The opinion of the court was delivered by: Berman, District Judge.
Amsterdam Tobacco Incorporated ("Am sterdam"), Boro Park Tobacco
Company Incorporated, The Koger Company, Incor porated, Queens Tobacco,
Grocery & Can dy Company, Incorporated, S/A Cigarette Company,
Incorporated, and Sunrise Can dy & Tobacco Corporation (collectively
"Plaintiffs") filed this action on or about December 1, 1998, against
Philip Morris Incorporated ("Philip Morris" or "Defendant") seeking
$312,000,000.00 in damages for Philip Morris' alleged role in a cigarette
smuggling enterprise operating from Virginia to New York. Amsterdam has
brought this action under the Racketeering Influenced and Corrupt
Organization Act of 1970 ("RICO"), 18 U.S.C. § 1961, 1962, 1964(a)
and 1964(c); the Anti-Trust Procedural Improvements Act of 1980
("Robinson-Patman Act"), 15 U.S.C. § 13, as well as under state law.
Philip Morris now moves to dismiss the instant action, pursuant to
Federal Rules of Civil Procedure ("Fed.R.Civ.P.") 12(b)(6) and 9(b),
arguing that Plaintiffs fail to state any claims for which relief can be
granted. For the reasons set forth below, Philip Morris' motion is
The following facts, which are set forth in Plaintiffs' Amended
Complaint,*fn1 are taken to be true for the purposes of this motion.
Amsterdam Tobacco Incorporated, Boro Park Tobacco Company, Incorporated,
The Koger Company, Incorporated, Queens Tobacco, Grocery & Candy
Company, Incorporated, S/A Cigarette Company, Incorporated, and Sunrise
Tobacco Corporation, are all licensed wholesale dealers of cigarettes
with their principal places of business in New York City. (Am.Compl.
¶ 3a-3f, 7). Philip Morris is in the business of manufacturing and
distributing cigarettes and tobacco products; its corporate headquarters
are located in New York City. (Am.Compl. ¶ 9, 10).
Philip Morris has created and maintained corporate programs known as
the "Retail Masters Program" and the "Wholesale Masters Program," both of
which are designed to increase sales of its products across the United
States. (Am. Compl. ¶ 22). In order for a wholesaler to participate
in the Wholesale Masters Program, it must provide information as to the
identity, location, and amount of sales of Philip Morris' products,
including the names and addresses of retailers, to Philip Morris on a
weekly basis. (Am. Compl. ¶ 26).*fn2 In order for a retailer to
participate in the Retail Masters Program, it must provide information as
to the wholesaler from whom the cigarettes were purchased and the amount
of Philip Morris' products that were sold during any particular period.
(Am.Compl. ¶ 28). Philip Morris requires its salespeople periodically
to visit the retail locations and to promote sales of its products at
retail locations. (Am.Compl. ¶ 29).
In Virginia, Philip Morris sells cigarettes directly to large retailers
and distributors such as, for example, the Price Club and Sam's Club.
(Am.Compl. ¶ 133). These large retailers, it is alleged, either sell
to a "second tier Virginia middleman" or directly to "smugglers" who
travel (back and forth) to Virginia from New York or New Jersey. (Id.).
The Virginia middlemen sell to "smugglers" from New Jersey or New York.
(Am.Compl. ¶ 34). The smugglers transport contraband cigarettes*fn3
to the New York City area where they distribute them to local retailers.
(Am.Compl. ¶ 35).
In or around December 1996, a Grand Jury in the Eastern District of
Virginia handed down an indictment against six individual defendants and
one corporate defendant ("Indictment"), alleging that these individuals
and the corporation had engaged in a conspiracy willfully and unlawfully
to ship, transport, receive, possess, distribute, sell, and purchase
large quantities of contraband cigarettes in violation of
18 U.S.C. § 2342.*fn4 (Am.Compl. ¶ 38). These defendants were
not charged with a criminal RICO violation, under 18 U.S.C. § 1962,
1963. (Am. Compl. ¶ 38). Philip Morris was not among the indicted
defendants in this cigarette smuggling case. (Id.).
Beginning in or about August 1994 and continuing through at least
December 1996, statistically more cigarettes were sold in Virginia per
capita "than could possibly have been consumed by the residents of
Virginia," while statistically fewer cigarettes were sold lawfully in New
York "than had been consumed by residents of New York State in the past."
(Am.Compl. ¶ 190).
The resellers of contraband cigarettes in New York were able to
undercut the market price because they did not pay (and, therefore, did
not have to absorb the cost of) the New York State and/or New York City
cigarette taxes. (Am.Compl. ¶ 199). As a result, Plaintiffs lost a
significant amount of sales and profits. (Id).
Philip Morris asserts here that none of Plaintiffs' legal theories
supports Plaintiffs' central claim that Philip Morris was legally
obligated to "police the marketplace" and enforce the laws against
cigarettes smuggling. (Defendant's Moving Brief at 2). In the
circumstances presented here, this Court agrees with Philip Morris.
Motion to Dismiss Standard
In resolving a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the Court
must accept the factual allegations set forth in the complaint as true
and draw all reasonable inferences in favor of the plaintiff. See
Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir. 1996). 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." Conley v. Gibson, 355 U.S. 41,
45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). This standard also applies to
RICO claims. See NOW v. Scheidler, 510 U.S. 249, 114 S.Ct. 798, 127
L.Ed.2d 99 (1994). However, the court is not required in a RICO case to
accept as true "conclusions of law or unwarranted deductions." First
Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 771 (2d Cir. 1994),
cert. denied, 513 U.S. 1079, 115 S.Ct. 728, 130 L.Ed.2d 632 (1995).*fn6
Plaintiffs claim that Defendant violated 18 U.S.C. § ...