1999 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

3-29-1999

Steamfitters Loc 420 v. Philip Morris Inc

Precedential or Non-Precedential:

Docket 98-1426

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Recommended Citation

"Steamfitters Loc 420 v. Philip Morris Inc" (1999). 1999 Decisions. Paper 82.

http://digitalcommons.law.villanova.edu/thirdcircuit_1999/82
Filed March 29, 1999 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 98-1426 

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. 

On Appeal from the United States District Court 

for the Eastern District of Pennsylvania 

(D.C. Civ. No. 97-cv-05344) 

District Judge: Honorable John P. Fullam 
Argued: January 28, 1999 

Before: BECKER, Chief Judge, SCIRICA and ROSENN, 

Circuit Judges. 

(Filed March 29, 1999) 

 MELVYN I. WEISS, ESQUIRE 

 MICHAEL C. SPENCER, ESQUIRE 

 (ARGUED) 

 KENNETH J. VIANALE, ESQUIRE 

 BETH A. KASWAN, ESQUIRE 

 JOAN T. BROWN, ESQUIRE 

 Milberg, Weiss, Bershad, Hynes & 

 Lerach, LLP 

 One Pennsylvania Plaza 

 New York, NY 10119 

 RICHARD B. SIGMOND, ESQUIRE 

 THOMAS H. KOHN, ESQUIRE 

 Sagot, Jennings & Sigmond, P.C. 

 The Penn Mutual Towers 

 510 Walnut Street, 16th Floor 

 Philadelphia, PA 19106 

 ROBERT J. CONNERTON, ESQUIRE 

 JAMES R. RAY, ESQUIRE 

 JOHN McN. BROADDUS, ESQUIRE 

 Connerton & Ray 

 1401 New York Avenue, N.W., 

 10th Floor 

 Washington, DC 20005 

 PERRY WEITZ, ESQUIRE 

 ROBERT L. GORDON, ESQUIRE 

 JERRY KRISTAL, ESQUIRE 

 MITCHELL BREIT, ESQUIRE 

 KAREN J. SABINE, ESQUIRE 

 Weitz & Luxenberg, P.C. 

 51 Haddonfield Road, Suite 160 

 Cherry Hill, NJ 08002 

 2 
 Of Counsel: 

 PROFESSOR G. ROBERT BLAKEY 

 PROFESSOR EINER ELHAUGE 

 Counsel for Appellants 

 HERBERT WACHTELL, ESQUIRE 

 (ARGUED) 

 STEVEN M. BARNA, ESQUIRE 

 PETER C. HEIN, ESQUIRE 

 STEPHEN R. BLACKLOCKS, 

 ESQUIRE 

 Wachtell, Lipton, Rosen & Katz 

 51 West 52nd Street 

 New York, NY 10019 

 MARY A. McLAUGHLIN, ESQUIRE 

 DAVID M. HOWARD, ESQUIRE 

 ALINE J. FAIRWEATHER, ESQUIRE 

 ANDREW S. MILLER, ESQUIRE 

 KATHY E. OCHROCH, ESQUIRE 

 Dechert, Price & Rhoads 

 4000 Bell Atlantic Tower 

 1717 Arch Street 

 Philadelphia, PA 19103-2793 

 DAVID S. EGGERT, ESQUIRE 

 JAMES ROSENTHAL 

 Arnold & Porter 

 555 12th Street, N.W. 

 Washington, DC 20004 

 Counsel for Appellee Philip Morris 

 Incorporated 

 ROBERT H. KLONOFF, ESQUIRE 

 PAUL S. RYERSON, ESQUIRE 

 PAUL REICHERT, ESQUIRE 

 Jones, Day, Reavis & Pogue 

 Metropolitan Square 

 1450 G Street, N.W. 

 Washington, DC 20005 

 3 
 JOHN D. GOETZ, ESQUIRE 

 MAUREEN T. TAYLOR, ESQUIRE 

 Jones, Day, Reavis & Pogue 

 1 Mellon Bank Center, 

 31st Floor 

 500 Grant Street 

 Pittsburgh, PA 15219 

 Counsel for Appellee R.J. Reynolds 

 Tobacco Company 

 EDWARD W. WARREN, ESQUIRE 

 KENNETH N. BASS, ESQUIRE 

 Kirkland & Ellis 

 655 15th Street, N.W., Suite 1200 

 Washington, DC 20005 

 Counsel for Appellee Brown & 

 Williamson Tobacco Corporation 

 (including as successor by merger to 

 The American Tobacco Company) 

 WILLIAM J. O'BRIEN, ESQUIRE 

 HOWARD M. KLEIN, ESQUIRE 

 Conrad, O'Brien, Gellman & 

 Rohn, P.C. 

 1515 Market Street, 16th Floor 

 Philadelphia, PA 19102-1916 

 JEFFREY S. NELSON, ESQUIRE 

 JOSEPH A. LANAHAN, ESQUIRE 

 Shook, Hardy, & Bacon, LLP 

 One Kansas City Place 

 1200 Main Street 

 Kansas City, MO 64105 

 Counsel for Appellee Lorillard 

 Tobacco Company 

 4 
 J. KURT STRAUB, ESQUIRE 

 Obermayer, Rebman, Maxwell & 

 Hippel, LLP 

 One Penn Center, 19th Floor 

 1617 John F. Kennedy Blvd. 

 Philadelphia, PA 19103-1895 

 Counsel for Appellee Liggett & Myers, 

 Inc. 

 STEPHEN J. IMBRIGLIA, ESQUIRE 

 Hecker, Brown, Sherry & Johnson 

 18th & Arch Streets 

 1700 Two Logan Square 

 Philadelphia, PA 19103 

 Counsel for Appellee United States 

 Tobacco Company 

 PATRICK W. KITTREDGE, ESQUIRE 

 GLENN E. DAVIS, ESQUIRE 

 Kittredge, Donley, Elson, Fullem & 

 Embick, LLP 

 421 Chestnut Street, 5th Floor 

 Philadelphia, PA 19106 

 STEVEN KLUGMAN, ESQUIRE 

 R. TOWNSEND DAVIS, JR. 

 Debevoise & Plimpton 

 875 Third Avenue 

 New York, NY 10022 

 Counsel for Appellee The Council for 

 Tobacco Research-USA, Inc. 

 WILLIAM J. O'BRIEN, ESQUIRE 

 HOWARD M. KLEIN, ESQUIRE 

 Conrad, O'Brien, Gellman & 

 Rohn, P.C. 

 1515 Market Street, 16th Floor 

 Philadelphia, PA 19102-1916 

 Counsel for Appellee The Tobacco 

 Institute 

 5 
 WILBUR L. KIPNES, ESQUIRE 

 Schnader, Harrison, Segal & 

 Lewis, LLP 

 1600 Market Street, Suite 3600 

 Philadelphia, PA 19103 

 Counsel for Appellee Smokeless 

 Tobacco Council, Inc. 

 RICHARD L. KREMNICK, ESQUIRE 

 Blank, Rome, Comisky & 

 McCauley, LLP 

 One Logan Square, 10th Floor 

 Philadelphia, PA 19103-6998 

 BRUCE M. GINSBERG, ESQUIRE 

 MARC RACHMAN, ESQUIRE 

 Davis & Gilbert 

 1740 Broadway 

 New York, NY 10019 

 Counsel for Appellee Hill & 

 Knowlton, Inc. 

 STEPHANIE W. KANWIT, ESQUIRE 

 Groom Law Group Chartered 

 1701 Pennsylvania Avenue, N.W. 

 Washington, DC 20006 

 DAVID ALLEN, ESQUIRE 

 CORINA TRAINER, ESQUIRE 

 UMWA Health & Retirement Fund 

 4455 Connecticut Avenue, N.W. 

 Washington, DC 20008 

 DANIEL B. EDELMAN, ESQUIRE 

 Yablonski, Both & Edelman 

 1140 Connecticut Avenue, N.W. 

 Washington, DC 20036 

 Counsel for Amicus Curiae United 

 Mine Workers of America Combined 

 Benefit Fund 

 6 
 KENNETH S. GELLER, ESQUIRE 

 JOHN J. SULLIVAN, ESQUIRE 

 Mayer, Brown & Platt 

 2000 Pennsylvania Avenue, N.W. 

 Washington, DC 20006 

 STEPHEN A. BOKAT, ESQUIRE 

 ROBIN S. CONRAD, ESQUIRE 

 National Chamber Litigation 

 Center, Inc. 

 1615 H Street, N.W. 

 Washington, DC 20062 

 Counsel for Amicus Curiae Chamber 

 of Commerce of the United States 

 CARL R. SCHENKER, JR., ESQUIRE 

 JOHN H. BEISNER, ESQUIRE 

 TERESA SWONG, ESQUIRE 

 O'Melveny & Myers, LLP 

 555 13th Street, N.W. 

 Suite 1500 West 

 Washington, DC 20004 

 HUGH F. YOUNG, JR., ESQUIRE 

 Produce Liability Advisory 

 Council, Inc. 

 1850 Centennial Park Drive, 

 Suite 510 

 Reston, VA 22091 

 Counsel for Amicus Curiae Product 

 Liability Advisory Council, Inc. 

 JAN S. AMUNDSON, ESQUIRE 

 General Counsel 

 National Association of 

 Manufacturers 

 1331 Pennsylvania Avenue, N.W. 

 Suite 1500 - North Lobby 

 Washington, DC 20004-1790 

 Counsel for Amicus Curiae National 

 Association of Manufacturers 

 7 
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 

Federal Rule of Civil Procedure 12(b)(6), on the ground that 

the claimed injuries of the plaintiff funds were too remote 

from any wrongdoing of the defendants to be redressable 

under either federal or state law. The correctness of that 

conclusion is the primary issue on this appeal. Put another 

way, we are called upon to determine whether plaintiffs 

have alleged a compensable injury proximately caused by 

defendants' allegedly fraudulent and conspiratorial conduct 

sufficient to avoid dismissal under Rule 12(b)(6). This basic 

proximate cause inquiry, drawn from tort law, is 

complicated by the allegations of intentional tort, the 

packaging of plaintiffs' claims in RICO and antitrust terms, 

and the addition of state-law claims based on fraud, special 

duty, unjust enrichment, negligence, strict liability, and 

breach of warranty. In the end, we conclude that the 

District Court correctly dismissed all of plaintiffs' primary 

claims as being too remote from any alleged wrongdoing of 

 8 
defendants, and the other claims as concomitantly lacking 

in merit; hence, we affirm the dismissal of the complaint in 

its entirety. 

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.2 See Barry Meier, Remaining States Approve 

the Pact on Tobacco Suits, N.Y. Times, Nov. 21, 1998, at A1.3 

_________________________________________________________________ 

1. The defendants include tobacco companies Philip Morris; R.J. 

Reynolds; Brown & Williamson; B.A.T. Industries; Lorillard; Liggett & 

Myers; the American Tobacco Company; and the United States Tobacco 

Company. In addition, named as defendants are the Council for Tobacco 

Research-USA; the Tobacco Institute; Smokeless Tobacco Council; and 

Hill & Knowlton, a public relations firm. 

2. The parties cite a large number of reported state and federal opinions 

of this genre (of both the union fund and attorney general variety), and 

have also provided us with a considerable number of unreported 

decisions. For the benefit of students of this litigation war, we list 

these 

decisions in an Appendix to this opinion. We note that in the vast 

majority of the union fund cases cited by the parties (15 of 20), at least 

some of the plaintiffs' claims were dismissed. In 11 of the 20 cases 

(including the present one), courts have dismissed the plaintiffs' entire 

case. In the only case to reach a jury, the tobacco companies recently 

prevailed in federal court in Ohio. See Barry Meier, Verdict Backs 

Cigarette Makers in Suit by Union Health Funds, N.Y. Times, Mar. 19, 

1999, at A10. 

3. Although the tobacco companies and state attorneys general have 

reached an agreement resolving the state suits, the litigation 

surrounding these cases is apparently far from over. See, e.g., Ann 

Belser & Mark Belko, County Files Suit Against Tobacco, Pitt. Post- 

 9 
In the present case, the Funds have brought federal claims 

under the Racketeer Influenced and Corrupt Organizations 

Act ("RICO"), 18 U.S.C. S 1962, and the antitrust laws, 15 

U.S.C. S 1. Their complaint also includes, under the 

supplemental jurisdiction statute, 28 U.S.C. S 1367, statelaw claims for misrepresentation, breach of special duty, 

unjust enrichment, negligence, strict liability, and breach of 

warranty. The Funds seek both damages and extensive

injunctive relief requiring the defendants to disclose any 

research on smoking that they have concealed, engage in a 

public education campaign to reduce smoking, cease 

advertising their products to minors, and fund smokingcessation programs. 

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 accomplished 

through the intentional and fraudulent actions of the 

tobacco companies, directed at both smokers and the

Funds themselves. 

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 Federal Rule of Civil 

_________________________________________________________________ 

Gazette, Mar. 6, 1999, at A1 (noting that Allegheny County, 

Pennsylvania, had filed suit against the tobacco companies in federal 

court at the same time it was seeking in state court to block final 

approval of the settlement by the attorneys general). In addition, the 

federal government appears poised to act. See White House Office of 

Communications, FY2000 Budget Summary and Supporting Materials 

(Feb. 1, 1999), available in 1999 WL 42060, at *46 ("To recover these 

losses [from tobacco-related health problems], the U.S. Department of 

Justice intends to bring suit against the tobacco industry, and the 

budget provides $20 million to pay for necessary legal costs."). 

 10 
Procedure 12(b)(6), and, in an order accompanied by an 

unpublished opinion, the District Court granted the motion. 

See Steamfitters Local Union No. 420 Welfare Fund v. Philip 

Morris, Inc., No. CIV.A.97-5344, 1998 WL 212846 (E.D. Pa. 

Apr. 22, 1998). The Court relied on two general grounds to 

dismiss the entire complaint, and invoked a number of 

additional rationales to reject the Funds' specific claims. 

First, it held that plaintiffs did not state a claim because of 

"the general rule [that] has long been established that one 

who pays the medical expenses of an injured party does not 

have a direct claim against the tortfeasor who caused the 

injury." Id. at *1. The District Court decided, however, that 

it "need not dwell upon this issue," as the Funds' claims 

"suffer from an even more fundamental flaw, namely, the 

fact that plaintiffs have not suffered any cognizable 

damages." Id. at *2. The District Court reasoned that the 

Funds' increased costs for smoking-related illnesses caused 

them no injury because "plaintiffs are merely handling the 

payments with money provided by others, and have no

genuine stake in the matter," id., and"cannot claim to have 

suffered any economic loss in the form of lost profits," id. at 

*3. 

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 specialduty 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 28 

U.S.C. S 1291. Our review of the District Court's order is 

plenary. See Gallo v. City of Philadelphia, 161 F.3d 217, 

221 (3d Cir. 1998). We accept as true all factual allegations 

in the complaint and will affirm a dismissal under Rule 

12(b)(6) only if "it is certain that no relief can be granted 

under any set of facts which could be proved." City of 

Pittsburgh v. West Penn Power Co., 147 F.3d 256, 262 n.12 

(3d Cir. 1998) (internal quotations omitted). 

 11 
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., Great Am. Ins. Co. v. 

United States, 575 F.2d 1031, 1033 (2d Cir. 1978). 

Generally, if an insurer wishes to recover from the

wrongdoer, it must assert the same claim--by way of

subrogation--that the insured could have asserted against 

the wrongdoer, as well as be subject to the same defenses 

that the wrongdoer could assert in defense of the claim. The 

defendants argue that the Funds could seek to recover the 

costs of treating participants' smoking-related illnesses only 

through tort actions such as those that have been asserted 

individually by smokers. Cf. Cipollone v. Liggett Group, Inc., 

505 U.S. 504 (1992). 

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- 

 12 
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. P 256. Plaintiffs correctly observe that the District 

Court did not address this alleged "direct" injury, but as is 

 13 
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 fraud, the predicate acts 

for the RICO claims, etc. Rather, we focus on the issue of 

proximate cause, a necessary element for bringing both 

antitrust and RICO claims, and an element we find lacking 

in plaintiffs' case. 

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 (1992) (RICO); 

Blue Shield v. McCready, 457 U.S. 465, 477 (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, 

 14 
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. 

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. 

P 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.4 

_________________________________________________________________ 

4. As noted above, the District Court also dismissed plaintiffs' complaint 

on the ground that the Funds have suffered no cognizable injury. See 

Steamfitters, 1998 WL 212846, at *2-*3 (finding that any increased 

expenses due to smoking-related illnesses of fund participants "merely 

meant that the unions negotiated a greater level of contributions from 

the employers"). We seriously doubt that this was an appropriate basis 

for dismissing the complaint. The plaintiffs clearly could not go at will 

to 

the employers who funded their health plans for a replenishment any 

time they needed more money. Increased costs likely necessitated 

reduced expenditures in other areas, as well as reductions in the Funds' 

reserves. Cf. Amicus Br. of UMWA Combined Benefit Fund at 22 (noting 

that the Funds cannot "merely return to the inexhaustible well of 

employers' bank accounts when the spigot for health benefits runs dry"). 

Simply because they are not the ultimate source of the money used to 

pay for smoking-related illnesses does not mean that the Funds have 

suffered no legally cognizable injury. 

 15 
B. Antitrust Standing: Remoteness and Proximate Cause 

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 (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 District Court also found that all of the Funds' claims are 

essentially subrogation claims and therefore could not be brought under 

the federal and state theories invoked in the complaint. See Steamfitters, 

1998 WL 212846, at *1. Again, we do not necessarily agree with this 

conclusion. As noted supra Part I.B.2, the Funds' claims of direct injury 

are fundamentally different from a traditional insurer-against-wrongdoer 

subrogation claim. They are said to arise not only out of the wrongdoer's 

actions toward the insured, but also out of his actions directed at the 

insurer in attempting to avoid the consequences of his misdeeds. 

We need not resolve these issues, however, for we conclude that the 

District Court correctly held that the Funds' alleged injuries are too 

remote from any wrongdoing by the defendants to be redressable 

through the RICO statute, the antitrust laws, or state common-law 

theories of recovery. 

 16 
"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 in effecting 

the ends of the alleged illegal conspiracy." Therefore, they 

argue, their claims fit precisely within the rule of McCready. 

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 

 17 
between the Funds and smokers. In McCready, 

psychiatrists allegedly conspired with Blue Cross to exclude 

psychologists from the psychotherapy market by 

persuading Blue Cross 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 Cross subscribers such 

as McCready did not exist, a conspiracy between 

psychiatrists and Blue Cross 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, 

 18 
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 Council of 

Carpenters, 459 U.S. 519 (1983) [AGC]. In AGC, a union 

sued a contractors' association on antitrust grounds, 

alleging a conspiracy to force builders and contractors to 

use primarily nonunionized subcontractors. The court of 

appeals had framed the union's argument for antitrust 

standing (which it had accepted) in much the same way 

that the Funds frame their argument here: "In support of 

the Union's standing, the [court of appeals] reasoned that 

the Union was within the area of the economy endangered 

by a breakdown of competitive conditions, not only because 

injury to the Union was a foreseeable consequence of the 

antitrust violation, but also because that injury was 

specifically intended by the defendants." Id. at 525. 

 19 
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 

_________________________________________________________________ 

5. In addressing the key remoteness issue, the parties argue a good deal 

about the meaning of footnote 25 in AGC, but we think they place too 

much weight on the Court's citations therein to an 1882 treatise on 

damages. The relevant paragraph of the footnote reads as follows: 

 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 afixed 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 

 20 
outlined a number of factors to consider in theflexible 

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 

b. Applying the AGC Factors 

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 

_________________________________________________________________ 

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 S 4, is not a panacea that will enable any 

complaint to withstand a motion to dismiss." Id. at 537 (footnote 

omitted). 

6. We take these "factors" from AGC's lengthy discussion of antitrust 

standing. However, our prior cases have at times distilled Supreme Court 

precedent in this area into a more succinct test:"To establish antitrust 

standing a plaintiff must show both: 1) harm of the type the antitrust 

laws were intended to prevent; and 2) an injury to the plaintiff which 

flows from that which makes defendant's acts unlawful." Gulfstream III 

Assocs., Inc. v. Gulfstream Aerospace Corp., 995 F.2d 425, 429 (3d Cir. 

1993). In other cases, we have extracted five relevant factors from AGC. 

See, e.g., Conte Bros. Automotive, Inc. v. Quaker State-Slick 50, Inc., 

165 

F.3d 221, 233 (3d Cir. 1998); In re Lower Lake Erie Iron Ore Antitrust 

Litig., 998 F.2d 1144, 1165-66 (3d Cir. 1993). 

 21 
sometimes support a damages claim under S 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

_________________________________________________________________ 

7. It is unclear from plaintiffs' complaint precisely what antitrust 

wrongdoing they allege is connected to their own injuries. See, e.g., 

Compl. P 242 (alleging defendants engaged in the "anti-competitive 

restriction of product choice and suppression of product information," 

thereby "restricting consumer choice, and causing consumers to suffer 

tobacco-related illnesses"); id. P 246 ("Defendants also conspired to 

eliminate competition among themselves in the research, development, 

production and marketing of alternative, higher quality, and safer 

cigarettes and tobacco products."). 

A business's decision to not produce a product, simpliciter, is not a 

violation of the antitrust laws, and it is not clear whether even a 

concerted decision among all of the businesses in an industry to keep 

one of their new products from reaching consumers would be an 

antitrust violation. Cf. Oahu Gas Serv., Inc. v. Pacific Resources Inc., 

838 

F.2d 360, 369 (9th Cir. 1988) ("A line of `product innovation' cases has 

consistently rejected antitrust liability for a monopolist's decision 

about 

when or whether to market new products."); Foremost Pro Color, Inc. v. 

Eastman Kodak Co., 703 F.2d 534, 544-46 (9th Cir. 1983). In Foremost 

Pro, the court observed that a business's decision to delay introducing a 

new product would not restrain competition, as consumers would still be 

able to choose among existing products by that business or its 

competitors. See id. at 545. The court went on to conclude: 

 22 
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 

_________________________________________________________________ 

 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 

introduction of a new product or an entire line of new products," but it 

is at least unclear whether such an agreement would constitute an 

antitrust violation absent allegations that the delayed introduction of 

the 

product involved an attempt to artificially raise prices for existing 

products, exclude non-conspiring competitors from a market, or 

accomplish some other conventional anticompetitive effect. See, e.g., 

United States v. Container Corp. of Am., 393 U.S. 333, 335-37 (1969) 

(noting that, while an agreement to exchange price information would be 

a "conspiracy" under the Sherman Act, it would constitute an antitrust 

violation only if it restrained trade, by, for example, limiting or 

reducing 

price competition); cf. American Tobacco Co. v. United States, 328 U.S. 

781, 809 (1946) ("It is not the form of the combination or the particular 

means used but the result to be achieved that the statute condemns."). 

While we do not decide whether an agreement among competitors to 

withhold a new product from a market would constitute an antitrust 

violation, we assume for the sake of assessing plaintiffs' antitrust 

standing that the conduct in which defendants allegedly engaged would 

constitute such a violation. 

 23 
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 

_________________________________________________________________ 

8. The Funds contend that there is an exception to the general rule that 

an antitrust plaintiff be either a consumer or competitor of the 

defendant's. See Appellants' Br. at 42-45. It is true that, drawing on 

language from McCready, 457 U.S. at 483-84, we have sometimes 

expressed the injury requirement in terms of the harm being 

"inextricably intertwined" with the defendant's wrongdoing. See, e.g., 

Gulfstream III Assocs., 995 F.2d at 429 (holding that plaintiff's injury 

may flow from defendant's wrongdoing if "there exists a `significant 

causal connection' such that the harm to the plaintiff can be said to be 

`inextricably intertwined' with the antitrust conspiracy" (citation to 

McCready and other cases omitted)). The simple invocation of this 

phrase, however, will not allow a plaintiff to avoid the fundamental 

requirement for antitrust standing that he or she have suffered an injury 

of the type--almost exclusively suffered by consumers or competitors-- 

that the antitrust laws were intended to prevent. 

 24 
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 Funds' claims based simply on 

indirect cost increases from smoking-related illnesses. The 

Funds are not consumers forced to pay higher prices for 

tobacco products or competitors harmed by defendants' 

ability to conceal the unsafe nature of their products. They 

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. Cf. Barton & Pittinos, Inc. v.

SmithKline Beecham Corp., 118 F.3d 178, 181 (3d Cir. 

1997) ("If the injury is not of the requisite type, even though 

the would-be plaintiff may have suffered an injury as a 

result of conduct that violated the antitrust laws, he or she 

has no standing to bring a private action under the

antitrust laws to recover for it."). 

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 

 25 
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 the 

 26 
present case. First, in the hypothetical case, the defendant 

fraudulently induced the plaintiffs to spend money that 

redounded directly to defendant's benefit (i.e., the funds 

paid for the procedure that the defendant invented). In a 

sense, this is no different than a garden-variety fraud case 

in which the defendant hoodwinks the plaintiff into giving 

him "money for nothing." In the present case, plaintiffs' 

direct-injury claim is that the tobacco companies 

fraudulently induced the Funds 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. In 

addition, in the New Jersey Carpenters hypothetical, the 

fraud essentially induced the plaintiffs to enter into the 

relationship that caused their injury: The defendant 

induced the plaintiffs to "cover" the cost of defendant's 

faulty procedure. In the present case, the relationship that 

links the smokers' illnesses with the Funds already exists: 

The plaintiffs are already (apart from anything the tobacco 

companies do) "covering" the costs of the smokers' 

illnesses. The alleged fraud simply prevents them from 

reducing their expenses arising out of this preexisting 

relationship. 

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 

 27 
duplicative litigation9 or complex apportionment of damages 

among various groups of plaintiffs.10 However, the Funds' 

damages claims are quite speculative (and very difficult to 

measure), implicating AGC's fifth factor. The Funds argue 

that damages may be easily calculated by aggregation and 

the application of statistical models. We question how easy 

this process would be. The Funds' alleged damages are said 

to arise from the fact that the tobacco companies prevented 

the Funds from providing smoking-cessation or safersmoking information to their participants, some of whom 

would have allegedly quit smoking or begun smoking safer 

_________________________________________________________________ 

9. The defendants complain that allowing the Funds to recover for their 

health care expenditures creates a danger of duplicative recovery in 

general (if not duplicative antitrust or RICO damages), because of 

Pennsylvania's collateral source rule. See, e.g. , Johnson v. Beane, 664 

A.2d 96, 100 (Pa. 1995) ("The collateral source rule provides that 

payments from a collateral source shall not diminish the damages 

otherwise recoverable from the wrongdoer."). The collateral source rule, 

however, is aimed at preventing a tortfeasor from benefitting from a third 

party's payment to the injured party. If the tortfeasor himself has 

already 

paid a portion of the injured party's damages, his own liability is 

correspondingly reduced. See, e.g., Restatement (Second) of Torts 

S 920A(1) (1979). We are uncertain how this latter principle would apply 

when the tortfeasor pays a portion of the injured party's damages 

indirectly--i.e., through the third party payer's separate action against 

the tortfeasor for recovery of the third party's payments to the injured 

party. We need not predict whether Pennsylvania courts would apply the 

collateral source rule in this context, however, as we do not rely on 

defendants' invocation of the rule to support our holding. 

10. However, to the extent that Fund participants have not been 

reimbursed for certain health care expenditures or have suffered some 

other pecuniary loss as a result of the tobacco companies' alleged 

conspiracy, they could bring their own antitrust claims (as well as 

personal injury claims) against the defendants. For example, as we noted 

supra at 22-24 & note 7, it is possible that the defendants were able to 

artificially increase the price of their products by conspiring to hide a 

major defect in these products and by inducing consumers to buy their 

products through fraudulent claims regarding their safety. While we have 

questioned the Funds' ability to state a claim for higher priced tobacco 

products, consumers who paid these higher prices would possibly be 

able to bring an antitrust or RICO claim. Therefore, to some minimal 

extent at least, an apportionment of damages between health care payers 

and smokers might be necessary. 

 28 
products, reducing their smoking-related illnesses, and 

thereby lowering the Funds' costs for reimbursing smokers' 

health care expenditures. In order to calculate the damages 

--i.e., the costs not lowered due to the antitrust conspiracy 

--the Funds must demonstrate how many smokers would

have stopped smoking if provided with smoking-cessation 

information, how many would have begun smoking lessdangerous products, how much healthier these smokers 

would have been if they had taken these actions, and the 

savings the Funds would have realized by paying out fewer 

claims for smoking-related illnesses. 

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, 

 29 
plaintiff's proof of damages will be evaluated under a more 

lenient standard," Danny Kresky Enters. 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. P 244.11 Third, at least some 

aspect of the plaintiffs' alleged injury--their inability to 

obtain and use information on the dangers of smoking or 

on smoking-cessation methods--may be of the type that the 

antitrust laws are intended to prevent, i.e., the restriction of 

consumer choices, which leads to increased costs for these 

consumers. However, the tenuous causal connection, the 

sketchy allegations of defendants' intent to target the 

Funds, and the minimal extent to which plaintiffs' injuries 

relate to the purposes of the antitrust laws are all 

_________________________________________________________________ 

11. Plaintiffs rely, both in attempting to distinguish their claims from 

traditional subrogation claims and in their efforts to avoid the import of 

AGC, on the alleged direct targeting of the Funds by the tobacco 

companies. Yet, we find scant mention of this direct targeting in 

plaintiffs' lengthy complaint and, when specifically asked by us to cite 

portions of the complaint that address this aspect of their case, 

plaintiffs 

could muster only three arguably relevant paragraphs (out of 317). See 

Appellants' Letter Br. of Jan. 25, 1999, at 2. While plaintiffs urged us, 

at oral argument, to remand so that they might amend their complaint 

to include more specific allegations of direct targeting by the 

defendants, 

see Tr. of Oral Argument at 18-19, we decline to do so, as the possibly 

inadequate pleading is not a factor in our holding.

 30 
substantially outweighed by the fourth AGC factor, the 

indirectness of the asserted injury. 

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 canfind 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., 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 

 31 
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 expenditures than 

they would have in the absence of tobacco products,

"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. 

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 selfunloading 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. 

 32 
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 selfunloader . . . 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 the plaintiff Funds after working its way 

_________________________________________________________________ 

12. We also found that the steel companies had alleged injuries of the 

type the antitrust laws were intended to prevent and that the existence 

of other parties with similar injuries did not "diminish the directness of 

the steel companies' injury." Lower Lake Erie, 998 F.2d at 1168-69. Our 

ultimate holding was that the plaintiffs' damages, arising from the 

conspirators' exclusion of lower-cost means of transportation from the 

market, conferred antitrust standing on the steel companies. 

13. We note another key difference between Lower Lake Erie and the 

present case. In Lower Lake Erie, the defendants did not simply conspire 

to delay their own introduction of a new product, as is alleged here. 

Rather, they engaged in archetypal antitrust conduct (price-fixing, 

boycotts, refusals to sell, etc.) in order to prevent other parties in the 

unloader market from introducing and using self-unloaders. See Lower 

Lake Erie, 998 F.2d at 1153-54. There was no question, therefore, that 

specific antitrust wrongdoing could be linked to specific antitrust 

injury. 

Cf. supra note 7. 

 33 
through another party (i.e., smokers) and at least two more 

steps: First, without safer products or information on 

smoking-cessation, smokers continued to smoke dangerous 

tobacco products. Next, these smokers became more ill 

than they otherwise would have without the tobacco 

companies' alleged conspiracy. Only at this point did the 

Funds allegedly suffer damages from the increased costs of 

the smokers' illnesses. 

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 (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 

 34 
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 

_________________________________________________________________ 

14. The plaintiff in Holmes was actually a private nonprofit corporation, 

the Securities Investor Protection Corporation ("SIPC"), which was 

required by federal law to reimburse the losses of certain investors. 

After 

paying for the losses of investors who had not invested in the defrauded 

securities, the SIPC asserted claims against those engaged in the fraud, 

as a subrogee. In discussing the causation chain in Holmes, we omit this 

additional link, as the SIPC stood in the investors' shoes for purposes of 

its claims. 

15. In the present case, the allegations of fraud and conspiracy directed 

at the Funds themselves might make the Funds more like the brokers' 

customers who did buy the manipulated stock. The Court in Holmes 

noted that these customers might have a RICO claim against the 

defendants, though it declined to reach this issue. See Holmes, 503 U.S. 

at 272 n.19. We note, however, that the defrauded investors in Holmes 

would have been able to allege direct injury from the fraud (i.e., their 

losses derived directly from the fraud, without any intervening links), 

while the Funds here, even if they were direct targets of the tobacco 

companies' fraud, did not suffer damages until this fraud prevented 

them from encouraging their participants to smoke less or not at all, 

which led to an increased incident of smoking-related illnesses, which in 

turn led to the Funds' increased expenses. See supra at 26-27. 

 35 
in Holmes held that the causal connection between the 

nonpurchasing investors and the stock manipulators was 

too attenuated for the plaintiffs to have RICO standing. 

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 broker-dealers 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 Oth ers 

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 

_________________________________________________________________ 

16. While this complex determination militates against allowing the 

Funds to bring their remote claim, it addresses one of defendants' 

objections, that allowing the Funds (rather than smokers) to bring claims 

for smoking-related illnesses would nullify the defendants' traditional 

defenses, such as assumption of risk and comparative negligence. These 

defenses presumably would be available in the present case, in the sense 

that smokers' own wrongdoing (or ignoring of known risks) would be a 

factor in establishing and measuring the link between the tobacco 

companies' actions and the Funds' damages. 

 36 
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 RICO injuries from any 

wrongdoing on the part of the tobacco companies. Cf. 

Brokerage Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d 

494, 521 (3d Cir. 1998) (finding RICO standing when

defendant targeted plaintiff 's contractual partner, 

plaintiff's injury arose from loss of that contract, and that 

contractual relationship "was a direct target of the alleged 

scheme--indeed, interference with that relationship may 

well be deemed the linchpin of the scheme's success").17 

_________________________________________________________________ 

17. Because of our conclusion that plaintiffs' RICO and common-law 

fraud claims fail for lack of proximate cause, we need not reach 

defendants' alternative argument that these claims were not pled with 

sufficient particularity. See Fed. R. Civ. P. 9(b) ("In all averments of 

fraud 

. . ., the circumstances constituting fraud . . . shall be stated with 

particularity."). We note, however, that plaintiffs' allegations are 

fairly 

general in nature and do not include "specific allegations as to which 

fraudulent tactics were used against" specific plaintiffs. Rolo v. City 

Investing Co. Liquidating Trust, 155 F.3d 644, 659 (3d Cir. 1998). On the 

other hand, we have cautioned that courts should "apply the rule with 

some flexibility and should not require plaintiffs to plead issues that 

may 

have been concealed by the defendants," id. at 658, as is alleged to have 

happened here. 

 37 
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 smokingrelated 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 17- 

37, 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. 

_________________________________________________________________ 

18. There is arguably a tension between our decision here that the 

tobacco companies cannot be held liable for the damages suffered by 

entities that paid for smoking-related illnesses, and the fact that these 

same tobacco companies recently agreed to pay more than $200 billion 

to settle claims brought by attorneys general for the states' similar 

costs 

of their citizens' smoking-related illnesses. We note in this regard that 

an 

explanation for the putative tension may be found in any number of 

places, including state laws conferring standing and broad rights of 

recovery on states for wrongdoing against their citizens or their coffers, 

as well as the political power of governmental bodies--and the threat of 

legislative action--that is lacking in this case brought by private 

entities. 

We need not, of course, engage these matters here. 

 38 
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 proximate cause and lack 

of cognizable injury, it also dismissed them for claimspecific reasons. The District Court found plaintiffs' statelaw fraud claims too speculative to be cognizable. See 

Steamfitters, 1998 WL 212846, at *3. Just as we have 

found the link between defendants' alleged fraud--providing 

false information regarding the safety of their products-- 

and plaintiffs' alleged injuries too attenuated to support a 

RICO claim, we also find the link too remote to support a 

common-law fraud claim. See Gibbs v. Ernst, 647 A.2d 882, 

889 (Pa. 1994) (requiring proximate cause as an element of 

fraudulent misrepresentation claim); see also Crawford v. 

Pituch, 84 A.2d 204, 207 (Pa. 1951) (holding that 

recoverable damages in a fraud case do not include those 

that are "consequential, speculative and even conjectural," 

but "only such as can be said to have been the immediate 

and proximate consequences of the deceit practiced upon 

the plaintiffs").19 For this reason, we agree with the District 

_________________________________________________________________ 

19. We recently held that a common-law fraud claim might succeed 

despite the fact that the fraudulent misrepresentation was made to a 

third party (as is true in the present case for the Funds' claims of 

indirect injury). See In re Orthopedic Bone Screw Prods. Liab. Litig., 159 

F.3d 817 (3d Cir. 1998). In Orthopedic Bone Screw, we held that "the 

mere fact that the alleged fraudulent misrepresentation was made to [a 

third party] and not the plaintiffs does not necessarily preclude a 

finding 

of legally sufficient causation," id. at 826, when the plaintiffs alleged 

that 

fraud on the third party (a government agency) led to approval of 

products that then were used by plaintiffs and caused them injuries. Id. 

at 827. We also held that a misrepresentation claim is not necessarily 

precluded when the alleged injury arises from a third party's (and not 

the plaintiff 's) reliance on defendant's misrepresentations. See id. at 

 39 
Court that plaintiffs cannot maintain their state fraud 

claims. 

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. 

_________________________________________________________________ 

828-29. These holdings, however, do not help plaintiffs in the present 

case. Even if the fact that the tobacco companies' misrepresentations 

were made primarily to smokers is not sufficient to defeat the commonlaw fraud claims, the harm that flowed from this fraud is much more 

attenuated than that in Orthopedic Bone Screw, in which the plaintiffs 

were directly harmed by their use of a product that was only available 

because of the defendants' misrepresentations to the third party. 

20. This court has yet to decide whether injunctive relief is available 

for 

a private party under RICO. See Northeast Women's Ctr., Inc. v. 

McMonagle, 868 F.2d 1342, 1355 (3d Cir. 1989). Other circuits are split 

on this issue. See Conkling v. Turner, 18 F.3d 1285, 1296 & n.8 (5th Cir. 

1994) (detailing circuit split). Given the lack of proximate cause in this 

case, the remoteness of plaintiffs' alleged injury from defendants' 

alleged 

wrongdoing, and our holding that plaintiffs' damages claims do not 

survive defendants' motion to dismiss, we need not reach this issue in 

the present case. 

21. The Pennsylvania Superior Court case relied on by the District Court 

and the defendants for the proposition that a special-duty claim requires 

 40 
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, 578 A.2d 609, 611 (Pa. Commw. Ct. 

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 . . . ."); Restatement 

(Second) of Torts S 323 (1965) ("One who undertakes, 

gratuitously or for consideration, to render services to 

another which he should recognize as necessary for the 

protection of the other's person or things, is subject to 

liability to the other for physical harm resulting from his 

failure to exercise reasonable care to perform his 

undertaking, if (a) his failure to exercise such care 

increases the risk of such harm, or (b) the harm is suffered 

because of the other's reliance upon the undertaking."); see 

also Morena v. South Hills Health Sys., 462 A.2d 680, 684 

(Pa. 1983) (adopting Restatement section 323(a) as the 

applicable law in Pennsylvania). 

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., 223 A.2d 849, 850 (Pa. 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 undertaken by [the insurance company] or that 

_________________________________________________________________ 

allegations of personal physical injury did not so hold. See Lower Lake 

Dock Co. v. Messinger Bearing Corp., 577 A.2d 631, 635 (Pa. Super. Ct. 

1990) (noting that prior Pennsylvania cases applying the special-duty 

rule did so only when there was physical injury or damages to property 

other than the allegedly defective one). We believe that the law on this 

issue is more uncertain in Pennsylvania than the defendants claim. 

 41 
they adversely affected [the plaintiff]"). 22 Finally, a specialduty 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 quasicontractual setting, when plaintiff seeks to recover from 

defendant for a benefit conferred under an unconsummated 

or void contract. See, e.g., Zvonik v. Zvonik, 435 A.2d 1236, 

1239-40 (Pa. Super. Ct. 1981); cf. Meehan v. Cheltenham 

Township, 189 A.2d 593, 595 (Pa. 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. 

Restatement of Restitution S 3 cmt. a (1937); see also id. at 

ch. 7 introductory note ("Actions of tort are ordinarily not 

restitutionary . . . . They are based primarily upon 

wrongdoing and ordinarily, through the payment of money, 

_________________________________________________________________ 

22. Of course, a company's failure to inform consumers about the known 

risks of its products would be relevant to the duty-to-warn aspect of a 

products liability claim. See Restatement (Second) of Torts S 402A cmt. 

j (1965). 

 42 
compensate the injured person for the harm suffered by 

him as a result of the wrongful conduct, irrespective of the 

receipt of anything by the defendant."). We can find no 

justification for permitting plaintiffs to proceed on their 

unjust enrichment claim once we have determined that the 

District Court properly dismissed the traditional tort claims 

because of the remoteness of plaintiffs' injuries from 

defendants' wrongdoing.23 

For the foregoing reasons, the District Court's judgment 

dismissing plaintiffs' complaint in its entirety will be 

affirmed. 

_________________________________________________________________ 

23. The District Court did not specifically address plaintiffs' strict 

liability, negligence, and breach-of-warranty claims, but these claims 

fail 

as well, for each requires a proximate connection between the 

defendants' conduct and the plaintiffs' injuries, a connection we find 

missing in this case. See, e.g., Davis v. Berwind Corp., 690 A.2d 186, 

190 (Pa. 1997) ("To recover under [strict liability], a plaintiff must 

establish . . . that the defect was a proximate cause of the plaintiff 's 

injuries . . . ."); Skipworth ex rel. Williams v. Lead Indus. Ass'n, 690 

A.2d 

169, 172 (Pa. 1997) ("Pennsylvania . . . follows the general rule that a 

plaintiff, in order to recover, must establish that a particular 

defendant's 

negligence was the proximate cause of her injuries."); AM/PM Franchise 

Ass'n v. Atlantic Richfield Co., 584 A.2d 915, 923 n.12 (Pa. 1990) ("As 

with all cases involving breach of warranty, the plaintiff is charged with 

the burden of proving that the defendant's breach is the proximate cause 

of the harm suffered."). 

 43 
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) 

 44 
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) 

Washington v. American Tobacco Co., No. 96-2-15056-8 

SEA, 1996 WL 931316 (Wash. Super. Ct. Nov. 19, 1996), 

and 1997 WL 714842 (Wash. Super. Ct. June 6, 1997) 

(denying motion to dismiss state antitrust claims, but 

dismissing special duty and unjust enrichment 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., __ F. Supp. 2d __, Nos. 

97-C-8113 & -8114, 1998 WL 849528 (N.D. Ill. Dec. 1, 

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 

 45 
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, Inc., 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., No. 97-8715-CIV-RYSKAMP, 1998 

 46 
WL 186878 (S.D. Fla. Apr. 13, 1998) (dismissing fraud, 

special duty, unjust enrichment, RICO, and antitrust 

claims) 

Stationary Eng'rs Local 39 Health & Welfare Trust Fund v. 

Philip Morris, Inc., No. C-97-01519 DLJ, 1998 WL 476265 

(N.D. Cal. Apr. 30, 1998) (denying motion to dismiss 

negligent breach of special duty claim, but dismissing 

fraud claims with leave to amend, and dismissing RICO, 

antitrust, intentional breach of special duty, unfair trade, 

and unjust enrichment claims without leave to amend) 

Steamfitters Local Union No. 420 Welfare Fund v. Philip 

Morris, Inc., __ F.3d __, 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 Blue Shield v. Philip Morris, Inc., No. C98-559R, 

1999 U.S. Dist. LEXIS 1820 (W.D. Wash. Jan. 6, 1999) 

(dismissing RICO, antitrust, fraud, special duty, unjust 

enrichment, and conspiracy claims) 

_________________________________________________________________ 

24. --Although the State of Minnesota is the nominal plaintiff in this 

case, the state supreme court's decision addressed only those claims 

brought by Blue Cross. 

 47 
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) 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

 48