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Private entities, such as union health and welfare funds, have recently filed cost recovery actions against tobacco companies, seeking to hold them liable for the smoking-related costs incurred by the funds. The funds have alleged in these cases that they were defrauded by the tobacco companies and related industry organizations into paying for their participants’ smoking-related illnesses and prevented from informing the funds’ participants about safer smoking and smoking-cessation products. The funds allege a variety of claims under state and federal law. Fraud and conspiracy are the underpinnings of plaintiffs’ federal statutory claims, brought under the antitrust laws (15 U.S.C. � 1) and the civil Racketeering Influenced Corrupt Organizations (RICO) statute (18 U.S.C. � 1962). The state law claims are for misrepresentation, breach of “special duty,” unjust enrichment, negligence, breach of warranty, strict liability and conspiracy, as well as unfair trade practices, consumer fraud, false advertising and state RICO and antitrust violations. THE REMOTENESS DOCTRINE The courts so far have unanimously rejected these mass expense actions as running contrary to the provisions of the remoteness doctrine. The remoteness doctrine arises from the basic concept of proximate cause, which embodies two distinct requirements — a plaintiff’s injury must be foreseeable and it must be direct. If an injury is “indirect” or “remote,” it is nonactionable. The U.S. Courts of Appeal for the Second, Third and Ninth Circuits have each upheld the tobacco industry’s position that “mass expense actions” are barred by the application of the remoteness doctrine. Oregon Laborers-Employers Health & Welfare Trust Fund v. Philip Morris Inc.,185 F.3d 957, 1999 U.S. App. LEXIS 15711 (9th Cir. 1999 ); Laborers Local 17 Health & Benefit Fund v. Philip Morris Inc.,172 F.3d 223, 1999 U.S. App. LEXIS 19576 (2d Cir. 1999 ); Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris Inc.,171 F.3d 912, 1999 U.S. App. LEXIS 5624 (3d Cir. 1999). These new rulings are crucial precedents for American industry, serving to keep the floodgates of litigation closed to claimants who seek to assess broad social costs of illness, accident and injury against remote product manufacturers. The issue on appeal in each of the three “welfare fund” cases was whether the plaintiffs’ primary claims were too remote from any alleged wrongdoing of defendants to be redressable under either state or federal law. This basic proximate cause inquiry was complicated by the allegations of intentional tort, the packaging of plaintiffs’ claims in RICO and antitrust terms, and the addition of state law claims based on fraud, special duty, unjust enrichment, strict liability and breach of warranty. The conclusions of the courts, however, were unanimous: The claimed injuries of the plaintiff funds were too remote from any wrongdoing of the defendants to be redressable. As the court reasoned in Oregon Laborers: “However compelling [plaintiffs'] charges may be, there are very sound judicial policy reasons for limiting legal actions to those parties most directly injured by the harmful conduct. These policies are not new and have lengthy historical roots in our jurisprudence. To allow plaintiffs to maintain actions that are entirely dependent upon the harm suffered by others threatens chaos for the judicial system, especially where others may (and have) filed their own actions and are capable of recovering a full range of damages, including the medical costs sought here.” 1999 U.S. App. LEXIS 15711, at *13. In each of the welfare fund cases, the courts initially determined whether plaintiffs had standing to maintain a civil action under RICO and antitrust laws. The requirements for standing are quite similar for both of these actions, as both provide a private right of action for damages only to those individuals “injured in [their] business or property by reason of” a violation of the law’s substantive provisions. Oregon Laborers, 1999 U.S. App.LEXIS 15711 at *5; see also Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 268 (1992); 18 U.S.C. � 1964 (c) (RICO); 15 U.S.C. � 15(a) (antitrust). Both causes of action also require that the alleged violation of the law be a “proximate cause” of the injury suffered. Oregon Laborers, supra; see Holmes, 503 U.S. at 268 (RICO); Blue Shield v. McCready, 457 U.S. 465, 477 (1982). While a direct relationship between the injury and the alleged wrongdoing is not the sole requirement of RICO and antitrust proximate causation, it has been recognized as “one of its central elements.” Holmes, 503 U.S. at 269 (citing Associated General Contractors v. California State Council of Carpenters,459 U.S. 519, 540 (1983). “Thus, a plaintiff who complained of harm flowing merely from the misfortunes visited upon a third person by the defendant’s acts was generally said to stand at too remote a distance to recover.” Holmes,503 U.S. at 268-69. THE REMOTENESS TEST In Associated General Contractors v. California State Council of Carpenters, 459 U.S. at 537-38, 540, 542-45, the U.S. Supreme Court established the test to determine whether alleged injuries were “too remote” to allow for recovery under RICO and the antitrust laws. The elements to be considered in making this determination are (1) the causal connection between the defendant’s wrongdoing and the plaintiff’s harm; (2) the specific intent of the defendant to harm the plaintiff; (3) the nature of the plaintiff’s alleged injury (and whether it relates to the purpose of the antitrust laws, i.e., ensuring competition within economic markets); (4) “the directness or indirectness of the asserted injury”; (5) whether the “damage claim is �highly speculative”; and (6) whether the courts will have to adopt complicated rules apportioning damages to obviate the risk of multiple recoveries. In the “welfare fund” cases, the courts applied the Associated General Contractorstest and determined that to permit such claims would allow highly speculative and complex claims that would be virtually impossible for the funds to prove with any certainty. “In this light, the direct injury test can be seen as wisely limiting standing to sue to those situations where the chain of causation leading to damages is not complicated by the intervening agency of third parties (here, the smokers) from whom the plaintiffs’ injuries derive.” Laborers Local 17, 1999 U.S. App. LEXIS 19576, at *30-31; see also Oregon Laborers, 1999 U.S. App. LEXIS 15711, at *7-9; Steamfitters, 1999 U.S. App. LEXIS 5624, at *17. The courts further recognized that the use of aggregated statistical proof would fail to isolate the portion of smoking-related expenses caused by the defendants’ alleged wrongful conduct, as opposed to illness caused by lawful sales of a lawful product. This inability to segregate damages would make it impossible to locate and avoid duplicating damages paid to the smokers themselves or to other health insurers that may also have paid a portion of the same smokers’ expenses. The Steamfitterscourt noted that relying on epidemiological studies that were never designed to draw this legal distinction, and by transposing data from one disparate population to another, plaintiffs sought to avoid the necessity of proving that alleged misconduct caused actual injury to the specific people whose medical expenses were in question. 1999 U.S. App. LEXIS 5624, at *18-19. Furthermore, there is no need for deterrence, as the direct claimants have sufficient independent incentive to pursue their own causes of action to redress the same alleged misconduct. Oregon Laborers, 1999 U.S. App.LEXIS 15711 at *7. Even though individual smokers cannot maintain antitrust and RICO actions (personal injury claims are not actionable under either statute), their individual causes of action will remedy the alleged harm done by defendants’ wrongful conduct. Laborers Local 17, 1999 U.S. App.LEXIS 19576, at *35-36; see also Oregon Laborers, 1999 U.S. App.LEXIS 15711 at *7 (smokers “are more direct victims of the alleged wrongful conduct and�can be counted on to vindicate the injury caused by defendants’ alleged wrongful conduct”). By cutting off claims that rely on indirect and speculative theories of causation, the remoteness doctrine parallels the constitutional requirement that proof of injury be linked to the individuals whose claims are actually in issue, not to statistical surrogates. In this way, the remoteness doctrine dovetails with constitutional restrictions on the use of statistical “sampling” and “extrapolation” in mass tort cases and ensures that the most direct claim can be redressed. WILL THE TREND SPREAD TO OTHER INDUSTRIES? Industries other than the tobacco industry may soon face similarly broad cost recovery suits. Whether such actions will succeed will depend largely on whether the courts continue to apply the remoteness doctrine. It is evident that failure to apply this doctrine to these types of actions would open the floodgates to new litigation and permit suits to be filed by any employer or insurer that has paid the medical expenses of an employee or an insured. Additionally, to allow plaintiffs to maintain actions that are entirely dependent on the harm suffered by others would impose unreasonable and unjustifiable stress on an already overburdened judicial system. D. Jeffrey Campbell is managing partner and Jennifer Fisher Weiss is an associate with Porzio, Bromberg & Newman, P.C., in Morristown, N.J. Telephone: (973) 538-4006.

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