Arkansas Blue Cross & Blue Shield v. Philip Morris, Inc.

47 F. Supp. 2d 936, 1999 U.S. Dist. LEXIS 4573, 1999 WL 199041
CourtDistrict Court, N.D. Illinois
DecidedApril 6, 1999
DocketNo. 98 C 2612
StatusPublished
Cited by3 cases

This text of 47 F. Supp. 2d 936 (Arkansas Blue Cross & Blue Shield v. Philip Morris, Inc.) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Arkansas Blue Cross & Blue Shield v. Philip Morris, Inc., 47 F. Supp. 2d 936, 1999 U.S. Dist. LEXIS 4573, 1999 WL 199041 (N.D. Ill. 1999).

Opinion

MEMORANDUM OPINION AND ORDER

BUCKLO, District Judge.

This action is one of three essentially identical actions brought by various Blue Cross and Blue Shield medical providers against numerous tobacco companies and others, alleging violations of federal RICO and antitrust laws, with pendent claims alleging violations of state law. Defendants seek dismissal under Rule 12(b)(6), Fed.R.Civ.P., for failure to state a claim. Similar motions were brought in the other two cases. The motion in the Western District of Washington was granted by Judge Rothstein. The motions in the Eastern District of New York case have been denied by Judge Weinstein.

The parties before me have extensively briefed the issues. There have also been numerous decisions addressing similar actions in addition to the opinions by Judge Weinstein and Judge Rothstein. This opinion will attempt to avoid repeating ev[938]*938erything that has already been said on this subject and will be limited to an explanation of why I agree with Judge Weinstein’s conclusion that plaintiffs have stated a claim for relief.

The facts alleged in plaintiffs’ amended complaint may be summarized as follows: The plaintiffs are seven independent, mainly not-for-profit Blue Cross or Blue Shield Plans (“Blue Cross”). Blue Cross provides 68 million Americans with health plan financing, including benefits for tobacco related illnesses. Blue Cross has incurred billions of dollars in costs attributable to illnesses related to the use of tobacco. Its injury is economic. The defendant tobacco companies intentionally caused its injury through a continuing conspiracy that began in 1953. The conspiracy’s purpose was to addict millions of Americans, including members of Blue Cross plans, to smoking cigarettes and other tobacco products. Their success has resulted in lung, throat and other cancers, heart disease, stroke, emphysema and other diseases. Smoking related illnesses are the leading cause of premature death in the United States. Non-smokers exposed to tobacco smoke are also affected. The conspiracy involved intentional misrepresentations about the safety of nicotine and its addictive properties, marketing efforts targeting children, and agreements not to produce or market safer cigarettes.

The basic argument made by defendants in these motions is that any injury to plaintiffs is indirect and too remote in terms of proximate cause to be legally redressable in this action. This argument has been accepted by some courts. Thus, in Regence Blueshield v. Philip Moms, Inc., et al, 40 F.Supp.2d 1179, 1999 U.S. Dist. LEXIS 1820 (W.D.Wash.1999), the court concluded that plaintiffs’ injuries were “derivative” of personal injuries to smokers because it would be impossible to separate the smokers’ injuries from that of the insurers and there would thus be a possibility of duplicative recovery. Id. at 1184. That conclusion has been rejected by the Seventh Circuit, however, which (in a somewhat different but still applicable context) has held that Blue Cross has an interest that is separate from that of its insureds for which it may seek recovery in appropriate cases. Blue Cross & Blue Shield United of Wisconsin v. Marshfield Clinic, 65 F.3d 1406 (7th Cir.1995). See also United States v. Aetna Casualty & Surety Co., 338 U.S. 366, 379, 70 S.Ct. 207, 94 L.Ed. 171 (1949). The Ninth Circuit has also reached the opposite conclusion in holding that an insured could not sue under RICO for money paid by his insurance company because only the insurance company has suffered the economic loss. Steele v. Hospital Corp. of America, 36 F.3d 69 (9th Cir.1994). Indeed, as Judge Weinstein noted in Blue Cross and Blue Shield of New Jersey, Inc. v. Philip Moris, Inc., 36 F.Supp.2d 560 (E.D.N.Y.1999) (slip op.) (“Blue Cross and Blue Shield”), it is unlikely that persons covered by Blue Cross plans could obtain reimbursement from Blue Cross for any damages paid in this case because they never paid the amounts that Blue Cross is seeking to recover. At 571.

Thus, the injury suffered by plaintiffs in this case is not derivative. It is the plaintiffs’ own economic injury. Defendants’ additional argument is that any wrong is not the proximate cause of Blue Cross’ injury. Whether a plaintiff has sufficiently alleged facts from which proximate cause may be found is governed by Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992). In that case the Supreme Court held that SIPC could not bring a RICO action because it could not show that defendant’s actions were the proximate cause of its injuries. Judge Weinstein, in the companion case to this one, has explained that under the Holmes analysis, proximate cause is sufficiently alleged in the complaints in these cases. First, the Holmes court was concerned that if an injury were too indirect, it might be too difficult to determine whether the plaintiffs injuries [939]*939are due to defendant’s conduct or to intervening third causes. Holmes, 503 U.S. at 269, 112 S.Ct. 1311. But in the present tobacco cases, Judge Weinstein noted that plaintiffs may well be able to bring reliable statistical and expert evidence to show the percentage of damage caused by defendants’ actions. In addition, they will not have to be concerned with contributory negligence because the torts alleged are intentional. Blue Cross and Blue Shield, at 575-76. The Holmes court was also concerned about the apportionment of damages among various claimants. As noted above, however, and by Judge Weinstein, id. at 576, the damages claimed in this case are separate from the damages suffered by smokers. Plaintiffs “seek recovery only for the economic burden of those medical claims and procedures which they directly paid as a result of tobacco use.” Id. Finally, the Holmes court was concerned that the SIPC was not the best plaintiff, and certainly not the only plaintiff, who could vindicate defendant’s wrongdoing. In contrast, in the present cases Blue Cross is the best, and under some case law perhaps the only, plaintiff who can bring this claim because no other potential plaintiff can claim economic injury. It is the only one who “can claim the ‘injury to business or property’ required by the RICO statute.” Id. at 576. See, e.g., Marshfield Clinic, supra; 65 F.3d at 1414.

Judge Weinstein in his very thoughtful opinion also addressed the issue that somehow the injuries complained of in this suit are too remote in the sense of foreseeability. To the contrary, he found, if “as alleged, the defendants conducted a decades long scheme to deceive the American public and its health providers concerning the addictive characteristics and health hazards of their tobacco products, and if they conspired to deprive smokers of safer or less addictive tobacco products, then their actions can properly be characterized as illegal and deliberate criminal fraud.” Blue Cross and Blue Shield at 580-81. “[T]he defendants would not have been in a position to realize the enormous profits of its industry without the compelled and unknowing subsidization by organizations such as the Blues.” Id.

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Related

City of St. Louis v. AMERICAN TOBACCO CO. INC.
70 F. Supp. 2d 1008 (E.D. Missouri, 1999)
ARKANSAS BLUE CROSS AND BLUE SH. v. Philip Morris
47 F. Supp. 2d 936 (N.D. Illinois, 1999)

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47 F. Supp. 2d 936, 1999 U.S. Dist. LEXIS 4573, 1999 WL 199041, Counsel Stack Legal Research, https://law.counselstack.com/opinion/arkansas-blue-cross-blue-shield-v-philip-morris-inc-ilnd-1999.