,uc Unilur(n'I'rddc 1'racliccs Act, 1'he law in "l'cttn(!svc is i(tat a plaintiff lnuNt allcgc and provc that an tm4-(tust injury was shl7ired iu order In nulintain an nctiuu rntder tho statc ttltti•trust hav, ht (iGea4 fKO. v. /4fa)n'o f'rtrnlcunr. !nc , R50 `, W':2d ~147 (I'cun. 19))). the Tauuc.ncd Suprcnto C'onrt applied the "anti-(rot t injury" ter(uircm~•,rt tu dtc Ccnncssec (tctrulctnn'1'r.tdc Praclices Act, which is suhbtantially slmilu lo thc Tct,ncuct+ Unilimn'(Yadc 1'rRelicc5 Acl in FRUstancC Rltd in itY iq,ellt to prevent UnhlWCul rostt:tinlS t5n tnnlu," Alier r'cviewi/tb the hixiory of Iltc anti-trust illjuty reyuircBleat under federUl L,w, dtc "fclu,cxsw \uprowc (,'nun IIdJ tlhd an nnti-trust injury is a prerequisite to en nnti-Imri ~ c1aiM )f/, IlI 4$3 to 456, Aectlrdingly, ":nt Rnli-Iru:a plAintifl'nlnst prnvC'RPti•ttirs injury' ef the tyl>.: the auti-nusr law'>: wne iutooduJ to pn'vent eud thar tlows frnm thRt w6ich mekes defendRms' nctv unlawlul '• /J, . r 457. See ahu ('ar v. lLrcl•.ney !'c9ru! 7cnnc,rApe. Lrc•., 775 S.W-2d 600 (Tenn. t'l. App. 19118) (:rwi-u•usi injury is essoaGal clcment uf T.(:'.A. §47-25-62,1)• Ket,rrdkm uf am injury'x cm+a,d eunneelion Ln au Rnti•Ilust vialation, no injttry is not an unli- t.n,rr injro_v'bnlurs it is WIIibutR6lc tn an anli•cnm(tctitivc aspccl of the practice under st:ruliny ...." A(GaUit R6'I+lirld (b+apnny v, U.S,A, PelrDleterl C'tunprary, 495 U.S. 328, 334 (1940). Such uu iqjnry is uoused by higher pricez, reduced uwput, or dvnage to a competitor's hrecinu•.., fltc cni<Wn..v ol'nn :utti•Iruxr inj,ay ixa'Shre<Eold r.quirpnene"in an.nti-Ir~tcase. e.g. (:erglll v. Adanfou4 q/ f'nLrradq lGrc,'q9 U.S. 1(14, 107 (I')N6). "Witlwut anti•trust )njury, nu plrvatc nuti•tnut ,retino will lie nl law nr in equity:' Al)/ed l4uducts ('nmprarry, lnc. v. l.andmnrk. 12R F. -td ?9N.402 ((,tlt (:ir. 1997}, 1'hc:udi-Intst in,iury rcyuircmenl establiuhes that theaMittvst luws wcre not designed tn provide ':1 rcroady and dmmnigen (hr nil injuries that ntigltt conceivably he u.rca) ta un amf-tnc\t violatiua.'• l)rnvali v. •V"treulard p)1 C'nrnpony, 403 U.S_ 251. 264 rt, 14 (11172). "1'husc laws ;ne "imended ut preserve compelitl'm /irr the hcudit of the consumers in rhe uuukat iu which cuNpctitiun uccun " Vinci v. IVrute MroraFeamnl. Inc.. 85 P•3d 1372. 1376 (9th Cir. 1'N)t), ("crv, 1)a.riv<l, 117 S.Ct. 1252 (1907), citing bt re /nawanrc AntiTYacr li//g., 939 p.2d. 'hccuon'17-25.•GI i uf tlto 1'ctnrlcttnt'frndc prottticox Act stataa that, "nu dealcraholl makc ...:alrs ut n:tail at below cust to tl+e rctuil.r, where t)te cfrect is lu in}ure or destroy cumputition ur :uhsLmlinl(y Icnscei cutnpetitiun ,." htterestsngly the State of Tenneesee has onac(cd the "Uofnie IictailcYS CigRrcuo Salvw L,aw" to cmvol unfnir compctition amongrctai(ers inttmanleul'cientcnes. Sct!"1'.f',A.47-25-S01ml-rnq.fotntdii+theIu9RSupplemettttothe -ft-nue:oxcc 0a(a. 14 „Od3 3308 Y, 18/ZZ ro, Iseta772 ' PAC£ Is
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•AUG. 5. 1998 4; 47PM-aa-se n~il~ps;os Pn MILLER & MARTIN FA8 N_ord23 78s ENO. 0430 P. 5 0~ ~ , ~ . . 1i Rapemtully aulmiNed, AGSS. AiS TiN, 00DW1N, MORRiS, LAURHNZl & BANID.TUN, P.C. 20o kftson Avmsq Suik 1400 Memphie, Tenqessea 38103 (901) 529-1903 (901) "AAW Fueimile R80RAPkGODWIN ., • CONN,BRTONdcRAY 19Z0 L Steat, N. W., Fourth Ploor WeehiWoa,D.C. 20036.5004 (202) 466BI90 (202) 654-3456 Faasimile ROBERT Z C9NNERTON JOHN 8RAAIDDUS' d
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DEO-11-66 16•21 FROM• SAKER DONELSON ID: 0039772303 PAGH 4® claiming, inrer alia. that the defendants engaged in a nationwide conspiracy to: • conceal the addictiveness and harmfulness of tobacco products; • misrepresent the harmfulness and addictiveness of tobacco products; . • knowingly disseminate false statements regarding the addictiveness and hatmfulness of tobacco products; • not compete based on claims as to the health or safety of tobacco products; • suppress the.davelopmerttand marketing'ofsafer, less-addictivo cigarettes; • manipulate the nicotine content and potency to maintain and assure addiction. The dcfcadams' move ta dismiss this action putsuant to Fed. R. Civ. P. 12 (b)(6), claiming the Funds have failed to state a cause of action for which relief can be granted. The Funds' ten-count complaintsl raise claims for ()) violations of federal and state antitrust law (eount 1); (2) violation of a special duty (count N); (3) strict liability (count V); (4) negligence (count VI); (5) breach of express and implied warrandes (count VII); (6) consumer fraud and tnisreprescntation (counts 11, Ili, and IX) ;(7) unjust enrichment (count VIII); and (8) conspiracy (X). Alternatively, the defendants move to dismiss this action pursuant to Fed. R. Civ. P. 12 (b) (7) for failure, to join indispensable parties - the individual union members who were 'The dcfendaats moving to dismiss include: Phillip Morris Inc., R.J. Reynolds Tobacco. Company, Arown & Williamson?obaeco Company, Lorillard Tobacco Compaay, United Stazes Tobacco Company, The Cottacil Fot• Tobaeca Research - U.S.A., Inc., Smokeless Tobacco Council, Inc., Hill & ICnowltoq, Inc., and LigYett Maye:s. Defendants B.A.T. lndustries p.l.c., and the Tobacco Is1.5titute, Inc., have not moved to dismiss and instead contest whether the court has proper personal jurisdiction over them. . 'Griginally, the Funds filed separate cotnplstints before the Cook County Circuit Court in Chicago, Illinois. "I1te defendants removed both actions pursuant to 28 U.S.C. § 1441, invoking federal jurisdiction undes 28 U.S.C. §§ 1331 &.1332. Onco-in federal court, the court grutted the Funds' motion to reassign the case captioned 97 C 8114, which was previously before Judge Aspen, to this court's docket based on its relatedness to 97 C 8113. The court has consolidated the actions since they raise completely identical questions of law and fact involving the same defendants_ See Fed. R. Civ. P. 42 (a). CO fv Cn ~ ~ CN V
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DEC-11-98 16=16 FROM= BAKER DONELSON ID. 00159723®3 PAC-£ 2D ! Finnlly, itt Narional A.ehesros GVurk¢rs :LleJitnl FYmtl v. Philrp .Wurris•. Inc.. 1978 W't. 732411, "I (f.D.Y.Y.OcNber 19, 1998) che courtdcclined tu di,ntiss e tmirrn timd c;tx a{;uiu,t the tubaicu industry which alleged - unlike the case at bar -- both R ICl) viotatiurts and Icdcml cummun law claims purportedly arising under ERISA. 'Che court ackuuwlctiG;od thut the "rcmtucncss' cases wcre "peraua4ivc' authority, but declined to come to any cunclttsiuu ahuut the applicable legal princip(cs until "spqcitie titcts" were "duvelulkd in the recurd."r' The only deeisions apart tium hitrionul Asbesra.e, su ra, entirely denying ntutiunx tu dismiss were two one-page orders wltllout opinion frnm a West Virginia dlYtrict court notin}; only the "dilticult and exacting burdens" required for 12(b)(6) dismissaL LVes( G'Irginitf Ulrin- Vullty Aren LRF.. GY. Welfare Fund v. .4mericun Tobucco C'n., ('iv. 1:97-(197% (S.l ). W. Va. Aug. 11. 1096): Gp-e.rt G1r),•iniu LuLorers' Penrinn Trust hunJ v. Phi6p :Lrarris, Inc., l'iv, 3:q7-117O8 (S.1). W. Va, Aug. 12. 1998), tiecausc the cotur did riot provide any rcuurniug Inr ils ruling, ihey present no mcaningful preccdemial value. B. By TheirSilcnce, Plalotiffs itnve Acquiesced In Defendants' Mntinn'I'o Div,mi.rs All Claitns BarrcJby Teoneasee'y Economic Lo+s Rule, As Well As Unju+t I':nrichmcnt, Breach Uf Warranty, and Special lluty Claimx . As previously noted. plaintitl's hrief is notabla lis.tite nrguments it doc. not nddrrss. . 1. . EconomieLu.roeRule 1'ennessee courts adhera to thc ecunontie loss tula which is a,lndicially-crented dueu•iue , precluding ncavery for purely economic losses abscnt a contractual uhRgaqt,n, pcrsotud injury, or prnpeny damage. Sae o. ,., linireJ7erlila Wurknu nJAmrrirrr. ah7.d 'IU v LUUr,4rrglrr SautingCarr„ 825, S.W.2d 83 ('I"enn. Ct. App. 1990). Courts apply the camuntic b+.+% ntk to reduce the risk isf"l'raudulcnt claima,limidess linbility, or liahility nut el' prupurtian to the .'- . defendants' fault." jtl_, at 85. Iht: Br. at 34, By their own culmission, plaintit7i are only suuking °econtrtnic dnmagul; `i s., tim reimbursement of rheir madiccd expenditurra. PI. Br. at 2, 3, 9, 23. 'fhcy buve not alleged persanul injtuy or propeny damages, nor the existence of a cuutracuttd relationship. alnt.+1 ull hsu Counts I and 11 af the Complaint arc barred by the cconontic lass rule. Ptaintiffs were unable to respond tn these arguments in any mnnncr " _..,.._~ .__ . ' Co '[perltapctheNationttlA.rbrsrn.reourtdefaredtulind6ecau;ethcSct.nndt:veunvunrentlyba.+uany',jfm,- f\D same insucs under appcal in an inrzrtoeutory appeal In the Lnhn•arx Lrxut !' esue. - (T7 - " tn their brieli ldtiiillli du nnt take issue with drtendanti sdatcmcut ui :f +plil•utnt0 uPthe eaanwnrc Inr. rNil: pl3intilhr llN iN§.'tIE: 9s+xear:F: lh3FIAFy Rlag' fEFAYEf r'FEHHHHIIE IN•'ia lL~iHIilk.'~HH~i:Flh`~' ,ci;'HI$ r;l'Iictli><cw -~ `p m~srupreseniarion. Thi:1rgamrnt Ihils Fnr the [cuuns set titPh. iLi~, __ .. al P7. ~ ~ II
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AUG. 5. 1998 4;48PM.za-ae r>~;Oe • N0. 0430 P. 804 ) TYdB COUNCIL FOR TOBACCO ) ) RkSBARCH -- U,S.A., INC. 900 3i° Avenue ) New York, NlY 10022 ) ) end ~ ~ THE TOBACCO INSTTTUTE, INC, ) 18751 Screet, N, W., Suite 800 ) Washingtoa,D.C. 20006 ) ) uxd ) ) SMOKELESS TOBACCO COUNC11,1NC. ) 1627 K Street, N.W, ) WaelUwgma, P.C. ) ) and ) ) HII,L & KNOWLTON, INC. ) 420 LeXirigton Avenue • ) New York, NY 10070 ) ) and ) ) UNITED STATES TOBACCO COMPANY ) 100 Putnam Avenue ) ) Greenwicb, CT 06830 ) ) and ) ) UNITED STATbS TOBACCO ) MANUFACTURZNO COMPANY, INC. ) • S0OF18aisOp94eeC ) Nashville, TN 37202 ) ) and ) ) GALLkR WHOLESALE, d/b/a ) P.M. GRSP,N & SONS, INC. ) 656 Madison Avenue ) Memphia, TN 38103 ) ) and ) ) TENN-M)5S DISTRIBUTORS ) 605 Scott StreeC ) Mepphis, TN 38112 ) ) Defepdant5. )
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DEC-11-98 16_1$ FROM. BARER DONELSON ID; 8015772303 • ~ • PASE 17 - 7'he court dismissed thc I'raud alaiur Onding thpt "nothing in lhc complainis caune (iicI this court to reasonably conclude that the Funds cver relied on defondnnta' t'acaul repre.eot:uiuns conceming their products." 1 f. ut 13.. Thc court also dismissed the hrcach of wnrrtmty clninls un the grounds that the lunds neither ullegeifthat they pun:h:ued tuhuccu products nor relied un auy of t)te alleged representationi reyarding defendants' products. Finally, the cnmt di:ani.,ed Ihe unjust enrichment claims on the grounds that plaintitYx did not allege. "what• it'un,v heoclit they have cnnferrad upon the dcl'endanis:" In ligltt of the caurl's deaision lu disrnis..+dl cbtima, the -cnn,piracycuuntfailedasamanernflaw. Ir).,at14-15. . ' . 2. Decixiorta Lorgely Grantint; Mntiona to IJi..miav . 'Che court in Stationary Engineer,r Local 19 Neulth & i6'al/irrc '1'rurt 1•im+l v)'hilip ,Llorrix: htc.. 199511.S. Dist. LF.XIti 8302 (N.D. Cal. Apr.1c), 1908) dismhscd I I nfthc plaimiff+ 12 claims in a case subst:utlially similar to the instant nctiun. In that cuse, tlte cuurt - dismissed plaintiffs' antitrust claims on remoteness grounds, in ltarr linding that thc i'undi claimed damages werc "entirely dependent on the h,um sullered by their mernhcrx :md beneticiarit:i as a result uf using tobacco products. Because plnSntitl's' darn:rge, iaescapubly 11.+w through harm suflered by third parties, plaintilTs have not alluged a dircct relttliunship between the injury aasertcd and the injttrious condition alleged." Id. at 9. . ' More recently two federal ceurt.i have issued deciaions gr.uniag Rulu 1?lhllb) ntotiuns ot large p:vt: .NewJenrey Carp+ortery !•lealth I:und v. Philip Alorris, lan. 17 V. tiupp12d (1).N.1. I'N1>i) and henrerckvl.ahorrrs!)istrrc•!.<.bu+rcrl %'unJv. Nill et Knnmlr++n, Lta:,19')$, WI. Goi_+N't ( W.D.Ky.(798). 2ltese two dec(sintu essentially reached Ihe a:rntc result by the amtc rcusrmiup, Plaintifls huve titcuscd on the KentuckpLuhurtrs docision iqthrir Supplwnenlal Hrid' in Opposition to Defendants' MntiOn to Dismiss fnr Failure lr1 .ti,'linG a Claim. (1°). Supp. !lc at For that re:uun, we address that specific decision. In Kemackyl.abnrerxJudge Ileybttm dividcd plaintifls' chtima inlo two categories, latn+ling them "Category One Claims° and "Category 1'wo C'htimi ""f'atct;ury Une t'iaiuts," constitutint; the bulk ot'the claims, were for the recovery of all mcdieul expense+ utu•ihut;thla to smoking-rulated illnesses. "Category Two Claims" were thuso medical expenses tltnt could hnve been avoided if(t) the funds had received ntore explicit infnrmatiom ahntn the health risks+.l smoking; (2) as a result of that informaliun the funds, would have alternd dtcir eoverages, dcductiblcs or co-paymcntc to deter their participa.tts from smoking; and (3) these hypnlfu•tical -•+$/fftyBF}1 RlPi§ iRl§ flti f'lR78tlRese FrtiiciplC ttidiiMtia the KICU uu,t aniifiib;f ~t):`flH):+ "~iih prrlu,Lre. N+~• euutt tx€ P3 ~! el y y*tea pla nu{)} IF~E t~ FEgI~~ tR£IF H~t~ tl~ltR:
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DHC-11-9B 16.22 PROM= BAKER DONELSON • ID- 9015772303 PAG£ 44 426 Wel. Fund v. Philip Morris, lnc., No. 97-5346, 1998 WL 212846 (E.D. Pa. Apr. 22, 1998); Iowa v. Philip Monis, 577 N.W.2d 401 (Iowa 1998) (dismissing tort and antitrust claims in their entircry); but see. Iron Workers Lo. No. 17 v. Philip Morris, Inc,, No, 97 C 1422, 1998 WL 602033 (i`l.n. Ohio Sept. 10, 1998) (denying motion to dismiss), As can be seen, the t;end has been to dismiss these claims on the basis that welfatt fuads or similar third panies have suffered no direct harm stemming from the tobacco industry's allcged misconduct. Overwhelming precedenf.ccmpels the court to conclude the satae. As the Supreme Court set forth in Associated General Contractors of California. Inc. v. Calrfornia State Caunci[ ofCarpenters, 459 U.S. 519. 532, n.25 (1983): [+.~]here the plaintiffsustaixs injury frotx the defeqdant's conduct to a thirrlperson, it is too remote, if the plaintiffsustains no other than a conttact relation to such a third person, or is under contract obligation onn his accouat, and the injury consists only in ... increasing the plaintiff s expense or labor of fltlfilling such contract, unless the wrungful act is willful for thatputpose. (emphasis in the original). The Supreme Court has consistently abided by Associated General to preclude plaintiffs From sceking recovery for remote economic injuries sustained by third parties. See Holmes v. Sec.riues Investor Protection Coxp., 503 US. 258, 268-269 (1992). The Seventh Circuit and Illinois precedatt likewise prevents such claims. In Dundee Cetnent Co. v. Chemical Labs. Inc., 712 F.2d 1166, 1168 - 70 (7th Cir. 1983), the SaveAth Circuit held that the rerqotencss doctrine bars plaintiffs from recovering purcly economic damages against defendants, as a matter of law, because a contrary ntle would expose defendantt to staQgering liability caused by specter of unlimitcd liability while sputring endless litigation. The Funds' reliance on State of Illinois V. Philip Morris is uapersuasive since that case denied the defendants' motion to disrniss on the basis that there were factual disputes relevant to the proximate cause analysis which precluded 6
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F EB. 1. 1999 11 : 51 AM"°M- MEMPHr9 0 r0• 790I5972 uu ijub .am:. 9 per.wm ol' an wUitir nr dcccplivc nct or pnuaiee declared tu he unlawfid by this part. may bring an ;rctiun in%tividn;diy ie r¢cuvcr nenuA dmmageQ." 'I'he SlOtute is c/aalr in its me8ning and m0.sl he conatrucd lilx:r.dly in order to cfl:`cttitta Ihe Ftakd purlwsc of the Ac't. 7here is nothinE in tile '1.f 7•.A ihu9f, nnr is th,v<any conrt tlcci:•inn, ih;il tvould suggest proximate rause to be a nececcrry uko'icut of a ccmao ol' ocliun uuder tile Act. Indeed, dic cnnlnuy eppear's lo be lruo. 14 is the unlsiJcred ol7inion uf lhi. Guut thal r¢:u.mcdhlc minds vntuld intarpnl tile section to mean that any yrrsou (howr:vor renlo(e) wbu can provo (he sull'raye of an uscenainable loss as a result of n deceptive act or pmetice ntpy htyng un action liv danmgcx 711u;q, rr:motcth+ss is aot a coml.ment or tile cuuse td'tu:ti.,n atcurduu; k, tile stuluta, '1'his cuucltision is rencltcel by givhtg enlphasis, that is mnuilisqy ituplir<I, from osa of the wurd "any" befurc pMson. Ilad the Legislature lnlcnded to qucdil'q tlr,tt itt termN of tesnvtcnare it surely would have dooe s'u. Gt lhc xanu uonteltt tFu; Legislmure rhr tenn luss" winiuut rerirenue tn ncglitfcnce, proxinmte cauw, ar (i,rC:.ctilhility. 'I'I nn eulYsitiClTd, the 1luCtrine uf renlntCtle%s }lqg n9 retraiplls11i11 It) the atusC ofaqiun naedctl by tlm Tunnasucr LCLr';hntu'C irt Ilte C0118nn1Cr pnneetiPlt Act. ' The dt>,:triuo ul'nutotcuca reniains, then, to be cwnidorecl in eunnection with the causea Of actinn sr.ded purzuant tu tlcc fiaud:ufd ntisr.presontution Ihp7ries ufdfe 1'unda' complainl. Pcrhons dtu hesl Ireuunem uf LLn stdljcct is liumtd in tltc npitlian of Judg Doltclu W, Antbrase, sitting in the 1lpireJ Rlntes t)isuiet t'nun for the Wcehern J,)istrict or Pennsylvnnia.• iler andro opinion is bmtumvd nprnt n prcm0a that the r.mmntnncss doctrinc it a IegsO - nut a lut:ttmt - itKltlity and is lhtls n,Iva::li,m nl'hiw ru hr dvrrrmincd by nte Ccmrt, Wltb wmnst respeet to Judge Ambrose and the olhcr luunta%l ui:tl,jadges evpund tlm connuy who lfave joittcd hcr iq dismissing the plafntifFs' cuntplaintx bccauxc 7bry nuntd tuu remote to rtv:ovcr, qti.s Court tuuxt depart and dis+gree, at least al lhis•jtatoturc o/lbu pn/ceedings. • r, rvi~c PACE 7 According tu all ittahnritica retuntcuen,. Ix u contlwneru or any analysis with regard to prnxin7ate atuw.. in'1 unorsyec the enms are IeEion in holding •hat nruahunte eause is always to be detennincd upnr ttle f:cna of unch ca,ee. 'i'hne proxirnate wnsc is urJlnarily a question for the jury '~cc 11'itfieuns rnrd i7ruAc ('nertnn,i; ha•., 0 u! v, :Irurrittm Tnltm:ru Cornnamyt er af, t,ivil t?o ~ Actiou 98-SS1, II.S.I),f', Wc:uern IJisaict ufPenn. t_)"1 I ~10 6 © VD
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825191?3
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'FEB. 1. 1999 11:53AM=0M' hBHPFtiS 0 rD. rsots772N0 33D8 Y. ZU/ZPe~~ ~ • "Mixepresametion by Concealment," Ux Note and Comment.) !o Count V of the complaint the Funds dkge that the tobaccu indusny, through advertising and the mass media and by other communications. the defendants "... repeatedly made the misreptosentntion that nicotine is not addictive and that cigarette smoking is not a proven cause of diuase. Moreover, dcfendants have recondy srared tbei they do not manipulaic nicotine levels in tlxir tobacco products so as to addict coeauqoers." (Paragraph 277 at Page 70)1]sey plead further. "In reprwenrmlons to the plaintiffs ... Defenda0u omitted the following tonerial informaiion; (t) nicotine Is addictive and defendauts manipulate nicotine levels in their tobacco products so as to addict consumers; and (2) Defendaets had detailed knowledge of the hermfW effects of cigazetle smoking. Defendants were under a% duty to disclose to dte plain4fts - the addicilw: nature of nteotine: thc mwtipulation of the nicotine levels in tobacco products; their intent to addict the cigarette consumiag public; and the ddl extent of their research on the adverse health effeatt of wing their produots. Defendanta had sole access to material facts concerning dte addictive nature of nieotino; the manipulation of nicotine levels in tobacco praducts; the Intent to addict Plaintiffs in the cigerene conaurning public; and their research on the adverse health effecu of using their products. Ddendants Inuw that priot to their addiction to nicotino, PlaindfG and their panicipartts, dependents and tetirees could not reasonably have discoveaed rhe addictive nature of'nicotine; the manipulatioo of the nicotine levels in tobacco product,; the intent to addict plaintiff in the cigarette conwutdng public: and Defendants' research on the adverse hcehh effects of their produees. In addition, Defendants actively conceated the addictive oanue of nicotiae, the manipulation of mcaome levels in the tobacco product and the intenr to addict the cigarette consuming publia" (Par.grapha 278 - 279 found at Pagea70& 71) Further, the pla'sntiPPs allege facts, which if proven and believed by a jtuy, support a ause of action. For example, Plaintiffs allege that beginning with a Januery 4, 1954 announcemeet entitled"a Frank Statement to Cigatcne $mokps," numemus factual representations were made by the defeadama, eacb ofwhieh was speeifical(y inu;nded by rhe defendants to cause dro plaintilfs, and the public in general, to rely on rapresenmtions that the defendants thenuelves believed that cig.renes wau not injtnious to beahh; (See PQagtaphs 51, 72, 7'/); that the defeadants would essist in the nesearch of tobacco ux; funba tbat tlto research would be autied out with integrity, and that results would be reveetad fully, (Peragraphs 90 - 92) The Center for Tobacco Resraeh, whoae formation was anrwwtced in a`Prank SramroenL" ftu*6a slated t6rt they "shall continue 411 possible ef('orts to bring the faets to light." (Paraanphs 101 - 103) Similar representations were made by defendants or their agmcv in 1964, (Paragraph 101), in 1970, (Paragmphs 10c & 10S), in 1972, (Paragraph 106), in 1983. (Pamgraph 107), in 1984, (Paagraph 108) and, in 1994. (Peragraphs 109, 202 - 203, 207 - 208), The plaiiati![s' complaint is replete witbh similar allegatien5, all of which if 16 CO fV U"I ~ ~ O ~ ~
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DEC-11-98 16:19 FROM: BAKER DONELSON • ID= 9H357723H3 PAGP p9 Citing to very few of the eoses defendants cited in Suppurt al' lhuir :trElununt that . plaintiffs' claims based upon fraud and negligent misrcpresenlation cannot stnwive ;t motion to dismiss,° pluintift's blatantly ignore a cantury old Tennes'sec.Suprcrne C'ourr upiniun (Dc'f: 1)r.:u 38) which tookjudicial nntice tltat cigarettes are "wholly aoxiuus and dclclerious tn health.... their every tcndcncy' is toward the impaitment af physical health and mcntal vigor." Austin v..Strue, 48 S.W. 305 (Tenn. 1898), rr(fd ar mpdified, 179 L1.S. 143 (1900) I'laintil't:a also ignore a ten year old Sixth Circuit opinioin citcd by detcndunts which held that "knuwledge that . cigtveae smoking is harmful tn health is widespre¢d and can be considered part ui Ilte eommun knowledge of the coimltunity.'` Raystlnn v. R.J Reynnldr fuLnecn ('n., 8•1')F.2d !.,1(i (ti" t'ir. I988). t'laintilTs apparcndy believe that because the tobacco industry ir'unpopulur nt the prcxent time. they should be allowed to ignore established preccdenuufd nthcrwisc curnrullinglnw. 'fn ' this end they would have this criun accept their hare allegation that thcW "rmrsotmbly mtd' jltstillubly" relied upon t)efendants' alleged misrcpresenraions. i'umplaint 'll1?83.'_90, rls a mutter nf law - law which phtintifG do not evcn attempt tu rc6ne any reltatree upon deFend:mtX',allegud ntisreprescntationS w;ts ratjustilisblu and, therefore, their liraud, dccuir and , negligent misrepresentation claims rntist be dismissed. .. Relyingupon.luhnblurtin.C'u,lnc.v.rblor.t'e/Dirs¢l;lntr.,819S.W.?d3.'.S('I'cnn.1'1')I)g pliu`null's''Nrgue that they hnve succcssl"ully alleged a claim fitr negligcrn misrepresentation and - should be allowed to recoup their alleged "economic loss." While it is u'ue that'Ccrmessce reengn'aes a claim fbr negligertt misrepresetnarian bascd upun Rcstatement(:4) of Ibns,, ~ . Riuer v. SvkeA', 912 S.W.2d 128. ('fenn: _1995), $ 552 does not apply tuproducts lirtbdily Cases , .. ?uch as.thc onu at bqr. W;;ata31-33 ("iulcudomic cnmmcnt:xurs arc in ovcrwhohuiug nccurd that : ::.,..:..:_,.:.._ . a plail?t[tYmay iii7t psc th~ ttlt't ~t iieyhgcni misrtpicsttntulion lu recovcr purc cumomic lucz tevytling _trnm.a prudpc{'a t;ailurg to jx;rfo n1115 expccted.°'.Tcnncasct: hus juincd (h(isc )urtsJictwns which~hold that )tmaluct liabillty claims resulting in ptrre cconomir: lo.as cun )so Iluttar tesstlvcd on thearigs i3thcr than negligcnce;'). Furthermore, the products liability mutue of this cnse aside,'I'ennc.cYt:e courts und tlte Rest:acntent (?nd) uf Totts are clear that negligent misreprescn(ation actinns ara restrieted ttt Ih,+.v , " lo en etfun to g¢t m'nund the holdings in Ounrahrr v Cvtorr.r C'urp , 47d R 5up, 11 a9 (Ii.D. p.r. 1'IX'A and C'iputtane r. Aiggetr Claup, Inu., 693 p. Supp, (dR7 ((J.N.J• 1988) tlttu "genur9l statauPBni lll:uivenning Idu naq ennsrimfo sn ssaump40n nr'a duty to plaintititv pnrfonn rnsunreh mtJ (nram+ hlrn uf nll Jnngers uf mprrene CC) xnrokin5"plnlntify.t axsart Ihat their cue"is not buied upon dufumtnnq' Odvcrli.dnµ," 1'I. In 111 11. Norrudiclus, ns N) noad on puge?b ofdelenduun' nptning memutandum, Pluintifl'i rendily ncknuwluJpe Ihnt 1hY ul)vBnd ~ misreprestlntStlons uf wHiEfi tfiey cbmphiiir wirrc Arnc+ed ut.emrikars fFr rfi9 ulle tltl ]illl 'hHe nl' hrdm•Ing penplu ~ lamtts af Wiiant Htity' 1t9t'F hstq ptlNlEl(r'irue di fie7i~rlaidFli3 ifl INE fllfld'j 1113H18~B RLtIli1111R° .VF~'lirrunr rX drsrngemurua at 6eer, . ' ~ ~ SV l9 0 T
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RECEI?`E:-'"° AUG Q 6 1998 0 • TER91 P. DURHAM
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JUK-29-98 i"-9:09 t P. 04 ) THE COUNCIL FOR TOBACCO ) RESEARCH -- U.S.A., INC. ) 900 3'~ Avenue ) New York, NY 10022 ) ) and ) ) THE TOBACCO INSTITUTE, INC. ) 1875 1 Street, N:W., Suite 800 ) Washington, I>.C. 20006 ) ) an.d ) ) SMOKELESS TOBACCO COUNCTL,INC. ) 1627 K Street, N.W. ) Washington, D.C. . ) ) and ) ) HILL & KNOWLTON, INC. ) 420 Lexington Avenue • ) New York, NY 10070 ) ) and ) ) UNITED STATES TOBACCO COMPANY ) 100 Putnam Avenue ) ) Greenwich, CT 06830 ) ) and ) ) UNITED STATES TOBACCO ) MANUFACTURING COMPANY, INC. ) 800 Hatrison Stteet ) Nashville, •N 37202 - ) ) and ) ) GALLER W,YOLESALE, d/b/a ) P.M. GREEN & SONS, INC. ) 656 Madison Avenue ) Memphis, TN 38103 ) ) and ) h ) TENN-MISS DISTRIBUTORS ) 605 Scott Street } Memphis, TN 38112 ) ) Defendants. )
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DEC-11-99 16•1B FROM= BAKER ooNBLSON ID. H076772383 PAGE 27 • - w An obvious defect jn plaintiff's' theory is that it proves loo muclt. (iivcn Ilu uhiyuitouncss of in;uraue in our society, it can always he allegnd Ihal n product rh:n c:,nrscz personal injury to consumers will foresctubly (if not certainly) rasult in a payment Uf heulth care expenses by entities like plaintifPs. 'fhusy tuty manufacturer ul'a praduct that is alleged iu hturu consumcrs can also be alleged to have foreseen the injury to payors ul' Itealth care cxpcnses; und, follo.ving plaintirTa' (ugie, the manufacturer's allegedly tortiuu+rondtret against the cunautuer should theretixe ix dremed to repcct a concomitant intent by the mtuntfaclura• tu harut rhe . cansunurs' insurcr-•-which; in plaintiffs view, defeats the remoteness principlm Far lium hc,np an exceptiun, plaintil'fs'furesv~uabiliry-as-intent theory wuuld'swallow-the rule and "pcrmit unlimited suits to be filed," Iowa v Philip Morris, bu.. 577 N. W?d 410, 407 ( fuwa 1997i). Plairnifti' novel theory would lead to lltc revolutionary conclusion that any tort nguin.st a conswtter crc:acs a direct action in favor ol'the consumer's health insurer. 'I'his is not the huv. Mun,rover, if dircct:ictions by remute plaintil'fs such as thcptmdywerc recnhuitcd. detindant.c wouldface tlm rush of nntltiplc recoveries Fram eutnpetirnLt, dircct lawzuiis hruught IryY remutc payors at olher points along the alleged catsatiun chain. pur txnmpla, rumnwrcial henlth insurers, NMOs, PpnS, and othcrs from which plaintiffs purchaso insururice ur survicv. cuuld seek recuvCry for the vcry same expenses plaintiffs an; sceking to recover in thc cnsa ut hnr. '1'Iris is precisely the duplicativc recovury scenuriu the Supr(me Court was seakmF to prevent iu !!nlmes. . . . . . 2. Plttintiffa Completely [gnore Lung-Established'1'emm++ee L,aw Regarding the . ' I lyangcra of Smoking As explained in defenJ:mts opening brieE plaintiffs' reliance up0m deti:udaur;' allcprd misrepresentation.c related rn the dangers ol-smaking is unjuuiriud. iYn mancr what c:wsc',il' uetinn plaintiffs choose to asscrt, their claim boils down to this: ilcl'cndants allegedly deceived plaintifl's about the dangcrs ol'smaking and had pluintin's known abutn the "risks uf sm4iup" they would not.havo delayed or avoided "laking step. to mnre uppnipri+ttely trcat tnbncc„-rel:ual injuries anddiseaaes as well .t.y to discourage and reduce tobacco usc." Pl. 13r. at 12, '!ti. - Acconliq to plnintiffs, it doesn't matter that there arc no allegations in the cumpLiinl that dCtendaqs nlade ariy rcpi'ii@cnlations directly to the funds thcrosclvus, it dnc.n't muncr t]su tln• aeneml public has known of the dungers associated with cigarelta snruking titr years viu warnings on cigarette lahels,_cungressional prnnouncement., the tiurgcun (ienural's pronounccmenu, etc.. and it doesn't matter that the Tennessee Supreme C:aun und many other CO N courts have long taken judicial notice of the dangers associated with cig:ueue sutokint;. (Tt ~ ~ ~ tv . R 19
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JUN-29-98 0 9:09 40 P,05 COMB NOW the Plaintiffs with their Motion to Amend the Complaint to include the United Furniture Workers Insurance Fund as a party Plaintiff. It appearing to the Court and based on statements of counsel and for good cause shown, the Motion should be granted. However, entry of this Order does not constitute a waiver of any jurisdictional defenses on the part of any Defendant. Furthennore, any previously 8led pleading by the Defendants will be applicable to the new party Plaintiff, the United Furniture Workers Insurance Pund. IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Plaintiffs' Complaint is amended to include the United Furniture Workers Insurance Fund as a pazty Ptaintiff. IT IS SO ORI3ERED, this wday 26of.Q&A-e / _, 1998. James F. Ru53ell HONORABLE CIRCUIT COURT JUDGE DIVISION II APPROVED: DL•BORAH GODWIlV, ESQ. FLORENCE M. JOHNSON, ESQ. TIMOT.H.Y TAYLOR, ESQ. Representing the Plaintiffs Allen, Godwin, Morris, & Latuenzi 200 Jefferson Avenue, Suite 1400 . Memphis, TN 38103 JIjJjAQY (A/!?9!)$, Clolk
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DEC-11-9H 1H=19 FROM= BAKER DONELSON ID• 90257723D3 • • PAG2 30 as aas•oeiaMd General C'qnrracrurr subsequently noted, this language apparetul•v uriginated in ,Llandevrlle !•slwuf Farnts, Ina, v. dmerirnn Crystal Srrkar C'u.,114 11.5. _ 1'), ^_•ib (1')J8), li'nm whieh 3•1cCready quotes, where the Courr simply held that growers ul'sup,ur hects (sellers) couht sue refiners (buyers) who allegedly cunspired to fix the price they u•uuldpu,v t6r the heets. .1.sxociated General G'untnrcrurs, 45'1 U.S. at 529 n. 19. As.cnriuted Grneru! ('onrrurrnr.s mudc it cletir that the huldiniss af th¢se cases, including h1cC'rcudy, wcro much nurruwer cutd that Cungress in fact did.ruti intend the open ended meaning that plamtifl': eLtim lar dsi. Innguagc :Issuefrned General C'amrociurs, 459 U.S..5?9-30, n.19, As.Ynciuled Uenqryl Ciintractors further clarilicd :1rc('r.ady in holdiug thnt (unlike the Ptaintiff in (vk('reiuiy) thq plaintiff union in .4ssuciuted Clertel'al ('nwrarrnr.s w;rs "neillter a cpiu rmergur:t cutnpztitnP' i.n the restruined marked, 'I'Itui is the IauA del'.ct hen•. Ily cuntrast, "HIcC'f4ally allcgct} Ihut 3he yqqs aannsutper of psychuther.ipeudc sen•iaes and that she had h..~¢n tnj4red by the dufund:utlg' cunsptracy to OS[c:qll sUUh serviecs," 459 I I,S. at i:N. Viruudl,t• yvd.ry nthur unio{t } ntd dect<iiin,addruytiltlg 4hl$ sarnv itrgumvnt h ls dittinguishzd ,Llc•('rrurlr un thts'snmehaii4Src c ,(~r~rgunLubur,)•q•(,mplayN.[lle9(rlrrtl }pSd/;rrv't,'rn.val•'unrlv.l'Itililr C .bturrAr lnr. 1991l..1`•1. 54a1itS (D U[erilnn Mi~ 1Ij Ir)9fl) Q'Lrintil"I'x' rcliunrr upan akl'reurh. ts °tnkplcuxl sincc, ua t comutneF Il1d pl>tln(rr1'In thqt cawc was a nuuket participcmt who 4uFEcrcd a tJuect. ti=taal iujury trunt IIIi:alls.gcdty urltroinnpwutive pnicliee"): •~'rrr~arrrr t{'ql~u !'lan v. Phrl(p N{arrn, 1`JsiB l I~(yisr f PX[S (!!f 75 ut t~8 0."_9 (I). Md. July 13. 19981 ("'Ihc Ptamhlt l1tn~'trp nnt in an n tlu~otl~ Pust[IU0 tn Q}d }yLtlnlll'( ht r11c('rrudv"I lrrrtflrr'ii!f J7urirlq (ahurnrq, l'1'JS WI, I,tl6N7f) `6 n.7 (bk4'te,uly "IjI4 nui inyptvp atleirvutjvk eluhn. (ip dte pttnmrry It tl)vqlvo(t a p9rShaeu[ s ctatm up41q6t ql an°itru.t, s)I lulder ln ttu} 4n•~c I Ini . . ~ t. Fundls Iwsc/ not PiachustI ,trty Prytlqpcy om tht tkli,7ittnpty i71f14hl1tar) t,l rnn ly'whol(v i' . . . , ,, s!. . ,. tter}vypvu)t b'(u(iniitvy Frrgln,ury t474 W} 4T6°07 aF!7 (' A uullt/+tVtu ryal}inG nf hlc( fy ih}y ,_ ,. ., ..,., ..: .?, .. .. . , , ., ,..:.:, tr:vcals that it ct xs Out auppon plaintiffs' PIyIm1, Ne„wJnixey'l'urpqnlur'y, 1'1r1H WJ: 3471:yt, :U ~} 4(nattng thnl .Alf4( rdur)1' ".WW p CortNym~r of p>;rihutbcr,tPy sdrviedn wh4rattti lltd Uniao tnwl fund hy tkh in+uru[s 'ar4 not yunatl[Pcrd I ihc murkdi fni {yyh ttca ptpr/qu qw, rurlrc thntt thcl ~ nrc dafan(taltts uuqtpdttwtd hl tliat ntarket ~.IicnNr ky Lqbnf ry ItN)N ,~VI A')S='? I, at 's) l" 1 hi. Liado [s motu •tkln'ie pHhehYfrlek',m`r7.lssnciincdbedeial'( unlrnrtur.r th,rn lu dlcf'rurn{s••. ~•I'jhs. Funds are one full stop removed froin the hann to their ptuticipant,...11n rulutiUhship nl'the Fundy injuries to tha suppression of uompetition in tltm market Qrr it •ml'ur cigat•ettu iM purcly incidental. Similarly, the Funds' claimed injuries from alleged suppnssion iif inlirrmmian Su a"t CO N CIl ~ \~D ~ lv sl V
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DEC-11-98 16•17-FROM. BAKER DONELSON fD. H0357723H3 PAGB 2B defr,wded, or ulherwuc violated duties owed to, the Funds' participmnt. , tho Fwtd•a as+ert'that dcfendants violated duties to the Funds themselves. Pt. Br. at 4, 9, Spucitically, plaintiffs nssen thatdalondants assumed a duty lu disclosc thc purils nf srnoking to the "general public"" (which included plainritl'S), and that had pluiutills known the allegedly conccalcd health risks ofsmoking, the Funds could have undcrtaken more rigornus prophylactic meaYures to reduce smoking by their partioipnnts. Ilms allegedly reducing the cspcnsr:s they uttimatcly paid fur smoking related discascs, e.g., limiting'cuverayce ufsmukiug- rclatcd disease, imposing cost sharing requirements on smukcr-parliaipanls. impu.utg ccss;uiun programs, and excluding smoking-relatad diseares from coverage unks, ••sali•r" ci);arcttes were smoked. pi. Br. at 4, 9. 'I'o establish the abuvc, plaintiffs will have to prove: (I) defendants ettgagcd in .' misconduct "directed" at plaintitfs; (?) as a result, plaintifl•s wcrc unaware. or less awarr, ol' lhc risk 1'uclurs of smuking- (3) had plainlilFs heqn more aw•,ur uf Qrr ri.h tactu" nl' cnwking lhe•y would have taken stepB to discourage smoking or encourage use ol'•'Icss hunnlitl" luhiu:,:u pruducts: (4) plaintiffs' hypothetical prophylactic nlCaslnL•s would havQ rClhl[L'd the stlll)knlh activitics ot'syme ofthcir panioiplmts; (5) this hypothetical recluetinu ul'+mnkmg cauxd by Ihc hypothetical prophylactic measures would have reduced the aggregate health henafils paid by . plaintif'fs and thishypothetical reduction can be proven in a nnn-axculativ¢ mtuthurt and (h) n% u resuh,plaintiH-s'werc "diroctly injurc¢" in the anmunt oFthc hypnthcrical incnanuut iii hndlh care cusr.c that could luve beea avoided by the hypothetical pn,phyL•Irtic measures. '1'lre luerc recitation of this convoluted chain demonstrates the wisdom uPthu Int}g-slanding ndu agninst re,rltllel•lalms. . , '!'he flaw in plaintiff•s' "direct" cause uPaction thwry is that pluiruil1z' injuries nrr wholly derivative of the irrdividual smokers' injuries. Plaintitt"s' allegcd ` mi sed uppunrmitics" m linm the amounu paid Girsmuking related illnesses all' involve tryiny tu pcrnuurle »utukur.+ to ,aup suflcring smoking related injuries. If no one smoked, or if no sm,tkar, were al lcgcdly in,jured, plaintiffs would not have a claim ot' danages, Plaintiffs are unah{d to artieul:rte any theory ,d damages that does not stand dnlhc shouiders of injured snrukcrs,'mrd, as such, the clailn+ are luu Tcntbtc and must !re disttlissed, ^ "77,e faundation for this theory is a rtucumenr called "A Frunk Stmcmem to C ignrcnr timuA,m~;' wnrch nllcgedty waz-pubtished in 44s n~wspapers re:uhing n<irculalion of lJ,•'.4S,nn0 in 238 ciiirr C~nnylainl 9 41 Obviously this Pounrlation ducumcnt wss addreueA to a subset of •Yl7e gun.ml pnhlic:' nawuty "r:igaretta Hqaally ohvieusfy, theso pluinthYs never hxv<bccn a mamber uf dup {uUtcr. 7Tu>, ihcir cunulu.my nIL•gnrii,n, reeeh beyond the aetunl theNal allegations in thcir pfeading. , 15
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'RUG. 5. 1998 4,48PM_2sas rls;os ~ NO. 0430 P, 9 05 COME NOW the Flaindffs with their Motion to Amend the Complaint to includc the United Furnitwe Workers Insurance Fund as a party Fiaintl€F. It appearing to the Court ®nd based on stnteptents of counsei and for good cause ehown, the Motion should be granted, However, entry of this Order does not constitute a waiver of any Judsdictiunal defenses on the part of aqy Defendant. Futt}xetmore, any previously 6led pleading by the Defendants will be spplicable to the new party Plaintifk; thc United Fumiture Workers lnsutanee Fund, IT IS 1°.H$REFORE O32DEYtED, AD,)UAG$D AND DECR>y.ED that Plaintiffs' Complaint is aznepded to inolude the United Fnraiture Workers Insurance Fund as a patty Plaintiff. TT FS SO OIiDEI24;D, this ?4ay of Qi7i.t.y/ 1998. Jamas F. Russell HONORABLE C,LRCUIT COURT JUDGE DIVISION II APPROVED; DEEOBAI3 GODWIN, ESQ. ~ PLORENCE M,1OF1I3SON, ESQ. TIMOT[iY TAXI.OR, ESQ, Representing the Plaintif€s .a11en, Godwin, Morris, & Lavrettt.i 200 Je$'erson Avenue, Suite 1400 Matnphis, TN 38103 ' fri
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8251917g
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DEC-11-99 18,16 FROM: BAMER DONELSON 0 LD: 90r 5772303 • P.rlGS S2 . 4. Breach uf Special Duty . I'rennesste law is eleur that to maintain a claint for hroach uf+pcciul duiy. phtintil'1'; nwsl ;tlloge and prove'rhysieal harnt proximately eaused by the Jdctendant] aclur." Uudlrr v /lm,lYr Curp..852 S.W.2d 435, 4J7! ('1'enn. C6 App. 1992). Dcf, 13r.2d. (:nuns unilbrntly intcrprct . this nde to naclude ecotlomic or ¢ommdreial injury, ax is alleged hmrd: ,~tl. I'htintifl's Icave nnt .and cannot- ailege physical h;mo7" Accordin8ly, :wy special duty clxinu sillluld be dismiased. . . , . plaintil't's. were unable to re,pond to these arguments in uny mamter, plaintiff s silcncc on these issues cnnstitutes acyuiisccncc with defcndauts' pasilioil. C'ountv 111. IV, V, VI, VII. VIII, fX, X• and XI.hould be dismisscd with prcjudia•. C, The Remaining Counts Muet lse Uisntfssr.rl As Well ' - 1. Plaintiffa' Arguntentr AgainstThe Rcmntenes.t Doctrine Are Ineffectuul a. Tennesnee Recognize+ the Retnorenes,v S)oitripe Un page 8 uf tlieir brirt'• plaitt,tiffs secmingly itrguu (it ix unclear preci,ely wltal plainliil: are trying to say) that 1'etincs,ee does not recognin: the doctrine ul'remotencs hecausc neilhcr ul dtc 7`unnessce casse.s cited by defendmns wns a third pany paynr rase aud dcuh unl'y wirh "lure+ieibifity" nr'pruximate cause" issues. This,rr.yp+msu untlec<cores (,lainlift.' ro(upleru : - - . . .. :.~,. , . . dtsregard for l5Uyears of QsrubiisltedjurisprudetrceJr and i6nnre, the Iact thm na mancr how assettedly foreseeable plaintiffs•' injurie..7ecovery is nnt available if sucft.ityuries are wu+ute: - Plaintill•s apparuntly believc il'they aClegc it wca rea,onably tbresceahte thcy would pay otu ntore '---~+,Vlaintit)9 SCef• tu.911rlnnunt Ihc remul014et5 dOCnine by nCSCnirlh Vr111it{~CF ln-1~ ul Ihc Ilrltl m {.1pp(uitioq thatTennesaee law reeognizes the right of a pluintilYtu rccover duntages in tnn due lu Ihe actc or umiasil(trm pf anuthcr who has u spccial reludnnxhip m nt3 plaintiff anJ thamfore Ir,ls nn nlrligaunn In e.rtrv aut ihe ilyty ioij>nW by thls relatiunhip with care. I)ris argument has no merit bacnurc plaiurif6 did not sull'ur plyclc:d hv!!t. jrpteh ip upretequtsite m eslablishing nhreacfi of spccial duly $c Def, nr pp.1t•]>. 'rhe rmly carses chcd by plaihiiffs io wppurt oPrheir hrauch uf specinl duty daim invnlvcd ubligmimrv uising upder canlrxd.t entcred mu~ h;r ih~ tienet)s oran cspras third pany ur frrom rcprcsrnmtiunt made d'ocerly m tha phtinrllT SSS NnLUr• v . Climar~ldli( $p+l..isiiCu, (rlM,$.l~ifzd 242 (Ct. App.'1'n. I98U) (empluycr undcnouk to p+n,.uvc grunp ti/c intwaurr: fi>r (ti tmplnyeMl: Atinri Cur~r Y Ci3rriy 6}drrrrr77iir (:n., $9 I F. 5upp I i(M.[l. Tn. 113 11 ( mrured vur.1 hxnn•r unJu,ryr<Pfctisepntradtqfinnrruncc)fG7anc.rtsShapNurd•"_7)N.Y,376(CI App,N.Y.1R'?)Nuryanncrruma Speeitic ~6presealptjuti tn ahuYer.00i frnm statements made tu dre gcnerui publir.). RTcru are In+ nltegrnlou+ in plaintil)y. G4TPIqint,thPt they qe(q Ihtcnded thicJ patry beneticiarics ofn cnntmer with mry ullrer puny nr llmi nny ypoclllC re(>r~senfatiun_g were ma!~e JIfeMIY tu plaintiffs themselves. F.vcn muns irttpnnanqy, thr.rc uc nti . a(le~ati+ins Iliat plainiifTs yuf&red phy3icu( harm. Thm, plaimitTs cmunt prevail on their clamt uf an ailelted ble.tvh of tip<ifinl duty. . ^ . 'r F'or example• nowherc in plamtil(r brlcf in oppoairian do they cite to. atlentpt tn drstiu¢unh, er ccen . ;uldttxs ih< hulding5 in flnfines v, Sa'uritie.r lm'estur Prote<rronC'urp. 5a) (LS..$8 (1~141), :Ir+rAorn• v.SKu.L t' Mass?90 ( l8•t6); or Mnhrfe Lifi+ 1nr C). v. Urnmc, 95 U.S. 754 (11173). all el' which wcrc cI1cJ In ihacndunW npenink memur,mdum, all of which set forth Ihe very basies ofthu remuteu<ss duatrine, anJ tlll ul'wlueh wcu' I'nlluwud in the recent deuibiotts dismisainy rimllnt elnims by F.RISA Irutt ILltds. Appnrently, phrinliffs Ja nut QD (Ilsputa the hu4lings in dlece cases because tlrey know thcy cannot. Scu pnge S nF dcfendalll: ulieniua bnaf Itn'.1 N mure er)mplvte discussiun nfthe huldingv in Ihese cares. ~ ~ ~ 13 1~0
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• 0 IN THE CIRCUIT COURT OF TENNESSEV - FOR THE THIRTIETH JUDICIAL DISTRICT AT MEMMIS ~ STEAMFITTERS LOCAL UNION N0.614) HEALTH AND WELFARE FLND, by and ) .:;ft2a1998 ..';:., i COURT CLERK through its Trustees, et al.. ) EY DC. Plaintiffs. ) Case No. 92260-3 ""' ) V. ) ) PHILIP M0RRIS, INC.. et al.. ) Defendants. ) DEFENDANTS' y1OTION TO DISMISS FOR FAILURE TO STATE A CLAIM Come now the undersigned Defendants and move this Honorable Court for an Oraer dismissing the Complaint with prejudice pursuant to Rule 12.02(6) of the Tennessee Rules~of Civil Procedure. In support of this motion. and as set forth in the accompanying Brief in Support of Defendants' Motion to Dismiss for Failure to State a Claim, Defendants would show that the Complaint fails to state a claim upon which relief may be granted for the following reasons: 1. None of Plaintiffs' claims are cognizable because they allege injuries that are too remote as a matter of law. '_. In addition to being too remote. each of Plaintiffs' claims should be dismissed for reasons specific to each count: a) Plaintiffs'claim under the Tennessee Consumer Protection Act should be dismissed because Plaintiffs are not consumers, bi Plaintiffs' claims under the Tennessee Unfair Trade Practices act should be dismissed because Plaintiffs fail to allege an antitrust injury and because they fail to allege acti% ity predominantly affecting intrastate commerce. c) Plaintiffs' unjust enrichment claim should be dismissed because Plaintiffs have an adequate remedy at law and because Plaintiffs fail to allege that they enriched Defendants in am' wac. d) Plaintiffs' breach of special duty claim should be dismissed because Defendants did not assume a legal duty and because Plaintiffs fail to allege that they suffered ph} sical harm.
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JUN-29-98 NON 9:08 . • P. 03 IN THE CIRCUIT COURT OF TENNESSEE FOR THE THIRTTETH JUDICIAL DISTRICT AT MEMPHIS STEAMFITTERS LOCAL UNION NO. 614 HEALTH AND WELFARE FUND, by and through its T'rustecs, TENNESSEE CARPENTERS REGIONAL HEALTH AND WELFARE FUND (fonnerly Carpentets National ' Health and Welfare Fund), by and through its Tnrstees, MIDDLE TENNESSEE TEAMSTERS TRUST FUND, by and through its Trustees, IRON WORKERS DISTRICT COUNCIL OF TENNESSEE VALLEY & VICINITY WELFARE PLAN, by and through its Trustees, and on behalf of themselves and all others similarly situated, v Plaintiffs, PHILIP MORRIS, INC. 120 F`ark Avenue New York, NY 10016 and R.J. REYNOLDS TOBACCO COMPANY Fourth and Main Streets Winston-Salem, NC 27102 and BROWN & WILLIAMSON TOBACCO CORPORATION 1500 Brown & Williamson Tower Louisville, KY 40202 and B.A:T. INDUSTRIES P.L.C. Windsor House Milbank, Knowle Green, Staines Middlesex, England TWI8 iDY and LORILLARD TOBACCO COMPANY I Park Avenue New York, NY 10016 I and LIGGETT GROUP, INC. 700 West Ma'tu Street Durham, NC 27702 • and THE AMERICAN TOBACCO COMPANY 1500 Brown & Williamson Tower Louisvi.lle, KY 40202 ) r ) ) ) ) ) ) ) ) ) ) ) ) Case No. 92260 - II ) ) ORDER ) ON MOTION TO ) AMENDCOMPLAINT ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) and j
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Hunton & Williams P. O. Box 951 Knoxville, Tennessee 37902 Counsel for Philip Morris Incorporated, and for purposes of this motion only, on behalf of defendants listed below; JefYJones, Esq. Matthew A. Kairis, Esq. Melanie Fahey, Esq. Jones, Day, Reavis & Pogue 1900 Huntington Center Columbus, Ohio 43215 Counsel for R. J. Reynolds Tobacco Company Kenneth N. Bass, Esq. Jennifer Gardner, Esq. Kirkland & Ellis 655 Fifteenth Street, NW, Suite 1200 Washington, DC 20005 Lee J. Chase, Esq. William L. Bomar, Esq. Glankler, Bmwn, PLLC Suite 1700 One Commerce Square Memphis, TN 38103 ' Counsel for Brown & Williamson Tobacco Corporation (individually and as successor by merger to The American Tobacco Company) Jeffrey S. Nelson, Esq. Richard L. Gary, Esq. Shook, Hardy & Bacon L.L.P. One Kansas City Place 1200 Main Street Kansas City, Missouri 64105-2118 Counsel for Lorillard Tobacco Company Co 3 ~
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MAV. 7. 1999 9:56AM NO. 0490 P. 5/17 0 0 0 olut• on renLnioness gmuMis, L1larers l.ocul 17 1•hmhl Nene(Sr Fund v. lrhilin Morris. 6n:., No. 9A.794a (7d Cir. April 9, 1999}. On Morel) 29, 1999, t0e Unl(ed Smtes Coun of nppcalA for the Third Cireuir affinned a trial coun's ruling dismissing ull c101ms by the union (rus[ filnd pluintiffs as too romore. Sle mfinets LocaLlJri ot;N•Q, dZ0 -Wp,IJ'ure Pun1i ar 'il v Phiilo MOrris. Jnc_ et. al., 1999 WL 167619 (34 Cir. March 29. 1999). In addition to the SeeOnd and Third Circuit opinions, thirteen other recent decisiens have di9micsed aimilar cornplulms, ns u muner of 1aw, as too remote? Several other coues have dismissed many of the cloims brought by third ' Parq' pgyers, while ello i ng cenatn claims to proeeed.3 Still other cnuns have refUsed to disntiss third-porty payor tases a's r0p remoO Both sides to thin litigntion agree thht this mtd6tudo ol- diffcrent oninions on the remoleness doctrine counsels in fuvor of proceeding in memsured fashion by allowing inlcrltrcutory appenl of the ]antlary 29 Order. Ihtalu Fund v. PMlln Mnrr7.jnE, 1991 U.S. Dist. LEXI9 8302 (N_D- Gl. Apr. 30, 1998); Oneraintenalneen Local 17 HeahA. end WelFa~ TI I Od v Am-l- TOb4eco Eo, No, BC 177968, Notice of Coourt's Order (C01. •Supcr. Ce. July 9, t998): Sqeen Aclnla Ouiid•pred,reerJ (iF.~l)i.)'.IBtLY-Philln Mneis. Inc.. No. DC 181607, Nnliee nf (:min's Order (Cal. gupet. Ci. June 22, 1998); eee arso Ir Workers L cal Un- n v Phl,(~p],.jOQla~)pa., 1990 WI. 6p2b77 (N.D. Ohin 1998) (uhimately 6lcmiming tedmei R)CO, kderal shd state embruah nd brmeh of -Veelal duty eiahm); L.hn a.I 17 N.nh & eeneer FL!^^ v PMlln Mmris. rno. 1998 WL 196217 [S,D.N.Y, Mes 2S, 1998) (dismissing federnl .nd smre enrlmut elNms, as well ee uojust enriebm.nt claim), ev tyQ, No, YA-79l0 (?d clr. April 9. 1999). v$,i4Na11.QaTL,93hA,p(OSWO'4er1(Medieei FunQ,y. Phillc Moafa.Inp„ 1998 Wr.772911, •1 (P..b.N.Y. rkloher 19, 1998); Wmt Vir.;nie OhiaVJlev~tr9419.E-W. Welfere 61n6„Fn~criec: Teb.eao La„ Cir; 2:97• 0979 (S.D. W. Ve. Aug. 11, 199!); Ylrvi ie Ltwran & Panaion Trrut Fund y. philln Mg-rrib,)n9., Clv, ]:97- 000 (4.D.1U. Ud Aae 19,1004); U1.1 W.011I U9IA I lU 1 a lol 01 m[ 01 u p ilio iU1 [ 1B, CI, al., Cate No.2:96•CV.829H (D, Utah M.reh 31, 1999): Ad. n Br Croerdp phlc "3hi Id v Ph'1'n Mortis InY,. No. 91C2612 (E.D. Ill. April 6, 1999); $lue Cross Hlnc ShjyJrh9f-NvM:.lFisev. Mo.. el. nl. v. ph lIp J1lplfjF.,JOG, c6 nl. Ceae No, 98-CV•72d7 (EA. N.Y. Merch 70,1009). 199 WL 1676r9.t •10)i ' Lebnran. TeamMen k Epglneen lleahn R welforc Plap, v Phllin Mnn)s_ g. d. CIVA No. A:98-CV16a, (D. Neb. Febru.ry la, 1999); AAL !,eoma~ .nd naoNtiORp^._I^SFlJ'S'LIGr7 A•rpemenr Heail~ypd We1 nre T,et (lBLQ tr w,,.rM1r&,ag, et. .I, v. PAllio Mat(Ir- 1^re e.t al.. CIV 97.1406 (Prcllminary Ordef, Jnnu6ry 26, 199): Order AJTirming Pre1)imiNry OJder, Februaty. 101,, 1999), 1:1.Wni1'11h ~ WelOue_'R.ur F~und for ~O~xra~t~in~e~ P,OC10een e(. e~ v. ~Itil1~oma_ ),~. er ~„ Glvyl rya. 4!-r/dl7i `D. Hew~ ~.wnry ~I, 1444~. {(BB,9aSVSlNianlrpr er. ul, v PMlie Mneis. Ine. ets el., No. C9tt-539R (W.D. Wuh, January 6, 1999): ,)yjl6emr & Drake Cu . ln.,,y, Amerieen Tnbq.eo n. al Civ. Acliun No. 96-JS3 (W.D. 1'a. Dee. 21, 1998); I''i HrothernanJ ef Tramn s J@qL774 Heo101 nnd Welfine 7Yn+r Flilld.y Pjl/frn sRnrda rney er N, 1098 WI• 849231 (N.D- 111. becember /, 199g): T (' me t N31ill, B rt FLL d er I y Phili Mad• L c r, 1, 21 F, Btlpp, 2d 664 (g.D, Teh. Atlg 31, 1998); Qte89g Lnherep;p,~^r 1( allh & W Ifara Tn sLl:hnd et. al v. Fhirin Mnrrir Inu.- ew aL, 17 P. Supp, 2d 1170 (D.Or Aua.24, 1991);,9ryf&-,r y(C)fars P6n n.t v Phllln Morde 1ag,,JLAL 27 F. SllYil.2d 623 (D, Md- July 131, 199A); $te.mOn.n I.ncsl union No_420 Welf ro Pund et. ol. y,,,,~~in Moee- rno.. er, el., 1998 Wh 212e46 (f,D. Pa. Apr. 22, 1998), eQA, Nn, 98•1426, rllp- op. (1 CIr., Mmeh 29, 1999); Saulhehst 8'Jor)dn J(nt8~~b~9~r.n~~fd~~S)rJ~A~e~ rlearlh~nna]~St!rCIfeR att,Q~„v ]')ljlln Menw~ rne. e{7r~. ^I„ 1998 W). 1Al6878 (SD .~~, Fl, Apr. )1, )99A)i 52H9SaHnC.OnKIPLOre11124 llea1l~t t' re al. nl. u d qL.N:...Y~hplli ma , CeSe JVO. UN•LV•9(11190•AA (Cireuit Court ror rhe 14drd Judicial Clrcuit of Mlchl6aq Fcbmary 2b, 1'AN1), Ne}L eaiee,gp~Wyti'fs3aE.MtJll• ,Cttlij(r,dlh a Welrere r,ryi FMd ct a7 r Phirla Mnnie Ine, No, CV-97-a91 r 8, (Seeond ludldul Dleirlm ofNow Meaeo, Decemba 14. 1998). r&2Kennmkvr~borpDDNrln[nu0~ WQ. e1~nL'[It ri5 S.J,)J]J.$.ISIIDXhep.-bl9..C{ gL, No. 3:97•CV-39e•H (W.D. Keetuaty, Saptamber 30, 1998); ({9W Jtr.ey CsrpSnlrn Ne.hh.fypQ„y~~jri0 Morri-<, rne., 17 F. Slyp 324 (D.NJ. )999) (rbls dee/siun may rmva bnen ovanuleu by Ihe TLtrd Clreuit In 1 5 3DHd E0EZL6SL06L 'QL SIHdWH4r `HO?ld b0~66 la6-S®-AtIW
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Michael Fa,v, Esq. Kasowitz, Benson. Torres & Friedmam 1301 Avenue of the Americas New York, New York 100 19-6022 Counsel for Liggett Group, Inc. Mary Elizabeth McGarry, Esq. Adam 1. Stein, Esq. Kathy L. McFarland, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017-3954 Counsel for B.A.T Industries plc Saul C. Belz. Esq. Waring Cox. PLC Morgan Keegan Tower 50 North Front Street, Suite 1300 Memphis, Tennessee 38103-1190 Counsel for The Tobacco Institute, Inc. eo Bea tan
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c. The Funds' Breach of Warranty Claims Should Be Dismissed Because the Funds Failed to Provide Defendants Timely Notice ...............33 5. The Funds' Conspiracy Claim Should Be Dismissed As Moot .........................33 D. The Economic Loss Rule Precludes Virtually All Of The Funds' Claims ...................34 E. Federal Law Preempts Virtually All Of The Funds' Claims.........................................35 F. The Tennessee Products Liability Act Precludes Virtually All The Funds' Claims Against Defendants Galler Wholesale and Tenn-Miss Distributors ......................40 I V. Conclusion .................................................................................................... ...........................41
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AUG. 5. 1998 4:47PMza-e8 nOW oa . N0. 0430 P. 7)s IN TI-Ib CItC17I,T COURT OF TENNESS1i8 FOR'i'IIB TyvRSIETX JUDICIAL DISTRICT AT MEMPHiS STI3AMFI.TTBRS LOCAL UNRON NO. 614 HEAJ.'1'FI AND WELFARS FUND, by and thcaugh its Trastees, TBNNESSEB CARPBNTERS REGIONAL IMALTH A,ND WBLpARBkUND (fonnetly CarpentcisNatianal Tlealth and Welfare Fund), by and through its Tntsteea, MIDDLE TENNESSEE TSAMSTBRS TRUST pC)ND, by and throu& its Troatees, IItON WORKBRS DISTRiCT COUNCIL OF TBNNESSEE VALLEY & VICINITY WliLFARB PLAN, by and 1voaElt its Trusteea, 2rd on behalf of themselvea and all others siruilarly situatrd, V. Plaiattffs, PffiLIP MORRIS, INC. 120 Paxk Avexme Now York, NY 10016 and R.J. REYNOLI)S TOBACCO COMPANY Foutth andMain Sttoets Wimatom-Salem,NC 27102 and BROWN & WII.IdAMSON TOaACCO CORPORATION 1500 arown & Williamson Tower Lauisville, KY 40202 and B.A.T, INDUSTRIBS P.L.C. Wind®or Aouso Milbank, Knowle Green, Staines Middlesex, England TW18 IDY and LORILLARD TOBACCO COMPANY I Park Avenue New Yoxk, NY 10016 and T.IOGETT GROUP, INC. 700 West Main Sttcet Durltam, NC 27702 and ',CfIB AMBRICAN TOBACCO COMPANY 15o0 Bt,oun & Wllliantaon Tower Louisbilla, KY 40202 and ) ) ) } ) ) ) ) ) ) ) ) ) CaseNo.92260-II ) ) ORDER ) ON MOTION TO } AhDIDCOMPLAINT ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) } ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
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:AUG. 5. 1998 4:4bPW-o3-9e n~ps;08 aN MILLER & MARTIN FAX N~Q23 785 ~NO, 0430 P. 2,05 , ~ ~ nN THE cIItCU1T.COUR'T OF TEMSSEE FOR TRE TFIIRTMTS JUDYCYAL DIS1`RiCT AT 1VIEMPFQS STSAM11TAti5LOCA4L1N1ONNO.614HEALTH ) AND WELFA888UNID, by aod fhrough ita'husrees, ) TL1fiIIM9sM CAIHAVTIBiB AB010NAL MALTti ) AND WEroiFARB FOND (fotmeRy Corpebtefe Nmioo0l ) Heahh aid Welfara Fund), by and through ca Tnumy ) MIDDPB' TBNN8SS118 T$AMSrBRS TRUST ) Fi1ND.ibp and tbroagh its Twstcea, IItON WORMaS ) DISTRiCT COUNCQ.OP T<3NNBSS$fi VALLI3Y& ) ViCwRY WSLFAltB P1.Ag hY•ead tluough ffs Tmgees„ ) oNM3D Ft1RNr1'Uxs WORRBStS Il¢SVB6NCE FRDm. ) byaodfhroughhsTeusxea,addonbelialfoff6emxlvee ) md of1 others emniady shuared, ) ) Blaintil~, ) v ) PHllAF.MORRi3, II1C. ) ) 120 ParJc Avenue ) New YdrF, NY 10016 ) ) aud ) ) R7. RE'i'NOLDS TOBACCO COAeANY ) FoWfh8edM8ip8Ycds ) Wmetoj"elem, NC 27102 ) ) ad ) BROWhi 'WII.LIAMSdNTOHACCO ) CORYORATION ) 150QBrptiw& Williem2oaTovm ) Iauisvil~, KY 40202 ) ) end ) H.A.T.1'1+TD11STRIES PL.C. Wiodaorliquse Mdbank;lCnawle Grea4 Seaines ATiddlo* BupJaod TW1S IDY snd LORII.TaAIiD TOBACCO COErII'ANY I Park Avawe NswYotk,NY 10016 THE AMBRICAN TOBACCO COWANY 1500 Btdwo & Williameon Tewer LnuisvV~ KY 40202 ' dUL 3'1 1993 FiRCUrt oouxr qMK BY~ad`w , Ci6eNa. 92360-D1v.11 AbGNIDED CLASS ACTION COMPLABdr AND =SAWFOR 7 t 1RY TRIAI. 9 ,,
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e) Plaintiffs' negligent misrepresentation claim should be dismissed because Plaintiffs may not recover for alleged misrepresentation allegedly made to third parties, and because Plaintiffs fail to plead justifiable reliance. f) Plaintiffs' fraud claim should be dismissed because Plaintiffs may not recover for alleged misrepresentation allegedly made to third parties, and because Plaintiffs fail to plead justifiable reliance. Additionally, Plaintiffs fail to plead fraud with particularity. g) Plaintiffs' breach of warranty claim should be dismissed because Plaintiff neither purchased nor consumed any Defendant's product, because they failed to adequately plead unmerchantability, and because they failed to timely notifv Defendants of the claim. h) Plaintiffs' civil conspiracy claim should be dismissed as moot. 3. Moreover, the economic loss precludes virtually all of Plaintiffs' claims, and the Federal Cigarette Labeling and Advertising Act preempts virtually all of Plaintiffs' claims. 4. Finally, the Tennessee Products Liability Act precludes all but the breach of warranty claim (which should be dismissed for the reason states above) against Tenn-Miss Distributors and Galler Wholesale. WHEREFORE, Defendants respectfully move this Honorable Court for an Order dismissing the plaintiffs' Complaint with prejudice pursuant to Rule 12.02(6) of the Tennessee Rules of Civil Procedure. This 20" day of April, 1998. Respeg,tfully subm_ eo Bearman, Jr., Esq. fP 363) / Baker, Donelson. Bearman & Caldwell 165 Madison Avenue. ?0" Floor Memphis. Tennessee 38103 Jack E. McClard, Esq. Maya M. Eckstein. Esq. Hunton & Williams Riverfront Plaza 9i1 East Bvrd Street, East Tower o N U"1 Richmond, Virginia 23219 ~ ~10 John A. Lucas. Esq. ~ Hunton & Williams P. U. Bor 951 Co O
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DEC-11-56 16:19 FROM: BAKER DONELSON 9 ID- 9H15772303 • 1'AC£ 32 have been provided by defendants in the marketitl6 of their pntductsP); l'undt;r v Lonllurtl 7ithaccu (:a, 681 So. 2d 1057, 106! (Ala. 1996) (Labeling Act prcempted I'muJulum suppressiun claims because they ineviktbly are based upunsmte law duty to disclou) htcts through advertising or promntionchannuls ofeontmunication"): Uu.S'ilva v. eInterirmt 7i,hucca C'o:,1+67 N,Y.S. 2d 651, 656 (N.Y. Sup. Ct. Dec. 12, 1997) ("applying tlre Supreme ('oun's )Cipllonel ducision to the complaint hcrein, the defenJants' tmuion tu dismixs the plaintiffs ulainl< basad on failure to warn. fratrdulent wncealrttent, and. implied w,urattty ;ttler tlm elYc¢tiw date of.the Labeling Act in I969 is gr,mted"); HuLvay v. Americwi Brturd<, Ira•.. 14')7 WI, ]'11'/<i at'd (S.D. Tx. Apr. 7, 1997) (applying Cipallone und Al{l•ood ta preempt "allcgatiuns of fraudulent concealment). While some ol'the above cascs express [be view that r•ertaiu cloitns based upon aflirtnative fraudulent misrepresentations are not preempted. •vbat thc l'tpnilune . plurality de.scribeda.s fraudulent nti,nprescntation claims hu.xctl otl the "mure gener:d . nbligatiod' uf'4hc duty not to rk.-ccivo" wcre premised upon alleged rpisrepresentntiunt of material factjustitiably relied upon by theindividual cigarette cuttsumer-user in tapoltutte {I ut 52N-29: PlnintilTs tannnt avoid the cnntext Ot'thair clnim. Plaintit f:5 did nut unrsume defendaats' products. Their claim is that ccrtuin non-panics were mislcd into stnuking more than Ihey mi4ht utherwix have smuked haauc defendants' generic suuentunts ttid nai sulticiendy place tha.e non-partics on proper noticc ot'thc.Jangers ufsmvking. 'I'his i, preci,cly the kind ul'chiim tlnu thc United States Supreme (".nurt has ruled is preempted by thu l.abeting Act. '1111s kind of generic. nan-specifka,claiin cannot possibly fit into thc nuraw ftaud exception to pr4-ordpiiow. S. Plaintiffs Cannua Alkg® A Cluim Under the Tennesxec Consumer lh•oteetiun Act PlaintitTs do not have a cause uf actinn under (he'fennr.s;oe ('ansumcr 1'nrisctinn Act ("the Act' , or "TCPA") because they never directly br indirectly purclta.sed or aved dutend:mts' products: P2tintitTs do notevett try to argue that they are "uon+umeri' within thc datiultian ul thv Act. Rather, plaintiffs argue that the Act generically applies to "Icgitimnte business entcrpri:a:.,;" the "consuming ptiblic;' and "otlturs~" whether or nut thesc nebtdous entitiea ever purelr,ucd or - used the cunsumer product ttuuwtu:tured or sold by defendant. PI. Br. ;u 26. Accurdinti to plaintiff's' distorted theory. theruforr, anyone and tiveryotu hus sutttdinh tn tue utuler the 1'('Pr\ Tltis intctpretatiun tlies in tlte taee of the Act's stated purpow to govcrn "good 1'ui(h dcnliug% between buyers and sellers=' TCPA 47-18-102(a), Although plaintiffs cite to several cases that puq+ortcdty support tht:ir intcrpretaii.w ul' ib, Act, nune provide suppt'trt, Fur' e.10amp{a; plaintit'fs Ivok to Blt+ke v: :Ikhtttt I:NIkiYttluries•. Lt[. 096 WL I9d9d7 CCenn. App. M;u. 27, 1996). But tn Blak,r the i+su...•a, whed,cr iudireqL 23
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DEC-II-SB 16=13 FROM: BAKER DONELSON 0 ID= 9015772303 • PAGE 22 We begin nur reply hriot with a detailed analysis uf all the recent court decisiuttv on . n)otions to dismiss sinlilar claims by F.RISA trust Punds against the tobacco induary nntl how thosc decisiuns arc applicablc to the issues bePare tltis Court, We then rtutc the cl7iats or phtintifTs' implicit acquieacence in the argumencr previously bricfeJ by tleteodantx. Fiually, we adJresp dtoss+}it~'ifi~ arguntt~iTs plaintilTs disputt' Toraa ftrrpanMrs In 7vtz7a C.t(/penter{ &nf{Jllfvptjirk.d7idy ('hU1~,~p~ryIr fitf., I+I'3K WI fi1f.1 Sqd (t:,l) TuI; Attyu•r 11, t918) thrcw tlrjfyn Irust lunil plattµlll~ lyleq 4111 >i uiyn[vuirtpl unt qg,tiytii c ,: I Inhµi;eu irltJustry tie{yltJ:tlltx, Muny qf thnie clwmY wkrti'ximtlu( ur IJeiulvu1 tu thv plu;y µl thy . .. , ~ : F,t,it yt har, tnvhWin~ rwta rnrlliy,i{ aWlms, frrud wtt~ p)i>rcpfVh~nt nii,n vl un)1 hw:uh sd ~Ixt i:(t - tluly, ltreqvh ororrtras and impllCd worr+lnhja wn>;ptM~y, uhlq>•t tintielntlVnl, ,mdviid qlury ul'. I~t~' +latv wnsuRlqr ~rutvapu~ ttct, ~V Vuutt mlatilict.th thuxtf ch+1111Y l!A IqP rcmuty fu tw tvou•~rwsvnotl ap(ryion tho Vtiilri u&*wA'whvUwr tihitliil'la' vliqm, wcry uly .. rumuta ns +t m lpor of lu wSpn4itivullri Uw Cyun avbttu~t It ~JynJ tlull "prp~ctto tlv vvu+u (tpiiiy liatlility tqr rvmulp ~ansvquV~IVQ~ " dnd dYtarn+ItUri th9t r¢tSy w'L9 16 +rl,tnr rgtVltniFiliip lµ,iwtipn t/efolltt4ntrt' allc},{G4 ~nntiYl.t tM~f ~IlfiitlGl~' 41~YMp'~ tllf µry. rh~11 tgillvitlitnl hnlnt.v,s r'iaitd in w+hiio pctinna pradicYWtt Ilpon *,o winw catu{4Yi (ne whuh pluGNi!'f't wvrv i,ll/up/inb +uh, thtu lharc w,vi q read dtrnat o(duplkytiva ILdnl/tr, tiwlplyitiq/ps Ihvwy t1f_1Ii,htlit~w iM ^tuu wpuctna+ivu, ahxtmrt, pnd imprrctioal" to juynty alla~ipy IhC vd8tt IV iWU9eeIhtu ,tttl) unt+liliiyqt i(nrarnx weighed t4,nst thu tpaipWtwnso ol'thu yction. . ~ .' ui t4 pl0intitft cti dij pmvcc Pnyx(u>t Jclelltttujis in aubnlg06, find thot ttft individual snuiitarx' dtcisitms to smake nr tn unntititlt! hnitrlint', uinuiniied to interveniny PncuAr9 which bruku thu uuustd uhuiu helauutf aIAit4°tnt4' tit3fitlBBi i!ntl plaintitTs• alleged ittjuruy. Trxavl,'urlaenrenY, 1')96 WL 685364 at •d-I I. llu,cd upou (lic atxwc reasuning, the caun divmisscd plaintifFs' antitrust eL•timx as too rcmute. tg.~~,ppF('~,~LderflltaeJylaren!ky1411tlR jultud in dtis fteply Menwr•uulmn w avuid a multiplicuY ~+I• mctnuraitdUtitjx{}~Yt1~~1( ~4 rlfed (n III6 Ct~tii{. L:ICIt dereadanl pft"1C1Vi5 I[A r{µht llt iStleM1 Indt'peiptl•Ill Inlerl'~IS •IY n~ unY.iist[p cr piatqni!yal?lg~rai3~.$•h"~tunnun r<latin8 b the abovo-llllud aution. Ify poinin4 m a rm¢lu ttupl+ M~nwraedum, nu berendant authnrl•r.es any orher iarty tn xt on tta Ixhull'nv hi anY ~~Ih~~1 ~~~"1°^r m iv.ur trbuink lu rhi3 ~te[Inn. F.ach Det'endaat rev:rvox alt rigbn. Includlny, witheut t[m[ntiun, ~Icl'un+u. ;wJ uhjcatiain la .cm+c. xrvice aF protcss, and persunaljumdictiun, and the tiling oP Ihis Mutiwt i+ Subjuct ,n:uul withunt waivr.r vl',wy qneh derenses and ubjwtiuns, , _ . II. Argqtnettrs and Authorities ; AnYh'Frr oq~CCOItr Court UC~T~R1ae tirtMQtiottA (tl UclmiYx tiintilar r'lailltS ' ,t'Eisions Dinnir\ine b kISA'fruKt Fuqt(l:qse:j iu Their @:ntirety on Rcmoicoexs • GrnunJ~,. }
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'.RUG. 5. 1998 4:47PN~'''urae*uo : ,iu rn mGLrn & nHrciiN FA804z3 7A5N0, 0430 P, 6;,pg ~ CU7,'lF1CA1T OF SERVICE ] xlweneoe M JobO®oq yereby cervfy that a o.apy ofthe foregoieg has beea meilcd postege prepaid to the t'oIIowiog iGdividud9,lWa the,:L/d&y p£ N, !6 1998; ,Lao Seaimuq 7r., 8sq_. BakW, Donelea4 Besnoan & Caldwdl 165 Madieon Avmua 20thl+loor 9emphie,lN 38103 Saal C. Bela, Psq. Wadeg CoX PLC Mo,ganKeegan Tower SONonhFront Street, Suito 1300 Mempitis, TN 38103-1190 LeeChase Eul. GaoWer Srowo, PLLC Suit®1700, One Caomorce Square Mmpbis, TN 38103 Mtnae Saeoq Ssq. 1+Giller & blaRio Sub 1000 Vo/untwBOilding 832 Georgia Avwue Cbattsaooga, TN 37402-1290 NfBiam $. SadceGt, Bdq. Re6eca B, Musiay E1q. . . Komerly, b4ot8gompy & Fpley, PC 550 Main Streat, 4rh$Ipor $nwNiQe,1N 37902 ltobae G. MeDoweS. Beq. Hekor, Doodaoq Beancaa.t CaWweU, PC 1700 Na®bvitk City Ceoter 511 Unien Street 14ashvma 7N 37219 7obn A. McRaYnolds.8aq. Balcey McReyoeMs, gyms, Braclcea, o'Ka~so 8c Shea 607 bfsrket Sheae,l lth Plaor BamCvillq'[N' 37903 Jobp Whwler, fiyq, Hodges Douehly S: Carson 6171aia StreM , fGi'oavillq TN 37902
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Barry S. Schaevitz, Esq. Jacob, Medinger & Finnegan, LLP 1270 Avenue of the Americas Rockefeller Center New York, New York 10020-1700 Counsel for Smokeless Tobacco Council, Ino. Bruce M. Ginsberg, Esq. Marc J. Rachman, Esq. Davis & Gilbert 1740 Broadway New York, New York 10019 Counsel for Hill & Knowlton, Inc. Robert G. McDowell, Esq. Baker, Donelson, Bearman & Caldwell, PC 1700 Nashville City Center 51 Union Street P. O. Box 190613 Nashville, TN 37219 Counsel for United States Tobacco Company Lee J. Chase, Esq. Glankler Brown Suite 1700 ' One Commerce Square Memphis, TN 38103 Counsel for Tenn-Miss Distributors CFRTIFI AT OF ERVI .F. I hereby certify that on the 20' day of April, 1998, a true copy of the foregoing was mailed, first class, postage prepaid, to the following counsel of record: Deborah Godwin, Esq. Timothy Taylor, Esq. Florence M. Johnson, Esq. Agee, Allen, Godwin, Morris, Laurenzi & Hamilton, P.C. 200 Jefferson Avenue. Suite 1400 .Memphis. Tennessee 38103 Robert J. Connerton, Esq. John Broaddus, Esq. Connerion & Ray 1920 L Street, NW, 4" Floor Washington, DC 20036-5004 Counsel for Plaintiffs 4
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DEG-11-9H 16.1S FROM: HAKER DONELSON ID, 9015772303 . PACB 33 purchcasers, i.e., purehavers who purchased infant formula from rctailt:rs, downstrnmt from the Defendant manufaciurcrs, could sue for the alleged price tixing. In (31uke, purehnsers of inLutl fomtula alleged that defendants limited and conspired to limit adverrising of inrhnt fi/nnula rn consumets and instead ptusued, an "aggressive ef7ort to sell their product+ tltruugh physiei:ats. nurses ttint haspitals.". Blake at a I. As a result, the ptaintiffs cillegeid they were forcad to pay aniricially high prices for the formula.'1'he intermediate court ruled that the stalute does not distinguish between dinet wtdindirect purchascrs and allowed the..TC.'PA cl;tim by the indirect purchasers to proceed beyond the L2.02(6) stage. Hen:, unlike I)lake, the Plaintiffs tue ncilher direct nor indirect purchasers of the Defcnalmvs' cigarette produets, nor arc they claiming an injury as a result of their purchase of cigarettes. Nothing in Blake stretches the application oi thc Tenntssee Consumcr Protectiun Act to persons who did rwt con+ume the pioduct.d1 Thus. 1fL.kr . does not support plaintiffs' claimttl ' - - 111. Conclusion Plaintiffs arc trust funds whose "raison d'etre" is to pay the health can c ats nr'tttuir Participants•. Obviously thuse plaintiffs never consumed a tobacco product: Nevertheless, they have filed this ton action seeking to recover from the tobacco industry thc on.u they paid fur treating the alleged smoking related illnesses of their smoker Pnrticipautv. Allowing thuse plnintiffs to proceed with these claims will require a complete rcvis)nn ol'thu suhstrmtive law and the long-standing bar on recovery by remote plaintiff.9. Plaintif fs need to bring their request to Uefendunta respcctridly rewrite the law to the Tennessce General Assembly, not to this Court. request that this Court dismics the cluim, beforc it. "Blake also provides dmt "if ihe ucts cumplained of predondnantly atlLx:t inler.vtate conan.a'ce, dcli•ml:xu.. mustprevail;" - Id, at •7, AlNaugh plainutTs claim defendanti -wodona dn not predominantly utl'ect intestate commerce-(I?I. Ar. at 2lh the altegation4 in therrComplaint bclie that atiseniun.: ce 4,g„ ComphtinA J1 6(allegiug violations of fedrsal Iaw); 19.(allegation of marketing "in the United Stam.a" and uf dtiftinK research tu foreign -cotoury); 22.27 (defendants sel/ products "thrunghout the United Stetes'); 42,17 /pruriding heulth ztatisrlcr rbr the United States); 54•56 (describing the "Cumposilion af the CigalMtc Industry in the United St:uci');'1118(ahet;ing advertising ptaced in newspapers "NUrosa the United Stotes"); and214 (providing national staliatics on smoking). These allegations defeat plaintiffs' argument that defeadanp' products were"curnmingled with the emmmmn nr.rna ofpropeny in thesta[e," Blake ur •5, and ettahlish that dte iransactiona enmpiained orare predatnia:uuty Intcntuta In chnracter. u'Rte othercases relied upon by plain(iff.t aisa involved tranrrodans In which dre plmntirli purrhased a product frem the defandents. fi5,,r Nmnlah v. bfemphlsAvlundn (ru., 67•1 g.W,2d'197, 305 ('I'ano. App. 1984)(PIalndff pn(ehaed uiremft fmm defendant)1 Manis v. Mack'r Ue4d Cuar, 824 &. W,2d 598 (Tenn. 199") (plaintitTpurehased 1979 Ford truek trom Jcfead;nq; 4anrwnnr v. Rw+uR, 949 B. W.2d 197 ('1'enu. 1997)(p6tlmlil purchased real property &um defen.iant), 24
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DEC-II-BB 16=15 FROM• BAKER DONELSON ZDz s0157']2203 PAGE ]H 0 • prophylactic mcasures woldd have resulted in a reduction in medical expenses lirr snlokinp . rulated iilnesses. "Category Two Claims° nre really u,ub+et ui °C:amgory One (auinu;' anJ s more accurate label would have baen''C:a[egory I(o)" claims. After innking this distinction• the couR applied the remoteness doctrine lu di+ntis: as impumii+sibly remote alI "C'atagory, Onc Cl:unts• "as well as all "Quegnry'fwo C'laimi' e.ccln two faderal RICO counts and one contmar law fraud count. In ulluwing thcKC nurmwly• circumscribed claims to survive the pleading stigt, Judge 1[oyburn cmnntuulcQ that he ruaahcd -this view"with considerable reservation" und futther atated that he saw "dillicultieS which could well be insurmountable" with regard the plaintiffs' preuf of claim. Aanntr/r,y Luharrrs; at'* I I- . . . ...;+t.~ nlthnugh plalnuFfv cn4 •W t6ta Opmtu4u5 hcli;:ful in theirxuppluarenud briuf, it docv nut tn any "'ny?id their etiott to .tvnld dismiaspl., The instant contplxint crmluins uu ItICt1 clmnr, and !)ir• Krnlut ky (,ghuren "C ptegory Twii" iumlmon law liaud chtim was saved hucausc ul'that Iterpree,ruun nf a quirk in Kcntucky l,nw. K,unfuky Lou;ts lRw~ lung he)d thyt a third puny not tltc utrgul of an atlt getl mtt~i twr a~cr ~7}uns nSUy'State c ulaim fitr 4 crit xo ] ip~y gy it wu>~tuunubly for ytlYihlpahnt liu wonly rgucivp tmd ' r C°o. v. poitnttally no m thgm >eu 1tigNlantl ,tilntur Trun,f HeX!~urn Btr(lillriy,Cn , 35 Q,F..?d 521, 523•:a SKy 1'1?! ). 'I'he Fttt~s tastual qllw!)ations m:ik~ it platn that thv I'unds wlru ihe torc~ecablu IuN,P/}nt~ uf Dctcniutp wlnrltauunwinx lyi tlu pinOlring public aot{ thc publi6 ot 10ryo, ' =r _ ~lu!2q. '!'cnntascc laty'howErtr, prttuludcs aplnlniilT~rurn rcttnt,rinE; hn Inmil inld ,., •. fleglibettt misroprcontuuun qirpoteW q t u Ih,lr!1 purly '3.~4,, Illll V• Julur lirrukr pulr k, iuv., R75 S. W 2d 647 ('frnlt f.l A1991) (Ph4inli(P tnwt ~rnvu ~Iqt Q~Ibllt! tntw +uppli~~l - inti) InnanantuthaplAmtlll ) fc~sprrr(v!c{Ilnn /ek v L~l,i+llWrt Iviaf/wt !n~ 4!1?;itl -. . ., ... . , . (Tcnn. 1772) (ea,ng), Inalioth.crcqso>Lu/rnrwr.rlnert(17e PhtlTnMunly,1 ~ Vojrl? ?d1771ti•{)•N•Y•1J'1711, thc court dtstnissetl plalnuff lUni1iartr{trtut apd 4nJui( ul{iv, lµttt.lp t•Initns, hm dcdined rt> , dismiss [tfC.O, fnlutl, anJ brcaclj of aptctgl Jury claim5, hoiding that phtirtil7i migln bc ahtc In proYCIN!ttY, in thy fprnr ar'°h7rilt tn thu fup~a'' mftasttucturc, linunci:d stability, or ability to r Atkr eanduGthlx n 9ilrtilnr wtalyli9. the Nfw Ja6rqV C'Ylrlr•ntCrx enurt nped Ihur 1110 1nhYiv 1110 clAhtti wete "not vcry impressive at all." Nmv,kvulvC'a+panrarr. 17 F. Supp. 2d at ]75. co ' Defend>tnu Ixlieve this decisiun is errnneuw b.cuuee the sn•ealled "Cutapury'1'wu 1'luin,{" nn: rnll entitely derivative of inJuriea ruwYerad by emukar plun psnicipunts, thus makinc ihnm 6nlwnnfaslbly rematc, a. N ~ hls duciriun I'ur inWClnautury appeat• e tic hum m ccnt'r ked J,d h • . y g y ave nx .ndanu well. Ikd 9 .9 I ~ ~ C.71
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0 APR 2 3 199g IN THE CIRCUIT COURT OF TENNESSEE `'F R 2 0 1998 FOR THE THIRTIETH JUDICIAL DISTRICT ATQP4WffftURT CLERK STEAMFITTERS LOCAL UNION NO. 614) HEALTH AND WELFARE FUND, by and ) through its Trustees, et aL, ) PlainHffs, ) V. PHILIP MORRIS, INC. et aL. Defendants. Case N BY. D_C. DEFENDANTS' BRIEF IN SUPPORT OF DEFENDANTS' MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM
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DEC-11-B6 16.18 FROM: BAKER-DONELSON ID= 9ID357723H3 PAC£ 29 • - . lossxs suffered by "the person or one of a limited group oF person, Ibr who.ru hrnclit and guidance [the dcf'cnJ:uttl, intendc to.upply the infinmutiun..," and that relianae upon the_ representation must occur "in a tr;msuction that [Ihu defenditnt] intends the inGrrmn/ion tu inllurnce..,or in asuhstantitdly simiGir tr,msactiutt." Restatatoent,(?"') uf'I'nus §55]; ,ecq iJ.:rl 129. As noted repeatedly, pLtintitls were not part of---cutd have nut aduyuately allegqt that thc) were part of - any "limited group" to whom defendants ullebedly inronded to supply rni:rupresentations. In I'aet, to argue that defendarus' allegcJ rcpruvantation.v werc':iintcd:n Ihcw plaintil'fs are reduccd to alleging that representatinny were made tu'hhe pu6lic, inchaling Pluintifti' participants and beneficiaries and tltosc who aJvnrtcc and protcat thc puhlic he.aldl." Complaint'l 90, \~t ,curd. id., ¶1 I t 5, 211. ?73, 274'. - , Finally, aside tiont the other foml defects, plaintil'fa have no negligent misrcpre.ent,ytiun claint withuutjustitiablc rcliance. John Marrin C:o., lnu. v. ,Dfnrsr/Diaarl• Lrr., 8t+) S,W.2d d'N (Tenn. 1991). Conclusury allegations denying knuwledge ol'whm Ihe cnurts ul"I'ennessec hute juJicially noticed is uummon knowledga simply woti t suflice. tieu Dcf: ltop.l3r., vuprg, nt 18-I') . Plaintiffs' ncgligent ntisrapresqntatiun claim firils as a matter ul'Iqu, 3. I'inintiffs Cannot Allege an Antitrust Injury .. . Plaintif7s concede thut they must adequately have ulle8ed an "antitrust intuty" In pursur an antitrust claim.l'I.1Dr., 0115. But they fail to cite a single case where mcdical.cspenses flowing f-n)ni physical injuries allegedly causcd by an tuuilrust violation wt I'r Jetrmed w hc injury "of thc type that the antitrust laws were intended tu prevent." -lh•Irnstrirk ('wp y Purbl., Bnw(-rJ-;D1uL Gev., 429II.S. 477. 489 (1')77). Inatc.td. they cite ln a.+'.iuriuA'Jf farrrr~tl C'nurrurraru', Arc..v, C'ulif'ornfa.Siarr C'ouncJl ufC.'arpenl.rat 451) U.S. 51') (1981), untl fr/nr ShialJ n(Virginirr v. ,SkC'reurh•, 457 U.S. 465 (1982), in suppurt nl'thcir claim that they have sul'tored an "antittust injurY•" Pl. Rr. at.l7. T3ut neither of tlrese enscs supports lilaintitfs' pn5itiutl.t' . . . . . . . , PlaintiRa quote Mc•C':rrady ti>r the proposition Ihat the Clnytun r\at "dues not conl inc its protection to cunsumers, or tu purohwers, or to compctitnrs, or tu sclln:...... I'I. I lr. nt 17, Ihu. " plaintifl8 alsu cite to nluv Cru.rs.re Rlue S'hield t/nrmJ v Mm.;fi/irtr! Fhn1:, 65 1' 3J 1•run, 1•11•1 t T" e lr 1995). in.rupporr oPtheirpusitiun thzt they havc rtanding to lfring un antimut claim. I'hts cavv in c,uny dis(in6uishahle bRrahillie(d dealt w.ith a consumer in the healul care market suing nn nllegedlY nnmulu,lnuc .upplier in the hcalUt care market. 'fhus, che,t/urslyield plaintifiwus a cortswner in the same m,uAmt ae the he.dth care supp6cr dcfwrdant. In itc decisiun, the Seventh Circuit in no way suggxsted rlru 61ue (Ynan hr+nren havc standingtoweentitiesincompletclydiBcrantmarket8g agyKcnruckyLuh,.n•cr,-IOVB Wl.hyt_99ur •ot"Ihe tabaccn induatry...(undJ the hcallh cara Induytry ... ato nocjunt nepnrule mudetx adhin Ihe sntoc ypherc, ihey .u'e two sepusto puns uf the econnmy:' Ihe erfaclc on thehealth care induntry lom+ mv luhucco compnnio+ atlegttlty suppressing a tnf.r cib+rette atrNnr concealWg informatlun rcguJing smokmK •+md hc:dih "dn noi nwku uut •m taWWmtinjuryundcrtmy.•.(hcoryaflhuctsc). 40
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Citv of Birminaham v. Trammel, 101 So. 2d 259 (Ala. 1958) ......................................................10 Citv of Birminaham v. Walker, 101 So. 2d 250 (Ala. 1958) .........................................................10 City of Flagstaff v Atchison. Topeka and Santa Fe Ry. Co., 719 F.2d 322 (9th Cit. 1983)...........8 Citv of Philadelphia v Philadelnhia Raoid Transit Co. 10 A.2d 434 (Pa. 1940) ...........................8 City State Bank v. Dean Witter Reynolds. Inc., 948 S.W.2d 729 (Tenn. Ct. App. 1996)............ 29 Coates v. A. C. and S., Inc.. 844 F. Supp. 1126 (E.D. La. 1994) ....................................................7 Connecticut Mut. Life Ins. Co. v. New York & N.H.R.R. Co. 25 Conn. 265, 65 Am. Dec. 571 (18 5 6 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Connors v Tremont Mining Co., 835 F.2d 1028 (3d Cit. 1987) .....................................................7 Cooper v. R.I. Reynolds Tobacco Co., 234 F.2d 170 (1st Cit. 1956), on remand, 158 F. Supp. 22 (D. Mass. 1957), aff'd 256 F.2d 464 (1st Cir. 1958) ....................................................................29 Counrv of Los Aneeles v. R.J Revnolds Tobacco Co.. No. 707651, slip op. (Cal. Sup. Ct., Dec. ~ 23, 1997) .................................................................................................... ............................2, 9, 11 Curtis v. Murphy Elevator Co., 407 F. Supp. 940 (E.D. Tenn. 1976) ...........................................34 Dale v. Thomas H. Temnle Co., 208 S.W.2d 344 (Tean. 1948) ....................................................33 Davenport v Chrysler Credit Corn., 818 S. W.2d 23 (Tenn. Ct. App. 1991) ................................14 Davis v Metronolitan Gov't ofNashville, 620 S.W.2d 532 (Tenn. Ct. App. 1981) ...............28, 43 Devine v. Roche Biomedical Labs, Ine., 637 A.2d 441 (Me. 1994) ..............................................25 District of Columbia v. Air Florida. Inc., 750 F.2d 1077 (D.C. Cir. 1984) .....................................8 Ditto v CMH Mfe.,1995 Tenn. Lexis 467 (Tenn. 1995) .............................................................33 Dobbs v. Guenther, 846 S. W.2d 270 (Tenn. Ct. App. 1992) .....................................................7, 29 Doe v. Linder Constr. Co., 845 S.W.2d 173 (Tenn. 1994) ..............................................................6 Doyle v. Hasbro, Inc., 103 F.3d 186 (1st Cir.1996) .....................................................................30 Dudley v. Unisys Coro., 852 S.W.2d 435 (Tenn. Ct. App. 1992) .................................................24 Dzik & Dzik, P.C. v. Vision Service Plan,1989 WL 3082 (Tenn. Ct. App., Jan. 20,1989)....... 20 East River Steamshio Coro v Transamerica Delaval, Inc, 476 U.S. 858 (1986) ........................34 Economy Auto Ins. Co. v. Brown, 79 N.E.2d 854 (III. Ct-App. 1948) ...........................................8 Fidelitv & Cas Ins. Co v. Sears, Roebuck & Co., 199 A. 93 (Conn. 1938) ...................................8 Fine v. Philio Morris. Inc., 239 F. Supp. 361 (S.D.N.Y. 1964) .....................................................29 First Nat'l Bank v. Brooks Farms, 821 S.W.2d 925 (Tenn. 1991) ................................................25 Florida v. American Tobacco Co., No. CL 95-1466 AH, slip. op. (Fla. Cir. Ct. Sept. 16, 1996)3, 11 Forrester v. Stockstill 869 S.W.2d 328 (Tenn. 1994) ...................................................................33 Gaines v. Excel Indus., Inc., 667 F. Supp. 569 (M.D. Tenn. 1987) ................................................. 24 Ganzevoort v. Russell 949 S.W.2d 293 (Tenn. 1997) ..........................................................•.••.••. 16 iv
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DEC-11-B6 16:17 FROM= BAKER DONELSON rD. 90157723e3 • • PAGB 25 lndn.rtrit.c, 67N So. 2d 1239 (Fht. 1996), •' . enied, 117 S.Ca. I'_•15 O9971. Ilut tlw Snrrtlrvn.rr Fla•ida Lahorers court addressed the. issue in an entire paragraph and agreed w•ith ihe Minnestxn . Supreme Court's holding in Stnte nf,Lfimicsaa v Philip binrris, lrrc.. 551 N. W. ?d 4'1p (Minu. 1996) that the fxt "[the pluintil•t] uccupies a different niche in the cumples wch af hadth care in.uitutions... does not ... uvercome the need fur a closer cannectiun between the injury and tttr tort.•'.1'oWheru•r Fluridu Laborers at'V. The court went un to find spccilically tbat "Ihe PunJ cannut escape the f'uct that any economic injuries which ure incun•ctl :u•c purely dcrivative ul' ihc . phy+icul injuries which its pnrticipunt. sttlTcrcil." Id. 'fhis is ntorc thun murc "IiP +urvice " and tho •Southeust Florida Laborers court never cven mentioned ihe : Lr.,•netured hrdievrrt¢s case, ,gp,r3, in cdnnection with its specifio discussion of pluintil'fs' ulleged ••spcclld rel:uiunship." I,I. at oj tf the fiduciary plaintiIli there had a good Faith basis fhr nrguing that Cnutt orred by not propurlY c0ilSideriq the Iegul cllect ofihtir "special relationship,"ihvy waru obliFated tu pwsuc theappnal tliry noticed, lnsteal, they voluntudly disttiissed it.- , -PlaintiFafailtouleqn4t91ytlititinguishillustr.rtivecqtphrycehcucliriduncaec.aitedby dclLzulmue,. (•'ur ~ruttple• pitlhttitFs attentpt to distinguish C'orrru,rx v'I'rrmonr .llining l'u., 835 F?dW'_8 (3d ('ir..1987) f 1 Ai; ut 7 C unnorf au~t{~nttr deti:ndants, nut thc plxinti!'f.. 'I'ha plun 4 tn C'trnnorr pruviJcd hc.dth b;pafriv tu [ l.hj I>rnaflainr)b$ ?Yhv wuru u sntttlcd tu hnrdits under tl}c liluck I,ung scncliix Act (V1a3r1'7~ 101•1.S,C, 4>,.'f.iur ) lari ii•t t[yeory of thc tryxfea' 3411 wqn tnvrthi! wwjii1 ii thay ceul4 ~amt~Frnw f[renqlvcnl })ty 1IN~nInlY prpcp)[yFc (nr a+/ahibbin; r)te, nperqf[inpiltty hef+uae, riwy fufll riNhlw xf tuhrygutina Ihe trusacca t yn racqrq anly, If tko aP.rilprti airv Ua{lp/ ly IpolvitiYNl .: honcJlpiurfatl wtdo[ th.81.pA,t' Jc I, (t Inphasls adda~) Simply pui !lu t1lritcey do n"t htlVq;t dttvcl yluim.tor rocovary ut thyFcus10( trv,ilin~ thc injurl. lr ap~g~ttlk, c4a+t.tf by tjtv vpvrntnr N. ` I'Iwt, cuntrir~tp plAlnuf(s' at xcittvn t:'pnntira Qttay u port tlul~nti niu tp Anv t iy ;' ' t.. PInlAtfth{" AilCgtttIvn t nI"UkacS" ~nlury huii )r A.Iy1u11t F of L.w . . .. .. . . .... . . .x ,...; ... ...., ,,,... As in virtually ttll oflhe uniun furtd actions tiled lhruughnut Wc cuuuu'y, ithtintil'f:i Complaint artfully uttuntpty tn evnde the iemotances doctrine by purpaning ta rottust plaiutiif;' N v,{rit)uti c,oal updrynpre (Wilri W ultnnaelv liable li,r i11•4bA h4yxllls), pcO lpy !p rschu f tliu uml uC lu al<h hy nuhw pu{tt ln Ih~ bv,ityfl ulnnys ~ii~aunn{ {o Ihc plrn I hv'/'hjni 1 nwnit ,tfilrtnetl . Jtatlti.uq uf 1(1< etwe nnnng th.iµt the npcrutuig wuuid not lic It,thlc iii tltc pgttef iciaiivr pniL r t)W 1i1.1)r1 untii thc ppvyaturY' IrAhility IG the bentttqIWt4w w,ts aalBbhAlWt/ ifqtst4lpt to a luntl ~~ - au'afd' prurrfulYi!(ed tmler tllu sta{utt u[ 1tl29 7 he e~ur~ ul{p s~tcriAr.Hily nitlgd l!'ut thp ., derivutive hnrat tts a "direot" injury. t'hus, in addition tu urging that dcfendant.' cundurt -LTI ~ ~ tb ~ N {V 16
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Table of Authorities Cases Alleood v. R.J. Reynolds Tobacco Co., 80 F.3d 168 (5th Cir.), cert. denied. 117 S. Ct. 300 (1996) ....................................... .................................................................................................... ... .............................:.......37 American Bldes. Co. v. White. 640 S.W.2d 569 (Tenn. App. 1982) ............................................16 American Nat'1 Bank v. Bradford, 188 S.W.2d 971 (Tenn. Ct. App. 1945) .................................28 American Tobacco Co. v. GrinnelL 951 S, W.2d 420 (Tex. 1997) ................................................37 Anthony v. Slaid. 52 Mass. 290 (1846) .................................................................................5, 9, 10 Associated General Contractors. Inc. v. California State Council of Caroenters, 459 U.S. 519 (1983) .................................................................................................... .................................5, 9, 15 Atkins v. Kirknatrick. 823 S. W.2d 547 (Tenn. Ct. App. 1991) ....................................................26 .Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (1990) ............................................17 Austinv. State 48 S.W. 305 (Tenn. 1898), affd as modified, 179 U.S. 343 (1900) ...................28 Baldwin v. United American Land Co 1995 WL 731788 (Tenn. Ct. App., Dec. 12, 1995) .......22 Benco Plastics. Inc. v. Westinghouse Elec. Com. 387 F. Supp. 772 (E.D. Tenn. 1974) ..............24 Blake v. Abbott Labs.. Inc., 1996 WL 134947 (Tenn. Ct. App., March 27, 1996)...........15, 16, 21 Blue Shield of Vireinia v: McCteadv, 457 U.S. 465 (1982) .........................................................15 Board of Educ. v. Cobb. 557 S.W2d 276 (Tenn, 1977) ...............................................................28 Brooke Groun Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) ......................19 Browder v. Hite, 602 S.W.2d 489 (Tenn. Ct. App. 1980) .............................................................22 Brunswick Com: v. Pueblo Bowi-O-Matic. Inc., 429 U.S. 477 (1977) .........................................17 C. Bennett Building Supplies, Inc. v. Jenn Air Coro., 759 S.W.2d 883 (Mo. Ct. App. 1988).....20 Cantlev v. Lorillard Tobacco Co.. 681 So. 2d 1057 (Ala. 1996) .............................................37, 40 Cantley v. Lorillard Tobacco Co., 681 So.2d 1057 (Ala. 1996). .................:.................................37 Cargill. Inc. v. Monfort of Colorado. Inc., 479 U.S. 104 (1986) ...................................................17 Chelsea Movine & Tmckina Co. v. Ross Towboat Co., 182 N.E. 477 (Mass. 1932) .....................8 Cirollone v. Lieeett Group. Inc.. 505 U.S. 504 (1992) ...............................................35, 36, 38, 39 Cipollone v. Liggett Group. Inc., 683 F. Supp. 1487 (D.N.J. 1988) .............................................24 Citv and County of San Francisco v. Philip Morris Inc., 957 F. Supp. 1130 (N.D. Cal. 1997) ......3 City and County of San Francisco v. Philip Morris. Inc. 1998 U.S. Dist. Lexis 3071 (N.D. Cal., March 3, 1998) .................................................................................................... .............................3 City of Birmingham v. Crow, 101 So. 2d 264 (Ala. 1958) ............................................................10 City of Birmineham v. The American Tobacco Comnanv, No. CV-97-P-1449-S, slip op. (N.D. Ala. March 9, 1998) ....... .................................................................................................... .. .....................................2, 10, 19 iii
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McNeill v Security Benefit Life Ins. Co., 864 F. Supp. 93 (E.D. Ark. 1993) afFd, 28 F.3d 891 (8th Cir. 1994) ....................................... ..................................................................... .......:................ 30 Memphis Bank & Trust Co. v Water Servs. Inc., 758 S.W.2d 525 (Tenn. 1988) .......................41 Miller v. American Familv Publishers, 663 A.2d 643 (N.J. 1995) ................................................16 Miller v B-B Distributing Co., 79 F.R.D. 219 (E.D. Tenn. 1978) ................................................40 Mills v. Polar Molecular Coro., 12 F.3d 1170 (2d Cir. 1993) ....................................................... 29 Minnesota v. Philio Morris Inc.. 551 N.W.2d 490 (Minn. 1996) .............................................3, 11 Mobile Life Ins. Co. v. Brame, 95 U.S. 754 (1878) ..........................................................•.....••..5, 9 Mtuszak v. Houston Oilers. Inc. 515 S.W.2d 725 (Tex.Civ.App. 1974) ......................................21 Mullins v. Parkey, 874 S. W.2d 12 (Tenn. Ct. App. 1992) ..............................................................1 Nicholson v. Clark. 802 S.W.2d 934 (Ky. Ct. App. 1990) ................................ ............................ 16 Ore-Ida Foods. Inc. v. Indian Head Cattle Co.. 627 P.2d 469 (Or. 1981) ............... ........................ 8 Owens v. Truckstoos of Am:, 915 S.W.2d 420 (Tenn. 1996) ........................:.........••••.......-•••..-•.•.41 Partee v. San Dieao Chareers Football Co., 668 P.2d 674 (Cal. 1983) .........................................21 Paschall's. Inc. v. Dozier, 407 S.W.2d 150 (Tenn. 1966) .............................................................. 22 Paugh v RJ Reynolds Tobacco Co. 834 F. Supp. 228 (N.D. Ohio 1993) ...........................--.....28 Pennsvlvania Nat'l Mut. Cas. Ins. Co. v. Barnett, 445 F.2d 573 (5th Cir. 1971) ............................9 Peoria Marine & Fire Ins. Co. v. Frost, 37111. 333 (1865) .......................................•••.......•••..•••••••.8 9ualitv Auto Parts Co. Inc. v. Bluff Auto Parts Co.. Inc., 1992 WL 379077, *2 (Tenn. Ct App., Dec. 21,1992), affd in nart rev'd in vart on other erounds, 876 S.W.2d 818 (Tenn. 1994) .....:..16 R.K Constructors. Inc. v. Fusco Corn.. 650 A.2d 153 (Conn. 1994) ..............................................8 Ramsay v. Voge_l, 970 F.2d 471 (8th Cir. 1992) ...........................................................................30 Riggs v. Burson, 941 S.W.2d 44 (Tenn. 1997) ................................................................................7 Ritter v. Custom Chemicides. Inc. 912 S. W.2d 128 (Tenn. 1995) ................................................34 Robinson v. Omer 952 S.W.2d 423 (Tenn. 1997) ........................................................................26 Rockineham Mut Fire Ins Co v Bosher 39 Me. 253, 63 Am. Dec. 618 (1855) ..........................8 Rovsdon v. RJ. Reynolds Tobacco Co., 849 F.2d 230 (6th Cir. 1988) .................................. 28, 37 Semowich v. R.J. Revnolds Tobacco Co.. 1988 WL 123930 (N.D.N.Y. Nov. 15, 1988) .............33 Sexton v. Sevier Countv. 948 S.W.2d 747 (Tenn. Ct. App. 1997) ........................................-...-.-28 Stnith v. Liquid Controls Coro., 1994 WL 147824 (Tenn. Ct. App. April 27, 1994) ...................41 Sonnenreich v. Philin Morris. Inc., 929 F. Supp. 416 (S.D. Fla. 1996) .................................••...-..37 CO tV Sound of Market Streec Inc. v. Continental Bank Int'I, 819 F.2d 384 (3d Cir. 1987) ..................25 U7 -_a Southeast Florida Laborers Dist. Health & Welfare Trust Fund v. Philin Morris, Case No. 97- \,p 8715-CIV-RYSKAMP, slip op. (S.D. Fla. April 13, 1998) .............................................................2 ~ kII-*3 O vi
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State ex rel. Dep't of Human Serv. v. Brooks, 412 N.W.2d 613 (Iowa 1987) superseded by statute as stated in Hill v. State, 493 N. W.2d 803 (Iowa 1992) .......................................................8 Stevenson v. East Ohio Gas Co.. 73 N.E.2d 200 (Ohio App. 1946) .............................................34 Stracener v. Swindle 1995 WL 414873 (Tenn. Ct. App., July 14, 1995) .....................................14 Swallows v. Western Elec. Co.. Inc. 543 S.W.2d 581 (Tenn. 1976) ..............................................7 Tacker v. Wilson 830 F. Supp. 422 (W.D. Tenn. 1993) .......... ....................................... .............. 15 Tartera v. Palumbo 453 S.W.2d 780 (Tenn. 1970) .......................................................................26 Tennessee ex rel. Beckom v. The American Tobacco Co.. Inc., No. 3:97-cv-436, slip op. (E.D. Tenn. December 1, 1997) ................................... ............. ................ ................................. .............. 31 Texas v. The American Tobacco Co., No. 5-96CV-91, slip op. (E.D. Tex. Sept. 8, 1997).3, 19, 23 United States v. Standard Oil Co. 332 U.S. 301 (1947) .................................................................8 United States v. Trammel 899 F.2d 1483 (6th Cir.1990) ..............................................................9 United Textile Workers of America. AFL-CIO v. Lear Siegler Seating Coro., 825 S.W2d 83 (Tenn. Ct. App. 1990) ......... ............ ......... ...................................................................................... .................--.34 Valley Products Co., Inc. v. Landmark, 128 F.3d 398 (6'" Cir. 1997) ...........................................17 Vinci v. Waste Management. Inc., 80 F. 3d 1372 (9th Cir. 1996), cert. denied. 117 S. Ct. 1252 (1997) .................................................................................................... .........................................18 Walls v. American Tobacco Co.,1nc.. No. 97-CV-0218-H, slip op. (N.D. Okla. July 10, 1997).31 Washington v. American Tobacco Co.. No. 96-2-15056-8 SEA, slip. op. (Wash. Super. Ct, June 6, 1997) .................................................................................................... ............................3, 11, 25 Washington v. American Tobacco Co., No. 96-2-15056-8 SEA, slip. op. (Wash. Super. Ct., November 19, 1996) .................................................................................................... ........3, 11, 23 Whitson v. Grav 40 Tenn. 441 (1859) ..........................................................................................26 Williams v. WMX Technoloeies. Inc., 112 F.3d 175 (5th Cir. 1997), cert. denied. 118 S. CL 412 (1997) .................................................................................................... ...................................29, 30 Wimberly v. American Casualty Co. of Reading, PA, 584 S. W.2d 200 (Tenn. 1979) ...................1 Wolens v. American Airlines. Inc. 626 N.E.2d 205 (Ill. 1993), afFd in part, rev'd in part, 513 U.S. 219 (1995) .................................................................................................... ..........................39 Zirkle v. City of Kineston, 396 S.W.2d 356 (Tenn. 1965) ............................................................23 Statutes 15 U.S.C. § 1334(a) .................................................................................................... ..................35 15 U.S.C. § 1331 .................................................................................................... .......................17 15 U.S.C. § 1331(2) .................................................................................................... ...................35 15 U.S.C. § 1331(a) .................................................................................................... ...................36 15 U.S.C. § 1333 .................................................................................................... ........................27 15 U.S.C. § 1333(a)(1) .................................................................................................... ...............27 ' vii
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0 Philin Morris. Case No. 97-8715-CIV-RYSKAMP, slip op. (S.D. Fla. April 13, 1998) (attached as Exh. 1). In Southeast Fioridai the court recognized that the plaintiff, another health and welfare trust fund, sought'to recover the health care costs expended to treat its participants who have suffered from tobacco-related illnesses ...... Id. at 2. The court dismissed the action because the "common law does not permit a plaintiff to recover in its own name from defendants for injuries which defendants allegedly caused to individual third party health care recipients." Id. at 7. Like the plaintiff in Southeast Floridad the Funds here may not recover in their own name for injuries Defendants allegedly caused to their Participants. Nonetheless, the Funds fashioned their complaint after those of the state attorneys general who have sued various combinations of the same defendants for reimbursement of health expenditures. In doing so - even apart from the flawed nature of those lawsuits - the Funds assume a status they cannot attain. Unlike some state attorneys general, the Funds cannot claim to be acting in a purported "sovereign enforcement" capacity. As private parties, the Funds cannot assert a State's purported sovereign interests. Thus, the decisions of some courts that (mistakenly) allowed some of the claims asserted by state Attorneys General to proceed past the motion to dismiss stage do not in any way sanction the Funds' attempt as rlvate plaintiffs to bring this action in the face of settled law barring any purported direct action for an indirect claim. Further, the Funds' complaint in this case contains many claims that are analogous to claims that.repeatedly have been reiected in courts across the country, even when asserted by an Attorney General in the sovereign name of a State: • City of Birmingham v. The American Tobacco Comnanv, No. CV-97-P-1449-S, slip op. (N.D. Ala. March 9, 1998) (dismissing all common law claims) (attached as Exh. 2); • Maryland v. Philip Morris, 1997 WL 540913 (Md. Cir. Ct., May 21, 1997) (dismissing all common law claims) (attached as Exh. 3); • Iowa v. RJ. Revnolds. No. CL71048, slip. op. (Iowa Dist. Ct. Aug. 26, 1997) (dismissing deception, special duty, unjust enrichment and indemnity claims) (attached as Exh. 4); . County of Los An¢eles v. R.J. Reynolds Tobacco Co.. No. 707651, slip op. (Cal. Sup. Ct, Dec. 23, 1997) (dismissing common law claims because they alleged only injuries "purely derivative" of the individual smoker's) (attached as Exh. 5). 2
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a Table of Contents I. Introduction .................................................................................................... ..............................1 II. Statement of Facts as Alleged in the Complaint .........................................................................3 IB. Argument .................................................................................................... ...............................4 A. The Funds' Claims Should Be Dismissed Because Their Alleged Injuries Are Too Remote To Be Cognizable .......................................................................................4 1. Precedent Throughout the Country Precludes the Funds' Remote Claims..........7 2. Similar Claims in Cigarette Cost Recovery Litigation Have Been Dismissed..10 3. The Remoteness Principle Also Bars the Funds' Statutory Claims ...................14 a. Remoteness Precludes the Funds' Consumer Protection Act Claim .....14 b. Remoteness Precludes the Funds' Tennessee Antitrust Claim ..............14 B. The Fund's Statutory Claims Should Be Dismissed For Additional Reasons Specific To Each Count .................................................................................................... ...16 1. The Funds' Consumer Protection Act Claim Should Be Dismissed Because the Funds Were Not "Consumers....... ..............................................................16 2. The Funds' Antitrust Claim Should Be Dismissed Because the Funds Failed to Allege an Antitrust Injury ..........................................................................17 3. The Funds' Antitrust Claim Should Be Dismissed Because it Alleges Actions that Predominantly Affected Interstate Activities ......................................20 C. The Funds' Common Law Claims Should Be Dismissed For Additional Reasons Specific To Each Coum .........................................................................................21 1. The Funds' Unjust Enrichment Claim Should Be Dismissed Because the Funds Did Not "Enrich" Defendants and the Funds have an Adequate Remedy at L aw .................................................................................................... ........21 2. The Funds' Breach of Special Duty Claim Should Be Dismissed Because Defendants did not Assume a Legal Duty and the Funds did not Suffer Physical Harnt .........................................................................................._23 3. The Funds' Fraud and Negligent Misrepresentation Claims Are Deficient as a Matter of Law ............................................................................................25 a. The Funds May Not Recover for Fraud and Negligent Misrepresentations Directed at Third Parties .................................25 b. The Funds Cannot Establish Justifiable Reliance ..................................26 c. The Funds Failed to Adequately Plead Their Own Claimed Reliance.29 4. The Funds' Breach of Warranty Claims Are Deficient as a Matter of Law...... 0 a. The Funds Failed to Allege that They Purchased or Consumed Defendants' Products .....................................................................30 b. The Funds' Breach of Implied Warranty Claim Should Be Dismissed Because the Funds Failed to Adequately Claim that Defendants' Products W ere Unmerchantable .....................................................31 1
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identical to-the question presented here, the Second Circuit ruled that the funds' injuries, as alleged, were "purely derivative of the physical injuries suffered by the plan participants" and therefore "too remote as a matter of law for [the funds] to have standing to sue defendants." Laborers Loca117, 1999 U.S. App. LEXIS 19576, at *45.' Likewise, the Third and Ninth Circuits ruled that the funds' injuries, as alleged in the respective complaints, were "too remote" from any alleged wrongdoing of the defendants. Oregon Laborers-Employers, --- F.3d ---, 1999 WL 493306, at *4; Steamfaters, 171 F.3d at 921, n.4. The allegations here mirror those in other union fund cases. The Funds seek to recover the cost of "provid[ing] medical treatment and other benefits to their participants and beneficiaries suffering from smoking-related illnesses." Complaint 15 (R. 7). These losses, m alleeed_ are incurably remote and derivative because, as the Ninth Circuit put it, "without any injury to smokers, plaintiffs would not have incurred the additional expenses in paying for the medical expenses of those smokers." Oregon Laborers-Employers, --- F.3d -, 1999 WL 493306, at *4. The Funds therefore cannot establish proximate cause, and their claims should be dismissed now. See Doe, 845 S.W.2d at 183 ("where the facts are not controverted [e.g., in the context of a motion to dismiss], the question of proximate or intervening cause is for the trial court"); Texas Carpenters, 21 F. Supp. 2d at 678 ("the Court concludes that the Funds fail to make a showing of legal cause sufficient to maintain the [derivative] claim"). The Funds have asserted that they have subrogation rights (Complaint ¶¶ 12-16, R. 12-14, 148), and their proper 7 The question certified for interlocutory review by the Second Circuit was "[w]hether, under the circumstances alleged in plaintiffs' complaint, economic injuries incurred by a union health care trust fund are purely O'.) derivative of the physical injuries which its participants suffered, and are therefore too remote to permit tV recovery as a matter of law." Laborers Local 17, 1999 U.S. App. LEXIS 19576, at *11. U-1 8 1\0 0 w N
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Ghem. Inc. v. Manco Petm.. Inc., 850 S.W.2d 447 (Tenn. 1993) .................................................17 Green v. American Tobacco Co.. 391 F.2d 97 (5th Cir. 1968), Qanel opinion overruled and 'lud¢ment affd for reasons set forth in the dissent. 409 F.2d 1166 (1969) ....................................33 Griesenbeck v. American Tobacco Co.. 897 F. Supp. 815 (D.N.J. 1995 ) ....................................38 Gunsalus v. Celotex Coro.. 674 F. Supp. 1149 (E.D. Pa. 1987) .............................................. 3, 24 Harbison v. Brigas Bros. Paint Mfg. Co., 354 S.W.2d 464 (Tenn. 1962), overruled on other Rrounds. Ennix v. Clav, 703 S.W.2d 137 (Tenn. 1986) .................................................................14 Hardwick v. State. 74 Tenn 103 (1880) ............:...........................................................................28 Harry J. Whelchel Co. v. Ripley Tractor Co.. 900 S. W.2d 691 (Tenn. Ct. App. 1995) ................33 Hawaii v. Standard Oil Co. 405 U.S. 251 (1972) .........................................................................18 Havduk v. Lanna. 775 F.2d 441 (1 st Cir. 1985) ............................................................................30 Haynes v. Cumberland Builders, 546 S. W.2d 228 (Tenn. Ct. App. 1976) ....................................26 Hill v. John Banks Buick. Inc., 875 S. W.2d 667 (Tenn. Ct. App. 1993) .............................8, 25, 43 Hill v. United States Fidelitv & Guaranty Co.. 428 F.2d 112 (S" Cir.1970) ...................................24 Holmes v. Securities Investor Protection Coro., 503 U.S. 258 (1992) ..................................5, 9, 15 Holt v. American Prog. Life Ins. Co.. 731 S.W.2d 923 (Tenn. Ct. App. 1987) ............................26 Illinois Brick v. Illinois 431 U.S. 720 (1977) ...............................................................................15 In re Deskins' Estates, 381 S. W.2d 921 (Tenn. 1964) ...................................................................14 In re Multidistrict Vehicle Air Pollution 367 F. Supp. 1298 (C.D. Cal: 1973), afFd 538 F.2d 231 (9th Cir. 1976) ..........................................................---....................................... .....................19 Industrial Risk Insurers v. Creole Prod. Serv.. Inc. 746 F.2d 526 (9th Cir. 1994) .........................7 Iowa v. R.J. Revnolds, No. CL71048, slip. op. (Iowa Dist. Ct. Aug. 26, 1997) .......................2, 11 Jasper Aviation. Inc, v. McCollum Aviation, Inc.. 497 S.W. 2d 240 (Tenn. 1972) ......................25 Kerr v. Hacknev Petro. Tennessee. Inc.. 775 S. W.2d 600 (Tenn. Ct. App. 1988) ........................17 Kllnatrick v. Brvant. 868 S. W.2d 594 (Tenn. 1993) ........................................................................6 King v. Dunlap, 945 S. W.2d 736 (Tenn. Ct. App. 1996) ................................................................I L.I.C. Coro- v. Baskin-Robbins Ice Cream Co.. 1993 WL 2796 (Tenn. Ct. App., Jan. 8, 1993)..16 Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc.. 1998 WL 146217 (S.D.N.Y. Mar. 25, 1998) .................................................................................................... ..........12, 18, 22,24 Lacey v. Lorillard Tobacco Co. 956 F. Supp. 956 (N.D. Ala. 1997) ............................................37 Lacev v. Lorillard Tobacco Coro.. 956 F. Supp. 956 (N.D. Ala. 1997) ........................................37 Lynch Disolav Corp. v. National Souvenir Ctr.. Ine., 640 S.W.2d 837 (Tenn. Ct. App. 1982)....20 Maneelv v. Generai Motors Coro., 108 F.3d 1176 (9th Cir. 1997) ........ ................................. ...... 29 Maryland v. Philip Morris,1997 WL 540913 (Md. Cir. Ct., May 21, 1997) ............................ 2, 10 McClung v Delta Square Ltd. Parmership, 937 S.W.2d 891 (Ienn. 1996) ....................................6 v
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15 U.S.C. § 1333(a)(2) .................................................................................................... ............... 7 15 U.S.C. § 1334 .................................................................................................... ....................... 28 T.C.A. § 47-18-102(2) .................................................................................................... ...............16 T.C.A. § 47-18-103(2) .................................................................................................... ...............16 T.C.A. § 47-18-109(a)(4) .................................................................................................... ............16 T.C.A. § 47-18-110 .................................................................................................... .....................16 T.C.A. § 29-28-102(6) .................................................................................................... ...............40 T.CA. § 29-28-106(7) ...............--..-----............................................................................ ...............40 T.C.A. § 29-28-106(a)(1) .................................................................................................... ...........40 T.C.A. § 29-28-106(b) .---................................................................................................ ...............41 T.CA. § 47-18-109(a) .................................................................................................... ...............16 T.CA. § 47-18-109(a)(1)................. .............................................. ................................................ 14 T.C.A. § 47-2-314 .................................................................................................... ......................31 T.C.A. § 47-25-101 et se .................................................................................................... ..........14 T.C.A. § 47-25-611 .................................................................................................... ....................17 Other Authorities 1 J. Sutherland, Law of Damaees 55-56 (1882) .............................................................................. 5 54 Am.Jur.2d § 265 (1971)-............................................................................................. .............20 City of Birmingham v. American Tobacco Co., No. 0097-P-1449-W, Hearing Tr. (N.D. Ala. October 2, 1997) .................................................................................................... ........................19 Prosser and Keeton, § 41 .................................................................................................... .............6 Restatement (Second) of Torts § 7(3) ............................................................................................24 Rules Tenn. R. Civ. P. 9.02 ..........................--........................................................................ ............._...29 viii
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0 Further, another federal district court addressing a motion to dismiss in a similar union trust fund case recently recognized that as fundamental principles of proximate cause dictate, plaintiffs may only recover for injuries that they have suffered. ... In general terms, the concept of "proximate cause" prevents a recovery from a party for remote and derivative injuries to a plaintiff resulting from that party's conduct toward another. Under the common law, therefore, one who pays the medical expenses of another may not recover those expenses from the third-party tortfeasor who caused the damage. Laborers Local 17, 1998 WL 146217, *2. While the Laborers Local 17 court in New York declined to dismiss the complaint on this ground - finding that the plaintiffs adequately alleged damage to the plaintiffs' "infrastructure, financial stability, or ability to project costs," ic. at *4- - the court also clearly stated that the "plaintiffs may not recover for the personal injuries of their participants." Id. Further, Defendants respectfully submit that the bar on remote recovery cannot be avoided by merely relabeling the Funds' harm as an injury to the"v "infrastructure, financial stability, or ability to project costs." First, such "losses" actually underscore the remoteness of these Funds' claims, as they necessarily depend on a lengthy chain of events: (1) smokers' employment by unionized employers; (2) the negotiation of collective bargaining agreements between employers and the labor unions; (3) the. creation of the Funds and negotiation of the employers' payments to them for the benefit of the employees; (4) Defendants' alleged tortious conduct in allegedly causing the Funds' Participants to suffer smoking-related injuries, (5) the Funds' payment of their Participants' alleged smoking-related medical costs, and (6) the expenditure of those payments causing injury to the Funds' "infrastructure, financial stability, or ability to project costs." If, as the New York court held, the Funds may not recover for their Participants' personal injuries, then, a fortiori, they cannot recover for an "injury" allegedly caused by that non-recoverable injury, i.e. an injury even more remote in the causal chain. The change in labels does not alleviate the remoteness of the claim. Second, the New York court's labels for the plaintiffs' alleged harm quickly evaporate when given tangible meaning. As the causal chain ~Adences, the plaintiffs' (and these Funds') "harm" is directly dependent on the'u Participants' physical injuries. What is the harm to the plaintiffs' "infrastructure, financial stability, or ability to project costs" other than harm from increased expenses for medical care? The practice of re-1abeYmg t\.e plaintif£s it4=y s noluog 12
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I. Introduction Plaintiffs, union multi-employer health and welfare trust funds (the "Funds"), purportedly bring this direct action in their own name and in their own right against various cigarette manufacturers and other entities (the "Defendants"). They seek recovery for medical payments made for treatment of certain participants and beneficiaries (the "participants") who used tobacco products. The Funds filed this putative class action complaint with 79 pages and eleven counts, alleging several state statutory and common law claims. This case is fundamentally different from individual personal injury actions and class actions brought by smokers. The Funds obviously are not smokers or consumers, and cannot claim that they suffered physical injury. Nor do the Funds sue as subrogees of the rights of any Participant who suffered personal injuries. Rather, the Funds assert a novel direct claim for alleged economic loss to themselves, which allegedly derived from tobacco-related personal injuries suffered not by the Funds, but by others - namely, various unidentified, individual Participants in the Funds. The Funds claim they have a right of action - independent of subrogation - because they paid their Participants' medical expenses. But the Funds' "direct action" suffers from a fitndamental and insurmountable defect: remoteness. The law simply does not allow a party who incurred expenses as a result of a wrong suffered by another to recover those expenses in a direct action, even if such expenses are (hypothetically) characterized as "foreseeable." The Funds, of course, may have the traditional remedy of subrogation, but instead have attempted to assert a "direct cause of action" contrary to established law batring remote remedies.' A federal court recently recognized the fallacy of the Funds' complaint by dismissing a similar case in its entirety. Southeast Florida Laborers Dist. Health & Welfare Trust Fund v. ' Under the doctdne of subrogation, a payorlplaintiff stands in the shoes of the injured person who has the direct claim. See Kine v. Dunlau. 945 S.W.2d 736, 740 (Tenn. Ct. App. 1996); Mullins v. Parkev. 874 S.W.2d 12, 14 (Tenn. Ct. App- 1992); Wimberly v. American Casualty Co. of Reading. PA, 584 S. W.2d 200, 203 (Tenn. 1979). The Funds, however, attempt to avoid this established method of recovery of medical expense payments - and its requirement for individual proof - by creating a hitherto unheard-of direct cause of action. Although the Funds allege that their plans conrain certain provisions under which they are subrogated to all the rights and causes of action of their Participants for injuries and illness covered by the Funds and caused by any third party tortfeasor, see Complaint, ¶¶ 12-15, the complaint nevertheless indicates that the Funds are suing in their own right, not as subrogees, as they have not attempted to meet any of the requirements for pleading a subrogation action. I
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DEC-11-98 16.15 FROM= BAKER DONELSON ID= 90I5772303 PACE SB , proj.ct cnsts"-euncepts ncither plcaded in the cnmpluint nor esplainud hy thu cuurt.' Acknowledging that thr:ru was "manit'csQy substantial ground hor diftercncu of opiniun" ds to Ihc correctness oi its ruling, the court certified nn interlocutory appeal under ZR 11.S.<'. § 129_'(b), Llf,. at 294, and tha Second Circ.uit accepted this appeal un July 14, 199R. - In addition, a California state cuun hearing two separate trust limrl ca.ecs suhstantinlly similar to this case recently dismissed the fimdti elainw for:udiiravr viulutiutts, liaud, mtcntionnl and ndgligcnt breach of special duty. ncgligancu, indemnity, unjust enrir.hn+em, restimtiun, and breach of warnutty on various grnund3, including retrtutunas,s Srrrv,r :h rm•s fn:ikl-1'ruduo¢P.r ldeulth Plan v. Philip rl•forris. fnc'., Ko. UC 181603, Nutice nt;('oun's Ordcr (('ol. Super. Ct. June ,',?, 1998) and l)peruftnXEngtneera Lnral 12 Plenlth and iiclfirrc'i'ruxt Fund r; Pmeriran lnbircen C n"No, !)C' 177966. Nuiiw uE 4ourt's nrc,~ef (Cal. Sulxr. (a. July 9, I'J9t{) (rrlying un In/ha ry v. Slarid an ! scauny (hat "(iIt hopbPns t,wpprupnatc l'gr lhl. i t)un to hlm• thu Jnt:Pnnal inregrily l,l' unc aiusa ot aetion to pinN( ~ arrlVYlpp d f~iruuf pruhlams in uuuthcr (i.c. quhnq2,uiuu)") 1 hs nnlv al nnl nlirvtvmg tlnn)itisai q3 bueen:irinrr was haxctl on a tmiyue CPi)hiriinxtatutcpuimithngnprryt~naht~)nirtryun~ttv},GlPdfwdlfNul niyahulingpl'injur,v,:uid ` the slmq+.unrt dtsmip cd thc Pdantital r.auee qf pcnott ill 11pi'_rrulnl,rg rrAlni irc l, pe istu~ts Kntpstp~ tn Dtz~riqq h,JuJrt~4' n( (tl,yitnV • or'urly all jt!' nuit+ Jutit,ipoaud upnlnoi thcl numvrous anlui4 fh.Fi h,lYU th n~iyM'nl ttil iir vinuatty Wr,qtiwl to phunnra' 0,YYp+ nN Qnly iwt) ruyps 1htii h+ivv fKyucJ ap,nwns }rn Iinrlumv Iu qi5tntss yat qAuwad thlr cascs tn produ}t) t I!}i: tn han {tNUrku t liaii/ f,)uir,~ t Plrllih qrrrti .? !nc I r19+i Wi. GIJ21)3 (N.1?, Ohio 1944) the4!tyn n;IwrrPrb iu tnv nu,+din ni iht 4minirunlt~'' . ttrurlw l.~lzi ntlamr {nu4un w siiFmlaA q~+1cial ~1yry il>flqjK hlll Jt nluil q,wir tm,µolt ~ri,t{) rC,fprct.tn, ., thr KIC{)tpduu~t?Pd ervP1 riqtsptr wy ylalm!t !° ~ttPi cPwtt c/v4111tu1/ In oiutirµr or itl+ply tho / walt•vzt!bhihud ~omukndtw ~rruftlnut QtP1ad ru t~irVU Ni rey N f itu, prlnr pqrw th5 miy+iliN !yltltin ' timJ clnimz and Irnprapr:rly ap~listl t~w tylit fctr wrtttrwt hijury;~ TIdO tuc,theql4ilid {o rt•0jjqiFa d+al rll4(Shesq InJurtes occcsirrlly arisy trmn paymr.m Ly tho 6111.1s m medicrluapuntlnsu(~thun fulhrt bXdenmtmn suc(I~in)unqsuqdeiiv~n4emillttnn•nmiriovlqrpn,ueru.a,v Inrl4pit, anY a+!lurphput "InfrSSrructuru'rin]iuias rtsultint; rrum rGc pnymulq u/ m,i ttly'.rl V\pl'l1YYY ,ue rn Ina <•au mr!ra Mmoro d+w+!he,"(njurlor platmid far the mc 11~!I PnYrnunu r6cnikNye rrttiPtin., r, Ijlu pmIP1 iuiprnpurlv, nmilatedd+.uunc.pieufPdr~Y~WBlniy~aitdremntaicax. 1e prier to the eouRtl Nlini{, rhe Iron IVnrk,trs plaintiifi vulnnlarily dinnivrud rtnne ur thv moru cluim, udvuncad by ptnlntlrfs hcie- Rnnd, t+njn9t tlRlChmen4 strict pruduerA Iblhlllty, IIUyllel'rIL'l'. IIIn~Ur INIUIu pomnt.,•i, breach uf wartanry and F.RISA claLny, lrrn+ IVOrkert, 51ip up.. ill 5, n T . " Thc lr.,n Workene' anritruxt claims have sln.e been disatirved oil ununnry judgoicnl nni aintutu nl' limiuiiian> gmmnls). rrun R',n4•rr Lucnf U'nius,wn. J' frxruruncr rund„nd7er'l'nnv,,•r+ t• 1')u7qr.l/orrex huvrponaed, Aicmnrmrdum Opiniun, Nrnumhcr LJ, 1998 ' IU to
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AUG. 5. 1998 4:47PW-o3-se 06,09 PM MILLSR & MARTIN . , . ~: Fes6az3 7asN0. 0430 P, 4P,n7 CO1VaNdVVd+e3ndividuW aod plvposed cRlaesreptea~vra, Stpmbm l.ood Ueioa No. 614 H®]rh and WeJ6ire Ymd, Taaoer®ep Catpeatera RegiooilHpelth and weEfAt® Fund (formedy Carpenters National Heelth and We1flae Fwad), Afiddle Toanessee Teamr[ets Tmst Fund, lroa , WoAcersDistrieeCownd ofTmae9sa® VaUey& VkJaOy WrJlrePlNq aadUcnedFurniNre Workers leauraqee Fuad, (herei,w$er eo0activaly refemd to aa the "Pldutiff Fuuds," "PlaiatPB§," or the "ftadel), an behalfaf"thmuelvea aad all othwsWady siputed lhhh ud Welfaro Tiost Funds in Teoumoo (heraioa&er rAned to aethe °Civsc'), aad hesein Me their Amepded CuqpWLd, dRep}og ih.e following a Puagaphs 1 rhrough 1s of tba ori8iad Caaptalm ue hereby L~eoryorated by refereace. B. A new paragnph 16 is added as follows: e .16. 73e tlaikd Fumid~rewo&ersLmuwu Fund (`Yhe Fuad") is aa "employee welfare bwe0s plao" and an "employee benefit plan° within tLe Employee Retiremeat laeome Seeurity Aoe (fiRISA), 29 U.S.C. §§ 100Zp),1002{3),1003(a), As aud4 tlu Fua6 is a lagql eatity aatitled to briog saitiaila own name poiausat to 29 U.S.C. § 1132(d), earsuaat to the ttue! agrcemeat under wleob i<was aie4red, the i+uad provideacompreheostve healtb care beee6ta to pactidpaete who an emplayod wider varioua aolleotive tiargainiog egeemwte and to thee dopmdesu, and re rearees. 1haddiqon thePWd eJaatth mul wedicel beaeHls ea! aorv[ees are provlded und~ asrriaeu beae80 p1coa lbst plaaaontiw caYin eubrogafioapuoviaiooa uoderwhich t6eFoad'u aubmSdad to all the righta aSid causes of action af aa pmtieipaara and bene&iedas for whom the Fund pays meEicsl, bam5tafor iojmier aod'ilhtossee aau®ed by aaythird patty tortdbesot The FwUd, an heL&ofitaelf and all qthrasiotiIaely eip4ded„ aeels to recover the tobacorelaw blaeHO eosta iocucred by it aod all Sumlliriy situated health aadwelfire 9mds, hulodioa, bot aot Gmhad to, wTaadhrues for medical asslepeae dna to the use of cobareq by their paetieipants aad bane5eiotiea. Jn additiou, the Fmid, on behaIFofitael[and aR' othora amihuly eiwsimd, briap this aodoato obtain doalaratary and eqaitable ielief a¢d =11taeap. Tho fauetees of the Fund am Mr. WiRio Sadd, Iwts,'Nilda PtUer. Mr. Hmry aoot, Us Ida raw .u.e y Mr.lasbel P"ivri, M8, Aadree Sttck, Mr. SaodyY'aploqMr..&uce Van Faa, Mt Uliaea Vergem, aad Mr. Ed Warshaoee, Theltua*ra' addrest is 1910 Air Lane D&e, P.O. Boz 100037, Neshv+714 Tema6Bee 37224. C. Parawphm 16 throµgh 309 of the oegmAl Complaint ®ra rmum6ered as 17 th[oWgp 310 oad iaco~yoraced by Rfereoee
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As explained by the United States Supreme Court in the context of the federal antitrust statute, it is well-settled that "[a]n antitrust violation may be expected to cause ripples of harm to flow through the Nation's economy; but 'despite the broad wording of [the federal antitrust statute] there is a point beyond which the wrongdoer should not be held liable."' Blue Shield of Virsinia v. McCreadv.457 U.S. 465, 475 (1982) (quoting Illinois Brick v. Illinois, 431 U.S. 720, 760 (1977)). In Associated General Contractors: the Court held that the legislature "did not intend to allow every person tangentially affected by an antitrust violation to maintain an [antitrust] action .." 495 U.S. at 535. Rather, an antitrust plaintiff must show a°directness of relationship," which is one of the "central elements" in proving causation. Holmes. 503 U.S. at 267-69. Tennessee courts also have recognized TUTPA's bar on remote claims. To state a claim under § 47-25-106, an antitrust plaintiff cannot recover unless she transacted business with the defendant, Tacker v. Wilson 830 F. Supp. 422, 430 (W.D. Tenn. 1993), or was a direct or indirect purchaser of the defendants' products. Blake v. Abbott Labs.. Inc.. 1996 WL 134947 (Tenn. Ct. App., March 27, 1996) (attached as Exh. 12). In Ta_ c,ker for example, the plaintiff casket retailer alleged that defendants, who were casket distributors and funeral service providers, conspired to prevent the plaintiff from selling caskets at reduced prices. 830 F. Supp. at 425. The plaintiff claimed that the defendants achieved their goal by refusing to conduct business with him and by persuading others from conducting such business. Id. at 425-26. The court dismissed the plaintiff's TUTFA claim, because he "alleged no facts that would indicate that plaintiff transacted business with any of the defendants." Id. at 430. See also Blhe 1996 WL 134947 (antitrust recovery available to any individual "without reference to classification as a direct or indirect pttrchaser"). As in Ta _,ker the Funds here have not "alleged [any] facts that would indicate that plaintiff[s] transacted business with any of the defendants." 830 F. Supp. at 430. The Funds do not allege that they purchased Defendants' products or conducted any business with Defendants. The Funds are too remote as a matter of law to recover for Defendants' alleged TUTPA violations. Accordingly, the bar against remote recovery precludes the Fund's TUTPA claim. See also Southeast Florida. Slip op. at 15 (plaintiffs antitrust claim "is wholly derivative and thus not cognizable as an antitrust injury"). 15
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[w]here the plaintiff sustains injury from the defendant's conduct to a third person, it is too remote, if the plaintiff sustains no other than a contmct relation to such a third person, or is under contract obligation on his account, and the injury consists only in ... increasing the plaintiffs expense or labor of fulfilling such contract, unless the wrongful act is willfitl for that purpose. Slip op. at 8 (quoting Associated Gen. Contractors. Inc. v. California State Council of Caroenters. 459 U.S. 519, 532 n.25 (1983)). Indeed, Anglo-American jurisprudence has long placed limits upon a plaintiffs right to recover for economic injuries resulting from harm visited upon a third party. At common law, a payor does not have a claim against a tortfeasor for costs provided a tort victim as a result of injuries caused by the tortfeasor. As stated by the United States Supreme Court, "a plaintiff who complain[s] of harm flowing merely from the misfortunes visited upon a third person by the defendant's acts [is] generally said to stand at too remote a distance to recover." Holmes v. Securities Investor Protection Corn.. 503 U.S. 258, 268-69 (1992) (citing I J. Sutherland, Law of Damaees 55-56 (1882)). In Associated Gen. Contractors 459 U.S. at 532 n.25, the Court offered the following illustration of the remoteness principle: A, who agreed with a town to support all the town paupers for a specific period, in return for a fixed sum, had no cause of action against S for assaulting and beating one of the paupers, thereby putting A to increased expense. This example appears to be based upon the leading case of Anthony v. Slaid. 52 Mass. 290, 291 (1846), in which the Massachusetts Supreme Judicial Court observed that the damage alleged by the plaintiff against the tortfeasor was "too remote and indirect i5 The court rejected the claim because it arose "not by means of any natural or legal relation between the plaindff and the party injured," but "by means of the special contract by which he had undertaken to support the town paupers." Id. Similarly, the Supreme Court rejected the remote claim alleged in Mobile Life Ins. Co. v. rame 95 U.S. 754, 758-59 (1878), in which the plaintiff life insurer sought to recover from Brame, who allegedly murdered the insured, McLemore. The Supreme Court rejected the claim, stating that . ' In both Holmes and Assocfated General Contrzctors, the Supreme Coun relied on I J. Sutherland, Law of Damases 55-56 (1882), which in turn describes the facts of and cites to Anthony v. Slaid. 520 M2ss. 290 (1846). 5
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DEC-11-95 16=19 FROH= SAKER DONELSON • 10: HH15772303 • PAGE 31 r¢llect ur Iluw from nnticompctitive conduer."). No reading ofAlCt fCt/t/v,uppurts plainlill'+' position in t(tia cttic.°n L PlaintiffsrCannot Escape Pruomptinn I'laintifls make only a cursory aucmpt iu rebut dcfendarus' urgwnents Ihnt the pcdend (;igarcne Labeling and Advertising Act ("Labeling Act") preempts virWally all aLtims. Ignvrink; the numerous authorities cited by dclondtntts, plaintilPs murr:ly, slate thcn <'ipullurre v. Li,gqrrr t'koup, Inc., 505 U.S. 504 (199'_'); carvia out u fraudulent misraprmscutation preenqrlirm arception (pl. ArL at 25) and insist that "this ie not a failuru to wnrn Ytuoking case:" Irl. lir. nt :'.b. Plaintiffs' interpretation ul'C'ipullone is incorrect. , With regard to-'I}audulent misrepn:sentati6ns:' the Cipnllnne plurality ruled that any nti.reprexuntatiuas prcmixtt on the ;theorythatdef'endanta'advcrtixatenteorpromationswcredcsigncdta'lecutrali/c°thesuttuWrY . wamings and "minimize the health hazards associated with smtiking" were prectnplid. despite th.ir churrriaerizntion as a fraudulent misrcpreserttation claim, because they were •iimpty the "ennverse' ofa nquiroment ihau dill'erent warnings should have been included." 505 I Ia: at 5Z7;,Sec;ho 505 U.S. at 54fi-56 (separatu two-jastiue opittiun).-(bunn have repeatedly dismissed claims premisud upon allegcd tiaudulern nondisulusure, suppression nr cuncenlnietu of int2umntion about smukin6 and hcalth, even when brnught by individual smokers. See Allgoqd v. R,J. Rdy9tnlds 7ohaecn (.b.. RII f. td I6H. ) 71 (5th ('ir.), «r,S Jeniqd,, 117 5,(a. .300 (1996) (I.aheling Act prOCmpttstd cluims dtnt'-A prank Statumeol to $mukerx" and thY industry's gcncral "it's not proven" cantpuiGn misrcpresr:utcd (ho Luulth risks ot'srnvktng)- Laray v f rvfllUCt! TlPubrc'tso l".u.. 956 It. Supp. 956, 90: (tY.[). Ala. l`>'/7) (prc omptinq "t~audulcnt suppre±8inu',', cluim wh~q "plalnti[f ttgscnti that nturt iafununliun shuuld -. ^ w Iq nnq hrief parpgrnph, plaintifts astpn thut fmausr: thcy hqvu Idlogad Injurics "hreaUiathly Intoqwim•d" witp lho injury dCt¢nJapts suppQscflly 6s+ul:ht tti intlict upon theiaarkct for toh.WU+t prnducts,lh.y tncot ma rraudant uC Aler ieqyy. pt,. (;r. ai 21. ' Ap ArtiyQ;i & }foympkamp put It In their iruarixe nn Antiutryt L.rw' ~'I Altltoulfh rhe:..phnrse [' iprtxlricably intertwlned"1 is very elasuc. thu mr+ming was clewly liniired . In N/ct;rrxrtl,Ptn thosc whirYP ft~lqlil are Ihe fbrfntlal rntlun; hy which tlrr d.akndmitq' dlcg:d cqrjrluul6ringti ¢Oau,t 114 ql!imhty injurylo Iltp hlark~iplace. lrQury to JrcC'row.h~ w,ti not mcu+ly u (aies~eafilar(+nSO4uencpufytjuryt0thepeyyhu,luglgs,itwnsthommnsbywld+:hrheconspinwy _ - . isenmp~uhed itt Illeg~l irblei±{y[tpfurlpg pdychologiin. whir:h it4f:11'was only nn unenued+ara . Qool taw.ud o%plplting contu'tiuds hd mtire high prL:od p.rychidp'lils and fcwer Inw pncea ~ . psyeholag{sq nnQ higlter Ihsur~rtt•e premiggis. . 3 philip E. Areeda & Horltpn ttuvcnkimp, Antitnrst Law 1Fdf it ..IS-76 (rur ud. IMS1. I(cre, thc tvnds' alleged injurics payments for their pmtlcipanrs' medical care • nre not "incxnicahlY intartwinnd" with the mpuy - that defcndants are allegcd te ha~e caLLted in a mukt for tobacco products. Mrher ntan buiug n neccs5:rry condition tbr, or un instrument oC rustnining the murken the alleged Injurirv tn ptaintrffd worc,n uteet a ~ consequence of the success of the alleged restraint. <e Comptain01=J9 (rrrcdteal costs "tlow dlrectiy fn+m" nuA are a"cohs<yuence oP the all<ged mttlCOmpetirive ucts). PtaintifP.a c;mnoi swwive a mntiun to.ttsnus.r maruly Bt (V alleging an "inartrieably intartwined" injury since Ihe issue of whenherplninrift's' snffcrnd An nnlilni,n inamr i5.t (TI quesrinnoflawWrthccountudccide. . , I %1D ~ IV 22 . co
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3. The Funds' Antitrust Claim Should Be Dismissed Because it Alleges Actions that Predominantly Affected Interstate Activities The federal courts have exclusive jurisdiction over suits alleging antitrust claims that inherently are interstate in character. Lynch Disnlav.Coro. v. National Souvenir Ctr._ Inc.. 640 S. W.2d 837, 841-42 (Tenn. Ct. App. 1982) (citing 54 Am.Jur.2d § 265 (1971)). Conversely, Tennessee's prohibition on restraints of trade applies only to transactions that are predominantly intrastate in character. Dzik & Dzik. P.C. v. Vision Service Plan. 1989 WL 3082, *2 (Tenn. Ct. App., Jan. 20, 1989) (attached as Exh. 16); Lynch Display Corp.: 640 S. W.2d at 840. Thus, allegations of unlawful restraints of trade in the interstate context give rise to a claim within the reach of the Sherman Act - for which only the federal courts have jurisdiction - thereby -requiring the dismissal of state antitrust claims. Id. For example, in Lynch Display Coro.. the plaintiff Tennessee wax museum sued the defendant Maryland manufacturer of wax figures and the defendant Washington D.C. museum after entering into lease and franchise agreements for wax figures. 640 S.W.2d at 839. The - agreements allowed the Tennessee plaintiff to lease the Maryland defendant's wax figures and become a franchisee of the Washington D.C. museum. Id. The court dismissed the plaintiffs' TUTPA claim, holding that the dispute was predominantly interstate in character and only incidentally affected intrastate commerce. Id. at 841. Even though the plaintiff was a Tennessee corporation and regularly transacted business in Tennessee, the fact that the "goods, services, and payments for them [was] flowing between parties in different states" rendered the activities predominantly interstate in character. Id. While the alleged actions "unquestionably" affected intrastate commerce, the intrastate effect was "incidental" to the actions' interstate character. Id. Further, in Dzik & Dritc 1989 WL 3082, the court dismissed the plaintiff's TUTPA claim because it alleged actions that were predominantly interstate in character. A Tennessee corporation alleged that it provided optometric services in Tennessee through the defendant, a Georgia corporation, until the defendant opted to no longer use the plaintiffs' services. Id. at *1. While there was "no question that there are some intrastate implications resulting from the transaction between the two parties ... the critical point is that to the extent intrastate commerce is affected by the actions of [the defendant], it is of a nature only incidental to the predominant agreement between a Tennessee corporation and a Georgia corporation." Id. at *2. See also C. Bennett Buildine Sunpties_ Inc. v. 3enn Air Coro..'i59 S.W ].d 883, 889 (Mo_ C\. App, \988) 20 N
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publicly acknowledged for decades. Syge Complaint ¶¶ 68,81 3 Yet, they claim they relied on Defendant's assertions about those risks, which allegedly induced them to refrain from preventing and discouraging their Participants from smoking cigarettes. Based upon a legally deficient causation Chan the Funds allege that Defendants violated several state statutory and common law claims. HI. Argument A. The Funds' Claims Should Be Dismissed Because Their Alleged Injuries Are Too Remote To Be Cognizable Each of the Furids' claims boils down to the following proposition: Various employers and labor unions have entered into collective bargaining agreements. Neither the Fund nor the Defendants are parties to those agreements. However, these collective bargaining agreements contain provisions under which the employers contribute monies to the Funds to provide health care benefits to their employees. Some of the employees allegedly developed health problems allegedly caused by smoking cigarettes. The Funds allegedly paid for their medical expenses. Therefore, the Funds claim they were harmed to the extent of those payments The Funds' claims fail at the threshold because, as a matter of well-settled law in Tennessee and other jurisdictions, a payor of another person's medical expenses may not maintain a direct action against the party that allegedly caused the injury. Regardless of the legal theory underlying the Funds' claims, each fails to state a claim because the law simply does not permit such a"direcP' action. Only those persons or entities actually injured-those directly impacted by the conduct that proximately caused their injuries - may recover in a direct action. No matter how (assertedly) foreseeable the injuries, recovery is not available if they are remote. The law denies recovery to remote parties like the Funds.4 In dismissing the plaintiff's claim in SotnlteAM Florida, the court aptly stated the law against remote recovery: 3 In fact. by operation of the Federal Cigarette Labeling and Advertising Act ("Labeling Act"), 15 U.S.C. § 1331, et gge , every cigarette package sold for the pascihree decades has cartied an explicit waming of these very risks. 00 ° The remoteness ofthe Funds' claims requires the Court to dismiss the entire complaint Moreover, as more 1V fully explained in Sections III.B-F, virtually all of the Funds claims must be dismissed for additional reasons specific (J'7 to each count The court need consider Sections III.B-F only if it disagrees with Defendants' remoteness argument. ~ MBET3]94fi6.1 \~O 0-0 0V298 _1 4 ~D ~
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[t]he relation between the Insurance Company and McLemore, the deceased, was created by a contract between them, but Brame was no party to a contract. The injury inflicted by him was upon McLemore, against his personal rights; that it happened to injure the plaintiff was an incidental circumstance, a remote and indirect restlt not necessarily or legitimately resulting-from the act of killing. Id. (emphasis added). The Court noted that courts uniformly reject claims for such derivative injuries: "[Wje are not cited to any case in this country or Great Britain where a different doctrine has been held." Id. at 759. Tennessee courts similarly bar recovery for remote and indirect results of a defendant's conduct 6 Under Tennessee law, conduct must be more than a remote cause of injury to be actionable. Doe v. Linder Constr. Co., 845 S.W.2d 173 (Tenn. 1992). The Tennessee Supreme Court has acknowledged that [a]s a practical matter, legal responsibility must be limited to those causes which are so closely connected with the result and are of such significance that the law is justified in imposing liability. Some boundary must be set ... Id. at 181 (quoting Prosser and Keeton, § 41, p. 264). Fixing this boundary of liability is the purpose underlying the principle of remoteness and the concept of proximate cause. Kilpatrick v. Brvant• 868 S.W.2d 594, 598 (Tenn. 1993). Proximate cause is merely the limitation which the courts have placed upon the actor's responsibility for the consequences of the actor's conduct. . .. The consequences of an act go forward to eternity, and the causes of an event go back to the dawn of human events, and beyond. Any attempt to impose responsibility upon such a basis would result in infinite liability ... Doe, 845 S.W.2d at 181 (quoting Prosser and Keeton on the Law of Torts, § 41, p. 264 (5' ed. 1984)). The Funds stand in the same position as any insurer, employer, or friend who provides benefits to an injured person. The law allows suit only by the injured person or a subrogee standing in the injured persons' shoes; there is no direct right of action in favor of a payor of benefits. No one may bring a suit in his own right simply because he provided benefits to an `Proximate cause is a legal matter for the Court to decide if'Yhe uncontroverted facts and inferencess to be drawn from the facts make it so clear that all reasonable persons must agree on the proper outcome." McClune v. Delta Square Ltd. Parmershie, 937 5. W.2d 891, 905 (Tenn. 1996). 6
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0 0 2. Similar Claims in Cigarette Cost Recovery Litigation Have Been Dismissed The Funds' complaint mimics benefit payment cost recovery actions brought over the past several years by a number of states and other payors of medical benefits. In these cases, courts across the country have ruled that fnnds, states or other payors of benefits do not have a direct common law right of action to recover the cost of benefits paid for individuals allegedly injured by smoking. The most detailed analysis of the issue appears in Marvland. 1997 WL 540913 at *9-12, in which the court dismissed all common law reimbursement claims. The court reviewed in detail the development of the common law since Anthony v. Slaid, and concluded that "federal and state courts follow the common law rule barring plaintiffs from recovering from defendant tortfeasors as a result of the defendants' injuries to third parties." Id. at 19-29 (citations omitted). Thus, the court held that the State of Maryland cannot recover damages from Defendants as a result of Defendants' alleged tortious conduct toward third-party smokers in Maryland in the present action because the damages are too remote and indirect a consequence of the acts of the wrongdoers under both the common law of Maryland, as adopted from the common law of England, and pursuant to the modem day proximate cause analysis as often articulated by federal and state courts. ISI., at 28. - Judge Pointer recently drew on the same principles to dismiss a cost recovery action nearly identical to this one. See City of Birmingham. Slip op 4-5. Judge Pointer held that the plaintiffs could not recover funds they allegedly spent providing medical and other benefits to employees and indigent citizens for alleged smoking-related diseases. Id. at 4. The Court relied upon Alabama precedent' rejecting suits by municipalities to recover from third-party tortfeasors funds spent for the treatment of injured employees. Id. As Judge Pointer noted, those cases represented the broader principle that "an accident insttrer, ... unless its contracts of insurance so ' Citv of Birmin;ham v. Crow. 101 So. 2d 264, 265 (Ala. 1958) (rejecting city's attempt to assert a direct, non-subrogated action against tonfeasor to recoup funds spent on employees' "medical, surgical, and hospiml expenses"); Citv of Birmingham v. Walker. 101 So. 2d 250, 256 (Ala. 1958) (dismissing city's claim to recover medical expenses for police officer's injury because "[t]he situation is no different than would be the case if the employee had entered into the same contract provisions with an insurance company"); Citv of Birmingham v. Trammef, 101 So. 2d 259, 262 (Ala. 1958) (answering negatively the question of"whether the city having paid [the employee] because the law created an obligation to do so, has a claim against [defendant] for wrongfully causing (the employee] to sustain the damage for which the city has paid him"). 10
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more than a semantic exercise whereby a remote payor of another's medical expenses may not recover those costs unless characterized as harm to the remote payor's "infrastructure, financial stability, or ability to project costs." Such a semantic exercise would turn on its head the long- settled rule barring recovery for a remote payor of another's medical expenses. As held by the court in Southeast Florida. the Funds "cannot escape the fact that any economic injuries which [they] incurred are purely derivative of the physical injuries which [their] participants suffered." Slip op. at 9. Third, the New York court's reasoning turis an its head well-settled rules against recovery for remote injuries. Under the court's reasoning, all sorts of remote payors - insurance companies, employers, employee benefit funds, governmental entities, etc. - would be free to bring direct actions purportedly independent of the rights of their beneficiaries. Unless the Laborers Local 17 decision can reasonably be limited to union funds, it is apparent that it departs dramatically from settled law and raises the spectre if wide-ranging consequences affecting not just union funds and tobacco companies, but many other entities and business, as well. Fourth, the Funds' claimed injury to.their "financial stability or ability to project costs" is misplaced because the Funds cannot suffer this harm, as a matter of law. As the district court held in Southeast Florida. [i]f the Fund recovers in this lawsuit, it would not reimburse contributing employers for their overpayments because it is statutorily prohibited from doing so. See 29 U.S.C. § 1103(c)(1) (1997). The Fund could not unilaterally reduce the employers' contributions because these contributions are determined in a collective bargaining agreement to which the Fund is not a party. Slip op. at 3-4. Finally, the New York court's hypothesized harms are just that - a judicial hypothesis. Neither the funds in Laborers Local 17 not the Funds here alleged such harms. Rather, the Funds pointedly seek to recover for their Participants' personal injuries: the Funds seek to "recover funds expended by the Plaintiff Funds to provide medical treatment and other benefits to their participants and beneficiaries suffering from smoking-related illnesses..." See, e.e., Complaint, ¶ 5. The. Funds have no direct right of action arising from benefit payments to or for Participants allegedly injured by smoking. For centuries, the law has insisted that plaintiffs have an adequately close link between the allegedly wrongfiil act and ilm alleged T'c,e F> ds 13
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9 In Ciuollone, the Supreme Court held that the Labeling Act, as amended by the Public Health Cigarette Smoking Act of 1969, expressly preempts all state law claims alleging that a cigarette manufacturer failed to disclose sufficient information regarding smoking and health - and, thus, should have included additional or clearer warnings - in post-July 1, 1969 advertising or promotions. 505 U.S. at 523,524 (fotu judge plurality); see also, 505 U.S. at 548-56 (separate opinion of Justices Scalia and Thomas): ' This preemptive effect is not limited to state statutory and regulatory acts, but also applies to state law tort claims imposing such "requirements or prohibitions." Id. at 522. Accordingly, in Cinollone, the Supreme Court held that any statutory or non-statutory claims that "require a showing that ... post-1969 advertising promotions should have included additional, or more clearly stated warnings ... are preempted." Id. at 524. Preemption is not determined by any "familiar subdivision" or label used to classify a claim (i.e. fraud, special duty, negligence). Id. at 523. The issue is "whether the legal duty that is the predicate of the common-law damages action constitutes a 'requirement or prohibition based on smoking and health."' Id. at 523-24. Insofar as any claim requires a showing that post- 1969 advertising or promotions "should have included additional, or more clearly stated, warnings, those claims are preempted." Id. at 524. Accordingly, the Cinollone Court held that the Labeling Act preempted plaintiffs' general "failure to wam" and negligence claims. Id. at 524. Notably, the Cipollone Court concluded that the Labeling Act preempted plaintiff's claims of, inter alt~ failttre to warn and fraudulent `neutraliaation" of warnings through "omissions or inclusions" in advertising or promotion because the claims necessarily sought to, in effect, retroactively impose a requirement that the manufacturer should have included "additional, or more clearly stated," warnings beyond those statutorily prescribed by Congress to be "adequate" to inform the public "about any adverse health effects of cigarette smoking." 15 U.S.C. § 1331(a); 505 U.S. at 524, 527, 530-31 (fourjudge plurality); see also 505 U.S. at 548- '-' Although Cipollone was decided by a divided court, a clear majority held that the Labeling Act preempts common law damages actions that would impose additional "requirements or prohibitions." Justice Stevens, joined by Chief Justice Rehnquist, Justice White, and Justice O'Connor, held that the Labeling Act preempts all but certain common law claims that are not based on "smoking and heahh" but on a duty not to deceive. Ciuollone. 505 U.S. at 525-29. Justice Scalia, joined by Justice Thomas, concurred in part and dissented in part, stating that the Labeling Act preempts virtually all common law damages actions. Id. at 549-56. 36
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Harry Zirlin. Esq. Debevoise & Plimpton 875 Third Avenue New York_ New York 10022 William S. Lockette, Jr.. Esq. Rebecca B. Murray, Esq. Kennerly. Montgomery & Finley. PC 550 Main Street. 4V' Floor Knoxville, Tennessee 37902 Counsel for The Council for Tobacco Research - USA, Inc. Saul C. Belz Esq. Waring Cox, PLC Morgan Keegan Tower 50 North Front Street, Suite 1300 Memphis, Tennessee 3 8103-1 1 90 Counsel for The Tobacco Institute, Inc. Barry S. Schaevitz, Esq. Jacob, Medinger & Finnegan. LLP' 1270 Avenue of the Americas Rockefeller Center New York, New York 10020-1700 Counsel for Smokeless Tobacco Council, Ine. Bruce M. Ginsberg, Esq. Marc J. Rachman. Esq. Davis & Gilbert 1740 Broadway New York, New York 10019 Counsel for Hill & Knowlton, Inc. Robe^ G. McDowell, Esq. Bak. :unelson, Beannan & Caldwell. PC 1700 Nashville City Center `l Union Street P. O. Box 190613 Nashville, TN 37219 Counsel for United States Tobacco Company Lee J. Chase. Esq. Glanker Brown Suite 1700 One Commerce Square Memphis, TN 38013 Cuuusel to< Tenn-:Yfiss DistribuFars 43
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violation." Hawaii v. Standard Oil Co., 405 U.S. 251, 263 n.14 (1972). Those laws "are intended to preserve competition for the benefit of consumers in the market in which competition occurs." Vinci v. Waste Management. Inc., 80 F. 3d 1372, 1376 (9th Cir. 1996), cert, denied, 117 S. Ct. 1252 (1997). The Funds do not allege any antitrust injury. Although the complaint contains a causal allegation that Defendants' conduct "Yaise[d] and stabifize[d] prices," Complaint, 1248, the Funds do not, and could not, claim injury from such price increases because they were not purchasers. On the contrary, any increase in cigarette prices or reduction in output arguably would have benefited the Funds by reducing cigarette consumption. See, e.g., Complaint, ¶ 248- 49 (alleging that conspiracy caused more tobacco-related illness by increasing the consumption of cigarettes). And rather than allege a reduction in output, the complaint alleges just the opposite: the "conspiracy" allegedly "cause[d] millions of persons to purchase cigarettes and tobacco products when they otherwise would not have done so." Id. The Laborers Local 17 court recognized this fault, holding that [c]reating increased demand for a product is not an anticompetitive activity. There can be no antitrust violation when the effect of an agreement is to increase competition, even if that agreement is utilawful for some other reason. 1998 WL 146217, *9, n.9.'= The Southeast Florida court also recognized fault in the plaintiffs antitrust claims The Fund has not and cannot allege antitrust injury. It is "neither a consumer nor a competitor in the market in which trade was restrained," ....Because many of the Fund's participants were addicted to cigarettes, the Fund's health care costs increased. This injury is simply not the type of injury that the antitrust laws were intended to prevent Slip op. at 14-15 (internal citations omitted). Accordingly, the Funds' allegations fail to allege a compensable injury under the antitrust laws. The federal court presiding over the State of Texas' Medicaid cost recovery lawsuit also dismissed the State's antitrust claims on precisely this ground: '=The Laborers Local 17 court also dismissed the plaintiffs' state and federal antitrust claims because the plaintiffs "were not tareets of the anticompetitive activity alleged." 1998 WL 146217, *9. 18
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82519237
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1996) (quoting Havduk v. Lana, 775 F.2d 441, 444 (1st Cir. 1985)). As the Fifth Circuit has stated, [a] complaint can be long-winded, even prolix, without pleading with particularity. Indeed, such a garrulous style is not an uncommon mask for an absence of detail. WMX Technoloeies. Inc., 112 F.3d at 178; see also Hamnton v. Tennessee Bd. of Law Examiners, 770 S.W.2d 755 (Tenn. Ct. App. 1988). , The Funds' conclusory allegation that it "reasonably relied" relied on Defendants' alleged misrepresentations (Complaint, 1282) do not in any event provide the particularity required by Rule 9(b). The Funds'. 79-page complaint fails to identify any statement or alleged misrepresentation upon which the Funds relied. Instead, the Funds merely allege that Defendants omitted certain information conceming the "addictiveness" of nicotine, Defendants' alleged manipulation of nicotine, and the alleged harmful hazards of smoking. See. e.e.. Complaint, 1278. Yet, the Funds do not identify any specific statement in which any Defendant made an allegedly fraudulent statement to them. The Funds fail to identify even a single particular statement by a particular Defendant that is expressly alleged to have been heard by the Funds or how and when the Funds relied upon it. Without knowing which fraudulent statements allegedly were made to the Funds, or whether and how the Funds relied upon them, or which Defendant allegedly made which particular allegedly fraudulent statement, Defendants cannot be on notice of the charges against them. See LePaw slip op. at 7-8 ("Plaintiffs make only very general conclusory allegations that they contend cover the acts of the multiple tobacco companies joined in the complaint ... Plaintiffs' allegations do not put defendants on notice as to the specific statements that plaintiffs contend were untrue"). Accordingly, even if the Funds' allegations of reliance were legally viable, Rule 9.02 would require that the Funds' fraud claim be dismissed. 4. The Funds' Breach of Warranty Claims Are Deficient as a Matter of Law a. The Funds Failed to Allege that They Purchased or Consumed Defendants' Products The Funds claim that Defendants breached express and implied warranties. However, the Funds' claims suffer from a fatal flaw: the failure to allege that any Defendant ever sold a product to any Fund, sold a product that harmed any Fund, that any Defendant ever gave the Funds any warranties, or that any Defendant had any contact whatsoever with the Funds. 30
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• Citv and County of San Francisco v. Philip Morris Inc., 957 F. Supp. 1130 (N.D. Cal. 1997) (San Francisco I)= (dismissing RICO, intentional breach of special duty, warranty, unjust enrichment and conspiracy claims); • Florida v. American Tobacco Co. No. CL 95-1466 AH, slip. op. (Fla. Cir. Ct. Sept. 16. 1996) (dismissing all claims not authorized by Florida's Special Statute) (attached as Exh. 6); • Washington v American Tobacco Co. No. 96-2-15056-8 SEA, slip. op. (Wash. Super. Ct.. November 19, 1996 (Washington I)) (attached as Exh. 7), and (Wash. Super. Ct., June 6, 1997 ( Washineton IA) (dismissing special duty and restitution claims) (attached as Exh. 8); • Minnesota v. Philip Morris Inc.. 551 N.W.2d 490, 495 (Minn. 1996) (dismissing special duty claims); and . Texas v. The American Tobacco Co., No. 5-96CV-91, slip op. (E.D. Tex. Sept. 8, 1997) (dismissing federal and state antitrust claims, deceptive trade practices claims, restitution and unjust enrichment claims, public nuisance claims, and negligent performance of a voluntary undertaking claims) (attached as Exh. 9). Despite overwhelming rejection by the courts, including the Southeast Florida court, the Funds assert virtually identical remote claims here. A forti ori such claims by the Funds, which are private parties, must similarly fail. II. Statement of Facts as Alleged in the Complaint The Funds in this action are employee health and welfare benefit plans that allegedly expended funds to "provide medical treatment and other benefits to their participants and beneficiaries suffering from smoking-related illnesses." Complaint, ¶ 5. They purport to represent `bthero similarly situated" funds in Tennessee. Complaint, ¶¶ 12-15, 36. Several Defendants are current or former cigarette manufacturers and sellers, while others include industry associations and a public relations firm that neither manufactured nor sold cigarettes. The Funds never purchased or consumed cigarettes. Nonetheless, the principal thrust of the Funds' complaint alleges that Defendants caused them some sort of pecuniary injury. The Funds acknowledge that the risks associated with cigarette smoking were widely known and ' On March 3, 1998, the San Francisco I Court ruled on a motion to dismiss the plaintiffs' Second Amended Complaint, reaffirming it earlier dismissal of the RICO, breach of express and implied warranty, restimtion and unjust enrichment claims: Cftv and County of San Francisco v. Philip Morris, Inc., 1998 U.S. Dist. Lexis 3071 (N.D. Cal., March 3, 1998) (San Francisco [t) (attached as Exh. 22). This decision again dismissed the claim for intentional breach of special duty, unjust enrichment and restitution after reviewing the amended allegations. Under Judge Jensen's interpretation of California law, the Court declined at this stage to dismiss the common law fraud and negligent breach of special duty claims. This pan of the Coun's decision is contrary to Judge May's decision in Los AnBeles. Slip op, at 3-4. 3
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D. The Economic Loss Rule Precludes Virtually All Of The Funds' Claims The economic loss rule is a judicially created doctrine precluding recovery for purely economic losses absent a contractual obligation, personal injury or property damage. United Textile Workers of America. AFL-CIO v Lear Siegler Seating Corn., 825 S.W.2d 83 (Tenn. Ct App. 1990) (applying economic loss rule to negligence claim); Ritter v. Custom Chemicides. Inc_ 912 S.W.2d 128 (Tenn. 1995) (applying economic loss rule to strict liability claim; stating that "Tennessee has joined those jurisdictions which hold that product liability claims resulting in pure economic loss can be better resolved on theories other than negligence"); Curtis v. Murohv Elevator Co. 407 F. Supp. 940 (E.D. Tenn. 1976) (applying economic loss rule to breach of warranty action). See eenerallv East River Steamship Corn. v. Transamerica Delaval. Inc._ 476 U.S. 858, 869 (1986). The economic loss rule is premised upon the principle that economic harm is simply too remote from a defendant's actual wrong-doing to be considered foreseeable. United Textile Workers 825 S.W.2d at 85. Additionally, "to permit recovery of damages [for economic loss] would open the door to a mass of litigation which might very well overwhelm the courts so that in the long run while injustice might result in special cases, the ends of justice are conserved by laying down and enforcing the [economic loss] rule." Id. (quoting Stevenson v_ East Ohio Gas Co.. 73 N.E.2d 200, 203 (Ohio App. 1946)). Courts apply the economic loss rule to reduce the risk of "fraudulent claims, limitless liability, or liability out of proportion to the defendant's fault" Id. The Rier court discussed the economic loss rule in the products liability context, explaining that "a manufacturer does not owe a duty to avoid causing purely economic damage." 912 S.W.2d at 132. Economic loss resulting from a defective product is recoverable only if negotiated in a sales contract. Id. Without a contractual remedy, a plaintiff may recover in tort only for personal injury or property damage. Id. Here, the Funds ask only for economic loss damages: reimbursement for their medical expenditures. The Funds do not allege they suffered personal or property damages and do not allege the existence of a contractual relationship. Thus, just as consumers of an allegedly defective product may not recover for purely economic loss without a contractual agreement, neither may the Funds, who do not allege a contractual relationship. To hold otherwise would provide the Funds with a greater remedy than is available to actual purchasers of cigarettes. 34
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fraudulently joined the non-diverse defendant by failing to state a claim for breach of implied warranty of merchantability. Id. The court agreed, stating: In the absence of any allegation that the cigarettes allegedly distributed and sold by the [non-diverse defendant] are different or not fit for the ordinary purposes for which such goods are used, the mere fact that all cigarettes are hatmful does not state a claim for breach of implied warranty. Id. at 4. The same reasoning applies here. The Funds fail to allege that Defendants manufactured any tobacco products that failed to meet any of the applicable requirements of Tennessee's implied warranty statute. The Funds make no allegation that the quality of these tobacco products varied from what passed in the industry, and they do not allege that the tobacco products were not labeled in accordance with federally-mandated warnings. The Funds brought this action against what is effectively the entire domestic cigarette manufacturing industry, generically making allegations against all Defendants. They allege that the issues as to all Defendants are common. Their premise is that the goods involved (effectively, the entire domestic market of tobacco products) are substantially identical. Necessarily, the tobacco products placed in issue here (1) "pass without objection in the trade .. .";(2) "are of fair average quality within the description"; (3) "are fit for the ordinary purposes for which such goods are used"; (4) "run ... of even kind, quality and quantity within each unit and among all units involved"; (5) "are adequately contained, packaged, and labeled"; and (6) "conform to the promises or affirmations of fact made on the container or label, if any." T.C.A. § 47-2-314. By statutory definition, they were merchantable. A claim that a product is "generally defective" does not state a claim for breach of implied warranty of merchantability. As one federal court explained in dismissing a substantively identical implied warranty claim: Plaintiff has simply not alleged . . . that defendant's Vantage cigarettes failed to meet any of the criteria [for breach of the implied warranty of merchantability]. Plaintiff concedes as much contending, instead, that defendant's cigarettes were not fit for human consumption because they are carcinogenic. That defendant's cigarettes are carcinogenic and are therefore not fit for human consumption does not, however, give rise to a cause of action [for breach of implied warranty]. That harmful characteristic is shared by all cigarettes and is not unique to defendant's Vantage cigarettes. 32
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0 r Jack E. McClard, Esq. Maya M. Eckstein, Esq. Hunton & Williams Riverfront Plaza 951 East Byrd Street, East Tower Richmond, Virginia 23219 John A. Lucas, Esq. Hunton & Williams, P. O. Box 951 Knoxville, Tennessee 37902 Counsel for Philip Morris Incorported, and for purposes of this motion only, on behalf of defendants listed below: Jeff Jones, Esq. Matthew A. Kairis, Esq. Melaneie Fahey, Esq. Jones, Day, Reavis & Pogue 190oHuntington Center Columbus, Ohio 43215 Counsel for R. J. Reynolds Tobacco Company ICennethN. Bass, Esq. Jennifer Gardner, Esq. Kirkland & Ellis 655 Fifteenth Street, N.W,_ Suite 200 Washington, DC 20005 Lee J. Chase. Esq. William L. Bomar, Esq. Glankler, Brown, PLLC Suite 1700 One Commerce Square Memphis, TN 38103 Counsel for Brown & Williamson Tobacco Corporation (individually and as successor by merger to The American Tobcco Company) Jeffrey S. Nelsons, Esq. Richard L. Gary, Esq. Shook, Hardy & Bacon, L.O.P. One Kansas City Place 1200 Main Street Kansas City, Missouri 64105- 2118 Counsel for Lorillard Tobacco Company ~ tJ 42 W .w~
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Semowich v. R.I. Revnolds Tobacco Co. 1988 WL 123930 (N.D.N.Y. Nov. 15, 1988) (attached as Exh. 20); see also Gieen v. American Tobacco Co., 391 F.2d 97. 106-13 (5th Cir. 1968) (Simpson, J., dissenting), panel opinion overruled and iudament afPd for reasons set forth in the dissent, 409 F.2d 1166 (1969). Accordingly, the Funds' claim that all cigarettes and tobacco products made by the entire industry are "generally defective" is insufficient to establish a claim for breach of implied warranty of merchantability, and the claim should be dismissed. c. The Funds' Breach of Warranty Claims Should Be Dismissed Because the Funds Failed to Provide Defendants Timely Notice Under Tenn. Code Ann. § 47-2-607, a plaintiff "must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy." Ditto v. CMH Mfe.. 1995 Tenn. Lexis 467 (Tenn. 1995); Harry 7. Whelchel Co_ v. Ripley Tractor Co.. 900 S.W.2d 691, 694 (Tenn. Ct. App. 1995). In Harry J. Whelchel Co., for example, the court dismissed the breach of warranty claims because the buyer failed to notify the seller of any breach until the initiation of litigation. 900 S. W.2d at 694. Here, too, the Funds did not notify Defendants of any breach until they initiated litigation. Their failure to provide notice within a reasonable time renders them "barred from any remedy" for their breach of express warranty and breach of implied warranty claims. Accordingly, the breach of warranty claims should be dismissed. - 5. The Funds' Conspiracy Claim Should Be Dismissed As Moot A civil conspiracy is a "combination between two or more persons to accomplish by concert an unlawful purpose, or to accomplish a purpose not in itself unlawful by unlawful means." Dale v. Thomas H. Temole Co.. 208 S.W.2d 344, 347 (Tenn 1948). A successful civil conspiracy claim requires the existence of an underlying tort. Forrester v. Stockstill, 869 S.W.2d 328, 330 (Tenn. 1994). "If the [underlying] claim fails, then the claim for conspiracy also must fail, for it cannot be that a conspiracy to do a thing is actionable where the thing itself would not be." Id. As evidenced above, each of the Funds' underlying claims fails to state a claim for which relief can be granted. Because of the lack of a viable underlying tort, the Funds' conspiracy., claim should be dismissed N - . CJ 1 ~ ~ 33 N rv Cr
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82519244
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0 CERTIFICATE OF SERVICE I hereby certify that on the 20'" day of April, 1998, a true copy of the foregoinq was mailed, first class, postage prepaid. to the following counsel of record: Deborah Godwin, Esq. Timothy Taylor, Esq. Florence M. Johnson, Esq. Agee, Allen, Godwin, Morris, Laurenzi & Hamilton, P.C. 200 Jefferson Avenue, Suite 1400 Memphis, Tennessee 38103 Robert J. Connerton, Esq. John Broaddus, Esq. Connerton & Ray 1920 L Street, NW, 4'" Floor Washington, DC 20036-5004 Counsel for Plaintiffs Marie V. Santacroce, Esq. Michael Fay, Esq. Kasowitz, Benson, Torres & Friedmam 1301 Avenue of the Americas New York, New York 1 00 1 9-6022 Counsel for Liggett Group, Inc. Mary Elizabeth McGarry, Esq. Adam I. Stein, Esq. Kathy L. McFarland, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 1 0 01 7-3 9 54 Counsel for B.A.T Industries p1c 44
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A federal district court recently denied a motion to remand for this reason, holding that _ plaintiffs' breach of warranty claims against non-diverse defendants failed to allege that defendants sold plaintiffs cigarettes or that plaintiffs ever consumed defendants' cigarettes. See Walls v. American Tobacco Co. Inc., No. 97-CV-0218-H, slip op. at 4 (N.D. Okla. July 10, 1997) (attached as Exh. 18). In Wa ,IIs plaintiffs brought a smoking and health class action complaint in state court, joining two non-diverse defendants. Id. at 1. After defendants removed to federal court based on fraudulent joinder, plaintiffs moved to remand. Id. The district court denied the motion to remand because the complaint lacked any allegation that either the local wholesale distributor or the retailer sold any product to these plaintiffs. And plaintiffs make no allegation that any of them ever used cigarettes purchased from the Oklahoma defendants ... Id.at4. Likewise, the Funds do not and cannot allege that they purchased Defendants' cigarettes or that they consumed Defendants' cigarettes. Accordingly, the Funds' breach of warranty claims should be dismissed. b. The Funds' Breach of Implied Warranty Claim Should Be Dismissed Because the Funds Failed to Adequately Claim that Defendants' Products Were Unmerchantable An implied warranty claim cannot be maintained if the goods at issue: (1) "pass without objection in the trade"; (2) "are of fair avemge quality within the description"; (3) "are fit for the ordinary purposes for which such goods are used"; (4) °run... of even kind, quality and quantity within each unit and among all units involved"; (5) "are adequately contained, packaged, and. labeled"; and (6) "conform to the promises or affirmations of fact made on the container or label, if any." T.C.A. § 47-2-314. By definition, then, an implied warranty claim requires that the particular goods sold differ from other goods of the same type generally accepted in the trade. Tennessee ex rel. Beckom v. The American Tobacco Co.. Inc.. No. 3:97-cv-436, slip op. at 4 (E.D. Tenn. December 1, 1997) (order denying plaintiff's motion to remand) (attached as Exh. 19). In Beckom the plaintiff brought a taxpayer action in state court seeking reimbursement of Medicaid funds for the State of Tennessee. Id. at 1. The plaintiff sued many of the same Defendants named here, and alleged a breach of implied warranty of merchantability claim against a non-diverse defendant. Id. Defendants removed the action, alleging that the plaintiff 31
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0 and ) ) THE COUNCII. FOR TOBACCO ) RESEARCH -- U.S.A., INC. ) 900 3`° Avenue ) New York, NY 10022 ) ) and ) ) THE TOBACCO INSTITUTE, INC. ) 1875 1 Street, N.W., Suite 800 ) Washington, D.C. 200,06 ) ) and ) ) SMOKELESS TOBACCO COUNCIL, INC. ) 1627 K Street, N.W. ) Washington, D.C. ) ) and ) ) HILL & KNOWLTON,.INC. ) 420 Lexington Avenue ) New York, NY 10070 ) ) and ) ) UNITED STATES TOBACCO COMPANY ) 100 Putnam Avenue )Greenwich, CT 06830 ) ) and ) ) UNITED STATES TOBACCO ) MANUFACTURING COMPANY, INC. ) 800 Harrison Street ) Nashville, TN 37202 -. . ._ . - -) ) and ) ) GALLER WHOLESALE, d/b!a ) P.M. GREEN & SONS, INC. ) 656 Madison Avenue ` ) Memphis, TN 38103 ` ) ) and ) ) TENN-MISS DISTRIBUTORS ) 605 Scott Street ) Memphis, TN38112 ) ) Defendants. ) l
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~ .~SETIIRN ON SERVICE OF SVMl4W I HEB.EBY CEBT ft THpT I HAVE SERVED THE WITBIlV SLTbIMONS: of the summons and a~coply of the Complaint to the following defendants T -P..C. Gilless, Jr., Sheriff. By PBIVATE PROCESS SERVER I HEREBY CERTIFY TIiAT I HAVE SERVED THE WITHIN SUMMONS: Deputy Sheriff By deliveringg on the day of 19 at M. a copy of the summons and a n copy of the Complaint to the following defendants (PLEASE PRINT THE FOLLOWING) Address Private Process Server Phone Company . Other manner of service; - Signature I hereby certify that I have NOT served this Summons on the within named defendant (s) " because is (are) not to be found in this County after diligent search and inquiry for the following reasons: _ This day of , 19 :. . By A.C. GiIless. Jr., Skleriff Dauty Sheriff j Q F I x I > m N 8 &
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disease, plaintiffs cannot show that this has in any way enriched the defendants. - Id. at 30-3 1. In the Washineton litigation, the court held that [t]o the extent that the State alleges that it performed any services for or at the request of the defendants, such as the provision of medical services that allow smokers to continue to purchase defendants' products, the benefits of the healthcare payments were enjoyed by the citizens of Washington and not by the defendants. In such circumstances, the benefits the State alleged that it conferred on defendants are too indirect and speculative to support its unjust enrichment claim under Washington law. Washin on I, slip op. at 14. And in Tex ,as the court rejected the State's unjust enrichment claim, stating that it is the individual smokers and not the Defendants who have received the primary and direct benefit of the payment of their medical expenses. Moreover, the State's expenditure cannot be said to have enriched Defendants. The Court finds that the alleged benefit enjoyed by Defendants is too attenuated and indirect to find support under the theory of unjust enrichment... Slip op. at 26. Finally, under Tennessee law "[q]uasi contract (or unjust enrichment) is one of those remedies properly called equitable ... and if the remedy at law is adequate," the court should dismiss the claim. Zirkle v. Cirv of Kingston. 396 S.W.2d 356 (Tenn. 1965). See-also Maryland. slip op. at 30-31 (court dismissed Maryland's restitution claim against tobacco manufacturers because the state had an adequate remedy at law, i.e., subrogation). The Funds have an adequate remedy at law in subrogation. For this reason, the Funds' equitable claim under the doctrine of unjust enrichment should be dismissed. 2. The Funds' Breach of Special Duty Claim Should Be Dismissed Because Defendants did not Assume a Legal Duty and the Funds did not Suffer Physical Harm The Funds' special duty claim should be dismissed because a duty cannot be created through statements made in advertisements and other corporate statements. Various courts addressing such claims in similar factuat contexts have found that advertising generally, and the "Frank Statement" specifically, does not create special duty liability. For instance, in the case brought by the Texas Attorney General, the court dismissed the State's special duty claim because Texas courts "have not extended it to create a duty based upon corporate statements or advertising." Texas, slip op. at 29. Additionally, in Gunsalus v. Celotex Coro., 23 Cm
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• its defenses to the subrogated claim by the unilateral act of the insurer in paying the injured party"); Economy Auto Ins. Co. v. Brown 79 N.E.2d 854, 858 (Ill. Ct. App. 1948) (insurer that settled liability claim against its drunk-driving insured could not recover those costs from the person who sold liquor to the insured; the insurer's injuries were too "remote and indirect"); Fidelitv & Cas. Ins. Co. v. Sears. Roebuck & Co. 199 A. 93 (Conn. 1938) (neither insurer nor employer could bring a direct action to recover medical expenses paid to injured employee; injury was too remote); Peoria Marine & Fire Ins. Co. v. Fmst. 37 Ill. 333, 336-37 (1865) (rejecting claim that insurer could bring direct action in its own name against a tortfeasor who injured the insured; insurer is limited to subrogation rights); Rockingham Mm. Fire Ins. Co. v. Bosher. 39 Me. 253, 257, 63 Am. Dec. 618, 620 (1855) (sustaining demurrer against insurer that brought suit in its own name against defendant for maliciously setting fire to a building insured by the company; insurer was only "remotely prejudiced"); Connecticut Mut. Life Ins. Co- v. New York & N.H.R.R. Co. 25 Conn. 265, 65 Am. Dec 571 (1856) (recognizing rule that where insurers had been permitted to recover from tortfeasors, they had done so "not by color of their own legal right, but under ... the doctrine of submgation"), cited with aporovai in R.K. Constructors. Inc. v. Fusco Com.. 650 A.2d 153 (Conn. 1994). Illustrative Employer Cases: Ore-Ida Foods, Inc. v. Indian Head Cattle Co., 627 P.2d 469, 472-74 (Or. 1981) (common law did not permit recovery for worker's compensation payments made by employer to tort victim's surviving companion); City of Philadelphia v. Philadelphia Rapid Transit Co., 10 A.2d 434 (Pa. 1940) (city could not recover against tortfeasor for employees' medical expenses; "whatever right the city has to recover the payments made by it must of necessity be based upon the equitable doctrine of subrogation"); Chelsea Moving & Trucking Co. v. Ross Towboat Co.. 182 N.E. 477, 478 (Mass. 1932) (employer denied recovery for payments of salary made while injured employee remained incapacitated; "[t]he damage sustained by the plaintiff is too remote from the wrong committed by the defendant and has no natural connection with it"). Illustrative Government Entity Cases: United States v. Standard Oil Co. 332 U.S. 301, 315-1 (1947) (government cannot recover health care costs for soldier struck by defendant's truck); City of Flaestaff v. Atchison. Topeka and Santa Fe Rv. Co., 719 F.2d 322, 323-24 (9th Cir. 1983) (city could not recover emergency medical service costs under any common- law tort theory); - District of Columbia v. Air Florida. Inc., 750 F.2d 1077, 1079-80 (D.C. Cir. 1984) (District of Columbia could not recover under any common law tort theory for emergency service costs resulting from plane crash); State ex rel. D~e 't of Human Serv. v. Brooks, 412 N.W.2d 613, 614 (Iowa 1987) superseded bv statute as stated in Hill v. State, 493 N.W.2d 803 (Iowa 1992) ("at common-law ...(t]he State could not institute suit against the recipient or others to 8
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promotion' channels of communication"); Griesenbeck v. American Tobacco Co., 897 F. Supp. 815, 823 (D.N.J. 1995) ("A company's attempt to notify its mass market of anything, whether a danger warning or a marketing effort, is considered 'advertising or promotion' under the general usage of those terms, and a state cannot impose requirements on such activities without running afoul" of the Labeling Act). In sum, "[r)egardless of the label attached to it, a plaintiff s claim based upon an alleged duty of defendants to provide a consumers more information regarding smoking and health than is required by the Labeling Act is preempted." Lac M 956 F. Supp. at 963. Thus, whether the Funds' claims are viewed as failure to wam claims or fraudulent concealment or "neutralization" claims, their claims are preempted by the Labeling Act. Cipollone. 505 U.S. at 524. The Funds here have not alleged that Defendants failed to comply with the Labeling Act's requirements, but seek to impose additional requirements or prohibitions "based on smoking and health" "with respect to the advertising or promotion of cigarettes" in violation of the Labeling Act's preemption provision. Indeed, Counts 1-6 and 10 plainly are premised upon breach of an alleged duty to communicate inforrnation about the health risks of smoking. In fact, the Funds acknowledge the preemptive effect of the Labeling Act on their negligence claim, Count 9, as they specifically limited their failure to warn allegations to actions predating 1969. Complaint, ¶ 307. Despite the Funds' failure to similarly limit their other claims, Counts 1-6 and 10 also are preempted by the Labeling Act. See, e.¢.. Complaint, 1235 (Count 1- Consumer Protection Act) (alleging that Defendants "[m]isrepresent[ed] material facts, fail[ed] to disclose material facts ... [and] ... [fJail[ed] to disclose facts to buyers . . . :'); ¶ 244 (Count 2 - Antitrust) ("Defendants restrained and suppressed research ... restrained and suppressed the dissemination of information on the ... harmful effects of cigarettes and tobacco products"); fj¶ 272-74 (Count 4-Special Duty) (Defendants undertook a special duty "to disclose ... complete and accurate information about the effects of cigarette smoking on human health" but failed to do so); ¶ 278 (Count 5 - Fraud and Deceit) (Defendants omitted certain information in their representations to the public); ¶¶ 288-89 (Count 6 - Negligent Misrepresentation) (Defendants , failed to be "truthful and accurate in their representations to" the public); ¶¶ 316-18 (Count 10 - Products Liability Act) (Defendants failed to warn the public of smoking's hazards). In Counts 1-6 and 10, the Funds seek to impose "tequirements ox prohihitions" undec state law. As the 38
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Id.'a The Ninth Circuit recently observed that smoking's risks are so widely known that "no one would currently accept an explanation that they did not realize that smoking is dangerous to one's health." Maneelv v. General Motors Com., 108 F.3d 1176, 1180 (9th Cir. 1997). Despite this public store of information, pronouncements, and opinions, and the intense public debate accompanying it, the Funds assert they "reasonably and justifiably" relied on Defendants' alleged misrepresentations. Complaint, T1Q 282, 290. Any reliance upon Defendants' alleged misrepresentations was unjustifiable, as a matter of law, and the Funds' fraud and deceit and negligent misrepresentation claims must be dismissed. c. The Funds Failed to Adequately Plead Their Own Claimed Reliance Under Tennessee's Rules of Civil Procedure, all averments of fraud, including the circumstances constituting the fraud, must be stated with particularity. Tenn. R. Civ. P. 9.02. See also Dobbs, 846 S.W.2d at 274, n.5. Under the rule, "general allegations of fraud and mistake are insufficient; the pleader is required to particularize ...:" Tenn. R. Civ. P. 9.02, Committee Comment. A plaintiff s complaint must "specifically identif[y] the time and place of each alleged false representation, and indentiffy] the manner in which each representation was deemed to have been fraudulent." Citv State Bank v Dean Witter Reynolds, Inc., 948 S.W.2d 729, 738 (Tenn. Ct. App. 1996). In other words, a plaintiff alleging fraud must "specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent." Williams v. WMX Technologies, In. 112 F.3d 175, 177 (5th Cir. 1997), cert. denied 118 S. Ct. 412 (1997) (citing Mills v. Polar Molecular Coro., 12 F.3d 1170, 1175 (2d Cir. 1993)). "Directly put, the who, what, when, and where must be laid out before access to the discovery process is granted." Id. at 178. "Mere allegations of fraud, corruption or conspiracy, averments to conditions of mind, or referrals to plans and schemes are too conclusional to sa6sfy the particularity requirements, no matter how many times such accusations are repeated." Doyle v. Hasbro, Inc.. 103 F.3d 186, 194 (1st Cir. "Additionally, extensive smoking and health litigation over several decades precludes the Funds' claim of justifiable reliance. More than 40 years have passed since lawsuits against cigarette manufacturers claiming concealment of alleged dangers and losses incident to tobacco use have been reported in published case reports. Se ~ Fine v. Philip Morris Inc., 239 F. Supp. 361 (S.D.N.Y. 1964); Coouer v R.J Reynolds Tobacco Co. 234 F.2d 170 (Ist Cir. 1956), on remand, 158 F. Supp. 22 (D. Mass. 1957), afFd, 256 F.2d 464 (Ist Cir. 1958). 29
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J 1% Ot'Z6lSZ8 W A,1)8[S'~o,p'g~l`edE:i PoweTSkilp Ln6GJ or A9"traALg `gY tjei'e.~~ r'6pM: om Tumm¢,m,,, (a2a)}ssaooo CM1amblivBaM1n¢!&SI°pl,eI P ' , SHIPpEA 9FfD6%A ..CCpUNTNIIMBER IWoU°IOnS uar¢ .. I WYYIIIIAA Th~ I C_n, nni~..n... ,___.___ ~IMIIYINYAIIIYIII FWern1EFv~-Y \ LORILLARD TOBACCO COI )pq v ryy MAN-WGP, 2 LBS 714 GREEN VALLEY ROAD GREENSBORO, NG 27406- REF: TN0426956p I~~ql~q~llqu~l~ili~li~lUlN~p~l~~9~~~~~'Illl~ll~lNlui I STANDARD OVERNIGHT THU TRK4 7900 4416 9653 FORMUmf GSO Al l ~A~98 Z7q0&NC_US XNI GSX DROP OFF T Clmtlmlmga. TN 3}ppp_~qp f 000 TeAan &JWN9 lllllllulN~ L L I
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56 (separate opinion of Justices Scalia and Thomas). In particular, the Court ruled that the Labeling Act preempted a fraudulent misrepresentation claim because such claims are simply the "converse" of a requirement that different warnings should have been included. 505 U.S. at 527 (four judge plurality);; see also 505 U.S. at 548-56 (separate opinions of Judge Scalia and Thomas). See also Allgood v. R.J. Reynolds Tobacco Co.. 80 F.3d 168, 171 (5" Cir.), cert de~ 117 S.Ct. 300 (1996) (Labeling Act preempted claims that "A Frank Statement to Smokers" and the industry's general "it's not proven" campaign misrepresented the healtlr risks of smoking); Cantlev v. Lorillard Tobacco Co. 681 So. 2d 1057,1061 (Ala. 1996) (Labeling Act preempted fraudulent suppression claims because they inevitably are based upon state law duty to disclose facts through advertising or promotional channels of communication). Several courts, including the Sixth Circuit, have held that the Labeling Act preempts causes of action based on failure to warn allegations. See. e.g.. Rovsdon v. R.J. Reynolds Tobacco Co.. 849 F.2d 230, 234-35 (6'" Cir. 1988) ("claims related to smoking and health that result in liability for noncompliance with warning, advertisement, and promotion obligations other than those prescribed in the Act have the effect of tipping the Act's balance of purposes and therefore actually conflict with the Act"); Lacev v. Lorillard Tobacco Co., 956 F. Supp. 956, 962 (N.D. Ala. 1997) ("a claim that defendants have a duty to disclose additional information concerning cigarette ingredients unavoidably attacks defendants' advertising and promotion"); American Tobacco Co. v. Grinnell. 951 S W.2d 420 (Tex. 1997) (finding that plaintiffs' claims for strict liability, negligent failure to warn, negligent testing, and fraudulent concealment were preempted); Allgood, 80 F.3d at 171 (claims based on the theory that "defendants discovered the health risks of tobacco through their research, and fraudulently concealed that information from the public" were preempted by the Labeling Act °[t]o the extent that plaintiffs' claims are based on fraudulent concealment or a failure to warn after 1969"); Sonnenreich v. Philip Morris, inc.. 929 F. Supp. 416, 419 (S.D. Fla. 1996) (court endorses the proposition that "the preemptive effects of the Labeling Act are broad enough to encompass 'mass notification' to consumers"); Cantlev, 681 So. 2d at 1061 (fraudulent suppression claim held preempted; "[cigarette] manufacturers . . . can ordinarily communicate directly with consumers . . . only through 'advertising or promotion" ; claims that a cigarette manufacturer fraudulently concealed material facts are "inevitably based upon a`state law duty to disclose ... facts through ... advertising or 37
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Nor do any of the TPLA statutory exceptions apply. The statute provides that a product liability claim may be maintained against a seller, despite a sealed container defense, only if the manufacturer is not subject to service of process or is judicially declared insolvent. T.C.A. § 29-28- 106(b). S.esi Owens v. Tmckctopc of Am , 915 S.W.2d 420, 431 (Tenn. 1996). Sre.alsit $mitlty t~iauid Co.,t,nis Co p _ 1994 WL 147824 (Tenn.Ct.App. April 27,1994) (stating that seller was not manufacturer of defective product; thus, "in the absence of the actual manufacturer being insolvent or not being subject to service ofpmcess ... (defendant] cannot be sued as a selIer') (attached as Exb. 21);M.mphie R nk & Tmst o, v Water Qervc_ Tnc . 758 S.W.2d 525, 526 (Tenn. 1988)( (no strict liability when seller is not manufacturer and actual manufacturer not insolvent or amenable to service of process). All of the manufacturer defendants were served with process, and none was . declared insolvent. Accordingly, virtually all of the Funds' claims against Tenn-Miss are barred by the TPLA, and the claims should be dismissed. IV. Conclusion The Southeast Florida court concluded its opinion with an observation that is proper here: The tobacco industry has, as of late, become the whipping-boy ofAmerican political discourse. The fact that the tobacco industry has recently become very unpopular, however, is insufficient ground for this Court to overturn well-established common law rules and well-settled methods of statutory interpretation to permit recovery where recovery would otherwise be barred. If courts were to ignore the law and permit recovery as a matter of course against an unpopular defendant for the sole reason that the defendant is unpopular, courts would have abandoned their constitutionally-mandated role of interpreting the law and would have assumed the role of political institutions. Slip op. At 15-16. For this and the other reasons stated above, the undersigned Defendants respectfully request that this Court dismiss the claims asserted. Respectfully submitted, oL(JBe. an, Sx, Esq. (16x J A - ~ #834 Baker, Donelson, Bearman & Caldwell 165 Madison Avenue, 20th Floor Memphis, Tennessee 38103 ai
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Supreme Court ruled in i ollone. "[t]he phrase '[n]o requirement or prohibition' sweeps broadly and suggests no distinction betweeh positive enactments and common law ...'[State] regulation can be as effectively exerted through an award of damages as through some form of preventive relief' and "the phrase 'state law' [includes] common law as well as statutes and regulations." 505 U.S. at 521, 322. Further, in their Prayer for Relief, the Funds seek injunctive and declaratory relief for the following: (1)(a) "Requiring Defendants to disclose ... all research previously conducted .:_ that relates to the issue of smoking and health and addiction." (1)(b) "Requiring Defendants to fund a corrective education campaign ... (1)(c) Requiring Defendants to "cease advertising and promotion campaigns that attract minors to begin smoking." (1)(e) "Requiring Defendants to disclose the nicotine yields of their cigarettes." (1)(f) "Declaring that the Defendants have violated ... the Tennessee Consumer Protection Act " The Funds' requests for injunctive and declaratory relief likewise is barred by the Labeling Act. The mandatory and prohibitory injunctions requested by the Funds in their Prayer for Relief, which, if granted, would be issued and enforced by a state court, would necessarily constitute "requirements" or "prohibitions" imposed by state law within the meaning of the Labeling Act. See, e.g.,, Wolens v. American Airlines. Inc., 626 N.E.2d 205, 206 (Ill. 1993) (holding that an injunction issued by an Illinois trial could would be a preempted regulation enacted and enforced by the state within the meaning of the Airline Deregulation Act), afPd in nart rev'd in nart. 513 U.S. 219 (1995). As with the Funds' preempted claims, the requested injunctions are undeniably "based on smoking and health." The Prayer for Relief plainly contemplates requiring Defendants to provide "additional, or more clearly stated, warnings" beyond those required by the Labeling Act, Cipollone. 505 U.S. at 524, or to provide "more information regarding smoking and health than is required by the Labeling Act." Lace 956 F. Supp. at 963. See Sonnenreich 929 F. Supp. at 419 (noting that "[Ijobbying, seminars, and public service announcements" are advertisements or promotions; "Any attempt by [tobacco companies] to notify its customers of 39
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0 Accordingly, the economic loss rule precludes all but the Funds'TCPA and TUTPA claims. which specifically allow economic loss recovery. E. Federal Law Preempts Virtually All Of The Funds' Claims The Federal Cigarette Labeling and Advertising Act ("Labeling Act"), 15 U.S.C. § 1331, et seo., preempts Counts 1-6 and 1019 of the Funds' complaint, to the extent they state claims based on Defendants' alleged failure to wam of the alleged hazards of cigarette smoking. In passing . the Labeling Act, Congress recognized that the sale of cigarettes is important to "commerce and the national economy." 15 U.S.C. § 1331(2). Congress included in the Labeling Act a broad policy statement explicitly declaring that it is Congress's duty to establish a "comprehensive" fedrzl program of cigarette labeling and advertising whereby (1) "the public may be adequately informed about any adverse health effects of cigarette smoking by inclusion of warning notices on each package of cigarettes and in each advertisement of cigarettes" (§ 1331(1)), and (2) commerce and the national economy will be "protected to the maximum extent consistent with this declared policy" and not "impeded by diverse, nonuniform, and confusing" cigarette advertisement and labeling regulations. § 1331(2). The Labeling Act requires cigarette manufacturers, inter alia, to set forth on all cigarette packages and advertisements warning messages with text prescribed by § 1333 of the Act Section 1334(a) provides that these warnings are the onlv statements "relating to smoking and health" that cigarette manufacturers must display on their packages. In so providing, Congress expressly preempted state law "requirement[s] or prohibition[s]" with respect to the advertising or promotion of cigarettes. Cipollone v. Lieeett Group, Inc., 505 U.S. 504, 515 (1992)?n Section 1334(b) states: "No requirement or prohibition based on smoking and health shall be imposed under State law with respect to the advertising or promotion of any cigarettes the packages of which are labeled in conformity with the provisions of this Act." 19 In daims I-6 and 10. the Funds allege. respectively, Consumer Protection Act violadons TUTPA violaions, unjLLtt enrichment, special duty, fraud and deceit, negligent misrepresenution, and Tennessee Products Liability Act violations. 20 Other than by information on the package itself, "advertising and promotion" is effectively the onlv method by which cigarette manufacturers can disseminate health information. Cantlev v. Lorillard Tobacco Co., 681 So. 2d 1057, 1061 (Ala. 1996). Thus, claims based on manufacturers' alleged fraudulent suppression of health information are "inevimblv based upon a 'state law duty to disclose ... facts through ... advertising or promotion' channels ofcommunication," and are preempted. Id. (emphasis added). See also Lacev v. Lorillard Tobaccc Corn.. 956 F. Supp. 956, 962 (N.D. Ala 1997) (any claim "that defendants have a duty to disclose additional inforrnation concerning cigarette ingredients unavoidably attacks defendants' advertising and promotion"). 35
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CSC United States Corporation C pany 1013 C e Road, Wilmington, DE, 19i~ 1297 (302) 636-5400 United States Corporation Company The Prentice-Hall Corporation System, Inc. NOTICE OF SERVICE OF PROCESS Date Processed: 14-JAN-98 Transmittal #: TN0426956P ALL To: LEGAL COUNSEL LORILLARD TOBACCO COMPANY Redirect sent to: 714 GREEN VALLEY ROAD GREENSBORO NC 27408 TYPE OF REPRESENTATION: Statutory We enclose the following documents which were served upon: The Prentice-Hall Corporation System, Inc. as registered agent in Tennessee for LORILLARD TOBACCO COMPANY (ID#: 0175250) Documents were served on 14-JAN-98 via Personal Service ID#: N/A Title of Action: STEAMFITTERS LOCAL UNION NO. 614 HEALTH AND WELFARE FUNCase #: 92260-2 vs. PHILIP MORRIS, INC. ET AL. Court: CIRCUIT COURT OF TENN. FOR 30TH JUD. DIST. AT MEMPHIS Nature of Case: CLASS ACTION SUIT ALLEGING BREACH OF DUTY, FRAUD, NEGLIGENCE, CONSPIRACY, ETC. X Summons . _ Notice of Mechanic's Lien A self-addressed stamped X Complaint Notice of Attorney's Lien envelope enclosed Garnishment _ Notice of Default Judgment Duplicate copies of the Notice _ Subpoena and Acknowledgement enclosed Other: Answer Due: 30 DAYS AFTER THIS SUMMONS HAS BEEN SERVED Documents Sent: Federal Express ID#: Call Placed: No call placed Spoke to: N/A Comments: N/A Attorney for Claimant: DEBORAH GODWIN AGEE, ALLEN, GODWIN, MORRIS, ET AL. 200 JEFFERSON AVENUE SUITE 1400 co N (71 , -.~ MEMPHIS, TN 38103 901/528-1702 ~ . ~ Form Prepared By: Dot Timmerman W %0 Please acknowledge receipt of this notice and the enclosures by signing and returning the acknowledgement copy. Original Client Copy - for your records The infornnttion on tl.i: n,vumltn] is provided for use in forwarding the attached documents. This information does not constitute a legal opinion as to the faCtS,P+" - details of this action. These should be obtained from the documents themselves. The receiver of this Vansmittai is responsible for interpreting 4oe docum3r° for taking appropriate actimi. If you have received only a copy ot' the transmittal, you should be aware that the documents have been sent to the original adr, You should contact that addressee for details or interpretations of the content of those documents.
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0 TABLE OF CONTENTS L NATURE OF THE"ACTION ................................................ 1 a. Tennessee Consumer Protection Act : ................................. 3 b. Tennessee Antitrust Act : ................. . . ....................... 3 c. . Unjustenrichment : ............................................... 4 d. Breach of a voluntarily undertaken duty : ............................... 4 e. Fraud and deceit : ................................................4 f. Negligent misrepresentation : ........................................ 5 g. Breach of express and implied warranties : .............................. 5 h. Negligence : .................................................... 5 i. Tennessee Products Liability Act: .................................... ~6 j. Conspiracy : ....................................................6 II. JURISDICTION AND VENUE ........................................... . . . 7 III.THE PARTIES ............. ........ .................................... A. Plaintiffs ................. ..........................................~g IV. CLASS ACTION ALLEGATIONS ......................................... 1? V. THE HEALTH CONSEQUENCES OF TOBACCO ............................. 15 A. HEALTH EFFECTS OF SMOKING ........... . ....................... B. HEALTEEFFECTS OF SMOKELESS TOBACCO ....................... C. 1994 CONGRESSIONAL TESTIMONY BY CIGARETTE MANUFACTURERS .................. . .......... 15 16 17 VI. THE COMPOSITION OF THE CIGARETTE INDUSTRY IN THE UNITED STATES .................................. 19 VII. NATURE OF THE CONSPIRACY ........................................ 19 VIII. FACTUAL ALLEGATIONS COMMON TO ALL COUNTS .................... 21 A. INDUSTRY CONSPIRACY: THE EARLY AND ONGOING PUBLIC DECEPTION ABOUT SMOKING AND HEALTH . . ....... . ... 21 B. THE INDUSTRY ASSUMES A SPECIAL DUTY ................ . ....... 26 C. THE ROLE OF NICOTINE IN SMOKING .............................. 44 D. TARGETING OF BLUE-COLLAR WORKERS AND MINORS ............. 57 E. AN ONGOING CONSPIRACY. . ................. . ................... 60 F. TOLLING bF APPLICABLE STATUTE OF LIMITATIONS ........ . ....... 61 IX. CLAIMS FOR RELIEF .................................................. 62 COUNTI VIOLATIONS OF THE TENNESSEE CONSUMER PROTECTION ACT .. 62 COUNT II VIOLATION OF TENNESSEE STATUTORY PROVISIONS REGULATING RESTRAINT OF TRADE BY TRUSTS ............................................................64 B. RESTRAINT OF TRADE IN MARKET FOR HEALTH CARETO WITI-IIIOLI~ NECESSARY ME ..............................................6 C. RESTRAINT OF TRADE IN MARKET FOR CIGARETTES ~ AND OTHER TOBACCO PRODUCTS WITH THE PURPOSE OF AFFECTING THE HEALTH CARE MARKET .................... 67 COUNTIII RESTITUTION BASED ON UNJUST ENRICHMENT ....................... 68 I
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53. The cigarette manufacturers continue to deny that nicotine is addictive and instead use various misleading euphemisms to describe the role of nicotine, such as "satisfaction," "strength," "rich aroma," and "pleasure." Nonetheless, there is now widespread agreement in the medical and scientific communities that the primary, if not sole, function of nicotine is to provide a pharmacological effect on the smoker that leads to addiction. 18
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0 encouragement, substantial assistance, and otherwise aided and abetted each other with respect to these wrongful acts. ~ II. J[1RISDICTION AND VENUE ~ 9. This complaint is filed and these proceedings are instituted under the provisions of the Tennessee Consumer Protection Act of 1977, Tenn. Code Ann. §§ 47-18-101 through 47-18- 121; the statutory provisions regulating unlawful restraint of trade by trusts, Tenn. Code Ann. §§ 47-25-101 through 47-25-112; the Tennessee Products Liability Act, Tenn. Code Ann. §§ 29-28-101 through 29-28-108; and the common law of the state of Tennessee. .. 10. The violations alleged herein have been and are being committed in whole or in part, anA affect commerce in, and the Tobacco Companies do business in, the City of Memphis, and County of Shelby, and elsewhere throughout the State of Tennessee. 11. Each Defendant has sufficient contacts with the State of Tennessee and/or does sufficietit i business within the state of Tennessee to subject it to the jurisdiction of the Tennessee Courts pursuant to Tenn. Code Ann. § 20-2-214. IIL THE PARTIES ` A. Plaintiffs - 12. The Steamfitters Local Union No. 614 Health and Welfare Fund (`the Fund") is an "employee welfare benefit plan" and an "employee benefit plan" within the Employee Retirement Income Security Act (EFIISA), 291J.S.C. §§ 1002(1), 1002(3), 1003(a). As such, the Fund is a legal entity entitled to bring suit in its own name pursuant to 29 U. S.C. § 1132(d). Pursuant to the trust agreement under which it was created, the Fund provides comprehensive health care benefits to participants who are employed under various collective bargaining agreements and to their dependents, and to retirees. In addition, the Fund's health and medical benefits and services are provided under a written benefit plan. That plan contains certain subrogation provisions under which the Fund is subrogated to all the rights and causes of action of it§ participants and beneficiaries for whom the Fund pays medical benefits for injuries and illnesses caused by any third party tortfeasor. The Fund, on behalf of itself and all others similarly situated, seeks to recover the tobacco-related benefit costs incurred by it and all , similarly situated health and welfare funds, including, but not limited to, expenditures for medical assistance due to the use of tobacco by their participants and beneficiaries. In 7
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68. Cigarette smoking increased dramatically in the first half of the 20th century, followed by an increase in incidences of lung cancer. As early as 1945, Dr. Alton Ochsner, a New Orleans surgeon and regional medical director of the American Cancer Society, told an audience at Duke University on October 23 that "there is a distinct parallelism between the incidence of cancer of the lung and the sale of cigarettes ... the increase is due to the increased incidence of smoking and that smoking is a factor because of the chronic irritation it produces." 69. In 1946, tobacco company chemists themselves reported concern for smokers' health. A 1946 letter from Lorillard chemist to its manufacturing committee states that "[cjertain scientists and medical authorities have claimed for many years that the use of tobacco contributes to cancer development in susceptible people. Just enough evidence has been presented to justify the possibility of such a presumption." 70. In response to such medical indictments against smoking, the tobacco companies, through industry.spokesmen, dismissed such reports as "the health scare." The companies alsq engaged in advertising campaigns to induce the public to believe that cigarette smoking was e actually beneficial to one's health. The tobacco companies made express claims and warranties as to the healthfulness of their products with reckless disregard to their falsity of their claims and the consequential adverse impact on consumers. Examples of their health warranties include the following: Old Gold, "Not a cough in a Carload;" Camel, "Not a single case of throat irritation due to smoking Camels;" Philip Morris, "The Throat-tested cigarette." Brown and Williamson also claimed that Kools cigarettes would keep the head clear and/or provide protection against colds. 71. These health-claim advertising campaigns were disseminated nationally in popular magazines, on the radio and television and were calculated to persuade non-smokers to begin smoking and to persuade smokers to continue. These campaigns were blatantly false, misleading, deceptive and/or fraudulent. 72. Other examples o£the tobacco companies' deceptive campaign are numerous and outrageous. In 1952, Liggett & Myers conducted a test for advertising purposes to demonstrate the absence of harmful effects of smoking Chesterfield cigarettes on the nose, throat and affected organs. The tests were conducted by Arthur D. Little, Inc., and were designed to have nd real scientific value. Nonetheless, the tests' conclusion that smoking Chesterfield cigarette? 22
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B. Defendants + 16. Philip Morris Incorporated ("Philip Morris") is a Virginia corporation with its principal place a of business at 120 Park Avenue, 16th Floor, New York, New York 10017. Philip Morris i5 in trade or commerce. 17. R.J. Reynolds Tobacco Company ("RJR") is a New Jersey corporation with its principal place of business atNorthMain Street, Winston-Salem, North Carolina 27102. RJR is in trade or I commerce. 18. Brown & Williamson Tobacco Corporation (`Brown & Williamson") is a Delaware corporation with its principal place of business at 1500 Brown & Williamson Tower, Louisville, Kentucky, 40202. On infonnation and belief Brown & Williamson has succeeded to the liabilities of the American Tobacco Company either by operation of law, or as matter of fact. Brown & Williamson is in trade or commerce. 19. B.AT. Industries P.L.C. (`B.A.T. Industries") is a British corporation with its principal place of business at Windsor House, 50 Victoria St., London. Through a succession of intermediary corporations and holding companies, B.AtT. Industries is the sole shareholder of Brown & Williamson. - Through Brown & Williamson, B.A.T. Industries has placed cigarettes into the stream of commerce with the expectation that substantial sales of cigarettes would be made in the United States and in Plaintiffs' cities and counties. B.A.T. Industries4 has also conducted, by itself or through its agents, subsidiaries, associated companies, or co~ conspirators, significant research for Brown & Williamson on the topics of smoking, disease and addiction. On infonnation and beli4 Brown & Williamson also sent to England research conducted in the United States on the topics of smoking, disease and addiction in order t® remove sensitive and inculpatory documents from United States jurisdiction, and such documents were subject to B.A.T. Industries' control. B.A.T. Industries is a participant in the conspiracy described herein and has caused harm in Plaintifs' cities and counties. B.A.T. Industries is in trade or commerce. 20. Lorillard Tobacco Company ("Lorillard") is a Delaware corporation with its principal place of business at 1 Park Avenue, New York, New York 10016. Lorillard is in trade or commerce. 10
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entered into an agreement with the other Defendant cigarette manufacturers and Defendant trade associations, and third parties to pursue, and knowingly pursue, the common course of conduct to commit or participate in the commission of all or part of the unlawful acts, plans, schemes, transactions, and artifices to defraud alleged herein: the manipulation of nicotine content in cigarettes, the misrepresentation, concealment and suppression of information regarding the health consequences of smoking and the addictive properties of nicotine, the deceptive practices relating to "light" cigarettes, the restraint of trade in the market for a less dangerous cigarette, and the targeting of minors. 34. All Defendants did and continue to do business with the participants and beneficiaries of PlaintiffFunds. Defendants caused tortious injury by acts or omissions to the PlaintiffFunds. . IV. CLASS ACTION ALLEGATIONS 35. This action is maintainable as a class action under Rule 23 of the Tennessee Rules of Civil Procedure. 36. Plaintiffs bring this action on their own behalf and on behalf of all others similarly situated as follows: all labor-management multi-employer health and,?welfare trust fvnds operating in the State of Tennessee. Such funds are those funds established pursuant to Labor Management Relations Act section 302(c)(5), 29 U.S.C. § 186(c)(5), which provide their participants and beneficiaries medical, surgical, or hospital care benefits, and are defined as "employee welfare benefit plans" under ERISA § 3(1), 29 U.S.C. § 1002(1).. 37. This class is so numerous that joinder of all members is impracticable. There are hundreds of health and welfare trust funds in Tennessee. The funds' decision-making authority is invested in boards oftrustees who generally meet monthly or less often. Obtaining a meeting of the minds among the hundreds of trustees involved as to the conduct of this suit would be nearly impossible. 38. The health and welfare trust funds have legal claims that are identical in virtually all respects except as to the amount of damages incurred from Defendants' unlawful conduct. Plaintiffs' claims are typical of the claims of the class and the issues of law and fact concerning liability are essentially identical among all class members. Plaintiff will fairly and adequately protect the interests of the class, having retained as counsel a Washington, D.C. law firm with a 14
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0 organization in 1954. Since that time, they have used the credibility gained by claims of disinterested industry-funded research better to misrepresent the material facts to the public, and to ensure the least restrictive regulations applicable to cigarette smoking and sales. In ( what has become the industry "marrtra," cigarette manufacturers claim that there is insufficient Y "objective" research to determine if cigarette smoking causes disease, and that cigarettes are. : not addictive. The Defendants make these misrepresentations despite their actual knowledge of facts to the contrary, facts which they conceal. 60. Defendants have repeatedly and consistently used the interconnected strategies of ~ misrepresenting their objectivity to gain credibility and used that credibility to better conceal their actual knowledge and thereby deceive the public about smoking and health for more than four decades. The cigarette manufacturers and their trade associations have engaged in a continuous conspiracy to deceive Plaintiffs and their participants and beneficiaries regarding facts material to the regulation of cigarettes. 61. Defendants' deception therefore included concealment of their own negative health and addiction research results from Plaintiffs and their participants and beneficiaries. Defendants have still not released these research results. However, the internal research that has become available directly contradicts what the cigarette manufacturers and their trade associations have told the public for decades. . 62. The cigarette manufacturers also have not told the public that they manipulate and control the , nicotine content and delivery of their products to create and sustain smokers' addiction t4 3 cigarettes. Again, the purpose and effect of such concealment has been to thwart and delaY aggressive measures by Plaintiffs and their participants and beneficiaries to control their health care costs incurred due to tobacco-related illness; to control, reduce, or eliminate nicotine- addiction among their participants and beneficiaries through educational and smoking cessation programs; to reduce or eliminate unnecessary costs of plan administration and claims processing; and to reduce, control, or eliminate unnecessary expenditures for disability, death, drug, and other benefits due to tobacco-related illness and/or addiction.. 63. The success of the industry's campaign of deceit and misinformation depended upon the cigarette manufacturers acting in concert. Had one company broken ranks early on and told the public what it knew about the health consequences of cigarette smoking, or its addictive 20
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VL THE COMPOSITION OF THE CIGARETTE INDUSTRY IN THE UNITED STATES 54. At all relevant times, Philip Morris, R]R, Brown Williamson, B.AT. Industries, Lorillard, Liggett and ATC (hereafter sometimes collectively "the cigarette manufacturers") together control virtually 100% of the cigarette market in the United States, I 55. The cigarette industry is one of the most profitable industries in the United States, with pro4 margins estimated to be in the range of 30%. Industry profits are in the billions of dollart's annually from domestic sales alone. 56. The unusually concentrated and highly profitable nature of the cigarette industry has facilitated the planning, implementation and funding of a decades-long conspiracy by th'~ cigarette manufacturers and their trade associations relating to the issues of smoking, health and addiction. VII. NATURE OF THE CONSPIRACY 57. This action arises out of an ongoing conspiracy by the leading cigarette manufacturers and their trade associations which together control the cigarette industry. 58. The cigarette manufacturers have pursued a conspiracy of deceit and misrepresentation against Plaintiffs, their participants, beneficiaries and others that is designed to thwart and delay Plaintiffs' efforts to control their health care costs incurred due to tobacco-related illness; to control, reduce, or eliminate nicotine-addiction among their participants and beneficiaries through educational and smoking cessation programs; to reduce or eliminate unnecessary costs of plan administration and claims processing; and to reduce, control, or eliminate unnecessary expenditures for disability, death, drug, and other benefits due th tobacco-related illness andlor addiction. 59. The means by which the cigarette manufacturers carried out their conspiracy were twofold: first, they agreed falsely to represent to Plaintiffs, their participants, beneficiaries and others that questions about smoking and health would be answered by a new unbiased, antl trustworthy source; second, they counted on the resulting public trust more effectively to misrepresent, suppress and confuse the facts about the health dangers of smoking, including addiction. Concealment of their actual knowledge was, therefore, critical to the conspiracy. The cigarette manufacturers set their plan in motion by creating a joint industry research 19
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0 21. Liggett Group, Inc. ("Liggett") is a Delaware corporation with its principal place of business at 700 West Main Street, Durham, North Carolina 27702. Liggett is in trade or commerce. 22. The American Tobacco Company ("ATC") is a Delaware corporation with its principal place of business at 1500 Brown & Williamson Tower, Louisville, KY 40202. ATC manufactured, marketed and sold cigarettes throughout the United States. ATC was purchased by Brown & Williamson which has succeeded to the liabilities of ATC. On information and belief, ATC is in trade and commerce. 23. The Council for Tobacco Research - U.S.A., Inc. ("CTR"), successor in interest to the Tobacco Industry Research Committee ("TIRC"), is a nonprofit corporation organized under the laws of the State of New York with its principal place of business at 900 3rd Avenue, New York, New York 10022. CTR is in trade or commerce. 24. Smokeless Tobacco Council, Inc. ("STC") is a New York non-profit corporation whosP, principal place of business is 1627 K Street Northwest, Washington, D.C. STC ostensibly was formed for reasons of supporting objective research into the biological consequences of the use of smokeless tobacco. Like CTR, it was used to further the goals of the conspiracy. Dominated by U.S. Tobacco, STC also included as members several small producers of smokeless tobacco and was financially supported by several of the Big Six tobacco companies, including at least Brown & Williamson, Lorillard and Reynolds. Personnel from the Tobacca Companies actively participated in STC activities. At all relevant times, STC operated as a public relations and lobbying ann of the Tobacco Companies and as agent and employee of the Tobacco Companies. It also acted as a fa.cilitating agency in furtherance of Defendants, combination and conspiracy as described in this complaint. In doing the things alleged, STC acted within the course and scope of its agency and employment, and acted with the consent, permission and authorization of each of the Tobacco Companies. All actions of the STC were ratified and approved by the officers and/or managing agents of the Tobacco Companies. STC has been involved continuously in the conspiracy described and its actions have affected commerce and caused harm in Tennessee. 25. The Tobacco Institute, Inc, ("TP) is a nonprofit co ~ rporation organized under the laws of th4 State of New York with its principal place of business at 1875 I Street N. W., Suite 800t 11
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r Washington, D.C. 20006. TI at all relevant times operated as the public relations and lobbying arm of the cigarette manufacturers. TI is in trade or commerce. 26. Defendant Hill & Knowlton, Inc. ("Hill & Knowltori') is an international public relations firm whose principal place of business is 420 Lexington Avenue, New York, New York. Defendant H"ill & Knowlton played an active and knowing role in the conspiracy complained of aiding the circulation and/or publication of the false statements of the tobacco industry and the Council for Tobacco Research. Hill & Knowlton has been the primary advertising agency responsible for dissemination of the false and misleading information in question, in its capacity as the advertising and public relations agency for The Tobacco Institute, CTR and several members of the tobacco industry, including Liggett, Philip Morris, Reynolds, American Tobacco and Lorillard. In the course of such representation, Hill & Knowlton i aided these defendants in creating and issuing false information and covering up the truth concerning the tobacco industry, the link between smoking and cancer or other health hazards, the addictive nature of smoking and the true nature of the activities of the TIRC/CTR and its relationship to the industry. Hill & Knowlton has been involved in the wrongful conduct and conspiracy since its creation. ° 27. Defendant United States Tobacco Company ("UST") is a Delaware corporation with its principal place of business at 100 West Putnam Avenue, Greenwich, Connecticut. UST manufactures, advertises;and sells Sano cigarettes throughout the United States, including the State of Tennessee. UST also manufactures, advertises, and sells approximately 90% of the smokeless tobacco (snuff and chewing tobacco) sold in the United States, including Tennessee, under various brand names including Happy Days, Skoal and Copenhagen. 28. Defendant United States Tobacco Manufacturing Company, Inc. ("USTMfg") is a Delaware corporation with its principle place of business at 800 Harrison Street, Nashville, Tennessee. USTMfg manufactures tobacco products under various brand names, including Skoal and Copenhagen. The registered agent for service of process on USTMfg is CT Corporate Systems. ~ 29. Defendant Galler Wholesale d/b/a P.M. Green & Sons, ("P.M. Green") is a Tennessee corporation with its principle place of busines at 656 Madison Avenue, Memphis, Tennessee. P.M. Green is a wholesale tobacco distributor that receives its tobacco products directly from 12
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0 are provided under a written benefit plan. That plan contains certain subrogation provisions under which the Fund is subrogated to all the rights and causes of action of its participants and beneficiaries for whom the Fund pays medical benefits for injuries and illnesses causef by any third party tortfeasor. The Fund, on behalf of itself and all others similarly situated; seeks to recover the tobacco-related benefit costs incurred by it and all similarly situated health and welfare funds, including, but not limited to, expenditures for medical assistance due to the use of tobacco by their participants and beneficiaries. In addition, the Fund, on behalf of itself and all others similarly situated, brings this action to obtain declaratory and equitable relief and restitution. The trustees of the Fund are Mr. Dave Hodgin, Mr. Jimmy White, and Mr. Mike Hullett. The Trustees' address is 1161 Mur&eesboro Road, Ste. 320, Nashville, Tennessee 37217. 15. The Iron Workers District Council of Tennessee Valley and Vicinity Welfare Plan ("the Fund")....isan°employee welfare benefit plan" and an "employee benefit plan" within the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1002(1), 1002(3), 1003(a). As such, the Fund is a legal entity entitled to bring suit in its own name pursuant to 29 U.S.C. § 1132(d). Pursuant to the trust agreement under which it was created, the Fund provides comprehensive health care benefits to participants who are employed under various collective bargaining agreements and to their dependents, and to retirees. In addition, the Fund's health and medical benefits and services are provided under a written benefit plan! That plan contains certain subrogation provisions under which the Fund is subrogated to all the rights and causes of action of its participants and beneficiaries for whom the Fund pays medical benefits for injuries and illnesses caused by any third party tortfeasor. The Fund, on behalf of itself and all others similarly situated, seeks to recover the tobacco-related benefil costs incurred by it and all similarly situated health and welfare funds, including, but not limited to, expenditures for medical assistance due to the use of tobacco by their participants and beneficiaries. In addition, the Fund, on behalf of itself and all others similarly situated, brings this action to obtain declaratory and equitable relief and restitution. The trustees of the Fund are Mr. Richard Ware, Mr. Donnie Carson, Mr. Melvin Brewer, Mr. Steve Kirkland, Mr. Steve Kirkland, Mr. Barry Dickerson, Mr. Jerry Wakefield, and Mr. John Luttrell. The Trustees' address is 8615 Hixson Pike, Hixson, Tennessee 37343. 9
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83. According to the Hill and Knowlton memorandum, cigarette industry executives viewed the problem as "extremely serious. and worthy of drastic action." The document continues, "ofHcials stated that salesmen in the industry are frantically alarmed and that the decline irn tobacco stocks on the stock exchange market has caused grave concern ...." ~ 84. The participants in the meeting agreed that a strong public relations response from the industry was necessary. From the beginning, these Defendants viewed the emerging research linking smoking and cancer as a public relations problem, not a public health issue. According to the Hill and Knowlton memorandum summarizing the meeting: a. The Chief Executive Officers of all the leading companies, except Liggett, "agreed to go along with a public relations program on the health issue." b. "They are also emphatic in saying that the entire activity is a long-term, continuing program, since they feel that the problem is one of promoting cigarettes and . protecting them from these and other attacks that may be expected in the future." c. "The curient plans are for Hill and Knowlton to serve as the operating agency of the companies, hiring all the staff and disbursing all Tunds." 3. Creation of Tobacco Industry Research Committee 85. Nine days later, Hill and Knowlton presented a detailed recommendation to the cigarette manufacturers and others. The recommendation recognized the importance of gaining the public trust and avoiding the appearance of bias if the "pro-cigarette" industry strategy waAA . to be successful. According to the memorandum: .- "[T]he grave nature of a number of recently highly publicized research reports on the effects of cigarette smoking have confronted the industry with a serious problem of public relations. ^ It is important that the industry do nothing to appear in the light of being callous to considerations of health or of belittling medical research which goes against cigarettes. The situation is one of extreme delicacy. There is much at stake and the industry group, in moving into the field of public relations, needs to exercise great care not to add fuel to the flames." 25
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{ larynx, esophagus, stomach, pancreas, uterus, cervix, kidney and colon, among others. All told, cigarette smoking is responsible for at least 30% of all deaths from cancer. 44. Smoking is the cause of more than 80% of deaths from pulmonary diseases such as emphysema and bronchitis. These chronic obstructive lung diseases have a profound social i and economic impact because of the extended disability of their victims. 45. Smoking is also responsible for thousands of deaths from cardiovascular disease, including stroke, heart attack, peripheral vascular disease and aortic aneurysm. Smoking is also linked to a large number of other serious illnesses. 46. The health consequences of smoking among women are of special concern because of the deleterious effect on reproduction. Smoking reduces fertility, increases the rate of miscarriages and stillbirths, retards uterine fetal growth and results in lower birth weights in infants. 47. The nicotine in cigarettes is addictive. Nicotine is now recognized as an addictive substance by such major medical organizations as the Office of the U.S. Surgeon General, the World Health Organization, the American Medical Association, the American Psychiatric Association, the American Psychological Association, the American Society of Addictiorg Medicine, and the Medical Research Council in the United Kingdom. All of thesc' organizations now acknowledge tobacco use as a form of drug dependence or addiction with severe adverse health consequences. B. HEALTH EFFECTS OF SMOKELESS TOBACCO '~ 48. Smokeless tobacco use can cause oral cancer. The risk of oral cancer increases with increased exposure to smokeless tobacco products, particularly in those areas of the mouth where smokeless tobacco products are used. The risk of cheek and gum cancers is nearly 50 times greater in long-term snuff users than in nonusers. Snuff and chewing tobacco contain potent carcinogens, including nitrosamines, polynuclear aromatic hydrocarbons and radioactive polonium. 49. Smokeless tobacco use can cause oral leukoplakia, a precancerous lesion of the soft tissue that consists of a white patch or plaque that cannot be scraped off. One study of 117 high school students who were smokeless tobacco users revealed that nearly 50 percent of these students had oral tissue alterations. There is a 5 percent chance that oral leukoplakias will 16 I
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cessation, nicotine-addiction control and other measures they otherwise would have taken had Defendants fulfilled their pledge. At that time, and continuing to the present, these Defendants knew or should have known that their failure to fulfill the duty they undertook, and other conduct as alleged herein, would result in increased health care and other related costs to Plaintiffs. 91. On January 4, 1954, the member Defendants announced the formation and purpose of TIRC, with a fu11 page'newspaper advertisement entitled "A Frank Statement to Cigarette Smokers." The statement appeared in 448 newspapers across the nation, reaching a circulation of 43,245,000 in l58 cities. 92. The "Frank Statement to Cigarette Smokers" stated in part: a. "Recent reports on experiments with mice have given wide publicity to a theory that cigarette smoking is in some way linked with lung cancer in human beings." b. "Although conducted by doctors of professional standing, these experiments are not regarded as conclusive in the field of cancer research." c. "[T]here is no proof that cigarette smoking is one of the causes [of lung cancer]." . d. "We accept an interest in people's health as a basic responsibility, paramount -. to every other consideration in our business," e. "We believe the products we make are not injurious to health." f. "We alivays have and always will cooperate closely with those whose task it is to safeguard the public health." g- "RNe are pledging aid and assistance to the research effort into all phases of tobacco use and health." h. "For this purpose we are establishing a joint industry group consisting initially of the undersigned. This group will be known as TOBACCO INDUSTRY RESEARCH CONIMITTEE." "In charge of the research activities of the Committee will be a scientist of unimpeachable integrity and national repute. In addition there will be an Advisory Board of scientists disinterested in the cigarette industry. A group I 27
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IN THE CIRCUIT COURT OF TENNESSEE FOR THE THIRTIETH JUDICIAL DISTRICT AT MEMPHIS STEAMFITTERS LOCAL UNION NO. 614 HEALTH ) AND WELFARE FUND, by and through its Trustees, ) TENNESSEE CARPENTERS REGIONAL HEALTH ) AND WELFARE FUND (formerly Carpenters National ) Health and Welfare Fund), by and through its Trustees, ) NIIDDLE TENNES SEE TEAMSTERS TRUST ) FUND, by and through its Trustees, IRON WORKERS ) DISTRICT COUNCIL OF TENNESSEE VALLEY & ) aa~ lJ ia-n~ ~ - 1998 CIRQr(Jt;rC6URT CLERK VICINITY WELFARE PLAN, by and through its Trustees ) and on behalf of themselves and all others similarly situated, ) / D..C., ) Plaintiffs, ) q ~o - z~ Z V. ) Case No. ~ - C ) PHILIP MORRIS, INC. ) CLASS ACTION COMPLAINT 120 Park Avenue ) AND New York, NY 10016 ) DENIAND FOR JURY TRIAL ) and ) ) R7. REYNOLDS TOBACCO COMPANY ) Fourth and 1Vlain Streets ) Winston-Salem, NC 27102 ) .:C`"'JIM'%4Y- ~.4O0."F,' Clerk ), oi the Circuit C o+_rt, S`-,eiuy and . ) rOt!ht)l )-Er!?2~::;5'~;: C!-:feif''y' iti1S ) r acc~ru ,s~r~ ~ BROWN & WILLIAMSON TOBACCO ) a' 1i?ed t?~_~~7 -~7d CORPORATION ) J11'JIiVi`Q!^E, 1500 Brown & Williamson Tower ) g Louisville, KY 40202 ) ) and ) ) B.A.T. INDUSTRIES P.L.C. ) Windsor House ) Milbank, Knowle Green, Staines ) Middlesex, England TW18 1DY ) ) and ) ) LORILLARD TOBACCO COMPANY ) 1 Park Avenue ) New York, NY 10016, ) ) and ) ) LIGGETT GROUP, INC. ) 700 West Main Street ) Durham, NC 27702 ! ) ) and ) ) ca THE AMERICAN TOBACCO COMPANY ) ti 1500 Brown & Williamson Tower ) ~ ~ Louisville, KY 40202 ) ~p -P ~ to b~ a true a ~d
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CSC The United States Corporation Company 1013 (Otre Road, Wilmington, DE, 1-05-1297 (302) 636-5400 United States Corporation Company The Prentice-Hall Corporation System, Inc. NOTICE OF SERVICE OF PROCESS Date Processed: 14-JAN-98 Transmittal #: TN0426956P ALL To: LEGAL COUNSEL LORILLARD TOBACCO COMPANY Redirect sent to: 714 GREEN VALLEY ROAD GREENSBORO NC 27408 TYPE OF REPRESENTATION: Statutory We enclose the following documents which were served upon: The Prentice-Hall Corporation System, Inc. as registered agent in Tennessee for LORILLARD TOBACCO COMPANY (ID#: 0175250) Documents were served on 14-JAN-98 via Personal Service ID#: N/A Title of Action: STEAMFITTERS LOCAL UNION NO. 614 HEALTH AND WELFARE FUNCase #: 92260-2 vs. PHILIP MORRIS, INC. ET AL. Court: CIRCUIT COURT OF TENN. FOR 30TH JUD. DIST. AT MEMPHIS Nature of Case: CLASS ACTION SUIT ALLEGING BREACH OF DUTY, FRAUD, NEGLIGENCE, CONSPIRACY, ETC. X Summons _ Notice of Mechanic's Lien A self-addressed stamped X Complaint Notice of Attorney's Lien envelope enclosed Garnishment _ Notice of Default Judgment Duplicate copies of the Notice _ Subpoena and Acknowledgement enclosed Other: Answer Due: 30 DAYS AFTER THIS SUMMONS HAS BEEN SERVED Documents Sent: Federal Express ID#: Call Placed: No call placed Spoke to: N/A Comments: N/A Attorney for Claimant: DEBORAH GODWIN AGEE, ALLEN, GODWIN, MORRIS, ET AL. 200 JEFFERSON AVENUE, SUITE 1400 MEMPHIS, TN 38103 901/528-1702 00 Form Prepared By: Dot Timmerman ND Please ac ow e ge receipt o t zs notice an t e enc osureky ssgnar~.g an re ng t zs ac now e gement copy. business rep yC71 , envelope is enclosed for your convenience. ~ DATE RECEIVED: ~ ~ CLIENT SIGN IV Acknowledgement Copy - to be returned t the address above W cc The informadon on this transmittal is provided for use in forwarding the attached documents. This information does not constitute a legal opinion as to the facts or deraus of rbis ..ceon. Thrse stoold be obafned from ,f.e doc..menss tfiemselves. Tf.e xeeeivec of this aansmittal is iesvonsibie fox intexprecmg the doevmem~s xnd for taking appropriate action. If you have received only a copy of the transmittal, you should be aware that the documents hpv0bylD SGJIZ to 111E 9lJgllJal bddIESSEC. You should contact that addressee for details or interprerations of the content of those documents.
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0 had no harmful•effect on the stated organs was widely publicized and the purported results were used to assure the general public that smoking Chesterfield cigarettes was harmless. 73. During the 1950's, Liggett & Myers sponsored the nationally popular Arthur Godfrey radio s and television sfiow wherein health claims were made based upon the alleged scientific studies assuring that "smoking Chesterfields would have no adverse effects on the throat, sinuses or affected organs." Arthur Godfrey, a smoker himself, subsequently contracted lung cancer. 74. Earlier consumer-oriented ads from the 1930's and 1940's often spouted wide-ranging medical claims which placed physicians holding cigarettes in the company of endorsers including Santa Claus ("Luckies are easy on my throat"), movie stars, sports heroes and circus stars. Similq ads even appeared in medical journals, where ads targeted directly to physicians. One, fA example, touted the Camel cigarettes booth at the American Medical Association's 1942 Annual Meeting. 75. In the New York State Journal ofMedicine, Chesterfield cigarette ads began running in 19331. The ads carried claims such as "Just as pure as the water you drink ... and practically untouched by human hands." 76. The tobacco companies sponsored cigarette ads in the New England Journal of Medicine, the Journal of the American Medical Association ("JAMA") and,<The Lancet from the 1930's through the 1950's. 77. For $$ee_n years; Philip Morris made various claims that its cigarettes were less irritating than i other brands. An ad in a 1943 issue of the National Medical Journal urged: "`Don't smoke' is hard advice for patients to swallow. May we suggest instead 'Smoke Philip MorrisT Tests showed three out of every four cases of smokers' cough cleared on changing to Philip Morris. Why not observe the results yourself?" Another ad by the company in JAMA in 1949 averred: "Why many leading nose and throat specialists suggest, 'Change to Philip Morris!" 78. Other companies employed different marketing techniques aimed at physicians. For example, Camel cigarettes paid tribute to medical pioneers and concluded: "Experience is the best teacher ....[e]xperience is the best teacher in cigarettes, too." Old Gold reacted to early negaitve medical studies with the slogan: "If pleasure's your aim, not medical claims ....'I m zv u-~ ~ 23 ao r.-3 ~3
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nationwide practice in Employee Benefits as well as a specialization in class action and complex toxic tort litigation in addition to local counsel. 39. The class meets the requirements for certification under Tenn. R. Civ. Pro. 23.02(1), in that the prosecution of separate actions by individual members of the class would (a) create a risk of inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards or conduct for the party opposing the class, and (b) as a practical matter, substantially impede the ability of members of the class who are not party to the adjudication to protect their interests. 40. The class meets the requirements for certification under Tenn. R. Civ. Pro. 23.02(2), in Defendants' actions constitute a common course of conduct which has affected all of the class members in the g'ame manner, thereby making injunctive and declaratory relief as prayed for in this Complaint appropriate with respect to the class as a whole. 41. The class meets the requirements for certification under Tenn. R. Civ. Pro. 23.02(3), in that common questions of law and fact predominate over individual questions making a class action a superior action. No other litigation by members of the proposed class concerning these claims has yet commenced. Judicial economy willbe promoted by concentrating the instant litigation in a single forum. - . '1 V. THE HEALTH CONSEOUENCES OF TOBACCO A. AF.a7.TH-EFFECTS OF SMOEING 42. The human tragedy of smoking-caused disease is enormous. Cigarette smoking is the leading cause of premature death in the United States. 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. Smoking-related illnesses account for one of every five deaths each year in the United States. Second hand smoke kills another 53,000 people annually. 43. At least 43 chemicals in the smoke inhaled by persons using Defendant cigarette ma*+»ffirt++rers' products have been determined to be carcinogenic. Cigarette smoking causes more than 85% of all lung cancer, which has now surpassed breast cancer as the primary cause of death from cancer among women. Smoking is also linked to cancers of the mouth, 15 M
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0 Some companies hired attractive women to deliver cigarette samples to physicians and their patients in their waiting rooms. 79. The publication ~f landmark studies such as the 1952 JAMA article on smoking and bronchial carcinoma by Alton Ochsner, M.D. prompted JAMA to ban advertisements from their journal. 80. During the 1950's the tobacco companies employed another method of deception in manufacturing and advertising to boost sales and to counter the "health scare:" "The Filter Derby" and "Tar Wars." The tobacco companies manufactured filtered cigarettes that were advertised with explicit and/or implicit warranties of tar/nicotine content and health claitns: ~ The tobacco companies' health claims and claims as to the effectiveness of the filters ip removing tar and nicotine were knowingly deceptive when made, and/or were made with reckless disregard for the health risks to the cigarette smokers. 2. "_°BiQ Scare" of 1953 and the Joint Industry Resoonse 1 81. The industry conspiracy began as early as the 1950's, when cigarette manufacturers were confronted with the publication of several scientific studies which sounded grave warnings about the health hazards of cigarettes. In December of 1953, Dr. Ernest L. Wynder of the Sloan-Kettering institute published the results of a study where he painted the shaved backs of mice with cigarette smoke condensate residue. Malignant tumors grew in 44% of the mice in Dr. Wynder's study, providing biological evidence that cigarette smoke caused cancer. The previous year, a?3ritish researcher, Dr. Richard Doll, published a statistical analysis showing that lung cancei was more common among people who smoked and that the risk of lung cancer was directly proportional to the number of cigarettes smoked. The widespread reporting of these studies caused what cigarette company officials later called the "Big Scare." 82. The cigarette industry responded quickly to the mounting adverse publicity of a link betweeA smoking and cancer. The ChiefExecutive Officers ofthe leading cigarette manufacturers mA on December 15, 1953, at the Plaza Hotel in New York City. The public relations firm of Hill and Knowlton, which was to play a central role in formulating and executing the industry response, coordinated the meeting and prepared a memorandum summarizing the day'.'~~ discussions. 24
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transform into malignancies in 5 years. The leukoplakias appears to decrease or resolve upon cessation of smokeless tobacco use. 50. Smokeless tobacco use causes oral cancer and oral leukoplakia and may be associated with an increased risk of cancer of the esophagus. Smokeless tobacco use has been implicated in cancers of the gum, mouth, pharynx and larynx. Snuff use also causes gum recession and is associated with,discoloration of teeth and fillings, dentai cavities and abrasion of the teeth. C. 1994 CONGRESSIONAL TESTIMONY BY CIGARETTE MANUFACTURERS 51. In 1994, the chief executives of the Defendant cigarette manufacturers testified under oath before the Subcommittee on Health and the Environment of the Committee on Energy and Commerce, U.S. House of Representatives, chaired by Congressman Waxman ("Waxman Subcommittee"). These executives knowingly made material misrepresentations and omissions to the Waxman Subcommittee about smoking, health and addiction, and in particular, stated that nicotine is not addictive. The tobacco executives made these statements knowing that they, would be communicated to Plaintiffs' and their participants. These statements included the following: a. Andrew Tisch, then CEO of Lorillard, asserted that smoking does not cause cancer. 'We have looked at the data and the data that we have been able to see has all been statistical data that has not convinced me that smoking causes death." b. Philip Morris President and CEO William I. Campbell, said that: i. "Philip Morris does not manipulate nor independently control the level of nicotine in our products." ii. "Cigarette smoking is not addictive." iii. "Philip Morris research does not establish that smoking is addictive." c. RJR CEO James W. Johnston said that, "smoking is no more addictive than coffee, tea or Twinkies." 52. The tobacco executives made these representations despite a substantial body of evidence; including evidence developed by the cigarette manufacturers themselves, dating back at 1easit 40 years, indicating that nicotine is not only addictive, but is the main reason why people smoke and continue to smoke. 17
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nature, the conspiracy would have failed. Without the agreement of each cigarette manufacturer to suppress the truth the deception that the joint industry research efforts were objective would be revealed, and the substantive claim that "not enough facts are known" to indict cigarette smoking as the cause of disease would ring hollow. The cigarette manufacturers agreed to come together in order to accomplish what could not have otherwise occurred - the unified and consistent distortion of public information on smoking, health and addiction. 64. The recent defection ofLiggett from the conspiracy -- in March 1997 -- affirms the existence of the conspiracy, as the industry's response has been aggressively to seek to suppress all i Liggett documents which relate to the conspiracy from the public, including from plaintiffs. 65. The testimony ofthe cigarette manufacturers before Congress in 1994 that smoking is not a proven cause of disease and death and that nicotine is not addictive is only one recent example of this ongoing pattern of deception and-suppression that began more than 40 years ago. VHI. FACTUAL ALLEGATIONS COMMON TO ALL COUNTS ~ A. INDUSTRY CONSPIRACY: THE EARLY AND ONGOING PUBLIC DECEPTION ABOUT SMOIOZVG AND HEALTH ~ 1. The Early Days -- ClaiminE Ci¢arettes Are Healthful 66. Inhalable tobacco became widely popular in the 19th century when W. Duke and Sons introduced the Bonsack mechanized cigarette-rolling machine. Through this device, cigarettes were mass-produced, distributed and sold nation-wide. 67. In 1881, Duke's factory produced 9.8 million cigarettes, 1.5 percent of the total market share. Only five years later, W. Duke and Sons manufactured 744 million cigarettes, more than the national total in 1883. By 1890, Duke's competitors, who by now had become mechanized, joined forces with Duke to establish the American Tobacco Company. By the turn of the century, nine of every ten cigarettes were those of W. Duke and Sons. Shortly after the formation of the American Tobacco Company, the State of North Carolina initiated an antitrust suit against the company. In May, 1911, the Supreme Court dissolved the American Tobacco Company, which was succeeded by four large firms: Liggett and Myers, Reynolds, Lorillard and American, plus many smaller firms. 21
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addition, the Fund, on behalf of itself and all others similarly situated, brings this action to obtain declaratory and equitable relief and restitution. The trustees of the Fund are Mr. Gil Mills, Mr. Williain G. Walton, Mr. Steve Andrews, Mr. James Corzine, and Mr. David Sink. The Trustees' address is 3746 Jackson Avenue, Memphis, Tennessee 38108. 13. The Tennessee Carpenters Regional Heath and Welfare Fund (formerly the Carpenters National Health and Welfare Fund) ("the Fund") is an "employee welfare benefit plan" and an "employee benefit plan" within the Employee Retirement Income Security Act (ERISA), 9 29 U.S.C. §§ 1002(1), 1002(3), 1003(a). As such, the Fund is a legal entity entitled to brin~f suit in its own name pursuant to 29 U. S.C. § 1132(d). Pursuant to the trust agreement unde'r which it was created, the Fund provides comprehensive health care benefits to participants who are employed under various collective bargaining agreements and to their dependents, and to retirees. In addition, the Fund's health and medical benefits and services are provided under a written benefit plan. That plan contains certain subrogation provisions under which the Fund is subrogated to all the rights and causes of action of its participants and beneficiaries for whom the Fund pays medical benefits for injuries and illnesses caused by any third parry tortfeasor. The Fund, on behalf of itself and all others similarly situated, seeks to recover the tobacco-related benefit costs incurred by it and all similarly situated health and welfare funds, including, but not limited to, expenditures for medical assistance due to the use of tobacco by their parpcip'ants and beneficiaries. In addition, the Fund, on behalf of itself and all others similarly situated, brings this action to obtain declaratory and equitable relief and restitution. The trustees of the Fund are Mr. Charles Maples, Mr. Bobby Boner, Mr. Henry Pierce, Mr. Richard Marcum, Mr. Michael Pfiffer, and Mr. Clyde Tyree. The Trustees' address is 1451 Elm Hill Pike, Suite 106, Nashville, Tennessee 37210. 14. The Middle Tennessee Teamsters Trust Fund ("the Fund") is an "employee welfare beneQ plan' and an "employee benefit plan" within the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1002(1), 1002(3), 1003(a). As such, the Fund is a legal entity entitled to bring suit in its own name pursuant to 29 U. S. C. § 1132(d). Pursuant to the trust agreement under which it was created, the Fund provides comprehensive health care benefits to participants who are employed under various collective bargaining agreements and to their dependents, and to retirees. In addition, the Fund's health and medical benefits and services 8
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• 4. Each year, thousands of Plaintiffs' participants and beneficiaries die from smoking the Defendant cigarette manufacturers' products. Each year, Plaintiff Funds must spend millions of dollars to purchase or provide medical and related services for their participants and beneficiaries suffering from diseases caused by cigarette smoking. Each year, the Defendattt cigarette manufacturers reap huge profits from the sale of cigarettes to the Plaintiff Funds' participants and beneficiaries. Each year, the Defendant cigarette manufacturers spend billions of dollars on advertising which has enormous appeal to young people. Each year, more children and teenagers, the cost of whose health care is now and will continue to be borne by the Plaintiff Funds, begin smoking. 5. This is an action to recover funds expended by the Plaintiff Funds to provide medical treatment and other benefits to their participants and beneficiaries suffering from smoking= related illnessesand to seek appropriate injunctive relief against the Defendants' continuing illegal and outrageous conduct. Among other things, Plaintiff Funds seek a permanent injunction to require the Defendants to disclose their research on smoking, addiction and health, to fund a remedial public education campaign on -the health consequences of smoking; and to fund smoking cessation programs for nicotine-dependent smokers. 6. The Trustees of the Plaintiff Funds are bound by their fiduciary duties under the Employee Retirement Income Security Act (`ERISA'), 29 U. S.C. § 1001 te sea." to ascertain the legal liability.of third parties tor pay for care and services available under the benefit programs of e the Funds, and to seek reimbursement to the Funds to the extent of such legal liability. The Funds have discovered that Defendants have been engaged in a protracted and willful course of corporate misconduct and misrepresentation in violating numerous federal and state laws, and in actionable breach of the duties owed to the Funds and their participants and beneficiaries. 7. The Defendants are cigarette and tobacco product ma.nufacturers, their trade associations and public relations`firms that control virtually the entire cigarette industry in this State and the Nation. For decades, the Plaintiff Health and Welfare Trust Funds have incurred significant expenses in providing necessary health care and other benefits to participants and beneficiaries who suffer, or who have suffered, from smoking-related injuries, diseases, or sickness. 2
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0 86. As a result of the meeting of December 15, 1953, and the recommendations of Hill and Knowlton, five of the six cigarette manufacturers agreed to create the Tobacco Industry Research Committee ("TIRC"). Liggett joined the industry trade group in 1964, the sam8 year the Surgeon General issued his first report linking cigarette smoking to lung cance) Also in 1964, TIRC changed its name to the Council for Tobacco Research ("CTR'). The cigarette manufacturers formed a second trade group, the Tobacco Institute ("TI") in 1958. 4. TIRC Control by Hill and Knowlton 87. As bad been proposed at the December 15, 1953 meeting, the cigarette manufacturers (except Liggett), through their agent Hill and Knowlton, operated, and effectively controlled TIRC. 88. TIRC was physically established in the Empire State building in New York City, one floor below the II'ill add Knowlton offices. Internal documents confinn that Hill and Knowlton, and not independent scientists, actually ran TIRC. A "highly confidential" internal memo reported: "Since the [TIRC] had no headquarters and no staff, Hill and Knowlton, Inc. was asked to provide a working staff and temporary office space. As a first organizational step, public relations counsel assigned one of its experienced executives, W.T. Hoyt, to serve as account executive and handle as one of his functions the duties of executive secretary for the [TIRC]." i f 89. In 1954,35 staff members of Hill and Knowlton worked full or-part time for TIRC. In thaV, ~ year, TIRC spent $477,955 on payments to I-Ell and Knowlton, over 50% of TIRC's entire budget. B. 111 E INDUSTRY ASSUMES A SPECIAL DUTY 90. Shortly after creating TIRC, the member cigarette manufacturers made an unambiguous pledge to the public, including Plaintiffs' participants and beneficiaries and those who advance and protect the public health. These Defendants represented that they would, through TIRC, conduct and report objective and unbiased research regarding smoking and health. When they made this representation, these Defendants knew or should have known that Plaintiffs' would consider the representation material to their decisions regarding health claims cost control measures, benefits implementation, claims processing, and other expenditures. Defendants also knew or should have known that Plaintiffs would fail to take or delay taking smoking 26
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the dangers of smoking would employ the same techniques as a traditional advertising or promotional campaign, save the goal ofdiscoumging smoldng"); C•riesenbeck_ 897 F.Supp. At 823; Catlav, 681 So. 2d at I061. Paragraph 1(e) of the Prayer for Relief would require modifications ofDefendants' advertising orperhaps a public service advertising campaign, discouraging 4raoking, Although it would not be designed to bolster sales, such a campaign nevertheless would constitute an advertisement respecting smoldng and health within the meaning of the Labeling Act $ee Sonnenreich, 928 F.Supp. At 419. F. The TennesseeProductsLiability ActPrecludes VirtuallyAllTheFunds' Claims Against Defendant Tenn-Miss Distributorsu Under the Tennessee Products Liability Act (`"CPLA"), a product liability action may not be maintained against a seller "when the product is acquired and sold by the seller in a sealed container and/or when the product is acquired and sold by the seller under circumstances in which the seller is afforded no reasonable opportunity to inspect the product in such a manner which would or should, in the exercise of reasonable care, reveal the existence of the defective condition." Teon. Code Ann. § 29-28-106. S=al8i2 hdillerv R-R T>istnbntinprClo., 79 F.RD. 219 (E.D. Tenn. 1978). Although this section does not apply to breach of express or implied warranty claims, sec T.C.A. 29-28-106(a)(1), it applies to all other product liability claims.' Additionally, the TPLA defines a seller as "a retailer, wholesaler, or distributor.." T.C.A. § 29-28-106(7). The TPLA bars all but the breach of warranty claims alleged against Tena-Miss Distnbutors (`"renn-Miss). The Funds describe Tenn-Miss as a'~vholesale tobacco distributor that received its tobacco products directly from tobacco manufacturers." Complaint, 130. Thus Tenn-Miss clearly is a"seller" as defined by the TPLA. Further, the Funds fail to make any allegations suggesting that Tenn-Miss manufactured cigarettes or that it had a reasonable opportunity to inspect the cigarette products it sold and failed to do so. The Funds fail to allege that Tenn-Miss received cigarette packages in anything other than fully sealed containers or that it had a reasonable opportunity to inspect the packages. =ZGalier Wholesale ("Galler") is also named as a"distdbutor' defendant. Gzller has not been served with process in this tnatter at this point. Therefore, this motion and memotandum are not technically submitted on behalf of Galler. However, all arguments and positions made by Tenn-Miss Disnbutors would apply equally to Craller and Galler should receive the benefi[ of any ruling in Tena-Miss Distributors' favor. pThe TPLA defines'product liability action" as including "all actions based upon ... negligence, breach of waaanty, express or implied; brrech of or failure to discharge a duty to wara or insnuct, whethernegligent, or iunocent, misrepresentation, conceahneat or nondisclosure, whether negligent, or innocent; or under any other substantive legal theory in tort or connact wbatsoever." T.CA § 29-28-102(b). 40
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119. In 1993, a former 24-year employee of CTR confirmed publicly that the joint industry research efforts were not objective: "When CTR researchers found out that cigarettes were bad and it was better not to smoke we didn't publicize that." "The CTR is just a lobbying thing. We were lobbying for cigarettes." 120. This and other evidence demonstrate that the role and purpose of TIRC and CTR in the cigarette manufacturers' strategy was to seek to use the public's trust to propagate "pro- cigarette" propaganda. An industry official wrote in his personal notes describing a meeting which included high level officials from various cigarette manufacturers that: "CTR is best & cheapest insurance the tobacco industry can buy and without it the Industry would have to invent CTR or would be dead." 121. Nonetheless, in its annual reports published between 1985 and 1992, CTR stated that itq + ScientifieJ:Advisory Board funded peer-reviewed research projects ` judging them solely on the basis of scientific merit and relevance." In 1994, Dr. James F. Glenn, CEO of CTR, submitted testimony to the Waxman Subcommittee thatr. a. "The Council ... sponsors research into questions of tobacco use and health • and makes the results available to the public." r - b. "Council grantees are assured complete scientific freedom in conducting their studies .._: . Publication of research results is encouraged in all instances." 5. The Examole of Dr. Hombureer 122. In fact, CTR-sponsored research projects were directed away from research that might add to the evidence against smoking. When CTR-sponsored research did produce unfavorable results, however, the information was distorted or simply suppressed. For example, Dr. Freddy Homburger, a researcher in Cambridge, Massachusetts, undertook a study of smoke exposure on hamsters. According to Dr. Homburger, he received a grant from CTR which was changed half-way through the study to a contract "so they could control publication -- they were quite open about that." Dr. Homburger has testified that when the study was completed in 1974, the Scientific Director of CTR and a CTR lawyer "didn't want us to A anything cancet" and that they threatened Dr. Homburger with "never get[ting] a penny more" if his paper were published without deleting the word cancer. 36
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a. A 1956- memorandum from the Vice President of Philip Morris Research and Development Department to top executives at the company regarding the advantages of "ventilated cigarettes" stated that: "Decreased carbon monoxide and nicotine are related to decreased harm to the circulatory system as a result of smoking .... decreased irritation is desirable ... as a partial elimination of a potential cancer hazard." b_ A 1958 memorandum sent to the Vice President of Research at Philip Morris, who a later became a member of its Board of Directors, from a company researcher stated P "the evidence ... is building up that heavy cigarette smoking contributes to lung cancer either alone or in association with physical and physiological factors...." c. A 1961 document presented to the Philip Morris Research and Development Committee by the company's Vice President of Research and Development included .-a=section entitled "Reduction of Carcinogens in Smoke." The document stated, in part: "To achieve this objective will require a major research effort, because carcinogens are found in practically every class of compounds in smoke. This fact prohibits complete solution of the problem by eliminating one or two classes of compounds. The best we can hope for is to reduce a particularly bad class, i.e. the polynuclear hydrocarbons, or phenols ... . - Flavor substances and carcinogenic substances come from the same classes, in many instances." d. A 1963 memorandum to Philip Morris' President and CEO from the company's Vice President ofResearch describes a number of classes of compounds in cigarette smok4 which are "known carcinogens." The document goes on to describe the link betwee~ smoking and bronchitis and emphysema. "Irritation problems are now receiving greater attention because of the general medical belief that irritation leads to chronic bronchitis and emphysema. These are serious diseases involving millions of people. Emphysema is often fa.tal either directly or through other respiratory complications. A number of experts have predicted that the cigarette industry ultimately may be in greater trouble in this area than in the lung cancer field." 29
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cigarettes are h4nnful, we want to do something about it regardless of what somebody else tells us to do. And we would do our level best. It's only human." 103. Another advertisement cosponsored by TIRC and the Tobacco Institute called "A Statement about Tobacco and Health" stated: "We recognize that we have a special responsibility to the public -- to help scientists determine the facts about tobacco and health, and about certain diseases that have been associated with tobacco use. We accepted this responsibility in 1954 by establishing the TIRC, which provides research grants to independent scientists. We pledge continued support of this program of research until the facts are known." "We shall continue all possible efforts to bring the facts to light." 104. The cigarette industry made additional representations in 1970 when its lobbying group, the - Tobacco Institute, placed a number of advertisements similar to the 1954 "Frank Statement." One advertisement stated in part: . - a. "After millions of dollars and over 20 years of research: The question about smoking and health is still a question." - b. "In the interest of absolute objectivity, the tobacco industry has supported totally independent research efforts with completely non-restrictive funding." c. "In 1954, the Industry established what is now known as CTR, the Council ` forTobacco Research--USA, to provide financial support for research by independent scientists into all phases of tobacco use and health. Completely autonomous, CTR's research activity is directed by a board of ten scientists and physicians who retain their affiliations with their respective universities and institutions. This board has full authority and responsibility for policy, " development and direction of the research effort." `i d. "The findings are not secret." 105. Another advertisement in 1970 stated that the industry "believes the American public is entitled to complete, authenticated information about cigarette smoking and health .... The tobacco industry recognizes and accepts a responsibility to promote the progress of independent scientific research in the field of tobacco and health." 32
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99. Philip Morris also concealed from the public its actual views of the research conducteq outside the influence of the industry. In a 1971 memorandum, Dr. H. Wakeham, then Vice President of Research and Development, referring to a recent study which found cigarette smoke inhalation caused lung cancer in beagles, stated, "1970 might very properly be called the year of the beagle. Early in the year, the American Cancer Society announced that thefi had finally demonstrated the formation of lung cancer in beagles by smoke inhalation in the now infamous Auerbach and Hammond study." Although Dr. Wakeham criticized the mice cancer studies, he conceded that "the beagle test was a critical one ... for the cigarette causation hypothesis." 100. Dr. Wakeham's memorandum demonstrates Philip Morris' approval of the industry's public dismissals of these independent studies: "The strong opposition of the industry to the beagle test is indicative of a new, more aggressive stance on the part of the industry in the smoking and health controversy. We have gone over from what I have called the 'vigorous denial' approach, the take it on the chin and keep quiet attitude, to the strongly voiced opposition and criticism. I personally think this counter-propaganda is a better stance than the former one." -- '; 101. Similarly, BATCO's internal view ofthe validity of mouse skin painting experiments differes markedly from the view expressed in public statements. Mmutes from a 1969 BATCO research conference stated "[h]istorically, bioassay experiments were undertaken by the industry with the object of clarifying the role of smoke constituents in pulmonary carcinogenesis. The most widely used of these methods [was] mouse-skin painting ....(a5 In the foreseeable future, say five years, mouse-skin painting would remain as the ultimate court of appeal on carcinogenic effects," Two years later a Brown & Williamson public relations document stated that "[m]uch of the experimental work involves mouse-painting or animal smoke inhalation experiments ....[T]he results obtained on the skin of mice should not be extrapolated to the lung tissue of the mouse, or to any other animal species. Certainly such skin results should not be extrapolated to the human lung." 2. Repeated False Promises to the Public 102. The industry renewed and repeated the deceptions of the 1954 "Frank Statement to Cigarette Smokers." RJR chairman Bowman Gray told Congress in 1964: "If it is proven that 31
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general feeling that an industry approach.as opposed to an individual company approach was highly desirable." 113. Each company also agreed not to perform research on smoking and health on their own. Thi.0 agreement was referred to as the "Gentlemen's Agreement." A 1968 internal Philip Morris draft memorandum entitled "Need for biological research by Philip Morris research and development," and prepared by the company's Vice President of Research and Development, states: "We have reason to believe that in spite of the gentlemans [sic] agreement for the tobacco industry in previous years that at least some of the major companies have been increasing biological studies with their own facilities." 114. As indicated by the 1968 "Gentlemans Agreement" memorandum, it was believed within the industry that individual companies were performing certain research on their own, in addition . to the joint.industry research. But the fundamental understanding and agreement remained intact: that harmfiil information and activities would be restrained, suppressed, and concealed. This included restraining, concealing, andr'suppressing research on the health effects of smoking, including the addictive qualities of cigarettes, and restraining, concealing, and suppressing the research and marketing of safer cigarettes: 4. Suonression and Concealment of Industry-Sponsored Bioloeical Research Role of CTR as a "Front" N ~,._- . . . . 115. Internal documents demonstrate that the joint industry research efforts undertaken througz'4 TIRC, and later, through CTR, were not disinterested or objective. Rather, they were designed and used to promote favorable research, to suppress negative research where possible, and to attack negative research where it could not be suppressed, all in order to convince the public, including Plainti$s'and their participants and beneficiaries, that the "case against smoking is not closed." 116. A 1974 report to the CEO of Lorillard from a research executive described CTR's scientific projects as "hav[ing] not been selected against specific scientific goals, but rather for various purposes such as public relations, political relations, position for litigation, etc. Thus, it seems obvious that reviews of such programs for scientific relevance and merit in the smoking and health field are not likely to produce high ratings." , 34
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disclosed. One of the researchers later stated about RJR's executives and lawyers that "they like to take the position that you can't prove harm because you don't know mechanism ... . And sitting right under their noses is evidence of mechanism[.] What are they going to do with this stufP They decided to kill it." 133. Internally, an RJR-commissioned report favorably described the Mouse House work as "the more important of the smoking and health research effort because it comes close to determining what was thought to be the underlying pathology of emphysema." Defendants have not disclosed any of the work done at the "Mouse House" to the public. I 39
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106. In 1972, TI President Horace Kornegay, testified before Congress and stated that "the cigarette industry is as vitally concerned or more so than any other group in determining whether cigarette smoking causes human disease .... That is why the entire tobacco industry ... since 1954 has committed a total of $40 million for smoking and health research through grants to independent scientists and institutions." 107. In March of 1983, Sheldon Sommers, MD, scientific director of CTR, testified before Congress that "[c]igarette smoking has not been scientifically established to be a cause of chronic diseases, such as cancer, cardiovascular disease, or emphysema. Nor has it been shown to affect pregnancy outcome adversely." 108. In 1984, RJR placed an advertisement in The New York Times stating that "[s]tudies which I conclude that smoking causes disease have regularly ignored significant evidence to the 0 contrary." 109. In response to what he described as "a number of charges ... leveled against the tobacco industry generally, and Philip Morris specifically," William Campbell, President of Philip Morris, told the Waxman Subcommittee in April 1994: ,' 7 ... our consumers are being misled and when that happens Philip Morris has and will continue to speak out loudly and clearly. Our consumers deserve to know the truth...... 110. Each of Defendants' representations to the public about sponsoring independent objective research and bringing the truth to light were false and deceptive. These misrepresentations . have sought to gain the trust of the public to better distort and suppress substantive information about smoking and health. 3. The Gentlemen's Aereement 111. Defendants' strategy depended for its success on joint and concerted action by the cigarette manufacturers and their trade associations. Upon information and belief, each of these Defendants agreed not to reveal to the public the true nature of TIRC, and later CTR, and not to disclose adverse information on smoking, addiction and health, in order to protec continued cigarette sales. ~ 112. In 1968, a memorandum addressed to the CEO of Liggett regarding a meeting of the research directors of the six cigarette manufacturers stated on the topic of smoking and health "a 33
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. [W]e put together a charcoal filter product with performance superior to anything in the market place. That product was known as Saratoga. Physiologically it was an outstanding cigarette. Unfortunately then after much '" discussion we decided not to tell the physiological story which might have appealed to a health conscious segment of the market. The product as test marketed didn't have good 'taste' and consequently was unacceptable to the public ignorant of its physiological superiority. 139. The research and development department at Philip Morris nonetheless viewed continued research into safer cigarettes as necessary to compete in the event that another cigarette company marketed a safer cigarette. The presentation to the Philip Morris Board of Directors continued: "The Research and Development Department is working to establish a strong _ technological base with both defensive and offensive capabilities in the smoking and health situation. Our philosophy is not to start a war, but if war comes, we aim to fight well and to win." ; - 9. Liggett Safer Cigarette: XA 140. Liggett also developed a safer cigarette. Company researchers believed that they had discovered which cigarette smoke constituents were carcinogens and found a way to remove them. Despite Liggett officials' belief that the product was commercially marketable, the company never marketed the safer cigarette and suppressed the research that led to its development. 141. Liggett contracted with a consulting firm to repeat the smoke condensate studies of mice performed by Dr. Wydner. The consulting firm confirmed Wynder's findings, and, as a result, in 1968, Liggett began "a tobacco additive program designed to reduce or eliminate the tumorigenic activity of cigarette smoke." 142. By 1979, Liggett had declared the work a success. Company documents state: "Briefly, as a result of 20 years effort in cooperation with [the consulting firm], we have developed a cigarette system which produces smoke of reduced'biological activity ....[T]here can be no argument that the use of the additives has resulted in a product with lower carcinogenic effects." 41
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of distinguished men from medicine, science, and education will be invited to serve on this Board. These scientists will advise the Committee on its research activities." "This statement is being issued because we believe the people are entitled to know where we stand on this matter and what we intend to do about it." 93. By the spring of 1955, the self-defense strategy recommended by Hill and Knowlton and implemented by the industry through the "Frank Statement" was largely successful. Hill and Knowlton reported to TIRC: a. "[P]rogress has been made .... The first 'big scare' continues on the wane." b. "The research program of the [TIRC] has won wide acceptance in the scientific world as a sincere, valuable and scientific effort." c. "Positive stories are on the ascendancy." .. 1. Industry Knowledge That Smoking is Harmful I 94. Even before the sponsors of the "Frank Statement" represented that "there is no proof that cigarette smoking is one of the causes" of lung cancer, an industry researcher had reported the contrary. As early as 1946, Lorillard chemist H.B. Parmele, who later became Vice President of Research and a member of Lorillard's Board:•of Directors, wrote to his company's manufacturing committee: "Certain scientists and medical authorities have claimed for many years that the use of tobacco contributes to cancer development in susceptible people. Just enough evidence has been presented to justify the possibility of such a presumption." 95. In the years following the 1954 "Frank Statement," and continuing to the present, the cigarette companies have repeatedly breached their assumed duty to report objective facts on smoking and tiealth. As evidence mounted both through industry research and truly independent stt}dies that cigarette smoking causes cancer and other diseases, Defendants continued publicly to represent that nothing was proven against smoking. Internal documents show that the truth was very different. The cigarette manufacturers knew and acknowledged internally the veracity of scientific evidence of the health hazards of smoking, and at the same time suppressed such evidence where they could, and attacked it when it did appear. .~ 96. Internal cigarette industry documents reveal, for example: F 28
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117. A 1972 internal document from a TI official to the group's President described the importance of using joint industry research to maintain public doubt about the link between smoking and disease: "For nearly twenty years, this industry has employed a single strategy to defend itself on three major fronts -- litigation, politics, and public opinion. While the strategy was brilliantly conceived and executed over the years helping us win important battles, it is only fair to say that it is not - nor was it ever intended to be - a vehicle for victory. On the contrary, it has always been a holding strategy, consisting of -- creating doubt about the health charge without actually denying it -- advocating the public's right to smoke, without actually urging them to take up the practice -- encouraging objective scientific research as the only way to resolve the question of the health hazard" . - - "As an industry, therefore, we are committed to an ill--defined middle ground which is articulated by variations on the,theme that, 'the case is not proved."' - "In the cigarette controversy, the public -- especially those who are present and potential supporters (e.g. tobacco state congressmen and heavy smokers)-:-- must perceive, understand, and believe in evidence to sustain their opinions that smoking may not be the causal factor." "As things stand, we supply them with too little in the way of ready- made credible alternatives." 118. A 1978 memo addressed to the CTR file from a Philip Morris official characterized CTR as "an industry 'shield'." The memorandum goes on to state: "the public relations value of CTR must be considered and continued ... . It is extremely important that the industry continue to spend their dollars on research to show that we don't agree that the case against smoking is closed ....There is a`CTR basket' which must be maintained for 'PR' purposes . 35
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0 deadwood in thci behavioral and biological studies area. I said that the "B" series are "Janus" series studies and should also be considered as deadwood." ("Janus" was a name of a project that attempted to isolate and remove the harmful elements of tobacco.) Wells further recommended that the research, development and engineering department also should undertake "to remove the deadwood from the files." 127. The recent sworn statements of Brown & Williamson's former Chief of Research, Jefiiev Wigand, confirm that Brown & Wdliamson's General Counsel Wells concealed sensitivP documents. Wigand stated that Wells sent sensitive research documents to London to avoid production in litigation, stamped scientific documents "attorney/client work product," even though the documents were not specifically created for litigation, and edited and suppressed the minutes of a scientific meeting to remove references to topics which might be the subject of litigation. 128. Upon information and belief, Mr. Wigand, as a result of his coming forward on this and other matters, and serving as a witness in litigation against the tobacco companies, has been the subject of unlawful threats and intimidation by Defendants. 129. Through CTR, the cigarette manufacturers have used lawyers and the claim of attorney/client privilege to ineulate CTR-funded research projects from disclosure to the public and to government officials. This conduct demonstrates the fal' sity of the industry representations jointly to fund objective research and to report the results of that research to the public. 7. Suppression and Concealment of Internal Biological Research Mouse House Massacre 130. In the 1960s, RJR established a facility in Winston-Salem, North Carolina, to research the x health effects of smoking using mice. In the facility nicknamed the "Mouse House," RJR 0 scientists researched a number of specific areas, including studies of the actual mechanism whereby smoking causes emphysema in the lungs. 131. The RJR lab made significant progress in understanding this mechanism. Despite this progress, RJR disbanded the entire research division in one day and fired all 26 scientists without notice. 132. Several months before the 1970 closure and firings, RJR attorneys collected dozens of research notebooks from the scientists. The notebooks have still not been voluntarily 38
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April 1994 that their respective companies do not manipulate nicotine, add it, independently control it, restore it during the manufacturing process, or otherwise achieve a minimum level of nicotine in their products. Thomas E. Sandefur, Jr., CEO of Brown & Williamson, has admitted that the company controlled nicotine, but in a now familiar refrain, stated that the company did so only for "taste." A primary purpose and effect of these decades-old denials and the suppression of scientific testing have been that entities such as the Plaintiff Funds could not and did not act earlier and more aggressively to implement smoking-cessation and educational programs; nicotine-addiction, reduction, and elimination measures; and other programs. Such actions which would have been implemented were not taken because Defendants concealed and suppressed the information that would have formed the basis for y action. 206. Thus, the cigarette manufacturers' attempt to deceive the public, government officials, consum,ers,and the Plaintiffs and their participants and beneficiaries, continues. As recently as April 1994, cigarette manufacturers placed advertisements across the country, denying that they believe cigarette smoking is addictive and making misleading statements to the public and Plaintiffs about whether the cigarette manufacturers deliberately control nicotine levels in their products. 207. An advertisement placed by Philip Morris in newspapers across the country, in April 1994 affirmatively represented that Philip Morris does not "manipulate" nicotine levels in its cigarettes, and that "Philip Morris does not believe that cigarette smoking is addictive." 208. RJR placed a similar advertisement in newspapers across the United States in 1994 stating that "we do not increase the level of nicotine in any of our products in order to "addict" smokers. Instead of increasing the nicotine levels in our products, we have in fact worked hard to decrease 'tar' and nicotine .... RJR's advertisement then touted its use of "various techniques that help us reduce the `tar' (and consequently the nicotine) yields of our products." 2(r9. These statements mislead the consuming public and Plaintiff9 because, as alleged above, Philip Morris and RJR use various sophisticated techniques to increase the nicotine content in their cigarettes and the actual nicotine delivery to the smokers. 56
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` 123. An internal CTR document describes how Dr. Homburger attempted to call a conference about the incident and how CTR stopped it: He ... was to tell the press that the tobacco industry was attempting to I press { suppress important scientific information about the harmf'ul effects of smoking. He was going to point specifically at CTR." "I arranged later that evening for it to be canceled." "Homburger was given a cordial welcome and nicely hastened [sic] out the door." "P. S. I doubt if you or Tom will want to retain this note." 6. CTR Special Projects Division 124. Another mechanism that CTR used to suppress research results that implicated smoking in disease was selectively to involve lawyers, and then invoke the attorney/client privilege to prevent the disclosure of harmfial information. CTR used the term "special projects" to mean a project that carried a risk of a negative result that might have to bd'suppressed. Industry lawyers selected and monitored "special projects" to prebent disclosure. One Philip Morris #0 official characterized CTR as a "front" for performing "special projects." ~ 1 125. Notes prepared at a 1981 meeting of the cigarette industry's Committee of General Counsel state: :"-When we started the CTR Special Projects, the idea was that the scientific + director of CTR would review a project. If he liked it, it was a CTR special project. If he did not like it, then it became a lawyers' special project." ...we were afraid of.discovery for FTC and Aviado, we wanted to protect it under the lawyers. We did not want it out in the open." 126. At least one cigarette company used similar tactics to suppress and avoid disclosure of its internal research on smoking and disease. At a time when the company was resisting discovery in a number of personal injury lawsuits, Brown & Williamson's general counsel, 7. Kendrick Wells, recommended, in a memorandum dated January 17, 1985, that much of the company's biological research be declared "deadwood" and shipped to England. He recommended that no notes, memos or lists be made about these documents. Wells stated, "I had marked certain of the document references with an X... which I suggested were 37
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0 Subcommittee -"[n]icotine [level] follows the tar level," and the correlation between the two "is essentially perfect," and "shows that there is no manipulation of nicotine." Dr. Spears neglected to mention to Congress that in a 1981 study, not intended for public release, he stated explicitly that low-tar cigarettes use special blends of tobacco to keep the level of nicotine up while tar is reduced: "[T]he lowest tar segment [of,product categories] is composed of cigarettes utilizing a tobacco blend which is significantly higher in nicotine." RJR, Lorillard, ATC, and TI have similarly represented to the public and to the FDA that the nicotine levels in their products are purely a function of setting the tar levels of such products. 203. ATC told the Waxman Subcommittee in an October 14, 1994 letter that "nicotine follows 'tar' delivery, i.e. high 'tar' -- high nicotine, low 'tar' -- low nicotine .... Nicotine is neither adjusted nor altered to compensate for losses inherent in the manufacturing process." Internal company documents reviewed by the Waxman Subcommittee show, however, that ATC's experimentation with adding nicotine to its tobacco was extensive -- extensive enough for ATC executive John T. Ashworth to instruct employees in a confidential memorandum: "In the future our use of nicotine should be referred to as 'Compound W' in our experimental work, reports, and memorandums, either for distribution within the Department or for outside distribution." - 204. Recent tests conducted at the direction of the FDA show that the low-tar brands actually have more nicotine by weight than the non-"light" brands. The high level of nicotine found in lower tar cigarettes seriously misleads consumers and renders the industry's claim of an "essenfially perFect" correlation between reduced tar and nicotine levels false. According to the FDA, the manufacturing defendants use a combination of the methods described above for boosting nicotine delivery to compensate for nicotine losses from the application of tar- reducing design modifications. The cigarette industry thereby maintains a continuing market for a product that consumers are misled to believe contains less of each of the harmful ingredients in regular cigarettes. 205. Against this mounting body of evidence of the cigarette industry's manipulation and control of nicotine levels in cigarettes, the cigarette manufacturers continue to deny to the public, and recently denied to Congress under oath, that they manipulate and control nicotine levels. Top executives from Philip Morris, RJR, Lorillard, Liggett and Brown & Williamson testified in 55
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• . D. TARGETING OF BLUE-COLLAR WORKERS AND MINORS 210. As part of their conspiracy, fraud, and market manipulation, as alleged above, Defendants also have used deceptive advertising, have aggressively marketed addictive tobacco products, and succeed in addicting populations such as the blue-collar and trade workers and minors. 211. In an article entitled "Targeting of Cigarette Advertising in U.S. Magazines 1959-86," investigators from the University of Michigan showed that the Tobacco Companies target blue-collar workers. As a result, the blue-collar crafts and trades, including workers covered by Plaintiffs and the Class, have higher smoking rates than the general public. 212. According to the National Health Interview Survey 1987-90, 47.1 percent of blue-collar construction workers were reported to be current smokers, compared to 24.2 percent for white collar occupations, and 39.2 percent for all blue-collar occupations combined, including construction workers. 213. A study- entitled "Occupational Mortality in California 1979-81" found that construction laborers have the highest overall mortality rates and the highest rates for smoking-related diseases. - Overall mortality for laborers was 4 to 6 rimes higher than for white collar occupations like physicians and teachers. A study entitled "Occupational Mortality in Washington State 1950-1989" found similar difFerences between construction workers and white collar workers in Washington. 214. Across the~ nation, the overwhelming majority of cigarette use and addiction begins when . users are children or teenagers. Eighty-two (82%) percent of daily smokers in the United States had their first cigarette before the age of 18, sixty-two (62%), percent before the age of 16, thirty-eight 38"/o percent before the age of 14. Thus, a person who does not begin smoking in childhood or adolescence is unlikely ever to begin. The younger a person begins to smoke, the more likely he or she is to become a heavy smoker. Sixty-seven (67%) percent of children who start smoking in the sixth grade become regular adult smokers and forty-six (46%) percent of teenagers who start smoking in the eleventh grade become regular adult smokers. 215. Smoking at an earlier age increases the risk of lung cancer and other diseases. Studies have shown that lung cancer mortality is highest among adults who began smoking before the age of 15. 57
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smokers of advertised low tar and nicotine cigarettes block the tiny, laser generated perforations in ventilated filters with their fingers or lips, thereby resulting in greater tar and nicotine yields to those smokers than those measured by the FTC smoking machine. 198. Cigarette manufacturers know that the ability to block ventilation holes allows smokers to "compensate" for nicotine losses that would otherwise be caused by tar-reducing modifications. The industry has studied smoker compensation in order to design cigarettes that allow smokers to compensate for lower nicotine yields. One such design feature is known as "elasticity." This refers to the ability of a cigarette, whatever its FTC measured nicotine yield, to deliver enough smoke to permit a smoker to obtain the nicotine he needs, e.g., through more or longer puffs, or by covering ventilation holes. 199. Industry studies show that smokers tend to obtain close to the same amount of nicotine from each cigarette despite differences in yield as measured by the FTC smoking machine. In a 1974 BATCO conference, researchers described the result of one such study: "The Kippa study in Germany suggests that whatever the characteristics of cigarettes as determined by smoking machines, the smoker adjusts his pattern to deliver his own nicotine requirements (about0.8 mg. per cigarette)." Smokers' compensation to obtain adequate nicotine also results in the delivery of more tar than the FTC test measure. 200. Second; the use of the more potent "free" nicotine that ammonia helps release, as opposed to the slower acting salt-bound nicotine, also serves to increase the amount of nicotine delivered to smokers of "light" cigarettes. An ammoniated cigarette that delivers more potetAt nicotine to smokers measures the same as a cigarette with no such additives. 1 201. The use of ammonia is another method used by the cigarette Industry, to reduce the FTC measured tar and nicotine levels in their cigarettes over the past two decades while still furnishing smokers with sufficient nicotine delivery. According to John Kreisher, a former associate scientific director for CTIZ, "[ajmmonia helped the industry lower the tar and allowed smokers to get more bang with less nicotine. It solved a couple of problems at the same time." 202. Third, the cigarette industry maintains that nicotine levels follow tar levels. In the words of Dr. Alexander Spears, Vice Chairman of Lorillard, in his 1994 testimony before the Waxman 54
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216. Although young people frequently believe they will not become addicted to nicotine or become long-term users of tobacco products, they often find themselves unable to quit smoking. Among smokers age 12 to 17 years, a 1992 Gallup survey found that 70% said if they had to do it over again, they would not start smoking and 66% said that they want to quit. Fifty-one (51%) percent of the teen smokers surveyed had made a serious effort to stop smoking -- but had failed. 217. Cigarette smoking among children and teens is on the rise. A 1995 Nat,ional Institute of Drug Abuse study found that between 1991 and 1994, the proportional increase in smoking rates was greatest among eighth graders, rising by 30%. 218. Cigarettes are among the most promoted consumer products in the United States. The Federal Trade Commission reported to Congress that domestic cigarette advertising and promotional expenditures rose from close to $4 billion in 1990 to more than $6 billion in 1993.'Tobacco product brand names, logos, and advertising messages are all-pervasive, appearing on billboards, buses, trains, in magazines and newspapers, on clothing and other goods. The effect is to convey the message to young people that tobacco use is desirable, socially acceptable, safe, healthy, and prevalent in society. Additionally, young people buy I the most heavily advertised cigarette brands, whereas many adults buy more generic or value- based cigarette brands which have little or no image-based advertising. Cigarette manufacturers, knowing that their advertising appeals to young people, continue to use these same marketing techniques to sell their products. 219. A July 1995 report by the California Department of Health Services surveyed tobacco advertisements in or around stores. In looking at almost 6,000 stores, the California Department of Health Services found that the average number of tobacco advertisements and promotions per store was 2526. Marlboro was the most frequently advertised and promoted cigarette brand with an average of 10.15 advertisements and promotions per store. Camel was the second most frequently advertised and promoted cigarette brand and had an average of 4.84 advertisements and promotions per store. These two brands were the most frequently advertised and promoted cigarette brands. Not surprisingly, Marlboro, Camel, and Newport, the most heavily advertised brands, are the leading brands smoked by children. m N ~ 58 ~ ~ , c:A CD
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i 220. RJR has even identified the stores in proximity to the youth market. RJR's Division Manager for Sales wrote all RJR sales representatives in 1990 regarding the "Young Adult Market" and asked them to identify what stores were in proximity to colleges or high schools. A follow-up letter by the sales division calls for a resubmitted list of Y.A.S. (Young Adult Smoker) accounts using new criteria, focusing on all accounts located across from, adjacent to, or in the general vicinity of high schools or college campuses. 221. Despite these disturbing statistics, each of the cigarette manufacturers maintains that the effect of its pervasive advertising and promotion of cigarettes is limited to maintaining brand loyalty and that it has no role in encouraging adolescents to experiment with smoking. In fact, the targeting of the minors is designed to addict minors to nicotine and thereby replace ~ the hundreds ofthousands of cigarette smokers who die each year due to smoking cigarettes. 222. The cigarette manufacturers know that they attract underage consumers to their products. For example, since 1988, R.IR has used a cartoon character called Joe Camel in its advertising campaign. It has massively disseminated products such as matchbooks, signs, clothing, mugs, and drink can holders advertising Camel cigarettes. The"advertising has been egective in attracting adolescents. Although RJR has knowledge of this fact, it still continues the Joe Camel advertising campaign. As a result of the campaign, the.number of teenage smokers who smoke Camel cigarettes has risen dramatically. One study found that Joe Camel is almost as familiar.to,six-year old children as Mickey Mouse, is enticing thousands of teens to smoke that brand, and has caused Camel's popularity with 12-17 year olds to surge dramatically. RJR knew or willfully disregarded the fact that cartoon characters attract children. 223. The model who portrayed the "Winston Man" for RJR's Winston brand cigarettes testified before Congress: "I was clearly told that young people were the market that we were going after." He further testified that "it was made clear to us that this image was important because kids like to role play, and we were to provide the attractive role models for them to i follow .... I was told I was a live version of the GI Joe........ 224. An RIR affiliate studied in detail the motivations of young smokers. A "Youth Target" study was the first of a planned series of research studies into the lifestyles and value systems of young men and women in the 15-24 age range, the stated purpose of which was to "provide 59
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health effects of their products. In addition, Defendants actively concealed the addictive nature of nicotine, the manipulation of nicotine levels in the tobacco products, and the intent to addict the cigarette consuming public. 280. The representations were false when made and known by Defendants to be false or were made with reckless indifference. The actions of Defendants, all done to maximize sales and profit at the expense of the public's health and safety, were so outrageous as to constitute gross fraud, ill will or evil motive. 281. These misrepresentations and omissions were made deliberately, willfully, and maliciously to mislead the Plaintiffs and their participants, dependents, and retirees into reliance and action thereon, and to cause Plaintiffs' participants, dependents, and retirees to purchase and use Defendants' tobacco products as Defendants intended them to be used. 282. The Plaintiffs and their participants, dependents, and retirees had no way to determine that the representations were false and misleading, and that they included material omissions, and these persons reasonably relied on Defendants' representations. 283. By reason of the reliance on Defendants' misrepresentatioris and omissions by the Plaintiffs, " their participants, dependents, and retirees, Plaintiffs have been damaged. 284. Defendants knew or acted with reckless indifference to the facti that nicotine was addictive, - Defendants manipulated the amount of nicotine levels in the tobacco products, and Defendant& intended to addict cigarette smokers but refrained from disclosing the facts to cigarette smokers, for the purpose of inducing them to purchase tobacco products, thus causing Plaintiffs to incur economic and other damages in an amount to be proven at trial. 285. In addition to either having actual knowledge or a reckless indifference to the true facts, the conduct of Defendants amounted to a willful refusal to know or to learn. 286. The Plaintiffs are therefore entitled to damages in an amount to be proven at trial, punitive damages, plus interest and costs. COUNT VI NEGLIGENT MISREPRESENTATION 287. The Plaintifi's restate and incorporate herein all foregoing paragraphs of their Complaint. 288. By reason of their knowledge and expertise regarding the addictive nature of nicotine, co manipulation of the amount of nicotine level in tobacco products, intent to addict, theirrv cn ~ 71 ~p ~
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on Defendants by, inter alia, satisfying their legal duties and saving them from bearing the costs for harm proximately caused by their fraudulent and wrongful conduct. 268. Defendants knew of and appreciated the benefits that the Plaintiffs's payment of increased health care costs conferred on them. 269. Defendants' fraudulent and wrongfiil conduct, and its perpetuation, make it inequitable, unjust, and unconscionable for Defendants to retain the benefits conferred on them by the Plaintiffs. 270. The Plaintiffs are therefore entitled to restitution from Defendants for the benefits the . Plaintiffs conferred on them in order to prevent Defendants' unjust enrichment as a result of their fraudulent and wrongfiil conduct. COUNTIV ' BREACH OF VOLUNTARILY UNDERTAKEN DUTY 271. The Plaintiffs restate and incorporate herein all foregoing paragraphs of their Complaint. 272. Defendants represented that they would undertake a special responsibility and duty to Plaintiffs and those who advance and protect the public~health to accept an interest in the public's health as a basic and paramount responsibility; to cooperate closely with those who safeguard the public health; to aid and assist the research effort into all aspects of tobacco use and human health; to continue to research and otherwise undertake all possible efforts to learn all the facts and to discover the truth about smoking and health; and finally, to disclose to the Plaintiffs and their participants, dependents, and retirees complete and accurate information about the effects of cigarette smoking on human health. 273. Defendants undertook to render such services recognizing that they were necessary for the protection of the public health, including the health of millions of the Plaintiffs' participants, dependents, and retirees. 274. Defendants have breached and continue to breach their special responsibility and duty by failing to exercise reasonable care to protect their undertaking. Defendants' failure to use due care in performing the duty that they voluntarily undertook to perform increased the risk of harm to the public, including the risk that Plaintiffs' participants, dependents, and retirees would become addicted to smoking and suffer illness and death from smoking-related causes, and thereby increase the costs of health care paid by the Plaintiffs above and beyond what it 69
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• marketers and policy makers with an enriched understanding of the mores and motives of this important emerging adult segment which can be applied to better decision making in regard to products and programs directed at youth." The study focused on the "primary elements of lifestyles and values among the youth of today," in learning how to market products to children and teens. E. AN ONGOING CONSPIRACY 225. At least as early as the 1950's, Defendants entered into an agreement for the unlawful purposes of (a) suppressing and concealing material scientific and medical information , concerning smoking, addiction and diseases; (b) representing falsely at various times to the government, the public, and Plaintiffs that they would undertake a special responsibility to make all possible efforts to learn all the facts and to discover and disclose the truth about smoking and health; (c) attempting to keep Plaintiffs' and the public ignorant of the true facts regarding smoking and addiction, in order to thwart and delay aggressive measures and/or to reduce smoking and nicotine addiction. 226. Defendants agreed to act jointly and to cooperate with each other in this conspiracy with a primary purpose of misleading Plaintiffs and causing them to delay taking aggressive measures to reduce and/or eliminate smoking and nicotine addiction. Additionally, Defendants agreed to act jointly and to cooperate with each other to mislead the public and Plaintiffs, causing Plaintiffs'-participants and beneficiaries,:particularly minors, to start or continue to smoke Defendants' dangerous, disease-causing cigarettes. These deceptions would not have been possible for each cigarette manufacturer acting individually. Through their combined actions of intentional misrepresentation and concealment over the last four decades, Defendants have managed to control the material information concerning smoking and health. 227. In furtherance of their conspiracy, the cigarette manufacturers formed the Tobacco Industry ' Research Council, its successor Council for Tobacco Research, and the Tobacco Institute, whose true purpose was not to discover and disclose the facts about smoking and health, but to thwart and delay, efforts of Plaintiffs to reduce and/or eliminate smoking and nicotine addiction. A further purpose of TIRC, CTI?, and TI was to gain the public's confidence so . that the cigarette manufacturers could suppress and conceal those damaging facts more effectively. 60
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228. The TIRC, CTR and TI actively participated in the conspiracy to conceal suppress and diflu' se all information about the hazards of cigarette smoking. 229. In furtherance of Defendants' conspiracy, Defendants also intentionally restrained and suppressed research, development, production and marketing of safer cigarettes and agreed to suppress information regarding the adverse health consequences of their products. In furtherance of their conspiracy, Defendants also gave encouragement and substantial assistance to each other and otherwise aided and abetted each other in perpetrating these wrongful acts. ' 230. Defendants intended to protect profits by controlling the public information about smoking and health, and by manipulating nicotine to create and sustain addiction to Defendants' products. These actions were done to benefit the conspirators, with the natural and necessary consequence of causing Plaintiffs not to take or to delay taking aggressive preventive measures and of addicting Plaintiffs' participants, beneficiaries, and minors to cigarettes. F. TOLLING OF APPLICABLE STATUTE OF LINIITATIONS 231. Any applicable statutes of limitation have been tolled by Defendants' affirmative and intentional acts of fraudulent concealment, suppression and denial of the facts as alleged above. On information and belief, such acts of fraudulent concealment included intentionally covering up and refn' sing to disclose internal documents, suppressing and subverting medical h and scientific-research, and failing to disclose and suppressing information concerning the health consequences of smoking, the addictive properties of nicotine and the defendant cigarette manufacturers' manipulation of the levels of nicotine yield in their cigarettes to addict Plaintiffs' participants and beneficiaries. Through such acts of fraudulent concealment, Defendants have successfully concealed from Pktintiffs and their participants and beneficiaries the truth about the health consequences of smoking, the addictive nature of cigarettes and the defendant cigarette manufacturers' manipulation of nicotine yield levels in their cigarettes, thereby tolling the running of any applicable statutes of limitation. Plaintiffs and their participants and beneficiaries could not reasonably have discovered the true facts until very recently, the truth having been fraudulently and knowingly concealed by Defendants for years. 232. In the alternative, Defendants are estopped from relying on any statutes of limitation because of their fraudulent concealment of the health consequences of smoking, the addictive nature 61
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( ~CYRCi3IT)' .CO[TItT OF '~E1~TNESSEE - 140 ADAMS AVENUE MEMPHSS,'PENNESSEEBS103 FOR THE THIRTIETH JUDICIAI. DISTRICT AT MEMPHIS' SUMMONS IN CIVIL ACTION NO_ AD DAMNUM $ AUTO 0 OTHER 0 STE_APWITrEESLOCAh.UNYON N0. 614 HPALTH. . ANI)'1niFTFARF. FIR7I), hy and tRTon+g1i i` c~ Trn+. - e$:,_ TENNESSEE CARPECTTER.S REGIONAI. HEALTH. fAND T,r7ELFAA3' jt ~ Welfare Flald), by and through itsTrusfiees d through its PLAINTIFF Trustees, on behalf of themselves and all.others sir.Lilarly situated. VS PHII7LP NARRIS. ZNC., et al. Home Address Business Address Home Add ess DEFENDANT Business Address • C} TOTjH'3DEP'h.NDANT.(8):.IARILTARD TOBACCO CONI,PAS7X C SERVE TfMUGH: Prentiss-Hall Cox'P oxati5?n $Ysterq g a 2. IfliiAn Sq. Chattanooga, TN 37402-2571 You are hereby summoned and required to defend a civil action by filing your answer with the `Clerkof the Court and serving a copy of your ansAC;r:ry1:., Ti.EN'; w Q thA~~~~ la DFROW GOM• E$O •aAd . TRIPTET 7,',!~`r.7, `QR,,. E$.(? Plaintiffs attorney, whose address is 200 .Teffexson Avenue, . Siai;te 1400 3?e.repHi_s-, TN 38103 within THIRTY (30) DAYS-after-this summons has been served upon you, not including the day of service. If you fail to do so, a judgment by-default may be taken against you for the relief demanded in the Complaint. Kenny W. Armstrong, Clerk & Master D.C. TESTED AND ISSUED 19 ~ JIMMY MOORE, Clerk TO THE DEFENDANT (S): . NOTICE: Pursuant to Chapter 919 of the Public Acts of 1980 you are hereby given the following notice: Tennessee law provides a four thousand dollar ($4000.00) personal property exemption from execution or seizure to satis[y a judgtnent If a judgment should be entered against you in this action and you wish to claim property as exempt, you must file a written list, under oath[ •of the items you w-ish, to' claim, as exempt withh the Clerk of the Court. The list may be filed at any time and may be changed by you thereafter as necessary, however, unless It is filed before the judgment becomes final, it will not be effective as to any execution or garnishment issued prior to the filing of the ILst. Certain items are automatically exempt by law and do not need to be listed: these include Itema of necessary wearing apparel (clothing) for yourself and your family and trunks or other receptacles necessary to contain such apparel, family portraits, the family Bible, and school booics. Should any of these items be seized, you would have.the right to recover them. If you do not understand your exemption right or how to exercise.it, you maywish to seek the counsel of a lawyer. -' COST BOND I hereby acknowledge and'bind myself for the prosecution of this action'and payment of all costs not to exceed $500.00 in this court which may at any time be adjudged against the plaintiff in the event the said plaintiff shall not pay.the same. . ; . - - - Witness My Hand this Day of . 19 - ' Co -Certification when applicable CP , ~ N ~ Surety
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addictive properties of nicotine and other harmful effects of cigarettes and tobacco products by agreeing to undertake joint funding and control of studies regarding the effect of tobacco products and alternative tobacco products on human health and to undertake joint funding and control of the publication, and promotion of the results of these studies. Defendants also agreed to suppress, distort, and neutralize independent scientific and medical research into the ~ cause and treatment of cigarette-related illness. 256. Through these and other agreements, understandings, and joint undertakings, Defendants suppressed and witbheld information on the true causal relationship between tobacco products and various diseases, the addictive properties of nicotine and Defendants' manipulation of the level of nicotine in tobacco products from medical researchers, state and federal governments, and medical and health care providers and payors. 257. Defendants' contract, combination, or conspiracy had the express purpose and effect of restraining; suppressing and withholding information necessary to medical care researchers, providers, and payors so that the costs of health care for smoking-related illnesses continued to be borne by health care providers and payors, such as th'e Health and Welfare Trust Fund, - were injured in their business and property by, among other things, having to provide or pay for the health care costs of persons with smoking-related diseases without being reimbursed by Defendants. 258. Unless ei}joinedfrom doing so, Defendants will continue to engage in a contract, combination, or conspiracy in violation of Tenn. Code Ann. §§ 47-25-101 and 47-25-102, and the Plaintiffs will continue to suffer substantial injuries to its business and property as a direct I9 result of Defendants' anti-competitive activity. C. RESTRAINT OF TRADE IN MARUT'T FOR CIGARETTES AND OTHER TOBACCO PRODUCTS WITH THE PURPOSE OF AFFECTING THE HEALTH CARE MARKET 259. Plaintiffs restate and incorporate herein all foregoing paragraphs of this Complaint. 260. Beginning at a time uncertain, but at least as early as the 1950's, and continuing until the present date, Defendants entered into a contract, combination, or conspiracy in unreasonable restraint of trade and commerce in the market for cigarettes and other tobacco products in the State of Tennessee, in willful and/or flagrant violation of Tenn. Code Ann. §§ 47-25-101 and 47-25-102. 67
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` of nicotine and the defendant cigarette manufacturers' manipulation of nicotine yield levels in their cigarettes. Defendant cigarette manufacturers were under a duty to disclose their ma.nipulation of nicotine levels in their cigarettes because this is nonpublic information over which such Defendants had exclusive control, because such Defendants knew this information was not available to Plaintiffs and their participants and beneficiaFies, and because this information was crucial to the consuming public in making purchasing decisions. 233. Until very recently, Plaintiffs and their participants and beneficiaries had no knowledge that Defendants were engaged in much of the wrongdoing alleged herein. Because of the fraudulent and active concealment of the wrongdoing by Defendants, including deliberate efforts -- which continue to this day - to give Plaintiffs and their participants and beneficiaries the materially false impression that there are no negative health consequences to smoking cigarettes, that cigarettes do not cause cancer and other disease, that nicotine is not addictive and that defendant cigarette manufacturers are not manipulating the nicotine levels and delivery of their cigarettes, Plaintiffs could not reasonably have discovered the wrongdoing and, time prior to this time, nor could the Plaintiffs have,?as a practical matter, taken legally effective action given the unavailability, until very recently, of internal memoranda and other documents (as generally described herein) as evidence in support of their claims. Defendants have attempted and are continuing their attempts to keep such internal information from reachingPleintiffs and their participants and beneficiaries. Indeed, Defendants still refuse to admit, and continue to conceal, the fact that smoking Defendants' cigarettes causes disease and that nicotine in Defendants' cigarettes is addictive. The cigarette manufacturers still refuse to admit that they have manipulated the level and delivery of nicotine in their cigarettes. IX. CLAIMS FOR RELIEF COUNT I VIOLATIONS OF THE TENNESSEE CONSUiyD;R PROTECTION ACT 234. Plaintiffs restate and incorporate herein all foregoing paragraphs of this complaint. 235. The Defendants have committed unfair and deceptive acts and practices in violation of the Tennessee Consumer Protection Act, Tenn. Code Ann. § 47-18-104, including but not limited to: a. Causing likelihood of confusion or of misunderstanding as to the source, i 62
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0 sponsorship, approval or certification of goods in the sale of cigarettes, in violation of Tenn. Code Ann. § 47-18-104(b)(2); b. Representing that goods, specifically cigarettes, have characteristics, ingredients, uses, or benefits that they do not have in violation of Tenn. Code Ann. § 47-18-104(b)(5); c. Representing that goods, specifically cigarettes, are of a particular standard, quality, or grade, if they are of another in violation of Tenn. Code Ann. § 47- 18-104(b)(5); d. Misrepresenting material facts, failing to disclose material facts, and other deceptive trade practices in the sale of cigarettes, in violation of Tenn. Code Ann. § 47-18-104(b)(27); and e. Failing to disclose facts to buyers that, if disclosed, may have influenced the :. buyers not to purchase cigarettes, in violation of § 47-18-104(b)(27). 236. Defendants' misrepresentations and failures to disclose include without limitation: a. Defendants' misleading and deceptive statement and practices relating to the issue of smoking and heahh, including intentional misrepresentations that there is no proof of causal connection between cigarette smoking and adverse health effects and that cigarette smoking is not addictive, in violation of.Tenn. Code Ann. § 47-18-104(b)(27); - b. Defendants' misleading and deceptive statements and practices relating to the industry's false promises to conduct and disclose objective research on the issue of smoking and health, in violation of Tenn. Code Ann. § 47-18- 104(b)(27); and c. Defendants' concealment, including intentional concealment, of information relating to the issue of smoking and health and failure to disclose material fact, in violation of Tenn. Code Ann. § 47-18-104(b)(27). 237. Each of the Defendants knew or should have known that these acts or practices were in violation of the Tennessee Consumer Protection Act, Tenn. Code Ann. § 47-18-104. 238. TIRC, CTR, and Tobacco Institute served as agents of each of the cigarette manufacturer Defendants, with the exception that TIRC and/or CTR were not agents of Liggett prior to 63
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0 239. Liggett joining CTR in 1964. Each of the cigarette manufacturers are liable as principals for the acts of each of the trade associations in violation of the Tennessee Consumer Protection Act. Defendants' actions in violation of the Tennessee Consumer Protection Act took place primarily within the State of Tennessee. 240. As a proximate result of Defendants' conduct, the Plaintiffs have suffered and will continue to suffer losses, and the Plaintiffs are therefore entitled to treble damages, attorney fees, and court costs pursuant to Tenn. Code Ann. § 47-18-109. COUNT H VIOLATION OF TENNESSEE STATUTORY PROVISIONS REGULATING RESTRAINT OF TRADE BY TRUSTS A. RESTRAINT OF TRADE IN MARKET FOR CIGARETTES AND OTHER TOBACCO PRODUCTS TO RESTRI~T PRODUCT OUALITY AND CHOICE 241. Plaintiffs restate and incorporate herein all foregoing paragraphs of this Complaint. 242. Beginning at a time uncertain, but at least as early as the 1950's, and continuing until the present date, Defendants entered into a contract, combination, or conspiracy in unreasonable restraint of trade and commerce in the market for cigarettes and other tobacco products in the State of Tennessee, in willfiil and/or flagrant violation of Tenn. Code Ann. §§ 47-25-101 and 47-25-102. 243. Defendants entered into a contract, combination, or conspiracy to eliminate competition, including the dissemination of product information regarding the quality, safety and composition of cigarettes and tobacco products, thereby eliminating alternative products from the market, restricting consumer choice, and causing consumers to suffer smoking-related illnesses and health care costs. These health care costs are inextricably intertwined with, and flow directly from, the anti-competitive restriction of product choice and suppression of product information. 244. In furtherance ofDefendants' contract, combination, or conspiracy to eliminate competition, including the dissemination of product information regarding the quality, safety and composition of cigarettes and tobacco products, Defendants restrained and suppressed research on the hannfiil effects of cigarettes and tobacco products; restr'ained and suppressed 64
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research into the adverse health effects of their products, and by reason of their statements to consumers in advertisements and other communications, at all times relevant hereto, Defendants owed the Plaintiffs and their participants, dependents, and retirees a duty of care which required, among other things, that Defendants be truthful and accurate in their representations to the Plaintiffs, their participants, dependents, and retirees concerning their tobacco products. 289. Defendants breached their duty of care to the Plaintiffs by negligently making the material misrepresentations alleged herein. 290. The Plaintiffs, their participants, dependents, and retirees reasonably relied on Defendants' representations, when in fact those representations constituted negligent misrepresentations. 291. Such reliance was not only foreseeable by Defendants but also intended by them, and it was ~ foreseeable to Defendants that such reliance would cause injury to the Plaintiffs, their parflcipants; dependents, and retirees because the Plaintiffs would incur increased health care costs. 292. The conduct of Defendants as more fully described above, all done to maximize sales and profit at the expense ofthe pubfic's health and safety,.was outrageous and performed with evil motive, intent to injure, ill will and without legal justification or excuse. 293. The Plaintiffs are therefore entitled to damages in an amount to be proven at trial, punitive damages, plus interest and costs. COUNT VH BREACH OF EXPRESS WARRANTY 294. The Plaintiffs restate and incorporate herein all foregoing paragraphs. 295. Defendants' advertisements and promotional statements contained broad claims amounting to a warranty that their products were not addictive, that they did not manipulate the nicotine levels in tobacco products, that they did not intend to addict Plaintiffs, their participants, dependents, and retirees, and that there were no adverse health effects arising from the use of their products. ~ 296. Defendants breached their warranties by offering for sale, and selling as non-addictive, tobacco products that were addictive and contained levels of nicotine manipulated to make them addictive. 72
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COUNTIX NEGLIGENCE 305. The Plaintiffs restate and incorporate herein all foregoing paragraphs. 306. Defendants had a duty to the Plaintiffs, their participants, dependents, and retirees to provide a reasonably safe product in design and manufacture, and to warn of the addictive nature of + nicotine and the defective nature oftheir products. 307. Defendants breached this duty of reasonable care by the following acts and omissions: a. failure to design and manufacture tobacco products that were not addictive, that did not contain unreasonable levels of nicotine, and/or did not minimize adverse health effects; b. failure prior to 1969 to wam Plaintiffs and their participants, dependents, and retirees of the addictive nature of nicotine when they knew or should have known of nicotine's addictive nature and of the adverse health effects of their products when they knew or should have known of these adverse health effects; and c. otherwise failing to exercise due care under the circumstances. 308. As a direct and proximate result of the carelessness and negligence of Defendants, Plaintiffs' participants, dependents, and retirees have become addicted to Defendants' tobacco products and have suffered adverse health effects and the Plaintiffs have suffered reasonably foreseeable damages. - 309. At all times relevant hereto, Defendants actually knew of the defective nature of tobacco products as herein set forth and continued to design, manufacture, market and sell tobacco ' products so as to maximize sales and profits at the expense of the publics' health and safety in conscious disregard of the foreseeable harm caused by these products. 310. The Plaintiffs are therefore entitled to damages in an amount to be proven at trial, punitive damages, plus interest and costs. COUNT X ViOLATIONS OF TENNESSEE PRODUCTS LIABILITY ACT 311. The Plaintiffs restate and incorporate herein all foregoing paragraphs. 312. At all relevant times, Defendants were engaged in the business of manufacturing, marketing, selling and supplying tobacco products for ultimate retail sale to consumers. Defendants 74
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261. In furtherance of this contract, combination, or conspiracy, and as a necessary step in effectuating its anticompetitive ends,. Defendants suppressed, distorted, neutralized and opposed dissemination of valid scientific and medical information and research concerning the health effects and addictiveness of tobacco products necessary to health care providers and payors, such as the Health and Welfare Trust Fund, as well as information necessary to judges, legislators and regulators. 262. Such actions were taken with the express purpose and effect of imposing payment of the costs of medical care for cigarette-related illnesses on health care payors such as the Plaintiffs and preventing the assumption of those costs by Defendants. 263. As a direct result of this contract, combination or conspiracy, health care providers and payors, such as the Health and Welfare Trust Fund, were injured in their business and property by, among other things, having to provide or pay for the health care costs of persons with smoking-related diseases without being reimbursed by Defendants through the civil justice system, the tax system or other regulatory mechanisms. 264. Unless enjoined from doing so, Defendants will continue to <engage in a contract, combination or conspiracy in violation of Term. Code Ann. §§ 47-25-P01 and 47-25-102, and the Health and Welfare Trust Funds will continue to suffer substantial injury~to its business and property as a direct result of Defendants' anti-competitive activity. COUNT III RESTITUTION BASED ON UNJUST ENRICHMENT 265. The Plaintiffs restate and incorporate herein all foregoing paragraphs. 266. Defendants, through their fraudulent and wrongful conduct as described herein, have reaped substantial and unconscionable profits from the sale of cigarettes in Tennessee, while at the same time engendering an ongoing public health crisis of unrivaled proportions. Defendants caused a public health crisis through their sale of a product that they knew would cause addiction and illness when used as intended, and they knew that the Plaintiffs would be required to pay ongoing health care costs for their participants, dependents, and retirees with smoking-related illnesses. 267. The Plaintiffs, rather than Defendants, bore the financial burden of paying the increased health care costs caused by Defendants' fraudulent and wrongfixl conduct, thereby conferring benefits 68
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• 297. This breach of the express warranties by Defendants has caused Plaintiffs' participants, dependents, and retirees to become addicted to Defendants' tobacco products and to suffer adverse health effects. 298. It was foreseeable to Defendants that their breach of warranties would cause injury to the ' Plaintiffs because the Plaintiffs would incur increased health care costs. 299. The Plaintiffs are therefore entitled to damages in an amount to be proven at trial, plus interest and costs. COUNT XM ,~ BREACH OF IMPLIED WARRANTY 300. The Plaintiffs restate and incorporate herein all foregoing paragraphs. 301. Defendants impliedly warranted that their tobacco products, which they designed, manufactured, marketed and sold to Plaintiffs' participants, dependents, and retirees, were merchantable and fit and safe for their ordinary use. 302. Defendants' tobacco products purchased and consumed by Plaintiffs' participants, dependents, and retirees were addictive, unmerchantable, and unfit for use when sold, and subjected these persons to addiction and/or increasing addiction and: to suffer adverse health effects. Therefore, Defendants breached the implied warranty of merchantability at the time the tobacco products were sold to Plaintiffs' participants, dependents, and retirees in that the . tobacco products were not fit for their ordinary purposes. 303. As a direct and proximate result of the breach of the implied warranty of merchantability by Defendants these persons are addicted or subject to addiction to Defendants' tobacco products, and the Plaintiffs have incurred increased health care costs. It was foreseeable to Defendants that their breach ofwarranties would cause injury to the Plaintiffs because the Plaintiffs would incur increased health care costs. 304. The Plaintiffs are therefore entitled to damages in an amount to be proven at trial, plus interest and costs. 73
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COUNT XI CONSPIRACY 320. The Plaintiffs restate and incorporate herein all foregoing paragraphs. 321. Beginning at least as early as the 1950s, and continuing until the present day, Defendants entered into an agreement or understanding to commit unlawful or tortious acts or to use unlawful or tortious means to commit acts not themselves illegal, and in fact did commit unlawful or tortious acts or use unlawful or tortious means to commit acts not themselves illegal, including without limitation, restraining and suppressing research on the harmful effects of smoking; restraining and suppressing the dissemination of information on the addictive effects of nicotine and the harmful effects of smoking; engaging in affirmative misrepresentations on the addictive effects ofnicotine and the harmfiil effects of smoking; and restraining and suppressing the research, development, production, and marketing of a safer - cigarette..,Tn furtherance of Defendants' conspiracy, Defendants lent encouragement, substantial assistance, and otherwise aided and abetted each other with respect to these wrongful acts. . 322. As a direct and proximate result of Defendants' unlawfiII conspiracy, the Plaintiffs have suffered and will continue to suffer substantial injuries and damages. 323. As a result of Defendants' conspiracy, Defendants are vicariously and jointly and severally liable with,respect to each cause of action described above in Counts One through'Itvelve above. 324. The Plaintiffs are therefore entitled to damages in an amount to be proven at trial, punitive damages, plus interest and costs. co ~ ~ 76 c,a -R
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7. Granting such other and fixrther relief as this Court deems equitable, just and proper. XI. DEMAND FOR JURY TRTAT. Plaintiffs hereby demand a jury trial. DATED: -71998. co N Cl'i 78 ~o w fV ON
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X. PRAYER FOR RELYEF WHEREFORE, Plaintiffs pray for relief and judgment against the Defendants, jointly and severally, as follows: 1. For injunctive and declaratory relief: 1 (a) Requiring Defendants to disclose, disseminate, and publish all research pieviously, conducted directly or indirectly by themselves and their respective agents, affiliates, servants, officers, directors, employees, and all persons acting in concert with them, that relates to the issue of smoking and health and addiction; (b) Requiring Defendants to fund a corrective public education campaign designed to reduce smoking as rapidly as possible, administered and controlled by an independent third party; (c) Requiring Defendants to cease advertising and promotion campaigns that attract minors to begin smoking; : (d) Requiring Defendants to fund smoking cessation programs including the provision of nicotine replacement therapy for dependent smokers; (e) Requiring Defendants to disclose the nicotine yields of their cigarettes based on realistic human smoking behaviors for each brand; (f) Declaring that the Defendants have violated the provisions of the Tennessee Consumer Protection Act, Tenn. Code Ann. § 47-18-104; and (g).4 Enjoining Defendants and their respective successors, agents, servants, officers, directors, employees and all persons acting in concert with them, directly or indirectly, from engaging in conduct violative of Tenn. Code Ann. § 47-18-104. t 2. Awarding damages and compensation to Plainti8's for past and future damages, including but not limited to health care expenditures caused by the Defendants' actions in violation of any laws, together with interests and costs. 3. Ordering Pre judgment and Post judgment interest, as provided by law. 4. Awarding punitive damages in an amount to punish Defendants and to deter future conduct. 5. Ordering treble damages pursuant to Tenn. Code Ann. § 47-18-109. (See ¶ 239 su ra). 6. Awarding Plaintiffs reasonable attorneys' fees and costs. 77
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0 related illnesses. A foreseeable and necessary consequence of Defendants' contract, combination, or conspiracy has therefore been the cost of medical care for users of Defendants' products suffering from smoking-related illnesses. These medical care costs are inextricably intertwined with the injury Defendants sought to inflict on competition in the market for tobacco products and flow directly from the conspiracy to suppress and withhold product information and suppress competition for alternative, higher quality and safer cigarettes and tobacco products. 250. Defendants' contract, combination, or conspiracy has accordingly resulted in a substantial injury to the business and property ofPlaintiffs' participants and beneficiaries, who would not have purchased cigarettes for the same price and in the same quantity in the absence of Defendants' contract, combination, or conspiracy and would not have suffered smoking- related illnesses and associated health care costs. < 251. The Defendants' contract, combination, or conspiracy has also caused a substantial injury to the business and property of the Health and Welfare Trust Funds, for the Defendants' conduct has resulted in a substantial increase in the cost of medical care for their participants and beneficiaries. The Funds have been required to bear these increased costs. 252. Unless enjoined from doing so, Defendants will continue` toengage in a contract, combination, or conspiracy in violation of Tenn. Code Ann. §§ 47-25-101 and 47-25-102, and the Health and Welfare Trust Funds will continue to-suffer substantial.injuries to its businesses and property as a direct result of Defendants' anti-competitive activity. B. RESTRAINT OF TRADE IN MARKET FOR HEALTH CARE TO WITHHOLD NECESSARY MEDICAL INFORIVIATION 253. Plaintiffs restate and incorporate herein all foregoing paragraphs of this Complaint. 254. Beginning at a time uncertain, but at least as early as the 1950's, and continuing until the . present date, Defendants entered into a contract, combination, or conspiracy in unreasonable restraint of trade and commerce in the market for cigarettes and other tobacco products in the State of Tennessee, in willful and/or flagrant violation of Tenn. Code Ann. §§ 47-25-101 and 47-25-102. 255. Defendants entered into a contract, combination or conspiracy to restrain and suppress research and other scientific and medical information on smoking-related illnesses and the 66
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i Respectfully submitted, AGEE, ALLEN, GODWIN, MORRIS, LAURENZI & HAMIi.TON, P.C. 200 Jefferson Avenue Suite 1400 Memphis, Tennessee 38103 (901) 528-1702 (901) 528-0246 Facsimile TIMQ O 0 R1 9 AYLOR, C,ONNERTON & RAY 1920 L Street, N.W l. Fourth Floor Washington, D.C. 20036-5004 (202) 466-6790 " (202) 659-3458 Facsimile 79 ROBERT J. CONNERTO JOHN BROADDUS V
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0 the dissemination of information on the addictive properties of nicotine and other harmful effects of cigarettes and tobacco products; and restrained and suppressed the competition, research, development, production and marketing of alternative, higher quality, and safer cigarettes and tobacco products. 245. In fistherance of their conspiracy, Defendants entered into an agreement to undertake joint ; funding and control of studies regarding the effect of tobacco products on human health, and to undertake joint funding and control over trade publications and promoting and marketing efforts. Through these and other agreements, understandings, and joint undertakings, Defendants conspired to suppress and withhold information on the true causal relationship between tobacco products and various diseases from consumers, state and federal governments, medical and health care entities, and the public at large. 246. Defendants further entered into an agreement to suppress and withhold information on the . addictive, properties of nicotine and to manipulate the level of nicotine in tobacco products. 247. Defendants also conspired to eliminate competition among themselves in the research, development, production and marketing of alternative, higher quality, and safer cigarettes and • tobacco products. - _ 248. Defendants' contract, combination, or conspiracy has ha&~the purpose and effect of restraining competition in the market for cigarettes and tobacco products in the State of Tennessee„ of preventing the sale of alternative, higher quality, and safer cigarettes and tobacco products, of artificially inflating the price of and demand for Defendants' cigarettes and tobacco products, of erecting barriers to competition and entry into the market and protecting the structure of the market, of causing the suppression of information that would otherwise have affected consumer and regulatory behavior, and of causing millions of persons to purchase cigarettes and tobacco products when they otherwise would not have done so. The natural effect of the conspiracy has been to raise and stabilize prices, wrongfully increase Defendants' profits, restrain and suppress competition in the research, development, production, and sale of alternative products, and standardize the tobacco products manufactured and sold in the State of Tennessee. 249. The contract, combination, or conspiracy also increased smoking-related illnesses and associated health care costs and artificially suppressed research and treatment of smoking- 65
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• would have been had Defendants not publicly represented that they were going to engage in the undertaking at all. 275. As a direct and proximate result of Defendants' conduct, the Plaintiffs have suffered and will continue to suffer substantial injuries and damages for which the Plaintiffs are entitled to recovery. COUNT V FRAUD ANI) DECEIT 276. The Plaintiffs restate and incorporate herein all foregoing paragraphs of their Complaint. 277. At all times during the course of dealing between Defendants, through advertising in the mass - media and by other communications, Defendants repeatedly made the misrepresentation that nicotine is not addictive and that cigarette smoking is not a proven cause of disease. Moreover, Defendants have recently stated that they do not manipulate nicotine levels in their tobacco products so as to addict consumers. The individual and cumulative effect of these . misrepresentations was to mislead the Plaintiffs and their participants, dependents, and retirees as to the addictiveness and actual health effects of cigarette smoking. 278. 7n representations to the Plaintiffs and their participants, dependents, and retirees, Defendants omitted the following material information: (1) nicotine is~ addictive and Defendants manipulate nicotine levels in their tobacco products so as to addict consumers; and (2) . Defendants--had detailed knowledge of the harmfiil health effects of cigarette smoking. 279. Defendants were under a duty to disclose to the Plaintiffs and their participants, dependents, and retirees the addictive nature of nicotine; the manipulation of the nicotine levels in tobacco products; their intent to addict the cigarette consuming public; and the full extent of their research on the adverse health effects of using their products. Defendants had sole access to material facts concerning the addictive nature of nicotine; the manipulation of nicotine levels in tobacco products; the intent to addict Plaintiffand the cigarette consuming public; and their research on the adverse health effects of using their products. Defendants knew that, prior to their addiction to nicotine, Plaintiffs and their participants, dependents, and retirees their participants, dependents, and retirees could not reasonably have discovered the addictive nature of nicotine; the manipulation of the nicotine levels in tobacco products; the intent to addict Plaintiff and the cigarette consuming public; and Defendants' research on the adverse 70
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0 c. Addison Yeaman, general counsel at Brown & Williamson, summarized his view about nicotine in an internal memorandum also in 1963: "Moreover, nicotine is addictive. We are, then, in the business of selling nicotine, an addictive drug effective in the release of stress mechanisms." d. Internal reports prepared by Philip Morris in 1972 and the Philip Morris U.S.A i Research Center in March 1978, demonstrate Philip Morris' understanding of the rolp. ~ of nicotine in tobacco use: "We think that most smokers can be considered nicotinp Y seekers, for the pharmacological effect of nicotine is one of the rewards that come from smoking. When the smoker quits, he foregoes [sic] his accustomed nicotine. The change is very noticeable, he misses the reward, and so he returns to smoking." e. From 1940-1970, ATC conducted its own nicotine research, funding over 90 studies on the pharmacological and other effects of nicotine on the body, 80% of all .. .; biological studies funded by ATC over this period. In 1969, ATC even test marketed a nicotine-enriched cigarette in Seattle, Washington. ~ f. In a 1972 document entitled `BJR confidential research planning memorandum on the nature of the tobacco business and the crucial role of nicotine therein," an RJR executive wrote: "In a sense, the tobacco industry, may be thought of as being a . specialized, highly ritualized, and specialized segment of the pharmaceutical industry. . .^Tobaccos products uniquely contain and deliver nicotine, a potent drug with a variety of physiological effects." 2. Supnression and Concealment of Research on Nicotine Addiction , . 153. The cigarette manufacturers, rather than fulfilling their promise to the public to disclosn, material information about smoking and health, chose a course of suppression, concealmenP and disinformation to Plaintiffs and the general public about the true properties of nicotine and the addictiveness of smoking. 154. Philip Morris hired V ctor DeNoble in 1980 to study nicotine's effects on the behavior of rat -, and to research and test potential nicotine analogues. DeNoble, in turn, recruited Paul C. Mele, a behavioral pharmacologist. 45
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0
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IN THE COURT OF APPEALS OF TENNESSEE WESTERN SECTION AT JACKSON STEAMFITTERS LOCAL UNION NO. 614 HEALTH ) AND WELFARE FUND, by and through its Trustees, ) TENNESSEE CARPENTERS REGIONAL HEALTH ) AND WELFARE FUND (formerly Carpenters National ) Health and Welfare Fund), by and through its Trustees, ) MIDDLE TENNESSEE TEAMSTERS TRUST FUND, ) by and through its Trustees, IRON WORKERS ) DISTRICT COUNCIL OF TENNESSEE VALLEY & ) VICINITY WELFARE PLAN, by and through its ) Trustees and on behalf of themselves and all others ) similarly situated, ) Plaintiffs, ) ) V. ) Case No. 02A01-9905-CV-00120 ) PHILIP MORRIS, INC., R.J. REYNOLDS TOBACCO ) COMPANY, BROWN & WILLIAMSON TOBACCO ) CORPORATION, B.A.T. INDUSTRIES P.L.C., ) LORILLARD TOBACCO COMPANY, LIGGETT ) GROUP, INC., THE AMERICAN TOBACCO ) COMPANY, THE COUNCIL FOR TOBACCO ) RESEARCH - U.S.A., INC., THE TOBACCO ) INSTITUTE, INC., SMOKELESS TOBACCO ) COUNCIL, INC., HILL & KNOWLTON, INC., ) UNITED STATES TO$ACCO COMPANY, ) UNITED STATES TOBACCO MANUFACTURING ) COMPANY, INC., GALLER WHOLESALE, ) d/b/a P.M. GREEN & SONS, INC., TENN-MISS ) DISTRIBUTORS, ) ) Defendants. ) DEFENDANTS' SUBMISSION OF SUPPLEMENT TO EXHIBIT B TO DEFENDANTS' REPLY BRIEF COME NOW the Defendants and file the attached Supplement to Exhibit B to Defendants' Reply Brief for consideration by the Court.
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IN THE COURT OF APPEALS OF TENNESSEE WESTERN SECTION AT JACKSON STEAMFITTERS LOCAL UNION NO. 614 HEALTH ) AND WELFARE FUND, by and through its Trustees, ) TENNESSEE CARPENTERS REGIONAL HEALTH ) AND WELFARE FUND (formerly Carpenters National ) Health and Welfare Fund), by and through its Trustees, ) MIDDLE TENNESSEE TEAMSTERS TRUST FUND, ) by and through its Trustees, IRON WORKERS ) DISTRICT COUNCIL OF TENNESSEE VALLEY & ) VICINITY WELFARE PLAN, by and through its ) Trustees and on behalf of themselves and all others ) similarly situated, ) ) Plaintiffs, ) ) V. ) Case No. 02A01-9905-CV-00120 ) PHILIP MORRIS, INC., R.J. REYNOLDS TOBACCO ) COMPANY, BROWN & WILLIAMSON TOBACCO ) CORPORATION, B.A.T. INDUSTRIES P.L.C., ) LORILLARD TOBACCO COMPANY, LIGGETT ) GROUP, INC., THE AMERICAN TOBACCO ) COMPANY, THE COUNCIL FOR TOBACCO ) RESEARCH - U.S.A., INC., THE TOBACCO ) INSTITUTE, INC., SMOKELESS TOBACCO ) COUNCIL, INC., HILL & KNOWLTON, INC., ) UNITED STATES TOBACCO COMPANY, ) UNITED STATES TOBACCO MANUFACTURING ) COMPANY, INC., GALLER WHOLESALE, ) d/b/a P.M. GREEN & SONS, INC., TENN-MISS ) DISTRIBUTORS, ) ) Defendants. ) DEFENDANTS REPLY BRIEF
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0 (804) 788-8200 Mn6chew $ Calvect Fltmton &,Williams Nadot>a Bank Plaza, Su'rte 4100 600 Paachtrea Street, NE Astnnta, GA 3a30a-221i€ (404) 858-4000 Cnuauel that P9aRlp A'Smrri. inenrpanctad BAEcB M. C'iina6oTg Ilavia & Q1R+ert 17461 Htoadway N®w Yotk, NY 10019 - (212)468-480d Couhac9 for HiU & Ffaeaesltou iahn S. Read Ridley Iat. Sa+x9idge, Jt. 6zeed'V'deltkamp 8obr71 & V9ce, P'L'LC 2400 GYtiqaa Plan Loulaville, KY 40202 (502)389.1600 Caumael for i3nlted ficate' Tolaaccn Campany qSUrleg_S. Capsia,. W inetott S. 11+CU6er Brown, Tm4d & &ieybtun PLL.C 400 W. INarke4 6tenat, 32ad Finar Gctuisvit!!e, KY40202-3983 (502) 589-5400 latTroy7, 7oaes Saott C. WaJkeC Ianes, Day, tteavis & Pogua 1900 fitmtinytoa Cantes Calpmtxl5, dF 43215 (614) 4693939 Counaal ~'at 9i.,7. Reeynalda Tobacco Company 4
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• 0 recover amounts expended for the recipient"; state's subrogation rights for recovery of Medicaid expenditures arise from and are limited by statute); United States v. Trammel. 899 F,2d 1483, 1487 (6th Cir. 1990) (refusing to supplement the Govemment's right under the Medical Care Recovery Act with an independent remedy); Pennsylvania Nat'l Mut. Cas. Ins. Co. v. Bamett 445 F.2d 573, 575-76 (5th Cir. 1971) (no common law right for govenunent to recover costs of providing medical care to veteran). Further, the rule barring remote recovery applies whether the tortfeasor's conduct is intentional or negligent. Each illustration of the remoteness principle provided by the Supreme Court in Associated General Contractors involved intentional misconduct: assault and battery of a pauper (Anthony v. Slaid), trespass, and forgery. Likewise, the Court applied remoteness -principies to intentional conduct in Holmes (stock manipulation), Associated General Contractors (conspiracy in restraint of trade), and Brame (murder); see also Los Aneeles. Slip op. at 3 (citing Holmes for the proposition that "this principle [against recovery for derivative injuries] applies to both intentional and unintentional torts"). See also Southeast Florida, Slip op. at 8 (the rule against remote recovery "applies to negligent as well as intentional torts"); Laborers Local 17 Health & Benefit Fund v. Philip Morris. Inc.. 1998 WL 146217, *2 (S.D.N.Y. Mar. 25, 1998) (the rule against remote recovery "govem[s] all common-1aw claims, including the intentional torts...") (attached as Exh. 10). - As the Supreme Court observed in Associated General Contractors. 459 U.S. at 534, the legal principles requiring proximate causation and barring remote claims reflect "[t]he general tendency of the law, in regard to damages at least,... not to go beyond the first step." The rationale for these rules is underscored here. The Funds pay benefits using monies paid to the Funds by employers. Were this Court to accept the Funds' invitation to "go beyond the first step" (i.e. beyond the allegedly injured Participants) and allow suit by a payor of benefits in a direct action, the Court would be inundated with "direct action" suits from employers, insurers, and other employee benefit funds. If the Funds may bring such suits, then it also can be argued that employers and insurers also may bring such suits, thereby abrogating at least 150 years of American jurisprudence. Similarly, the Fund could bring such a suit every time someone allegedly injured one of their beneficiaries. 9
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without payment of the value thereof." Paschall's. Inc. v. Doier 407 S.W.2d 150, 155 (Tenn. 1966); Baldwin v. United American Land Co., 1995 WL 731788, at *2 (Tenn. Ct. App.. Dec. 12, 1995) (attached as Exh. 17). The unjust enrichment claim is "founded on the principle that a party receiving a benefit desired by him, under circumstances rendering it inequitable to retain it without making compensation, must do so." Id. at 155. Recovery depends upon whether the defendant was enriched "at the loss and expense of the plaintiff." Browder v. Hite, 602 S.W.2d 489,491 (Tenn. Ct. App. 1980) (quoting 66 Am.Jur. 946). The Funds' payment of medical care for its Participants has not "enriched" Defendants in any way, despite the Funds' conclusory allegations to the contrary. Defendants received no economic benefit, profit, or other form of enrichment from the Funds' expenditures. Indeed, in the Laborers Local I7 case, the court dismissed the plaintiffs' unjust enrichment claim precisely for this reason: The expenses that plaintiffs incurred were paid at the behest of their participants. They did not confer a benefit on the defendants. The simple assertion that without those payments "defendants would have been liable for lawsuits by individual smokers seeking to recover the cost of their medical care," is too speculative to constitute a benefit accepted by the defendants. 1998 WL 146217, •14 (internal citations omitted). Similarly, the Southeast Florida court held that the fund failed to allege that it conferred a benefit upon the defendants; the court explained that an unjust enrichment claim cannot be used to obligate a defendant to provide medical care to smokers where the plaintiff is legally obligated to do so.... Because the Court declines to invent a new cause of action, the plaintiff cannot, as a matter of law, state a claim for unjust enrichment. Slip op. at 11. Further, the San Francisco I court dismissed the unjust enrichment claims against the defendants in that case for the same reason: "Plaintiffs cite no benefit which has been confeaed on defendants by plaintiffs themselves." Slip op. at 30. The court stated that "[w]hile courts have broad equitable powers to redress wrongs ... plaintiffs are asking this Court to stretch its powers too far here." Id. If defendants have indeed been unjustly enriched, in that their profits were increased as a result of wrongful conduct, the enrichment was at the expense of individual smokers, not the city and counties ... While plaintiffs have unquestionably spent money on health care costs for the indigent as a result of tobacco-related 22
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injured party. The Funds here are no different, and there is no basis for ignoring well-settled law. On the facts pled, the complaint seeks to recover benefits paid by the Funds because of injuries allegedly suffered by the Funds' Participants - i.e., "to recover funds expended by the Plaintiff Funds to provide medical treatment and other benefits to their participants and beneficiaries suffering from smoking-related illnesses ..:" Complaint, 15. The Funds' purely conclusory allegations that they suffered injuries "[a]s a direct and proximate result" of Defendants' conduct, Complaint, ¶¶ 275, 303, 308, 316, 322, cannot avert dismissal because the court may accept as true only the Funds' allegations of fact -not their allegations of law: "In ruling on such a motion ... the inferences to be drawn from the facts or the legal conclusions set forth in a complaint are not required to be taken as tme." Riggs v. Butson, 941 S. W.2d 44, 47-48 (Term. 1997) (citing Dobbs v Guenther. 846 S.W.2d 270,273 (Tenn. Ct App. 1992)); see also Swallows v. Westem E1ec. Co.. Inc., 543 S.W.2d 581, 583 (Tenn. 1976) (a motion to dismiss for failure to state a claim admits only well-pled facts, not conclusions). Further, as held by the Southeast Florida court, the Funds "cannot escape the fact that any economic injuries which [they] incurred are purely derivative of the physical injuries which [their] participants suffered." Slip op. at 9. 1. Precedent Throughout the Country Precludes the Funds' Remote Claims One-hundred-fifry years of precedent from across the country precludes direct recovery for economic loss as a result of another's injuries. Whether the plaintiff is an insurer, employer, employee benefit fund, or governmental entity, the result is always the same - one who pays benefits to or for another has no direct right of action against the alleged tortfeasor. For example: Illustrative Emplovee Benefit Plan Cases: Southeast Florida, Slip op. at 6 (slip op. (S.D. Fla. April 13, 1998) (trustees of benefit fund could not maintain action against cigarette manufacturers; "everyone who sues a third-party tortfeasor to recover medical costs expended may recover only by bringing a subrogation claim and cannot sue a third-party tortfeasor directly"); Connors v. Tremont Mining Co., 835 F.2d 1028, 1029 (3d Cir. 1987) (trustees of benefit fund have "only rights of subrogation" against coal operators alleged to be liable to fund beneficiaries under Black Lung Benefits Act); Coates v A. C. and S.. Inc.. 844 F. Supp. 1126, 1134, 1137 (ED. La. 1994) (holding that health and welfare benefu fund lacked "distinct and independent" rights to sue asbestos manufacturer for injuries caused to participants by occupational asbestos exposure; fund would be limited to subrogation). Illustrative Insurer Cases: t~rn t R k t surers v Creole Prod. Serv Inc 746 F.2d 526, 528 (9th Cir. 1984) (bar against direct claims is the just result" because ttre aefenaam `st,ov%a ~vbe 7
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12-13 (dismissing breach of special duty claim against cigarette companies where plaintiff alleged no physical harm atid sought only ec6nomic compensation for higher medical expenses). Here, the Funds fail to allege that they suffered any physical harm as a result of Defendants' alleged conduct. The only harm alleged is pecuniary loss that cannot serve as the basis of a special duty claim. In a similar case, the State of Washington also alleged that the defendant made certain statements giving rise to a special duty to render direct services for the protection of public health and to assist other who protect public health. Washington Ih slip op: at 11. Although the court assumed for the purposes of deciding the defendants' motion to dismiss that such a duty was created and that the defendants breached that duty, it nonetheless dismissed the claim because the State of Washington failed to allege physical harm. Id. at 12; see also Devine v. Roche Biomedical Labs, Inc., 637 A.2d 441, 447-48 (Me. 1994) (denying recovery for emotional distress injury unaccompanied by physical injury); Sound of Market Street. Inc. v. Continental Bank Int'I 819 F.2d 384, 392 (3d Cir. 1987) (denying recovery in absence of physical injury). Accordingly, the special duty claims should be dismissed. 3. The Funds' Fraud and Negligent Misrepresentation Claims Are Deficient as a Matter of Law The Funds' complaint asserts novel and strained theories of fraud and negligent misrepresentation that cannot withstand scrutiny. Both claims should be dismissed for iwo fundamental reasons: (1) the Funds may not recover for injuries resulting from alleged misrepresentations made to third parties; and (2) as a matter of law, the Funds cannot establish that they justifiably relied upon Defendants' alleged misrepresentations. Additionally, the Funds' fraud claim should be dismissed because the Funds failed to plead it with particularity. a. The Funds May Not Recover for Fraud and Negligent Misrepresentations Directed at Third Parties Tennessee law precludes a plaintiff from recovering for fraud and negligent misrepresentation directed at a third party. Se , eg, Hill v. John Banks Buick, Inc., 875 S.W.2d 667 (Tenn. Ct. App. 1993) (plaintiff must prove that "defendants supplied information to the lap intifF'); Jasper Aviation. Inc. v. McCollum Aviation. Inc., 497 S.W. 2d 240 (Tenn. 1972) (same). A party pleading fraud and deceit must allege that the defendant misrepresented a material fact "to obtain an undue advantage over him ...." First Nat'I Bank v. Brooks Farms. 821 S.W.2d 925, 927 (Tenn. 1991). Similarly, loss for negligent misrepresentation is limited to 25
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TABLE OF CONTENTS (Continued) COUNT IV BREACH OF VOLUNTARILY UNDERTAKEN DUTY ..................................................................69 COUNT V W FRAUD AND DECEIT ............... . ................................ 7O COUNT NVI NEGLIGENT MISREPRESENTATION ... . ............................... 71 COUNT VII BREACH OF EXPRESS WARRANTY ................. . ................. 72 COUNT XIII ~ BREACH OF IMPLIED WARRANTY .................................... 73 COUNT IX NEGLIGENCE ......................................................74 COUNT X VIOLATIONS OF TENNESSEE PRODUCTS LIABILITY ACT ................ 74 COUNT XI CONSPIRACY ......................................................76 ~, . . . <. . . . _ ,k . , .. X. PRAYER FOR RELIEF .................................................. 77 XI. DEMAND FOR JURY TRIAL ............................................. 78
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lack an adequate link, and this is fatal to each of their claims. Accordingly, this Court should dismiss the Funds' complaint. - 3. The Remoteness Principle Also Bars the Funds' Statutory Claims a. Remoteness Precludes the Funds' Consumer Protection Act Claim Under Tennessee law, statutes must be construed with reference to the common law. See Harbison v. Briggs Bros. Paint MfQ. Co.- 354 S.W.2d 464 (Tenn. 1962), overruled on other rg o~ds Ennix v. Clav- 703 S.W.2d 137 (Tenn. 1986); In re Deskins' Estates- 381 S.W.2d 921 (Tenn. 1964). A statute is not presumed to change the common law unless its language explicitly declares or necessarily implies as much. Davenport v. Chrysler Credit Coro., 818 S.W.2d 23 (Tenn. Ct. App. 1991). Thus, to the extent possible, statutes must be construed in conformity with the common law. See, e.e.. Snvder v. McEwen 256 S.W. 434 (Tenn. 1923). Thus, Tennessee's Consumer Protection Act (`°1'CPA") must be applied in conformity with the common law principles of remoteness and proximate cause. The TCPA allows "[a]ny person who suffers an ascertainable loss ... as a result of the use or employment..:" of an act violating the TCPA may maintain a TCPA claim. T.C.A. § 47-18-109(a)(1) (emphasis added). The plain language of the TCPA does not evidence an intent to abrogate the common law principles of proximate cause and remoteness. Additionally, Tennessee courts have held that the TCPA embodies the principles of proximate cause and remoteness. See. e.o, Stracener v. Swindle 1995 WL 414873 (Tenn. Ct. App., July 14, 1995) (attached as Exh. 11). Accordingly, the Funds' TCPA claim against Defendants is too remote as a matter of law, and should be dismissed. b. Remoteness Precludes the Funds' Tennessee Antitrust Claim As explained above, Tennessee statutes must be construed with reference to the common law. See In re Deskins' Estates 381 S.W.2d 921 (Tenn. 1964). Like the Tennessee Unfair Trade Practices Act (TUTPA), T.C.A. § 47-25-101 et sea., must be read in conformity with the common law concepts of proximate cause and remoteness. Nothing in TUTPA's plain language evidences an abrogation of the common law requirement of proximate cause and its prohibition against recovery for remote injuries. Accordingly, the principle of remoteness applies to the Funds' TUTPA antitrust claim. ' 14
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loss suffered "by the person ... for whose benefit and guidance" the information was supplied. Robinson v. Omer, 952 S.W.2d 423, 427 (Tenn. 1997) (quoting Restatement (Second) of Torts. § 552). Here, despite the Funds' conclusory allegations to the contrary, the Funds' alleged injury is based on statements Defendants allegedly made to third parties - the Funds' Participants. The Funds try to bootstrap their claims onto alleged statements made to amorphously named third parties, such as "the public", "the cigarette consuming public", and "Plaintiffs and their participants, dependents, and retirees." Se ,e ~ Complaint, ¶¶ 277, 278, 279, 280, 290. The Funds' alleged injury, however, indisputably is based on alleged misrepresentations that allegedly induced the Funds' Participants to consume Defendants' cigarettes. The Funds specifically state that "Defendanis intended to addict cigarette smokers but refrained from disclosing the facts to cigarette smokerss for the purpose of inducing them to purchase tobacco products, thus causing Plaintiffs to incur economic and other damages in an amount to be proven at triaL" Complaint, 1284 (emphasis added). The Funds readily acknowledge that Defendants' alleged misrepresentations were directed at third parties - smokers. Such allegations do not satisfy the Funds' burden to sustain their fraud and negligent misrepresentation claims. b. The Funds Cannot Establisb Justifiable Reliance Claims for fraud and deceit and negligent misrepresentation require a showing of justifiable reliance. Holt v. American Prog. Life Ins. Co.. 731 S.W.2d 923 (Tenn. Ct. App. 1987); Atkins v. Kirknatrick 823 S,W.2d 547 (Tenn. Ct. App. 1991). To state a claim for fraud, "the plaintiff must have reasonably relied upon that representation to his injury." Haynes v. Cumberland Builders 546 S.W.2d 228, 232 (Tenn. Ct. App. 1976) (citing Whitson v. Grav. 40 Tenn. 441 (1859)). Additionally, a claim for negligent misrepresentation can be successful "only if there is justifiable reliance upon the information." Tartera v. Palumbo. 453 S.W.2d 780, 784 (Tenn. 1970). Here, the Funds conclusorily assert that Defendants induced them to rely upon their alleged misrepresentations. Se ,e e.e.. Complaint, ¶¶ 281, 291. Such conclusory allegations are insufficient to defeat a motion to dismiss. RIE4s, 941 S. W.2d at 47-48. Even assuming their veracity, the Funds' reliance was unreasonable as a matter of law in light of the decades-long 26
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0 B. The Fund's Statutory Claims Should Be Dismissed For Additional Reasons Specific To Each Count 1. The Funds' Consumer Protection Act Claim Should Be Dismissed Because the Funds Were Not "Consumers" The Tennessee Consumer Protection Act (TCPA) permits recovery only for "consumers." See T.C.A. § 47-18-102(2); L.LC. Corn. v. Baskin-Robbins Ice Cream Co.. 1993 WL 2796, *3 (Tenn. Ct. App., Jan. 8, 1993) (attached as Exh. 13); American Bldgs. Co. v. White, 640 S.W.2d 569, 575 (Tenn. App. 1982). A "consumer" is defined as any "person who seeks or acquires by purchase ... any goods, services, or property." T.C.A. § 47-18-103(2). See also Ganzevoort v. Russell. 949 S.W.2d 293, 297 (Tenn. 1997). In Quality Auto Parts Co.. Inc. v. Bluff Auto Parts Co.. Inc., the court rejected a claim by an employee that his employer violated the CPA by making allegedly disparaging statements against him. 1992 WL 379077, *2 (Tenn. Ct. App., Dec. 21, 1992), affd in parL rev'd in nart on other arounds. 876 S.W.2d 818 (Tenn. 1994) (attached as Exh. 14). The court affirmed the dismissal of the plaintiffs claims because he had not purchased anything from the defendant. Id. Thus, the plaintiff was not a"TCPA" consumer and could not maintain the claim.10 Id. Indirect consumers also may recover under the TCPA if they suffered an "ascertainable loss." See Bla~,ke 1996 WL 134947; T.C.A. § 47-18-109(a). A plaintiff suffers an ascertainable loss if he "received something less than, and different from, what [he] reasonably expected in view of the [defendant seller's] presentations." Miller v. American Family Publishers, 663 A.2d 643, 654 (N.J. 1995). A loss is not considered ascertainable if it is "a matter of conjecture and speculation." Nicholson v. Clark. 802 S.W.2d 934, 939 (Ky. Ct. App. 1990). Here, the Funds seek to recover their allegedly increased health care costs allegedly resulting from personal injuries suffered by their Participants. The Funds do not allege that they purchased Defendants' products, or that they suffered an ascertainable loss as indirect consmners. Not a single allegation in the Funds' complaint suggests that the Funds ever 1°ThelanguageoftheTCPAsupportslimitingrecoverytoconsumers. SeeT.C.A.§47-18d02(2)(policyof act to protect consumers ; § 47-18-109(a)(4) (in fixing damages, court shall consider (A) the competence of the CO consumer, (B) the namre of the deceptionor coercion practiced on the consumer, and (C) the damage to the consumer ; IV § 47-18-110 (fouryearstatute of repose runs from "date of consumertmnsaction giving rise to the claim for relie0. (J~7 .~ 1~0 1\~1 16
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public controversy over the health effects of smoking - a controversy set forth in excruciating detail in the Funds' complaint. The Funds' own complaint belies their allegation of reliance, as it points to occurrence after occurrence that renders any reliance wholly unjustifiable. The Funds acknowledge that as far back as the 1950's, several scientific studies "sounded grave warnings about the health hazards of cigarettes."" Complaint, ¶ 81. Such studies placed the Funds on notice of smoking's potential health hazards, rendering any reliance unjustifiable. Additionally, the Funds state that [i]n December of 1953, Dr. Ernest L. Wynder of the Sloan- Kettering Institute published the results of a study . . . providing biological evidence that cigarette smoke caused cancer. The previous year, a British researcher, Dr. Richard Doll, published a statistical analysis showing that lung cancer was more common among people who smoked and that the risk of lung cancer was directly proportional to the number of cigarettes smoked. Complaint, 191 (emphasis added). These oublished studies provided the Funds notice of the alleged dangers of cigarettes, thereby rendering the Funds' reliance unjustifiable. Further, Congress passed the Federal Cigarette Advertising and Labeling Act (Labeling Act) in 1965, requiring health warnings on all cigarette packages to ensure that the public was "adequately informed" about health risks associated with smoking. 15 U.S.C. § 1331 (as amended in 1969). Between 1969 and 1984, the Act required each cigarette package to contain the following statement: Warning: The Surgeon General Has Determined That Cigarette Smoking Is Dangerous To Your Health. 15 U.S.C. § I333. Since 1984, the Act has required all cigarette packages and advertising to contain one of four graphic rotating warnings, 15 U.S.C. § 1333(a)(1) and (2), which state: SURGEON GENERAL'S WARNING: Smoking Causes Lung Cancer, Heart Disease, Emphysema, and May Complicate Pregnancy. SURGEON GENERAL'S WARNING: Quitting Smoking Now Greatly Reduces Serious Risks to Your Health. SURGEON GENERAL'S WARNING: Smoking By Pregnant Women May Result in Fetal Injury, Premature Birth, and Low Birth Rate. co IV 16Public pronouncements of the alleged dangers of smoking are considerably older than that S~ ,gg., U'7 Austin v. State, 48 S.W. 305 (Tenn. 1898), afPd as mod.ified 179 U.S. 343 (1900). _~ ~10 N ~
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provide, would have no common law right of subrogation", id. at 4, and that the principle's logical corollary also precluded "direct actPons by the [remote payor] against the third party tortfeasor." Id. at 5. . Similarly, in Minnesota. 551 N.W.2d at 492 & 495, the Minnesota Supreme Court rejected common law claims asserted against cigarette companies by an insurer, Blue Cross.' The court accepted defendants' arguments that "[i]f a tort has been committed ... it was against the smoker," and the "remedy, if any, lies in [the insurers'] statutory and common law right to a subrogation claim:' Id at 494-95. Blue Cross could not assert a tort claim because the injury it asserted was "simply too remote" to permit recovery. Id. at 495. Other courts addressing reimbursement claims have reached similar conclusions: 1. In Los Aneeless slip op. at 34, the court dismissed the county's common law claims alleging intentional and negligent conduct because they were "purely derivative of the individual smokers." 2. In Washineton I. slip op. at 12-13, the court dismissed common law claims asserted by the state for failure to adequately allege proximate causation. The court also rejected the State's attempt to replead these claims. Washin on II, slip op. at 7-10. 3. In Iow slip op. at 7-8, the court dismissed Iowa's common law reimbursement claims, ruling that they were "derivative and too remote." 4. In lori slip op. at 2, the court dismissed the state's claims to recover Medicaid expenditures, except those based on a 1994 Florida statute for which there is no Tennessee equivalent. The court stated that there "can be absolutely no question that prior to the 1994 [statute] there was no indeoendent cause of action permitting the State to go forward in seeking Medicaid reimbttrsement" Additionally, in the recent Southeast Florida case, the court applied the rule against remote recovery to dismiss the health and welfare fund's similar claims. Slip op. at 5-9. The court explained that Florida law "follows the well-establish common law regarding proximate cause", id. at 8, and held that "everyone who sues a third-party tortfeasor to recover medical costs expended may recover only by bringing a subrogation claim and cannot sue a third-party tortfeasor directly." Id. at 6. ° The State of Minnesota's similar claims were not before the Minnesota Supreme Court. ' As stated earlier, the Funds, unlike state attorneys general, cannot claim to be suing in some purported "quasi sovereign" capacity. Thus, the decisions of some courts allowing some of the claims asserted by some governmental plaintiffs to proceed past the motion to dismiss stage do not in any way sanction the attempt by the Funds, as private plaintiffs, to bring this action in the face of the settled law, which bars any purported direct action on an indirect claim. 11
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0 ("Where the burden on interstate commerce so outweighs the state's interest, the state antitrust laws are not applicable"); Mtuszak v. Houston Oilers. Inc.. 515 S.W.2d 725 (Tex.Civ.App. 1974) (Texas antitrust laws have no application to professional football's reserve system); Partee v. San Die og_ hargers Football Co.. 668 P.2d 674 (Cal. 1983) (state antitrust statute not applicable to interstate activities). Similarly, the Funds' attempt to assert a TUTPA claim should be dismissed because the actions alleged are predominantly interstate in character. The complaint plainly alleges an interstate conspiracy and interstate conduct allegedly violating antitrust laws. See. e.g., Complaint, 116 (alleging violations of federal law); 19 (allegation of marketing "in the United States" and of shifting research to foreign country); 22, 27 (defendants sell products "throughout the United States"); 42-47 (providing health statistics for the United States); 54-56 (describing the "Composition of the Cigarette Industry in the United States"); 208 (alleging advertising placed in newspapers "across the United States'); 214 (providing national statistics on smoking). Not a single factual allegation in the Funds' complaint suggests that Defendants' actions occurred in or were limited to Tennessee, or even that any Fund purchased any of Defendants' products in Tennessee. Rather, the factual allegations in the Funds' complaint suggest that Defendants' alleged antitrust violations occurred within their facilities outside the State of Tennessee. Accordingly, because the Funds' TUTPA claim alleges actions that predominantly affect interstate commerce, the claim should be dismissed." C. The Funds' Common Law Claims Should Be Dismissed For Additional Reasons . Specific To Each Count 1. The Funds' Unjust Enrichment Claim Should Be Dismissed Because the Funds Did Not "Enrich" Defendants and the Funds have an Adequate Remedy at Law To maintain a claim for unjust enrichment, a plaintiff must allege "a benefit conferred upon the defendant by the plaintiff, appreciation by the defendant of such benefit, and acceptance of such benefit under such circumstances that it would be inequitable for him to retain the benefit ° Blake does not suggest a different result. In Blke the court rejected the defendants' argument that the plaintiffs' TUTPA claim should be dismissed because of certain activities that had some affect on interstate commerce. 1996 WL 134947,'4-5. The court °fzil[edj to find an allegation that the alleged conspiracy took place outside the State or that the transactions complained of occurred outside the state." Id. at'4. Here, on the other hand, none of the Funds' allegations suggest that the alleged conspiracy took place in Tennessee or that any transaction between the Funds and Defendants occurred in Tennessee. The decision in Blke is inapplicable to this case. 21
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Individual and proposed class representatives, Steamfitters Local Union No. 614 Health and Welfare Fund, Tennessee Carpenters Regional Health and Welfare Fund (formerly Carpenters National Health and Welfare Fund), and bfiddle Tennessee Teamsters Trust Fund, (hereinafter collectively referred to as the "Plaintiff Funds," "Plaintiffs," or the "Funds°), on behalf of themselves and all other similarly situated Health and Welfare Trust Funds in Tennessee (hereinafter referred to f, as the "Class"), allege the following: L NATURE OF THE ACTION 1. For years, and continuing to date, the Defendant cigarette manufacturers and their trade associations have engaged in a conspiracy to mislead, deceive and confuse the Plaintiff Funqs and other health care payors throughout the United States regarding the overwhelming evidence that cigarette smoking causes fatal disease, and that the nicotine in cigarettes is a powerfully addictive substance. Although the cigarette manufacturers promised the public that they.would lead the effort to discover and disclose the truth about smoking and health, they have, in fact, systematically suppressed and concealed material information and waged an aggressive campaign of disinformation about the health consequences of cigarette smoking. The cigarette manufacturers have taken these actions,-eventhough they have known for years, based on their own secret research, that their products eventually injure or kill the consumer when used exactly as intended. 2. For decades the cigarette manufacturers have known on the basis of their own long-concealed research, that nicotine is addictive. At the same time, at least certain Defendants hav6 developed sophisticated techniques to manipulate the nicotine delivery of cigarettes so as t4 create and sustain addiction in smokers. Yet publicly the cigarette manufacturers have denied and continue to deny that nicotine is addictive and that they manipulate the nicotine delivery of cigarettes. In April 1994, each of the Chief Executive Of&cers of the Defendant cigarette manufacturers testified before the Congressional Subcommittee on Health and the Environment that nicotine is not addictive. 3. The cigarette manufacturers have been engaged in this sort of conduct despite their knowledge that the vast majority of new smokers are children and teenagers. Of daily smokers, eighty-two percent start before the age of eighteen. Every day more than 3,000 American teenagers begin smoking. 1
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sought to impose special duty liability on cigarette company defendants based on the "Frank Statement." 674 F. Supp. 1149, 1156 (E.D. Pa. 1987). The court held that "the American Tobacco Company's general statements in advertising [do not] constitute an assumption of a duty to plaintiff to perform research and inform him of all dangers of cigarette smoking." Id. at 1157. The district court in Cipollone v. Liggett Group. Inc., reached the same conclusion. 683 F. Supp. 1487, 1495 (D.N.J. 1988). Thus, as a matter of law, Defendants cannot be held to have undertaken a special duty based upon statements in advertising. The Funds' claim also should be dismissed for failing to allege that they suffered physical harm as a result of Defendants' alleged actions. A special duty claim must include allegations that the plaintiff suffered actual physical harm. See, e.¢., Restatement (Second) of Torts §§ 324A (stating that a party performing a special duty "is subject to liability ... for physical harm resulting from his failure to exercise reasonable care'). The tort, which is predicated upon Section 324A of the Restatement (Second) of Torts, holds that [o]ne who undertakes, gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of a third person or his things, is subject to liability to the third person for physical harm resulting from his failure to exercise reasonable care to protect14 his undertaking ... (emphasis added). Physical harmn is defined as "the physical impairment of the human body, or of land or chattels." Restatement (Second) of Torts § 7(3). Courts uniformly interpret this rule to exclude economic or commercial injury, as is alleged here. Dudley v. Unisys Com.852 S.W.2d 435, 438 (Tenn. Ct. App. 1992) (claim for breach of special duty requires allegation of "physical harm proximately caused by the [defendant] actor"); Benco Plastics. Inc. v. Westinehouse Elec. Coro., 387 F. Supp. 772, 786 (E.D. Tenn. 1974) (refusing to apply Section 324A in the absence of physical injury to the constuner).15 See also Washineton II. Slip op at '" The word "protect" is a typographical error and should be "perform." See Hil I v. United States FideliN & Guaraniv Co. 428 F.2d 112, 115 n.2 (S" Cir. 1970); Gaines v. Excel Indus., Ine.. 667 F. Supp. 569, 571 n.l (M.D. Tenn.1987). 's The Laborers Local 17 court denied the defendants' motion to dismiss the plaintiffs' special duty claim, holding that New York law contradicts the Restatement by not requiring that plaintiffs suffer physical hann. 1998 WL 146217, *12. That decision is inapposite here, because Tennessee law does require plaintiffs advancing breach ofspecial duty claim to allege physical harm. 24 O\
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0 8. This action is based upon the deliberate and willful misconduct by Defendants. Some of Defendants' misconduct and offenses came to light as the result of congressional hearings in 1994 and subsequent investigation by private and public entities. The Defendantc' misconduct, actions and statements are violations in the following areas of law: a. Tennessee Consumer Protection Act: Defendants have committed unfair and deceptive trade practices in violation of the Tennessee Consumer Protection Act by their misleading and deceptive statements and practices relating to the issue of smoking and health, including intentional misrepresentations that there is no, proof of causal connection between cigarette smoking and adverse health effects and that cigarette smoking is not addictive; misleading and deceptive statements and practices relating to the industry's false promises to conduct and disclose objective research on the issue of smoking and health; and their concealment, including intentional concealment, of information relating to the issue of smoking and health and failure to disclose material facts. b. . Tennessee Antitrust Act: J Beginning at least as early as the 1950's, and continuing to the present, Defendants entered into a contract, combination, or conspiracy in restraint of trade in the market for cigarettes in the State of Tennessee. Defendants have agreed to restrain and eliminate competition in that market in order to sell nicotine-laden cigarette products and nicotine delivery devices to consumers. The Defendants' conspiracy had the purpose and effect of unreasonably restricting the quality of the cigarettes manufactured and sold in Tennessee by retarding the research, development, production, and sale of alternative products. The conspiracy to control and maintain the market was accomplished in part by anti- competitive patent accumulation practices restraining and suppressing research on the harmful effects of smoking and the development of alternative, higher quality, and safer competitive cigarettes. Defendants also entered into contracts, combinations, or conspiracies to protect the cigarette market by restraining the market for health care. The purpose of those conspiracies was to suppress and withhold information on the true causal relationship between cigarette smoking and various diseases. ~ 1 3
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0 tobacco manufacturers, including the above-named Defendants. The registered agent for service of process on P.M. Green is Mr. August Anthony Galler, 656 Madison Avenue, Memphis, Tennessee. At all times relevant to this action, P.M. Green was, and continues to be, an integral link in the chain of distribution for tobacco products in the State of Tennessee. Through its distribution of tobacco products, P.M. Green has participated in the wrongful acts of the Defendant manufacturers, both as agent and co-conspirator. 1 30. Defendant Tenn-Miss Distributors (`"fenn-Miss") is a Tennessee corporation with its principlT place of busines at 605 Scott Street, Memphis, Tennessee. Tenn-Miss is a wholesale tobacco distributor that receives its tobacco products directly from tobacco manufacturers, including the above-named Defendants. The registered agent for service of process on Tenn-Miss is Mr. Paul Oliver, 605 Scott Street, Memphis, Tennessee. At all times relevant to this action, Tenn-Miss was, and continues to be, an integral link in the chain of distribution for tobacco products in the State of Tennessee. Through its distribution of tobacco products, Tenn-Miss has participated in the wrongful acts of the Defendant manufacturers, both as agent and co- conspirator. . 31. As used in this Complaint, the term "Defendant" includes all predecessor and successor entities to the n$med Defendants. 32. Each Defendant cigarette manufacturer and each Defendant trade association is sued individually as a primary violator and as an aider and abettor. In acting to aid and abet the commission of the fraud and other wrongful conduct complained of herein, each Defendant acted with an awareness of the fraud and other wrongful conduct. Each Defendant nonetheless rendered substantial assistance or encouragement to the accomplishment of tha@ fraud and was aware of its overall contribution to the conspiracy, scheme, and commo~ course of wrongful conduct alleged herein: the manipulation of nicotine content in cigarettes, the misrepresentation, concealment and suppression of information regarding the health consequences of smoking and the addictive properties of nicotine, the deceptive practices relating to "light" cigarettes, the restraint of trade in the market for a less dangerous cigarette, . and the targeting of minors. 33. Each Defendant cigarette manufacturer and each Defendant trade association is sued as a co- conspirator. The liability of each Defendant arises from the fact that each such Defendant 13
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purchased or used Defendants' products. Accordingly, the Funds were not direct or indirect consumers and the Court should dismiss the Funds' TCPA claim. 2. Tbe Funds' Antitrust Claim Should Be Dismissed Because the Funds Failed to - Allege an Antitrust Injury Tennessee courts require plaintiffs alleging state law antitrust violations to establish that they suffered an antitrust injury. In Ghem. Inc. v. Maoco Petro., lnc., 850 S.W.2d 447 (Tenn. 1993), the Tennessee Supreme Court applied the "antitrust injury" requirement to the Tennessee Petroleum Trade Practices Act, which is substantially similar to TUTPA in substance and in its intent to prevent unlawful restraints on trade." In Ghem, Inc. the Court reviewed the history of the antitrust injury reqtrirement, surveying United States Supreme Court precedent from Brunswick Corp. v. Pueblo BowI-O-Matic, Inc.. 429 U.S. 477 (1977), to Atlantic Richfield Co. v. USA Petroleum Co. 495 U.S. 328 (1990). After reviewing these seminal decisions, the Court explicitly held that an antitrust injury is a prerequisite to an antitrust claim. Id. at 453-56_ Accordingly, an antitrust plaintiff must prove "antitrust injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Id. at 457 (quoting Brunswick, 429 U.S. at 489). See also Kerr v. Hackney Petro. Tennessee. Inc. 775 S. W.2d 600 (Tenn. Ct. App. 1988) (antitrust injury is essential element of Tenn. Code Ann. § 47- 25-623). - Regardless of an injury's causal connection to an antitrust violation, an injury is not an antitrust injury "unless it is attributable to an anticompetitive aspect of the practice under scrutiny." Atlantic Richfield Co. 495 U.S. at 334. Such an injury is caused by higher prices, reduced output, or damage to a competitor's business. The existence of an antitrust injury is a "threshold requirement" in an antitrust case. See, e. _g., Careill. Inc. v. Monfort of Colorado. Inc., 479 U.S. 104, 107 (1986). "Without antitrust injury, no private antitrust action will lie at law or in equity." Valley Products Co.. Inc. v. Landmark, 128 F.3d 398, 402 (6'h Cir. 1997). The antitrust injury requirement establishes that the antitrust laws were not designed "to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust " Seccion 47-25•611 of the Petroleum Trade Practices Act states that "[n]o dealer shall make ... sales at retail at below cost to the retailer, where the effect is to injure or destroy competition or substantially lessen competition ...:' 17
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143. Liggett never marketed the safer cigarette, a product called "XA," and abandoned the XA project. On information and belief, Liggett did so for two reasons. First, disclosing the . feasibility of a safer cigarette would imply that all existing cigarettes were not safe. Second, Philip Morris apparently threatened Liggett with retaliation if Liggett violated the industry agreement not to disclose negative information on smoking and health. Liggett's Assistant Research Director, Dr. James Mold, reported that Liggett's president said that he was "told by someone in the Philip Morris Company that if we tried to market such a product that they would clobber us." 10. Liggett, James Mold and the Suppression of the XA Research 144. During the XA project, Liggett attempted to insulate the research by the use of company lawyers. According to Dr. Mold, after 1975, "all meetings that we had regarding this project were to be attended by a lawyer .... All paper that was generated ...[was] to be directed to the Law Department." Dr. Mold stated that lawyers even collected all the notes after each meeting. 145. Dr. Mold stated that despite its significance, the conipany lawyers not only ultimately succeeded in stopping the project, but ordered him not to publish the results of the research that led to the safer cigarette. The consulting firm published only an abstract of the paper, modified by the legal department, without Dr. Mold's name. ' 146. When asked why.Liggett never marketed the safer XA cigarette. Dr. Mold explained that: "[Management circles] felt that such a cigarette if put on the market would seriously indict them for having sold other types of cigarettes that didn't contain this, for example. Or that they were carrying on this biological research at the same time saying it meant nothing." 11. Liegett Safer Cigarette Patent 147. Liggett had also obtained a patent for the process it had discovered to produce its safer cigarette. The patent application described the reduction in cancer in mouse studies, prompting stories in the media that Liggett was the first cigarette company to admit that smoking caused cancer. Liggett responded by issuing a press release it called a "Liggettgram" which stated: k 42
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P 155. DeNoble and Mele discovered that nicotine met two of the hallmarks of potential addiction -- self-administration (rats would press levers to inject themselves with a nicotine solution) anI tolerance (a given dose of nicotine over time had a reduced effect). 156. However, Philip Morris instructed DeNoble and Mele to keep their work secret, even from fellow Philip Morris scientists. Test animals were delivered at dawn and brought from the loading dock to the laboratory under cover. 157. Lawyers for the company told DeNoble that the data he and Mele were generating could be dangerous. Philip Morris executives began talking of killing the research or moving it outside of the company so Philip Morris would have more freedom to disavow the results. 158. In August 1983, Philip Morris ordered DeNoble to withdraw from publication a research paper on nicotine that had already been accepted for publication after a full peer review, by the journal "Psychopharmacology." According to DeNoble, the company changed its mind because-it did not want its own research showing nicotine was addictive or harmfiil t~ compromise the company's defense in litigation recently filed against it. He said that Philip Morris officials had correctly interpreted the suppressed'nicotine studies as showing that, in terms of addictiveness, "nicotine looked like heroin." ' 159. In April 1984, Philip Morris closed DeNoble's nicotine research lab. DeNoble and Mele ~ were forced abruptly to halt their studies, turn off all their instruments and turn in their security badges by morning. Philip Morris executives threatened them with legal action if they published or talked about their nicotine research. According to DeNoble, the lab literally vanished overnight. The animals were killed, the equipment was removed, and all traces of the former lab were eliminated. 160. DeNoble testified to the Waxman Subcommittee that "senior research management in Richmond, Va:, as well as top officials at the Philip Morris Company in New York, continually reviewed our research and approved our research." DeNoble also stated that these officials were specifically told that nicotine was a drug of abuse. 161. Brown & Williamson undertook its potentially sensitive research on nicotine through a contractor in Geneva, Switzerland, and through British affiliates at an English lab calleti Harrogate. 46
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Antitrust injury, a component of the standing inquiry, is an "injury of the type the antitrust laws were intended to prevent and that flows from that which makes the defendants' conduct unlawful". .. The State's alleged injuries are increased medical care costs caused by Medicaid recipients' consumption of tobacco products. Assuming arguendo the State has alleged unlawful acts, the State has not alleged an antitrust injury of the type the antitrust laws were designed to protect. Texas, slip op. at 20-21 (citations omitted). The court in the City of Birmingham's medical expense recovery suit recently rejected the City's request to file an amended complaint asserting an antitrust claim by opining: "Oh, no; no; no. Come on. I am not going to allow that..,. It's clear that these plaintiffs cannot possibly have standing to present an antitrust claim." City of Birmineham v. American Tobacco Co, No. - 0097-P-1449-W, Hearing Tr. at 23-24 (N.D. Ala. October 2, 1997) (attached as Exh. 15). The same is true here. An antitrust claim analogous to the Funds' claims was dismissed more than twenty years ago in In re Multidistrict Vehicle Air Pollution. 367 F. Supp. 1298 (C.D. Cal. 1973), affd, 538 F.2d 231 (9th Cir. 1976). There, Attorneys General from several states brought a parens patriae antitrust action against automobile manufacturers for allegedly conspiring to delay the development of effective air pollution control devices, asserting that the resulting smog damaged the states and their respective citizens. The court held that this was not an°antitrust injury": - Antitrust laws ... are not intended - nor do they purport to be - a panacea to cure all the ills that befall our citizenry by the accident that some damages or injury may have been caused by a business enterprise . . . Defendant's conspiracy, as now defined by plaintiffs, is one addressed not to the marketplace, but rather to joint tortfeasors refusing, or delaying in, the abatement of an existing and continuing public nuisance ...[T]he redress for such unlawful conduct, is not found in the antitrust laws. Id- at 1304-05. In sum, this Court should not countenance the Funds' attempt to recast Defendants' allegedly tortious conduct as an antitrust violation. See Brooke Group Ltd. v. Brown & Williamson Tobacco Com., 509 U.S. 209, 225 (1993) (antitrust laws should not be misused to convert torts into antitrust claims); In re Multidistrict Vehicle Air Pollution. 367 F. Supp. at 1305 (rejecting "attempt to squeeze nuisance body into an antitrust form"). The Funds' have not alleged an antitrust injury, and the claim should be dismissed. 19
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f. Neelieent misrenresentation: By reason oftheir knowledge and expertise regarding the addictive nature of nicoti,ne, manipulation of the amount of nicotine level in tobacco products, intent to addict, their research into the adverse health effects of their products, and by reason of their statements to consumers in advertisements and other communications, at all times relevant hereto, Defendants owed the Plaintiffs and their participants, dependents, and retirees a duty of care which required, among other things, that Defendants be truthful' and accurate in their representations to the Plaintiffs, their participants, dependents, and retirees concerning their tobacco products. g. Breach of express and implied warranties: Defendants' advertisements and promotional statements contained broad claims amounting to a warranty that their products were not addictive, that they did not manipulate the nicotine levels in tobacco products,:that they did not intend to addict Plaintiffs, thei~ participants, dependents, and retirees, and that there were no adverse health effects arising from the use of their products. Defendants breached theiT warranties by offering for sale, and selling as non-addictive, tobacco products that were addictive and contained levels of nicotine manipulated to make them addictive. Defendants impliedly warranted that their tobacco products, which they designed, manufactured, marketedand sold to Plaintiffs' participants, dependents, and retirees, were merchantable and fit and safe for their ordinary use. Defendants' tobacco products purchased and consumed by Plaintiffs' participants, dependents, and retirees were addictive, unmerchantable, and unfit for use when sold, and subjected these persons to addiction and/or increasing addiction and to suffer adverse health effects. Therefore, Defendants breached the implied warranty of merchantability at the time the tobacco products were sold to Plaintiffs' participants, dependents, and retirees in that the tobacco products were not fit for their ordinary purposes. h. Neelinence: Defendants had a duty to the Plaintiffs, their participants, dependents, and retirees to provide a reasonably safe product in design and manufacture, and to warn of the addictivi nature of nicotine and the defective nature of their products. Defendants breached this duty w (V U7 5 , ~ N U-1 C !q
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SURGEON GENERAL'S WARNING: Cigarette Smoke Contains Carbon Monoxide. Congress has determined that these statutorily prescribed warnings are legally adequate to inform of any alleged health risks of smoking. 15 U.S.C. § 1334. The provisions of the Labeling Act cannot have escaped the Funds' notice. Indeed, as a matter of law, the Funds are bound to knowledge of this federal statute, as "everyone ... is changed with knowledge of the law." Sexton v. Sevier County, 948 S. W,2d 747, 751 (Tenn. Ct. App. 1997) (citing Davis v. Metrooolitan Gov't of Nashville, 620 S. W.2d 532, 535 (Tenn. Ct. App. 1981)).° The Labeling Act and its accompanying warnings render the Funds' alleged reliance unjustifiable as a matter of law. Even before the public pronouncements cited in the Funds' complaint, the Surgeon General's pronouncements, and Congress' pronouncements, the risks associated with smoking were well known. A century ago, the Tennessee Supreme Court noted that [cigarettes are] wholly noxious and deleterious to health ... Beyond question, their every tendency is toward the impairment of physical health and mental vigor. There is no proof in the record as to the character of cigarettes; yet their character is so well and so generally known to be that stated above that the courts are authorized to takejudicial cognizance of the fact. Austin. 48 S.W. at 305; see also Allgood v. R.J. Reynolds Tobacco Co., 80 F.3d 168, 172 (5th Cir.), cert. denied, 117 S. Ct. 300 (1996) (court dismissed smoker's fraud claim because "[I]ike the dangers of alcohol consumption, the dangers of cigarette smoking have long been known to the community" (citing Rovsdon v. R.J. Reynolds Tobacco Co., 849 F.2d 230, 236 (6th Cir. 1988)); Pauah v. RJ. Revnolds Tobacco Co., 834 F. Supp. 228, 230-231 (N.D. Ohio 1993). In Rovsdon, the Sixth Circuit noted that "[t]he normal use of cigarettes is known by ordinary consumers to present grave health risks." Rovsdon. 849 F.2d at 236. The court explained that tobacco has been used for over 400 years and ... its characteristics have also been fully explored. Knowledge that cigarette smoking is harmful to health is widespread and can be considered part of the common knowledge of the community. " Thfs Court may take judicial notice of statutory, regulatory, and judicial assertions conceming the health risks of smoking. Seey. ~o. Board of Educ. v. Cobb, 557 S. W.2d 276 (Tenn. 1977) (court may take judicial notice of agency regulations); American Nat'I Bank v. Bradford, 188 S.W.2d 971 (Tenn. Ct. App. 1945) (courts of course do take judicial notice of published opinions of their own and of other courts ...:'); Hardwick v. State, 74 Tenn. 103, 104 (1880) (Judicial notice of statutes). 28
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Defendants' conspiratorial conduct was motivated by their desire to maintain the status quo in the cigarette industry - to perpetuate the unregulated and unfettered sale of f nicotine in their products - thereby creating and maintaining a stabilized market demand if through nicotine dependency in consumers. c. Unjust enrichment: Defendants, through their fraudulent and wrongful conduct as described herein, have reaped substantial and unconscionable profits from the sale of cigarettes in Tennessee, whilb at the same time engendering an ongoing public health crisis of unrivaled proportions. Defendants caused a public health crisis through their sale of a product that they knew would cause addiction nnd illness when used as intended, and they knew that the Plaintiffs would be required to pay ongoing health care costs for their participants, dependents, and retirees with smoking-related illnesses. . -:; d::. I_3reach of a voluntarily undertaken dutv: r Defendants represented that they would undertake a special responsibility and duty to Plaintiffs and those who advance and protect the public health to accept an interest in the public's health as a basic and paramount responsibility; to cooperate closely with those who safeguard the public he,alth; to aid and assist the research effort into all aspects of tobacco use and human health; to continue to research and otherwise undertake all possible efforts to leanl all the facts and to discover the truth about smoking and health; and finally, to disclose to thl Plaintiffs and their participants, dependents, and retirees complete and accurate information about the effects of cigarette smoking on human health. e. Fraud and deceit: ' At all times during the course of dealing between Defendants, through advertising in the mass media and by other communications, Defendants repeatedly made the misrepresentation that nicotine is not addictive and that cigarette smoking is not a proven cause of disease. Moreover, Defendants have recently stated that they do not manipulate nicotine levels in their tobacco products so as to addict consumers. The individual and cumulative effect of these misrepresentations was to mislead the Plaintiffs and their participants, dependents, and retirees as to the addictiveness and actual health effects of cigarette smoking. 4
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of reasonable care by their failure to design and manufacture tobacco products that were not i addictive, that did not contain unreasonable levels of nicotine, and/or did not minimize adverse health effects; failure prior to 1969 to warn Plaintiffs and their participants, dependents, and retirees of the addictive nature of nicotine when they knew or should have known of nicotine's addictive nature and of the adverse health effects of their products when they knew or should have known of these adverse health effects; and otherwise failing to exercise due care under the circumstances. i. 'B'ennessee Products Liability Act: Defendants were engaged in the business of manufacturing, marketing, selling and supplying tobacco products for ultimate retail sale to consumers. These tobacco products were expected to and did reach the purchaser without substantial change in their condition as manufactured, manipulated, marketed and sold by Defendants. Plaintiffs' participants, dependents, and retirees consumed the tobacco products in the manner in which the tobacco i products were intended to be used, that is, for personal consumption, causing and/or subjecting them to become addicted to nicotine and tobacco products and to suffer adverse health effects. It was foreseeable to Defendants that their design, manufacture, and the marketing and sale of the tobacco products would cause injury to the Plaintiffs because thi; Plaintiffs would incur increased health care costs. Defendants' tobacco products, containing manipulate.d levels of nicotine, as manipulated by Defendants, constitute defective and/or unreasonably dangerous products under Tennessee law. . j. Cons iracy- Beginning at least as early as the 1950s, and continuing until the present day, Defendants entered into an agreement or understanding to commit, and did in fact commit, ~ unlawful or tortious acts, including without limitation, restraining and suppressing research on the harmful' effects of smoking; restraining and suppressing the dissemination of information on the addictive effects of nicotine and the harmful effects of smoking; engaging in affirmative misrepresentations on the addictive effects of nicotine and the harmful effects of smoking; and restraining and suppressing the research, development, production, and marketing of a safer cigarette. In fiutherance of Defendants' conspiracy, Defendants len?. CO N 6 ~p <J, ~
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"Liggett and the cigarette industry continue to deny, as they have - consistently, that any conclusions can be drawn relating such test results on mice in laboratories to cancer in human beings. It has never been established that smoking is a cause of human cancer." "The laboratory experiments reported in the patent were conducted for Liggett by an independent researcher, The Life Sciences Division of Arthur D. Little, Inc." 148. At the time Liggett made this statement, Dr. Mold estimates that Liggett had spent a total of $10 million on research involving mice, in part to develop the safer XA cigarette. Liggett's internal reports on the benefit of the XA, and the absence of increased risk of harm from the additives used, specifically used animal studies as reliable indicators of the health effect of the product on humans. 149. Despite overwhelming scientific evidence and the confirmation of this evidence by their own internal research, the cigarette manufacturers and their trade associations continue to this day to repeat over and over, in a unified stance, that there is no causal connection between cigarette smoking and adverse health effects. These representations are misleading, deceptive and untrue. They rest at the heart of the industry's ongoing conspiracy to market and profit from a product it knows is deadly. Il 43
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0 C. THE ROLE OF NICOTINE IN SMOKING 150. The cigarette industry has also made every effort to conceal and deny that nicotine is a powerfully addictive substance. While carefully studying its addictive character and acting upon that knowledge to maintain cigarette sales, each of the cigarette manufacturers haq denied that nicotine is addictive. 151. This public deception and the industry's secret manipulation of nicotine were and are critically important to the cigarette manufacturers. As objective researchers increased their warnings ofthe health dangers of cigarettes, nicotine addiction kept people smoking. This second front in their strategy to sell their dangerous products allows the cigarette manufacturers to continue to sell their dangerous products even to those who eventually come to doubt the industry's health claims. And if a new consumer is fooled for a time by "pro-cigarette" disinformation on health, and takes up smoking, it may well be too late. Instead of a simple decision not to purchase a product, the consumer must fight an addiction. 1. Industry KnowledQe of the Addictiveness of Nicotine 152. Cigarette manufacturers have known since at least the early 1960s of the addictive properties of the nicotine contained in the cigarettes they manufacture and sell. Industry documents are replete with evidence of such knowledge. ?~ a. In 1962, Sir Charles Ellis, scientific advisor to the board of directors of BATCO, Brown &Williamson's parent company; stated at a meeting of BATCO's worldwide - subsidiaries, that "smoking is a habit of addiction" and that "[n]icotine is not only ~ very fine drug, but the technique of administration by smoking has considerable psychological advantages. ..." He subsequently described Brown & Williamson as being "in the nicotine rather than the tobacco industry." b. A research report from 1963 commissioned by Brown & Williamson states that when a chronic smoker is denied nicotine,"[a] body left in this unbalanced state craves for renewed drug intake in order to restore the physiological equilibrium. This unconscious desire explains the addiction of the individual to nicotine." No information from that research has ever been voluntarily disclosed to the public or the plaintiffs. 44
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e. Brown & Williamson and its parent company, British American Tobacco Company (`BATCO"), researched the health effects of nicotine and were aware early on, as reported at a B.A.T. Group Research Conference in November 1970, that "nicotine may be implicated in the aetiology [cause] of cardiovascular disease. ..." f A 1961 "Confidential" memorandum from the consulting research firm hired by Liggett to do research for the company states: "There are biologically active materials present in cigarette tobacco. These are: a) cancer causing b) cancer promoting c) poisonous d) stimulating, pleasurable, and flavorful." g. A 1963 memorandum from the Liggett consulting research firm states: "Basically, we .. -., accept the inference of a causal relationship between the chemical properties of ingested tobacco smoke and the development of carcinoma, which is suggested by th e ~ statistical association shown in the studies of Doll and Hill, Horn, and Donn with some reservations and qualifications and even estimate by how much the incidence of cancer may possibly be reduced if the carcinogenic matter can be diminished, by an appropriate filter, by a given percentage." " 97. These internal Liggett documents sharply contrast with the information Liggett provided to the Surgeon General in 1963. Liggett withheld from the Surgeon General the views of its researchers and consultants that the evidence showed cigarette smoking causes human disease. 98. The report Liggett presented to the Surgeon General omitted all of these views. Instead, it focused on alternative causes of disease, such as air pollution, coffee and alcohol consumption, diet, lack of exercise, and genetics. Liggett criticized the known statistical association between smoking and mortality and various diseases as "unreliably conducted" and inadequately analyzed." The Liggett report concluded that the association between smoking and disease was inconclusive and was in fact due to other factors coincidentally associated with smoking. ] 30
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173. DeNoble did discover such an analogue, but Philip Morris chose to halt its effort to determine whether the nicotine analogue could be used to make a safer cigarette. On information and belief, Philip Morris decided not to pursue nicotine analogues in order to avoid risking adverse publicity and compromising the industry's consistent position that there was no alternative design for cigarettes. 174. Brown & Williamson also understood that nicotine was the essential ingredient in maintaining - tobacco sales. The company attempted to develop a "safer" cigarette which internal documents described as "a nicotine delivery device." 175. By the end of the 1970's, however, Brown & Williamson, in a pattern that was repeated st throughout the industry, closed its research labs and halted all work on a safer cigarette. ~ 176. R7k's efforts to develop a safer cigarette also focused on delivering nicotine to the consumer without the harmful constituents of tobacco smoke. In the late 1980's, RJR developed and test marketed Premier, a virtually tobacco-free cigarette which was, in essence, a nicotine delivery system. _ 177. The cigarette manufachxrers have affirmatively misreprese,nted the role of nicotine in tobacco use to consumers and to Plaintiffs, their participants and beneficiaries. Even today, Brown & Williamson, RJR and TI continue to claim that nicotine is important in cigarettes for taste and "mouth-feel." However, tobacco industry patents specifically distinguish nicotine from flavorants,.,_ An~RJR book on flavoring tobacco, while listing approximately a thousand flavorants, fails to include nicotine as a flavoring agent. The cigarette industry has actually concentrated on developing technologies to mask the acrid flavor of increased levels of nicotine in cigarettes. 4. Industry Control and Manipulation of Nicotine 178. Cigarette manufacturers have developed and used highly sophisticated technologies designed to deliver nicotine in precisely calculated quantities -- quantities that are more than sufficiet}t , to create and sustain addiction in the vast majority of individuals who smoke regularly~Cigarette manufacturers control the nicotine content of their products through selective breeding and cultivation of plants for nicotine content and careful tobacco leaf purchasing plans. The companies control nicotine delivery (i.e. the amount absorbed by the smoker) with various design and manufacturing techniques. 49
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help the U.S. industry for these reports to be passed on to the Surgeon General's Committee." ` 167. Similarly, an RdR-MacDonald Marketing Summary Report from 1983 concluded that the primary reason people smoke "is probably the physiological satisfaction provided by the nicotine level of the product." . 168. To this day, the cigarette manufacturers have concealed from the public and the Plaintiffs their extensive knowledge of the addictive properties of nicotine and its critical role in smoking: 169. As recently as December 1995, the Wall Street Journal reported on an internal Philip Morris draft document analyzing the competitive market for nicotine products for the years 1990 - 1992. The report describes the importance of nicotine: "Different people smoke for different reasons. But the primary reason is to deliver nicotine into their bodies.... It is a physiologically active, nitrogen containing substance. Similar organic chemicals include nicotine, quinine, cocaine, atropine and morphine. While each of these substances can be used to affect human physiology, nicotine has a particularly broad range of influence. During the smoking act, nicotine is inhaled into the lungs in smoke, enters the bloodstream and travels to the brain in about eight to ten seconds." 170. The cigarette manufacturers have long understood that reducing or eliminating nicotine from their products wbuld hurt sales. As one company researcher wrote in a 1978 report to Philip Morris executives: "If the industry's introduction of acceptable low-nicotine products does make it easier for dedicated smokers to quit, then the wisdom of the introduction is open to debate." " 171. Instead, the industry attempted to develop ostensibly safer ways of delivering adequate dose's of nicotine to create and sustain addiction in the smoker. 172. Some members of the industry studied artificial nicotine or nicotine analogues that would have the addictive and psychopharmacological properties of nicotine without its dangerous effects on the heart. Philip Morris hired Dr. DeNoble, in part, to research and develop a nicotine analogue. m ND C~ 48 ~O N ~ O~N
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manufactured their tobacco products, manipulated the level of nicotine in their tobacco products and through their sales and marketing efforts sold these tobacco products to retailers, who in turn sold the tobacco products to Plaintiffs' participants, dependents, and retirees. 313. These tobacco products were expected to and did reach the purcha~er without substantial change in their condition as manufactured, manipulated, marketed and sold by Defendants. 314. Plaintiffs' participants, dependents, and retirees consumed the tobacco products in the manner in which the tobacco products were intended to be used, that is, for personal consumption, causing and/or subjecting them to become addicted to nicotine and tobacco products and to suffer adverse health effects. 315. These persons were not aware of the addictive nature of tobacco products, the manipulation of the nicotine levels of these tobacco products, Defendants' intent to addict them, and the adverse health effects of the tobacco products. 316. As a direct and proximate result ofDefendants' design, manufacture, and the marketing and sale ofthe.tobacco products, these persons have suffered addiction or adverse health effects or are subject to addiction to said products or adverse health effects and the Plaintiffs have suffered damages. It was foreseeable to Defendants that their design, manufacture, and the marketing and sale of the tobacco products would cause injury to the Plaintiffs because the Plaintiffs would incur increased health care costs. - 317. Defendants' tobacco products, containing manipulated levels of nicotine, as manipulated by Defendants, which caused or subjected Plaintiffs' participants, dependents, and retirees to become addicted to nicotine and the tobacco products upon personal consumption and to suffer adverse health effects from the use of these products, constitute defective and/or unreasonably dangerous products under Tenn. Code Ann. § 29-28-105. 318. At all times relevant hereto, Defendants actually knew of the defects herein set forth and continued to design, manufacture, market and sell tobacco products so as to maximize sales and profits at the expense of the public's health and safety in conscious disregard of the foreseeable harm caused by these products. 319. The Plaintiffs are therefore entitled to damages in an amount to be proven at trial, punitive damages, plus interest and costs. 75
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162. In 1963, Brown & Williamson debated internally whether to disclose to the U.S. Surgeog General, who was preparing his first official report on smoking and health, what the company knew about the addictiveness of nicotine and the adverse effects of smoking on health. Addison Yeaman, general counsel, advised Brown & Williamson to "accept its responsibility" and disclose its findings to the Surgeon General. He said that such disclosure would then allow the company openly to research and develop a safer cigarette. 163. Brown & Williamson rejected Yeaman's advice to make full disclosure to the Surgeon General. A series of six letters and telexes exchanged by Yeaman and senior BATCO official A.D. McCormick between June 28 and August 8, 1963, document the company's decision not to disclose its research findings to the Surgeon General. That research, some of which was later characterized in a report in the Journal of the American Medical Association as "at the cutting edge of nicotine pharmacology," preceded the main published reports from the general scientific community by several years. 3. The Industry's Interest in Nicotine 164. A chronology of the industry's research and development activities confirms that the cigarette manufacturers understood early on that nicotine was the key to their industry's success. Tho industry has conducted extensive research establishing that smokers require a certain level a~ nicotine from their cigarettes and that tobacco "satisfaction" is attributable to nicotine's effect on the body after absorption. - 165. Philip Morris internal reports from 1972 and 1978 characterize the role of nicotine in tobacco use: "The cigarette should be conceived not as a product but as a package. The product is nicotine .... Think of the cigarette pack as a storage container for a day's supply of nicotine .... Think of the cigarette as a dispenser for a dose unit of nicotine." 166. Documents from a BATCO study called Project Hippo, uncovered only in May 1994, show that as far back as 1961, this cigarette company was actively studying the physiological and pharmacological effects of nicotine. Project Hippo reports were circulated to other U.S. cigarette mattu~'acturers and to TIRC, demonstrating that at least some of the industry's nicotine research was shared. BATCO sent the reports to officials at Brown & Williamson and RJR, and circulated a copy to TIRC with a request that TIRC "consider whether it would (DO N 0~ 47 t0 N f; CS~
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a. A Philip Morris patent application discusses an invention that "permits the release ... in controlled amounts and when desired, of nicotine into tobacco smoke." b. Another Philip Morris patent application explains that the proposed invention "is particularly useful for the maintenance of the proper amount of nicotine in tobacco smoke," and notes that "previous efforts have been made to add nicotine to Tobacco Products when the nicotine level in the tobacco was undesirably low." c. 1991 RJR patent application states that "processed tobaccos can be manufactured under conditions suitable to provide products having various ~1 nicotine levels." 189. Dr. David A Kessler testified in detail before the Waxman Subcommittee about the various forms of nicotine manipulation practiced by the tobacco industry: manipulating the rate at which nicotine is delivered in the cigarette; transferring nicotine from one material to another; increasing the amount of nicotine in cigarettes; and adding nicotine to any part of a cigarette. 190. Dr. Kessler's disclosures show that nicotine is not an inevitable or unavoidable component of tobacco products. In fact, each of the defendant cigarette manufacturers has the capability to remove all or virtually all of the nicotine from cigarettes using technology already in existence. i._ . . _ . , - . 191. The cigarette mamtfacturers' manipulation and control of nicotine levels is further evidenced by the emergerice of companies that specialize in manipulating nicotine and that are now offering their services to tobacco manufacturers. On information and belief, a process called tobacco reconstitution, patented and marketed by the Kitnberly-Clark Corporation subsidiary, LTR Industries, is widely used throughout the industry. 192. Reconstituted tobacco is made from stalks and stems and other waste that cigarette manufacturers formerly discarded and now use to make cigarettes more cheaply. In th.~ reconstitution process, pieces of tobacco material undergo treatment that results in the extraction of some soluble components, including nicotine. The pieces are then physically formed into a sheet of tobacco material, to which the extracted nicotine is re-added. Although denied by tobacco executives, it is publicly reported that this process adjusts 52
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nicotine levels in the products, and that one manufacturer "readily admits to setting levels of nicotine ... for the tobacco sheet." s 193. An advertisement in tobacco industry trade publications for the Kimberly-Clark tobacco reconstitution process states: "Nicotine levels are becoming a growing concern to the designers of modem cigarettes, particularly those with lower 'tar' deliveries. The I{imberly-Clark tobacco reconstitution process used by LTR Industries permits adjustments of nicotine to your exact requirements .... We can help you control your tobacco." 194. The tobacco industry's own trade literature explains that the Kimberly-Clark process enables manufacturers to triple or even quadruple the nicotine content of reconstituted tobacco, thereby increasing the nicotine content of the final manufactured product. 195. Another,_:enterprise quite explicitly specializes in the manipulation of nicotine and its use as an additive. This company does business under the name "The Tobacco Companies of th, . Contraf Group." An advertisement run by the Contraf Group in the international trade press states: "Don't Do Everything YourselE Let us do it More Efficiently!" Calling itself "The Niche Market Specialists," Contraf lists among its areas of specialization "Pure Nicotine and other special additives." ` ,7.. Li ng t Cigarettes: A Marketing Hoax 196. The cigarette industry's manipulation of nicotine is particularly deceptive in its marketing of "light" or low-tar and low-nicotine cigarettes to retain the health conscious segment of the smoking market. Recent studies demonstrate that cigarettes advertised as low tar and low nicotine have higher concentrations of nicotine, by weight, than high yield cigarettes. Nevertheless, the cigarette manufacturers have successfully identified "light" cigarettes to consumers as a reduced tar and reduced nicotine product. The cigarette manufacturers have accomplished this deception through several strategies. 197. First, cigarette manufacturers designed their "light" products so that advertised tar and nicotine levels understate the amounts of tar and nicotine actually ingested by human smokers. Such design features include a technique called filter ventilation in which nearly invisible holes a are drilled in the filter paper, or the filter paper is made more porous. Predictably, manfl"y CO ND ~ 53 ~ ~ W 0 ~
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19 5. Manipulation of Nicotine Content: Y-1 El 179. The story of Brown & Williamson's development of a new tobacco plant dubbed "Y- 1" is one ofthe more egregious examples of the cigarette industry's concealment of its control and manipulation of the nicotine levels in its products. 180. On June 21, 1994, Dr. David A Kessler, Commissioner of the Food & Drug Administration, told the Waxman Subcommittee that FDA investigators had discovered that Brown & Williamson had developed a high nicotine tobacco plant, which the company called "Y-1." This discovery followed Brown & Williamson's flat denial to the FDA on May 3, 1994, that it had engaged in "any breeding of tobacco for high or low nicotine levels." 181. When four FDA investigators visited the Brown & Williamson plant in Macon, Georgia on May 3, 1994, Brown & Williamson officials denied that the company was involved in breeding tobacco for specific nicotine levels. Only after the FDA had learned of the development of Y- 1 in its investigation and confronted company officials with the evidence did the company admit that it was growing and using the high-nicotine plant. 182. In fact, in a decade-long project, Brown & Williamsoti secretly developed a genetically- ,, engineered tobacco plant with a nicotine content more than twice the average found naturallF~ a in flue-cured tobacco. Brown & Williamson took out a Brazilian patent for the new plant', which was printed in Portuguese. Brown & Williamson and a Brazilian sister company, Souza Cruz Overseas, grew Y- 1 in Brazil and shipped it to the United States where it was used in five Brown & Williamson cigarette brands sold in Plaintiffs' cities and counties', including three labeled "light." When the company's deception was uncovered, company officials admitted that close to four million pounds of Y- 1 were stored in company warehouses in the United States. 183. As part of its cover-up, Brown & Williamson even went so far as to instruct the DNA Plant Technology Corporation of Oakland, California, which had developed Y - 1, to tell FDA investigators that Y - 1 had "never [been] commercialized." Only after the FDA discovered two United States Customs Service invoices indicating that "more than a half-million pounds" of Y- 1 tobacco had been shipped to Brown & Williamson on September 21, 1992, did the company admit that it had developed the high-nicotine tobacco. 50
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184. Y- 1 is one example of an overall trend in the tobacco industry to increase the nicotine content of tobaccos. American tobaccos of all types have undergone cumulative increases in total nicotine levels since the 1950s. Nicotine levels in the most widely grown American tobaccos increased between 10 - 50 percent between 1955 and 1980. On information aA belieC this increase is the result of the industry's active and controlling participation in efforts to breed and cultivate tobacco for high nicotine levels. 6. Manipulation of Nicotine Delivery ~ 185. The nicotine content of the raw tobacco is not the only variable manipulated by the cigarette manufacturers to deliver a pharmacologically active dose of nicotine to the smoker. Cigarettes are not simply cut tobacco rolled into a paper tube. Modem cigarettes as sold throughout Tennessee and the United States are painstakingly designed and manufactured to control nicotine delivery to the smoker. 186. For example, cigarette manufacturers add several ammonia compounds during the manufacturing process which increase the delivery of nicotine and almost double the nicotine transfer efficiency of cigarettes. , 187. In 1995, Brown & Williamson publicly denied that the use of ammonia in the processing of tobacco increases the amount of nicotine absorbed by the-smoker. Nevertheless, the company's own internal documents reveal that it and the other cigarette manufacturers use ammonia compounds to increase nicotine delivery. A 1991 Brown & Williamson conSdentidl 61 blending manual states: "Ammonia, when added to a tobacco blend, reacts with the indigenous nicotine salts and liberates free nicotine .... As the result of such change the ratio of extractable nicotine to bound nicotine in the smoke may be altered in favor of extractable nicotine. As we know, extractable nicotine contributes to impact in cigarette smoke and this is how ammonia can act as an impact booster." According to the Brown & Williamson manual, all American cigarette manufacturers except Liggett use ammonia technology in their cigarettes. 188. Tobacco industry patents also show that the cigarette industry has developed the capability to manipulate nicotine levels in cigarettes to an exacting degree. For example: 51
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DEC-11-9B 16:17 FROM: BAKER DONELSON 0 I0, 9235772303 • PACE 24 plaintiffs' argument appears to be ehat because labor union funds are "I inanecd by collcetiv'cly- hugained contrihutiuns [from the pruticipanu' employcrsi I;enerated by the L'tbur ol' chc ct}vcrr+l workcrs' (f I. Dr., at !i). Ihe funds should be ontitk•J tu bring a"direat" action n);ainst dcl'endaw::. I'hrintilYs fail to cite any case supponing this assettion.. Several couas adjudicating olher labor union fund tases have explicitly rcjeeted attempcs by plaintil7i [u im'ttko,n-called special relstionsllip+in order to circumvent the rule against remote claims. tiSruhrr'er,,, vuLw.;[, (eytwring the union trust fund's position with 131ue Cross' positivn in thc blinnesutU litigntit,n. . norint; that tba Minnesota cwurt's rejectinn of Bluo Cross: ",pecial status" orgwuem and thcn:upon rejecting rhe.uni,m trust fund's "speoial rclation+hip" argument tts n h;!sis Alr a:mding); .Sonncea.+'t Florida I•uhorer.,', •~unr', ("This "special relatiun,hip" Ihil, to xhow tlut the [ptuintiFf has) sullered direct harm); rVew Jerse•v Carprnlers. sur,r;j, ("Ihia rule uguin,t rccovcrv for rem.,le injuries spplics with equal G)ree to the Funds..... )t SfdurrrJiRVrs l,,,rul I Miu,r No .1!U 61+lfrvu Fund v, Philip binrrL[ !nc„ umra, ("Whether the cunlrihtuiun, are pn+perly auributeJ to the employer or the punicipating worker:, it is clenr that plaintilTs' I the Prmde'l uwn cennwui intcre,tk were not ut1'eeted by the payments. '['he faet that the medic:d eo,tk pnid out nl'tttetic funds increased because of dufandunts' wrongdoing.aauseJ no harm to plaintill's; it tnerrly ntvuut .....,..,._. . iJtUE tl)g,qniuns nugatiat@(I a yreatcr level ol'cuntributions Iiom thc cmployar,," "pLnintilis urc nurcly hanc(ling the peym nlf with money pmvided by ulhnrs, :mdhave nu genuinv sutke in ihc rnwitur"): '!'he sqme is [ryy in, the instant eu'sa .. f!Ipfmij7s fccbly atteqlptytais[ingu{sh Snuthea.vr F7uritlr[ Lahw't'r•e,,11,,ra, ns payinFt tntly. Itp vervuc" to t1?e ltmds' allcgcJ "spccial rclatlon,hip" wilh their p:utieipunts and I7>cu,intt tn+rgad on [hc 1'lutida 4uprqntc Court t(euisinn in:Ij;encY jrr llralrlr l'urr• r•Is.rorinrrd suttl.lcnt ra pruyypn ia n111 nn e~~ mv71t) L'lamt(fq du nut anempi tn n.uncile tn ii~t,Anmenr wnh nteir p,1+iu1m [m''[o~nneorlhaii!•wllcrl t11u9iraJivF'mrurancu,euqduynurxove,nmrmnl ai,titltqirtlaitnxurauniyueandli , rnyt}"lquey yduJ AY Pu&ndppt}'I{~~h~t Af 7 9( P9tlres5 or r}ke iolu+ypv un( Ihu "xpawl icl,uiund!qi' h.•twevn tln' (U'iltls m!vj [I!u,r,p,i[Sir•Ip?m. ., ~;I t~i; u_67 PlminilYa amtplY Ckn!imhave it ~ ut1!.wa)•1;"' -Platnufta xOUp aRenpt {U ~iYluad tbu eytirt bY Linng xcv!;nlf w! u, whieh purpnnvdly afiJ uw dl+mni ".t pbtimit'txtatvunnvAoptmcaagnrqtJx. snmu!•nypi,mt{y~hetlid~!an(inrV 4!uu',mW„w,k„t'n~uiularcy+ :<vr . ,4raw ri/LGenprulu v. /7tffrp 4totrti. /m S51 N~'..2Q nr q9„ !(~ 0.j!ynqaprg NI!W 4nnr r`1'~ ~~nt anty ai.nn, [!entWC OMrC Cro&r tris sjtnply lyu rcn(p[d tp fC~'SiY<r iq d4cd[ Wliua) trrµ n/ AIUh,hpul+ 1'hrlrp Srnrrn, 6t. , N•p?hU7,U717; ~qo.'xvrt san~rt~(~hi t:u y t+faqa, 14'j7)Ihpii(iiq,itpt;l!rsuyary!(nrun-L'rwt,!niumn.uun P} rucevu[ fn us uYtn namw f0(111r•~d in}ytux INMSJiv d~ ruclplenql, NYk fVIV~r,rlpii~frul Y•dnlt'rc„n 7;,lve ~ oNq.'10 : 15U56-N, slipp up a[ I i7.JJ!Va71! Mtpcr 3'(. J4nq 4 IV9T1S!Ilsmiv~~nq v~ umv I nlym!ah ol +paci:J ,I„iv. unJuu.enrwpm~mpntlresrituunn)i,~laularyNvL'hrhpA/rNr~Iric,S72N~1V2tt;lUl tni,tlmrtt9v81 (ntYrming luwur v4ui1} dlxinbsPl whh )!reluJi~p ul'cmnmml law iliPl!!n ainC¢Yf! M1x.M1tik UI Inv.u .m vtllDlcnes• gt'ntutita hvlJy!g'rtieNtarou,u!mil[oCUVtrtlway!:~.[,allepedlyLc+i!lcdl!Yevl'vnJSntyhw!ux,ihcmlunas.uc ilerivutive w!J tuu remote Funhermore, cuurta feom some ol'the aame jurisdicduns that have Ji+rn(sw'tl nnly p'!nlni!r ul'tlnm Ijw,uu, ~ have dil„ as impenniMlibly ramnt, uniun rund luweuits in their ehtirvry. 1•_,e r.,g „V•ar/urrr.r 19v!/Lr: J7un .' PNlipdinrrr,+, 1978U.$,Disr,LI3XI$11R7,9(I).MdJuly17.199R)(MurylanJ)..<•+udrdrre'N•'(qrnlr7.~rlvrrrrel+ia N IlculrfrtfWrt((veTrus'rFundvhhdyr,Srurn.r, 1TJ8WLIBB87R(5.D,1tIuAp,1111,1'P)81tFIundA.11•er.. ('urp.v,ros. Rocldi D1' n~/1r Fund v. PHilip,4l,arir (G,U.'l'x. nug, tn, 1908) (71u.nz). ~ \0 ~ IV li
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8. Safer CiQarette 134. Several cigarette manufacturers' biological research appears to have been directed toward developing a cigarette with reduced health risks. These companies performed research which involved dividing cigarette smoke into its different chemical constituents, or "fractions," to discover which part of the cigarette smoke caused disease. Several companies were successful in discovering which specific constituents in tobacco smoke were carcinogens, or were linked to ather diseases. These companies kept the research secret and never reported it to the public. 135. A number of companies also successfully removed certain harmful constituents from cigarette smoke and devd~oped prototype cigarettes with reduced health effects. These products were never marketed. ' 136. A memorandum written by an attorney at the flrm of Shook, Hardy & Bacon, long-time . lawyers~for,the cigarette industry, articulated the industry-wide position regarding the issue of a safer cigarette. The 1987 memorandum, referring to the marketing by RJR of a smokeless cigarette, Premier, stated that the smokeless cigarette could "have significant effects on the tobacco industry's joint defense efforts" and that "[t]he industry position h4 always been that there is no alternative design for a cigarette as we know them." The attorney also noted that, "Unfortunately, the Reynolds announcement ... seriously undercuts - this component of industry's defense." ... 137. As early as 1958, a memorandum from a Philip Morris researcher to the company's Vice President ofResearch and Development proposed that the company attempt to make a safer cigarette that could enable it to ` jump on the other side of the fence ... on the issue of tobacco smoking and health........ 138. Philip Morris did perform the research and development of such a product. However, the company never released the research and never informed the public that existing cigarettes were not safe br that a safer cigarette was possible. A 1964 Philip Morris research and development presentation to its Board of Directors stated: "Two years ago, in anticipation of a health crisis to be precipitated by the Smoking and Health Report of the Surgeon General's Committee, we undertook to develop a physiologically superior cigarette.
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