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A Brooklyn federal jury on Monday rejected racketeering and civil fraud claims against the tobacco industry brought by Empire State Blue Cross and Blue Shield. The verdict was a severe loss for Empire Blue Cross and Blue Shield, which had sought $800 million in damages on its claim that cigarette makers should be held responsible for the increased health care costs stemming from industry misrepresentations about the dangers of smoking. The victory was not complete, however, as that same jury awarded $17.8 million to Empire Blue Cross and Blue Shield toward the costs of treating New York smokers — an award made after the jurors found the tobacco companies had violated the New York State Consumer Protection Act. The verdict came at the close of a 10-week trial before Senior Judge Jack B. Weinstein of the U.S. District Court for the Eastern District of New York. It was the first of several suits filed by 20 state-based Blue Cross and Blue Shield plans nationwide. Had Blue Cross and Blue Shield, which insures four million New Yorkers as well as employees of multistate employer groups, prevailed under the racketeering claims, the $800 million in damages could have been tripled. But the jury rejected the health insurer’s argument that smokers had relied upon statements made by the tobacco companies on the dangers of smoking. “It’s not a total victory, but it’s pretty darn close,” said defense lawyer Peter Bleakley of Arnold & Porter. “Even under the [consumer protection] claim, they only recovered about 2 percent of what they were looking for.” During closing arguments, Bleakley had told the jury that “[t]he fact of the matter is that the evidence has shown that the American people at large, and Empire subscribers, were aware that cigarette smoking is dangerous, and that it can kill and [they] have been aware of it for decades.” Plaintiffs’ lawyer Vincent FitzPatrick of Dewey Ballantine argued in closing that cigarette makers had “lied to the American public.” “More Empire members smoked,” he told the jury. “There was more disease, and Empire had to pay more.” Monday FitzPatrick acknowledged that the verdict was “good and bad from our point of view.” “It’s discouraging to people who are bringing fraud and RICO claims, but it’s very encouraging to third-party payers who are bringing actions under consumer protection statutes,” he said. “This is a landmark — the first time that any insurer or third-party payer has prevailed in any of these suits against the tobacco industry.” And although he was “disappointed in the amount” recovered under the consumer protection statute, FitzPatrick said that verdict was “very likely to withstand any appeal by the tobacco industry.” PENDING SUITS With 20 more lawsuits brought by Blue Cross Blue Shield plans still lined up for trial before Judge Weinstein, FitzPatrick said he is contemplating moving for summary judgment on the consumer protection claims. Two weeks ago, Weinstein issued an opinion in the case, Blue Cross and Blue Shield of New Jersey, Inc. v. Philip Morris Inc., 98 Civ. 3287, in which he found that for evidentiary purposes, the tobacco industry had engaged in a conspiracy. The ruling had the effect of allowing any statement made by an individual tobacco company to be used against all industry defendants. In another ruling in March, Weinstein found that the tobacco companies could not use as a defense the fact that the increased health costs associated with the deception about the dangers of smoking were passed on to consumers. But Weinstein, in ruling on the so-called “pass on defense,” nonetheless said the jury would be able to hear “evidence of the basic facts of the insurance industry — including pass on premium practice to cover increasing costs.” Bleakley said Monday, “We haven’t decided yet whether we are going to appeal even this modest verdict.” “I can’t imagine any of the other Blue Cross plans are going to feel encouraged,” he said. “It’s a pretty minimal recovery when you consider how much time and effort it takes to prosecute these actions.”

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