Phillip Morris, Inc., R.J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corporation, Lorillard Tobacco Company, Liggett Group, Iiic. and Liggett & Myers, Inc. (“Appellants”) appeal from a decision of the United States District Court for the Eastern District of New York (Jack B. Weinstein, Judge) denying them judgment as a matter of law following a jury verdict in favor of Empire Healthcare, Inc. (d/b/a Empire Blue Cross & Blue Shield) (“Empire”).
For the reasons set forth below, we reverse judgment on Empire’s subrogation claim and will, in due course, remand the matter to the district court to enter judgment for Appellants on that claim. We reserve decision on the award of attorneys’ fees, which may be affected by the outcome of the certification process. Finally, we certify two related questions to the New York Court of Appeals.
I. BACKGROUND
A. Underlying Facts
In April 1998, twenty Blue Cross/Blue Shield plans and their subsidiaries and affiliates (the “Plans”) filed suit against defendant tobacco companies in the Eastern District of New York seeking to recover costs of providing health care to plan subscribers (a/k/a plan “members”) as a result of medical conditions causally connected to, or exacerbated by, tobacco use. The Plans alleged that because of defendants’ long-standing deception of the public as to the negative health consequences of cigarette smoking, the Plans’ health care expenditures rose as a result of spending on subscribers who were harmed by defendants’ products. The factual un-derpinings of these claims are set forth in great length in three underlying district court opinions. See Blue Cross & Blue Shield of New Jersey, Inc. v. Philip Morris, Inc.,
B. District Court Proceedings
In April 1998 when the Plans commenced this action, they sought recovery under federal law, including the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961 et. seq.; common law; and state statutory law, including New York’s consumer protection statute, N.Y. Gen. Bus. L. § 349 (“Section 349”). Defendants unsuccessfully moved for dismissal on the grounds that the claims were remote and therefore barred as a matter of law. Defendants then unsuccessfully renewed their motion after this Court found similar common law and RICO claims were too remote to permit suit in Laborers Local 17 Health & Benefit Fund v. Philip Morris Inc.,
In September 2000, the district court ruled that Empire’s claims would proceed to trial alone, and that the other Plans’ claims would be stayed pending resolution of the Empire trial. See Blue Cross I,
The jury found Empire’s federal law and common law claims to be unsupported, but found that Empire’s claims under Section 349 were supported by the evidence against all defendants except the British American Tobacco Company. The jury awarded Empire $17,782,702 on their direct claim under Section 349, and $11,829,784 on their subrogated claim under Section 349.
Appellants then moved for judgment as a matter of law. The district court denied the motion in an extensive opinion which explains both the underlying evidence and the district court’s reasoning in great depth. We, therefore, will not recapitulate the district court’s reasoning, choosing instead to refer the reader to the opinion: Blue Cross II,
II. DISCUSSION
On appeal, Appellants argue that the district court erred in denying their motion for judgment as a matter of law because: 1) Empire’s Section 349 subrogation claim was not proper because Empire did not identify its subrogors and detail each sub-rogor’s claim; 2) Empire lacked standing to sue under Section 349 because it was not acting as a consumer; 3) Empire’s claim on its own behalf was too remote to be actionable under Section 349; 4) Empire did not provide sufficient evidence to prove causation and damages under Section 349; and 5) Empire was not entitled to rely on aggregate proof of causation and damages in proving its claim under Section 349. In addition, Appellants challenge the district court’s award of attorneys’ fees to Empire. We address each argument in turn.
A. Propriety of Empire’s Subrogation Claim
Appellants contend that they are entitled to judgment as a matter of law on Empire’s subrogation claim because Empire failed to prove that any subrogor was entitled to recover.
In Laborers Local 17,
Empire never identified the actual number of subrogors or their names, much less provided any individualized information about the claims to which Em
Accordingly, we hold that allowing Empire’s claim to proceed under the guise of subrogation was improper as it was not a true subrogation claim.
B. Effect of Empire’s Status as a Non-consumer on its Standing to Sue on its oum Behalf under Section SJf.9
Section 349 prohibits “[deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service .... ” N.Y. Gen. Bus. Law § 349(a). Section 349 currently contains a private right of action such that “any person who has been injured by reason of any violation of this section may bring an action in his own name to enjoin such unlawful act or practice, an action to recover his actual damages ..., or both such actions.” N.Y. Gen. Bus. L. § 349(h).
Appellants argue that Empire lacked standing to sue on its own behalf under Section 349 because Empire is not a consumer and is not standing in the shoes of a consumer. However, a plaintiff need neither be a consumer nor be someone standing in the shoes of a consumer to have an actionable claim under Section 349. See Securitron Magnalock Corp. v. Schnabolk,
C. Possible Remoteness Bar to Empire’s Direct Action
Plaintiffs “direct” action is derivative of injuries to third parties and is, therefore, essentially indirect. Laborers Local 17,
In Laborers Local 17, we addressed parallel language in RICO, which states that “[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter may sue”, 18 U.S.C. § 1964(c) (emphasis added), and we held that that language incorporated common law principles of proximate cause.
While it is clear that our precedent would not prevent Empire’s direct claim from being brought under a state statute, it is not clear that the claim can be brought under Section 349 specifically. Merely looking to the language of Section 349 does not resolve this question. The key phrase, “by reason of’, has been interpreted to not require proximate cause in the context of the New York State Dram Shop Act, N.Y. Gen. Oblig. Law. § 11-101(1).
Section 349 — like the Dram Shop Act and unlike RICO — relaxes other common law tort requirements. See Stutman v. Chemical Bank,
Since, like the Dram Shop Act, Section 349 does not require all elements of a traditional common law tort, it would be reasonable to interpret Section 349’s “by reason of’ phrase as consonant with the
There are, however, two New York state cases addressing claims similar to those in the case at hand which can be read to suggest a different interpretation. In Eastern States, Health and Welfare Fund v. Philip Morris, Inc.,
Similarly, in A.O. Fox Memorial Hospital v. American Tobacco Co., Inc.,
In short, we cannot predict whether the New York Court of Appeals would find Empire’s direct claim sufficiently direct to be actionable under Section 349. Given this uncertainty, we believe that the most prudent approach is to certify the underlying question to the New York Court of Appeals.
We may certify “unsettled and significant question[s] of state law ... [that] will control the outcome of a case.” Prats v. Port Auth. of New York & New Jersey,
However, certification “is appropriate where with respect to the question asked there is a split of authority; or, if there is a statute implicated, its plain language does not answer the question; or when what is presented is a complex question of New York common law for which no state authority may be found.” Hamilton v. Beretta U.S.A. Corp.,
As explained above, the plain language of Section 349 does not provide us "with guidance in resolving this question because that language is open to varying interpretations. Similarly, although there are lower court cases touching on the issue, it is possible that the New York Court of Appeals might not follow their lead given (1) the objectives of Section 349, (2) the fact that Section 349 clearly relaxes other common law tort requirements, and (3) the decisions in Vitolo, Desiano, and Catania.
The fact that resolution of this case will require analysis of important policy considerations of the state of New York also favors certification. See New York Univ. v. First Fin. Ins. Co.,
For the above reasons, we will respectfully certify the following question to the New York Court of Appeals: Are claims by a third party payer of health care costs seeking to recover costs of services provided to subscribers as a result of those subscribers being harmed by a defendant’s or defendants’ violation of N.Y. Gen. Bus. Law § 349 too remote to permit suit under that statute?
D. Sufficiency of the Evidence as to Causation and Damages, Assuming that Individualized Proof of Harm was not Required
Appellants argue that Empire’s proof was insufficient to prove causation and
1. Liability for Failures to Disclose
Appellants argue that because they complied with the Public Health Cigarette Smoking Act of 1969, 15 U.S.C. § 1334, they cannot be held hable under Section 349 for failing to disclose information about the health effects of cigarettes. The jury instructions, however, stated that for the “challenged acts or practices” to result in liability, Empire must “prove that the chahenged acts or practices were misrepresentations and were misleading in a material way.” Given these instructions, we are content that liability was predicated on Appellants’ affirmative misrepresentations rather than on their alleged failures to disclose.
2. Sufficiency of Proof of Postr-1980 Misrepresentations Causing Harm
Appellants argue that Empire’s claims must fail as a matter of law as there was no proof that Empire was damaged by post-1980 misrepresentations because: 1) Empire offered no proof that specific subscribers were induced to smoke (or to not quit smoking) by any such misrepresentations; 2) Empire offered no proof that specific subscribers who were so induced were the same subscribers to incur smoking-related health care costs; and 3) Empire’s experts offered no proof that Empire itself was damaged by posb-1980 misrepresentations.
We find that there was sufficient evidence to support the jury’s verdict. We “will upset a jury verdict only if there is ‘such a complete absence of evidence supporting the verdict that the jury’s findings could only have been the result of sheer surmise and conjecture.’ ” Norton v. Sam’s Club,
Although Empire concedes that it did not provide specific evidence that post-1980 misrepresentations induced specific subscribers to smoke and that these were
In short, Appellants fail to satisfy the “heavy burden” required for judgment as a matter of law.
3. Sufficiency of Empire’s Proof as to Damages Caused by Unlawful Conduct as Opposed to Lawful Conduct
Appellants argue that even if Empire showed that it was damaged by postr-1980 misrepresentations, Empire’s proof of such damages was insufficient as a matter of law because Empire’s model of damages did not adequately segregate its costs for providing health care services caused by Appellants’ misconduct from costs that it would have incurred even if Appellants’ had not violated Section 349. Appellants contend that the model, created by Dr. Jeffrey Harris, who was one of Empire’s expert witnesses, assumed that defendants would have engaged in an anti-smoking campaign and that they would have warned the public that smoking can be lethal and that it causes lung cancer, emphysema, and heart disease.
Appellants mischaracterize the portions of Dr. Harris’ testimony regarding the assumptions behind his model that they cite to support their contentions. According to that testimony, Dr. Harris calculated and testified about two types of damages. The first type of damages stemmed from defendants’ alleged failure to innovate as the result of an industry-wide conspiracy not to compete on the basis of health claims. Dr. Harris testified that he believed that if the defendants had not engaged in such a conspiracy, they would have competed with one another to make safer cigarettes. It was in the context of discussing a world with such innovation that Dr. Harris testified that tobacco companies would have publicized health information about cigarettes in an effort to show that their own products would minimize negative health consequences.
The second type of damages Dr. Harris calculated were damages resulting from defendants’ alleged dissemination of misinformation regarding the health effects of cigarettes.
In the end, however, it was the jury’s responsibility to determine whether or not Dr. Harris’ assumptions were reasonable and whether his estimates were reliable, and to evaluate the damages information before it. Given that defense counsel extensively explored on cross-examination the assumptions behind Dr. Harris’ calculations, we find no reason to believe that the jury was not able to evaluate Dr. Harris’ testimony in this way.
4. Sufficiency of Empire’s Proof of Damages Caused by Each Appellant
The jury found that the defendants were not jointly and severally hable. Given this finding, Appellants argue that they are entitled to judgment as a matter of law on the grounds that the jury had no basis for apportionment because Empire’s statistical model of its claimed damages did not apportion damages among defendants. We disagree, finding that the jury had a sufficient, albeit perhaps less than ideal, basis for assessing relative liability. When the jury was told about particular misrepresentations, the party making those misrepresentations was identified, thus allowing the jury to assess the relative blameworthiness of each defendant. Appellants argue that any apportionment based on the frequency and egregiousness of Appellants’ misconduct would be improper speculation as to the effects of such behavior on subscribers. Appellants offer no support for this assertion and we find it to be without merit. In determining damages, the jury was allowed to act on “probable and inferential as well as (upon) direct and positive proof.” See Bigelow v. RKO Radio Pictures,
Appellants also suggest that the jury was not permitted to take market share into account when assessing liability because there is no reason to believe that defendants with higher market shares engaged in more misconduct. It is possible, however, that the New York Court of Appeals would permit market share liability in this case.
For the above reasons, we conclude that Appellants have failed to show that Empire did not offer sufficient proof to allow the jury to apportion damages.
E. Propriety of Empire’s Reliance on Aggregate Proof of Causation and Damages
While Empire provided some information about individual subscribers, Empire relied on aggregate (ie., statistical) proof of causation and damages. Appellants argue that aggregate proof was not permissible because: 1) it violated Appellants’ constitutional right to a jury trial; 2) it violated Appellants’ constitutional right to due process; and 3) Section 349 requires individualized proof. We find that the first two arguments are without merit, while the third merits certification to the New York Court of Appeals.
1. Right to a Jury Trial
As the district court recognized in Blue Cross II,
does not prohibit the introduction of new methods for determining what facts are actually in issue, nor does it prohibit the introduction of new rules of evidence. Changes in these may be made. New devices may be used to adapt the ancient institution to present needs and to make of it an efficient instrument in the administration of justice.... Indeed,*226 such changes are essential to the preservation of the right. The limitation imposed by the amendment is merely that enjoyment of the right of trial by jury be not obstructed, and that the ultimate determination of issues of fact by the jury be not interfered with.
In re Peterson,
Nevertheless, Appellants argue that their Seventh Amendment rights were violated by allowing aggregated evidence of causation and harm (as opposed to separate evidence about each individual subscriber). First, Appellants rely on two Fifth Circuit opinions, neither of which would be controlling even if we were bound to follow them. Not only do both cases address class action claims, not direct actions, but neither held that aggregate evidence of causation violates the Seventh Amendment. In the first case, In re Fibreboard Corp.,
Appellants next argue that their right to a jury trial was violated because, by consolidating “snippets” of testimony from a variety of subscribers, Empire was able to create a “perfect subscriber” and to litigate the case on that basis. They argue that because Empire chose excerpts of subscriber depositions rather than presenting the complete depositions to the jury, the jury was not allowed to fully evaluate the testimony, and therefore Appellants did not receive a true jury trial. Appellants rely primarily on Broussard v. Meineke Disc. Muffler Shops, Inc.,
2. Right to Due Process
Appellants argue that their due process rights were violated when they were held hable based on aggregated proof and without being able to cross examine each of Empire’s subscribers who allegedly incurred greater health care costs due to their tobacco use.
To support their argument, Appellants point to the New York Supreme Court’s finding in Eastern States that defendant tobacco companies had a due process right to cross-examine each individual subrogee in a subrogation action brought against them.
Appellants also place some reliance on the Fifth Circuit’s holding in Cimino,
Accordingly, we find that Appellants failed to show a violation of their due process rights.
3. Individualized Proof under Section 349
Appellants argue that Section 349 requires individualized proof of causation and damages and, thus, that aggregate proof is not sufficient.
It may well be that the New York Court of Appeals would find that individualized proof is necessary to bring a class action under Section 349. See Carnegie v. H.R. Block, Inc.,
It is less clear, however, whether the New York Court of Appeals would require individualized proof for Empire’s claim on its own behalf to succeed. No New York case has yet to extend the requirement of individualized proof outside of the class action or subrogation context, the New York Court of Appeals has never held that individualized proof is necessary for all claims brought pursuant to Section 349, and — unlike class action claims and subro-gation claims — Empire’s claim on its own behalf is not simply a consolidation of other individuals’ claims. Given the significant uncertainty as to how the New York Court of Appeals would decide this issue, we believe that the most prudent approach is to certify the underlying question to the New York Court of Appeals.
F. Propriety of the Attorneys ’ Fee Award
The district court awarded Empire $ 37,841,054.22 in attorneys’ fees. The district court determined that this amount only covered fees for legal work that was relevant to Empire’s Section 349 claims, and fees for work exclusively related to other claims and other plaintiffs were not allowed. Blue Cross III,
III. CONCLUSION
We REVERSE judgment for Empire on Empire’s subrogation claim and will in due course REMAND to the district court with instructions to enter judgment for Appellants on that claim. We RESERVE DECISION on the award of attorneys’ fees to await the outcome of the certification pro
Because there is considerable uncertainty as to how the New York Court of Appeals would decide these last two issues, we hereby respectfully certify the following questions to the New York Court of Appeals:
1. Are claims by a third party payer of health care costs seeking to recover costs of services provided to subscribers as a result of those subscribers being harmed by a defendant’s or defendants’ violation of N.Y. Gen. Bus. Law § 349 too remote to permit suit under that statute?
2. If such an action is not too remote to permit suit, is individualized proof of harm to subscribers required when a third party payer of health care costs seeks to recover costs of services provided to subscribers as a result of those subscribers being harmed by a defendant’s or defendants’ violation of N.Y. Gen. Bus. Law § 349?
The certified questions may be deemed expanded to cover any further pertinent question of New York law involved in this appeal that the Court of Appeals chooses to answer. This panel retains jurisdiction and will consider any issues that may remain on appeal once the New York Court of Appeals has either provided us with its guidance, or declined certification.
It is therefore ordered that the Clerk of this Court transmit to the Clerk of the Court of Appeals of the State of New York a Certificate, as set forth below, together with a complete set of the briefs, appendices, and record filed in this Court by the parties.
Certificate
The foregoing is hereby certified to the Court of Appeals of the State of New York, pursuant to 2d Cir. R. § 0.27 and N.Y. Comp.Codes R. & Regs. tit. 22, § 500.17, as ordered by the United States Court of Appeals for the Second Circuit.
Notes
Judge Parker was the principal author of the opinion of the Court.
. Empire is one of many Blue Cross and Blue Shield Plans and their respective subsidiaries to bring claims in this action. The court below severed and stayed the claims of the other plaintiffs pending resolution of this appeal. Thus, despite the style of the caption, only Empire is a plaintiff-appellee.
. In this opinion, the term "defendants” refers to all the defendants listed in the caption, whereas the term "appellants” refers only to the defendants who brought this appeal.
.The jury found that Phillip Morris, Inc. was liable for 38% of Empire’s damages; R.J. Reynolds Tobacco Co., for 37%; Brown & Williamson Tobacco Corp., for 16%; Lorillard Tobacco Co., for 8.5%; and Liggett Group, Inc. and Liggett & Myers, Inc., for a combined .5%. The jury awarded Empire $17,782,426 on Empire’s direct claim under N.Y. Gen. Bus. L. § 349, and $11,829,784 on Empire's subrogated claim under N.Y. Gen. Bus. L. § 349. Judgment was entered on both claims, but because the damages for the subrogated claim were subsumed within the damages on the direct verdict, Empire’s recovery was limited to $17,782,426.
. The Dram Shop Act states in relevant part that:
Any person who shall be injured ... by any intoxicated person, or by reason of the intoxication of any person ... shall have a right of action against any person who shall, by unlawful selling to or unlawfully assisting in procuring liquor for such intoxicated person, have caused or contributed to such intoxication; and in any such action such person shall have a right to recover actual and exemplary damages.
NY Gen. Oblig. Law § 11-101(1) (emphasis added).
. We note that both the Eastern States and A.O. Fox decisions were rendered before our opinion in Desiano cautioned against applying the proximate cause requirement for RICO claims as set forth in Laborers Local 17 to state statutes.
. Appellants were only held responsible under Section 349 for post June 19, 1980 misconduct because prior to that there was no private right of action under Section 349. See Sabater v. Lead Indus. Ass’n, Inc.,
. The district court found that there were "more than sufficient examples of post-1980 misconduct to support [the] verdict.” Blue Cross II,
. Contrary to Appellants’ assertion, Dr. Harris did not admit that his damages model was unable to estimate the impact solely of defendants’ affirmative misrepresentations. Rather, the testimony cited by Appellants for this proposition merely stated that Dr. Harris could not measure the actual damages, and so he had to estimate those damages.
. Another interpretation of the testimony is that Dr. Harris was using "more information” and "less misinformation” somewhat inter-changably. He had explained that in developing his model he used "more information” as a proxy for less misinformation because given the nationwide nature of defendants’ alleged misconduct, he could not find anyplace which was not exposed to misinformation, but only places that were exposed to more information that was accurate.
. Appellants suggest that the New York Court of Appeals’ decision in Hamilton v. Beretta U.S.A. Corp.,
. According to the trial plan, a separate jury would determine what damages the class as a whole was entitled to by extrapolating from the amount of damages owed to these particular class members. Id.
. Because we have found that Empire’s sub-rogation claim must fail because it did not meet the basic standards for subrogation, we need not address Appellants' argument that allowing the subrogation claim to proceed would violate their due process rights.
. Both parties argue that the question of whether Section 349 requires individualized proof should not be certified. Empire argues that this is a procedural question and is therefore governed by federal law. Appellants argue that this question involves the interplay of state law and the Erie doctrine and thus can only be decided by this Court. We do not believe the question is procedural, but rather that it is substantive. In essence the question ís: what are the elements that must be proven to prevail in a Section 349 action? Specifically, the issue is not whether the evidence was of a type that may be used to show liability, but rather whether Empire must show that particular individuals were harmed in particular ways under particular circumstances to prevail on a Section 349 claim. Thus, New York law applies.