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I T R .F. OF CONTENTS 2 Page No. 3 I. INTRODUCTION ......................................................... 1 4 II. ARGUMENT ............................................................. 2 5 A. PLAINTIFFS HAVE FAILED TO ALLEGE AND CANNOT ESTABLISH 6 ALL THE ESSENTIAL ELEMENTS OF A WRONGFUL DEATH CLAIM UNDER CALIFORNIA LAW ......................................... 2 7 B. THE AMENDMENT TO SECTION 1714.45 DOES NOT, AND 8 CANNOT, RETROACTIVELY CHANGE THE CHARACTER OF DEFENDANTS' CONDUCT AGAINST MR. GUZMAN, 9 WHICH WAS NONTORTIOUS WHEN IT OCCURRED ................... 4 10 1. The Amendment to Section 1714.45 Does Not Contain an Unequivocal Expression of Retroactive Intent ..................... 4 11 2. Even if the Legislature Had Intended the Amendment to 12 Section 1714.45 to Apply Retroactively, Due Process Would Forbid it .... 5 13 C. DEFENDANTS ARE ENTITLED TO JUDGMENT AS TO PLAINTIFFS' PUNITIVE DAMAGES CLAIM BECAUSE ANY ATTEMPT TO 14 ALLEGE A SURVIVAL ACTION WOULD BE FUTILE ................... 7 15 III. CONCLUSION ....... :................................................... 8 16 17 18 19 20 21 22 23 %10 24 Ot ~ 25 v c~a 26 ND ~10 27 28 0009147.01 REPLY MEMORANDUM -1- CASE NO. C-99-0t797 MMC

1714.45. As a result, any attempt by Plaintiffs to amend their wrongful death complaint would be futile. Accordingly, this Court should deny leave to amend and grant Defendants' motion for judgment on the pleadings as to Plaintiffs' punitive damages claim. III, CONCLUSION The wrongful death complaint in this case fails to allege, and Plaintiffs cannot establish, any tortious conduct against their decedent, which is an essential element of a wrongful death cIaim. Plaintiffs' attempt to have the amended version of Section 1714.45 applied retroactively to create tortious conduct and liability where none existed previously has been rejected by every court addressing the issue, and should also be rejected by this Court. For all the reasons discussed above, Defendants' motion for judgment on the pleadings should be granted, and judgment should be entered on behalf of 12 13 14 15 16 17 18 19 28 the Defendants. Dated: June 11, 1999 0009147.01 Respectfully submitted, SHOOK, HARDY & BACON L.L.P. By: J, . -~~ MORDECAI D. BOONE Attorneys for Defendants PHILIP MORRIS INCORPORATED and LORILLARD TOBACCO COMPANY; and on behalf of BROWN & WILLIAMSON TOBACCO CORPORATION, individually and as successor by mergea'to THE AMERICAN TOBACCO COMPANY; and R.J. REYNOLDS TOBACCO COMPANY REPLY MEMORANDUM -$- CASE NO. C-99-01797 MMC

Richard Shively, SBN 104895 Lucy E. Mason, SBN 196810 Mordecai D. Boone, SBN 196811 SHOOK, HARDY & BACON L.L.P. One Market Steuart Tower, Ninth Floor ®RIGUN, r '~ JUN i "1 1999 San Francisco, CA 94105 5 Telephone: (415) 904-6300 ttNG Facsimile: (415) 904-6303 _ . :; COURT. YOkm~~'•~rJI~~HIGi-OY CALIPOftNI~~ 6 Attorneys for Defendants PHILIP MORRIS INCORPORATED and 7 LORILLARD TOBACCO COMPANY; and on behalf of BROWN & WILLIAMSON TOBACCO CORPORATION, 8 individually and as successor by merger to THE AMERICAN TOBACCO COMPANY; and 9 R.J. REYNOLDS TOBACCO COMPANY 10 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA 18 19 20 21 22 23 24 25 26 27 28 SARA GUZMAN, individually and as Guardian ad litem for MARIO GUZMAN and KEVIN GUZMAN, minors, ERIC GUZMAN AND ROBERT GUZMAN, Plaintiffs, Case No. C-99-01797 MMC REPLY MEMORANDUM IN SUPPORT OF CERTAIN DEFENDANTS' MOTION FOR JUDGMENT ON THE PLEADINGS (Fed. R Civ. P. 12(c)) Date: June 25, 1999 Time: 9:00 a.m. PHILLIP MORRIS TOBACCO COMPANY, Dept.: Courtroom 2, 17th Floor et al., Judge: The Honorable Maxine M. Chesney Defendants. Filed .on rrren ly Herwith: • Supplemental Request for Judicial Notice; • Proof of Service ~ O\ V V w oc N W REPLY MEMORANDUM 0009147,01 CASE NO. C-99-01797 MMC

B. THE AMENDMENT TO SECTION 1714.45 DOES NOT, AND CANNOT, RETROACTIVELY CHANGE THE CHARACTER OF DEFENDANTS' CONDUCT AGAINST MR GUZMAN, WHICH WAS NONTORTIOUS WHEN IT OCCURRED Richards and American Tobacco hold not only that Section 1714.45 immunized all of Defendants' alleged conduct, but also that the statute rendered that conduct nontortious as a matter of law. Plaintiffs do not contest this, but argue -- in effect -- that this Court should apply the amendment to Section 1714.45 retroactively (i.e., in such a way as to change the legal effect of prior conduct) to enable them to satisfy an essential element of their wrongful death claim. However, the amendment 10 11 12 13 14 15 27 28 to Section 1714.45 cannot be applied retroactively in any context because (1) the amendment does not contain an unequivocal expression of retroactive intent, as required under California law; and (2) even if the Legislature had intended the amendment to Section 1714.45 to apply retroactively, due process would prohibit such a result. Western Sec. Bank v. Superior Court, 15 Cal.4th 232, 243, 62 Ca1.Rptr.2d 343, 250 (1997) (retroactive application of a statute must be consistent with considerations of due process). 1. The Amendment to Section 1714.45 Does Not Contain an Unequivocal Expression of Retroactive Intent Under California law, statutory enactments, including amendments to statutes, will only operate prospectively unless there is an express and unequivocal statement by the Legislature to the contrary. See, e.g., Evangelatos v. Superior Court, 44 Cal.3d 1188, 1206-12, 246 Cai.Rgtr. 629, 640-44 (1988) ("California authorities have long embraced" the principle that legislative enactments are presumed to apply prospectively absent an express and unequivocal statement to the contrary by the Legislature); see alsoLandgrafv. USIFilm Products, 511 U.S. 244, 265, 114 S.Ct. 1483, 1497 (1994) ("[T]he presumption against retroactive legislation is deeply rooted in our jurisprudence, and embodies a legal doctrine centuries older than our Republic"). Every court to have specifically addressed the issue of whether the amendment to Section 1714.45 contains the necessary unequivocal expression of retroactive intent has held that it does not, so that the amendment may not be applied retroactively to change the character of nontortious conduct occurring prior to January 1, 1998. See, e.g., Van Fossen, slip op. at 4 (RFJN Exh. G) 0009147A1 96773833 REpLY mEmoxnrDUm -4- CASE NO. C-99-D1797 MMC

1(`Because the 1997 amendments to Section 1714.45 contain no unequivocal expression of retroactive 2 intent, the amendments are not retroactive, and Defendants are immune from liability for Plaintiffs 3 tobacco-related personal injuries caused by conduct occurring during the effective period of the 1987 4 statutory enactment"); ShipunofJ; slip op. at 4 (RFJN Exh. H) (same); Myers, slip op. at 8-9 (SRFJN 5 Exh. A) (allowing claims to proceed based upon conduct occurring prior to January 1, 1998 would be 6 an impermissible "retroactive application" of the amendment to Section 1714.45, and "would be 7 contrary to law"); Baker, slip op. at 8 (RFJN Exh. E) ("Absent a clear statement of [retroactive] intent 8 by California's Legislature" the amendment to Section 1714.45 can only apply prospectively); Persley 9 v. Brown & Williamson Tobacco Corp., No. CV 97-2696 JMI (RCX), slip op. at 3 (C.D. Cal. Feb. 11, 10 1998) (SRFJN Exh. B) (the amendment to Section 1714.45 "contains no express declaration of 11 retroactivity, and therefore can only be applied prospectively"); Fibreboard Corp. v. R.J. Reynolds 12 Tobacco Co., No. 791919-8 (Alameda County Super. Ct. Jan. 13, 1999) (order sustaining defendants' 13 demurrers) (SRFJN Exh. C) (holding that the amendment to Section 1714.45 "cannot be retroactively 14 applied"); and Pavolini (RFJN Exh. F) (implicitly rejecting retroactivity claim). 15 Accordingly, because the amendment to Section 1714.45 contains no unequivocal 16 expression of retroactive intent, Plaintiffs' argument that this Court should apply the amendment 17 retroactively to create tortious conduct where none existed before must be rejected. However, even 18 assuming arguendo that the Legislature did intend the amendment to apply retroactively, due process 19 would prohibit such an application. 20 2. Even if the Legislature Had Intended the Amendment to Section 1714.45 to Apply Retroactively, Due Process Would Forbid it 21 22 Because of the fundamental unfairness of retroactive laws, the Legislature's authority 23 to enact such laws is constrained by the due process clauses of the federal and state constitutions. See 24 California Employment Stabilization Comm'n v. Payne, 31 Cal.2d 210, 215, 187 P.2d 702, 704 (1947). 25 Laws that "create new obligations, or impose new duties, or exact new penalties because of past 26 transactions are generally considered to be repugnant to fundamental legal principles espoused by both 27 the civil and comrnon law." People v. Fontaine, 237 Cal.App.2d 320, 331, 46 Cal.Rptr. 855, 863 28 (1965), vacated on other grounds, 390 U.S. 593 (1968). 0009147.01 96773034 I REPLY MEMORANDUM i -5- CASENO. C-99-0179"i MMC

19 C. DEFENDANTS ARE ENTITLED TO JUDGMENT AS TO PLAINTIFFS' PUNITIVE DAMAGES CLAIM BECAUSE ANY ATTEMPT TO ALLEGE A SURVIVAL ACTION WOULD BE FUTILE Plaintiffs agree that punitive damages are recoverable only in a survival action and not in a wrongful death action under California law. Plfs. Opp. at 6-7. Plaintiffs assert that they have adequately pled survival claims in their "Complaint for Damages for Wrongful Death" or, alternatively, they seek leave to amend their complaint to assert a survival action. Id. However, Plaintiffs have not adequately pled a survival action, and any attempt to do so in this case would be futile and therefore should not be permitted by the Court. See Cahill v. Liberty Mutual Insurance, 80 F.3d 336, 339 (9th , Cir. 1996) (trial court does not abuse its discretion in refusing to grant leave to amend when amendment would be futile). Plaintiffs are correct that only through the assertion of a survival action on behalf of Mr. Guzman could punitive damages theoretically be recovered against these Defendants. See California Code of Civil Procedure sections 377.30-377.35. However, Mr. Guzman is not a party to this case in any capacity (see Plfs. Opp. at 3 -- "Mr. Guzman is not the plaintiff), so no punitive damages are recoverable. Furthermore, Plaintiffs' statement that the allegations in their wrongful death complaint provide Defendants with "ample notice" of the survival claims which could be asserted on Mr. Guzman's behalf amply demonstrates that their wrongful death claim is merely derivative of Mr. Guzman's personal injury claims. (Le., the same allegations of Defendants' nontortious pre-1998 conduct form the basis of both Mr. Guztnan's purported survival claims and Plaintiffs' svrongfal death claim.) Therefore, not only have Plaintiffs failed thus far to allege any survival claims on behalf of Mr. Guzman in this case, but they also have definitively established that there is no reason for them to be granted leave to amend in an attempt to do so. It is undisputed that Mr. Guzman suffered no tort and could not have recovered against these Defendants because of the immunity provided by the original Section 1714.45, which was in effect at the time of his personal injury. See Def. Mem. at 9, citing Baker, Pavolini, Van Fossen, and Shipunoff; see also Myers, slip op. at 8(holding that Section 1714.45 bars all causes of action based upon conduct occurring before January 1, 1998, regardless of the date Plaintiff was injured). Thus, any survival claims seeking punitive damages on behalf of Mr. Guzman would be barred by Section 767/ `~ 8'~ 6 CASE NPLY O. C 99-O1 MEMORANDUM MMC aoosi4,.m -7-

1 2 3 4 5 6 7 8 9 10 11 22 23 24 25 26 27 28 death claim, regardless of when it accrues, is derivative of the decedent's personal injury claims. Thus, because Mr. Guzman suffered no tort when he was injured and could not have recovered against these Defendants, his heirs are also foreclosed from prevailing on the merits of their wrongful death claim, which is based on the same alleged conduct by Defendants. Indeed, applying the amended version of Section 1714.45 -- which requires wrongful death claims to be determined "on their merits" -- to the claim in this case would lead to the same result. Defendants' conduct which allegedly injured Mr. Guzman was nontortious (under Richards and American Tobacco). Thus, Plaintiffs simply cannot establish an essential element of their wrongful death claim, and that claim necessarily fails "on the[ ] merits." Accordingly, Plaintiffs are relegated to arguing that the amended version of Section 1714.45 should be applied in such a way as to recharacterize the legal effect of Defendants' previously nontortious conduct. However, that would amount to a retroactive application of the amended statute and, as set forth below, the amended version of Section 1714.45 cannot be applied retroactively to change the nature of past conduct occurring prior to January 1, 1998. Indeed, every court specifically addressing this issue has held that the amendment to Section 1714.45 is prospective only, and cannot be applied retroactively in any context.t 1. Plaintiffs argue that federal court and state court decisions holding that the original version of Section 1714.45 applies to personal injury cases filed after the effective date of the amendment have "no value as precedents" in this wrongful death case. Plfs. Opp. at 6. However, Baker, Pavolini, Van Fossen, and Shipunoff (RFJN Exhs. E-H) (citations omitted) all hold that the same legal theories that are alleged in this case are subject to Section 1714.45, and that such claims are therefore barred where -- as here -- they are based on pre-1998 conduct by the Defendants. Further, those cases implicitly recognize that no personal injury claim can be based on that nontortious pre-1998 conduct. Thus, under California law, Mr. Guzman's death from injuries which are claimed to have resulted from Defendants' nontortious conduct cannot form the basis of a viable wrongful death claim. See Def. Mem. at § III.A.4. Finally, as discussed in § 1T.B., infra, those cases unanimously hold that the amendment to Section 1714.45 cannot be applied retroactively to change the legal significance of conduct which occurred prior to January 1, 1998. 967738732 REPLY MEMORANDUM 0009147.01 -3- CASE NO. C-99-D1797 MMC

® - ` 4 5 17 18 19 20 21 22 23 24 25 26 27 28 I. INTRODUCTION Defendants moved this Court for judgment on the pleadings because Plaintiffs have failed to allege any tortious conduct against their decedent, Mr. Guzman, which is an essential element of a wrongful death claim under California law. In their opposition, Plaintiffs do not contest that all of Defendants' alleged conduct against Mr. Guzman was nontortious when it occurred pursuant to California Civil Code section 1714.45 ("Section 1714.45"). Rather, Plaintiffs make but one argument in opposing this motion: because Mr. Guzman allegedly died, and their claim accrued, twenty-four hours after the amended version of Section 1714.45 became effective on January 1, 1998, the elements of their wrongful death claim -- that is, the question of whether Defendant's previous conduct was tortious -- should be determined under the new law. However, such an argument fails. California law does, not permit the merits of a wrongful death claim to be detennined solely on the basis of a new law which first becomes effective one day before the decedent's death where the conduct that allegedly caused the decedent's injury and death all occurred before the effective date of the new law. Further, Plaintiffs' argument that the amended version of Section 1714.45 should govern the determination of the nature (i.e., tortious or nontortious) of Defendants' past conduct against Mr. Guzman would require this Court to apply that amendment retroactively. As discussed in this reply brief, every court specifically addressing the issue has held that the 1998 amendment to Section 1714.45 cannot apply retroactively to change the legal effect of conduct that occurred prior to January 1, 1998. Indeed, less than three weeks ago, the U.S. District Court for the Eastern District of California refused to apply the amended version of Section 1714.45 retroactively and dismissed all claims -- including fraud claims -- based upon Defendants' alleged conduct occurring prior to January 1, 1998. See Myers v. Philip Morris Incorporated, et al., No. CIV-F-99-5449-REC-LJO, slip op. (E.D. Cal. May 25,1999) (Supplemental Request for Judicial Notice ["SRFJN"] Exh. A). Finally, Plaintiffs should not be permitted to amend their wrongful death complaint to assert a survival action on behalf of Mr. Guzman, as it would serve no purpose. Mr. Guzman suffered no tort, and therefore has no claims against these Defendants, due to the applicability of Section 1714.45. Accordingly, amendment would be futile. For all these reasons, judgment on the pleadings in favor of Defendants should be entered with respect to Plaintiffs' wrongful death complaint. 0009147.01 96, 73830 REPLY MEMORANDITM -1- CASENO.C-99-0i797MMC

i - • IL ARGUMENT A. PLAINTIFFS HAVE FAILED TO ALLEGE AND CANNOT ESTABLISH ALL THE ESSENTIAL ELEMENTS OF A WRONGFUL DEATH CLAIM UNDER CALIFORNIA LAW 10 11 12 13 14 15 23 24 25 26 27 28 A wrongful death claim under California law requires the essential element of tortious conduct against the decedent. Plaintiffs do not contest that the Defendants' alleged conduct against Mr. Guzman, their decedent, was nontortious as a matter of law under Richards v. Owens-Illinois, Inc., 14 Cal.4th 985, 60 Cal.Rptr.2d 103 (1997) and American Tobacco Company v. Superior Court (Stanton), 208 Ca1.App.3d 480, 255 Cal.Rptr. 280 (1989), and that -- as a result -- he could not have recovered against these Defendants in a personal injury action. Thus, although implicitly agreeing that a meritorious wrongful death claim must include allegations of tortious conduct against Mr. Guzman, Plaintiffs have alleged nothing but conduct that was nontortious when it occurred. In an attempt to salvage their claim, Plaintiffs argue that -- because Mr. Guzman died, and their claim accrued, one day after the effective date of the amendment to Section 1714.45 -- the question of whether they can establish the elements of their wrongful death claim must be resolved entirely on the basis of the new law set forth in that amendment. Plfs. Opp. at 2-6. However, this accrual argument is simply a red herring. Richards and American Tobacco, which represent the law in effect when Mr. Guzman was injured (i.e., before the effective date of the amendment to Section 1714.45), hold that Defendants' conduct which allegedly caused that injury was nontortious as a matter of law. California law does not permit the merits of a wrongful death claim to be detetuvned solely on the basis of a new law which first becomes effective one day before the decedent's death where the conduct that allegedly caused the decedent's injury and death all occurred before the effective date of the new law. See, e.g., Salin v. Pacific Gas & Electric Company, 136 Cal.App.3d 185, 192-93, 185 Cal.Rptr. 899, 903 (1982) (wrongful death plaintiff "stands `in ...[decedents'] shoes' with such rights, and only such rights, [as] they would have had, had they survived"); Brown v. Rahman, 231 Cal.App.3d 1458, 1461, 282 Cal.Rptr. 815, 817 (1991) ("life' of the wrongful death action is dependent upon the outcome of the original personal injury suit"); see also Defendants' Opening Brief ("De£ Mem.") at § lII.A.4 and other cases cited therein. 96773831 Plaintiffs chose not to respond to this caselaw because it demonstrates that a wrongful REPLY MEMOIZANDUM 0oo914zo1 -2- CASE NO. C-99-01797 MMC

I 2 3 4 9 10 11 12 13 14 15 26 27 In accordance with these principles, a change in the law that seeks to change the legal effect of past events and to impair existing rights cannot apply retroactively. For example, in Morris v. Pacific Electric Railway Co., 2 Cal.2d 764, 43 P.2d 276 (1935), the California Supreme Court held that the Legislature could not retroactively amend the law and reverse the legal effect of a litigant's previously tortious conduct because "[t]o apply the amendment now," after the conduct had already occurred, would be "arbitrary and unjust" because it would impair existing "substantive right[s]." Id., 2 Ca1.2d at 769, 43 P.2d at 277. Likewise, in In re Marriage of Garcia, 67 Cal.App.4th 693, 698-99, 79 Cal.Rptr.2d 242, 245 (1998), the Court of Appeal recently relied on Morris for the proposition that a statute that changes the "legal effect of past events" and impairs "existing substantive" or "vested right[s]" -- such as a pre-existing defense -- cannot be applied retroactively. In this case, Plaintiffs are seeking to salvage their wrongfW death claim by asking the Court to retroactively change the legal effect of Defendants' previously nontortious conduct against Mr. Guzman. Such a retroactive application of the amendment to Section 1714.45 would change the "legal effect of past events" and would deprive Defendants of a "substantive" or "vested right" -- the immunity provided by Section 1714.45 with respect to their conduct occurring before 1998. See Beck Dev. Co. v. Southern Pacifzc Transp. Co., 44 Cal.App.4th 1160,1207, 52 Cal.Rptr.2d 518, 550 (1996) ("[i]n general, legislation that makes certain conduct unlawful cannot be applied to conduct that was lawful and completed before its enactment"); and Saenz v. Whitewater Voyages, Inc., 266 Cal.App.3d 758, 763-64, 276 Ca1.Rptc 672, 676 (1990) ("wrongful death plaintiff is subject to any defenses which defendant could assert against the decedent"). No California case has ever applied a new statutory provision retroactively to render tortious -- after the fact -- nontortious conduct that occurred prior to the change in law, because such a result would "be arbitrary and unjust." Morris, 2 Cal.2d at 769, 43 P.2d at 277. Accordingly, even if the Legislature had intended that the amendment to Section 1714.45 should have retroactive application, fundamental principles of fairness embodied in the due process clauses would prevent the imposition of liability upon these Defendants for conduct that was nontortious when it occurred. 2811 //// 96773835 REPLY MEMDRANDL3M CASE NO. C-99-01797 MMC 0009147.01 -6-