Opinion
No. 00-CV-5332.
April 23, 2002
Peny Weitz, Robert J. Gordon, Jerry Kiristal, Richard L. Akel, Esq. Weitz Luxenberg, New York, NY., Steven E. Fineman, Esq., Thomas M. Sobol, Lieff, Cabraser, Heimann, Bernstein, New York, NY., Elizabeth J. Cabraser, Richard M. Heimann, Robert J. Nelson, Lieff, Cabraser, Heimann, Bernstein, San Francisco, CA., Norwood Wilner, Sporwood Wilner Maciejewski Matthews, P.A. Jacksonville, Florida, Stanley Chesley, Esq., Wait, Chesley, Waite Schneider, Bayless Chesley, Cincinnati, Ohio, Gregory T. Camold, Esq., Wayne F. Dennison, Esq., Brown Rudnick Freed Gesmer, Boston, Mass., Charles Mangan, Esq., Sheller Ludwig Badley, Philadelphia, PA., Plaintiff in Simon I Simon II.
Joshua Kassner, John Angelos, Esq., Law Offices of Peter G. Angelos, P.C., Baltimore, MD., O'Donoghue O'Donoghue, Washington, D.C., Plaintiff National Asbestos.
Melvyn I. Weiss, Esq., Beth A. Kaswan, Esq., Michael C. Spencer, Esq., Milberg Weiss Bershad Hynes Lerach, New York, NY., Plaintiff Bergeron.
Paul J. Bschorr, Esq., Vincent R. FitzPatrick, Jr., Esq., Michael Hefter, Esq., Heather K. McDevitt, Esq., Dewey Ballantime LLP., New York, NY., Martha J. Talley, Esq., Dewey Ballantime LLP., Washington, DC., For Plaintiffs Blue Cross, et al.
Jonathon W. Cuneo, The Cuneo Law Group, Washington, D.C., Hutton Hutton, Mark B. Hutton, Derek S. Casey, Chan P. Townsley, Wichita, KS., Gary Richardson, Richardson Ward, Tulsa, OK., For Plaintiff Mason, et al.
Peter A. Bicks, James L. Stengel, Orrick, Herrington Sutcliffe, LLP, New York, NY., Thomas R. McNaboe, Thompson, McNaboe, Ashley Bull, LLC, P.A., Portland, MA., Steven Kazan, Kazan, McClain, Edises, Simon Abrams, Oakland, CA., For Plaintiff Raymark.
Kevin J. Dunne, Esq., Eric M. Kraus, Esq., Sedgwick, Detert, Moran Arnold, Esq., New York, NY., Marjorie P. Lindblom, Esq., David Bernick, Esq., Andrew R. McGaan, Esq., Deirdre A. Fox, Esq., Kirkland Ellis, Esqs., New York, NY., U. Gwyn Williams, Esq., Goodwin, Proctor Hoar, LLP, Boston, MA., Defendant Brown Williamson.
Harold Keith Gordon, Byron G. Stier, George Kostolampros, Jones, Day, Reavis Pogue, New York, NY., Theodore M. Grossman, Hugh R. Witing, Mark A. Belasic, Jones, Day, Reavis Pogue, Cleveland, OH., Robert H. Kilonoff, Jones, Day, Reavis Pogue, Washington, D.C., Jerome R. Doak, Margaret I.. Lyle, Jones, Day, Reavis Pogue, Dallas, TX., Ursula M. Henninger, Esq., Womble Carlyle Sandridge Rice, Winston-Salem, NC., Defendant R. J. Reynolds.
Alan Mansfield, Esq., Robert J. Kirshenberg, Esq., Stephen L. Saxl, Esq., Greenberg Traurig, LLP, New York, New York, William L. Allinder, Esq., Lori Connors McGroder, Esq., Shook, Hardy Bacon, LLP, Kansas City, MO., Defendant Lorillard Tobacco.
Michael V. Corrigan, Joseph M. McLauglin, Ronald M. Neuman, Adam I. Stein, Esq., Simpson Thacher Bartlett, New York, NY., Defendant BAT Industries, p.l.c.
Donald J. Strauber, David A. Wallace, Daniel Endick, Chadbourne Parke, LLP, New York, NY., Defendant BATCO.
Peter Bleakley, Esq., Murray R. Garnick, Esq., David S. Eggert, Eric Suter, Arnold Porter, Washington, DC., Peter L. Critchell, Esq. Dechert Price Rhoads, New York, NY., John B. Williams, Esq., Thomas W. Mitchell, Esq., Colher, Shannon, Rill Scott, Washington, DC., Kenneth J. Parsigian, Esq., Paul E. Namser, Esq., Goodwin, Proctor Hoar, Boston, MA., Defendant Philip Morris.
Anne E. Cohen, Esq., Harry Zirlin, Esq., Steven S. Michacis, Esq., Debevoise Plimpton, Esqs, New York, NY., Defendant Council for Tobacco Research USA, Inc.
Bruce J. Ginsberg, Esq., Davis Gilbert LLP, New York, NY., Defendant Hill Knowlton.
Jacob Horowitz, Esq., Seward Kissel LLP, New York, NY., Defendant Tobacco Institute.
Bryan A. McKenna, Esq., Jacob Medinger Finnegan, New York, NY., Defendant Smokeless Tobacco.
Arthur H. Aizley, Esq., Eric S. Sarner, Esq., Skadden Arps Slate Meagher Flom, New York, NY., Defendant U.S. Tobacco.
Leonard A. Feiwus, Esq., Kasowtiz Benson Torres Friedman, New York, NY., Defendant Liggett.
MEMORANDUM FOR DISCUSSION PURPOSES
There are various motions relating to certification of class actions and other matters returnable on June 26 at 11 A.M. In preparation for that conference it may be desirable to exchange views to increase the usefulness of that meeting.
The parties should understand that the views expressed here are designed to help structure our discussion. No decisions have been made respecting these matters. Any statements contained in this memorandum are tentative and subject to hearing from all counsel and to appropriate motions.
Since the court of appeals has the appeal in the New York Blue Cross case (No. 98-CV-3287) before it, it would seem desirable to simultaneously have before that court decisions on certification under Rule 23(f) as well as decisions on motions to dismiss, for transfer and for other relief. It would seem desirable to certify all such motions for interlocutory appeal so that the court of appeals can address the entire controversy at once.
When national class tobacco actions were commenced here this court believed that they could be settled with op-out subclasses for compensation and a non-opt-out class for punitive damages. The approach suggested for punitive damages was predicated upon the assumption that there were limits on such damages of a constitutional and factual nature (i.e. a limited asset). A total punitive damage award could, the court believed, be shared by the entire population of harmed individuals through the use of the equivalent of trusts and the cy pres doctrine, or as a percentage addition to any compensatory damages awarded in this court or elsewhere, or in a combination of the two. There appeared to be good policy and precedential reasons for not permitting punitive damages to be awarded haphazardly on a case-by-case basis. Judicial control of the amounts and distribution of punitive damages would be on an equitable basis.
Settlement negotiations have thus far proved unproductive. Settlement of cases against one of the relatively smaller producers seemed close, but last-minute collateral demands from both sides could not be resolved despite excellent attorneys on both sides and the efforts of the special master, Edwin Wesely, as well as professorial advisors for both sides, who all attempted with great skill to resolve differences.
The court is now faced with a series of complex cases, some in the form of putative class actions that look to a trial or dispositive motions for resolution.
The Asbestos related cases were tried on a test basis on a complaint by the Manville Trust (Falise v. American Tobacco, No. 99-CV-73 92). A hung jury resulted in a mistrial. Despite the court's expressed view that it had delivered a charge too heavily weighted towards defendants which could be adjusted on any retrial, Manville withdrew from the litigation. This was a justified decision. The trustees had fiduciary obligations requiring them to balance the limited prospects of a final award after appeal in favor of the trust against the enormous cost of trying these cases. The asbestos cases are sui generis since the jury must take into account the fact that most asbestos case awards are reduced, directly or indirectly, by the increased risks to workers voluntarily smoking as well as by the increased risk of harm based on synergy of smoking and breathing asbestos dust.
Realistically, it does not seem likely that any asbestos based case will be prosecuted in view of the huge litigation costs. It would seem appropriate for plaintiff in the case which remains (No. 98-CV-675) to follow the lead of Manville and withdraw. These claims are expensive to resolve for both sides. If the plaintiffs are not serious about prosecuting them, they should be dropped. The court will entertain a motion for dismissal of asbestos based claims.
The New York Blue Cross case is on appeal after trial and a jury verdict in favor of plaintiff. The question remains of what to do with the remaining Blue Cross cases.
Plaintiffs should understand by now the substantial litigation problems and costs in these cases and the limited probabilities of success. They may wish to follow Manville's lead. They must recognize the antipathy that courts of appeals, in this and other circuits, have shown for somewhat similar Erisa cases on any RICO or related theory.
Nevertheless, if plaintiffs are serious about going ahead with the remaining Blue Cross cases, the court will seriously consider trying them on a consolidated basis. Accountants and statisticians may be able to show total and breakout costs by individual plans, although the enterprise is daunting.
The court will consider denying certification and providing for a consolidated trial if plaintiffs can demonstrate in some detail a plan to proceed with discovery and trial. An outhne of the proposed discovery and of the experts' approaches will be necessary. If the court rules in plaintiffs favor it will deny any of defendants' motions to dismiss, and will and certify the denial and the consolidation for interlocutory appeal.
The ERISA-based cases seek recovery for costs resulting from employee's smoking. The problems are similar to those in the Blue Cross cases. The issues are even more difficult at this stage for two reasons: 1) The differences among ERISA plans compared to what appears to be the relative uniformity of the Blue Cross/Blue Shield plans, present serious problems of resolution in any integrated trial; and 2) None of the ERISA cases have yet been tried. The same considerations apply with respect to the last two paragraphs under the Blue Cross discussion.
A Ouasi-Oui Tam action based upon claims paid by the federal government was transferred to this court from Texas. The federal district court for the District of Columbia has suggested that a similar suit brought directly by the federal government was not viable; no appeal was taken from its interlocutory order. Despite being given repeated opportunities to oppose this statutorily authorized private action in this court, the United States has expressed no desire for a transfer or dismissal.
On the present record, the case will be ordered to go forward promptly for trial. It will be tried by one of the judges of this court. The unreimbursed expenditures of the individual claimants are a complicating factor for disclosure and trial and should not be covered in this suit.
Discovery costs may be substantially reduced by using government computer generated information and statistical analysis. Any referral to the Magistrate Judge to supervise discovery will be stayed so that a stay can be sought in the court of appeals. Appropriate motions should be made so that the court can certify decisions for interlocutory appeals.
Individual Smokers claims are presented in a variety of class actions and proposed individual test cases. It would be desirable from plaintiffs' point of view — and perhaps from defendants' as well — to dispose of the claims of individual smokers, to the extent that they are viable given the running of statutes of limitations and other restrictions.
The present component of the proposed Simon II class action of twenty-pack-year-plus smokers covers a large part of the universe of injured smokers, but not all. If the twenty pack group is treated as a subclass, it would appear to be desirable to provide for a subclass in Simon II of all lesser smokers so that the total damage now recoverable for and by smokers would be available in one action. Subclasses of the more or less seriously injured would arguably be sufficiently, even though roughly, obtained by the scope of the smoker's exposure along the twenty pack divide. A different ordering of subclasses should be considered.
A complete coverage of the universe of those directly injured by smoking would include a subclass for nonsmokers who have been injured by breathing smoke emitted by others ("passive claims"). There appears to be no representatives of such a subclass at present. In addition, there are serious doubts about the viability of such a national subclass. The statute of limitations will reduce the temporal scope of any such claims now brought. In addition, local, state and individual exclusions of smoking in airplanes, restaurants and many public and other buildings have in recent years reduced the damages from passive smoke injuries on a non-uniform basis. Injuries to children, spouses and the like within homes seem largely due to the persistence of well-warned smokers. Omission of such a subclass would not, therefore, seem to seriously compromise a universal individual's compensation or punitive damages recovery.
Passive smoking claims do not appear ripe for inclusion in view of the limited number of cases and available epidemiological studies. The court is not deciding on the merits that these claims are not includable or making any other decision on the merits of such potential claims. If it turns out at a later date that these passive claims are viable, persons harmed by second-hand smoke or other third-party claimants may be in a position to seek to share in any punitive damage fund on an equitable basis.
Two major problems have been presented with respect to the manageability of an individual smoker class action. They are one, the variability of state law requiring too many subclasses for ajury to handle and, two, detailed differences among members of the class based on such factors as when they started to smoke, why, when they stopped and why, how defendants actions or inactions affected their decisions, how much damage they suffered and whether various defenses are available against individuals. Neither the legal conflict of law nor the factual sets of problems make management insuperable.
As to the conflict of laws issue, the court has already expressed the view that New York may be considered the center of gravity for conflict purposes in this class action so that New York law applies. There may be some applicable statute of limitations, caps or amounts, or exclusions by individual states that can be taken care of by appropriate charges and statistical analyses.
While there is some precedent for treating the varieties of state law in the form of subclasses, this court remains dubious about that approach in as complex a litigation setting as the present one. Should the court of appeals for the Second Circuit or the New York Court of Appeals reject a one state approach, but leave the issue of possible grouping states open for conflicts purposes, the court will consider how these differences in the law can be taken into account in a statistical analysis.
The contention that each member of the class has to be dealt with separately for factual purposes would, if accepted, lead to an impossibly complex suit that a single jury could not handle. As demonstrated in theBlue Cross trial, however, statistical analysis and a thorough set of available demographic and epidemiological studies of tobacco use and its effects can permit the case to be tried on a statistical basis. Within the parameters set by the court of times of liability and other factors it might be possible for statisticians and others to compute the total recoverable damages by this universe of smokers.
The court is prepared to consider certifying Simon II along the lines set out above.
There remains the problem of set-offs, if any, that the parties should account for. Should the defendants be given credit for cases already tried, and if so, how? Should defendants be given credit for the settlement with the State Attorneys General and, if so, how? Credit for the Attorney General settlements seems somewhat dubious in a litigated case of individual direct claims since the Attorney General litigation appears to have been based upon third party claims of the states rather than claims on behalf of the smokers themselves. In a settled case, offsets would arguably be more easily accommodated. It may be that set-offs can be handled as a matter of law by the court rather than by the jury, in which case the issue would not interfere with a jury trial.
Because of the expense of notification, no notification should be required until the court of appeals has decided the issues of certification and, following appeal, the trial court has clarified details of the class.
No claims for future injuries should be adjudicated. The only claimants who should be allowed into the class will be those whose claims are ripe at a cut-off date which can be approximately the date trial is scheduled to begin. Future claims would overcomplicate the case. In any event they appear of decreasing importance in view of widespread warnings now available.
The individual class should probably also provide for a subclass of those claiming punitive damages. Since the practice of allowing such damages varies by states this may, arguably, be a subclass slightly different from the universe of the claimant subclasses. Punitive damages, if any, would depend upon the theory of recovery.
While the punitive damage claimants could be treated as part of a non-opt-out class, it probably would be simpler to allow opt-out so that members of the compensatory subclasses could eschew the class action completely. They might, however, then face the danger that the total punitive damages allowed in Simon II (particularly given the court's greater control over punitive damages) might come up to the maximum permitted. allowing no punitive damages in the individual opt-outers' suits for compensation; the role of estoppel in this developing area of punitive damage law is unclear.
There remains the problem of allocation among members of the class of the total damages, if any. The contention might be made that while statisticians can compute — and jurors find — total allowable damages, the allocation would have to be on an individual basis, requiring millions of possible trials.
The allocation of the total compensatory damages and punitive damages to individuals is essentially a problem for equity and not the law. It would seem appropriate to provide for equitable matrixes that would allocate the recovery to individuals using criteria such as disease, age, time of commencing and ceasing of smoking, and perhaps law of the state of residence. (Defendants in prior mass cases have been concerned with total liability, not allocation to individual claimants except as that affected the total judgments and estoppel aspects.) This result can readily be obtained through utilization of an agency appointed under the authority and supervision of the court. It is essentially what happens even in the "settlement" of individual mass tort cases where payments by defendants are made gradually out of a stream of income. Conceivably that arrangement of gradual payment would be possible as a matter of equity in any payment of tobacco awards.
To sum up, the cases now pending and their proposed dispositions at the next hearing on dispositive and certification motions might be, if the above analysis is followed:
1. Raymark Industries v. American Tobacco Co., 98 CV 675: Set for trial or dismissed;
2. National Asbestos Workers Medical Fund v. Philip Morris Incorporated, 98 CV1492: Dismiss or consolidate with other health fund classes for discovery and trial; deny certification of class;
3. Blue Cross and Blue Shield of New Jersey v. Philip Morris Incorporated, 98 CV 3287: Set for additional discovery and trial on a consolidated basis following resolution of the present Blue Cross case by the court of appeals or dismissed;
4. Sturgeon v. Philip Morris (Simon I), 99 CV 1988: Realign in Simon II with respect to subclasses and certify Simon II;
5. Bergeron v. Philip Morris Incorporated, 99 CV 6142: Dismiss or consolidate with other health fund cases for discovery and trial; deny certification of class;
6. Decie v. American Tobacco, 00 CV 2340: Realign and certify in Simon H with respect to subclasses omitting such damages as increased premiums or non-insurance;
7. Mason v. American Tobacco, 00 CV 4442: Set for trial;
8. Ebert v. Philip Morris, 00 CV 4632: Realign and certify in Simon II with respect to subclasses;
9. In re Simon II, 00 CV 5332: Realign with respect to subclasses and certify;
10. Browne v. Philip Morris, 02 CV 5909: Individual trials denied; realign and certify in Simon II with respect to subclasses.