United States District Court, E.D. New York
June 6, 2005.
BARBARA SCHWAB, et al., Plaintiffs,
PHILIP MORRIS USA INC., et al, Defendants.
The opinion of the court was delivered by: JACK WEINSTEIN, Senior District Judge
This memorandum continues the conversation at the May 26, 2005
hearing. It is based on prior proceedings and the Memorandum in
Support of Plaintiffs' Motion for Class Certification and
Appointment of Class Representatives and Co-Lead Counsel
("Plaintiffs' Motion"). Discovery, preparation of defendants'
papers in response to the Plaintiffs' Motion, and preparation for
the scheduled September 12, 2005 hearing on Plaintiffs' Motion go
forward. The court has some preliminary reflections and
questions. They are listed below, but not necessarily in order of
importance. None of them should suggest that the court has any
preconceptions about cogency or answers.
1. Does a civil suit under RICO, for monetary loss based on the
price paid for a product sold in violation of federal mail and
wire fraud substantive law, split a cause of action for the
physical or other harm caused by use of the product based on
fraud under state substantive law? Can members of the present
putative class of plaintiffs recover on a federal RICO "loss of
value" theory while they and others sue, or can sue, separately
for physical damages or other claims under various state laws? Compare Price v. Phillip Morris, No.
00-L-112, 2003 WL 22597608 (Ill. Cir. Mar. 21, 2003) (10.1
billion dollars for deceptive marketing of "light" cigarettes),
with In re Simon II Litig., 407 F.3d 125, 138 (2d Cir. 2005)
("In certifying a class that seeks an assessment of punitive
damages prior to an actual determination and award of
compensatory damages [for physical harm], the district court's
Certification Order would fail to ensure that a jury will be able
to assess an award that, in the first instance, will bear a
sufficient nexus to the actual and potential harm to the
plaintiff class, and that will be reasonable and proportionate to
those harms."). The Price case, like the instant case,
contained no claims for personal injury or addiction. See Miles
v. Philip Morris, No. 00-L-112, 2001 WL 34366710, at *1 (Ill.
Cir. Feb. 1, 2001). The court in Price rejected defendants'
challenge of splitting. Id. at *3.
The RICO statute relied upon by plaintiffs appears to preclude
personal injury awards so that physical harms could not be
compensated for under that federal substantive provision. See
18 U.S.C. § 1963(c) ("Any person injured in his business or
property by reason of a violation of section 1962 [prohibited
activities] of this chapter may sue. . . .") (emphasis added).
State substantive law would be required for such recoveries,
would it not? See 2., infra.
2. Assuming there were a settlement in the instant case, what
would be the nature and scope of the release? Would it be
possible for the release to encompass theories of fraud and
related theories in personal injury cases arising out of what is
essentially the same charged "lights" cigarette fraud? See 1.,
supra. Would the class have to be extended, with additional
representatives and counsel, to provide in essence two major
subclasses as follows:
A. Those who claim economic damages for reduced value
received as "defrauded" purchasers of "lights" under
RICO; and B. Those who assert fraud or related theories in
personal injury cases claiming physical, emotional,
and related damages as purchasers and users of
"lights" under state laws?
What would be the effect of a class action so modified on other
"lights" actions pending or threatened based on the law of
3. Returning to the issue raised in 1., supra, the court
reads plaintiffs' present claims as based on a simple
RICO-federal-mail-wire-fraud concept rather than on state
substantive consumer fraud law. Nevertheless, the court is not
clear on the relationship between the two sets of fraud laws
federal and state. Can, and if so should, the instant class
action exclude fraud claims based on the consumer fraud law of
jurisdictions such as that in Price and other such suits
commenced and not yet commenced? Can the damages for a single
fraud transaction (no matter how extensive) be recovered both
under non-state RICO substantive federal mail-wire fraud law
and under state fraud and other law?
Does a loss by defendant under state consumer fraud law, as in
Price, which is arguably essentially the same as
RICO-federal-mail-wire-fraud substantive law in its primary
elements, have a collateral estoppel effect preventing the losing
defendant from contesting the same elements of the RICO fraud
What, if any, collateral estoppel effect would there be in a
loss by defendants in the RICO case by the government in United
States v. Phillip Morris, 99-CV-02496 (D.D.C.)? See, e.g.,
Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979) (offensive
Does a win by plaintiffs under either federal or state law
result in precluding another claim based on the same fraud under
the other law? Thus, for example, if Price stands up on appeal, would sales of light cigarettes in Illinois during the
Illinois conspiracy period be excluded from the recovery base in
the instant case? See, e.g., Beck v. Levering, 947 F.2d 639 (2d
Cir. 1991) (collateral estoppel and double recovery); LaFleur v.
Whitman, 300 F.3d 256, 271 (2d Cir. 2002) (choice of law in
collateral estoppel); Bajwa v. Metropolitan Life Ins. Co.,
208 Ill.2d 414 (2004) (Illinois collateral estoppel rule). Would the
Illinois class have to be carved out of the present RICO class
(as it appears to be in paragraph 32 of the first amended
4. Assuming that a single federal substantive theory applies
under RICO, does each state's law have any application at all
under that theory? If so, how are they related?
5. If individual state substantive law has some bearing under
A. or B. of 2., supra, which states do members of the class fit
into the states where they resided at the commencement of the
suit, where they were smoking, etc.? In Price the state where
the cigarettes were bought was apparently deemed crucial in
figuring class damages. See Price v. Phillip Morris, No.
00-L-112, 2003 WL 22597608, at *17 (Ill. Cir. Mar. 21, 2003).
6. If individual state substantive law has some bearing under
A. or B. of 2., supra, can groups of states be treated as
providing essentially the same substantive law, and how much
difference does that characterization tolerate? Are class
representatives from states or groups of states with different
substantive rules required?
7. If plaintiffs in the instant case win on their present
single RICO theory, will any future state punitive damages then
be available in view of the fact that RICO provides a form of
punitive damages in its multiplication provision? See
18 U.S.C. § 1964(c). How does individual state substantive punitive damages
law (as limited by federal constitutional law) impact on this
issue, if at all? Would a treble RICO recovery prevent punitive
state law damages in future state law based claims? Cf. Simon II in 1., supra. Would punitive
damages already awarded or yet to be awarded in state based
claims preclude RICO trebling?
8. If plaintiffs in the instant case win, how can or should a
recovery be divided? Will a disbursing facility be required, and
if so, what will be its method and plan of operations?
9. If individual state law differences have some bearing on
the present single RICO theory, can the experts estimate the
numbers of lights smokers and damages by different states or
groups of states?
10. How should the jury be charged in the case as it now
stands? Will the plaintiffs draft a proposed charge in time for
the September 12 hearing so that the viability of the litigation
can be better evaluated? Should there be special findings? If so,
how should they be phrased? Note that Price was non-jury with
findings by the court.
11. For argument's sake only, accepting Parts I, II, and III of
the statement of "facts" in Plaintiffs' Motion as true, and
assuming that named plaintiffs are appropriate representatives,
and that they and counsel satisfy all Rule 23 requirements, how
do plaintiffs propose to confront the legal and administrative
problems of certifying, notifying, and trying the case? As one
class? As a consolidation of subclasses? As excluding persons
recovering in other actions? See 1. and 2., supra, and 21.,
infra. A detailed proposed litigation plan to help the court
decide on the litigation's practicability might be helpful.
What evidence can the court consider in deciding certification
questions? See May 26, 2005 Trans. at 21.
12. Assuming for argument's sake only that plaintiffs' factual
claims are supported i.e., that defendants have conspired to
commit a continuing fraud on "lights" smokers knowing that many would die or suffer from diseases, in order to make profits
on cigarettes they sold as "safer" than prior cigarettes, thus
defrauding those who bought the cigarettes of the difference
between the value they thought they were getting and that they
received is some procedural modification on proof or burdens of
proof available? See May 26, 2005 Trans. at 26.
13. Plaintiffs' Motion was filed under "seal." Why? The courts
discourage unnecessary sealing particularly in a matter of public
interest such as a national class action.
14. Can discovery and evidence in other cases be used in the
present case against defendants to reduce costs? Against
15. Is it possible to try the case in whole or in part on
stipulated facts and experts' evidence or on written direct
testimony or other appropriate techniques? What classes and
number of witnesses and classes of evidence does either side plan
to provide at the trial?
16. What public reports and other data can be introduced
without further witnesses at trial?
17. Can a conspiracy theory support evidence of statements
(admissions) of some defendant parties and non-parties against
other defendants? Which ones? Are there two conspiracies one
for "lights," and an earlier one for "regulars" and do both,
either, or neither provide a basis for evidence admissibility
against all or some members of the conspiracy? See Rule
801(d)(2)(E) of the Federal Rules of Evidence.
18. To what extent can experts project the behavior of
plaintiffs or defendants as a group or sub-group based on
samples? How should such samples be selected? How should sample
information be obtained by questionnaire, deposition, a mix,
19. If members of the class would have smoked anyway (perhaps
because they were addicted or for other reasons), what monetary loss did they
suffer by buying "lights" instead of regular cigarettes at what
was essentially the same price?
20. What relevant knowledge, reliance, motivation, differences
in methods of smoking, or other factors can be attributed to all
or some members of the class, and how can partial knowledge or
other differences attributable to some class members be
translated into impact on possible monetary damages of the class?
Would these factors affect distribution of possible proceeds?
See 8., supra.
21. In viewing the alleged conspiracy and alleged congeries of
tobacco cigarette harms from a transactional perspective, see
12., supra, might the totality of possible claims be approached
in a variety of ways to take into account various state and
federal causes of action and differing effects on individual
smokers? In light of the fact that limited cases have been
brought on different theories with different individuals and
classes of aggrieved persons, is a rational solution to the broad
controversy, while perhaps difficult, possible? Have the tactics
of defendants' and plaintiffs' counsel in cigarette cases as well
as the rulings of courts suggesting limits on a unified approach
to a mass tort created the risk of duplication and splitting?
Would that strategic and tactical history prevent an appropriate
disposition of the instant and related litigations? See, e.g.,
1. and 3., supra, on splitting a cause of action and double
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