to dismiss under Rule 12(b)(6), Fed. R.Civ.P.
I have considered the recent Third Circuit opinion in
Steamfitters Local Union 420 Welfare Fund v. Philip Morris,
Inc., 171 F.3d 912 (3d Cir. 1999), in reaching my conclusion.
In that case the Third Circuit rejected various union health
and welfare fund suits against tobacco companies in which the
funds also alleged RICO and antitrust violations. Analyzing the
claims principally under the antitrust laws, the court agreed
with many of the arguments made by Blue Cross in this case:
that increased costs from treating tobacco related illnesses
were a cognizable injury, 171 F.3d at 921, n. 4; that
plaintiffs direct injury is "fundamentally different from a
traditional insurer-against-wrongdoer subrogation claim," id.
and were not duplicative of those suffered by smokers, id. at
930; that there may be a causal connection between plaintiffs'
injuries and defendants' conduct, id. at 926; that there might
be proved an antitrust violation from a conspiracy to keep a
safer product off the market, id. at 926; that the claims of
direct injury might meet the third and fourth factors discussed
in Associated General Contractors of California, Inc. v.
California State Council of Carpenters, 459 U.S. 519, 103 S.Ct.
897, 74 L.Ed.2d 723 (1983), id. at 927; and that plaintiffs'
damages were potentially calculable using statistical analysis,
id. at 929-930. The court nevertheless affirmed the district
court's dismissal of the case on the grounds that plaintiffs'
injury was not shown to be a necessary step in the success of
defendants' conspiracy, id. at 923, and, conversely, that
plaintiffs would have covered the costs of their insureds'
illnesses regardless of defendants' conspiracy, id. at 928. It
also thought plaintiffs' damages too speculative. Id. at
929-30. At least in the present case, however, Blue Cross has
alleged that its injury enabled defendants' conspiracy to
succeed. If defendants had not been able to reap the benefits
of the billions of dollars in payments made by Blue Cross,
smokers would have quit sooner, or died sooner or not smoked at
all, all of which would have reduced defendants' profits
presumably by great amounts. Under plaintiffs' theory, it was
thus important to the success of the conspiracy that Blue Cross
and the people it covered be misled about the dangers of
smoking for as long as possible. Although Blue Cross has
continued to cover the costs of smoking related illnesses,
there would have, according to it, been fewer illnesses related
to smoking. In addition, as discussed above, plaintiffs claim
injury from their inability to cover other diseases and
procedures because of the huge ongoing cost of paying for
smoking related illness. With regard to the court's conclusion
regarding speculative damages, in view of its other statements
agreeing that it might be possible to prove damages, I assume
that its affirmance of the lower court, while mentioning its
belief in the difficulty of proof in this area, did not depend
on this factor. At any rate, the Blue Cross plaintiffs, because
of their size, are possibly in a unique position to present the
kind of statistical proof that will be required to prove their
case. They may be unsuccessful but in the present case they
have alleged sufficient facts to go forward with discovery.
Judge Weinstein has set an early trial date in the case
before him. He also limited that trial to the RICO claims in
the interest of judicial economy. Discovery in the present case
has already begun. It makes sense, however, to defer trial
until after the trial in the Eastern District of New York. It
would also simplify matters, as Judge Weinstein concluded, to
conduct discovery and try only the RICO claim. I will, however,
give the parties 21 days to submit any argument against
limiting the case to the RICO claim.
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