The RICO allegations contained in the Blues' complaint was found
to be consonant with Supreme Court precedent, modern tort law's
conception of proximate causation, and the statutory design and
policy of RICO.
Ten days after the Blue Cross opinion was issued and
approximately six months after the National Asbestos opinion,
the court of appeals of the Second Circuit decided an
interlocutory appeal in a case involving RICO allegations against
the tobacco industry by union trust fund-insurers. See Laborers
Local 17 Health & Benefit Fund v. Philip Morris, Inc.,
172 F.3d 223 (2d Cir. 1999) ("Laborers Local 17"). The court in
Laborers Local 17 found the claims of plaintiff trust funds to
be compensated for tobacco related expenditures to be too
"indirect." The defendants then renewed their motions to dismiss
the complaints in both Blue Cross and National Asbestos on the
grounds that both suits are controlled by Laborers Local 17.
C. Amendments To Plaintiffs' Original Complaints
In June 1999 plaintiffs in both Blue Cross and National
Asbestos moved to amend their complaints to add new claims and to
restate, in the alternative, the original federal and state
claims under subrogation; they continue to press all their
original claims. They were permitted to amend their complaints
pursuant to the liberal standards of Rule 15 of the Federal Rules
of Civil Procedure. Decision was reserved on whether the amended
complaints stated valid causes of action.
II. ANALYSIS OF CLAIMS
Defendants argue that Laborers Local 17 bars federal claims
in both Blue Cross and National Asbestos. Yet, even if the
plaintiffs' "direct" RICO theory, discussed in this court's Blue
Cross and National Asbestos memoranda denying motions to
dismiss, were barred by Laborers Local 17, neither of these
actions can be dismissed at the pleading stage because the
amended complaints state valid subrogated and other claims.
While it may not be commonplace for RICO claims to be asserted
by a subrogee, such a claim is consistent both with the policies
of RICO and the purposes of the modern equitable doctrine of
subrogation. It is advisable to develop a full factual record in
this and other issues (see infra, part II.D) in order to provide
a more complete and accurate basis for possible appellate review.
A. "Direct" RICO Claims
Defendants contend that Laborers Local 17 bars plaintiffs'
original complaints because the injuries are not sufficiently
"direct." By contrast, plaintiffs argue that there are important
factual and pleading distinctions between Laborers Local 17 and
Blue Cross and National Asbestos which could lead to different
There are differences between the Blues and the plaintiffs in
Laborers Local 17 which are relevant to the standing and
proximate cause analysis. The Blues are not simply a traditional
insurer which passively receives premiums for the purpose of
allocating risk. As was recognized in Blue Cross, the Blues
play a far more active and direct role in the provision of health
care to its populations:
Today subscribers often rely on organizations such
as the Blues not only to allocate risk, but also to
help establish and administer networks of hospitals
and physicians to make health care more affordable.
The Blues are the largest provider of such managed
are programs in the country. Some 45 million
individuals are enrolled in some type of managed care
administered by the Blues. Through these managed care
programs plaintiffs take an active and leading role
in shaping the delivery of health care in this
country. Directly and indirectly, medical
insurers-providers such as the Blues decide what
medical procedures will be offered, to whom they will
offered and when and how they will be offered.
Blue Cross, 36 F. Supp.2d at 586.