Opinion
No. C-99-2621 MHP
November 12, 1999
MEMORANDUM AND ORDER
Plaintiffs are nineteen Native American Tribes with governing boards duly recognized by the Secretary of the Interior and one non-profit corporation consisting of Native American pueblos also with a governing board duly recognized by the Secretary of the Interior. On June 2, 1999, plaintiffs, on behalf of themselves and others similarly situated, filed this civil rights class action for declaratory, injunctive and monetary relief against defendants Philip Morris, Incorporated, R.J. Reynolds Tobacco Holdings, Inc., R.J.
Reynolds Co., American Tobacco Co., Inc., Brown Williamson Tobacco Corp., B.A.T. Industries, P.L.C., and Lorillard Tobacco Co., Inc. In their complaint, which arises from defendants' actions in reaching a "universal" settlement with forty-six states and five territories of the United States, plaintiffs seek relief to secure rights, privileges and immunities established by the Thirteenth and Fourteenth Amendments of the United States Constitution, for the deprivation of property in violation of the due process clause, for violation of The Civil Rights Acts of 1866 and 1871, and for interference with tribal authority and sovereign rights. Plaintiffs also filed a motion for preliminary injunction against defendants. On August 5, 1999, certain defendants filed a motion to dismiss plaintiffs' complaint. The court stayed the preliminary injunction motion in order to first resolve defendants' motion to dismiss. Now before the court is defendants' motion to dismiss. Having considered the parties' arguments at the hearing before this court and their submissions, the court now enters the following memorandum and order.
Five of the seven defendants have joined in this motion to dismiss: Philip Morris, Inc., R.J. Reynolds Tobacco Co., Brown Williamson Tobacco Corp. (both individually and as successor in interest by merger to the American Tobacco Co.), and Lorillard Tobacco Co.
BACKGROUND
Unless otherwise noted, the background facts are taken from plaintiffs' complaint. At the motion to dismiss stage, the court is required to take all facts as alleged by plaintiffs' as true.
On November 23, 1998, it was announced that the major Tobacco Manufacturers had reached a "universal" settlement with forty-six states and five territories of the United States. These states and territories (the "Settling States") and the Tobacco Manufacturers (defendants in this action are referred to as the Participating Manufacturers in the Master Settlement Agreement) entered into one agreement to settle and resolve all existing and future claims against defendants primarily relating to the sale, manufacture and marketing of cigarettes and smokeless tobacco products. This agreement, known as the Master Settlement Agreement ("MSA"), provides for, inter alia, (1) payments to the Settling States in excess of $200 billion through the year 2025 by defendants; (2) prohibitions on certain advertising and sponsorships by defendants; (3) reduced "youth access" to tobacco products; and (4) funding by defendants of a program on public education, see MSA, § VI(b), (c) at 42. The MSA states that the payments and prohibitions "are in settlement of all the Settling States' antitrust, consumer protection, common law negligence, statutory, common law and equitable claims for monetary, restitutionary, equitable and injunctive relief by the Settling States." See MSA, § XVIII(d) at 131.
The five territories included in the Master Settlement Agreement are American Samoa, the Northern Mariana Islands, Guam, the U.S. Virgin Islands and Puerto Rico.
The MSA authorizes the formation of an escrow account to which defendants will make payments according to a schedule set out in the MSA. Distribution of funds to the Settling States will be based on a formula agreed to by the Settling States' Attorneys General and defendants requiring annual payments to begin approximately April 15, 2000. This formula is based in part on state population or census data which includes the population of Native Americans.
Plaintiffs consist of a class of Native Americans who were not parties to the MSA. Plaintiffs contend that they were unfairly and discriminately excluded from the MSA. In addition, they allege that they are deprived of the benefits of the MSA, while at the same time are subject to certain restrictions and prohibitions of the MSA. Although the MSA expressly states that the "Settling States do not purport to waive or release any claims on behalf of Indian Tribes," MSA, § XII(a)(6) at 114, plaintiffs allege that the MSA compromises their rights and privileges and infringes on their tribal sovereignty rights due to the following provision:
Plaintiffs allege that at least one representative of the plaintiff class, Table Bluff Reservation, is domiciled in this district (in Humboldt County).
Defendants request the court to take judicial notice of the Master Settlement Agreement ("MSA").
The court finds that the accuracy and authenticity of the MSA cannot be disputed by the parties. In addition, the MSA is a document of the type capable of ready determination by resort to sources whose accuracy cannot be reasonably questioned. See Fed.R.Evid. 201(b). The court can take judicial notice of facts beyond the complaint and matters of public records such as pleadings in another action and records and reports of administrative bodies. Anderson v. Calif. Republican Party, No. C-91-2091 MHP, 1991 WL 472928, *2 (N.D.Cal., Nov. 26, 1991), aff'd, 977 F.2d 587 (9th Cir. 1992) (table). "`[D]ocuments whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6) motion to dismiss.'" Fecht v. The Price Co., 70 F.3d 1078, 1080 n. 1 (9th Cir. 1995), cert. denied, 517 U.S. 1136 (1996) (quoting Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir.), cert. denied, 512 U.S. 1219 (1994)); see Emrich v. Touche Ross Co., 846 F.2d 1190, 1198 (9th Cir. 1988) (holding that a district court's taking notice of the "proceedings and determinations" of prior related litigation does not necessitate treating the Rule 12(b)(6) motion as one for summary judgment).
Accordingly, although the court takes judicial notice of the MSA, the motion to dismiss is not converted into a motion for summary judgment.
Actions Within Geographic Boundaries of Settling States. To the extent that any provision of this Agreement expressly prohibits, restricts, or requires any action to be taken "within" any Settling State or the Settling States, the relevant prohibition, restriction, or requirement applies within the geographic boundaries of the applicable Settling State or Settling States, including, but not limited to, Indian country or Indian trust land within such geographic boundaries. MSA, § XVII(ff) at 147.
This provision applies to any action to be taken by defendants as required under the MSA, such as restrictions on advertising, prohibitions on marketing tobacco products to teenagers and prohibitions on sponsorships by defendants.
In their complaint, plaintiffs bring eight separate claims. The first three are premised on section 1983. Plaintiffs allege that defendants are state actors who, while acting under color of state law, (1) violated and interfered with plaintiffs' tribal sovereignty; (2) violated plaintiffs' due process rights; and (3) violated plaintiffs' equal protection rights. Plaintiffs allege that through the MSA, defendants "have interfered with existing and future contracts between Plaintiffs and Class members and the Defendants and their agents." Cmplt. ¶ 73. In addition, plaintiffs allege that the MSA is "designed to significantly impact citizens, resulting in the arbitrary, unfair and unreasonable deprivation of the Plaintiffs' and members of the Class' property and rights for no legitimate purpose and without due process of law." Id. ¶ 81. This deprivation, according to plaintiffs, took the form of a tax on "Native American tobacco consumers to fund a settlement from which Native American Tribes derive no benefit." Id. ¶ 85. Further, plaintiffs contend that "[i]mplicit in the Master Settlement Agreement is the exclusion of Native American Tribes from the Master Settlement Agreement benefits, in whole or in part, because of their Native American heritage." Id. ¶ 93. In addition to their section 1983 claims, plaintiffs also bring claims for violations of sections 1981 and 1985(3), a claim for violation of the Privileges and Immunities Clause and a request for both declaratory and injunctive relief.
LEGAL STANDARD
A motion to dismiss for failure to state a claim will be denied unless it appears that the plaintiff can prove no set of facts which would entitle him or her to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Fidelity Financial Corp. v. Federal Home Loan Bank of San Francisco, 792 F.2d 1432, 1435 (9th Cir. 1986), cert. denied, 479 U.S. 1064 (1987). All material allegations in the complaint will be taken as true and construed in the light most favorable to the plaintiff. NL Industries, Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). Although the court is generally confined to consideration of the allegations in the pleadings, when the complaint is accompanied by attached documents, such documents are deemed part of the complaint and may be considered in evaluating the merits of a Rule 12(b)(6) motion. Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir.), cert. denied sub. nom. Wyoming Community Dev. Auth. v. Durning, 484 U.S. 944 (1987).
On any other motion to dismiss under Rule 12(b), the court may consider matters outside the pleadings, but must accept as true all material allegations of the complaint and construe the complaint in favor of the plaintiff. See Fed.R.Civ.P. 12; Warth v. Seldin, 422 U.S. 490, 501-02 (1975) (considering the issue of standing). Each ground for dismissal will be considered in turn.
DISCUSSION
Defendants argue that plaintiffs' complaint must be dismissed because it is based on nothing but conclusory allegations of discrimination which are contradicted by the language of the MSA. Second, defendants argue that plaintiffs lack constitutional standing to assert their claims. Third, defendants argue that plaintiffs' claims based on the MSA are barred by the Noerr-Pennington doctrine. Fourth, defendants argue that plaintiffs' claims brought pursuant to section 1983 must be dismissed because there is no state action here. Finally, defendants contend that each of plaintiffs' eight claims fail to state a claim upon which relief may be granted. Because defendants' arguments regarding plaintiffs' standing to bring these claims may be determinative of the action, the court must first address this issue.
I. Standing
Under Article III, the Constitution limits the federal court's power to only allow the resolution of "cases" and "controversies." Article III's requirements are not satisfied "merely because a party requests a court of the United States to declare its legal rights, and has couched that request for forms of relief historically associated with courts of law in terms that have a familiar ring to those trained in the legal process." Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 471 (1982). A component of this essential doctrine is that a federal court's jurisdiction is premised on a litigant's threshold showing that it has standing to sue. The plaintiff has the burden of establishing three requirements in order to meet the "irreducible constitutional minimum of standing." Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). First, plaintiff must have suffered an injury in fact, "an invasion of a legally-protected interest which is (a) concrete and particularized; and (b) actual or imminent, not `conjectural' or `hypothetical.'" Id. (internal quotations and citations omitted). Second, plaintiff must establish "a causal connection between the injury and the conduct complained of — the injury has to be fairly traceable to the challenged action of the defendant, and not the result of some third party not before the court." Salmon v. Pacific Lumber Co., 30 F. Supp.2d 1231, 1237 (N.D.Cal. 1998). Third, plaintiff must show a "substantial likelihood" that its injury will be redressed by a favorable decision by the court. Simon v. Eastern Ky. Welfare Rights Organization, 426 U.S. 26, 38 (1976). In addition to the constitutional requirements, federal courts have required litigants to meet certain prudential principles. As such, a litigant must generally assert his own legal rights and interests, and not those of third parties. See Warth, 422 U.S. at 499. Additionally, a court will not adjudicate "abstract questions of wide public significance" which are merely "generalized grievances" shared by many, and which should be addressed in the legislature. Id. at 499-500. Finally, where Congress or the Constitution is the source of the alleged legal violation, the Supreme Court has held that a plaintiff must also meet a prudential standing requirement that its claims fall within the "zone of interests" sought to be protected or regulated by the statute or constitutional guarantee in question. See Bennett v. Spear, 520 U.S. 154, 117 S.Ct. 1154, 1161 (1997).
As a preliminary matter, plaintiffs contend that they have standing to sue both on their own behalf as a federally recognized tribal government to protect their own sovereign and proprietary interests, as well as in their capacity as parens patriae. Parens patriae standing rests in a state or other sovereignty to protect a set of interests that the sovereign has in the well being of its populace. See Alfred L. Snapp Sons, Inc. v. Puerto Rico, 458 U.S. 592, 601-02 (1982). To have standing under this doctrine, the State must assert an injury characterized as a "quasi-sovereign" interest. Id. at 601. For example, in Alfred L. Snapp Sons, Inc. v. Puerto Rico, 458 U.S. 592 (1982), Puerto Rico had parens patriae standing when it sued a private company alleging the company had violated certain federal statutes. Puerto Rico argued that these statutes guaranteed the interests of Puerto Rico residents in the full and equal participation of the federal employment service scheme. Id. at 609. Similarly, plaintiffs here contend that they have parens patriae standing to pursue the quasi-sovereign interests (1) in the health and well being, both physical and economic, of their tribal members, and (2) in not being discriminately denied rights and benefits under federal statutes. See id. at 607. While the court finds that plaintiffs' standing may be analogous to Puerto Rico's parens patriae standing under these circumstances, plaintiffs have not alleged parens patriae standing in their complaint or in any other pleadings properly before this court on a motion to dismiss.
Rather, the complaint states that plaintiffs bring these claims "on behalf of themselves and members of the Class." Cmplt ¶ 4. The court finds, however, that provided plaintiffs can show the three constitutional limits on standing, as well as the prudential limits on standing for their asserted claims, as set forth above, their standing can be viewed as analogous to organizational standing. Thus, the tribal plaintiffs have standing to sue both "`in [their] own right . . . to vindicate whatever rights and immunities the [Tribes] itself may enjoy,' and in so doing, `may assert the rights of its members, at least so long as the challenged infractions adversely affect its members' associational ties.'" Salmon, 30 F. Supp.2d at 1238 (quoting Warth, 422 U.S. at 511).
A. Standing to Complain of Exclusion from the MSA and its Benefits
Defendants argue that plaintiffs lack constitutional standing to complain of exclusion from the MSA or its benefits because they cannot show injury in fact or any causal connection between the MSA and harm to plaintiffs. Defendants contend that because the agreement expressly preserves plaintiffs' rights, there is no injury in fact. Plaintiffs respond that the MSA does not "preserve" any of their claims because defendants and the Settling States have no authority to waive or release plaintiffs' claims and, therefore, that provision is a legal nullity. The court agrees that to the extent plaintiffs contend that they have been excluded from the MSA and deserve monetary benefits from the MSA, they cannot show injury in fact.
Even assuming that the MSA's provision preserving plaintiffs' claims are — as plaintiffs allege — a legal nullity, plaintiffs' claims are, therefore, still preserved because there is no provision in the MSA indicating that it seeks to settle any claims the Tribes may have against defendants. Plaintiffs themselves acknowledge that defendants and the Settling States have no authority to waive or release the tribes' claims. Therefore, the court finds that plaintiffs cannot show they have suffered from their exclusion in order to receive a piece of the MSA-pie. Plaintiffs, either the Tribes themselves or the individual tribal members, may still bring their own claims against defendants. At the hearing on this motion, plaintiffs argued that although they can still technically bring their own claims against defendants, such claims have been compromised by the MSA.
For example, plaintiffs' counsel explained that if the Tribes wanted to bring false advertising claims against defendants, defendants could now argue that there are no false advertisements because they are in compliance with the MSA. This is an absurd argument, and the court fails to see how this highly speculative contention constitutes an injury for purposes of the constitutional standing doctrine. If plaintiffs have false advertising claims they are not precluded from bringing them. Otherwise, plaintiffs' argument suggests that the settlement should be enjoined so that defendants are permitted to continue false advertising practices and to give plaintiffs a chance for a claim.
Plaintiffs further argue that their exclusion from the MSA was discriminatory and that itself constitutes an injury. Assuming this is a sufficient injury for purposes of the standing doctrine, the court is not convinced that plaintiffs have shown that this injury is fairly traceable to any action by defendants.
Defendants entered into the MSA with the Settling States to resolve the lawsuits pending against them in numerous state courts around the country. Plaintiffs were neither parties to any of these lawsuits, nor did they seek to intervene in these state court actions. Plaintiffs argue, however, that certain parties to the MSA had not initiated lawsuits against defendants yet were included in the settlement. Additionally, plaintiffs allege that they too had pending lawsuits against defendants, but were still excluded. Yet, plaintiffs' claims against defendants are different from those asserted by the states or those that could be asserted by the other entities who had not brought suit but were included in the MSA. Although some of the claims brought by the Settling States are also claims that the Tribes could have brought (and can still bring even after the execution of the MSA), the common element of the Settling States' released claims are for reimbursements for Medicare funds. Plaintiffs cannot bring such claims, only the federal government can bring such claims because unlike the Settling States, plaintiffs have not incurred Medicare expenditures.
The MSA expressly provides that it was entered into "to settle and resolve with finality all Released Claims against the Participating Manufacturers and related entities." MSA at 1. In addition, it states that "the Settling States and the Participating Manufacturers wish to avoid the further expense, delay, inconvenience, burden and uncertainty of continued litigation (including appeals from any verdicts), and, therefore, have agreed to settle their respective lawsuits. Id. at 2.
The MSA provides the following recital: "WHEREAS, more than 40 States have commenced litigation asserting various claims for monetary, equitable and injunctive relief against certain tobacco product manufacturers and others as defendants, and the States that have not filed suit can potentially assert similar claims." MSA at 1 (emphasis added).
Plaintiffs also contend that have been injured by their exclusion of the benefits of the MSA. Yet, plaintiffs do not point to any provision in the MSA or otherwise which provides that Native Americans are excluded from receiving any of the benefits of the MSA. While it is true that the money is provided directly to the Settling States and not to any tribes, the MSA does not dictate how the Settling States can spend the funds. The Tribal members, like any other citizen of the state, are entitled to share in the funds distributed to the Settling States. The Settling States may very well use the money to fund state projects or services that benefit or are used by tribal members. Therefore, the court finds that plaintiffs do not have standing to complain of exclusion from the MSA and its monetary benefits.
B. Standing to Complain of the Restrictions and Prohibitions of Section XVII(ff)
Plaintiffs' claims, however, do not merely rest on their exclusion from the MSA, but also from the fact that the MSA's restrictions and prohibitions are applicable on their land. See MSA § XVII (ff). For example, plaintiffs contend that the MSA interferes with and prevents their enjoyment of contractual relationships regarding Brand Name Sponsorship, Outdoor Advertising and Transit Advertising. Cmplt. ¶ 114. The parties inform the court that these restrictions and prohibitions, unlike the monetary distributions which have not yet been approved by all the Settling States, are already in place. Plaintiffs allege that these restrictions and prohibitions infringe on their tribal sovereignty interests, as well as their contracts and other property. However, plaintiffs do not point to any contracts between themselves and defendants or third parties that have been harmed or that are in imminent danger of being harmed. Defendants maintain that they do not plan on breaking any leases on billboard space or infringing any contracts with plaintiffs.
The court notes that although it has already found that plaintiffs do not have standing to complain of their alleged exclusion from the monetary benefits of the MSA, it is questionable whether such a claim is even ripe for consideration. The court is aware that the money distributions are not scheduled to begin until at least June of next year. See Gordon Fairclough, States are Planning Assorted Uses for Tobacco-Settlement Funds, Wall St. J., Aug. 24, 1999, at A4. In fact, the money cannot be paid out until courts in eighty percent of the states that will receive eighty percent of the award approve the settlement. See City to Give Up on Tobacco Funds, N YL.J., Aug. 17, 1999, at 2. Federal courts may only act in the face of a justiciable case or controversy.
See Benton v. Maryland, 395 U.S. 784, 788 (1969). The court questions whether "there is a substantial controversy, between the parties having adverse legal interests, of sufficient immediacy and reality" to warrant the exercise of jurisdiction by the court. Lake Carriers Ass'n. v. MacMullan, 406 U.S. 498, 506 (1972).
Therefore, plaintiffs have not shown an injury in fact fairly traceable to defendants' action to confer constitutional standing to assert such claims. Further, plaintiffs' contention that their tribal sovereignty interests would be violated if defendants sublease their interest in the billboards to the states is highly speculative. Plaintiffs admit that defendants have not taken action to sublease any space, nor have they shown that any action is imminent. At such time as when billboards and other advertisements are placed on tribal land without tribal approval, plaintiffs may be able to bring an action against the infringing parties.
Presently, however, the court finds that plaintiffs have not met the constitutional requirements of showing an actual injury redressable by the court. Therefore, plaintiffs cannot base their claims on the restrictions and prohibitions of section XVII(ff) of the MSA.
C. Standing to Complain of the Price Increase on Tobacco Products
Defendants also argue that plaintiffs have no standing to pursue claims premised on the allegation that the increase in tobacco prices after defendants entered into the MSA has created a de facto tax or burden on plaintiffs. Defendants argue that plaintiffs do not have standing to assert claims based on this allegation because they cannot assert facts that they themselves suffered an actual injury from the price increase as compared to an "abstract concern" about the increase. Plaintiffs again allege that they have parens patriae standing as to these claims in order to promote their sovereign interests in the protection, health and well being of their tribal members. The court has already found that plaintiffs have not alleged such standing in their complaint. Assuming arguendo that plaintiffs had alleged such standing, the court finds that plaintiffs have not shown, and cannot show, that the "injury" of the tax is "to a sufficiently substantial segment of the population" so as to give it standing to sue as parens patriae. Alfred L. Snapp Sons, 458 U.S. at 607; see also Alabama and Coushatta Tribes of Texas v. Trustees of Big Sandy Indep. Sch. Dist., 817 F. Supp. 1319, 1327 (E.D.Tex. 1993) (finding that Tribes did not have parens patriae standing to sue school district about restrictions on hair length of male students), remanded without opinion, 20 F.3d 469 (5th Cir. 1994). Still, plaintiffs contend they have alleged a sufficient injury to themselves based on defendants' actions in increasing the price of its products. Plaintiffs argue that the increase infringes their tribal sovereignty, a legally-protected interest which comports with standing principles. See Moe v. The Confederated Salish and Kootenai Tribes, 425 U.S. 463, 468 n. 7 (1976). In Moe, the Supreme Court noted that the tribe there had standing due to a "discrete claim of injury" from the state taxation on cigarettes which the tribes alleged could not be imposed on them. See id. Here, however, unlike in Moe, the price increase is not an actual state tax; rather, it is a price increase — a mere cost of doing business. See Hise v. Philip Morris, Inc., 46 F. Supp.2d 1201, 1209 (N.D.Okla. Apr. 29, 1999).
The court notes the absurdity in plaintiffs' argument that its fight against restrictions on tobacco advertising and marketing, as well its fight against the price increase on tobacco products, would promote the health and well-being of its members.
Even though plaintiffs' allege that the price increase is a de facto tax, the court does not find that this provides a constitutional injury in fact to meet the standing limits. Further, the Tribes themselves do not purchase tobacco products and would not be harmed by the price increase. Although tribal members do purchase tobacco products, they — like other citizens of the state — are eligible for the benefits of the MSA and, therefore, the price increase does not constitute either a penalty or a cognizable injury. In addition to plaintiff's failure to show injury, plaintiff fails to meet the prudential standing limits because its claims are merely "generalized grievances." Warth, 422 U.S. at 500. Plaintiffs are attempting to "convert the judicial process into `no more than a vehicle for the vindication of the value interests of concerned bystanders.'" Valley Forge Christian College, 454 U.S. at 473 (quoting United States v. SCRAP, 412 U.S. 669, 687 (1973)). Finally, the court notes that even if plaintiffs have standing to complain of the price increases, the court finds that — to the extent they allege that the price increases constitute a deprivation of their property — plaintiffs cannot show they have a property interest in the price of cigarettes. See id. at 1209 ("plaintiffs clearly have no recognized property interest in paying a certain sum to a retailer to purchase a tobacco product"). Plaintiffs' due process claim may not be based on the price increase.
Based on the foregoing, the court finds that plaintiffs do not have standing to complain of exclusion from the MSA or its benefits, to challenge the restrictions and prohibitions of section XVII(ff) of the MSA or to contest the price increases on tobacco products. Because all eight of plaintiffs' claims rests on one or all of these premises, all of plaintiffs' claims must be dismissed.
CONCLUSION
For the foregoing reasons, the court hereby GRANTS defendants' motion to dismiss.
IT IS SO ORDERED.