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March 25, 1998


The opinion of the court was delivered by: SCHEINDLIN



 I. Background

 Plaintiffs are labor union health and welfare trust funds (the "Funds") that supplement employers' basic medical benefits by providing death, disability and prescription drug benefits and related services. Defendants are tobacco companies and tobacco public relations firms. Plaintiffs allege that defendants have engaged in a conspiracy to deceive the general public, including plaintiffs, as to the health risks associated with smoking, the addictiveness of nicotine, and the levels of nicotine in their products. As a result, plaintiffs allege, they have spent millions of dollars more than they otherwise would have to provide medical benefits to health plan participants. The Funds have brought this action "to recover money expended . . . to provide medical treatment to their participants and beneficiaries who have suffered and are suffering from tobacco-related illnesses and to obtain appropriate injunctive relief." Class Action Complaint and Demand for Jury Trial P 7, Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., No. 97 Civ. 4550 (S.D.N.Y. filed June 19, 1997) [hereinafter Compl.]. *fn1" Plaintiffs allege RICO and antitrust violations, and assert common law claims for fraud, breach of special duty, and unjust enrichment.

 Defendants have moved to dismiss the action under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. They contend that plaintiffs have no direct claim against defendants for three reasons: 1) as a matter of law, the chain of causation between plaintiffs' injuries and defendants' alleged acts is too attenuated to support a verdict for plaintiffs, because the alleged injuries are only remotely connected to defendants' alleged acts, 2) plaintiffs' sole remedy is by subrogation to their participants' claims, and 3) the federal Cigarette Labeling and Advertising Act preempts all of plaintiffs' common law claims. Defendants also raise additional count-specific objections to each of plaintiffs' claims.

 II. Jurisdiction

 This Court has subject matter jurisdiction over the action pursuant to 28 U.S.C. §§ 1331, 1337 (1994) because Counts I-III of the complaint raise questions of federal law. Supplemental jurisdiction over the state claims raised in Counts IV-X is asserted because the federal and state claims both derive from "a common nucleus of operative fact." United Mine Workers v. Gibbs, 383 U.S. 715, 726, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966); Promisel v. First Am. Artificial Flowers, Inc., 943 F.2d 251, 254 (2d Cir. 1991); 28 U.S.C. § 1367(a) (1994).

 III. Legal Standard for Motion to Dismiss

 In deciding a motion to dismiss under Rule 12(b)(6), the court must accept all material facts alleged in the complaint as true and must draw all reasonable inferences in the nonmovant's favor. See Kaluczky v. City of White Plains, 57 F.3d 202, 206 (2d Cir. 1995). The court may not grant the motion merely because recovery seems remote or unlikely. Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir. 1996) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974)). A complaint should not be dismissed for failure to state a claim unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id. (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957)).

 IV. Discussion

 In recent months, state and federal courts have seen an explosion of civil actions arising from the use, marketing or sale of tobacco products. To date over forty states have filed suit, as have cities, counties, and private third-party payors, all attempting to recover the cost of treating tobacco-related diseases. See Proposed Tobacco Industry Settlement, Preamble, P 22 (June 20, 1997). All of these cases address common questions: If in fact the tobacco industry is 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 marketing documents become increasingly available to the general public, some have become convinced that the tobacco industry should be held liable for the entire cost of tobacco-related disease, however that cost was incurred. *fn2" Whether an industry should be penalized for successfully marketing a legal product is certainly an interesting question, but it is beyond the scope of any single lawsuit. Policymaking on such a scale is ordinarily left to the legislature; in fact, there are various proposals before Congress that would "mandate a total reformation and restructuring of how tobacco products are manufactured, marketed, and distributed in this country." Proposed Tobacco Industry Settlement, Preamble P 1. *fn3" The issue addressed here, in contrast, is much more limited: to determine whether and how defendants should be held responsible to these particular plaintiffs.

 As a result, allegations that the defendants have marketed their products to children, that these products are unreasonably dangerous, or that they have inflicted harm on individual smokers are not relevant here. Nor are claims of harm to society or to plaintiffs as members of the general public. Rather, as fundamental principles of proximate cause dictate, plaintiffs may only recover for injuries that they have suffered. If those injuries were caused by defendants, then defendants should indeed be held responsible. But plaintiffs have no standing to vindicate the public's rights. When stripped to the basics, the issues in this litigation are relatively simple: To the extent that plaintiffs have alleged that defendants have harmed them directly, they have stated a claim on which relief may be granted.

 A. Do plaintiffs have a direct claim against defendants?

 Because the issue of proximate cause is central to the disposition of this case, I will discuss it in some detail before addressing plaintiffs' state and federal claims individually.

 1. Proximate Cause

 Defendants' fundamental argument is that plaintiffs have no direct claim against them because they did not proximately cause plaintiffs' injuries. In general terms, the concept of "proximate cause" prevents a recovery from a party for remote and derivative injuries to a plaintiff resulting from that party's conduct toward another. See, e.g., Holmes v. Sec. Investor Protection Corp., 503 U.S. 258, 268-69, 117 L. Ed. 2d 532, 112 S. Ct. 1311 (1992); Mobile Life Ins. Co. v. Brame, 95 U.S. 754, 758-59, 24 L. Ed. 580 (1877). Under the common law, therefore, one who pays the medical expenses of another may not recover those expenses from the third-party tortfeasor who caused the damage. See, e.g., Associated Gen. Contractors, Inc. v. California State Council of Carpenters, 459 U.S. 519, 532 n.25, 74 L. Ed. 2d 723, 103 S. Ct. 897 (1983) (citing 1 J. Sutherland, Law of Damages 55-56 (1882)); Anthony v. Slaid, 52 Mass. 290, 291 (1846) (plaintiff who undertook to support town paupers could not recover from tortfeasor who assaulted pauper, increasing plaintiff's expenses, as damages were too remote). Plaintiffs have alleged that defendants deceived them about the dangers of tobacco, inhibiting plaintiffs' ability to minimize health-care expenses, and shifting the cost of tobacco-related disease to the plaintiffs. See, e.g., Compl. PP 269-74. Defendants maintain that plaintiffs' claims are no different from those rejected in Anthony v. Slaid, and that the alleged injuries, though worded as direct claims, are equally remote.

 The question of when an alleged injury becomes too remote to allow recovery is often difficult. "Because of convenience, of public policy, of a rough sense of justice, the law arbitrarily declines to trace a series of events beyond a certain point." Palsgraf v. Long Island R. Co., 248 N.Y. 339, 352, 162 N.E. 99 (1928) (Andrews, J. dissenting). *fn4" That point is reached when "the connection between the defendants' negligence and the claimants' damages [becomes] too tenuous and remote to permit recovery." Kinsman Transit Co. v. City of Buffalo, 388 F.2d 821, 824-25 (2d Cir. 1968). While "a variety of factors may be relevant in assessing legal [proximate] cause," in order to plead a prima facie case, a plaintiff is generally required to "show that the defendant's negligence was a substantial cause of the events which produced the injury." Derdiarian v. Felix Contracting Corp., 51 N.Y.2d 308, 315, 434 N.Y.S.2d 166, 414 N.E.2d 666 (1980); accord Nallan v. Helmsley-Spear, Inc., 50 N.Y.2d 507, 520, 429 N.Y.S.2d 606, 407 N.E.2d 451 (1980). If such a showing is made, no intervening acts -- for example, the decision of plan participants to smoke -- will break the causal connection if such acts are a reasonably foreseeable result of the defendants' negligence. Derdiarian, 51 N.Y.2d at 315; Stephenson by Coley v. S.C. Johnson & Son, Inc., 168 Misc. 2d 528, 638 N.Y.S.2d 889, 892 (Sup. Ct. N.Y. Co. 1996), aff'd, 658 N.Y.S.2d 636 (2nd Dep't 1997).

 Other factors that courts may consider when determining proximate cause in intentional tort cases include: 1) the defendant's intent to do harm, 2) the degree of moral wrong involved, and 3) the seriousness of the harm originally intended. Restatement (Second) of Torts § 435B (1965). These factors are considered because the greater the intent to harm, the more foreseeable it is that harm will result.

 These general principles govern all common-law claims, including the intentional torts alleged in the complaint. They also apply to plaintiffs' statutory claims. Congress intended that antitrust litigation "would be subject to constraints comparable to well-accepted common-law rules applied in comparable litigation[,]" including rules defining proximate cause. Associated Gen. Contractors, 459 U.S. at 533. New York's antitrust statute, the Donnelly Act, has been interpreted similarly. Anheuser-Busch, Inc. v. Abrams, 71 N.Y.2d 327, 335, 525 N.Y.S.2d 816, 520 N.E.2d 535 (1988) (Donnelly Act "should generally be construed in light of Federal precedent"); Van Dussen-Storto Motor Inn, Inc. v. Rochester Tel. Corp., 63 A.D.2d 244, 407 N.Y.S.2d 287, 293 (4th Dep't 1978) (defining proximate cause under Donnelly Act by citing to federal precedent); see also Tri-Star Pictures, Inc. v. Leisure Time Productions, B.V., 1992 U.S. Dist. LEXIS 15232, 1992 WL 296314, at *6 (S.D.N.Y. 1992), aff'd, 17 F.3d 38 (2d Cir. 1994) (citing Van Dussen-Storto Motor Inn) (proximate cause under Donnelly Act). The same proximate cause constraints apply to RICO claims. Holmes, 503 U.S. at 268; Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 23-24 (2d Cir. 1990) (RICO violations "proximately cause a plaintiff's injury if they are a substantial factor in the sequence of responsible causation, and if the injury is reasonably foreseeable or anticipated as a natural consequence.").

 The purpose of requiring a direct relationship between defendants' conduct and plaintiffs' injury is threefold. First, the more remote the injury, the more difficult it is to ascertain the amount of damages attributable to the defendants' acts, rather than to some other factor. Holmes, 503 U.S. at 269. Second, allowing indirectly injured plaintiffs to proceed creates the risk of multiple recoveries. Id. Third, those who are directly injured are in a better position to "vindicate the law as private attorneys general," without any of the problems found in suits based on more remote injuries. Id. at 269-70.

 If all of plaintiffs' allegations regarding defendants' knowledge and intent are true -- and I must assume as much for the purposes of this motion -- then a jury could reasonably find that plaintiffs' injuries were foreseeable, and that defendants' behavior was a substantial cause of those injuries. For example, plaintiffs maintain that defendants knew how to manufacture a less harmful cigarette but did not do so because it would have compromised their litigation strategy. Compl. PP 125-39. One direct consequence of such a decision would be to limit plaintiffs' ability to reduce their health care costs by encouraging their participants to use less harmful tobacco products. The next step, then, is to analyze the policy factors enunciated in Holmes to determine whether plaintiffs' injuries are too remote for recovery as a matter of law.

 First, are there other parties better suited to act as "private attorneys general"? Individual smokers and public agencies have an incentive equal to that of the plaintiffs' to "prosecute" defendants for deceiving the public about the dangers of tobacco. None, however, would have a strong interest in vindicating the harm to plaintiffs -- their reduced ability to minimize health-care expenses and their assumption of the financial burden of tobacco-related disease among plan participants. There is a substantial risk that those harms will go unremedied if this action is not allowed to continue.

 Next, is there a risk of multiple recoveries for the same harm? Plaintiffs are correct in arguing that there is not. No other party may recover for harm to the Funds' infrastructure, financial stability, or ability to project costs. To the extent that the harm took the form of increased expenses for medical care, those costs will only be recovered once. Plan participants who bring personal injury actions against the defendants may not recover expenses that the Funds have already reimbursed. N.Y. C.P.L.R. 4545(c) (McKinney 1992). Conversely, as defendants' briefs discuss at length, plaintiffs may not recover for the ...

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