Allegheny Gen'l Hosp v. Philip Morris Inc , 228 F.3d 429 ( 2000 )

Opinions of the United
2000 Decisions States Court of Appeals
for the Third Circuit
10-6-2000
Allegheny Gen'l Hosp v. Philip Morris Inc
Precedential or Non-Precedential:
Docket 99-4024
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Filed October 6, 2000
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 99-4024, 00-3101 and 00-3102
ALLEGHENY GENERAL HOSPITAL; ALLEGHENY VALLEY
HOSPITAL; ARMSTRONG COUNTY MEMORIAL HOSPITAL;
CANONSBURG GENERAL HOSPITAL; CARBON-
SCHUYLKILL COMMUNITY HOSPITAL, INC., d/b/a
MINERS MEMORIAL MEDICAL CENTER;
CHAMBERSBURG HOSPITAL; FORBES REGIONAL
HOSPITAL; HAZLETON--ST. JOSEPH MEDICAL CENTER;
LEHIGH VALLEY HOSPITAL; MUHLENBERG HOSPITAL
CENTER; NORTHEASTERN PENNSYLVANIA
CORPORATION, d/b/a HAZLETON GENERAL HOSPITAL;
SAINT LUKE'S HOSPITAL OF BETHLEHEM; SAINT
LUKE'S -- ALLENTOWN CAMPUS; ST. LUKE'S
QUAKERTOWN HOSPITAL; SAINT VINCENT HEALTH
CENTER; WAYNESBORO HOSPITAL,
v.
PHILIP MORRIS, INC.; R.J. REYNOLDS TOBACCO
COMPANY; BROWN & WILLIAMSON TOBACCO
CORPORATION; B.A.T. INDUSTRIES, PLC; THE
AMERICAN TOBACCO COMPANY, INC., c/o BROWN &
WILLIAMSON TOBACCO CORPORATION; LORILLARD
TOBACCO COMPANY; LIGGETT GROUP, INC.; UNITED
STATES TOBACCO COMPANY; TOBACCO INSTITUTE,
INC.; THE COUNCIL FOR TOBACCO RESEARCH--USA,
INC.; SMOKELESS TOBACCO COUNCIL, INC.; HILL &
KNOWLTON, INC.,
Allegheny General Hospital; Allegheny Valley Hospital;
Armstrong County Memorial Hospital; Canonsburg
General Hospital; Carbon-Schuylkill Community Hospital,
Inc., d/b/a Miners Memorial Medical Center;
Chambersburg Hospital; Forbes Regional Hospital;
Hazleton--St. Joseph Medical Center; Lehigh Valley
Hospital; Muhlenberg Hospital Center; Northeastern
Pennsylvania Corporation, d/b/a Hazleton General
Hospital; Saint Luke's Hospital of Bethlehem; Saint
Luke's--Allentown Campus; St. Luke's Quakertown
Hospital; Saint Vincent Health Center; Waynesboro
Hospital,
Appellants in 99-4024,
Armstrong County Memorial Hospital; Carbon-Schuylkill
Community Hospital, Inc., d/b/a Miners Memorial
Medical Center; Chambersburg Hospital; Hazleton--St.
Joseph Medical Center; Lehigh Valley Hospital;
Muhlenberg Hospital Center; Northeastern Pennsylvania
Corporation, d/b/a Hazleton General Hospital; Saint
Luke's Hospital of Bethlehem; Saint Luke's-- Allentown
Campus; St. Luke's Quakertown Hospital; Saint Vincent
Health Center; Waynesboro Hospital,
Appellants in 00-3101,
Allegheny General Hospital; Allegheny Valley Hospital;
Canonsburg General Hospital; Forbes Regional Hospital,
Appellants in 00-3102.
ON APPEAL FROM THE ORDER OF
THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
(D.C. Civ. No: 99-9)
District Court Judge: The Honorable Donetta W. Ambrose
Submitted Under Third Circuit LAR 34.1(a)
July 19, 2000
Before: SLOVITER, NYGAARD, and FUENTES,
Circuit Judges
(Opinion Filed: October 6, 2000)
2
Terrence J. O'Rourke
Sean O. Sheridan
Melissa L. Staggers
Nash & Company, P.C.
11 Stanwix Street
Suite 700
Pittsburgh, PA 15222
ATTORNEYS FOR APPELLANTS
Kenneth J. Parsigian,
Christopher D. Moore
Goodwin, Proctor & Hoar, LLP
Exchange Place
Boston, MA 02109
Kevin C. Harkins,
Cohen & Grigsby, P.C.
11 Stanwix Street
15th Floor
Pittsburgh, PA 15222
ATTORNEYS FOR APPELLEES
PHILIP MORRIS, INC. AND
BROWN & WILLIAMSON
TOBACCO CORPORATION
Scott D. Livingston,
Marcus & Shapira, LLP
301 Grant Street
One Oxford Centre, 35th Floor
Pittsburgh, PA 15219
ATTORNEY FOR APPELLEE
R.J. TOBACCO COMPANY
Thomas Finarelli
Lavin, Coleman, O'Neil, Ricci,
Finarelli & Gray
510 Walnut Street
1200 Penn Mutual Towers
Philadelphia, PA 19106
ATTORNEY FOR APPELLEE
B.A.T. INDUSTRIES P.L.C..
3
Howard M. Klein
William J. O'Brien
Conrad, O'Brien, Gellman &
Rohn, P.C.
1515 Market Street
16th Floor
Philadelphia, PA
ATTORNEYS FOR APPELLEES
THE TOBACCO INSTITUTE AND
LORILLARD TOBACCO COMPANY
Stephen J. Imbriglia
Hecker, Brown, Sherry & Johnson
18TH & Arch Streets
1700 Two Logan Square
Philadelphia, PA 19103
ATTORNEY FOR APPELLEE
UNITED STATES TOBACCO
COMPANY
Patrick W. Kittredge
Kittredge, Donley, Elson, Fullem
& Embick
421 Chestnut Street
Fifth Floor
Philadelphia, PA 19106
ATTORNEY FOR APPELLEE
THE COUNCIL FOR TOBACCO
RESEARCH-USA, INC.
4
Wilbur L. Kipnes
Schnader Harrison Segal &
Lewis, LLP
1600 Market Street
Suite 3600
Philadelphia, PA 19103
John K. Gisleson
Schnader, Harrison, Segal &
Lewis, LLP
120 Fifth Avenue
Fifth Avenue Place, Suite 2700
Pittsburgh, PA 15222
ATTORNEYS FOR APPELLEE
SMOKELESS TOBACCO COUNCIL,
INC.
Richard L. Kremnick
Blank, Rome, Comiskey &
McCauley, LLP
One Logan Square
Philadelphia, PA 19103
ATTORNEY FOR APPELLEE HILL
& KNOWLTON, INC.
J. Kurt Straub
Obermayer, Rebmann, Maxwell
& Hipple
1617 John F. Kennedy Blvd.
One Penn Center, 19th Floor
Philadelphia, PA 19103
ATTORNEY FOR APPELLEE
LIGGETT GROUP, INC.
OPINION OF THE COURT
FUENTES, Circuit Judge:
Sixteen Pennsylvania hospitals brought this suit against
various tobacco companies and their trade associations,
seeking to recover unreimbursed costs of health care
provided to nonpaying patients suffering from tobacco-
5
related disease. The hospitals alleged that the tobacco
companies engaged in a conspiracy lasting more than 40
years to manipulate the nicotine content in cigarettes and
other tobacco products. They alleged that the tobacco
companies deceived and misled the public about the
addictive properties of nicotine and the health risks of
smoking. As a result, many people used tobacco and
developed lung cancer and other tobacco-related illnesses.
The hospitals expended significant resources treating these
tobacco users, and now seek recovery of their expenses
under federal antitrust and RICO provisions, as well as
state common law theories.
In Steamfitters Local Union No. 420 Welfare Fund v. Philip
Morris, Inc., 171 F.3d 912, 917-18 (3d Cir. 1999), cert.
denied, 120 S. Ct. 844 (2000) [hereinafter Steamfitters], this
Circuit affirmed the dismissal of similar claims brought by
union health and welfare funds, reasoning that the funds'
injuries were too remote from, and not proximately caused
by, the tobacco companies' alleged wrongdoing. Relying on
Steamfitters, the District Court dismissed the hospitals'
claims. The hospitals appeal. We hold that because the
hospitals' damages are too speculative and their injuries
are too remote from the tobacco companies' alleged
wrongdoing, proximate cause is lacking, and thus the
hospitals do not have standing to sue. We therefore affirm.
I. Factual Background and Procedural History
The appellants are sixteen charitable not-for-profit
Pennsylvania hospitals (the "Hospitals"). 1 They are licensed
under the Pennsylvania Health Care Facilities Act, 35 Pa.
Cons. Stat. SS 448.101-448.904b, and are required by
_________________________________________________________________
1. The Hospitals are: (1) Allegheny General Hospital; (2) Allegheny Valley
Hospital; (3) Armstrong County Memorial Hospital; (4) Canonsburg
General Hospital; (5) Carbon-Schuylkill Community Hospital, Inc. d/b/a
Miners Memorial Medical Center; (6) Chambersburg Hospital; (7) Forbes
Regional Hospital; (8) Hazleton -- St. Joseph Medical Center; (9) Lehigh
Valley Hospital; (10) Muhlenberg Hospital Center; (11) Northeastern
Pennsylvania Corporation d/b/a Hazleton General Hospital; (12) Saint
Luke's Hospital of Bethlehem; (13) St. Luke's -- Allentown Campus; (14)
St. Luke's Quakertown Hospital; (15) Saint Vincent Health; and (16)
Waynesboro Hospital.
6
Pennsylvania law to provide health care to Medicaid,
medically indigent, and nonpaying patients (collectively
"nonpaying patients"), see 35 Pa. Cons. Stat. S 449.8(a).
The Commonwealth of Pennsylvania does not fully
reimburse the Hospitals for health care provided to these
patients. The Hospitals therefore bear the financial burden
of their care. The defendants are various producers of
tobacco products and their trade associations (the"Tobacco
Companies").2
The Hospitals allege that, over a 40 year period, the
Tobacco Companies conspired to conceal from the public
the medical risks and addictive nature of tobacco and to
limit information that might reduce the sales of tobacco
products. This effort involved the suppression of scientific
research on safer tobacco products and on methods of
reducing individual consumption. It also involved false
affirmative representations of tobacco use as a safe or even
beneficial activity. The Hospitals allege that, as a result of
this conspiracy, millions of Americans smoked, chewed,
and snuffed tobacco. Many developed lung cancer, oral
cancer, heart disease, and a host of other serious
afflictions. Some tobacco users had health insurance or the
resources to pay for treatment. But others, for whatever
reason, were medically indigent and could not afford health
care -- i.e., the nonpaying patients.
The Tobacco Companies allegedly knew that the burden
of treating these patients would fall on direct health care
providers, such as the Hospitals. In fact, the Hospitals
claim that from the inception of the conspiracy, the
Tobacco Companies intended to shift to the Hospitals the
cost of diagnosing and treating tobacco-related diseases
suffered by nonpaying patients. They do not claim that the
Tobacco Companies are legally liable to the tobacco users
_________________________________________________________________
2. The Tobacco Companies are: (1) Philip Morris, Inc.; (2) R.J. Reynolds
Tobacco Company; (3) Brown & Williamson Tobacco Corporation; (4)
B.A.T. Industries, P.L.C.; (5) The American Tobacco Company, Inc. c/o
Brown & Williamson Tobacco Corporation; (6) Lorillard Tobacco
Company; (7) The Ligget Group, Inc.; (8) United States Tobacco
Company; (9) The Tobacco Institute, Inc.; (10) The Council for Tobacco
Research -- U.S.A., Inc.; (11) Smokeless Tobacco Council, Inc.; and (12)
Hill & Knowlton, Inc.
7
themselves. Rather, the Tobacco Companies are allegedly
liable to the Hospitals for the Hospitals' unreimbursed
expenses, which reportedly amounted to millions of dollars
each year.
The Hospitals' allegations encompass two theories-- an
indirect injury theory and a direct injury theory. 3 Under the
indirect injury theory, the Hospitals allege that, through
deception, the Tobacco Companies caused nonpaying
patients to smoke, inducing significant tobacco-related
diseases. The law required the Hospitals to provide
treatment to these patients regardless of their ability to pay
for it. The Hospitals therefore reason that the Tobacco
Companies' wrongful acts increased the unreimbursed
costs the Hospitals incurred.
Under the direct injury theory, the Hospitals allege that
the Tobacco Companies' conspiracy to conceal information
about the risks of tobacco, and to prevent the development
of safer cigarettes and alternative nicotine delivery devices,
hampered the Hospitals' efforts to reduce tobacco
consumption among nonpaying patients. In other words, if
the Tobacco Companies had not conspired, the Hospitals
could have more effectively counseled patients to quit
smoking or use safer products, reducing the health care
costs of treating tobacco-related disease.
The Hospitals seek recovery under various legal theories,
including claims under federal antitrust laws, 15 U.S.C.
SS 1-37a, the Racketeer Influenced and Corrupt
Organizations Act ("RICO"), 18 U.S.C. S 1962, and state
common law claims for fraudulent misrepresentation,
fraudulent concealment, negligent misrepresentation and
omission, breach of special duty, public nuisance, aiding
and abetting, indemnity based on intentional conduct,
restitution, unjust enrichment, quantum meruit, and civil
conspiracy. In response, all but two of the Tobacco
Companies filed a Rule 12(b)(6) motion in the District Court
to dismiss the complaint for failure to state a claim upon
which relief may be granted. The District Court granted the
motion, holding that the Hospitals' federal antitrust and
_________________________________________________________________
3. We import this useful terminology from Chief Judge Becker's
discussion in Steamfitters, 171 F.3d at 919-20.
8
RICO claims were based on remote and indirect injuries
and on an attenuated theory of causation, and that
therefore the Hospitals lacked standing to bring those
claims. The District Court also found no merit in the
remaining state common law claims, dismissing them on a
variety of rationales.
The Hospitals filed a notice of appeal. Thereafter, the
parties stipulated that the remaining two Tobacco
Companies, B.A.T. Industries, P.L.C., and Smokeless
Tobacco Council, Inc., had joined in the motion to dismiss.
This stipulation rendered the District Court's orderfinal
and appealable as to all the Tobacco Companies. We
therefore have jurisdiction under 28 U.S.C. S 1291. See
Fassett v. Delta Kappa Epsilon (N.Y.), 807 F.2d 1150, 1155
(3d Cir. 1986) (actual finality cures an earlier jurisdictional
defect); Pireno v. New York State Chiropractic Ass'n, 650
F.2d 387, 389 n.4 (2d Cir. 1981), aff 'd sub nom. Union
Labor Life Ins. Co. v. Pireno, 458 U.S. 119 (1982) (later
stipulation of dismissal as to a remaining defendant
rendered earlier order final and appealable).
We exercise plenary review over the District Court's Rule
12(b)(6) dismissal. See Steamfitters, 171 F.3d at 919. In
judging that dismissal, we take all the Hospitals' factual
allegations as true, and affirm only if "it is certain that no
relief can be granted under any set of facts which could be
proved." See City of Pittsburgh v. West Penn Power Co., 147
F.3d 256, 262 n.12 (3d Cir. 1998) (internal quotations and
citations omitted); see also Fed. R. Civ. P. 12(b)(6).
II. Federal Claims - Antitrust and RICO Claims
This case presents an issue of first impression in this
Circuit: whether hospitals, with a legal duty to provide
unreimbursed medical care to nonpaying patients suffering
from tobacco-related disease, have standing to assert
antitrust and RICO claims against tobacco companies.
Apart from the Court below, we have found only one district
court that has directly considered the issue. See Association
of Wash. Pub. Hosp. Dists. v. Philip Morris, Inc. , 79 F. Supp.
2d 1219 (W.D. Wash. 1999) (dismissing the claims).
Our analysis of the Hospitals' claims nevertheless draws
guidance from the closely analogous Steamfitters decision,
9
where a group of union health and welfare funds, who paid
for tobacco-related health care for their members, brought
suit against tobacco companies. In Steamfitters, this Court
affirmed the dismissal of those union funds' various
antitrust and RICO claims on the grounds that the union
funds' injuries were too remote, the injuries were not a
necessary step to the success of the tobacco companies'
alleged conspiracy, and the damage claims were too
speculative and difficult to prove. See 171 F.3d 912. The
result in Steamfitters is consistent with all the Courts of
Appeals (as well as numerous district courts) that have
considered whether health and welfare funds may bring
such claims. See Lyons v. Philip Morris Inc., No. 99-2843,
2000 WL 1234272 (8th Cir. Sept. 1, 2000); United Food and
Commercial Workers Unions, Employers Health and Welfare
Fund, No. 99-13476, 2000 WL 1190787 (11th Cir. Aug. 22,
2000); Texas Carpenters Health Benefit Fund v. Philip
Morris, Inc., 199 F.3d 788 (5th Cir. 2000); Laborers Local 17
Health and Benefit Fund v. Philip Morris, Inc., 191 F.3d 229
(2d Cir. 1999), cert. denied, 120 S. Ct. 799 (2000); Oregon
Laborers-Employers Health & Welfare Trust Fund v. Philip
Morris, Inc., 185 F.3d 957 (9th Cir. 1999), cert. denied, 120
S. Ct. 789 (2000); International Bhd. of Teamsters, Local
734 Health and Welfare Trust Fund v. Philip Morris, Inc.,
196 F.3d 818 (7th Cir. 1999). We have found only two
district court decisions that have decided otherwise. See
Service Employees Int'l Union Health and Welfare Fund v.
Philip Morris Inc., 83 F. Supp. 2d 70 (D.D.C. 1999); Blue
Cross & Blue Shield of New Jersey, Inc. v. Philip Morris Inc.,
36 F. Supp. 2d 560 (E.D.N.Y. 1999), as amended sub nom.
National Asbestos Workers Med. Fund v. Philip Morris Inc.,
74 F. Supp. 2d 221 (E.D.N.Y. 1999) [hereinafter Blue
Cross/Nat'l Asbestos Workers Medical Fund].
Steamfitters provides an analytic framework for health
care industry suits against tobacco companies. The key to
the analysis is that the Hospitals must have standing to
assert federal antitrust and RICO claims, or those claims
will be dismissed. See Steamfitters, 171 F.3d at 921 (citing
Holmes v. Securities Investor Protection Corp., 503 U.S. 258,
268 (1992) (standing for RICO claims) and Blue Shield v.
McCready, 457 U.S. 465, 477 (1982) (standing for antitrust
claims)). Whether the Hospitals have standing depends on
10
whether the Tobacco Companies' alleged conspiracy
proximately caused the Hospitals' injuries. Proximate
cause, in turn, depends on, and is intertwined with, the
remoteness of those injuries. See Steamfitters , 171 F.3d at
921 ("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
. . .").
The Hospitals raise antitrust and RICO claims that are
essentially identical to those the union funds raised in
Steamfitters. Therefore, Steamfitters controls and requires
dismissal unless there is some relevant difference between
the alleged injuries that the Hospitals suffered here and the
alleged injuries that the union funds suffered in
Steamfitters. The Hospitals allege numerous differences, but
we only see three substantive ones.4 The union funds in
Steamfitters were entities financed through member dues or
fees that voluntarily paid health care providers to treat their
members. By contrast, the Hospitals in this case (1) have a
legal duty to provide medical care to nonpaying patients, (2)
directly provide medical care, rather than paying another
health care entity to provide it, and (3) provide care without
reimbursement. We now turn to the import of these
differences.
A. Standing as Quasi-Governmental Entities
Emphasizing their legal duty to provide health care, the
Hospitals first argue that, unlike the union funds in
Steamfitters, they have "quasi-governmental" standing.
They assert that the State of Pennsylvania, through the
creation of a legal duty to provide care and through a
myriad of licensing and medical statutes, delegated to the
Hospitals the traditional public function of providing health
care to those without means. According to the Hospitals,
this delegated power entails a quasi-governmental right --
_________________________________________________________________
4. For example, the Hospitals argue that the Tobacco Companies
specifically intended to harm them, and that the Hospitals are not
traditional insurers with subrogation rights. Despite the Hospitals'
statements to the contrary, the union funds raised these same points in
Steamfitters. See id. at 921 n.4 (discussing subrogation), 925-26
(discussing specific intent to harm).
11
as found in state governments -- to sue Tobacco
Companies on behalf of nonpaying patients without regard
to proximate cause. In response, the Tobacco Companies
argue that the Hospitals, as private entities, lack the
prerequisites of such standing -- i.e., either an authorizing
statute or government status. We agree with the Tobacco
Companies.
State governments have standing to sue tobacco
companies for damages suffered when paying for smoking-
related illnesses, without regard to proximate cause. See
Laborers Local 17 Health and Benefit Fund, 191 F.3d at
243-44. This standing may proceed from two sources: (1) a
statutory provision that grants an entity the right to sue,
see Steamfitters, 171 F.3d at 934 n.18; see also Laborers
Local 17 Health and Benefit Fund, 191 F.3d at 243 (listing
numerous examples); or (2) a government's "political power"
and "threat of legislative action" combined with its parens
patriae right to protect the health and welfare of its citizens,
see Steamfitters, 171 F.3d at 934 n.18; see also Texas v.
American Tobacco Co., 14 F. Supp. 2d 956, 962-63 (E.D.
Tex. 1997).
The Hospitals cannot call on either of these sources. They
do not act under a statutory provision allowing them to
sue. Nor are they a state government entity, possessing
political power or the threat of legislative action sufficient to
invoke parens patriae authority. Therefore, they do not
have quasi-governmental standing, and they must show
proximate cause.
The Hospitals attempt to skirt this obvious conclusion by
citing Blue Cross/Nat'l Asbestos Workers Medical Fund for
the proposition that nonprofit medical providers occupy a
parens patriae relationship with their covered populations,
therefore entitling those providers to quasi-governmental
standing. See 36 F. Supp. 2d at 581. The language the
Hospitals cite, however, does not refer to quasi-
governmental standing; rather, it simply makes a policy
point about the important societal role of nonprofit medical
providers. That the District Court in Blue Cross/Nat'l
Asbestos Workers Medical Fund still required a showing of
proximate cause by the plaintiffs undercuts the Hospitals'
12
argument. See id. at 573.5 A parens patriae suit, by
definition, involves the government as the real party in
interest. See Black's Law Dictionary 1137 (7th ed. 1999)
(parens patriae is "[a] doctrine by which a government has
standing to prosecute a lawsuit on behalf of a citizen")
(emphasis added); see also Alfred L. Snapp & Son, Inc. v.
Puerto Rico, 458 U.S. 592, 607 (1982) ("[i]n order to
maintain a [parens patriae] action . . . the State must be
more than a nominal party"); Hawaii v. Standard Oil Co. of
Cal., 405 U.S. 251, 258-59 (1972) ("the right of a State to
sue as parens patriae"). Though the Hospitals undoubtedly
have an important role in today's society, their status does
not remotely approach that of a government. Having
rejected quasi-governmental standing, we proceed to
proximate cause.
B. The Steamfitters Analysis
1. Antitrust Claims
Proximate cause is a requirement for antitrust claims
because "[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. Determinations of proximate
cause depend largely on a case-by-case factor analysis,
rather than on a bright-line rule. See Steamfitters, 171 F.3d
at 922 (stating that Supreme Court cases repeatedly note
that " `proximate cause is hardly a rigorous analytic tool' ")
(quoting McCready, 457 U.S. at 477 n.13).
Steamfitters used two Supreme Court cases, McCready
and Associated Gen. Contractors, Inc., v. California State
Council of Carpenters, 495 U.S. 519 (1983) [hereinafter
AGC], as paradigms for evaluating antitrust claims in the
tobacco context. See 171 F.3d at 922. McCready allows a
proximate cause finding where injured plaintiffs are an
essential and necessary part of an alleged antitrust
conspiracy. AGC, the more recent case, provides a general
_________________________________________________________________
5. As explained later, the proximate cause reasoning of Blue Cross/Nat'l
Asbestos Workers Medical Fund is questionable in light of prevailing
Second Circuit doctrine.
13
analysis for the determination of proximate cause through
an evaluation of six factors. The Hospitals cannot show that
the Tobacco Companies' alleged conspiracy proximately
caused their injuries under either McCready or AGC. They
therefore lack standing to assert their antitrust claims.
a. The McCready Analysis
In McCready, Blue Shield subscribers sued Blue Shield
for antitrust violations, alleging that Blue Shield had
conspired with psychiatrists to push psychologists out of
the psychotherapy market by only reimbursing subscribers
for psychiatrist-provided psychotherapy. See 457 U.S. at
467. In analyzing proximate cause, the McCready Court
"look[ed] (1) to the physical and economic nexus between
the alleged violation and the harm to the plaintiff, and (2),
more particularly, to 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. Id. at 478. McCready held that the Blue
Shield conspiracy proximately caused the subscribers'
injury because the injury was integral to the conspiracy
and therefore within Congressional antitrust concern:
[d]enying 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 . . . [the class of subscribers] . . . 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 (emphasis added) (quotations and citations
omitted). Therefore, the subscribers had standing to sue.
Steamfitters followed the reasoning in McCready. It first
noted that the tobacco companies 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." 171 F.3d at 923. Thus,
14
the union funds' injuries were not the "means" by which
the Tobacco Companies achieved their alleged conspiracy;
nor were the union funds' injuries "necessary" or "integral"
to the alleged conspiracy.6 See id. The union funds were
merely ancillary victims of ripple effects from the
conspiracy; they did not fall within congressional concern,
and therefore proximate cause and antitrust standing did
not exist.
Applying this test here, we ask whether "the[T]obacco
[C]ompanies could have achieved their alleged aims without
the existence of the [Hospitals] or the relationship between
the [Hospitals] and [nonpaying patients]." Id. at 923. The
Hospitals say no, arguing that, unlike the union funds,
they have a duty to provide medical treatment directly to
smokers unable to afford treatment. Unlike the union fund
members, the nonpaying patients could not have obtained
health care outside the Hospitals; that is, without the
Hospitals, the nonpaying patients would have died more
quickly from tobacco-related disease. By keeping them
alive, the Hospitals were defrauded by the Tobacco
Companies into maintaining a ready supply of tobacco
users.
Heinous as this seems, it does not fall within McCready.
As in Steamfitters, the very existence of smokers would
have given the Tobacco Companies more than sufficient
reason to engage in a conspiracy to suppress information,
safer tobacco products, and research, regardless of the
existence of the Hospitals. See 173 F.3d at 923. If the
allegations are true, then the Hospitals may have made the
conspiracy "more profitable or allowed it to exist longer,"
but that fact alone is insufficient. See id. at 923. Since the
Hospitals were not "a necessary step in effecting the ends
of the alleged illegal conspiracy," proximate cause and
standing for the Hospitals' antitrust claims do not exist
under McCready. 457 U.S. at 479.
_________________________________________________________________
6. The Hospitals claim that the plaintiffs in Steamfitters did not allege
that they were integral to the tobacco companies' conspiracy. This is not
correct. See id., 171 F.3d at 922-23 (union funds alleged that their
payments were necessary to and the very means of effecting the
conspiracy).
15
b. The AGC Analysis
Finding no proximate cause under McCready, we look
next to AGC. See Steamfitters, 171 F.3d at 927. In AGC, a
labor union sued a contractor's association, alleging that
the association conspired to restrain union activities by
coercing third parties and association members into
entering contracts with nonunion contractors. In holding
that the union lacked standing to bring antitrust claims,
AGC outlined six factors for determining proximate cause
and standing:
(1) the casual 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
purposes 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."
Steamfitters, 171 F.3d at 924 (quoting AGC, 459 U.S. at
537-38, 540, 542-44).
Steamfitters applied these factors to the union funds'
antitrust claims, and found that, while the funds satisfied
factors one through three, the indirectness of the funds'
injuries and their highly speculative damage claims,
subsumed under the principle of remoteness,
overwhelmingly showed the lack of proximate cause. Here,
the District Court used the same analysis, and held that
the alleged conspiracy did not proximately cause the
Hospitals' injuries. The Hospitals argue that the District
Court misapplied Steamfitters. The Tobacco Companies
disagree. We now evaluate these arguments through an
independent examination of the AGC factors.
(1) Factor 1: Causal Connection
There is a causal connection between the Tobacco
Companies' alleged conspiracy and the Hospitals' injuries
16
-- i.e., but-for that alleged conspiracy, the injuries would
not have arisen. This supports a finding of proximate
cause. Yet, while a causal connection is necessary for a
finding of proximate cause, it is not sufficient by itself. See
Steamfitters, 171 F.3d at 925.
(2) Factor 2: Specific Intent to Harm
The Hospitals allege that the Tobacco Companies
specifically intended to shift the costs of the nonpaying
patients' tobacco-related illnesses to the Hospitals. Citing
the Restatement of Torts and a well-known treatise, 7 the
Hospitals argue that specific intent to harm creates
proximate cause as a matter of law. Yet, as AGC and
Steamfitters clearly state, the invocation of specific intent to
harm does not automatically create standing. See AGC, 459
U.S. at 537 (specific intent to harm "is not a panacea that
will enable any complaint to withstand a motion to
dismiss"); Steamfitters, 171 F.3d at 925 ("we do not find
[the intent to harm] dispositive on the issue of antitrust
standing"). Intent is simply another factor supporting a
finding of proximate cause.
(3) Factor 3: The Nature of the Hospitals' Injury
This factor asks whether the Hospitals' injuries fall within
the scope of congressional antitrust concerns, and
specifically, the maintenance of economic competition. See
AGC, 459 U.S. at 538-39; see also United States v. Topco
Assocs., Inc., 405 U.S. 596, 610 (1972) ("Antitrust laws . . .
are the Magna Carta of free enterprise. They are as
important to the preservation of economic freedom and our
free-enterprise system as the Bill of Rights is to .. .
fundamental personal freedoms."). The intent of the
antitrust laws covers injuries to "consumers forced to pay
higher prices for tobacco products or competitors harmed
by [the Tobacco Companies'] ability to conceal the unsafe
nature of their products." Steamfitters, 171 F.3d at 927.
The District Court found that the Hospitals' injuries,
however alleged, involved indirect costs from treating
_________________________________________________________________
7. F. Harper, F. James, O. Gray, The Law of Torts S 6.1, at 270 (2d ed.
1986) ("all intended consequences are legal or proximate").
17
nonpaying patients, costs not incurred as a consumer or a
competitor. Thus, the injuries did not fall within
congressional antitrust concern.
The Hospitals vigorously disagree. First, they argue that
construing this factor against their claims effectively
insulates the Tobacco Companies from private enforcement
actions. This objection is misplaced. " `Congress did not
intend the antitrust laws to provide a remedy in damages
for all injuries that might conceivably be traced to an
antitrust violation.' " AGC, 459 U.S. at 534 (quoting Hawaii
v. Standard Oil Co, 405 U.S. 251, 263 n. 14 (1972)).
Next the Hospitals argue that the District Court erred in
finding that their claims, alleged as consumers in the
market for safe cigarettes and for information related to the
effects of tobacco, were not the type intended to be
remedied by the antitrust laws. Like the union funds in
Steamfitters, the Hospitals have an indirect and a direct
injury theory. See Steamfitters, 171 F.3d at 919-20. The
indirect theory encompasses the Hospitals' higher health
care costs from the increased smoking of nonpaying
patients deceived and misled by the Tobacco Companies. In
Steamfitters, the Court found that the union funds' similar
indirect theory did not allege an injury in the capacity of a
consumer or competitor. See id. at 926-27. Citing
Steamfitters, the District Court correctly found that the
Hospitals' indirect theory claims are not of the proper type.
The Hospitals "are simply some of the many groups or
individuals suffering the financial or medical repercussions
of the decades-long marketing of a product that we now
know is demonstrably unsafe." Id. at 927.
The Hospitals' direct injury theory includes allegations,
however, that the Hospitals were consumers of information
and alternative nicotine delivery devices, and that the
Tobacco Companies' suppression of this market prevented
the Hospitals from successfully counseling nonpaying
patients to stop smoking or to use safer cigarettes. This
suppression allegedly prevented the Hospitals from
reducing health care costs. These injuries, alleged by the
Hospitals as consumers, "may be of the appropriate type" to
be remedied by antitrust laws. See id. at 927 (considering
the same theory offered by the union funds). The District
18
Court therefore incorrectly concluded that claims under the
direct injury theory are not within congressional intent. Yet,
this error is inconsequential since the next two factors --
the remoteness of the injury and the speculativeness of
damages -- overwhelm any finding that the direct injury
claims may be within congressional antitrust concern.
(4) Factor 4: Directness/Indirectness of the Injury
The directness or indirectness of the injury involves two
inquiries: (1) the appropriate party, and (2) remoteness. See
Steamfitters, 171 F.3d at 927. As to the appropriate party,
Steamfitters stated:
[s]ubsumed 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 Iinterest . . . diminishes the justification for
allowing a more remote party such as the Union to
perform the office of private attorney general."
Id. at 927 (quoting AGC, 459 U.S. at 542). The nonpaying
patients in the present case, while more directly injured,
may be unwilling to sue the Tobacco Companies for
antitrust violations. Moreover, the direct injury theory
covers some damages that only Hospitals could have
sustained.8 Thus, the District Court correctly determined
that the Hospitals seem like the appropriate party.
However, following Steamfitters, the District Court found
that the Hospitals' injuries were too remote and the chain
of causation too attenuated to satisfy the directness of
injury factor. It found that the injuries were indirect and
derivative of nonpaying patients' smoking injuries,
_________________________________________________________________
8. The Tobacco Companies note the possibility that nonpaying patients
may bring antitrust suits for increased medical expenditures, given
Pennsylvania's collateral source rule, which allows a patient to recover
for health costs, even if the patient did not pay those costs. We discuss
this contention later, eventually declining to resolve the issue since we
do not rely on the Tobacco Companies' invocation of the collateral source
rule to support our holding. See Steamfitters , 171 F.3d at 928 n.9.
19
overshadowing the possibility that the Hospitals might be
the appropriate party.
The Hospitals first argue that an intentional injury
cannot be indirect. But, as discussed earlier, specific intent
to harm does not magically create standing or cause alleged
antitrust injuries to be direct. See AGC, 459 U.S. at 537.
The Hospitals also argue that their injuries are independent
and separate from injuries to nonpaying patients, and in
support, list numerous examples. However, we rejected a
nearly identical claim in Steamfitters, with language directly
applicable to the present case:
[u]nder plaintiffs' direct theory, the tobacco companies'
conduct aimed at the [Hospitals] induced the
[Hospitals] 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 [Hospitals],
the injury itself certainly was no more direct than the
indirect injury that arose from the defendant's actions
toward smokers. . . . [P]laintiff 's direct-injury claim is
that the tobacco companies fraudulently induced the
[Hospitals] to not spend money (on safer-smoking or
smoking-cessation products) that, if spent, would have
diminished a separate revenue stream (i.e., smokers'
purchase of tobacco products) for the defendants. We
view this as an indirect connection.
171 F.3d at 927-28. Of course, the Hospitals are different
from the union funds in Steamfitters in that they provide
free medical care, provide it directly, and have a duty to
provide it. Yet only the direct provision of care is relevant to
remoteness. Moreover, direct provision does not alter the
fact that the Hospitals dealt solely with the nonpaying
patients, and not with the Tobacco Companies. Cf.
International Bhd. of Teamsters, Local 734 Health and
Welfare Trust Fund, 196 F.3d at 827 (rejecting the direct
payment argument). The Hospitals' injuries are still
derivative of the nonpaying patients' injuries. As in
Steamfitters, the Hospitals' injuries are too remotely
connected in the causal chain from wrongdoing on the part
20
of the Tobacco Companies; thus, the Hospitals' injuries do
not satisfy the directness of injury factor. See Steamfitters,
171 F.3d at 927-28.
(5) Factor 5: Highly Speculative Damages
Faced with similar theories based on increased medical
costs, Steamfitters held that the union funds' alleged
damages were highly speculative and difficult to measure.
See 171 F.3d at 928-29. The District Court found the same
true of the Hospitals' antitrust claims.
We agree with the District Court that the Hospitals'
alleged damages are speculative and uncertain. To quote
Steamfitters:
[i]n order to calculate damages -- i.e., the costs not
lowered due to the antitrust conspiracy -- the
[Hospitals] must demonstrate how many smokers
would have stopped smoking if provided with smoking-
cessation information, how many would have begun
smoking less dangerous products, how much healthier
these smokers would have been if they had taken these
actions, and the savings the [Hospitals] would have
realized by paying out fewer claims for smoking-related
illnesses.
Id. at 929. All these speculative calculations create a vast
uncertainty about the Hospitals' damages, and leads us to
question whether a remediable injury exists.
The Hospitals argue that they can calculate damages
through aggregation and statistical modeling.9 The union
funds in Steamfitters made a similar argument, and it was
rejected. See id. at 929 ("we do not believe that aggregation
_________________________________________________________________
9. Aggregation and statistical modeling are methods of estimating the
characteristics of an entire population by looking at a sample of that
population. While the Hospitals offer few specifics, we believe that they
contemplate sampling a group of nonpaying patients, examining the
incidence of tobacco use and the average health care costs among that
sample, and then extrapolating the results of that sample to the entire
population of nonpaying patients. See generally Michael J. Saks & Peter
David Blanck, Justice Improved: The Unrecognized Benefits of Aggregation
and Sampling in the Trial of Mass Torts, 44 Stan. L. Rev. 815 (1992).
21
and statistical modeling are sufficient to get the[plaintiffs]
over the hurdle of the AGC factor focusing on whether the
`damages claim is . . . highly speculative' ") (quoting AGC,
459 U.S. at 542). Both the union funds in Steamfitters and
the Hospitals here have access to the same information
base from which to calculate damages. In both contexts,
that calculation is highly speculative.
Lastly, the Hospitals argue that difficulty in proving
damages should not prevent the Court from remedying an
injury, especially where statistical and aggregate evidence is
well-accepted by courts to show damages and liability.
Again, Steamfitters responds directly to this point when it
notes that sometimes:
[a]ggregation 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. . . . In the present
context, however, a finding of antitrust standing must
precede a finding of liability, which itself precedes an
assessment of damages.
Id. at 929 (citations omitted). Similarly, in this case
standing must be determined first.
(6) Factor 6: Avoiding Trial Complexity
The final factor is whether the claim is judicially
manageable in terms of avoiding duplicate recoveries and
complex apportionment. The District Court found that this
case did not present significant problems of duplicate
recoveries or complex apportionment, but acknowledged
that some apportionment might be required if smokers
brought their own claims against the Tobacco Companies.
The Hospitals generally agree. They further add that their
injuries -- i.e., the costs of providing free health care -- are
fundamentally different than the nonpaying patients'
injuries -- i.e., the health damages from smoking and the
out-of-pocket costs of paying for health care. Thus, the risk
of duplicate damage claims is extremely limited. The
Tobacco Companies counter that, under Pennsylvania's
collateral source rule, nonpaying patients could sue to
recover the costs of their medical treatment even if they did
22
not pay for that treatment. Thus, they argue that duplicate
recoveries and apportionment are a real concern.
The collateral source rule provides that payments from a
third-party to a victim will not lower the damages that the
victim may recover from a wrongdoer. This rule prevents
the wrongdoer from benefitting from the third-party's
payments. See Johnson v. Beane, 664 A.2d 96, 100 (Pa.
1995). The application of this rule to a situation where the
wrongdoer pays the victim's damages indirectly through a
third-party suit is unclear. Steamfitters declined to predict
how Pennsylvania courts would rule on this issue, since it
did not rely on the invocation of the rule to support its
holding. See 171 F.3d at 928 n.9. We follow a similar route.
Since this is an issue of state law, and since the
indirectness of injury and the speculativeness of damages
factors already militate so strongly against a finding of
proximate cause, we choose not to address the application
of the collateral source rule. Thus, we assume the District
Court was correct in finding little risk of duplicate
recoveries and complex apportionment.
* * *
The Hospitals' claims satisfy the first three factors. There
is a causal connection, the Hospitals allege the Tobacco
Companies harbored specific intent to harm, and, at least
for the direct injury theory, the Hospitals' injuries are
within congressional antitrust concerns. However, these
three factors are outweighed, as they were in Steamfitters,
by the sheer remoteness of the Hospitals' injuries from the
alleged conspiracy. That remoteness is evident in the highly
speculative nature of the Hospitals' damages claims. This
deficiency is also manifested in the indirectness of the
Hospitals' injuries:
[t]he 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 [Hospitals'] increased expenditures[are simply
too great]. . . . The tortured path that one must follow
from the tobacco companies' alleged wrongdoing to the
[Hospitals'] increased expenditures demonstrates that
23
the plaintiffs' claims are precisely the type of indirect
claims that the proximate cause requirement is
intended to weed out.
Steamfitters, 171 F.3d at 930. The three distinctions the
Hospitals offer -- direct provision of health care, free
provision of health care, and a duty to provide health care
-- are not significant enough to change the analysis.
Steamfitters controls: proximate cause is lacking, and the
Hospitals lack standing to assert their antitrust claims.
2. RICO Claims
Standing to assert RICO claims requires that the alleged
RICO violation proximately caused a plaintiff 's injury --
i.e., the violation is not too remote from the injury. See
Holmes v. Securities Investor Protection Corp., 503 U.S. 258,
268 (1992). The principles underlying proximate cause in
RICO are analogous to those in antitrust, and thus much
of the previous discussion about antitrust applies here. See
Steamfitters, 171 F.3d at 932; but see Callahan v. A.E.V.,
Inc., 182 F.3d 237, 263 n.18 (3d Cir. 1999) (where the
factual underpinning of an antitrust claim and a RICO
claim are different, the importation of antitrust proximate
cause analysis may be inappropriate).
The formal factors of proximate cause in RICO are,
however, slightly different. The three factors are: (1) the
directness of the injury -- "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) the difficulty of apportioning damages among potential
plaintiffs -- "allowing recovery by indirectly injured parties
would require complicated rules for apportioning damages;"
and, (3) the possibility of other plaintiffs vindicating the
goals of RICO -- "direct victims could generally be counted
on to vindicate the policies underlying" RICO in a better
manner than indirect victims. Steamfitters, 171 F.3d at 932
(quoting Holmes, 503 U.S. at 268-69). Steamfitters drew on
its antitrust analysis in finding that the union funds' RICO
claims were too remote for proximate cause or standing.
See id. at 933-34. The District Court applied the same
24
principles to the Hospitals' RICO claims and reached the
same conclusion. The Hospitals argue that the District
Court erred.
Again, there are three differences between the union
funds' claims and the Hospitals' claims -- the direct
provision of medical care, the free provision of medical care,
and the duty to provide medical care. We believe that none
of these differences are significant enough to change the
RICO standing analysis; therefore the result in Steamfitters
governs.
a. The Directness of the Injury
This factor addresses the difficulty of ascertaining
damages traceable to the Tobacco Companies' conduct. As
we noted in discussing the antitrust claims, the Hospitals'
injuries are remote and indirect, and there is much
uncertainty and speculation about what would have
happened to the Hospitals had the Tobacco Companies not
conspired. See Laborers Local 17 Health and Benefit Fund,
191 F.3d at 240 ("sheerest sort of speculation to determine
how these damages might have been lessened had the
Funds adopted [special] measures"). Reasoning from
Steamfitters is directly applicable:
if the [Hospitals] 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. . . .[T]his
causation chain is much too speculative and
attenuated to support a RICO claim.
171 F.3d at 933 (footnote omitted). Like the Court in
Steamfitters, we find that the Hospitals' injuries are
indirect. Neither the duty to provide medical care, nor the
direct or free provision of medical care, affects this
conclusion.10
_________________________________________________________________
10. The Hospitals raise the same arguments here as they did in support
of their antitrust claims. For the same reasons as in that discussion, we
reject those arguments.
25
b. The Difficulty in Apportioning Damages Among
Plaintiffs
Directly injured parties like the nonpaying patients are
unlikely to bring RICO claims against the Tobacco
Companies. We recognize, however, the uncertainty over
whether the collateral source rule would allow nonpaying
patients to recover health care costs which they did not
incur. For the same reasons as in our discussion of
antitrust standing, we decline to resolve this uncertainty
and assume that problems of apportionment would not be
significant.
c. The Possibility of Other Plaintiffs Vindicating
RICO's Goals
Again, it is unclear whether nonpaying patients can
recover from the Tobacco Companies, since the Hospitals
bore the burden of the unreimbursed medical expenses.
Thus, the Hospitals may be the most appropriate party to
vindicate the purposes of RICO. We assume other plaintiffs
are not willing to recover.
d. Summary
In summary, while the Hospitals may be the best party to
vindicate RICO claims and problems of apportionment may
not be significant, "the remoteness of the[Hospitals']
alleged RICO injuries from any wrongdoing on the part of
the [T]obacco [C]ompanies" leads us to conclude that
proximate cause is lacking. Steamfitters, 171 F.3d at 933-
34. The differences between the Hospitals' injuries and the
union funds' injuries in Steamfitters are not significant
enough to overcome remoteness. Therefore, the Hospitals
lack standing to assert RICO claims.
C. Proximate Cause and Public Policy
Perhaps sensing that their antitrust and RICO claims are
materially the same as those dismissed in Steamfitters, the
Hospitals argue that justice and sound public policy dictate
that they have standing to sue. The Hospitals cite two
district court opinions that take this view. See Blue
Cross/Nat'l Asbestos Workers Medical Fund, 36 F. Supp. 2d
26
at 584 ("The moral blame attached to [the Tobacco
Companies'] conduct, and society's policy in preventing
harms in the future, could scarcely argue more strongly in
favor of a finding of proximate cause."); Service Employees
Int'l Union Health and Welfare Fund, 83 F. Supp. 2d at 84-
85 ("If Plaintiffs can ultimately prove their allegations, can
there really be any doubt that sound public policy demands
that they be given an opportunity to do so?") (footnote
omitted).
These cases are problematic. First, they are district court
cases from other circuits. Second, the Courts of Appeals
have neither approved nor adopted their holdings. See, e.g.,
International Bhd. of Teamsters, Local 734 Health and
Welfare Trust Fund, 196 F.3d at 827 ("[Judge Weinstein's]
decision in [Blue Cross/Nat'l Asbestos Workers Medical
Fund] fails to anticipate the second circuit's conclusion in
Laborers Local 17 Health & Benefit Fund; the .. . decision
is a thinly disguised refusal to accept and follow the second
circuit's holding.") Third, to the extent those decisions offer
a "justice-based" conception of proximate cause and
standing for antitrust and RICO claims, they run contrary
to Steamfitters.
For the record, we believe here that sound public policy
argues against proximate cause and standing. When an
injury is indirect, remote, and many steps away from the
alleged cause, it is unadvisable to allow a case to proceed.
See Palsgraf v. Long Island R.R. Co., 162 N.E. 99, 103 (N.Y.
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.").
The Hospitals are dangerously close to asserting that they
have standing to sue any company that causes a nonpaying
patient's disease or illness. For example, could the
hospitals sue a group of auto manufacturers for the
unreimbursed costs of treating nonpaying patients injured
in car accidents, simply by alleging that the manufacturers
conspired to keep defective vehicles on the road? See Assoc.
of Wash. Pub. Hosp. Dists., 79 F. Supp. 2d at 1226. We
doubt that would be in the interests of public policy.
27
It is beyond dispute that the Tobacco Companies have
engaged in "decades-long marketing of a product that we
now know is demonstrably unsafe." Steamfitters, 171 F.3d
at 927. At times, courts have ordered compensation. See,
e.g., Amy Driscoll, Jurors Call $145 Billion Tobacco Verdict
a `Message'; Florida Panel Members Say Record Award Is
Firms' Penalty for Lying, Wash. Post, July 16, 2000, at A2
(a Florida jury returns $145 billion verdict in a class action
suit against tobacco companies). We express no view on the
propriety of such compensation. We simply hold that, due
to the remoteness of the Hospitals' injuries, this third-party
suit against the tobacco industry may not proceed. 11
III. State Common Law Claims
In addition to their antitrust and RICO claims, the
Hospitals raise numerous state common law claims. We
find these to be without merit.
A. Fraudulent Misrepresentation, Fraudulent
Concealment, Negligent Misrepresentation and
Omission, and Special Duty Claims (Counts VI, VII,
VIII, and IX)
The Hospitals raise claims of fraudulent
misrepresentation, fraudulent concealment, negligent
misrepresentation and omission, and special duty against
the Tobacco Companies. Proximate cause is an element of
each of these claims. See Steamfitters, 171 F.3d at 934-35,
937 n.23. Here, proximate cause is lacking due to the
remoteness of the Hospitals' injury in relation to the
Tobacco Companies' alleged conspiracy and the
speculativeness of damages. Therefore, the District Court
_________________________________________________________________
11. Another parallel argument that the Hospitals raise is that we should
interpret RICO standing broadly. (Br. of Appellant at 46 (citing Blue
Cross/Nat'l Asbestos Workers Medical Fund and N.O.W. v. Scheidler, 510
U.S. 249 (1994)). As explained in the text, Judge Weinstein's Blue
Cross/Nat'l Asbestos Workers Medical Fund opinion is questionable given
prevailing Second Circuit doctrine. Moreover, Scheidler deals with an
entirely different factual situation. See 510 U.S. 249 (plaintiff clinics
alleged that defendants conspired to threaten staff and patients in order
to destroy clinics' business). Generally, RICO should be interpreted
broadly, but not so broadly as to eviscerate any connection between
alleged wrongdoing and harm.
28
correctly dismissed these state common law claims. See id.
at 934 ("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.").
B. Remaining Claims
The Hospitals' remaining claims of public nuisance,
aiding and abetting and civil conspiracy, restitution, unjust
enrichment, quantum meruit, and indemnity do not require
proximate cause. The District Court therefore considered
the merits of each. The Tobacco Companies urge this Court
to read a proximate cause requirement into these claims,
arguing that the remoteness doctrine and the direct injury
requirement would be meaningless if plaintiffs could
circumvent these principles by creative labeling of their
claims. Since we agree with the District Court that the
remaining claims fail on other grounds, we decline to adopt
their suggestion.
1. Public Nuisance Claim (Count X)
"[A] public nuisance is `an unreasonable interference with
a right common to the general public.' " Philadelphia Elec.
Co. v. Hercules, Inc., 762 F.2d 303, 315 (3d Cir. 1985)
(quoting Restatement (Second) of Torts S 821B(1) (1979)). In
order to recover damages in a private action for public
nuisance, a plaintiff must have suffered a harm of greater
magnitude and of a different kind than that which the
general public suffered. See id.; see also Pennsylvania Soc'y
for the Prevention of Cruelty to Animals v. Bravo Enters.,
Inc., 237 A.2d 342, 348 (Pa. 1968). The law requires greater
and different injury because (1) it is difficult to "draw[ ] any
satisfactory line for [any] public nuisance" and (2) "to avoid
multiplicity of actions[,] invasions of rights common to all of
the public should be left to be remedied by public action by
officials." Restatement (Second) of Torts S 821C cmt. b
(1979).
The District Court found that the Hospitals did not
sufficiently allege that they suffered a harm different from
and of greater magnitude than the harm suffered by the
general public. We agree. The Hospitals' injuries are
29
derivative of the nonpaying patients' injuries, and the
Hospitals are one of numerous parties in the public harmed
by the alleged conspiracy. In these circumstances,
remedying the source of the conspiracy is more properly a
task for public officials. The District Court correctly
dismissed the public nuisance claim.
2. Aiding and Abetting and Civil Conspiracy Claims
(Counts XI and XV)
Aiding and abetting and civil conspiracy claims require
an underlying tort cause of action. See Strickland v.
University of Scranton, 700 A.2d 979, 987-88 (Pa. Super.
Ct. 1997) (elements of civil conspiracy); Caplan v. Fellheimer
Eichen Braverman & Kaskey, 884 F. Supp. 181, 184 (E.D.
Pa. 1995) ("[a] claim for civil conspiracy can proceed only
when there is a cause of action for an underlying act"). The
District Court dismissed the aiding and abetting and civil
conspiracy claims for lack of an underlying action, and we
uphold that dismissal. The Hospitals do not dispute this
reasoning, though they argue that an underlying cause of
action exists in the antitrust, RICO, and other state law
claims.
3. Restitution, Unjust Enrichment and Quantum Meruit
(Counts XIII and XIV)
In discussing unjust enrichment claims, the Steamfitters
Court explained:
[i]n the tort setting, an unjust enrichment claim is
essentially another way of stating a traditional tort
claim. . . . [There is] no justification for permitting
plaintiffs to proceed on their unjust enrichment claim
once [it is] determined that the District Court properly
dismissed the traditional tort claims . . .
171 F.3d at 936-37. Following this reasoning, the District
Court dismissed the Hospitals' restitution and unjust
enrichment claims against the Tobacco Companies since
the traditional tort claims were properly dismissed. We
believe this is a proper reading of Steamfitters.
The Hospitals now argue that their unjust enrichment
30
claim is not based in tort, but rather in an implied contract
for the benefit they conferred on the Tobacco Companies by
providing care to nonpaying patients.12 This argument
dresses the unjust enrichment claim in quantum meruit
terms. "Quantum meruit is a quasi-contractual remedy in
which a contract is implied-in-law under a theory of unjust
enrichment; the contract is one that is implied in law, and
`not an actual contract at all.' " Hershey Foods Corp. v.
Ralph Chapek, Inc., 828 F.2d 989, 998-99 (3d Cir. 1987)
(quoting Ragnar Benson, Inc. v. Bethel Mart Assocs., 454
A.2d 599, 603 (1982)). The Hospitals' quantum meruit
claim is based on the theory that by paying for the medical
services required by nonpaying patients, the Hospitals
discharged the Tobacco Companies' legal duties and saved
them from bearing costs caused by their fraudulent and
wrongful conduct. The District Court found this claim to be
without merit.
We agree. "Unjust enrichment is . . . an equitable
doctrine[, with the following elements:] benefits conferred
on one party by another, appreciation of such benefits by
the recipient, and acceptance and retention of these
benefits under such circumstances that it would be
inequitable [or unjust] for the recipient to retain the
benefits without payment of value." 16 Summary of Pa. Jur.
2d Commercial Law S 2.2 (1994) (citing various cases). In
the present case, the Tobacco Companies had no legal
obligation to pay the medical expenses of smokers, and
thus the Hospitals' provision of medical services did not
"benefit" the Tobacco Companies by removing their
obligation. Cf. Oregon Laborers-Employers Health & Welfare
Trust Fund v. Philip Morris Inc., 185 F.3d 957, 968 (9th Cir.
1999) (discussing unjust enrichment under Oregon law)
_________________________________________________________________
12. We reject the Hospitals' contention that there was an implied
contract between the Hospitals and the Tobacco Companies in which the
latter implicitly promised to compensate the Hospitals for unreimbursed
medical care. The claim that the Hospitals reasonably expected to be
paid is not supported by their factual allegations and is inconsistent
with a major factual premise of their case -- that they did not know of
the Tobacco Companies' conspiracy. Under no set of facts alleged can we
find that the Tobacco Companies ever implicitly promised to pay for
these services.
31
("Without a legal obligation on the part of defendants to
pay, the payment by plaintiffs did not `benefit'
defendants."). In addition, since the Hospitals had an
independent obligation to provide health care to nonpaying
patients, incidental benefit to the Tobacco Companies is not
enough to maintain an action; the nonpaying patients got
the main benefit, not the Tobacco Companies. See
Restatement of Restitution S 106 (1937) ("A person who,
incidentally to the performance of his own duty . . . has
conferred a benefit upon another, is not thereby entitled to
contribution.").
Even if some benefit went to the Tobacco Companies, it
is unclear that allowing them to retain it is unjust. First,
the benefit was incidental to the Hospitals' performance of
its duty, and second, the Hospitals did not have a
reasonable expectation of payment from the Tobacco
Companies. See Aloe Coal Co. v. Department of Transp., 643
A.2d 757, 767 (Pa. Commw. Ct. 1994) (incidental benefit
and lack of expectation by plaintiffs showed that benefit
was not unjust). Lastly, the distance between the Hospitals'
provision of medical care and the Tobacco Companies'
alleged benefit show that the benefit was not unjust. For all
these reasons we affirm the District Court's dismissal of the
Hospitals' quantum meruit and unjust enrichment claims.
4. Indemnity Based on Intentional and/or Reckless
Conduct Claim (Count XII)
Under Pennsylvania law, indemnity is available only (1)
"where there is an express contract to indemnify," or (2)
where the party seeking indemnity is vicariously or
secondarily liable for the indemnitor's acts. Richardson v.
John F. Kennedy Mem'l Hosp., 838 F. Supp. 979, 989 (E.D.
Pa. 1993). The Hospitals acknowledge that no express
contract existed and that they are not secondarily liable.
Thus, the District Court correctly held that, under
Pennsylvania law, an action for indemnity is unavailable.
IV. Conclusion
For all the foregoing reasons, the District Court's
dismissal of the Hospitals' complaint will be affirmed.
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A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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