STEAMFITTERS LOCAL UNION NO. 420 WELFARE FUND; International Brotherhood of Painters and Allied Trades, District Council No. 21 Welfare Fund; International Brotherhood of Electrical Workers, Local Union No. 98, Health & Welfare Fund; Composition Roofers Union Local 30 Combined Health & Welfare Fund; Laborers’ District Council Building and Construction Health and Welfare Fund; Carpenters Health & Welfare Fund of Philadelphia and Vicinity; Cement Mason‘s Union Local No. 592, on behalf of themselves and all others similarly situated, Appellants v. PHILIP MORRIS, INC.; R.J. Reynolds Tobacco Company; Brown & Williamson Tobacco Corporation; B.A.T. Industries P.L.C.; Lorillard Tobacco Company, Inc.; Liggett & Myers Inc.; The American Tobacco Company; United States Tobacco Company; The Council for Tobacco Research-U.S.A., Inc.; The Tobacco Institute, Inc.; Smokeless Tobacco Council, Inc.; Hill & Knowlton, Inc.
No. 98-1426
United States Court of Appeals, Third Circuit
March 29, 1999
171 F.3d 912
Argued Jan. 28, 1999.
To those who would argue that our ability to correct flawed state court reasoning violates the deference intended to be given to state court rulings, I would answer that the statutory standard is extremely deferential, even as I propose to constitute it. Congress has said that we can grant relief only if the Supreme Court has addressed a specific area, and then only if the law is clearly established, and then, only if the state court has disregarded the law or has engaged in flawed reasoning in applying it. This is, in fact, deferential.7
Herbert Wachtell (Argued), Steven M. Barna, Peter C. Hein, Stephen R. Blacklocks, Wachtell, Lipton, Rosen & Katz, New York, N.Y., Mary A. McLaughlin, David M. Howard, Aline J. Fairweather, Andrew S. Miller, Kathy E. Ochroch, Dechert, Price & Rhoads, Philadelphia, PA; David S. Eggert, James Rosenthal, Arnold & Porter, Washington, DC, for Appellee Philip Morris Incorporated.
Robert H. Klonoff, Paul S. Ryerson, Paul Reichert, Jones, Day, Reavis & Pogue, Washington, DC; John D. Goetz, Maureen T. Taylor, Jones, Day, Reavis & Pogue, Pittsburgh, PA, for Appellee R.J. Reynolds Tobacco Company.
Edward W. Warren, Kenneth N. Bass, Kirkland & Ellis, Washington, DC, for Appellee Brown & Williamson Tobacco Corporation (including as successor by merger to The American Tobacco Company).
William J. O‘Brien, Howard M. Klein, Conrad, O‘Brien, Gellman & Rohn, P.C., Philadelphia, PA; Jeffrey S. Nelson, Joseph A. Lanahan, Shook, Hardy, & Bacon, LLP, Kansas City, MO, for Appellee Lorillard Tobacco Company.
J. Kurt Straub, Obermayer, Rebman, Maxwell & Hippel, LLP, Philadelphia, PA, for Appellee Liggett & Myers, Inc.
Patrick W. Kittredge, Glenn E. Davis, Kittredge, Donley, Elson, Fullem & Embick, LLP, Philadelphia, PA; Steven Klugman, R. Townsend Davis, Jr. Debevoise & Plimpton, New York, N.Y., for Appellee The Council for Tobacco Research-USA, Inc.
William J. O‘Brien, Howard M. Klein, Conrad, O‘Brien, Gellman & Rohn, P.C., Philadelphia, PA, for Appellee The Tobacco Institute.
Wilbur L. Kipnes, Schnader, Harrison, Segal & Lewis, LLP, Philadelphia, PA, for Appellee Smokeless Tobacco Council, Inc.
Richard L. Kremnick, Blank, Rome, Comisky & McCauley, LLP, Philadelphia, PA; Bruce M. Ginsberg, Marc Rachman, Davis & Gilbert, New York, N.Y., for Appellee Hill & Knowlton, Inc.
Stephanie W. Kanwit, Groom Law Group Chartered, Washington, DC; David Allen, Corina Trainer, UMWA Health & Retirement Fund, Washington, DC; Daniel B. Edelman, Yablonski, Both & Edelman, Washington, DC, for Amicus Curiae United Mine Workers of America Combined Benefit Fund.
Kenneth S. Geller, John J. Sullivan, Mayer, Brown & Platt, Washington, DC; Stephen A. Bokat, Robin S. Conrad, National Chamber Litigation Center, Inc., Washington, DC, for Amicus Curiae Chamber of Commerce of the United States.
Carl R. Schenker, Jr., John H. Beisner, Teresa Kwong, O‘Melveny & Myers, LLP, Washington, DC; Hugh F. Young, Jr., Product Liability Advisory Council, Inc., Reston, VA, for Amicus Curiae Product Liability Advisory Council, Inc.
Jan S. Amundson, General Counsel National Association of Manufacturers, Washington, DC, for Amicus Curiae National Association of Manufacturers.
Before: BECKER, Chief Judge, SCIRICA and ROSENN, Circuit Judges.
OPINION OF THE COURT
BECKER, Chief Judge.
This is one of a vast number of cases filed in state and federal courts all over the nation seeking to hold tobacco companies liable for the smoking-related costs incurred by union health and welfare funds. The plaintiff funds allege that they were defrauded by the defendants-tobacco companies and related industry organizations-into paying for their participants’ smoking-related illnesses, as well as prevented by these defendants from informing the funds’ participants about safer smoking and smoking-cessation products. The defendants allegedly conspired to prevent the funds from obtaining and using information that would have reduced the incidence of smoking-and therefore of illness-among the funds’ participants. The fraud and conspiracy charges are the underpinnings of plaintiffs’ federal statutory claims, which are brought under the antitrust laws and the civil RICO statute. Plaintiffs also assert state common-law claims based on supplemental jurisdiction.
The District Court dismissed plaintiffs’ complaint under
I. Background
A. Facts and Procedural History
This suit was brought by seven Pennsylvania-based union health and welfare funds (the “Funds“) as a putative class action on behalf of all such similarly-situated funds against eight tobacco companies and certain industry organizations (collectively, the “tobacco companies“)1 to recover for the Funds’ costs of treating their participants’ smoking-related illnesses. The suit is patterned after similar suits brought by state attorneys general, which were recently settled with the tobacco companies for more than $200 billion. See Barry Meier, Remaining States Approve the Pact on Tobacco Suits, N.Y. Times, Nov. 21, 1998, at Al. In the present case, the Funds have brought federal claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO“),
The Funds allege, inter alia, that the tobacco companies conspired to suppress research on safer tobacco products, defrauded health care providers and payers by informing them that the companies’ tobacco products were safe, and caused smokers to become ill by preventing the dissemination of smoking-reduction and smoking-cessation information. All of these actions allegedly caused the costs of smoking-related illnesses to be shifted from their proper source, the tobacco companies, to the plaintiff Funds (and others). This shift in costs purportedly was accom-
Seeking to recover for these costs, the Funds filed suit in the District Court for the Eastern District of Pennsylvania in August 1997. Shortly thereafter, the defendants moved to dismiss the complaint under
The District Court also dismissed the complaint because (1) plaintiffs “allege no injury of the sort the antitrust laws were designed to prevent“; (2) the Funds’ common-law fraud claims “are entirely too speculative to be taken seriously“; (3) plaintiffs “simply do not have legal standing to advance” claims for injunctive relief; (4) the state special duty claim is “restricted to ‘physical harm‘” that plaintiffs do not allege they suffered; and (5) the Funds’ unjust enrichment claim “is simply a subrogation claim expressed in different language.” Id. at *3-*4. Plaintiffs filed a timely notice of appeal. We have appellate jurisdiction under
B. The Allegations and Theory of the Complaint
Plaintiffs’ complaint is voluminous (containing 317 paragraphs and running to 116 pages) and detailed in its explication of the history of the tobacco companies’ alleged wrongdoing. By now, this history is well-known to the public at large, though plaintiffs rely heavily on the fact that the defendants successfully conspired to cover up their wrongdoing for almost five decades. This conspiracy was allegedly directed at both smokers and the plaintiff Funds themselves. Therefore, plaintiffs aver, they are both indirect and direct victims of the defendants’ wrongful conduct.
1. The Indirect Injury
The Funds’ indirect injury allegedly arises from the fact that they paid millions of dollars for the smoking-related medical expenses of Fund participants whom they say were victimized by the tobacco companies’ conspiracy and fraud. The defendants respond that this indirect claim is simply a traditional subrogation claim dressed up in treble-damages federal statutory clothing. They invoke the general principle that an insurer‘s only claim against a tortfeasor for the insurer‘s costs arising out of wrongdoing against an insured is by way of subrogation. See, e.g.,
2. The Direct Injury
In plaintiffs’ submission, notwithstanding defendants’ argument that all of the Funds’ claims are essentially subrogation claims, their “direct” claim is a fundamentally different legal claim from the typical insurer-against-wrongdoer claim that falls under the principle of subrogation. This direct claim is said to arise not only out of a tortfeasor‘s actions toward an insured, but also from its actions toward the insurance company (here the Funds) itself. The traditional subrogation principle holds that an ” ‘insurer, upon paying to the assured the amount of a loss of the property insured, is doubtless subrogated in a corresponding amount to the assured‘s right of action against any other person responsible for the loss.’ ” Great Am. Ins. Co., 575 F.2d at 1034 (quoting W. Vance, Vance on Insurance 787 n.2 (3d ed.1951)). Here, the Funds are essentially claiming that they paid for more than “the property insured” (i.e., the health of fund participants) because the defendants caused the Funds to expend additional costs that would have been paid by the tobacco companies (through reduced revenues and tort damages) if they had not defrauded the Funds and conspired to cover up their wrongdoing.
As the Funds frame their direct injury argument: “Had defendants not undertaken their deceptive, fraudulent, and anticompetitive activity, the Trusts’ trustees, administrators, and advisors could have taken countermeasures against smoking and smoking-related illness and would have commenced legal efforts much sooner and more effectively to impose the costs resulting from tobacco use on the tobacco companies.” Appellants’ Br. at 10. Plaintiffs’ complaint sets out this theory as follows:
Defendants’ contract, combination, or conspiracy was and is for the express purpose and effect of restraining, suppressing and withholding information necessary to medical care researchers, providers, and payers, including Plaintiffs and members of the Class, so that the costs of health care for tobacco-related illnesses continue to be borne by health care providers and payers, such as Plaintiffs and members of the Class, [who] are injured in their business and property by, among other things, having to provide or pay for the health care costs of persons with tobacco-related diseases without being reimbursed by Defendants.
Compl. ¶ 256. Plaintiffs correctly observe that the District Court did not address this alleged “direct” injury, but as is clear from our discussion below, we do not find the directness of the Funds’ alleged injury dispositive of whether they have stated a claim under either federal or state law.
II. Plaintiffs’ Federal Claims
A. Introduction
Plaintiffs’ federal claims are based on the antitrust laws and the RICO statute. In brief, they allege that defendants conspired to withhold certain information and products from the Funds, and fraudulently induced the Funds to reimburse smokers for illnesses caused by the tobacco companies’ wrongdoing. We need not focus on many of the necessary elements of these claims, such as the details of the conspiracy and the fraud, whether the Funds (or others) reasonably relied on the
Given the Supreme Court‘s determination that the standing requirements for RICO and antitrust claims are similar, and that the standing analysis under these federal laws is drawn from common-law principles of proximate cause and remoteness of injury, we analyze the key remoteness issue for plaintiffs’ federal claims under the rubric of standing doctrine. See Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 268, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992) (RICO); Blue Shield v. McCready, 457 U.S. 465, 477, 102 S.Ct. 2540, 73 L.Ed.2d 149 (1982) (antitrust).
As is clear from our discussion below, the key problem with plaintiffs’ complaint is the remoteness of their alleged injury from the defendants’ alleged wrongdoing. Remoteness is an aspect of the proximate cause analysis, in that an injury that is too remote from its causal agent fails to satisfy tort law‘s proximate cause requirement-a requirement that the Supreme Court has adopted for federal antitrust and RICO claims. Cf. McCready, 457 U.S. at 477 (“In the absence of direct guidance from Congress, and faced with the claim that a particular injury is too remote from the alleged violation to warrant [antitrust] standing, the courts are thus forced to resort to an analysis no less elusive than that employed traditionally by courts at common law with respect to the matter of ‘proximate cause.’ “). By subsuming the proximate cause requirement under the concept of standing, the Supreme Court has acknowledged that a private plaintiff might validly plead (and even prove) that a defendant has committed an antitrust violation, but still lack standing to enjoin or remedy this violation if his own injury is too remotely connected to it. Therefore, in discussing whether plaintiffs have standing to bring their antitrust or RICO claims, we will focus on proximate cause in general and on remoteness in particular.4
Plaintiffs’ claims are largely grounded in allegations of fraud on the part of defendants. Therefore, we would normally focus initially, in addressing the federal claims in this case, on the RICO claims, which are predicated on alleged mail and wire fraud by the defendants. See Compl. ¶ 224(a). However, the Supreme Court has discussed proximate cause more expansively in the antitrust context, and has incorporated this discussion into its RICO jurisprudence. See Holmes, 503 U.S. at 268-70. We therefore begin our discussion of plaintiffs’ federal claims with an analysis of the Court‘s holdings in the antitrust field.
In adopting a proximate cause requirement for antitrust claims, the Supreme Court has explained that, despite the broad language and remedial purpose of the antitrust laws, “[i]t is reasonable to assume that Congress did not intend to allow every person tangentially affected by an antitrust violation to maintain an action to recover threefold damages for the injury to his business or property.” McCready, 457 U.S. at 477. In discussing the requirements for proximate cause, the Court has repeatedly noted that “proximate cause is hardly a rigorous analytic tool.” Id. at 477 n. 13; see also Associated Gen. Contractors, Inc. v. California State Council of Carpenters, 459 U.S. 519, 536-37 & n. 34, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983); Merican, Inc. v. Caterpillar Tractor Co., 713 F.2d 958, 964 (3d Cir.1983) (“Because of the infinite variety of claims that arise under the antitrust statutes, [the Supreme Court] has refused to fashion a black-letter rule for determining standing in every case.“). Therefore, the Court has emphasized that lower courts should avoid applying brightline rules and instead should analyze the circumstances of each case, focusing on certain key factors.
1. Blue Shield v. McCready
In McCready, the Court held that the primary factors for evaluating proximate cause in an antitrust action were: (1) “the physical and economic nexus between the alleged [antitrust] violation and the harm to the plaintiff” and (2) “more particularly, . . . the relationship of the injury alleged with those forms of injury about which Congress was likely to have been concerned in making defendant‘s conduct unlawful and in providing a private remedy” under the antitrust laws. McCready, 457 U.S. at 478. In discussing these factors (and finding that the plaintiff in McCready had standing to assert a claim under the antitrust laws), the Court noted:
The availability of [an antitrust] remedy to some person who claims its benefit is not a question of the specific intent of the conspirators. . . . Here the remedy cannot reasonably be restricted to those competitors whom the conspirators hoped to eliminate from the market. McCready claims that she has been the victim of a concerted refusal to pay on the part of Blue Shield, motivated by a desire to deprive psychologists of the patronage of Blue Shield subscribers. Denying reimbursement to subscribers for the cost of treatment was the very means by which it is alleged that Blue Shield sought to achieve its illegal ends. The harm to McCready and her class was clearly foreseeable; indeed, it was a necessary step in effecting the ends of the alleged illegal conspiracy. Where the injury alleged is so integral an aspect of the conspiracy alleged, there can be no question but that the loss was precisely the type of loss that the claimed violations . . . would be likely to cause.
Id. at 479 (emphases added) (omission in original) (internal quotations omitted). The Funds allege that the defendants’ hiding of their knowledge of the dangers of smoking and conspiring to keep safer tobacco products from the market “was the very means by which [the tobacco companies] sought to achieve [their] illegal ends” and the Funds’ payment of extra costs “was a necessary step
We disagree. Unlike the defendants in McCready, the tobacco companies could have achieved their alleged aims without the existence of the Funds or the relationship between the Funds and smokers. In McCready, psychologists allegedly conspired with Blue Shield to exclude psychologists from the psychotherapy market by persuading Blue Shield to reimburse subscribers for this service only when it was provided by a psychiatrist. The reimbursement scheme was both the alleged conspiracy and the cause of McCready‘s harm: McCready was a psychotherapy patient denied reimbursement for her treatment by a psychologist. If Blue Shield subscribers such as McCready did not exist, a conspiracy between psychiatrists and Blue Shield would never have come about (as it would have been ineffective to achieve the alleged aims of the conspiracy). Cf. Gregory Mktg. Corp. v. Wakefern Food Corp., 787 F.2d 92, 96-97 (3d Cir.1986) (holding that plaintiff, a food broker for defendant manufacturer, had suffered no antitrust injury because it was not a consumer or competitor of defendant, and was not an “essential participant” in defendant‘s scheme to price-discriminate against certain retailers).
In contrast, the tobacco companies would have had ample reason to engage in a conspiracy to prevent safer tobacco products from coming on the market, regardless of the relationship between the Funds and smokers. The very existence of smokers would be a sufficient reason for such an alleged conspiracy. The fact that the Funds reimbursed smokers for their smoking-related illnesses might have made the conspiracy more profitable or allowed it to exist longer, but the relationship between the Funds and smokers was not “a necessary step in effecting the ends of the alleged illegal conspiracy.”
It is for this reason that plaintiffs’ reliance on Prudential Insurance Co. of America v. United States Gypsum Co., 828 F.Supp. 287 (D.N.J.1993), is also misplaced. In that case, which also included allegations of fraudulent acts intended to mislead consumers about the safety of defendants’ product (asbestos), the district court denied defendants’ motion for summary judgment on plaintiffs’ RICO claims. The court noted that “the fraud scheme directly targeted entities like Prudential, [a real estate dealer,] for the fraud would not have been worth it if large real estate dealers did not continue to buy such buildings.” Id. at 297. In addition, the plaintiffs “stood to keep the defendants’ products valuable by continuing to buy buildings containing defendants’ products.” Id. In the present case, the tobacco companies’ alleged fraud would still have been “worth it” if the Funds and other health care payers did not reimburse smokers for their illnesses.
In addition, the defendants’ fraud in Prudential prevented the building purchasers from obtaining information about the dangers of asbestos-information that would have led them to not purchase buildings containing this product. In this case, however, even if the tobacco companies had not prevented health care payers from discovering the dangers of smoking, there is no claim that the Funds would have chosen to not insure smokers. The defendants’ conspiracy in McCready and the defendants’ fraud in Prudential would have been without purpose or effect if the plaintiffs in those cases did not use the services of the directly targeted parties, psychologists and building contractors, respectively. The same is not true in the present case.
2. Associated General Contractors
a. The Relevant Factors
Shortly after McCready was decided, the Supreme Court provided further guidance in this area in Associated General Contractors, Inc. v. California State Coun-
After discussing at length proximate cause principles likely incorporated by Congress into the Sherman Act in 1890, see id. at 530-34 & nn. 20-25,5 the Supreme Court outlined a number of factors to consider in the flexible antitrust standing analysis: (1) the causal connection between defendant‘s wrongdoing and plaintiff‘s harm; (2) the specific intent of defendant to harm plaintiff; (3) the nature of 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 “damages claim is . . . highly speculative“; and (6) “keeping the scope of complex antitrust trials within judicially manageable limits,” i.e., “avoiding either the risk of duplicate recoveries on the one hand, or the danger of complex apportionment of damages on the other.” Id. at 537-38, 540, 542-44.6
i. Causation and Intent
Although the first two factors-a causal connection and an intent to harm the plaintiff-were present in AGC, this was insufficient to give the plaintiff antitrust standing. See AGC, 459 U.S. at 537; see also Merican, 713 F.2d at 964 n. 13 (“Claims that a defendant specifically intended to harm the plaintiff, however, are not of controlling significance. Although a defendant‘s improper motive may sometimes support a damages claim under § 4[of the Clayton Act], it ‘is not a panacea that will enable any complaint to withstand a motion to dismiss.’ ” (quoting AGC, 459 U.S. at 537)). Plaintiffs urge us to focus on the causal connection (proximate or otherwise) between the tobacco companies’ wrongdoing and the injury to the Funds, as well as the companies’ alleged specific intent to foist the costs of their wrongdoing onto the Funds. As in AGC, we do not find these factors to be dispositive on the issue of antitrust standing. See also Gregory Mktg., 787 F.2d at 95 (“[N]either causation in this but-for sense nor an allegation of improper motive is sufficient to ‘enable any complaint to withstand a motion to dismiss.’ ” (quoting AGC, 459 U.S. at 537)).
What is more, for the reasons set forth in the margin, it is unclear whether there exists a causal connection (proximate or otherwise) between any antitrust wrongdoing on the part of the defendants and the Funds’ alleged injuries of increased health care expenditures.7
An agreement among competitors to suppress information on the dangers of their product might constitute an antitrust violation if the conspiracy artificially raised the price consumers were willing to pay for the product. Here, however, the plaintiffs do not allege (and could not plausibly allege) that consumers’ paying higher prices for tobacco products injured the Funds. On the contrary, these higher prices more likely would have led fewer persons to purchase the products, thereby decreasing the costs (and injuries) to the Funds. Therefore, while there may be a causal relationship between the conduct of the defendants and the injuries alleged by the plaintiffs, we are uncertain that these injuries are connected to any conduct of the defendants that violates the antitrust laws. See supra note 7.
ii. Nature and Directness of Injury
In analyzing the third and fourth factors, the Court in AGC observed that the plaintiff union was neither a consumer (as the plaintiff in McCready was) nor a competitor within the market that allegedly had been restricted (i.e., the market for building subcontracts). Further, its alleged harm was indirect because it claimed that the defendants conspired to induce third parties to do business with nonunion contractors instead of union contractors, and the plaintiff union was harmed only because it had contracts with the latter and not the former. The Court concluded that “the Union is neither a participant in the market for construction contracts or subcontracts nor a direct victim of the defendants’ coercive practices.” AGC, 459 U.S. at 540 n. 44. This analysis inveighs against plaintiffs’ position.8 The Court‘s holding in AGC that the union did not have standing also undercuts the Funds’ argument that the foreseeability of their injury strongly favors our finding that proximate cause exists here. See Appellants’ Br. at 25. No doubt the defendants in AGC foresaw that their conspiracy favoring nonunion contractors would harm the unions that had contracts with the target of the conspiracy-unionized contractors. Yet this foreseeability was insufficient to overcome the remoteness of the union‘s injury from the defendants’ wrongdoing.
Our analysis of the first four AGC factors counsels against recognition of the
However, the Funds’ claims of direct injury include allegations that they were in the market for safer tobacco products or for products that would reduce or prevent people from smoking. Therefore, these claims might meet the third factor from AGC. If the Funds were consumers in a market for information and products that would have reduced their expenditures (because they allegedly would have provided the information and products to their participants, some of whom would have smoked less and become less ill), their asserted injuries-as consumers-may be of the appropriate type.
The Funds’ claims of direct injury might also meet the fourth factor from AGC, which focuses on the directness or indirectness of the alleged injury. Subsumed in the “directness” factor is also the issue of whether other, more directly injured parties could vindicate the policies underlying the antitrust laws: “The existence of an identifiable class of persons whose self-interest would normally motivate them to vindicate the public interest in antitrust enforcement diminishes the justification for allowing a more remote party such as the Union to perform the office of a private attorney general.” AGC, 459 U.S. at 542. While more directly injured parties existed in AGC (i.e., unionized subcontractors who were the target of the boycott), this is not necessarily the case here. Smokers can sue for personal injuries arising from smoking, but they are unlikely (or unable) to press antitrust claims against the tobacco companies.
Although we acknowledge that plaintiffs’ claims of direct injury appear, at least initially, to meet a number of the first four AGC factors, we question whether these direct injuries are necessarily more direct than the indirect injuries on which much of our discussion has focused. Under plaintiffs’ direct theory, the tobacco companies’ conduct aimed at the Funds induced the Funds to not take certain actions, which led to a greater incidence of smoking (and of smokers using more dangerous products), which led to more illness, which led to increased health care expenditures being borne by the plaintiffs. Although the alleged wrongdoing was more directly aimed at the Funds, the injury itself certainly was no more direct than the indirect injury that arose from the defendants’ actions toward smokers.
In another union fund case, a district court focused on this alleged direct injury in partially denying the defendants’ motion to dismiss. In that case, the court analogized the direct-injury claim to a hypothetical case in which a defendant fraudulently induced health funds into reimbursing participants for a dangerous medical procedure that then harmed these participants. See New Jersey Carpenters Health Fund v. Philip Morris, Inc., 17 F.Supp.2d 324, 332-33 (D.N.J.1998). In such a case, the court believed, the funds would have a cause of action against the defendant for their economic damages caused by the fund participants’ use of the procedure that the funds were wrongfully induced to cover.
We are not convinced, as the district court in New Jersey Carpenters was, that this hypothetical case presents a causation chain similar to the Funds’ direct claim in
Our belief that the plaintiffs’ direct claim comes no closer than their indirect claim to meeting the proximate cause requirement for antitrust standing is supported by the dearth of discussion of this allegedly unique claim in plaintiffs’ complaint and brief to this Court. See Appellants’ Br. at 21-22 (discussing “direct” injury); id. at 23-39 (discussing “indirect” injury); see also infra note 11 (noting minimal allegations of “direct” injury in complaint). At all events, as is clear from our extensive review of all of the AGC factors, we find that however plaintiffs characterize their claims-as direct or indirect-they necessarily fail for being too remotely connected in the causal chain from any wrongdoing on defendants’ part.
iii. Speculativeness of Damages and Trial Complexity
We find that AGC‘s sixth factor does not militate against a finding of antitrust standing, as there is little danger of duplicative litigation9 or complex apportionment of damages among various groups of plaintiffs.10 However, the Funds’
It is apparent why the Funds argue that they can demonstrate all of this through aggregation and statistical modeling: it would be impossible for them to do so otherwise. Cf. Barnes v. American Tobacco Co., 161 F.3d 127, 143 (3d Cir.1998) (affirming denial of class certification in statewide smokers’ suit, because “addiction, causation, the defenses of comparative and contributory negligence, the need for medical monitoring and the statute of limitations present too many individual issues to permit certification“). Yet we do not believe that aggregation and statistical modeling are sufficient to get the Funds over the hurdle of the AGC factor focusing on whether the “damages claim is . . . highly speculative.” AGC, 459 U.S. at 542.
In some litigation contexts, there is a meaningful distinction between damages that are completely incapable of determination and those that are difficult to determine but are nonetheless measurable. In those contexts, if the latter is the case, aggregation and statistical modeling may be appropriate (though we need not decide that issue here) to allow plaintiffs to overcome the difficulty of proving the amount of damages. Cf. Hilao v. Estate of Marcos, 103 F.3d 767, 782-87 (9th Cir.1996) (allowing use of aggregation and statistical analysis to determine compensatory damages). But cf. Arch v. American Tobacco Co., 175 F.R.D. 469, 493 (E.D.Pa.1997) (rejecting use of statistical evidence to overcome need to prove individual damages in putative class action). In the present context, however, a finding of antitrust standing must precede a finding of liability, which itself precedes the assessment of damages. Therefore, the fact that “once liability is established, plaintiff‘s proof of damages will be evaluated under a more lenient standard,” Danny Kresky Enters. Corp. v. Magid, 716 F.2d 206, 212 (3d Cir.1983), does not eliminate from our analysis of the AGC factors the speculative (though potentially measurable) nature of plaintiffs’ damages. This speculativeness strongly militates against plaintiffs’ position.
iv. The AGC Factors Applied: Summary
Against this somewhat lengthy background, we can now summarize our review of the AGC factors in this case: First, some causal connection appears to exist between the conduct of the tobacco companies and the injury suffered by the plaintiff Funds-though we doubt that this connection links some antitrust wrongdoing with an antitrust injury. Second, plaintiffs have alleged, if barely, that the defendants’ conspiracy specifically targeted them, though for the most part their complaint alleges that the plaintiffs were targeted along with “consumers, state and federal governments, medical and health care entities, and the public at large.” Compl.
The sheer number of links in the chain of causation that connect the defendants’ suppression of information on the dangers of their products and withholding of safer tobacco products from the market to the Funds’ increased expenditures are greater than in any case we can find in which this court or the Supreme Court has found antitrust standing. These alleged links include the following: (1) the tobacco companies engaged in a conspiracy to suppress information and withhold products from the market; (2) the Funds were prevented from informing their members about the dangers of smoking and the availability of less dangerous products; (3) smokers continued to smoke dangerous tobacco products that they would not have otherwise used (or would have used less); (4) smokers contracted more smoking-related illnesses; and, finally, (5) the Funds suffered increased expenses due to their reimbursement of smokers’ health care costs.
As to the final two AGC factors, there is only a slight possibility of duplicative antitrust recoveries or problems apportioning antitrust damages, because smokers are unlikely to make their own antitrust claims based on increased health care expenditures. However, the Funds’ damages claims are highly speculative and would entail complex calculations potentially involving numerous individuals not party to this case, i.e., Fund participants who do smoke or have smoked in the past.
The short of it is that, while we find that the plaintiffs’ antitrust claims barely meet certain AGC factors, the fulfillment of these factors is greatly outweighed by the extremely indirect nature of the Funds’ injuries and the highly speculative and complex damages claims The tortured path that one must follow from the tobacco companies’ alleged wrongdoing to the Funds’ increased expenditures demonstrates that the plaintiffs’ claims are precisely the type of indirect claims that the proximate cause requirement is intended to weed out. Cf. Palsgraf v. Long Island R. Co., 248 N.Y. 339, 162 N.E. 99, 103 (1928) (Andrews, J., dissenting) (“What we do mean by the word ‘proximate’ is that, because of convenience, of public policy, of a rough sense of justice, the law arbitrarily declines to trace a series of events beyond a certain point.“).
What is more, in proposing a solution to the speculative nature of their damages-i.e., using aggregation and statistical modeling to measure damages-the Funds focus too far down the road to assist their case for standing: The task of accurately measuring damages can be approached only after a plaintiff has met the requirements for standing and has proven liability. While we do not doubt that the Funds have paid out more in health care
3. Lower Lake Erie
Our own precedent that provides the most support for plaintiffs’ antitrust claim is In re Lower Lake Erie Iron Ore Antitrust Litigation, 998 F.2d 1144 (3d Cir. 1993). In that case, the district court dismissed for lack of antitrust standing one of plaintiffs’ claims that was based on a theory similar to that put forth by plaintiffs here. The plaintiffs, various steel manufacturers and transportation companies, alleged that certain railroad companies conspired “to preclude potential competitors from entering the market of lake transport, dock handling, storage and land transport of iron ore.” Id. at 1151. The steel companies’ claim that was dismissed was “based on the theory that had the conspiracy not delayed the use of self unloading vessels, the steel companies would have paid vessel companies a lower rate for lake transportation.” Id. at 1154. The district court found that this claim failed, reasoning that “because the steel companies were only potential customers of non-conspiring competitors, (the vessel companies), damages could be ascertained only by speculating when the vessel companies would have begun using self-unloaders absent a conspiracy. Assessment of damages would also require additional conjecture related to the rates the private docks would have charged to handle the self-unloaders.” Id.
After analyzing the factors from AGC, we disagreed with the district court‘s conclusion. First, we found that a direct causal relationship existed between the defendants’ wrongdoing and the steel companies’ alleged harm: “[D]elayed . . . introduction of the more efficient self unloader . . . caused loss of the profits which would have been realized had the less costly transport system been in place,” and “it was unquestionably the steel companies who bore the brunt of the increased costs attributed to the railroad‘s agreement to thwart development of the less expensive technology.” Id. at 1168.12 This matches closely the Funds’ theory in the present case: Delayed introduction of safer tobacco products caused higher costs than they would have faced had these products been allowed to enter the market, and it was health care payers who bore the brunt of the increased costs attributed to the tobacco companies’ agreement to thwart development of safer tobacco products.
There is a key difference, however. In Lower Lake Erie, the use of more expensive unloaders-made necessary by the defendants’ wrongdoing-caused a loss of profits for the plaintiffs without any intervening events.13 The inability to use cheaper unloaders, in and of itself, caused the plaintiffs’ damages. Here, the alleged conspiracy that delayed introduction of safer tobacco products only caused damages to
This distinction between Lower Lake Erie and the present case illustrates the most fundamental flaw in plaintiffs’ claims. The injuries that they allegedly suffered from defendants’ wrongdoing are simply too remote from that wrongdoing to be cognizable under the antitrust laws. The causal links that plaintiffs must connect in order to make their case are just too numerous and too speculative to meet the requirements of AGC and of the Supreme Court‘s and this court‘s other antitrust precedents.
C. RICO Claims: Holmes v. SIPC
In Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992), the Supreme Court held that its discussion of proximate cause and remoteness in cases such as McCready and AGC applied to the analysis of proximate cause in RICO cases as well. See Holmes, 503 U.S. at 268; see also McCarthy v. Recordex Serv., Inc., 80 F.3d 842, 855 (3d Cir.1996) (“Significantly, antitrust standing principles apply equally to allegations of RICO violations.“). Therefore, much (if not all) of what we have said above in our discussion of antitrust standing applies to the Funds’ RICO claims. We discuss here, however, the specific requirements for stating a claim under RICO, to better explicate our reasons for finding that all of plaintiffs’ claims must fail for being too remote and speculative.
In Holmes, the Court addressed the directness inquiry when it explained that “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. This was primarily because (1) the more indirect the injury, “the more difficult it becomes to ascertain the amount of a plaintiff‘s damages attributable to [defendant‘s wrongdoing], as distinct from other, independent, factors“; (2) allowing recovery by indirectly injured parties would require complicated rules for apportioning damages; and (3) direct victims could generally be counted on to vindicate the policies underlying the relevant law. Id. at 269-70.
1. Directness of the Injury
The plaintiff in Holmes alleged that the defendants had conspired to manipulate certain stock prices, which led to losses for brokers, which led to the brokers’ inability to return investments of customers who had not bought the manipulated stock.14 In the present case, the tobacco companies are in the position of the stock manipulators in Holmes, while the smokers-the third party linking the plaintiffs and defendants-are in the same position as the brokers; the plaintiff Funds, who suffered a loss because of the harm that the defendants brought upon the third party, are in the same position as the brokers’ customers who did not invest in the manipulated stock.15 The Supreme Court in Holmes
The Court reasoned as follows: “If the nonpurchasing customers were allowed to sue, the district court would first need to determine the extent to which their inability to collect from the brokerdealers was the result of the alleged conspiracy to manipulate, as opposed to, say, the brokerdealers’ poor business practices or their failures to anticipate developments in the financial markets.” Id. at 272-73. Applied to the present case, if the Funds are allowed to sue, the court would need to determine the extent to which their increased costs for smoking-related illnesses resulted from the tobacco companies’ conspiracy to suppress health and safety information, as opposed to smokers’ other health problems, smokers’ independent (i.e., separate from the fraud and conspiracy) decisions to smoke, smokers’ ignoring of health and safety warnings, etc.16 As in Holmes, this causation chain is much too speculative and attenuated to support a RICO claim.
2. Apportionment of Damages and Vindication by Others
As noted above, the Court in Holmes expressed two further concerns (in addition to the directness factor) that supported its conclusion that nonpurchasing investors did not have standing: (1) the court would need to apportion treble damages between the brokers and the nonpurchasing customers, and (2) the brokers could vindicate the RICO claims themselves. See id. at 273. As we noted in our discussion of the Funds’ antitrust claims, more directly injured parties, i.e., smokers, would be unlikely to bring federal claims against the tobacco companies for the same damages claimed by the Funds. Yet, as we also noted above, Fund participants who have not been fully reimbursed for their out-of-pocket costs that are traceable to defendants’ alleged fraud and conspiracy might bring RICO or antitrust claims. Therefore, as in Holmes, a court adjudicating the Funds’ RICO claims would need to consider the appropriate apportionment of damages between smokers and others such as the Funds who suffered economic losses as a result of the tobacco companies’ alleged fraudulent acts.
It is true that the final concern-that another party could better vindicate the RICO claims-may not be as fully applicable to this case as to Holmes because the Funds allege that they suffered far greater economic damages than smokers themselves, many of whom were reimbursed for their direct pecuniary losses. Yet we are unconvinced that this distinction is sufficient to overcome the concerns about apportioning damages and, most fundamentally, the remoteness of the Funds’ alleged
D. Summary of Federal Claims
At this point in contemporary history, there can be little doubt that the tobacco companies’ products have caused smokers to contract certain illnesses and that the plaintiff Funds (and others) have borne some of the costs of these illnesses by reimbursing their participants for their health care expenditures. It is therefore quite possible that some of these health care providers and payers have had to cut back on their coverage of other medical problems in order to fund the costs of smoking-related illnesses, causing other Fund participants to pay out-of-pocket expenses they otherwise would not have paid. It also may be the case that unions and their members have been forced to accept lower wage increases or to forgo benefit improvements in order to achieve contract settlements with employers that included sufficient contributions to the Funds to pay for smoking related illnesses. All of these parties-non-smoking Fund participants, unions, union members, employers-can claim to have suffered some injury arising out of the tobacco companies’ conduct. At some point, however, the causal link between defendants’ actions and the negative effects that eventually result is not proximate enough to meet the prudential requirements for antitrust or RICO standing. In this case, for the reasons set forth supra at 922-34, we believe that this necessary proximate-cause connection is missing.18 Therefore, plaintiffs’ federal claims based on alleged violations of the antitrust laws and the RICO statute were properly dismissed by the District Court.
III. Plaintiffs’ State-Law Claims
The same principles that lead us to conclude that plaintiffs’ antitrust and RICO claims were properly dismissed lead to the inevitable conclusion that their statelaw claims must also fail.
A. Fraudulent Misrepresentation
While the District Court dismissed the Funds’ remaining claims for the same reasons it found the antitrust and RICO claims wanting, i.e., lack of proxi-
B. Injunctive Relief
If the plaintiffs have antitrust standing for their damages claim, they almost certainly would have standing to seek injunctive relief, as the standard is lower for such a claim. See McCarthy, 80 F.3d at 856 (only proximate cause and “threatened loss or injury cognizable in equity” are required for injunctive relief under the antitrust laws). However, as we have detailed above, the necessary element of proximate cause is missing and therefore, just as plaintiffs lack standing to seek damages for their alleged injuries, they lack antitrust standing for equitable relief as well.20
C. Special Duty
The defendants maintain, and the District Court held, that a special-duty claim in Pennsylvania requires averments of physical injury. Whether or not this view is correct (and we take no position on it),21 we conclude that plaintiffs’ special-duty claim too must fail.
Special-duty claims arise most often in the context of the provision of public or commercial services. See, e.g., Yates v. City of Philadelphia, 134 Pa.Cmwlth. 282, 578 A.2d 609, 611 (1990) (“[A] special relationship is found only where an individual is exposed to a special danger and the authorities have undertaken the responsibility to provide adequate protection for him or her. . . .“);
Converting a company‘s marketing into a special undertaking to inform the public about the known risks of its products would subject every manufacturer that advertises its products to liability for a “special duty” created by such marketing, and that duty would be violated by every material omission in such advertising. We are unwilling to so dramatically extend the scope of liability for a state-law cause of action. Cf. DeJesus v. Liberty Mut. Ins. Co., 423 Pa. 198, 223 A.2d 849, 850 (1966) (holding that no special duty arises from workers’ compensation insurance company‘s “advertising material representing that it provides loss prevention service and safety counsel to its policyholders” when plaintiff-worker did not aver that “the advertisements were part of any contract or other legal obligation under-taken by [the insurance company] or that they adversely affected [the plaintiff]“).22 Finally, a special duty claim is effectively a negligence cause of action, and therefore requires the element we have found missing from plaintiffs’ case, proximate cause. See Morena, 462 A.2d at 684 & n. 5 (noting that the plaintiff in a special-duty case must still prove the underlying elements of a negligence claim, including proximate cause).
D. Unjust Enrichment
Unjust enrichment is typically invoked in a question setting, when plaintiff seeks to recover from defendant for a benefit conferred under an unconsummated or void contract. See, e.g., Zvonik v. Zvonik, 291 Pa.Super. 309, 435 A.2d 1236, 1239-40 (1981); cf. Meehan v. Cheltenham Township, 410 Pa. 446, 189 A.2d 593, 595 (1963) (noting that unjust enrichment is an equitable remedy, requiring for recovery that there be both “(1) an enrichment, and (2) an injustice resulting if recovery for the enrichment is denied“).
In the tort setting, an unjust enrichment claim is essentially another way of stating a traditional tort claim (i.e., if defendant is permitted to keep the benefit of his tortious conduct, he will be unjustly enriched). As the Restatement of Restitution puts it:
The desirability of permitting restitution in [tort] cases is ordinarily not so obvious as in the cases where there has been no tort since the tortfeasor is always subject to liability in an action for damages and . . . the right to maintain an action for restitution in such cases is largely the product of imperfections in the tort remedies, some of which imperfections have now been removed.
For the foregoing reasons, the District Court‘s judgment dismissing plaintiffs’ complaint in its entirety will be affirmed.
Appendix
Government Bodies as Plaintiffs
Arizona v. American Tobacco Co., No. CV-96-14769 (Ariz.Super.Ct. May 27, 1997) (denying motion to dismiss)
Idaho v. Philip Morris, Inc., No. CV-OC-97-03239*D (Idaho Dist. Ct. Sept. 2, 1998) (denying motion to dismiss consumer protection claims, but dismissing antitrust, nuisance, and conspiracy claims)
Illinois v. Philip Morris, Inc., No. 96L 13146 (Ill.Cir.Ct. Nov. 13, 1997) (denying motion to dismiss state antitrust, negligence, and civil conspiracy claims, but dismissing special duty, nuisance, and unjust enrichment claims)
Indiana v. Philip Morris, Inc., No. 49D07-9702-CT-003236 (Ind.Super.Ct. July 23, 1998) (dismissing conspiracy, antitrust, unjust enrichment, indemnity, assumed duty, criminal mischief, and nuisance claims)
Iowa ex rel. Miller v. Philip Morris, Inc., 577 N.W.2d 401 (Iowa 1998) (affirming dismissal of deception, special duty, and indemnity claims)
County of Los Angeles v. R.J. Reynolds Tobacco Co., No. 707651 (Cal.Super.Ct. Dec. 23, 1997) (dismissing breach of warranty, fraud, strict liability, and negligence claims with leave to amend), petition for review granted, No. S068747, 1998 Cal. LEXIS 2475 (Cal. Apr. 22, 1998)
Maryland v. Philip Morris, Inc., No. 96122017, 1997 WL 540913 (Md.Cir.Ct. May 21, 1997) (denying motion to dismiss consumer protection and antitrust claims, but dismissing unjust enrichment, special duty, fraud, breach of warranty, negligence, strict liability, and conspiracy claims with leave to amend)
City & County of San Francisco v. Philip Morris, Inc., 957 F.Supp. 1130 (N.D.Cal.1997) (dismissing RICO, negligent misrepresentation, special duty, warranty, and unjust enrichment claims with leave to amend), and No. C-96-2090 DLJ, 1998 WL 230980 (N.D.Cal. Mar.3, 1998) (denying motion to dismiss fraud and certain special duty claims, but dismissing other special duty claims)
Texas v. American Tobacco Co., 14 F.Supp.2d 956 (E.D.Tex.1997) (denying motion to dismiss RICO claims, but dismissing antitrust, unjust enrichment, and nuisance claims)
Union Funds as Plaintiffs
Hawaii Health & Welfare Trust Fund for Operating Eng‘rs v. Philip Morris, Inc., No. 97-00833 SPK (D.Haw. Jan. 25, 1999) (dismissing RICO, antitrust, false advertising, and special duty claims)
International Bhd. of Teamsters Local 734 Health & Welfare Trust Fund v. Philip Morris, Inc., 34 F.Supp.2d 656 (N.D.Ill. 1998) (dismissing antitrust, special duty, strict liability, negligence, breach of warranty, fraud, unjust enrichment, and conspiracy claims)
Iron Workers Local Union No. 17 Ins. Fund v. Philip Morris, Inc., 23 F.Supp.2d 771 (N.D.Ohio 1998) (denying motion to dismiss RICO, antitrust, and conspiracy claims)
Kentucky Laborers Dist. Council Health & Welfare Trust Fund v. Hill & Knowlton, Inc., 24 F.Supp.2d 755 (W.D.Ky.1998) (denying motion to dismiss some RICO and deceit claims, but dismissing other RICO claims and antitrust, fraud, special duty, and unjust enrichment claims)
Laborers & Operating Eng‘rs Util. Agreement Health & Welfare Trust Fund v. Philip Morris, Inc., No. CIV 97-1406 PHX SMM (D.Ariz. Feb. 10, 1999) (dismissing RICO, antitrust, fraud, assumed duty, and unjust enrichment claims)
Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., 7 F.Supp.2d 277 (S.D.N.Y.) (denying motion to dismiss fraud, special duty, and RICO claims, but dismissing unjust enrichment and antitrust claims), interlocutory appeal granted, 7 F.Supp.2d 294 (S.D.N.Y.1998), appeal docketed, No. 98–7944 (2d Cir. argued Feb. 4, 1999)
National Asbestos Workers Med. Fund v. Philip Morris, Inc., 23 F.Supp.2d 321 (E.D.N.Y.1998) (denying motion to dismiss RICO, unjust enrichment, indemnity, and assumed duty claims)
New Jersey Carpenters Health Fund v. Philip Morris, Inc., 17 F.Supp.2d 324 (D.N.J.1998) (denying motion to dismiss certain fraud and RICO claims, but dismissing antitrust, special duty, and unjust enrichment claims)
New Mex. & West Tex. Multi-Craft Health & Welfare Trust Fund v. Philip Morris, Inc., No. CV-97-09118 (N.M.Dist. Ct. Dec. 24, 1998) (dismissing all claims)
Northwest Laborers-Employers Health & Sec. Trust Fund v. Philip Morris, Inc., No. C97-849WD (W.D.Wash. Dec. 23, 1998) (denying motion to dismiss)
Operating Eng‘rs Local 12 Health & Welfare Trust v. American Tobacco Co., No. BC 177968 (Cal.Super. Ct. July 9, 1998) (dismissing strict liability, special duty, breach of warranty, restitution, and unjust enrichment claims without leave to amend, and dismissing fraud and conspiracy claims with leave to amend)
Operating Eng‘rs Local 324 Health Care Fund v. Philip Morris, Inc., No. 97-741291 CZ (Mich.Cir.Ct. Feb. 12, 1999) (dismissing all claims)
Oregon Laborers-Employers Health & Welfare Trust Fund v. Philip Morris, Inc., 17 F.Supp.2d 1170 (D.Or.1998) (dismissing antitrust, RICO, consumer protection, unjust enrichment, indemnity, assumed duty, and conspiracy claims)
Seafarers Welfare Plan v. Philip Morris, 27 F.Supp.2d 623 (D.Md.1998) (dismissing RICO, antitrust, tort, consumer protection, and unjust enrichment claims)
Southeast Fla. Laborers Dist. Health & Welfare Trust Fund v. Philip Morris, Inc., 1998 WL 186878 (S.D. Fla. Apr. 13, 1998) (dismissing fraud, special duty, unjust enrichment, RICO, and antitrust claims)
Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912, No. 98-1426 (3d Cir. Mar. 1999) (affirming dismissal of RICO, antitrust, fraud, special duty, unjust enrichment, strict liability, negligence, and breach of warranty claims)
Texas Carpenters Health Benefit Fund v. Philip Morris, Inc., 21 F.Supp.2d 664 (E.D.Tex.1998) (dismissing RICO, antitrust, tort, breach of warranty, and unjust enrichment claims)
West Va. Laborers’ Pension Trust Fund v. Philip Morris, Inc., No. 3:97-0708 (S.D.W.Va. Aug. 12, 1998) (denying motion to dismiss)
West Va.-Ohio Valley Area I.B.E.W. Fund v. American Tobacco Co., No. 2:97-0978 (S.D.W.Va. Aug. 11, 1998) (denying motion to dismiss)
Other Health Care Payers as Plaintiffs
Minnesota v. Philip Morris, Inc., 551 N.W.2d 490 (Minn.1996) (affirming denial of motion to dismiss state antitrust, consumer protection, and equitable claims, but dismissing tort claims)24
Regence Blueshield v. Philip Morris, Inc., 40 F.Supp.2d 1179 (W.D.Wash.1999) (dismissing RICO, antitrust, fraud, special duty, unjust enrichment, and conspiracy claims)
Williams & Drake Co. v. American Tobacco Co., No. 98-553 (W.D.Pa. Dec. 21, 1998) (dismissing RICO, antitrust, consumer protection, fraud, special duty, indemnity, and unjust enrichment claims brought by self-insured employer)
Notes
In torts, a leading treatise on damages set forth the general principle that, ” ‘[w]here the plaintiff sustains injury from the defendant‘s conduct to a third person, it is too remote, if the plaintiff sustains no other than a contract relation to such a third person, or is under contract obligation on his account, and the injury consists only in impairing the ability or inclination of such person to perform his part, or in increasing the plaintiff‘s expense or labor of fulfilling such contract, unless the wrongful act is willful for that purpose.’ Thus, A, who had agreed with a town to support all the town paupers for a specific period, in return for a fixed sum, had no cause of action against S for assaulting and beating one of the paupers, thereby putting A to increased expense. Similarly, a purchaser under an output contract with a manufacturer had no right of recovery against a trespasser who stopped the company‘s machinery, and a creditor could not recover against a person who had forged a note, causing diminution in the dividends from an estate. 1 J. Sutherland, Law of Damages 55-56 (1882) (emphasis in original, footnote omitted).”AGC, 459 U.S. at 532-33 n. 25. Contrary to defendants’ contention, the Court appears to have quoted this excerpt from Sutherland as simply a “general principle” and not as the outer limits of possible antitrust liability. Further, while the first example cited appears to support the tobacco companies’ argument on remoteness, the allegations here are more analogous to a situation in which A agreed to support all the town paupers and S, after assaulting and beating a number of the paupers, covered up his wrongdoing and affirmatively kept A from reducing its costs of supporting the injured paupers. While we still question whether, in Sutherland‘s view, A would have a cause of action against S under this scenario, it is certainly a closer question than that raised by the example in the excerpt. On the other hand, plaintiffs place much weight on the qualifier at the end of the internally quoted language, i.e., “unless the wrongful act is willful for that purpose.” Our view of the import of this qualifier, however, is not the same as theirs, as we do not think a sentence fragment in a single quotation in a Supreme Court footnote is sufficient to override the clear text of that opinion-text that squarely holds that “an allegation of improper motive, although it may support a plaintiff‘s damages claim under § 4, is not a panacea that will enable any complaint to withstand a motion to dismiss.” Id. at 537 (footnote omitted).
It is appropriate to emphasize that as a general rule, “any firm, even a monopolist, may bring its products to market whenever and however it chooses.” [Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 286 (2d Cir.1979)]. Without more, it is not unlawful for any competitor in any market to delay the introduction of a new product or an entire line of new products until, as [plaintiff] alleged in this case, the competition forces such introduction. In order to state a claim for relief under section 2 [of the Sherman Act], product introduction must be alleged to involve some associated conduct which constitutes an anticompetitive abuse or leverage of monopoly power, or a predatory or exclusionary means of attempting to monopolize the relevant market, rather than aggressive competition on the merits.Id. at 545-46 (omission in original). We do not decide here whether this reasoning holds true when competitors-rather than a single monopolist-agree to “delay the in-