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Appeals Court Rules for Tobacco Companies

Tuesday, 22 May 2001 12:00 AM

A federal appeals court in Washington dismissed racketeering and fraud claims Tuesday brought by labor-management healthcare trust funds against Philip Morris and other tobacco companies, saying the injuries claimed by the funds were too remote from the alleged conduct of the companies.

The appeals court also upheld a federal judge's dismissal of claims against the tobacco companies by Guatemala, Nicaragua and Ukraine.

Tuesday's ruling could be a portent in the Justice Department's stalled lawsuit in Washington against the major tobacco companies. The government seeks to recover the cost to federal healthcare programs for treating tobacco-related illnesses.

Attorney General John Ashcroft said last month the future of the under-funded federal lawsuit, which like the case brought by the healthcare trusts also makes racketeering claims against the tobacco companies, will depend on whether those claims survive dismissal in a pre-trial appeal.

The three-judge panel handing down Tuesday's ruling sits on the U.S. Court of Appeals for the District of Columbia Circuit, the second most-influential court in the country.

Several labor-management healthcare trust funds, led by Service Employees International Union Health and Welfare Fund, sued "Philip Morris, other tobacco companies, and other entities related to the tobacco industry," Tuesday's court opinion said, "alleging a fraudulent scheme to preserve their control of the cigarette market and to avoid the costs of treating smoking-related diseases by counteracting smokers' efforts to quit, by impairing the ability of health care providers to reduce costs through effective smoking cessation programs and safer cigarettes, and by concealing the tobacco industry's active role in manipulating and perpetuating the resulting health care crisis."

In a separate case, Guatemala, Nicaragua and Ukraine also sought to recover costs associated with treating tobacco-related illnesses.

"They contend that as sovereign nations constitutionally (or otherwise legally) obligated to provide free healthcare and other forms of social welfare to their residents," the opinion said, "or at least to those who cannot afford to pay for such benefits, they have suffered economic harms to their treasuries that are independent of any harms allegedly suffered by their residents as a result of smoking defendants' products."

A federal judge, combining the cases brought by the funds and the three countries, dismissed all of the sovereign nations' claims and all the claims brought by the funds except for those brought under the federal fraud statutes and the Racketeer Influence and Corrupt Organizations Act.

On Tuesday, the appeals court upheld the dismissal of all the claims in the nations' lawsuit, and dismissed the remaining claims brought by the funds.

The appeals court "must determine whether the (funds) have demonstrated proximate cause in seeking, on an aggregate basis, to recover costs incurred as a result of paying for the health care needs of individual smokers," the court's opinion said.

In other words, the trusts must be able to show that conduct by the companies directly led to their costs.

"Similar claims have been considered and rejected as too remote by seven other circuits (federal courts of appeal)," the opinion said. "Because we agree with the other circuits that the alleged injuries ... (to the funds) are too remote to have been proximately caused by the defendants' alleged conduct, we reverse the denial of the motion to dismiss with respect to the RICO and fraud claims in (the trusts case) ... and otherwise affirm the dismissal of the complaints" in the case brought by the three nations.

Supreme Court precedent requires "a plaintiff whose alleged injury possesses a sufficiently direct causal relationship to the alleged wrongdoing," the appeals court opinion said.

(No. 00-7093, Service Employees International Union Health and Welfare Fund et al vs. Philip Morris et al, consolidated with No. 98cv00704 etc.; and No. 00-7023, Republic of Guatemala vs. The Tobacco Institute et al, consolidated with Nos. 00-7118, and 00-7120)

Copyright 2001 by United Press International. All rights reserved.

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A federal appeals court in Washington dismissed racketeering and fraud claims Tuesday brought by labor-management healthcare trust funds against Philip Morris and other tobacco companies, saying the injuries claimed by the funds were too remote from the alleged conduct...
Appeals,Court,Rules,for,Tobacco,Companies
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2001-00-22
Tuesday, 22 May 2001 12:00 AM
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