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Page 3 1ST CASE of Level I printed in FULL fotmaz. FORqES ACTION PROJECT LLC et al.; Plaintiffs, v. STATE OF CALIFORNIA et al., Defendants. No. C 99-0607 MJJ UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA 2000 U.S. Dist. LEXIS 163 January 5, 2000, Decided January 5, 2000, Filed; January 10, 2000, Entered in Civil Docket DISPOSITION: [*I] Defendants' motions to dismiss GRANTED and motion for leave to amend DENIED. COUNSEL: For FORCES ACTION PROJECT LLC, FREEDOM OF CHOICE, SMOKERS OF THE WORLD UNITE, HAWAII SMOKERS RIGHTS, CONSUMERS LLC, WILLIAM H. STEINBARTH, ENOCH A. LUDLOW, JR., RAYMOND SASSO, DAN CRACRAFT. TEE ALLEN, ADA A. VENTURELLI, ANGELO VENTURELLI, JR., PATRICIA J. MOORE, DANIEL MOORE, JEANETTE HARRIS, STEPHEN GERLING, HARRY H. KNAPP, SEAN O'HEATHRBM, MARY L. HERRIN, KIMBERLY M. SANDERS, PHYLLIS LINDBLOOM, KAREN J. MILLER, DAVID STEINBERG, ALICE BULLER, YVONNE HESTER, JEAN A. LEVINSON, MARIANNE TAVELLI. STEVE GEORGE, MICHAEL W. RICHTER, JAMES C. GORDON, LOUISE BLAKE, BENITA CHESTNUT, GLORIA A. PACHECO, GERALD FRANCIS PACHECO, CHEYENNE ROTHMAN, KRISTEN D. RISBECK, CARL RISBECK, TAMMY L. GAYLER, LARRY MIKEL, CVITKOVICH, NANCY C. HUGHES, MARY JANE VAN WAGONER, GRANT E. DENHAM, NAYDEEN LAMOREAUX, DUSTIN L. BIXBY, SUSAN M. BURTON, CONNIE JEAN RIPPON, MICHAEL LEPORE, CRAIG N. RUSSELL, TIMOTHY A. GIBSON, MIC BOURELL, CHELNISHA MARIE EDGEMAN, MARK S. KUCHENBECKER, DANIEL M. BLOOD, JENNIE M. FEATHERSTONE, LYLE ANNE BLACKETT MICHAEL W, BLACKETf JIMMY L. GILESON, GREG C. GAFA, WILLIAM HOLT, DAVID ALAN ELIASON, PEGGY JOANNE BROADHEAD, CHARLES THOMAS FEATHERSTONE, DAVID J. GREEN, JOHN P. HUNTER, KEVIN W. ROBERTSON, MARK LEROY PETERSEN, EDWARD GENE HAGGARD, WILLIAM THEODORE, SERVIS RAY GREEN, HELEN W. MOSER, RICHARD KENT ERICKSON, EVELYN CAROLYN TIMPE, AL PACHECO, PAULA NAFUS, PAT NEELEY, WILLIAM GRENEK, PAULINE L. NAFUS, KELLY HEMENWAY, EARL fi ROCHE, ROBERT COBARRUBIAS, BERNADETTE COBARRUBIAS, EDDIE JOE MARTINEZ, FRANCES MARTINEZ, DOTILDE MEDINA, RONALD R. HANKS, CYNTHIA JEAN CLARK, STEVE DURAN, REGINA LEAH RODGERS, TOMMY JAMES PISTONE, ROBERT NEAL WILCOCK, DOUGLAS M. HUNTER, JAMES WATERS, CALVIN BOYD SMITH, JOSEPH MICHAEL SMITH, DAWN MARIE SCOTT, ANTHONY ALAN SCOTT, ROBERT WIISON, KENNETH T. TERRY, KENT SWENSON, SARAH COLLAZZI SANCHEZ, MARGARET SANCHEZ, ARTHUR P. SANCHEZ, FRANCES STRICKLAND, MELANIE D. HOYT, JODIE STEVENSON, BETTY N. HENDRICKSON, JERRAD L. SROUFE, GAYLE R. BURNHAM, CHERYL JOHNSON, WESLEY D. SAGER, BRENDA L. RUSSELL, JAMES JONATHAN PARKER, A. BRENT DEE, AYMAN GIRGIS, DENNIS SOMERVILLE, MICHAEL EVANS, KELLiE LEE ROBERTSON, JOANNE WASHER, ROBERT W. LASVICH, RANDALL D. HILL, CHASE DEE JOHANSEN, WADE E. TODD, GREGORY LEON HINCKS, STEVE CAMLOTT, TAMMY L. BUHLER, JEFFREY T. KERR, SHAUNA RAE ROWLEY, JAYNE STEPHENS, ANN B. LONGSHAW, DONALD CARLISLE, CLAY BURN HENDRICKSON, ROBERT HAY, LORRIE OCKEY, LARRY J. MURDOCK, VAUGHN PEART, RODNEY N. FORBUSH, JAMES RUSSELL CLENDENON, DEBORAH K. THOMPSON, DOUGLAS C. ROBERTS, DELROY E. MARK, G. ALLAN KEMPTON, RHONDA ADAMS, BRAD LEE HARRISON, SHEILA BRACKETT, CHER BAILEY,

0 2000 U.S. Dist. LEXIS 163, *1 JOHN T. MORGAN, ROBERT WAYNE BLEVINS, KATHLEEN MIYASATO, ROBERT THOMAS ADAMS, DIANE WATERS, ARTAMAE MILLIGAN, CURTIS ALLEN, STACIE ANN TRUJILLO, CYNTHIA O'HARA, BRIAN JAMES BRYSON, ROBERT RAY CROMWELL, ERIC PEASE, JUSTIN EARL LARSEN, BRADLEY CHARLES GINGELL, VIROQUE KUNZ, BOBBI JO BAILEY, DAVID A. RICHARDS, SHERRY JOHNSON, WYATT WALKER, DAVID J. HOLBROOK, MIKE MARVIDAKIS, ANTHONY WADE THOMPSEN, DENISE LOUATO, BECKY LEE THOMPSON, KAY MELIS, TUCKER THOMPSON SNARR, MEGAN ALLEN WILLAHAN, KAMI MELIS, SCOTT ROSANDER, KIM GIBSON, WILLIAM G. YATES, VICKIE HUNT, CARY A. DOTSON, LORI L. WEBER, JASON SCOTT ISBELL, MARGIE LOUISE PICKOUDOU, BENNY L. BELLON, DANIEL EWING, OLA EWING, JOAN VERONICA JENSEN, LYNNANN DAY, DAVID B. DAY, JIMMY MICHAEL JENSEN, SHAWN ERIC FILLINGIM, ROBERT R. OWENS, BENJAMIN LEE GIBSON, KENNETH L. GIBSON, BRUCE DAVENPORT, DOUGLAS C. NORBERG, JOSEPH R. WILEY, JR., DAVID LEE HUNTER, JEREMY KEVIN LANDERS, DANIEL RAY CHRISTENSEN, ROBERT J. MCPHERRON, JOSHLYN MARIE ISOM, JAMES L. DUNN, MICHAEL A. BERTOT, MARCI JOY RENZFRO, KARI TRINA WALKER, DANIELLE PELLETIER, ADAM WELCH, ANGELA REGAN, KAMI DAWN HIGGINS, DAVID J. BERTOT, JARED A. GOLLINGER, JAMES R. NIELSEN, LARRY GLENN YOUNG, ANN V. YOUNG, DUSTIN ROY VINCENT, BRENDA K. QUICK, CORY NIELSEN, JESSICA JOAN JAFARI, STEVE JOHN WALTON, NOBLE L. SMITH, CARIN ELIZABETH HAMILTON, TERRY ALLEN BIRCH, KEITH J. WESTWOOD, CARL H. ROBERTS, RON GIBBS, JOAN ALLEN, JUSTIN SCHIFFMAN, HAROLD E. BURGOYNE, MICHAEL T. MURPHY, DONALD J. GRAHAM, MAX SMITH, JASON P. SMITH, ALAN G. HERRON, EDA LEE HERRON, DIANA L. NESS, DARLA JIMENEZ, BRYAN HILBORN, BOBBIE JOE SESSONS, KEVIN W. SILCOX, RAYMOND ALLEN HUGHES, RUTH ANN GRAHAM, BRUCE R. GRAHAM, ROBIN M. COOK, BRENT M. BARFUSS, WILLIS J. KNIGHT, CLIFFORD RAY MILBURN, RALPH E. WILLIAMS, JOANNA PARKER, PATRICIA L. LUCE, LYNN A. MEIER, WILLIAM J. MEIER, KATHLEEN SEEDLE, LOUIS D. ROSENBERG, SONJA MASSINGILL, JUDITH M. ROSENBERG, ERNA MUEKSCH, JACK LITTLE, JOHN P. SULLIVAN, OTI'0 J. MUEKSCH, JACK BOWERS, CAROL JENSEN, RICK ENG, 0 Page 4 JOHN D. JACOBY, LISA REDMOND, LYNN KAHN; VALERIE L. LEE, VICKI J. BESSETTE, THOMAS G. MULLER, ROBERT F AINSWORTH, LYNELLE A. COLE, FRANCISCO D. FLORES, RICHARD H. GINGRICH, HELEN J. EVANS, RONALD GORENCE, PAUL PLAKOSH, JR., THOMPSON G. HACKEIT, JOHN A. FERGUSON, REID P. CONDIT, CHARLES BARANOSKY, JENNIFER M. DONLON, REX H. WALLACE, MICHAEL A. VALDEZ, ELENO E. RODRIQUEZ, ALBERT PAPA, FRANK M. GIESING, MARK A. BURNS, BRYAN D. MANN, STEVEN D. PARIS-ADAMS, RODNEY K. POPE, MARC W. LAPOINTE, JOHN B. KING, VERNON E. VIEHE, CHARLENE A. JOBE, MARTHA RONHOVDEE, RONALD RONHOVDEE, ELIA M. KHOURY, ALAN A. HUSBY, JOSEPH S. CUSATI, SEAN D. HENDERSON, CHRISTOPHER B. ROCKWOOD, KAREN BARNEY, HILARY SUE WOOD, ARTHUR T. HIRST, STEPHEN F. MURPHY, .DONALD G. ELLIS, ELIZABETH ERICKSON, DAVID A. DOUBLEDAY, JACQUELINE S. MILLER, PATSY J. BAGDANOV, JAMES BAGDANOV, RICHARD G. PAUL, ELROY G. RUHE, JASON L. FILLMORE, LUNIE F. COOK, CHARLES W. HOLT, LOUIE WELCH, EDWARD H. DAVIS, ANITA J. ROYAL, BALWICK HEATON, RANDALL SHELNUTT, CHARLES W. COX, JR., CYNTHIA M. LOWMAN, BARRY N. WILLIAMSON, JACK 0. BRADY, JERRY L. JOHNSON, GARLAND H. HALE, NANCY M. STOREY, FRANKLIN HYATT, FRANCES FRANKLIN, RONALD W. BERGMAN, CYRUS J. STOW, PAUL C. ARMBRUSTER, HELEN S. GLOVER, DONALD G. OAKLEY, EDWARD W. STOREY, MARY C. KIMBROUGH, PEGGIE F. BARNETT, DOROTHY S. SWINDERMAN, ROBERT LAWTON, CLAY F. GARLAND, GUY R. WINDERMAN, CYNTHIA KNIGHT, DOROTHY L. HINTON, ROY A. COLQUITT, SHANE M. ADAMS, JEFFREY I FOLDS, LINDA A. HALSTROM, HAROLD S. FOLDS, ROLAND D. THORNTON, JR., SHIRLEY J. THORNTON, GEZA L. JOZAN, JOY A. MCELWANEY, ROBERT J. SPECK, DAVID J. STAEBLER, C. RICHARD ELLCH, JAMES M. HARREL, JACOB G. STANSBURY, JR., ROY E. MBRAKMANN, MARY A. KUDRICK, ELIZABETH LIAGIN, ROSALIND MARRrIONT, ROBERT R. SMITH, JOAN B. ANDERSON, FELT E. LAIR, ARCHIE D. ANDERSON, HENRY P. SHOTWELL, ANDREW DILIO, JOHN E. SUSKO, KENNETH J. SILVER, THEODORE T. MORAN, THOMAS E. GRAVES, STEVEN MURPHY, RICHARD LEVINE, SUSAN P. MURPHY, JESSE V. SILVERMAN, MARGARET V. BOERICKE, ROSA A. RAIMAN, JAMES M. WINTON, KAROL

0 • Page 6 2000 U.S. Dist. LEXIS 163, "2 that the MSA amounts to a taking of smokers' prop- erty through the inevitable post-MSA price hikes for cigarettes, a rise in prices plaintiffs claim occurred with- out notice and an opportunity to be heard, which violates their constitutional rights to due process, as well as the right to equal [*3] protection under the laws because smokers alone must bear the costs of the MSA; (2) that the MSA insulates tobacco companies from suit, thereby depriving smokers of a right to legal redress without con- sideration, also in violation of their constitutional rights; (3) that statutory provisions of the California Welfare and Institutions Code mandating notice to individual state medical assistance recipients upon the State's decision to pursue recovery from a third party on the recipient's behalf, in order to allow that recipient to intervene if desired, were not followed. First Amended Complaint, PP S 1, 82, 84. Plaintiffs seek recovery under the federal civil rights statute, 42 U. S. C. § 1983, and for an alleged conspiracy amongst the defendants to injure plaintiffs' constitutional rights, 42 U.S.C. § 1985. n2 n2 Plaintiffs have sought leave to add a Sherman Act count to their complaint. For completeness' sake, this proposed amendment, which is not an ap- propriate grounds for leave because it is futile, is also discussed herein at section IV.1. a Settlor State." MSA, II(pp)(emphasis added). Thus, the agreement specifically does not claim to release the tobacco companies from medical expense obligations to individuals, such as plaintiffs. n3 Section 14124.73 reads: "If an action or claim is brought by the director pursuant to subdivision (a) of section 14124.71, written notice to the ben- eficiary, guardian, conservator, personal representa- tive, estate or survivor given pursuant to this section shall advise him of his right to intervene in the pro- ceeding, his right to obtain a private attorney of his choice, and the director's right to recover the rea- sonable value of the benefits provided." B. Due Process Violations -- Section 1983 Plaintiffs claim that the expected rise in tobacco prices resulting from the MSA constitutes a deprivation of their Fourteenth Amendment due process rights. The complaint does not articulate the right further, beyond [*6] the purely economic damage to be done smokers upon future purchases of cigarettes. In opposing defen- dants' motions, plaintiffs also allege that the price hikes amount to an unlawful taking in violation of the Fifth Amendment. [*4] 1. Allegations of the First Amended Complaint A. Medi-Cal Recoupment Statute Plaintiffs contend that the MediCal recoupment statute (California Welfare & Institutions Code 14124.73), which gives individuals a right to intervene in state- initiated suits to recover MediCal proceeds from tort- feasors n3, provides both an independent cause of ac- tion and a predicate violation triggering section 1983. To support this assertion, plaintiff has submitted one affidavit from the survivor of a man who died of can- cer. Harris Decl. The plaintiff argues that the MSA was in effect a settlement of her outstanding MediCal claim against the tobacco companies without notice to her of a right to intervene, and that the MSA should be set aside for that reason. Plaintiffs point to nothing in the MSA that would indicate it is the settlement of any individual or collective set of MediCal claims. In fact, a reading of the MSA suggest precisely the oppo- site conclusion. "Releasing Parties" are defined as, inter alia, persons or entities, "to the extent that any such en- tity (as opposed to an individual) is seeking recovery of health-care expenses (other than premium or capitation payments [*5] for the benefit of present or retired state employees) paid or reimbursed, directly or indirectly, by C. Conspiracy to Divest Smokers of Legal Rights - Section 1985 Plaintiffs claim that the MSA affects their ability as individuals to recover damages from the tobacco com- panies for smoking-related health care costs. However, an examination of the MSA itself demonstrates that no such provision is included in the MSA, and in fact, in- dividual rights to sue are explicitly exempted from the release clauses therein. Plaintiff does not rebut this, but counters in opposing the motion, that the unsuccessful attempt to settle the tobacco dispute in 1997 allegedly included such a waiver of individual claims against the tobacco companies. LEGAL ANALYSIS I. Jurisdiction A. Plaintiffs' Standing 1. Constitutional Standing Article III of the Constitution restricts the Court's jurisdiction to "Cases" and "Controversies.' Casey v. Lewis, 4 R3d 1516. 1519 (9th Ctr. 1993). The party invoking federal jurisdiction bears the burden [*7] of es- tablishing standing. FW/PBS, Inc. v. Dallas, 493 U.S. 215, 231, 107 L. Ed. 2d 603, 110 S. 0. 596 (1990). The "itmducible constitutional minimum of standing"

0 2000 U.S. Dist. LEXIS 163, 7 under Article III requires a showing of three elements. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 119 L. Ed. 2d 351, 112 S. Ct. 2130 (1992). First, the plaintiff must have suffered an injury in fact, i.e. an invasion of a legally protected interest which is both (1) concrete and particularized, and (2) actual or im- minent, as opposed to conjectural or hypothetical. Id. Second, there must be a causal connection between the injury and the conduct complained of; i.e. the injury must be fairly traceable to the challenged act, and not the result of some third party not before the Court. Id. Third, the injury complained of must be redressable to confer standing. A likelihood of redress from the relief sought, and not a mere speculative chance is necessary. All Article III standing requirements must be met; a fail- ure to demonstrate any one is fatal, as the Court would not have subject matter jurisdiction. The Court finds serious questions of standing resound on all three component [*8] parts of the Article III in- quiry. First, plaintiff was not a party to the MSA, and is not directly implicated in its effects. The suggestion is that three byproducts of the MSA: namely, a result- ing increase in cigarette prices, a recovery of MediCal funds, and a forfeiture of individual plaintiffs' rights to sue the tobacco companies directly -- create the requisite direct injury. Under scrutiny, each basis fails as a mater of law to establish Article III standing. i. Injury In Fact To risk stating the obvious, none of the plaintiffs are actually parties or. signatories to the MSA. None are bound under the MSA to pay a cent to the states' coffers, and none have had their legal rights to redress against the tobacco tnanufacturen, impaired one iota by the MSA itself. MSA, II(nn)(1)(defining "Released Claims" as eonfined to such claims that had, should or could have been brought by a"Seteling State" or "Releasing Party", where neither term is defined to incorporate individu- als). Instead, plaintiffs argue that the indirect, down- stream economic effects of the MSA cause the injury - that they, as smokers, are the silent victims of the agreement memorialized in the MSA. In essence, [*9] the claim boils down to the following: plaintiffs will, they allege, pay more for cigarettes be- cause of the MSA. From that arguable assertion, plain- tiffs weave the cntirety of their putative legal claim, alleging that the price difference constitutes a penalty (or, as plaindffs now characterize it in their opposition brief, a"taking") against smokers, in violation of their constitutional rights. However, the Court's inquiry as to whether plaintiffs have sustained a cognizable injury only begins with the assertion that the MSA constitutes a penalty. To determine whether plaintiffs can establish an 0 Page 7 invasion of a legally protected interest which is concrete and particularized, the Court would first have to ascer- tain the amount of any price hike directly attributable to the MSA's provisions. This exercise, while highly conjectural, would not end the soothsaying necessary to determine whether plaintiffs' injury is both concrete and particularized under plaintiffs' theory. To ascertain that an injury has occurred due to the MSA, the Court would also have to undertake an examination of what the mar- ket price for cigarettes would be absent the MSA. In other words, the Court would have to [*10] evaluate the merits of each and every lawsuit settled by the MSA, and project the effect of the resolution of these matters on the tobacco companies' product prices, Only after having achieved the dual exercises in prognostication could the Court ascertain whether plaintiffs had suffered a concrete and particularized'injury sufficient to confer standing. n4 n4 Put another way, plaintiffs' theory of standing would require this Court to step into the shoes of the tobacco companies and evaluate whether the MSA was an economically sound choice over the litiga- tion alternative. Only if it was not, and the tobacco companies had agreed to impose upon themselves (or, as plaintiffs would argue, their customers) costs they would not otherwise have incurred in litigat- ing the now-settled claims, can the MSA itself be characterized as injurious. This approach is equally unavailing. Plaintiffs' claim, at bottom, requires the Court to pile inference upon inference, to disregard legal agreements for what they are and to disregard [* I 1] the cotttplex free market and assume away a multitude of market-driven reasons for the price of tobacco products. See Common Caase v. Dept. of Energ}; 226 US. App. D.C. 266, 702 F.2d 245, 251 (D.C. Cir. 1983). Because of the conjectural and highly speculative nature of plaintiffs' claim, the Court finds that plaintiff has failed to allege facts sufficient to allege injury that is concrete and par- ticularized under Lujan. Plaintiffs' substantive claims under42 U.S.C. sectiona 1983 and 1985 fare no better upon closer analysis than their assertion of standing in this matter. First, the plain- tiffs have failed to state a cognizable constitutional in- terest of which they have been deprived as a result of the MSA. This is a predicate requirement of a section 1983 action. In addition, no court has recognized a constim- tiottal right in a vested in a consumer's expected future price for a consumer item, in this case cigarettes. This is logical, because consumers have the ability to avoid any

0 Page 1 [ 2000 U.S. Dist. LEXIS 163, *25 foothold. Not only is a section 1983 claim not properly predicated on a state statute, but the Court cannot grant the relief under that statute, the Court cannot reach its merits indirectly through section 1983. n6 While the Court has serious doubts about the applicability to the MediCal recoupment statute as a basis for liability in this matter, the Court does not reach the question of the underlying merits, since it is barred under Pennhurst from entertaining the claim. 2. Noerr-Pennington Doctrine The Noerr-Pennington doctrine protects the right of citizens to petition the government for redress, by pro- viding that such an act cannot form the factual basis for a later suit. Initially limited to the antitrust context, the Noerr-Pennington doctrine has since expanded to im- munize the use of litigation as the factual basis for other litigation. See, e.g., Evers v. County of Custer, 745 F.2d 1196 (1984). Importantly in this context, litigation [*26] settlements are also within the ambit of the immu- nity conferred. See Coluntbfa Pictures v. Professional Real Estate Investors, 944 F2d 1525, 1528 (9th Cir. 1991). The Supreme Court has fashioned an exception to the Noerr-Pennington doctrine, the so-called "sham exception." For a party to avail itself of the benefit of this exception, a two-tiered test must be met. First, the challenged lawsuit must be objectively baseless, without any reasonable basis to elicit a favorable outcome. The Supreme Court has made clear that a "sham exception" to Noerr-Pennington must meet a two-tiered test. First, the challenged lawsuit must be objectively baseless, without any reasonable basis to elicit a favorable outcome. Only if that initial inquiry can be met does a court move on to the subjective motivation of the party's use of gov- ernmental process. Professional Real Estate lnvestors v. Columbia Pictures Industries Inc., 508 U.S. 49, 123 L. Ed. 2d 611, 113 S. CY. 1920 (1993). Plaintiffs have not alleged facts or otherwise argued that the MSA is a sham agreement under the test annunciated by the Supreme Court in Professional Real Estate Investors. Therefore, [*27] on this record, defendants' action in negotiating and entering into the MSA are immunized from suit under Noerr-Pent»ngton. Ill. Plaintiffs' Motion for Leave to Amend During the pendency of briefing on defendants' mo- tions, plaintiffs sought to amend the complaint to add a Sherman Act claim. The Court finds persuasive a re- cent district court analysis which addressed this precise issue in terms of the MSA. In Ifise et al. v. Philip Morris et al, 46 F Supp. 2d 1201 (N.D. Okla. 1999), the district court held, based on several Supreme Court precedents, that plaintiffs lacked Sherman Act standing because they were not direct purchasers of the cigarettes from the defendants. The Supreme Court has held, un- der the so-called "direct purchaser" doctrine, that indi- rect, downstream purchasers of products lack standing under the antitrust statutes. Illinois Brick Co. v. State of Illinois, 431 U.S. 720, 746, 52 L. Ed. 2d 707, 97 S. Ct. 2061 (1977); Kansas and Missouri v. Utilicotp United Inc., 497 U.S. 199, 211, 111 L. Ed. 2d 169, 110 S. Ct. 2807 (1990). This line of precedent could not be clearer on the principle that a Sherman or [*28] Clayton Act claim must be brought by a party directly purchasing from the defendant. In this case, the proper plaintiff class would likely be wholesalers and/or retail vendors of cigarettes. Plaintiffs are not wholesalers or direct purchasers, but consumers. Tberefore, plaintiffs do not have the requisite standing to raise an antitrust claim against the tobacco companies and leave to amend to add such a claim is clearly futile, and thus warrants denial of leave to amend. Ascon Properties v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989). The Court therefore DENIES leave to amend to add a Sherman Act claim. CONCLUSION Plaintiffs seek to nullify one of the most significant civil settlements in the nation's history, to which they are concededly not a party, based upon, inter alia, a pur- ported constitutional interest in keeping cigarettes cheap. Plaintiffs have not asserted a cognizable interest wartant- ing Article Ill standing, and collectively have asserted a classic example of a generalized grievance, not properly addressed to the judicial branch. For that fact, as well as the other incurable jurisdictional deficiencies identified in this memorandum and [*29] order, the Court hereby GRANTS the motions to dismiss plaintiffs' complaint in its entirefy for failure to establish a case or controversy within the meaning of Article III, and also DENIES leave to amend to add a Sherman Act claim for a failure to meet Article III's strictures. IT IS SO ORDERED. Dates: 1l5/2000 MARTIN J. JENKINS UNITED STATES DISTRICT JUDGE

0 2000 U.S. Dist. LEXIS 163, *1 J. PRICE, ELIZABETH K. APPERSON, BOB L. HOWARD, EDWARD C. APPERSON, BILLIE E. BAUER, JORGE LARCO, LINDA J. FORRESTER, STAN FORRESTER, TRINA BERMAN, CINDY WOMER, RALPH J. KING, BARBARA COLLINS, JAMES C. GORDON, PATRICK RYAN, MARGARET J. WATT, COREDELIA V. SCOYOC, JOSEPH A. ROHLA, FREDERICK C. WILLIS, III, ALBERT RICKSECKER, ELLEN HERTZ, ANTHONY L. AMORELLI, JAMES E. PROKOP, PETER L. PETRAKI, CHRIS PETERSEN, KENNETH B. SHELTON, CHRISTINE A. SMITH, THEODORE H. SCHAAR, CHRISTOPHER P. RAGON, CARL P. SCHOEN, KENT E. MILLER, KHALI M. KHOURY, DANNY Z. ZEIDON, BRETT FROHWEIN, JOHN D. SEILER, DONALD OWENS, MARK I WELSH, STEVEN SCHWARTZ, MERCEDES DAVIS, ZACHARY BAIRD, WALSH GERALDINE, IMAD BITAR, GRAYLON R. REVELS, SHILOH F. MILLER, STEVEN I MILLER, ROBERT W. BRECKINRIDGE, LISA L. . LINCOLN, ALAN SWANSON, JR., RUTH PHILLIPE, SAMANTHA PHILLIPE, ZENA L. GARCIA, CONNIE M. BURR, TERRI L. NEWMAN, PAUL A. NEWMAN, CLAYTON E. FASSETf LYNN P. CHRISTENSEN, KRISTOPHER B. GREIER, KARYN KBviBERLING, Plaintiffs: Donald W. Ricketts, Donald W. Ricketts Law Office, Santa Clarita, CA. For STATE OF CALIFORNIA, BILL LOCKYER, de- fendants: Amy J. Hertz, Thomas Greene, Tiffany L. Clark, Michele M. DeCristoforo, Andrea Lynn Hoch, Attorney General's Office, Sacramento, CA. For CITY AND COUNTY OF SAN FRANCISCO, LOUISE H. RENNE, defendants: Owen J. Clements, San Francisco. For CITY AND COUNTY OF SAN FRANCISCO, LOUISE H. RENNE, defendants: Patrick J. Mahoney, City Attorney's Office, City and County of San Francisco, San Francisco, CA. For STATE OF UTAH, JAN GRAHAM, defendants: Eugene Crew, Mark T. Jansen, Robert 7. Shilliday, Townsend & Townsend & Crew. LLP, San Francisco, CA. For STATE OF UTAH, JAN GRAHAM, defendants: James R. Soper, Salt Lake City, UT. For PHILLIP MORRIS INC, defendant: James F. Speyer, Arnold & Porter, Los Angeles, CA. • Page 5 For PHILLIP MORRIS INC, defendant: Curtis M. Caton, Anna S. McLean, Helen L. Marsh, Heller Ebrman White & McAuliffe, San Francisco, CA. JUDGES: MARTIN J. JENKINS, UNITED STATES DISTRICT JUDGE. OPINIONBY: MARTIN J. JENKINS OPINION: ORDER GRANTING DEFENDANTS' MOTION TO DISMISS AND DENYING MOTION FOR LEAVE TO AMEND INTRODUCTION Before the Court are defendants' motions to dismiss, which the Court converted to motions for summary judg- ment. nl For the reasons set forth in this memoran- dum and order, plaintiffs cannot establish standing to sue on the claims asserted, and the complaint is there- -fore DISMISSED under F.R.C.P. 12(b)(1) for a lack of subject matter jurisdiction. nl The Court initially converted the motions under FRCP 12(b)(6) to motions for stttntuary judgment, to enable the consideration of extrinsic evidence, such as the multistate agreement itself, in its consider- ation of this matter. Because the Court ultimately decides that it lacks subject matter jurisdiction, the distinction is somewhat academic, since the Court's review of the record to ascertain standing is more wide-ranging than that on a motion to dismiss, en- compassing any and all extrinsic evidence salient to that determination. [*2J FACTUAL BACKGROUND This case is brought pursuant to 42 U.S.C. §§ 1983 and 1985 by several smokers' rights groups and nearly 400 individual smokers against many of the parties to the multistate tobacco settlement agreement (MSA), entered between 46 state anomeys-general on behalf of their states and the major tobacco companies in November 1998. Defendants are the States of California and Utah, their respective attomeys-general, the California Departments of Justice and of Health Services, the Chief Deputy Director of the California Department of Health Services, the City and County of San Francisco, San Francisco City Attorney Louise Renne, and several ma- jor tobacco companies (namely Lorillard Tobacco Co., Philip Morris, Inc., R.J. Reynolds 7bbacco Company, and Brown & Williamson Tobacco Corporation). The complaint generally makes the following allegations: (1)

0 cannot establish a predicate showing of injury because, as explained supra, their alleged MSA-caused injury is conjectural at best on this record. The Court therefore GRANTS defendants' motions pursuant to Rule 12(b)(1), for plaintiffs lack standing to bring their claims. Even assuming arguendo that the standing hurdle were not fatal, several jurisdictional de- ficiencies also exist as to the named defendants. B. Personal Jurisdiction Over Utah Defendants in order to establish personal jurisdiction over the State of Utah and its Attorney General, plaintiffs have to establish "minimum contacts" between those parties and this forum. Utah has not consented to this Court's jurisdiction. Therefore, the jurisdictional question is framed: does Utah's signing of the MSA constitute Utah's purposeful availment of the rights and privileges of California according to International Shoe Co. v. Aiishington, 326 U.S. 310, 90L. Ed. 95, 66 S. L7. 154 (1945) and its progeny? The answer on this record is clearly not. Thus, without reaching the Eleventh Amendment is- sues that would in any event [*22] bar suit against Utah and/or its Attorney General, the Court finds that it lacks personal jurisdicdon over them. C. City and County of San Francisco and City Attorney Renne Neither the City and County of San Francisco nor the City Attorney are parties to the MSA. Simply put, one group of non-parties to the MSA (i.e. plaintiffs) is at- tempting to sue another group of non-panies to the MSA (i.e. the City and County, and the City Attorney) over the effects of the MSA. Plaintiffs, at a minimum, must allege these defendants participated or helped to t:ause the predicate act that gives rise to the injury complained of in this matter. Here, there is no such allegation. Thus, there is no case or controversy established with the City and County of San Francisco, nor with the City Attorney, arising from the MSA, and they are not proper parties to this suit. n5 n5 In the briefs on defendants' motions, the par- ties have referenced civil litigation ongoing in this circuit between the City and several tobacco compa- nies. This cannot possibly provide the basis for the Court's subject matter jurisdiction, as (1) there has been no factual nexus traced or even inferred between that litigation and the events giving rise to this com- plaint; (2) that suit was not affected by the MSA; and (2) it would be immunized litigation behavior under Noerr-Pennington in any event. 2000 U.S. Dist. LEXIS 163, *21 Page 10 [*231 D. Immunities 1. Eleventh Amendment Immunity The Eleventh Amendment provides immunity for states and state agencies from suit by citizens of other states. Over time, the Eleventh Amendment proscrip- tion has been extended to immunize a state from suits by its own citizens as well. Papasan v. Allain, 478 U.S. 265, 276, 92 L. Ed. 2d 209, 106 S. CY. 2932 (1986). Three decisions handed down in the last Supreme Court term confirm that the Eleventh Amendment is a vital and central concern wherever states or state entities are sued. Alden v. Maine, U S. , 119 S. G7. 2240, 144 L. Ed. 2d 636 (June 23, 1999); College Savings Bank v Florida Prepaid Postsecondary Education Expense Board, iJ.S. , 119 S. Cr. 2219, 144 L. Ed. 2d 605 (June 23, 1999); Florida Prepaid lbstsecondary F.ducation Fapense Board v CoUege Savings Bank, U.S. , 119 S. C7. 2199, 144 L. Ed. 2d 575 (June 23, 1999). Fundamental Eleventh Amendment doctrine provides that states cannot be sued in federal court, absent their consent. Neither California nor Utah has con- sented to be sued. Therefore, the states, and the California state agencies (the Depattment of Justice and of Health Services) would be dismissed under Eleventh Amendment [*24) immunity even had plaintiff overcome the standing hurdle. Under Ex Parte Young, a federal court may provide injunctive relief against a state officer, as the Eleventh Amendment offers no cloak for unconstitutional con- duct. 209 fJ.S. 123, 28 S. Ct. 441, 52 L. Ed. 714 (1908). The injunctive relief granted must be prospec- tive in nature. Edefman v. Jordan, 415 U.S. 651, 39 L. Ed. 2d 662, 94 S. 0. 1347 (1974). Thus, the Court (assuming away arguendo the standing concerns enumer- ated in section LA, supra) could entertain the claim on its merits against the California Attorney General in his official capacity as signatory of the MSA. However, the ' fatal substantive flaws in plaintiffs' showing under sec- tion 1983 and 1985 make this no more than an academic distinction. Under Iknnhurst State Sch. & Hosp. v Haldernum, 465 U.S. 89, 123-124, 79 L. Ed. 2d 67, 104 S. LY. 900 (1984), federal courts cannot grant injunctive relief pursuant to state law against state officials. Therefore, plaintiffs are barred from seeking injunctive relief in a federal forum under the MediCal recoupment statute. n6 A fortiori, plaintiffs' section 1983 claim is also barred insofar [*25] as it relies upon the state statute as its

0 20W U.S. Dist. LEXIS 163, *11 economic injury by eschewing consumer products. The free market aside, plaintiffs have not been able to state a single precedent that would warrant so revolutionary ["`12] a definition of constitutional interest. Allowing such a claim to go forward would fundamentally change the nature and volume of section 1983 litigation, by cre- ating a constitutional right in an economic expectancy. Even had plaintiffs been able to establish standing, the claim would thus collapse under its own weight. Second, the plaintiffs have attempted to include as defendants the tobacco companies, who are private ac- tors. Plaintiffs characterize the 1998 MSA (as well as the failed 1997 negotiation) as the predicate state act under- lying the section 1983 claim, for which it holds the to- bacco company defendants equally responsible. Private actors cannot normally meet the "under color of state law" provision of section 1983, and their actions stand- ing alone do not ordinarily give rise to a section 1983 claim. Gomez v. Toledo, 446 US. 635, 640, 64 L. Ed. 2d 572, 100 S. Cf. 1920 (1980); lfut Ort v. 8state of Stanewich, 92 E3d 831, 836 (9th Cir. 1996). While private actors are not immunized derivatively through their alleged conspiracy with immunized state actors, see Dennis u Sparks, 449 US. 24, 27, 66 L. Ed. 2d 185, 101 S. Ct. 183 (1980), ["13] this assumes (1) a cognizable underlying conspiracy and (2) a constitu- tional injury to plaintiff. As discussed above, neither predicate obtains here. Finally, liability under Section 1985 depends on the viability of a claim under section 1983: in other words, a cause of action for conspiracy. must be premised on an act or acts that would be actionable under section 1983. Caldeira v County of Kauai u al., 866 F.2d 1175, 1181-2 (9th Cir. 1989). As discussed above, the Court cannot find or infer a legal predicate upon which a sec- tion 1983 might go forward under the facts alleged in the complaint. Accordingly, the section 1985(3) claim must fail as a matter of law as well. ii. Causation The same problems of speculativeness infect plaintiffs' attempt to establish the minimum element under Article IIi of causation. Setting aside for a moment the present- day range of microeconomic factors that affect the price of cigarettes, the plaintiffs ask the Court to presume that in the future (1) there will be price hikes in cigarettes, (2) those price hikes will be attributable to the MSA, and (3) that the price hikes impact upon the cottstim- tional rights held by plaintiffs. ['14] Not only is the causal chain attenuated, its links are extremely weak in logical terms. Moreover, the entire causal link can be avoided merely by altering consumer choices, i.e. not buying cigarettes. 0 Page 8 A similar argument regarding economic injury as a basis for standing was rejected by the Ninth Circuit. In San Diego Gun Rights Committee v. Reno, 98 F.3d 1121 (9th Cir. 1996), plaintiffs alleged that the fed- eral Violent Crime Control and Law Enforcement Act of 1994 created a 4D-100 % increase in the market prices of affected guns, thereby injuring plaintiffs' ability to exercise their constitutional rights. The court affirmed the district cottrt's conclusion that plaintiffs lacked standing to allege this injury, finding that Lujan's second prong was not met. The court found two broad bases for this conclusion. First, the court noted that other legislation in the area of firearms regu- lation and other market factors would render any deter- minadon that the Act alone caused the injury was "tan- tamount to sheer speculation." 98 F.3d at 1130. Here, too, both legislation affecting tobacco sales (including explicit taxes on cigarettes at the state and federal ['15] levels) and other market forces (inflation, the laws of supply and demand, weather affecting tobacco whole- sale costs) all can, and do, have an effect on the price of tobacco products wholly independent of the MSA. San Diego Gun's second basis for determining that plaintiffs aerein lacked standing was related to the de- fendants' interface, or lack thereof, with the injury- causing product. While gun sellers set the price of guns in ehe marketplace, plaintiffs had named the Attorney General and other government defendants who were not market actors as defendants. The San Diego Gun court, relying on Lujan, found that the injury claimed did not pass Article III muster because it resulted directly from the independent act of a third party not before the court. Id. at 1130, citing Lujan, 504 fI.S. at 560. This is essentially the case here. Plaintiffs are consumers of retail tobacco products. Neither the government enti- ties nor the tobacco corporations set the market price of cigarettes. Instead, retailers and wholesalers, who are not defendants in this suit, actually set the market price of tobacco products and thus cause the putative injury claimed [•16] by defendants. Thus, the causality prong of Lujan is clearly missing on this record. iii. Redressability Plaintiffs' grievance cannot be redressed by the relief sought, redressability being a predicate requirement for standing under Lujan. In many respects, the redress- ability inquiry is the mirror image of the causality in- quiry under Lujan, since an injury cannot be redressed by abating an act that did not cause it. Thus, many of the deficiencies identified supra in the Court's discussion of causality apply with equal force to the redressabllity prong. By their complaint, the plaintiffs seek the Court to enjoin enforcement of the MSA, because of the ef-

0 20011 U.S. Dist. LEXIS 163, *16 fects it has on the price of consumer tobacco products. Even if the Court did so, the retailers selling tobacco products could charge exactly what they please for their products. Plaintiffs would continue to suffer exactly the same injury, without even the pretext of a legal claim for recovery. Thus, for a Court even to entertain the relief requested would be an exercise in judicial futility. In sum, plaintiffs have wholly failed to establish the con'stimtional minima for standing. Even had it crossed the minimal [*17J constitutional threshold, however, the Court fmds that plaintiffs' claim fail to meet the pruden- tial standing requirements articulated in 11hr1h v. Seldin, 422 U.S. 490, 45 L. Fd. 2d 343, 95 S. Ct. 2197 (1975J. 2. Prodential Standing The Court's inquiry into standing does not end with an examination of the constitutional minima set forth in Article III. Additional prudential principles bear on the question of standing, even where the Article III minima are satisfied. First, a plaintiff must assert her own legal rights an interests, and cannot rest a claim on the le- gal rights and interest of third parties. A&rrh, 422 U.S. at 499. Second, courts refrain from adjudicating gen- eralb-°d grievances raising "abstract questions of wide public significance', which are most appropriately ad- dressed in the representative branches of government. Id. at 499-500. Third, as a prudential check on stand- ing the plaintiff s complaint must fall within the "zone of interests' to be regulated or protected by the statute or constitutional guarantee at issue. See, e.g., Association ojData Processing Service Orgs. v. Camp, 397 U.S. 150, 153, 25 L. Ed. 2d 184, 90 S. Ct. 827 (1970). [*181 i. No Jus Tertii Employing a pass-through theory, plaintiffs are essen- tially attempting to adopt the economic burden borne by the tobacco companies as their own injury. In other words, plaintiffs' "injury" is purely derivative of the to- bacco companies' agreed payment schedule to the states under the MSA. Because such pass-tbrough theories are not cognizable in this judicial context, plaintiffs' attetnpt is in essence an attempt to assume standing through an injury not their own. This is barred by the prohibi- tion against third-patty suits, and the Supreme Court in Warth clearly counsels the Court against taking this type of claim to establish a case or controversy. ii. No Generalized Grievances The prohibition against generalized grievances stems from the separation of powers concerns enshrined in Article Iil. The logic underlying this prohibition is that general grievances can be most effectively addressed 0 Page 9 by and through the representational branches of gov- ernment, and any judicial activity in those spheres would necessarily stray into the executive and legislative realms. The MSA did not abolish smoking. Smokers are still several million strong in this country, [19) and in fact stand to benefit from the provisions in the MSA, in- cluding the establishment of a national foundation which will inter alia support the study of and educational pro- grams to prevent diseases associated with the uses of to- bacco products in the states. MSA at 4.1. The impact of the MSA, if any, upon the economic well-being of those who choose to continue smoking can be addressed to the legislatures responsible for implementing the MSA. In short, the plaintiffs have identified no grievance par- ticular to their lot as individuals, beyond their status as smokers, that is impacted by the events giving rise to their complaint. This is too general a grievance to warrant standing. iii. Zone of Interests Plaintiffs have filed suit under sections 1983 and 1985, on due process and equal protection grounds. There is no legal support for plaintiffs' assertion that there is a constitutionally protected property interest from a fir- ture expectancy in the pricing of cigarettes. Therefore, the due process clause, which prevents the deprivation of inter alia, property interests, does not include plain- tiffs within its zone of interests. Similarly, the Equal Protection Clause requires [*20] status in a protected class of individuals. As discussed above, the group of American smokers is not a protected class, nor is it within the traditional zone of interest implicated by the Equal Protection Clause. Ascriptive characteristics (such as race and gender), not classifications based on economic choices (such as the choice to become a con- sumer of tobacco products) provide the contours of pro- tected classes within the meaning of the Equal Protection Clause. 3. Associational Standing In order for an association to obtain standing under Article Iri, it must be alleged that 'its members, or aay one of them, are suffering immediate or threatened in- jury as a result of the challenged action of the sort that would make a justiciable case had the members them- selves bought suit." Nbnh, 422 U.S. at 511. The com- plaint is devoid of information defining the member- ships of the organizational plaintiffs (the membership of which may overlap in part or in whole with the individ- ual plaintiffs), and therefore the organizational plain- tiffs have failed to allege sufficient facts to support a finding of standing under Article III. Moreover, even if organizational plaintiffs [*21] had alleged sufficient factual information regarding their memberships, they