The opinion of the court was delivered by: Weinstein, Senior District Judge.
Plaintiff, an asbestos distributor, was sued in extensive
litigations for injuries its product allegedly caused; it has
paid substantial sums in settlements and after trials. It now
claims that some or all of the damages it paid for in these
lawsuits were caused by the defendant tobacco entities. It brings
this suit on the theory, among others, that it would have
impleaded the defendants in those cases had the defendants not
fraudulently concealed their own liability for damages.
Defendants moved to dismiss on the pleadings. The motion was
denied by order dated August 11, 1999. This memorandum provides a
brief explanation for that order.
A fortiori, defendants' reliance on Laborers Local 17 is
inappropriate here since the main issues implicated in the
present action were not even addressed in dictum in Laborers
Local 17. The contention of the instant plaintiff is based on
fraud in actual litigations resulting in excessive judgments
against plaintiff that allegedly would have been avoided or
reduced had defendants been parties to the original litigations.
Essentially, plaintiff has stated a direct claim for common law
fraud in inducing it not to sue or implead defendants and in
covering up their complicity.
The plaintiff's complaint pleads the following elements in
sufficient detail: (1) explicit and implied misrepresentation of
material facts — lack of danger of cigarette smoking to those
working with asbestos and the absence of addictive
characteristics of defendants' products; (2) knowledge by
defendants of the falsity of the misrepresentations; (3) intent
by defendants that the plaintiff act in reliance on the
misrepresentations by not suing or impleading defendants when
smokers with lung diseases sued plaintiff; (4) justifiable
reliance by plaintiff on the misrepresentations; and (5)
resulting injury in recoveries against plaintiff that would have
been avoided or reduced had plaintiff known the truth.
That it may seem unlikely that plaintiff will be able to prove
elements (2),(3) and (4) is not a ground to grant defendants'
motion directed to the pleadings.
This is a garden variety fraud theory. See, e.g., Channel
Master Corp. v. Aluminium Limited Sales, Inc., 4 N.Y.2d 403,
406-07, 176 N.Y.S.2d 259, 262 (1958) ("[I]t is sufficient to show
that the defendant knowingly uttered a falsehood intending to
deprive the plaintiff of a benefit and that the plaintiff was
thereby deceived and damaged."). Inducing the plaintiff to
refrain from acting is actionable. Id. ("One who fraudulently
makes a misrepresentation . . . for the purpose of inducing
another to act or refrain from action in reliance thereon . . .
is liable for the harm caused by the other's justifiable reliance
upon the misrepresentation." (citations and quotation marks
omitted)). The ingenuity of humanity in devising frauds, and the
need to deter them, has led to the creation of a common law and
statutory net sufficiently wide to ensnare the alleged frauds.
Cf., e.g., Moore v. PaineWebber, Inc., 189 F.3d 165, 170-72 (2d
Cir. 1999) ("tricking" plaintiffs into buying life insurance with
funds that they would otherwise have used for IRAs is actionable
fraud under RICO).
With respect to non-RICO claims, federal preemption by the
Cigarette Labeling and Advertising Act does not apply to the
deliberate acts to deceive alleged by plaintiff. See, e.g.,
Cipollone v. Liggett Group, Inc., 505 U.S. 504, 529, 112 S.Ct.
2608, 120 L.Ed.2d 407 (1992) (plurality) ("[I]n the 1969 Act,
Congress offered no sign that it wished to insulate cigarette
manufacturers from longstanding rules governing fraud. . . .
Thus, we conclude that the phrase `based on smoking and health'
fairly but narrowly construed does not encompass the more general
duty not to make fraudulent statements."); see also Laborers
Local 17 Health & Benefit Fund v. Philip Morris, Inc.,
7 F. Supp.2d 277, 287 (S.D.N.Y. 1998) ("Cipollone expressly held
that claims of fraud by intentional misstatement are not
preempted"), rev'd on other grounds, 191 F.3d 229 (2d Cir.
The motion to dismiss is denied.
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