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Index of Pleadings / Discovery Case Name: Iowa V. RJR Case Number: Cl 71048 Court: Iowa District Court for Polk County

Date: 19980714/D
Length: 425 pages
86329039-86329461
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86329038/86329462/State of Iowa V. RJR, Et Al. Court Papers - Volume IV
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RECEIVED JUL 21 1998 cc rn TERR! P. DUR-!AM c,-j N ~10 0 -t- -~r- • 0
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0 INDEX OF PLEADINGS/DISCOVERY CASE NAME: CASE NUMBER: COURT: is IOWA V. RJR CL 71048 IOWA DISTRICT COURT FOR POLK COUNTY NO. PARTY DOCUMENT NAME SIGNED FILED SERVED VOLUAEI 1. PLAINTIFF PETITION 1-15-97 2. LTC NOTICE TO LORILLARD TOBACCO COMPANY 1-21-97 3. LOEWS NOTICE TO LOEWS CORPORATION 1-21-97 4. LI NOTICE TO LORILLARD INC. 1-22-97 5. PLAINTIFF 15T REQUEST FOR ADMISSIONS TO LTC, LOEWS AND LI 1-21-97 6. PLAINTIFF IsT REQUEST FOR PRODUCTION OF DOCUMENTS TO LTC, LOEWS AND LI 1-21-97 7. PLAINTIFF 15T SET OF INTERROGATORIES TO LTC, LOEWS AND LI 1-21-97 VOLUME II 8. COURT AGREED ORDER - MOVING DEFENDANTS HAVE UNTIL 3/17/97 TO ANSWER 1-29-97 9. DEFENDANT AFFIDAVIT OF MARK S. SCHWARTZ 2-27-97 10. LOEWS RESPONSE TO 15T SET OF INTERROGATORIES (INCOMPLETE) 11. PLAINTIFF MEMO IN SUPPORT OF PROPOSED CASE MANAGEMENT ORDER D=5-2-97 12. PLAINTIFF 15T AMEND. TO PETITION 6-13-97 13. DEFENDANT MEMO IN SUPPORT OF CERTAIN DEFS' PROPOSED PHASE I CASE MANAGEMENT ORDER NO DATE 14. PLAINTIFF RULE 82(D) NOTICE OF SERVING BRIEF / STATES' SURREPLY BRIEF 6-24-97 15. DEFENDANT NOTICE OF SUBMISSION OF MEMO PURSUANT TO IOWA RULE OF CIVIL PROCEDURE 82(D) 6-25-97 16. PLAINTIFF SECOND MEMO IN SUPPORT OF PROPOSED CASE MANAGEMENT ORDER 6-25-97 17. DEFENDANT CERTAIN MOTION FOR EXTENSION OF TIME 6-26-97 18. DEFENDANT CERTAIN DEFS. MOTION TO DISMISS 1~ AMEND. PETITION - ORAL ARGUMENT REQUESTED 7-11-97 19. DEFENDANT MEMO IN SUPPORT OF THEIR MOTION TO DISMISS THE STATE'S IST AMEND TO THE PETITION 7-11-97 20. JUDGE READE ORDER SETTING HEARING MOTIONS TO DISMISS WILL BE HEARD 11-14-97 7-22-97 21. JUDGE READE SCHEDULING ORDER 7-23-97 22. PLAINTIFF PRELIMINARY CASE MANAGEMENT ORDER 7-23-97 23. PLAINTIFF MEMO IN RESISTANCE TO DEFS' MOTION TO DISMISS PL'S 1~r AMEND TO THE PETITION 7-25-97
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0 INDEX OF PLEADINGS/DISCOVERY CASE NAME: CASE NUMBER: COURT: 0 IOWA V. RJR CL 71048 IOWA DISTRICT COURT FOR POLK COUNTY NO. PARTY DOCUMENT NAME SIGNED FILED SERVED VOLUME II 24. PLAINTIFF STATE'S SURREPLY BRIEF IN RESISTANCE TO THE 8-22-97 MOTION TO DISMISS THE 15T AMENDMENT TO ITS PETITION VOLUME III 25. JUDGE RULING ON CERTAIN DEFS. MOTION TO DISMISS - 8-26-97 READE GRANTED 26. JUDGE RULING ON CERTAIN DEFS' ORAL MOTION FOR 8-19-97 READE TEMPORARY RELIEF FROM PRELIMINARY CASE MANAGEMENT ORDER 27. LTC JURY DEMAND OF DEF. LTC AND ANSWER OF LTC TO 9-19-97 PUS PETITION AND AFFIRMATIVE DEFENSES 28. LI JURY DEMAND OF DEF. LI AND ANSWER OF LI TO 9-19-97 PL'S PETITION AND AFFIRMATIVE DEFENSES 29. JUDGE AMENDED AND SUBSTITUTED PRELIMINARY CASE 9-23-97 READE MANAGEMENT ORDER 30. PLAINTIFF MOTION FOR AN ORDER ADVANCING AN 9-25-97 INTERLOCUTORY APPEAL FOR PROMPT SUBMISSION 31. DEPUTY PL'S APPLICATION FOR INTERLOCUTORY APPEAL SET 9-26-97 CLERK TO BE HEARD ON 10/6/97. 32. PLAINTIFF MOTION TO SHORTEN DEADLINES SO PL'S MOTION D=9-26-97 TO COMPEL JURISDICTIONAL DISCOVERY CAN BE CONSIDERED AT THE 10/30/97 STATUS 33. PLAINTIFF BRIEF IN SUPPORT OF MOTION TO COMPEL 10-3-97 JURISDICTIONAL DISCOVERY FROM DEF. LOEWS 34. PLAINTIFF MOTION TO COMPEL JURISDICTIONAL DISCOVERY 10-3-97 FROM DEFS. CHALLENGING JURISDICTION. (ATTACHMENTSINCLUDED: 1. PLS 1ST SET OF INTERROGS (LOEWS) 2. PLS 15T REQUEST FOR DOCS (LOEWS) 3. PLS IST REQUEST FOR ADMISS (LOEW5 35. JUDGE RULING ON PL'S MOTION FOR EXTENSION OF 10-14-97 READE DEADLINE.... (1). DISCOVERY ON JURISDICTIONAL MOTIONS 12/10/97, (2) PL SHALL FILE MOTIONS TO DISMISS FOR LACK OF JURIS. BY 1/15/98. (3) HEARINGS ON MOTIONS TO DISMISS BE HELD 2/24 AND 2/25/98
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0 INDEX OF PLEADINGS/DISCOVERY CASE NAME: CASE NUMBER: COURT: IOWA V. RJR CL 71048 IOWA DISTRICT COURT FOR POLK COUNTY NO. PARTY DOCUMENT NAME SIGNED FILED SERVED VOLUME IV 36. JUDGE ORDERED: (1) APP FOR INTERLOCUTORY APPEAL IS 10-17-97 CARTER GRANTED (2) DEADLINES SHALL APPLY AND EXTENSIONS NOT GRANTED UNLESS A VERIFIED SHOWING OF THE MOST UNUSUAL/COMPELLING CIRCUMSTANCES 37. PLAINTIFF MOTION INTERLOCUTORY APPEAL W/O PAYMENT OF 10-21-97 FEE AND COMBINED CERTIFICATE 38. PLAINTIFFS INTERLOCUTORY APPEAL FROM THE DISTRICT COURT 10-31-97 OF POLK COUNTY 39. PLAINTIFF/ PROOF BRIEF 11/18/97 APPELLANT REPLY BRIEF 12-8-97 40. PLAINTIFF MOTION TO ADVANCE AND SET ORAL ARGUMENT DATED = 12-9-97 41. PLAINTIFF/ MOTION TO EXPEDITE SUBMISSION OFF APPEAL 12-19-97 APPELLANT SERVED ON 12/9 IS SET TO BE HEARD ON 12/29 W/O ORAL ARGUMENT. 42. DEFENDANT/ RESPONSE TO STATE'S MOTION TO ADVANCE AND SET 12-24-97 APPELLEES ORAL ARGUMENT 43. JUDGE APPLICATION TO EXPEDITE APPEAL IS DENIED 1-5-98 LARSON 44. COURT AFFIRMED THAT COURT DIDN'T ERR WHEN 4-22-98 DISMISSING COUNTS II, III & VII OF STATE'S PETITION 45. PLAINTIFF CORRECTED PGS. FOR 4/22198 OPINION 5-7-98 46. COURT SUPREME COURT AFFIRMS DISTRICT COURT 6-3-98 JUDGMENT AND PROCEED WITH DILIGENCE 47. PLAINTIFF MOTION FOR RULE 136 PRETRIAL CONFERENCE 6-11-98 48. PLAINTIFF SUPPLEMENTAL RESISTANCE 6-12-98 49. LOEWS RESISTANCE TO PL'S MOTION TO COMPEL 6-30-98 JURISDICTIONAL DISCOVERY 50. DEFENDANT MEMO IN SUPPORT OF DEFS' MOTION FOR JUDGMENT 7-1-98 ON THE PLEADINGS AS TO COUNT VIII (NUISANCE), COUNT V (CONSPIRACY), AND COUNT VI (AIDING AND ABETTING) 51. DEFENDANT RESPONSE TO PL'S MOTION FOR RULE 136 PRETIRAL 7-6-98 CONFERENCE 52. PLAINTIFF PL'S RULE 106(D) NOTICE OF SERVING A RESPONSE TO 7-13-98 DEFS' SUPPLEMENTAL MEMO REGARDING THEIR MOTION TO DISMISS 1~ AMENDMENT TO PL'S PETITION 53. PLAINTIFF RESPONSE TO DEFS' SUPPLEMENTAL MEMO IN 7-13-98 SUPPORT OF DEF'S MOTION TO DISMISS PL'S 1ST AMEND TO ITS PETITION 54. COURT ORDER SETTING HEARING ON MOTIONS 7-14-98
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A. THE LEGISLATURE HAS EXPRESSLY AVI'HORIZED THE STATE TO RECOVER FOR "INDIRECT" INJURIES AND HARM TO THE "GENERAL ECONOMY." The plain language of the Iowa Ongoing Criminal Conduct Act (OCC), Iowa Code chapter 706A, expressly authorizes the Attorney General, as a prosecuting attorney, to bring a claim on behalf of the "general economy, resources, and welfare of this state," or on behalf of any injured person. Iowa Code §§ 706A.3(10),(11). The damages recoverable under such a claim are for "direct or indirect injur[ies caused] by conduct constituting a violation of this chapter." Iowa Code § 706A.3(7). The State has thoroughly pleaded the factual basis for violations of the OCC under Iowa Code § 706A.2. See First Amended Petition, Count X and paragraphs 1-242, incorporated by reference. Nonetheless, the Tobacco Industry continues to argue that the statute does not apply, and cites to the Iowa Supreme Court decision in this case. This issue is quite simple: the Supreme Court had only common-law claims before it. All of the common-law claims before the Supreme Court were seeking damages linked to medical assistance payments. On those counts, the Supreme Court ruled the statutory remedy in Iowa Code 249A precluded common-law actions for recoupment of medical assistance, and that common-law mechanisms for such recovery were not sufficiently direct. The State's OCC count is of an entirely different nature. Contrary to the Tobacco Industry's conclusory assertion, the OCC count is analogous to the Iowa Consumer Fraud Act claim in Count I, which this Court allowed to go forward. It is statutorily granted by the General Assembly. Damages under OCC, while they may include amounts paid by the State for medical assistance, are neither tied to nor limited to such payments. Finally, the OCC Act statutorily removes the "directness" question by allowing both direct and indirect damages, and authorizing 2
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A. THE IOWA OCC IS NOT PATTERNED AFTER FEDERAL RICO, BUT RATHER IS PATTERNED AFTER THE MODEL ONGOING CRIMINAL CONDUCT IN THE REPORT OF THE PRESIDENT'S COMMISSION ON MODEL STATE DRUG LAWS ........................... . ........ 5 B. THE CASES CITED BY THE TOBACCO INDUSTRY EXPLORING LIMITATIONS OF FEDERAL RICO LAW HAVE NO BEARING AT ALL ON THE IOWA OCC, WHICH WAS EXPRESSLY DESIGNED TO AVOID RICO LIMITATIONS .............................. . ...... 7 C. IN ANY EVENT, EVEN IF THE LIMITATIONS OF RICO WERE APPLICABLE TO THE IOWA OCC, THE TOBACCO INDUSTRY'S MOTION TO DISMISS SHOULD NOT BE GRANTED ................. 8 CONCLUSION ............................................................10
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"lUL.21. 1998' N59i"x $1',~ 6 4452 ! . wEr's e siuntY ~ NO, 6367'P, 313-- ,~uuz 3 I`~ IN TIiE IOWA DISTRICT COURT FOR POLK COUNTY THE STATE OF IOWA, ex rel. THOMAS 1. MILLER, in his capacity as ATTORISEY GENERAL OF THE STATE OF IOWA, Plaintiff, v5. R.J. REYNOLDS TOBACCO COMPANY, et al., Defendants. CL 71048 ORDER SETTING HEARING A hearing will be held on August 5, 1998, at 9:00 a.ra On August 5, 1998, the Court wilt post a ei,tt on the door of eourtroom 204 of the Polk County Courthouse stating the location of the hearing. The agenda is as follows: I. Argumeet on Defendants' Motions to Dismiss the First Amendment of the Petition. 2, Argument en Plaintii£'s Motion to Compel ludsdiotional Discovery. 3: Argument on PlaintifFs Motion for Rule 136 Pretrial Conference. 4. Argument on Defendant's Motion for Iudgmont on the Pleadinss. 5. Updating dates and deadlines on Amended and Substituted prelitninary Case Management Order. 6. Other issues/motions set by counsel pursuant to paragraph 9 of the Amended and SubsGtuted Prelintinary Case Management Order, . - SO OI2DERED this 14th day of]uly, 1998. LINDqC R READE, JU6GE- FIFTy1 JL7DIC7AL DISTRICT OF IOWA Polk County Courthouse 500 Mufberry Ave. Des Moines, IA 50309 w5
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TABLE OF AUTHORITIES FEDERAL CASES Laborers Local 17 v Philip Morris, 97 Civ. 4550 (SAS), slip op. at 21-26 (S.D.N,Y., Mar. 25,1998) ....................... ................... .......... 9 Rosello v Brown & Williamson, No. CIV-97-1910 (JAF), 1998 WL 313365 at 12 (D. P.R., June 2, 1998) . . ............ . . ............................ . ........ 8,9 Southeast Florida Laborers v. Philip Morris~ No. 97-8715-CIV-RYSKAMP, 1998 U.S. Dist. LEXIS 5440, at 15-18 (S.D. Fla., Apr. 13, 1998) ............... . .............................. 7 Stationary Enaineers v. Philip Morris, C-97-01519 DLJ, Order, slip op. At 7 (N.D.Cal., Apr. 30,1998) .................................................... 7 STATE CASES State of Arizona v American Tobacco Co., No. CV-96-14769, slip. op. at 16 (Ariz. Super. Ct., Maricopa Co., July 17, 1997) .......... 8 State of Minnesota ex rel Humnhrey v Philip Morris, 551 N. W.2d 490, 495 (Minn. 1996) ............................................. 3 State of Wisconsin v Philip Morris, No. 97-CV-328, Decision and Order, slip op. At 26-28 (Wisc. Cir. Ct., Br. 11, Dane co., March 17, 1998) ................................ 7 FEDERAL STATUTES I8 U.S.C.§ 1964(c) ........................................................ 7 STATE STATUTES Ariz. Rev. Stat. § 13-2114.04(A) .............................................. . 8 Iowa Code 249A ......................................................... 2,4 Iowa Ongoing Criminal Conduct Act (OCC), Iowa Code chapter 706A ........... 2, 4, 5, 10 Iowa Code § 706A2 ................................................. . ...... 2 Iowa Code §§ 706A.3(10) (11) ..... . ...... . ....... 7 2 8 co , , ........................ , rn Iowa Code § 706A.5(1) ......................................................4 c.•d ~ Wisc.Stat § 946 87(4) 7 0 . . ...................................................... -t~1 co -iii-
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B. THE CASES CITED BY THE TOBACCO INDUSTRY EXPLORING LIMITATIONS OF FEDERAL RICO LAW HAVE NO BEARING AT ALL ON THE IOWA OCC, WHICH WAS EXPRESSLY DESIGNED TO AVOID RICO LIMITATIONS. Of the four cases attached to the Tobacco Industry's supplemental memorandum, two are decided under the federal RICO Act. The other two are based on Wisconsin and Arizona statutes, both of which are similar to the federal RICO Act. None of these statutes is analogous to the Iowa OCC Act, which by its express terms is more beneficial to aggrieved plaintiffs, as is explained above in discussing the Model Act. Federal law, as the cases point out, discusses the scope of injuries cognizable under the law as injuries "by reason oF"RICO violations. ,Se 18 U.S.C. § 1964(c); Stationary Engineers v Phi i,g Morris, C-97-01519 DLJ, Order, slip op. at 7 (N.D. Cal., Apr. 30, 1998)("Stationarv Engineers"); Southeast Florida Laborers v. Philip Morris, No. 97-8715-CIV-RYSKAMP, 1998 U.S. Dist. LEXIS 5440, at * 15-18 (S.D. Fla., Apr. 13, 1998)("Florida Laborers"). The . tatio aryEn'r r and Florida Laborers cases (both distinguishable in that they are not brought by states) read the 'by reason of' language to require a direct, "first-level" causal link between the RICO violation and the plaintiffs injury. As the State has already shown above, this requirement is expressly removed under Iowa Code § 706A.3(7) and (11), which allow recovery for indirect injuries and "general economy" injuries. Similarly, the Wisconsin statute at issue in e of Wisconsin v Philin Morn No. 97- CV-328, Decision and Order, slip op. at 26-28 (Wisc. Cir. Ct., Br. 11, Dane Co., Mar. 17, 1998), uses RICO's "by reason of' formulation. See Wisc. Stat. § 946.87(4). Again, this is contrary to the express language of the Iowa OCC Act, and accordingly, the holding of the case Co rn w 7 tv ~ 0 csi tn
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ROGER W. STONE #L10005358 SIMMONS, PERRINE, ALBRIGHT & ELLWOOD, P.L.C. 115 Third Street S.E., Suite 1200 Cedar Rapids, Iowa 52401-1266 PH: (319) 366-7641 FAX: (319) 366-1917 FAX: (515) 246-1550 khinrich I P:SWPltobc[1Psupp-r.brf co Gl C_/J r"D ~10 lI- o ~ ~
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Environmental crimes and social victimization crimes such as drug dealing are therefore compensable. . . Model Act, comments to Section 6, "Civil Remedies; Actions," at F-201 (emphasis added). This is further supported by the comments to Section 4, "Defmitions," at F-194-195, which suggest that "specified unlawful activity" includes "intentional environmental crimes that involve danger to human life or threaten resources." These comments provide further support for the State's claim that direct and indirect injury to the economy and the state's fisc are recoverable under Iowa's OCC Act. These comments also respond to the Tobacco Industry's erroneous position that pecuniary losses based on underlying personal injuries are not compensable: the Model Act was aimed at "danger to human life" and °social victimization crimes such as drug dealing." The harm from such environmental crimes and drug dealing is physical and personal, but also causes economic and other injury to society generally and to the State. Such harms were clearly contemplated by the drafters of the Model Act on which the Iowa OCC Act was based. Finally, the comments show just how perfectly Count X fits into the Iowa OCC. In the State's Petition, as amended, the State pleads that nicotine is a drug and that the Tobacco Industry suppressed information about the role of nicotine, and indeed manipulated nicotine precisely for its pharmacological effects. See~e.g, Petition 1157, 77(i), and 146450. The entire case brought by the State is aimed at "social victimization," carried out through deception, fraud, targeting of minors, and conspiracy to suppress relevant information as well as safer products. Because Count X is such a precise fit with the Iowa OCC Act, as supported by the comments to the Model Act, the Tobacco Industry's motion to dismiss Count X must be denied. 6
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9 0 IN THE IOWA DISTRICT COURT FOR POLK COUNTY THE STATE OF IOWA, ex. rel. THOMAS J. MILLER, in his capacity as ATTORNEY ) GENERAL OF THE STATE OF IOWA, ) ) Plaintiff, ) ) vs. ) ) R. 7. REYNOLDS TOBACCO COMPANY, ) et al., ) ) Defendants. ) ) NO. CL 71048 PLAINTIFF'S RESPONSE TO DEFENDANTS' SUPPLEMENTAL MEMORANDUM IN SUPPORT OF DEFENDANT'S MOTION TO DISMISS PLAINTIFF'S FIRST AMENDMENT TO ITS PETITION INTRODUCTION The Tobacco Industry incorrectly argues that the Iowa Supreme Court opinion in this case, and a few attached opinions from other jurisdictions, control the State's OCC claim. The Tobacco Industry misses the target: it is noteworthy that in its supplemental memorandum attacking a wholly statutory claim, the Tobacco Industry never quotes the language of the actual Iowa statute. As the State demonstrates below, none of the cases cited by the Tobacco Industry is relevant to the Iowa OCC, and in fact the distinguishing factors of the cases only highlight the reasons why Count X must survive the defendants' motion. ARGUMENT I. THE IOWA SUP F O TRT'S R 7i IN ON FMO . C AND EXCLUSIVTI'Y WITH RESPECT TO THE STATE'S COMMON LAW CLAIMS HAVE NO B.ARI_N ON TBE CTATECTA 7TORY CLAIM UNDER T_HF, O C. IN WHICH THE ,IS .ATLIRF. .XP F.4S ,Y A Pi'FiORT7.F STATE TO F ONOMY" AND EXP F S Y D. RFS O F D S ARE NOT PREMPTED BY ANY OTHER STATUTE.
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CONCLUSION The Tobacco Industry's pursuit of its motion to dismiss Count X ignores the plain language of Iowa Code 706A, which expressly authorizes the State's action. The comments of the drafters of the Model Act, which the Tobacco Industry admits is the model for chapter 706A, demonstrates that the Iowa OCC was created for precisely this type of claim. Recent federal court decisions in Puerto Rico and New York demonstrate the weakness of the arguments raised by Tobacco Industry, even under the more pro-defendant federal RICO language. For all of these reasons, Count X of tl+e State's Petition, which thoroughl~, pleads a statutory cause of action under Iowa Code chapter 706A, must be permitted to go forward. The Tobacco Industry's motion to dismiss Count X must be denied. SPECIAL COUNSEL FOR STATE OFIflWA NT R.`APPEL, 479-68-8537 BRET A. DUBLINSKE, 482-74-0359 DICKINSON, MACKAMAN, TYLER &HAGEN, P.C. 1600 Hub Tower, 699 Walnut Street Des Moines, Iowa 50309 PH: (515) 244-2600 E. RALPH WALKER #PK0006346 WALKER LAW FIRM 2501 Grand Avenue, Suite E Des Moines, Iowa 50312 PH: (515) 281-1488 FAX: (515) 281-1489 Respectfully submitted, THOMAS J. MILLER ATTORNEY GENERAL OF IOWA\ GLENN L. NORRIS #PK0004035 HAWKINS & NORRIS 2501 Grand Avenue, Suite C Des Moines, Iowa 50312 PH: (515) 288-6532 FAX: (515) 288-8733 STEVEN P. WANDRO #484-76248 WANDRO & GIBSON, P.C. 2501 Grand Avenue, Suite B Des Moines, Iowa 50312 PH: (515) 281-1475 FAX: (515) 281-1474 -10-
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IN THE IOWA DISTRICT COURT FOR POLK COUNTY THE STATE OF IOWA, ex. rel. ) THOMAS J. MILLER, in his capacity as) ATTORNEY GENERAL OF THE STATE ) NO. CL 71048 OF IOWA, ) ) Plaintiff ) PLAINTIFF'S RESPONSE TO , ) DEFENDANTS' SUPPLEMENTAL vs. ) MEMORANDUM IN SUPPORT ) OF DEFENDANT'S MOTION R. J. REYNOLDS TOBACCO ) TO DISMISS PLAINTIFF'S COMPANY, et al., ) FIRST AMENDMENT TO ITS ) PETITION Defendants. TABLE OF CONTENTS gage_ INTRODUCTION ..........................................................1 ARGUMENT ..............................................................I I. THE IOWA SUPREME COURT'S RULINGS ON REMOTENESS AND EXCLUSIVITY WITH RESPECT TO THE STATE'S COMMON LAW CLAIMS HAVE NO BEARING ON THE STATE'S STATUTORY CLAIM UNDER THE OCC, IN WHICH THE LEGISLATURE EXPRESSLY AUTHORIZES THE STATE TO RECOVERY FOR "INDIRECT" INJURIES AND HARM TO THE "GENERAL ECONOMY" AND EXPRESSLY DECLARES OCC REMEDIES ARE NOT PREEMPTED BY ANY OTHER STATUTE ....................... I A. THE LEGISLATURE HAS EXPRESSLY AUTHORIZED THE STATE TO RECOVER FOR "INDIRECT" INJURIES AND HARM TO THE "GENERAL ECONOMY.......................................... 2 B. THE LEGISLATURE HAS EXPRESSLY DECLARED THAT THE OCC REMEDIES ARE NOT PREEMPTED BY ANY OTHER STATUTE........ 4 II. NONE OF THE TOBACCO INDUSTRY'S CITED CASES INVOLVE STATE OCC STATUTES AUTHORIZING THE STATE TO BRING ACTIONS TO RECOVER FOR INDIRECT INJURIES AND FOR HARM TO THE "GENERAL ECONOMY" ..........................................................
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CERTIFICATE OF SERVICE The undersigned hereby certifies that a copy of the document attached to this Certificate was hand delivered to the persons listed below at the addresses indicated, on the 13 day of July, 1998: Roger T. Stetson Belin, Lamson, McCormick, Zumbach & Flynn 2000 Financial Center 666 Walnut Street Des Moines, IA 50309 Henry A. Harmon Grefe & Sidney 2222 Grand Avenue Des Moines, IA 50312 Richard R. Chabot Sullivan & Ward, P.C. 801 Grand Avenue, Suite 3500 Des Moines, IA 50309-2719 Steven L. Nelson Davis, Brown, Koehn, Shors & Roberts, P.C. 2500 Financial Center 666 Walnut Street Des Moines, IA 50309-3993 The undersigned fnrther certifies that a copy of the document attached to this Certificate was mailed to the persons listed below at the addresses indicated, stamped with the appropriate postage for ordinary mail and deposited on the 1'~ day of July, 1998, in a United States Post Office mail receptacle, in Des Moines, Iowa. Michael M. Fay Kasowitz, Benson, Torres & Friedman, L.L.P. 1301 Avenue of Americas New York, NY 10019-6022 -12-
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is irrelevant. In State of Arizona v American Tobacco Co, No. CV-96-14769, slip. op. at 16 (Ariz. Super. Ct., Maricopa Co., July 17, 1997), the language used is "injury... by a pattern of racketeering." See Ariz. Rev. Stat. § 13-2114.04(A). This, combined with a finding of the court that the Arizona act was patterned after federal RICO, resulted in the Arizona court requiring a direct link. The Iowa Code, unlike the Arizona code, is not patterned after RICO, and instead expressly permits "indirect" injury to be recovered. ee Iowa Code § 706A.3(7). These irrelevant cases provide no support for dismissing Count X. C. IN ANY EVENT, EVEN IF THE LIMTTATIONS OF RICO WERE APPLICABLE TO THE IOWA OCC, THE'TOBACCO INDUSTRY'S MOTION TO DISMISS SHOULD NOT BE GRANTED. Even if the Iowa OCC Act was identical to federal RICO, the cases cited by the Tobacco Industry are not the "last word" on the causal relationship issue relied on by the Tobacco Industry. On June 2, 1998, the federal district court in Puerto Rico refused to dismiss that Commonwealth's RICO claim. Sgg Itosello v Brown & Williamson, No. CIV-97-1910 (JAF), 1998 WL 313365 at * 12 (D. P.R., June 2, 1998)("Rss.c114")[Attachment A]. The Rosello court found "Puerto Rico does have standing to sue defendant cigarette manufacturers based on the direct nature of the expenses covered by the government for medical expenses to treat smoking-related illnesses... Given the responsibility the Commonwealth has to its people, such expenses do qualify as a direct injury," ,I1 In addition to allowing the state to proceed with its RICO count in its proprietary capacity as a state, the Rosello court also noted that "Puerto Rico is uniquely positioned to sue the cigarette manufacturers under the doctrine of parens patriae," which the court found applicable to the RICO claim. IS1, 8
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the Attorney General to act on behalf of the general economy and welfare of both the State and its citizens. The Minnesota Supreme Court, in a decision cited with approval by the Iowa Supreme Court in the present case, unambiguously supported distinction that State makes in this brief: The fact that we find that Blue Cross lacks standing to pursue a tort action, however, has no impact on our decision as to Blue Cross's claims arising under Minnesota's consumer protection and antitrust statutes. The legislature may, by statute, expand the connection between conduct and injury necessary to permit suit. On these claims, we hold that the broad grants of standing within the statutes themselves reach Blue Cross and allow it to join the State of Minnesota in pursuit of relief for these claims. State of Minnesota ex rel Hu=h_reyvPhilip Morria, 551 N.W.2d 490, 495 (Minn. 1996). In the present case, contrary to the Tobacco Industry's claims, the Iowa Supreme Court's ruling on tort claims cannot be applied to statutory claims such as Count X. As in Minnesota, the Iowa statute at issue provides a "broad grant" of authority to the Attorney General to bring this action and to recover even indirect injuries on behalf of the general welfare and economy. The Tobacco Industry's supplemental memorandum never quotes the statute, and as a result never attempts to explain how the Supreme Court's ruling, on claims of an entirely different nature, interact with the express language of chapter 706A. The Tobacco Industry never attempts to harmonize its repetitious theme of remoteness with the Act's explicit statutory recognition of indirect and "general economy" damages. These shortcomings are fatal to the Tobacco Industry's argument. The language passed by the Iowa Legislature permits the State's claim, and the motion to dismiss Count X must be denied. ca rn CN 3 rv ~10 0 cs~ ~
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B. THE LEGISLATURE HAS EXPRESSLY DECLARED THAT THE OCC REMEDIES ARE NOT PREEMPTED BY ANY OTHER STATUTE. The Iowa Supreme Court had only common law claims before it when it ruled that Iowa Code chapter 249A was the "exclusive" remedy. The Court did not address statutorily authorized causes of action. In the case of Iowa Code 706A, the legislature was clear: The provisions of this chapter shall be liberally construed to effectuate its remedial purposes. Civil remedies under this chapter shall be supplemental and not mutually exclusive. Civil remedies under this chapter do not preclude and are not precluded by other provisions of law. Iowa Code § 706A.5(1)(emphasis added). The Tobacco Industry asks this Court to legislate, to add the language "except for chapter 249A" to the statute. That is not what the legislature said, nor, given the command to broadly construe the Act, is it what the legislature intended. Count X cannot be dismissed on "medicaid exclusivity" grounds. Even if the OCC remedies could be precluded by other provisions of law, chapter 249A would not require the dismissal of Count X. The State is seeking a wide variety of remedies permitted under the OCC Act. Many are wholly independent of medical assistance payments; others may use medical assistance payments as proof of the amount of damages, but all are for independent OCC damages, none are based on the medical assistance itself. Accordingly, there is no basis for dismissing Count X. 11. NO OF THE TOBA O TRY'S C D 4E INVOLVE 4TA OCC STATUTES AUTHORIZINC THE STATE TO BRING ACTIONS TO RECOVER FOR IND F T IN TRTF FOR IRARM TO THF " E RAT, ECONOMY" The Tobacco Industry attaches a few cases that allegedly support its arguments. A closer review, however, shows that the cases are not relevant, and are easily distinguishable. Moreover, 4
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Bruce G. Merritt Debevoise & Plumpton 875 Third Avenue New York, NY 10022 J. Michael Weston Moyer & Bergman 2726 First Avenue N.E. Cedar Rapids, IA 52406-1943 Michael C. Lasky Fred M. Weiler Davis & Gilbert 1740 Broadway New York, NY 10019 D, Scott Wise Vincent T. Chang Davis, Polk & Wardell 450 Lexington Avenue New York, NY 10017 Fred L. Dorr David C. Pulliam Wasker, Dorr, Wimmer & Marcouiller, P.C. 801 Grand Avenue, Suite 3100 Des Moines, IA 50309-8036 khinrichI P:\WPaub-ctl0.supp-r.brf
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The Rosello court also ruled in favor of the plaintiff on the issue of whether the RICO damages were economic of personal injuries. The court found that "although the racketeering injury allegedly led to health damages, the cost to the Plaintiffs here is not physical but economic." jd, at *20. On March 25, 1998, a federal district court in New York permitted a labor union health and benefit fund to proceed with a RICO claim, concluding "plaintiffs' showing of factual and proximate cause is sufficient to survive a motion to dismiss." Laborers Local 17 v Philip Morris, 97 Civ. 4550 (SAS), slip op. at 21-26 (S.D. N.Y., Mar. 25, 1998)("New York Laborers") [Attachment B]. The New York Laborers court found the allegations against the Tobacco Industry to be "the sort of 'pernicious commercial practices' that RICO was intended to prevent." U at 22 (internal citation omitted). As did the $osc11q court, the New York Laborers court rejected the argument that the RICO claim was a claim for personal injuries. jd, at 26. These cases suggest that under federal RICO courts are divided as to whether medical assistance injuries are sufficiently direct to support a claim. The better position, given the "pernicious commercial practices" at issue, the responsibility of the State to pay medical assistance, and the intent by the Tobacco Industry to avoid the social costs of its deadly products, is to permit such claims. This is particularly true under the more plaintiff-protective Iowa OCC, where section 706A.5 calls upon the Court to interpret the Act broadly to serve its remedial purpose, and where even indirect damages are expressly recognized. 9
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while the Tobacco Industry's memorandum does not reflect this, the cases do not represent settled law, but rather are examples of just one side in a split among jurisdictions. A. THE IOWA OCC IS NOT PATTERNED AFTER FEDERAL RICO, BUT RATHER IS PATTERNED AFTER THE MODEL ONGOING CRIMINAL CONDUCT ACT IN THE REPORT OF THE PRESIDENT'S COMMISSION ON MODEL STATE DRUG LAWS. The Tobacco Industry has already acknowledged that Iowa Code chapter 706A is "nearly identical" to the Model Ongoing Criminal Conduct Act which accompanied the Report of the President's Commission on Model State Drug Laws ("Model Act"). See Defendants' Memorandum in Support of Their Motion to Dismiss the State's First Amendmenr to the Petition ("Defendants' Initial Memorandum") at 3 n.2. The Model Act is not a mere copy of federal RICO recast in state terms. Rather, it incorporates various criminal statutes and "includes several modifications to clarify civil liability," and reflects "reform efforts" relating to the federal RICO statute. Sgg Model Act, "Policy Statement", F-187 (attached to Defendants' Initial Memorandum as Exhibit A). As the comments and annotations to the Model Act prove, the Model Act is significantly different from federal RICO. The Model Act, and accordingly the Iowa OCC Act, are not subject to the arguments raised by the Tobacco Industry in their supplemental memorandum. Further, the Model Act precludes many arguments raised in Defendants' Initial Memorandum. In addition to the specific language adopted in the Iowa OCC Act, highlighted above, the comments to the Model Act state: The measure of damages for this cause of action is actual damages, computed from either the point of view of injury to the State's economy, tax base, resource misallocation and loss, investment potential, programmatic costs of civil and criminal justice, etc. or from the point of view that all proceeds of conduct constituting a violation warps and debases the economy and therefore damages it. 5
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John C. Monica Craig Proctor Catherine Castellucio Shook, Hardy & Bacon One Kansas City Place 1200 Main Street Kansas City, MO 64105-2118 Dan K. Webb Thomas J. Frederick Kurt L. Schultz Kevin J. Narko Winston & Strawn 35 West Wacker Drive Chicago, IL 60601 Robert A. Van Vooren Thomas D. Waterman Lane & Waterman 600 Norwest Bank Building Davenport, IA 52801 Thomas F. Gardner Jones, Day, Reavis & Pogue 77 West Wacker Drive Chicago, IL 60601 Mark C. Cunha Adam I. Stein Simpson, Thacher & Bartlett 425 Lexington Avenue New York, NY 10017-3954 R. Todd Gaffney Finley, Alt, Smith, Scharnberg, May & Craig, P.C. 604 Locust Street Des Moines, IA 50309-3773 Andrea R. McGann Michelle Browdy Kirkland & Ellis 200 East Randolph Drive Chicago, IL 60601 -13-
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--- F.Supp. --- (Cite as: 1998 R'L 313365, *21 (D.Puerto Rico)) Page 17 the other to the third person, or (c) the barm is for principle that federal employees owed a duty to suffered because of reliance of the other or the those who would receive the benefit of their third person upon the undertaking. performance only to the extent that their superiors See generally Jeffries v. United States, 477 F.2d owed such a duty), cert, denied, 435 U.S. 1006, 98 52 (9th Cir.1973); Zabala Clemente v. United S.Ct. 1876, 56 L.Ed.2d 388 (1978). States, 567 F.2d 1140, 1144, 1148 (Ist Cir.1977) (citing the Restatement of Torts 2d §§ 323, 324A END OF DOCUMENT Copr. 0 West 1998 No Claim to Orig. U.S. Govt. Works
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0 --- F.Supp. --- (Cite as: 1998 WL 313365, *3 (D.Puerto Rico)) Washington, D.C. law firm. Shook is a limited liability partnership organized under the laws of Missouri, with its principal place of business in Missouri. Jacob is a limited liability partnership with its principal place of business in New York. No Jacob attorney is a member of the Puerto Rico Bar, and none has ever been admitted pro hac vice to practice before the courts in Puerto Rico. Chadboume is a limited liability, New York- based law partnership. None of these firms has an office, bank account, telephone, mail box, employee or agent in Puerto Rico, nor does any own or rent any real property in Puerto Rico. Accordingly, there is no general jurisdiction, since law firm defendants have no systematic and continuous activity in Puerto Rico. See Foster-Miller, Inc. v. Babcock & Wilcox Canada, 46 F.3d 138, 144 (1st Cir.1995). *4 The second prong of the Puerto Rico long-arm statute requires the prima facie demonstration of the commission of a tort. See 32 L.P.R.A.App. III R. 4.7 (1983). Plaintiffs assert that law firm defendants have engaged in the promotion of cigarettes in Puerto Rico through their active involvement in the public relations of the Council For Tobacco Research ("CTR") and the Tobacco Institute ("TI"), and have prepared, selected, and trained witnesses who were to testify on their behalf. Plaintiffs allege that the law firm defendants have been active members of various industry subcommittees, including the Research Review Committee, the Committee of Counsel, and the Communications Committee; that they have helped find and direct industry-friendly research; and that they have even recommended to destroy adverse internally- conducted research. Plaintiffs state that the law firm defendants have also been involved in the management of industry-funded projects, and have enmeshed themselves in certain research for the purpose of shrouding it in a false cloak of work- product protection. Plaintiffs provide many examples of law firm defendants' activities. Plaintiffs state specific instances of Shook attorneys' research proposals to industry general counsel, and allege that Shook attorneys even advised that the tobacco company terminate unfavorable research and destroy the data. Plaintiffs maintain, inter alia, that Chadbourne attorney Janet Brown, while acting in a non-lawyer capacity and on behalf of Chadbourne, sat on CTR's Board of Directors from 1971 to 1991 as a Page 4 representative of the law firm, not merely a representative of a CTR member company. Additionally, Plaintiffs provide examples of Covington attorneys' involvement in recommending and directing industry-friendly research, particularly their proposal to research the additive Chemosol. Plaintiffs claim that Covington proposed to destroy unfavorable research results. Plaintiffs also contend that Jacob attorneys were excessively intrusive in the writing and editing of the final research report, and controlled and distorted the interpretation of the research through their public relations efforts. The subtle yet crucial distinction to be made here is that Plaintiffs do not assert jurisdiction over law firm defendants merely as a result of their legal representation of the tobacco companies. Therefore, the law of principal and agent is not applicable here because Plaintiffs do not rest their claim on the mere existence of an attomey-client relationship. Rather, the claim is that the law firm defendants' activities in Puerto Rico went beyond mere legal representation, and became both the promotion of business and tortious fraud. They allege a tort that but for the attomey-client relationship might not have arisen. Nevertheless, the alleged promotion of business and fraud did not constittne legitimate legal representation. It is undisputed that the non- resident law fum defendants represented clients transacting business in Puerto Rico, and that normal incidents of legal representation, such as making phone calls and sending letters to the forum, and accepting payment from banks within the forum state, do not by themselves automatically establish purposeful availment sufficient to be a "deliberate creation of a 'substantial connection" ' with the forum state. Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir.1990) (citing Burger King, 471 U.S. at 475). However, where a non- resident law fum takes an active role in promoting business within the forum state, there may be a"scbstantial connection." Sher, 911 F.2d at 1362. The issue here then is not simply resolved by concluding that there is no personal jurisdiction over the attorneys because they acted as agents of their clients. Rather, the issue is whether law firm defendants went sufficiently beyond the regular confines of the'tr legal representation to satisfy the Puerto Rico long- arm statute by transacting business or committing a tortious act in the forum of Puerto Rico. *5 "If the product whose sales are nourished by Copr. 0 West 1998 No Claim to Orig. U.S. Govt. Works
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0 --- F.Supp. - (Cite as: 1998 WL 313365 (D.Puerto Rico)) Pedro ROSSELLO, in his capacity as Governor of the Commonwealth of Puerto Rico; Jose A. Fuentes Agostini, in his capacity as Attorney General of the Commonwealth of Puerto Rico, on behalf of the Commonwealth of Puerto Rico, and the Commonwealth of Puerto Rico, Plaintiffs, V. BROWN & WILLIAMSON TOBACCO CORPORATION, as successor by merger to the American Tobacco Company, et al., Defendants. No. CIV. 97-1910(JAF). United States District Court, D. Puerto Rico. June 2, 1998. Pedro J. Durand, Esq., Deputy Attorney General for Litigation, Puerto Rico Department of Justice, San Juan, Ronald L. Motley, Esq., Ness, Motley, Loadholt, Richardson & Poole, Charleston, SC, Benjamin Acosta, Jr., Esq., Law Offices of Benjamin Acosta, Jr., San Juan, for Plaintiffs. American Brands, Inc. [Fortune Brands, Inc.]; Barus Holdings, Inc ., Philip Morris Incorporated (Philip Morris U.S.A.); Philip Morris Companies, Inc., and R.J. Reynolds Tobacco Company, Salvador Antonetti, Esq., Heriberto J. Burgos Perez, Esq., Fiddler, Gonzalez & Rodriguez, San Juan, Philip Morris Incorporated (Philip Morris U.S.A.); and Philip Morris Companies, Inc., Manuel Guzman, Esq., Carlos Steffens, Esq., Manuel Guzman Law Offices, San Juan, Douglas W. Davis, Esq., Jack E. McClard, Esq., Hunton & Williams, Richmond, VA, R.J. Reynolds Tobacco Company, Robert F. McDermott, Jr ., Esq., Jones, Day, Reavis & Pogue, Washington, D.C., Robert Gaffey, Esq., Michael S. Chernis, Jones, Day, Reavis & Pogue, New York, NY, The American Tobacco Company; Brown & Williamson Tobacco Corporation, and Batus Holdings, Inc., Peter Bellacosa, Esq., Kirkland & Ellis, New York, NY, British American Tobacco Company, Ltd., British- American Tobacco (Holdings) Ltd., and B.A.T. Industries, PLC, Eric A. Tulla, Esq., Rivera, Tulla & Ferrer, Hato Rey, B.A.T. Industries, P.L.C., Mark G. Cunha, Esq., Andrew T. Frankel, Esq., Kathleen L. Turland, Esq., Simpson, Thacher & Page 1 Bartlett, New York, NY, Rjr Nabisco, Inc., Sam Mills, Esq., Daniel F. Kolb, Esq., Vincent T. Chang, Esq., Davis, Polk & Wardwell, New York, NY, Lorillard Incorporated; Lorillard Tobacco Company; and Loews Corporation, J. William Newbold, Esq., Paul M. Brown, Esq., Thompson Coburn, St. Louis, MO, Loews Corporation, Francisco A. Besosa, Esq., Axtmayer, Adsuar, Muniz & Goyco, P.S.C., San Juan, United States Tobacco Company, and UST, Inc., Vicente Santori- Coll, Esq., Santori, Santori & Casal, Hato Rey, Michael Belch, Esq., Douglas Fleming, Esq., Skadden, Arps, Slate, Meagher & Flom, LLP, New York, NY, The Council for Tobacco Research- U.S.A., Inc., Paola de Kock, Esq., Debevoise & Plimpton, New York, NY, The Tobacco Institute, Inc., Hector Reichard De Cardona, Esq., Thomas J.Code, Esq., Reichard & Escalera, San Juan, Shook, Hardy & Bacon, Brendan V. Sullivan, Esq., George A, Borden, Esq., Michael S. Sundermeyer, Esq ., R. Hackney Wiegmann, Esq., Malachi B. Jones, Esq., Gilbert O. Greenmann, Esq., Williams & Connolly, Washington, D.C., Chadbourne & Parke, LLP, Harold D. Vicente, Esq., Vicente & Cuebas, San Juan, Of Counsel: Michael A. Cooper, Esq., William J. Snipes, Esq., Holly H. Weiss, Esq., Ian A. Shavitz, Esq., Sullivan & Cromwell, New York, NY, Covington & Burling, Jaime Sifre Rodriguez, Esq., Hilda M. Surillo Pena, Esq., Sanchez, Betances & Sifre, P.S.C., San Juan, Of Counsel: David A. Brownlee, Esq., Peter J. Kalis, Esq., David R. Cohen, Esq., Kirkpatrick & Lockhart LLP, Pittsburgh, PA, Jacob, Medinger & Finnegan, LLP, Pedro J. Santa-Sanchez, Esq., O'Neill & Borges, San Juan, Liggett & Myers Inc., Brooke Group Ltd., and Liggtt Group Inc., Edgar Cartagena Santiago, Esq., Goldman Antonetti & Cordova, San Juan, Marie V. Santacroce, Esq., Michael M. Fay, Esq., Kasowitz, Benson, Torres & Friedman LLP, New York, NY, for Defendants. OPINION AND ORDER FUSTE, District J. *1 Plaintiffs, the Governor and the Attorney General of the Commonwealth of Puerto Rico, along with the Commonwealth, sue Defendant cigarette manufacturers and related corporations and law firms for the economic and health damages caused by their manufacture, deceptive promotion, and sale of cigarettes to the citizens of Puerto Rico. Copr. ® West 1998 No Claim to Orig. U.S. Govt. Works EXHIBIT I A
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0 --- F.Supp. -- (Cite as: 1998 WL 313365, *5 (D.Puerto Rico)) such favorable publicity proves hazardous, knowledge of that hazard by the public relations machine amounts to tortious trickery.' Barreras- Ruiz v. American Tobacco Co., 964 F.Supp. 613, 615-16 (D.P.R.1997). Accepting the above- supported allegations as true, Plaintiffs make a prima facie case that the law firm defendants have contributed in the false representation of the dangers of cigarette smoking to the consumers of cigarettes, including those in Puerto Rico. Barreras-Rutz, 964 F.Supp. at 616 (citing Boit v. Gar-Tec, 967 F.2d 671, 675 (Ist Cir.1992)). An allegation of fraud in this forum provides this court with personal jurisdiction over law firm defendants pursuant to the Puerto Rico long-arm statute, 32 L.P.R.A.App. III R. 4.7 (1983), and the Due Process Clause, U.S. Const. Amend. XIV § 1. When the determination of jurisdiction is so closely intertwined with the facts of the case that the court must engage in some fact-finding to determine whether it has jurisdiction, the court should use the "likelihood" standard in assessing jurisdiction. Foster-Miller, 46 F.3d at 146. Here, a categorical jurisdictional determination would require a decision of the ultimate facts at issue: Whether the law firm defendants committed fraud in this jurisdiction through any public relations efforts in which they may have engaged. Accordingly, the decision regarding jurisdiction here is preliminary, and may be revisited at any time the record makes such a reconsideration appropriate. Boit, 967 F.2d at 675. We find it likely that law firm defendants' alleged intimate, complicated and extensive involvement in the public relations functions of CTR and TI went beyond general legal representation, and may constitute affirmative business promotion actions. Additionally, we find that Plaintiffs' claim that much of law firm defendants' conduct in disseminating information for the purposes of public relations involved actual fraud, a tortious act allegedly directed at the People of Puerto Rico. These alleged actions, laid out in the second amended complaint, were consummated in this forum and arose from law firm defendants' activities within Puerto Rico. Moreover, that there is a sufficient nexus between the forom, defendant, and the cause of action to satisfy the due process requirements of fair play and substantial justice. As explained above, the proper standard requires an Page 5 evaluation of the defendant's activities in the fotum, the purposeful availment of the forum, and the reasonableness of the exercise of jurisdiction. We find that there need be no specific allegations here that the information targeted Puerto Rico because the reasonableness of the allegations outweighs the weakness in the other criteria. Ticketmaster-New York v. Alioto, 26 F.3d 201, 210 (1st Cir.1994) (stating: "An especially strong showing of reasonableness may serve to fortify a borderline showing of relatedness and purposefulness"); Burger King, 471 U.S. at 477 (stating that defendant bears the burden to "presem a compelling case that the presence of some other considerations would render jurisdiction unreasonable"). We find it sufficiently likely that law firm defendants indeed committed fraud to find jurisdiction over them. *6 We accordingly find law firm defendants amenable to suit in Puerto Rico. We do not find jurisdiction based on the mere existence of an attorney-client relationship. Rather, we find personal jurisdiction because of law firm defendants' own alleged affirmative acts regarding the dissemination of information to the citizens of Puerto Rico regarding the tobacco industry. 2. Council for Tobacco Research (CTR) The Council for Tobacco Research (CTR) moves for dismissal, relying on the jurisdictional arguments made by its fellow defendants here. Since those arguments did not suffice to extract the other defendants from this case, they do not aid CTR. Furthermore, the reasons for which the Tobacco Institute failed to convince this court of its lack of jurisdiction apply here. See Docket Document No. 112; see also Barreras-Ruiz v. American Tobacco Co., 964 F.Supp. 613, reconsideration denied, 977 F.Supp. 545 (D.P.R.1997). We therefore deny CTR's motion for dismissal. 3. Loews Corporation Defendant Loews Corporation (Loews), a Delaware corporation whose principal place of business is in New York, moves pursuant to Fed.R.Civ.P. 12(b)(2) to dismiss the amended complaint on the basis of lack of personal jurisdiction. Loews maintains that it is only a holding company and the indirect corporate parent of Lorillard Corporation and Lorillard Tobacco Company ("LTC"), with Copr. ® West 1998 No Claim to Orig. U.S. Govt. Works
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0 --- F.Supp• -°- (Cite as: 1998 WL 313365, *2 (D.Puerto Rico)) exists where the cause of action directly arises from the defendant's forum-based contacts. Id. at 414 & n. 8; Donatelli v. Nat'1 Hockey League, 893 F.2d 459, 452 (Ist Cir. 1990). To be subject to specific jurisdiction, a defendant must have "purposefully avail[ed] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Burger King, 471 U.S. at 475 (quoting Hanson, 357 U.S. at 253). The purposeful availment requirement exists to assure that personal jurisdiction is not premised solely upon a defendant's "random, isolated, or fortuitous" contacts with the forum. Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984). The First Circuit requires that in order for there to be specific jurisdiction, the connection between the litigation and the defendant's activity not be attenuated and indirect. Donatelli, 893 F.2d at 463. Rather, the defendant's in-state conduct must form an "important, or material, element of proof" in the plaintiff s case. United Electrical, Radio & Machine Workers of America, 960 F.2d at 1089. These principles boil down to a tripartite test for the ascertainment of specific jurisdiction. First, the claim underlying the litigation must directly arise out of, or relate to, the defendant's forum-state activities. Second, the defendant's in- state contacts must represent a purposeful avaihnent of the privilege of conducting activities in the forum state, thereby invoking the benefits and protections of that state's laws and making the defendant's involuntary presence before the state's courts foreseeable. Third, the exercise of jurisdiction must ... be reasonable. *3 960 F.2d at 1089. In tort cases, specific jurisdiction depends largely on the strength of the connection between the tortious conduct and the contact with the forum, rather than the purposeful availmem of benefits in the forum. Barreras-Ruiz v. American Tobacco Co., 964 F.Supp. 613 (D.P.R.1997) (citing Thompson Trading, Ltd. v. Allied Lyons PLC, 123 F.R.D. 417, 426 (D.R.L 1989)). The Puerto Rico long-arm statute, 32 L.P.R.A.App. III R. 4.7 (1983), specifies certain acts on the part of a nonresident defendant which will vest a court with personal jurisdiction over that nonresident defendant. In relevant part, Rule 4.7 Page 3 provides: (a) Whenever the person to be served is not domiciled in Puerto Rico, the General Court of Justice shall take jurisdiction over said person if the action or claim arises because said person: (1) Transacted business in Puerto Rico personally or through an agent; or (2) Participated in tortious acts within Puerto Rico [personally or through his agent]; or r+* (5) Owns, uses or possesses, personally or through his agent, real property in Puerto Rico. Puerto Rico law provides a three-pronged test to determine personal jurisdiction under Rule 4.7(a). One, there must be an act done or consummated within the forum by the nonresiaent defendant ... Two, the cause of action must arise out of the defendant's action within the forum state. Three, the activity linking defendant, forum and cause of action must be substantial enough to meet the due process requirements of "fair play and substantial justice." Escude Cruz v. Ortho Pharmaceutical Corp., 619 F.2d 902, 904-05 (1st Cir.1980) (citing A.H. Thomas Co. v. Superior Court, 98 P.R.R. 864, 870 (1970)). In other words, Puerto Rico's long-arm statute requires a causal connection between the defendant's contacts in Puerto Rico and the cause of action. Id.; see also Pizarro v. Hoteles Concorde International, 907 F.2d 1256 (1st Cir.1980). Therefore, to satisfy due process and allow this court to exercise personal jurisdiction, Plaintiffs must allege a prima facie case for the commission of a tort. See 32 L.P.R.A.App. III R. 4.7 (1983). B. Analysis of Defendants' Motions to Dismiss for Lack of Jurisdiction 1. Tbe Law Firm Defendants Defendants Shook, Hardy & Bacon, LLP ("Shook");Jacob, Medinger & Finnegan ("Jacob"); Chadbourne & Parke ("Chadbourne"); and Covington & Burling ("Covington"), (collectively, "law firm defendants"), and Defendant Loews Corporation ("Loews") move to dismiss Plaintiffs' claims on the basis of lack of personal jurisdiction. Accepting all well-pleaded facts by Plaintiffs as true, we must ascertain whether this court has jurisdiction over law fum defendants. Covington is a Copr. 0 West 1998 No Claim to Orig. U.S. Govt. Works
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0 -- F.Supp. ---- (Cite as: 1998 WL 313365, "7 (D.Puerto Rico)) the activities of the subsidiary. Escude Cruz, 618 F.2d at 905; Walker v. Pueblo International, Inc., 569 F.2d 1169, 1172 (1st Cir.1978). To pierce the corporate veil, Puerto Rico law requires "strong and robust evidence" that the parent has such a degree of control over the subsidiary as to render the latter a mere shell. San Miguel Fertilizer Corp. v. P.R. Drydock & Marine Terminals, 94 P.R.R. 403, 409 (1967). "In order to fmd that jurisdiction over the subsidiary results in jurisdiction over the nonresident parent, plaintiff must show that the parent exercised the type of control 'necessary to ascribe to it the activities of the subsidiary." ' Escude Cruz, 619 F.2d at 904 (citing Product Promotions, Inc. v. Cousteau, 495 F.2d 483, 493 (5th Cir.1974)). So where the subsidiary is merely a branch or division of a larger whole, the instate presence of one part may render the parent present in the forum as well. Wells Fargo & Co. v. Wells Fargo Exp. Co., 556 F.2d 406, 419 (9th Cir.1977). "8 Although the corporate separation need not be a sham or subterfuge, where the parent has held the subsidiary out as its agent or exercised an undue degree of control over the subsidiary, piercing the veil may be appropriate. Walker, 569 F.?d at 1173. The parent-subsidiary relationship in itself does not suffice to justify the exercise of jurisdiction, but the close relationship between the two companies is a relevant factor. Mangual v. General Battery Corp., 710 F.2d 15, 21 (1st Cir.1983). Generally, 'a corporate entity may be disregarded in the interests of public convenience, fairness and equity." FDIC v. Ma rtinez-Almodovar, 671 F.Supp. 851, 876 (D.P.R. 1987) (citations omitted); see also Donatelli, 893 F.2d at 466 (stating: "Situe the essence of personal jurisdiction is to bring responsible parties before the court, a corporation which is actually responsible for its subsidiary's decision to undertake instate activities should, in all fairness, be within the state courts' jurisdictional reach"). Whether a subsidiary is only an empty shell and the corporate forms have been entirely disregarded is a question of fact, and allegations of interlocking directorates and stock ownership will not alone suffice. Escude Cruz, 619 F.2d at 904. A genuine issue of material fact exists as to the existence of Loews' control over Lorillard, Inc. and LTC. Rather than offering mere conclusory and baseless statements, Plaintiffs point to evidence and present affidavits to support their allegations. This court has 0 Page 7 stated that: Ownership of all the stock of the subsidiary, interlocking directorates, common shareholders and similar names, will not suffice, by itself, to pierce a corporate veil. Rather, factors such as inadequate financing, commingling of assets and control of the day to day operation of the subsidiary are considered crucial in removing the corporate veil. Satellite Broadcasting Cable, Inc. v. Telefonica de Espana, S.A., 786 F.Supp. 1089, 1100 (D.P.R.1992) (citations omitted). As discussed above, Plaintiffs have alleged that Loews assisted in the financing of its subsidiaries, and partook in their operations and policies. These allegations suffice to raise a genuine issue of material fact regarding Loews' involvement in the activities of its subsidiaries. (b) Loews' Participation in the Tobacco Conspiracy Plaintiffs maintain that Loews has been independently involved in the tobacco conspiracy by its membership in TI and CTR, which have allegedly misrepresented the health dangers of tobacco use. Plaintiffs point to the minutes of TI Board of Directors and Executive Committee meetings to prove Loews' regular attendance. Plaintiffs additionally cite the attendance of Preston Robert Tisch, of Loews, at a minimum of six CTR meetings between 1971 and 1974. As in the analysis regarding personal jurisdiction over law firm defendants, the determination of jurisdiction here is closely intertwined with the facts of the case. In order to determine whether we have jurisdiction over Loews, we must determine whether Loews committed a tortious act or business promotion in Puerto Rico. This is precisely the issue at the heart of the case which determines Loews' liability. We therefore must engage in some fact- fmding to determine whether we have jurisdiction. *9 Accordingly, we use the "likelihood" standard in assessing jurisdiction. Foster-Miller, 46 F.3d at 146. Here, a categorical jurisdictional determination would require a decision of the ultimate facts at issue: Whether Loews committed fraud in this jurisdiction through its involvement in TI and CTR. For purposes of the jurisdictional analysis, we find that Loews' alleged participation in TI and CTR may constitute an actual fraud, a tortious act Copr. ® West 1998 No Claim to Orig. U.S. Govt. Works
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J. Eugene Balloun Shook, Hardy & Bacon 9401 Indian Creek Parkway Overland Park, KS 77210
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0 I~arm U3wAtwlwazoli woej wanUSIN I . I 86329097 0
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0 --- F. Supp - ---- (Cite as: 1998 WL 313365, *9 (D.Puerto Rico)) allegedly directed at the People of Puerto Rico. In this context, we find it sufficiently likely that Loews indeed committed fraud to fmd jurisdiction over them. These alleged actions, laid out in the complaint, were consummated in this forum and arose from Loews' activities within Puerto Rico. Moreover, there is a sufficient nexus between the forum, Loews, and the cause of action to satisfy the due- process requirements of fair play and substantial justice. 4. Fortune Brands, Inc. Plaintiffs claim that Defendant Fortune Brands, Inc. ("Fortune"), both independently and through its subsidiary, American Tobacco Company ("ATC"), has participated in the manufacture of cigarettes, the conspiracy to create doubt regarding the health dangers of cigarettes, the targeting of minors for the sale of cigarettes, and the manipulation of nicotine levels in their cigarettes. Fortune moves to dismiss this action for lack of personal jurisdiction. Fortune is the new name of American Brands, Inc. ("American Brands"), which was the sole parent corporation of ATC from 1986 to 1994. In 1994, American Brands sold ATC to Brown & Williamson Tobacco Corporation. To prove that Fortune was involved in the manufacture and promotion of cigarettes in Puerto Rico, Plaintiffs cite examples of American Brands' personnel membership on the TI Committee of Counsel, as well as the American Brands' funding of CTR itself and Special Projects of CTR. Plaintiffs furthermore refer to American Brands' participation in the TI Executive Committee, the funding of the TI Testing Laboratory, and its involvement in Special Accounts projects. [FN1] Plaintiffs allege that American Brands has consistently resisted disclosure of facts relating to the activities of its subsidiary, the ATC, and has therefore conspired with ATC to avoid the exposure of ATC's fraudulent and tortious activities. According to Plaintiffs, American Brands' Board of Directors recommended against various shareholder resolutions including a resolution that sought to disclose information regarding nicotine content in ATC's tobacco products, a resolution that sought to require a report on the promotion of lower-priced 10 Page 8 cigarettes to African-Americans and low-income persons, and a resolution that would have established a committee to review compliance with the voluntary Cigarette Advertising Code. Plaintiffs additionally maintain that American Brands viewed itself and presented itself to the public as being in the tobacco business as evidenced by its atmua] reports. Additionally, Plaintiffs note that American Brands gave advice to CTR Special Projects researchers regarding tar and nicotine testing, commented on the TI Testing Laboratory, analyzed TI press releases, formulated responses to Surgeon General reports, and advised on youth smoking campaigns. Moreover, Plaintiffs allege that American Brands was a generous financial contributor to groups that were promoting cigarette usage. *10 Plaintiffs claim that there is jurisdiction over Fortune not only because of these independent activities explained above, but also by virtue of the activities of its subsidiary, the ATC. Plaintiffs state that there was no meaningful distinction between American Brands and the ATC. They cite the fact that the meetings of the board of directors of the ATC were routinely held at the offices of American Brands and that they shared many board members. Fortune defends that it sold ATC on December 22, 1994, and ATC subsequently merged into Brown & Williamson Tobacco Corporation, thereby ceasing any Fortune interest in ATC. Fortune states that even before the ATC sale in 1994, ATC was a distinct legal entity from its then-parent, Fortune, maintaining separate records, bank accounts, directors' meetings, management, and policies. Fortune itself has no employees, office, agent or property in Puerto Rico. The analysis above regarding piercing the corporate veil of a par:nt company applies here. As we have already explained, to pierce the corporate veil, Puerto Rico law requires "strong and robust evidence" that the parent has such a degree of control over the subsidiary as to render the latter a mere shell. San Miguel Fertilizer Corp., 94 P.R.R. at 409. We find that Plaintiffs have made a sufficient showing that it is likely that the non-resident parent Fortune did exercise the type of control over its subsidiary ATC "'necessary to ascribe to it the activities of the subsidiary." ' Escude Cruz, 619 F.2d at 904 (citing Product Promotions, Inc. v. Copr. 0 West 1998 No Claim to Orig. U.S. Govt. Works
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0 E. RALPH WALKER #PK0006346 WALKER LAW FIRM P.C. 2501 Grand Avenue, Suite E Des Moines, Iowa 50312 PH: (515) 281-1488 FAX: (515) 281-1489 ROGER W. STONE #L10005358 SIMMONS, PERRINE, ALBRIGHT & ELLWOOD, P.L.C. 115 Third Street S.E., Suite 1200 Cedar Rapids, Iowa 52401-1266 PH: (319) 366-7641 FAX: (319) 366-1917 FAX: (515)'?46-4550 0 STEVEN P. WANDRO #484-76-2548 WANDRO & GIBSON, P.C. 2501 Grand Avenue, Suite B Des Moines, Iowa 50312 PH: (515) 281-1475 FAX: (515) 281-1474 P:\WP\rob-106notpld
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RECEpV, S RECEIVED JUL171998 JUL 1 7 1998 7ERR1 P. DW' TERR! P. DURHAM
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i --- F.Supp• ---- (Cite as: 1998 WL 313365, *10 (D.Puerto Rico)) Cousteau, 495 F.2d 483, 493 (5th Cir.1974)); Wells Fargo & Co., 556 F.2d at 419. See also Foster- Miller, 46 F.3d at 146 (finding that where the issue of personal jurisdiction is intimately necessitates some finding of facts that are ultimately at issue, the likelihood standard is appropriate). We accordingly conclude that we have personal jurisdiction over Fortune. 5. B.A.T. Industries p.l.c., British American Holdings Ltd., and BATUS Holdings, Inc. Plaintiffs maintain that BAT Industries, p.l.c. ("BAT") has been intimately involved in the tobacco -related activities of its subsidiaries, British American Holdings Limited ("BAT Holdings"), Brown & Williamson Tobacco Corporation ("Brown") and British American Tobacco Company ("BATCo."), and in the so-called tobacco conspiracy as a whole. BAT is a corporation based in the United Kingdom and the parent company of Brown and British-American. BATUS Holdings, Inc. ("BATUS") is an intermediate parent company in the United States between BAT and Brown. Plaintiffs allege a wide variety of activities performed by BAT that render it directly liable, beyond its role as the parent of a tobacco manufacturing subsidiary. The most notable element of plaintiffs' allegations is the Tobacco Strategy Review Team (TSRT), in which the parent company directly participated in strategy related to the "anti- smoking lobby." Docket Document No. 66, PlaintifFs Exhibit No. 50. Plaintiffs also point to corporate positioning against competitors. However, this evidence merely serves to demonstrate that the parent company had an entirely justifiable financial interest in its subsidiary. The TSRT alone demonstrates the parent companies' active roles in the fraud alleged by Plaintiffs. According to the law discussed above regarding parent liability, we find that the Plaintiffs' allegations, if true, are sufficient to provide us with jurisdiction over defendants BAT, BAT Holdings, BATCo., and BATUS, as well as the subsidiary manufacturer, Brown. 6. Liggett & Myers Inc., Brooke Group Ltd., and Liggett Group Inc. '11 Liggett & Myers Inc., Brooke Group Ltd., and Liggett Group, Inc. move for dismissal relying on the same bases as its codefendants. As we noted • Page 9 with regard to CTR's motion, the insufficiency of these arguments will not permit these defendants to escape jurisdiction, and their motion is therefore denied. 7. RJR Nabisco, Inc. RJR Nabisco, Inc. (RJRN) moves for dismissal based on lack of personal jurisdiction, filing an affidavit indicating its lack of presence in this forum. RJRN is the parent company of R.J. Reynolds, the manufacturer of Camel and other widely-consumed cigarettes. Plaintiffs' opposition details direct participation by defendant RJRN in TI meetings and in some cigarette product development. Furthermore, RJRN allegedly participated in supporting and defending the highly visible Joe Camel advertising campaign, the comic- book figures of which were linked by many in the press to increasing teenage smoking. Plaintiffs also detail the promotion of positive aspects of smoking by RJRN. These allegations of RJRN's actions, following the law cited above, suffice for jurisdictional purposes. We therefore deny RJRN's motion to dismiss. II. Substantive Arguments for Dismissal A. Lack of Standing and Causation Defendants contend that the Commonwealth does not have the standing or adequate causation to sue the Defendants because it has not been damaged and claims damages based on injuries to third parties. In order to bring a proper suit, the plaintiff must have standing, which involves the plaintiffs having suffered a direct or actual injury. The requirement of standing guarantees the plaintiff's interest, rather than hypothetical, is real. 13 Charles Alan Wright, Arthur R. Miller, and Edward H. Cooper, Federal Practice and Procedure: Jurisdiction 2d § 3531 (1984). Contemporary standing law began with the case of Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970). "Since Data Processing, the Court has treated the 'injury in fact' requirement as part of the basic conceptual scheme of Article III, both inside and outside the administrative law setting in which the term had its origin." William A. Fletcher, The Structure of Standing, 98 Yale L.J. 221, 230 (1988). Although the 'injury in fact' standard appears quite clear, the Copr. ® West 1998 No Claim to Orig. U.S. Govt. Works
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0 --- F.Supp- ---- (Cite as: 1998 WL 313365, *6 (D.Puerto Rico)) separate and distinct bank accounts, check books, investments, and financial records. Loews argues that the two have separate and independent corporate officers, staffs, employees, principal places of business, and Boards of Directors. Loews itself does not have a bank account, telephone, employee, agent, office in Puerto Rico, and does not rent or own any real property in Puerto Rico. Citing the Puerto Rico long-arm statute, Plaintiffs maintain that personal jurisdiction over Loews rests upon (1) Loews' ultimate control over its tobacco subsidiaries and (2) Loews' membership in the conspiracy to promote tobacco products. They cite to State of Oklahoma v. R.J. Reynolds Tobacco Co., CJ-96- 1499 (Cleveland Co. Okla. Dist. Ct. Jan. 6, 1978), denying Loews' motion to dismiss. Docket Document No. 88. (a) Loews' Control Over Its Subsidiaries According to Plaintiffs, Loews' corporate history illustrates its control over its tobacco subsidiaries. Plaintiffs allege that P. Lorillard Co. was incorporated under New Jersey law in 1911. In 1954, Loews Theatres, Inc. was incorporated in New York. In 1960, Robert and Lawrence Tisch gained control of Loews Theatres, Inc. Lorillard Corporation was incorporated in Delaware in February 1968. In April 1968, P. Lorillard Co. merged into Lorillard Corporation. In November 1968, Loews Theatres, Inc. acquired Lorillard Corporation. In 1969, Loews was incorporated in Delaware, and Lorillard Corpration merged into Loews Theatres, Inc. and became the tobacco division of Loews Theatres, Inc., also known as "Lorillard, a Division of Loews Theatres, Inc." In 1971, Loews Theatres, Inc. became a wholly-owned subsidiary of Loews Corporation. In 1985, Loews Theatres, Inc. changed its name to Lorillard Corporation, In 1989, Lorillard Tobacco Company ("LTC") was incorporated in Delaware, and all operations of Lorillard, Inc. were transferred to Lorillard Tobacco Company. The final result is that Lorillard Tobacco Company is a wholly-owned subsidiary of Lorillard, Inc., which is a wholly- owned subsidiary of Loews Corporation. Loews Corporation owns 100% of the stock of Lorillard Corporation, which owns 100% of the stock of LTC. *7 Plaintiffs maintain that Loews dominates its 0 Page 6 subsidiaries by infiltrating their management structures with Loews officers and directors. Plaintiffs state that Loews uses its authority over LTC to influence LTC's profits from cigarette sales, and that Loews derives 40% of its own profits through LTC's cigarette sales. Plaintiffs allege that Loews makes significant ntanagement decisions affecting Lorillard, regarding methods of accounting and 1996 shareholder resolutions in order to protect its profit margin. Plaintiffs allege that Loews led the public to believe it is a tobacco company through its various corporate publications, annual reports, and internal correspondence which evidence its active role in tobacco manufacture and that Lorillard and LTC are divisions of Loews, not separate corporations. Plaintiffs claim that Loews is also heavily involved in financing Lorillard and LTC to cover normal business expenses, such as employee retirement plans, computers, and products liability insurance. Plaintiffs point to Lorillard's "salesman's training manual," which states that Loews Corporation performs the finance, public relations, personnel, and legal functions for Lorillard. Moreover, in the 1986 services agreement between Loews and Lorillard, Loews agreed to provide Lorillard with personal services, telecommunications services, purchasing services, accounting services, data- processing services, cash-management services, tax- preparation services, insurance services, real estate management services, and other miscellaneous services. A court's jurisdiction over a subsidiary company doing business within a state does not by itself confer jurisdiction over its nonresident parent corporation, even if the parent is the sole owner of the subsidiary. Alvarado-Morales v. Digital Equipment Corp., 843 F.2d 613, 616 (Ist Cir.1988) (affirming the dismissal of a complaint against the nonresident parent corporation in the absence of showing that the parent company had any involvement in the actions giving rise to the complaint); Escude Cruz v. Ortho Pharmaceutical Corp., 619 F.2d 902, 904 (1st Cir.1979) (citing Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 45 S.Ct. 250, 69 L.Ed. 634 (1925)). There is a presumption of separate corporate identities that must be overcome by clear and convincing evidence that the parent in fact controls Copr. ® West 1998 No Claim to Orig. U.S. Govt. Works
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CERTIFICATE OF SERVICE The undersigned hereby certifies that a copy of the document attached to this Certificate was hand delivered to the persons listed below at the addresses indicated, on the 13th day of July, 1998: Roger T. Stetson Belin, Lamson, McCormick, Zumbach & Flynn 2000 Financial Center 666 Walnut Street Des Moines, IA 50309 Henry A. Harmon Grefe & Sidney 2222 Grand Avenue Des Moines, IA 50312 Richard R. Chabot Sullivan & Ward, P.C. 801 Grand Avenue, Suite 3500 Des Moines, IA 50309-2719 Steven L. Nelson Davis, Brown, Koehn, Shors & Roberts, P.C. 2500 Financial Center 666 Walnut Street Des Moines, IA 50309-3993 The undersigned further certifies that a copy of the document attached to this Certificate was mailed to the persons listed below at the addresses indicated, stamped with the appropriate postage for ordinary mail and deposited on the 13th day of July, 1998, in a United States Post Office mail receptacle, in Des Moines, Iowa. Michael M. Fay Kasowitz, Benson, Torres & Friedman, L.L.P. 1301 Avenue of Americas New York, NY 10019-6022
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9 0 ~..-~ al~.~~~ R` ju+ 17 1998 -rER,.r.,= P. pURHAM
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• --- F.Supp. --- (Cite as: 1998 WL 313365, *18 (D.Puerto Rico)) conduct; 2) of an enterprise; 3) through a pattern; 4) of racketeering activity.' 18 U.S.C. § 1962(c) (1994); Libertad v. Welch, 53 F.3d 428, 441 (1st Cir.1995). The law on RICO requires very specific allegations of racketeering, and those allegations cannot await trial to fmd their specificity. Ahmed v. Rosenblatt, 118 F.3d 886, 889 (ist Cir.1997). Although the original complaint failed to meet this rigorous particularity standard, as the Defendants assert, the second amended complaint's extensive detailing of the RICO allegations amply meets the standard. *19 The alleged enterprise may be: "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.' 18 U.S.C. § 1961(4) (1994). Plaintiffs carefully detail the structure of the tobacco industry's behavior that makes it an enterprise for RICO purposes. Allegedly, the enterprise began in 1953 at a meeting of industry leaders in New York during which the industry research and lobbying arms were born. Plaintiffs argue that the Council on Tobacco Research (CTR), preceded by the Tobacco Industry Research Committee (TIRC), served, along with the Tobacco Institute (TI), to propagate information that was contradicted by progressively more conclusive research demonstrating the health dangers of cigarette smoking. Plaintiffs have proffered sufficient evidence of the existence of a joint enterprise including the tobacco manufacturers and their parent corporations, the Council on Tobacco Research, and the Tobacco Institute. This collective clearly meets the standard for an enterprise under RICO. RICO requires Plaintiffs to allege a pattern of racketeering activity involving at least two predicate acts within ten years of each other. 18 U.S.C. § 1961(5). "Predicate acts under this statute are acts indictable under any one or more of certain specified laws, including the mail and wire fraud statutes." Ahmed, 118 F.3d at 888-89. See also Feinstein, 942 F.2d at 42; McEvoy, 904 F.2d at 788. We need not repeat each of the plaintiffs' hundreds of RICO allegations, which have been asserted not only in the instant case, but in cases nationwide. The allegations, if true, make it apparent that this enterprise engaged in specific acts over several years that constituted a concerted campaign to obfuscate 0 Page 15 the growing body of indisputable evidence regarding the dangers of smoking. This campaign, as the documents proffered demonstrate, was viewed by its participants as necessary to increase consumption of the unquestionably-dangerous cigarettes that provide billions of dollars of income from addicts around the world. The acts alleged in a RICO claim must be continuous, in that the related acts constituted continued criminal activity or the threat or probability of such continued activity. Abmed, 118 F.3d at 889. See also Feinstein, 942 F.2d at 45. In the instant case, the temporal proximity of the act alleged falls well within the statutory requirement. "Racketeering activity" includes a wide range of federal crimes. Here, the relevant crime is mail and wire fraud, under 18 U.S.C. § 1341 (1994) and 18 U.S.C. § 1343 (1994). Defendants allegedly engaged in activities pursuant to the agreement among the various manufacturers to further the purpose of the enterprise of promoting a product known by its manufacturers to be dangerous. With regards to the RICO statute, a distinction must be made between mail and wire fraud and fraud generally. The former qualifies under the RICO statute, whereas the latter does not. Giambattisa v. McGovern, 974 F.2d 1329, 1992 WL 214444 (1st Cir. Sept.4, 1992). If the uses of the mails are related and amount to, or pose threat of, continued illegal activity, they may be subject to a RICO action. Aetna Casualty Surety Co. v. P & B Autobody, 43 F.3d 1456, (ist Cir.1994) (citing Digital Equipment Corp. v. Curie Enterprises, 142 F.R.D. 16 (D.Mass.1992)). The evidence of the ongoing succession of fraud regarding the health safety of cigarettes, which occurred in many instances over wire and mail, clearly satisfies this requirement. *20 Defendants also argue that the alleged damages are not against a business or property, but are costs based on personal injuries that are pecuniary. They cite to cases which hold that RICO claims may not rely on allegations of personal injuries. See Reiter v. Sonotone Corp., 442 U.S. 330, 339, 99 S.Ct. 2326, 60 L.Ed.2d 931 (1979); Bast v. Cohen, Dunn & Sinclair, P.C., 59 F.3d 292, 295 (4th Cir.1995). Here, since the Commonwealth makes its claim based on the health damages to the People of Puerto Rico, Defendants claim that the injuries are not Copr. 0 West 1998 No Claim to Orig. U.S. Govt. Works
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IN THE IOWA DISTRICT COURT FOR POLK COUNTY THE STATE OF IOW:A, } ) Plaintiff. ) Law No. CL 000 7I04$ ) ) V. ) R.J. REYNOLDS TOBACCO COMPANY, ) et al., ) Defendants. ) DEFENDANTS' RESPONSE TO PLAINTIFF'S MOTION FOR RULE 136 PRETRIAL CONFERENCE
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a Bruce G. Merritt Debevoise & Plumpton 875 Third Avenue New York, NY 10022 J. Michael Weston Moyer & Bergman 2726 First Avenue N.E. Cedar Rapids, IA 52406-1943 Michael C. Lasky Fred M. Weiler Davis & Gilbert 1740 Broadway New York, NY 10019 D. Scott Wise Vincent T. Chang Davis, Polk & Wardell 450 Lexington Avenue New York, NY 10017 Fred L. Dorr David C. Pulliam Wasker, Dorr, Wimmer & Marcouiller, P.C. 801 Grand Avenue, Suite 3100 Des Moines, IA 50309-8036 Brent B. Green Duncan, Green, Brown, Langeness & Eckley, P.C. 400 Locust Street, 380 Capital Square Des Moines, IA 50309-2331 Wayne T. Stratton Goodell, Stratton Law Firm 515 South Kansas Avenue Topeka, KS 66603-3999 Joseph R. Gunderson Dreher, Simpson & Jensen, P.C. 699 Walnut Street, 15t° Floor Des Moines, IA 50309
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! i 863291-05 1N3JNW l131Mf16NO~ 1SYkl %fK YVOHj 3Qyyy tl3d1d 03l'JA~3tl Pit , A " A I/ I s •
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John C. Monica Craig Proctor Catherine Castellucio Shook, Hardy & Bacon One Kansas City Place 1200 Main Street Kansas City, MO 64105-2118 Dan K. Webb Thomas J. Frederick Kurt L. Schultz Kevin J. Narko Winston & Strawn 35 West Wacker Drive Chicago, IL 60601 Robert A. Van Vooren Thomas D. Waterman Lane & Waterman 600 Norwest Bank Building Davenport, IA 52801 Thomas F. Gardner Jones, Day, Reavis & Pogue 77 West Wacker Drive Chicago, IL 60601 Mark C. Cunha Adam I. Stein Simpson, Thacher & Bartlett 425 Lexington Avenue New York, NY 10017-3954 R. Todd Gaffney Finley, Alt, Smith, Schamberg, May ScCraig, P.C. 604 Locust Street Des Moines, IA 50309-3773 Andrea R. McGann Michelle Browdy Kirkland & Ellis 200 East Randolph Drive Chicago, IL 60601
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differs from state to state. This knowledge is best evidenced by the historical and current smoking cessation programs promoted by the State. • Taxes paid to the State generated. directly or indirectly. bY the manufacture or sale of tobacco or cigarettes. • H_istorical and current smoking cessation education. • Curriculum guidelines regarding smoking education. • Use of tobacco in prisons and other state institutions. • Research relating to tobacco. • Laws regulating the sale and use of cigarettes and the State's enforcement or lack thereof • Smokine related w•orker s compensation claims. • Alternative causes of the illnesses the State attributes to smoking, such as genetic, environmental, lifestyle, and other causes or contributing factors. Numerous Iowa state departments and agencies will be asked to produce relevant documents, including without limitation the Governor's Office, the Department of Public Health, the Department of Human Services, the Department of Education, the different councils and information centers concerning the Governor's Alliance on Substance Abuse, the Lieutenant Governor's Office, the Department of Revenue and Finance, the Iowa Finance Authority, the Auditor of the State's office, the Department of General Services, the Iowa Treasurer's office. and the Iowa Legislative Service Bureau..' 3 In the State ofTesas case, for erample, documents were produced from more than 25 state agencies with responsibility for various aspects of that state's regulator,v..health care, and educational policies relating to cigarettes. tv
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0 -- F. Supp. --- (Cite as: 1998 WL 313365, *14 (D.Puerto Rico)) continuous nature of the tort. In Castano v. American Tobacco Co., 870 F.Supp. 1425 (E.D.La.1994), rev'd on other grounds, 84 F.3d 734 (5th Cir.1996), the court held that the Louisiana statute of limitations did not preclude that case because the tort was continuous and because it was not based on a failure to warn. Careful review of Puerto Rico's statute of limitations leads to a similar conclusion. It has been long established that statutes of limitations do not prescribe the suits based on continuous torts. See, e.g., Mack v. Great Atlantic and Pacific Tea Co., 871 F.2d 179, 183-84 (Ist Cir.1989); Arcelay v.. Sanchez, 77 D.P.R. 782, 795 (1955). Defendants argue that other smoking cases, Barnes v. American Tobacco Co., 984 F.Supp. 842 (E.D.Pa.1997), and ABgood v. R.J. Reynolds Tobacco Co., 80 F.3d 168 (5th Cir.), cert. denied, --- U.S. ----, 117 S.Ct. 300, 136 L.Ed.2d 218 (1996), limited certain smoking claims because the statute of limitations had run. Those cases involved harms against individuals rather than against the collective as represented by the Commonwealth. Furthermore, Plaintiffs correctly cite to the preeminence of public policy interests in determining whether the statute of limitations has run. See Municipio de Cayey v. Soto Santiago, 92 J.T.S. 97. We, therefore, find that the claims brought by Plaintiffs are still valid because the alleged torts are continuous. E. Unjust Enrichment *15 Plaintiffs pursue a cause of action sounding unjust enrichment. They allege that the tobacco companies, through the production, promotion, and sale of their tobacco products, have knowingly created a massive public health crisis for which the Plaintiffs had to provide medical care. Plaintiffs allege that their obligation to provide medical care to indigents suffering from the usage of Defendants' tobacco products is a tremendous financial burden which should properly be borne by the enterprise which profited from the sale of these tobacco products in the first place. Plaintiffs claim they have saved Defendants from bearing the health care costs of tobacco-related disease which they essentially caused. Plaintiffs maintain that they have enriched tobacco companies by relieving them of the possibility of immense liability and litigation expenses from thousands of individual suits by addicted smokers. Plaintiffs claim they acted to avert an immediate public health crisis which i Page 12 Defendants created and had the duty to rectify. Plaintiffs argue that their duty to provide public health care does not relieve Defendants from their obligation to perform restitution to the Plaintifl's. But for Defendants' activities, Plaintiffs' duty to injured smokers would not have arisen. Defendants argue unjust enrichment is the principle that no one may enrich himself unjustly at the expense of another. Compania Popular v. District Court, 63 P.R.R. 116, 122 (1944) (citations omitted). "Unjust enrichment is a doctrine based in equity which seeks to do justice in the absence of a contractual or legal obligation ... and its purpose is to avoid the inequity of a person unjustly enriching himself at the expense of another." Ocaso, S.A. Compania De Seguros Y Reasegoros v. Puerto Rico Maritime Shipping Authority, 915 F.Supp. 1244, 1263 (D.P.R.1996) (citing Umpierre v. Torres Diaz, 114 D.P.R. 446 (1983); Silva v. Comision Industrial, 91 D.P.R. 891 (1965)). To state a claim for unjust enrichment under Puerto Rico law, a plaintiff must establish (1) an enrichment, (2) a correlative loss, (3) a proximate cause connection between the enrichment and the loss, (4) the absence of a justification for the enrichment, and (5) the absence of an adequate remedy at law. Ortiz Andujar v. E.L.A., 122 D.P.R. 817, 823 (1988). The Restatement of Restitution § 1, comment b, explains the meaning of a"benefu": A person confers a benefit upon another if he ... satisfies a debt of the other or in any way adds to the others security or advantage. He confers a benefit not only where he adds to the property of another, but also where he saves the other from expense or loss. The word benefit therefore denotes any form of advantage. Id. Performance of an act which was not defendant's legal duty to perform does not confer a benefit and does not enrich the defendant. Florida Power & Li ;ht Co. v. Allis-Chalmers Corp., 752 F.Supp. 434, 439 (S.D.Fla.1990); see also Texaco Puerto Rico, Inc. v. Department of Consumer Affairs, 60 F.3d 867 (1st Cir.1995). If a third party pays the debt of another despite the debtor's proclamation that he will not pay any such debt, the third party is entitled to compensation to the extent that the debtor has benefitted from the payment. Banco Construction Corp. v. Banco Exterior De Espana, S.A., No. 91- 1938, 1991 WL 566021, at *2 (D .P.R. Jan. 12, 1993). Therefore, in order for Plaintiffs to establish a claim for unjust enrichment Copr. 0 West 1998 No Claim to Orig. U.S. Govt. Works
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I. INTRODUCTION Defendants oppose Plaintiffs request for a trial setting in February 1999 on the following grounds:' • Plaintiffs request wholly ignores Defendants right and need to take substantial discovery of the State of Iowa. including discovery relating to the history of the State's regulation of tobacco products, the State's and Iowa public's awareness of the risks of smoking. and the State's damages claims. Depending on the outcome of pending motions. that discovery could also include extensive inquiry into the operation of the State of Iowa's Medicaid and other public health care programs and depositions and other discovery of those Iowa Medicaid and other public health care recipients for whose medical costs Plaintiff seeks to recover. Among other reasons. Defendants have been precluded from taking such discovery to date because of Plaintiffs interlocutory appeal to the Supreme Court of Iowa from this Court's order dismissing various of Plaintiffs claims, which divested this Court of jurisdiction over these proceedings. Plaintiff correctly notes that its need to take discovery of Defendants is largely eliminated by the discovery which has taken place in the State of Minnesota action. See Motion for Rule 136 Pretrial Conference ("Plaintiffs Motion"). at 2-3. The converse proposition is not true, however. The discovery which defendants took of the State of Minnesota in that case is I This response is filed on behalf of those Defendants not challenging jurisdiction, namely: Philip Morris Incorporated; Philip Morris Companies Inc.; R.J. Reynolds Tobacco Co.; Brown & Williamson Tobacco Corp., individually and as successor to The American Tobacco Co.; Lorillard Tobacco Co.: Lorillard Inc.; The Council for Tobacco Research--U.S.A., Inc.; Hill & Knowlton. Inc.: British-American Tobacco Company Limited: United • States Tobacco Company; and UST Inc. 2
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0 ---F.Supp. ---- (Cite as: 1998 WL 313365, *13 (D.Puerto Rico)) party would be entitled to recover those expenses in a state law tort action against the tortfeasor. Id. at 1487. However, in the instant case, the government relies precisely on a wide variety of state tort actions, specifically not based on the subrogation claim, nor solely on the government's coverage of Medicaid expenses. Furthermore, several courts have determined that the subrogation remedy provided in the statute is not an exclusive one, but rather an additional remedy for plaintiffs to pursue. See e.g., Hedgebeth v. Medford, 74 N.J. 360, 378 A.2d 226, 228 (N.J.1977). For these reasons, the Defendants' arguments that subrogation or assignment are the only suitable causes of action fall to sway the court. Relatedly, Defendants argue that the Medicaid recipients should be joined to the action because otherwise individual beneficiaries, under the collateral source rule, would be able to recover for their damages, requiring Defendants to pay twice for their liability. This scenario is unlikely, given that no individual has ever won damages against a cigarette manufacturer for smoking- related illness in Puerto Rico, and given that this court has denied the motion to certify a class action against the very same Defendants. This argument, accordingly, fails to convince the court of the inappropriateness of this action. C. Preemption by the Federal Cigarette Labeling and Advertising Act Defendants argue that the Federal Cigarette Labeling and Advertising Act, 15 U.S.C. § 1331 (1994), preempts several elements of the Plaintiffs' complaint. The Labeling Act was intended, as the Supreme Court stated in Cipollone v. Liggett Group, Inc., 505 U.S. 504, 512, 112 S.Ct. 2608, 120 L.Fd.2d 407 (1992), to prevent the national economy from being "impeded by diverse, nonuniform, and confusing cigarette labeling and advertising regulations with respect to any relationship between smoking and health." Id. In that case, the Supreme Court pointed out that where a federal and a state law were in conflict, the state law is preempted, id. at 517, and state law can be exerted though an award of damages, as well as legislation. Id. at 521. However, as the Court determined in that case, "there is no general, inherent conflict between the federal preemption of 0 Page 11 state warning requirements and the continued vitality of state common-law damages actions." Id. at 518. The Court took a very limited view of the range of actions that may be preempted by the Labeling Act, pointing to only claims where the state law requires or prohibits advertising or promotion. In that case, the Court determined that the only claims that could be preempted directly concern issues of "smoking and health.' Id. at 528. Thus, claims that the manufacturers committed acts of fraud in promoting their products did not concern "smoking and health," but rather the duty not to deceive. Id. at 529. •14 "To the extent that plaintiffs' claims are based on fraudulent concealment or a failure to warn after 1969, they are preempted by the Federal Cigarette Labeling and Advertising Act," L,Ilgood v. R.J. Reynolds Tobacco Co., 80 F.3d 169, 171 (1st Cir.1996). However, this preempts elements of the plaintiffs' claims only to the extent that they focus on advertising; it does not preempt a finding of liability based on defendants' research, testing practices or nonadvertising public commentary. The limited extent to which this case is preempted by the Labeling Act, thus, does not preclude the Plaintiffs' claims, which center on other tort duties or on research and manufacturing issues. D. Statute of Limitations Defendants argue that Counts 2-11 of the Commonwealth's Complaint are barred by the statute of limitations of one year in Puerto Rico for torts arising from "grave insults or calumny, and for obligations arising from ... fault or negligence." 31 L.P.R.A. § 5298. Defendants argue that Count 1 is limited by the fifteen-year statute of limitation for unjust enrichment/restimtion actions. Defendants' statute of limitations' arguments on RICO claims will.be addressed along with other analysis on that statute. Defendants claim that Plaintiffs had notice of the alleged torts well before a year ago. In support of this claim, they provide a laundry list of such notifications from sixteenth-century musings about the dangers of tobacco to the recent spate of state cases against tobacco manufacturers, some of which had been filed well before the instant suit. co Plaintiffs base their defense on the fact that this Ch case is not prescribed by the statute of limitations W because of public policy bases and because of the t`J Copr. ® West 1998 No Claim to Orig. U.S. Govt. Works ,~0 O V (N
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i - F.Supp. --- (Cite as: 1998 WL 313365, *15 (D.Puerto Rico)) by virtue of their medical expenditures on behalf of injured smokers, they must show that Defendants had a duty to pay the medical expenses of the individual defendants and Plaintiffs fulfilled Defendants' obligation. *16 If a third party pays the debt of another despite the debtor's proclamation that he will not pay any such debt, the third party is entitled to compensation to the extent that the debtor has benefitted from the payment. Id. We find that Plaintiffs have failed to state a claim for unjust enrichment under Puerto Rico law, since they do not adequately allege a benefit which they conferred upon Defendants. It is not Defendants wbo have received a benefit from Plaintiffs' medical care expenditures, but rather the individual smokers. Plaintiffs' claim that they have spared Defenaants the liability and litigation expenses is too speculative and remote to constitute a benefit. Indeed, before this court is a case for such damages, Barreras-Ruiz v. American Tobacco Co., No. 96-2300(JAF). The only way Plaintiffs' health- care expenditures on indigent smokers could constitute a benefit to Defendants would be if Defendants were legally liable to the individual smokers for their medical care, and Plaintiffs' expenditures specifically discharged Defendants' liability. There is no evidence to this effect. This, combined with the fact that it is Plaintiffs' independent statutory duty to pay the medical costs of indigent individual smokers in Puerto Rico, compels us to conclude that Plaintiffs have not established a claim of unjust enrichment. F. Nuisance Claim Plaintiffs bring a cause of action against Defendants based on the doctrine of public nuisance, claiming that Defendants' tobacco-related activities have interfered with the public's right to be free from unwarranted injury, disease, and sickness, and have caused damage to the public safety and general welfare. Puerto Rico law defines nuisance as: Anything which is injurious to health, indecent or offensive to the senses, or an obstruction to the free use of property, so as to interfere with the comfortable enjoyment of life or property .... Such actions may be brought by any person whose property is injuriously affected or whose personal enjoyment is lessened by the nuisance. 32 LP.R.A. § 2761 (1990). Defendants argue that Plaintiffs' public nuisance claim should be dismissed Page 13 because Plaintiffs allege only a monetary loss, and no property damage. Examining the language of the statute, we find that Plaintiffs do indeed state a cause of action for public nuisance under 32 L.P.R.A. § 2761. In addition to mentioning the enjoyment of property, the statute specifies that "anything" injurious to health so as to interfere with the "comfortable enjoyment of life" is a nuisance. This language is sufficiently broad to sustain Plaintiffs' action at this stage. G. Injunctive Relief Plaintiffs seek injunctive relief, arguing that they will suffer irreparable injury when the children of Puerto Rico start using cigarettes without adequate knowledge of this product's harmful and addictive effects, and then burden the Commonwealth with their tobacco-related illnesses. *17 The factors which a court should consider in deciding whether an injunction is proper are: (1) the nature of the damages each party will suffer upon granting or denying the injunction; (2) the existence of an adequate remedy at law; (3) the probability that the movant will eventually prevail on the merits; (4) the probability that the action becomes academic if the injunction is not granted; and (5) the public interest in the granting of the injunction. P.R. Telephone Co. v. Superior Court, 103 D.P.R. 200 (1975); 32 L.P.R.A. § 3523 (1990). See also Universidad del Turabo v. Liga Atletica Interuniversitaria, 126 D.P.R. 497 (1990). The nature of the damages each party will suffer upon granting or denying the request for an injunction will be monetary. The only harm the Plaintiffs may suffer as a result of Defendants' continued tobacco- related activities is in the form of continued medical expenditures for indigent smokers. Similarly, the injury that Defendants would suffer should the injunction be granted would be in the form of lost revenue. Adequate relief for these potential injuries is found at law. We, accordingly, dismiss Plaintiffs' request for injunctive relief. H. Misrepresentation and Omission Plaintiffs allege that Defendants made fraudulent and negligent misrepresentations and omissions. A claim for fraudulent misrepresentation requires that the plaintiff establish (1) defendant's false Copr. 0 West 1998 No Claim to Orig. U.S. Govt. Works
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essentially useless for purposes ot this case for obvious reasons: The outcome of any trial in this case will turn not on the State of Minnesota's and the Minnesota public•'s awareness of the risks of smoking and what the State of .bfinnesota did by way of regulating tobacco products. but rather, among other things, on the State oflowa s and the lo ra pubtic's awareness of the risks of smoking and what the State of Iowa did by way of regulating tobacco products. Thus. Plaintiff s attempt to suggest that the discovery in this case is essentially wrapped up and the parties are ready to go to trial is disingenuous and nothing more than empty posturing. • In addition to the stay of discovery resulting from Plaintiffs interlocutory appeal to the Supreme Court, discovery in this case is also stayed until further Order of the Court under the Amended and Substituted Case Management Order entered on September "_'3. 1997. It should remain stayed pending determinations on Defendants' motions to dismiss the First Amendment to the Petition and for judgment on the pleadings with respect to Plaintiffs nuisance, conspiracy. and aiding and abetting counts. Plaintiff currently maintains that it has the right to recover Medicaid and other public health care costs under various remaining counts. See e g. Petition. Count VIII, 283, 284(A): Count X 294(A)(6-7). As set forth in their pending motions. Defendants vigorously disagree on the grounds that the Supreme Court's decision affirming this Court's dismissal of other counts clearly precludes any attempt by Plaintiff to recover Medicaid and other public health care costs in this direct action. See Defendants' Supplemental Memorandum in Support of Their Motion to Dismiss the 5tate's First Amendment to Petition at 1-3: Defendants' Memorandum in Support of Their Motion for Judgment on the Pleadings at 4-5. While substantial discovery by Defendants of the State of Iowa will be necessary regardless of the outcome of this dispute, the scope of that discovery will have to be 3
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considers the facts -- instead of posturing and making simplistic assertions about being "ready for trial" -- an 18-month discovery and pretrial schedule would be aggressive. Plaintif3's suggestion that a February 1999 trial date is appropriate because it "would comply with the Time Standards for Case Processing adopted by the Iowa Supreme Court (jury cases to be tried within 18 months of filing)" (Plaintiffs Motion, at 2) is obviously ridiculous. First, these standards are not intended to be woodenly applied. See Ragan v. Peterson, 569 N.W. 2d 390, 394 (Iowa App. 1997) (noting standards are not mandatory and "must not be applied in a mechanical fashion, detached from the overall notion of justice. While timely case processing is an important aspect ofjustice, the paramount obligation of a court is to insure the process is fair and just."). Second, Plaintiffs assumption that the "clock" for this case should run from the time of the filing of the original Petition blatantly ignores the procedural history of this case: The Court has stayed any discovery in this case pending determinations on Defendants' motions. Third, the current urgency Plaintiff attaches to having this case set for trial in February 1999 stands in stark contrast to its prior actions in this proceeding. For one, Plaintiff did not even sene its Petition on any Defendants until more than two months after it was filed in No% ember, 1996. Then, Plaintiff waited seven months before filing its First Amendment to the Petition, adding three new counts. Finally, of course, Plaintiff imposed a self-inflicted stay of the trial court proceedings in this case by taking an interlocutory appeal from this Court s Order dismissing its health care cost recovery claims, thereby divesting this Court of jurisdiction for more than seven and one-half months. Accordingly, there is no reasoned basis upon which the State can argue that the discovery phase of this case -- which may be as extensive as any in the rn
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It is likewise important to recognize how deposition discovery for Defendants necessarily differs from state to state, whereas Plaintiff may have little if any need to take additional depositions of Defendants. Numerous witnesses for Defendants have already been deposed, some.on multiple occasions, in other proceedings on the same allegations made by Plaintiff in this case. Conversely, Defendants will have no such head start in preparing for and taking a significant number of fact depositions of present and former State employees and third parties relating to the facts reflected in the documents that will be produced. Indeed, it is only after document production from a particular agency or on a particular issue is substantially complete when Defendants can identify and prepare for the fact witnesses they will need to depose. Finally, Defendants require discovery in several technical areas that will need to be developed through analysis of documents and depositions of both fact and expert witnesses, including such matters as demographics pertaining to smoking and disease prevalence of the Iowa population; procedures for. and the State's efforts to recover payments from, third parties; cost-containment efforts; and fraud, waste, and abuse issues. Thus, even if Plaintiff intends to use the same witnesses and experts in its case as were used in Minnesota, these experts will need to produce expert reports specific to this case and their depositions will have to be taken. Moreover, because Defendants' cases will necessarily differ in every state, Defendants' experts or expert reports in this case will differ substantially. Many experts -- presumably for both sides, but certainly for Defendants -- will need to review and analyze documents produced by the State. w 8
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IN THE IOWA DISTRICT COURT FOR POLK COUNTY THE STATE OF IOWA, ex. rel. THOMAS ) J. MILLER, in his capacity as ATTORNEY ) GENERAL OF THE STATE OF IOWA, ) ) Plaintiff, ) ) vs. ) ) R. J. REYNOLDS TOBACCO COMPANY, ) et al., ) ) Defendants. ) NO. CL 71048 PLAINTIFF'S RULE 106(d) NOTICE OF SERVING A RESPONSE TO DEFENDANTS' SUPPLEMENTAL MEMORANDUM REGARDING THEIR MOTION TO DISMISS FIRST AMENDMENT TO PLAINTIFF'S PETITION The undersigned certifies pursuant to Iowa Rules of Civil Procedure 106(d) that the State of Iowa's Response to Defendants' Supplemental Brief in Support of their Motion to Dismiss Plaintiff's First Amendment was served by hand delivery or by mail to representatives of the defendants on July 13, 1998. A copy of the brief was hand delivered to Judge Linda R. Reade' s chambers on July 13,1998. Respectfully submitted, THOMAS J. MILLER ATTORNEY GENERAL OF IOWA R: ~ EL, 479-68-8537 BRET A. DUBLINSKE, 482-74-03 50 DICKINSON, MACKAMAN, TYLER & HAGEN, P.C. 1600 Hub Tower, 699 Walnut Street Des Moines, Iowa 50309 PH: (515) 244-2600 FAX: (515) 246-4550 GLENN L. NORRIS #PK0004035 HAWKINS & NORRIS 2501 Grand Avenue, Suite C Des Moines, Iowa 50312 PH: (515) 288-6532 FAX: (515) 288-8733
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0 C. Prior Experience In Similar Litigation Establishes That At Least 18 Months Will Be Required For Discoverv In This Case Taking all of these facts into account. Plaintiffs proposed trial date of February 1999 is plainly ludicrous, as demonstrated by the experience in other state attorney general actions that have proceeded to trial to date. All but one of these cases has taken over two to three years from filing to trial, without the stay of discovery necessarily imposed in this case by Plaintiff s interlocutory appeal. The one exception -- the State of Texas case -- was on a federal court "rocket docket" in the United States District Court for the Eastern District of Texas, where the ordinary constraints of litigation scheduling do not apply. Yet even in that case, almost 22 months elapsed between the filing of the complaint and the scheduled trial date. Indred, a simple review of the number of depositions required in other state attorney general actions suggests why Plaintiff s proposed February 1999 trial date, in a case in which no discovery has taken place to date, is unreasonable: • In the State o(.Llississippi case, 203 fact and expert witness depositions were taken by all parties. • In the State of Florida case. 289 fact and expert witness depositions were taken by all parties. • In the State of Texas case, 179 fact and expert witness depositions were conducted. Likewise, unless the State of Iowa is uniquely ready to produce documents to Defendants -- and there is nothing to suggest that it is -- there is no reason whatsoever to believe that its production of relevant documents to Defendants will be completed by February 1999, much less all fact and expert depositions taken and the case ready for trial: 9
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Bamuel B. Sebree 6NOOK, NARDY 4 BACON, L.L.P. One Auuee City Place 1200 Main Street Eaneae City, Mieeouri 64105 Tel: (616) 676-6550 (Attorneys for defendant Lorrilard Tobacco Canpany) Peter 4. McRenrm Rric S. Sarnar Mark S. Cheffo S6AOBEB, AR6B, SLATB, MPN'IDdR i FL01/ LLP 919 Third Avenue New York, New York 1u022 Tel: 12121 735-3000 Fax: (212) 735-3925 (Attomeye for defendants United States Tobacco Cqnpany) F.n: (712) 909-6636 (4ttomeye for (hfendmt The Cbunoil for Tobacco Reeeareh-G.S.A., Ine.) Michael N. Fay G1901fIT3, BENSON, TGAASS 6 FRIRdIAM 1301 Avenue of the Aoeticee 36th floor New York. Rev Tork 10019 Tel: 12121 506-1700 (Attorneye for defendant Liggett Group, Inc.) Bruce M. Gineherg Michael C. Wfky DAVIS 4 GILBERT 1760 Broadway, ird Floor New York, New York 10019 Tei: (2121 66e-ie00 Pax: (212) 66t-6eeB (Attorneys for defendant Nill 6 lnowlton, Inc.) n V V 606Z2 9 g Anthony Mansfield 6EWAAB 4 IUSSRL one Battety Park Plare Nev York, Baw York 10004 Tel: 1212) 576-1200 Fax: 1212) 660-6621 IAttomeys for defendant The Tobacco Institute, Inc.) Steven Idugnun OEBEV0I6R 4 PLIMPitbi /75 Third Avenue New York, Nev York 10021 Tel: {217) 3D9-6000 49 Barry S. Schaevitz dACOB, MSOINGER 4 PINOIXSeA, LLP 1270 Avenue of the Anericas 31st Floor Nev York, New York 10020 Tel: Ill7) 332-7700 Fsx: 1311) 337-7777 IAttorneys for defendant Smokeless Tobacco Council, Inc.I so
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the public thousands of documents ... germane to the issues of this lawsuit." Plaintif sMotion. at 2. In making this assertion, however, Plaintiff conveniently ignores that none of the discocen taken in the State of Minnesota case eliminates the need for Defendants to take discovery of the State of loira in this case. Indeed, Plaintiffs assertion that "the discovery which will be needed by the defendants" is timited in scope and only "will relate to damages, and this information is in the hands of the plaintiff' is preposterous. PlaintifPs Motion, at 3. This is essentially a products liability and fraud case, in which Plaintiff alleges that it and the citizens of Iowa were deceived as to the health risks of smoking and damaged as a result. In order to test that claim. Defendants' trial preparation in this case will require the State of Iowa to produce, and Defendants to review, large numbers. probably millions, of pages of documents relating to the State's awareness of smoking and health issues, State tobacco regulatory matters, tax revenues. and similar matters. In other words, while the various states, including Iowa, may put on roughly similar cases against Defendants in every state, the facts relating to the case which Defendants will put on relating to state awareness and regulation, and the like, will necessarily be different in every state because the evidence relating to each particular state is entirely different. Specifically, discovery of the State of Iowa by Defendants as to the following matters, among others, will be necessary and appropriate: • The State's sponsorship, participation in and support of the cigarette industry. Each state treats tobacco or cigarettes in disparate ways in terms of sales regulation, tax collection, and state support. This support can take forms such as manufacture and sale of cigarettes or investment in tobacco companies. • The State's awareness of the health risks associated with smoking and the timing of the State's awareness. The level of knowledge about the health risks of tobacco 6
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• In the State of Sfinnesota case (tiled August 17, 1994), the state's document production began in November 1995 and was ongoing until the start of trial in Januarv 1998. • In the State of Washington case (filed June 5, 1996), the state's document production began in December 1996 and was not completed until May 1998. Approximately two million pages of documents have been collected from the state records management department and state archives. • In the State of Oklahoma case (filed August 22, 1996), the state's document production began in July 1997 and is currently scheduled to end in October 1998. • In the State of Mississippi case (filed May 23, 1994), the state's document production began in December 1995 and was ongoing until the case settled shortly before the scheduled trial date in Julv 1997. D. Plaintiff's Request For A February 1999 Trial Date Is Patently Unreasonable A re% iew of the facts thus reveals Plaintiff's requested February 1999 trial setting [or what it is: A transparent litigation ploy that is intentionally unreasonable so that Defendants will be forced to object, allowing Plaintiff to posture and falsely claim that Defendants are engaged in "delaying" tactics. tn fact, Defendants are properly engaged in defending themselves against allegations that will necessarily require extensive inquiry into what the State of Iowa knew, and when it knew it, about the health risks of smoking, and what choices the State of Iowa made based on that knowledge. Further, to the extent that any health care cost recovery claims remain in this case following the determination of Defendants' pending motions, substantial discovery of the State and Iowa public health care recipients will be required in this area as well. Thus, it is hardly unreasonable to allow at least 18 months from the commencement of discovery to complete discovery and file and hear dispositive motions before trial. Indeed, when one Un to
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expanded to include the State's Medicaid program and Nledicaid recipients if Plaintiff is permitted to proceed on the remaining counts under which it purports to seek the recovery of health care costs. Thus, the prudent course would be to await the outcome of pending motions before allowing discovery to proceed -- and, certainly, before setting a trial date in this action -- so the scope of the discovery that will be required by Defendants in this action can be more precisely determined. In sum. Plaintiffs request for a trial setting in February 1999 is wholly unrealistic and totally ignores both Defendants' right and need to take substantial discovery and the procedural history of this case, in which no merits discovery has taken place to date due primarily to Plaintift's own interlocutory appeal from this Court's Order dismissing its health care recoupment claims. Depending upon the outcome of Defendants' pending motions, at least 18 months may be required for the orderly completion of discovery and the filing and hearing of dispositive motions once discovery commences before this case can proceed to trial. Even if Defendants' pending motions are successful and any claims purportedly seeking the recovery of health care costs are dismissed, substantial discovery would still be necessary and a February 1999 trial setting would still be wholly unrealistic. Accordingly, Plaintiffs request for a trial setting in February 1999 should be denied and the Court should wait until after it has ruled on Defendants' pending motions before holding a Pretrial Conference. II. ARGUMENT A. Background The Iowa Supreme Court affirmed in all respects this Court's dismissal of Counts 11, Ill. IV, and VII of the State's Petition on April 22, 1998. lox•a ex rel. Miller v. Philip Morris 4
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Of Counsel Thomas F. Gardner IONES, DAY. REAVIS & POGUE 77 W. Wacker Drive Chicago, Illinois 60601 (312)782-3939 (312) 782-8585 (fax) BROWN & WILLIAMSON TOBACCO CORPORATION, individually and as successor by merger to THE AMERICAN TOBACCO COMPANY ~l. Rog6r T. Stetson PK0005294 b BELIN LAMSON McCORIMIC ZUMBACH FLYNN A Professional Corporation 2000 Financial Center Des Moines. Iowa 50309 (515)243-7100 (~15)282-7615(fax) Of Counsel Andrew R. McGaan Michelle H. Browdy KIRKLAND & ELLIS 200 East Randolph Drive Chicago, Illinois 60601 (312) 861-2000 (312) 861-2200 (fax) 14
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Respectfully submitted, PHILIP MORRIS INCORPORATED and PHILIP MORRIS COMPANIES INC. By v `Cg ~~n/l - t/ ~t_ v~UZas Robert A. Van Vooren # 336283228 Thomas D. Waterman # 000008441 LANE & WATERMAN 220 N. Main Street 600 Norwest Building Davenport, Iowa 52801 (319) 324-3246 t319) 324-I616 (fax) Of Counsel Dan K. Webb Thomas J. Frederick Kevin J. Narko WINSTON & STRAWN 35 West Wacker Drive Chicago, Illinois_60601 (312) 558-5600 (312) 558-5700 (fax) R.J. REYNOLDS TOBACCO COMPANY Steven L. Nelson DAVIS, BROWN. KOEHN, SHORS & ROBERTS. P.C. The Financial Center 666 Walnut Street, Suite 2500 Des Moines, Iowa 50309-3993 (515) 288-2500 (515) 243-0654 (fax) co rn w ~ ~ ~ co 13
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0 --- F.Supp. -- (Cite as: 1998 WL 313365, *11 (D.Puerto Rico)) inquiry into the causal connection between the defendants' acts and the alleged injuries suffered entails a highly contextual analysis. Defendants cite to several recent cases, none of which controls here, which nonetheless require our attention. First and foremost, Defendants point to State of Minnesota v. Phillip Morris, Inc., 551 N. W.2d 490 (Minn.1996), in which the Supreme Court of Minnesota decided that Blue Cross of Minnesota did not have standing to sue cigarette manufacturers for tort liability. Blue Cross' role in the health of people who have suffered from smoking illnesses was no more than that of an insurer, and the victims of the alleged torts, its customers. Of chief relevance to the instant case is the observation that "vigor cannot substitute for a direct interest in the matter at issue." Id. at 495. The other case cited by defendants is City and County of San Francisco v. Phillip Morris, 957 F.Supp. 1130 (N.D.Cal.1997), in which a group of municipalities sued the cigarette manufacturers on several bases, largely similar to those in the instant case. In that case, the court found that California law required a closer relationship between the plaintiff and the injuries allegedly caused by defendants' products. That basis also prompted the Circuit Court of Maryland to assert that the State of Maryland had no standing to sue defendant cigarette manufacturers. *12 Although these cases directly address the principal inquiry in determining whether Puerto Rico has standing in this case, we find that Puerto Rico does have standing to sue defendant cigarette manufacturers based on the direct nature of the expenses covered by the government for medical expenses to treat smoking-related illnesses. Although other courts have rejected the directness of such injuries, arguing that in reality the injured parties were the smokers and not those responsible for their medical expenses, we find it relevant that the Commonwealth of Puerto Rico was required to incur exorbitant medical expenses allegedly resulting from the consumption of the defendants' products. Given the responsibility the Commonwealth has to its people, such expenses do qualify as a direct injury. Furthermore, we find that the government of Puerto Rico is uniquely positioned to sue the cigarette manufacturers under the doctrine of parens patriae. In a case in which Alabama sued the Tennessee Valley Authority, the Fifth Circuit upheld a lower 0 Page 10 court's finding of standing. "In addition to its parens patriae interest, which arguably can be no different substantively from that of its citizens, the state asserts a proprietary interest distinct from that of any individual or group of its citizens." Alabama v. Tennessee Valley Authority, 636 F.2d 1061, 1064 (5th Cir.1981). In parens patriae, a state sues on behalf of its citizens' health, comfort, and welfare. Alabama v. Tennessee Valley Authority, 467 F.Supp. 791 (N.D.Ala.1979). In the instant case, the government of Puerto Rico is in a unique position empowered to sue on behalf of the welfare of its citizens in part because the purported class action for smokers, case 96-2300, was not certified largely because of the impracticable nature of such a large class. Although the harms alleged in that case and in the instant case differ, the latter serves as the only forum in which a broader remedy may be pursued given the denial of class certification. B. Subrogation/Assignment Defendants argue that since the Plaintiffs seek damages for the expenses of covering Medicaid, their only remedy is to seek reimbursement through subrogation, by which the beneficiaries of the state funds would obtain a judgment against the Defendants which would be payable to the Plaintiffs. Defendants argue that subrogation is the exclusive remedy for Plaintiffs, since statutory remedies typically preclude other remedies. Defendants' argument is based largely on case law that stands for the proposition that an assignor cannot have more extensive rights than an assignee. The strongest support for this argument centers around a Sixth Circuit decision regarding the Federal Medical Care Recovery Act ("FMCRA"), 42 U.S.C. §§ 2651-2653 (1994); United States v. Trammel, 899 F.2d 1483 (6th Cir.1990). In that case, the Sixth Circuit determined that the government only had the right to sue under FMCRA in the situation where an individual could prevail on a state law tort action. The language of the FMCRA, therefore, clearly limits the government's right of recovery to situations where state law imposes tort liability upon a negligent person. *13 The government argues, nonetheless, that its right of recovery is distinct from, and independent of, the injured party's right to recover in a state law action. The FMCRA, it argues, entitles the government to recover whether or not the injured Copr. ® West 1998 No Claim to Orig. U.S. Govt. Works
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Of Counsel Bruce G. Merritt Eric Falkenstein DEBEVOISE & PLIMPTON 875 Third Avenue New York, New York 10022 (212)909-6000 (212) 909-6836 (fax) UNITED STATES TOBACCO COMPANY and liST INC. By _jyJ7-u f fBrent B. ("Chris") Green. Esq. J~v Gregory R. Brown. Esq. DUNCAN, GREEN, BROWN. LANGENESS & ECKLEY 380 Capital Square 400 Locust Street Des Moines,Iowa 50309-2331 (515) 288-6440 (515) 288-6448 (fax) BRITISH AMERICAN TOBACCO COMPANY. LTD. John A. McClintock PK0003481 6~ AX.T Chester C. Woodburn III PK0006085 David L. Brown PK0000599 HANSEN, McCLINTOCK & RILEY co Eighth Floor - Fleming Building 0'\ 218 Sixth Avenue ~ N Des Moines, Iowa 50309-4092 ~ (515) 244-2141 - (515) 244-2931 (fax) N I 16
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histor}' of Iowa jurisprudence -- should be condensed into the seven-month time period between August 1998 and F..bruary 1999. A more prudent course of action would be for the Court to resolve all dispositive motions directed to the pleadings, after which a case management conference could be conducted. At that point, the issues and parties remaining in the case will be established and the parties and this Court will be in a better position to determine the amounts of time necessary for the various items that are necessarily included in Phase I of the Case Management Order. Accordingly, any discussion of specific pretrial issues at this time, much less setting a trial date for less than eight months from now, is premature and should be deferred until after this Court issues rulings on the pending motions.' III. CONCLUSION For the foregoing reasons, Defendants respectfully request that Plaintiffs Motion for Rule 136 Pretrial Conference be denied. ' The topics a trial court should address and consider taking action on at a pretrial conference encompass issues such as "stipulations regarding the authenticity of documents, and advance rulings from the court on the admissibility of evidence;" "specifying all damage claims in detail ° and providing for the identification of "witnesses and documents," "all proposed exhibits and mortality tables and proof thereof." and "questions relating to voir dire examination ofjurors." See Iowa R. Civ. P. 136. Given the dearth of any discovery in this case besides that relating to jurisdictional issues, Plaintiff's suggestion that this Court and the parties presently meet at a pretrial conference to discuss these issues is meritless. 12
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0 -- F.Supp. -- (Cite as: 1998 WL 313365, *17 (D.Puerto Rico)) representation; (2) plaintiff's reasonable and foreseeable reliance; (3) plaintiff's injury from the reliance; and (4) defendant's intent to defraud. Wadsworth, Inc. v. Schwarz-Nin, 951 F.Supp. 314, 323 (D.P.R.1996). A claim for negligent misrepresentation requires that a plaintiff allege that (1) there was a misrepresentation which (2) was the result of defendant's negligence and (3) upon which plaintiff justifiably relied, and that (4) plaintiffs reliance caused him harm. 31 L.P.R.A. § 3018. Plaintiffs satisfy all the prongs each claim requires. First, Plaintiffs adequately allege that Defendants made a misrepresentation regarding the harmful and dangerous effects of tobacco usage. Next, Plaintiffs allege that they reasonably relied upon these false representations and, as a result, they were unable to take appropriate regulatory action and were forced to bear the costs of treating the health problems the tobacco products created. Defendants' argument that the reliance was unreasonable is specious. Plaintiffs' allegation regarding Defendants' misrepresentation is sufficient to state a claim for both fraudulent and negligent misrepresentation. Plaintiffs point to Defendants' statements regarding the addictive, carcinogenic and pathologic qualities of cigarettes; strategized to market cigarettes to minors; manipulated the level of active nicotine in cigarettes; suppressed less hazardous cigarettes; misrepresented the status, purpose, and activities of CTR; misrepresented their knowledge about the health hazards of smoking; and misrepresented the tobacco industry lawyers' control over the affairs of the tobacco industry. That the Plaintiffs were aware of other studies contradicting the Defendants' proclamations regarding the safety of smoking does not persuade us that their reliance was unreasonable. Furthermore, we find the detailed examples with which Plaintiffs make their claim for fraud to be adequately specific to satisfy Fed.R.Civ.P. 9(b). IlI. Voluntary Assumption of a Special Undertaking *18 Plaintiffs allege that Defendants breached the duty they voluntarily assumed to report fully and honestly to the residents of Puerto Rico regarding the health effects of their industry through the Frank Statement, advertisements, and the Cigarette Advertising Code. Moreover, Plaintiffs claim that Defendants breached their voluntarily-assumed duty to refrain from marketing cigarettes to minors. ! Page 14 Defendants argue that (1) Puerto Rico law does not recognize a special duty cause of action, (2) they owed no special duty to Puerto Rico or its residents, and that (3) Plaintiffs fail to allege physical harm. No section of the Puerto Rico Code specifically delineates a cause of action based upon the voluntary assumption of a special undertaking, nor have Plaintiffs pointed to any Puerto Rico case interpreting any other section of the code to allow such a cause of action. Assuming without deciding that Puerto Rico recognizes such a cause of action and, as in other jurisdictions, adopts the approach of the Restatement of Torts Second §§ 323, 324A, [FN2] Plaintiffs still fail to state a claim. See Second Amended Complaint, In 325, 326 & 331, 327-28. Plaintiffs do not show that Defendants' statements in the Frank Statement, advertisements, and the Cigarette Advertising Code are sufficient to create an assumption of duty. See Gunsalus v. Celotex Corp., 674 F.Supp. 1149, 1156 (E.D.Penn.1987) (finding tobacco defendants' statements "insufficient to create a duty and any failure to fulfill their promises did not increase the risk of harm to plaintiff"). Furthermore, Plaintiffs fail to allege the requisite physical harm called for under the Restatement. Plaintiffs' claim for recovery for mere economic injury is insufficient. See Washington v. American Tobacco Co., Inc., No. 96-2-15056-8, 1997 WL 714842, at *2-3 (Wash. Sup.Ct. June 6, 1997). J. Civil Conspiracy and Aiding and Abetting Plaintiffs claim that Defendants have aided and abetted each other in that they knew their actions were illegal or tortious undertakings, and knowingly and substantially assisted one another in these undertakings. As a result, Plaintiffs claim that they were unable to take appropriate regulatory action, and the residents of Puerto Rico suffered physical injury which Plaintiffs were forced to subsidize. Plaintiffs' allegations are sufficient to sustain a claim for civil conspiracy. However, Plaintiffs' claim for aiding and abetting is dismissed because Puerto Rico does not recognize a separate cause of action for aiding and abetting. K. Racketeering and Corrupt Organizations Act A claim under 18 U.S.C. § 1962(c) must allege "each of the four elements required by the statute: 1) Copr. ® West 1998 No Claim to Orig. U.S. Govt. Works
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Of Counsel John Nyhan Jay Henneberry Suzanne Cate Jones CHADBOURNE & PARKE LLP 601 South Figueroa Street Los Angeles, California 90017 (213) 892-1000 (213) 622-9865 (fax) HILL & KNOWLTON, INC. B~44-~Jose h R. Gunderson PK0008641 DREHER, SIMPSON & JENSEN 1200 Hub Tower 699 Walnut Street Des Moines, Iowa 50309 (515) 288-5000 (515) 288-7718 (fax) Of Counsel Fred M. Weiler Yvonne Look DAVIS & GILBERT 1740 Broadway New York. New York 10019 (212) 468-4800 (212) 468-4888 (fax) co rn w ND ~ ~ t.; tv 17
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1920 L Street, 0 F_cor Appearances Y. cORC6061m1 Defendants' rncion to dismiss the RtCC clain stated Washington, D.C. 20036 Tal: (1011 666•6790 in Ccunts I and 33 16 denied. Por F1ain0iffe in the 111Nirere Loeal 17 (97 C1V 45801 aud $j paxi (102) 659-3458 /97 CIp 4676) ktiomet Defendants' motion to dismiss the antitrust eiain Stephen Gordon Perty Meitr Joel Spivak stated in Counta III and IV is granted, Arthur N. LuxeOherg NIRIIN a GORDON Steven S. Finann 96 Ntter Mill Road, Suite 310 Defendants' untion to diniea the fraud claiu stated Karen J. Mandel Grreet Nack, NY 11021 MBITZ 6 LIII69iBERG, p.C. Tel: 15161 466-6030 in Count V is denied. 160 Maiden Lanr, 40° ylcor Fax: (7161 t95•7164 Naw York, NY 10036 Defendanta' antion to dismiss the breach of epecial Tel: 12111 550-5500 Pax: 1111) 344-5462 For Plaintiffs in puetto Rican I6mm (91 C1Y 8662) aad Let6r- duty claim stated in Count Vt is denied. The claims alleged in Count VII (strict: liability),' Count VIII Inegligence), and Count IX lhroach of express and Nslvyn 1. Neles David J. Berahad Michael C. Spencer Kenneth.7. Vianale Piled Actions (97 CIY 9395 throu0h 97 CIY 940211 Michael E. Ciaffa G. Oliver Koppell X&YBR, SDOEZI, RNGLISK implied varrantieel are dismiesed without pre.judice with MILBERd NSISS BBRS9LID NYNPS & LBAALII LLP . One Pennsylvania Plara 6 KLBIN, p:C. I505 Kellus Place Mineola, NY 11501 plaintiffe' consent. New York, NY 10119 Tel, (516) 741-6565 Telc (212) 594-5300 Fax: 1516) 161-6706 Defendants' motion to dismiss the unjuet enrichment Fax: (2121 666-1229 claim stated in Count X is granted. SO OBDBRED: ra A chuindli~. tl.S.D.J: Williaa S. Lerach Patrick J. Coughlin Allen N. Mansfield IRLB8R0 NNIpS BBPSgkD NYNFS 6 LBRACN LLP 600 West Brcadny San Diego, CA 92101 Tel: (619) 231•10S9 Fax: (619) 731•7413 Robert S. Schachter Natalie klaney 3NFRLING, SCNACS74R 6 SNSNLINO, 6LP 767 Third Aveoae New York, NY 10017 Tel; (1121 223-3900 Fax, (212) 371•5969 LRVY, 9L17MBlt & p61R002I, p.c. Robert J. Connerton SO en' Avenue Nev York, KY 10011 Dated: New York, Nev York JarM S. Ray Tel: 11121 611-6100 Match 25, 1998 John McN. Broaddue Pax: (1121 617-1182 CONNSR70N 6 9UY 43 ~ 44 . 45 2606~298
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LORILLARD TOBACCO COMPANY and LORILLARD INC. n~dG/tjt'c rG~-y1 Ross H. Sidney PK005 30 bi Henry A. Harmon PK000213d" GREFE & SIDNEY 2222 Grand Avenue Des Moines, Iowa 50312 (515) 245-4300 (515) 245-4452 (fax) Of Counsel Jeffrey S. Nelson Catherine M. Castelluccio SHOOK, HARDY & BACON. L.L.P. One Kansas City Place 1200 Main Street Kansas City. Missouri 64 1 05-2 1 1 8 (816) 474-6550 (8 16) 421-5547 (fax) THE COUNCIL FOR TOBACCO RESEARCH-- U.S.A.. INC. J. Michael Weston L10005956 !~7-64'rI'/ Brenda K. Wemer LI0014950 MOYER & BERGMAN, P.L.C. Commerce Exchange Building 2720 First Avenue N.E. Cedar Rapids, Iowa 52406-1943 (319) 366-7331 (319)366-3668 (fax) 15
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IN THE IOWA DISTRICT COURT FOR POLK COUNTY THE STATE OF IOWA, ) ) Plaintiff, ) Law No. CL 71048 ) ) V. ) R.J. REYNOLDS TOBACCO COMPANY, ) et al. ) ) Defendants. ) MEMORANDUM IN SUPPORT OF DEFENDANTSG MOTION FOR JUDGMENT ON THE PLEADINGS AS TO COUNT VIII (NUISANCE), COUNT V (CONSPIRACY), AND COUNT VI (AIDING AND ABETTING)
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• Third, the State has not alleged, and cannot allege, an essential element of a nuisance claim: that Defendants controlled the instrumentality of the alleged nuisance at the time at which the alleged nuisance harmed smokers. • Fourth, Defendants' sales of cigarettes are sanctioned by state and federal governments and, therefore, cannot constitute a nuisance. Moreover, some Defendants do not design, manufacture, market or sell cigarettes. • Fifth, the State cannot recover money damages under a public nuisance theory. • Sixth, the economic loss doctrine precludes recovery under Count VIII. The State's claims for conspiracy in Count V and aiding and abetting in Count VI likewise fail. Conspiracy and aiding and abetting are derivative claims, and can only be brought where an underlying tort exists to support them. With the dismissal of the State's tort claims in this action, no such underlying tort exists, which requires dismissal of both Counts V and VI. I I. ARGUMENT Iowa Rule of Civil Procedure 222 provides that "[a]ny party may, at any time, on motion, have any judgment to which that party is entitled under the uncontroverted facts stated in all the pleadings, or on any portion of that party's claim or defense which is not controverted .. Iowa R. Civ. P. 222. The Iowa Supreme Court has explained that "[tlhe proper function of a motion for judgment on the pleadings is simply to test the sufficiency of the pleadings to present an appropriate issue for trial:' Slanron v. Ci1y ofDes• Lfoines, 420 N.W.2d 480, 482 (Iowa 1988).
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Ineorporuted. 577 -N.W. _'d 401 (Iowa 1998). Currently pending before this Court are Defendants' Motion to Dismiss the State's First Amendment to the Petition of Counts X (Ongoing Criminal Conduct Act). XI (prima facie tort), and XII (indemnity)' and Defendants' Motion for Judgment on the Pleadings as to Count V (conspiracy). Count VI (aiding and abetting), and Count VIII (nuisance). If these motions are successful, the only count in the Petition that will remain is Count I(Iowa Consumer Fraud Act). Further, the motions of several Defendants contesting personal jurisdiction remain pending. On September 23, 1997. this Court entered an Amended and Substituted Case Management Order ("CMO") which, inter alia, provided for a stay of all discovery until further order of the Court. CiviO, at 7. This Court specifically deferred discovery on the merits until the time it issues final rulings on the outstanding motions. Id, at 13.- Determinations on these motions have been further delayed by the State's interlocutory appeal from the Court's Order dismissing Counts Il. III. IV, and VII, which divested the Court of jurisdiction to hear and determine pending motions for more than seven and one-half months. B. Defendants Will Require Substantial Discovery In This Action Once discovery can proceed in this action, Defendants will require and be entitled to obtain substantial amounts of information from the State of Iowa. Plaintiff asks this Court for an early trial date because "the trial in the State of Minnesota of claims against the various defendants in this lawsuit has significantly and substantially diminished the amount of discovery that will be necessary for the preparation of this lawsuit for trial" and "Minnesota has released to - The State concedes in its supplemental resistance that "[t]he Supreme Court decision appears to be dispositive of Counts XI and XII, pleading prima facie tort and indemnity." State's Supp. Res. Br. at 1. 5
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9 0 CERTIFICATE OF SERVICE The undersigned certifies that the foregoing instrument was served by hand delivery to the Walker Law Firm. P.C.. Wandro & Gibson, P.C.. and Hawkins & Norris, and by U-S. mail to all other counsel listed below at their respective addresses on the 6th day of July, 1998. Steven L. Nelson F. Ralph Walker WALKER LAW FIRM, P.C. 2501 Grand Avenue, Suite E Des ytoines, Iowa 50312 Roger W. Stone SIMMONS, PERRINE, ALBRIGHT & ELWOOD, P.L.C. 115 - 3rd St., S.E., Suite 1200 Cedar Rapids,Iowa 52401-1266 Steven P. Wandro WANDRO & GIBSON. P.C. 1-501 Grand Avenue Suite B Des Moines. Iowa 50312 Brent R. Appel DICKINSON. MACKAMAN. TYLER & HAGAN. P.C. 699 Walnut, 1600 Hub Tower Des Moines, Iowa 50309 D. Scott Wise Vincent T. Chang DAVIS POLK & WARDWELL 450 Lexington Avenue New York. New York 10017 ,vlichael Lieber James C. Munson KIRKLAND & ELLIS 200 E. Randolph Drive Chicago, Illinois 60601 Glenn Norris HAWKINS & NORRIS 2501 Grand Avenue Suite C Des Moines, Iowa 50312 Roger T. Stetson BELIN. HARRIS. LAMSON & VIcCORVIICK 2000 Financial Center Des Moines, Iowa 50309 Thomas F. Gardner JONES, DAY, REAVIS & POGUE 77 W. Wacker Drive Chicago, Illinois 60601 J. Michael Weston MOYER & BERGMAN. P.L.C. 3rd Floor Commerce Exchange Bldg. 2720 First Avenue, N.E., P.O. Box 1943 Cedar Rapids, Iowa 52406-1943 r' Ws1n 17705.98 6/30198
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INTRODUCTION Three additional counts contained in the State's original Petition, Count VIII for nuisance, Count V for conspiracy, and Count VI for aiding and abetting, are legally defective and should be dismissed.'-' Speci£cally, the State's nuisance claim contained in Count VIII fails for at least six independent reasons: • First, the Iowa Supreme Court's decision affirming this Court's dismissal of Counts II, III, IV and VII also applies to bar the State's claim in Count VIII. State v. Philip Morris Incorporated, 577 N.W.2d 401 (Iowa 1998). The State is precluded from basing an action on remote and derivative injuries to Iowa citizens who smoke -- this is precisely the basis for Count VIII. See id. at 406-07; (Petition ~¶ 281. 283-84.) To the extent the State seeks to recoup Medicaid payments in Count VIII, the ruling of the Supreme Court could not be more clear: "The State's exclusive remedy for recovery of [Medicaid] costs is under section 249A.6." 577 N. W.2d at 406. • Second. Count VIII fails to allege either a public or a private nuisance under Iowa law. Nuisance law does not encompass actions based on allegedly defective products. '-/ The moving Defendants are Philip Morris Incorporated; Philip Morris Companies Inc.; R.J. Reynolds Tobacco Co.; Brown & Williamson Tobacco Corporation (individually and as successor by merger to The American Tobacco Company); Lorillard Tobacco Company; Lorillard Inc.; United States Tobacco Company; UST Inc.; The Council for Tobacco Research -- U.S.A.. Inc.; Hill & Knowlton. Inc. and British-American Tobacco Company. Ltd. 2
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• i•I1I of the complaint raise questione of federal law. auppleaiental jurisdiecion over che state clairu ralsed in [oumta N-y is asserted because the federal and state claiu both derive from 'a couaon nucleus of operative fact.• United ine ynrk.,rs v Gibbs, 383 U.S. 715, 126 (1966); piosiseLv Pirnt Am , Artificf l F1_~ owers. Inc, 943 F.2d 251, 294 (2d Cir. 199111 28 U.S.C. 9 1367(a) 119961. , III. Legal Standard for llotion to Diemiaa In deciding a sotion to dismiss under Rule 12(b) (6), the court must accept all material facts alleged in the complaint as true and an:st draw all reasonable inferences in the nonmovant's favor. g00 r".~i4iky v. City gf IUite Plaina, 57 F.3d 202, 206 l2d Cir. 19951. The court aey not grant the motion merdy because recovery seen renace or unlikely. 9L17Pub3~Y~LiLL, 79 F.3d 316, 321 (2d Cir. 1996) (quoting S heu"r~ v~hnin•, 416 U.S. 232, 236 (19741). A.coeplaint should not be dismissed for failure to state a clafal nnlees 'it s µ'Vin beyond doubt that the plaintiff can prove m set of Li te in eupport of his claim which would entitle him to relief," IL (quoting co~nl,hy v•ibeon, 355 U.S. 41, 45-/6 (1957)). b680bZ~98 IV. Discnsaioe in recent months, state and federal courts have seen an explosion of civil actions arising from the use, earketiugror sale of tobacco products. To date ever forty statee have filed suit, as have cities, counties, and private third-party payors, all atteapting to recover the cost of treating tobacce•telated diseases. 6yy plopgayd Tobac i:c Settleaent, Preamble, 1 22 fJune 20, 1997). All of theee caeei address canron questions: If in fact the tobacco industry ie liable for the cost of tobacco-related disease, to whom should it be held responsible? As the contents of the tobacco Industry's internal research and narketing docueents become increasingly available to the general public, eoee have become. convinced that the tobacco ipdustry should be beld liable for the entire cost of tobacco•nlated dieaass, hevevzr that eoat vas incurred.a Nhether an industry should be peoaiited for successfully t$as. sy„ Rlsa crose glue Shield of Nimesota. Tobacco Reh site (viefted Nar. 19, 1990 <r.w.anbluecrosetobacco.coas (publishing trial exhibits in = hy„fluphsy v. P io 1h,rrie Inc, Ro. C1-94•8565 (Nioo. filed Aug. 17, 1994)1. 5 marketing a legal product is certainly an interesting question, but it is beyond the scope of any ain9le lawsuit. policyeaking on such a scale is ordinarily left to the legislature) in fact, there are various proposals hefore Congraas that would •uandetc a total reformation aad resttucturing of how tobacco products are eanu/acturcd, earketsd, and distributed in thia country.' P -sed Tah.~lg ns ly httleeent. Preamble 11.1 The issue addreesed here, in contrast, is much sore llmitedi to determine whether and how defendants should be held responsible to these particular plaintiffs. As a resolt, allegations that the defendants have narketed their products to children, that these praducta are unreasonably dingerous, or that they have inflicted hara on individual smakers are not relevant here. Nor are clai¢e ef haru to society or to plaintiffs as menhera ef the general public. Rathev, as fundamental principlu of pzoriute eause dictate, plaintiffs may only ramrer for injuries that they -.h ' .. ~ t&y YnM o Sel s to inora Prevention, S. 1713, 105th Cong. 119971; p'hlic Nealth eervj,re Act, 5. 1645, lOSth Cong. 119971; Tnlnre yrodicts vs Child_rt, S. 1636, 105th Cong. 1199117 Tobacce Ounta Pluctuatlone, R.R. 3261, 105th COng. 1t997/; s deral Fund R nalttre tmd r Toba o se~,ytteeenn,_, N.R.J. Rts. 109, 105th Cong, 119971. 6
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0 - F.Supp. -- (Cite as: 1998 WL 313365, *20 (D.Puerto Rico)) covered by RICO according to Reiter. However, although the racketeering activity allegedly led to health damages, the cost to the Plaintiffs here is not physical but economic. The Supreme Court has indicated that no specific "racketeering injury" must exist for a RICO suit to succeed. "If the defendant engages in a pattern of racketeering activity in a manner forbidden by these provisions, and the racketeering activities injure the plaintiff in his business or property, the plaintiff has a claim under section 1964(c). There is no room in the statutory language for an additional, amorphous 'racketeering injury' requirement." Sedima S.P.R.L. v. Imrex Co., 473 U.S. 479, 495 (1985). Thus, the fact that injuries alleged by Plaintiffs ostensibly stemmed from the predicate acts of Defendants, and qualify as a proper RICO injury. The Commonwealth of Puerto Rico alleges injuries related to this addiction and consumption, both in the financial cost to the island's economy in terms of medical expenses bome by the government and in terms of lost tax revenues from people incapacitated by tobacco-related illnesses. "Recovery under RICO, however, is not limited to direct victims. Damages that 'flow from the commission of the predicate acts' are recoverable." Roeder v. Alpha Ind. Inc., 814 F.2d 22, 29 (Ist Cir.1987), citing Sedima, 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346. Thus, the direct or indirect nature of the Commonwealth's claimed damages may not be at issue. Finally, we address the statute of limitations issue raised by Defendants. Again, they argue that Plaintiffs' claim is time-barred here because of the four-year statute of limitations that attaches to RICO claims. Defendants argue again that the knowledge of the risks of smoking and the widespread debate should have made Plaintiffs aware of the damages well before four years prior to the filing of the instant suit. Defendants' assertion elides the distinctions between the factual bases for the suit generally and those behind the RICO allegations. The latter allegations hinge on facts that came to light far more recently principally concerning Defendants' interconnected knowledge of health risks and the role this played in the alleged racketeering. We, therefore, fmd no reason to bar the RICO claim based on the running of the statute of limitations. 0 Page 16 Thus, the Commonwealth's RICO claim survives the substantial burden of demonstrating that the statutory requirements have been satisfied in presenting a basic civil RICO claim. IV. Conclusion *21 In conclusion, we deny the motions to dismiss based on lack of jurisdiction and all of the substantive motions, except the motions to dismiss on the claims of unjust enrichment, aiding and abetting, voluntary assumption of a special duty, and the request for injunctive relief, which we grant. This Opinion and Order disposes of Docket Documents Nos. 29-39, 43-48, 50- 54, 58, 61, 63-70, 73, 85, 88, 89, and 104. IT IS SO ORDERED. FN1. Plaintiffs explain that Special Account projects were projects funded and administered by lawyers in order to shield potentially damaging research from the public under improper claims of privilege or protection. FN2. Section 323 of the Restatement (Second) of Torts provides: Negligent Performance of Undertaking to Render Services One who undertakes gratuitously or for consideration, to render services to anodter which he should recognize as necessary for the protection of the other's person or things, is subject to liability to the other for physical harm resulting from his failure to exercise reasonable care to perform his undertaking, if (a) his failure to exercise such care increases the risk of such harm, or (b) the harm is suffered because of the other's reliance upon the undertaking. Section 324A provides: Liability to Third Person for Negligent Performance of Undertaking One 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 protect his undertaking, if (a) his failure to exercise reasonable care increases the risk of harm, or (b) he has undertaken to perform a duty owed by Copr. 0 West 1998 No Claim to Orig. U.S. Govt. Works
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TABLE OF CONTENTS I. INTRODUCTION ............................................................................................ 2 II. ARGUMENT .................................................................................................... ...... 3 A. THERE IS NO LEGAL BASIS FOR THE STATE'S NUISANCE CLAIM ................................................................................... 4 L The State May Not Recover For Its Alleged Injuries Because They Are Remote And Derivative, And The State Has Failed To Plead Its Exclusive Remedy For Medicaid Reimbursement Under Iowa Code Section 249A.6 ......................... 4 2. The State's Nuisance Claim Is Outside The Accepted Boundaries Of Nuisance Theory ..................................................... 5 A. Iowa Nuisance Law Does Not Encompass Defendants' Alleged Conduct ............................................. 6 B. Iowa Law Comports With The Law Of Other States .................................................................................. 7 3. befendants Did Not Control The Instrumentality Of The Alleged Nuisance After The Point Of Sale ...................................... 10 4. Defendants' Sales Of Cigarettes Are Sanctioned By The State And Federal Government And, Therefore, Cannot Constitute A Nuisance ..................................................................... 11 5. The State Cannot Recover Money Damages On A Public Nuisance Theory ........................................... .................................. 13 6. The Economic Loss Doctrine Prohibits Recovery Of The State's Purely Economic Alleged Losses....................................... 14 B. THE STATE'S CONSPIRACY AND AIDING AND ABETTING 00 CLAIMS FAIL BECAUSE THERE IS NO VALID UNDERLYING CLAIM .................................................................................................... ... 15 0~\ w tv ~ ~ I I I. CONCLUSION .................................................................................................... .. 16 fv V
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0 --- F.Supp. ---- (Cite as: 1998 WL 313365, *1 (D.Puerto Rico)) Defendants move for dismissal on jurisdictional and substantive bases. I. Personal Jurisdiction A. Legal Standard for Personal Jurisdiction The United States Supreme Court, in International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), laid out the basic jurisdictional principle regarding in persottnm jurisdiction: [D]ue process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the foront, he have certain minimum contacts with it such that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice." International Shoe, 326 U.S. at 316 (citing Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940)). This due-process analysis for ascertaining when a district court may exercise personal jurisdiction over a defendant insists upon three criteria. First, there must be sufficient "minimum contacts" with the state in which the court sits. 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Second, the defendant must have purposefully availed itself of the privilege of conducting activities in the forum state, exposing it to the benefits and burdens of the enforcement of the state's law, and reasonably apprizing defendant that he may be haled into,that forum's court. Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958); Foster-Miller, Inc. v. Babcock & Wilcox Canada, 46 F.3d 138, 144 (1st Cir.1995). The relevant factors regarding the conduct and connections to the forum which should cause a nonresident defendant reasonably to anticipate that he may be haled into a court include: (1) the burden on defendants; (2) the forum state's interest in adjudicating the dispute; (3) the plaintiffs interest in obtaining convenient and effective relief; (4) the judicial system's interest in obtaining the most effective resolution of the controversy; and (5) the common interests of all sovereigns in promoting substantive social policies. Burger King Corp. v. Rudzweic, 471 U.S. 462, 477, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). 40 Page 2 While a single or occasional act on the part of a corporate agent is insufficient to establish jurisdiction, some acts "because of their nature and quality and the circumstances of their commission," could be sufficient in and of themselves to confer jurisdiction over a foreign corporation. International Shoe, 326 U.S. at 318; Hanson, 357 U.S. at 253 (stating "there must be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its law"). Finally, jurisdiction must not offend the traditional notions of fair play and substantial justice. Id.; Foster-Miller, 46 F.3d at 144. This includes an evaluation of the inconveniences which would result to either of the parties from a trial in another forum. International Shoe, 326 U.S. at 317. *2 The determination of whether there is personal jurisdiction is a very fact-intensive process. Burger King, 47! U.S. at 485-86. The court's attention must focus on "the relationship among the defendant, the forum, and the litigation." Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977). Plaintiff bears the burden of demonstrating the court's personal jurisdiction over the defendant, and must proffer all the necessary facts to enable the court to make such a finding. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936); Boit v. Gar-Tec Products, 967 F.2d 671, 674-75 (1st Cir.1992); U.S.S. Yachts, Inc. v. Ocean Yachts, Inc., 894 F.2d 9, 11 (lst Cir.1990). The district court cannot make findings of fact in determining whether there is personal jurisdiction, but can only accept plaintiff's proffered evidence as true if it is properly supported. Boit, 967 F.2d at 675. There are two types of personal jurisdiction: general and specific. United Electrical, Radio & Machine Workers of America v. 163 Pleasant Street Corp., 960 F.2d 1080, 1088 (lst Cir.1992). General jurisdiction may be invoked when the litigation does not directly arise from the defendant's forum-based contacts, but from the defendant's continuous and systematic activity, unrelated to the suit, in the forum state. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-16 n. 9, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). Specific jurisdiction, which involves a particularly fact-intensive analysis, Copr. 0 West 1998 No Claim to Orig. U.S. Govt. Works
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0 Thomas A. Finley FINLEY, ALT. SMITH. SCHARNBERG. .M:yY & CRaIG, P.C. 4th FIr - Equitable Bldg.. 604 Locust Street Des Moines. Iow'a 50309-3773 John C. Monica Catherine M. Castelluccio SHOOK, HARDY & BACON One Kansas City Place. 1200 Main Street Kansas City, Missouri 64105-2118 Robert A. Van Vooren Thomas D. Waterman LANE & WATERMAN 600 Norwest Bank Building _'20 North Main Street Davenport, Iowa 52801-1987 Bruce G. Merritt DEBEVOISE & PLIMPTON 875 Third Avenue New York, New York 10022 Fred L. Dotr WASKER, DORR, WIMMER, et al 801 Grand Avenue, Suite 310 Des Moines. Iowa 50309-8036 Brent B. "Chris" Green Gregory R. Brown DUNCAN, GREEN, BROWN, et al 380 Capital Square 400 Locust Street Des Moines, Iowa 50309-2331 John A. McClintock Chester C. Woodburn III HANSEN McCLINTOCK & RILEY Eighth Floor - Fleming Bldg. 218 Sixth Avenue Des Moines, Iowa 50309-4092 0 Ross H. Sidney Henry A. Harmon GREFE & SIDNEY 2222 Grand Avenue Des Moines. Iowa 5D312 Mark C. Cunha Adam I. Stein SIMPSON, THACHER & BARTLETT 420 Lexington Avenue New York, New York 10017-3954 Michael M. Fay KASOWITZ, BENSON, TORRES & FRIEDMAN, LLP 1301 Avenue of the Americas New York, New York 100 19-6022 Michael C. Lasky Donna vi. Gitter DAVIS & GILBERT LLP 1740 Broadway New York, New York 10019 Richard R. Chabot SULLIVAN & WARD. P.C. 801 Grand Avenue. Suite 3500 Des Moines, Iowa 50309-2719 Dan K. Webb Thomas J. Frederick Kevin J Narko WINSTON & STRAWN 35 West Wacker Drive Chicago. Illinois 60601 John Nyhan Jay Henneberry CHADBOURNE & PARKE LLP 601 South Figueroa St. Los Angeles, California 90017 2
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have suffered. if those injuries ware caused by dahpdants, then defendants should indeed be held responsible. But plaintiffs have nu standing to vindicata the public'a rights. ithen stripped to the basica, the issues in this litigation are relatively de,pls: To the extent that plaintiffa have alleged that defendants have harmed then directly, they have stated a claim on which relief aay be granted. a. Oo plaintiffs have a direct clafa against defendants? Because the issue of proximate causs is central to the . + disposition of this case, I rill discuss it in aone detail before addressing plaintiffs' state and federal claima individually. 1. P1ioX/mte Cauee Defendants' fundamental argument is that plcintiffs have no direct claim against' thea because they did not proximately cause plaintiffa' injuries. In general terms, the concept of eptoaimete cause' prevets a recovery from a patty for remote and deriva'•'' ¢ariaa to a plaintiff resulting frcm that party's conduct toward another. 5ey, ¢,y,,, yolms v. Sec. tnventnr Protection Corn., 503 U.S. 258, 268-69 (19921; KQ3ile j,ife Ina Co. u Brama, 95 U.9. 759, 75a-59 I1a711. Under the 7 cwwon iaw, therafora, ane who pays the aedical erpenees of anotber eay not recover those expenses fran the third-party terctaasor who caused the danags. 8fe, C.g., aesnetehd a.n pg8pras,tore. Ine, v G]lrornia Sta ncil of +ruen n, 459 U.S. 519, 532 n.25 119831 (oiting I d. Sutherland, Id1l..oC Qp®tgEy 55-36 (1ee2)1; Mt~mty v. slaid, 52 Mnss. 2e0, 291 118161 (plaintiff who undertook to support town paupers tould not recover fro,e torttessor who assaulted Pauper, increasing pldntiff's expenees, as damages were too reaotel. Plaintiffs have alleged thet defendante deceived them about the dangers of tobacco, inhibiting plaintiffe' ability to nioisite health-care expenees, and shifting the cost of tobacco-related disease to the plaintiffs. $IS, t,,g., Conpl. 11 269-7l, Defendants eaintain that plaintiffs' claies are no different frea thnee rejected in Anthenv v staid, and that tde alleged injuries, though wardsd as direct claias, are equally remote. The question of when an alleged injury becoaee toa remate to allow recovecy ir -' '"..diffleltlt. 'Because of convenience, of public policy, of a rough sense ot justice, the law arbitrarily declines to trace a series of events beyond a certain polnt ' Palenr-gf_,y~Jqpg„y-3md R. en., 710 N.Y. 339, 0 352 119111 (aadra4s, J, dicaanting).' That point is reached when 'the connection between the defendants' negligence and the elaieanes' danagu Ihecomasi too tenuoua and remote to pemit recovery,' ninaean nsir~pp,. v. C1x,qy_ uEfaln, 386 P.2d 831, e26-25 (2d Ctr. 1%81. nhlle •a variety of factors ay be relevant in assessing legal Iproainatel cause,• in order to plead a pil®i.SiC14 caee, a plaintiff Is.geeerally required to `shov that the defendant's negligence w1e a substantial cause of the events which prodnced the injury, grdi ra Iee y~Pe1{r , Cuntrectina Coro , 51 N.Y.2d 308, 315 119a0f; gpppid Na11an v. ~ IIelO51sY-_4SAS,InO., 50 N:Y.td $07, 520 (19g0). lf such a ~ iboving Is rsde, no intetvvening acts -- for exapple, the I- ~_ decision of plan participants to seoke -- rill break the causal connection if euch acts are a reaeonably.foraaeeahle result of the defendante' negligence. ptLdliilap, 51 N.Y.2d at 315; ( ~ V/ > i 0 9tanhansana hv ColeK v. B.C,. 1o naon t Son. 7nn.. 638 N.Y.S.2d z 889, 892 (Sup. Ct. N.Y. Co. 1996), D", 658 N.Y.S.2d 636 12nd m pep't 19971. , .,i..,.. .. 'ahile not pert of the majority opinion, the Mdreaa dissent is often quoted in discuesione of prdxieate cause. $9y, yy, Asaaclated Gen Cnn[ractoa, 459 U.B. at 537 9.30 331Ya Shield ef Va v MMrudy, 4S7 N.9. 165, 471 n.13 119e73. 9 VL806Z298
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0 intentionally 'nisrepresented, failed to disclose and mucealed material facts' about the haaards of tobacco use. CaaQl. J 265. The Act preempts fraudulent pisreDregentation claim that merely allege that defendants should have lncluded edditionnl or mre clearly stated warnings in their advertisements. C1yn11lme, sos U.S. at 524. Pleintifft, however, allego intentional fraud, both by false representation and by concealment of maeerial facts. Sipnllonp exprevaly held that claim of fraud by intentional misstatement are nqt preempted because they 'are predicated not on a duty 'based on sneking and health' but rather on a more general obligation: the duty not to deceive.• ld,L at 528-29 (Blackman, Kennedy, and Souter, JJ., concurring in the judgment in relevant patc): 59p allp state by numhrev e. Philin Harris Inc_, No. Ci-94-8565 (Nlen. Feb. 2, 199!); n7Sllyd v. American Tobacco Co., 1997 NL 810807 ac *3 fSUp. Ct. N,7. Co. 19971; Bmall y terillard Tobacco Ca Inc, No, 110949/96 pt. IIf para. 7(sup. Ct. N.Y. Co. Oct. 26, 19)7) (denying notions to dismiss on pzeeeQ~t}?;•srnundel. The Act, therefore, does not bar pleintiffs' fraud claime. • Count VI states that defendants voluntarily aseumad a special duty to protect the public health and to provide 19 inforratioo about the effects of tobacce use. Coapl. 1 ]79. LSp11llp0A did not discuss preemption of special duty claims. In the related context of express warranties, howawr, the Court concluded thar "a comron-las remedy for a contractual cemmitment voluntarily undertaken should not be regarded as a'reqairemext ,., iapoeed under State law." 11{gl1pB9, 595 U.^. at 526 (quoting 15 U.S.C. 9 13341b)). The predicate duty is impoeed not by the State, but by the party a»uring the obligation. jd, at 525. Claims based on voluntarily assumed obligations, then, are not preenpted beeauee they do not fall within the language of the Act. jd, at 525-26 (Blackoun, Kennedy, and Souter, JJ., concurring in the judgment in relevant part) ; State by NtnnUhrev v. Philip Harrls inc., No. C1-9t-fS69 U9ino. Feb. 2, 1996) (order finding no preeaption). Couot VI is not preeepted because the special duty that !t alleges le one that would have been voluntarily assumed by defendants rather than ene iepoeed by the state. plaintiffs' final:+ni..law claim is for unjust enriolseent. oonpl• jf 3ae-15. plaintiffe allege'that by paying their participants' tobacca-related eedical costs, they have canferred a benefit on the defendants that the defendants should 5806Z298 20 tepay. Cofpl. 11313-14. Payrtent of medical co.ta in unrelated to the 'adwcrtising and promotion• of tobaceo. Assuming for the moment that plaintiffs' payments created a valid unjust enrichoent clal., a•fair but narrow reading' of the Act, Cim,llnne, 505 U.S. at 524, reveals that such a claim is not within the atatute'a reech. Accordingly, the cigarette Laheling and Advertising Act daes not preempt any of plaintiffs' common law cltitu. >t. save plaintiffs stated a p,rlpolppim can for each alsis9 In addition to urging the court to dismiss the entire conplaint on remoteness groanda, defendants raise count-specific objections to each of plaintiffa' federal and state claims. I will address each of these in turn. . 1. $IC4 alc0 authorires private civil actions by 'any person injured in his business or property by reason of,• 1e U.S.C. F 1964(c) (1994), 'a pattern of racketeering +ctivity ld, F 1962, such as fraud or obstruction of 7uqt.41 :;•Sefl id. S 1961. Ae discussed atove, plaintiffs' showing of fatual-and proaimte cause is sufficient to survive a motion to dismiss. In sn action brought pursuant to statuto, hovaver, atanding requirea 21 5: m D r m ~
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Count V1II of the Petition -- like the dismissed counts that the Supreme Court addressed -- is based on alleged injuries that are remote and derivative. Count VIII is grounded in the State's alleged "expenditure of hundreds of millions of dollars for medical services, facilities, and services provided to citizens and/or employees of the State injured through use of Defendants' cigarettes." Petition ¶ 283; see also Petition Count VIII Prayer for Relief ¶ A (seeking damages "in the amount of all of the costs the State has expended as a direct result of injuries caused by the Defendants' cigarettes"). As with the other common law counts dismissed by this Court, a failure to apply the remoteness doctrine to Count VIII would permit unlimited suits to be filed against Defendants or other manufacturers allegedly liable to employees, insureds, or Medicaid recipients. See 577 N.W.2d at 407. Further. to the extent that the State specifically seeks to recoup Medicaid payments in Count VIII, the Supreme Court's ruling could not be clearer: "The State's exclusive remedy for recovery of [Medicaid] costs is under section 249A.6." Id. at 406. Thus, Count VIII of the Petition should be dismissed. 2. The State's Nuisance Claim Is Outside The Accepted Boundaries Of Nuisance Theory The very basis of the Petition -- the alleged harm caused by cigarettes -- is wholly unrelated to any theory of nuisance. "A product which has caused injury cannot be classified as a nuisance to hold liable the manufacturer or seller for the product's injurious effects." AMERICAN LAW OF PRODGCT LIABILITY §§ 1:48. 27:3 (1987). The Iowa Supreme Court has defined the two types of nuisance - public and private -- under Iowa law: A public or common nuisance is a species of catchall criminal offenses, consisting of an interference with the rights of a community at large. This may include anything from the obstruction of a highway to a public gaming house or indecent 5
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• 0 of ascertaining the truth.' y,lliie, 615 P.2d aa to; himd could find that it was justifiable for plaintiffa eo accept the yreres e Co. v. Protective Lifa Ina Co , lob P,3d 1331, 1542 (2d Cir. 1997), •(I)ndeed eeme cues have imposed liability in situations in which plaintiff could have deteradsed the truth with relatively apdest investigatiom pJAIljg, 61! F.2d at 60. Mhen misrepreeentationa concezo matters py, peculiarly within the defendant's knowledge, New York court® have olten found no justifiable reliance, holding that if a plaintiff 'w the means of knowing, by the exercise of ordinary intelligence, the truth .., (it) must make use of those eeans.' Haiija, 615 P.2d at 60-61; aanmme f¢abe, 57 F.3d at 156; uear Prg=, 109 P.3d at 1542. Such decieions have generally involved plaintiffs who wera 'placed on guard or practically faced -with the facts,• fi01ix1, 615 F.2d at 61. In the cues pending here, a jury couli reasonably conclude that the truth about the health effects oi tobacco wu peculiarly within the defendants' knowledge. Plaintiffs maintain that defendants assuned reaponeib.t)d'y fcr conducting and reporting tobacco research, and that they t,ek steps to ensure that the public would not be able to obtaln the negative results. Compl. It 1o9-2e, k jury accepting tiwee allegationa deferdants' atatemeuts about tobacco as true withm.i conducting an independent investigation. These are questions of fact that cannot be decided at this stage of the proeeediap. For the sama reason, it is not yet appropriate to reach thr quastiun of whether plaintiffe relied to their detrimeent on defendants' statements -- i.e., whether their costs would have been reduced had they known of the concealed information. Pli:intiffa have eot forth •circunetancee constituting fraud' with sufficient particularity. Sts Fed. R. Civ. P. 9(b). Whether they will be able to prove their claia is a matter reserved for the trier of fact. Htt 9an vrancieco it, slip op. at 14-15 hrder denying motion to dieaies fraud claim as pleaded in te:and amended complaint). Consequently, defendants' mtion to cismisa Couat V is denied. 6. Ireaah of 8pecill nutv gader certain circwstances the law inpoees a duty of care an one who acts for the benefit of another,ae,j:rn in the abseace of a contractual relationship. `(oine wta aesunee to act, even though gratuitou®ly, eey thereby becone s.ebject to the duty of acting carefully, if he acts at all.' G1 nr v, n N 34 35 0606Z2g8 ,SlaYd, 233 N.Y. 236, 339 (1922) (citatione cmittelil Bee..al]o fldliiN, 5p N.Y.2d at 522 (quoting noeh Co. v. Rerae la r w.r.r jg,,, 247 N.Y. 160, 167•6B 119261). If a duty of care exists, then 'a tort may result as well from acte af omission as of coesission.' 1(aCh. 247 N.Y. at 167. gzistence if a duty is a question of law for the cnurt to decide. fiudraehy v Crain'e d„Y. e~.y!nen, 593 N.Y.9.2d 514, 51S (let Dep't 19!'31. in Count VI, plaintiffs contend that defendants assumed a duty to 'those who advance the public health• by promising to assist in research efforta and to provide coeplete information about smoking and health. Conepl. 112'e6-79. They allege that defendants' subsequent conduct deennstrated a lack of reasonable care in the perforeance of that ducy. IQ, 1 261, ylnally, they clafa that they delayed taking actiin to reduce costs associated with tobaceo-related disease lacauee they relied on defendants' promises. Id,, 11 28042. he discussed above, a jury could reuonably conclude that defendmts were in the beat position to discover the truth about the heaith efh'.^of tobacco. gst pt. Iv.B.e. Raving done so, it could then reasonably find that it was justifiable for plaint.ffe to rely on defendants' promises to seek out and publicize that 36
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"Under the motion for judgment, the properly pleaded allegations of fact in said pleadings are admitted and accepted as true." Evans v. Herbranson, 241 Iowa 268, 278, 41 N.W.2d 113. 120 (1950). "In many respects a motion for a judgment on the pleadings is reviewed in a similar manner to a motion to dismiss under Rule 104(b) of the Iowa Rules of Civil Procedure." Stanton, 420 N.W.2d at 482 (citation omitted)? For the reasons set forth below, Defendants are entitled to judgment on the pleadings in their favor as to Count VIII for nuisance, Count V for conspiracy, and Count VI for aiding and abetting. A. THERE IS NO LEGAL BASIS FOR THE STATE'S NUISANCE CLAIM. 1. The State May Not Recover For Its Alleged Injuries Because They Are Remote And Derivative, And The State Has Failed To Plead Its Exclusive Remedy For Medicaid Reimbursement Under Iowa Code Section 249A.6 Count VIII must be dismissed because it improperly seeks to recover remote and derivative injuries. The Iowa Supreme Court affirmed this Court's dismissal of four counts of the State's Petition and held that the State could not recover damages based on the four common law counts that were before the Supreme Court. State v. Philip Morris Incorporated. 577 N.W.2d 401. 406-07 (Iowa 1998). The Supreme Court agreed with this Court's conclusion that "the State cannot recover damages caused by defendants because the injuries are derivative and too remote." Id. at 406 (internal quotation marks omitted). 2 Defendants did not specifically challenge Counts V, VI, and VIII in their original motion to dismiss, although they were encompassed by the general grounds for dismissal raised by that motion. Regardless, the prior denial of a motion to dismiss does not preclude the granting of a motion for judgment on the pleadings under Rule 222. Gigilos v. Stavropoulos, 204 N.W.2d 619. 622 (Iowa 197' )). 4
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. Other factors that courts my consider when. determining proxlmace cause in intentional tort eaees inoludet 1) the defendant's intent to do harm, 2) thc degree of aaral wrong involved, and 3) the seriousness of the harn orlginally intended. Aeatatenanc (Second) of Torts 5 t35g 11965). Theee factors are considered because the greater the inteat to bara, the more foreseeable it is that hara will result. These general principles govern all concon-lav claina, including the intentional torts alleged in the complaint. They also apply to plaintiffs' statutory claims. Congteee intended that antitrust litigation 'would be subject to constraints eoaparable to well-accepted common-lav rules applied in co0qarable litlgatfonGl' lncluding rules defining proxinate cause. Aeenrlabni f+n fnntnactort, 459 U.S. at 533. llaw York's antitrust statute, the Oonnelly Act, has been interpreted similarly. aey ,,._,Y,srr•AUngh tnc„~ Ahr>_w, 71 p.Y.7d 327, 335 (19ea( (Doonelly Act 'ahould generally be cunetmed in light of pederal precedent'); Vae nuea.e.arnrrn wror ':. Ins~ d„rhnSer 7eL [a:v., 407 h.Y.S.2d 287, 293 (4th Dep't 19761 (defining proximate cause under Donnelly Act by citing to federal precedent), aea_alap 7ri-9ear victuree, Inc. v. haisu*e 10 Tine prrdUMinnc ~L, 1992 Yh 296314, at e6 (S.p.N.Y. 19921, l=, 17 F•3d 36 /2d eir. 199aI (citing Ve++ 0.esen-_ ecg xot Inn) (proxiaate cause under Oonnally Actl. The saoa proxi.ate cause constraints apply to RICO cleine. gdlQqa, 503 n.S. at 269, &rht v namerp3~fe~rine H^_'aee Inc., 197 p.2d 21, 23-21 (2d Clr. 1590) UIICO violations 'proximtely wuae a plaintiff'a injury if they are a subntantiel fictor in the aequence of responsible causation, and if the injury is reasonably foreseeable or anticipated as a natural consequence."1. , Tne purpose of requiring a direct relationship Mtweea defendants' conduct and plaintiffs' injury Is threetold, First, the eon renote the injury, the ewre difficult it is to ascertain the asount of damages attributable to the defendants' acts, rather than to come other factor. Ik110[b 509 Y.S. at 269. Secwd, allowing indirectly Snjured plaintiffs to preceed createe the riek of cultiple recoveries, I4. Third, those v,ho are directly injured an in a better position to 'vindicate the as much fce the purposes of this sotion -- then a jury could reasonably tind that plaintiffs' Injuries were foreseeable, and that defendanta' behavior wae a substantial cauee of those injuries. For example, plaintiffs esintain that defendants imev how to lanufecture a less haraful cigarette but did not do so because it veuld have compreaised their litigation stntegy. Coepl. 11 125-39. One direct consequence of such a decision vould be to limit plaintiffs' ability to reduce their health care costs by encouraging their participants to use less hataful tobacco products. The next step, then, is to analyze the policy factors enunciated in pp,imfS to determine vhether plaintiffa' Injuries are too remote for recovery a a aatter of lav. Firet, ara there othet parties better suited to act ae 'privete attorneys general'7 Individual smkers and public agencies have an lncencive equal io that of the plafntiffs' to •prosecute' defeadants for deceiving the public about the dangers of tobacco. None, however, would have a strong interest law as private attorneys general,' without any of the in vindinting the han to plaintiffs -- their reduced abilitgr found in suits baeed on uure renote injuriee, Id, et 269-70. If all of plaintiffs' allegations regarding defendants' knevledge and intent are true -- and I nuat aesuee 11 to einirtl2e health-care expenses end their assumption of the financial burden of tobaao-related disease among plan participante. ihere ia a substantial dsk that those harau vill 12 Z806Z~9~
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! 0 e plaintiffs' gIN clalec rmct be dindcsed ae a natter of law because 'a11 of the Funds' claimed injuries result from alleged personall injuries to their partioipants,• rather then injuries to businesa or property. oets,' Neo.. at 13. Thay particularly rely on the holding in rity as d o m y„f a ea Pr•n_ philtp_ ~, 957 F. Supp. 113a IN.D, Cal. 1997) [hereinafter San pranr.isco Ii, in which local governments sought to recover the cost of treating indigent residencs suffering from tobacco-related diseases. There, the court disnissed the RICO claim with leave to anend, finding that plaintitfa' elaine were 'wholly derivative' of those of the individual smcksre.' Id, at 1139. As a result, plaintiffs' injuries consisted only of the econaaic consequences of personal injuries, which are not cawqranaable under RICO, end that plaintilfs~therefore had failed to neet the proximate cause requirements outlined in gqlppB. Id, at 1130. When defendants argue that plaintiffs' claim are ePlaintiffs did not pursue the RICO claim in their .e-esnnd A__gaed s laiS, City end roonty of [.n xranqley V. phiiip Morrie. Inc , No. C-26-2090 (N.D. Cal. Nar. 3, 1994) lorder denying motion to dimies second arsnded complaint) (hereinafter $,n Pr nciaco III. 25 L806~7298 derived froe personal injuries, they ars simply rapnting their argument that pleintiffs' injuries ate too cemte. By detendning that plaintiffs have adepuately alleged prozieate cause, 1 have already eoncluded that plalnrifes' claim are nOC baaed on the personal injuries of their participants. Sae part IV.a.1. Instead, they are bned on the hera to plaintiffs' intraetructure and financial stability caused by defendants' alleged atteapts to deceive the plaintiffs. . as a rerult, they do allege an injury to business or property, aa the atatute requires. ffias, defendants' motion to dismics Coufte I end II ls denied. 2. Entitlylt rederal antitrust law authorites private civil actiona by `any person . . . injured in his business or propsrty by reuon of anything forbidden in the antitrust lawa(.1' 15 U.S.C. 9 15 (1994). Those laws forbid 'Ielvmy eontract, combination ..., or conspiracy, 1n restraint of trade or wamerce among the several States, or with foreign nationef.!' IL 1 1. Naw York antitrust law prohibits `(elt'ery contract, egreement, errangement or coebination •vherebf . . . fclonpetition or the frea exacin of any activity in the 26 eonduct oE any busineea, trade or cmmcree or in t1e futniahing of any service . . . is or may be reatrained.• lonnelly Act. B:y. gen. Bus. Law i 340.1 IltosLlnney 1999); As discussed In part 1V.B.1 above, I have already concluded that plaintiffs' claim are for injuriu to buainoa or property thot are not so resace ae co prevent recovery. standing thus depemAs on whether defendants' alleged acts constitute an antitrust i folation and on whether plaintiffs are vithin the claes the attittust laws seek to protect. i1CSKGddy, 457 U.S. at 471; !eA also Bhrahap8, 79 P.3d at 337, ' dn antitrust violation is an agreement in restraint of trade that cauees 'injury of the type the antitruat lawe eece intended to prevent ..•. The injury should reflect the antieorpetitive effect either of the violation or of anticaapatitive acte made possibie by the violation • Byyna9iGk Qpp V Rebin 9ow1.d.Mat inc , 479 U.S. 477, a6t (397711 ae4 1W gaeith •adio mrn v Nazeltine Researah. Ioy„ 395 U.S. 100, 125 (19C9Y liejuzy should be •the type of l~sa that the olaimed violations of the antitrust laws would le likely to cauee.'1. In Count III, plaintiffs allege that defendants 27
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• was not in defendant's possession at time of injury): City of Wanchester v. National Gypsum Co., 637 F. Supp. 646, 656 (D.R.I. 1986) (rejecting nuisance claim because of insufficient proof that defendants were in control of instrumentality, a "basic element of the tort of nuisance"); Johnson County v. U.S. Gypsum Co., 580 F. Supp. 284, 294 (E.D. Tenn. 1984) ("[A]s an elementary principle of tort law, a nuisance claim may only be alleged against one who is in control of the nuisance ureating instrumentality."); Town of Hooksett Sch. Dist. v. W R. Grace & Co.. 617 F. Supp. 126, 133 (D.N.H. 1984) (rejecting nuisance claim based on sale of asbestos on this ground); Gelman Sciences, Inc. v. Dow Chem. Co., 508 N.W.2d 142, 144 (Mich. Ct. App. 1993) (per curiam) ("Plaintiffs nuisance claim [for contamination of property allegedly caused by defendant's industrial solvent] cannot be sustained because there is no evidence that the defendants controlled the nuisance at the time of injury."): Detroit Bdd of Educ.. 493 N.W.2d at 522 (holding that manufacturer cannot be liable when object allegedly constituting nuisance left defendants' premises and was out of defendants' control). Count VIII is based on the allegedly harmful effects of cigarettes after they left Defendants' control. Consequently, the State cannot satisfy yet another requirement to state a valid nuisance claim. 4. Defendants' Sales Of Cigarettes Are Sanctioned By The State And Federal Governments And, Therefore, Cannot Constitute A Nuisance The State fails to articulate a concise and coherent theory of liability under the law of nuisance. The State's verbose Petition recites a litany of claims allegedly related to the manufacturing and marketing of cigarettes over the past forty years. The State appears to seek to halt the manufacturing and marketing of cigarettes. However, the sale of tobacco products is a Il
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Id. at 521 (citing 63 Am. Jur. 2d.. Products Liability, § 593). To hold that manufacturers could be held liable under a nuisance theory would convert every products liability suit into a nuisance claim, obviate the need for plaintiffs to meet elements of proof required in tort and warranty law, and, as the Eighth Circuit has explained, turn nuisance into "a monster that would devour in one gulp the entire law of tort." Tioga Pub. Sch. Dist. #15, 984 F.2d at 921. Indeed, the Illinois trial court hearing that state's Medicaid cost recovery suit dismissed a nuisance claim against some of these same Defendants even though Illinois nuisance law is "broader in scope than other state[s] nuisance laws" and it defines common law public nuisance to include "an act or failure to act which injures the safety, health or morals of the public, or which causes substantial public annoyance. inconvenience or injury." Illinois v. Philip Morris Incorporated, No. 96 L 13146, slip op. at 20 (I11. Cir. Ct. Nov. 13, 1997) (citation omitted) (attached as Exhibit "A"). Similarly, the federal district court hearing the State of Texas' suit against some of these Defendants dismissed that state's nuisance claim, explaining that "the Court is unwilling to accept the State's invitation to expand a claim for public nuisance beyond its grounding in real property." Texas v. American Tobacco Co., No. 5-96CV-91, slip op. at 28 (E.D. Tex. Sept. 8, 1997) (attached as Exhibit-'B"). Various trial courts across the country have summarily dismissed nuisance claims in health care cost recovery suits against many of these same Defendants. See, e.g.. City of Birmingham v. American Tobacco Co., No. CV-97-P- 1449-S, slip op. at 8(N.D. Ala. Mar. 9. 1998) (attached as Exhibit "C"); Arizona v. American Tobacco Cu., No. CV-96-14769- slip. op. at 4 (Ariz. Super. Ct. June 26, 1997) (attached as 9
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exposures. A private nuisance, on the other hand, is a civil wrong based on the disturbance of rights in land. Guzman v. Des Moines Hotel Partners. 489 N.W.2d 7, 10 (Iowa 1992) (citations omitted). Defendants are aware of no Iowa case applying nuisance principles to a products liability action. a. Iowa Nuisance Law Does Not Encompass Defendants' Alleged Conduct No Iowa court has extended the concept of nuisance to a claim based on allegations even remotely analogous to the allegations contained in Count VIII. The State has not pled that the Defendants violated any criminal statutes. Thus, Count VIII fails to allege an essential element of a public nuisance. The State vaguely characterizes the nuisance for which it seeks to recover as Defendants' alleged "repeated unlawful. antisocial and unreasonable conduct," referring to the 242 paragraphs of the Petition spread over 85 pages. (Petition Q¶ 280- 8I.) This does not satisfy Iowa law. The State's conclusory attempt merely to plead nuisance -- without explaining how the alleged conduct fits into to the existing definition of nuisance -- is insufficient as a matter of law. As stressed by the towa Supreme Court in Guzman, "`Unless the facts can be brought within one of the two categories mentioned, there is not, with any accurate use of the term, a nuisance."' Guaman, 489 N.W.2d at 10 (quoting W. PAGE KEETON ET AL., PROSSER & KEETON ON THE LAW OF TORTS § 86, at 618-19 (5th ed. 1984)).3 00 C\ W 3 Because Defendants' alleged conduct does not involve land, it cannot be tV ~ considered a private nuisance. See Gu=mun. 489 N.W.2d at 10. ~ W N) 6
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lawful business heavily regulated by federal, state and local governments -- including the government of this State. The State's attempt to ban tobacco judicially through this nuisance claim would usurp the authority of Congress and the Iowa legislature to regulate the tobacco industry. In a strikingly similar case, Campbell v. Jaclonan Brothers, 140 Iowa 475, 118 N.W. 755 (1908), the Iowa Supreme Court recognized that the lawful sale of liquor was not a nuisance per se, but rather was a business that the legislature alone regulated. The Campbell court refused to enjoin an alleged liquor nuisance. The Supreme Court observed that the sale of "intoxicants" was recognized as a legitimate business at common law. 118 N.W. at 759. Further. the court noted: Almost without exception the courts have everywhere taken notice of the deleterious effects and influences that follow in the trail of this business and have manifested a willingness to give full effect to every law enacted to suppress them, but not in all of these thousands of cases in which the subject has been treated or ruled upon do we find a single authoritative precedent holding that, independent of .statute, the court has any jurisdiction whatever to order the suppression of it.... The duty of observing the changed conditions and needs of society and providing laws fitted to the demands of the hour is vested in the Legislature alone. The fact that, judged by the higher standards of right and wrong. the selling of intoxicating liquors is an inexcusable act working harm to the community where it is permitted does not of itself give rise to a cause of action at law or in equity. Id. at 759-60 (emphasis added) (citations omitted). As with the "intoxicants" discussed in Campbell, the courts have no power to ban the legitimate industry of tobacco. It is the role of the Legislature to regulate tobacco in this State. See also State ex rel. Clemens v. ToNeCa, /nc., 265 N.W.2d 909, 917 (Iowa 1978) (refusing to enjoin as a public nuisance defendants from operating 1"
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Exhibit 'D"); McGraw v. American Tobacco Co.. Civ. A No. 94-C-1707. 1995 WL 569618 (W. Va. Cir. Ct. June 6, 1995) (attached as Exhibit "E"). The State has not alleged a public or private nuisance as defined by Iowa law. Further, Iowa law does not support a nuisance claim based on an allegedly defective product. Thus, this Court should grant Defendants' motion for judgment on the pleadings as to Count VIII. 3. Defendants Did Not Control The Instrumentality Of The Alleged Nuisance After The Point Of Sale Because the basis of Count VIII is not truly sufficient to state a nuisance claim, it is not surprising that the State fails to allege an essential element of such a claim: that the instrumentality of the alleged nuisance caused harm while within Defendants' control. The health injury alleged by the State occurred, if at all, after the point of sale once Defendants' cigarettes were in the control of individual consumers. The authority is overwhelming that nuisance law does not provide a cause of action under such circumstances. .See, e.g., Tioga Pub. Sch. Di.st. #15. 984 F.2d at 920 (observing that courts have unanimously found sellers of asbestos not liable in nuisance suits because "liability for damage caused by a nuisance turns on whether the defendant is in control of the instrumentality alleged to constitute a nuisance, since without control a defendant cannot abate the nuisance"); City ojBloomington, 891 F.2d at 614 & n.4 (dismissing public nuisance claim and noting absence of "any cases holding manufacturers liable for public or private nuisance claims arising from the use of their product subsequent to the point of sale"); Moran v. Pittsburgh-Des Moines Steel Co., 166 F.2d 908, 913-14 (3rd Cir. 1948) (holding that manufacturer was not liable in nuisance for sale of defective gas tank because tank 10
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Rather than alleging a claim that fits within the nuisance law of Iowa, Count VIII seeks recovery based on injuries allegedly caused by defective products. As demonstrated by the relief that the State seeks in Count VIII -- damages for health care expenditures paid on behalf of Medicaid recipients allegedly injured by Defendants' products and injunctive relief relating to the sale of cigarettes -- the State's nuisance claim is, in fact, a product liability claim. Count VIII concerns the.sale of goods -- cigarettes -- that allegedly harmed consumers of those goods. The State has simply recast a products liability claim as a nuisance claim. Iowa nuisance law, however, does not support a nuisance claim based on an allegedly defective product.4 b. Iowa Law Comports With The Law of Other States Iowa is not alone. The nuisance law of other states similarly rejects attempts to convert products liability actions into nuisance claims. See, e.g. City of Bloomington v. Westinghouse Elec. Corp., 891 F.2d 611. 614 & n. 4 (7th Cir. 1989) (dismissing nuisance claim and noting a complete absence of "cases holding manufacturers liable for public or private nuisance claims arising from the use of their product subsequent to the point of sale"); Levit v. 4 Although the Iowa Supreme Court has indicated in two cases that a public nuisance may exist apart from real property, see State ex rel. Turner v. United-Buckingham Freight Lines, Inc., 211 N.W.2d 288 (1973); State ex rel. Turner v. Younker Bros., Inc., 210 N. W.2d 550 (1973), neither of those cases extended the nuisance doctrine to hold a manufacturer liable for injuries allegedly caused by its products. Further, United-Buckingham indicates that injunctive relief is available in a nuisance case unconnected to real property only if the court finds repeated statutory violations undeterred by multiple statutory penalties, a prerequisite the State has not pled and cannot plead in this case. See 211 N. W.2d at 290-91. To the extent the State relies on Defendants' alleged violations of the Iowa Consumer Fraud Act, such reliance is misplaced because the Consumer Fraud Act -- unlike the statutes involved in United-Buckingham and Younker Brothers -- provides adequate remedies if the State can prove violations of its provisions. See Unlted-Buckingham, 211 N.W.2d at 291; Younker Bros.. 210 N.W.2d at 565. Finally, neither case permitted the State to recover money damages under a public nuisance theory, and both limited the remedy to prospective injunctive relief. United-Buckingham. 211 N.W.2d at 291-92; Younker Bros.. 210 N.W.2d at 565-66 (affirming order striking claim for money damages).
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! 74 (Iowa 1997); Heick v. Bacon. 561 N.W.2d 45, 51-54 (Iowa 1997); Eldred v. McGladrey. Hendrrckson_ & Pullen, 468 N. W.2d_218, 221 (Iowa 1991). None of these conditions for conspiracy or aiding and abetting liability is met here. This Court has dismissed all tort claims contained in the original Petition with the exception of the nuisance claim, which, as set forth above, is meritless. The State has conceded that its remaining tort claims for indemnity and prima facie tort contained in the Amendment to the Petition are barred by the Supreme Court's ruling in this case. Further, the Court has already dismissed the State's claim in the original Petition for violation of the theft by deception statute and, for the reasons set forth in Defendants' recently filed motion to dismiss the Amendment to the Petition, the State's claim for violation of the Ongoing Criminal Conduct Act is invalid. The State's only remaining claim, that for violation of the Iowa Consumer Fraud Act, involves a statute that does not expressly provide for secondary liability. Consequently, the State's secondary liability claims for conspiracy in Count V and aiding and abetting in Count VI should be dismissed. IIL CONCLUSION Defendants respectfully request that this Court enter judgment on the pleadings in their favor dismissing Count VIII (Nuisance), Count V (Conspiracy), and Count VI (Aiding and Abetting) and award Defendants such other relief as this Court deems just and equitable. ~ 16 N
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massage parlors: "A court of equity does not have a roving commission to punish all conduct which in the opinion of the court corrupts public morals or offends community tastes."); Ciry of Osceola v. Blair. 231 Iowa 770, 2 N.W.2d 83, 83-85 (1942) (invalidating ordinance prohibiting as a nuisance lawful business of soliciting orders at private residences); accord Restatement (Second) of Torts § 821B cmt. f (1979) (explaining that if a comprehensive set of legislative acts or administrative regulations governs details of a particular kind of conduct. "the courts are slow to declare an activity to be a public nuisance if it complies with the regulations"). The sale of cigarettes is a heavily regulated5 lawful business. The State has not alleged that Defendants have violated the extensive regulatory scheme governing their conduct. Accordingly, there is no basis for the State's nuisance claim. 5, The State Cannot Recover Money Damages On A Public Nuisance Theory There is no authority on which the State may base a claim for money damages in Count VIII. The State alleges that it "has been damaged as a result of the expenditure of hundreds of millions of dollars ...." Petition 1283. A governmental body, however, has no right to recover damages on a public nuisance claim. See RESTATEMENT (SECOND) OF TORTS § 821 C cmt. j. The public nuisance remedies available to the state at common law are limited to criminal prosecution and suits for injunctive relief. Id. Again, the State ignores the law in an attempt to manufacture a valid claim. Thus, this Court should grant Defendants' motion for judgment on the pleadings as to the State's claim for damages in Count VIII. 5 A detailed statutory scheme regulates and taxes Iowa cigarette sales. See Iowa Code chapter 453A. 13
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• ~ ~ @ ~ P 1! o' f: targets of the anticompetitive activity alleged, flaintiffa do not have,atanding to pursue the claised antitnut viclation. hccordingly, defendants' motion to disaiss Counts :II and IV is granted. 3. YZ19d Camnn law fraud may consist of sither fraudulent misrepresentation or fraudulent concealment. Plaintiffs' fraud claim alleges bnth. Po prove fraudulent mivrepreseitation under NeN York law, a plaintiff. muat ahov, 1) a nazrial false repreeentation, 21 intent to defraud the plaintiff thereby, 3) reasonable reliance on the representation, ant 61 damage resulting hom euch reliance. Baapue hrane at tftemationale D'Inveetisaenent v. Narvland Nat'1 n a;nk, 57 P.3d 116 153 (2d , , Clr. 1995)i Na11f. v. Bankera 7hat Cb., 615 l.2d 61 10 17d , Cir. 19601. Each element must be shown by clear ari convincing evidence. He~ ukra , 57, P.3d at 153. 1e establish fraudulent concealment, a plaintiff auet prove all nf the above elements, and rust,~"t;}•hy clear and convincing raidence that the defendant had a duty to disclose the material information concealed as well. 1L That duty may arise from `the need to complete or clarify (a] partial or aobiguous etateeene, or from 31 69 a6z2.98 a fidaciary, or coofidential relationship between ahe parties! ]d,, at 155 icltations onitted). It may also arise whett one party hae superior knowledge of certain informtion not readily available to the other party, and knows that the ss xnd party ie acting en the basis of mistaken knowledge. Id. Count V alleges that plaintiffs relied cB etatesente in which defendants promised to disclose all material information discovered about the effects of toba:co on human health. Coepl. ij t71-75. Plaintiffs charge that despite that promise, defendants intentionally `nisrepreeented, failed to disclose and eoncealed material facts about the huean health hazards of tobacco use.• ld, 1 265. TM.y allegedly nierepreeented thoae facts by eaking partial ani incomplete statements conceroing the health effects of aaokiq6 1d. 1267, and fraudulently concealed material facts by buryinq the results of secret tobaccs research not readily available to the public, Id. 1 266. Plaintiffs clai chat because they accepted the in£otmatioan they received fK, the defendants ae t:ve, they did not take action ae quickly or as thoroughly as tfey otherwise would have. Inatead, they depended on false ard incomplete information ehen deciding what actione to take to reduce tobacco 32 uee among their participants. This reliance ulti iately led to an increase in their health care coats. la, 1) M, 176. Por the purpoees of this notion, I muat racept as tme plaintiffs' allegations that defendants have heen conducting secrat research into the dangers of tobacco and crat they have intentionally suppreeeed the negative results of tlut research. If eo, then defendants have had superior knowledgi of material information not readily available to the piaintif:s, and their public state.ants regarding the health effects of smoking have been, at beet, incomplete, Under these circumstances, defendants would have had a duty co disclose tte results of their research, as plaintiffs were conducting thei: business on the basis of incomplete knowledge of the dangers ef tobacco. Defendants argue chat if plaintiffu relied on defendants' representations, that reliance was no; justifiable because plaintiffs were sophisticated parties with access to many other sources of inforwtion. New York tollo,m a two-tier standard in determining whether r.1;-,g;^ is reaacnable. Nhen eatters are held to be 'peculiarly within defendant's knowledge,' a plaintiff may rely on the defendant s statements without further investigation, 'as Iltl hae no tndependant means 33
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General Motors Corp., 682 F. Supp. 386. 387 (N.D. Ill. 1988) (refusing under Illinois law to apply nuisance law to a product liability action); City ofSan Diego v. U.S. Gypsum, 35 Cal. Rptr. 2d 876, 882-84 (Cal. Ct. App. 1994) (rejecting city's nuisance claim against manufacturers of asbestos-containing building materials); Warren Consol. Schs. v. {3!R. Grace & Co., 518 N.W.2d 508, 511 (Mich. Ct. App. 1994) ("Manufacturers, sellers, or installers of defective products may not be held liable under a nuisance theory for injuries caused by the defect."); Detroit Bd. of Educ. v. Celotex Corp., 493 N.W.2d 513, 521 (Mich. Ct. App. 1992) (stating that nuisance cases "almost universally concern the use or condition of property, not products"); see also, e.g., Tioga Pub. Sch. Dist. #1.i v. United States Gypsum Co.. 984 F.2d 915, 920 (8th Cir. 1993) (noting that absence of cases applying nuisance law to products liability claims supports inference that nuisance law was not intended to apply to such claims). A Michigan appellate court explained the problems with expanding and distorting nuisance law to cover allegedly dangerous goods when it rejected an attempt to transform an asbestos products liability claim into a claim for nuisance in Detroit Board of Education v. Celotex Corp., 493 N.W.2d 513 (Mich. Ct. App. 1993). The court rejected allegations that the defendant asbestos manufacturers were liable as creators of a nuisance: The remoteness of any possibility that a product which has caused injury is legally classifiable as a nuisance for the injurious effects of which the manufacturer or seller may be held liable is apparent. For one thing, the idea of a wrongful use of property (as distinguished from an improper condition of property) is basic to the legal concept of nuisance. For another thing, the role of the 'creator' of a nuisance, upon whom liability for nuisance-caused injury is imposed, is one to which manufacturers and sellers seem totally alien. 8
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Of Counsel John Nyhan Jay Henneberry Suzanne Cate Jones CHADBOURNE & PARKE LLP 601 South Figueroa Street Los Angeles, California 90017 (213) 892-1000 (213) 622-9865 (fax) HILL & KNOWLTON, INC. By Josep'S R. Gunderson PK0008641 6Jy'rrf DREHER. SIMPSON & JENSEN 1200 Hub Tower 699 Walnut Street Des Moines, Iowa 50309 (515) 288-5000 (515) 288-7718 (fax) Of Counsel Fred M. Weiler Yvonne Look DAVIS & GILBERT 1740 Broadway New York, New York 10019 (212) 468-4800 (212) 468-4888 (fax) 21
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t 6. The Economic Loss Doctrine Prohibits Recovery Of The State's Purely Economic Alleged Losses The economic loss doctrine precludes any recovery by the State under a nuisance theory. The Iowa Supreme Court in Nebraska Innkeepers, Inc. v. Pittsburgh-Des Moines Corp., 345 N.W.2d 124 (Iowa 1984), explained the economic loss doctrine as follows: The well-established general rule is that a plaintiff who has suffered only economic loss due to another's negligence has not been injured in a manner which is legally cognizable or compensable. # 4 4 Courts which have addressed this issue have repeatedly expressed concern that a contrary rule would open the door to virtually limitless suits, often of a highly speculative and remote nature. Such suits would expose the negligent defendant to a severe penalty, and would produce serious problems in litigation, particularly in the areas of proof and apportionment of damages. Id. at 126-27 (citations omitted). As this Court explained in dismissing Count III of the Petition, the State "seeks purely economic damages from defendants.in this case. The State does not claim that it has suffered any physical injuries." State v. R.J Reynolds, No. CL 71048, slip op. at 12 (Iowa Dist. Ct., Aug. 26, 1997). The Court's holding with regard to Count III applies equally to Count VIII, which also seeks purely economic damages. See Petition Count VIII, Prayer for Relief I A.6 Count VIII does not allege that the State has suffered any physical injuries. Iowa law does not support the State's claim for nuisance. 6 This Court should reject any argument that the economic loss doctrine applies to negligence claims but not to nuisance claims because, as the Iowa Supreme Court has explained, "nuisance is merely a condition created by th[e] defendant, if at all, through negligence." Guzman, 489 N. W.2d at 11. 14
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LORILLARD TOBACCO COMPANY and LORILLARD INC. By (2n Henry A. Harmon PK0002130 GREFE & SIDNEY 2222 Grand Avenue Des Moines, Iowa 50312 (515)245-4300 (515) 245-4452 (fax) Ross H. Sidney PK00§!10 16;j rfiG-t Of Counsel Jeffrey S. Nelson Catherine M. Castelluccio SHOOK, HARDY & BACON, L.L.P. One Kansas City Place 1200 Main Street Kansas City, Missouri 64 1 05-21 1 8 (816) 474-6550 (816) 421-5547 (fax) THE COUNCIL FOR TOBACCO RESEARCH-- U.S.A., INC. By &,,Z e. J. Michael Weston L10005956 Brenda K. Werner LI0014950 MOYER & BERGMAN, P.L.C. Commerce Exchange Building 2720 First Avenue N.E. Cedar Rapids, Iowa 52406-1943 (319) 366-7331 (319) 366-3668 (fax) 19
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0 ~ rJut o 2 IN IN THE IOWA DISTRICT COURT FOR POLK COUNTY THE STATE OF IOWA, ) ) Plaintiff, ) ) vs. ) LAW NO. CL 71048 ) R J. REYNOLDS TOBACCO ) COMPANY, et al., ) ) Defendants. ) LOEWS CORPORATION'S RESISTANCE TO PLAINTIFF'S MOTION TO COMPEL JURISDICTIONAI. DISCOVERY a173222.04
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Respectfully submitted, PHILIP MORRIS INCORPORATED and PHILIP MORRIS COMPANIES INC. By YjC4:G J'cn Up-a-2~ Robert A. Van Vooren # 336283228 Thomas D. Waterman # 000008441 LANE & WATERMAN 600 Norwest Building 220 N. Main Street Davenport, Iowa 52801 (319) 324-3246 (319) 324-1616 (fax) Of Counsel Dan K. Webb Thomas J. Frederick Kevin J. Narko WINSTON & STRAWN 35 West Wacker Drive Chicago, Illinois 60601 (312) 558-5600 (312) 558-5700 (fax) R.J. REYNOLDS TOBACCO COMPANY By Steven L. Nelson DAVIS, BROWN, KOEHN, SHORS & ROBERTS. P.C. The Financial Center 666 Walnut Street, Suite 2500 Des Moines.lowa 50309-3993 (515) 288-2500 (515) 243-0654 (fax) 17
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Of Counsel Thomas F. Gardner JONES, DAY. REAVIS & POGUE 77 W. Wacker Drive Chicago, Illinois 60601 (312) 782-3939 (312) 782-8585 (fax) BROWN & WILLIAMSON TOBACCO CORPORATION, individually and as successor by merger to THE AMERICAN TOBACCO COMPANY B ogerT. Stetson PK0005294 J11r4/I BELIN LAMSON McCORMICK ZUMBACHFLYNN A Professional Corporation 2000 Financial Center Des Moines, Iowa 50309 (515) 243-7100 (515) 282-7615 (fax) Of Counsel Andrew R. McGaan Michelle H. Browdy KIRKLAND & ELLIS 200 East Randolph Drive Chicago, Illinois 60601 (312) 861-2000 (312) 861-2200 (fax) 18
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0 CERTIFICATE OF SERVICE The undersigned certifies that the foregoing instrument was served by hand delivery to the Walker Law Firm, P.C., Wandro & Gibson. P.C., and Hawkins & Norris, and by U.S. mail to all other counsel listed below at their respective addresses on the 1st day of July, 1998. Steven L. Nelson E. Ralph Walker WALKER LAW FIRM, P.C. 2501 Grand Avenue, Suite E Des Moines, Iowa 50312 Steven P. Wandro WANDRO & GIBSON, P.C. 2501 Grand Avenue Suite B Des Moines, Iowa 50312 Brent R. Appel DICKINSON, MACKAMAN, TYLER & HAGAN, P.C. 699 Walnut, 1600 Hub Tower Des Moines, Iowa 50309 D. Scott Wise Vincent T. Chang DAVIS POLK & WARDWELL 450 Lexington Avenue New York, New York 10017 Michael Lieber James C. Munson KIRKLAND & ELLIS 200 E. Randolph Drive Chicago, Illinois 60601 f.•Wsint77o5 99 N30N6 Roger W. Stone SIMMONS, PERRINE, ALBRIGHT & ELWOOD, P.L.C. 115 - 3rd St., S.E., Suite 1200 Cedar Rapids,Iowa 52401-1266 Glenn Norris HAWKINS & NORRIS 2501 Grand Avenue Suite C Des Moines, Iowa 50312 Roger T. Stetson BELIN, HARRIS, LAMSON & McCORMICK 2000 Financial Center Des Moines, Iowa 50309 Thomas F. Gardner JONES, DAY, REAVIS & POGUE 77 W. Wacker Drive Chicago, Illinois 60601 J. Michael Weston MOYER & BERGMAN, P.L.C. 3rd Floor Commerce Exchange Bldg. 2720 First Avenue. N.E., P.O. Box 1943 Cedar Rapids, Iowa 52406-1943
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go muemedied if :F.is action it not allowed to contime. ULtinatcly, plaintiffs say not be able to sustain their burden difficult to prove, plaintiffs' alaime of injury are not so ~ ~ Next, ls there a risk of aaltiple recoveries for the o' proof. That does aoc mean, howover, that they should not be reaote ae to warrant dismissal at this stage. 2 n9 Plaintiffs are co h i ect in th h alloved to make the atteept. Sed Ta+aq,.+. Wrinan Tnbacen tb, 1. [yhfPgaCiaY a r. ~R. same ar argu ng rr at t ere h not. No other party may recover for harm to the Funds' o. 5-96•cY-91, slip ap. at 17 Idifficulty ln and of iteelf doee Defehdante maintain that because plaintiffs' claims F 5 infrastructure, financial stability, or ability to project not bar acticnl. are Indirect, their cnly renedy is by ouing as subrogeas of any n ~ costs. To the extent that the haa took the form of Increased Pmxiwnte csuse is ordinarily a question for the fact ~ ~ expenses for medical care, those costs will only be recovered finder to resolve. QerdiaCiiB, 51 B.Y.2d.at 314-15; Yal]aB, 50 N once. Plan participants who bring personal injury actions N.Y.2d at 570. •obviouely there Is a substantial difference ~ f dant ma t r ve i t th d th d between alleging soaething and proving it.• 6rizona'v Anari n e en s y no aga ns e eco r expenses at the iW s i 0 r have already reimbursed. N.Y C P L k 4545(c) (HcBinne 1992) Tcbaccn Co . Iag., No. CJ-96-14769, slip op. at 2 (aria. Super. . . . . y . . ~ Conversely, as defendants' briefs discuss at length, plaintiffe Ct. May 37, 1997) (order denying motion to dismiss and holding ~ may not recover for the personal injuries of their participants. that proximate cause was not precluded by the every nature• of 00 Because costs borne only by the Funds are recoverable only by the flwds, thers can be no risk of multiple rarovaxise. claimed damages). BOnethelesq •(tlhe issue is not whether a plaintiff will ultimately prevail but whether the elaisane is Finally, will it be difficult to ascertain the damages entitled to offer evidence to support the ciaim.- 8ahhue[.Y,. • caused by the defendants? Plaintiffs face a significant burden $hqdaa, 416 U.s. 211, ]34 (197/). a pleading vill survlve a in the daamges phase of litigation. Not only will they have to motion to dismiss it it alleges a set of facts that would translate intangible concepts such as •reduced ability to entitle the plaintiff to relief if proven. See ldL at 136; x se • (nt fi ur but the i i h h mo et l Sonlev v- 6lheon, 355 U.S. 41, 45-46 11951). Plaintiffs have -care e pen a o g es, y m nim ze ea t n ary will have to propose a plausible method of-separating damages etated a QZiaa fecie case for several of their claims, as caused by defendants froe danegee caused by other faccore. discueacd in part N.ebelow, while thaae claiae my be () u 13 14 plan participants haned • by the defendants. In general, subrogation is a legal device that enables one party (the •subrogee•) to put itself lo the place of a party who has sustained an iunjury in order to obtain recovery. Subrogation may be available either through statute or private agreement. plaintiffs here have nn statutory right to subrogation; however, many of their employee benafit plan contracts contain subrogation provisions. Hcs, 9ag., Befs.' Mea. at 2(guoting benefit plea for participants in the United Federationof Teachers Helfare Fundl. As subrogees, plaintiffs would •etand in the sboes' of the injured participants, and their elaias would be subject to the sane affirmative defenses, such as assumption of risk, as would apply in actione brought by the harmed individuals. Some courts in other tobacco-related cases have held that subrogation is the exclusive remedy againet these is 2806Z298
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Of Counsel Bruce G. Merritt Eric Falkenstein DEBEVOISE & PLIMPTON 875 Third Avenue New York, New York 10022 (212) 909-6000 (212) 909-6836 (fax) UNITED STATES TOBACCO COMPANY and UST INC. By 0 Brent B. ("Chris") Green. Esq. Gregory R. Brown. Esq ~. DUNCAN. GREEN. BROWN, LANGENESS & ECKLEY 380 Capital Square 400 Locust Street Des Moines. Iowa 50309-2331 (515)288-6440 (515) 288-6448 (fax) BRITISH AMERICAN TOBACCO COMPANY, LTD. By U-VI7~ Joh~rt .A McClintock 5~v~ t PK0003481 Chester C. Woodburn III PK0006085 David L. Brown PK0000599 HANSEN. McCLINTOCK & RILEY Eighth Floor - Fleming Building 218 Sixth Avenue Des Moines, Iowa 50309-4092 (515)244-2141 (515) 244-2931 (fax) 20
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49 cr a
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B. THE STATE'S CONSPIRACY AND AIDING AND ABETTING CLAIMS FAIL BECAUSE THERE IS NO VALID UNDERLYING CLAIM Because there is no valid underlying tort. the State's claims in Count V for conspiracy and Count VI for aiding and abetting fail as a matter of law. Civil conspiracy "'do[es] not set forth an independent cause of action' but rather 'is sustainable only after an underlying tort claim has been established."' See K & S Partnership v. Continental Bank, 952 F.2d 971, 980 (8th Cir. 1991) (citation omitted) (emphasis added); Robert's River Rides, Inc. v. Steamboat Dev. Corp., 520 N.W.2d 294, 302 (Iowa 1994)7 Similarly, an aiding and abetting claim may only be sustained where there is an underlying tort claim, criminal violation, or statute explicitly providing for aiding and abetting liability. See Central Bank v. First Interstate Bank, 511 U.S. 164, 191 (1994): .State ex rel. Goettsch v Dtacide Distribs.. Inc.. 561 N. W.2d 369, 373- 7 Accord Entertainment Research Group v. Genesis Creative Group, 122 F.3d 1211, 1228 (9th Cir. 1997), cert. denied, 118 S. Ct. 1302 (1998) (holding that there must be another tort upon which a plaintiff can base a civil conspiracy claim); Gaming Corp. ofAmerica v. Dorsey & Whitney. 88 F.3d 536. 551 (8th Cir. 1996) ("Under Minnesota law conspiracy is based on the commission of an underlying tort.... Thus, the gist of the action is not the conspiracy charged, but the tort working the damage to the plaintiff.") Akins v. Zeneca, Inc., No. 94-5132. 1995 U.S. App. LEXIS 21536. at *8 (6th Cir. July 27. 1995) (holding that Tennessee conspiracy law requires a plaintiff to first prove the existence of an underlying tort) (attached as Exhibit "F"); Champion Parts, Inc. v. Oppenheimer & Co., 878 F.2d 1003, 1008 (7th Cir. 1989) (holding that under Illinois law "conspiracy becomes actionable only when the underlying conduct which is the subject of the conspiracy is independently tortious."); McCarthy v. Kleindienst, 741 F.2d 1406, 1413 n.7 (D.C. Cir. 1984) (holding that conspiracy is "sustainable only after an underlying tort claim has been established."): Mizokami Bros. v. Mohay C'hem. C'orp., 660 F.2d 712. 718 n.8 (8th Cir. 1981) (same): Southeastern Pipeline Serv. v Citizens &.S'outhern Bank, 617 F.2d 67. 6q (5th Cir. 1980) ("founded on the district court's conclusion that there was no underlying tort on which a conspiracy could be based."); Rotermund v United,Smtes Steel C'orp., 474 F.2d 1139. 1145 (8th Cir. 1973): Jones v..4merican Tobacco ('o., Nos. 5:97CV0593. 5:97CV0594. 1998 U.S. Dist. LEXIS 6361. at * 49 (N.D. Ohio Apr. 23, 1998) (attached as Exhibit "G"); Gosden v. Loui.r. 687 N.E.2d 481. 496 (Ohio Ct. App. 1996) (holding that it has long been established "that an underlying tort is required before a civil conspiracy claim can be successful.°), appeal not ulloued. 78 Ohio St. 3d 1456 (1997). 1i
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tobacco businesses." Order of September 19, 1996 in State of Florida v The American Tobacco Co., CL 95-1466 AH, at 6 (attached hereto as Exhibit 2). This finding was affuxned on appeal, with the appellate court declaring that "there was ... ample evidence presented that Loews Corporation does not direct the day-to-day business of Lorillard and that it monitors its subsidiaries to make sure that competent individuals are running its subsidiaries but allows its subsidiaries to run autonomously." Florida v. The American Tobacco Co., 707 So.2d 851, 856 (Fla. App. 1998). Thus, as recognized by the Florida courts, the discovery responses and documents provided to Plaintiff in September 1997 reflect the fact that Loews Corporation does not "control" Lorillard Tobacco Company. Plaintiff now seeks to compel additional responses on the basis that the "discovery from Florida [is not] responsive to Plaintiffs requests regarding Iowa jurisdiction." Plaintiff's Brief at 2. What Plaintiff well knows, however, is that Loews Corporation has fully answered Plaintiff s Iowa-specific discovery requests by stating that it has no contacts whatsoever with Iowa. The Florida discovery responses and documents were provided to address Plaintiff s "control" allegation, and they are more than sufficient to address Plaintiff's requests concerning that topic. Plaintiff's dissatisfaction with those discovery responses reflects nothing more than Plaintiff's apparent disappointment that they demonstrate that Loews Corporation simply does not "control" Lorillard Tobacco Company. However, the responses are not inadequate just because they do not show what Plaintiff wishes were true. Moreover, many of Plaintiff s discovery requests that ' purport to address the "control" allegation, as well as some Iowa-specific requests, violate the general rule that jurisdictional discovery should be limited in scope so it will not "`frustrat[e] the significance and benefit of... immunity from suit."' Foremost-McKesson v. Islamic Republic of 0173222.04 3
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b. Irrelevant Requests .................................. 17 3. Loews Corporation Properly Objected to PlaintifPs Requests to the Extent They Sought to Impose Obligations Other Than Those Required by Iowa Law ..................................... 19 4. Loews Corporation Need Not Provide Privileged Information ...... 20 5. Loews Corporation Need Not Provide Information Protected by Trade Secret Law ......................................... 22 6. Loews Corporation Properly Limited its Responses to Infonnation That Would Affect This Court's Jurisdiction Over It .............. 22 7. Even Though Loews Corporation Objected to Producing Publicly- Available Information, Loews Corporation Responded to These Requests ................................................ 23 8. It is Reasonable for Loews Corporation's Discovery Responses To Be Produced at Loews Corporation's Iowa Counsel's Office ....... 23 9. Loews Corporation Need Not Provide Constitutionally-Protected Information .............................................. 24 10. Loews Corporation Properly Objected to Producing Information in the Possession of Third Parties ............................... 25 IV. CONCLUSION ....................................................... 26 0173222.04 I1
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• n 239. While plaintifls ouy recover for breach of any duty that defendants eesumad on their behalf, they may not recover for breach of a duty assumed to another. `fAI dity directly assumed for the benefit of a particular person or entity does not extend to third parties who vere not the intended heneflclariee of the subject undettaking.•" daDHGn, 566 N.Y.S.2d at 951. Neither may plaintiffs recover for breach of a duty voluntarily assumed on behalf of the public generally. It is the responsibility of the courts to 'fix ':he orbit of duty" within the limits dictated by both pollry- and logic. ,TbpArfl, 566 N.Y.5.2d at 965. If any member of the public could allege a apecial duty on the baels of general publfi etateaenta, liability would be 'unduly and indeed indefinitel3 extended by this enlargement of the tone of duty', $ep y4, 247 N.Y. at 166. Taken to this extreme, the special duty do-:trine would displace negligence•baeed tort law entirely. To recover, -••therefore, pla/ntfffe will have to show that defendeata made 'aPlaintiffa are not alleging that th:ry were the intended third party beneficiaries of proaiaee awde to their patticipants. in Reatatenent (Secrondl of Torts 9 321A 11965). 6o zhcb7.29g promises directly to health care providers :uch ae the plaletiffs. Mith that caveat, defendantr' maticn to dismiss Count VI 11 denied. S. Jpluat Eeriehuat Liability for unjust enrichment resta ea :he eqaitable principle that a person 'ehall not be allowed to e¢fch himself unjustly at the expense of another.' Millr v.,$ppl0ae, 218 N,Y, e00, 107 /1916); Nlpufacturers Nanover 7evst f,o. v. Chamical Denk, 559 N.Y.S.td 704, 707 flet Dep't 1910). A claim , for unjust enrichaent is available vhen 'the acts o1 the parties or others have placed in the possession of one person money under such circumstances that in equity and good annsclence he osiht not to retain !t.' tljiiCY, 211 N.Y, at 407; ;JdDp(aCturAtq Nenever Tnet. 559 N.Y.S.3d at 707. in Count 1, plaintiffs allege that by paying the medical expenses of their participants for treat..nt of tebacco•related dieeaaee, they 'tzpeoded sm which ptendanta had . . . a duty to pay, bbecause the axpeoaee .i91re i»neequencer of defendanta' unlawful activitiee, cenpl. 1) 311-13. They argae that defendants have been unjm.tly enriched ae a result, . Tu recover for unjust enricheent, plaiuticfa eeiat ahow 41 that 'setvicee were performed for the defendaatlrl resulting in .,. unjuet enrichaent.' Qapr.y'.i'irf Se,, evi,rg,'..nr y, A~rt y, Trpkd CorR„ 501 N.Y.S.2d 777, 771 14th Dep't 19561 'It is not enough that the defendant received a benefit from the activities of the plaintiff ... ; if services were perfuraed at the beheet of roneoae other than the defendant, the plaintiff nuat look to that perron for recovery.' gMJ v. K-Tet gOpgyralnment, i2., 56e N.Y.3.2d 756, 757 11ct Dep t 19911; Hry AW an~ AuSkean 9aa1[y, inc v , Marine Midland eant. N A 66f N.Y.S.2d 73, 1e (2nd Dep't 19971; Kaoral'a Tire Sp,i7fj0a, 508 M.S.2d at 77e. The expenses that plaintiffs iacurred were paid at the behest of their particlpants. They did not confer a benefit on the defendants, Yhe simple assertion that without those payments 'defendanta would have been liable for lawsuits by individual rmokera seeking to recover the cnt of their nedical care,• P1e.' Nr, at 41, is too speculative io constitute a banefit aceepted by the defendants. n. yuyjnld v phil{n M6iie_JDC ,!e97 Mh 560911 at '16 (Nd. Cir. Ct. 1997). Under these clrcumetancee, the plaintiffs cannot establish that their actions unjustly enriched the defendants. Defendanl e' rotion to dismiss Count X is therefore granted. 62
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• O w information. The Restatement (Second) Of Torts suemarlaea the breach of special duty doctrine as follows: one who undertakes ... to render nrnices to aaother which he should recognize u neassary for the protection of the other's person or things, is subject to liability to the other for physical harm rasulting from hle failure to exercise reasonable care if (a) his failure to exercise auch care increases the risk of euch harm, or (b) the tum is suffered because of the other'e reliance upon the undertakin7. Reetatenent (Second) of Torts 9 323 11965). Defendants argue that Count VI does not state a claim because plalntiffs have not alleged that they suffered physical ham. Q=t 11 ino;e v. philiR,Nnrrfe inc , No. 96L13146, slip op. at 17-t1 (I11. Cir. Ct. Nov. 13, 1997); Iowa v R.d. Rmmolde, No. Cb71c46, slip op. at 1l (IOwa Dist. Ct. Aug. 26, 4997)t Hi9hingtg4 v. anmr6can jobacco Co., No. 96-2-15056.1-SRA, elip op, at 4;Nash. Super, Ct., Jattt 10, 19971 (special duty claims dieniea0d because no phyeical harm alleged) yith San Frpne_srm 1, 957 F. Supp. at 11431 San Francisco II, slip op. at 21 (physi:al ham noh required). New York hae not adopted the Restatenxnt'e physical ham requirement. On the contrary, Nev York courts have 37 L606z298 recoguSad that ecotudc losn ar danage to proFe:ty aey give rise to an action tor breach of an assumed duty. a1iRret, 233 N.Y. 236 (defendant who negligently certified weighi Of shipment of beans liable for resulting economic 100311 IS7ch, 247 N.Y. 160 (no liability for property dazuge bec.auae no pracieate tause found). While theea cases predate the Restatenem: by several decades, no court hae overmled thes. It is likely that a New York court, if presented with the questian, would fold that New York continues to recognize such causes of action A federal court should not restrict a commn law cause of action in a wmer that the state courts have not requized. Accordingly, plaintitft are not required to allege that defmulants have caused then physical bata. The remaining issue to be decided ie whether defendants aaeumed a duty of can to the plaintiffs M assumed duty arises 'once a person undertakes a certait course of cor.bct upon which another relies.' Neard v. citv pf_Nf1LYg1#, S] N.Y.2d 66, 72 (19931: N111i0, 50 N.Y.2d at 522. In deciding whether a duty vae assumed under New York law, 'the queation is whether defendant's conduct placed plaiptiff in a more vulnerable position than plaintift would have :xen is had 36 defendant done nothing.' Ileai4, 12 N.Y.2d at 7:; pllliB, 50 N.Y.2d at 5221 Jpaie v Fi .litv aSasualtso oE NeE York, S66 N.Y.S.1d 962. 964 (3rd Dep't 1991), afl_'d, "9 N.Y.2d 667 (1992); 1LlJl/p Npth, 147 N.Y. at 161 ('The qu(ry always ia whether the purported wrongdoer hae advanced to su:h a point as to havs launched a force or instrument of ham, oc his stopped where inaction ie at most a refusal to becane an nstrusent Of good.'). The allegations in Count VI, when assune.i'to be true, indicate that. defendants voluntarily assumed a duty to the plaintiffs. Relying on defendants' proeisae to 'a:.d and aeeistt the research effort into all phases at tobacco use and health,' Campl. 1279, plaintiffs aude deciaions that negati'tely affacted the financial health of their busiaeseee. That na(.•ative iapact was the diract reeult of dsfendanta' promise to act on plaintiffs' behalf. Nad defendants fully kept tkee proaieee, plaintiffs would have been alerted to the full rnelt of totacco- related disease. Had defendants retained silent, plaintiffs would likely have obtained that information from other sources. By assuming to act, defendants thereby become su)ject to the duty of acting carefully, if at all. S!p ¢LBLCL, 233 N.Y. at 39
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0 LAW OFFICES " SHOOK,HARDY&BACON L.L.P ONE KANSAS CITY PLACE 1200 MAIN STREET OVERLAND PARK, KANSAS HOUSTON, TIXAS A LIMITED UA9ILT' PARTNEiSHIP INCLUDING KANSAS CITY, MISSOURI 641 0 5-211 8 WASHINGTON, D.C. PROF£SSIONAL COHPORATIONS TELEPHONE (818) 474-6550 , FACSIMILE (816) 4215547 LONDON.ENGLAND ZURICH, SWITZERLAND July 6, 1998 BY FEDEX Jeffrey R. Boffa Wachtell, Lipton, Rosen & Katz 51 W. 52nd Street New York, NY 10019 (212) 403-1000 Re: State oflowa v. Lorillard Tobacco Company et aL Dear Jeff: I am enclosing a copy of Henry Harmon's July 1 letter and a copy of Loews Corporation's Resistance To Plaintiff's Motion To Compel Jurisdictional Discovery (with attached Exhibits 1, 2, and 3). Plaintiff's reply brief is due on July 9. We are having a meet-and-confer with plaintiff's counsel in Des Moines today to try to understand what their objections really are. When I return, I will let you know how it went. If it is not successful, this issue likely will be addressed in an August 5 hearing with the court. Please call if you have any questions. Sincerely, JSN/ma cc: Gary W. Garson (by FedEx) Terri P. Durham (by FedEx) 0119336.01
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• defendaata. tbwvet, in each of theee caaes, the right nf dues so expliciely); }11i0^3e _ o~fe xa ri. ,.. , po. ~ ~. subrngatlon arose by statute, not by private cantratt. jwa v. 96L13146, slip op. at 5 1111. Cit. Ct. Nov. 13, 19971 Inothing n ~ 0.* •venlda, No. CL71046 (Iova Dist. Ct. Aug• 36, 1997)f in .tha statute lidts the State to aubrogation) (ordere ~ Narvland v Phi1Ep Morrfs 7nc, 1997 NL 540913 (Nd. Cir. Ct. partially granting aotione to dismiss). Neithlr analyeie is 0 ~ 5 n ec 19971; M(Trzv v As.rlran TnSuren Cn, po, 94-C1107 IY.Ya. Cix. Ct. ear. 31, 1997) (arders denying motione to disaisa on subrogation graundsl. Ioua. Maryland, and pest virginia sued tobacco coupaniea to recover the caat of providing health cara to their citizens. In each case, the court relied on the principle that where there is a etatutory renedy, that remedy ie exclusive unless the eta,tute indicatee otherwiae, Each conxt concluded that the applicable state Medicaid statute, which created a right of subrogation, vae intended to provide an exclusive remedy for the State. (qya, No. C17104a, slip op, at 6-7; fidiyjdn{l, 1997 NL 640913 at 43; &qrdiL No. 94•C1707, slip op. at S. courta applying other statutee have reacbed the ~tapposite cronclueioa on the ground thac the language in their directly applicable bere, as Yew York's Medicaid statute doas nur apply to chese plaintiffs. There is ao statute establishing subroaation as plaintiffs' excluoive renedy. Inatead, plaintiffs' subrogation xights were created by private contracts with plan participants. Such rights cannot liadt the Funds' ability to recaver frw those not party to the agreements. Thus, if plaintiffs have stated valid cauees of action, the fact that they nay also be entitled to sue in subrogation would not extinguish thea. 3. faemmatkp Defendants argue In the alternative that plaintiffa' with respect to the advertising or promotion of any cigarettea the packages of which are labeled in rnnforaity with the provisiau of this chapter.' ,Id. S 13341b1. Defendants contend that this lenguage preeepte plaintiffs' fraud, breach of apeeiel daty, and unjust enrichment elains, which axe New York coemon law causes of action. The controlling decision addressing the scope of the preemption provision is s'ippilooe v. Ltqaatt ce'oun. Inc., 505 U.S. 504 11992) (plurality opinion). Z>Gl11gDS held that camaon law rules imppse `requirertents or prohibitioos' within the neaning of the Act because they are •premised un the existence of a legal duty.' jd, at 522. The Act, therefore, appliea to co®on laY claims. ld, at 513 ISCalia and Thomas, da., concurring in relevant part). To determine whether a particular claim 1s preerpted, the court enat ^aek whether the legal duty comnoa law clains hava been preaped by the federal Cigarette that is the predicate of the commo-1aw damages action Labeling and Advertising Act. 15 U.S.C. Ef 1331-40 (199Q f"Vaae Medicaid statutes created a cusulative, rather thaa an (heY!•• "sar -the Act'). The act eandatu certain unifora exclusive rsmedy. Tfyas v. a•erican Tabarca to„ 3to. S-96CV-91, slip op. at 10-11 (S.D. Tex. Sept. 8, 1997). (statutory remedy does not extinguish prior com.en law cause of action wleas it warning labels on cigarette packaging fod preeupce all State regulation of tobacco advertising: 'No statearnt or prohibition based on saoking and health shall be imposed under State lew M6Z~98 17 constitutes a'requirasent or prohibition baeed on amoking and health ,.• .. ~"'V9d under State law with respect to advertising or prosotion,' giving that clause a fair but narrow rnding.' jd,, at 523-24. _ count V of the complaint alleges that defendants is
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twenty-nine requests, Loews Corporation answered nineteen, and two were non-substantive.3 Thus, the vast majority of Plaintiff's discovery requests duplicate Florida requests, and Loews Corporation directly answered most of Plaintiff's non-duplicative requests. Moreover, Loews Corporation directly answered most of the dunlicative requests, as well, usually to specifically note that Loews Corporation has no contacts with Iowa. Therefore, in direct contradiction to Plaintiff's implication, Loews Corporation has answered the discovery requests in three ways: by responding directly to most requests that have equivalent Florida requests, by providing Plaintiff its Florida discovery responses, and by responding directly to many of the requests that do not have Florida equivalents. These responses are perfectly appropriate and fully adequate in this case. 2. Loews Corporation's Florida Discovery Responses Were Largely Not Florida-Specific, But Addressed the Same "Control" Allegation at Issue Here The majority ofthe discovery requests from Florida (like the majority of the discovery requests in this case) do not concern forum-specific activities of Loews Corporation, whether the forum is Florida or Iowa or anywhere else. Instead, they address the relationship between Loews Corporation and certain of its subsidiaries (i.e., the "control" allegation). See, e.g., Iowa Interrogatories 18-26 (generally addressing Loews Corporation's relationship with its subsidiaries); Iowa Requests for Production 1-15 (same). These are not the only examples of issues common to the Iowa and Florida discovery requests; indeed, as noted above, forty-six of the sixty-three non-Iowa-specific discovery requests 3. Loews Corporation answered Interrogatories 4-6, 22, 24, and 31-32; Requests for Admission 1, 4-7, and 19; and Requests for Production 42-25, 47-48. Interrogatories 29-30 are non-substantive (i.e., they ask Loews Corporation to explain why they have failed to admit other Requests for Admissions, and to state whether any documents sought in the Requests for Production have been destroyed). 0173222.04 6
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• • ' Thomas A. Finley FINLEY, ALT, SMITH, SCHARNBERG. MAY & CRAIG, P.C. 4th FIr - Equitable Bldg., 604 Locust Street Des Moines, Iowa 50309-3773 John C. Monica Catherine M. Castelluccio SHOOK, HARDY & BACON One Kansas City Place, 1200 Main Street Kansas City, Missouri 64105-2118 Robert A. Van Vooren Thomas D. Waterman LANE & WATERMAN 600 Norwest Bank Building 220 North Main Street Davenport,Iowa 52801-1987 Bruce G. Merritt DEBEVOISE & PLIMPTON 875 Third Avenue New York, New York 10022 Fred L. Dorr WASKER, DORR, WIMMER, et at 801 Grand Avenue, Suite 310 Des Moines, Iowa 50309-8036 Brent B. "Chris" Green Gregory R. Brown DUNCAN, GREEN, BROWN, et al 380 Capital Square 400 Locust Street Des Moines, Iowa 50309-2331 John A. McClintock Chester C Woodburn III Ross H. Sidney Henry A. Harmon GREFE & SIDNEY 2222 Grand Avenue Des Moines, Iowa 50312 Mark C. Cunha Adam I. Stein SIMPSON, THACHER & BARTLETT 420 Lexington Avenue New York, New York 10017-3954 Michael M. Fay KASOWITZ, BENSON, TORRES & FRIEDMAN, LLP 1301 Avenue of the Americas New York, New York 10019-6022 Michael C. Lasky Donna M. Gitter DAVIS & GILBERT LLP 1740 Broadway New York, New York 10019 Richard R. Chabot SULLIVAN & WARD, P.C. 801 Grand Avenue, Suite 3500 Des Moines, Iowa 50309-2719 Dan K. Webb Thomas J. Frederick Kevin J Narko WINSTON & STRAWN 35 West Wacker Drive Chicago, Illinois 60601 John Nyhan J H b o n w N ~ . ay enne erry ~ HANSEN McCLiNTOCK & RILEY CHADBOURNE & PARKE LLP -~. Eighth Floor - Fleming Bldg. 601 South Figueroa St. ~ 218 Sixth Avenue Des Moines, Iowa 50309-4092 Los Angeles, California 90017 I
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replicate requests propounded in Florida. In addition, twenty-nine of the forty-one Iowa-specific discovery requests replicate Florida requests, with the focus shifted to Iowa from Florida. Because of the close identity of the issues explored in the Iowa and Florida discovery requests, Loews Corporation's Florida discovery is responsive to Plaintiff's requests here. III. PLAINTIFF'S ATTACKS ON LOEWS CORPORATION'S OBJECTIONS ARE NOT WELL-FOUNDED Loews Corporation has responded to Plaintiffs discovery -requests, both directly and by providing Plaintiff with responses to numerous nearly-identical Florida discovery requests. The responses clearly demonstrate that Loews Corporation has no contacts with Iowa, that it does not "control" Lorillard Tobacco Company. Presumably to avoid this unfavorable fact, Plaintiff attacks Loews Corporation's general objections instead of the adequacy of Loews Corporation's specific responses. However, Plaintiffs "objections to the objections" are no more well-founded than are its jurisdictional arguments as a whole. A. Loews Corporation's Objection to Plaintiff s Attempt at Merits Discovery Is Appropriate Plaintiff challenged Loews Corporation's General Objection A, which objected to discovery requests that address the merits of the case. However, this Court has ruled that the only discovery that is permissible is that directed to personal jurisdiction over those defendants, including Loews Corporation, that are challenging the Court's jurisdiction. $eg Amended and Substituted Preliminary Case Management Order of September 23, 1997, ¶ 16 ("Discovery limited to jurisdictional issues may proceed.... All other discovery is currently stayed, and will remain stayed until further order of the Court"); see generally Barrett, 290 N.W.2d at 920 (stating that when "discovery on the jurisdictional issue" is ordered, "it should ordinarily be limited to the contested 0173222.04 7
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TABLE OF CONTENTS I. INTRODUCTION AND FACTUAL BACKGROUND ........................ 1 II. LOEWS CORPORATIONADEQUATELY-RESPONDED TO PLAINTIFF'S DISCOVERY REQUESTS ................................................ 4 A. Loews Corporation Answered Plaintiff's Iowa-Specific Requests by Stating That it Has No Contacts with Iowa ............................ 4 B. Because The Jurisdictional Inquiry Should Chiefly Consist of a "Control" Analysis, the Florida Information Provided to Plaintiff is Both Relevant and Sufficient ................................................... 5 1. The Discovery Requests Propounded by Plaintiff Correlate Highly to the Florida Discovery Requests ............................. 5 Loews Corporation's Florida Discovery Responses Were Largely Not Florida-Specific, But Addressed the Same "Control" Allegation at Issue Here ..................................... 6 III. PLAINTIFF'S ATTACKS ON LOEWS CORPORATION'S OBJECTIONS ARE NOT WELL-FOUNDED ................................................ 7 A. Jurisdictional Discovery May Not Seek Information That is Related Only to the Merits of an Action ................................. . ........ 7 B. The Six-Year Response Period Provided by Loews Corporation is Appropriate and Supported by Case Law .............................. 8 C. Loews Corporation's Remaining General and Specific Objections Are Appropriate .................................................... 14 1. Loews Corporation Need Not Provide Information About "Affiliates" or "Subsidiaries" That Have Nothing To Do With This Litigation ................................................ 14 2. Loews Corporation Properly Objected to Plaintiff's Overbroad, Burdensome, and/or Irrelevant Requests ....................... 16 a. Overbroad/Burdenso_ne Requests ....................... 16 0173222.04 1
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LOEWS CORPORATION'S RESISTANCE TO PLAINTIFF'S MOTION TO COMPEL .IURISDICTIONAL DISCOVERY Defendant Loews Corporation submits this brief in resistance to Plaintiff's Motion to Compel Jurisdictional Discovery from Defendants Challenging Jurisdiction ("Plaintiff's Motion") and PlaintifPs Brief in Support of Motion to Compel Jurisdictional Discovery from Defendant Loews Corporation ("Plaintiff's Brief'). For the reasons set forth below, Loews Corporation requests the Court to deny Plaintiff's Motion. I. INTRODUCTION AND FACTUAL BACKGROUND Plaintiff generally moves to compel Loews Corporation to produce all materials requested in Plaintiff's 104 discovery requests, many of which seek merits discovery, rather than jurisdictional discovery. Instead of identifying the alleged inadequacy of Loews Corporation's specific discovery responses, Plaintiff s Brief consists almost entirely of complaints about Loews Corporation's "general objections" to Plaintiffs discovery requests. Such broad-sweeping, nonspecific allegations are not sufficient to support a motion to compel. See Arons v. Lalime, 167 F.R.D. 364, 368 (W.D.N.Y. 1996) (denying motion to compel because, inter alia, plaintiff "failed to identify with specificity the discovery requests and responses at issue"). Through its responses and production of almost 2,000 pages of documents, Loews Corporation has more than adequately responded to Plaintiff s discovery requests. Moreover, Loews Corporation's general and specific objections are proper and appropriate responses to Plaintiffs wholesale fishing expedition. Plaintiff's discovery requests fall into two basic categories. The first consists of requests designed to determine whether Loews Corporation has any personal contacts with Iowa. Loews Corporation fully answered virtually every Iowa-specific request propounded by Plaintiff, ' m C7\ ~ fV 0173222.04 1 ~ ~ U't i.Tr
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• 3 nMi6n BTarIS DI6TRIC1 CDDRI ~ 50UfSDRH DISYRICT 0Y R1N YORR ~ Q G. a. 0 LAB093R8 LOCAL 17 R1ALTR i B9311PlT FD1ID ad T70I TeANSP09T YO9A91 DiIDA I001 YOnt N 5 CIIT 99IVAte BUS LIIRS DGG1a Da1taFli P TRUSS, Dp11QOH aN0 D9otR ~ 97 Civ. 4550 (S98) Plaintiffs, rel, 97 Civ. 4676 V. 97 Civ 7346 D . 97 Civ. 6462 pHItIP NOQ9ID, INC., R.d- 9RPNOL09 97 Civ. 9395-9402 ~ TOBACCO CO., HROWS i RILL3AYSOA TOBICCO < 0 CORP., D.A,T. 111005. PlbfCf. LORILLa9D TOBACCO Co., IHC., 6IC~R1T i NFiBS INC., TRR AI¢9ICiJ( TOBACCO CO., UIf3TID iTATR9 ~ w ~ TOBACCO CO., Tfd COD9CIL FOi T09rCC.0 DSSDAaCe-paA, I11C., TDa IODKCO IRDTITOTi, IRC., 6II04ELRA6 TODRCCO oe COIDICIL, INC. aad RILL i AIONLTO0, INC., Defendants. S9I9A A. 9C9fInD6ui, 0.9.D.J., I. Background , Olaintiffe are labor union health and welfare trust funds (the •lwds•) that eupplenent eaployere' basic medical benefits by providing death, disability and prescription drug benefits and related services. Defendanta are tobacco cespenlea and tobacco public relations firms. Plaintiffs allege 'that 1 N.Y. LABORERS LOCAL defendents have engaged in a conspiracy to deceive the general public, including plaintlffs, as to the health risks associated with sooking, the addictiveneee of nicntine, and the levels of nicotine ln their producta. as a result, plaintiffs allege, they have spent aillione of dollars more than they otherwise would have to provide nedical benefits to health plan participante. The Funds have brought this action •to recover eoney enpended . . . to provide medical treotaent to their participants and beneficiaries who have suffered and are suffering from tobacce-related illnesses and to obtain appropriate injuactive relief,' Class Action Cosplaint and Demand for Jury Trial 17, 1a62r rs Ineal 17 Realth i nefk F„nd y. Phtlip Mnrrie. Inc., Ro. 97 Civ. 4550 IS.D.A.Y. filed Juna 19, 19971 (hereinafter Caepi.l•, plaintiffa allege RiCO ead 'Defendants presented their substantive arguanta in aeaoranda filed in United F raLion of teachere celfare P!nd v_, 1b. 91-1676 IS.D.S.Y. filed June 25. 19911. Dafendmta' papere in labn+.r. t.,ni 17 incorporate those arguments by reference. The reverse is ttus for plaintiffs. Accordiogly, this opinion will refer to defendants' DFT opening and reply ueDorands and to plaintiffs' rak+rers wai 17 opposition brief. pd9 Xe.orandue in 9upport of Dafendants' Motion to Disaies the Caaqlaint for rallure to State a Cleia, Ilelted Fed ratie f Teachetllrflfern Fond v. Pbilip orrie. lnc.. No. 91-4676 (6.D.R.Y. filed June 15, 1997) Idated Oct. 17, 19911 (hereinatar Dafa.' Men.l; Plaintiffs' Meronndw of Law in opposition to Defendants' Hotion to Diaaiae the Conplaint, tyhrr ra Ln-al-j7H,1th c e fi Fund v Philip Morrle. Inc., © 86329080 ( antitrust violations, and assert common law claime for fraud, breach of special duty, and unjust enrichment. Defendants have moved to diswi6s the action under Fed. D. Civ. P. 171b)(6) for failure to state a elaim. They contend that plaintiffs have no direct claim against defendants for three reaaone, 1) as a eatter of law, the chain of causation between plaintiffs' injuries and defendants' alleged acta is teo attenuated to support a verdict for plaintiffs. because the alleged injuries are only remotely connected to defendants' alleged acts, 2) plaintiffa' aole remedy is by subrogation to their participants' clafes, and 31 the federal cigarette Labeiing and Advertising Act preeapts all of plaintiffe' comm law clafne. Defendants also raise additional count-apeclfic objeetiona to each of plaintlffs' claime. II. ancladictlcm Thie Court has subject DatteY jurisdiction over the action parsuent to 28 U.S.C. 59 1331, 1337 (19941 beeauee counte No. 97 Civ. 4550 (S.D.H.Y. filed June 19, 1997) (dated Dec. 5, 1997) Ihereimfter pL.' Hen.l; Meeorandum in Support of Defendants' Motion to pianisa the tr.aplaint for Failure to State a Claie, Ihyte,d,F ara ion oJvjeaeh.re Welfare Fund v Phil1 f'grri.. Jan. 27, nc., Ro, 97-4676 (S.D.N.Y. tiled June 25, 19981 (hereinafter Replyl, 1997) (dated 3
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time and again telling Plaintiff what it apparently does not wish to hear: Loews Corporation has absolutely no contacts with Iowa, and it never has. These responses are consistent with the Affidavit of Mark S. Schwartz, Assistant Controller of Loews Corporation ("Schwartz Afftdavit"), which detailed the corporate history of Loews Corporation and the fact that it does not have, and has never had, any contacts with Iowa. (This affidavit was provided to the Court as Exhibit A of Loews Corporation's Memorandum in Support of Motion to Dismiss Plaintiff s Petition for Lack of Personal Jurisdiction. A duplicate copy is attached as Exhibit 1.) No additional responses to this category of requests is necessary. The second broad category of discovery requests is designed to elicit information to support PIaintiff's claim that Loews Corporation somehow "controls" Lorillard Tobacco Company. See Complaint 124. The same "control" allegation was made by Plaintiffs in State of Florida v. The American Tobacco Co. (Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida, Case No. CL 95-1466 AH). In that case, Loews Corporation responded to very similar jurisdictional discovery. In September 1997, Loews Corporation provided Plaintiff its Florida jurisdictional discovery responses and documents. Plaintiff agreed to accept these discovery responses to determine whether their production could resolve the discovery dispute that Plaintiff has now brought before this Court. There is little unique to either Florida or Iowa in the responses and documents provided to Plaintiff. Rather, they chiefly address Loews Corporation's operations and relationship with its cigarette- manufacturing indirect subsidiary, Lorillard Tobacco Company. These responses and documents resulted in the Florida court's ruling that it did not have personal jurisdiction over Loews Corporation, declaring that Loews Corporation is a "holding compan[y] not actively operating 0173222.04 - 2
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that Loews Corporation has no contacts with Iowa. For the same reason, however, they are not helpful to Plaintiffs theories. Because Loews Corporation has consistently answered Plaintiffs Iowa-specific discovery, there is nothing to compel in this area. Plaintiff's Motion should be denied. B. Because The Jurisdictional Inquiry Should Chiefly Consist of a "Control" Analysis, the Florida Information Provided to Plaintiff is Both Relevant and Sufficient Plaintiff alleges that Loews Corporation somehow "controls" Lorillard Tobacco Company. ,$~e Complaint 124. By making this allegation, Plaintiff aclrnowledges that discovery not specific to Iowa may be relevant in determining this Court's jurisdiction over Loews Corporation. Loews Corporation does not dispute that, and accordingly provided Plaintiff with discovery responses and documents from Florida that adequately address Plaintiffs "control" allegation. Although Plaintiff is apparently unsatisfied with the information contained in these responses, the responses are sufficient to allow Plaintiff to evaluate the validity of its "oontroP" theory. 1. The Discovery Requests Propounded by Plaintiff Correlate Highly to the Florida Discovery Requests Plaintiff served Loews Corporation with a total of 104 discovery requests -- 33 Interrogatories, 20 Requests for Admission, and 51 Requests for Production. Seventy-five of these requests are substantially identical to discovery requests propounded by plaintiffs in the State of F rida case, the answers to which Loews Corporation provided Plaintiff here? Of the remaining Twenty-three of the thirty-three interrogatories match requests from Florida (Iowa Interrogatories 1-3, 7-21, 23, and 25-28), as do thirteen of the twenty requests for admission (Iowa Requests for Admission 2-3, 8-15, 17-18, and 20), and thuty-nine of the fifty-one requests for production (Iowa Requests for Production I-12, 14-39, and 41). 0173222.04 5
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November 27, 1990 to November 27, 1996, Loews Corporation did not conduct any activity either in Iowa or outside of Iowa which had an effect in Iowa. In addition, Plaintiff now has a detailed description of the relationship between Loews Corporation and Lorillard Tobacco Company over the past several years. Plaintiff has alleged no fact to justify a time-consuming and costly exploration of Loews Corporation's activities beyond this six-year period. Plaintiff claims Bearry v. Beech Aircraft Coro.. 818 F.2d 370 (5th Cir. 1987), supports its position. Beg= was a case in which Beech Aircraft was sued because it allegedly manufactured faulty airplane equipment that resulted in fatal plane crashes in several states. The issue considered by the Fifth Circuit was whether a non-resident of Texas could be subject to the jurisdiction of a Texas court "solely because a large quantity of products manufactured by the defendant ... has flowed into Texas during the past five years." 818 F.2d at 372. No language in the opinion indicates, as Plaintiff suggests, that the Fifth Circuit permitted discovery into a five-year period of time because the plaintiff had engaged in a five-year marketing campaign. ea Plaintiff's Brief at 5. To the contrary, the Fifth Circuit placed little value upon the nationwide advertising campaign, holding "that [because] Beech has engaged in a nation-wide advertising program does not support a finding of general jurisdiction." Id at 376. The Fifth Circuit's limitation of the discovery period was more likely based upon the fact that over the five-year period in question, $250 million of Beech products were sold to independent Texas dealers. Id, at 372. Contrary to the Bean facts, Plaintiff has not and cannot demonstrate that any Loews Corporation product, let alone $250 million of products, was sold in Iowa. Loews Corporation is a holding company that has never sold or made any product, in Iowa or anywhere else. ee Schwartz Affidavit 19. There is not now, and has never been, any such thing as a "Loews Corporation 0173222.04 11
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C. Loews Corporation's Remaining General and Specific Objections Are Appropriate 1. Loews Corporation Need Not Provide Information About "Affiliates" or "Subsidiaries" That Have Nothing To Do With This Litigation Plaintiff complains of Loews Corpcration's General Objection C, which objects to Plaintiffs requests "to the extent they seek information about corporate 'affiliates', [or] 'parent, subsidiary, successor or predecessor corporations' ... other than Lorillard, Inc. or Lorillard Tobacco Company." Loews Corporation has agreed to respond regarding "the activities of itself or its relationship with Lorillard, Inc. or Lorillard Tobacco Company." Contrary to Plaintiff's assertion, General Objection C is not based upon the inadmissibility of evidence. Instead, it objects to providing information or documents which are simply irrelevant to the subject matter of the pending litigation, which is a proper objection in light of Iowa R. Civ. P. 122(a), which restricts discoverable areas of inquiry to those relevant to the subject matter of case (acknowledged in Plaintiff's Brief at 11). General Obj ection C merely confines the responses to entities related to Loews Corporation that are named as defendants, discussed within the Petition, and arguably have anything to do with the subject matter of this suit. Loews Corporation has significant and, in some cases, majority or greater stock ownership in a number of major American companies, including CNA Financial Corporation, the parent of the CNA family of insurance companies; Bulova Corporation, the venerable watch company; Diamond Offshore Drilling, Inc., one of the world's largest offshore drilling rig operators; and Loews Hotels Holding Corp., a luxury hotel chain. The subject matter of this suit, which is an effort by the State of Iowa to recover allegedly tobacco-related health care and other costs, has nothing to do with any of these or other Loews Corporation subsidiaries, other than the named 0173222.04 14
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canspired to restrain trade in the narket for tobeew praducts by agreeing to eliminate eowputition in the reeearch, Although plaintiffs have alleged aa antitrust in the partlcu:ar iniustry Id., Plaintiffs have not alleged violation, their antitrust clatas austt he dismi ued because 'that they were a diretc target of defendants' acts, or that they development, production and narketing of aafer alternativa plaintiffs are not within that area of the ecuwmy ... tobacco products. Coapl. If 2fo-41! Conduct suppresaing - endangered by (thati breakdowa of competitive conditions.' product innovation and development has an anlicoopaitive dCCiAfldY, e57 U.S. at 414 fquoting in ce wnttidiet.i t v hicle effect. Sta, G.g., Allied 7uhs & rh„du9t Co Ind{a__~ n Ycauar }aC., 481 U.S. 492 1190111 -a-'"'rl. n S'y ot nhayyyal>s~'re• Inc v Nvdrolevel Corn , 456 U.S. 556 119821 Irefusal of standard-setting organisetions to approve new products was anticompetitive); Cl:., acsociated C..n. trar r., 959 U.S. at 528 ('Coercive activity that prevents its victioe froal naking free choices between narket alternatives ia inherently air Pollution, 18l p,2d 122, 129 19th Cir. 1973/1• The Second circuit has adopted a'targat area' teat for detersining antitrust standing: the plaintiff nust either be the 'diract target• of the alleged antitrust violation or fal: within its 'target aree.' ftimyirs Proeetions lnc v nm,e Hox Office, jpd„ 724 F.2d 290, 292 (2d Cir. 1933) Icititg l;AldeygaG OntemrlRea Cg2D,-v United ,ktiet T.atre firculC,..1nfi, 454 , destructive of competitiva cronditione lu this Iti2d 1292 (id Cir. 19711; pll y n. r reg. v raaa- ol, ., respect, Count III alleges a violation of the type Ihe antitruet 431 F.2d 183 (sd Cir, 197811. The target area ie ttat sector of laws ars intended to prsvent ! 'Coant IV restates che allegations in count III in the context of gev York law. 'Other activities alleged in Count III, vtdle possibly ~ vriliwEul, do not constitute antitrust violationa. Plaintiffs claie that defendants suppreased inforestion that would otherwise have affected consOner behavior in the oarket for tobacco products, causing price inflation and in~seaeing the demand for tobacco products. Conpl. If 218, 24). Creating increased demand for a product is not en aoticoaipetitive ectivity. There can be no antitrust violation whet the effect 2e the ecenoey endangered by a breakdown of conpetitiv i conditions of an agreement ia to increaee competition, even if that agresy,ent is unlawful for sace other reason. 9paatikk, 422 U9:' " ieat ad0_!Lp goC~tOtdy, 157 U.S. at 182. Plaintiffe also e1aim that defmdsnte restrained research tad withheld information freo participants in the urket for Ieelth can. Cospl. I1 215-49, 254. Such activities ars net antitrust violations because they do net restrict coopetitien •tnaag health care providers. Antitruat law forbide agreements .n reetraint of the flow of coamerce, nut the flow of infotntica, 29 ara within the target area of those acts. Plaintiffs allege that defendantu agreed i o forego the developsut of safer alternative tobacco products. The direct targete of such aa agreement, if it-existe, ae obviously conauners of tobacco products. The target area is the tobacco eector of the econouy in that the unlawful agreeaenl co supprese developnest yvuld result in a market where neithe.: deaand nor prices would be governed by market forces. Plairtiffe claie that se a result of defendants' conduu, aedieal cetts for their participants with tobacco-related diseases have incteaeed. This is not an injury created by endangering cospeti:ion in the target area. In fact, it is not clear that plaintiffs' interests would be served by enhanced eaopetition ir the tobacco wrket. SHI a.mpcieted Gen. C'Mera ora. 459 U.S. It 539. while atiflJ product innovation my have increased the mmber of partipjg;t!r yith tobacco-related diaeue, pla:ntiffe also allege that anticcapetitive pressures have inonae.d the price of tobacco producte, an effect vhich would tend tc reduce the nuaber of tobacco coneusers. Therefore, as thiy were not 3p 8806Z~98
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667 N.E.2d at 1145. Furthermore, it appears that no other state has adopted the rule created by the Strom court; instead, the majority position requires the plaintiff to prove that a corporation has "control" over any documents before the corporate party can be required to produce such documents. ee Camden Iron & Metal v. Marubeni America Corn., 138 F.R.D. 438 (D.N.J. 1991) (holding that party seeking production of documents bears burden of establishing other party's control over such documents). Therefore, even if Plaintiff were able to establish the relevance of discovery regarding subsidiaries of Loews Corporation that have nothing to do with this case, Plaintiff would have to demonstrate Loews Corporation's control over those entities. 2. Loews Corporation Properly Objected to Plaintiff s Overbroad, Burdensome, and/or Irrelevant Requests Plaintiff challenges General Objection D, which objects to the requests "to the extent they seek documents concerning Lorillard Tobacco Company and/or Lorillard, Inc. which have no bearing upon ... personal jurisdiction over Loews Corporation, and on that basis they are overly broad, unduly burdensome and seek irrelevant information." Thus, Loews Corporation, similar to its General Objection C, merely objects, quite properly, to providing information that is burdensome or irrelevant to the issue of personal jurisdiction. Significantly, although Plaintiff seems to contend that General Objection D prevents Plaintiff from obtaining relevant evidence, Plaintiff has not specified information to which it is entitled but has not received. Neither has Plaintiff indicated which specific discovery requests were incorrectly labelled as irrelevant. a. OverbroadlBurdensome Requests Plaintiff claims that when Loews Corporation asserts an objection of "undue burden, overbreadth and harassment, Defendant is obliged, at the least, to initially advise as to whether it has, 0173222.04 16
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F.Supp. 1076, 1080 (D.R.I. 1992); see also Naartex Consulting Corp. v. Watt, 722 F.2d 779, 786 (D.C. Cir. 1983), this is nothing more than a recognition that in cases where the governmental contact is not the defendant's only contact with the forum, the trial court would merely assert jurisdiction on the basis of the defendant's non-governmental contacts. In that case; the issue of "governmental contacts" would be irrelevant. Furthermore, the cases that hold that personal jurisdiction does not arise from "sole" contact with a forum's government say nothing about jurisdictional discovery. It is axiomatic that if contact with government is irrelevant for jurisdictional purposes, the topic is exempt from jurisdictional discovery. In short, if the communication with the government is protected under the First Amendment, there is no reason that protection should be abrogated simply because the communicating entity has other contacts with the forum. Plaintiff also makes a half-hearted argument that the government contacts doctrine applies only to contact with the federal government. Plaintiff's Brief at 18. However, the right to petition the government, which is the foundation for the government contacts doctrine, extends to state governments as well as the federal government. Even Plaintiff cites a case that recognizes as much. ee utlivan, 785 F.Supp. at 1080. Loews Corporation's objection, therefore, is valid. 10. Loews Corporation Properly Objected to Producing Information in the Possession of Third Parties In response to Request for Production 49, Loews Corporation objected "to the extent [this request] seeks production of documents or information in the possession of third parties." Plaintiff challenges this objection. However, this objection is nothing more than an embodiment of Iowa R. Civ. P. 129, which states that the purpose of requests for production is to seek documents "in the possession, custody or control of the party upon whom the request is served." Courts 013a2zo4 25
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systematic," contacts that would justify subjecting Loews Corporation to the jurisdiction of this Court. Specific jurisdiction exists over an entity where the subject matter of a suit derives from the entity's contacts with Iowa, so long as those contacts constitute "minimum contacts" and the court's exercise of personal jurisdiction comports with due process. ovi 507 N.W.2d at 415- 16; see also International Shoe Co. v. Washin gtorz, 326 U.S. 310, 316 (1945). Again, discovery concerning this type of jurisdiction should be limited to a reasonable time period. Courts routinely restrict jurisdictional discovery to a reasonable period of time, usually around five years before the date of filing ofthe petition. ee e. ., Metropolitan Life, 84 F.3d at 569 (six years); Wilson v. Belin, 20_F.3d 644, 650-51 (5th Cir.), cert. denied, 513 U.S. 930 (1994) (five years); Gates Learjet Corn. v. ens , 743 F.2d 1325, 1329, 1330-31 (9th Cir. 1984) (three years); American Overseas Marine Corp. v. Patterson, 632 So.2d 1124, 1127 (Fla. App. 1994) (three and one half years); ate illar Indus. v. Kesker, 639 So.2d 1129, 1131-32 (Fla. App. 1994) (five years); Rokeby-Johnson v. Derek Brvant Ins. Brokers. Ltd., 594 N.E.2d 1190, 1197 (Ill. App. 1992) (one year); cf Wooten. Honeywell & Kest P.A. v. Posner, 556 So.2d 1245, 1246 (Fla. App. 1990) (eight years too burdensome). In addition, the trial court in Florida's nearly-identical suit against the tobacco industry limited the jurisdiction inquiry period to seven years before the filing of the petition. B~e Report and Recommendation of Special Master in State of Florida v. The American Tobacco Company, et al., Case No. CL 95-1466 AH (Circuit Court of the 15th Judicial Circuit of Florida, In and For Palm Beach County, August 13, 1996) at 3 (attached hereto as Exhibit 3). Thus, the six-year response period provided by Loews Corporation is eminently reasonable. The information provided by Loews Corporation clearly demonstrates that from 0173222.04 10
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to Plaintiff''s requests "to the extent they request documents and other information for all time or an unreasonably long period of time," and limits Loews Corporation's responses to the time period November 27, 1990 until November 27, 1996. Whether this Court analyzes its jurisdiction over Loews Corporation on a "general jurisdiction" or "specific jurisdiction" basis, this six-year time period will provide the Court with the information it needs to make its jurisdictional determination. General jurisdiction exists over an entity whose contacts with Iowa have been so continuous and systematic that the subject matter of the suit need not be the same as the subject matter of the entity's contacts with Iowa. Covia v. Robinson, 507 N.W.2d 411, 416 (Iowa 1993). Clearly, if Loews Corporation has no contacts with Iowa over the six years before the filing of this lawsuit, as Loews Corporation so states in its Iowa-specific discovery responses, its contacts with Iowa cannot be labelled "continuous and systematic," no matter what the nature of its contacts might have been before that six-year period. Therefore, the six-year response period will allow Plaintiffs and this Court to assess whether general jurisdiction over Loews Corporation is proper. Metropolitan Life Ins. Co. v. Robertson-Ceco Corp. 84 F.3d 560 (2nd Cir. 1996), cited by Plaintiff, supports Defendant's limitation of discovery "to a reasonably contemporaneous time period." In Metropolitan Life, the court determined that the district court had acted reasonably by permitting inquiry into contacts with the forum state for a six-year period which was reasonably contemporaneous to the suit being filed. Id. at 569. Additionally, the court noted that "examining a defendant's contacts over a period of several years is appropriate when applying the 'continuous and systematic' standard." Id. at 569 (citing Braman v. Mar,v Hitchcock Memorial Hosp., 631 F.2d 6, 9 (2nd Cir. 1980)). Since Loews Corporation had no contacts with Iowa between November 27, 1990 and November 27, 1996, Plaintiff cannot demonstrate any, let alone "continuous and 0173222.04 9
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Court and the financial resources of Loews Corporation. The second major flaw in Plaintiff's conspiracy argument is that Plaintiff may not resort to a "conspiracy theory" to argue that jurisdiction over Loews Corporation is proper. The conspiracy theory of jurisdiction has never been adopted in Iowa. In fact, exercising jurisdiction under such a theory would violate due process. Se_g Kinnerman v. McCone, 422 F.Supp. 860, 873 n.14 (N.D. Cal. 1976) (labelling as"ftivolous. .. the contention that personal jurisdiction, the exercise of which is governed by strict constitutionall standards, may depend upon the imputed conduct of a co-conspirator"); National Inrlne_ Sand Ass'n v Gibson, 897 S.W.2d 769, 773 (Tex. 1995). As such, it is not a proper area for jurisdictional inquiry. As authority for the suggestion that Iowa has adopted the conspiracy theory of jurisdiction, Plaintiff cites DeCook v Environmental Sec. Corp„ 258 N. W.2d 721 (1977). However, the De ook court did not base its decision to assert jurisdiction over the non-resident defendants upon their alleged participation in a conspiracy having an effect in Iowa. The court considered numerous factors, including that defendants were directors of an Iowa corporation, authorized the sale of securities in Iowa, and utilized revenues from the sale for their own benefit or use. Considering these factors, the DeCook court held that "the present situation is such that due process of law will not be denied by requiring these individual directors to defend in instant Iowa actions." Id. at 728. Moreover, the De oo court did not consider whether asserting jurisdiction based solely' upon alleged participation in a conspiracy would comport with due process such that traditional notions of fair play and substantial justice are not offended. The De ok case does not establish that Iowa has adopted the conspiracy theory of jurisdiction. 0173222.04 13
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1
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jurisdictional issues"). Loews Corporation's General Objection A, therefore, is appropriate and consistent with this Court's Order. Plaintiffpresents not one specific example of an improper use of the merits objection. Instead, Plaintiff engages in illogical rhetoric to suggest that, because Loews Corporation objected to responding to improperly-propounded merits discovery, it should be held in this case through trial. Plaintiffs Brief at 3-4. This suggestion would leave a jurisdictional defendant with a Catch-22 when presented with improper merits discovery: either answer the merits discovery that should never have been propounded, or object to it and remain in the case through trial. All Loews Corporation can discern from Plaintiff's argument is that Plaintiff believes Loews Corporation's merits objections pertain to the entirety of any request that has a merits aspect to it. To the contrary, Loews Corporation's General Objection A explicitly states that it pertains to requests only "to the extent they are directed to the merits of the pending action." (Emphasis added). Plaintiff cites Martin v. Ju-Li Corn- to support its proposition that Loews Corporation shouldxemain in this case through trial. 332 N.W.2d 871 (Iowa 1983). However, Martin addressed a situation where the merits and jurisdictional issues were inextricably intertwined. Id. No such suggestion is made here -- at least not until Plaintiff attempted to do so by putting words into Loews Corporation's mouth. In fact, the merits and jurisdictional issues are not intertwined, and this Court can clearly determine from Loews Corporation's jurisdictional discovery responses that Loews Corporation is not subject to the jurisdiction of this Court. B. The Six-Year Response Period Provided by Loews Corporation is Appropriate and Supported by Case Law ~ Plaintiff also challenges Loews Corporation's General Objection B, which objects rn W N ~ ~ 0173222.04 8 O~ TV
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product." Under BearrvB then, Plaintiff would not be entitled to discovery for any years because Loews Corporation has never sold any product in Iowa. Plaintiff also attempts to distinguish Wooten, 556 So.2d 1245, by implying that the court there limited the scope of discovery based solely on relevance. PIaintiff's Brief at 6. This misrepresents the analysis and holding of the court.° The discovery requests in Wooten were not limited solely by relevance. The defendant raised three objections to plaaintill's requests: relevancy, burden, and privilege. Id at 1246. Although the court did determine that the discovery sought irrelevant information, the court addressed the additional objections raised and held "we agree with petitioner that the requirement to search all of its files for the past eight years is unduly burdensome if not virtually impossible...." Id. Nothing Plaintiff argues can change the fact that ooten held that an eight-year discovery period was "unduly burdensome." Id. In support of its argument that the time period for discovery should be greater than six years, Plaintiff claims that an alleged "conspiracy" between the defendants has been ongoing for a significantly longer period of time than six years. The first flaw in this argument is that Plaintiff s claim that Loews Corporation has played a continuous role in an alleged ongoing conspiracy undercuts its assertion that it should be entitled to examine documents from decades ago. If there truly is an ongoing conspiracy, which there is not, six years' worth of discovery should be more than enough to allow Plaintiff to divine Loews Corporation's participation in it. Plaintiff cannot provide any facts to support that Loews Corporation is involved in any alleged conspiracy, and now desperately claims that it is entitled to continue its fishing expedition, squandering the time of the cao rn w N 4' Plaintiffs analysis also presumes that its requests seek only relevant information. Loews Corporation ~-O disagrees. "-' C1 0173222.04 12 O\
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35 Vdesr. Chicago, P.. Telephone: Telefax: Robert A . Thomas D. LANE & iP1 n'B'r 600 Nolm'=-._ .. Davenpor r _ Telphone: Telei`ax: ii - LIGGE'H"" INC. THE BROu... Michael M KA.SOW1T'7 AN LLP 1301 Ave_i:.. New York. "" UNITED S'i , T, INC. Michae' SKADDE. )M 919 Thrr.: New Yo'' Telephor±e' Telefax: THE Ci:: Bruce C. DEBEi' ~ 875 T.:C. New Yn- Tele~brTeteiax. 7. MicY.. MOYt;r. . 2720 F'i -' P.O. B: Cedar 1{:.: Telerr Teleta;. IiILi r. Michc_.
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in Iowa "which subject[j it to ... jurisdiction," arguing that it is entitled to inquire into Loews Corporation's "minimum contacts" within or having an effect upon Iowa. Plaintiff's Brief at 9. However, Loews Corporation has not taken any position to contradict this premise, and has acknowledged the appropriateness ofthis discovery. Indeed, as noted above, it repeatedly responded to Plaintiff s Iowa-specific responses by stating that it has no contacts with Iowa. This argument by Plaintiff is a red herring. Plaintiff next turns to the assertion of so-called "conspiracy jurisdiction." Plaintiff maintains that discovery regarding any theory of personal jurisdiction is appropriate regardless of whether the theory has any factual support or legal validity. The appropriate guidelines for discovery, however, are not those advanced by Plaintiff, but those which reflect Iowa law. As noted above, the conspiracy theory of jurisdiction has never been adopted in Iowa, and exercising jurisdiction under such a theory would violate due process. ee Kipperman, 422 F.Supp. at 873 n.14; National Indus. Sand Ass'n. 897 S.W.2d at 773. Therefore, it is not a proper topic for jurisdictional discovery. General Objections F and L, which Plaintiff also challenges, fall under the same irrelevancy framework as General Objection D. General Objection F sets forth Loews Corporation's basic irrelevancy objection. Clearly, to the extent a request is irrelevant to the issue of personal jurisdiction, Loews Corporation need not respond to it. ee Iowa R. Civ. P. 122(a) (limiting discoverable information to that "relevant to the subject matter involved in the pending action"); Carolan v. Hill. 553 N.W.2d 882, 886 (Iowa 1996). General Objection L objects to the requests "to the extent they seek documents relating to advertising, marketing, or promotion of cigarettes after July 1, 1969" because they "seek documents relating to claims that are preempted by the Federal 0173222.04 18
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defendants. Any inquiry relating to other entities is irrelevant and improper. There is no reason to allow Plaintiff to extend its already-expansive fishing expedition to these companies. Plaintiff cites Strom v. American Honda Motor Co., 667 N.E.2d 1137, 1141-45 (Mass. 1996), as authority for the proposition that "discovery [is] required where 'information sought is in the possession or custody of a wholly owning parent (or virtually wholly owning) or wholly owned (or virtually wholly owned) subsidiary corporation, or of a corporation affiliated through such a parent or subsidiary .... To rule otherwise would be to reward corporations that disperse potentially useful information among related entities." Plaintiff's Brief at 8 5 Even if such were the law, it would not have any application in this case because the relevant subsidiaries are not the subject of General Objection C, and in fact are parties to this suit. Therefore, even if Plaintiff harbors the baseless suspicion that Loews Corporation has "disperse[d] potentially useful information among related entities," that suspicion has been alleviated by the fact that Loews Corporation already has agreed to provide responsive information regarding the relevant subsidiaries. Indeed, through the Florida discovery responses and documents, Plaintiff has relevant information regarding Loews Corporation's relationship with its only subsidiary involved in the manufacture of cigarettes. Therefore, this dispute regarding General Objecton C is moot. Nevertheless, Plaintiff's attempted use of Strom is overbroad. Plaintiffls creative placement of an ellipsis omits a very telling portion of the opinion, where the Massachusetts Supreme Court acknowledges "that the Federal cases do not go so far as to articulate such a rule." 5. Plaintiff also cites cases which are not analogous and are inapposite. Seg Plaintiff s Brief at 8 (citing Coopet Indus. v. British Aerospace. 102 F.R.D. 918 (S.D.N.Y. 1984), and In Re Uranium Antitmst Litigation. 480 F.Supp. 1128 (N.D. Ill. 1979). The situation at hand does not concern documents stored with an affiliate overseas or even discovery demands for documents located in foreign countries. 0173222.04 15
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IN THE IOWA DISTRICT COURT FOR POLK COUNTY THE STATE OF IO WA, ex rel. et al, Plaintiff, vs RJ. REYNOLDS TOBACCO COMPANY, ) et al ) ) Defendants. ) LAW NO. CL 71048 AFFIDAVIT I STATE OF NEW YORK ) ) ss COUNTY OF NEW YORK ) Mark S. Schwartz, having been first duly sworn says: 1. I am Assistant Controller of defendant, LOEWS CORPORATION. I have been employed by Loews Corporation since 1987. The following facts are stated, under oath, upon personal knowledge based on my tenure with Loews Corporation since 1987 and my review of the relevant books and records and investigation of these matters. 2. Loews Corporation was formed in 1969. It is a Delaware corporation, having its principal office and place of business at 667 Madison Avenue, New York, New York. 3. In 1968, Lorillard Corporation, a manufacturer of cigarettes, was acquired by a company named Loews Theatres, Inc. At the time of this acquisition, Loews Theatres, Inc. operated a number of movie theaters and hotels. 4. In 1969, Lorillard Corporation merged into Loews Theatres, Inc. and became a division of Loews Theatres, Inc. rather than a subsidiary. Lorillard Corporation thus became known as "Lorillard, a Division of Loews Theatres, Inc." Loe«s Theatres, Inc. had three primary lines of business at that time: movie theaters, hotels and tobacco products. =zsiT i
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the State of Iowa. These responses, while not helpful to Plaintiff's theories, are directly responsive to the Iowa-specific requests. In fact, Loews Corporation's counsel informed Plaintiffs counsel at the meet-and-confer on August 8, 1997, that Loews Corporation has provided no Iowa-specific information because none exists. - In addition, Plaintiff advances an argument that it is entitled to "receive information about activities which have occurred outside of Iowa but which had an effect upon Iowa." Plaintiff's Brief at 15. It is unclear why Plaintiff presents this argument since Loews Corporation's General Objection M only objects to the requests to the extent they are "not limited in geographical scope to actions ... occurring in or having an affect upon Iowa." Responses at 5 (emphasis added). In fact, Plaintiff cites this exact language in its own Brief. Plaintiff's Brief at 15. Thus, there is no disagreement, and Plaintiffls argument is moot. 7. Even Though Loews Corporation Objected to Producing Publicly- Available Information, Loews Corporation Responded to These Requests General Objection N obj,ects to the requests "insofar as they seek production of documents that are publicly available on the grounds that such documents are as accessible to plaintiff as they are to Loews" In challenging this objection, Plaintiff fails to mention that, subject to this objection, Loews Corporation in fact provided substantive and complete responses regarding any relevant information pertaining to Loews Corporation in response to both Interrogatories 3 and 5-- the only interrogatories identified by Plaintiff as utilizing this objection. ee Plainriff's Brief at 16. Thus, there is nothing to compel. 8. It is Reasonable for Loews Corporation's Discovery Responses To Be Produced at Loews Corporation's Iowa Counsel's Office General Objection 0 objects to producing documents at the offices of Plaintiffs 0173222.04 23
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! JONES, DAY, REAVIS & POGUE 77 W. Wacker Drive Chicago, IL 60601 Telephone: 312/782-3939 Telefax: 312/782-8585 Steven L. Nelson DAVIS, BROWN, KOEHN, SHORS & ROBERTS, P.C. 2500 Financial Center Des Moines, IA 50309-3993 Telephone: 515/288-2500 Telefax: 515/243-0654 RJR NABISCO, INC. D. Scott Wise Vincent T. Chang DAVIS, POLK & WARDWELL 450 Lexington Avenue New York, NY 10017 Telephone: 212/450-4000 Telefax: 212/450-4800 FORTUNE BRANDS, INC. f/k/a AMERICAN BRANDS, INC. Roger T. Stetson BELIN LAMSON McCORMICK ZUMBACH FLYNN 2000 Financial Center Des Moines, TA 50309 Telephone: 515/243-7100 Telefax: 515/243-1408 BROWN & WILLIAMSON TOBACCO CORPORATION (Individually and as Successor by Merger to The American Tobacco Company); BATUS HOLDINGS, Andrew R. McGann - 312/861-2183 Michelle Browdy - 312/861-2460 Michael Liebert KIRKLAND & ELLIS 200 East Randolph Drive Chicago, IL 60601 Telephone: 312/861-2000 Telefax: 312/861-2200 Roger T. Stetson BELIN LAMSON McCORMICK ZIIMBACH FLYNN 2000 Financial Center Des Moines, IA 50309 Telephone: 515/243-7100
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Cigarette Labeling and Advertising Act." Plaintiff attempts to mischaracterize this objection as a novel "pre-emption privilege." Plaintiff's Brief at 14. In fact, General Objection L is simply another irrelevancy objection -- Loews Corporation objects to producing documents that are not relevant to viable causes of action. The irrelevant information, as stated in the objection, includes documents relating to the advertising, marketing, or promotion of cigarettes after July 1, 1969. See i ollone v. Liggett Group, 505 U.S. 504, 524 (1992) (holding that 1969 amendments to Federal Cigarette Labeling and Advertising Act preempted state law claims based on inadequacy of advertising, marketing, or promotion of cigarettes). Therefore, Loews Corporation should not be compelled to produce such information. In its discussion of General Objection D, Plaintiff also challenges Loews Corporation's "vague and ambiguous" objection to various Requests, despite the fact that this topic is completely unrelated to General Objection D, and in fact was not the basis of any of Loews Corporation's general objections. Nevertheless, Plaintiff fails to present any substantive argument regarding the allegedly inappropriate use of the "vague and ambiguous" objection. Instead, Plaintiff complains that Loews Corporation does not state "how the requests could be read in more than one way." Loews Corporation did, however, consistently inform Plaintiff which terms in its Requests were vague and ambiguous. Plaintiff's challenge is meritless. 3. Loews Corporation Properly Objected to Plaintiff s Requests to the Extent They Sought to Impose Obligations Other Than Those Required by Iowa Law Plaintiffnext challenges General Objection E, which "objects to the 'Instructions' and 'Definitions' to these [requests] to the extent they attempt to impose obligations on Loews Corporation other than those imposed or authorized by the Iowa Rules of Civil Procedure ...." 0173222.04 19
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Telefax: 515/243-1408 B.A.T. INDUSTRIES, PLC; BRITISH AMERICAN TOBACCO COMPANY, LTD.; BRITISH AMERICAN (HOLDINGS) LTD. Mark C. Cunha - 212/455-3475 Adam Stein - 212/455-3345 Kathleen Turland - 212/455-2896 SI1bII'SON, THACHER & BARTLETT 425 Lexington Avenue New York, NY 10017-3954 Telephone: 212/455-2000 Telefax: 212/455-2502 Thomas A. Finley, R. Todd Gaffney Kerry A. Finley FINLEY, ALT, SMITH, SCHARNBERG, MAY & CRAIG, P.C. Fourth Floor, Equitable Building 604 Locust Street Des Moines, IA 50309 Telephone: 515/288-0145 Telefax: 515/288-2724 John A. McClintock Chester C. Woodburn III David L. Brown Eighth Floor, Fleming Building 218 Sixth Avenue Des Moines, Iowa 50309-4092 Telephone: 515/ Telefax: 515! John Nyhan Jay Henneberry Suzanne Cate Jones CHADBOURNE & PARKE LLP 601 South Figueroa Street Los Angeles, CA 90017 Telephone: 213/892-1000 Telefax: 213/622-9865 PHILIP MORRIS INCORPORATED; PHILIP MORRIS COMPANIES INC. Dan K. Webb, Thomas J. Frederick Kurt L. Schultz, Kevin J. Narko - 312/558-5530 WINSTON & STRAWN
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a
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counsel, instead stating that the documents will be produced at Loews Corporation's local counsel's office. In fact, the nearly 2,000 pages of documents that Loews Corporation provided Plaintiff from the Florida discovery were made available at Loews Corporation's local counsel's office, which is less than three blocks from Plaintiff's counsel's office. These documents were reviewed there by Plaintiff s counsel, and documents selected by Plaintiff s counsel were copied and provided to them. Iowa R. Civ. P. 130 specifies that documents and things are to be produced at "a reasonable time, place, and manner." Loews Corporation believes that the reasonable place is its local counsel's office. 9. Loews Corporation Need Not Provide Constitutionally-Protected Information In various responses, Loews Corporation asserts an objection such as the following: "Loews Corporation also objects to this interrogatory to the extent it seeks information by which Loews Corporation's First Amendment rights to free speech and to petition the government, as guaranteed by the United States Constitution, may be impaired." See, e.e., Responses to Interrogatories at 13. Plaintiff asserts that this objection "only applies where jurisdiction is sought where the defendant's sole contact with the forum is its association with the government." Plaintiff's Brief at 18. This contention is irrelevant because Plaintiff has yet to establish even one fact indicating that Loews Corporation had any contact with, or any contact having an effect upon, the State of Iowa. Nevertheless, while the cases applying the government contacts doctrine do so "where a plaintiff attempts to establish jurisdiction over a nonresident defendant whose sole contact with the forum is predicated on contact with" a governmental entity, see Sullivan v. Tagliabue, 785 017322204 24
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3 ~ ~
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Copy to: THE STATE OF IOWA EX REL THOMAS J. MILLER IN HIS CAPACITY AS ATTORNEY GENERAL OF THE STATE OF IOWA E. Ralph Walker, PK0006346 WALKER LAW FIRM 2501 Grand Avenue, Suite E Des Moines, IA 50312 Telephone: 515/281-1488 Telefax: 515/281-1489 Steve P. Wandro, #484762548 WANDRO & GIBSON 2501 Grand Avenue Des Moines, IA 50312 Telephone: 515/281-1475 Telefax: 515/281-1474 Brent R. Appel, #479688537 DICKINSON, MACKAMAN, TYLER & HAGEN 699 Walnut Street, 1600 Hub Tower Des Moines, IA 50309 Telephone: 515/244-2600 Telefax: 515/246-4550 Glenn L. Norris, PK0004035 HAWKINS & NORRIS 2501 Grand Avenue, Suite C Des Moines, IA 50312 Telephone: 515/288-6532 Telefax: 515/288-9733 Roger W. Stone, L10005358 SItVIMONS, PERRINE, ALBRIGHT & ELWOOD 153 3rd Street S.E., Suite 1200 Cedar Rapids, IA 52401-1266 Telephone: 319/366-7641 Telefax: 319/366-1917 ATTORNEYS FOR PLAINTIFT R.J. REYNOLDS TOBACCO COMPANY Thomas F. Gardner - 312/269-4124
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0 5. In 1969, Loews Corporation was formed. From 1969 to 1971, Loews Corporation held no interest, direct or indirect, in any company involved in the tobacco business. 6. In 1971, Loews-Theatres, Inc. became a wholly owned subsidiary o,f Loews Corporation. Subsequently, Loews Corporation made several other acquisitions, including the acquisition of a majority interest in CNA Financial Corporation in December 1974, and the acquisition of a majority interest in Bulova Watch Company, Inc, in 1979. 7. Following the transfer or other disposition of the movie theater and hotel components of its business, in 1985 Loews Theatres, Inc.'s name was changed to Lorillard, Inc. to more accurately reflect the nature of its remaining business. 8. In 1989, Lorillard Tobacco Company was formed, and the operations of Lorillard, Inc. were transferred to Lorillard Tobacco Company. Lorillard, Inc. became a holding company, Lorillard Tobacco Company is a wholly owned subsidiary of Lorillard, Inc. Lorillard, Inc. is, in turn, a wholly owned subsidiary of Loews Corporation. 9. Loews Corporation is solely a holding company. At no time during its history has Loews Corporation manufactured, tested, designed, marketed, distributed, sold, offered for sale, supplied or placed in the stream of commerce cigarettes or tobacco products for use in Iowa or anywhere else, and it has never participated with or assisted others in so doing. Further, no direct subsidiary or indirect subsidiary of Loews Corporation has ever had express or implied authority to act as Loews Corporation's agent in the testing, design, manufacturing, marketing, distribution, or sale of cigarettes or other tobacco products in Iowa or anywhere else. Loews Corporation is not a tobacco l company. -2- S%HIBIT 1
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0 0 48
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10. Loews Corporation`'d'oes not now, and has never, processed, serviced, or manufactured any products, materials or things anywhere which were used or consumed within Iowa in the ordinary course of commerce, trade or use. Loews Corporation's indirect subsidiary, Lorillard Tobacco Company, does manufacture cigarettes for sale in Iowa and elsewhere. 11. Loews Corporation does not conduct business in Iowa and does not have an office in Iowa. Loews Corporation does not own, rent, use or possess any real or personal property in Iowa. It maintains no bank accounts and has no telephone listings in Iowa. It does not pay taxes of any kind in Iowa. 12. Loews Corporation maintains no employees, agents, or other representatives within the State of Iowa for the transaction of business of any nature. In addition, Loews Corporation is not engaged in solicitation or service activities within Iowa, and is not qualified to conduct business there. LUlL artz Mark S. Schw -t Subscribed and sworn to before me, a notary public, this ~ day of Febnaary, 1997. PKz~ Notary Public FLORAPUO?ID NOTARY Na.41-60t9482 NewYork O1aGtled In Queens County G'Br6ticate Filed in New York Cou Commission Expires Oct 25, 18
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0 ;>. ia9R- Ag.nla" Doesmenc wn3 Finding or: :.ppl:cab,li., ol /=ra•1 d 2xcertion Lo 3a53 Dccuaer.t nv later t:hen :.uqua*_ 7, T:,. at 12?. i.5.6.~. !'HLS _LJ:E day of a.uguat, 1996. /s f / i / 1 1 , ' , ( ~ L
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State appealed, and the resolution of Defendants' second Motion to Dismiss was stayed. On April 22, 1998, the Iowa Supreme Court ruled on the appeal of the first Motion to Dismiss. This briefmg is limited to what impact, if any, the rulings of this Court and the Iowa Supreme Court on the first Motion to Dismiss have on the second Motion to Dismiss. The Iowa Supreme Court decision has no bearing on Count X, and the ruling of this Court on the first Motion to Dismiss supports permitting the State to proceed with Count X. While this Court's August 26, 1997, ruling dismissed a number of common-law claims, this Court refused to dismiss the statutory Consumer Fraud Act claim. The Court noted that the "Act expressly authorizes the Attorney General to bring actions on behalf of consumers," and because of that express statutory authorization, "no motion to dismiss can be sustained on claims that the harms are 'indirect' or `remote. "' State of Iowa v R J. Reynolds et a1 , CL 71048, Ruling on Certain Defendants' Motion to Dismiss, August 26, 1997, at 8-9. Similarly, Iowa Code 706A specifically authorizes the Attorney General to "bring a civil action as parens patriae on behalf of the general economy, resources, and welfare of this state. .." Iowa Code § 706A.3(11); e al706A.3(1) (a prosecuting attorney or an aggrieved person may bring action); § 706A.3(9) (attorney general may intervene or appear as amicus curiae in an action brought by any person). Moreover, Iowa Code 706A expressly includes the conclusion this Court reached under the Iowa Consumer Fraud Act: "Any prosecuting attorney may bring a civil action on behalf of a person whose business or property is directly or indirectly injured by conduct constituting a violation of this chapter. .." Iowa Code § 706A.3(10)(a) (emphasis added).
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• SPECIAL COUNSEL FOR TATE OFI6WA BRENT R. APPEL, 479-68-8537 BRET A. DUBLINSKE, 482-74-0350 DICKINSON, MACKAMAN, TYLER & HAGEN, P. C. 1600 Hub Tower, 699 Walnut Street Des Moines, Iowa 50309 PH: (515) 244-2600 E. RALPH WALKER #PK0006346 WALKER LAW FIRM 2501 Grand Avenue, Suite E Des Moines, Iowa 50312 PH: (515) 281-1488 FAX: (515) 281-1489 ROGER W. STONE #L10005358 SIMMONS, PERRINE, ALBRIGHT & ELLWOOD, P.L.C. 115 Third Street S.E., Suite 1200 Cedar Rapids, Iowa 52401-1266 PH: (319) 366-7641 FAX: (319) 366-1917 FAX: (515) 246-4550 Respectfully submitted, THOMAS J. MILLER ATTORNEY GENERAL OF IOWA\ GLENN L. NORRIS #PK0004035 HAWKINS & NORRIS 2501 Grand Avenue, Suite C Des Moines, Iowa 50312 PH: (515) 288-6532 FAX: (515) 288-8733 STEVEN P. WANDRO #484-76-2548 WANDRO & GIBSON, P.C. 2501 Grand Avenue, Suite B Des Moines, Iowa 50312 PH: (515) 281-1475 FAX: (515) 281-1474
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Bruce G. Merritt Debevoise & Plumpton 875 Third Avenue New York, NY 10022 J. Michael Weston Moyer & Bergman 2726 First Avenue N.E. Cedar Rapids, IA 52406-1943 Michael C. Lasky Fred M. Weiler Davis & Gilbert 1740 Broadway New York, NY 10019 D. Scott Wise Vincent T. Chang Davis, Polk & Wardell 450 Lexington Avenue New York, NY 10017 Fred L. Dorr David C. Pulliam Wasker, Dorr, Wimmer & Marcouiller, P.C. 801 Grand Avenue, Suite 3100 Des Moines, IA 50309-8036 Brent B. Green Duncan, Green, Brown, Langeness & Eckley, P.C. 400 Locust Street, 380 Capital Square Des Moines, IA 50309-2331 Wayne T. Stratton Goodell, Stratton Law Firm 515 South Kansas Avenue Topeka, KS 66603-3999 Joseph R. Gunderson Dreher, Simpson & Jensen, P.C. 699 Walnut Street, 15' Floor Des Moines, IA 50309
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ORDEF-1D _-\-`-D AD= GED -.'st.vithin ttwentv ;:avs of thz tiiina o_`:e aforementioneii list each De:erdant recaainins tn this cause of action shall answer the Srate s Second Amended Comotaint as taCounts One, Two and Eiehteen. The Court has aiso been in receipt of the Mediator's Report in this case which has been hled in the official Court file. Without referencing any details, the Nfediator has indicated that further mediation mieht be cuitYUl in this case. Now that the Court has ruled as stated in this Order the Cour, directs _2rther mediation. [t is therefore ORDERED A.V'D .-1D=GED that all remainrng parties in this cause of action shall submit to NIediation ~yith the Court Mediator in ttris case :or a second session to mediate in good-iaith, said session to comr,tence no [ater than sirv davs from the cntrv of atus Cour*. Order. It is fttrther ORDERED A.V-D ADJL-DGED that he Stieciai Yfaste: previousiv apoointed in this case mav now proceed to hear all outstanding discoveri matters relevant to the zemaining .hree counts in this ;:ause, i. , nea':ge nce• products :iabiiitv, and those issues aer*ineat :o te issuance of iajuncd ve relief set forth in Count Eighteen. It is further ~RED a_':v .A-l.Dn .'~.JGL:7 ihat this t_Juft s/L7L not t^.Ie:"•..1.7 MLtloGS iC R.'.tlzaT anc'!:r R--..C._iC.'.. _..a-=- :.,.aT_i.v to ub Mcuc?'_ .C JI-=-i_s set :Qr _. .n .:r- ,.. ~--v'_ri2 .^.ad a P,ill of Jral ar?::.Cler:s ?SlC eXte:SP:e ,e_a; memoranda submlttel on these issues. Once again s.il par.ies and the Special Master are reminded that in conducting discovery and other aear:ngs in this case that this Cour; tullv intends to abide by its Order Setiina Trial to commence on Auput 1. 1997, DON E A.ND ORDERED in Caarnbe:s in West Palm Beach. Palm 9eac:: County, Florida on - I~,~~CE ,=~iD this 16th day of September. 1996. ~- ^='~.~. ..;,ror ffiIBIT 2
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John C. Monica Craig Proctor Catherine Castellucio Shook, Hardy & Bacon One Kansas City Place 1200 Main Street Kansas City, MO 64105-2118 Dan K. Webb Thomas J. Frederick Kurt L. Schultz Kevin J. Narko Winston & Strawn 35 West Wacker Drive Chicago, IL 60601 Robert A. Van Vooren Thomas D. Waterman Lane & Waterman 600 Norwest Bank Building Davenport, IA 52801 Thomas F. Gardner Jones, Day, Reavis & Pogue 77 West Wacker Drive Chicago, IL 60601 Mark C. Cunha Adam I. Stein Simpson, Thacher & Bartlett 425 Lexington Avenue New York, NY 10017-3954 Thomas A. Finley Finley, Alt, Smith, Scharnberg, May & Craig, P.C. 604 Locust Street Des Moines, IA 50309-3773 Andrea R. McGann Michelle Browdy Kirkland & Ellis 200 East Randolph Drive Chicago, IL 60601
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D]Qe , Order nn Mocuns ;o ^,saas CL Q ~.~ uin aH Supreme l.our: Jf Flonda has 2iven directton to C7a1 .;our•S n this state as :0 precisely what .:luses of acnon the SLIte of FIorIQa rnav maintain. l7ev are sCt tortll :II Ase:1Cv 'Or Health Care -~dm[n. v. Associated Industres of Florida. Inc.. No. 36,' LL, slip. op. (Fla. June ?". 1996) ("Associated nd e''). It is the Associated Indtistries case that defines how the State may seek reimbursement for Medicaid payments from third parties in Florida It never ceases to amaze the Court how some of the itnest lawz•ers in the land can disagree over the meaning of one Florida Supreme Court ooinion. T"ne parties spent a haJt-day doine just that The associated Industries case includes a scholari,v historical review :ollowed by soecit7c holdines thatcontrol the litigation in this case. As the Florida Supreme Court stated: We now must address the nature of the State's cause of action. We recogni.ze that many aspects of the Act have been challenged on constitutional grounds. I?owever, in view of the numerous theories as to the origin and substance of -~Le Si_:te's ac :on. we ;.hoose to arst define the contour5 of that action and ;hen evaluate the .-~.cc against constitutional st_ndzrds. ?.ssoc:a*ed [ n vsr ;es sserts :hat _he 54.te was limited :o Iradii.enai nodors su. nro_Zt:cr1, i3:?_r.meat_ anC ae.^. '_'ntll ~..L:e ie2'slature :.3ended k-t in i 9Y '. and ma_ ,mder these :raditional t:eories. the State would be 3,:biec: _e tae >ame legal obstacles Ihat the Medicaid recipient would face in pursuing a claim. Associated Industries contends that it was the 1994 modincations that gave the State an independent cause of action and abrogated the atfitmative defenses available to a third-party tort feasor. We agree that it was the I 99a modifications coupled with the 19()0 ar[eldments that established an indep_endent cause of action. See ~.ssociated Industries at pp. 15-l6. [Emphasis added.] There can be absolute!y no question that prior to the 1994 law there was no indenendent cause of action per:nitting the State to go forward in seeking Medicaid reimbursement. As the Florida Supreme Court stated in Associated Industries: Once aQain. there can be no argument after 1994 that the State's csuse of action s 3e:ivative in the nature of a3ubrogation. i.si?_nme.na. or :ien. Rather, it s a ie•.v +ndenendent cause ni .c.mn S a[e o nro~~e: I ze2ii_eac x s__.__.. ;e ffiIBIT 2
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J. Eugene Balloun Shook, Hardy & Bacon 9401 Indian Creek Parkway Overland Park, KS 77210 Co 01\ w ND \C CN
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The Supreme Court did not address any statutory claims, and its opinion on the first Motion to Dismiss does not impact Count X. The Supreme Court decision rested on two pillars: first, that with respect to the common law claims on appeal the Iowa Medicaid statute was the exclusive remedy, precluding those common law claims; second, that certain common law claims were too "remote and derivative" to proceed. As this Court held with respect to the Iowa Consumer Fraud Act claim, the remote and derivative argument does not apply where there is express statutory authorization for the Attorney General to bring claims on behalf of others, or in the case of chapter 706A, on behalf of the economy and general welfare of the State of Iowa. The exclusivity of the Medicaid statute also is not relevant to Count X. Damages under Count X are not expressly or exclusively tied to Medicaid expenses. Even if the damages were tied to Medicaid, Iowa Code § 706A.5(l) expressly states that chapter 706A is to be "liberally construed to effectuate its remedial purposes," and that remedies in chapter 706A "do not preclude and are not precluded by other provisions of law." The legislature expressly intended that no other statute could bar the application of chapter 706A. As a result, neither component of the Supreme Court's holding prevents Count X from going forward. Because Iowa Code chapter 706A expressly authorizes the Attorney General to bring claims on behalf of the economy and general welfare, and further authorizes the Attorney General to seek both direct and indirect damages, and because chapter 706A by its express language cannot be preempted or merged into any other statute or claim, Count X must survive the Tobacco Industry's second Motion to Dismiss.
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?1 - oeaer .;n Stouons :u ]isn= C_ ~i-aa .L4 rnird. rhe F ior.'da Supreme Court held in Associated ?ndustnes: .. Consequently, the State may proceed independentlv with its new cause ot action to recover all pavments made after the eriective date ot the 1994 Act_ soecificallv July I 19911 Of course, the State may also pursue claims occurring prior to that date under the 1978 traditional subrogation action. .. See Associated Industries at p.S 6. [Emphasis added.] Therefore, in this case the State may pursue only damages for ae_lige :ce andlor produc-s liabiiity for payments made after the effective date of the 1994 Act, i.e.. July l, 1994. As stated in Associated Industties, the State by separate actions may pursue claims before that date under separate traditional subrogation actions. Having defined the Stare's cause of acaon as set forih in Associated Industries, onlv Counts One and Two of the Second Amended Complaint are proper causes of action to obtain monetar damages in this case. With one esception all the retnaining counts must be dismissed with pre; udicc. Damages for claims occurring prior to July i. 199u must be sought by the Plaintiffs through tr adiri-ionai subroption actions. rowe:e:. Ciunt Ei2;aeea of ahe Second k.rended CJmntaLt :s i praVer'.or InJui.ct:'%e reiiei. Count `=hteen seeks to pretect .:,:nors within :.'ae State of Fioeda and see?s, in aar, :o enjoin violations of the criminai laws of the State of Florida including the distribution and sale of cigarettes to minors under the age of 18. In addition, under Chapter 317, Florida Statutes, injunctive relief is provided for in cases involving fraudulent practices including misleading advertising. Furthermore, in giving the State the widest latitute in pleading a cause of action for injunctive relief. the Court recoenizes that the allegations of the Second -kmended Complaint may very welJl describe a public nuisance endangering the health of Florida's citizens, and especially its children. The Florida Supreme Court has held: The power of a court of eauirv to abate a public nuisance where no oroperry rights of the complainant are involved, even in the absexe of a statute, we °tnd artrmed . See ?ompano Horse C'.ub •r State I l 1 So. 30 i 1 Fla. :9_" ') at ^.3' 0. [n :he a'ore.^:ennoned 1cinion. :he : ionda Sucreme ~~-.>ur. '.tie;a :e :o _ucce .i :_°anse in =^uirr, 1;g$TSIT 2
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0 0 IN THE IOWA DISTRICT COURT FOR POLK COUNTY THE STATE OF IOWA, ex. rel. THOMAS ) NO. CL 71048 J. MILLER, in his capacity as ATTORNEY ) GENERAL OF THE STATE OF IOWA, ) ) Plaintiff, ) ) PLAINTIFF'S SUPPLEMENTAL vs. ) RESISTANCE ) R. J. REYNOLDS TOBACCO COMPANY, ) et al., ) ) Defendants. ) The Court has permitted supplemental briefing on Defendants' pending Motion to Dismiss Plaintiffs amendments to its complaint. As the merits of the issues have previously been thoroughly briefed, the purpose of the supplemental briefing is to address any issues raised by the Iowa Supreme Court's ruling on the appeal of the first Motion to Dismiss. The Supreme Court decision appears to be dispositive of Counts XI and XII, pleading prima facie tort and indemnity. For the reasons stated below, however, Count X, a statutory count under Iowa Code chapter 706A, is not affected by the Supreme Court decision, and is further supported by this Court's ruling on Defendants' First Motion to Dismiss. COUNT X, UNDER IOWA CODE 706A, IS NOT AFFECTED BY THE RULINGS OF THIS COURT OR THE IOWA SUPREME COURT ON DEFENDANTS FIRST MOTION TO DISMISS, AND DEFENDANTS' MOTION TO DISMISS COUNT X MUST BE DENIED On June 13, 1997, the State of Iowa amended its petition to allege a claim under Iowa Code chapter 706A. The Tobacco Industry moved to dismiss, its second such motion, and the issue was thoroughly briefed on the merits. See Plaintiff's Resistance at 2-11; Plaintiff s Surreply at 4-11. On August 26, 1997, this Court entered a ruling on Defendants' first Motion to Dismiss. The -I -
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L_r ~ prLeS 'n regular basis In Ch1s i.ate or committed any :ort in this state. i 1e iacts lemselves are not Suosmnnallv :n controve:sv. T'ne questlon IS'•~netrler the facs are sufficient by a preponderance of evidence to suocon the theories of alter-e;o, aiding and abetting, agency, and/or "mere instrumentality" regarding the aforementioned torts. Vone of the required indicators have been proven to this Court's satisfaction. B.~.T. Industries, PLC; Loew s Corporation; and Batus Holdings, Inc., do not market- manufacture, se!1- or deliver tobacco products in Florida or place these products in the stream of commerce. These companies are holding companies not actively operating tobacco businesses. The Court has aot even reached the "rifinimum contacts" considerations required in any analysis if the :acts had warranted a findin2 of the commission of a tort. .Aimost by den.nition. this Court's finding that the Plaintiffs have failed to mee: their burden to show statutory jurisdictional grounds to maintain actions against these three entities means :hat there cerrainly could be no minimum contacts :n ;.e Scate of F:orida. Cer ainiv the .2vidence submicted does not show anv sufficient minimum contacts. It is therefore OR.,LR: DA-`; .A-DJ'CDGED u^.aC C: U SQic:_U: 3 wfot:ors :o Dismiss Led by B.A.T. C, :,~T--oration: lr:: _ n s =oiY s, inc *e L-d =_ same are ae: GRIVTED a:-,d aiI --.rez2 Defendanrs are DISMTSSED uom :he Second.Amended Comrlaint with Prej udice. Having found that the Plaintiffs do maintain a viable cause of action in Counts One. Two and Eishteen of the Second.-krnen ded Complaint as to the remaining Defendants, the Court must require answers to the Second Amended Complaint ;o be filed by ;he remaining DeYendanu. The Court must also address the is_ue of the idencity of recipients of lfedicaid paymenrs. The State cannot proceed without identir ing each individual rec,pient of Medicaid oayments. It is therefore ORDERED .-\.tiD :1DJL:DGED that the Plaintiffs provide the ideatitv of•each individual recipient of Medicaid oavments for which damaees will be : airned under he l994 Act The State shall aie with the C',eric of atis Cour, a list ;dezufvin; each-suca individuai -ecipient within :hir^- dav5 Jr :he Ct :C15 OrCer and 'rot9de 1_UCy JC 71e Sa.:.e .15C :n all -e71aL^lrle ve,eaC:,l:[S at E%HIBIT 2
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9 0 4_sa3ar.c_ T-r:E TOHaCCO IRST:T•T.'fi. IMC., by R. 3entamine.2te:d :or .'°tendant. R.J. R'sYh6LDS TGBA^_CO CCMPAh'Y, by Eric S. 5arnur and ica 8-..•.h Sommers for Defendants, U:1I'.SD STATa`5 TOBACCC• Cvi4?AA'Y and _TST Ucon -r.crideration of (_) Flalnci;Ps' Nctice ot Heariitg on All Llef~nd3cta' oioje-eio^.s mo i:•__e^o3.tories, RequRate to Produce and ReTueets •for Adm-ia®ion; (2) Motion co quaa: and tor Encnf of ==o::er_tiv* Order oP De!endant, SwA*T Industries p.l.c.; (3) :!4TCrindum of Law of 8*A•T. Ir.dustries p.l.c. in Suqport of Ketiorn r.•j puasi and for Entry of Protective Order ar-d exh±bits attached ~.. r.heretot id) 5'sainti#fe' Memorandum of Law i:% 0pposition to 3•A*T . _nduwrr:es p.i.c.'s Motion to Quash and for Entry of a Pror,ectiva C-dar: (5) neply MeTorandua of 8•A-T Induatriea p.l-c. in Support c,! a!etion to Quash aad for Entry o_ Preteetiye Ord9z; (6) PTaintiffs' action to Compel; (7) Memorandum c: Law ot S+A;T industriea p.l.c. in Oppoxition to Plaintiffs' Motion to Cor_pel Oincoc•ery' and (8) oral Argument of counsel, the Special Master r-FCrta ead raeo=ends dispoeicion of the motions as follawsr 1. ?laintilfa ?:ave '_ndicated that tthey will serve merita disc.:very' rec,_ests oa ali defendants other than thesw that are _hjal,angi.-tg juriad:ction (i.e., H*A+T INDVSTAL£S, 8AT[TS and LOY'rt5) . aSdiaonal r.apoase to any previouely-aerved juriadictional di eco•fery reyhust shall be required rrom any party that is not eha;.;ezging jurisdictioz. Tr. at 6-7. 2. Flaintilfa have voluntarily withdrawn :nterrogatory uo. 28 :n PlaintiFfa' First Set of Ir.terroqateries co s*A•T tnduatrlea F.l.c. on ct+.e Isa.:e o° :,5 aa,-gonan, Juriediction, and the
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_(1) - Qbjections r3ised in Intsrrogatory 14 chrough 1!s aza ,rrerruied. (2) Objectlone to Incarrogatortes 7-10, 14, ;s-17 and 19 ar« .n•eiru?ed except to the qxtenc that the interrogaecc?.ea will ba a^a:oersd only as cc B*A•T Ih'D'JSTAI&5 and 3ATV9. 1 (3) Objecticna to :ncerrogatoriee li-17 nnd 19 are c•rerrsled to the extent that aaswers ahall be provided as they relate co B-A*T INOVS3RIE8, BROUN L'w'I:.,uIA:KSOCi, BATCc and BATUs. (4) Objectiona to Intsrrogatory.l3 is overru2nd to the Txt!11t that the reaponsa shall ;•e-late to all accounts where B•A+T, . 1; 'NCG5TRIS3 :a titled on an account, or authorized to make deposits or wicharawal• from•auch an account. (5! Objections to Incarrogatorise 16 and 17 are cvesrsJ.ed co tha extent that the raspoase shall relate to all :+ccouatn w:era B*A*T INDIISTRIfiS is titled on an account, or t•jthorized to make deposits or withdrawals from such an aceouac. Objections raised in Interrogatori.es 15. 25 and 27 ar~ austained. (7) Objeetions raised to Incerrogatoriee ]0, 22-24, 25- 35 are overruled. (9) objections to Intarzogatory 21 i9 overruled to the ext:nt th.rt the interrogwtory ehalT be limited to financial iCPStitntton9 within the stata of 9lorida. 7. in view of the rulinqs tarai:above entered, Piaintiffs' ("otion to Comptl• Discovery is D8NI8D. A. BROWN B l7ILLIlUN1.,dlf shall oubmit a proposed counter-ordnr • ith respect to piaintiffs' Moticn for ID, ss Mera Review of •sanuary
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0 s -:^rseap~i~d;ng interrocacories served cn DATU5 and IAEW9. $g~ Tr. at 3. Plaincitle' deaand+ for written•diecovery are overbroad 4nd incor.aiacer.n with the Court's Order o, Jtuio 1C, =956 and Cbtn_Mm=&QgTlnt nc. v. *• on a'<og, 542 9c.lid 1232 (FLa. 1??7{ . inscfar as they eeeic diaee•rary inco the period frem 1965 to -he pr9aent. Objections to discovery post-datiny the Eiling of =he ot'iq°_;:a2 complainc on Febrsa:y 21, 1995, and prs-dating the Filing n[ the original Complaittt by sever. (7) years, are snatAiaed. 4. S*A+.^• Ih-JUSTRLB' motiQn for a protective order atrikir.g Requests for Admisricr. Noa" 1-36 and 54-56 te GRa.~iTED, gs,q Tr. at _24. aeither a*A•T ZNDUaTRIEB nor any of the other DeCendante wit.`. ;uriadicticn moticna pending (i.e., 811xG2 ar_d LOE'rls) , need answer. _equ.ar"s !or Admisaion Nos. 1-35 ard 54-t4 because those reqnests seek m;rits discovery and tY.ereLcre are beyond the scope of the li®iLed and inexpeneiva jurisdictional discovery authoriaed by the •_oort'a Order of :,une 10, 1996 and C"loneaale. Obviously this ruliag sho•sLd apply to those same questions posed at at=y dc~ceition taken in ecnnection with they pending jurisdiction motions. 5. With regard to the objections raised by Y•A•T INDIISTR22S to ths r!!msining Raquests !or Aamission which were not the subject uf the M.otinn for Proteetiv. Order, the Objections to Requeet for tidmie.ion nutFers 3?-a7 are overru3ed and the Objeetions to Requests for Admissioo nu.mbers 48-53 are sustainad. 6. with regard to the intarregatoYieo propounded to H•A•T t*IDUSTRIES and the obj4cSiec.y raised to those intersogatories, the Eollocri-.g Cir"dings are made: EgHiBIT 3
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0 0 46
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0 Pny_c ~ Oreer ~n C(,~C.;lhn >H i Jurisprudence. i 7e imporance of the holdins ?oes to the Stste's abilic. :o maintain Count Eignteen. the Injunction Count: ...'Therefore, whenever a public nuisance is shown, equity must enjoin it at the suit of the government. Every place where a public statute is openly, publicly, repeatedly, continuously. persistently and intentionally violated is a public nuisance...' Sec Pompano Horse Club at p.810. The State's Second Amended Complaint asserts, in part, repeated. continuous, persistent and open violations of Florida's public statutes concerning fraudulent practices and sales to minors. Consequentlv, Count Eighteen stands on its own and separate from the 1994 amendments discussed above. The Court having:uled that Counts One. Two and Eighteen may stand, and that all remaining counts cannot in this action. the Morions to Dismiss attaclking the allegations of the Second Amended Complaint be and the same are hereby Gc2A,tiTF,D. Iti P.-\RT, and DENi^ED, P`i PART. As to Count-s ~'ne, Two and Ei_ehteea, the Motions to D smiss attacking the Se end Amended Compiaint 7e and the same are herebv pF_tiTED. As :C ail other rema nin¢ counts the 'vIcnons to Disuiss;.e and the saane are:_e:ebc GR.LuN TcD Sv":7:=?c Howeve:, the P:aintiffs may pursue traditional subrogation in separate actions. The Court must now tum to the rhree Motions to Dismiss attacking this Court's jurisdiction over B.A.T. Industries, PLC; Loew's Corporatien: and Batus Hok+_ngs, Lnc. Tne issue is whether any or all of these three entities can be sued for ne2iigence, products iiabiuty, and/or enjoined in this state in this action. In essence, the auestton is whether any and/or all of these entities transacted business in Florida during the pertinent times in question or committed the torts of negli;ence and/or a marketing of allegedly defective products in Florida. The answer in eac:i case is "no." Whate•ier allegations the P!a}ndffs have made have been controverted by the Defendants in affidavits andor supporting doc:{meneation and evidence shi:"tine :o the P!aintiiis che burden of proof by a oreconderar.ce of :he e:•tcence ~o sunpor:ur,sdict{or.. :.e burden aavi^_ beer shifted. '^e Srate itas :ailen -o ;.r•,•:e'.a eacc c:ses ihat :hese :hree _^t:::es :^a,;e :::.nsacted ,usiness oc -, EXHIBIT 2
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RECEIVED JUN 1 6 1998 TERRlP.dURHAM 0 0
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RECEIVED JUN i 0 1998 TERFi! P. DURHAM C."
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Mark C. Cunha 425 Lexington Avenue New York, NY 10017-3954 Bruce G. Merritt 875 Third Avenue New York, NY 10022 Michael C. Lasky 1740_Broadwa New York, NYy10019 J. Eugene Balloun 9401 Indian Creek Parkway Overland Park, KS 77210 D. Scott Wise 450 Lexington Avenue New York, NY 10017 Thomas F. Gardner 77 West Wacker Drive Chicago, IL 60601 Michael Liebert 200 East Randolph Drive Chicago, IL 60601 Thomas A. Finley 604 Locust St., 4th Fl. Des Moines, IA 50309-3773 J. Michael Weston P.O. Box 1943 Cedar Rapids, IA 52406-1943 John C. Monica One Kansas City Place 1200 Main Street Kansas City, MO 64105-2118 Wayne T. Stratton 515 South Kansas Avenue Topeka, KS 66603-3999 Steven L. Nelson 2500 Financial Center Des Moines, IA 50309-3993 Fred L. Don 801 Grand Ave., Suite 3100 Des Moines, IA 50309-8036
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IN T?iE CIRC7IT COURT OP T7iF3 Fl?TEENTfi JUDICIAi, CIRCC'.T CF F)ARICA, _N atiD FbR PA:.:4 MCH COi);fTY CASE NO. CL 95-L466 AH ::z STATE OF FLORIDA, et al., , P1Ai.Zti!fa, TRE AMERiC.3:7 TOBACCO COMPANY, at al., Defendants. RgaoaT aua RscoWwnd4Tau or sPPCia*• erL= THIS CAUSE camc on for hearing on Thuraday, Auguat 1, Ls96, at 11:CCa.m., pursuant to (I) Plaintiffa' Notics of Hearing on All nwtendanta' O3jsctiona to Interrogatoriea, Aequest• to Produce and P.equ®ata for Admiaaion, and Plaintiffa' Motion to Compel Dieeovery; and (2) H•A*T Indurtriea p.1.c'a ("B*A+T INDL'$TRILS") Motio_^_ to pureh a.-td for Entry of Protective Order with reapect to certain of claintiffe• RequestA for Admiaaion. Appearancem were nade by robert M. Montgomery, Jr. and William C. Geatry for the Plaintiffs, cy Gcorge P. Supran and Mary Elixabeth MCGarry for :deSendanc, H•A"T I:IDGSTRIES, by Stephen J. :Crigbaum a.v3 Murtxy r. Gar.liek for Defendant. Pf£ILIP MORRIS INC'JRFORASEIT, by Edward A. Mooq, JaRSS C. Munaon and David aernick for Defendanta, aRONN & wILT.=AMSCN 'SOSACCO CORPORATION (•BROW[4 & WILLIAMSON•) and BA2'IIS HOLDIN3s, INC., (°SATp3'), by James M. McCaan, Jr. for Defendant, BRITi$Ii-AM$SSIC.aN T9LACC0 COMPAiPY LIMITED, Dy David L. Roa tor Defendaata, LOEW5 r=ORPORATION ("LOrR6") and LOHRILLARD TCBACC-S COMPANY :^LOa2RILLtRD"), by Jame• A. Goold end Anthony 9aldau:a to=
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dun.16.1998 2:09PM 0 Richard R. Chabor SULLIVAN bc WARD, P.C. 801 Orand Avenue, Suite 7500 ` Des Moines, IA 50309•2719 Joseph iL Gundersoa DREHER, SIIv1PSON & J$N'SEN, P.C. 699 Walnur Srreer, Suite 1200 Des Moines, IA 50309 Dan K. Webb WINSTON & STRAWN 35 West W2ckerDrive Chicago,1160601 • No, 9455 P. 9/9 Michael M. Pap KASOWIT2, BENSON LAW FIRM 1301 Avenue of Amerieas New York, NY 10019-6022 Ross H. Sidacy Henry A. Harmon GREFE & SIDNEY 2222 Grand Avenue Des Moines, IA 50312 Roberc A. VanVooran LANE & WATERMAN 220 North Main Street Daveapon, IA 52801-1987
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5 Peter Durham Research Institute 90 Fifth Avenue New York, NY 10011 Lexis-Nexis Attn: Legal Research 8891 Gander Creek Dr. Miamisburg, OH 45342 John E. Flynn Asst. Vice President Commerce Clearing House, Inc. 4025 W. Peterson Ave. Chicago, IL 60646 Chief,.Opinions Unit The Bureau of National Affairs 1231 - 25th Street, N.W. Washington, D.C. 20037
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45
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1un, 16, 1998 2; 08PM 0 ` No. 9455 P, 4/9 IN THE IOWA DISTR.tCT COURT FOR POLK COUNTY THE STATE OF IOWA, es rel. THOMAS J. MILLER, in his capacity as ATTORNEY GENERAL OF THE STATE OF IOWA, Plaintiff, vs. R.J. REYNOLDS TOBACCO COMPANY; RJR NABISCO, INC.; THE AMERICAN TOBACCO COMPANX'; AMERICAN BRANDS, ING; BROWN & WILLIAMSON TOBACCO CORPORATION; B.AT. JNDUSTRIES, PLC; BATUS HOLDINGS, INC; BRITISH AMERICAN TOBACCO COMPANY, LTD.; BRITISFI-AMERICAN w No. CL 000-71048 (HOLDINGS) LTD.; PFTII.IP MORRIS INCORPORATED (PHTT IP MORRIS U S.A.); PHILlP MORRIS COMPANIES, INC.; LIGGETT & MYERS, INC.; LIGGETT GROUP, INC.; TFM BROOKE GROUP, LIMITED; LOHILLARD TOBACCO COMPANY;LORnTARn INCORPOB.ATED; LOEWS CORPORATION; UNITED STATES TOBACCO COMPANY; UST, IlVC.;1'HE COUNCIL FOR TOBACCO RESEARCH; THE TOBACCO INSTITUTE, INC.; HII,L & KNOWLTON, INC., Defendants. MOTION FOR RULE 136 PRETRIAL CONFERENCE COMES NOW the plaintiff, THE STATE OF IOWA, ex rel, THOMAS 7. MILLER, in his capacity as ATTORNEY GENERAL OF THE STATE OF IOWA. Pursuant to Iowa Rule of Civil Procedure 136, the Court is requested to 00 O\ Crt schedule a Pretrial Conference in this matter at the earliest pracdcable time for the tv _ \~o (v
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` Jun, 16. 1998 2:08PM ` DICRINSON, MACKAMAN, TYLER & HAGEN, P.C. Brent R Appel #479688537 699 Walnut, 1600 Hub Tower Des Moines, IA 50309 PHc 515-244-2600 FAX: 515-246-4550 Coun fix a specific date for trial of this lawsuit and fix other deadlines; and that the Court grant such further and additionall relief as may be fair, just, equitable and reasonable in all the premises. Respectfully submitted, ATTORNEY GENERAL OF IOWA Thomas J. Miller Attorney General WALKER LAW FIRM, P.C. E. Ralph Walker #PK0006346 2501 Grand Avenue, Suite E Des Moines, IA 50312 PH; (515) 281-1488 FAX: (515) 281-1489 WANDRO & ASSOCIATES, P.C. Steven P. Wandro, #484762548 2501 Grand Ave., Suite B Des Moines, IA 50312 PH: (515) 281-1475 FAX: (515) 281-1474 SIMMONS, PEBRTNE, ALBRIGHT & ELWOOD, P.L.C. Roger W. Stone, #LI0005358 115 3rd St. S.E., Suite 1200 Cedar Rapids, IA 52401-1266 PH: (319) 366-7641 FAX: (319) 366-1917 9 Na.9455 P. 7/9 49 Glenrdl. Norris #PK00040 George F. Davison, Jr, 493W366 Carla T. Schemmel PK0008610 2501 Grand Avenue, Suite C Des Moines, IA 50312 PH: 515-288-6532 FAX: 515-288-9733 AT'TORNEYS FOR THE PLAINTIFF Ttu STATE OF IOWA Page -4- 00
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0 0 44
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0 0 -'101
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2 Jay Henneberry, and Suzanne Cate Jones of Chadbourne & Parke, LLP, Los Angeles, California, for appellee British American Tobacco Company, Ltd." Corrected pages ~re attached. Dated this ~~'L'day of May, 1998. THE SUPREME_ COURT OF IOWA ames reasen, Justice Copies to: Thomas J. Miller Attorney General Hoover Building LOCAL Hon. Linda R. Reade Polk County Courthouse 500 Mulberry D"es Moines, IA 50309 E. Ralph Walker 2501 Grand Ave., Suite E Des Moines, IA 50312 Brent R. Appel 1600 Hub Tower 699 Walnut Des Moines, LA..50309 Steven P. Wandro 2501 Grand Ave., Suite B Des Moines, IA 50312 Glenn Norris 2501 Grand Ave., Suite C Des Moines, IA 50312 Roger W. Stone I 15 3rd St., S.E., Suite 1200 Cedar Rapids, IA 52401-1266 Roger T. Stetson 2000 Financial Center Des Moines, IA 50309
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4 Brent B. Green 380 Capital Square 400 Locust Street Des Moines, IA 50309-2331 Richard R Chabot 801 Grand Ave., Suite 3500 Des Moines, IA 50309-2719 Joseph R Gunderson 699VJalnut St., Suite 1200 Des Moines, IA 50309 Dan I<. Webb 35 West Wacker Drive Chicago, IL 60601 Michael M. Fay. 1301 Avenue of Americas New York, NY 100 19-6022 Ross H. Sidney 2222 Grand Ave. Des Moines, IA 50312 Robert A. Van Vooren 220 N. Main St. Davenport, IA 52801-1987 John A. McClintock Chester C. Woodburn III David L. Brown Hansen, McClintock & Riley Flemin Building 218 6t~ Avenue. Des Moines, IA 50309 Clerk of District Court Polk County Courthouse 500 Mulberry Street Des Moines, IA 50309-4241 Iowa State Bar Association 521 E. Locust Des Moines, IA 50309 Mead Data Central P.O. Box 933 Dayton, OH 45401 West Publishing Co. P.O. Box 64526 St. Paul, MN 55164
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=1~; rlrOCi n~ %s•+nnns :` 7~5mm Q >H product: (_) causation: and i:) damages. We'aave now cer:ned :he cause oi action as it e~iss after ae o9u sme-tdments. See .-\sseciated rndustr`.:s at p. 19. [Emphasis added.] The Florida Supreme Court has ruled that before the 1994 law that the State•s cause of action was "derivative in the nature of a subrogaiion. assignment, or lien." Therefore, rhe Plaintiffs in tf-is cause of action are limited to bringing complaints for aegligence and/or defective products in seeking Medicaid reimbursements. Bv separate actions the State may pursue subrogation. assignment_ and/or lien rrgarding any and all damages occur.ing prior to the 1994 amendments. Second, the Flor.da Supreme Court held in Associated Industries: As part of the 1994 amendments to the Act, the legislature enacted a para¢.*aph that allows the State to proceed without identirving each individual recipient of Medicaid papments ... We find that this portion of the statute does in fact encroach upon due process guarantees of the Florida Constitution under article 1, section 9... The current _ -ac: would prevent a defendant 7om demons¢a.ting_he impronr.ety of individual pavments. Impropriety could be the result of saud, misdiagrosis of the patient's condition, or unnecessary neatments. The de:endant's inabilirr *.o dete.::~ir-e individual Nledicaid recioiea w;,uid aiso preclude :.t:at defendant 57om proving taat its nroduct was . .•:e^ the rec:ai~a. : :Wce. ;l•a >;atnto: ~ er^visic,^. :esaits in 3 con:.::sive nresumntion'liat everv Medicaid oavme: t is proper and necessitated by the deiendant's product. It is iilogical and unreasonable to call this a fair process. A. defendant dannot rebut this presumption because :here is no mechanism for determining for whom the payments were made . . . See Associated industries at pp. 29-30. lrmpbasis added.] What the Flonda Supreme Court has done in this sec;ion of the Associated Industries case is to striice an; portion of the 199,1 amendments disabling any defendant fron•, questioning the propriery oI individual payments. The Florida Supreme Court did s require that identity of recipients of Medicaid payments be plead in the complaint. :~, specific mechanism to identify must be afforded :o ::7e Defendants so a::hallen,e to any improper payments to individuals can be made. The snecinc r^ec:^anisrr: :o allow'or omnliarce .vith ::.is ~orion o[ :he =:orica Suoreme Court's oninicn := s: c^_tec ' cstr. s.v :: ,e se: foa^ ::e:c~~ E%6IBIT 2
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aun. 18, 1998 2:98PM • 9 No.9455 P. 5/9 purpose of fixing a date for trial and setting discovery deadlines. in support of this Motion, the plaintiff states: 1. Plaintiff respectfully requests that this matter be set for trial and that the Court fix a firm trial date in accordance with the Iowa Rules of Civil Procedure and the Time Standards for Case Processing adopted by the Iowa Supreme Court. Plaintiff suggests that a trial in February 1999 is reasonable and appropriate. It is a date for trial which was originally suggested by the Court. Pla:,ntiff notes that a Februar,v 1999 trial date would comply with the Time Standards for Case Processing adopted by the Iowa Supreme Court (cases in which a jury has been demanded are to be tried within 18 months of filing). While this case is unique, involves a number of defenda.nts, and has been focused on pre-trial motions to dismiss, plaintiff believes recent developments, which are discussed below, make the request for trial in February 1999 reasonable and realistic. 2. Plaintiff respectfully submits that the trial in the State of Minnesota of claims against the various defendants in this lawsuit has significantly and substantially diminished the amount of discovery that will be necessary for the preparation of this lawsuit for trial. Most notably, the Minnesota Document Depository is now available for review of defendants' documents and materials. Furthermore, Minnesota has released to the public thousands of documents previously designated by the defendants as confidential, and those documents are germane to the issues of this lawsuit. Page -2-
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IN THE SUPREME COURT OF IOWA No. 69 / 97-1683 Filed Apri122, 1998 STATE OF IOWA ex rel. THOMAS J. MILLER, in His Capacity as Attorney General of Iowa, Appellant, vs. PHILIP MORRIS INC. (PHILIP MORRIS U.S.A.); PHILIP MORRIS COMPANIES, INC.; R.J. REYNOLDS TOBACCO CO.; BROWN & WILLIAMSON TOBACCO CORPORATION, Individually and as Successor by Merger to the AMERICAN TOBACCO CO.; LORILLARD TOBACCO CO.; LORILLARD INC.; UNITED STATES TOBACCO CO.; UST, INC.; THE COUNCIL FOR TOBACCO RESEARCH-U.S.A., INC.; HILL &. KNOWLTON, INC.; THE BROOKE GROUP, LTD.; LIGGETT & MYERS, INC.; LIGGETT GROUP, INC.; and BRITISH AMERICAN TOBACCO COMPANY, LTD., Appellees, RJR NABISCO, INC.; AMERICAN BRANDS, INC.; B.A.T. INDUSTRIES, PLC; BATUS HOLDINGS, INC.; BRITISH-AMERICAN (HOLDINGS) LTD.; LOEWS CORPORATION; and THE TOBACCO INSTITUTE, INC., Defendants. MAY 07 1998 CLERK SUPREME CQ;1R7 Appeal from the Iowa District Court for Polk County, Linda R. Reade, Judge. An interlocutory appeal from the district court's dismissal of three counts of plaintiffs petition. AFFIRMED. Thomas J. Miller, Attorney General, E. Ralph Walker of the Walker Law Firm, P.C., Des Moines, Steven P. Wandro of Wandro & Gibson, P.C.,
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Jun, 9.1998 5;O1PM • IN THE SUPREME COURT OF IOWA No- 97-1683 Polk County No. CL71048 PROCEDENDO STATE OF IOWA ex rel. THOMAS J. MILLER, in His Capacity as Attorney General of Iowa, Plaintiff-Appellant, vs, ~ No, 9359 F, 3/4 ~ ~ p ~ RJ. REYNOLDS TOBACCO COMPANY;.RJR NABISCO, INC; TFIE AMERICAN TOBACCO COMPANY; AMERICAN BRANDS, INC.; BROWN & WILLIAMSON TOBACCO CORPORATION; B.A.T. INDUSTRIES, PLC; BATUS HOLDINGS, INC.; BRITISH AMERICAN TOBACCO COMPANY, LTD.; BRITISH-AMERICAN (HOLDINGS) LTD.; PHILIP MORRIS, INCORPORATED (PIIILIP MORRIS US.A.); PHILIP MORRIS COMPANIES, INC.; LIGGETT & MYERS, INC.; LIGGETT GROUP, INC.; THE BROOKE GROUP, LIbII.TED; LORILLARD TOBACCO COMPANY; LORILLARD INCORPORATED; LOEWS CORPORATION; UNITED STATES TOBACCO COMPANY; UST, INC.; THE COUNCIL FOR TOBACCO RESEARCH; THE TOBACCO INSTITUTE, INC.; and HILL & KNOWLTON, INC„ Defendants-Appellees. To the Iowa District Court for Polk County- Whereas, rhere was an appeal from the district coutt judgment in the above-captioned case to the supreme court, and on the 22nd day of April, 1998, the supreme court affirmed the district court judgrnent. Therefore, you are hereby directed to proceed with diligence and according to law in the same manner as if there had been no appeal. In witness whereof, I have hereunto set my hand and affixed the seal of the supreme court. Done at Des Moines this ~day of June, 1998. ~ R.K. R chardson, Cler k Iowa Supreme Court
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. RECEr v~ .~ APR 2 2 1998 TERRI P. DURHAM
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3 Brent B. Green and Gregory R. Brown of Duncan, Green, Brown, Langeness & Eckley, P.C., Des Moines, for appellees United States Tobacco Company and UST, Inc. Joseph R. Gunderson of Dreher, Simpson & Jensen, Des Moines, and Fred M. Weiler and Yvonne Look of Davis & Gilbert, New York, New York, for appellee Hill & Knowlton, Inc. John A. McClintock, Chester C. Woodburn III, and David L. Brown of Hansen, McClintock & Riley, Des Moines, and John Nyhan, Jay Henneberry, and Suzanne Cate Jones of Chadbourne &. Parke, LLP, Los Angeles, California, for appellee British American Tobacco Company, Ltd. Considered by Larson, P.J., and Carter, Lavorato, Andreasen, and Ternus, JJ.
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oaisAPR. 22 1998812:22PM 5jWj&a9sz cnkra & siunEY -, -- •• NO, 3738 P. 4/12°°" S Brent 8, Green and Gregory R, Brown of Duncan, Green. Brown, Langeness & Edeley, P.C., Des Moines, for appeIIees United States Tobacco Company and UST, xnc, Joseph R. Gunderson of Dreher, Simpson & Jensen, Des Moines, and Fted M. Weiler and Yvonne Look of Davis & Gilbert, New York, New York, for appellee Hill 4 Knowlton, Inc. Considered by Larson, P.J., and Caner, Lavorato, Andreasen, and'Temus, JJ•
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MAY 12 1998 C,-'l IN THE SUPREME COURT OF IOWA No. 69 / 97-1683 CORRECTION NOTICE STATE OF IOWA ex rel. THOMAS J. MILLER, in His Capacity as Attorney General of Iowa, Appellant, vs. PHILIP MORRIS INC. (PHILIP MORRIS U.S.A.); PHILIP MORRIS COMPANIES, INC.; R.J. REYNOLDS TOBACCO CO.; BROWN & WILLIAMSON TOBACCO CORPORATION, Individually and as Successor by Merger to the AMERICAN TOBACCO CO.; LORILLARIS TOBACCO CO.; LORILLARD INC.; UNITED STATES TOBACCO CO.; UST, INC.; THE COUNCIL FOR TOBACCO RESEARCH-U.S.A., INC.; HILL &- KNOWLTON, INC.; THE BROOKE GROUP, LTD.; LIGGETT & MYERS, INC.; LIGGETT GROUP, INC;; and BRITISH AMERICAN TOBACCO COMPANY, LTD., Appellees, RJR NABISCO, INC.; AMERICAN BRANDS; INC.; B.A.T. INDUSTRIES, PLC; BATUS HOLDINGS, INC.; BRITISH-AMERICAN (HOLDINGS) LTD.; LOEWS CORPORATION; and THE TOBACCO INSTITUTE, INC., Defendants. MAY 07 1998 CLERK SUPREME C6URT Pursuant to Iowa Supreme Court Rule 8.1, the opinion in this case, filed April 22, 1998, is corrected as follows: On page one, in the caption, add "British American Tobacco Company, Ltd." as an appellee and delete "British American Tobacco Company, Ltd" as a defendant. On page three, add "John A. McClintock, Chester C. Woodburn III, and David L. Brown of Hansen, McClintock &- Riley, Des Moines, and John Nyhan,
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RECEIVED JAN 0 8 1998 TERRI P. DURHAM
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2 E. Ralph W alker 2501 Grand Ave., Suite E Des Moines, IA 50312 Brent R Appel 1600 Hub Tower 699 Walnut Des Moines, IA 50309 Steven P. Wandro 2501 Grand Ave., Suite B Des Moines, IA 50312 Glenn Norris 2501 Grand Ave., Suite C Des Moines, IA 50312 Roger W. Stone 115 3rd St., S.E., Suite 1200 Cedar Rapids, IA 52401-1266 Roger T. Stetson 2000 Financial Center Des Moines, rA 50309 Mark C. Cunha 425 Lexington Avenue New York, NY 1 00 1 7-3954 Bruce G. Merritt 875 Third Avenue New York, NY 10022 Michael C. Lasky 1740 Broadway New York, NY 10019 J. Eugene Balloun 9401 Indian Creek Parkway Overland Park, ICS 77210 D. Scott Wise 450 Lexington Avenue New York, NY 10017 Thomas F. Gardner 77 West Wacker Drive Chicago, IL 60601 Michael Liebert 200 East Randolph Drive Chicago, IL 60601
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4 Clerk of District Court Polk County Courthouse 500 Mulbeny Street Des Moines, IA 50309-4241
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aizAPR,22.1998a12:22PM s 452 GREFE & SIDNEY N0, 3738 P. 3/12oos 2 Des Moines, Roger W. Stone of Simmons, Per•rine, Albnghc & Ellwood, P.L.C., Cedar Rapids, Brent R. Appel of Dickinson, Mackaman, Tyler & Hagen, P.C., Des Moines, and Glenn Norris of Hawkins St. Norris, Des Moines, for appellant Robert A. Van vooren and Thomas D. Waterman of Lane & Waterman, Davenport, and Dan IC Webb, Thomas J. Frederick, Kutt L. Schultz, and Kevin J. Narko of Wintson & Strawn, Chicago. Yllinois, for appellees Philip Morris incorporated and Philip Morris Companies, Inc. Steven L. Nelson of Davis, Brown, TCoehn, Shors & Roberts, P.C.. Des Moines, and Thomas P. Gardner of Jones, Day, Reavis & Pogue, Chicago, illinois, for appellee R. J. Reynol& Tobacco Company. Roger T, Stetson of Beiin Lamson McCormick Zumbach Flynn, P.C., Des Moines, and Andrew R. McGaan and Michelle H. Browdy of Kirldand & Ellis, Chicago, Illinois, for appellees Brown &Williamson Tobacco Corporation and The American Tobacco Company. Ross H. Sidney and Henry A. Harmon of Grefe & Sidney, Des Moines, and John C. Monica, Craig E. Proctor, and Catherine M. Castelluccio of Shook, Hardy S:. Bacon, L.L,P., Kansas• City, Missouri, for appellees Lorillard Tobacco Company and Loriilard Incorporated. J. Michael Weston and Brenda K, Werner of Moyer & Bergman, P.L.C., Cedar Rapids, and Bruce G- Meriitt and Eric Falkenstein of Debevoise & Plimpton, New York, New York, for appellee The Council for Tobacco Research.
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oai~APR, 22. 1998'812:24PM &J&aass _ ~ ~-_`-'~_ -----^- GREFE k SIDNEX N0.3738 P. 12/12'12 I1 The zemoteness doctrine was applied to prevent Blue Cross and Blue Shield of Minnesota (Blue Cross) from bringing a direct ton action against tobacco companies to recover for injuries to its consumers, the smokers. State v Philip Monis, Aa, 551 N.W.2d 490, 495 (Minn. 1996). The Minnesota-5upreme Couri found that while it believed Blue Cross had been injured, the tort was too remote for Blue Cross to recover upon it. Id. The court stated there needed to be a "closer connection between the injury and the alleged tortfeasor." Id. In the matter before us, a failure to apply the remoteness doctrine would permit unlimited suits to be filed. Any employer or insurer who paid medical expenses of an employee or Insured injured by smoking would have a claim against the tobacco industry. We are not inclined to open the proverbial flood gates of litigation to such an extent. V. Concluston. We conclude the trial court did not err in dismissing counts II, IIT, and VII of the State's petition. ABBFtRMEL1.
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Jun, 9, 1998. 5cQIPM 0 IN THE SUPREMk COURT OF IOWA No. 97-1683 Polk County No. CL71048 BILL OF COSTS STATE OF IOWA ex rel. THOMAS J. MILLER, in His Capacity as Attorney Generall of Iowa, Plaintiff-AppeUant, V5. ~ No. 9359 P, 4/4 R.J. REYNOLDS TOBACCO COMPANX;. RJR NABISCO, INC.; THE AM12ICAY TOBACCO COMPANY; AMERICAN BRANDS, INC.; BROWN & WILLIAMSON TOBACCO CORPORATION; B.A.T. INDUSTItIES, PLC; BATY7S HOLDINGS, INC.; BRITISH AMERICAN TOBACCO COMPANY, LTD.; B12ITISFI-AMERICAN (HOLDINGS) LTD.; PIX[LIP MORRIS, INCORPORATED (PHILIP MORRIS U.S.A.); PHILIP MORRIS COMPANIES, INC.; LIGGETT & MYERS, INC.; LIGGE'CT GROUP, INC.; THE BROOI{E GROUP, LIMITED; LORILLARD TOBACCO COMPANY; LOR[LLARD INCORPORATED; LOEWS CORPORATION; UNITED STATES TOBACCO COMPANY; UST, INC.; THE COUNCIL FOR TOBACCO RESEARCH; TIIE TOBACCO INSTITUTE, INC.; and HILL & KNOWLTON, INC., Defendants-Appellees. On the 22nd day of April, 1998, the supreme court affirmed the district court judgment. Clerk'sfeesincurred ....................................... S 00.00 Amount of clerk's fees already paid by the appellant ............. $ 00.00 Balance due the clerk .............. . .......... . ............ S 00.00 Printing costs of appellees .......... . . . . .................... 2$ 48_00 [Computed pursuant to Iowa Rule of Appellare Procedure 16(c)] TOTAL ......................... . .......... $ 248.00 The above costs of $248.00 are hereby taxed against the appellant, and judgment is entered accordingly. The costs shall be paid to the clerk of the district court, who shall pay them to the persons entitled thereto. See Iowa Code § 625.19. The district courr clerk shall remit them to Robert Van Vooren.~ ~i Dated this -)day of June, 1998. E-- K. Itic ardson, Clerk Iowa Supreme Court 1Q -A
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3 Thomas A. Finley 604 Locust St., 4th Fl. Des Moines, IA 50309-3773 J. Michael Weston P.O. Box 1943 Cedar Rapids, IA 52406-1943 John C. Monica One Kansas City Place 1200 Main Street I<ansas City, MO 64105-2118 Wa e T. Stratton 515 South Kansas Avenue Topeka, KS 66603-3999 Steven L. Nelson 2500 Financial Center Des Moines, JA 50309-3993 Fred L. Don 801 Grand Ave., Suite 3100 Des Moines, IA 50309-8036 Brent B. Green 380 Capital Square 400 Locust Street Des Moines, IA 50309-2331 Richard R. Chabot 801 Grand Ave., Suite 3500 Des Moines, IA 50309-2719 Joseph R Gunderson 699 Walnut St., Suite 1200 Des Moines, IA 50309' Dan IC Webb 35 West Wacker Drive Chicago, IL 60601 Michael M. Fay 1301 Avenue of Americas New York, NY 10019-6022 Ross H. Sidney 2222 Grand Ave. Des Moines, JA 50312 Robert A. Van Vooren 220 N. Main St. Davenport, IA 52801-1987
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oaiFAPR, 22. 199012:24P. Sek2da 4452 GEEFS & 5! D ~-T- -~------ - -------- NEY ~I~ N0, 3738 P, 10/12)10 9 Restatement aE Restitution § 76, at 331 (1936), In.15[unt v. E»rzen, 252 N.W.2d 445, 448 (Iowa 1977), we cited section 76 of the Restatement of Restitution in support of indemnification of the original tortfeasor. We recognized indemnirf "is founded on equitable principles; it is allowed where one person has discharged an obligation that anotherperson should bear; it places the final responsibility where equity would lay the ultimate burden." Hunt, 252 N.W.2d at 447-48 (citation omitted). In Hunt, a tottfeasor, who was held liable for injuries caused by him and those injuries caused by the treating hospital, was allowed to seek indemnity for the latter injury. Because the original tortfeasor was held liable to the injured person by operation of law, he could claim indemnity against the hospital. In Aetera v. Lyons, 168 N.W.2d 759, 766,68 (Iowa I969), we recognized a common law right of indemnity in certain situations. We stated: The breach of nondeleaable duties may constitute a basis for an action in indemniryagainst a third party who creates a dangerous condition.,.. One who is liable only by reason of a duty imposed by law for the consequences of another's negligence may recover over against the active perpetrator of the wrong. Peters, 168 N,W.2d at 766. We held an owner of a dog who was not guilty of a wrong but was statutorily liable for damages caused by the owner's dog, may be indemnified by the party guilty of the wrong ihat caused the Ioss. ldU at 768. We agree with the State that Iowa recognized common law indemnity before the adoption of section 249A6 in 1979. However, common law indemniry is limited to circumstances where there is an express contract, vicarious liability, or a breach of an independent duty of the indemnitor to the indemnitee. Duniels v, Highway Truck F.quip„ Inc., 505 N,W.2d 485, 490 (Iowa 1993). Both Hunt and Peters were classic cases involving vicarious liability. Indemnity was allowed because the law imposed liability on one person for the actionable conduct of another.
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GREFE & SIDNEY HILL & KNOWLTON, INC. CASTELUCCIO ~~L 6~~ .,Ae' .7 epn R Gunderso ~4 . EHER, SIMPSON IFSEN 1200 Hub Tower 699 Walnut Street Des Moines, Iowa 50309 (515) 288-5000 (515) 288-7718 (fax) Of Counsel Fred M. Weiler Yvonne Look DAVIS & GILBERT 1740 Broadway New York, New York 10019 (212) 468-4800 (212) 468-4888 (fax) 7 0008
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oOAPR, 22. 1998s12:23PhI J&.aasz . ' GREFE & SIDNEY ~• Np, 3738 P. 8/]2 1008 7 down one of two avenues for the recovery of medical assistance benefits paid for an individual when the legal•liabiliry for injury rests with another individual: (1) action directly against the tort- feasor, or (2) claim against the settlement or judgment recovered by the medicall assistance recipient. Department of Human Servs. v. Brooks, 412 N.W.2d 613, 615 (Iowa 1tI87), In Brooks, we refused to allow the Stare to make a common law claim for reimbursement against the recipient's conservatorship. Id.•at 616_ We xecognized a recipient of public assistance was not obligated at common law to reimburse the State for assistance provided. IdR at 614. Section 249A.6(1) was the legislature's litnited response to the common law rule. Scott v. State er reT. Dep't of Human Serps., 438 N.W.2d 834, 835 (Iowa 1989). Under the statute, the department s right'to reimbursement depended on subrogation principles. Bales v. Warnm County, 478 N,W,2d 398, 400 (Iowa 1991). If the department elects to pursue its claim against the tortfeasor direetly, the department's clainn is subject to any defense that might be asserted against the recipient. Id. at 401, After section 249A.6( I) was amended in 1989, the department was subrogated to the extent of those payments, to all monetary claims which the recipient may have against third pardes. ffiilt v. State ex ret. Dep't ofHuonan Servs., 493 NAti'.2d 803, 807 (Iowa 1992). The amendment specifically provided the failure of the recipient to state a claim for recovery of medical expenses did not defeat the department's right of subrogation if there was any recovery on the recipient's claim. Id. In 1993 the legislature deleted reference to "subrogation" and instead provided the department would have a"lien" on all monetary claims which the recipient may have against third parties. 1993 Iowa Acts ch. 180, § 50. ~ N -p
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dun, 16. 1998 2:09PM ' er, nACC n 0/fl • No, 9455 P. B/9 CER'1'TFIC1iTB OF SERVICE The undersigned certifies chac a true copy of this instrement was served upon each of the attorneys of record and on all other persons riot represented by counsel. The names and addresses of each person upon whom service was made appears below. This furcher certifies that a true copy of this document was ettolosed in an envelope, addressed to each person whose nanu appears below, with postage fully paid. Each envelope was deposited in a United States Post Office Depository in Des Moines, Iowa, on iune 11, 1998. One of the Attorneys for the Plaintiff Copy to: Roger T. Steuson BELIN HARRiS LAMSON MCCORbIICS ZUMSACFF, AP.C. 2000 Financial Center Des Moines, IA 50309 Thomas A. Finley FINLEY, AhT, SMITH, SCI:IARNBERG, MAY & CRAIG, P.C. 604 Locose Street, 4* Floor DesMoines, IA 50309-3773 Mark C. Cunha SIMPSON, THACHER & BARTLETT 425 Lexington Ave. New York, NY 10017.3954 Bruce G. Merritt DE9EVOISE & PLIMI'TON 975 Thisd Ave. New York NY 10022 Michael C. Lasky DAVIS & GILBERT 1740 Broadway New York, NY 10019 J. EugeneBalloun SHOOK, HARDY & BACON 9401 Indian Creek Parkway OverlandPark, KS 77210 D. Scoct W'ise DAVIS, POLK & WARDWSLL 450 Lexington Ave. New York, NY 10017 Thomas F. Gardner JONES, DAY, REAVIS & POGLJE 77 West Wacker Drive Chicago, IL 60601 Michael Lieben 'aTR>'H„ALsTTt & ELLIS 200 East Randolph Drive Chitago, IL 60601 J. Michael Weston MOYER & BERGMAN, P.L.C. P.O.Box1949 Cedar Rapids, IA 52406-1943 John C. Monica SHOOK, HARDY & BACON One Kansas Cicy Place 1200 Main Street Kansas City, MO 64105-2118 Wayne T. Stratton GOODELL, STRATTON LAW FIRM 515 South ISansas Ave. Topeka, ISS 66603-3999 Steven L. Nelson DAVIS, BROWW,1KOEHN, SHORS & ROBERTS, P.C. Suite 2500, The F"mancial Center, 666 Walnut Street Des Moines, IA 50309-3993 FredL. Door WASKER, DO'RR, WARvIER 8[ MARCOtm1Fx P.C. 801 Grand Avenue, Suite 3100 Des Moines, IA 50309-8036 Brent B. Green DUNCAN, GREEN, BROWN, LANGENESS & ECKLEY, P.C. 400 Locust Street, 380 Capital Square Des Moines, IA 50309-2331 Page -5-
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04!?APR, 22. 1998s12:24PM 6Y 4452 GREFE & SIDNEY NO. 3738 P, 11/12)II 10 C. Discussion Here, the State urges the discharge of the staiutoxy' obligation to pay Medicaid benefits entitles it to seek indemnification from the defendants. We agree the purpose of the federal requirement in 42 U.S,C. § 1396a(a)(25) and Iowa Code section 249A6 was to auth.orize and enhance the recovery of medical payments- from third parties responsible for the injury that required medical services, Section 249A.6(6) expressly allows a direct action against a liable third party. However, the State is not pursuing a lien remedy to recover medical payments under section 249A.6. A statutory cause of action under section 249A.6 was not pled in the petirion. The State made no subrogation claim against the defendants and has no common law zight to indemnity, The State's exclusive rernedy for recovery of these costs is under section 249A.6. Although the statutory provisions to enforce the remedy may be impractical, it is the only remedy provided. IV. . Remote and Derlvative Claims. The district court dismissed counts II, 111, and VII because "the State cannot recover damages caused by defendants because the injuries are derivative and too remote," We agree. Under Iowa law, an employer cannot recover in a direct action against a third party for remote and derivative injuries resulting from a third-parry's conduct towards the employee. Andersm Plasterers v. Meirucke, 543 N.W.2d 612, 613 (Iowa 1996); see also Eddy v. Casey's Gen. Store, Inc., 485 N.W.2d 633, 636-37 (Iowa 1992) (absent dram shop act, link between seller of alcohol and party injured by drunk driver is too remote to impose liability). The remoteness doctrine "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." Craft Chtm. Co. v.111inois,Bel1 TeI. Co., 60S N.E.2d 243, 245 (111. App. Ct 1993).
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. - - • -_- -- - 1212_9/97 MON 11;09 F.A% 515 215 44>2 GREFE & SIDNEY copy to: THE STATE OF IOWA EX REL THOMAS J. MILLER IN HIS CAPACITY AS ATTORNEY GENERAL OF THE STATE OF IOWA E. Ralph Walker, PK0006346 SCALRER LAW FIRM 2501 Grand Avenue, Suite E Des Moines, IA 50312 Telephone: 515/281-1488 Telefax: 515/281-1489 Steve P. Wa.ndro, #484762548 AANDRO & GIBSON 2501 Grand Avenue Des Moines, IA 50312 Telephone: 515/281-1475 Telefax: 515/281-1474 Brent R. Appel, #479688537 DICKINSON, MACItAMAN, TYLER ~ HAGEN 699 Walnut Street, 1600 Hub Tower Des Moines, IA 50309 Telephone: 515/244-2600 Telefax: 515/246-4550 Glenn L. Norris, PK0o04035 HAWKINS & NORRIS 2501 Grand Avenue, Suite C Des Moines, IA 50312 Telephone: 515/288-6532 Telefax: 515/288-9733 Roger W. Stone, L10005358 SIMMONS, PERRINE, ALBRIGHT & ELWOOD 153 3rd Street S.E., Suite 1200 Cedar Rapids, IA 52401-1266 Telephone: 319/366-7641 Telefax: 319/366-1917 CdSTELUCCIO
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lAP$ 22, 1998812:24PM 5' 446E CaEFE & SYDN$Y 8 r• N0.3738 P, 9/12100s A. Statutory Construction. . , The district court applied rules of statutory coristarction in its detennination that section 249A.6 was the State's exclusive remedy to recover Medicaid costs. The court concluded: ' The Iowa Supreme Court has long recogniaed che legat principle that statutes creatin~ rights and Iiabiliues that did not exist at common law provide ihe exclusive remedy for enforcing those rights and liabilities. Sce Van BaaTe v. Ciiy of Dcs Moines, 550 N.W.2d 153, 156 (lowa 1996); Cole v. City of Muscatine, 14 Iowa 296, 298-99 (1862). Because there was no right to recover Medicaid costs from the reeipient. or third-parties at common law, the district court found section 249A.6 was the State's exclusive remedy. In support the district court cited .Brooks where we stated: The recipient of public assistance was not obligated at common law to reimburse the State for assistance provided. The State could not inutitute suit against the recipient or others to recover amounts expended for the recipient Brooks, 412 N.W.2d at 614 (citations omitted) (emphasis added). The State argues a converse rule of statutory construction applies; that is, where a statute merely prescribes a new remedy for a preexisting right or liability, the new remedy is deemed cumulative, unless the statute shows an intention to abrogate or supersede the old remedy. See Lodge v. Drakc, 243 Iowa 628, 631, 51 N.W.2d 418, 419-20 (1952), The State claims a common law right to indemnity predates section 249A.6. B. Common Law Indemnity. The State claims the Restatement of Restitution provides a sufficient basis for the State's common law claim of indemnity, Under the provisions of the Aestatement: A person who, in whole or in part, has discharged a duty which is owed by him but which as between himself and another should have been discharged by the other, is entitled to indemnity from the other, unless the payor is barred by the wrongful nature of his conduct.
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4 Clerk of District Court Polk County Courthouse 500 Mulberry Street Des Moines, IA 503b9-4241
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RECEIVED flEC3a9997 TERRI P. DURHAM ~ rn ~ ~ ~ cn 0
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04/~APR, 22. 1998' 12: 22PM s~zg~ 445z c~rx ~ siunaz - ., ------0• A9.3738 P. 5/12°"a - 4 ANDREASBN, )usticc. - The Attorney General of the State of Iowa filed a ninety-nine page petition in district court against twenty-two defendants collectively identified as the tobacco industry, The State claims it has been damaged because it innxi~red, and eontinues to incur, substantial costs providing health care and other services to citizens and employees of the state who have suffered or will suffer from tobacco- related injuries, diseases, and illness. The petition identified nine separate counts. Certain defendants filed a motion to dismiss the petition. Foilowing hearing on the motion, the district court dis missed four of the nine counts. We granted the State's application for interlocutory appeal. See Iowa R. App. P. 2. On appeal, the State challenges the dismissal of count 11 (civil liability for deception), count ITT (voluntary assumption of a special dury), and count VII (indemnity). The State does not contest the dismissal of count IV (unjust enrichmenr/restiturion) and has waived its right to challenge the court's ruling on this count. See Iowa R App.1'. 14(a)(3); State v. CRST Int'1, Inc, 553 N.W.2d 890, 895 (Iowa 1996). I. Scape of Review. On an appeal from the dismissal of claims under Iowa Itule of Civii Procedure 104(b), our review is closely dreumscsibed We assess the petition in the light most favorable to the plaintiff and resolve all doubts and ambiguities in plaintiffs favor. Below v. Skarr, 569 N,W.2d 510, 511 (Iowa 1997). "To sustain such a motion, the movant must show no state of facts is conceivable under which the plaintiffs might show a right of recovery," Id. 11. Background. A brief summary of the allegations contained in the petition as described in the State's reply brief, shows:
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12/29/97 HON 11;09 F.A% 315 2453452 GREFE & SIDNEY e.,-. CdSTELUCCZO 0 By UNITED STATES TOBACCO COMPANY.and . UST INC. Des Moines, Iowa 50309 (515) 288-6440 Fax (515) 288-6448 & Eckley 380 Capital Square 400 Locust Street Brent B. ("Chr een, Esq. Gregory R. B , ~sq. Duncan, Gree , Brown, Langeness BRITISH AMERICAN TOBACCO COMPANY, LTD. 0007 By ohn A. McClintock 034 1 Chester C_ Woodbur 2 PK00060.85 David L. Brown PK0000599 HANSEN, McCLINTOCK & RILEY Eighth Floor - Fleming Building 218 Sixth Avenue '' Des Moines, Iowa 50309 (515) 244-2141 (515) 244-2931 (fax) e Of Counse]. John Nyhan Jay Henneberry Suzanne Cate Jones CHADBOURNE & PARKE LLP 601 South Figueroa Street Los Angeles, California 0017 (213) 892-1000 (213) 622-9865 (fax) 6
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0 0 JAN m 7 ,99s IN THE SUPREME COURT OF IOWA No. 97-1683 Polk County No. CL71048 TL~~ ~ ORDER JAv 05 199; ~ STATE OF IOWA ex rel. THOMAS J. MILLER, in ~ His Capacity as Attorney General of Iowa, e Cl ~. n. _~_y 4 Plaintiff-Appellant, ~ vs. R.J. REYNOLDS TOBACCO COMPANY; RJR NABISCO, INC.; THE AMERICAN TOBACCO COMPANY; AMERICAN BRANDS, INC.; BROWN & WILLIAMSON TOBACCO CORPORATION; B.A.T. INDUSTRIES, PLC; BATUS HOLDINGS, INC.; BRITISH AMERICAN TOBACCO COMPANY, LTD.; BRITISH-AMERICAN (HOLDINGS) LTD.; PHILIP MORRIS, INCORPORATED (PHILIP MORRIS U.S.A.); PHILIP MORRIS COMPANIES, INC.; LIGGETT & MYERS, INC.; LIGGETT GROUP, INC.; THE BROOI<E GROUP, LIMITED; LORILLARD TOBACCO COMPANY; LORILLARD INCORPORATED; LOEWS CORPORATION; UNITED STATES TOBACCO COMPANY; UST, INC.; THE COUNCIL FOR TOBACCO RESEARCH; THE TOBACCO INSTITUTE, INC.; and HILL & KNOWLTON, INC., Defendants-Appellees. The State has filed a second application to expedite this appeal (an order was entered on October 17, 1997, granting an initial application to expedite the appeal), and the defendants have filed a response in which they resist the application. Upon consideration of the application and response, IT IS ORDERED that the application to expedite this appeal be denied. Dated this S~+hday of January, 1998. J.L. Larson, Justice Copies to: Thomas J. Miller Attorney General Hoover Building LOCAL LORI 50119 IOWA-AG RTG. SLIP RECE *D BY: --- 'Y- E EXP ITED COPIES TO: WGZ CM2L C1P£` JAS PTFi 1st pg. WJC REN KTB ULL COPIES TO: GEV SMC
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0 RECEIVED DEC 1 2 1997 TERRI P. DURHAM
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2 E. Ralph Walker 2501 Grand Ave., Suite E Des Moines, IA 50T12 Brent R. App el 1600 Hub Tower 699 Walnut Des Moines, IA 50309 Steven P. Wandro 2501 Grand Ave., Suite B Des Moines, IA 50312 Glenn Norris 2501 Grand Ave., Suite C Des Moines, IA 50312 Roger W. Stone 115 3rd St., S.E., Suite 1200 Cedar Rapids, IA 52401-1266 Ro er T. Stetson 20~0 Financial Center Des Moines, [A 50309 Mark C. Cunha 425 Lexington Avenue New York, NY 10017-3954 Bruce G. Merritt 875 Third Avenue New York, NY 10022 Michael C. Lasky 1740 Broadway New York, NY 10019 J. Eugene Balloun 9401 indian Creek Parkway Overland Park, KS 77210 D. Scott Wise 450 Lexington Avenue New York, NY 10017 Thomas F. Gardner 77 West Wacker Drive Chicago, IL 60601 Michael Liebert 200 East Randolph Drive Chicago, IL 60601
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OE C 2 2 1997 IN THE SUPREME COURT OF IOWA No. 97-1683 ° Polk County No. CL71048 ORDER STATE OF IOWA, ex rel., THOMAS J. MILLER, in His Capacity as Attorney General of Iowa, Plaintiff-Appellant, vs. R.J. REYNOLDS TOBACCO COMPANY; RJR NABISCO, INC.; THE AMERICAN TOBACCO COMPANY; AMERICAN BRANDS, INC.; BROWN & WILLIAMSON TOBACCO CORPORATION; B.A.T. INDUSTRIES, PLC; BATUS HOLDINGS, INC.; BRITISH AMERICAN TOBACCO COMPANY, LTD.; BRITISH-AMERICAN (HOLDINGS) LTD.; PHILIP MORRIS, INCORPORATED (PHILIP MORRIS U.S.A.); PHILIP MORRIS COMPANIES, INC.; LIGGETT Sz MYERS, INC.; LIGGETT GROUP, INC.; THE BROOKE GROUP, LIMITED; LORILLARD TOBACCO COMPANY; LORILLARD INCORPORATED; LOEWS CORPORATION; UNITED STATES TOBACCO COMPANY; UST, INC.; THE COUNCIL FOR TOBACCO RESEARCH; THE TOBACCO INSTITUTE, INC.; and HILL & KNOWLTON, INC., Defendants-Appellees. Appellant's motion to expedite submission of the above-captioned appeal, served on December 9, 1997, is set for consideration by the court, without oral argument, on December 29, 1997. Resistance, if any, shall be filed and served on or before December 24, 1997. g (YIUA~k4 Deputy er , Supreme Court o owa Copies to: Thomas J. Miller Attorney General Hoover Building - LOCAL Dated this (~ day of December, 1997.
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0 0 39
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3 Thomas A. Finley 604 Locust St., 4th Fl. Des Moines, IA 50309-3773 J. Michael Weston P.O. Box 1943 Cedar Rapids, IA 52406-1943 John C. Monica One Kansas City Place 1200 Main Street Kansas City, MO 64105-2118 Wa e T. Stratton 515 South Kansas Avenue Topeka, KS 66603-3999 Steven L. Nelson 2500 Financial Center Des Moines, IA 50309-3993 Fred L. Dorr 801 Grand Ave., Suite 3100 Des Moines, IA 50309-8036 Brent B. Green 380 Capital Square 400 Locust Street Des Moines, IA 50309-2331 Richard R. Chabot 801 Grand Ave., Suite 3500 Des Moines, IA 50309-2719 Joseph R. Gunderson 699 Walnut St., Suite 1200 Des Moines, IA 50309 Dan K. Webb 35 West Wacker Drive Chicago, IL 60601 Michael M. Fay 1301 Avenue of Americas New York, NY 10019-6022 Ross H. Sidney 2222 Grand Ave. Des Moines, IA 50312 Robert A. Van Vooren 220 N. Main St. Davenport, IA 52801-1987
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. DEC. 12. 1997 10:23AM . • NO. 7014 P, 19/20 Thomas F. Gardner JONES, DAY, REAVIS & POGUE 77 West Wacker Drive Chicago, IL 60601 Brent B. Green DUNCAN, GREEN Law Firm 380 Capital Square 400 Locust Street Des Moines, IA 50309-2331 Richard R. Chabot SULLIVAN & WARD, P.C. 801 Grand Avenue Suite 3500 Des Moines, J.A 50309-2719 Joseph R. Gunderson DREIIER, SIMPSON & JENSEN, P.C. 699 Walnut Street Suite 1200 Des Moines, IA 50309 Dan K. Webb WINSTON & STRAWN 35 West Wacker Drive Chicago, IL 60601 J. Michael Weston MOYER & BERGMAN, P.L.C. P.O. Box 1943 Cedar Rapids, IA 52406-1943 John C. Monica SHOOK, HARDY & BACON One Kansas City Place 1200 Main Street Kansas City, MO 64105-2118 Wayne T. Sh•atton GOODELL, STRATTON Law Firm 515 South Kansas Avenue Topeka, KS 66603-3999
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, DEC, 12. 1997 10:23AM 0 Copy mailed to: Roger T. Stetson BELIN, HARRIS, LAMSON 2000 Financial Center Des Moines, IA 50309 Michael Liebert KIRKLAND & ELLIS 200 East Randolph Drive Chicago, IL 60601 Mark C. Cunha SIMPSON, THACHER & BARTLETT 425 Lexington Avenue New York, NY 10017-3954 Thomas A. Finley FINLEY, ALT Law Firm 604 Locust Street Fourth Floor Des Moines, IA 50309-3773 Bruce G. Merritt DEBEVOISE & PLIMPTON 875 Third Avenue New York, NY 10022 Michael C. Lasky DAVIS & GII,BERT 1740 Broadway New York, NY 10019 J. Eugene Balloun SHOOK, HARDY & BACON 9401 Indian Creek Pkwy Overland Park, KS 77210 D. Scott Wise DAVIS, POLK & WAR.DWELL 450 Lexington Avenue New York, NY 10017 . NO, 7014 P. 1s/20
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4d!zAPR, 22. I998d12:23PM ° 2 aasz GAEFE & SIUNEY 6 NO. 3738 P, 7/12'on7 The court also found the alleged torts were tommitted against the Medicaid recipients and State employees, not the State. Because the injuaies are derivative and remote, the court concluded the State could not bring a direct action against the defendants.• We will first consider if section 249A.6 provides an exclusive remedy to the State to recover medical costs thus prohibiting a common law indemnity claiin (count VII). We will then consider if the damages claimed by the State in counts II, IiI, and VII are remote and derivative and thus prohibited. TII_ Section 249A.6. Iowa Code section 249A.6 provides in part: 1. When payment is made by the deparunent for medical care or expenses ttsrough the medical assistance program on behalf of a reciptent, the department shall have a lien, to the e,xtent of those payments, upon all monetary claims which the recipient may have against third parties. A lien under this section is not effective unless the department files a notice of lien with the clerk of the district court in the countv where the recipient resides and with the recipient's attornev . , , , 5, For purposes of this section the tenm "third parry" includes an attorney, mdividual, institution, corporation, or public or private agency «hich is or may be liable to pav part or all of the medical costs jncurred as the result of inlury, disease or disability by or on behalf of an applicant for or recipient of assistance under the medical assistancr program. 6. The departmetu may enforce its lien by a civil action against any liable third party. Section 249A6 was enacted in 1979 to pemtit the State to enforce its right of subrogation against ptrsons who were legally liable to a recipient for medical expenses incurred under the provisions of the Medical Assistance Act, a joint federal and state program, See 42 U.S,C. § 1396a(a)(25). Under this statutory scheme, the State can proceed
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1:i.',9197 HQ'{ 11:U3 cAS 515 245 4432 . 0 GREFE & SIDtiE y ~ . .,.,~ C~y~-„, ;_ . 6 IN THE SUPREME COURT OF IOWA SUPREME COURT NO. 97-1683 POLK COUNTY NO. CL71048~~ . .... c,~10 ED DEC 2 4 199) k(1002 GLC-Fili SUmaiF ( C}URT x®,~ -....: STATE OF IOWA, ex rel., THOMAS J. MILLER, in his capacity as ATTORNEY GENERAL OF THE STATE OF IOWA, Plaintiff-Appellant, vs. R.J. REYNOLDS TOBACCO COMPANY; THE AMERICAN TOBACCO COMPANY; HROWN & WILLIAMSON TOBACCO CORPORATION; PHILIP MORRIS INCORPORATED; PHILIP MORRIS COMPANIES INC.; LIGGETT & MYERS, INC.; LIGGETT GROUP, INC.; THE BROOKE GROUP, LIMITED; LORILLARD TOBACCO COMPANY; LORILLARD INCORPORATED; LOEWS CORPORATION; BRITISH .AMERICAN TOBACCO COMPANY, LTD.; UNITED STATES TOBACCO COMPANY; UST INC.; TIHE COUNCIL FOR TOBACCO RESEARCH USA INC.; and HILL & KNOWLTON, INC.; Defendants-Appellees. RJR NABISCO, INC., AMERICAN BRANDS, INC.; B.A.T INDUSTRIES, PLC; BATUS HOLDINGS, INC.; BRITISH-AMERICAN (HOLDINGS) LTD.; THE TOBACCO INSTITUTE, INC.; Defendants. DEFENDANTS-APPELLEES' RESPONSE TO STATE's MOTION TO ADVANCE AND SET ORAL_ARGUMENT The instaht appeal is an interlocutory appeal from the District Court for Polk County. At the same time the State filed its application for interlocutory appeal it filed a Motion for Expedited eubmission. This Court granted the State's motion and set the timetable for this appeal in accordance with Rule 17 of the Rules of Appellate Procedure. Now, the State has moved to advance the hearing; date still further. 0 Defendants-Appellees take no position with regard to the relief requested in the State's Motion to Advance and Set Oral C\ C~Q N ~ IV Ln 4a
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Passenaers, 414 U.S. 453, 94 S. C~=.-'090,-38 :. -... 646 (1974) . . . . . . . . . . . . . . . . . . . National Union Fire Insurance Co. v. Continental-I11. Coro., 958 F. - Supp. 775 (N.D. I11. 1987) . . . . . . . . . . . 35 New York State Deoartment of Social Services v. &owen, 846 P.2d 129 (2d Cir. 1988) . . . . . . . . . . . . . . . . . 30 New York v. New Jersev, 256 U.S. 296, 41 S. Ct._492, 65 L. Ed. 937 (1921) . . . . . . . . . . . . . . . . . . . . . 21 North Dakota v. Minnesota, 263 U.S. 365-, 44 S. Ct. 138, 68 L. Ed. - 342 (1923) . . . . . . . . . . . . . . . . . . . 20 Pennsvlvania Deoartment of Pub1=c Weifare v. Ouaker Me3. Care and ..._,Survivors Plan, $36 F. Supp. 314 (W.D. Pa. _9937 -35 Pennsylvania v. West Virginia, 262 C*.._ .,58, Ed. 1117 (1923) . . . . . . . . : . . . .~ . nerrv v.. Dow'_in4,.95 ...3d 231 2d _9961 PhiliD M.'Jrr~S ^("Jv'Dv_'3' ~' ' , -23 -. .3 : _ ___ 1997) .. . . . . . . . . . . . . . ... . . United_ctatds v. Stan:ard"Ji).'Co - -L. ts~ 23 2]67 _,. STATE CASES All_e~ ^s ra^ ' '::a 3: }-67 S._-_ 20, GU 3 -
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. DEG. 12. 1997 10:22AM • , • N0. 7014 P. 17/20 2. This appeal is from a ruling of the District Court for Polk County, dated August 26, 1997, which ruling held on a motion to dismiss that the State, as a matter of law, could not prove proximate cause of its damages and had no right under common law theories to recover past and future payments for medical costs the State has made and will make for tobacco-related illnesses. 3. This appeal involves questions of public importance, and rights which are likely to be greatly impaired by delay. 4. The ruling of the District Court held that the State could not, as a matter of law, prove proximate cause of damages that continue to accrue at a rate in excess of $2.5 million dollars per month. 5. The advancement of this fully submitted case, to a date specially set for oral argument, at the earliest practicable time, would prejudice no party in this very significant case. WHEREFORE, the State of Iowa respectfully requests entry of an Order specially setting the case for oral argument in advance of the time it would otherwise be submitted, at the earliest practicable time convenient to the Court's schedule. Respectfully subroitted, THOMAS J. MILLER Attorney General of Iowa CERTIFICATE OF SERVICE 7he undersigned hereby cer46es Ihat a true copy of tpe toregaang rnitrumenr was served apen each of the aBorneys or record at etl par6:: to the abqve-entdled cause Ey en• 61as1ng the Sena -p 21 enuelepB addressed Ia each such attorney ol his rcrpr,ctss address,s disclosed by Ihe plead. m¢s bl recard I:;;:m, e,,;5 pustage Nlly paid, and by de• posihng sa~p envmnpe in a Lmted $lsTfyp~st Oncee deposltury In. (1ef M6~hes Inwe. .n f.. Y T'~) . Xf~L7/N~"-//"^"t 0)NtTl Dep Iloo N E. ALLEN PK1000100 y Attorney General r State Office Building econd F7oor Des Moines, IA 50319
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, DEC. 12. 1997 10:22AM 0 • N0, 7014 P, 16/20 DEC 11 1997 IN THE Si7PREME COURT OF IOWA No. 97-1683 Folk County No. CL71048 STATE OF IOWA, ex rel, THOMAS J. MTLLER, in his LORI 50119 capacaty as ATTORNEX GENX~KjuL, IOWA-~ RTG- SLIP ~ RECEI A BY: plaintiff-Appellant, EXPEDI~D COPIES TO: ?M"'_ ?'._ V. FULL COPIES T0= GEV dBCH WL$. WGZ 8Yde2 -eP2 JAS PTFI R. J. REYNOLDS TOBACCO COMPANY, lst pg. WJc RErr x•ra et. al., Defendants-Appellees. MOTION TO ADVANCE AND SET ORAL AROUMENT COMES NOW the State of Iowa, by and tbrough its Attorney General, and pursuant to Iowa Rules of Appellate Procedure 20(a) and 21(f), MOVES this Court for an Order specially setting this matter for oral argument, at the earliest available time. 1. Application for Interlocutory Appeal was granted by Order on October 17, 1997, which Order also expedited this appeal under the procedure established by Iowa Rule of Appellate Procedure 17. Those procedures have been followed by the parties, and this matter is now submitted. Both by the terms of Rule 17 and the October 17th Order, this case is granted priority status for submission purposes over other civil cases. JMC
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Baker v. Sterling, 348 N.E.2d 584 (N.Y. 1976) . . . . . . . _3 Bales v. Warren Co., 478 N.W.2d 398 (Iowa 1991) ...... i3 Bremer County v. Curtis, 54 Iowa 72, 6 N.W. 135 (1880) ... 15 Chelsea Moving & Trucking Co. v. Ross Towboat Co., 182 N.E. 477 (Mass. 1932) . . . . . . . . . . . . . . . . . . 36 City of Philadelphia v. Philadelphia Rapid Transit Co, 10 A.2d 434 (Pa. 1940) . . . . . . . . . . . . . . . . . . . 36 Clinica_lPerfusionists. Inc. v. St. Paul Fire & Marine Insurance . .Co., 650 A.2d 285 (Md. 1994) . . . . . . . . . .- 45 _ Cole v. City of Muscatine, 14 Iowa 296 (1862T....... 15 Connecticut Mutual Life Insurance Co. v: New York & N.H. R.R. Co., - 25 Conn. 265 (1856) . . . . . .. . . . . . . . . 36 Cunningham v. Kartridg Pak Co., 332 N.W.2d 881'-(Iowa 1983) . 38 Cunninaham v. Kart°'_da Pak Co., 332 N.W.2d 881 (Iowa 1983) . 43 Daniels v Hi-W=vmruck Eguipment- Inc, 505 N.`w.2d 485 (Iowa ;993) - . . . . . . . . . . . . . . . . . . . . . . . . . 4 3 ._ DApar'm°^z o`P'jb'~ W= "ar- v; 'rvr= , 540 ^i.c.2d 18 (Ind. 1989) . . . . . . . . . . . . . . . . . . . . . . . . . 2? 3? FiFaAid Y3^er v __ .riuard_ansfiio o` .1n--?'_' ., -c a "=:'. Ca=_ ~966i d ~- ._o,~a 1989; : ..2 .~ _ _;•n3
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Pennsylvania Dep't of Pub. Welfare v. Quaker Med. ~are and Survivors plan, 836 F. Sunp. 314-(W.D. Pa. 1993, Pennsylvania v. West Virginia, 262 U.S. 553, 43 S. C~. 658, 67 L. Ed. 1117 (1923) Perry v. Dowling, 95 F.3d 231 (2d Cir. 1996) Philip Morris Incorporated v. Blumentha2, 123 F.3d 103 (2d Cir. 1997) Scott v. State ex rel. Dep't of Human--Servs., 438 N.W.2d 834 (Iowa 1989) Selectmen of Bennington v. McGinnis, 1 D. Chip. (Vt.) (1790) Snyder v. Davenport, 323 N.W.2d 225 (Iowa 1982) State ex rel. Dep't of Human Servs. v. Brooks, 412 N.W.2d 613 (Iowa 19871 State ex re1. Dep't of Human Servs. v:. Pierce, 460 N.W.2d 467 (Iowa 1J90) State v. Cciligan, 128 Iowa535, 104 N.W. 905 (1S0S) State v. Fitch Co., 236 Iowa.208, '_"9--°N.W.2d 380 ('_945r State v. Monk, 514 N.W.2d 448' •'Iowa-`_994) Van Baale v e_ .'aina = b5i; ^" W 2d '_996 V3L:7?'.II C. ..., r_-oCess Wyoming v_ 'blorado,-259 ~;.5. 419,..i2 ... Ct. 552, =d: 999 .=92-2 _o'++a Code 9 249A.-5 Iowa Code ;.668.5 ~_996, 441 =owa Aa'min. Code 75.Y .. LL:•ha R. F,no. P. -a4(f' ~a3. 42 &.S.C.-y 1396 (1996) 42 C.F.R. ~ 433.145-433._• W ON W :ru. --=a« :-__^=='a': Code t N ~ O
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B. Whether The District Court Correctly Held That The State May Not Recover For Remote And Derivative Claimed Injuries Based On Alleged Injuries To Others. American Mut. Liab. Ins. Co. v. Reed Cleaners, 122 N.W.2d 178 (Minn. 1963) Anderson Plasterers v. Meinecke, 543- N.W.2d 612 (Iowa 1996 Anthony v. Slaid, 52 Mass. (11 Met.) 290 (1846) City and County of San Francisco_ v. Philip Morris Incorporated, 957 F. Supp. 1130 (N.D. Cal. 1997) City of Philadelphia v. Philadelphia Rapid Transit Co., 10 A.2d 434 (Pa. 1940) Chelsea Moving & Trucking Co. v. Ross Towboat Co., 182 N. E. 477 (Mass. 1932) Con_necticut Mut. Life Ins. ~Co. v. New York & N.H. R.k. Co., 25 Conn. 265 (1856) Cunningham v. Kartridg Pak Co., 332- N.W.2d 881 (T_owa 1983) L'undee _,.. v. Cherrical =,ab., (7th Cir. 1983) Dyer v.Kru3, 533 2;.W.2d 221 (-owa 1995i Hdd. W.2d 633 "oNa 'G92 Fifield :•lanor v. Finston, 354?.2d 1~~73 ;Ca_. 1960) - Great .=,:m.. -zr:s. =o. v. 0:n~,,._. S~:ate.3,= ._ _.2a _03:. ;2a Cir. '_978i ~1;^es v. __es Inves _ _Pro'-ect,ion Corp. 258 125 117 Ed. 2d 532 1992i _.J. •Tei.____ & Scn, _.._. v. Ja^ksc.-- 7;,9 ?.2a 682 _a:. _9a5. In re Rocbin.s, 230 P:.W.2d 483 !Towa 1975) IndustriaZ Risk Insurers v.-Creole Frod. Servs., I 746 F.2d 526 .yt; Cir. _994.
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Nelson v. Fogelstrom, 284 N.E.2d 339-(Ili. Ct. Apo.. 1972) .+ Nelson v. Todd's Ltd., 426 N.W.2d 120 (Iowa 1988) ..... 44 Northern States Contracting Co. v. Oakes, 253. N.W. 371 (Minn. 1934) . . . . . . . . . . . . . . . . . . . . . . . . . 3 7 Ore-Ida Foods, Inc. v. Indian Head Cattle ~o., 627 P.2d 469 (Or. 1981) . . . . . . . . . . . . . . . . . . . . . 30 RK Constructors Inc. v. Fusco Corg.,-650 A.2d 153 (Conn. 1994) 37 Richards v. Midland Brick Sales Co., 551 N.W:2d 649 (Iowa C,.. Aop. 1996) . . . . . . . . . . . . . . . . . . . . . 45 In re Robbins, 230 N.W.2d 489 (Iowa 1975) Scott v. State ex rel-.D-partment of Human Serarices,438 N.W.2d °3: (Iowa 1989) . . . . . . . . . . . . . . . . . . _- Selectm°n of Benr.incto^ McCi^.n.is, 1 D.Chiri. :Vt.. 4- .179^,' ''9 Smith v3 CRST Znter^atio:~al, T_ncN.W.2_J _9=" -- SnVderv. DavenDOrt, 323 N.W.23225 '_o•Na 1582. . . . . . . _9 State-Rx rel. o` ~..M9n - - °s= 9rcoks, -"' N...2a _~ '- - F,-3 rTo.wa :937, . . . .. . . ---. . . . . . . . . =3 Rti°"JYJks, 4i.~''. :`..W.23 a: 6:.5 . . . . --. . . ..-_ C,~-,-.....>..'...- ~_L3Z-~.._~.._ .,_ ..... -. _ ___
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1992) Hvlerv. Garner, 548 N..W.2d 864 (Iowa 996) . _ . . . . . . . 4^ I J Weinrot & Son, Inc. v. Jackson, 708 P.2d 682 (Cal. 1985) . . . . . . . . . . . . . . . . . . 36 IndianaDeoartment of Public Welfare v Larson, 486 N.E.2d 545 - (Ind. Ct. App. 1985) . . . . . . -. . . . . . . . 23 7nhabitants of Deer Isle v. Eaton, 12 Mass. 327 (1815) ... 15 Johnston v Veterans' Plaza Authority, 535 N.W.2d 131.(Iowa 1995) . . . . . . . . . . . . . . . . . . Jones Counzv v. Norton, 91 Iowa 6B0, 60 N.W. 200 (1894) . . i4 Kraft Chemical Co v Illinois Sell Telegraph Co., 608 N.E.2d 243 (Ili. CC. App. 1993) . . . . . . . . . . . . . . 4 Kremerv. Noble, 304 N.W.2d 215 (Iowa 1981) Kremer, 304 N.W.2d at 215-17 ...... Lease v. Vance, 28.Iowa 509 (1870) ... Id. at 156 iuWes . . ~w-5, . . . . . . ~5J ...~._'-" v rQwa "epaY- - - _937i . . . . Ph___c m22:'. =99 Ma-t~r_o`..=ztat3 . . . . . . . '-7_ 5-'-v:^es, 5_.7 ti.N.2d __2 =zw a . . . . . . . . . . . . . . . . _:. ~ idoN s&'~22u_~r CL --e•.-'""f,~..~. ...._. .',L.I ~ . .~. .eR..-•-- 5 ~ . ... c... Y 7.. .._.... - _936. . . . . . . . . . . . :7'_'~ . Sa~-°S- - _"-_- -- - __,__ -In~~:. -"- . ----" _aua 1391 . . . . . . ebra=_a y=°:°rs P tsbu n"^ es-"':o'_^_ 20_ ~wa --- . . . . . . . . . . . .
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IV. ARGUMENT A. The District Court Correctly Held That The Statutorily- Prescribed Lien Remedy Contained in Iowa Code § 249A.6 Is The State's Exclusive Remedy To Recoup Medicaid Expenses. Among the alleged damages for which the State seeks recovery in this action are Medicaid payments it made to recipients allegedly suffering from smoking-related diseases. (See, e.g., Petition TT 2, 43, 45; Hearing Tr. at 66, 74, 81; State's Br. at 4.) Thc District Court held that Iowa-Code § 249A.6 orovides the State's exclusive remedy to recoup such Medicaid expenses from third parties. (Ruling at 6-7.) This Court's review of the District Court's Ruling is limited to esrors of law. See Dyer v. Krug, 533 N.W.2d 221, 222 (Iowa 1995r:-- As set forth below, the District Court's Ruling is clearly correct as a matter of law, and should be affirmed. 1. The State's Statutorily-Prescribed Lien Remedy Is Found In Iowa Code § 249A.6 ..Yea~eQ ___ 17G- as ___~_ x=X of _.^.3-JOGla- _.__~r_ , r.C-, i":ediva=?i -- is a C::.Cer3t~. _=ed_-_=a'__ and . s~:a`_~DYogra.^.l de5ig^.eQ i.c f1:r^.is^ assista_ce to needv=._^d'_vLduals: See 42 i;.S.C. §-'_,.,96 e-- seq. :-936); Hill v. s_atQ Dep'C- of Human Servs., 493 IG.P7.2d 803, 805 ;_owa =992i. _.._ Sta7:e-cf aowa elecced to par.____pate_ 1. Z:e Y'.edlcai.: pro-_? ..- ce?':: _^a _.. 1967, and, therefore, musC.co:r.oly with the __. _..,_..ts-.:moosed by the Social Securi-y Act_ and _ederai See-;;arris v. McRae, 442 CO O\ Hd. 2d 784, 794 ',~98G;. w fV Ore o-` .....ese r=au'_rem=nts '_s _ca=`a participati.^.g stat \0
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oaizAPR• 22. 1998s12c23PM 5 4asz • GRBFE & SIDNEY 5 .• 90. 3738 P, 6/12 uud The petition alleges a long and detailed history of the de£endants' misre resentations andxoncealraent•of the truth about the health hazards of tobacco. The defendants have krtown since the 1930's of the health hazards of cancer, coronary hearrt disease, em hysema, and stroke due to smoking- Be ~'nrting fo years ago, defen"dants conspired to suppress and made every ef~rt to hide scientafic evidence of the deadty health consequences of tobacco and nicotine. Following the initial `Big Scare" ahout tobacco causing cancer in 1953, -the defendants created the Tobacco Industry Research Committee to mani ulate information about tobacco- related research. The defendants' "Frank Staternent" of 1954, pubiished in several newspapers in fowa, misrepresented the knowledge available about tobacco's effects and promised to conduct valid research and report honestly the results. The defendanes breached those promises viirtualiy pnmediateZy and have continued to do so for over forty years. The defendants continued to deny and attack the evidence that smoking caused cancer, falsely represented their own research, and suppressed information that would have shown the actual conseguences of smoking. The defendants agreed not to conduct individual research and to rely on their captive -Council for Tobacco Research to promote "favorable" research and suppress. negative research. Specific wrongful acts included making false testimony to Congress, reporting false information to the surgeon general, publishing Ealse reports, maldng a"gendeman's agreement" to suppress research, using lawyers and attorneyclient privilege to hide the resulfs of research pxoject,s, firing scientists, dosmg laboratories, threatening legal action agatnst scientists, and concealing studies if the results were unfavorable, cancelling research on safer cigarettes, deceiving the public'about the addictiveness and health effecu of nicotine, and manipulating the level of nicotine to enhance addiction. The defendants have targeted slogans, magazines, glamorous images. and sexual themes at children to addict them and ensure their future markets. Defendants directed their acts at and intended to have an impact on the State. The defendants acted purposefully knowing that when consumers use cigarettes as intended, Iowans would be certain to suffer tobacco-related diseases and the State itself would be iril ured. As a result the State was obligated to pay and has paid hundreds of millions of dollars to provide medical care for tobacco- related illnesses. In their motion to dismiss, the defendants argue (a) the State's exclusive remedy to recoup Medicaid costs is under lowa Code section 249A.6 (1997), and (b) the State's claim to recover damages is for remote and derivative injuries that are nonrecoverabie. The trial court found at common law the State had no right to recover Medicaid costs from the recipient or third parties and therefore the State's exclusive remedy for recovery of Medicaid costs was under section 249A6.
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has attempted to sidestep its statutorily-prescribed.._e.,._ Y contained in Section 249A.6 by filing common law claims aga!r.s~ Defendants. There is no legal Hasis for the State's action, and the District Court's Ruling that the State's claims seeicing recovery of Medicaid benefits must be dismissed is correc.t as a matter of law. In addition, a long line of case authority in Iowa and eis=w:.ere supports the District Court's Ruling that the State may not recover damages for its alleged injuries that are remote and derivative of alleged injuries to Medicaid_recipients and State employees. The State's alleged injuries are clearly derivative: e Swateis a"seccnd-'~evel"-o=ainz~.ff w?~ich seeks to recover economic losses deriving from payments made for z::e t:reatment alleged injuries te _irs_-level' Medicaid there ar.e too :'.a-.y ect-..-- __.t_-.1er_ncs =r;tens _or s1^l.... -..- iniurles are '_i'sewise as _=_cogr.:z- , xecinie ts a: d Stace = _= w:lo s-.o::e. _..._ _ta~Le's a__-..._ '.rc__~ ..o_ ac_.,....-, :at ni g:a accocr.~ f Dis=ric_ _cv=A wAaa: s-.a:r_nq, a.^.d ot^-er ..St.ate s.^.:of.er' S -.e~ith d1l=lcult:1es. r rcr hreac: _.;din g the reasora smoki^g,t^= sTorer~'s a•Hareraa
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at 214, 17 N.W.2d at 384. In other words, the State, as owner c_ the damaged bridge, was seeking recovery for its own direct injury in Fitch. It was not, as here, pursuing derivative claims arising from alleged harm to others. In any event, the fact that the State may pursue common law claims in a totally unrelated context provides_no support whatsoever for its attempt to circumvent its statutorily-prescribed remedy contained in Section 249A.6. The State irrelevantly notes that tne federal district court did not exclude or bar common law claims.in City & County of San-F'rancisco- v. Philip Morris, Incorporated- '" 957 F. Supp. 1'_3C, 1141 (N.D. Cal. 1997). (State's Br. at 42.)• However, tha*_ court was iriterpretir.a":.^i~Tae language- in a California statute bearino t, resemblance to the -la.^.guageof Section 249A.6. Further, ur.11_ke Brooks, HiII, Bales, and other related cases--in ;owa, there is no . simila= ab,_,:dar.ceo- exo3icit_'v s=atin7 _..a- the stat_.tw-v reC_uv _s _..__~s_. _. -_nal?y, _.._ S~_-ate cites an ~.. -ana appe:late cour~ dP.._'s_...., _:IJ_at:3 C?C _ .__ _..h. _.._.21 54-, (I.^.a. L_. ACD. _y377, _: aa- stat_ s _=e.n. _,..^.'.edj' to be .^_.. -ei:c_'lslve. _ _ Dr. a_ 27-28. ~ -r.owever, the State' s analysfsc` Ind-Iana law is _..". ^'e_- and y ^a-e^•arate. The i-~diana SuDreII[°_",ro1rt 6'lhse^'1e^__: :as _.._e."., tha= ~-:e ..nawe .._ -P.disI:a''a -sole and eXclIJS_sie reh9eqv CO r?~~'1L ..°_d=Cfli7-Efo°_ nse9 was found C.^c See ..c~3=~:~..^.~ .._ _..j.. W?I~are .. "'r_°P• 5c0S.E.2d~3,.20 =93~;_ -^'.s-.. ic =nd:ana :,.:i:re iowa, _.._
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that the term "others" in Brooks refers only to representatives of the recipient. (State's Br-. at 37-38.1 "his assertion is baseless. First, the only "others" mentioned Brooks are "persons_ legally liable to the benefit recipient for medical expenses incurred as a result _of that liability," i.e., alleged third-party tortfeasors like Defendants. Brooks, 412 N.W.2d at 615. Second, Baker v. Sterling, the.New York Court of Appeals case cited by Brooks, held that "no action could be brought [at common law] to recover sums expended-for [the°recipient's] care and maintenance." 348 N.E.2d 584, 587 (N.Y..!-976). Thus, this Court has not limited the principle that prohi6its the recoupment of qublic assistance payments absent s:.a*utory aurhority from third parties to "others" iaho are legal representatives of Medicaid _.-.recinients, as the State attempts to do-here. b. The State's Indemnity Claim Is Legally Invalid ^he State also erro::eously cdnt>zds that its indem,^_', theory in Count VI= r3rcvi-des a basis for recoverv independen~ ~: :!-:;~ co::=er..tio.. Fa: firs~ an_d Foremost-, be_a::se ~.._ S_ate -a^ro= a-,-jid the =xciusi•. _ of _Sect_.,._-249_k_6 si__. -by asse_t_ _ ..t...__ _=aims. See, e.g., Var Baale;- 550 ti.W.2d at 155 istat:atory remedy exciusive where _iga - ." and.cor°esponding liabil_ r.ow:: at =coT.m,or. =aw~ . __n addition, -. as De°e^dants urged below ._rg...- "_'r. 9'0-97. ,.~_....._ V1i is legally flawe3 _o_ orher _=aso.n.sY r..- `---• -..ae-;r'__, i--s a•:•ailable w^e.. --.T3ismissa~'_• mav be a`firmed .,.7 a.n.y -casis urged by _ ic.,..__...._....
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determined that the dismissal was improper because the case 3id r.__. "concern[] the central sovereign functions of state government," the test a case must meet for Younger abstention to apply. See id. at 106. The Second Circuit held that the state's suit -- even though it included claims under state unfair trade practices and antitrust laws -- "is more accurately classified as a subrogation action grounded in tort." Id. Such a case does not implicate "central sovereign functions" because it "primarily concerns the apportionment of loss based upon theories of tort liability." Id. at 107. As in Blumenthal, the State seeks compensatory damages for sums it allegedly- expended in connection with its Medicaid program. In fact, the State's position in this appeal is even more dissimilar to Snapp than was Conn=ticuG's position _a Blumenchal because ~..~ S-1-ate of =owa seeks com-,on law money damages _r. Coun ~s II, and VI?. S_a-_e's ar°g;:-ent _:^at-_:: as_ass-ert:-^a a quasi-sovereiar _..__re_St '-s -..a _-.-____, •,i .^.out me--_. d. The State's Position Is NotSupported By The Other Authorities It Cites - The =_--.aining a::_hori..ie.s by ,.:> S`_a::.e _.. supoor: of_tsf purtior_e3 _`-ahF_. ~o- .._i^g . common '_aw 'f°iaims seeking t __ecovery of ..=_d:.^a_d exo=:sesar3 __;:ewise _nanpos'_te. '"he Sta;.e cites State v. ritch Co., 235.Iowa 202,-17 -S.iv.2d 380 ('_945), for the oroo`Jsi_io: _haC.,-it may Dursllee a-'ommcI: _ao; cause of actio: - nere. lState's Br. at 40.. However, Pitch ^ai-e-y .._ld -:,at _.._ -State could recover for p:^.ysical c_opa_ _ da=age caus2d by the 3e<o __r.da°t-'s•_:_._c.. _ta=_-owr.e-d bridcu-_ . _ _.... _, 236 :.cr•a
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state's exclusive remedy to recoup Medicaid expenses is found i-n statutory law. 3. The State Is Not Pursuing A Lien Remedy Under Section 249A.6 The State spends an extensive portion of its brief attacking the District Court's finding that Section 249A.6 creates a "traditional assignment/lien/subrogation" remedy. (State's Br, at 24-29.) As set.forth below (see infra ), the District Court's Ruling on this issue is correct. Regardless, this Court need not reach this issue in order to affirm the District Court whatever the nature of the remedy contained in Section 249A.6, __ is cleaY''_hat- it is the State's exclusive remedya,':d !:h3~ ~::'.e S'_ate has chcsen to ignore it in this action! ivowhere is Sectior. 249A.6 referenced-- in the State's Petition_ The State has not complied with any-of the procedural requiremer.ts_-of Sec--io:: 2_5::.5.g/ _.a_e:3, the State reneatedly :as admi_tea ~r.at is noz. p__s.._ _ a at_- _ory reieay .r.aer S3cti,~.. 249A.5. As the S~:a:.ee cause er.a:::p; e "a notice of .l`_en with county where the d2=s _-- _t:s brie`- " tai statutorl ac.ion ur.der. .-.___=: n'eaded in the a _-e: :s^edy, :.he S:.ate must file { 3is*`ict court in the ien!: .-es--des and wit;^-'.the recipient's attornev when the recio=ert's __ _ for r..=_dica' assistaace es--ablis^ed." Iowa Code § 2Y5A.5l11 see also -4- :owa Ad^:i n. _cde 75.4. '=he State '.:as not cc:^.plied wit:: this or orocedu_a- requrr_m~r._s `_o_ bri ngi^y an a:aicn _tae= S=_ct_or: 2Y9:+.5 .
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seeks to protect interests of the public. See Alfred L. SnaFc & Son, Inc. v. Puerto Rico, 458 U.S. 592, 602, 102 S. Ct. at 325., 3266, 73 L. Ed. 2d 995, 1004 (19~2`. _Examples include a state's attempt to "represent the interests of its residents in maintaining access to" natural resources from another state,-id, at---605, 102 S. Ct. at 3267, 73 L. Ed. 2d at 1006, or, as in the case of Snapp, to "secur(e) residents from the harmful effects of discrimination." Id. at 609, 102 S. Ct. 3270, 73 L. Ed. 2d at 1008-09. In contrast, a state does not act in its "quasi -sovereign" capacity when, as here, it seeks merely to protect its own coffers. See, e.g., Philip Morri.s Incorporated v. Blumenthal, 123 F.3d 103, 106-07 (2d Cir. 1997) . Counts 1:.,-_-_1 and SL= si:nnlv see, _c recover money damages for the State. :'ney do nat invoive :~_._ types of relief souaht in Snapp br the cases discussed _.. _.^.app.11 71 ee, e.a.. Snapp, 458 t.S. R ~ 598-99,,°C2 S. __. a_ 3254, 73 L. Ed.. 2d 1002 :.see;cina -dec.lara=~rv an.a-: 4~ u c::ive re:ie_' ma!;da=y *:g .. :edera: _sk.,- :a..•s%, eorg'a v. Penns2,lvanlaR. R. -- ,;2- ...S.439, -13, Y-15,55 S. Cc. - 7:.5, 719, 72_~, Ed. 1.05= .1945. (seek_nc3 to _';oit: discrir..: natcry rate-fixing nract.icesi; NDrth Dar:oCa v. Minnesota, 263 U.S. 365, 375-75-, Sc_ •-S . Ct. -33, :4-C, 58 ~. ~~. 3Y923! ;seeicina _,. en;ci: Mi^_^eso-a's met:^.od of -r3:n-:n - ._.:rfac=_ waters; reques`. for .._.-::L°_.^.3.=-.~~ =a`_.".".°-'--S ..._.._~., .._..~'.~S°_ .... •.•°.'_" Amendm=_r.t bars - ,- aims) ~ Pennsv_'-.•3rt-a ,:est ._rginia, 262 U.5_ »3, _ =3 -S..CC. 558, 560, 67 '.. Ed. 1_:7 "-923~ l.se°_Ki _ conz~_...:ed...
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statutes creating rights and liabilities that did not exis= a= common law provide the exclusive remedy for enforcing those riah~s and liabilities: [T]he well known principle applies, that where a statute gives a right and -creates a liability which did not exist at common law, and the statute at the same time provides a specific mode in which such right shall be asserted and liability ascertained, that mode and that alone must be pursued. Cole v. City of hTuscatine, 14 Iowa 296, 29E---99 (1862); see also National R.R. Passenger Corp. v. National Ass'ri.of R.R. Passengers, 414 U.S. 453, 458, 94 S. Ct. -650, 693, 38 li-: Ed. 2d 646 ('1374, ("when legislation expressly provi3es a particular remedy_ c= remedies, courts should not expand t..e coverage of the statute ~z Baale -v.. _it•r cf Des subsume other remedies"). --- - :his Court _ecer,t-,, rea°=<~e3 tiii-s nrL.,.:p"e t :at. fhe c T 'a : serr,^ _- a_te cro: _~s ex.c_ s'_. _..,eans for a e eT.n_oiree _z =.a---.^.ae ..is or : er ..isc :arge an.: nre= ts D: v C-._.. ?/t...con_a.:ed none will be held _c exisz~ prov i 1?ci ."~; Bremer 4: t d. v. .Z u-,__ e stat-ute 'inless expressly iowa 72, 6 ?:.W. 135 '1880/ ("It w3s..~-ld, a*_-an early day ir. this country;~ there could not [be a-cair.mo::_'aw ria:a o`_-act_o.^l by_~ate t~r'ecc.:n mozey paid to sunoort. ~:^e iadiaent?. Znhabitants e_' -e__ 1-sZe v. Eaton, 12 Mass. 327 f(1815)]; Selectmen of Ben_ni.n.2:.cr ~. A:c.=ennes, _D. ....ip. (Vt., . 4 4 _ '"L''^. , .
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against third parties. See Iowa Code 4 249A.6 (l). This Cour- defined a "lien" as follows: In ordinary use, a"lien" is a ch_arge upon property for payment of a specific obligation that is independent of the lien. . . . This _lien or charge on property thus- serves as security for the debt or obligation of the property owner. Federal Land Bank v. Boese, 373 N.W.2d 118, 120 (Iowa 1985) (emphasis added). The 1993 amendment thus enhanced the State's rights by giving it a security interest in monetar,v claims wh'_c^ Medicaid recipients have against third parties. - What the 1993 amendment did not do.- is what the State ass'erts:-...did not give the State an-:ndeoen=dent, "direct"._ight of ac'ion to sue po•en~;ally liable t:ird par-_ies without reference to specific• c.laims against those third" part=es allegedly he-_d 'ny individual Medicaid recipie..ts.- (See State's 3r. at 25.) _nsteaci, tosu= is •N^.o1-y der_*.ative -c_` any such c=a:-s. the _State_'_s right' en4oy~e ies iie^ by M-.-- .---_ .. a_a=-nst any ian:.e third party." Iowa- cd° A_a=~, the _1 ~.. ..r.at _..- ...__' Stat° ^'.av--eu`_.or.ue is ~~•.:co^ a:l ^•^.-:.,.._`a-y c' _a_~'.s ~whic ; ~:ne __cioient may ^av= added- . aa a es. ' Iow•a.Code ~ _=9A.5(1) (emphasis not e`__~ective,-an3 thus cannot be 'Lrtl:=_, enforced in~an action e State ..nder Sect-ion 249A.6, "unless the .SAyartr.ent of ....°a^ S__v_ces] __Aes a..~.-_= o`_ _ien w_th the 9! Obviously, this action has not be°-n brought by b'.A`Ea_= -L.: a°Da°_'_.^c. _ __ _._'P3:.
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Further, the State can identify absolutely` no Iowa autY:or,_=;: allowing the State to pursue a "quasi -sovereign" or "parens patriae" claim for purely monetary losses allegedly suffered by the State. Indeed, the United States Court of Appeals for the Second Circuit recently made clear that sovereign interests are not implicated in Medicaid reimbursement suits like this one. In Philip Morris Incorporated v. BI unentha2, the Second-Circuit considered whether the district court properly cTismissed on Younger abstention grounds a suit brought by cigarette manufacturers and others to enjoin the State of Connecticut from filing a Medicaid reimbursement action.-See 123 F.3d ac 105-Oo.--" The Second Clr-cui_ 11 (...continuedl to enjoirn diversion c= natural oas __D'Ninq i^._iL'tersta'..e chan ne! ' Wyoming v. Colora3o;: 259 L'.S. 4'9, New York v. New „ers=v, 255 ' 937 i192"- (seeicirg- ..,. c: ?-Iarbor; ; K3risas v. CUlcraJo, 2,.5: ...5. 51 . L. Ed-~-955 !1907i -tseP_kina. to str?am); OeDrg_za` t':-~TCR.:esBee 492, 65 L. E... sewage into New Yor:: f;55, 05e, sicn of int=rs'.a!~e = c 230, 236, 27 Ct.-F1¢,-.._9, 51 L. Ed_ _038 ._-iv7: seak-:ng Qa.enjoin discharae "noxious gas"); Kansas v. Col~rado, =85 '.;.5-:-125, 137, 22 S. Ct. 552, 556, 46 --.-'E3. . 497.- !i902) iss~e:ir_J t~-? : inters'_ate stre.ami; Missouri v. II1_ Lli" '1`.VPl^Rl..^.~. VN =T1 - ;.5. 236, 21Y Ct_.-331 45 L. Ed. 497 .(_901) (seeki^:a-.to enj~-n d .:... _..terstate strea;n~ . , 42 S_ Ct. 552, 554,. 55 :.. s_:;:: _: _._ters_a-_e strea:". , W [V sc^arge of sewage w O CO
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a statute controls. See Kremer, 304 N.W.2d at 216-'-7. -~_ another, Count VII fails to state a claim for indemnity. Iowa law recognizes three bases for indemnification, none of which apply here: (1) express contract; (2) vicarious liability; and (3) breach of an independent duty of the indemnitor to the indemnitee. See Daniels v. Hi-Way Truck Equip., Inc., 505 N.W.2d 485, 489 (Iowa 1993). In particular, a breach of a general duty of reasonable care owed to the public is insufficient to establish a right to indemnity. See Allied Mut. Ins. Co. v. State, 473 N.W.2d 24, 27 (Iowa 1991). Consequently, the State cannot base its attempt to recoyer_ Medicaid exoenses from Defendants on a_.right of indemnity. c. The State's Argument That It May Bring a Direct Action Because It Has a Quasi-Sovereign Interest Is Unavailing Further attempting ta circumvent its--.exciusive statutory remedy under Section 245A.6, ~he S_ate ar?,;es ~.::at __ ^as a"quas:- sovereia right to b_=ns-_-.:s derivative actLc: for money damaaes. (StaWe's_3r. at47..i =_ s^c'.:-_d-be noted that .-i.s argumenv _s bei::g-ral,s=-d bv. the ~-tave -.._ _--z r--st __T.e s anc~'-• State sa-d no' 'ng ~--- s=«_ abc.::: possessing a n,. "ouas4_-sovereian" riaht to :,-- - t--_~-l.awssit. In any event, the Stia=e fundamentally misconceives the "quasi-scvereign 'interest" :doct°ir_e on which __ bases this argusezt. '"^e "q:;asi-sove-e:.an" doi=?^:ne may apply when a state 6!( r'Dn"..^.ued) prevaiZi~g party even __ not -Y__ed upon by-the cou°= below. See MatLer of Estate 0 _` 6'oss,.. ~v_ -...,-~~-878, 8"I-3 ^-_ `:Owa =.995! .
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petition and is not involved in this appeal."-.(State's Br. a- 3_ 36 n.2 (emphasis added).) Moreover,during the June 27, _;. District Court oral argument, counsel=for the State represente.:: In conclusion[,] this is not a Medicaid reimbursement action. That's Hills and Bales. It is a direct action and a common law [sic]. We believe we've outlined a number of common law claims that preexisted thee statutory framework. (Hearing Tr. at 89 (emphasis added)). . Given this, the State's focus on the.meaning of --he 1993 amendment to Section 249A.6 is both -__relevant and misleadina. Apparently, the State wishes to confuse the_i-ssues on appea- , drawing :?;e Court in4o a discussio.^ cf •h'^at ~..~ Legis:a_,.:r_ intended by this amend-,ent. Once _- z-s~-det==ar.e3, cowever, a_ the Sta-e is not pursuing its stat•.acry remedy in this action, there- is no need for fw_ ~..__ a na'_ysis -_ statu_e to uoho_a Dist~ca Cota='t's R,,; {g ceca.~se, as sa_- t°_ s=a_*.acr:, re^edv is exc:•.:s'_~,e. 4. The State's Argument That The 1993 Amendment To Section 249A.6 Authorizes Or Permits Its Action Is Baseless at•.ena..._..t . 249A.F. Cas°__es's. L-acn._,na a".•. ''auPOrt in the =......__. ._- law, _fl.^.Q ~ac_ _ ~.._ _..S _ __aC~_ ..a_____ .,_ -3s :ourt's prE'.x..u_~ decisions in pZ"'ooifs, Hll l, and B3_es... t..., _:~a=e .._ les to arQue ....a7~ .'_heS°-. =as°_s and au::hori.Zed ZnQeVe:~3e i.-=', cJ-im3n actzc^ -5=a!:1ve_1v overrl_e-" Co C1 3_e __ ..__Lg . a Q_ie__,(JJ reccve r~j _calQ expenses. \-0 ~1J ~ N
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to that brought by the State of mowa in this action. See 41ary1anti v. Philip Ko.rris Incorporated, No. 96122017/CL211487, 1997 WL 540913 (Md. Cir. Ct. May 21, 1997). The Maryland cour~ held that subrogation "is the exclusive remedy available= to the State of Maryland in seeking to recover reimbursement for funds expended through the Medical Assistance Program for the smoking related illnesses of program recipients(.)" Id. at *7:_ The court based -0 conclusion on the language of Maryland's Medicaid statute which specifically refers to the remedy of subrogationrr See Md. Health- General Code Ann. § 15-120 (1996). Relying on the established principle of statutory construction, e.-Pressio unius est exclusie alterius, tne Maryla.n.d cour_ statea, "-it; ^.. -ae :e-ai ruie u_..._- principles of statutory-ccnstruc-.ion is t-hat, absent a legislative intent to the -contrary-; statutoril: _-eated ~;r,edy is deemed __ be exclus-ve. .•"arylanj, at *3. As '._.__ `.1:_s -..__ "aDOlies even-in _^sta=:ces ....-__ c._.__- °,av ne a--.a=~:ernative cause of act.:or_recoan'_zed under __.._rai or coct:^on law in Maryland, but ar,, - ies ---. _r.s-u-.--- w'.__- •ras ..u rec ized -cause o'_ act'_o_n- ad co^r;tn =aw::,, s`.:c:: as --- :o recover fromm alleged -.__rd-c-arty citizens. TJ. a' *4 eas :rs _.._ ccs=s Ao^ , the case ue_` _ cQu_ the Maryia-d ?!e7'_ca:3 ;ee-=_d eat:.zg aniured a5ea'b=~5^ed _::].e" ::'J t: e remedy set fort.. xc'~•asive." a_
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These principles apply with equal force here. ..._ LegisZature has adopted a comprehensive schene for the recoupmer: of Medicaid benefits in Section 249A.6, which provides the State with a right and a remedy unknown at common law. Section 249A.6 sets forth a comprehensive scheme for dealing with recoupment of Medicaid benefits -- including detailed notice requirements~l and a specific formula allocating tort recoveries among attorneys, the rec~pient, and the federal and state governments5j -- which wouiH be rendered meaningless by common law direct claims for Medicaid reimbursement. This Court has rejected attempts to circumve.= statutorily-prescribed remedies in other coritexts. See Eddy v. Casey's Gen. Store,_ Inc., 485- N.W.2d 633,637 i:owa _352 (dismissal-of common law claims-recruired by excius_vity of dramshop . actsj; iCremer v. Noble, 30e ti.W.24 215, -2_5-17 (Iowa 19d- !deta'__ed c7ens: .. =ta_ t_ aover ~d e'_.. s=Te ~r- par:y_ ~..__ cla: ^s-, t=r's e?n'_~:ac - rei^oLrse:r.e^t claim'. __ s~~.:-a Sta:.e's .._ ._.. ~-. . :.~ ..~ -~.._:_~ ._.. - a. The State's Attempted Distinction Of Brooks Is -- - --- Baseless ,at=_d wa.. _.'s .......__ta=n ..'_ i t or_ -.z._._ _ z:at r _ has ce c ...... _. r - -ensployin g .; ts __3_d =:<pe:a~s, _ :e 5_a::e argues, crat_c ar.a-~rsis or- _ t'ae case authori ty, .-`. _:.wa .--...'5e 75-4: =cwa Code ~(- .. See _C'6u _1..- _ _-., . . . , _ _-- _C wd r.,...._... _.,..._ .
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remedy for the recovery of Medicaid costs and in dismissing t State's common law claims for those costs. 5. The District Court's Ruling Is Consistent with the Rulings of Other Courts Finally, the decision of the District-Court is consistent with rulings in similar litigation around the country holding that, absent statutory authority, states may not sue directly to recover Medicaid costs from potentially liable third parties. In Agency for Health Care Admin. v. Associated Indu5:, 678 So. 2d 1239 (Fla.) , cert. denied, 117 S. Ct.. 1245, 137 T~: Ed. 2d 327 (1996), the Florida Supreme Court held that Florida could not assert common . law claiPls seeking di rec` recovery o'_ 'P:edicai+l costs for a..leae.4 smoking-related i1lnesses. In _994,--the a __-•:siature hao enacted a unique stat::tz -nermitti _ a direct, =_..-sub-cgaticr: action by the State to recover Ntedicaid cos:~s-=ro= _..ird parties. While uohold-:ng the State's _ig:~t -.c .._-.^.a a statu_cry ......- subrbgat_.,., ac--.on i.,_ ,.cs_s a e---°--._ u_ _ inc•.1'"'le~i orior .z.. e`:act:'en e st.a='1'..e : T'r.ls Lor°--9AY: st.._.._ la::g'.:a3e ea'..e the State the - C'.:rs:._ t?:l:'~1-"zY resources. ..cweve-, =hs met•r.cd of~ eurs;.__ was lir.:ited to radi`io-:a_' Id, at 1249 (emnhasis ad3ed si..._iarly, ~.. statc = ;.ca:d recoupment case _'-sssd^. the s-.a,_=-'-s ..,,..,mo' law c'_a_:^,=_ t!:at :- rpcrted to-fas'r.:~ : a...,.._-, .._ract cause of a:'t~.on _uencica=
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clerk of the district court in the county where the recio-en= resides and with the recipient's attorney when the recipient's eligibility for medical assistance is established." Id. The plain language of Section 249A.6- thus establishes that it provides the State with a cause of action to enforce its lien on monetary claims which a particular Medicaid recipient may have against third parties.Lol It does not, as.the State asserts, make the State a"superlitigant" by authorizing an independent, "direct" action by the State divorced from any lien rights it may possess to recover Medicaid costs based upon the monetary claims which recipients may have against potentially liable third parties.'-11 --The State's remaining co nte^tions concer^.ing the '_993 amendment toSection 249':..5 ' ca- ba " c-s:. '^`_ss_Pa .. "-~af'y'. "~rst, _ '~:: : "r__.__ ~e renlacPae._df c_` the Stat_'s v-=9-~i_s wi_.- a L•'en toi o-ain - ' a^ccaaae v_ '..._ ~statu,:.e-: _s, ,.t __,.rse, control'_i.^.a. See S-,ace v. D7onk Iowa R. AN -. P. .2d 4-3, !:'Jwa 1574; .._..aeed, _.._ S~at_'s :.,az t3e :J73 aR'.e.n.-jment to Section 2i~A-F- au--:oriZe_s an _::5eL'i°_.n.2e'.=t com, or. _aw action is inconsiste:it.wit.. `_ai--ed efforts ...a..-- _during the _99t legislative sessio a^:end._Section 249?..C bring a:: -1r.aependent cause ,_ action : Obviously, if, as the State c::nte^ tn>-Attorney General to ! Sen- yu ng at 3 ....,. 245A.6 a'_->a~-y aut::o'_"=.z_°d such an act'_.on, .:^ese . efforts would have Yze?.'.
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(State's Br.-at 25.) The State can produce no support whatsce:~er for this argument. First and foremost, there is nothing whatsoever in the language or any legislative history relating to the 1993 amendment to suggest that the Legislature intended to overrule the holdings in Brooks, Hill, and Bales that Section 249A.6 provides the State with its exclusive remedy for the recoupment of Medicaid costs. Certainly, there is no reference to any common law claims for the recovery of such costs or any suggestion that the 1993 amendment was some type of "stealth" legislation intended to give rise t.c new, previously-barred common law claims. The manifest purpose of the.-993 amendment. wass to give the State a _--:uno.^, all mo.^.etar.: claims which a Medicaid recipient may :nave agairst third parties. See Iowa Code-§ 249A.6(l). This purposew•as _.n r:o way inconsisten~ - wit•r., and was A"-e~=_.d wit:ou`_ -e`_erence to, __.'_s _,,..__'s _-_-^as in Brooks, Hi21, and Pales, arid• irn oar_ic•.:'_ar,_.t.`:e__ holdings that Section 249A.6 . orovides =he State's -exclusive remedv. Co^seTaen7:~y, the S~:a~:e's assertlo.^. ::.^.3:~: the :.992 a:".:e.^.d'^P: = s.o',.°how _'legis'_atively over_-1es" Erooks, Hil_, and Haies is s^eer self- serving snecula::on. .. is a_so remedy created 'ey_;.ae but is inconsis;.ent W CJ\ (J _.^.correct spec~=at'_cr.=' The State's 1ier. ZND ;33 am,e^dMen:: not oniy °ails to author:ze, O I to recover xe71Cai3 c--sts As noted above ~ e of -ndPne n3e=r~ common law action w ,_a__ seeks _. rJue !ier_. 993 a7e^d^e-:t ca...,e ..:e S:.ate a 1ier. upor. all monetary _laiTs which a P'edicai~~ec_pient t:ay ::ave
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remedy did not, as explained above, authorize an independent "direct" action as asserted by the State. (See State's Br. at 25.. The StateLsright to pursue an action under Section 249A.6 following the 1993 amendment remains derivative of the rights Si:^.__ar:y;- t~:e State's v°_ the Districc. Court s-an^;e.^,_ _.. 3esc-_bi t.._ t:a_'are of the t'_on o= -_._.. "su~-_ocat:on" als.: avoids _o•.:a--~'ode § 668.5, which =-ecoveries. rn w :ether _eco:'- - _s(J" possessed by individual Medicaid recipients`against potentially liable third parties. As noted above, the 1993 amendment enhanced the State's rights by giving it a security interest -- a lien -- in monetary claims held by Medicaid recipients aaa~inst third parties. The lien remedy has possible advantages over subrogation.121 A lien provides protection to the State with iittle or no cost. By.giving the requisite notice, the State may reap the beiiefits of any claims pursued by a recipienu. The State thus may'_r`=ap the be:e'__ts c` the recinien*_'s claims without expending:---_-_ts own financial resources. However;--if the recipient chooses not to pursue a claim, ..i= State ^',ay brin ? an action c =.. r e«s lien. See =cwa Code § 249A. S~?5) .-=n short, while the . 199-3- amendment ef:ected ceYta'^ hanges, no_t:_na _. .~_s lan.g ad=_ _ a:b~ _eg~s"~ative h.is~:or; sl:QaeS.`_S __ was _...a_._:e`d .... __..e "?Nr1t_ _ .._ __'xa law c.^.S1=ea by the State. so.:~r: ~ s ar. - ::e. -_-.. C_ s
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Anthony v. Slaid, 52 Mass. (11 Met. ) 290 (1846) . In Slaid, plaintiff had contracted with a town to provide support for the town's poor. The defendant's wife assaulted -a pauper and the plaintiff "was put to increased expense for his cure and support." Id. at 291. The Massachusetts high court held that no such cause of action could be maintained, explaining that "[t]he damage [was] too remote and indirect" because it arose "not by means of any natural or legal relation between the plaintiff and the party injured," but "by means of the special- contract by which he had undertaken to support the town paupers." Id. (emnhasis added). Numerous decisions following Slaid have held that one who pays the medical expenses of another allegedly,injured by a t..--rd party has no independent right of action against that third . party.L3j. This princinle has ii;cewise 'neen aonlieci to bar other :.ypes of 3irect act_ica-.aga~r.stalleged th:rd-parcy-tortfeasors. It iss frequently invoked, l.._ example-> fo prevent direct ;as opposed :.o subrogation) actions by insu-rers a3a:.ns:t thi~•d carties 131 See, e.4., I.J. W'einrot dScn,'. Inc. v.- Jackson, 7~9 ;.1.. 582, 691 Cal. '1955);:.Ore-:da Foods, Inc. v., Indian Head vattie Co., 627 ?.2d-459, 472-74 (Or. 1981); Fifield Manor v. Finston, 354 P.2d 1G73, i075 `Cal. 1960); Iity ef F':`:adelp,'Tia r. Philadelphia Rapid Transit Co., 10 A.2d 434, i30 (Pa. 194u-i-; ahelsea h.'oving & TrLlckZn3 Co. i/. Ross To:,-CoaL ,..,. , __.. ...~. -7-4-, 4)5 ~Mass. :732, Connecticut h:ut. Life Ins. _,.. .. %'e:v York x ,..Y. R.R. Co., 25 Conri. 265 ?1856) ; Rockinal:am hu~:. Fire Ins. ~.. .. 5osher, 39 're. 2-E3 ._>..;:~.
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grounds that recovery for such losses is barred by the re.^.tcte: ess doctrine. The Maryland trial court hearing that state's action against members of the tobacco industry noted in dismissing the state's claims: "At common law a plaintiff had no right to recover damages from a defendant tortfeasor as a result'of the defendant's injuries, harm, or lack of care to a third person, regardless of the fact that the defendant's actions may have put the plaintiff t.c what otherwise would have been unnecessary or increased expense." State of Maryland v. Philip Morris Incorporated; No. 96 122C7.7/C:. 211487, 1997 WL 540913, at *9 (Md. Cir. Ct. Nay-21, 1997); accoru Nelson v. Fogelstrcm, 284 N.E2d 339, 341 Ct. Apti. __"'2 . "Under the common law of England, as incorporated into the ...,..,,...,.= law of Maryland, a plai-tiff did- not have a= right to recover dama4es `_ro a de-e°.as- teasc- :... his ow-= na:r.e or of .._c o-.::: -right as a resui a da t`s in uries to a tl:ird cart: beca'ise the damagewaa-.i~+: _e':'.o'e a.^.Q-:..Tl~1reC~ a`co]":sequence of the ..ac v ~__ ..r e- W±'.,.-_^.3=e'_". M1"ar. :dT.J, _._ va`- '_a.^.d CoUr _ _.._S . coP.c1 l:Qed t :a :: . "Sta;._ of ..ary:an.. ca.not Y=_ :er aaTacges =_„7. ..< =endants as a result ofDefenda^-s'alieged .-.- _ar ~,:okers _ . ..a-rtious co.^.yvt ~cward a ^Caryland in :: e presenct ...e ause the damages- a_Ye_ - ~oo rec;ote and in_q~_ rect a conseQUence of the acts of ~:=e wro.^.~Tdoers. . . ar.o ...__ :ar^.a.eS Id, a= *=3-=4. _.._ Va- , _ (soLg:^.t by the p:a::r,tiffsi are taa _ re;no:e' an.d indirect ^z'ar,y=ar.d, at *=-.
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treatment of alleged injuries to "first-level" plaintiffs, _._ , Medicaid recipients and State employees who smoke. The State's alleged injuries are likewise remote: as the District Court recognized, there are too many potentially intervening factors for which the State's theory of recovery in this action would not account, including the reasons a Medicaid- recipient or State employee began smoking, the smoker's awareness of the risks of smoking, and other factors that might account for the smoker's health difficulties. The District Court's Ruling dismiss-ing Counts 11, and VII on remote and derivative injury grounds is supported by a long line of authorities in Iowa and elsewhere holding that "second-level" plaintiffs like the State cannot recover. This Court reviews the Ruling of the District Court for errors of law. See D,rer v. Krug, 533 ti.W.2d 221, 222 !_c•ha 1U5). :or the reasons set forth below, --ne District Co,.:rt's__nuling"was clearly correct. 1. States Supreme ...,,___ :-as-onserv=d: - LO stand a:: ".J re-°Qte a 3isLar.ce 'recover. _,fA,l n_ la_n__"_ whocor..p=a:.^ lls; 6F harm flowina --_`^erelv cis`_or_::r:es visited unon a tnird J person by the de=e:-:uant's_act [is)=ger.erally said The State's Claimed Injuries Are Not Recoverable Because They Are Too Remote Holmes v. Securi..ies: _..,:_s....,. Proz__...ca __rc}, 503 -,,.S. 258, 268- 65; '12 S. C 8, _17 _. E.,. -.. 532 __332; (citing .. Ja.ar.t G. _^RSa__::o, LAW o= The genesis of the line of autna-_4t_=s on which Holmes ~3 was the Suoreu._ .,.:3ic:a: Cour- ~,i deci__,,.. in
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and ci*_ies' special duty claims on the_ ground-that 'blainti_"_' claims as currently [pled] do not link the alleged injury direct:;' to the defendants' alleged breach of duty." San Francisco, 95-7 F. Supp. at 1143-44. The court specifically held that, to state a valid claim, a plaintiff must allege "an injury directly caused by such breach." Id. at 1144 (emphasis added). The court noted that "plaintiffs are unable to state a typical negligence claim due (to; the dcr'_vative nature of their alleged injuries." Id. at 1143. The Petition here suffers the same deficiencies_ as the dismissed complaint in San Francisco: the State has no" alleged that its alleged injuries were directly caused by Defendants' alleged breacr: of a voluntary soecia= duty. Rather, all of the State's ali=_ge; injuries under Count III derive from alleged injuries to smokers. Accordingly, the District Court-correctly dismissed Count iiI. D. The State Has Waived Its Right To Challenge the District Court's Ruling that the State May Not Assert A Claim In Count IV For Unjust Enrichment/Restitution The State has waived any right it '.,:ad to challenge t.._ dis^'_s=a: ^f--Coun= IV. -.._ 5=ate-'s _-ave^.e^~_ c= t::> issues ci,_s not refer to the dis-;n_ssa= o= rta_=_'=s un~•us4 enrichment clai-.. Furt'er, the State's Brief _..__,~des no ar3un'~ent w.a_sc. -__ -ha:. Dist.rict. Conrt-erred in d'-sc.iss'_r-g _..unt IV. 'Phus, =:.e State has waive^-_ts _ig^-_o c^alle::g_=::at port-on cf t_':e 7istrict CouYt's -_Ru'_:r.3-. See Smith-vh fRS^-.Irt',., Iric.~ 553 _.-.J1.214 895 ,_o•na Hyler v. Sarn=_, _-- '.•:.~.. 364, _,. _ ._...-„a _35S'. . r,.__^ex~ --it i-s _so _ate for __._ __aze t.. raise any argu^gn'. ccnc>Y"._-^.a Ce;:nt .,iv See j_.:nst_.. v. 6"e~__an-s' _ iaca aut.. , ~»
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of Counsel Dan K. Webb Thomas J. Frederick Kurt L. Schultz Kevin J. Narko WINSTON & STRAWN 35 West Wacker Drive Chicago, Illinois 60601 (312) 558-5600 (312) 558-5700 (fax) R.J. REYNOLDS TOBACCO COMPANY By Steven L. Ne±son DAVIS, BROWN, KOEHN, ROBERTS, P.C. The Financial Center 666 Walnut.SLreet, Suite 2500 Des Moines, Iowa 5030Cl (52_5)- 289-2500 -(5=5) 243-0654 (fax; o` Co'uns== Thomas F. 3ardner .,_..ES, DAY,- R7AVIS & POG:;E 77 ... Wackes Drive ".3=2: 782-3T9~.3:9 7'}L :SJJJ and as a=_essor bv merger tc :an.__a_ ,.c..=er Des ':~.Ja 50309 (5151 282-7b-_~ =ax
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the States misconstrues the legal basis for the District ruling: The doctrine of remoteness is not based upon a factual inquiry to determine whether the damages claimed were foreseeable or whether there was proximate cause; rather, it is a legal doctrine incorporating public policy considerations Kraft Chem. Co. v. Illinois Bell Tel. Co., 608 N.E.2d 243, 245 (Ill. Ct. App. 1993) (emphasis added). Thus, contrary to the State's exclusive focus on proximate cause- °[t)he questiorn properly is one of legal, not factual, remoteness. Although courts often refer to remoteness or lack of foreseeability, most cases that preclude a plaintiff from recovering against a defendan:: _`cr economic losses actually are based on t::e ~agal poi'_cy _-a-_, regardless of foreseeabiiity, a certa not be abie_ to reco•ier agains`. a Cement L... v. Chemical Labs., losses resu-~in o frc-._- Co. v: Bna.r:e, 9 v. Slai`.l', SL Mass. "e::',oz_::ess s'ee, e. 3. , Insuranc= As ti:e 7istr:ct Court -ecc-=_zed, _^e'__m.:,teness doctrine reauires that __._ S=ate's c'_aias :._ u_s...isse; -~:so'_ar as zY ey see;r to recover healtt; care coscs alleged'_ State for t he ca'_"e of Med=ca~'3' '_'eclD.in.^.~s a': d_=at°_ ~::e zo s::'.,..._na_ related diseases. The State's alleged deriVatlve: t}1a C!:a`_.e is a°se.4_ond-'_°_ve'° yp plainti=f should =_ciraent de`_endant." Dundee 1168 ~ 7t : t_._ ~fAc:.v=rv of ec.........__ =s ar2 ~1?ar:r 1cn s P e/C s t..) rec~..a= R^b: -..._._ ..;sses deY=v.in;. _`_"o.- . ua`7:::ents . ^'.aue
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to recover insurance payouts allegedly resul6ing from t, rieG inflicted on insureds by the third party. See, e.g., Great .4rr. Ins. Co. v. United States, 575 F.2d 1031, 1033-34 (2d Cir. 1978); Insurance Co. v. Brame, 95 U.S. 754, 24 L. Ed..580 (1877). It has likewise been applied to prohibit recovery for other remote and derivative injuries, such as the increased insurance costs resulting from torts against third parties. See, e.g., Northern States Contracting Co. v. Oakes, 253 N.W. 371 (Minn. 1934? ; nr: Constructors Inc.v. Fusco Corp:', 650 A.2d 153,- 157-(Conn. 1994,; Unique Paint Co. v. Wia. F. Newman Co., 411 S.E.2d 352-; 353 iGa. Ct. App. 1991`. _ _ _ -One case in this -ineo°_ ,author-_~_~ies of __icniar interest here is United States v. Standard Oi1-Co., 332 U.S. 301, 67 S. Ct. 1604, 91-L.Ed. 2d (195'J)-. -in Stanz3ard oil, the United •-States 5,.,;re^':e Cotir t-.-°a ?aw =ight-to recover-a__vcrlv `_5rsusts __ '.':ad exnendeci for treatina a soidie_'-who had bee: struci cv de`_eTdant'aC•truck. Id. at 313. FLlr::her, __ __, =:e3 -_':e su^_^ a rei^:burseT.er.t a_a'.^/ng---~_ was for Congress, POC LC? -=u31c1a_ Dran c:, to _e.n.(1 «s "CreaC_ve . ~OliCf:" LO _-._ si_Iat Id. et 3'_7. Consist=nr-w~t- ttiis,o -ne o`_ au:.horities from ot::er I jurisdicvio^s,*_nis CoLrt !:as __..=_wise vejected claims by plai __ ts_se_e.kizg to _ec;-:er =v _ -_...___ a::d.,__iva_-_v= --; -ies. Just last year in Anderson Plasterers v. Meifl--cke, 543 N.W.2d 612 (IOWa 1995i, tliis. Court held that --c+:a 'ia~w does ..o.. permi': a
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, DEG 11. 1997 1:52PM , 0 NO. 7005 P. 6/35 D-eg.artment y7f Pub, Welfar v myree, 540 N.E. 2d 18, 20 (Ind. 1989) , , , , , , , , , , , , , , , , , , , 19 Federated Mut. Tmplement & Hardware Znt_ co v,Rmnkelbereer, 172 N.W.2d 137 (Iowa 1969) ..,,. 7, 11 1'ernande2 v. DeylQrtment of Human Serv,, 375 N,W,2d 701 (Iowa 1985) ag . . . . . . . . . . . . . . . 14 ., 485 N.W.2d 626, 629 (Iowa 1992) . . . . . . . . . . . . . . . . . . . . . 6 k'ranzen v. nimo .k .o u1d &,So, , 251 Iowa 742, 101 N.W.2d 4 (1960) . . . , . . . , , , . 1, 6 Haqen v. Syxaco uef, and Mktq,,,, Inc., 526 N.W.2d 531 (Iowa 1995) . . . . . . . . . . . . . . . 13 Hedqebeth v. Me,dford" 74 N.J. 360, 378 A.2d 226 (1977) . . . . . . . . . . 11, 12 Hill v. StAte nep't of Human Services, 493 N.W.2d 803 (Iowa 1992) . . . . . . , , . . . 9, 10, 17 Hoiii~th v. schminkev, 553 N.W,2d 591 (Iowa 1996) . . . . . . . . . . . . . . . 22 Holmes v. Becurities 2nvqst,ar Protection S9rp.,503 U.B. 258, 112 S.Ct. 1311, 117 L. Ed. 2d 532 (1992) . . . . . . . . . . . . . . 23, 24 Hunt v. Ernzen, 252 N.W.2d 445 (Iowa 1977) . . . . . . . . . . . . . 1, 2 '. 486 N.E. 2d 546, 548 (Ind. Ct. App. 1984) .....,._ 19 Iowa Elec. Right.& ,Dwer v, ceneralE)ec. Co, 352 N.W.2d 231 (Iowa 1984) , , , , , , , , , , , , , , , 5 Kremer v. City of Council sluffs, 304 N.W.2d 215 (Iowa 1981) . . . . . . . . . . . . . . . 8 Maryland v, Phillip Morrie_ Znc „ No. 96122017/CL211487, 1997 WL 540913 (Md. Cir. Ct. May 21, 1997) ,,,.,,, 20 p[cDermott v. of New ork, 50 N. Y. 2d 211, 217, 428 N.Y.9. 2d 643, 646, 406 N.E. 2d 460 (1980) . . . . . . . . . . . . . . . . . . . . . . . 6 Moser v. ~oro Sales Coro_, 312 N.W.2d 881 (1981) ..., 18 City oo~New o v ad ndtLStrieG Ass'n, 222 A.D.2d 119, 644 N.Y.S.2d 919 (N.Y, App. Div. 1996) . 4 iv
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elsewhere throughout the country have denied °second-;e:•e: plainti=fs like the State the right to sue disectly to recover their alleged injuries.141 2. Courts In Similar Litigation Have Applied The Remoteness Doctrine To Bar Plaintiffs' Claims Courts in health care cost recovery cases similar to this one throughout the country have dismissed claims for economic losses resulting from alleged, smoking-related injuries on the - It should be noted that such--"second-level" n'-ainti_`fs 3c not necessarily lack a remedy. Here the Stafia-may seek to.r_co_ its A°ediica_d cos.ts.._ cy bri.^.gi nYa an ac~iio^ under Section 247r.. ~. Insurers may see to recover i^s rance payou ~~y he:.^.g assia-:ed cr subrogated.to their insureds' rights. See, e.a'., Williams v. Globe Indem: Co., 5o7F.2d c37, 840 :cth-C__. '-974i, cerE. denied, 4271 ii.5. ;9B ._575i , Na___::al F___ __r.s Reed ~iean-z-s, .....~inerta> ;__. s v. Y.o.•ne J_ab. In s. C_a..:°,s --ase_ o:: ass_acme^t or _Y .._ ca_'_.... .-- -=-s'.:::~ the State seeks `:e__, : a-ely, te ahro;at: ._ _i- 3e=e:a--s so_elv b-cause -.._ cayor -- .a~`:=_r t;.an t=e caY =:' -- see:a _., recover a_a_r= the third party. See industrial R'_sk Ir.su-ers v. Creole Prod. Servs., 74E :.2d 5-2F, ? 3~: .,__.. _9 .,., ,.}:e agair.st- `n :cT. _ndemn'__y is so•.:ght de`erses to the subrJga:.ed clai,.. e~ ia=-ral act
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DEC.11.1997 1:53PM • ~ N0.7005 P. 10/35 ~ newspapers in Iowa, misrepresented the knowledge available about tobacco's effects and promised to conduct valid research and report honestly the results. (App. at 46-49). The defendants breached those promises virtually immediately and have continued to do so for over 40 years. (App. at 48-53). The defendants continued to deny and attack the evidence that smoking caused cancer, falsely represented their own research, and suppressed information that would have shown the actual consequences of smoking (App. at 55). The defendants agreed not to conduct individual research and to rely on their captive Counsel for Tobacco Research to promote "favorable" research and suppress negative research. (App. at 58-59). Specific wrongful acts included making false testimony to Congress, (App. at 40-41), reporting false Snformation to the Surgeon General, (App. at 51-52), publishing false reports, (App. at 48-49, 55-57), making a "gentleman's agreement" to suppress research, (App. at 58-59), using lawyers and the attorney-client privilege to hide the results of research projects, (App. at 53-64), firing scientists, closing laboratories, threatening legal action against scientists, and concealing studies if the results were unfavorable, (App. at 65-66, 78), canceling research on safer cigarettes, (App. at 69-71), deceiving the public about the addictiveness and health effects of nicotine, (App. at 33-34, 75-77), and manipulating the levels of nicotine to enhance addiction, (App. at 80-88). The defendants have targeted slogans, magazines, glamourous images, and sexual themes at children to 3
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DEG 11. 1997 1:62PM 0 + N6, 7005 P. 4/35 9. THE RIGHTS AND LIABILITIES THE STATE ASSERTS PREDATED TEE ENACTMENT OF SECTION . 17 10. THE CASES CITED BY DEFENDANTS FROM OTHER JURISDICTIONS Dp NOT SUPPORT A RULING THAT SECTION 249A.6 IS AN EXCLUSIVE REMEDY . . . . . . . . . . . . . . . . . • 19 11. UNSUCCESSFUL SUBSEQUENT LEGIBLATIVE PROPOSALS ARE IRRELEVANT TO THE ISSVE BEFORE THIS COURT . , . . . . . . . . . , 20 12. CONCLUSION: SECTION 249A.6 IS NOT AN EXCLUSIVE REMEDY TgAT BARS COMMON LAW CnaIMS . . . . . . . . . . . . . . . . . . 21 C. THE ALLEGATIONS IN THE PETITION REGARDING THE DEFENDANTS1 CONDUCT CAUSING THE STATElS DAMAGES ARE SUFFICIENT TO AITHSTAND A NOTION TO DISMISS . . . . . . . . . . . . . . . . . . 21 CONCLUSION AND REQUEST FOR RELIEF , , . . . . . . , . , . 25 PROOF OF SERVICE AND CERTIFICATE OF FILING ........ ATTORNEY'S COST CERTIFICATE . . . . . . . . . . . . . . . . 11
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, DEC.11,1997 1:52PM • ARGIIMENT . NO, 7005 P, 8/35 A. FHB STATE'S CLAIM OF INDEMNITY 18 SUPPORTED 8Y TSIB COURT'S DECISIONS AND TRE FACTS ALLEGED IN T$E PETITION. This Court has stated that "indemnity ... is allowed where one person has discharged an obligation that another person should bear." $unj v, Ernzen, 252 N.W.2d 445, 447 (Iowa 1977). Indemnity "places the final responsibility where equity would lay the ultimate burden." Id,, at 447-48, This Court cited Pros=_er, Torts, § 51 at 313 (4th Ed.): Indemnity is a shifting of responsibility from the shoulders of one person to another; and the duty to indemnify will be recognized in cases where community opinion would consider that in justice the responsibility should rest upon one rather than the other. $YDt, 252 N.W.2d at 448. The decisions of this Court provide many examples of shifting the burden of liability from one person who has discharged a statutory obligation to another person, who should bear the ultimate burden. &Qg, a•cr•, citv of Des Moines v. 8arnes, 238 Iowa 1192, 1199, 30 N.W.2d 170, 173 (1947) (city liable on a statutory duty could obtain indemnity from creator of dangerous condition); xranzen V. pim _Q,id & Co•, 251 Iowa 742, 750-51, 101 N.W.2d 4, 10 (196o)(city could obtain indemnity from contiguous owner); pgters v. Lyons, 168 N.W.2d 759, 767-68 (Iowa 1969) (dog owner liable under statute could obtain indemnity from seller of defective Chain); Ro%ma171 v. Northland s_revsyj~d T.i yna5, 242 Iowa 1135, 49 N.W.2d 501 (1951) (common carrier liable under statute could obtain indemnity from operator). 1
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N.W.2d- 131, 132 (Iowa 1995) (argument raised for _`irs~ t_...e _.. reply brief is too late and cannot be considered); Mueller v. St. Ansgar State Bank, 465 N.W.2d 659, 660 (Iowa 1991) (refusing *_o consider issue first asserted in untimely amendment to brief). The waiver rule applies to interlocutory appeals. See, e.g., Moser v. Thorp Sales Co., 312 N.W.2d 881, 886 (Iowa 1981.). Accordingly, the Court should affirm that portion of the District Court's Ruling dismissing Count IV. V. CONCLUSION Defendants respectful'_y request that the Court a`_f__t, August 26, 1997 Ruling on Certain Defe.^.dar.ts' N.ot_onto Dismiss theDis~rict Court of Polk Coun~y, Reade, S;:u dismissing Counts II,- -'_II, IV, and V1S- -o° the~ueti_io.^.. REQUEST FOR ORAL ARGUMENT .-efendants-AOOellees rea-.lest __.,_ >rcu:^,et.` . 71 :{~R3=S =NCC3: C:<;,-E1 a _ .._.:_r= ... Van `.'oore_. » y,~o'233-E2° __ _..~T.a- ~. ".~>~er-,a:: _ ." .a:'
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6. Conclusion The District Court's conclusion. that Section 249;,.c provides the State with its exclusive_remedy for the recovery of Medicaid costs from potentially liable third parties is supported by the explicit language of Section 249A.6, controlling iowa precedent, and decisions of other courts -involved in similar litigation throughout the country. There is no legal error in the District Court's Ruling. Accordingly, this Court should affirmthe District Court. B. The District Court Correctly Held That The State May Not Recover For Its Claimed Injuries Because They Are Remote and Derivative _ The Distric~ Court dismissed Counts=ll, III, and V1I for a second, independent reason: "iT1he State carjpot recover damages under the theories pled in.this-.case for injur3,.es allegedly caused by defendan 's beca,~se j'w_ e.s are ....-_vai__LYe andd toc -e..._t_. (Ruling at. 7.) Sner_ifi.cal'_y, .,;.ce _Sisirict -court held State's claims were derivat'-ve o_cau.se ~_ to_t.S have been v wese ..mm_t'e^ ai- ..- ^r.ed.--caid __c;o_=_.._ ..- StaGe e:ac_oyee who smo}:ed. " ild;,: damages" the State's -~ --es are .,, we^ote. --ild. at 8.. D.~st_ic~e_Court -`urt.er heic t^.at- because ,tj:nere--are :-.any co.-^~ialiy tervening =actors betNee: de`-er.dants' a:.lea=d ......'~St and ^, State's sa'_eged ~-he oor~ion 'os attac;cir,g the D_'str=c- Co',='s ., ng on :.hasor ..a.`- - . ._ses sole'_y _.._ iss•4e o°_ oroXimate caus°_ (See _~ate's t_. at 3-23.) in doin- sc, s'
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plaintiff to recover in a direct action against a third par-;: '_.,_ remote and derivative injuries resulting from that third aarty's conduct toward another -- in Anderson Plasterers, the nlainti`_f employer's claim for loss of its workers' time, the expense of hiring replacement workers, and increased workers' compensation premiums allegedly resulting from the defendant's negligence that injured the plaintiff's employees. Anderson Plasterers is only this Court's most recent expression of this general principle- of law.- This Court :as repeatedly refused recovery to indirectly injured plaintiffs due tc the- remote nature of the injury. See Eddy v. Casey's Gen. Store, Inc., 485 N.W.2d 633,-636-37 (Iowa 1992) (absent dramshop act, i•_nk between seller of alcohol and party injured is-too remote to im..pose liability);_ Cunningham v. Kartridg Pak Co., 332N.W.2d 881, 883-85 (Iowa '_983) (rejecting as "ur.tenable" _._.._rec`~y Ir.jured shareholder's produ'ct.s liability ciaim,hoLd:ng claim ^::st ce asserted by the directly injured ccrporationj. Aoplying the ,-± c p?=_s a down -i,n these cases, _.__ State -cannot recover for payme n`_s -- alleaedly" inade for the 'r.eal--:: care exp=nses of Medicaid rec_ni=_ts and State employees 7'.:e _~ smokina-reiated diseases. These are c'_assic-types of derivative injuries barred by the remoteness doctr'_r:e. _?hey are deriva:_ve be=ause the State' s al leged the ,.edicaid and o~ :er health care expenses it paid cut -- s~et Gc:ely from a'___ged injuries to Medicaid --ecipients ar.d Sta~e emphyees resulting from, smok i-:-g. Under these circumsta°:ces; Chis- Court and courts
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strict liability claim) ; Richards v. Midland-Brick Sales Co.. SS_ N.W.2d 649, 650 (Iowa Ct. App. 1996) ("It is a c_renerally recognize; principle of law that plaintiffs cannot recover- in tort where the.y have suffered only economic harm.") ; Clinical Perfusionists, Inc. v. St. Paul Fire & Marine Ins. Co., 650 A.2d-285, 294 (Md. 1994) (refusing to permit recovery of costs incurred by a plaintiff from physical harm suffered by a third party: "Extending the Rule of [Restatement (Second) of Torts] § 324A to include economic loss is a can of worms which we leave sealed.").LY As the District Court concluded: "Plaintiff seeks purely ecor.omic damages from defendan~s in this case." (Ruling at 12.) Thus,-the District Court correct'_}- .dismissed Count III. Finally, the State inexplicably reiies on the federa: district court's decision in City and Councy of San Franciscz, v. Philip .,___is Incurcorated, 957 _-Scc_ Cal. __°'~ _.2 argue that "ciovern:^e..^.`.al suba~`risia::s i;afve; a° c'_a:.:r, for brea:~:: __ voluntary duty agdi-:s- --._ _cca=-c ae=e :'ca^t-s, fSt3te's 2" a~: 4h._= _,...=_a=. .-_c _--_ 5~: a~ie'-w ' _o.n,'_entlo.^.s, Francisco decisior~-suooorts t:e District sourt's dismissal c_ . roll^=Eve.n.QtI; ,.,.__..e IP. _=.,:a -, °iL.'.:2~e_'v eccnomic loss __ recovaraDle .,_:::a, Cc__t dism=ssed various coun_ies' L6r- . -- ,..-- state's ara,.:-er._ t"at t_.- ecounn-c _ss doc'.rrne ^-as - .ce: oaraara^:_ 2~ ON ..e_`e nda:-ts_ _ea=iaentlv oerfor~ N ~D W W N
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State's remedy (State's Br. at 28-29)- is misplaced. :ow•a'= Medicaid program must comply with the requirements of the federal program. See Harris v. McRae, 448 U.S. 297, 301-, 100 S. Ct. 2671, 2680, 65 L. Ed. 2d 784, 794 (1980). The federal program mandates that the Medicaid recipient assign his or her rights to the state administering the Medicaid program. See 42 U.S.C. §§ 1396k, -.1396a(a)(25), 1396a(a) (45) ; 42 C.F.R. §§ 433.145-433.148; see also Perry v. Dowling,-95 F.3d 231, 234 (2d Cir. 1496); New York State Dep't of Social Servs. v. Bowen, 846 F.2d 129, 131 (2d Cir. 2988I; Pennsylvania Dep't of Pub. Welfare v. Quaker Med. Care & Survivors Plan, 836 F. Supp_. 314, 318 (W.D. Pa. 1993);.Lowes v. Lowes, 650 N.E.2d 1171, 1175 (Ind. Ct. App. 1995; . While not ex.piicit:,Y using the word "assignment," Section 249A.6_comports with this federal mandate by essentially creating an assignment remedy, as demor.s'ra_ed by --its rea.:ire:;e:a _?-:e !Ieoart;:ent of ....-,s: Serv-icEs be given notice of rr.one=ary c'aims which recipients T.ap have auair_st third var._i=s. See _owa Code § 247A.6(2). e _tate'J a__et':o_ tc, -_.__,-.. _. e-a::=..age of s=ctic.. L49FS.6- tc sait ..---s o`:r.j`ioses -S T.o.~_.~. irrPlevar.z-anQ wrong. _. 1t -'s ir_rel°Va.^.` Geca'.'.Be, ::.'le S:ate aC1.'iiii.s ~:Y:at ,.Y ~~s not ollrs'.:-I:Q a .-:.3eY Jec lJ:. 2'_ ytf. F r wl.lc.- brjvide.5' tne-. S:-a:L- with its exclusive re;.edy for __._ rec ;ver; of "'edicaid costs. __ is wrong-heca::se Secticr 243A.6 .c~~~ea=~.' does ...e._. authorize _.._ k-'d o_ _.^.deoen3A.^.t cd:r.^cx _aa act'_c^ __ ~_ "~~~t: costs _^at =..~ 9 Llroua^~_ Acc7rdi^ ..:s:.rict Court was LGrreLt .. i__ t:olQiiQ _~3= Section 2 .~,:y._ _s .__-_n S::a'.e'S eY.=1.:s
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DEC. 1L 1997 1:54PM . ~ N0, 7005 P. 14/35 represented by this Court's decision in red- a.d M Tmplement & Hard,ware Tns, Co v I7unkelberoer. 172 N.W.2d 137, 141-42 (Iowa 1969), overruled on other grounds by Lewis v. Stata, 256 N.W.2d 181, 189-92 (Iowa 1977), superseded by statute, Section 123.94. This Court held that an automobile owner, whose liability was vicarious by reason of a statute and arose from the operator's negligence and the dramshop's violations, was entitled to indemnity against a dramshop. The owner was an innocent party and not guilty of intentional wrong or moral turpitude. ld_, at 141. Here, the State's liability arises salely by reason of a statute, the State is innocent, and the defendants' acts caused the State's liability for health care costs. The defendants misread All_ id Mtt_ In9. Co. v. State, 473 N.W.2d 24, 27 (Iowa 1991), as support for their argument. This Court's decision actually affirms that one liable solely by virtue of a statute may seek indemnity from the responsible party. 1d., at 28. Alli.gd involved a collision between a State-owned vehicle and a truck. Allied Mutual insured the truck owners and paid claims brought by passengers in each vehicle. Allied then brought indemnity claims against the State. With respect to Allied's claims for indemnity for the insurer's payments to the first passenger, a State employee, the State's iminunity under the workers' compensation act barred the indemnification claims against the state. J,~J, at 27. With respect to the claims for the insurer's payments to the second passenger, this court held that Section 321.493 did 7
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.DEC, 1 h 1997 1:53PM • 9 N0, 7005 P. 11/35- addict them and ensure their future markets. (App. at 95-99). For example, the "Joe Camel" campaign increased R.J. Reynolds' share of the "children's market" from 0.51 to 32.8% in a few years, and Joe Camel became as ubiquitously recognized by children as Mickey mouse, (App. at 98). Defendants directed their acts at and intended to have an impact on the State. (App. at 105). The defendants acted purposefully knowing that when consumers used cigarettes as intended, Iowans would be certain to suffer tobacco-related diseases and the State itself would be injured. (App. at 36). As a result, the State was obligated to pay and has paid hundreds of millions of dollars to provide medical care for tobacco-related illnesses. (App. at 115). 2. IOWA LAW SUPPORTS T8$ STATB'e CLAIMS FOR INDEMNITY Defendants' brief weakly asserts, as an alternative basis for dismissal, that the State fails to state an indemnity claim. Traditionally, this Court allows indemnity based on (1) express contract, (2) vicarious liability, (3)breach of an independent duty, or (4) primary as opposed to secondary liability, eritt-TQrh Coro. v. Amerj_a,n Magnetics Corn., 487 N.W.2d 671, 673 (Iowa 1992). Restatement of Restitution §§ 76 and 96 provide a sufficient legal basis for the State's common law claim of indemnity for breach of an independent duty. =, 252-N.W.2d at 448. The State's Brief discussed Cir4y of New York v. Lead Indu9- i 4 Acs'n, 222 A.D.2d 119, 644 N.Y.S.Zd 919 (N.Y. App. Div. 1996)(city could obtain indemnity under Restatement of 4
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,DEC. 1 b. 1997 1:53PM • 0 NO. 7005 P. 12/35 Restitution § 76 from sellers of a toxic product, namely lead paint, for costs of treating and monitoring health of children and other costs). The defendants' brief did not even mention or discuss the State's reliance on the New York case or Restatement §76. $gg gir,Q, City o New York v. Keene Corp,, 132 Misc.2d 745, 505 N.Y.S.2d 782 (S.Ct.N.Y. 19a6)(city's common law duty to provide healthy schools gave rise to a valid claim for indemnity under Restatement of Restitution § 76 for costs of abating hazardous condition). This Court has also recognized and cited with approval Restatement (Second) of Torts § 886B as an analytical framework for indemnity. Towa Eiec. Light & Power v. General Elec. Co., 352 N.W.2d 231, 238 (Iowa 1984). Comment c states: The unexpressed premise has been that indemnity should be granted in any factual situation in which, as between the parties themselves, it is just and fair that the indemnitor should bear the total responsibility, rather than to leave it on the indemnitee or to divide it proportionately between the parties by contribution. It is sometimes said that a right to indemnity arises when the indemnitor owes an independent duty to the indemnitee. This may prove to be nothing more than a way of stating the problem (when is the duty owed?), but it happens to be true in some of the instances stated in Subsection (2), in which the indemnitee would have an action of tort against the indemnitor, irrespective of a right of indemnity. Restatement of Torts (Second) § 886B, Comment c at 346 (1979). At least one court has held that Restatement of Restitution § 76 implies a contractual basis for indemnity. The Court of Appeals of New York held that "[where] payment by one person is compelled, which another should have made...a contract to reimburse or indemnify is implied by law." 5
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I DEC,'11, 1997 1;52PM , • NO. 7005 P. 7/35 Ci y of New York v KeenA Corn, 132 Misc.2d 745, 505 N.Y.S. 2d 782 (Sup.Ct. 1986) . . . , . . , , , , , , 5 Peters v. Lyons, 168 N.W.2d 759 (Iowa 1969) ...... 1, 6 pri -. v. Kinc, 259 Iowa 921, 146 N.W.2d 328 (1966) ... 12 Roz,maj z? v. Northi and Greyhound Lines, 242 Iowa 1135, 49 N,W,2d 501 (1951) 1 State ex rel DeR't of Human aeryicgs v Brogkn, 412 N.W,2d 613 (Iowa 1987) . . . . . . . , . 9, 10, 11, 15 State ex ral. epartment of Human Gerv v Pierce, 465 N.W,2d 467 (Iowa 1990) , , . . . . . . . , , 14 United_ St_a_tea v. Standard Oil ComUanv, 332 U.S. 301, 67 S.Ct. 1604, 91 L. Ed. 2067 (1947) . 24, 25 550 N.W.2d 153 (Iowa 1996) . .,. . . . . . . . . 14, 15, 18 VAyghn v. Ag Processing. Inc., 459 N.W,2d 627 (Iowa 1990) . . . . . . . . . . . . . . . 15 BTATUTEB AND RULES 1978 Acts (67th G.A,) Ch. 1094 . . . . . . . . . . . . . 11 Cal. Gov't Code §§ 23004.1 and 23004.3 . , . . . . . . . 19 Iowa Code § 216.6-216.13 . . . . . . . . . . . . . . 15, 16 Iowa Code § 249A.6 . . . . . . . . . . . . . . . 8 - 21, 25 Iowa Code Chapter 400 . . . . . . . . . . . . . . . . . . 15 42 U.S.C. § 1396, . . . . . . . . . . . . . . . . . . 11, 12 42 U.S.C. § 2651 . . . . . . . . . . . . . . . . . . . . 11 OTHER Prosser, Torts, § 51 at 313 (4th Ed.) . . . . . . . . . . 1 Restatement of Restitution § 76 . , , . , , , . . , , , 4, 5 Restatement of Restitution § 96 . . . . . . . . . . . . . 4 Restatement (Second) of Torts § 886B at 346 (1979) . . . 5 Saks & Blank, .Tusis-e r_mnroved: The tn ognized Benefits of 8aqreqation and SaZIpling jn the Trial of MaC.Q Torts, 44 Stanford L. Rev. 815 (1992) . . . . . . . . . . . . . 24 V
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,DEC, 1 L. 1997 1: 53PM • 0 N0, 7005 P. 9/35 1. THE FACTB ALLEGED IN T$E PETITION MORE THAN SUFFICIENTLY DEMONSTRATE THAT DEFENDANTS SHOULD IN JUSTICE BEAR THE HEALTH CAPE COSTS OF TOBACCO-RELATED DISEASES AND INJURIES. The facts alleged in the petition make a clear, forceful, and sufficient statement upon which "community opinion would consider that in justice the responsibility [for tobacco- related health care costs] should rest upon one [the defendants] rather than the other [the State]." Hunt, 252 N.W.2d at 448. A brief summary of the allegations shows defendants' misrepresentations, deceptions, conspiracies, manipulations, and concealment intentionally directed at smokers, children, and the State with knowledge that cancer, emphysema, strokes, and coronary disease would result and that the state taould incur hundreds of millions of dollars of health care costs for tobacco-related illnesses. The petition alleges a long and detailed history of the defendants' misrepresentations and concealment of the truth about the health hazards of tobacco. The defendants have known since the 1930's of the health hazards of cancer, coronary heart disease, emphysema, and stroke due to smoking. (App. at 37, 39). Beginning 40 years ago, defendants conspired to suppress and made every effort to hide scientific evidence of the deadly health consequences of tobacco and nicotine. (App. at 42). Following the initial "Big Scare" about tobacco causing cancer in 1953, the defendants created the Tobacco Industry Research committee to manipulate information about tobacco-related research. (App. at 42-46). The defendants' "Frank Statement" of 1954, published in several 2
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a DEC?11, 1997 1: 51PEf ~ ~ N0, 7005 P, 3/35 TABLE OF CONTENTS TABLE OF ADTHORITIES . . . . . . . . . . . . . . . . . iii ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . 1 A. THE STATE'S CLAIM OF INDEMNITY IS SUPPORTED BY THIS COIIRT'S DECISIONS AND THE FACTS ALLEGED IN THE PETITION . . . . . . . . . . . . . . . . 1 1. THE FACTS ALLEGED IN THE PETITION MORE THAN SUFFICIENTLY DEMONSTRATE THAT DEFENDANTS SHOULD IN JUSTICE BEAR THE HEALTH CARE COSTS OF TOBACCO-RELATED DISEASES AND INJURIES . . . . , . . . . , 2 2. IOWA L11N SUPPORTS THE STATE'S CLAIMS FOR INDEMNITY . . . . . . . . . . . . . . . . 4 B. SECTION 249A.6 IS NOT AN EXCLUSIVE REMEDY THAT BARS THE STATE'S COMMON LAW CLAIMS ...... 1. CONTRARY TO THE DEFENDANTS' REPRESENTATIONS, THIS COURT HAS NEVER HELD THAT IOWA CODE SECTION 249A.6 IS AN EXCLUSIVE REMEDY THAT BARS THE STATE'S COMMON LAW CLAIMS . . . . . . . . . . . . B 9 2. THIB COURT'S USE OF THE TERM "OTHERS" IN BRQO$@ DID NOT EXEMPT THIRD PARTIES FAOM LIABILITY FOR REIMBURSEMENT OF MEDICAID BENEFITS . . . . . . . . . . . . . . . . . 0 3. THIS COURT RECOGNISED IN $RQO$S, THAT THE STATE HAS A DIRECT ACTION . . . . . . . . 11 4. THE LEGISLATURE MADE NO EXPRESS STATEMENT OF ESCLUSIVITY . . . . . . . . . . . . . . 12 5. THE PURPOSE OF SECTION 249A.6 IS FURTHERED BY ALLORING THE STATE'S COMMON LAW CLAIMS . . . . . . . . . . . . . . . . 13 6. SECTION 249A.6 DOES NOT EXCLUDE COMMON LAW CLAIMS TO RECOUP IMPROPERLY PAID BENEFITS . . . . . . . . . . . . . . . . . 14 7. SECTION 249A.6 IS DISTINCTLY DIFFERENT FROM OTHER COMPREHENSIVE STATUTORY SCHEMES THAT BAR COMMON LAW RIGHTS .... 8. SECTION 249A.6 IS NOT A COMPREHENSIVE SCHEME OF STATUTORY LIABILITY ...... 14 16 Ca Cn <.JJ fV ~ W s> 0 L
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. DEC.-11. 1997 1:52PM i . NO, 7005 P. 5/35 9AM Age_Sy o H al h a Adm n v Associated IllduSy, 678 So. 2d 1239 (Fla.), cert. d ne ied, Paae 117 S.Ct. 1245, 137 L.Ed.2d 327 (1996) . . . . , . . , , 20 A11ied Mut. Tns. Co. v. Gtate, 473 N.W.2d 24 (Iowa 1991) . . . . . . . . . . . . . . . 7, 8 American Trust & sav. Bank v. U.S. Fidelity & Guaran y Co., 439 N.W.2d 188 (Iowa 1989) ........ 6 334 N.W.2d 142 (IOWa 1983) . . . . . . . . . . . . . . . 16 Baker v. sterlinv_, 39 N.Y. 2d 397, 401, 348 N.E. 2d 584, 587, 384 N.Y.S. 2d 128, 131 (1976) . . . , , , . , . 10 Bales v. Warren Countv, 478 N.W.2d 398 (Iowa 1991) . . . . . . . . . . . 9, 10, 24 Blue Shield of Virgini_a y. McCreadv, 457 U.S. 465, 73 L. Ed. 2d 149, 102 S.Ct. 2540 (1982) ._......, 22 A_ritt-Tech Coro y American Magnetics Corn., 487 N.W.2d 671, 673 (Iowa 1992) . . . . . . . , . . , , 4, 6 Burlington Truck Lines. InQ„ v. Iowa Emnlovment Sec. Comm., 239 Iowa 752, 32 N.W.2d 792 (1948) ..... 21 Central Bank of Denyer y. First Interstat_e_ BaDkpf Dei1LeL, 511 U.S. 164, 128 L. Ed. 2d 119, 114 S.Ct. 1439(1994) . . , . . . . . . . , , 20, 21 Cimino v. RayNark Indus., 751 F. Supp. 649 (E.D. Tex. 1990) . . . . . . . . . , . . 24 gity and Count,y of San Francisco v. Philip Morris. Inc., 957 F. Supp. 1130, 1141 (N.D. Cal. 1997) . . . . . . . . . . . . . . . . . . 19 (a y2P Des Moines v. Bar_nes, 238 Iowa 1192, 30 N.W.2d 170 (1947) . . . . . . . . . . 1, 6 Crfcchio v.,Ea~,;, 90 N.Y.2d 296, 660 N.Y.S.2d 679, 683 N.E.2d 301, 307 (1997) . . . . . . . . . . . . . 10 naniels v. Hi-Way Truck Eq,L,ip.. tnr_., 505 N.W. pp 2d 485,490 (Iowa 1993) , , , , , , , , , , , , , , , , , 6 p\ W FV \0 CN lll ~ N
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pEC, 11. 1997 1:54PM • 0 NO. 7005 P. 13/36 Mpj),ermott v. City of New York, 50 N. Y. 2d 211, 217, 428 N.Y.S. 2d 643, 646, 40 6 N.E. 2d 460 (1980). In Fisher v. Keller 7ndu i G_ Inc., 485 N.W.2d 626, 629 (Iowa 1992), this Court stated that the discharge of an obligation under the worker's compensation statute created "what amounts to an express contract between the insurer and the worker, the first recognized ground for indemnity." This Court has rejected the doctrine of indemnity based upon active-passive negligence because it does not fit within the statutory network of comparative fault. American Trust & aanb , 439 N.W.2d 188, 190 (Iowa 1989); i?anieis v. Hi-Way Truck EgµjP.. _Tnc., 505 N.W. 2d 485,490 (Iowa 1993)(active-passive basis is abandoned). This Court, however, has not rejected common law indemnity where the indemnitee's liability is based upon a statutory obligation and the indemnitee seeks to shift the responsibility to the one who should bear it. Harnes, 238 Iowa 1192, 30 N.W.2d 170, PAterc, 168 N.W.2d 759, Franzen, 251 Iowa 742, 101 N.W.2d 4. After abandoning the active-passive distinction, this Court considered a claim for indemnity based on a theory of primary-secondary liability in Hritt-Tech, 487 N.W.2d at 673-74. The State's discharge of the statutory obligation to pay Medicaid benefits entitles the State to seek indemnification against those defendants responsible for the medical expenses. The only basis of the State's obligation to pay Medicaid expenses is its statutory obligation. The basis for indemnity based on vicarious liability is 6
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.DEG. 11. 1997 1: 54PM • • NO, 7005=P. 16/35- - not exclude common law claims against third parties expressly or impliedly. The purpose of Section 249A.6 is consistent with and furthered by allowing common law claims against third parties. Section 249A.6 allows the state to recover improper payments based on common law claims. The principles of statutory construction demonstrate that Section 249A.6 is not a comprehensive scheme of statutory liability that excludes common law claims against third parties. This Court has held that the State has a direct action against wrongful third parties. The use of the term "others" by this Court and subsequent unsuccessful legislative proposals do not mean Section 249A.6 excludes common law claims. 1. CONTRARY TO 1'$E DEPENDAHTB' REPREHENTATIONBo THIS COURT HAS NEVER HELD TH7lT IOWA CODE SECTION 249A.6 IS AN EXCLUSIVE REMEDY THAT BARS THE sT1RTE'S COMMON L11W CLAIMS. The defendants' brief erroneously argues that this court has held that Iowa Code Section 249A.6 is an exclusive remedy and bars common law claims against liable third parties. (Def. Brief at 26, 13, and 14). The issue of whether Section 249A.6 bars the State's common law claims against liable third parties for recovery of Medicaid expenses has never been before this Court, is one of first impression, and, contrary to the defendants' brief, was not reached in s a ex r.l. Dg,t of +man Services v. B_rooke, 412 N.W.2d 613 (Xowa 1987), BaLes v. Warren Co+n v, 47s N.W.2d 398 (Iowa 1991), or Hill v. 00 State Dep't af Human eryj ccs, 493 N.W.2d 803 (Iowa 1992). QN W The issues in Brooks, H,Lyl, and Bales involve disputes over N ~ the State's share of a recovery or settlement in favor of the w tr+ w 9
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•DEC, 14. 1997 1:54PM • • N0, 7005 P, 15/35-' not create a duty on the part of the State to the insurer greater than the duty of its driver. JSJ,, at 27-28. The decision in 811.j&d is inapposite to this case and does not support the defendants' position. in fact, this Court stated that the State, liable only by virtue of a statutory obligation, would be entitled to indemnity. ld,,• at 28. The defendants also misread $remer v. C1tyof -o +ncy Alliffs, 304 N.W.2d 215 (Iowa 1981) . in x TpmaY, this Court held that the legislature did not intend that an injured policeman repay benefits to the policemen's retirement pension system from his third-party recovery, in part because of the system's actuarial assumptions. The decision says nothing about indemnity claims against third parties. When this Court decided I(remer in 1981, the policemen's pension statute, Chapter 411, did not authorize recoupment of benefits from third party settlements, and this statute stood in sharp contrast to the Medicaid statute, Section 249A.6, which authorizes and requires such recoupment. In summary,,this Court's decisions provide a sufficient basis for common law indemnity in favor of the State, whose liability arises solely by discharge of a statutory obligation, and against defendants, whose morally culpable conduct caused the State to incur the damages. A. SECTION 249A.6 IS NOT AN EXCLUSIVE REMEDY THAT BARS TEE ST7lTE I8 COMMON LAW CLAIMS. Section 249A.6 does not bar common law claims for many reasons. This Court has never held Section 249A.6 excludes common law claims against third parties. The legislature did 9
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nnr tt i nnv t .CEm+ .DEC. 11, 1997 1:55PM ~ N0, 7006 P. 17/35 - recipient. This Court did not hold in Brooks, $],Z1, $3105 , or any other case that Section 249A.6 is an exclusive remedy that bars common law claims against third parties. 2. THIS COIIRT' S USE 010 T$E TERFd "OTHERB° IN Z$flO1C8 DID NOT EXEMPT THIRD PARTIES PROM LIABILITY YOR REIMBURSEMENT OF MEDICAID BEDiE8IT8. This court's statement in Rrocks that the State "could not institute suit against the recipient 2z o rs" does not exempt third party wrongdoers from common law indemnity. The common law rule protected eligible recipients and "others," such as the recipient's conservatorship in xirpok5 or a recipient's estate. There is no indication that "others" meant third party tortfeasors. This Court's statement in 9ropks was attributed to Ba er v. stq iinc, 39 N.Y. 2d 397, 401, 348 N.E. 2d 584, 587, 384 N.Y.S. 2d 128, 131 (1976). Br11Ser addressed the issue of recoupment from a recipient of public assistance. The statute in Aake provided for claims against recipients, their estates, their executors, and their administrators and successors in interest. 7.a, S.aIS9Z did not involve the issue of whether claims could be brought against third party tortfeasors. A subsequent New York case, CriSGh?o v. p.nn+ j, 90 N.Y.2d 296, 660 N.Y.S.2d 679, 683 N.E.2d 301, 307 (1997), makes clear that Baker was not dealing "with the right to recover from responsible third parties." The narrow issue in both $ro_pk&, and $akeZ was whether the State was entitled to reimbursement from a recovery on behalf of a child. The "others" referred to in each case were parents or persons who held the proceeds of a recovery. Application of the principle 10
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,DEG. 11. 1997 1:55PM ® ~ N0. 7005 --P. 19/35 the state every opportunity to recoup its payments from third parties," Hedgepeth, 74 N.J. at 228, 378 A. 2d at 366, including direct actions to enforce common law rights. 4. THE LEGI8LAT9RE MADE NO EXPRESS 8T71TEMENT OP EXCLUSIVITY. Significantly, the legislature made no statement or indication that it intended Section 249A.6 to exclude any •available remedies against liable third parties. The absence of a legislative statement of exclusivity is all the more important because the issue is whether the State has limited its own available remedies by enacting Section 249A.6. Section 249A.6 was originally enacted to meet a federal statutory requirement that the state have a remedy to allow recovery of Medicaid payments trom liable third parties. $rQo$s, 412 N.W. 2d at 614; 42 U.S.C. § 1396a(a)(25). To infer from this purpose a legislative intent that would exclude or limit the State's available common law remedies to the advantage and benefit of wrongdoers is illogical, impractical, contrary to the legislation's purpose, and without support in the statute's text or history. This Court has held that "statutes will not be so interpreted as to deprive one of a common law right unless the statute unequivocally so states." Pri - v. Kina, 259 Iowa 921, 146 N.W.2d 328, 330 (1966). The principles of Price make clear that Section 249A.6 should,not deprive the State of its common law rights, because "nothing in the act" takes those rights away. pricg, 146 N.W,2d at 330. 12
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DEC, 11. 1997 1,56PM 0 ~ NO, 7005---P. 23/35 initial hearings, administrative releases, civil actions, venue, statutes of limitations, and judicial review. The legislature's intent that civil rights claims be adjudicated exclusively within the scheme created by Chapter 216 is manifest. In contrast, Section 249A.6 provides no details about the standard of liability or other similar provisions and simply provides a remedy for reimbursement of Medicaid expenditures. 8. SECTION 249A.6 IS NOT A COMPREHENSIVE SCHEME OF STATUTORY LIABILITY. The defendants' brief barely addresses this issue of whether Section 249A.6 is a comprehensive scheme of liability. The defendants cite only two aspects of the statute--namely, the notification requirements and allocation provisions--in support of their plea that Section 249A.6 be deemed to be a comprehensive scheme of liability that excludes common law rights. Neither the notice nor the allocation provisions make Section 249A.6 a comprehensive scheme of statutory liability. The notice requirements assume that the recipient has an attorney and is pursuing a third-party action. The provisions have no meaningful application where the State brings a direct action to enforce its lien or common law rights. The state's filing a notice of lien with the Clark of the District Court or the recipient's attorney would not appear calculated to give meaningful notice to anyone, where the recipient has not filed an action against the liable third party or hired an attorney. The failure to file the lien notice may "not prevent recovery on the obligation." Armour-nial. Inc. v. 16
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DEC, 1~. 1997 1:55PM 0 • N0, 7005 P, 20/35 5. THE PURPOSE OF SECTION 2i9A.6 IS FURTHERED SY ALLOWING THB STATEWS COMMON LAW CLAIMB. Just as significantly, the purpose of Section 249A.6 is consistent with and furthered by the State pursuing common law remedies against liable third parties to recover Medicaid payments. This Court has stated it will consider the goal of the legislation and the consequences of a particular construction when interpreting legislation. Haaen v. Texaco Refand Mgtq,,, jnc_, 526 N.W.2d 531, 542-43 (Iowa 1995). The purpose of the federal requirement in 42 U.S.C. 1396a(a)(25) and Section 249A.6 was to authorize and enhance the recovery of medical payments from third parties responsible for injuries. Interpreting Section 249A.6 to exclude common law remedies against liable third parties would limit the State's recovery and be contrary to the original goal of the statute. That consequence would be so contrary to the original legislative goal that it could not have been the legislature's intent. HaTan, 526 N.W.2d at 543. Furthermore, the interpretation urged by the defendants would interpret a statute intended to maximize the recovery of Medicaid payments from third parties to benefit those persons whose conduct caused the State to incur the payments. In Haaen, this Court could not accept such an interpretation because it would limit the state's recovery and was contrary to the legislative purpose. ZA. at 543. There is no more reason for interpreting Section 249A.6 to limit or bar the State's recovery than there was for so interpreting the statute in $agen. 13
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DEG. li. 1997 1:55PM • 0 NO. 7005 'P, 18/35 of ejusdem generis to the statement would result in the general term "others" taking its meaning from the specific term "reeipients." rn_,nkaiher^er, 172 N.W.2d at 140. The use of the term "others" does not bar the State's common law claims. 3. '17[IS COURT RECOGNIZED IN BROOKS THAT THE STATE HAS A DIRECT ACTIOH. This Court's decision in EZ9Cks recognized the State could choose between two methods of recovering Medicaid benefits: (1) a direct action against the tortfeasor; or (2) a claim against the recipient's settlement or judgment. .Brp01a, 412 N.W.2d at 615. This Court cited Hedgebeth v. Medford, 74 N.J. 360, 365, 378 A.2d 226, 228 (1977), which held that the State of New Jersey had two methods of recovery, namely: (1) an "independent right of recovery," similar to 42 U.s.C. § 2651, even though New Jersey's statute and its history contained no reference to the independent right of recovery, and (2) a right to seek recovery by way of the Medicaid recipient through a right of subrogation. 74 N.J. at 365-66, 378 A. 2d at 228. At the time of the BrDaj~& decision, Section 249A.6, 'like the New Jersey statute, contained no reference to a direct action. 1978 Acts (67th G.A.) Ch. 1094, § 1. Nevertheless, this Court recognized in Broo$g, that the State had a right to a direct action. There is no logical reason to assume that the State's implied right of dizect action prohibited the State from using any claims available to it, including common law indemnity claims. A more logical approach, and one consistent with the federal requirement of 42 U.S.C. § 13s6a(a)(25) to seek reimbursement, is to "afford II
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DEC, 1 ~. 1997 1: 55PM ~ • NO, 7005 P. 21/35 -- 6. SECTION 249A.6 DOES NOT EXCLUDE COMMON LAW CLAIMS TO RECOUP IMPROPERLY PAID BENEFITB. This Court has held that the rule providing for no right of reimbursement from the public assistance recipient does not exclude common law claims to recoup improper payments. State ex rel. (Zepa m-n- of Human -rv. V. Pierce, 460 N.W.2d 467, 468 (Iowa 1990); Fern_andez v. Department of Human serv,, 375 N.W.2d 701, 709 (Iowa 1985). These decisions demonstrate that the rule protects the innocent or qualified recipient and was never intended to, nor did it, protect the wrongdoer. The defendants' attempt to use this rule as a shield to protect third party wrongdoers conflicts with the reason for the rule and would extend the rule beyond the persons originally protected. Since innocent third parties are liable at common law for receiving a wrongful payment, there would be no reason, absent an unequivocal legislative statement, that third party wrongdoers would be exempt from common law liability for Medicaid payments caused by their wrongdoing_ 7. SECTION 249A.6 IS DISTINCTLY DIFFERENT FRO1[ OTHER COMPREHENSIVE STATUTORY SCHEMES THAT BAR COMMON'LAN RIGHTS. The principles of statutory construction for determining whether a statute provides an exclusive remedy discussed in Van Raale v. City of Des MoinAS, 550 N.W.2d 153, 155-56 (Iowa 1996) demonstrate that Section 249A.6 does not exclude common law remedies. In Section 249A.6, the legislature did not create a comprehensive scheme of statutory liability similar to other statutes that bar some common law remedies of private litigants. 14
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pEC. 1l 1997 1:57PM 0 ~ N0, 7005-'P. 29/35 be held responsible. This Court's definition of when damages are "too remote" is found in Fjplinggworth v. Schminkey, 553 N.W,2d 591, 597 (Iowa 1996). Under this Court's decisions, a defendant's conduct may be "too remote" from the damages when the connection is unnatural, unreasonable, improbable, or unforeseeable, LL As discussed in the State's brief, the connection between the defendants' wrongful conduct and the State's payment for tobacco-related health care costs was known, intended, foreseen, probable, a natural consequence, and a direct result. The link between defendants' conduct and the State's damages is not "remote." The defendants' assertion that there is a "remoteness doctrine" that governs this case finds no support in this court's decisions. The United States Supreme Court has said: The traditional principle of proximate cause suggests the use of words such as "remote," "tenuous," "fortuitous," "incidental," or "consequential" to describe those injuries that will find no remedy at law. And the use of such terms only emphasizes that the principle of proximate cause is hardly a rigorous analytic tool. Blue Shield of Virg n;a y. Mccready, 457 U.S. 465, 477 n. 13, 73 L. Ed. 2d 149, 160 n. 13, 102 S.Ct. 2540 (1982). This Court's decisions regarding proximate cause and motions to dismiss provide a well-tested framework for analyzing the sufficiency of a petition under Iowa law, and the defendants' reliance on cases from other jurisdictions, last century, or federal statutes add little or nothing to the analytical framework of this Court's decisions. Under this 22
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~EC, 1#. 1997 1:58PM 0 0 N0, 7005 P. 30135-' Court's decisions there can be no question that the District Court erred when it dismissed the State's claims because the State could not prove the requisite causal link. The defendants' brief cites Hoim v.iSecuri*_ies Tm_~tsor Pr ction Corn., 503 U.S. 258, 112 S.Ct. 1311, 117 L. Ed. 2d 532 (1992). That case involved federal RICO claims arising from stock manipulation on behalf of persons who did not even buy the stock and whose only damage was that their brokers- dealers could not pay their bills. The Court held that the plaintiff's claims on behalf of non-purchasing customers were "too remote" under the federal RICO statute. The Court identified three factors in determining whether a claim was "too remote" under RICO: (1) the less direct the injury, the greater the problem in ascertaining the amount of a plaintiff's damages due to the defendant's conduct as opposed to other factors; (2) the risk of multiple recoveries; and (3) the directly injured victims would have an incentive to sue. Although the FtD1mess test for standing under RICO has little or no relevance to this case, it is clear that the State's claims are not "too remote," under the FIq mPG factors. Under the first factor, scientific and statistical methods of proof enable the State to prove its damages in a single direct action more accurately and reliably than in tans of thousands of subrogation actions. - The perception that [statistical] aggregation provides inferior adjudication is largely illusory .[and] in fact, aggregation adds an important layer of process which, when done well, can produce more precise and reliable outcomes. 23
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11/03/97 MON 13:31 FAX 515 245 4452 GREFE & SIDNEY 0 003
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ABC..1S, 1997 1:58PM • ! N0, 7005 -P. 32/35 - -' at 313, 91 L. Ed. at 2073. The issue in S andard Oil was not "remoteness", but was whether a federal court should create a right where Congress had not yet enacted a statute. In this case, however, the Iowa legislature has enacted a statute to fulfill a federal requirement that the State seek recovery from third party wrongdoers who caused Medicaid expenses. Under this Court's decisions, the issue of proximate cause does not depend on whether the action is subrogation or a direct action. Defendants admit the State's damages are not subject to any proximate cause challenge in a subrogation action. (bef. Brief at 39 n. 14). If the State's damages are not "too remote" for recovery in a subrogation action, the damages are no less the proximate result of defendants' conduct when the State sues directly to recover its Medicaid expenses from the intentional wrongdcers who caused the expense. D. CONCLUSION AND REQOEST POR RELIEB The District Court erred in ruling that section 249A.6 was an exclusive remedy that barred common law claims and that the State could not prove the requisite causal link. The State requests that this Court reverse the District Court's dismissal of Counts 2, 3, and 7. ATTORNEY GENERAL OF TOWA ~, co gy 2 ///i & 1~ A"-1 ° ; Thomas .'Miller rv Attorney General ~ w rn ~ 25
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.DEC, 11, 1997 1:56PM 0 I* NO, 7005 P. 25/35 Section 249A.6 did not expressly create new rights. The state's claim of common law indemnity and other claims' predated the original enactment of Section 249A.6. Neither did Section 249A.6 expressly create a corresponding liability in the third party wrongdoers that was "unknown at common law." The "corresponding liability" of the third party wrongdoers was "known at common law." Section 249A.6 does not point to a specific method of enforcement. Rather, it contemplates both individual actions by recipients and direct claims by the State and is no more specific than relying on the general jurisdiction of the Iowa District Court. Section 249A.6 is not a comprehensive scheme that created new rights and liabilities against third parties that were unknown at common law. In contrast, Section 249A.6 is "a statute merely prescribing a new remedy for a preexisting right or liability," and is not exclusive of common law rights. ydn haal@, 550 N.W.2d at 155-56. Section 249A.6 once allowed the State a subrogation remedy and to step into the shoes of the I The defendants erroneously claim that the state has waived its unjust enrichment claim because the State did not take an interlocutory appeal on this issue. Defendants' grief at 46-47. There is no rule that all issues decided by a district court be included in an interlocutory appeal. Parties should be encouraged to present highly focused interlocutory appeals because of the extraordinary nature of the appeal. A party can present issues it believes appropriate for interlocutory consideration, while reserving other issues for appeal after final judgment. This Court's decision in Moser v_ Thorp _,ales Coro., 312 N-W.2d 881 (1981), does not suggest that a party waives its right to appeal after final judgment on any issue not raised in interlocutory appeal. Interlocutory appeal, of course, is final "as to issues properly preserved and raised." The remaining issues may be appealed after final judgment. 18
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0 38 -P~
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RECEIVED DEC 1 1 1997 TERRI P. DURHAM w
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.DEC, 1L 1997 1:56PM ` ~ NO, 7005 P, 22/35 In VAn Baa1e, this Court held that Iowa's civil service statute excludes common law claims for wrongful discharge but does not exclude common law claims based on rights different from the rights protected by the statute or requiring proof of facts beyond those facts necessary to state a claim under the statute. j1a at 155-56. The comprehensive scheme of statutory liability in Chapter 400 creates a right to continued employment for civil servants, removal procedures, and appeals and hearings before the Civil Service Commission and District Court. Chapter 400 is so detailed and comprehensive that the legislature clearly intended to exclude common law claims for wrongful discharge In contrast, Section 249A.6 does not prohibit certain acts, include a standard of liability, or create a procedure for adjudicating rights. Section 249A.6 is such a minimal scheme that there is no evidence of an intent to exclude the State's common law claims. In Vaughn v. Ag ProceSsi_q Ine., 459 N.w.2d 627 (Iowa 1990), this Court held that the civil rights statute excluded common law claims for unfair or discriminatory practices but not claims of wrongful discharge based on an employment contract or retaliation for filing a workers' compensation claim. JA,, at 638-39. Iowa Code Chapter 216, the civil rights statute, creates a detailed and comprehensive scheme of statutory liability, including detailed definitions of prohibited acts, unfair practices, and exceptions, Sections 216.6-216.13. Chapter 216 also creates a comprehensive administrative system for filing complaints, investigation, 15
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AEG..1;, 1997 1:58PM 0 0 NO, 7005 -P, 31/35 Saks & Blank, Jus _i ._ im8royed• m p Tn =niped Henqfi o Aggregat5on aUd 4 mp ing in thfi Tria1 of Mass xorrs, 44 Stanford L. Rev. 815, 826 and 833 (1992). Professors Saks and Blank argue persuasively that aggregated procedures: (1) meet traditional notions of due process, (2) may be necessary for vindicating due process values, and (3) yield more accurate awards. Courts routinely use statistical models in many cases to prove liability and damages. S_gfl ggnQ.ra1 y C+mina v. $aymark 7nduq., 751 F. Supp. 649, 659-63 (E.A. Tex. 1990). Regarding the second factor, there is absolutely no risk of multiple recoveries of medical costs which have been paid by the State. When the State acts directly, the recipient cannot also recover those costs paid by the State. Regarding the third factor, the recipients have no incentive or obligation to assert claims for medical expenses which they have not paid out of pocket, as this Court has previously held. RaloR, 478 N. W. 2d at 401. The right to recover the medical expenses belongs to the State. The defendants' brief also cites United StateG v. s an ard Oil Comn,any_, 332 U.S. 301, 67 S.Ct. 1604, 91 L. Ed. 2067 (1947), which is not a"remoteness" aase. In that case, the Supreme Court held that it would not recognize a federal common law action for negligent interference with the relationship between the United States and a soldier, because (1) the role of federal courts is more modest than that of state courts in identifying common law liabilities, and (2) Congress could act directly to protect the fisc. 332 U.S. 24
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pEC, 11. 1997 1:56PM 0 ~ NO, 7005 P, 24/35 =Qdg,gJfi ShinleY Co., 334 N.W.2d 142, 145 (Iowa 1983). The allocation rules in Section 249A.6(4) apply when a recipient incurs attorney's fees and court costs to enforce his or her claim. When the State acts directly to enforce its lien or common law rights, however, the recipient incurs no legal fees and is not entitled to any portion of the recovery. Nill, 493 N.W.2d at 807. The allocation rules of Section 249A.6(4) simply do not apply when the State acts directly. These allocation rules do not bar direct actions by the State based on common law rights. Totally missing from Section 249A.6 are the types of provisions common to statutes which create comprehensive schemes of statutory liability and exclude common law rights of private litigants. Most conspicuously, the plaintiff must necessarily look outside Section 249A.6 to the common law for claims of negligence, strict liability, malpractice, indemnity, or other basis for its claims. That fact alone demonstrates that the legislature intended that the State's claims against wrongful third parties would be based upon common law claims. 9. T1iE RIfiRT9 AND LIABILITIES THE STATE ASSERTS PREDATED TH8 ENACTMENT OF SECTION 249A.6. The defendants' brief asserts that Section 249A.6 should exclude the State's common law remedies because the statute grants a new right and creates a corresponding liability unknown at common law. The only new right created was the State's right to recover benefits from the innocent recipient. With respect to the State's recovery against third parties, 17
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i ., .~; ~~, '~ 1997 1 : 59PM 40 j§~``-N0, 7005 -P, 35/35 -- . I further certify that on December 0 , 1997, 2 will file this document by mailing eighteen (18) copies of it to the Clark of the Supreme court, statehouse, Des Moines, Iowa 50319. ATTOR_uEYIB COST CERTTF7CATE I certify that the actual cost of reproducing the necessary copies of PLAINTIFF/APPELLANT STATE OF IOWA'S REPLY BRIEF consisting of .~2. y/8 pages was in the sum of 5 3/y•~-a Ae4 Gr/ / ROG$ q. STON$
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DEC, 1 j, 1997 1: 57PM • • NO. 7005 P, 26/35 recipients and assert their preexisting common law rights. After the 1993 amendment, Section 249A.6 "prescribes a new [lien] remedy" for recovery. Both before and after the 1993 amendment, Section 249A.6 is a remedy in favor of the State for enforcement of preexisting common law rights against third parties who caused injuries. As such, there is no reason or logic to the argument that the remedy provided the State in Section 249A.6 was intended by the legislature to exclude the State's common law rights. 10. THE CASES CITED BY DEFENDANTS FROM OTHHR JURISDICTIONS DO NOT SUPPORT A RULING THAT SECTION 249A.6 IS AN EXCLUSIVE REMEDY The cases from other jurisdictions cited by defendants do not support their position. In City and County of San Franc;cco v_ Phi ig Mo iG, 7nc-, 957 F. Supp. 1130, 1141 (N.D. Cal. 1997), the California Medicaid lien statute did not bar or exclude common law claims. Cal. Gov't Code yy 23004.1 and 23004.3 provided lien remedies similar to Section 249A.6, and the court rejected the argument that the statute precluded the common law action, because it was not clearly exclusive. Defendants' brief at 23 mischaracterizes the State's reference to Indiana Dep't of Public Welfare v. Lar,gon, 486 N.E. 2d 546, 54B (Ind. Ct. App. 1984), which the State discussed for the purpose of showing that principles of subrogation do not apply to actions under the Medicaid lien statute. (State's Brief at 27-28). The case of DQnartmPnt og Pub. welfare v. Tyree, 540 N.E. 2d 18, 20 (Ind. 1989), involved recoupment from a recipient's estate and did hot hold 19
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tn, -1-qb1997 1:58PM • , N0, 7005 -P, 33/35-- Walker Law Firm, P.C. ~ Dickinson, Mackaman, Tyler & Hagan, P.C. E. Ralph Walker #PTC0005346 Brent R. Ap~e1 #4796 8537 2501 Grand Avenue, Suite E Des Moines, IA 50312 PH: 515-281-1488 FAX: 515-281-1489 699 Walnut, 1600 Hub Tower Des Moines, IA 50309 PH: 515-244-2600 FAX: 515-246-4550 Wandro & Gibson, P.C. Hawkins & Norris " " " U'iG C'fi Fw'J Steven P. Wandro #484762 2501 Grand Ave., Suite B 48 Glenn Norris #PK0004035 2501 Grand Ave., Suite C Des PH: Moines, IA 50312 515-281-1475 Des Moines, IA 50312 PH: 515-288-6532 FAX: 515-281-1474 FAX: 515-288-9733 Simmons, Perrine, Albright & "ood, P.L.C. Roger44. Stone #LI0005358 115 Third St., S.E., Suite 1200 Cedar Rapids, IA 52401-1266 PH: 319-366-7641 FAX: 319-366-1917 PROOF OF SSRVTCE AND _CERT_rFTCJ,TS OF FTY_rNG I certify that on December k , 1997, I served this document by mailing two copies to counsel for all other parties in this matter at their respective addresses as shown below: Co rn Roger T. Stetson Michael Liebert w BELIN, HARRIS, LAMSON FIRM KIRKLAND & ELLIS 2000 Financial Center 200 East Randolph Dr. ~ Des Moines, IA 50309 Chicago, IL 60601 w ~ Mark C. Cunha Thomas A. Finley O SIMPSON, THACHER & BARTLETT FINLEY, ALT LAW FxRM
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.DEG. 1}, 1997 1:57PM 0 0 NO, 7005 P. 28/35 - (citation omitted) o flu nc,iron T+ck 1.{.n s, znc• v. towa Fmp't,pyment sec. csrrn., 239 Iowa 752, 32 N.W.2d 792, 797 (194s)("the language may have omitted because deemed unnecessary to a clear expression of the intent"). 12. CONCLUSION: SECTION 249A.6 IS NOT AN EXCLUSIVE RE]SEDY THAT BAAB COMMON LAW CLAINS. Section 249A.6 provides the state a direct action and looks to the common law for the basis to recover Medicaid expenses from third parties. Neither the legislature nor this court expressly or impliedly stated that common law claims against third parties should be barred. The purpose of the legislation and principles of statutory construction are consistent with allowing common law claims against third parties rather than barring them. The District Court erred in ruling that Section 249A.6 barred the State's common law claims against third parties. C. T$8 ALLEGATIONS IN THE PETITION &BGABDING THE DEFENDJiNTS@ CONDUCT CAUSING THE STATEFB DAMAGES ARE SUFFICIENT TO i6IT$STAND A MOTION TO DISMISS. This Court's many decisions on proximate cause simply do not establish that defendants who (1) conspired to sell carcinogenic, addictive, and toxic products in Iowa, (2) lied and concealed the truth about the hazards, (3) falsely promised over 40 years to conduct and report honest research, (4) targeted children with deceptive, alluring advertising, and (5) did these acts intentionally and knowing that the State would pay hundreds of millions of dollars in tobacco- related health care costs are "too remote" from the damages to 21
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11/03/97 MON 13:31 FAX 515 245 4~452 GREFE & SIDNEY IN T$E SUPREME COURT OF IOWA SIIPREMS COURT NO. 97-1683 POLK COUNTY NO. CL71048 STATE OF IOAA, ex rel., THOMAS J. MILLER, in his capacity as ATTORNEY GENERAL OF THE STATE OF IOWA, vs. PlaintifP-Appellant, R.J. REYNOLDS TOBACCO COMPANY, THE AMERICAN TOBACCO COMPANY, BROWN & WILLIAMSON TOBACCO CORPORATION, PHILIP MORRIS, INCORPORATED (PHILIP MORRIS U.S.A.), PHILIP MORRIS COMPANIES, INC., LIGGETT & MYERS, INC., LIGGETT GROUP, INC., T$E BROOICE GROUP, LIMITED, LORILLARD TOBACCO COMPANY, LORILLARD INCORPORATED, LOEWB CORPORATION, UNITED STATES TOBACCO 'COMPANY, IIST, INC., THE COUNCIL FOR TOBACCO RESEARCH, and HILL & KNOWLTON, INC., DeEendante-Appellees. RJR NABISCO, INC., AMERICAN BRANDS, INC., B.A.T.INDQSTRIES, PLC, BATIIS HOLDINGS, INC., BRITISH AMERICAN TOBACCO COMPANY, LTD., B,RITISH-A,MERICAN (HOLDINGS) LTD_,THE TOBACCO INSTITUTE,,INC., Defendants INTERLOCUTORY APPEAL FROM THE DISTRICT COURT OF POLK COUNTY THE HONORABLE LINDA R. READE, JUDGE APPELLANT STATE OF IOwA'S BRIEF THOMAS J. MILLER ATTORNEY GENERAL OF IOWA 2ND FLOOR, HOOVER BUILDING DES MOINES IA 50319 ATTORNEYS POR PLAINTIFE'-APPELLANT STATE OF IOWA 0002
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~E;, ,1A 1997 1:58PM • 425 Lexington Ave. New York, NY 10017-3954 Bruce G. Merritt DEBEVOISE & PLIMPTON 875 Third Ave. New York, NY 10022 Michael C. Lasky DAVIS & GILBERT 1740 Broadway New York, NY 10019 J. Eugene Balloun SHOOK, HARDY & BACON 9401 Indian Creek Pkwy. Overland Park, KS 77210 D. Scott Wise DAVIS, POLK & WARDWELL• 450 Lexington Ave. New York, NY 10017 Thomas F. Gardner JONES, DAY, REAVIS & POGUE 77 West Wacker Dr. Chicago, IL 60601 Brent B. Green DUNCAN, GREEN LAW FIRM 380 Capital Square 400 Locust St. Des Moines, IA 50309-2331 Richard R. Chabot SULLIVAN & WARD, P.C. 801 Grand Ave., Ste. 3500 Des Moines, IA 50309-2719 Joseph R. Gunderson Dreher, Simpson & Jensen, P.C. 699 Walnut St., Suite 1200 Des Moines, IA 50309 Dan K. Webb WINSTON & STRAWN 35 West Wacker Drive Chicago, IL 60601 0 NO, 7005 P. 34/35 - 604 Locust St., 4th Floor Des Moines, IA 50309-3773 J. Michael Weston MOYER & BERGMAN, P.L.C. P.O. Box 1943 Cedar Rapids, IA 52406-1943 John C. Monica SHOOK, HARDY & BACON One Kansas City Place 1200 Main St. Kansas City, MO 64105-2118 Wayne T. Stratton GOODELL, STRATTON LAW FIRM 515 South Kansas Ave. Topeka, KS 66603-3999 Steven L. Nelson DAVIS, BROWN LAW FIRM 2500 Financial Center Des Moines, IA 50309-3993 Fred L. Dorr WASKER, DORR LAW FIRM 8o1 Grand Ave., Ste. 310 Des Moines, I A 50309-8036 Michael M. Fay KASOWITZ, BENSON LAW FIRM 1301 Avenue of Americas New York, NY 10019-6022 Ross H. Sidney GREFE & SIDNEY 2222 Grand Ave. Des Moines, IA 50312 Robert A. VanVooren LANE & WATERMAN 220 North Main Street Davenport, IA 52801-1987 R. Laird Hart COVINGTON 4 BURLLSPjG 1201 Pennsylvania Ave. N.w, P.O. Box 7566 Washington, DC 20044-7566
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11/03/97 MON 13:32 FAX 515 245 4452 GREFE & SIDNEY 91006 0 ~ C. THIRD CANON: A NONCOMPREBENSIVE REMEDY IS NOT EXCLUSIVE ..... 38 d. PRECEDENTS INVOLVING THE STATE OF IOWA . . . . . . . . . . . . . . 40 0. PRECEDENTS FROM OTHER STATUTES . 40 f. THE CALIFORNIA DECISION ..... 42 9• SUMMARY: THE DISTRICT COIIRTf S RULING THAT SECTION 249A.6 PROVIDED AN EXCLUSIVE REMEDY AND BARRED COMMON LAW CLAIMS IS ERROR . . . . . . . 42 4. TEE STATE HAS PLED COMMON LAW CLAIMS IN THE PETITION THAT ARE NOT BARRED BY SECTION 249A.6 AND ENTITLE T8E STATE TO RECOVERY . . . . . . . . . . . . . . . . 3 5. T8E DISTRICT COURT ERRED BY RULING THAT THE STATE'S CLAIMS ARE IMPROPER BECAUSE THEY ARE "AT BEST A DERIVATIVE CLAIM" . . 46 6. SECTION 249A.6 IS THE LEGISLATURE'S MANDATE TBAT THE DAMAGES ARE NOT "TOO REMOTE" . . . . . . . . . . . . . . . . . 48 C. CONCLUSION AND REQUEST FOR RELIEF ...... 49 REQIIEST FOR ORAL ARGIIMENT . . . . . . . . . . . . . ... 50 PROOF SERVICE AND CERTIFICATE OF FILING TTTORNEY'S COST CERTIFICATE ~ C\ W fV ~ W v iii
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DEC, 11. 1997 1:57PM • ~ N0.7005 P. 27/35- that the Indiana statute provided an exclusive remedy against third parties. The issue was not addressed or discussed. The decision of the trial court in Maryland is based on a principle rejected by this Court's decision in prige, 146 N.W.2d at 330. The Maryland trial court held that "absent clear legislative intent to the contrary, statutorily created remedies are deemed to be exclusive." Even assuming that this decision is reported, it follows a principle of law contrary to Iowa law. plarvi ud v. Phi1lip Morris n-„ No. 96122017/CL211487, 1997 WL 540913 (Md. Cir. Ct. May 21, 1997). In Agency for Health Care AdmLn_. 3Z. As,ao_ ciared Tndus., 678 So. 2d 1239 cert, denied, 117 S.Ct. 1245, 137 L.Ed.2d 327 (1996), the Florida Supreme Court did not address the issue of whether the State had common law remedies. The case was a declaratory action raising issues only about Florida's special legislation. 678 So. 2d at 1246. 11. ANSUCCBSSPIIL SUBSEQUENT LEGISLATIVE PROPOSALS AR8 IRRELEVAliT TO THE ISSUE BEFORE TSIS COURT. Any inference that unsuccessful legislative proposals in 1996 are relevant to any issue in this case 1s illogical and impractical. The United States Supreme Court has stated: [F]ailed legislative proposals are "a particularly dangerous ground on which to rest an interpretation of a prior statute. ". .."Congressional inaction lacks persuasive significance because several equally tenable inferences may be drawn from such inaction, including the inference that the existing legislation already incorporated the offered change." Central R:nk of Denver v U.S. ]64, 128 L. Ed. cc First rnt,grst^te Bank of Denver, 511 Cn W N ~ 2d 119, 114 S.Ct. 138 1439(1994) 0 , W CA -p
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11/0a/97 MON 13:33 FAX 515 245 4452 GREFE & SIDNEY ~ i Restatement (Second) of Torts § 442 . . . . . . . . 13, 14 ?testatement (second) of Torts § 766C . . . . . . . . . . 18 '-,1 Anm. Jr. 2d Liens § 2 (1970) . . . . . . . . . . . . . 31 :,1 Am. Jr. 2d Liens g 15 (1970) - . . . . . . . . . . . 32 :±i Am. Jr. 2d Liens § 36 (1970) . . . . . . . . . . . . 32
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11/03/97 MON 13:32 FAX 515 245 4452 GREFE & SIDNEY TABLE OF CONTENTS 19004 Pac® TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . ip STATEMENT OF THE ISBUES . . . . . . . . . . . . . . . . i STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . 4 ARGUliENT . . . . . . . . . . . . . . . . . . . . . . . . 5 A. THE DISTRICT COURT ERRED BY RULING THAT T8E STATE CANNOT, AS A MATTER OF LAW, ESTABLISH THE REQUISITE CAUSAL LINK BETWEEN DEFENDANTS' CONDUCT AND THE STATE'S DAMAGES ....... 5 1. THE PETITION ALLEGED THE STATE'S DAMAGES WOULD NOT HAVE OCCURRED "BUT FOR" THE DEFENDANTS' CONDUCT . . . . . . . . . . 6 2. THE PETITION ALLEGED THAT DEFENDANTS' CONDUCT WAS A SUBSTANTIAL FACTOR IN PRODUCING THE STATE'S DAMAGES ...... 7 3. THE DISTRICT COURT ERRED IN ITS RULING THAT THE STATE HAD FAILED TO PROVE PROXIMATE CAUSE BECAUSE THERE WERE MANY POTENTIALLY INTERVENING FACTORS . . . . 11 a. THE DISTRICT COURT ERRED BECAUSE INTERVENING ACTS MAY RELIEVE DEFENDANTS OF LIABILITY ONLY TF THE INTERVENING ACTS WERE NOT REASONABLY FORESEEABLE . . . . . . . . . . . . 2 b. THE DISTRICT COURT ERRED BECAUSE THE INTERVENING OR SUPERSEDING ACTS IDENTIFIED SY THE DISTRICT COURT WERE WITHIN THE SCOPE OF RISK CREATED BY DEFENDANTS . . . . . . . 3 a. THE DISTRICT COURT ERRED BECAUSE THE SMOKERS' USE OF TOBACCO APPEARS TO BE NORMAL RATHER THAN EXTRAORDINARY, SO IT IS NOT AN INTERVENING OR SUPERSEDING CAUSE . . . . . . . . 4 4. THE DISTRICT COURT ERRED WHEN IT RULED ON A MOTION TO DISMISS THAT THE STATE COULD NOT PROVE THE REQUISITE CAUSAL LINK BETWEEN DEFENDANT'S CONDUCT AND THE STATE' S HARM . . . . . . . . . . . . . co ols W N 18 ~ t~a V V I
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11/03/97 MON 13:33 FAX 515 245 4452 GREFE & SIDNEY fQI010 r • ,P ompson V. Bohlken, 312 N.W.2d 501 (Iowa 1981) . . . . . . . . . . . . . . . 45 ','an Baale v, City of Des Moines, 350 N.W.2d 153 (Iowa 1996) . . . . . . . . . . . 34-36, 38 =1auahn v. Aa Procesg-in3 Inc., :59 N.W.2d 627 (Iowa 1990) . . . . . . . . . . . . . . . 38 }ftaver y,, Reaqan, 886 F. 2d 194, 197 (8th Cir. 1989) .. 10 STATUTES ANII RIILES :993 Iowa Acts (75th G.A.) Ch. 180, § 50 . . . . . . . . 25 :iowa Code § 13B.10 . . . . . . . . . . . . . . . . . . . 28 :: owa Code § 85.22 . . . . . . . . . . . . . . . . • . - 41 :. owa Code § 239.3 . . . . . . . . . . . . . . . . . . . 28 :.owa Code § 249A.6 . . . . . . . . . . 24-30, 33-43, 47-50 :.owa Code g 252C.2 . . . . . . . . . . . . . . . . . . • 28 '_ owa Code § 252E.11 . . . . . . . . . . . . . . . . . . 28 : owa Code § 455G.13 . . . . . . . . . . . . . . . . . . 39 : owa Code § 601A . . . . . . . . . . . . . . . • . . • • 38 ]owa Code § 714.16(2) (a) . . . . . . . . . . . . . . . . 4 ]owa Rule of Appellate Procedure 14(f)(10) . . . . . . . 8 Iowa Rule of Appellate Procedure 17 . . . . . . . . . . 5 z2 U.S.C. §1396a(a) (25) . . . . . . . . . . . . . . . . . 34 OTHER Pestatement of Restitution § 76 . . . . . . . . . . 43, 44 Festatement of Restitution § 96 . . . . . . . . . . . . 44 b:estatement (Second) of Torts § 323 . . . . . . . . 45, 46 p.estatement (Second) of Torts § 324A . . . . . . . . 45, 46 b:estatement (Second) of Torts § 435B . . . . . . . . 23 vii
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11/03/97 MON 13:34 FAX 515 245 4452 GREFE & SIDNEY STATEMEpPP OF THE CASE On November 27, 1996, the Plaintiff State of Iowa filed _.ts petition and joined a growing number of other states in s:eeking damages and other relief against twenty-two manufacturers and sellers of tobacco products. The petition alleges that the State has been damaged because it has incurred and continues to incur substantial costs to provide health care and other services to the citizens and employees cf the State who have suffered and will suffer from tobacco- related injuries, disease and illnesses. (Petition 112, 43, 45). The petition alleges generally a detailed history of conduct by the defendants to sell tobacco products in Iowa, increase tobacco sales through false and deceptive advertising, conceal, misrepresent and suppress scientific and medical evidence about the health consequences of smoking and the addictiveness of nicotine, target children as the next generation of smokers, and manipulate the levels of nicotine. (Petition 5134, 38, 70, 90, 101, 145, 217). The petition alleges that when Iowans used cigarettes as intended, they suffered disease and illness, including cancer, and the defendants knew and intended that the State of Iowa would be injured thereby. (Petition 1138, 241). The petition asserts claims in nine separate counts. (Petition pp. 85-98). Count I alleges violations of the Iowa consumer Fraud Act, Iowa Code g 714.16(2)(a). Count II alleges civil liability for deception. Count III alleges a breach of a special duty 00 rn voluntarily assumed. Count IV alleges unjust enrichment. C~ N7 w 4 cc co
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11/03/97 MON 13:34 FAX 515 245 4452 CREPE & SIDNEY ~ ~ . Count V alleges a civil conspiracy claim. Count VI alleges Jiability for aiding and abetting the violations described in other counts. Count VII seeks indemnity for the State's health care costs. Count VIII alleges a claim for nuisance. Count IX seeks injunctive relief. On March 17, 1997, fourteen defendants filed motions to dismiss all nine counts of the petition. Ruling at 1. A tsearing was held on June 27, 1997. The District Court issued a Ruling on Certain Defendants' Motions to Dismiss on August ..6, 1997. The Ruling sustained the motions as to Counts II i civil liability for deception), III (voluntary assumption of a_ special duty), IV (unjust enrichment), and VII (indemnity). 7tuling at 15. The District Court denied the motions as to counts I, V, VI, VIII, and IX. Yd. On September 25, 1997, the state filed its Application for Interlocutory Appeal with this Court. On October 17, 1997, this Court granted the I:pplication and ordered that the case be expedited under Iowa ):. App. P. 17. ARGUMENT A. THE DISTRICT COURT ERRED BY RULING TEAT THE STATE CANNOT, AS A MATTER OF LAW, ESTABLISH T8E REQUISITE CAUSAL LINX BETWEEN DEFENDANTS1 CONDUCT AND THE STATE'S DAMAGES. The District Court erroneously ruled that "under Counts :1, 3 and 7 the plaintiff will not be able to establish the -equisite causal link between defendants' alleged wrongful •Ionduct and plaintiff's alleged injury." (Ruling at 7-8). 'Che applicable standard of review is for correction of errors 5 0016
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11/03/97 MON 13:35 FAX 515 'L45 4452 GREFE & SIDNEY z:t law. Hornby v. Rtate, 559 N.W.2d 23, 24 (Iowa 1997). The District Court committed numerous errors at law in its Ruling: (1) the District Court erred because the petition alleges facts satisfying the requirements of "but for" and proximate cause; (2) the District Court erred because the "potentially intervening factors" identified by the District Court do not establish an intervening or superseding cause; (3) the Cistrict eourtt ignored facts pleaded in the petition; (4) the District Court considered facts outside the petition; (5) the District Court resolved uncertainties against the allegations of the petition; and (6) the District Court considered the merits of the allegations on a motion to dismiss. 1. T8E PETITION ALLEGED THE STATE'S DAMAGES WOULD NOT HA9E OCCURRED "HQT FOR" THE DEFENDANTS' CONDUCT. This Court recently summarized the requirements for proof o_ causation as follows: [UJnder any definition of causation, this element has two components: (1) the defendant's conduct must have in fact caused the plaintiff's damages (generally a factual inquiry) and (2) the policy of the law must require the defendant to be legally responsible for the injury (generally a legal question). Gc>rst v. Ma ehall, 549 N.W.2d 810, 815 (Iowa 1996) (emphasis in original). The requirement of "but for" causation is merely causation in fact. Id. at 817. The petition alleges the defendants' conduct was the "but for" cause of the State's damages. The petition alleges the State has incurred damage because it is obligated pay health care costs because of Iowans' use of tobacco products. 19017 e 6
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11/03/97 MUN 1J:38 FAX 515 245 44dZ G1itFB & J1UNr:Y '7 • uroved at trial, could readily lead a reasonable person to . :onclude that such conduct was a substantial factor in causing -he State to incur medical costs for treatment of tobacco- related illnesses and diseases. The foreseeability of the harm justifies and warrants t-:xtending responsibility to defendants for the results of their conduct. Scogains, 560 N.W.2d at 5671 Sdgell, 526 N.W.2d ZAt 540. In this case the foreseeability of the tobacco- related injury and consequences for the State are thoroughly, repeatedly, and fully pleaded in the petition. Regarding the loreseeability of the damage, the petition alleged: At all pertinent times, defendants purpose£ully and intentionally engaged in the above-described activities, and continue to do so, knowing full and well that when the consumers used those cigarettes as they were intended to be used, the State of Iowa's citizens and employees would be substantially certain to suffer injury, disability, disease, and illness, including cancer, emphysema, heart disease, and other illnesses, as well as death, and that the state of Iowa itself would be injured thereby. Petition 138. The defendants acted with the knowledge that smokers would eventually become addicted, contract disease, and incur health care costs. (Petition at fQ38, 47, 70, 90, S7, 101, 145, 149, 217). The petition alleges specifically that the conduct of the defendants has produced the intended and foreseeable results of causing addiction, tobacco-related illnesses, and substantial health care costs for the State. (Petition 1134, 38). The State was obligated to pay tobacco- related health care costs. (Petition %276); Weaver v. Reagan, 10 q
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11/03/97 MON 13:34 FAX 515 245 4452 t:owa Code § 714.16 GREFE & SIDNEY kestatement (Second) of Torts §§ 435B, 442 and 766C "~I. WHETSER T$E DISTRICT COURT ERRED WHEN IT RULED THAT IOWA CODE SECTION 249A.6 WAS AN EXCLUSIVE REMEDY FOR THE STATE'8 RECOVERY OF MEDICAID REIMBURSEMENT AND BARRED CLAIMS BASED ON THE COMMON LAW 7•.ppleby v. Farmers State Bank of Dows, 244 Iowa 288, '_~6 N.W.2d 917 (1953) F.rmour-Dial, Inc. v. Lodge & Shipley Co., 334 N.W.2d 142 (Iowa 1983) I+ales v. Warren County, 478 N.W.2d 398 (Iowa 1991) Beier Glass Co. v. Brundige, 329 N.W.2d 280 (Iowa 1983) City and County of San Francisco v. Philip Morris, Inc., 957 F.Supp. 1130 (N.D. Cal. 1997) City of New York v. Lead Indus. Ass'n, 222 A.D.2d 119, 644 N.Y.S. 2d 919 (N.Y. App. Div. 1996) DeBurkarte v. Louvar, 393 N.W.2d 131 (Iowa 1986) Eddy v. Casey's General Store, Inc., 485 N.W.2d 633 (Iowa 1992) Farmers Cooperative Co. v. Stockdales' Corp., 366 N.W.2d 184 (Iowa 1985) Federal Land Bank v. Boese, 373 N.W.2d 118 (Iowa 1995) FLsher v. Keller Industries, Inc., 485 N.W.2d 626 (Iowa 1992) Frontier Properties Corp. v. Swanberg, 488 N.W.2d 146 (Iowa 11)92) Hagen V. Texaco Ref. and Mktg., Inc., 526 N.W.2d 531 (Iowa 1')95) H.t11 v. Montgomery Ward & Co., 252 N.W.2d 421 (Iowa 1977) H.'..11 v. State Dep't of Human Services, 493 N.W.2d 803 1992) (Iowa Hornby v. State, 559 N.W.2d 23 (Iowa 1997) Htnt V. Ernzen, 252 N.W.2d 445 (Iowa 1977) Irdiana Dep't of Public Welfare v. Larson, 486 N.E.2d 546 ('?nd. Ct. App. 1984) Iowa Fed'n of Labor v. Iowa Dep't of Job Service, 4:,7 N.W.2d 445 (Iowa 1988) 2 i
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11/03/97 MON 13:32 FAX 515 245 4452 GREFE & SIDNEY 0 0 T7aBLE OF AIITHOR T'L IES ,;lnderson P1_a_.9tere_rs v. Meinecke, '343 N.W.2d 612 (Iowa 1996) . . . . . . . . . . . . . 17,18 Appleby v. Farmers State Bank of Dows, ;?44 Iowa 288, 56 N.W.2d 917 (1953) . . . . . . . . . . 33 :334 tnc. v. i.oaae & 8nipiey co., N.W.2d 142 (Iowa 1983) . . . . . . . . . . . . . 30, 31 iaQ V. Warren Connty, ,178 N.W.2d 398 (Iowa 1991) . . . . . . . . . . . . . 25, 45 Lteeman v Manyji7e CorpAsbes o nicca_ omoensa_'on Fund, 1,96 N.W.2d 247 (Iowa 1993) . . . . . . . . . . . 8, 9, 18 lieier Glass Co. v. Srundiae, 29 N.W.2d 280 (Iowa 1983) . . . . . . . . . . . . . 31, 32 0 f+0 oonrnz~ sc v. wane! ! o uoun'cv, N.W.2d 1 (Iowa 1993) 8, 18 City and oun v o San Fran iG o v Philin Morris 2nc., 557 F.Supp. 1130 (N.D. Cal. 1997) ...... 22, 42, 46 Sitv of New Xork v. Te ad ndus _ i-a A c'n. Inc. , Z22 A.D.2d 119, 644 N.Y.S. 2d 919 (N.Y. App. Div. 1996) . . . . . . . . . . . . . . . . . . . . . 43, 44 j'asuXkart~ v. i,onvar, 393 N.W.2d 131 (Iowa 1986) . . . . . . . . . . . . . . . 45 gddy v. Casey's Gen_ a1 Store. Inc., 485 N.W.2d 633, 637-38 (Iowa 1992) ..... 16, 17, 18, 39 p;ztatp of Dyer v. Krua, 533 N.W.2d 221 (Iowa 1995) . . . . . . . . . • • • - 19, 20 F,3rm - Coon ra ive Co, v. Stockdal es' Cor,E7., 366 N.W.2d 184 (Iowa 1985) . . . . . . . . . . . . . . . 37 xad~ pjr _I J~and B~,nk v. Boese, 373 N.W.2d 118 (Iowa 1995) . . . . . . . . . . . . . . . 30 Ftisher y. xeller Industries. Inc., 485 N.W.2d 626 (Iowa 1992) . . . . . . . . . . . . . . . 41 iv I
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11/03/97 MON 13•32 FAX 515 245 4452 GREFE & SIDNEY 0005 5. THE DISTRICT COURT ERRED WHEN IT RULED THAT "OTHER FACTORS WHICH MIGHT ACCOUNT FOR THE SMO2CERIS HEALTH DIFFICULTIES" MADE THE STATE UNABLE TO ESTABLISH THE REQUISITE CAUSAL LINR . . . . . . . . . 21 6. COURTS CONSIDER ADDITIONAL FACTORS IN DETERMINING PROXIMATE CAUSE WHEN INTENTIONAL CONDUCT IS ALLEGED ..... 22 7. SUltMARY: THE DISMISSAL OF THE STATEIS CLAIMS FOR MEDICAID DAMAGES FOR FAILURE TO BE ABLE TO ESTABLISH THE REQUISITE CAUSAL LIN$ WAS ERROR . . . . . . . . . 23 B. THE DISTRICT COURT ERRED WHEN IT RULED THAT IOWA CODE SECTION 249A.6 WAS AN EXCLUSIVE REMEDY FOR THE STATEIS RECOVERY OF MEDICAID REIMBURSEMENI' AND BARRED CLAIMS BASED ON THE COMMON LAW . . . . . . . . . . . . . . . . . 24 1. THE DISTRICT COURT ERRED wHEN IT RULED THAT SECTION 249A.6 IS A"TRADITIONAL ASSIGNMENT/LIEN/SUBROGATION" REMEDY . . 24 2. THE DISTRICT COURT ERRED IN ITS RULING THAT SECTION 249A.6 WAS NOT A DIRECT ACTION STATUTE AND PERMITTED ONLY SUBROGATION CLAIMS . . . . . . . . . . . 29 1. THE STATEoS MEDICAID LIEN IS ENFORCEABLE BY A CIVIL ACTION AGAINST THIRD PARTIES . . . . . . . 30 2. A LIEN IS A CHARGE ON PROPERTY WHICH SECURES AN UNDERLYING RIGHT . . 30 3. THE STATE'S STATUTORY LIEN SECURES A STATUTORY OR COMMON LAW RIGHT . . 32 3. THE DISTRICT COURT ERRED WHEN IT RULED THAT SECTION 249A.6 WAS AN EXCLUSIVE -RENEDY THAT BARRED RECOVERY OF MEDICAID COSTS ON COMMON LAW CLAIMS ...... 33 a. FIRST CANON: "A SENSIBLE, PRACTICAL, WORRABLE, AND LOGICAL CONSTRUCTION" . . . . . . . . . . . . . . . . . 35 b. SECOND CANON: THE STATUTE IS NOT GENERALLY EXCLUSIVE WHEN THE COMMON LAW RIGHT PREEXISTED THE NEW REMEDY . . . . . . . . . . . . . . . . . . 36 ii
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11/03/97 MON 13:33 FAX 515 245 4452 GREFE & SIDNEY 2008 " 10 0 _°rontier Propertj.g,.~(',orn. v. Swanberg, .:88 N.W.2d 146 (Iowa 1992) . . . . . . . . . . . . . 40, 42 ,t; rc y. Marchal2, ;49 N.W.2d 810 (Iowa 1996) . . . . . . . . . . . . 6, 7, 18 jiagen y. Texaao ReF and Mktg.. nc., !>26 N.W.2d 531 (Iowa 1995) . . . . . . . . 7, 10-14, 18, 31 )ta3]l v. Montqpmerv Ward & Co., ::52 N.W.2d 421 (Iowa 1977) . . . . . . . . . . . . . . . 44 ][ahmeraen yy Ford Motor Co, :,57 N.W.2d 7 (Iowa 1977) 11, 12 ]ii1 1 v. C-a e nep't o H iman rvices, •~93 N.W.2d 803 (Iowa 1992) . . . . . . . . . . . 25, 27, 37 ]1o11ingsworth v Schminkev, !:53 N.W.2d 591, 597 (Iowa 1996) ...... 11, 12, 15, 18 ]lorn y. State, !,59 N.W.2d 23 (Iowa 1997) . . . . . . . . . 6, 19, 24, 33 ]iuber V. Watson, t+o. 95-1959 (Iowa September 17, 1997) ....... 7-9, 18 ]i n v. . ri 2en, ;.$2 N.W,.2d 445 (Iowa 1977) . . . . . . . . . . . . . . . 44 'ndiana Dep't of Public klelfa3@ v. Larson, •186 N.E.2d 546 (Ind. Ct. App. 1984) ...... 27, 28, 31 ' owa F1 P ic lAgh & pnc r c•o v neralFl ectr; o, :;52 N..W.2d 231 (Iowa 1984) . . . . . . . . . . . . . 11, 18 'owa Fed'n of Labor V. Iowa Q,,,wp't of 7oh s-rvi , "27 N.W.2d 443 (Iowa 1988) . . . . . . . . . . . . . . . 33 Home Mut Cas Co v );'a>;ners Mut. Hai 1'in Co., ~owa , :47 Iowa,183, 73 N.W.2d 22 (1955) . . . . . . . . . . . 44 ;lennev v. Iowa Di c+ri .o ur _ for r.i nn County, 456 N.W.2d 921 (Iowa 1990) . . . . . . . . . . . . . . . 33 y. Sinclair Oil ['orA., ,:76 N.W.2d 341 (Iowa 1991) . . . . . . . . . . . 7, 8, 18 1,pnnh pnmac]Lpr v Farm Bureau Mutual Insuran~cw Go. , ,i60 N.W.2d 858 (Iowa 1990) . . . . . . . . . . . • . 19, 20 l.ewi s v. Sta e, ;'.56 N.W.2d 181 (Iowa 1977) . . . . . . . . . . . . . . . 16 Oo O\ W v tV W Co
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11/03/97 MON 13_35 FAX 515 245 4452 GREFE & SIDNEY proximate cause are only rarely decided as a matter of law." Bi.oomauist V. W9Fg'1,1o Countv, 500 N.W.2d 1, 5 (Iowa 1993) (rejecting a requirement of epidemiological evidence to establish proximate cause); Iowa R. App. P. 14 (f)(10). Secondly, proximate cause includes the element of foreseeability of the damage. Srate v. Ayers, 478 N.W.2d 606, 608 (Iowa 1991). In determining whether conduct is a proximate cause, this Court has looked to the "proximity and f~reseeability of the harm flowing from the actor's conduct, aLthough it is not necessary that the actual consequences of a defendant's negligence should have been foreseen." C~~Qgain_s, 560 N.W.2d at 567, quoting Kelly, 476 N.W.2d at 3-t9. Proximate cause requires only that some injury be foreseeable. Sgo_qgj ns, 560 N. W. 2d at 570. Thirdly, proximate cause is a test of the sufficiency of the evidence. This Court has said that the test is whether a jury could logically make the necessary inference of the cilusal connection between the defendant's action and the p.i,aintiff's injury. Ruber v. y7,-i,t,son, No. 95-1959 (Iowa 5optemher 17, 1997); 9gaur, 510 N.W.2d 859. This Court has found that this is not a rigid test. Id, Rather, it "is er:sentially a test used to analyze the sufficiency of evidence needed to satisfy the substantial factor requirement" of proximate cause. 1;1, A defendant's act or omission need only be ,3 proximate cause, not tl= proximate cause. Beeman ll~ll<P-~IbX 8 Oil , 496 0019
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11/03/97 MON 13:33 FAX 515 245 4452 GREFE & SIDNEY 0 • STATEMENT OF TB'E ISSUES I. WHETHER THE DISTRICT COURT ERRED BY RULING THAT THE STATE CANNOTf AS A MATTER OP LAWf ESTABLISH THE REQUISITE CAUSAL LINK BETWEEN DEFENDANTS' CONDUCT AND T8E STATE'S DAMAGES -lnderson Plasterers v. Meinecke, 543 N.W. 2d 612 (Iowa 1996) 3eeman V. Manville Corp. Asbestos Disease Compensation Fund, 496 N.W.2d 247 (Iowa 1993) 3loomquist v. Wapello County, 500 N.W.2d 1 (Iowa 1993) :ity and County of San Francisco v. Philip Morris, Inc., 957 La.Supp. 1130 (N.D. Cal. 1997) Gddy v. Casey's General Store, Inc., 485 N.W. 2d 633 (Iowa 1992) Lstate of Dyer v. ICrug, 533 N.W.2d 221 (Iowa 1995) :grct v. Marah 11, 549 N.W.2d 810 (Iowa 1996) 4agen v Texaco Ref. and Mktg.. Tnc., 526 N.W.2d 531 (Iowa 1995) Haumersen v. Ford Motor Co., 257 N.W.2d 7 (Iowa 1977) llS?1l].nasworth v,_,Schminkey, 553 N.W.2d 591, 597 (Iowa 1996) Hornby v. State, 559 N.W.2d 23 (Iowa 1997) Huber v. Watson, No. 95-1959 (Iowa September 17, 1997) Lowa Electric Light & Power Co. v. General Electric Co., 352 N.W.2d 231 (Iowa 1984) Kelly v. Sinclair Oil Corp. 476 N.W.2d 341 (Iowa 1991) Leuchtenmacher v. Farm Bureau Mut. ins. Co., 460 N.W.2d 858 (Iowa 1990) Lewis v. State, 256 N.W.2d 181 (Iowa 1977) Magers-Fioncf v. State, 555 N.W.2d 672 (Iowa 1996) Renander v. Inc., Ltd., 500 N.W.2d 39 (Iowa 1993) Scoggins v. Wal-Mart Stores, Inc., 560 N.W.2d 564 (Iowa 1997) Snyder v. Davenport, 323 N.W.2d 225 (Iowa 1982) 4~na+ y Ow_ns- o ning Fiberglass Corro., 510 N.W.2d 854 (Iowa 1994) state v. Ayers, 478 N.W.2d 606 (Iowa 1991) Weaver v. Reagan, 886 F. 2d 194, 197 (8th Cir. 1989) co O\ w ND ~ Ui Co Un I
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11/03/97 MON 13:36 FAX 515 245 4452 CREPE & SIDNEY loo remote from the defendants' alleged conduct because "There are many potentially intervening factors ... including but tot limited to: the reasons the smoker began smoking, the ~Amoker's awareness of the risks of smoking, and other factors ,ihich might account for the smoker's health difficulties." Ruling at 8. This Court's cases demonstrate clearly that the District Court erred when it ruled that "potential" intervening factors precluded the State from showing the "requisite causal Link" between the defendants' conduct and the State's damages. 8. THE DISTRICT COURT ERRED BECAUSE INTERVENING ACTS MAY RELIEVE DEFENDANTS OF LIABILITY ONLY IF TF1E INTERVENING ACTS WERE NOT REASONABLY FORESEEABLE. 0023 This Court has held that an intervening act may relieve •i defendant of liability only if the intervening act was not -easonably foreseeable. Ho>>ing 'o h, 553 N.W.2d at 598. )is'3$ga, 526 N.W.2d at 540; Hau~en, 257 N.W.2d at 15. Each of the "potentially intervening factors" identified by the District Court relate to the use of tobacco as intended by the 4iefendants, were foreseeable by the defendants, and were, in !'act, foreseen by the defendants. The petition specifically rIlleges that the defendants knew and intended that the tobacco products would be used by citizens of Iowa. (Petition 1134, :-8, 70, 90, 145, 149). since the use of tobacco was toreseeable, it cannot be an intervening cause. No reasonable nind could conclude that use of cigarettes by Iowa citizens was not reasonably foreseeable. Ha en, 526 N.W.2d at 540 (no co reasonable mind could conclude that putting petroleum in an O'N W underground petroleum storage tank was not reasonably ~ W ~10 12
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11/0a/97 MON 13:3a FAX 515 245 4452 GREFE & SIDNEY • MA$ R-£'onpr y_, 4 a , 555 N.W.2d 672 (Iowa 1996) . . . . . . . . . . . . . . 19 Minnesota ex rel xuma_hr,ey v Phi 1 i,p rtor,r,i s' nr _, 551 N.W.2d 490 (Minn. 1996) . . . . . . . . . . . . 48, 49 Nebraska Innkeepers, Inc. v. Pittsburgh-Des Moines Corp., 345 N.W.2d 124 (Iowa 1984) . . . . . . . . . . . . . . . Peters v. Lyons, 168 N.W.2d 759 (Iowa 1969) . . . . . . . . . . . . . 36, 43 Pirelli-Armstrona Tire Coro. v. Midwemt-We-rner & Pf]eide e'. LII~., , i40 N.W.2d 647 (Iowa 1995) . . . . . . . . . . . . . 41,42 ite Giant Oi 1 o an,i o, ;28 N.W.2d 524 (Iowa 1995) . . . . . . . . . . . . . . . 42 RS7lander v. ~Ltd. , 500 N.W.2d 39 (Iowa 1993) . . . . . . . . . . . . . . . 19 )tozmajzl v. Northland Greyhound Lines, ::42 Iowa 1135, 49 N.W.2d 501 (1951) . . . . . . . . . . 36 ;;r~ogglns-v. Wal-Mart Stores. Inc., °,60 N.W.2d 564 (Iowa 1997) ...... 7, 8, 10, 13, 14, 18 p,lfred T.. Snapp &_Son_y. Puerto RiCO, 458 U.S. 592, 607, 102 :. Ct. 3z60, 73 L. Ed. 2d 995, 1007 (1982) ....... 47 ~,+der.-~v. DavPnport, 223 N.W.2d 225 (Iowa 1982) . . . . . . . . . . . 17, 39 ap~ ur v. ow n-mr- orni ng Fi.berglaee CO_rD., 510 N.W.2d 854 (Iowa 1994) . . . . . . . . . . . . 7-9, 18 2tatp v. AyerS, 478 N.W.2d 606 (Iowa 1991) . . . . . . . . . . . . . . . 8 State v. F.W. Fitch Co., 216 Iowa 208, 17 N.W.2d 380 (1945) . . . . . . . . . . . 40 $~,~~a v. Jones, 298 N.W.2d 296 (Iowa 1980) . . . . . . . . . . . . . . 31 -^~,•-_a_ta ex rel. Dep't „ H iman fi-*'vi rP v. B oL oks, 41.2 N.W.2d 613 (Iowa 1987) . . . . . . . . . . 24, 34, 37 ~,tate ex rel palmer v Board of Sumerviao_rg, 365 N.W.2d 35 (Iowa 1985) . . . . . . . . . . . . . . . 26 S_teffenc v Amerioan Standard Tna. .o., 181 N.W.2d 174 (Iowa 1970) . . . . . . . . . . - • . • . 42 ZDD9 vi
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11/03/97 MON 1a:ae FAX 515 245 4452 GREFE & SIDNEY Wd U Jz ~ . about the risks of smoking (Petition at 1135, 90, 97, 151-61). 5. T8E DISTRICT COURT ERRED WHEN IT RULED THAT "OTHER FACTORS WHICH MIGHT ACCOUNT POR T&E sMO1fER4S HEFiLTH DIFFICIILTIES" MADE THE STATE UNABLE TO ESTABLISH THE REQUISITE CA98AL LINK. The District Court ruled that the State's injuries were remote, in part, because "other factors ... might account ;or the smoker's health difficulties." (Ruling at 8). This --uling by the District Court shows its misunderstanding of the :-tate's claims. The petition seeks recovery of tobacco- :•elated health care costs and does not seek recovery for costs uaused by "other factors-" (Petition 112, 45, 259, 263, 276). :;econdly, while "other factors" might have caused some cancer, _t is true that tobacco use has caused cancer for which the ;:tate paid the health care costs. That "other factors" might .ilso cause cancer cannot justify dismissal of a claim seeking ::eimbursement of health care costs for tobacco-related i.llness. Thirdly, the standard for motions to dismiss in Iowa ias never been that "other factors" might cause damage. Almost no plaintiff's claim could survive a motion to dismiss if a 4efendant's mere contention that some "other factor" might.have :aured the plaintiff's damage was a sufficient basis to .iismiss a claim. The District Court did not even identify, iescribe, or name the "other factors" and required only that the..defendants contend that "other factors" might have caused the State's damages. Fourthly, the District Court's ruling on 'other factors" breaking the chain of causation ignores the relevant Iowa cases on proximate cause and intervening or 21 U°t
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11/03/97 MON 13:38 FAX 515 245 4452 GREFE & SIDNEY :or today's society. Iai. The defendant had no duty not to tnterfere negligently with the contract between the employer ind employee. That this Court expressly stated that intentional interference with the employer/employee -elationship could be actionable demonstrates that the defect in the 8adersqn Plastereys' claim was the lack of the riefendant's duty rather than a failure of proof as to proximate cause. Similarly, Restatement (second) of Torts f 766C relates to claims of negligent interference with contractual relationships, and has no practical or logical application to the State's claims in this case. Edv and do not provide a framework <r'test for when injuries are "too remote" to survive a motion to dismiss. This Court's longstanding principles on proximate and superseding cause are the appropriate framework for csetermining if a petition can survive a motion to dismiss P,ased on inability to prove "the requisite causal link." The C,istrict Court erred by dismissing the State's claims for Diedicaid costs on the grounds of inability to prove "the 1-equisite causal link," and not citing or discussing even one of the leading Iowa cases on proximate cause: Huber, Scoaains, Serst. Hollinqswo h, Hacren, Snaur, Bloomauist, Bee ma_n, Kelly, c:z Iowa F~l P~-+~, 4- TH8 DISTRICT COURT ERRED W$EN IT RULED ON A MOTION TO DISMISS THAT TSE STATE COULD NOT PROVE T8E REQUISITE CAUSAL LINK BETWEEN DEPENDANT3' CONDUCT AND THE STATEIs HARM. Issues of proximate cause and intervening or superseding 18 I0.1029
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11/03/97 MON 13:38 FAX 515 245 4452 GRBFE & S1llMY LBluZu Lpplying this analysis to the sale of tobacco, the causal nexus between the damages alleged by the State and the sale of cigarettes is as great as or greater than the nexus between damages to third parties and the sale of alcohol to intoxicated persons. In both situations, the sale of the product is a proximate cause of the injuries because the harm _s a foreseeable consequence of the sale. Subsequent dramshop cases did not hold that the sale of alcohol to intoxicated persons could never be the proximate cause of injury to third parties but rather turned on whether the remedy provided by -he statute was exclusive. S-e-e Edav; Snyder v oaven^o_rt, 323 Td.W.2d 225 (Iowa 1982). These cases establish that the Court ::hould not rule that the sale of cigarettes is "too ramote" to be a proximate cause of the State's injuries. The District Court also cited Anderson P1_asterers v. Meinectr_e, 543 N.W.2d 612, 613-14 (Iowa 1996), for the proposition that "plaintiff cannot recover for injuries unless auch injuries are proximately caused by the offending conduct if the defendants." Ruling at 7. While this is a correct ::tatement of Iowa law, the statement does nothing to justify :he District Court's dismissal of the State's claims. In Anderson Plasterers, this Court held that Iowa law did not permit a claim for negligent interference with the contractual relationship between an employee and employer. Sd_ This Court did not hold that the plaintiff had failed to prove proximate cause. Rather, this Court determined that a common Law cause of action relevant centuries ago had become obsolete 17 e i
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11/03/97 MON 13:38 FAx 515 24~4452 GREFE & SIDNEY i the smoker began smoking" included defendants' conduct, and i.hat for many years smokers were not aware of the risk because r,f the defendants' actions to hide the truth and scientific 3:nowledqe about smoking. (Petition 112, 35, 38, 45, 59, 83, !+0, 97, 145, 212, 241, and 245). The petition alleges that the ciefendants, through advertising campaigns directed at c:hildren, failure to disclose material facts, efforts to mask the health hazards, distortion of research results, and other ¢:cts, caused smokers to begin and continue smoking. (Petition !!535, 90, 97, 101, 108, 145, 149, 173, 177, and 213-218). The Idstrict court erred by not accepting the allegations as true. The District Court erroneously considered facts outside the petition in ruling that the state cannot prove proximate cause. 9=, e.a., Rstatp of D_ v,_, 533 N.W.2d at 223. The tistrict Court's conclusory statements about (1) the reasons the smoker began smoking, (2) the smoker's awareness of the zisks, and (3) the "other factors" that may have caused illness were nowhere found nor alleged in the Petition. The District Court also erred when it resolved the ambiguities and uncertainties in favor of the defendants, rather than in favor of the State. r,Aucht.nma,pher, 460 N.W.2d at 861. Specifically, the District Court resolved against the State the allegations that defendants' conduct caused the State to incur 1~ealth care costs for tobacco-related illnesses (Petition 152, 38, 45, 241, 245, 259); defendants' conduct caused the smokers to begin smoking (Petition Qq166, 176, 182, 186, 213-218): and defendants failed to disclose information 20 I
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11iVJ/al Mun 13:37 NAA 010 L4a 4•4SC uMCMb h J1llnhY t26 N.W.2d at 540. The smoking-related illnesses and payment of health care costs for those illnesses is "within the scope cf risk created by the actors' conduct." The petition does r.ot allege a harm outside the scope of risk created by the defendants nor does it allege that the smokers intentionally inflicted themselves with smoking-related diseases. As stated by this Court in Haaen, "therefore, [Restatement 4442H] applies and prevents the [smokers'] action from being a superseding cause." Hagen, 526 N.W.2d at 540-41. For that rGason, the smokers' reasons for use or awareness of the risks is not an intervening or superseding cause under Iowa law. C. TRE DISTRICT COURT ERRED BECAUSE THE SMORERS' USE OF TOBACCO APPEARS TO BE NORMAL RATHER THAN EXTRAORDINARY, SO IT IB NOT AN INTERVENING OR SUPERSEDING CAUSE. This Court has examined whether the consequences are "e:xtraordinary rather than normal" in determining whether an i_Ztervening or superseding factor breaks the chain of causation. Scoggjns, 560 N.W.2d at 570. Restatement (Second) of Torts § 442(b) identifies that an intervening factor may b,reak the chain of causation when: The fact that its operation or the consequences thereof appear after the event to be extraordinary rather than normal in view of the circumstances existing at the time of its operation; Zet. If the consequences are "extraordinary rather than normal," an intervening factor may be considered a superseding cause. Scpggins, 560 N. W. 2d at 570. That tobacco-related i;lnesses and payment of health care costs result from 14 I
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11/03/97 MON 13:37 FAX 515 245 445Z GHEbt & SIDNEY de:endants' conduct is not a result that is "extraordinary ra•-her than normal." (Petition g'138-40). The occurrence of tobacco-related illnesses is "normal rather than extraordinary" be<-!ause millions of people have smoked for many years, one- fourth of all cancers are tobacco-related, the adverse effects on human health have been known for years, tobacco-related di3ease pervades society, the costs amount to hundreds of millions of dollars each year, and the State has paid the co:3ts for decades. (Petition fq39, 42, 45, 47). The defendants' conduct and sale of tobacco resulted in tobacco- related illnesses, regardless of the smokers' reasons for smoking or awareness of the risk. (Petition qq38-40, 42). The District Court said that the "reason the smoker began smoking" and "the smokers' awareness of the risks of smoking" were two af "many potentially intervening factors" that made tY.e damages "too remote". (Ruling at 8). This Court has defined a cause that is "too remote" as: If upon looking back from the injury, the connection between the negligence and the injury appears unnatural, unreasonable, and improbable in the light of common experience, such negligence would be a remote rather than a proximate cause. If, however, by a fair consideration of the facts based upon human experience and logic, there is nothing particularly unnatural or unreasonable in connecting the injury with the negligence, a jury question would be created. Hullin= arth, 553 N.W.2d at 597. The occurrence of tobacco- riilated illnesses and the State's payment of health care for those illnesses is not "unnatural, unreasonable, and Lnprobable in light of common experience." "There is nothing p.irticularly unnatural or unreasonable in connecting" the 15 LKJ VGO
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11/03/97 MON 13:39 FAX 515 245 4452 GREFE & SIDNEY ICJpJ4 n.;.cotine and defendants' targeting of children. Third, there iu no question that the degree of harm was extreme. Finally, there is a direct connection between the defendants' conduct and the tobacco-related illnesses for which the State paid the health care costs. Comment a to Restatement §435B states: .responsibility for harmful consequences should be carried further in the case of one who does an intentionally wrongful act than in the case of one who is merely negligent or is not at fault. Under the principles of Restatement §435B, the defendants are liable for the consequences of their intentional acts. 7. SU'MMARY: THE DISMISSAL OF THE STATE'S CLAIMS FOR ML°DICAID DAMAGES FOR FAILURE TO BE ABLE TO ESTABLISH THE REQUISITE CAUSAL LINR WAS ERROR. The District Court's Ruling regarding the "requisite causal link" between defendants' conduct and the State's damages contains many errors at law- The District Court's ruling ignores well-established case law on proximate cause, intervening or superseding cause, and rules for adjudicating rotions to dismiss. The affirmative defense of intervening or superseding cause was not established by the defendants' a;otion to dismiss. The "requisite causal link" was clearly, completely, and sufficiently pled. Looking back from the _.njury, the harm is not unnatural, unreasonable, improbable, i:xtraordinary, or unforeseeable. The intentional conduct of i.he defendants makes them liable for the consequences. The !;tate is entitled to a ruling from this Court correcting the District Court's errors at law on the issue of causation. 23
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11/0a/97 MON 13:37 FAX 515 245 4452 GREFE & SIUNEY • 0 tefendants' conduct with the State's damages; in fact, the defendants' conduct has caused harm for many years to hundreds cf thousands of victims with costs exceeding hundreds of millions of dollars. The facts alleged in the petition do not describe a "remote cause" within this Court's definition. T11e District Court cited Eddy v. Casay'•G .-n . a_i Storp" Iric,, 485 N.W.2d 633, 636-37 (Iowa 1992), for the proposition, "..ibsent (the] dramshop act, [the] link between seller of aLcohol and injured party is too remote to impose liability." Ruling at 7. The District Court misconstrued this Court's raling in Edv, which held that Iowa's dramshop act provided tae exclusive remedy against licensees or permittees who pr,ovided alcohol to intoxicated persons. Eddy 485 N.W.2d at 638. Eddy's essential holding was not that the link between the sale of alcohol and injury was "too remote." Before Lewis y. State, 256 N.W.2d 181 (Iowa 1977), this Court did not permit an action for sale of alcohol to intoxicated persons. I-Y Lewis, this Court held that the common law authorized ctaims of negligence against dramshops for the sale of alcohol to intoxicated persons. This Court held: [W}e see no valid reason to now perpetuate the injustice and hardship resulting from the application of the judicially formulated rule that the consumption of an alcoholic beverage, rather than its sale, is the proximate cause of injury flowing from intoxication: I,[. at 191. In re, this Court established that the question of proximate cause of injury from the sale of alcohol to iqtoxicated persons was for the trier of fact. Iid,, at 192. t 16
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11/03/97 MON 13:40 FAX 516 245 4452 GKEFh & SIDNEY B. THE DISTRICT COURT ERRED WHEN IT RULED TBAT IOWA CODE SECTION 249A.6 WAS AN EXCLUSIVE REMEDY FOR THE STATE'S RECOVERY OF MEDICAID REIMBURSEMENT AND BARRED CLAIMS BASED ON THE COMMON LAW. The District Court ruled that Iowa's Medicaid Lien :3tatute, Section 249A.6, was an exclusive remedy for the recovery of Medicaid reimbursement and barred claims based on the common law. Ruling at 6-7. The applicable standard of review is for correction of errors at'law. Hornby, 559 N.W.2d v.t 24. The District Court's Ruling rested upon conclusions that: (1) Section 249A.6 was a "traditional assignment/lien/subrogation° statute, (2) Section 249A.6 was r:ot a direct action statute, and (3) there was no common law Lasis for recovery of Medicaid costs, (Ruling at 6-7). The District Court erred in reaching each of these conclusions. 1. THE DISTRICT COURT ERRED WHEN IT RULED THAT SECTION 249A.6 IS A"TRADITIONAL ASSIGNMENT/LIEN/BIIBROGATION" REMEDY. The District Court ruled that Section 249A.6, is d "traditional assignment/lien/subrogation statute" and does not esllow a direct action. (Ruling at 6 n.4). The District Court aerred because; (1) Section 249A.6 expressly provides for a, direct action by the State to recover Medicaid reimbursement, and (2) the 1993 amendment eliminated all references to subrogation. Before the 1993 amendment, Section 249A.6 was z! subrogation statute, and the State became subrogated to the rights of recipients upon the State's payment of medical assistance. The State's subrogation rights under the statute did not assure satisfactory reimbursement of medical i 24
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11/0J/87 MON 13:37 FAX 515 245 4452 GREFE & SIDNEY foreseeable.) Whatever the individuals' reasons for smoking cr knowledge of its dangers, the smoking of the defendants' tobacco products was foreseeable by the defendants. only the use of tobacco in a manner "not reasonably foreseeable" could rise to an intervening cause. Scoqqins, 560 N.W.2d at 570. b. THE DISTRICT COURT ERRED BECAUSE THF. INTERVENING OR SUPERSEDING ACTS IDENTIFIED BY THE DISTRICT COURT WERE WITHIN TH$ SCOPE OP RISK C1tEATED BY DEFENDANTS. The intervening factors cited by the District Court relating to the individual smokers' reasons and knowledge are r.ot intervening or superseding causes under Iowa law because the harm is within the scope of risk created by the c',efendants. This Court has often followed Restatement iSecond) of Torts § 442 for guidance on intervening or e.uperseding cause. scoaains, 560 N.W.2d at 570; Haaen, l;.W.2d at 540. Restatement § 442B states: Where the negligent conduct of the actor creates or increases the risk of a particular harm and is a substantial factor in causing that harm, the fact that the harm is brought about through the intervention of another force does not relieve the actor of liability, except where the harm is intentionally caused by a third person and is not within the scope of risk created by the actor's conduct. 526 Restatement § 442B makes clear that the smokers' reasons for :moking or awareness of the risks are not superseding causes ':.:hat excuse the defendants from liability. The smokersI •;onduct caused the very same harm as that risked by the lefendants' sale and advertising of tobacco products. Hagen, 13
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11/V:f/NI MVIV 1J:SH CAA 010 L40 44JL ~l(CYG a ~1LIVCY superseding cause. The petition alleged nothing about "other factors" but instead alleged that tobacco use was a substantial factor in producing the health care costs, the health care costs were a foreseeable result of the defendants' conduct, the defendants' conduct was designed and intended to increase tobacco use in Iowa, the defendants knew of the risks, dangers, addictiveness, and carcinogenic nature of their product, and the harm resulted from the use of the pr.oduct in the manner intended. (Petition 512, 34, 38, 41, 9[), 97, 145, 149, 166, 176, 212, 228). The District Court's dismissal of the State's claims because "other factors" might also have caused health difficulties is an error at law. 6. COURTS CONSIDER ADDITIONAL FACTORS IN DETERMINING PRO%IMATE CAUSE WHEN INTENTIONAL CONDUCT IS ALLEGED. In intentional rather than negligent tort cases, courts 1c.,ok to the following factors in determining proximate cause: () the defendants' intent to commit the harm, (2) the degree o:' moral culpability, (3) the seriousness of the harm intended, and (4) the connection between the defendants' c:.>nduct, the harm intended, and the harm actually caused. R~:statement of Torts (Second) §435$; City and County of San F;-ancisco v. Philip Morris. Inc., 957 F. SUpp. 1130, 1142 ()d.D. Cal. 1997). The petition alleges that the defendants' conduct was knowing and intentional. (Petition at 1138, 41, 9:,, 145). The degree of moral culpability is great because of the conspiracy to deceive, misrepresent and conceal the knowledge about the health effects and the addictiveness of (.J UJJ I 22
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11/03/97 MON 13:38 FAX 515 245 4452 GREFE & SIDNEY cause are particularly ill-suited for disposition on a motion to dismiss. The Court must regard all facts alleged in the State's petition as true on a motion to dismiss. Hornbv, 559' V.W.2d at 24 (Iowa 1997). Dismissal under a motion to dismiss :s proper only if no state of facts is conceivable under which the State might show a recovery. Renander vInc. .i•td... 500 V.W.2d 39, 40 (Iowa 1993). The motion to dismiss admits the a:llegations in the petition and waives any ambiguity or uncertainty in the petition. Ids Additionally, the a;llegations are construed in the light most favorable to the pleader, with doubts resolved in the pleader's favor. ],euchtenmacher v. Farm Bureau Mutual Insurance Co., 460 N.W.2d 858, 861 (Iowa 1990). Facts outside the petition should not he considered. Estate of Dyer v. Kruo, 533 N.W.2d 221, 223 :Iowa 1995). The merits of the State's allegations are not at ;ssue on a motion to dismiss. Maaers-Fionof y. state, 555 1f.W.2d 672, 674 (Iowa 1996). The District Court erred because ..t failed to: (1) accept the allegations as true, (2) resolve ;tny ambiguities or uncertainty as to causation in favor of the :;tate, (3) construe the causation allegations in a light most 1'avorable to the State, (4) consider whether there were any ~'acts under which the State might show causation, (5) consider nnly the facts in the petition, and (6) consider the Iowa law nn proximate cause and intervening or superseding cause. The District Court failed to accept as true the ,illegations that defendants' conduct caused the illnesses and diseases for which the State incurred costs, that "the reasons 19 ~KJ UJU c
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11/03/97 MON 13;41 FAX 515 245 4452, . GREFE & SIDNEY . ~ best, is only one-fourth correct. The section is not "-raditional," "assignment," or "subrogation." Bollowing the 1993 amendment, the statute is a lien statute and provides for a direct action. The District Court's conclusion rejected this Court's well-established principles of statutory construction and failed to address the fundamental issue of the legislature°s intent in creating the Medicaid lien in the 3993 amendment. The State is entitled to a ruling construing the scope of the lien created to improve the State°s recovery rf ASedicaid benefits. The first foundation for the District Court's Ruling that there was no common law right to recovery af Medicaid benefits is illogical and impractical. 2. M DISTRICT COURT ERRED IN ITS RULING THAT SECTION 249A.6 AAS NOT A DIRECT ACTION STATUTE AND PERMITTED ONLY SUBROGATION CLAIMS. The District Court erred by ruling that Section 249A.6 was not a direct action statute and permitted only subrogation ~:laims for the recovery of Medicaid payments. (Ruling at i n.4). The State's right to recover Medicaid payments in a direct action is well established by the following principles: 1. The State's Medicaid lien is enforceable by a civil aotion against third parties. 2. A l.iam is a charge on property which secures an u,nderlyiasg right. 3. The State®s' Medicaid lien secures a statutory or common law right. Before discussing these propositions and the Iowa authority establishing them, an example will demonstrate the 29 ®
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11/V4/C!1 CLViY 1J:tlJ YAA .71J LYJ HYJL l.f$LYL 6 J1UlVLy 0 iKJ V40 9 The breach of nondelegable duties may constitute a basis for an action in indemnity against a third person who creates a dangerous condition. . . . "One who is liable only by reason of a duty imposed by law for the consequences of another's negligence may recover over against the active perpetrator of the wrong. . . . I3,_ at 766 (Iowa 1969) (citations omitted); Farmers Cooggrative Lo. v. S nckdal , ort., 366 N.W.2d 184, 185-86 (Iowa 1985). The State has the nondelegable duty to pay for the medical expenses of persons in Iowa who meet the eligibility standards of Medicaid and whose medical expenses have been caused by the acts and conduct of the defendants. The State 4as without legal fault. Under the common law, the atate has Es direct cause of action for indemnity. The Court should find e:n underlying action to implement the.right of the State to recover on its lien under Section 249A.6(6). This action exists in the Iowa doctrine of common law indemnity. This Court has never held that the State cannot recover t•tedicaid benefits from liable third parties under the common :!aw. Quite the opposite: The common law was the basis of the State's subrogation claims against third parties under :;ection 249A.6 since the State began paying medical .sssistance. The District Court misread Hill, 493 N.W.2d at 305, and Drooks, 412 N.w_2d at 614, for the proposition that "there is no right to recover Medicaid costs from the -ecipient or third parties." Ruling at 6. Hill and Brooks :;tated that the State could not recover Medicaid benefits from .he "recipient or others" (i.e., representatives standing in 37
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11/VJitlt MVav 1J.YV PAn JYU .-+u ++ur The department may enforce its lien by a civil action against any liable third party. The District Court erred by ignoring this Court's well- established principles for construction of statutory e,mendments. This Court has expressly stated how statutory «mendments must be construed: . Rather than presuming new legislation intends no change in law we are to presume the opposite. The appropriate rule for construing amended legislation is as followsc The courts have declared that the mere fact that the legislature enacts an amendment indicates that it thereby intended to change the original act by creating a new right or withdrawing an existing one. Therefore, any material change in the language of the original act is presumed to indicate a change in legal rights. The legislature is presumed to know the prior construction of terms in the original act, and an amendment substituting a new term or phrase for one previously construed indicates that the judicial or executive construction of the former term or phrase did not correspond with the legislative intent and a different interpretation should be given the new term or phrase. Thus, in interpreting an amendatory act there is a presumption of change in legal rights. This is a rule peculiar to amendments and other acts purporting to change the existing statutory law. irate ex rel. Pn1m .r y Board og_yupgrqisorc, 365 N.W.2d 35, 37 (Iowa 1985) (emphasis added) (citation omitted). The District Court ignored these fundamental rules for construing statutory amendments. Even though the 1993 amendment deleted all references to subrogation, the District Court ruled that Section 249A.6 is a "traditional assignment/lien/subrogation statute." Following the 1993 amendment, Section 249A.6 is a lien statute. The use cf the terms, "traditional," "assignment," and "subrogation," to I 26
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11/0J/97 MUN 13:40 NAX 51o 440 44oz uxnrn aaluwcz 0 i issistance payments, however, and the State lost three oases Ln this Court. I Qeo~t of xuman drop]s, 412 N.W.2d 613, 614-16 (Iowa 1987), the State could not recover on its subrogation claim where the plaintiff 3sserted no claim for medical expenses. In Bales v. Warren Zountv, 478 N.W.2d 398 (Iowa 1991), the State's subrogation ;laim was subject to reduction for comparative fault of the recipient. In Hill v. State Deg' of Hum n Sesyi ®s, 493 ^I.W.2d 803 (Iowa 1992), the State's subrogation claim was reduced by attorney's fees and court costs. The legislature responded to these decisions by substantially rewriting Section 249A.6. 1993 Iowa Acts (75th G.A.) Ch. 180, g 60. The 1993 statutory amendment specifically eliminated each and every reference (nine instances) to subrogation. The 1993 amendment eliminated the specific impediments to the State's recovery in a subrogation action as interpreted by Hw1aG and Hill, namely that the State "stands in the shoes of" the recipient, the State can only sue if the recipient does not, and the State's subrogation claim is subject to al2 of the defenses the third party would have against the recipient. In place of the subrogation rights, the 1993 amendment provided the State with a lien. The 1993 amendment provided the State with a lien on all monetary claims which a recipient may have against third parties, Section 249A.6(l), and provided that the State may enforce its lien directly against a liable third party, Section 249A.6(6). Section 249A.6(6) provides specifically for a direct action: 25 I
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tii~oia~ mwv lo.4u rna oi~ cro .e..ac unnrn «..av.vci describe Section 249A.6 is wholly without any basis or support in the language of the statute or legislative history. Without even attempting to analyze or discuss the lugislature's deletion of the term "subrogation" nine times f_•om Section 249A.6, the District Court inexplicably ruled that the section remained a"subrogatiori' statute. The 1~gislature could hardly have made more clear that following the 1993 amendment, Section 249A.6 is no longer a"subrogation" s~atute. The District court erred by failing to follow principle of,construction expressed in Palmer: an amendment substituting a new term or phrase [lien] for one previously construed [subrogation] -indicates that the judicial . . construction of the former term or phrase [subrogation] di& not correspond with the legislative intent and a different interpretation should be given the new term or phrase [lien]." the palMer, 385 N.W.2d at 37. In 1993, the legislature deleted every reference to, "subrogation" and substituted the word ":Aen" following the State's losses before this Court in.Bales in 1991 and Hill in 1992. The District Court's conclusiori t11et the legislature meant nothing by its 1993 amendment was error. n41ana Det7 486 N.E. 2d 546, 548 (Ind. Ct. App. 1984)-. In 1982, Indiana created a gtatutory lien in favor of the State to recover Medicaid benefits in place of an earlier subrogation action. In reviewing, the effect of the change, the court stated: The , use of the term "lien" in this statute, as the use of the term "subrogation" in the previous regulation, is clear and unambiguous and must be 27
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11/03/97 MON 13:41 FAX 515 245 4452 GREFE & 6IDNE ® f@1042 334 N.W.2d 142 145 (Iowa 1983) ; FPde a1 i,ansa 8ank v. Hoese, , 3'73 N.W.2d 118, 121 (iowa 1995). Specifically, this Court has discussed the relationship between a lien and the underlying obligation in the following terms: In ordinary use a lien is a charge upon property for the payment of a particular obligation that is independent of the lien. . . The obligation here is the right of indemnification, the right to recover. The lien is incident to and dependent upon the right of the employer to recover, but the right to recover provided by indemnification is not dependent upon the lien. E,rmour-nial, 334 N.W.2d at 145 (citations omitted). See a1.s4, Ihdj,jjna, 486 N.E.2d at 548. American Jurisprudence, often cited by this Court in its discussion of liens, described the obligation underlying a lien as follows: Although a lien is an incident of, and inseparable from, the debt which it secures, it is distinct therefrom, and in a proper case the debt ar.obligation may be enforced even though an action to enforce the lien may be barred. El Am. Jur. 2d T.l.ns § 2(1970). This Court presumes that the legislature knows the meaning given to particular terms by this Court when legislation is enacted. fja,cgen, 526 N.W.2d at `.>367 State v. Jones, 298 N.W.2d 296, 298 (Iowa 1980). This Court further presumes that the legislature intended to use this Court's definitions, absent contrary indication. Beiar Class Co. v_ Hrundiae, 329 N.W.2d 280, 285 (Iowa 1983). t,pplying its own presumptions, this Court should assume that the legislature knew of the Armour-Dial definition of the term 'lien" and presume that the legislature intended to use that 31 1
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37
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11/03/97 MON 13:42 FAX 515 245 4452 GREFE & SIDNEY Ifl 04J < 0 neaning. There is no contrary indication in the legislation „r history. Because the 1®gisiative amendment deleted the -.erm "subrogation," which had hampered the state's recovery, +Lnd substituted the term "lien," which this Court had previously defined, this Court should, rule that the 'egislature knew and intended to adopt this Court's definition r,f the substituted term. SeieX Glass, 329 N.Sd.2d at 298. 3. The 8tatees statutory lien secures a statutory or commoA law right. The Court should identify the underlying obligation :;ecured by the Medicaid lien created by the legislature in ,993 to facilitate the State's recovery of Medicaid -eimbursements, The Medicaid lien either secures a statutory t:laim for Medicaid payments or common law claims. American Jurisprudence expresses that the underlying obligation arises necessarily from the common law or statute: Statutes relating to liens may be divided into two general classes, namely: (1) those which declare a right of lien already existing at common law, and merely modify its incidents, or are codifications of common-law liens, and (2) those which create a right of lien where no such right existed at common law. )i Am. Jur. 2d Liens, § 36 (1970). The authors also stated: It is, however, appropriate here to note generally that there can be no lien in the absence of an obligation to be secured. . tii Am. Jur. 2d T•ionC § 15 (1970). These references make clear ~-hat the obligation underlying the Medicaid lien must arise krom either the statute or common law. 32 01%
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11/03/97 MUN.1a:42 FAX 515 245 4452 GREFE & SIDNEY W~045 law. Hornbv, 559 N.W.2d at 24. The District Court erred because it did not address: (1) the reason why Section 249A.6 was enacted; (2) this Court's principles regarding determination of whether a remedy in exclusive; and (3) the underlying obligation secured by the Medicaid lien. Under the joint federal and state Medicaid program, the State must enforce its right to recover against persons liable for medical expenses incurred by the State. 42 U.s.C. §L396a(a)(25); Brooks, 412 N.W. 2d at 614. The legislature enacted Section 249A.6 to implement this requirement. Isd. The enactment of a remedy to meet a federal requirement does not demonstrate a legislative intent to exclude other remedies. A sensible and. logical construction is that the legislature intended thatt the State use all available remedies to fulfill the requirement of pursuing liable parties. There is no reason to conclude that.the legislature intended to exclude common law remedies rather than simply ensure that the federal requirement of seeking recovery was fulfilled. This Court has recently considered whether a statute provides an exclusive remedy in ?~an R=.ala v. City of Des r,oines, 550 N.W.2d 153, 155-56 (Iowa 1996). This Court stated that when a statute is silent as to whether its remedy is exclusive, principles of statutory construction are to be followed. Jd. The first principle of oonstruction when a statute is silent as to whether its remedy is exclusive is: Among the most venerable of the canons of . statutory construction is the one stating that a statute should be given a sensible, practical, workable, and 34
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11/03/97 %O:i 13:48 FAX 515 245 4452 GREFE & SIDNEY Iffi085 °
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11/0J/07 NUN 1:3:44 FAX 515 'L45 445'G (;KEY£ K~SIDNEY . ~ ~ action or underlying obligation secured by the Medicaid lien. If 'he legislature had intended to create a comprehensive, sell-contained scheme, the statute could have specified the basis for the State's claims against liable third parties, the standard of liability, rights of interventa.on, joinder of par.:ies and claims, the effect of hold harmless agreements, evidence as to economic losses, claims for contribution, and oth(:r aspects of a comprehensive scheme. The legislature ' ore:dted a comprehensive scheme with those features for recovery of State payments for envircnmental corrective action , costs in Section 455G.13. In contrast, Section 249A.6 contains lonu of those aspects of a comprehensive scheme and can hardly be viewed as comprehensive scheme when compared to ,S.~e.cr_ion:455G.13. Yet both statutes provide remedies for the staCe to recover.monies it spends from liable third parties. I,owa's' Dram Shop Act is a comprehensive statute that bars certain common law actions against licensees and permittees. F,dr,,x y Casey's Genera7 Sto__~?nc., 485 N.W.2d b33, 637-38 (Icwa 1992); Sgyder v. Davenoort, 323 N.W.2d 225, 226-27, (Iowa 19.E2). Iowa's Dram Shop Act is a comprehensive scheme because it identifies the standard of liability, the persons who are li<:ble under the statute, requires a claimant to give notice to the dram shop operator, and requires the licensee to carry .li:ebility insurance. These provisions led this Court to a conclusion that a'common law negligence action could not be mawntained.against a licensee or permittee. FddV, 485 N.W.2d at 636. . In contrast, the statutory scheme of Section 249A.6 WJ050 P 39
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11/03/97 MON 13:41 FAX 515 240 452 GREFE & SIDNEY error of the. District Court Ruling. Example: A single injured p.atient receives treatment paid for by the State under M:dicaid. The State brings a civil action pursuant to section 249A.6(6) directly against the person responsible for the injuries for which the State paid the medical treatment. Under the 1993 amendments, the State is not subrogated to the rights of the recipient or limited by subrogation. Under what claim does the State prosecute its civil action? G3rtainly not under a subrogation claim, which claim the l-:gislature deleted in 1993. 8ecause the State has a direct action to enforce the lien specifically authorized by section 249A.6(6), there is an underlying right of recovery secured by t1e lien. The appropriate inquiry is to identify the underlying basis for the claim secured by the Medicaid lien. 1. The statees Medicaid liesa is enforceab2e. by a civil action against third parties. Section 249A.6(6) provides for a direct action against liable third parties to enforce the Medicaid lien. The 1993 araendment to Section 249A.6(6) expressly authorized a civil a::tion by the State to enforce its lien directly. Specifically, Section 249A.6(6) provides: "The department may enforce its lien by a civil action against any liable third p.irty." The legislative remedy enacted in 1993 expressly a..Ithorized direct actions by the State against third parties. 2. A lien is a charge on property which secures as underlying right. Under Iowa law, a lien is independent of the obligation that it secures. Armour-Dfa1, Tn . v. .odee & ship]ey Co., Wjve1 4 30 - A-
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11/VJ/b/ .+1V.. 1J.4Y !A6 J1J G~u .lYJG vllLfG u../yl/..61 ® does not identify a standard of liability, provide a specific method of ascertaining liability, immunize a specific class, or require defendants to carry liability insurance. Section 249A.6 when compared to the Iowa Dram Shop Statute cannot be oonsidered a comprehensive scheme. d. PRECEDENTS INVOLVING THE STATE OF IOWA. Tn State v. F.W. Fitch Co., 236 Iowa 208, 17 N.W.2d 380 (1945), this Court ruled that the State of Iowa had a right to sue at common law for damages to a bridge due to the negligence of a trucking company, even though the statute empowering the State Highway Com.-nission to bring suits for damages to state property did not permit the negligence acti.7n. ?.d., 236 Iowa at 214, 17 N.W.2d at 383. The statute creating the new remedy for the Commission did not bar the State of Iowa's common law claim, even though the Commission had no right to sue in negligence. This Court stated: it is the general rule that, independently of any statutory provision, a state may institute a suit in any of its own courts, whether required by its pecuniary interests or the general public welfare. ... The fact that the state may delegate to an agent the power to sue in tort or otherwise indicates such power inheres in the state. Fitch, 236 Iowa at 214, 17 N.w.2d at 383-84. The Ft~ decision supports a decision in this case that Section 249A.6 doe:: not bar the State's common law counts. ea PRECEDENTS PR6HI OTHER STATDTEB. Precedents from two other Iowa lien statutes further demonstrate that Section 249A.6 is not exclusive of common 40 4
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11/03/97 MON 13:41 PA% 515 245 4452 GREFE & SIDNEY 0 given its plain, ordinary meaning. . . . A lien is a claim which one holds on the property of another as security for an indebtedness or charge. . . . Therefore, the equitable prin®iples.a®d discretion in determining reimbursement pursuant to a suDrogation statute do not apply to rgimbursement !or the Medicaid benefits. yi. at 548 (emphasis added). The District Court's conclusion that Section 249A.6 "remained" an "assignment" statute is equally erroneous. The word "assignment" never appeared in the statute before or after the 1993 amendment. The Iowa legislature clearly knows how to c:-eate an "assignment." See, e.a., 3ection 252C.2 (assignment of support obligations); Section 252E.11 (assignment of m(tdical support payments); Section i3B.lo (wage assignment); and Section 239.3 (assignment of periodic support payments). The legislature expressly created a lien, deleted subrogation, and was silent as to an assignment. The District Court apparently labels the amendment "traditional" to bolster its conclusion that the legislature moant no change by deleting every reference to "subrogation" and creating a direct right of action with the 1993 amendment. The word "traditional" is not in the statute or history, but WJVJb the term did appear in defendants' briefs. The conclusion that the statute remained "traditional" begs the question, o"£ers no help in understanding what changes were intended, and ignores significant textual changes. 00 G\ The District Court's characterization of Section 249A.6 a:s a "traditional assignment/lien/subrogation" statute is, at ~ aC7 0 t 28
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11/03/97 MON 13:46 FA% 515 245 4452 GREFE & SIDNEY ® requirement of "physical harm." The defendants' duty included protecting the State and public from incurring the medical costs the state now seeks to recover. In ebr a1, Innkpeners, Tnc V Pittsburch-Des Moines io=., 345 N.W.2d 124, 126-27 (Iowa 1984), this Court held that a negligence claim would not support a claim for purely c•.conomic damages.. This Court's "economic loss rule" has not heen applied to cases seeking recovery of medical expenses for care of individuals, cases where the State is suing for "physical harm" to its employees and citizens, or cases _.nvolving intentional torts. The State is not seeking to zecover lost profits, but rather the costs of health care directly related to defendants' conduct. The fact that defendants' conduct caused "physical harm° to the individuals who used tobacco and the State paid for the treatment of the "physical harni° is a sufficient allegation of damage under Restatement (Second) of Torts §§323 and 324A. In A= iI-anc,isco, the court ruled that the governmental subdivisions had a claim for breach of a voluntary duty against the tobacco i.tefendalts, if properly pled. 957 F. Supp. at 1144. Counts _i, III, and VII stated valid common law claims under Iowa law •'snd the District Court's decision dismissing those counts ::hould be reversed by this court. s. THE DISTRICT COURT ERRED BY RULING T$AT THE S'Y'ATE 9 8 CLAIMS ARE IMPROPER SECAUSE THEY ARE "AT BEST P, DERIVATIVE ChAIPfl." The District Court ruled that "the plaintiff is trying to aring a direct action in Counts 2, 3, and 7 on facts that 46
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11/03/97 MON 13:42 FA% 515 245 4452 GREFE & SIDNEY 0 This Court must "construe[] the statute so that it will best effect rather than defeat.the legislative purpose." Iowa F?d'n of daboS y. Iowa Dep't of Job Se yice, 427 N.W.2d 443, 445 (Iowa 1988). "(I]t is the business of courts to so construe an act as to suppress the mischief and advance the remedy.°" 1 by y.,_F~ a=epr#®gtate Bank of D ws, 56 N.W.2d 917, 921 (Iowa 1953). This Court has stated that it assumes a statutory amendment is adopted to accomplish a purpose and is not simply a futile exercise of legislative power. Jennev v. Iow~ Ccy~r,t 'O T,inn C-olan V, 456 N.W:2d 921, 923 (Iowa 3990). The 1993 amendment was intended to facilitate the State's recovery of Medicaid payments, avoid the pitfalls of subrogation, and provide the benefits of a direct action._„ 1.°his Court's principles of statutory.construction dictate z ruling that the State's direct action under. a:4,9A-.6(6) is a remedy to enforce an underlying statutory.or vpmm®n law obligation: (1) amendments are presumed to effect ej; change, (2) the legislature is presumed to know and adopt this. Court's definitions of terms, (3) statutes are to be <:onstrued to effect and not defeat legislative purposes.,, and ;.:4) courts.are to construe statutes,to advance the remedy, . 3. . THE DISTRICT COURT €RRED WHEN IT RULED THAT SECTION 249A.6 W1s8 AN EXCLUSIVE REMEDY TSAT BF,RRED RECO9ERY.OF MEDICAID COSTS ON COMMON LAW CLAI:4S. The District Court ruled erroneously that Section 249A.6 was an exclusive remedy that barred the State's recovery of '4edicaidI costs on common law claims. (Ruling at 6). The .applicable standard of review is for correction of errors at 33 f~044 cc 01\ w tV ~ -p ~
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11/03/97 MUN 13:43 NAX 515 245 4452 hREFE & SIUNEY ® a.he common law rights of the recipient. The 1993 amendment <limi.nated subrogation as the State's remedy to enforce common :aw rights and substituted a lien . Since the legislature was !:ilent as to the underlying obligation secured by the Medicaid _ien, a sensible, practical, workable and logical construction of the 1993 amendment's creating the Medicaid lien and authora.zing a direct action would include the State's <:nforcement of common law rights. The legislature gave no _ndication it intended to supplant and exclude the State's c:ommon law rights. b. SECOND CANON: TIiE STATUTE IS NOT GENERALLY EXCLUSIVE WHEN TME COMMON LAW. RIGHT PREEXISTED TAE NEW REMEDY. The second canon of construction cited in yan saale recognizes that a statute which grants or creates a new right unknown at common law may be an exclusive remedy. Conversely, vhen the right preeXisted a new remedy, the statute is not cienerally an exclusive remedy. The state's common law right to indemnity predated the Medicaid statute. Se ~, Rozmaizl g North7and Greyhound r_.ines, 24-2 Iowa 1135, 49 N.W.2d 501 (1951). This Court recognized a civil action for "common law indemnity." Peters v.1,yons, 168 N.W.2d 759, 767-68 (Iowa 1969) (insurer was entitled to common law indemnity). This Court stated: . a(...continued) the petition and is not involved in this appeal. This Court, however, may, as it did in Ha en, reject defendants' argument that the State is limited to a subrogation claim under Bales and rule tha7- the legislature created a new statutory cause of action under Sec-ion 249A..6, just as it construed Section 455G.13 in 10047 i I 36
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9 RECElVED NOV 4 - 1997 TERRI P. DURHAM
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11/03/97 MON 13:47 FAX 515 245 4452 ~ GREFE & SIDNEY . ioag1 fz.tiling to consider the effect of the 1993 amendment's d+letion of all references to subrogation, substitution of the l,,.en remedy, and provision of the direct action to enforce the 1_en. The District Court also erred by failing to apply well- established principles of statutory construction to the 1993 amendment deleting a previously construed tenn [subrogation] and substituting a new one [lien). The District Court also e_r®neously applied the canons of statutory construction for determining whether a statute provides an exclusive remedy. T'1is Court should rule that Section 249A.6 does not bar the S=ate's coxnnon law claims. The State also requests that this Court reverse the District Court's dismissal of the State"s c Laims in Counts 2, 3, and 7 for the reason that Section 249A.6 does not bar the State's common law claims for xeimbursement of Medicaid damages. R .OII 4'1,' FOR ORR7±L• ARGDPfBN .?laintiff/Appellant State of Iowa requests oral argument. ATTORNEX GENERAL OF IOWA By:a Thomas J. L$Yiller Attorney General 50
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.a.W[y .. Ja./~.Ll law ~'•ights of recovery. In Fr ++r r proae=iPS Cora y .Srianb~rg, 488 N.W.2d 146, 149 (Iowa 1992), this Court determined that the mechanic's lien statute is not exclusive, was' cumulative of other cor,unon law remedies, and the contractor could pursue its common law remedies. Iowa's workers' compensation statute permits an insurer indemnification, a lien, and subrogation to recover payments from liable third parties under Iowa Code Section 85.22. The righs.s under Section 85.22 includes the right of the workers' comp,ansation insurer to proceed under common law theories agai.nst liable third parties who may have caused the employee's injury. In Fisher v, i.Pltg rnd s ; rnc., 485 N.W.2d 626, 629 (Iowa 1992), thiS Court stated: [o]ne claiming by way of subrogation stands in the shoes of the subrogor, and it is reasonable to impose an a subrogee any impediments or limitations faced by the person whose interests have been inherited. The indemnity rights accorded by Iowa Code Section 85.22(1) amount to a direct appropriation of the injured workeres "recovery of damages to the extent of the [insurer's] payment. The statute creates . what amounts to an express contract between the insurer and the worker, the first recognized ground for indemnity. In Pire1_1i-Arm~trong mira Corti yK+dwest-Werne; & Pfleidere,r'_rnc., 540 N.W.2d 647, 649 (Iowa 1995), this Court als,3 held that a workers' compensation insurer's right to indrzmnification and a lien did not exclude a right to con-t:ractual indemnification. Neither the mechanic's' lien sta:ute nor the insurer's lien under Section 85.22(1) bar 41
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11/03/97 MON 1a:43 FAX 515 245 4452 GREFE & SIDNEY logical construction. ad. at 155. The second principle of construction is: According to another rule, when a statute grants a new right and creates a corresponding liability unknown at common law, and at the same time points to a specific method for enforcement of the new right, this method must be pursued exclusively . . [and] (the converse rule that when a statute merely prescribes a new remedy for a preexisting right or liability, such new remedy is deemed cumulative, unless the statute shows an intention to abrogate or supersede the old remedy). ;;,A. at 155-56 (citations omitted) (emphasis in original) . The third applicable principle of statutory construction is: We note and approve the foll®wing variation of the rule: "Where the legislature has approved a comprehensive scheme for dealing with a specified kind of dispute, the statutory remedy provided is generally exclusive." .La. at 156 (citations omitted). a. FIRST CANON: "A SENSISL$r PRACTICAL, pOR$ABLE, ASID LOGICAL CONSTRUCTION." In this case, Section 249A.6 is silent on whether its Lien is exclusive. Since the statute creating the lien does aot expressly identify a statutory basis for the obligation underlying the lien, the sensible, practical, and logical :onstYUction dictates that the obligation exists in the common iaw.' Before the 1993 amendment, the State was subrogated to 2 This Court may determine that the legislature intended that Sec-tion 249A(6) would create a statutory cause of action. tiaggn_, 526 N.W.2d at 541 (This Court rejected defendants' argument that tho State's only claim under Section 455G.13 was for subrogation and held that the legislation created a statutory cause of action.) A:~tatutory cause of action under Section 249A.6 was not pleaded in (continued...) 2048 35
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- 11/03/97 _ MON 13:47,FA% 515 245 4452 GREEE & SIDNEY A~T®R~"y e 8 ~ST,_ C~'&R'PIFSCA E I certify that the actual cost of reproducing the necessary copies of PLa.INTIFF/APPELLANT STATE OF IOW}1'S 3RIEF consisting of /t 3~L pages was in the sum of $ & QIF0 , d 084
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11/03/97 MON 13:46 FAX 515 245 4452 GREFE & SIDNEY ® with the issue of "proximate cause" and the connection made between the two concepts remained unexplained and unsupported I>y citation to authority. Ruling at 7-8. Section 249A.6 utates clearly the State can recover regardless of whether its claim is "derived" from paying for an individual°s health care. ":hat the State paid a citizen's health care costs does not make the State unable to prove proximate cause. The objection that the State's claim is "derivative" is ,~ssentially a plea by the defendants that the State be required to bring a subrogation action to recover Medicaid ;~ayments. After the 1993 amendment, defendants' arguanent that ::owa law authorizes only a"subrogation" action to recover Medicaid payments has no validity. 6. SECTION 249A.6 YS THE IEGISLATIIRET8 PIA2NNDATE THAT THE DAMAGES ARE NOT "TOO REAIOTE." The District Court's citation to MJnn g®ta x Y-~ ;fumnhrev v. Philj,n Mprr1S, Inc._, 551 N.W.2d 490 (Minn. 1996) ts authority for its conclusion that the "alleged injuries .rere too remote' renews the issue of how a statute relates to the issue of proximate cause. Ruling at S. - i+ii ranQso a held :hat a private insurer had standing to assert two statutory ;ounts for t_obacco-related health care costs but did not have standing to assert a common law count for breach of a ,roluntary duty against the defendants. Jd. at 495-97. The ,iefendants' argument in Minnesota was that the plaintiff "must initiate a subrogation action against the tobacco companies." .[d. Two crucial distinctions between the insurer in Minnesota 48 W059
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11103197 MVY 13:43 r'AA 516 'L46 445'L .(iRtt'h & J1UIVtY 0 t`ie shoes of the recipient). Hi7t, 493 N.W.2d at 805s Br952~, 4 12 N. W. 2d at 614. This Court did not address the issue of wnether the state had common law claims against third parties r•=sponsible for reimbursement of medical assistance in l3.ill or BtookS. The District Court erroneously extended the term "cthers" from Hill and BL99ks to include liable third parties, rather than limit the term to representatives of the recipient. This extension is neither required nor justified by the use of the term "others" by this Court. This Court's second canon of construction requires that Section 249A.6 not exclude the State's common law rights of recovery because the right to indemnity predated the enactment of the section and there is no indication that the legislature intended to bar enforcement of common law rights. C. TSIRD C31NON8 A NONCOASPAEHENSI9E REMEDY IS NOT E$CLUSIVE. The third canon of construction is that a comprehensive statutory remedy is generally exclusive. Van Baale, 550 N.W.2d at 156. Section 249A.6, however, is far from a comprehensive scheme.. The statutory scheme does not expressly state that it is exclusive or comprehensive. eomoare Vaugh y,A.,,_P~cessina. Inc., 459 N.w.2d 627 (Iowa 1990) (Chapter 601A is an exclusive remedy). If the legislature had intended to create a comprehensive or exclusive scheme for recovery, the legislature knew how to express that Section 249A.6 was a comprehensive or exclusive remedy. Section 249A.6 lacks several features of.a comprehensive scheme. The section does not even identify the cause of 38 Wj ®49
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11/03/97 MON 13:45 FAX 515 245 4452 GREFE & SIDNEY provided an exclusive remedy, and barred recovery on common law claims. (Ruling at 6-7). The legislature did not state expressly or impliedly that Section 249A.6 is the exclusive remedy by which the State can recover its Medicaid costs from ]iable third parties. This Court has not previously held that :,ection 249A.6 is 'the exclusive remedy for the State's recovery. There is no sensible, practical or logical reason {-.o conclude that the statute provides an exclusive remedy, t:ontains a comprehensive scheme, or excludes common law 4:laims. Regardless, the District Court's ruling simply does not address or identify the fundamental issue of what is the underlyi4rig obligation secured by the Medicaid lien. Section >.49A.6 creates a lien in favor of the State, al3ows the State eo enforce the lien directly, and the lien must secure an underlying obligation authorizing the direct recovery. The 8tate is entitled to a ruling from this Court that Section 249A.6 does not bar co;nmon law claims against third parties for recovery of Medicaid benefits. 4. THE STATE HAS PLED COMMON LAW CLAIMS IN TEE PETITION THAT ARE NOT BARRED BY SECTION 249A.6 Alr'B ENTITLE THE STATE TO RECOVERY. Count VII pleads a common law claim for indemnity. This claim has been recognized by this Court in Peters, 158 N.W.2d at 767-68, and other cases. Other courts have recognized the common law claim in similar circumstances. In york v. 7gad TndLs- Ass'n, 222 A.D.2d 119, 644 N.Y.S. 2d 919 (N.Y. App. Div. 1996), the court recognized a common law claim for indemnity under Restatement of Restitution §76 by a city 43 If;! 054
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. 11/03/97 MON 13:45 FAX 515 245 4452 GREFE & SIDNEY 9 against manufacturers and marketers of a toxic product for expenses of treating and monitoring the health of children <axposed to the hazards, payments made to,injured persons, and other costs. Ia. 222 A.D.2d at 124-28, 644 N.Y.S.2d at 922- ::5. Restatement of Restitution §76 provides: A person who, in whole or part, has discharged a duty which is owed by him but which as between himself and another should have been discharged by the other, is entitled to indemnity from the other, unless the payor is barred by the wrongful nature of his conduct. _'his Court has cited Restatement of Restitution §76 with ;,,pproval in , 252 N.47.2d 445, 447-48 (Iowa ~.977). This Court stated: Zndemnity, a form of restitution, is founded on equitable principles7 it is allowed where one person has discharged an obligation that another person should bear; it places the final responsibility where equity would lay the ultimate burden. ..~d. This Court has also cited with approval Restatement of '12estitution §96, which provides: A person who, without personal fault> become subject to tort liability for unauthorized and wrongful conduct another, is entitled to indemnity the.other for expenditures properly in the discharge of such liability. fnva Hnmss Mnt_ aC. Cc®. y. FatRl s Mut. xa2l Iowa 183, 73 N.W.2d 22, 26 (1955). Common has the of from made Tns.' o., 47 law indemnity provides a basis for the State's recovery of its damages. Count II pleads a claim for liability for civil damages for violation of criminal statutes prohibiting deception. This claim was recognized in H-il v M®ntgomerg wa & o, 4055 a 44
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11/03/97 INfON 13:47 FAX 515 245 4452 ~ GREFE & SIDNEY --. -._-. _. -.-.- ® ' Bivice G. Merritt DI;BEVOISE & PLIMPTON 8'°5 Third Ave. N,_w York, NY 10022 Mi.chaal C. Lasky DAVIS & GILBERT 1%40 Broadway New York, NY 10019 J. Eugene Balloun S;iOOK, HARDY & BACON 9401 Indian Creek Pkwy. Overland Park, KS 77210 D. Scott Wise DAVIS, POLK & WARDWELL 450 Lexington Ave. New York, NY 10017 Thomas F. Gardner JONES, DAY, REAVIS & POGUE 77 West Wacker Dr. C:hicago, IL 60601 Rrent B. Green DUNCAN, GREEN LAW FIRM _80 Capital Square 400 Locust St. Des Moines, IA 50309-2331 F'.lchard R. Chabot :~ULLIVAN & WARD, P.C. F07, Grand Ave., Ste. 3500 Ues Moines, IA 50309-2719 ~:oseph R. Gunderson Dreher, Simpson & Jensen, P.C. 1,99 Walnut St., Suite 1200 I)es Moines, IA 50309 ,)an K. Webb 'dINSTON & STRAWN ~,5 West Wacker Drive '.hlcago,.T-L 60601 I further certify that on J. Michael Weston MOYER & BERGMAN, P.L.C. P.O. Box 1943 Cedar RapidS, IA 52406-1943 John C. Monica SHOOK, HARDY & BACON One Kansas City Place 1200 Main St. Kansas City, MO 64105-2118 Wayne T. Stratton GOODELL, STRATTON LAW FIRM 515 South Kansas Ave. Topeka, KS 66603-3999 Steven L. Nelson DAVIS, BROWN LAW FIRM 2500 Financial Center Des Moines, IA 50309-3993 Fred L. Dorr WASKER, DORR LAW FIRM 801 Grand Ave., Ste. 310 Des Moines, I A 50309-8036 Michael M. Fay KASOWITZ, $ENSON LAW FIRM 1301 Avenue. of Americas New York, NY 10019-6022 ltoss H. Sidney . GREFE & SIDNEY 2222 Grand Ave. Des Moines, IA 50312 Robert A. VanVooren LANE & WATERMAN 220 North Main Street Davenport, IA 52801-1987 R. LaiFd Hart COVINTON & SURLLING P.O. Box 7566 Washington, DC 20044-7566 October 1997, I will file chis document by mailing two (2) copies of it to the clerk of rhe Supreme Court, Statehouse, Des Moi , Iowa 50319, / / ROG R Ed TONE 10663
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36
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_A 11/03/97 MON 13:46 FAX 515 241SM52 GREFE & SIDNEY and the State of Iowa in this case are that the State has ::tanding under Section 249A.6 to assert its direct claim for ?Redicaid recovery and the Iowa legislature eliminated subrogation as the State's remedy. The Iowa legislature lestroyed the validity of the "subrogation" argument for the defendants in this case by the enactment of the 1993' amendment to Section 249A.6. The decision in Minnesota that a private insurer did not have standing under the common law does not justify dismissal of the State of.Iowa9s claims in this ca5e. C. CONCLUSION APdD FBEQIIEST FOR RE3.IEF. The petition alleges facts that establish the requirements of "but for" and proximate cause under the well- established requirements of Iowa cases. Defendants have not, by their motions to dismiss, established as a matter of law the affirmative defense of interveninq or superseding cause. The District Court's Ruling violated fundamental principles for adjudicating motions to dismiss. The State requests that this Court reverse the District Court's dismissal of the State's claims in Counts 2, 3, and 7 for the reason that the allegations in the petition satisfy the requirements of pleading that the defendants' c®nduct caused the State's damages. The District CourCt erred by ruling that Section 249A.6 is .an exclusive remedy for the State°s recovery of its Medicaid damages, was a "traditional assignment/lien/subrogation" statute, barred claims based on the common law, and provided no right to a direct action. The District Court erred by 49
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11/03/97 MON 13t46 FA.Y 515 245 A452 GREPE & SIDNEY 0 constitute at best a derivative claim." Ruling at 7. The District court erred becausen (i) Section 249A.6(6) expressly a:athorizes the State to bring a direct action for recovery of Eedioaid payments; (2) the State pled a direct action; (3) the 8uling did not identify the problem or defect with a claim being °derivativee° and (4) the Ruling cited no authority to support dismissal because the claim,was "derivative." By definition, all claims under Section 249A.6 arise because the State has paid the medical care for an individual whose injury was caused by a third party. There can be no valid objection to an action by the State for Medicaid reimbursement that the State's claim is merely "derived" from the payment of an individual's health care costs. Tf that ubjection were valid, the State could never recover on any f:laim brought directly against liable third parties under ;3ect4on 249A.6(6). The legislature intended the State to recover its Medicaid costs from third parties in a direct ection when it passed the 1993 amendment. The State has a right to bring claims founded on its Vasi-sovereign interest in protecting the physical and _~d_ L. ;:conomic health and well-being of its citizens. Aife Snagp & Son v. Puerto Rico, 458 U.S. 592, 607, 102 S. Ct. 3260, 73 L. Ed. 2d 995, 1007 (19®2). That the State's interest may be "derived" from harm directed at its citizens does not vitiate the claim; rather, aadm recognizes the State's right to assert such claims. The District Court may have confused a "derivative" claim a e 47
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~ RECEIVED 0CT221997 TERRI P. DURHAM ®
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li/uJ/87 _mUrv l:f-45 YAA a15 Z45 4452 GREPE & SIDNEY ® N.W.2d 421, 423-24 (Iowa 1977). The District Court's. 252 •lismissal of Counts VII and II was based only on the grounds 7f lack of the "requisite causal link" and that Section 249A.6 barred common law claims. The reversal of the District Court on these holdings would restore both counts. Count III pleads a claim for voluntary assumption of a special duty. The State alleges that defendants voluntarily assumed a duty by issuing statements in which they promised to take'an interest in public health, report research honestly and completely, and promised that the public could rely on their reports. (Petition %q 70-73, 90-98, 254-60). This Court recognized the claim of breach of a duty voluntarily assumed in ~~k r v. r,ouva , 393 N.W.2d 131, 135 (Iowa 1986) and ThomAson v-. -Boh1 k n, 312 N. W.2d 501, -507 (:Iowa . 1981). The 4istrict Court dismissed Count III ruling that "the•State of Iowa.has' not suffered any physical harm" and the claim is barred by °the economic loss doctrine." Ruling at .11-:12. This Court has not defined the phrase "physical harm" in Restatement (Second) of Torts g§323 and 324A. This Court.has not held that the recovery of medical expenses by the State for treatment of injured persons is outside the definition of "physical harm." This Court has held,, however, that the State has full ownership of the claim for medical treatment and'the recipient has no financial interest in making a claim for the expenses covered by Medicaid. Bale&, 478 N.W.2d at 401. The "physical harm" to the citizens of Iowa by tobacco use for wrhich the State paid the medical costs would satisfy the 45 t
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11/03/97 MON 13:47 FA% 515 24~52_ Walker Law Firm, P.C. f ~/-4157 )". Ral'ph Walker #PK0006346 a501 Grand Avenue, Suite E ues Moines, IA 50312 !)H: 515-281-1488 _'AX: 515-281-1489 Wandro & Gibson, P . C. A0 GREFE & SIDNEY .Steven P. Wandro #484 2501 Grand Ave., Suite 8 Des Moines, IA 50312 PH: 515-281-1475 FAX: 515-281-1474 Simmons, Perrine, Albright 6,E22Iwood, P.Ti,C. ogerOW. Stone #L20005358 115 Third St., S.E., Suite.1200 Cedar Rapids, IA 52401-1266 PH: 319-366-7641 FAXe 319-366-1917 Dickinson, Mackaman, Hagan, P. C. Brent R. Appel 479688537 699 Walnut, 1600 iiub Tower Des Moinesc IA 50309 PH: 515-244-2600 FAX: 515-246-4550 Hawkins & Norris Glenn Norris #PK0004035 2501 Grand.Ave., Suite C Des Moines, IA 50312 PH: 515-288-6532 FAX: 515-288-9733 - PROOF OF SER®ICE UD CERTIx'ICATE OF FILING . .I certify that on October -31 , 1997, I served th,is document by mailing one copy to counsel for all other parties in this matter at their respective addresses as shown below: Roger T. Stetson BELIN, HARRIS, LAMSON FIRM 2000 Financial center Des Moines, IA 50309 Mark C. Cunha SIMPSON, THACHER & BARTLETT 425 Lexington Ave: New York, NY 10017-3954 Michael Liebert KIRKLAND & ELLIS 200 East Randolph Dr. Chicago, IL 60601 Thomas A. Finley FINLEY, ALT LAW FIRM 604 Locust St., 4th Floor Des Moines, IA 50309-3773
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10/20GT. 22, 19973 2:56PM sis 24®452 6NEFE & SIDNEY NO, 6297 P. 8/15,oux that the State's exclusive remedy to recover 1VYedicaid costs from third parties is seceiona 249A.6 of the Iowa Code; VIi. Whether or not the district court comuutted error at law whes it held the State could not prove proximate cause as a tuatrxx of law. 3. The undersigned asserts in good faith that this appeal meets jurisdictional r':quirements and is from an interlocutory ruling where permission for appeal has been r:quested and granted by the supreme court. 4. - The names of the parties involved in this appeal and•their desiguations in ciistrict court are shown below under column A. Their respective attorneys' names, 1iw firms, addresses, and telephone numbers are shown below under column B: Page -3-
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`"= bCT, 20. 1991" 6:06P~ y=~ `RF"ouRr cc ~~i °i00, 1648''~ :P. 5/6'a 0°s r 4 O'ban K Wcbb 35 West W2ckes Drive ChicAgo, &L 60601 v'fviichaei M. Fay 1301,Avenuc of ,Arnr.,rlcas New Yorlc, NY 10019-6022 `'Rnss H. Sidney 2222 Gsand.Aare. Des Moines, Ll $0412 L-- Ii®bert A. Van Vooren 220 N. Main St. Davenport, IA 52801-1987 V •Clerk of District Court Polk County Cosuthosxse 500 Mtilbc~y S~urte[ Des Moines, Yt~50309,424A l0/80/97 MON °8t36 [TX/&X NO 723B1 Q005
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.^ "lorOCT. 22. 1997•3 2:54Pk 311 20 452 GREFE & SIDNEY 9 N0, 6297 P. 3/15&'ou., clxis matter as provided by'towa Rule of App®Ilate Procedure 12(a). ATTORNEY GENERAL OF IOWA Y: 'Chomas'J. Miller Attorney General 'W1R3,BER LA~'1 FIRM, P.C. ]:. Ralph Walkei PIC0006346 2.501 Grand e9venue, Suite E I )es Moines, IA 50312 ]'H: 515-281-1488• 3 ?AX: 515-281-1489 '.mANDIZO & GIBSON, P.C, a'teven P. Vandro 484762548 „501 Grand Ave., 5uite. B 1)es Moines, IA 50312 :'I3: 515-281-1475 i'AX: 515-281-1474 STMMOIVS, P , Ai.ERIGkiT & ELWOOD, P.L.C. Roger W. Stone, Id0005358 115 3rd St. S.E., Suite 1200 Cedar Rapids, IA 52401-1266 PH: 319-366-7641 FAX: 37.9-366-1917 DICKINSON, MACKAMAN, TYI ER & I3AGEN,1'.C- Brent R. Appe147968fi537 699 Walnut, 1600 Hub Tower Des Moines, IA 50309 PH: 515-244-2600 FA3C: 515•246-4550 Glenn orris PKO®04035 George . Davison, Jr. 49356 2501 Grand Avenue, Suite C Des Moimes, IA 50312 K1 515-288-6532 PAX: 515-288-9733 -ATI'OIFSTEYS FOR THE P APPELLANP STATE OF IOWA Page -2-
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1o/s0CT. 20. 19979 6:05Pjj~ sla 241OL452 GREFE & SIDNEY cnNO. 1648:io P. 3/6 Z aoa " ay ifu I Tr rido amr~ SIJPREAtllp[xa27 0.Ek16 P•=• , 2 be granted except upon a verified showing of the most us'tu®ual and compelling circumstances. Dated this ~~ y of ®csober, 1997. U. e, upreme ourt a owa Copies to; t-Thomes j. Miller Attorney General HooverBuilding - LOCAL /° E. Ral Walker 2501 Grand Ave. Suite E Des Moines, YA 510312 &'Brent la, Appel 1600 I3ub'Tower 699 Waatsut Des Moines, tA.50309 °-/Steven P. Wandro 2501 Grand Ave., Suite B Des Maisies, IA 50312 `/Glenn Norris 2501 Grand Ave., Suite C Des Adoines, rL4 50312 ./~er W. Stone 115 3rd Sc, S.E., Suite 1200 CedarRapids,YA 52401-1266 V Ro~er T. Sretson 2000 Finaracial Center Des Moines, 1150309 J Mark C. Cunha - 4251zdngron Avenue* NewYork, NY 10017-3954 /Eruce G. Merritt 875 ThirdAvenexe New York, NY 10022 VMichael C. Lasky 1740 Broadway New York, NY 10019 10/ZO/9T NON 06:8® [T%/RI NO 72361 IM003
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10izpCT, 22. 19973 2;50 515 20 452 GREFE & SIDNEY ~ N0, 6292 P. 13/15+cu APPELLANT'S NAME: THE STATE OF IOWA, ex. rel. 'rI-€ONYAS J. MMILI..BR, un has capacity as ATTORIVF-Y. .. .. . GENERAL OF THE STATE OF IOWA ATI'ORNEY GEN'E1tAZ. OF IOWA By:, VP,k.AER LAW FIRM, P.C. E. Ralph Wallser PK0006346 2501 Grand Avenue, Suite E Des Moines, IA 50312 P 13; 515-281-1488 FAX~ 515-291-1489 WANDRO & GIBSON, P.C. Si.evah P. Wandro 484762548 2S01 Grand Ave., Suite B Lies Moines, IA 50312 P [3: 515-281-1475 Tr AX: 515-2814474 S C[VIIVIONS, Y'ERitINE, AI BRIGgI7C ik. EbWOOD, P-L.C. 1? oger W. Stone, L10005358 13 3rd St. S.E:, Suite 1200 C edar Rapids, IA 52401-1266 P Ei: 319-366-7641 FAXr 319-366-1917 rk otnan. Miller Attorney General DICKINSON, MAC N, TYLER & HAGEN, P.C. Brent R. Appel 479688537 699 Walnut,1600 Hub Tower Des Moimes, IA 50309 PH: 515-244-2600 F : 515 246455® SVc N GlennX Norris FR0004035 ` ~. Davison, Jr. 49356 George 2501 Grand Avenue, Suite C Des Moines, IA 50312 P11 515•288-6532 pAX: 515•288-9733 LiLoOF OF SEEZVYCE AIQ7D CP,PaTUffCATE OF FIY.IIJG I ae[dfy ehnE on October 21.1997, I served this doeetmaos by masil.ng a eopy to all other panies in this e.accsr and to the court reporter from ®rksom the rrausmipt has bKa ordsred at their respeaive addeessrs as slman below. Page -8-
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1oi20CT, 22. 19973 2:56PM 515 2* 452 GREFE & SIDNEY ` NO. 6297 P, 9/15'uua Co uanm~ ; Cm[wm assics. ttomcys: lappd6aae: 'i'he State of Iowa, ex. rcl. Thowas j, Mlller, in his 1'homaa J- Miller, Ataoruey Getiera9 of the Staze of I Apecity as Attorney Generxl of the State of Iowa owa Gordon All.ea Hoover Stam Office Building Des Moines, IA 50319 1'elephoue; 515-281•5166 W.ALKP1t LAW PI1tM, P.C. 8. Ra1ph VPolkarPK0006346 2501 Gtiqd Avenue, Suite E . es Moines, IA 50312 Telephoue: 515281-1488 WA1VDat0 & GIBSON, P.C. Steven P. Wandro, 484762548 2501 Grand Ave., Suite B Des Moiaea, IA 50312 Telephone: 519-281-1475 i BIfMMON5, P,ERXIlVE, ALBRiGH'T & ELVV®OD, p.LC. I Roger W. Stoae,130005358 ! 115 3rd St. S,E„ Sulte 3200 Cedsr Baplds.IA 52401-1266 ~ Telephone; 319-366•7641 HAWMNS 6C NOliAYS La Hewiciru PK0002181 j Gleea L. Norris P$0004035 - George 8• Davison, Jr. 493567366 I C.rlla T. Schemmel PKOOOB61o 2501 Grand Avenue, Suite C Des Moinea,1A 50312 ~ i Telephone: $15-288-6532 i3IGIQNSON, MACICAASAN,IYLPR 8: ;FIAGEN, p.C. 9reoc R Appe1479688537 699 Wab,ut,1600 fiub Tower rB Moioa, IA 50309 PH:515-24-2600 1'age -4-
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'"io/20CT. 22• 1997a 2:57PM 515 20 452 5i ant E, Green D:JNCAN, GREEN, BROWN, LANGENFSS & 5 ;KyEY, P.C. 40:1 Lceuse Street, 380 Capital Square D,•s Moines, IA 50309-2331 -Richvd $. Chabot SI ILLBVAN & WARD, P.C. 8C 1 Grand Avenue, Suite 3500 Dcs MoSnes, IA 50309-2719 jo•eph $. Gunderson DKF,HEit, S}MPSON Bz JENSEN, P.C. 69'D Wslnut Srreei, Suite 12pp D-•a Moines, IA 50309 D:,n K. Webb W :NSTON & STftAWN 35 Weat Waeker Drive Cl:icago. IL 69601 GEEFE & SIDNEY . ® NO. 6297 P• 15/15)15 Michael M. Pay KASOWlTZ, BENSON LAW FIRM 1301 Avenue of Americas New York, NY 10019-b0a2 Idoss fb Sidnep X•Ienty A. Fiatman GRBFb az StDNEY 222a Grand Avenue Des Moines, IA 50312 Robert A. VsnVooxen - LANE & WATERMAN 220 North Maia Street Dsvenpart, IA 52.801•1987 R Laird hiatc COVITTGTON & BSJRLLIIeIG 1201 Pennsylvania Avenue, N.W.o P.O. 8oz 7566 Washington, DC 200447566 Page -10-
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1o/;pCT, 20. 1999)F 6:06PME sisz asz GREFE & SIDNEY c,NO, 1648`•PP, 4/6 QDDa ° OCT .{la ' y'! tod ; 4ere1 aJR'f C6EthG ~ ~ ~l - v'`f. Pugene BaJloun 9401 Indian Creek parlc!aq Oveslfand Park, T(S 77210 °°°D. Scott Wise 450 Leadngtoxe Avenue New Yorlc, NY 10017 •/Chomas F. Gagdnea 77 West Wacker Drive Chicago, IL 60601 w24itFuaei 9.ieb®r 200 East Itandolph Drive Chicago, IL 60601 3 `°'Thomas A. Firdey 604 Locust St. 4th Fl. Des Moines, IA. 50309-3773 ~'T- Mieiea.el Weston ~P,O. Box 1943 Cedar Rapids, .lA 5Z406-1943 ,/]ohn C. Monica One Zfansas City Place 1.200 Main Streee Kansas City, MO 64 105-2 1 1 8 r./Wayne T. 5tratton 515 S o ut h. l<ans as Avenue Top®lca, KS 66603-3999 Steven L. Nelson 2500 Financial Center Des Moines, IA 503093993 v Fred L. Dorr 801 Grand.Ave., Sufte 310 Des Moines, IA 50309-®036 u'Brent B. Green 380 Capital Square 400 L®aest Street Des Moines, IA, 50309-2331 a`' Ridtard A Chabot 801 Grand Ave., Suite 3500 Des Moines, %A 50309-2719 Aoseph R. Gunderson 699lNalnut St., Suite 1200 Des Mo"smes, IA 50309 , , I e 10/20/B7 MON OB:aB (1"g/1t2 N0 72561 Q004
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_'10/-'QCT, 22. 19971: 2;54PM: 51S 20 452 GREFE & SIDNEY S N0; 6297 P. 2/151002 IN Td~.+ SiJPRFIm COiJJR'T OF n$ STATE bP PR[rrE coU'rlr No. 97•1683 Polk County No. CL 71048 GOMM TE•iB STATE OP IOWA, ex. rei. THOMAS J. MILLER, in his capacity as ATTORNEY GEIVERAT. OF THE STATE OF IOWA, Plaintiff - Appellant, vS. R.J. REYNOLDS TOBACCO COMPANY, RJR NABISCO, INC., THE AMERICAN TOBACCO COMPANY, AMERICAN BRANDS, INC., BROWN & WT[.LIAMSON TOBACCO CORPORA'1'IOATo B.A.`C. INDZJSTRIES, PL.C, BATUS HOLDINGS, INC., BRITISH AMERICAN TOBACCO COMPANY, LTD., BRiTYS CAN (HOLDINGS) LTD., PIiI'Ln' MOR'RIS,INCORPORATk.D (PHILIP MORRIS U.S.A.), PIffi.II' MORRIS COMPANIES, INC., LIGGETT & MYERS, IINC., iIGGETT GROUP, INC., THE BROOKE GROUP, LDZED, LORILLARD TOBACCO COIvA1'ANY, LORaLLARD INCORPORATED, LOEWS CORPORATIOIV, UNITED STATES TOBACCO COMPANY, UST, INC., THE COUNCIL FOR']COBACCO RESEARCH, THE TOBACCO INSTITUTE, INC., HILL & KNOWLTON, INC., Defendants - Appellees. MOTION OF THE P TI~""I? STATE OF IOWA TO DOCKET IN'1']ERL®CIJ T®RY APPEAL WITHOUT PAYMENT OF FEE COMES NOW the State of Iowa, by and through Thomas J. Miller, in his capacity es Attorney General of the State of Iowa, and pursuant to Iowa Rule of Appellate Procedure 12(a), respe&tfully requests that the Clerk of Court enter the Interlocutory Appeal in this matter upon the docket. The State of Iowa is t•he appelleut in this matter. ®RE, the State of Iowa respectfully requests that the Clerk docket ~. ~
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•loizOCT. 22. 1997a 2:56PM 515 20 452 GREFE & SIDNEY db NO. 6297 P, 12/16'lY U qited Staes Tobacco Company tent B. Greoa U ST, Inc. ; LJIeiCAN, GREEN, BROWPT, I.ANGENESS & CPSITY, P.C. 400 Loeust Steeey 380 Capital Sqnare ea Meiont, IA 50309-2331 dephoae; 515-288.6440 Ttte Council Eor Tobacco Researah . Michad Westoa MOl'ER&PF.tGMAN 2726 8irst Aveone N,E. Cedxr Rapids„ YA 52406-1943 TelepLoae: 319-366•7331 Bruce G, Maritt DEBEVOTSE & PLRvA'TON " 875 Third Avenue NewYork, NY 10022 Tdep6one: 212•909.6000 7 he Tobeacn Instit>ste red L. Dorr ASKBA, DORR, WZIMER & MARCOVILLEA, C. 801 Gnad Aveaue, Suite 3100 Des Moiaes, IA 5®309-8036 Telephone; 515-283-1801 Lvird Hut COVNG7ON & BI7RLLNG 1201 Peaarylvania Aveaue N.V. O. Sos 7566 ashiag[oa, DC 20044-7566 Teteplwaoc 202=662-66000 1(ill B: Kaoalwa, Ino cbael C. Losky redM. Wdlcr pVdS & L;II.BERT 1740 Brocd.way ~ ew York, NY 10019 Telepbone: 212-459.1800
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1®izOCT, 22. 1997a 2:57PM 515 2* 452 GREFE & SIDNEY ~ NO. 6297 P, 14II5)14 I forther rer:iLy that on Oerober ]1.1997,1 wiII Fale this document with the Clerk of ihc Iowa District G •orr for Polk County. I further certify that an Oaober 24, 199 , I will fde rJ4doumenfjSY Pdrao~dly deli}rkrsnB 3 copies of it -o the Clerk of the Supa^eme Court, Statehouse, Des Moines, I Cupies ro: RoacrT, Stetson. BE LIN HARRiS LAMSON MCCORMlCSS, Zi kMBRCH, A P.C. ZplO Financial Crater Do. tvloines, IA 50309 Ma r.k C. Ciwha Ad,rmL Suan SdA IPSON,'fHACIiER & BA'RTLETT 42' LettingronAve. New York, NY 10017-3954 Bnice G. Merritt DE9BVOISE & PLIIVLPTON 875 Third Ave. Ne.v York NY 10022 whad C. Taslsy DP, VIS & GIIBERT 174.) Broadway - Ne.o York, NY 10019 j. P,ngaee Ballouu SHOOx, PL4RDY & BACON 940 L Iadioq Creek Parkway O.nrland Park, KS 77210 D. `icott Wise DA VIS, POLK & WARDWELL 450 LexingroqAve; Ne.v York, NY 10017 Th, mac F. Gardner JOl JES, DAY, REAVLS 8t', POGYIE 77 lnea Waeker Drive Chimgo, IL 60601 Michael Lieben Andrea R. McCann M'ichell® 8rowdy liIItl{LAIVD & ELLIS 200 Eut Randolph Drive Chicago,ll. 60601 Thom®sA, 9?uiley FllvLEY, ALT, SMITH, SCIiAItNBERG, MAY & CR4.IG, P.C. 604 Locust Streee, 4'b Ploor Dee Molne. IA 50309-3773 J. Miehael Weston MOYER & BBRGMAN, g,L.C, P.O.Box 1943 Cedar Raplda, 7A 52406-1943 John C. Monicrr SHOOK, HARDY & BACON One $smss City Plate pJ00 Main Street Kansas City, MO 64105-z118 Wayne T. Stratton GOODEL'L, STRATI'ON LAW FR@Bd 515 South ISaaros Ave. Topeka,lLS 66603•3999 Steven L. Nelson DAVIS, BROWN, KOEHN, SHOBS & ROBERTS, P.C. Suite2500, ThoPiasncisl Center, 666 Walnut Street Des Moines, IA 50309-3999 Pred L. Dorr W66TCi'R DORR, WIMMER & MARCOUII.LER, P.C. ®01 Grand Aernue, Suite 3100 Des Moinea, IA 50309-8036 Page -9-
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_'iaiaOCT. 22. 19993 2:55PH 815 2 45E E•red L.Dorr i1FASRER DORR, WiNQaR BL •. }.[ARCOCTtL.LER, P.C. 801 Grand Avenue, Suite 3109 I yes bd'oines, IA 50309-8036 I srent B. Green 3 )UNCAN, GREEN, BROWN, LAPYGENESS & aCKLEY, P.C. %O0 Locurt Stm.et, 380 Capitsl Square 'i 9os Moines, IA 9 03 09-2 3 3 1 '::ehud R. Chabot SULLIVAN & WARD, P.C. ~01 Gsaad Avenue, Suite 3500 :)es Moines, IA. 50309-2719 j'oseph R Guntkrson ORE[Mti, SffiQpSON & j'ENSEN, P.C. 699 Walnut Ssreet, Suite 1200 Des D+loittes, IA 50309 ®an K Webb WINSTON Ot STRAWN 35 West Wacku a"hive Chicago, IL 60601 The uedersigaed further oanifies rhar on Oeto 21 S'CATE OP lOwA TO DOCHE'r ORY Ap Fi1ad with the C(erk eE thelowa Supreme Courr at the Srateho 6R6FB 8. SIDNEY Page -4- NO. 6297 P, 5/15"'a Wiohael M. Fay KASOWiTZ, $BNSON LAW PIRM 1301 Aveaue of Americo4 New York, NY 10019-6022 Ross H. Sidney Hesuy A. Harmon GHEF$ & SIDNEY 2222 Grtied Avenue Des Moines, 7A 50312 gnbert A. VanYooren LANE & WATERMAN 220 North Main Sereet Davenport, IA 328031987 R 1.aird'Hats COVIIdGTON & SU81.1.ING i2q1 Pennsybraoia Avenue, N.W., P.O. Box 7566 Wubingeon, DC 200447566 71; r -q ~ j l.i rfus hf017LTOL' $A~N9 De's es, o{v,J5031t. ® Daviaoa, Jr:, ne of ah(~aorneys for
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'laisaCT. 22. 19973 2:56PM sis 20 452 GREFE & SIDNEY A N0, 6297 P. 11/15u1 ' lulltp MoPris, InooapOTau.d P6illip Morris Cor®panies,lne. obert A. Vw Yooren Thomas D. Waeerm®n LAN$ & WATERb3AN ipD Nnrwmt Baak Building avetfpoas, ]A 52801 Telephooa: 319-324-3246 Dac K, Webb Thomas J. Predcriak Kurt L Schultz evia j. Nerko STON Bt S9'RAWN 35 West WaCker Arive Chicago, IL 60601 elephoas; 312856.9600 13ggete & Myers, Inc. Rtehazd R Chaboc aggace Gmup,lnc. amrs G. Saaedlle t`he Brooke Group, Limiced SLILLIVkbal6a WARD, P,C. 801Graad Avcnuq Suise 3500 Des Meinea, EA 50309-2719 TeSephone: 515-244-3500 c6aelDd.Pay OWl?L, ~L~[dSON, TORRES & BRIEDIvS2.N, LL8 1301 Aoeuue of rhe Amencas Now Yack, NY 10019-60?2 Telephene: 212.5O64709 l.orillard Incorporated Ross s`T. Sidney I-®awe Corporatioa Henry• A Iiarmon GRB.BH & 5IDN'E7C 2222 Gssusd Avenue ss Maiues, L150312 f I Teiephone: 515•2454300 j ohn C. Moniaa CrrigProcroE Cathesioe Casteliudao SHOOK, HARDY & BACON ;' OneKaasea CiryPlaee 1200 Main Scceec I Know CitT, AHO 641D5-211B I Telephene:816-4746550 I EugeneSalloPn ; SHOOK,I3ARDY & BACON I 94011ndian Creels Pukmay j Overtend Pads, KS 77210 Page -6-
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-1oi20CT, 22. 19973 2:55PM S1S 2is 452 GREFE & SIDNEY d;strict court inhering therein. ® N0, 6297 P, 7/15too7 2B. I need not order a transcript under Iowa Rule of Appellate Procedure 1J(c) because this matter arises pursuant to a Motion to Dssmiss. While proceedings b:1ow were transcribed, they consisted of the argument of counsel and are not relevant nor material to the issues to be presented in this Interlocutory Appeal, I will NOT prepare a statement of the evidence or proceedings pursuant to lowa Rule of Appellate Procedure 10(c). 2C The issues appellant intends to present on this Interlocutory Appeal are: I. VP/hether or not the d'astrict court committed error as a matter of law when it held that the State could not prove proximate cause of its damages and had no right to recover past and future payments for medical costs the State has made and will cnake for tobacco-related illnesses; IL Whether or not the district court committed error as a matter of law when it sustained the motions to dismiss Counts II, III, and VII of the Petition at Law; IIL Whether or not the State has the righi to recover past and future Medieaid and other State payments from tobacco manufacturers who have sold cigarettes in Iowa; IV. Whether or not the district court committed error at law whe n it held Section 249A.6, Iowa Code is a"traditional as5ignment/lien/subrogation" remedy and does not allow any action againsst liable parties except as a snbrogation action; V. Whether or not the district court committed error at law when it held that there were no common law bases for indemnity of Medicaid costs and expenses paid by the State; VI. Whether or not the district court coYnrnieted error at law when it held Page •2-
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uizOCT. 22. 19973 2:56PM 515 2aw9-das2 GREFS & SIDNEY ® NO. 6297 P. 1P/15110 ppollees° F.J. Reynolds Tobatro Company Sieven d-. Nelson ;qR Nabisco, Inc. Kris Idolttb Smith DAVIS, BROWN, KOSHN, SIiORS & IiOBERTS, P.C. 2500 Finaneaal Center, 666 Walnut Streaz Des Moines, IA 50309-3993 Telephone; 51W88-?S00 'fhogeas 8. Gudner ONES, DAY, REAVIS 8& POGUE 77 West Wether Drive Chicago, IL 60601 Telepho®et 3127B2-3939 . D, Scott Wise Vincent t. ChaO.ge DAVIS, ROLTS. & WARDV7£1.L 450 Lexingaon Avenue Nem York, NY 10017 Phe American Tobacco Company ger T. Stetson americw Brauds, Inc EL1N IIARRL4 LAMSON MCCORMICP. 1'.roma & Williamsoa Tobamu Corpontion Zi)A98ACH, AP.C. itatus Iiuidinga, Ina 2000 Finaodal Center Des Moines, lA 50309 Teltphone: $15-?.417100 rbad T..iebcn Andra R. McCraan 'ehelle Browdy XRKLAlVD ec P'Lt-iS 200 East Rs,dolph Drive Chiwgv, IL 60601 13,A.T. dndostries,l'LC Thomas A. Pinley iDridsh Ameriwt 3°obacso Company, Ltd. dL Todd Gaffney Britit6-Amor'sna'(Eioldings) Ltd. , ALT, SMiTH, SCHARNRPitG, MAY & CRAiG, P.C. 694 T.ocpat Sueet Des Moines, IA 50309-3TI3 ~ elephone: 515-288-®145 C Cmba ' Adam 1, Stein SA4PSON, THACk1ER St SARTLBTY' , 425 Lesdngton Avenue ~ i ew York, NY 10017-3954 Page -5-
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1o/zCCT, 22. 19973 2:55PM 515 240 sz FOR YOr.r;=; .;--. _ S GREFE & SXdNEY ® NO. 6297 P. 6/15'°°" IN 1BE SL7A'REME COUR'I` OF 1HE S7A"iA OP I64A2 ' ,99 7 Nn. 97_1681 Polk County No. CL 79048 u4rnnvurncmc v~VCi~ TFTE STATE OF IOWA, ex rel. Tt3OMAS J. w.d-ER, in his capacity as ATTORNEY GENERAL OF THE STATE OF IOWA, Plaintiff • Appellans, vs. I3.J: RE'Y'NOLDS TOBACCO COMPANY, RJR NABISCO, INC.,'THE MMERICAN`-, .. TOBACCO COMPANY, AMERICAN BRANDS, INC., BROWN & WILLIAMSON TOBACCO CORPORATION, B.A.'Y'. IINDUSTdtffiS, PLC, BA'TUS I3OL'DTATGS, INC., BRITISH A1ERICAIV TOBACCO COMPANY, LTD., bRIT$SH AMERICAI`T(HOLDINGS) LTA., PFiTC tP MORRIS, INCOB.PORATED (d'H8LI1' MORRIS C7.S.A.), PHIC.Il' MORRIS COMPANIES, YNC.,ILIGGpTT & MYBRS, INC., LIGGETT GROUP, INC., THE BROOISL GROUP, LIMITED, LORI.LLARD TOBACCO COMPANY, LORILLARD II•iCORPORA.'1`ED, LO$WS CORPORATION, UNITP.D STATES TOBACCO COMPANY, UST, INC., THE COUNCIL FOR 7POBACCO RESEARCH, TkIE TOBACCO IIVSTITIJ'd`E, INC-, HILL & KNOWLTON, INC., Defendanes - Appellees. COMBINED CERTIFICATE COMl',S NOW the the Ssate of Iowa, by and through'Tkomas 1. Milier, in his capacity as Atiomey General of the State of Iowa, and pursuant to Iowa Rule of Appellate 1'rocedure 10, the following Combined Ceatifcate is submitted; 1. Or~ed r of the Iowa Supreme Court granting interlocutory appeal in this maiter was entered on October 17, 1997- Interlosutory Appeal is taken from zhe ruling and order of the Iowa District Court for Polk County entered and filed with the Clerk of Court on AugcLCt 26, 1997, as well as all other ruliags and decisiosis of the ; „ ..
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a-°1<OCT, 22. 1997-3 2:55PV- 515 z~9s2 , cRepE & sinreEz 0 N0, 6297 P, 4/15y°"" p OOJ~F OF SEYtVICE. AND CEYZ'H.'IPICAYE OF PILYl~fr I certify that oa Ocuber 21.1997, I served she fotegoi°g MOTION °O,,F~,T~,~HE PLAIlVTIRP SCATE ( DP IOWA TO DOC1iET I1~EBFAS.`ETi'OR~Y APPLAL'~OUT Ye4,amcgv a iOF i'1'E b1~1a4ling one - ( L) rupy to cnuncel for all other parties in this u,mer at their George ]ADaviron, jr„ fJna of the *raeys for thePlsin ff Aeger T. Stetaon 7tEL1N HARRIS LAMSON MCCORMICK :![7I$QACIi, A P.C. ; 0Q0 Financial Center 1)es Moines, IA 50309 `Bark C. C1u'1ha Adm+L Stein ;.'IIvIPSON, THACHER & BARTl.E1"1' 425 Y.esington Ava 1+1ew York, NY 10017 3954 Michael Liebett Andrea R. McGnno Michelle 9rowdy SIRKLANV ac ELLIS 200 East Randolph Drire Chicago, IL 60601 Thomas A. Pioley FINLSY, ALT, SMI'RI7, SCHARNBERG, MAY & CRAIG, P.C. 604 Loeust Strcct, 4`~ Ploor Dea Moines, IA 50309-3773 3nux G. Merritt OEBEVOISE & PL%6PTON S75 Tltird Ave. New York NY 10022 ,Yliohaei C.:Gavky DAVIS & GILBERT 1740Broadway New York, NY 10019 I. Eugene 8alloun SHOOK, Hl.RDY 9e BACON 9401 Indian Creck Parkway Orerlaad Park, SB 77210 D. Seotr Wise - DAVIS, POLK & WARDVpELL 450 Lexington Ave, New York, NY 10017 'Shornas F. G"er JONES, DAY, RSAVLS & POGUE 77 West Waclter Drive Chicogo,lL 60601 J. Mechael Wertoa MOYER & SP.&G;MAN, P.L.C r.O. Bus 1943 CsdarRepids,JA.524olr19F3 John C. Monica SHOOK, tIARDY & BACON One Kno.sas City Place 1200 Main Street Kanses City, MO 64105•2118 Wayne T. Stratton GOODELL, S'fRATTON LAW PIItM 515 South Ransas Ave. ToPe&a, $$ 66663-3999 Steren L. Nelson DAVIS, BROWN, KOSHN, SHOR5 & ROSERTS, P.C. Suite 2500, The Financial Center, 666 Walnut Street TJesT4oiner, Iff 30309-3993 Page •3-
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[W] hen a statute grants a new right and creates a corresponding liability unknown at common law, and at the same time points to a specific method for enforcement of the new right, this method must be pursued exclusively. Id. at 155 (citations omitted) (emphasis added).3! This Court found such a conclusion particularly appropriate in Van Baale because "the legislature ha[d] provided a comprehensive scheme for dealing with a specified kind of dispute." Id. at 156. Thus, even in the absence of express exclusivity language, the civil service statute in Van Baale was held to create an exclusive remedy. 3 This Court has applied the rule ci:-ad in Cole and Van Baale in numerous other cases. See, e.g., Vaughn v. AG Processing, Inc., 459 ti.W.2d527, 538 (Iowa 199C, fplainti.F`_ could not bring civil action based cn a'_leaed-vio:azions o---_ri:ninal statutes prohibi7_ng '.relig=~..s disir».i na_; c_= w; ere :owa Civil 2ignts Act provided a rec:edy~; Snyder v. Davenport, 323 N.W.2d 225, 227-29 (Iowa.1982) (dra^s^oo statute_ro,r'_ded exclusive remedy and oreciuded co m:on '_aw act_on cecaise scat:a ec--ovided "a soecific remedy for a_ight that was not recognized- at common law") ; Jefferson Caunty Farm Bureau v.Sher.^ran, 208- Iowa 614, 618, 226 N.W. 182, 184-85 (1929) (rEciting rule in determining whether _ conditions of anorooria*_ior_s statute were mandatory); Lease v. Vance, 28 Iowa 509, 511 (1870) (statute creating obligation not recognized by common law regarding partition fences was plaintiff's excl::Si'Je
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loiFOCT, 20, 199719 6, 06PM: 515 2~452 GREFE & SIDNEX ~++1 QNO, 1648-IO P, 6/6 (Maol GRFFE & SMNEY, P.L.C. ATI'ORNMATLAW 2?121`,li 49dD AVENUE P.O. BOX fl0494 DES MOINES, I0WA403®6 Y/Si3.AND 8. GRSPB 8LF7.MRONIC BffAH. 'n+1.ECOFJB RObSU.BIDNBY GKeNDa1RMQPAOL.COM ISL4A4R4ASY '1110MA3 W. CARtSNTFA RI:NRY A. HAPPSON TRLFYHUNE C1l A1TOKfl.PRWMW - isu)204i®0 ST6r6HC'ID.HARDY . RR,9R8TC.THOMSON - CI+AIG S. SIIANNON J08N WE34YE8 Ph nUCx ], f<sCNULTS ?MBg W. THOMAS - GUY H. COOK 2Y&illY E. KdSNFA ANDREW D. HAH.f. S4"HANRt G. T@CHAU MARK A. SLIlUB.THEIS MAEICY ®'6RN.M TNlOTHY N. TRIPR DAYtD C. iCOdPATWICR - FACSIHILE 'PRANSMISBZON ************##****4t##~1t*#+B'klktk if9fletk'Jf#*#1R1,ltC#9P*'k##+kp## DATE: TID1E: October 19, 1997 CD+®-J, AM Oxigia.l seaw by repilar mail - well nol be SeaB -A. wilU be seal via Sis'ND TO: J. Monica/C. Cas telluccio 816-421-2708 B. Merritt 212-909-6836 D. wiss/V. Chang 212-450-4800 R. VanVooren/T. Waterman 319-329-1616 @i. Balch/E. Sarn er 212-735-3525 J.M. Weston 319-366-3668 T.F. Gardner 312r782-8585 R.fi. Stetson 243-1408 P.M. Weller 212-468-4888 M. Cunha/A. Stei n/K. Turland 212-455-2502 T.J. Frederick/K .J. Narkb 312-558-5700 M.T. Yelenicle/F. B. OyehOlu 212-541-5369 Jim Munson/t4ike Lieber 312-861-2200 S.L. Nelson 243-0654 T. Finley/T. GaF Fney 288-2724 R. Laird HHart 202-662-6291 F. Dorr 283-1802 C. Green 28®-6448 John McClintock 244-2931 Suzanne Cate Jon es 213-622-9865 Joe R. Gundsrean 288-7718 At*PORNEY SENDI-NGa Henry A. Harmon Sf:NT B7t: ' Michelle C. Golichtly OUR SILE NO.: 50.5752 - NtIt4878R OF PAGES (INCLLTLtING THIS kAGE) : 5 _ Pursuant to Apnellate Ruj¢ 1,2S the District Court nroceed'n~cs are stame~d_ unless r man e un8 r a 1 12-G. CONPm@NiIAYTiY NO74eH . 'A'liCa R9ATfikYAL3 AND DOCUMBN7S ENCLOSED Wn7l.TlAB FA7l TRANSWi8510N AR8 Tia6 PROFE@TY OF THBSSND6R AI7U Al1H AITOSNSY-IRl1YH~GHD AND CONFIDFAlTL4L. TH6 MATERPAiS AND DOCUMF3iM1'S ARE DCl'EtBDED ONLY FOR THI'i UN60FTH6IIiD3VmUAL(S) OR77AH SNTRY(H+8)NA>1FDBIIIAW. IFTHERP.6DMOFTBt65A4WS9AG8T3 NOTTHEINiBNDED Ri'.CQICNT, OR T£Pr FbfP'LOYEE OR A06NY R05PONS®LE FOR D6LlVHt1NG IT TO THE !Kd@NDED RECIFIBATC, YOU ARE m ASBY NOIGm THAT ANY D19SII.ffiIATAON, DL4CRffiUTdON, b19CLOSUR$, COPYIDIO, ORTHETAKQdO OF ANY AC610N II: R.ELLA""'E ON THE CONTSWTS OF THIS COIMUd[CA'nON SA $CRICPLY FxOHm1T®- 1P YOU HAVe RFGFIVFD TH64 CY NIIdUNtCATLON IN H<tROA. PL2ASE NOTdFY THR SENDE@ DA18BDiATRI.Y 6Y'fELWPHON5T0 ARRANGFa FOAR6TURN OF TI16 O@SG8dA1. MATID]A18 AND DOCUMENTS. ON
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Plaintiff further implies that Loews Corporation has in some manner refused to prepare a privilege log when one is necessary. Loews Corporation has never taken that position. Loews Corporation will prepare an appropriate privilege log for any discoverable evidence which it withholds solely on the basis of any privilege or exemption. Discoverable evidence that is withheld for reasons in addition to privilege will not, of course, be listed on a privilege log. If, for example, a document is both irrelevant and privileged, that document need not be produced at all, even by description on a privilege log, because it is irrelevant. See 8 Wright, Miller & Marcus, Federal Practice & Procedure § 2016.1 at 235 (stating that "the [log] requirement should not apply with respect to materials that are also withheld on grounds other than privilege ... since those materials are not 'otherwise discoverable."'). Plaintiff cites Shook v. City of Davenport, 497 N.W.2d 883 (Iowa 1993), for the proposition that at this time Loews Corporation "should locate [privileged documents], identify them, create a`privilege log' and provide the list to Plaintiff, then have the Court conduct an in camera inspection of the documents to determine on its own which documents are, arguably, privileged." Plaintiff's Brief at 12. The plaintiff in Shook sought disclosure of various materials which were subject to the "work product" privilege. 497 N.W.2d at 886. The court held that an in camera review of privileged materials should be conducted only if plaintiff has met its "burden to show that he had a`substantial need of the materials in the preparation of his case and said he [was] unable without undue hardship to obtain the substantial equivalent of the materials by other means."' Id. at 888 (citing Iowa R. Civ. P. 122(c)). Plaintiff has made no such claim or showing here. Therefore, Plaintiff attempts to obviate its obligations when seeking privileged material and misrepresents the context and purpose of the in camera review conducted by the hook court. For 017322104 21
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or knows of any, documents which regard the discovery request " Plaintiff's Brief at 10. Plaintiff cites no authority to support this statement. The purpose of an "overbroad or burdensome" obj ection is to inform Plaintiff that "compliance with the discovery request would require an unreasonable amount of time and an unreasonable expenditure of money." Berg v, Des Moines General Hospital, 456 N.W.2d 173, 177 (Iowa 1990). A defendant is not obliged to determine what documents it has that may be responsive to an overbroad and burdensome request. Plaintiff cites Br g as authority for the proposition that if Loews Corporation cannot produce either the aforementioned information or the requested documents, "it [Loews Corporation] should explain to the Court the steps taken to attempt production and the steps taken to conclude that the information or documents cannot reasonably be produced." Plaintiff s Brief at 10. A thorough analysis of Berg, however, reveals no language standing for this proposition or from which this inference can be drawn. As noted above, however, the Berg case does recognize the validity of the unduly burdensome objection. 456 N.W.2d at 177. b. Irrelevant Requests In an effort to make its far-ranging discovery requests appear to be "relevant," Plaintiff engages in a lengthy discussion of the purported bases it claims authorize jurisdiction over Loews Corporation. First, Plaintiff alleges that Loews Corporation has sufficient mi„imum contacts with the State of Iowa for the Court to subject Loews Corporation to jurisdiction. Second, Plaintiff states that Loews Corporation can be subject to personal jurisdiction based upon "conspiracy jurisdiction." Plaintiff s Brief at 9-10. Plaintiff argues that any topic of information remotely related to these theories of jurisdiction is an appropriate area of inquiry. Plaintiff first addresses the issue ofLoews Corporation's alleged "minimum contacts" 0173222.04 17
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Irn, 905 F.2d 438, 449 (D.C. Cir. 1990); see also Barrett v. Bryant. 290 N.W.2d 917, 920 (Iowa 1980); Glenea l,g e Ship Mgmt. Co. v. Leondakos, 602 So. 2d 1282, 1284 (Fla. 1992) (holding that jurisdictional discovery "should not be broad, onerous, or expansive, nor should it address the merits of the case.") Thus, the breadth of PlaintifPs requests lends weight to Loews Corporation's general objections. This Court should deny Plaintiff's Motion. H. LOEWS CORPORATION ADEQUATELY RESPONDED TO PLAINTIFF'S DISCOVERY REOUESTS A. Loews Corporation Answered Plaintiff's Iowa-Specific Requests by Stating That it Has No Contacts with Iowa Time after time, Loews Corporation fully responded to Plaintiffs Iowa-specific discovery by informing Plaintiff that Loews Corporation has no contacts with Iowa. Forty-one separate discovery requests (16 Interrogatories, 8 Requests for Admission, and 17 Requests for Production) seek information concerning Loews Corporation's contacts with Iowa.' These discovery requests cover every conceivable area in which Loews Corporation could have contact with Iowa. Loews Corporation answered these requests by consistently stating that it has never had any contacts with Iowa. It stated the same through its Schwartz Affidavit. Loews Corporation provided these responses on June 16, 1997, thus belying Plaintiff's claim that "[w]hen they finally responded to Plaintiff's discovery responses, Defendants produced nothing in the way of meaningful discovery." Plaintiff s Brief at 2. Apparently, Plaintiff cannot distinguish between the concepts of "meaningful" and "helpful to Plaintiff s theories." The Iowa-specific responses that Loews Corporation provided are very meaningful; they clearly indicate ee Interrogatories 3-17, 33; Requests for Admission 1-3, 13, 14, and 17 through 19; and Requests for Production 16-25, 32, 44-48, and 51. 0173222.04 4
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0 Donna Gitter DAVIS & GILBERT 1740 Broadway New York, NY 10019 Telephone: 212/468-4800 Telefax: 212/4684888 Joseph R. Gunderson DREHER, SIlIIPSON AND JENSEN PC 1200 Hub Tower, 699 Walnut Des Moines, Iowa 50309 Telephone: 515/288-5000 Telefax: 515/288-7718 Fred L. Dorr 801 Grand avenue, Suite 3100 Des Moines, IA 50309-8036 Brent B. Green 380 Capital Square 400 Locust Street Des Moines, IA 50309-2331 Richard R. Chabot 801 Grand Avenue, Suite 3500 Des Moines, IA 50309
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! 0 47
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Plaintiff agrees that Loews Corporation is responsible for producing or identifying only relevant information that is subject to discovery in accordance with the Iowa rules and law. Plaintiff's Brief at 11. In the requests, however, Plaintiff attempts to expand the appropriate obligations imposed upon Loews Corporation by setting forth "Instructions" and "Definitions" that purport to dictate how Loews Corporation must respond and what Loews Corporation must produce. Plaintiff repeatedly seeks to expand Loews Corporation's obligations by requesting Loews Corporation to produce discovery that is irrelevant, discovery that is safeguarded by various privileges and protections, discovery that is appropriately directed to other defendants, discovery of all documents "wherever located," and discovery that is not reasonable or relevant under the Iowa rules of evidence or Iowa case law. All such requests are properly subject to General Objection E. 4. Loews Corporation Need Not Provide Privileged Information Loews Corporation's General Objection G objects to the requests "to the extent they seek disclosure of information protected from discovery by the attorney-client privilege, the work product doctrine, the joint defense privilege or common interest privilege, and/or any other applicable privileges and exemptions." Plaintiff takes issue with this objection with reference to Interrogatory 2, addressing its purported right to obtain the identity of any individual "who helped to produce the discovery responses." Plaintiff's Brief at 12. In fact, despite the fact that the scope of Interrogatory 2 is objectionable, Loews Corporation provided the name and company title of the witness who verified the interrogatories. Loews Corporation disagrees with Plaintiff's contention that Loews Corporation must identify "each individual consulted or who otherwise assisted in preparing these answers :" Seg Interrogatory 2. This information is protected by the privileges asserted by Loews Corporation in General Objection G. 0173222.04 20
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. nurt should find that Loews Corporation need not produce privileged 1.oews Corporation Need Not Provide Information Protected by Trade .Secret Law il Objection H objects to the requests "to the extent they seek trade secrets, itively sensitive information." Loews Corporation further objects to disclosure .n because it is not relevant to the issue of personal jurisdiction. In challenging does not explain how -- in light of the fact that it is unaware of any responses by this general objection -- the objection relates to its motion to compel. ee Given that Plaintiff cannot point to one request where it feels a response is objection, its complaint is patently meritless. :.oews Corporation Properly Limited its Responses to Information That 's Relevant to This Court's Jurisdiction Over It Objection M objects to the requests "to the extent they are not limited in ictions, statements or activities occurring in or having an affect upon Iowa." whole purpose of the jurisdictional discovery in this case is to determine .tion has sufficient contacts with Iowa to allc,w this Court to exercise personal v information that does not aid that determination is neither relevant nor nded and Substituted Preliminar_r C_ase Manaeement Order of September 23, oging this objection, Plaintiff claims that "Defendant has yet to produce any " Plaintiff s Brief at 15. This is blatantly incorrect. As noted above, Loews ed Plaintiff s Iowa-specific requests by stating that it has no contacts with 22
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Jun. 16. 1998 2:08PM • 0 No, 9455 P. 6/9 Testimony from the trial in Minnesota and exhibits offered there, in the opinion of plaintiff and his counsel, significantly reduce the amount of discovery which will be necessary to prepare this matter for trial. 3. Previously, this Court has entered an Order directing that discovery be conducted in stages. Plaintiff respectfully submits th•at such staged discovery is no longer necessary because of the existence of and access to the Minnesota Document Depository, as well as the trial testimony 2.nd exhibits offered in Minnesota. 4. Plaintiff respectfully submits that the amount of discovery which it needs from the defendants in this matter will be "°fowa specific" and will include requests for information regarding marketing of the defendants' tobacco products within the state of Iowa. PLtintiff believes that the discovery which will be needed by the defendants will relate to damages, and this information is in the hands of the plaintiff. 5 Plaintiff respectfully requests that the Court enter an Order setting trial in February 1999; that the Court fix a date fo r completion of discovery; that the Court fix a date for designation of expert witnesses by the parties; that the Court fix a date for dispositive motions; that the Court fix a date for submission of witness lists, exhibit lists, trial briefs and jury instructions, and that the Court fix such other dates as shall allow the parties to bring the matter to trial in February 1999. WHEREFORE the plaintiff respectfully requests that the Court enter an Order for Pretrial Conference as soon as practicable; that after the Pretrial Conference the Page -3- ,~
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interpreting the nearly-identical Fed. R. Civ. P. 34 hold that the party seeking production of a document bears the burden of establishing the other party's control over such documents. S,~e Camden Iron & Metal v Marubeni America Coro 138 F.R.D. 438 (D.N.J. 1991); United States v. Int'1 Union ofPetroleum & Indus. Workers, 870 F2d 1450, 1452 (9th Cir. 1989). Plaintiff has not met this burden in regard to Request for Production 49. In fact, Plaintiff cannot meet this burden because, as Loews Corporation informed Plaintiff in the response, it either was not a defendant in most of the cases listed in Request for Production 49, or was dismissed or dropped from the case in the early stages. Therefore, Loews Corporation produced few, if any, documents in the cases which Plaintiff identifies. As such, the request is plainly objectionable. IV. CONCLUSION Although Plaintiffs Motion to Compel purportedly addresses the inadequacy of Loews Corporation's discovery responses, Plaintiff chooses not to discuss any specific response. Rather, it attacks the straw man of Loews Corporation's general objections. Not only are Loews Corporation's general objections entirely proper, but Loews Corporation answered virtually every Iowa-specific request propounded by Plaintiff, and provided Plaintiff with discovery from Florida that is directly responsive to the non-Iowa-specific discovery propounded by Plaintiff. Loews Corporation has been forthcoming and cooperative in responding to Plaintiff's discovery requests and in providing Plaintiff with information concerning Loews Corporation's relationship with Lorillard Tobacco Company. Authorizing Plaintiff to expand its fishing expedition will not reveal any evidence that Loews Corporation has contacts with Iowa or that it "controls" Lorillard Tobacco Company, because neither of these allegations is true. This Court should 0173222.04 26
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0 recognize as much, and deny Plaintiff's Motion to Compel. Dated: June 29, 1998 0 Respectfully Submitted, GREFE & SIDNEY, P.L.C. 15 AL'-O'r- . y PK005130 armon PK0002130 2222 Grand Avenue, P.O. Box 10434 Des Moines, Iowa 50306 Telephone: (515) 245-4300 Facsimile: (515) 245-4452 ATTORNEYS FOR DEFENDANT LOEWS CORPORATION OF COUNSEL: Jeffrey S. Nelson, Esq. Catherine M, Castelluccio, Esq. Shook, Hardy & Bacon L.L.P. 1200 Main Street Kansas City, Missouri 64105 Telephone: (816) 474-6550 Facsimile: (816) 421-2708 1~ CE.RI'IFICATE OF SERVICE SM w,di,~xgd Caeby ceNifla tWt ~ trw a;ry d w i !rs~vs bv+umrst was mwd npon s+d..lF t1i b2LersA uaa•i .Y qE paMss M tbs movewrdtFtM aiuf¢ tp Yqx.us' +.~ en enrik9e t&r67tlA to s4$ sM'.!f %%~" w` 7~ x~~',~tye zA6,~s as &tulaev by tlee Plend" eF tsele@ .rac, xMt II*mas fully rAK aad by EWWrB WA tinp lape 1~ a Yn¢ud Sc.NS Mst C,ac. Atpeului7 iC'k"M t7;n."g4 . .~ ~WJof Vi4=:~ ~ D173272.04 27
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CERTIFTCATE OF SERVICE The undersigned hereby certifies that a copy of the document attached to this Certificate was hand delivered to the persons listed below at the addresses indicated, on the 12th day of June, 1998: Roger T. Stetson Belin, Lamson, McCormick, Zumbach & Flynn 2000 Financial Center 666 Walnut Street Des Moines, IA 50309 Henry A. Harmon Grefe & Sidney 2222 Grand Avenue Des Moines, IA 50312 Richard R. Chabot Sullivan & Ward, P.C. 801 Grand Avenue, Suite 3500 Des Moines, IA 50309-2719 Steven L. Nelson Davis, Brown, Koehn, Shors & Roberts, P.C. 2500 Financial Center 666 Walnut Street Des Moines, IA 50309-3993 The undersigned further certifies that a copy of the document attached to this Certificate was mailed to the persons listed below at the addresses indicated, stamped with the appropriate postage for ordinary mail and deposited on the 12th day of June, 1998, in a United States Post Office mail receptacle, in Des Moines, Iowa. Michael M. Fay Kasowitz, Benson, Torres & Friedman, L.L.P. 1301 Avenue of Americas New York, NY 10019-6022 O
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12/29/97 MON 11:09 FAX 515 =4 452GREFE & SIDNEY : >+-+ CASTELUCCIO Of Counsel John C. Monica Craig E. Proctor Catherine M. Castelluccio SHOOK, HARDY & BACON, L.L.P. One Kansas City Place °° 1200 Main Street Kansas City, Missouri 64105 (816) 474-6550 (816) 421-5547 (fax) THE COUNCIL FOR TOBACCO RESBARCH-- U.S.A., INC. J. M"ichael Westo 00 9'56 Brenda K. Werne O 4950 MOYER & BERGMAN, P.L.C. Commerce Exchange Building 2720 First Avenue N.E. Cedar Rapids, Iowa 52406 0006 (319) 366-7331 (319) 366-3668 (fax) Of Counsel Bruce G. Merritt Eric Falkenstein DEBEVOISE & PLIMPTON 875 Third Avenue New York, New York 0022 (212) 909-6000 (212) 909-6836 (fax) cD °° CY\ W 00
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6. Conclusion . . . . . . . . . . . . . . . . . . 33 B. The District Court Correctly Held That The State May Not Recover For Its Claimed Injuries Because They Are Remote and Derivative . . . . . . . . . . . . l. The State's Claimed Injuries Are Not Recoverable Because They Are Too Remote . . . . . . . . . 10 The United States Suprem . . . . . . . . . . . 46 V. CONCLUS I ON . . . . . . . . . . . . . . . . . . . . . . . 4 7
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CERTIFICATE OP FILING I, Kevin J. Narko, hereby certify that I filed this Proof Erief of Defendants-Appellees by depositing two copies thereof i.n the United States mail with certified postage prepaid on November 18, 1997, addressed to the Clerk of the Supreme Court Iowa, State Capitol Building, Des Moines, Iowa, 50319. Kevitn J. N ~ / a~ko WINSTON & STRAWN 35 West Wacker Drive Chicago, IL 60601 of CERTIFICA:E OF SERVICE _.--I, Kevin J: Narko, hereby cer=`__y ,.^at this-Proc`_ of Defendants-Aopeilees was served by me on November 18, 1997, by deposi one conv --- -r.e U^l_ed 3z~a~es :r.a:_ wi...- s•,.=f____.._ = postage a"-xed ar.d addressed t,o each of at_o=>, s..f record 'cereir.: Th::-as " Att4rr.ey General of 'owa 2nd Floor,~'r.oover, 3uilding Des _Moi :es- IA 50319 Brent R. Appel_ Dicki.•tisc n, Mackaman, Tyler &_?:agan, P.C: 699 Walnut, 1600 Hub Tower Des Moines, IA 50309 Roger W. Stone Simmons, rerr:_:'.e, e'i:C__ Ellwood, P.L.C. 2501 Grand Ave. Su=te 7- Des Moines, SA 5`,3_2 Law ..i_ , P.C. 250` ~rand Avenue, Sui~_ _ Des X.oi ~es-,"`.1A 50312 Steven P. Wandro Wandro & Gibson, P.C. 25-D1 Grand Avenue S li : ,_-e B Des "4oines,-_IA 50312 _:.n tio__is H3'r:_r-;^S & .:..^L'r-s 25D'__Grand Avenue, Suite C ..es"~`.o1^ieS, '.z
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. DEC, 12. 1997 10:23AM 0 Steven L. Nelson DAVIS, BROWN Law Firm 2500 Financial Center Des Moines, IA 50309-3993 FY-ed L. Dorr WASKER, DORR Law Firm 801 Grand Avenue Suite 310 Des Moines, IA 50309-8036 Michael M. Fay KASOWITZ, BENSON Law firm 1301 Avenue of Americas New York, NY 10019-6022 Ross F3. Sidney GREEE & SYDNE'Y' 2222 Grand Avenue Des Moines, IA 50312 Robert A. VanVooren LANE & WATERMAN 220 North Main Street Davenport, IA. 52801-1987 R, Laird Hart COVINGTON & BY7RLING 1201 Pennsylvania Avenue NW P.O. Box 7566 Washington, DC 20044-7566
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TABLE OF AUTHORITIES (1980i... - . t . 2-~ 7- ()N IV W /V FEDERAL CASES Alfred L. Snapp & Son Inc. v. Puerto Rico, 458 U.S. 592, 102 S. Ct. 3260, 73 L. Ed. 2d 995 (1982) ...... 20 Ci_t_v_and County of San Francisco v. Philip Morris Incornorated, 957 - _ F. Supp. 1130 (N.D. Ca1.1997)1,-4, 5, 23, 41, 45, 46 Dundee Cement Co. v. Chemical Lab. Inc., 712.F.2d 1166 (7th C_ -- 1983) . . . . . . . . . . . . . . . . . . . , General Foods Corp. v. United States, 448 F. Supp. 11i 1D. Y.d. . . . . . . . . . . . . . . . . . . . . . . 1978) Georaia_ v. Pennsylvania R.R. Co., 324U.S. 423, 65 S. Ct.~-715, 89 ~ L. Bd. -.1051 !1945 . . . . . . . . . . . . . . . 2-- -. Georaia v. °'-nnessee Cocp°r .20,- .y.S: 23~1; ~27 _. - ~ Ed.- 1038 (1907/ ^ . . . . . . . . . . . . . . . . Great Amdrica Ins::ranc=_ Co. -ed Stat?~=,. 573 F.2d ,03= !2d Cir.--1978i . = Ra3 ~1-48 ,,.5.
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l2; 29l97 310N 11: 09 FAX 51S 245452 GREFE & SIDNEY -- ++- Ca51'ELliCCIO @DDa Of Counsel °° Thomas F. Gardner JONES, DAY, REAVIS & POGUE 77 W. Wacker Drive Chicago, Illinois 60601 (312) 782-3939 (312) 782-8585 (fax) BROWN & WILLIAMSON TOBACCO CORPORATION, individually and as successor by merger to THE AMERICAN TOBACCO COMPANY By BELIN LAMSON 1KG`CORi1ICK ZUMBACH FLYNN A Professional Corporation 2000 Financial Center Des Moines, Iowa 50309'° (515) 243-7100 (515) 282-7615 (fax) oger T. Stets Of Counsel Andrew R. McGaan Michelle H. Browdy KIRKLAND & ELLIS 200 East Randolph Drive Chicago, Illinois 60601 (312) 861-2000 (312) 861-2200 (fax) LORILLARD TOBACCO COMPANY and LORILLARD INC. tSv~ss n/ aaaiiny rruv~v 4 nr A. Harmon PK0002aQ0 RE E & SIDNEY 2222 Grand Avenue Des Moines, IoWa 50312 (515) 245-4300 W (515) 245-4452 (fax) 0\ ts" tV ~ N CIl V
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Di T:-t. CiRC;:h" CO[."R i OF -::E FiF"'HE.`IT- TL"DICIAL CIRCtiT. FOR P.-~m 3EACH COL:NT"". FLORIDA C A5 E NO : CL 96-i-i6o ."lr THE STATE OF FLORIDA, et al., Plaintiff(s), vs. TH.E .~\,ERICAIN TOBACCO COIviPA.NY, et al., Defendant(s). SEP 19 ?aa6 ORDER GRANiI'rG Lv P4RT D 1D VT5 M OTiON TO Di r1I S ORDER DEtiYIi4r INPART DF jMNTS' MOTIONS TO DISMISS: 4N-D ORDER TO P aRTIFS TO ONDi r'I' FL"RTFiER NTEDLATION I'z:S C.~CSE catne on to be aeard'oefore the Court on the 6th day of Seotember. '.990 :~on ..Sz •.'ai'.oL's :iv:1vI75 :O L: ~~S .'.'.ea by :Jeienuanu.n :Ais :.a'.15e. Defendants B.A.i. Indu-stries, PLC; Loews Corporation; and Barus Holdings, Inc., have moved to dismiss Ihe Plaintias' Second :'<mended Complaint by attacking this Court's jurisdiction to proceed '.a their respective cases. The other Defendants' Motions to Dismiss seek dismissai of the Plaintiffs' Second \mended Complaint for failure to state a proper and permissible cause of action. Extensive legal memoranda with supoorting documents and eshibits have been filed in support of the :notions and in opposition thereto. :-\ full day of oral arguments was heard by this Court. First. Ihis Cour, must determine what cause o[ ac:;on the State/Plaintiff is permitted to bring in the State of F:orida T:ze Court is aware that manv other st-ates have brought actions aeaitvst some or ail oi 1:e Defencsu_= tnumerated in the P!amtiis" ~econd ?-.-nend°d Comeiaint. :~owever. :'.e E%HIBIT 2
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* voluntarily undertaken duty and unjust enrichment, respect4ve~i., are likewise supported by the law. The State-cannot maintain a valid claim for a breach of a voluntarily undertakern ducy because the State has suffered no physical harm and because it seeks to recover for strictly economic losses to it. The State has raised no argument contesting the District Court's dismissal of its unjust enrichment claim, and thus has waived any right to challenge this portion of the Ruling. In sum, the District Court's Ruling dismissing Counts i, III, IV, and VII of the Petition was correct as a matter of law and should be upheld by this Court.
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12:29/97 MON 11:08 FS1 515 245 4452 GREF£ & SIDNEY ++-+ CASTELiJCCIO • Defendants-Appellees defer to this Court's determination as to when this matter should b2 heard and otherwise take position on the State's Motion. PHILIP MORRIS INCORPORATED and PHILIP MORRIS COMPANIES INC. ~dl I AffZ.~.~~i./ Vo n Robe'rt A. Van rman LANE & WATERMAN 220 N. Main Street Suite 600 Davenport, Iowa 52801 (319) 324-3246 (319) 324-1616 (fax) Thomas D. Wat of Counsel Dan K. Webb Thomas J. Frederick Kurt L. Schultz Kevin J. Narko -WINSTON & STRAWN 35 West Wacker Drive Chicago, Illinois 60601 (312) 558-5600 (312) 558-5700 (fax) no R.J. REYNOLDS TOBACCO COMPANY BY ,L~~ Steven L. Ne1 DAVIS, BROWN/J KOLHN, SHORS & ROBERTS, ~p C. The Financial Center 666 Walnut Street, Suitg,2500 Des Moines, Iowa 50309 (515) (515) 288-2500 243-0654 (fax) 00 3 C\ W \10 N Gfl' Cr~
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1ttlN 11:U3 FAX ;15 245 4452 . GREFE s SIDt:EI '-,- CdSTELL:CCLO i Argument (the "Motion"), except to note that, contrary to the State's assertion, the issues on appeal do not involve "rights which are likely to be greatly- impaired by:,.delay." Motiors, q 3. The issues on appeal involve whether or not the State may recover money damages, specifically including whether or not the State has a right to recoup Medicaid payments by any means other than pursuant to Iowa Code § 249A.6.1/ The passage of time will not va adversely affect the State's purported rights. See Leonhardt v. Holden Bus. Forms Co., 828 F. Supp. 657, 672 (D. Minn. 1993) (holding there was no reason for expedited resolution of purely financial dispute because the passage of time would not cause irreparable harm). Thus, while Defendants-Appellees desire a prompt resolution of this appeal, the State has failed to demonstrate the basis for such preferential treatment. This Court hears numerous appeals every year. The litigants.in most, if not all, of those appeals desire that their cases be heard as soon as practicable. The State has simply failed to distinguish this case from those numerous other pending appeals. 1/ The State's Motion mischaracterizes the issues on appeal. In addition to the issues noted in the Motion, the District Court also held tfiat the state could not, as a matter of law, recover its alleged dam4ges resulting from smoking-related injuries to others because such alleged damages are remote and derivative, which are concepts distinct from proximate cause, as explained in Defendants- Appellees' brief filed in this appeal. 2 k!I OOJ
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TABLE OF CONTENTS - CERTIFICATE OF FILING . . . . . . . . . . • . • • . . . • . • . CERTIFICATE OF SERVICE . . . . . . . . . • • • . • . . • • . ATTORNEY'S COST CERTIFICATE . . . . . . . . . • . . . . . . . -- TABLE OF CONTENTS . . . . . . . . . . . • . . • • . . . . . . - I. STATEMENT OF THE ISSUES . . . . . . . . . . • . . . . . . I1. STATEMENT OF THE CASE . . . . . - . . . . . • • ~ I I I . SL'N.NfAnY OF THE ARGUMENT . . . . . . . - . . . . . . . . . IV. '""s.-Ccu_t Ras__,vious' $-,._n-rte 22 2 p.n. ed,Y F;ms.......-.-- ~.. S.---=--- =_.' Ac=1CI: '_S Base_e5S o`JOtcer __.._us _ .. - S_ :!_ _ .hir Se~,'~-SO:= 2Y7A.6 . ARG:°YENT . . . . . . . . . . . . . . . . . . . . . . . . The District Court Correcul}• Held-'That The Statutcrily-Prescribed ie: Remedy --c.._ained In -oHa Code § 249A.6 Is The State's Exclusi-Je Remedy To Recoco Y.ed-caid Expenses . . . . . . . . . . . . . 1. The S~a:~e's Stat.._.,_-ly-?rescYibed L-_.. Re-._ . Found In Lowa Cocie~§ 245A.6 . . . . . . - - . . ^at ..._ S=a~° s .-tate's At~._:1:D=ew D=55-. _..13` - ?dSe:e.55 .... . . . . . . ...~--- o =f= 4 7 " ~P=a".:S°_ --.~-_es_ :S u na:'31_; . . . . . ~~ :J;"• ~;=q a _-_.^.as a ')'.:as__S.^.I°r°_Qn Suppor~ed . _^:e
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by the Iowa Medicaid statute, Iowa.Code Section 249A.6-. (Rulina at 5-7.) To attempt to recoup Medicaid expenses the State must pursue the sr- atutorily-prescribed remedy. The State did not do so. Accordingly, the District Court dismissed Counts_II, III, and VII, asserting claims for civil liability for deception, voluntary assumption of a special duty and indemnity, respectively. 0 Second, the State's claimed injuries are both remote and derivative. The law does not permit recovery for such injuries. (Ruling at 7-8.) The District Court, therefore, held that a second, independent ground existed to dismiss Counts II, III, and VII. • Third, the District Court ruled`the 6tate's attemu= to assert a claim for voiuntary assumption of a_special duty, Count III, also fails because :.^e State ~_as -:ot suffered a physica_ inj:.ry, and _::e economic _css doc=__.._ cars a ny __ccver, at 10-12.) "-' i Fdurti:, t^e State could not, as a ratter of law, t:ai:aa_n a C=a_.. __._ Count IV. at 12-14. III. SUMMARY OF THE ARGUMENT :s .,.._ r_ redy a ai'<alz _ ..., the State to recoup Medicaid wayr,:e:as __.._: alieaed'= __ab:= _..`_rd carties such as Defendants -- _::e statnt:,ry __...edy of ~cwa _..-de j 249A.6. As the Sta expl = adm±ts, __ "as r,o_ ac__,... parsuan_ t. Section 249A.5. Fur=.her, even thouah no com,:in law remedy exists to reC`o:1D -D::D'_:u :as9ista.^.re Lav'aeilts s'i^_^ .as-Xed_ca=d, the State
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~~/.ZAPR, 22. 1998a12;22PM 5AdElkhoAdiqpb2 _ GREFE & SIDNEY NQ 3738 P. 2/12002 , IN THE SUPREME COURT OF IOWA No. 69 / 97-1683 ~ 1998 Filed A ri122 p , STATE OP IOWA ex re1. THOMAS . MILLER, in ~ q~_PR~ IQ 2G19 °~d~ His Capaci,ty as Attorney Ganeral o~Iowa, ~ Appellant, _ . I CLERKSUPREFAtCOURT. vs. PHILIP MORRIS INC. (PHILIP MORRIS U.S.t1-); PHILIP MORR1'S COMPANIES, INC.; RJ. REY1vOLDS TOBACCO CO.; BROWN & WILLIt1MSON TOBACCO CORPORATION, IndividuaJly and as Successor bV M~~~e_rger to the AMERICAN TOBACCO CO.; IARILLR~ TOBACCO CO.; LORILLARD INC.; UNITED STATES TOBACCO CO.; U•S7.', INC.; THE COUNCIL FOR TOBACCO RESEARCH U,S.A, INC.; HILL &IINOWLTON, INC.; THEBROOKE GROUP, LTD.; LIGGETT & MYERS, INC.; and LIGGETT GROUP, INC., Appellees; RJRNABISCO, INC.; AMERICAN BRANDS, INC.; B.A.T. INDUSTRIES, PLC; BATUS HOLDINGS, INC.; BRITISI-I AMERICAN TOBACCO COMPANY. LTD.; BRITISH-AMERICAN (HOLDINGS) LTD.; LOEWS CORPORATION; and THE TOBACCO INSTITUTE, INC„ Defendants. Appeal from the Irnva District Court for Polk County, Linda R. Reade, Judge, An inLerlocutorv appeal from the district couri s dismissal of three counts of plainrifPs petition. AFFIRMED. Thomas ). Miller, Attorney Genetal, E. Ralph Wallcqr of the Walker Law Finm. P.C., Des Moinea, Steven P. Wandro of Wandro & Gibson, P.C.,
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Of Counsel Andrew R. McGaan Michelle H. Browdy KIRKLAND & ELLIS 200 East Randolph Drive Chicago, Illinois 60601 (312) 861--2000 (312) 861-2200 (fax) LORILLARD TOBACCO COMPANY and LORILLARD INC. By `~ - '21 15, Ross H. Sidney PK 0 3 Henry A. Harmon P 0213'0 GREFE & SIDNEY 2222 Grand Avenue Des Moines, Iowa 50312 (515) 245-4300 (515) 245-4452 ifax: Of Counsel Sonn C. Monica Craia E..P_octor ^_a=:.erine M. Cas=e1-',=c== _..,Oi:, :LARDY & =.AC.^..`:, ~..:.. 0-:-e Kansas Ci~:v Place Na_._~___e_ :a=.sas City, Missouri 64: . ~G.~_5=47 fay.~
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0 Roger T. Stetson_ _ Belin, Harris, Lamson & YcCormick 2000 Financial Center. Des Moines, IA 50309 Thomas A. Finley Finley, Alt, Smith Scharnberg, Max & Craig,..P.C._ 604 Locust Street, 4th Floor Des Moines,- IA 50309-3773 -- Steven L. Nelson - Davis, Brown, Koehn, Shors S Roberts, P.C. _ 2500 Financial Center Des Moines, IA 50309-3993 Michael M. Fay Kasowitz, Benson 1301 _.~;venue o-` t..-e :a.:.e~_cas New York, NY 10019-'322 Fred ... D_-_ Wasker, Dorr, Wi*...mer, __ a S0y-Grand Ave., Suite __.. Des MoineS, :A- "503°.~r--S-36 Caa'?5 'Nas _ s James--C. Xunsor. K'_r''.-lana & Ellis 200 East Randolph Drive - Chicago, ;._ -9u'S01 Mark C. Cunha Simpson, Thacher & Bartlet __425 Lexington Avenue New York, NY=-10017-3954 D. Scott Wise Davis; Polk & rrlardwell 450 Lexington Avenue New York, NY 10017 Richard R. Chabo= Sull:var. & Ward, P.C. 80_ C--a.n.d Ave-ue, Suite 35G: 1,es :v:,^,_..es, =A °_C3-09-27_- a_ ~5 ~' or=nt~ _~ =._s /6 7y _'_-0`J-- '>'ieT .l- J.,__ J.Y:. e 5L1::: 0~ q, i^IiNSTON & STRAWN 3=
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DeBurkarte V. Louver, 393 N.W:2d 131 (Iowa 199~ Dyer v. Krug,_ 533 N.W.2d 221 (Iowa 1995) Gene_raI Foods Corp. v. United States,- 448 F. Supc. (D. Md. 1978) Minnesota v. Philip Morris Incorporated, 551 N.W-2d 490 (Minn. 1996) Nebraska Snnkeepers Inc. v. Pittsburgh-Des Moines Corp 345 N.W-2d 124 (Iowa 1984) Nelson v. Todd's Ltd., 426 N-W.2d 12t)-(Iowa 1988) Richards v. Midland Brick Sales Co., 551 N.W.2d 6_9 (=owa Ct. App. 1996) Thompson v. Bohlken, 312 N.W.2d 501 (Iowa 1981) D. Whether The State Waived Its Right To Challenge the District Court's Ruling Dismissing The State's Unjust Enrichment/ Restitution Count By Not Raising Any Arguments Directed To The Count In Its Brief. - DVer v. Krug, 533 N.W.2d 221 (Iowa 1995~ :?vler v_ Garner, 548 N-+t.2d B€? 'Iowa=996) :-- Johnston v. Veterans' Plaza .4uth. 5-35 N.W.2d =cwa Moser z• Tho_n Sales _^o. ':2 ^--W-2d--ffi81 ?owa Lfie'ier v. St. Ansaar S~a=e Ban)c, 463 N.W-2d 959 =owa -RST zn-'1, I=. -=3 -:P:.2d -3.90 !lowa II. STATEMENT OF THE CASE •"he StatF F'__ed a n:^_-count _e.._,.ionaqains= ciaarette manufacturers and other entities o.^. Noverm:eY 2771996. The State's Petition see::s._ ro -'eco•.:o M.?d,_ca-u = ::ses _--- atate _-_a_^':s __ ca_; Lo'_` ..°dica'1Care of =owa reside.^.zs '•v'~IG allegedly s'.::Fer°_.^. iro^: lll _°_SSes dis-as~ t .e S=ate -..D-.te:]ds were a~tr:.^,i:`.a'J_e `o clgar°z_._c :-.- C_a::_ 31s: s°°_aCs _.. rs'".^." a.^,A,.:-^-zs sC°_.._
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Insurance Co. v. Brane, 95 U.S. 754, 24 L. Ed. 580 Kraft Chem. Co. v. Illinois Bell Te2-._Co., 608 N.E.2d 243 (I11. Ct. App. 1993) Maryland v. Philip Morris Incorporated, No. 96122017/CL211487, 1997 WL 540913 (Baltimore City, Md. Cir. Ct. May 21, 1997) Minnesota v. Philip Morris Incorporated, 551 N.W.2d 490 (Minn. 1996) National Union Fire Ins. Co. v. Continental 111. Corp., - - 658 F. Supp. 775 (N.D. I1l. 1987) Nelson_v...Fogelstrom, 284 N.E.2d 339 (Ill. Ct. App. 1972 Northern States Contracting Co. v.Oakes, 253 N.W. 37= (Minn. 1934) Ore-Ida Foods, Inc. v. Indian Head Cattle Co., 627 ?. 2.. 469 (Or. 1981) RK Constructors Inc. v. _ Fugco Corp. ;- 650 A. 2d 153 'G:,::r.. 1994) Rockingham Mut. Fire Ins.-Co. v.--Bcsner, 33 Me. 253 (1855) Silva v. Home Indem._Co., 476 A.2d--b64 (R.I. 1980: Unique Paint Co. .. ,..... .. Neh-r,a:i :r_-Z, 41- S.n.2d (Ga. Ct. App. Unitej States v. Stan.iYa-a ~iI _.,.~332 ...5. .-..Ct.1604, 9= L. =d. 26 2J62_.i=947 [tiilliams _v. u?obe 1^.iem. :97c_; C. 5'v7'.F.23837 The State is Unable To State A Valid Claim For Breach Of A Voluntarily Assumed Duty. City and County of San Francisco v. Philip Morris Incorporated, 957 _. Su__ .=-l3C ;?7.7. Cai. 1997) Clinical _erftsionist-s, L._. .. d . =au< re & ^:arine -- Ins. -Co., 65C A.2d 285 i'<d°. -994 l Cur.ningham v. Kartri dg Pak Cc. ,-r.~ 32 °:.'rI. 2d 981 ( Iowa _983,
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third parties by requiring that Medicaid recipients assign the'_= rights against those third parties to the State, which in turn exercises those rights as assignee of_the recipients. See €2 U.S.C. §§ 1396k, 1396a(a)(2), 1396a(a)(45); 42 C.F.R. § 433.146; see also Marshall v. Iowa Dep't of Human Servs.,_559 N.W.2d 612,614 (Iowa 1997) (federal Medicaid Act and recoupment regulations are binding on the State) . To comply with this requirement, the Legislature enacted Iowa Code § 249A.6, which ~ads in pertinent part: 1. When payment is made by the [Department of Human Services) for medical ca-e_or expenses through the medical assistance program on behalf of a°recipient, the department shall have a lien, to the extent of those payments, upon- ali monetary claims whic)'; ..he recipie.^L ,~^ a y - _ ay ::ave-agai^st th_`ra parties. S. For _ourcoses of ~his secz-.... ~. e term tl:ird nart,v" includes an attorne}~-~ n.dividuai, _ blic or pr-ivate agenc =_nst zGr, corrc_ , V which is or cr.ay ~~ n abi- topav part-r.zr all of the :nedical cscs incurred as_a resuis: of ._njur,•, uisease or _disabi'_~ty by or on be::aif of an acp2==ant _`c= or _-=-c_ent ._ as_ista-:c=_ .nner the medical assistance o-oaram. decart^:=-nt may __f__--- -cs lien by a acai.::st a: ,° _iao--e Iowa Code § 2 n~iasis adaedi. Sect reauires;er~ ~'.-a~ ,.ie S_ate I -ode 5 243.7, --asse.x'S -nts. 24yP..6 also contai-is g example, a =y against whom i- ..~_
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11/UJ/W7 MUN 1J:J4 YAA 013 Z45 445T bKtbb & S1llNhY :owa Home Mut. Cas. Co. v. Farmers Mut. Hail Ins. Co., :47 Iowa 183, 73 N.W.2d 22 (1955) Iowa Rule App. P. 14 :;enney v. Iowa District Court for Linn County, 456 N.W.2d 921 (Iowa 1990) t:innesota ex rel. Humphrey V. Philip Morris, Inc., 551 N.W.2d 490 (Minn. 1996) Nebraska Innkeepers, Inc. v. Pittsburgh-Des Moines Corp., :45 N.W.2d 124 (Iowa 1984) Paters v. Z~yons 168, N.W.2d 759 (Iowa 1969) Ilirelli-Armstrong Tire Corp. v. Midwest-Werner & Pfleiderer, ]nc., 540 N.W.2d 647 (Iowa 1995) ked Giant Oil Co. v. Lawlor, 528 N.W.2d 524 (Iowa 1995) Y.o2maj21 v. Northland Greyhound Lines, 242 Iowa 1135, 49 N.W.2d 501 (1951) ].ifred L. Snapp & Son v. Puerto Rico, 458 U.S. 592, 607, 102 :>. Ct. 3260, 73 L. Ed. 2d 995, 1007 (1982) f.nyder v. Davenport, 323 N.W.2d 225 (Iowa 1982) State v. F.W. Fitch Co., 236 Iowa 208, 17 N.W.2d 380 (1945) ;;tate v. Jones, 298 N.W.2d 296 (Iowa 1980) .~.tate ex rel. Dep't of. Human Services v. Brooks, 412 N.W.2d 613 (Iowa 1987) ;ta -e gg rel. Palme>r v. Board of Supervi_sors, ::65 N.W.2d 35 (Iowa 1985) :'•teffens v. American Standard Ins. Co., 181 N.W.2d 174 (Iowa 3970) Thompson v. Bohlken, 312 N.W.2d 501 (Iowa 1981) Ig Ul4 1`anAaale v. City of DQs Moines, 550 N.W.2d 153 (Iowa 1996) Vaughn v. Ag Processing, Inc., 459 N.W.2d 627 (Iowa 1990) fl Am. Jur. 2d Liens §§ 2,15,and 36 (1970) 1993 Iowa Acts (75th G.A.) Ch. 180, § 50 9owa Code §§ 13a.10, 85.22, 239.3, 249A.6, 252C.2, 252E.11, &55G.13, and 601A hestatement of Restitution §§ 76 and 96 tn #kestatement (Second) of Torts §§ 323 and 324A C;\ Ui e2 U.S.C. §1396a(a)(25) tJ ~ trt co 3
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3. Conclusion - The State seeks to recover undes Counts II, III, and v-: for economic losses that are derivative of injuries allegedly suffered by Medicaid recipients and State employees who smoke. Under the legal remoteness doctrine recognized in Iowa and elsewhere, such losses cannot be recovered in a s3irect action such as the State_brings here. Accordingly, the District Court's Ruling dism,issing Counts II,-III, and VII on remoteness grounds was correct as a matter of law, and should be affirmed by this Court. C. The State Is Unable To State A Valid Claim For Breach Of A Voluntarily Assumed Duty -n a_utile attemot to demonstrate _~ is able to asse:= a common law claim, the State separaze:.r argues ..:at _~ :as s~:a_e.: a valia-claim for breach of a volir._ar'_:y under--aken duty _.. _~u.._ -- III. fS.*_ate's Br. at. 45.: 7'r.e Uist°ict'_Court dismissed Counc: beca,se t.._ Sta::e :as ..~t s::==ered snv [-vsicai at - 11.) _ - _ _ .. - _.^a? l~..u_ . ,- ., _C'q•S._ ., . _/ _.._ 6~ .._.. la'o. ~.,._ ... Dver v. i:r::g, 533 ,..'ri: -2-d ...._, 2.2213 ,_owa-.1-595, . .nere is ..., __aa- -basis w.,,.ovLrt.._.- _.._ State d~;es not ..?scutA t^e D=s_--nt Court's co'_ding that suc;: a claim reo•Li-es physical Rather, tne- State argues t::at "itl:-re 'physica ,-.'ar... -::o .-..-. +._._:.Zel"is for which the Staze rP'..('!1~..re.PPnr wa by tobacco use costs wou"_d satisfy the S_a-e`s Ir. nt YJ S..a~e __tes no autr.or_ty -- novel oroaosttion tha: arn ctee_ `_ r= any 77 i vu~: _.._ =isdictid::.-- to suoport its ._ of phys 'ca: narm to others
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11/03/97 MON 13:35 FAX 515 245 4452 GREFE & SIDNEY 14018 ;Petition 552, 43, 45, 259, 276). The defendants' actions :-iad a direct and proximate result of causing cancer and other .iiseases for which the State of Iowa spent hundreds of :aillions of dollars to provide health care for tobacco-related Lllnesses. (Petition 122, 34, 38, 45, 90, 145, 149, 241, 259, ?62, 276). There can be no dispute that the State's lllegations satisfied the "but for" component of causation. 2. THE PETITION ALLEGED THAT DEFENDANTS' CONDUCT WAS A SIIBSTANTIAL FACTOR IN PRODUCING THE STATE'S DAMAGEB. In Iowa cases, proximate cause is generally described as 3 requirement of showing that the conduct of a party is "a 3ubstantial factor in producing damage'° and no rule of law relieves the defendant of liability. Scocygina v Wa -Mart :3tores. Inc „ 560 N.W.2d 564, 567 (Iowa 1997); Ger ~, 549 rI.W.2d at 817; liacien v. Texaco Ref. and Mktq.. Inc., 526 rI.W.2d 531, 537 (Iowa 1995)f Snaur v. Owens-Corpj_na F_berglaas _oro., 510 N.W.2d 854, 858 (Iowa 1994). Regarding proximate :ause, this Court has stated: Proximate causation presents the question of whether the policy of the law will extend responsibility to those consequences which have in fact been produced by an actor's conduct. KeZly v. Sinclair Oil Coro, 476 N.W.2d 341, 349 (Iowa 1991)7 Gerst, 549 N.W.2d at 817. Several well-established principles emerge from this court's discussions of proximate cause. First, the issue of proximate cause is for the jury. Huber v. Watson, No. 95-1959 (Iowa September 17, 1997). This Court has "long been committed to the principle that issues of 7
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(Attorneys for plaintiffs in cases 97 CIV 9399 David M. Bernick Merk Cunha and 91 CIV 9401 o01y1 XIRXLAND 6 BLLIB Adao, stain ~ C 200 R. RYIdOlpk Drive SIMPSON TWS(1{6R 6 SARI'L21T David Paul Horowitr Chiugo, I1Lnoia 60601 425 10409011 Avenue Q LAW OFPICE OF DAVID PAUL HOROWITZ Tel: 1312) B41•2000 NeV York, New York 10017 14 East 60° Street, Suits 400 FaA: 13121 e61-2200 Tel: (2121 655•1000 ~ New York, NY 10022 Fax: (212) 455-25g2 ~ Tel: (212) 750•7200 Kenneth N. Bass ° Paul B. Taylor (Attorneys for defendant B,B.T Industries p.l.c. P (Rttorneys for plaintiffs in cases 97 CIV 9399 KIRKLkND & SLLIS in all cases and attorneys for defendant and 97 CIV 9401 onlyl 655 Pifteenth Street, NR Britieh-Aoarlcan Tobacco Coapany Ltd. in all e w Suite 1200 caeee except 97 CIV 9395•939a, 97 CIV 9400 and Washington, D.C. 20005 97 CIV 94021 For Defendanta in A11 Actioos (uaept where indiGted): Tel: (2021 879-5014 N FaX: (2021 af9•5200 ro Peter C. Hein Thomas J. MoCormeck ? Barbara Robbins (Attorneys for defendant Brovn 6 Milliareon Robert Pruyne < MACDTELL, LIPTON, ROgEN 0 KATZ Tobacco Corporation, including as succeasor by CILIDBOB6HE & PARIC; 0 51 Naet 52nd Street merger to defendant ihe Aeerican Tobacco 30 Rockefeller Plaaa New York, New York 10019 CoapanyV New York, NY 10112 x Tel: 12121 403-1000 Tel: (2121 4gS-5100 Fax: (2121 541-5369 A ~ Paul K, stocker Robert R. Oaffey Michael 9, Chernie (Attorneys for defendant 00 Paul y. Jones J0NR9, DAY, RBAVIS & POOOR Britiah•Amrican Tobacco Company PHILLIPS, LYTLB, HITCHCOCK, BLAINB 6 HOBER 599 Lexington Avenue New York, New York 10022 Ltd. in cases 97 CIV 9395-9395, 97 CIV 9100, and 97 CIV 9402) 3400 Marine Midland Center Tel: (212) 326-3939 Buffalo, New York 14203 Tel: (7161 547•e400 Robert F. McDernott, Jr. Alan S. Mansfield Fax: (7161 R52-6100 Donald B. Ayer . (Attorneye for defendant JONES, 0.SY, RFAVIS f POGVB OBEENBRRG, TAAORI), HOFFMAN, Philip Norria lncotporated) Metropolitan Squera 1450 0 Street, K.M., Suite 700 Washington, D.C. 20005-20Be Tel: 12021 179•3939 LIPOPP, ROSBN & QOBS7EL CiticorpCenter 153 East 53rd Street Marjorie Press Lindblom Fax: (l02) 737•2a32 New York, Maw York 10022 Peter A. Bellacoaa Tel: 12121 601•9200 KIRRLAND a ELLIS 153 East 53rd Street New York, New York 10022 Tel: {2111 446-4500 (Attorneya for defendant R.J. Reynolds Tobacco Co9pany, RJx Nabieco Holdings Corp., and RJR Nabisco, Inc.) obert S. Northrip Bruce R. Tepikian 46 41 m 9606Z298
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11/03/97 MON 13:36 FAX 515 245 4452 GREAE & SIDNEY 886 F.2d 194, 197 (8th Cir. 1989). The petition alleged facts upon which a reasonable person could conclude that the State's payment of health care costs for tobacco-related illnesses was rs foreseeable result of defendants' conduct. 3. TSE DISTRICT COURT ERRED IN ITS RULING THAT THE STATE BhD FAILED TO PROVE PROXIMATE CAUSE BECAUSE THERE WERE "MANY POTENTIALLY INTERVENING FACTORS." Intervening or superseding causes may break the chain of causation between a defendant's conduct and a plaintiff's 1.iamages. Ho?]inaswgr:th v. Schminkey, 553 N.W.2d 591, 597 ;Iowa 1996); Hactpn, 526 N.W.2d at 537. This court has stated: We have held that a defendant's conduct is not a legal cause of a plaintiff's harm if it is superseded by later independent forces or conduct. The court must find that "the later-occurring event is such as to break the chain of causal events between the actor's [conduct] and the plaintiff's injury." [aven, 526 N.W.2d at 538 (citations omitted). Whether conduct ,ras an intervening or superseding cause is for the jury, lnless undisputed facts leave no room for a reasonable 3ifference of opinion. Id.; HaumPrsen M. Ford Motor Co, 257 K.W.2d 7, 15 (Iowa 1977). This Court has stated: A determination of whether another person's conduct constitutes a superseding cause is usually a question of fact, and it is a question of law only in extreme circumstances where it is manifestly clear that the intervening conduct was a superseding event. ow ~lgctrir Light & Power Co v General Electric Co., 352 W.W.2d 231, 235 (Iowa 1984) (citations omitted). The District Court ruled that the State's injuries were 40022 11
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2. This Court Has Previously Held That The State's Statutorily-Prescribed Remedy Contained In Iowa Code § 249A.6 Is Exclusive This Court has previously held that Iowa law does not recognize any common law right to: recover public assistance payments, and that Section 249A.6 provides the exclusive remedy for the recovery of Medicaid expenses: The recipient of public assistance was not obligated at common law to reimburse the State for assistance provided. The State"could not institute suit against the recipient or others to recover amounts expended for the recipient. Congress and the state legislatures,- however, have enacted provisions allowing' limited reimbursem,ent of medical assistanca-benefits. Congress established an entitleme_r.t program for the medically needy as part of,the Social Security Act. Under the joint federal and state_program the state must enforce-lts r:ght of subroga[ion against persons legally liable to the benefit recipient __medica= efpenses incur-red as a result of that liab~litv_.-- To .^.pleme7t ^is reau:r_:-.er.tt!:e =~wa legislature enacted iowa Cod_e § 2~yA.5 .... Stat_ e.x re1. Lep'-of Haman ..ervs. v- Brooks,. S=2 S.i:.2d 6'13, (-cw-a =98T~ +,citations =___edl.~'.e^,thasis ada`=a;-; see also Hi_'? c•. S.tat_ Dep'L.,_ `-owa -992(disc~esingleg'_s=atire ..istory and ^ase =a~a_.acp-iy=ng § 2Y9A.6); Ba2es v. Warren Co., 478 3_98, 4Z-- -97!1 (:ho:ding that DHS' ^".°_d--^.aid___c.:om.._._ „_a_..m was "ao-.efnedby" § 249A.6). There was no co,mo-: law _ia: t va _ r_caver ..=~d:caid proceeds specifical'_y, because.the-Medicaid oroa=-: was ...._ -~S=ab'_'_sr.ed under federal law unci- ;958, and --or:a d:... ._..t _z.-s See Dunlap Care Center v. _cwa ep't Of _-_ial Ser:'s.,.353 N.W.2d 389, 393 '=swa -9R4-..
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This same conclusion was _eached in the recent 'eaer : court ruling in City & County of San Francisco v. Philip Mcrris Incorporated, 957 F. Supp. 1130 (N.D. Cal._1997). There, the federal district court refused to permit derivative, second-level government plaintiffs to recover health care cos_ts allegedly due to smoking under the federal RICO statute "because of the lack of directness between plaintiffs' claimed injuries and defendants' alleged conduct[.]" Id. at 1138 (emphasis added)Likewise, t.._ Minnesota Supreme Court has held that Blue Cross/Blue Shield lacked standing to pursue direct claims based on alleged smoking-related illnesses suffered by its insureds because its_ alleged damages were "slmDly tD0 remote" to permit reCOVer}' agaiIIst_-,,~.^.e <lefendaIIts. See Minnesota v. Philip Morris Incoroorated,-55_ ti::W.2d 490, 495 f"Sinr. 1996). _..- + .. _.. _ ,'aE case 7.. S~aLe la'd a,la_':S beDaw'se Ca___"__._3 '_3',a 3 D°_tween _..~ caUsaz_,.__ r9ouirem,°^iz:s _.. -..__.___..n3. and ':~q:lgenr to1"t. ^ases. City & _~uhtv cf San =ranclscc, 95? '- _upp.°a_ _141. Beca::se ...c ar Q=s~:-_nctlGneY_iszs ......__ _c++a -.aw, a::-d because l:efe::.`la:::a . .. _ .__ „ _f . . ^..... SeOK.H'_=.1_::3_-_c_ of _hD_ .... ?rO_:-:'.75 ^t __T..u-1eness, ..Ot DrOI:.^,.ate ca'_,s°_, i~.___,.zG-= caI: :.a,{e no sO'_a:zC oo=aon of t:.e °_ed=ra- -c _.: _ity & zount,v cf San Fran_--scD.
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11/03/97 MON 13:35 FAX 515 245 4452 GREFE & SIDNEY N.W.2d 247, 254 (Iowa 1993)'. There is no question that a reasonable person could conclude that the defendants' conduct was a "substantial factor" in causing tobacco-related illnesses for which the state paid and continues to pay the medical costs. (Petition 41112, 34, 38, 41, 43, 45, 262, 276). A reasonable person could conclude that the defendants' advertising, targeting of youth, misrepresenting of nicotine's addictiveness, and aiisrepresenting and concealing of the scientific evidence of the causal connection between tobacco use and disease all contributed to the' use of tobacco by Iowans in a manner intended by the defendants. (Petition 1156, 70, 84, 90, 97, -_01, 115, 145, 166, 176, 212, 228). The defendants' tobacco Froducts directly caused cancer, emphysema, coronary disease, e,trokes, and other tobacco-related illnesses. (Petition 112, :.8-45, 70). Tobacco causes one-fourth of all cancer deaths e:nd one-fifth of all deaths. (Petition 1138, 39, 40, 42). Ci.garette manufacturers have known for decades that nicotine :.s addictive and that their products cause cancer, other cliseases, and death. (Petition 4959, 74, 77, E3, 89, 145, 49, 150, 159). The defendants' conduct, even if only partly 'In cases involving exposure to asbestos, the requirement of prcximate cause is readily satisfied by "a reasonable inference of exposure to a defendant's product coupled with expert testimony regarding the cumulative effects of exposure to the product. $ggZ=, 496 N.W.2d at 254; $,paur, 510 N.W.2d at 860-61. In u„r,or }. Watson, No. 95-1959 (Iowa September 17, 1997), this Court recently held that evidence establishing "something stronger than a mere possibility . . . linking the asbestos in question with the unr.amed defendants" was sufficient to generate a jury question on praximate cause. It was error for the trial court to conclude otherwise. Slip op. at 8. 9 40020
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for_treatment of State employees. Certain Defendants "Defendants") responded by filing a Motion to Dismiss the Petition in its entirety (the "Motion to Dismiss").11 The majority of the remaining defendants sought dismissal based on lack of personal jurisdiction. The District Court heard argument on the Motion to Dismiss June 27, 1997. On August 26, 1997, the District Court issued a Ruling dis,issing four of the nine counts of the Petition ("Ruling";. District Court dismissed counts attempting__to assert causes of action based on civil liability for deception-~(CountII) , vo''~cntar~assumption of a special duty (COun t III), un_:a: enrichment/restitution (Count IV) , and -::de:r.nisy (Count V-= . ..._ District Court based its _.Ruling '-on- Lour- independent legall princioles: . si^ce _:Ier_e is ro _,........, ??-ea:-caid Gxneas=s- o_ exclusive . -~ef_..:~3 r_g n blic.aasistat^e~ua:^:encs, Dism'_-ss ~.._ Pev_::_3.n a-:-d s::b:^i~- rhiiip y:orris - Incorvo-ated; -_nses a~e'_ orescr:weu ;o ::ed _._ the Mution ..., _r.sta :- :,noel'_ees' 3r'_e_° are Ycrris:Comnanies Inc.; R.T. Revriolds_ I'cbacco ~ , ?rown t .,_-'__aason-="obacco Coroorat:c., individually ard as successor by ;~araer tei Tze American Tobac_c -- - ~- . Co.~ca:~ty, --~- --ar~.,,cacco America^__ycbzcco Co,;cany, Dic it>7; v..__ _ates Tobacco Cc pany; US?'Ine.; _.._ tounc_'_ for `:obacco..._.=search---- U.S.A., Inc.; a. d Hi;.l. 'L .s:o'.v__.....
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Brooks is but one of many decisions by- this emphasizing that the right to reimbursement of public assistance payments did not exist at common law and is exclusively a statutor} creation.?l More generally, this Court has long recognized that zi See State e_x- rel. Dep't of Human Servs. v. Pierce, 460 N.W.2d 467, 468 (Iowa 1990) ("When [public as-sistance] benefits :a`re b_r. properly paid there is no common law right provided tc recoup them."); In re Guardianship of Hunter,--442 N.W.2d 94, ,_ (Iowa 1989) ("At common law, a recipient of public assistance was not obligated to reimburse the State for the- assistance provided."); Scott v. State ex rel. Dep't of-Human Servs., =35 N.W.2d 834, 835 (Iowa 1989) ("[T]here was no common-law obligation for a public assi*stance recipient to -reimbu.se 'k:e public =..r be.^.e_°_ts. _o•.aa Code Sect_.,_. "<-7:-..6(1) -s ,.^e _ea-_s_at,.__ s ~...___ resnonse to the.cc^iaon-lawrule.:.')ici~a=ion omlttedi;-In re Estate of Frentress,"249 Iowa 783, 787, 89 S.W.2d 367, 369 (1958) i'Bc~: the obl'_gation -so provide. 3ss:stance; s', t_ reimburse trerefor are stat•atory, ....~ common, law. "~ ; State v. Colligari, _29 __~wa- 536, _:,- N.W. 945 ("i*9-:,., ,' iWje find no autfiori-tv for holding that ti:e atate .:.:as any common law riaht of reccver-y aga'_nst those w-:o receive tne benef-it_s of [treatment at hospitals~-_`or the insanel. ., Jones _tv, v. Nerton, 91 iowa 680, 682, ..., .•.r;-. 2G6, 201 ._39Yi . . ihere is =-w............._aw __'abi'___y on `hp' part of the aefe:,dant [to _eoay Lhe .......ntv for t`e coses and exc=_::.ses:.of ^ousingdeced=nt1 a:u __ is-a iam_liar rule that
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special duty. Moreover, the State's reliance on a1'Ieged p^}•s-'ca: haruLto Medicaid recipients and state employees highlights the fact that-the State's claims are derivative and _~Ioo remote to oerm'_t recovery. Iowa law mandates that the plaintiff must suffer the physical harm. In both cases cited by the State in support of Iowa's recognition of voluntary duty claims, the plaintiff suffered actual physical harm. See DeBurkarte v. Louvar, 393 N.W.2d I3--, 137 (Iowa 1986) (perm_itting action against doctor for "lost cilanee of survival" damages resulting from misdiagnosis of pZaintiff's breast cancer); Thompson v. Bohlken, 312 N.W.2d 501, 508 (Iowa 19811 _(oermitting action against :_^.screr for--plaintiff's 'ioss c' his fingers resulting from insurer's negligent inspection o°_ machi: ery) ; see also Cunningham v. riartridg Pak Co., 332 N.W.2d -881,-_EES_ -(lowa 19837 (''Irolicit`.in fcr-;'.:cts liahility.-aw :s notior: _.`.at the d=-_°ect'_,:e r,rc:uct caused phvsical harm :.o t.. p?'ai_n_i_`f or his nroper:..'.", -:asi= _-I o-3ginal?. 3s-•.au=_s al:,4aed=~Y arose ,,.._ 2= a physical i7iu-y_.to so:e other pe-scn si:fficient. Minnesota v. Ph:lip Plarris Ir.co p_at_d, 55_ _.+..2u 490, 495 ,1:in... 19)6: , _..- Minneso`_a Suz~;Y=t-.=- Cou== d:s^.:issed a speci al du~y claim. nearly lde n~:ical to `'J'.i::t i;_. _.. Nl.^."lesOta7 Cross, __Ke _..- State here, alleged =.^.a` tobacco _..d,.atry .._`:-^uants owed a sp==_a_ duty ..... ?l'_,e ..':'oss -a::'d __~_-ss i;a~ _-_':7 =..._ -_...- Iw:'n a leged injuries as a "direcl ourcnasnr .._ .=a_`.^ za:e, " a na _.. bP^a_f o= _nd_viduals. "!;n..es~-a S::o=eme io::-t cor_ec!::.,
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understood that the "gravamen of this case is whether or not ~:.._ injury suffered by Blua Cross is sufficiently traceable to *_ortious conduct on the oart of the tobacco companies.u_ Id. at 493. The court concluded that Blue Cross could not "overcome the need for a closer connection between the injury and the alleged tortfeasor," and that its alleged injury was too remote and derivative. Zd. a: 495. "Therefore we hold that Blue Cross does not have standing -.o pursue its tort claim, based on the assumption of a'special d. , against the defendant(s]." Id. This Court's economic loss doctrine -- which prohibits a plaintiff from recovering in tort for purely'!~conomic losses -- also suooorts the- District Court's dismissai _D_° Count ... Nebraska Innkeepers, Inc. v. Pittsburgh-Des Moines Corp., 345 N.W.2d 124 (Iowa :784), :.his Court discussed '[,-]he we-:- es_abla?:ed general -.:_e ...-nat _ c~a_ n~i`f w::c : as onlv economic loss due t.c an:;t: er's ne-_liae :ce has not been in a manner which is -eQa_l,V coGT.1iZable "_ c~0e nsab:e. " ~2F, ';'ne CoL_: "Cour*.s whic^ have adaressea ..=s --ssue have __r-U 1 2 WollidG open r.tA^^Cc3T tD -~b'1r~llaily llP.it~?SS s,3~t5, .._~='_.n of a S+'3Hc'1la~:_ve a.n.d ;^ot= nature. Such sui ts would ex.oose _ . ^~ ,..___...^..a=s .-7 a s°_'..'O_7.`g-peP.alty, .a-.a = ~ ~em.s in a:d woul3 rodsce se- .. _ ?ga::'_o.^., Lar~~cl::arit _.. `..._ are3a o- proof an3 aoportlon^~ezt of damages. . r ...,...__::Q G e iera .._O9 i] S.:cp.11', 113 (D. sd. 1978)/; see aisc Nelscn_c'. Tcdd's N.'r.'.2d .20,_121-22 'Iowa I988i (app'_y_^J economic loss-doc4rl:e
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11./UJ/8(ElUtV id:94 kAA dlD Z4u 4404 laKtYC & p1USCY 0 common law rights. Similarly, there is no' reason for excJusion of common law claims under Section 249A.6. Section 249A.6(6) provides for a direct action against liak)le third parties. This Court has also held that Iowa's direct action statute is not an exclusive remedy for recovery aga".nst insurers. S gpnc v m i an anda a nG Co, 181 Y.W.2d 174, 177 (Iowa 197®); R d-ian o;i o v Law1o , 528 Id.W_2d 524, 533-34 (Iowa 1995). The Fron i r Ptopi i s, pir•,a t;; gteffens, and R d 'an cases are examples of Iowa statutes which authorize recoveries against third parties but are not comprehensive, exclusive remedies that bar recovery und~ar the common 1aw. These cases demonstrate that Section 249A.6 is not an exclusive remedy. f. TEE CALIFORNIA DECISION. The California medical cost subrogation statute did not exclude or bar common law claims in ~'ty and county of s-4n )ratlcisqp y. hi 1 ip Morri s. Inc., 957 F. Supp. 1130, 1141 (Di."). Cal. 1997). The federal district court held that it was not clear that the subrogation statute operated to supplant common law claims and the court rejected the defendants' argcunent that the statute precluded the governmental entities f.rcm pursuing common law claims. g. SUMASARYe THE DISTRICT COIIRTgS RULING TFAT SECTION 249A.5'PRO®IDED AN EXCLUSIVE REMEDY A'ND HAIt.RFD COMMON LAW CLAIMS Is ERROR. The District Court erred by ruling that 8ection 249A.6 remained a "traditional assignment/lien/subrogation" statute after the 1993 amendment, did not permit a direct action, 42 I a
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w more than mare causation: There is also the issue of statutory intent. To satisfy the requireaeat, •tht plaintiffla) naut ahow both that Ithey are) within the class the statute sought to protect and that the ham done wae one that the statute vaa ncant to prevent.' Abrahams V. Youne & AnM .aa inr, 79 F.3d 234, 237 12d Cir. 1996). Counts I and 11 describe the sort of 'pernicious commercial practiceu' that RICd wae intended to prevent. 89L Rhrich v R A T_Indus P.L C, 964 F. Supp. 16/, 166-67 (D.N.J, 1997) Iquoting Nsxypgy~aron. uealtv e, 596 y. Supp, 988, 991 ID.N.J. 198/) IRIm designed to eliminate commercial 'practicee, not personal injuriea)), In Coaat I, plaintiffs allege that the defendant cobacco companies violated 9 1963(c) by conducting certain enterprises through a pattern of racketeering activity, including•mail and wire fraud, perjury, and ohstruction of juatice., Coopl. 11212-25. iW or oore of these acts constitute 'rackeceering' if they eccur often enough to campriae a pattern of activity.' The entr.,t3* identified are the Tubatto Institute, the Council for Tobacco Research, and 'Defendante do not dispute'ths adequary of plaintiffs' allegations regarding the 'pattern' element. 33 9806Z298 a'public relations enterprisa' that aenunted to an aseooiatieo. in-fact in vhlch all defendants participated. Plafntiffe' RICO Statement at 31-39, ]db9.g•.r_.•tnx~,i7_n th & 9an.Elt Fund v pAtiio 6brris. tne., lto. 97 Civ. 4550 (S,D.p.Y. filad June 19, 1951) Idated Sept. 1S, 19971 Ihereinaftex RICO $tatement), count Ir alleges chat defendants used income derived froa that pattern of racketeering activity to acquire and operate the Tobacco Institute and the Ceuncil for Tobacco' 9eeearch, in violation of 9 19621a). Cocpl. 11226-33. The complaint also allegee a RICO conspiracy.' H6A 10 U.S.C. 5 19621d1. , The question, then, is whether plaintiffs fall within RICD's protected 'tone•of-interests.' SGS Hg100(, 503 U.S. at 187 19calia, S., concurringl, Only the direct targets of a racketeering scheu have standing ,e intended beneficiaries of the RICO laws. Abrabs , 79 F.3d at 236 Iplaintift'a injuries 'did not flov fras the Aaxme thac the predicate acte ...,nn intended to cav6e and the laes against thea were lntended to prevent')t In ro Amer; an em rn oh.rahnl r Ht6Ff)apn, 39 'S.,g t„ti,ised ata s v o linas, 110 U.S. (69, 477•18 11g97) IRICD conepiraey exists if alleged conspirator knew of conspirary'a gwls and agreed to facilitate them). 23 p,3d 395, 400 12d Cir, -994) (shareholders harmed by public expoaure of 1103 violations aiud at eonpetitor not intended targets of violatimis)t IILSht, 897 y.2d at 24 lealessun had no RICD claim whna enploy.r's fraud drove potential customers away)t CL fitipdardhr d nunere eoc v a ae_Me,lina~ d9999., 99g F.3d 102, 104 12d Cir. 1993) (plaintiffa were direct targets of fraudulent scheaea). Plafntiffa maintain chat they, along with their participants and others, vere aeong the direct targeta of the fraud alleged. In support of that statement, they claim that defendants made 'deliberate efforts . . . to give plaintiffs ... the materially false impression that there are no negative health consequences to tobacco use, . . . that nicotine is not addictive and that the Tobacco Companies ura not manipulating the nicotine levels in their products.' Compl. 1 211; RICO Btatenent at 35-36. An alleged object of defendants' conduct 'wae the avoidance and shifting of tobacca-related health eara cnats onto othera, including Plaintiffs.• Coepl. 1 224, LSGg>sl RICD Statement at 33, 46. BeCause theee allegationa - demonstrate that plaintiffs do hava standing, their RICO claine are eufficient to withstand a motion to dfamise. ' Defendants argue that, causation iseuce eeide, aa
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FEDERAL STATUTES 42 C.F.R. § 433.145-433.148 . . . . . . . ... . . . . . 12, 30 42 U.S.C. § 1396 (1996) . . . . . . . . . . . . . . . . . . 11 STATE STATUTES Iowa Code 5 249A.6 (1996) . . . . . . . . . . . . . . . passim
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THE COUNCIL FOR TOBACCO RESr.A=.~---- - U.S.A., INC. By~ m I GhU4K (,CJfl-o t~'i2 Michael Weston LS00 renda K. Werner LI04 - Commerce Exchange Building 2720 First Avenue N.E. Cedar Rapids, Iowa 52406 4950 MOYER & BERGMAN, P.L.C. (319) 366-7331 (319) 366-3668 (fax) Of Counsel Bruce G. Merritt Eric Falkenstein DEBEVOISE & PLIMPTON 875 Third Avenue New York, New York 002" (212) 909-600G !212; 9CS-6836 ('ax D STATES TOBACCO CO'!PANY and ~ es C'us_ Moines, owa e~^J, --ar 50309 Esc ..=_a: (515) 288-5440 =ax_ f,515) 298-6448
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0 I. STATEMENT OF THE ISSUES A. Whether The District Court Correctly Held That The Statutorily-Prescribed Lien Remedy Of The State's Medicaid Act Is The State's Exclusive Remedy to Recoup Medicaid Expenses When There Was No Common Law Right To Recoup Medicaid Or Other Public Assistance Payments. Agency for Health Care Admin. v. Associated Indus. 678 So. 2d 1239 (Fla., cert, denied, _U.S. _ 117 S. Ct. 1245, 137 L. Ed. 2d 327 (1996) AlfredL. Snapp & Son, Inc. v. Puerto Rico, 458 U.S. 592, 102 S. Ct. 3260, 73 L. Ed. 2d. 995 .(1982) 1989~ Sc_:ai Servs., _'-3 N.w.23.389 ?owa _;94'. Ever v. i:rua, _~33 N.W.2d -22_. '-owa: 1995 - Eddy v. Case~.'s Gen- Store, Inc., 485 N.W.2d 633 (Iowa 992) Federa2 Land Bank of `:'.a':a v. .,..ese,`373 'v.W.2d !;.8 {Io'+ia 1985) Allied Mut. Ins. Co. v. State, 473 N.W.2d 24 (Iowa 19911 Baker v. Sterling, 348 N.E.2d 584 (N.Y..1.976) Bales v. Warren Co. 478 N.W-=2d 398 (Iowa '_991) Bremer County v. Curtis, 54 Iowa 72, 6 N.W...135 i188C . City andCounty of San Pranciscb' v. Philip Morris - Incorporaced, 957 F. Supp. 1130 (N.S7. Cai. 1997) - Cole v. Citvof A'uscatine, 14 Iowa~295 t1952i Eaniels v. H;:-;;'ay Truck Inc., 5_....2d Y= (Iowa 1993) cf P;:b. ~ialfa_e ,. :ree' S4t ti.E.2a _3 1..~. .;;eorxffa v. Pe: nsylvan:.a .'?.F,. 324 U.S. :39, 55 S. 715, 83 ~. Ed. 105'_ 5 51 L. Ed. 1Q38 !1907 2d 784 .1y8~ , Geo~gia T~w:essee ~occe~_;... , 21'i=5 U.S. 230, 27 S. r
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Hill v. State Dep't of_Human Servs.. 493 N W.2d 803 "cwa 1992 In re Estate of Frentress, 249 Iowa.783, 89 N.W.2d 367 (1958) In re Guardianship of Hunter, 442 N.W.2d 94 (Iowa 1989) Indiana Dep't of Public Welfare v. Larson, 486 N.E.2d 546 (Ind. Ct. App. 19B5) Inhabitants of Deer Isle v. Eaton, 12 Mass. 327 ('_8151 Jefferson County Farm Bureau v. Sherman, 208 Iowa 614, 226 N.W. 182 (1929) Jones County v. Norton, 91 Iowa 68D~ 60 N.W. 200 (1894) Kansas v. Colorado, 206 U.S. 46, 27 S-. Ct. 655, 5'_L. Ed. 956 (19D7) Kremer v. Noble, 304 N.W.2d 2'5 (Iowa 1981' Lease v. Vance, 28 Iowa 509 (1870) Lowes v. Locwes,..550 N.E.2d _.171 (Ind. Ct. Anp. _995Marshall v.- £cwa Dep't o-~ Human Servs.,5S9 N.W.2d 5_2 =owa 1997 i•;arvland c•. FhiZip +;~-r-x~is Incorcorated, _._. 961220i7r'~-=.1997 [v`=. 5-0y:.3 .?1d..C=_-. .._. 2:, 1987) :'latt._..-^f .^_f ~..`. ~ Ed. 497 ~.19Q"1: s .- 2^--: 878 i1o,Na 208, 21-'S. CC National R.,R. Passenger.Corc:-v. :7ational Ass'n of R.R. Passenxers, 414 U.S. 453, 94 S. C_. 6•9D, 38 L. Ed, 2d 646 ;1974! New York v. New Jersey, 256 ?.F.S. 296, 41 S. C... 492, L. nd- 937 (1921) .:e« York State Dep'- of S__:r;.- v. Bowen, 129 (2d Cir. 1988) North Dakota v. Minnesota, 263 U.s -:365, 44 S. Ct. _38, 68 L. Ed. 342 ?1923)
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0 0 BRITTS?i AMERICAN TOBAC=- COMPADIY, LTD. Chester C. Woodburn III PK040608= David L.-Brown P 0000599 HANSEN, McCLINTOCK & RILEY Eighth Floor - Fleming Building 218 Sixth Avenue Des Moines, Iowa 50309 (515) 244-2141 (515) 244-2931 (fax) By j 4 n Q M C U"-~ ohn A. McClintock PK Of Counsel John Nyhan Jay nenr.eberry Suzanne Cate Jones C'riADBOUR;QE•& PARKE L:.P 6---' South-Fiaue_ca v_.reez: 'os Angeles, Caii_`crn`_a (2!3) 892=100J :21Bi 622--y865 ;~ax: '- - -=ti_..:. _=_s X.oines, _Owa 5-?. -_ _~ M. iti°___u= _ . ~...^.e Look ==,~~5 & C=L3B: T _ . .rr=.aj'Na f ..- YcrY.. New Y .-=2. 453-4953 '_3x co O\ C.V fV \10 W W 00
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,? DECA 11, 1997 1:51PM 0 4p NO, 7005 P. 2/35 ;. '93T IN THS SUPREME COURT OF IOWA SUPREME COURT NO. 97-1683 POLK COUNTY NO. CL71048 STATE OF IOWA, ex r.l., THOMAS J. MILLER, iL bi8 capacity as ATTORNEY GENERAL OF THE STATB OF IOWA, Ya. PlaintilL-Appellant, R.J. RBYNOLDS TOBACCO COMPANY, TH8 AMERICAN TOBACCO COMPANY, BROWN i WILLIAMSON TOBACCO CORPORATION, PHILIP MORRIQ, INCORPORATED (PHILIP MORRIS U.S.A.), PHILIP MORRIS COMPANIES, INC., LIGGETT F MYERS, INC., LIGGETT GROOP, INC., TIP BROOKE GROUP, LIMITED, LORILLARD TOBACCO COMPAt7Y, LORILL7LLtD INCORPORATED, LOENS CORPORATION, UNITED STATES TOBACCO COMPANY, UST, INC., T88 COUNCIL FOR TOBACCO RESEARCH, and HILL i KNOWLTON, INC., Defendhnta-Appallees, BJR NABISCO, INC., AMERICAN BRANDS, INC., B.A.T.INDUSTRIIIS, PLC, BATUS HOLDINGS, INC., BRITISH AMERICAN TOBACCO COMPANY, LTD., BRITISH-AMERICAN (HOLDINGS) LTD.,THR TOBACCO INSTITUTE, INC., Defendants. INTERLOCUTORY APPEAL FROM THH DISTRICT COURT OF POLK COIINTY THE HONORABLE LINDA R. READ6, JUDGE APPSLLANT STATE OF IOIPAIS REPLY BRIBF THOMAS .7. MILLER ATTORNSY GENERAL OF IOWA 2ND PLOOR, HOOVER BUILDING DES MOINES IA 50319 ATTORNEYS FOR PLAINTIFF-APPELLANT " STATE OF IOWA LORI 50118 IOWA-A. RTG. SLIP RECEIV~D BY: ~ Ll(~-1 EXPED~TED COPIES~ xp " % ~~.f4i-,i ~`.,. FOLL COPIES TO; GEV JGbt WLA [~7yC WGZ GM6L C-RZ JILG p~ 1et pg. WJC REN RTg
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0 RECEIVED DEC3o1987 TERR! P. DURHAM 0
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