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. e du/thir dc ir c uit_1999/82Filed 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 othe rs 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. FullamArgued: 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

2Of 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

3JOHN 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

4J. 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

5WILBUR 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

6KENNETH 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

7OPINION OF THE COURT

BECKER, Chief Judge.

This is one of a vast number of cases filed in stat e and federal courts all over the nation seeking to hold tobacco companies liable for the smoking-related costs incu rred 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 fu nds' participants about safer smoking and smoking-cessat ion products. The defendants allegedly conspired to pre vent the funds from obtaining and using information that wou ld have reduced the incidence of smoking--and therefor e of illness--among the funds' participants. The fraud a nd conspiracy charges are the underpinnings of plainti ffs' federal statutory claims, which are brought under t he

antitrust laws and the civil RICO statute. Plaintif fs also assert state common-law claims based on supplementa l jurisdiction.

The District Court dismissed plaintiffs' complaint under Federal Rule of Civil Procedure 12(b)(6), on the gr ound that the claimed injuries of the plaintiff funds were to o remote from any wrongdoing of the defendants to be redress able

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 plaint iffs have alleged a compensable injury proximately cause d 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 antitru st terms,
and the addition of state-law claims based on fraud , special duty, unjust enrichment, negligence, strict liabili ty, and breach of warranty. In the end, we conclude that th e District Court correctly dismissed all of plaintiff s' primary claims as being too remote from any alleged wrongdo ing of

8defendants, and the other claims as concomitantly l acking

in merit; hence, we affirm the dismissal of the com plaint 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 p utative class action on behalf of all such similarly-situat ed funds against eight tobacco companies and certain industr y organizations (collectively, the "tobacco companies ")1 to recover for the Funds' costs of treating their part icipants' smoking-related illnesses. The suit is patterned af ter similar suits brought by state attorneys general, w hich were recently settled with the tobacco companies for mor e than $200 billion.2 See Barry Meier, Remaining States Ap prove the Pact on Tobacco Suits, N.Y. Times, Nov. 21, 199 8, at A1.3

___________________________________________________ ______________

1. The defendants include tobacco companies Philip Morris; R.J. Reynolds; Brown & Williamson; B.A.T. Industries; Lo rillard; Liggett & Myers; the American Tobacco Company; and the United States Tobacco Company. In addition, named as defendants are the C ouncil for Tobacco Research-USA; the Tobacco Institute; Smokeless Toba cco Council; and Hill & Knowlton, a public relations firm.

2. The parties cite a large number of reported stat e 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 liti gation war, we list

these decisions in an Appendix to this opinion. We note t hat in the vast majority of the union fund cases cited by the parti es (15 of 20), at least some of the plaintiffs' claims were dismissed. In 1 1 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 attorne ys 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 Toba cco, Pitt. Post-

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

under the Racketeer Influenced and Corrupt Organiza tions Act ("RICO"), 18 U.S.C. S 1962, and the antitrust l aws, 15 U.S.C. S 1. Their complaint also includes, under th e supplemental jurisdiction statute, 28 U.S.C. S 1367 , statelaw claims for misrepresentation, breach of special duty, unjust enrichment, negligence, strict liability, an d breach of warranty. The Funds seek both damages and extensive injunctive relief requiring the defendants to discl ose any research on smoking that they have concealed, engag e in a public education campaign to reduce smoking, cease advertising their products to minors, and fund smok ingcessation programs.

The Funds allege, inter alia, that the tobacco comp anies conspired to suppress research on safer tobacco pro ducts, defrauded health care providers and payers by infor ming them that the companies' tobacco products were safe , and caused smokers to become ill by preventing the dissemination of smoking-reduction and smoking-cess ation information. All of these actions allegedly caused the costs of smoking-related illnesses to be shifted from the ir proper source, the tobacco companies, to the plaintiff Fun ds (and others). This shift in costs purportedly was accomp lished through the intentional and fraudulent actions of t he 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 Penn sylvania in August 1997. Shortly thereafter, the defendants moved to dismiss the complaint under Federal Rule of Civi l

___________________________________________________ ______________

Gazette, Mar. 6, 1999, at A1 (noting that Allegheny County, Pennsylvania, had filed suit against the tobacco co mpanies in federal court at the same time it was seeking in state cour t to block final approval of the settlement by the attorneys general ). In addition, the federal government appears poised to act. See Whit e House Office of Communications, FY2000 Budget Summary and Supportin g 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 i ndustry, and the budget provides $20 million to pay for necessary le gal costs.").

10Procedure 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 gro unds 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 clai m because of "the general rule [that] has long been established that one who pays the medical expenses of an injured party d oes not have a direct claim against the tortfeasor who caus ed the injury." Id. at *1. The District Court decided, how ever, 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 cognizab le damages." Id. at *2. The District Court reasoned th at the Funds' increased costs for smoking-related illnesse s caused them no injury because "plaintiffs are merely handl ing 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 prof its," id. at

*3.

The District Court also dismissed the complaint bec ause (1) plaintiffs "allege no injury of the sort the an titrust laws were designed to prevent"; (2) the Funds' common-la w fraud claims "are entirely too speculative to be ta ken seriously"; (3) plaintiffs "simply do not have lega l standing to advance" claims for injunctive relief; (4) the s tate specialduty claim is "restricted to `physical harm' " that plaintiffs do not allege they suffered; and (5) the Funds' unj ust enrichment claim "is simply a subrogation claim exp ressed in different language." Id. at *3-*4. Plaintiffs fi led a timely notice of appeal. We have appellate jurisdiction un der 28

U.S.C. S 1291. Our review of the District Court's o rder is plenary. See Gallo v. City of Philadelphia, 161 F.3 d 217, 221 (3d Cir. 1998). We accept as true all factual a llegations 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, 26 2 n.12 (3d Cir. 1998) (internal quotations omitted).

11B. The Allegations and Theory of the Complaint

Plaintiffs' complaint is voluminous (containing 317 paragraphs and running to 116 pages) and detailed i n its explication of the history of the tobacco companies ' alleged wrongdoing. By now, this history is well-known to t he 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 plaintif f Funds themselves. Therefore, plaintiffs aver, they are bo th indirect and direct victims of the defendants' wrongful cond uct.

1. The Indirect Injury

The Funds' indirect injury allegedly arises from th e 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 f or the insurer's costs arising out of wrongdoing against a n 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 a gainst the wrongdoer, as well as be subject to the same de fenses that the wrongdoer could assert in defense of the c laim. The defendants argue that the Funds could seek to recov er the costs of treating participants' smoking-related ill nesses only through tort actions such as those that have been a sserted individually by smokers. Cf. Cipollone v. Liggett G roup, Inc., 505 U.S. 504 (1992).

2. The Direct Injury

In plaintiffs' submission, notwithstanding defendan ts' argument that all of the Funds' claims are essentia lly subrogation claims, their "direct" claim is a funda mentally different legal claim from the typical insurer-agai nst-

12wrongdoer 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 al so 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 o f a loss of the property insured, is doubtless subrogated in a corresponding amount to the assured's right of acti on against any other person responsible for the loss.' " Great Am. Ins. Co., 575 F.2d at 1034 (quoting W. Vance, V ance on Insurance 787 n.2 (3d ed. 1951)). Here, the Funds a re essentially claiming that they paid for more than"t he property insured" (i.e., the health of fund partici pants) because the defendants caused the Funds to expend additional costs that would have been paid by the t obacco companies (through reduced revenues and tort damage s) if they had not defrauded the Funds and conspired to c over up their wrongdoing.

As the Funds frame their direct injury argument: "H ad defendants not undertaken their deceptive, fraudule nt, and anticompetitive activity, the Trusts' trustees, administrators, and advisors could have taken count ermeasures against smoking and smoking-related illnes s and would have commenced legal efforts much sooner and more effectively to impose the costs resulting from toba cco use on the tobacco companies." Appellants' Br. at 10. Plai ntiffs' complaint sets out this theory as follows:

Defendants' contract, combination, or consp iracy was and is for the express purpose and effect of restraining, suppressing and withholding information nece ssary to medical care researchers, providers, and pay ers, including Plaintiffs and members of the Clas s, so that

the costs of health care for tobacco-related illnesses continue to be borne by health care provider s and payers, such as Plaintiffs and members of th e Class, [who] are injured in their business and prop erty by, among other things, having to provide or pay for the health care costs of persons with tobacco-re lated diseases without being reimbursed by Defenda nts.

Compl. P 256. Plaintiffs correctly observe that the District Court did not address this alleged "direct" injury, but as is

13clear 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 feder al or

state law.

II. Plaintiffs' Federal Claims

A. Introduction

Plaintiffs' federal claims are based on the antitru st laws and the RICO statute. In brief, they allege that de fendants conspired to withhold certain information and produ cts from the Funds, and fraudulently induced the Funds to reimburse smokers for illnesses caused by the tobac co companies' wrongdoing. We need not focus on many of the necessary elements of these claims, such as the det ails of the conspiracy and the fraud, whether the Funds (or others) reasonably relied on the fraud, the predica te acts for the RICO claims, etc. Rather, we focus on the i ssue of proximate cause, a necessary element for bringing b oth antitrust and RICO claims, and an element we find l acking 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 proxima te cause and remoteness of injury, we analyze the key remoteness issue for plaintiffs' federal claims und er the rubric of standing doctrine. See Holmes v. Securiti es 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 prob lem with plaintiffs' complaint is the remoteness of the ir alleged injury from the defendants' alleged wrongdoing. Remoteness is an aspect of the proximate cause anal ysis, in that an injury that is too remote from its causal a gent 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, 45 7 U.S. at 477 ("In the absence of direct guidance from Con gress,

14and faced with the claim that a particular injury i s too

remote from the alleged violation to warrant [antit rust] standing, the courts are thus forced to resort to a n 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 requir ement under the concept of standing, the Supreme Court ha s acknowledged that a private plaintiff might validly plead (and even prove) that a defendant has committed an antitrust violation, but still lack standing to enj oin or remedy this violation if his own injury is too remo tely connected to it. Therefore, in discussing whether p laintiffs have standing to bring their antitrust or RICO clai ms, we will focus on proximate cause in general and on rem oteness in particular.

Plaintiffs' claims are largely grounded in allegati ons of fraud on the part of defendants. Therefore, we woul d 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 c ontext, and has incorporated this discussion into its RICO jurisprudence. See Holmes, 503 U.S. at 268-70. We therefore begin our discussion of plaintiffs' feder al claims with an analysis of the Court's holdings in the ant itrust field.4

___________________________________________________ ______________

4. As noted above, the District Court also dismisse d plaintiffs' complaint on the ground that the Funds have suffered no cogni zable injury. See Steamfitters, 1998 WL 212846, at *2-*3 (finding tha t any increased expenses due to smoking-related illnesses of fund p articipants "merely meant that the unions negotiated a greater level of contributions from the employers"). We seriously doubt that this was a n appropriate basis for dismissing the complaint. The plaintiffs clearl y could not go at will

to the employers who funded their health plans for a r eplenishment any time they needed more money. Increased costs likely necessitated reduced expenditures in other areas, as well as red uctions in the Funds'

reserves. Cf. Amicus Br. of UMWA Combined Benefit F und at 22 (noting that the Funds cannot "merely return to the inexhau stible 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 tha t the Funds have suffered no legally cognizable injury.

15B. Antitrust Standing: Remoteness and Proximate Cau se

In adopting a proximate cause requirement for antit rust claims, the Supreme Court has explained that, despi te the broad language and remedial purpose of the antitrus t laws, "[i]t is reasonable to assume that Congress did not intend to allow every person tangentially affected by an a ntitrust

violation to maintain an action to recover threefol d damages for the injury to his business or property." McCrea dy, 457 U.S. at 477. In discussing the requirements for pro ximate cause, the Court has repeatedly noted that "proxima te cause is hardly a rigorous analytic tool." Id. at 4 77 n.13; see also Associated Gen. Contractors, Inc. v. Calif ornia 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 Co urt] has

refused to fashion a black-letter rule for determin ing standing in every case."). Therefore, the Court has emphasized that lower courts should avoid applying brightline rules and instead should analyze the circumsta nces of each case, focusing on certain key factors.

1. Blue Shield v. McCready

In McCready, the Court held that the primary factor s for evaluating proximate cause in an antitrust action w ere: (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 compl aint. 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' c laims of direct injury are fundamentally different from a traditional insu rer-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 act ions directed at the insurer in attempting to avoid the consequences of his misdeeds.

We need not resolve these issues, however, for we c onclude that the District Court correctly held that the Funds' alleg ed injuries are too remote from any wrongdoing by the defendants to be redressable through the RICO statute, the antitrust laws, or st ate common-law theories of recovery.

16"the physical and economic nexus between the allege d

[antitrust] violation and the harm to the plaintiff " and (2) "more particularly, . . . the relationship of the i njury alleged with those forms of injury about which Congress was likely to have been concerned in making defendant's conduc t unlawful and in providing a private remedy" under t he antitrust laws. McCready, 457 U.S. at 478. In discu ssing these factors (and finding that the plaintiff in Mc Cready 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 competitor s whom the conspirators hoped to eliminate from the mar ket. 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 psychologis ts of the patronage of Blue Shield subscribers. Denyin g reimbursement to subscribers for the cost of treatment was the very means by which it is alleged th at Blue Shield sought to achieve its illegal ends. T he harm to McCready and her class was clearly foreseeab le; indeed, it was a necessary step in effecting the ends of the alleged illegal conspiracy. Where the in jury alleged is so integral an aspect of the conspiracy a lleged, there can be no question but that the loss was pre cisely 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 defe ndants' 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 Fun ds' payment of extra costs "was a necessary step in eff ecting the ends of the alleged illegal conspiracy." Theref ore, they argue, their claims fit precisely within the rule o f 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 relations hip

17between the Funds and smokers. In McCready,

psychiatrists allegedly conspired with Blue Cross t o 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 conspirac y and the cause of McCready's harm: McCready was a psychotherapy patient denied reimbursement for her treatment by a psychologist. If Blue Cross subscrib ers 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 a lleged aims of the conspiracy). Cf. Gregory Mktg. Corp. v. Wakefern Food Corp., 787 F.2d 92, 96-97 (3d Cir. 1986) (hold ing that plaintiff, a food broker for defendant manufacturer , had suffered no antitrust injury because it was not a c onsumer or competitor of defendant, and was not an "essenti al participant" in defendant's scheme to price-discrim inate against certain retailers).

In contrast, the tobacco companies would have had ample reason to engage in a conspiracy to prevent s afer tobacco products from coming on the market, regardl ess of the relationship between the Funds and smokers. The very existence of smokers would be a sufficient reason f or such an alleged conspiracy. The fact that the Funds reim bursed smokers for their smoking-related illnesses might h ave made the conspiracy more profitable or allowed it t o 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 t hat case, which also included allegations of fraudulent acts intended to mislead consumers about the safety of defendants ' product (asbestos), the district court denied defen dants' motion for summary judgment on plaintiffs' RICO cla ims. The court noted that "the fraud scheme directly tar geted entities like Prudential, [a real estate dealer,] f or the fraud would not have been worth it if large real estate d ealers did not continue to buy such buildings." Id. at 297. In addition,

18the plaintiffs "stood to keep the defendants' produ cts

valuable by continuing to buy buildings containing defendants' products." Id. In the present case, the tobacco companies' alleged fraud would still have been "wor th it" if the Funds and other health care payers did not reim burse

smokers for their illnesses.

In addition, the defendants' fraud in Prudential pr evented the building purchasers from obtaining information about the dangers of asbestos--information that would hav e led them to not purchase buildings containing this prod uct. In this case, however, even if the tobacco companies h ad not prevented health care payers from discovering the d angers of smoking, there is no claim that the Funds would have chosen to not insure smokers. The defendants' consp iracy in McCready and the defendants' fraud in Prudential would have been without purpose or effect if the plaintif fs in those cases did not use the services of the directly targ eted parties, psychologists and building contractors, respectively. The same is not true in the present c ase.

2. Associated General Contractors

a. The Relevant Factors

Shortly after McCready was decided, the Supreme Cou rt provided further guidance in this area in Associate d General Contractors, Inc. v. California State Counc il of Carpenters, 459 U.S. 519 (1983) [AGC]. In AGC, a un ion sued a contractors' association on antitrust ground s, alleging a conspiracy to force builders and contrac tors to use primarily nonunionized subcontractors. The cour t of appeals had framed the union's argument for antitru st standing (which it had accepted) in much the same w ay that the Funds frame their argument here: "In suppo rt of the Union's standing, the [court of appeals] reason ed that the Union was within the area of the economy endang ered by a breakdown of competitive conditions, not only because injury to the Union was a foreseeable consequence o f the antitrust violation, but also because that injury w as specifically intended by the defendants." Id. at 52 5.

19After discussing at length proximate cause principl es

likely incorporated by Congress into the Sherman Ac t in 1890, see id. at 530-34 & nn.20-25,5 the Supreme Co urt

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5. In addressing the key remoteness issue, the part ies argue a good deal about the meaning of footnote 25 in AGC, but we thi nk they place too much weight on the Court's citations therein to an 1882 treatise on damages. The relevant paragraph of the footnote rea ds as follows:

In torts, a leading treatise on damages set forth the general principle that, "[w]here the plaintiff susta ins injury from the defendant's conduct to a third person, it is too remote, if the plaintiff

sustains no other than a contract relation t o 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 wi llful for that purpose." Thus, A, who had agreed with a town to suppo rt 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 expe nse. Similarly, a purchaser under an output contract with a ma nufacturer had no right of recovery against a trespasser who s topped 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 55-5 6 (1882) (emphasis in original, footnote omitted).

AGC, 459 U.S. at 532-33 n.25. Contrary to defendant s' contention, the Court appears to have quoted this excerpt from Suth erland as simply a "general principle" and not as the outer limits of possible antitrust liability. Further, while the first example cited a ppears to support the tobacco companies' argument on remoteness, the alle gations here are more analogous to a situation in which A agreed to support all the town paupers and S, after assaulting and beating a numbe r of the paupers, covered up his wrongdoing and affirmatively kept A from reducing its costs of supporting the injured paupers. While we s till question whether, in Sutherland's view, A would have a cause of actio n against S under this scenario, it is certainly a closer question th an 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., "unles s the wrongful act is willful for that purpose." Our view of the import o f this qualifier, however, is not the same as theirs, as we do not th ink a sentencefragment in a single quotation in a Supreme Court f ootnote is sufficient

20outlined a number of factors to consider in theflex ible

antitrust standing analysis: (1) the causal connect ion 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 c ompetition within economic markets); (4) "the directness or indirectness of the asserted injury"; (5) whether t he "damages claim is . . . highly speculative"; and (6 ) "keeping the scope of complex antitrust trials within judici ally 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 AG C, this was insufficient to give the plaintiff antitrust st anding. See AGC, 459 U.S. at 537; see also Merican, 713 F.2d at 964 n.13 ("Claims that a defendant specifically intende d to harm the plaintiff, however, are not of controlling significance. Although a defendant's improper motiv e may

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to override the clear text of that opinion--text th at 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 discu ssion of antitrust standing. However, our prior cases have at times di stilled Supreme Court precedent in this area into a more succinct test:"T o 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 unlawf ul." Gulfstream III Assocs., Inc. v. Gulfstream Aerospace Corp., 995 F. 2d 425, 429 (3d Cir. 1993). In other cases, we have extracted five relev ant factors from AGC. See, e.g., Conte Bros. Automotive, Inc. v. Quaker S tate-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).

21sometimes 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.' " (quo ting 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 i ntent 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 se nse nor an allegation of improper motive is sufficient to `ena ble any complaint to withstand a motion to dismiss.' " (quo ting AGC, 459 U.S. at 537)).

What is more, for the reasons set forth in the marg in, it

is unclear whether there exists a causal connection (proximate or otherwise) between any antitrust wron gdoing on the part of the defendants and the Funds' allege d injuries of increased health care expenditures.7 An

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7. It is unclear from plaintiffs' complaint precise ly what antitrust wrongdoing they allege is connected to their own in juries. See, e.g., Compl. P 242 (alleging defendants engaged in the "a nti-competitive restriction of product choice and suppression of pr oduct information," thereby "restricting consumer choice, and causing c onsumers to suffer tobacco-related illnesses"); id. P 246 ("Defendants also conspired to eliminate competition among themselves in the resea rch, development, production and marketing of alternative, higher qua lity, and safer cigarettes and tobacco products.").

A business's decision to not produce a product, sim pliciter, is not a violation of the antitrust laws, and it is not clea r whether even a concerted decision among all of the businesses in a n industry to keep one of their new products from reaching consumers w ould be an antitrust violation. Cf. Oahu Gas Serv., Inc. v. Pa cific Resources Inc.,

838 F.2d 360, 369 (9th Cir. 1988) ("A line of `product innovation' cases has consistently rejected antitrust liability for a mon opolist'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. 1 983). In Foremost Pro, the court observed that a business's decision to delay introducing a new product would not restrain competition, as cons umers would still be able to choose among existing products by that busi ness or its competitors. See id. at 545. The court went on to c onclude:

22agreement among competitors to suppress information on

the dangers of their product might constitute an an titrust 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 no t plausibly allege) that consumers' paying higher pri ces for tobacco products injured the Funds. On the contrary , these

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It is appropriate to emphasize that as a ge neral rule, "any firm, even a monopolist, may . . . bring its produ cts to market whenever and however it chooses." [Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 286 (2d Cir. 1979)]. Without m ore, it is not unlawful for any competitor in any market to delay th e introduction of a new product or an entire line of new products un til, as[plaintiff] alleged in this case, the competition forces such in troduction. 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 o r 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 del ayed introduction of

the product involved an attempt to artificially raise p rices 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. 3 33, 335-37 (1969) (noting that, while an agreement to exchange price information would be a "conspiracy" under the Sherman Act, it would cons titute an antitrust violation only if it restrained trade, by, for exam ple, limiting or reducing price competition); cf. American Tobacco Co. v. Uni ted States, 328 U.S. 781, 809 (1946) ("It is not the form of the combina tion or the particular

means used but the result to be achieved that the s tatute condemns."). While we do not decide whether an agreement among c ompetitors to withhold a new product from a market would constitu te an antitrust violation, we assume for the sake of assessing plai ntiffs' antitrust standing that the conduct in which defendants alleg edly engaged would

constitute such a violation.

23higher prices more likely would have led fewer pers ons 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 defe ndants 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 su pra note

7.

ii. Nature and Directness of Injury

In analyzing the third and fourth factors, the Cour t 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 bee n restricted (i.e., the market for building subcontra cts). Further, its alleged harm was indirect because it c laimed that the defendants conspired to induce third parti es to do

business with nonunion contractors instead of union contractors, and the plaintiff union was harmed onl y because it had contracts with the latter and not th e former.

The Court concluded that "the Union is neither a participant in the market for construction contract s or subcontracts nor a direct victim of the defendants' coercive practices." AGC, 459 U.S. at 540 n.44. This analysi s inveighs against plaintiffs' position.8 The Court' s holding in AGC that the union did not have standing also under cuts the Funds' argument that the foreseeability of thei r injury

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8. The Funds contend that there is an exception to the general rule that an antitrust plaintiff be either a consumer or comp etitor of the defendant's. See Appellants' Br. at 42-45. It is tr ue that, drawing on language from McCready, 457 U.S. at 483-84, we have sometimes expressed the injury requirement in terms of the ha rm being "inextricably intertwined" with the defendant's wro ngdoing. See, e.g., Gulfstream III Assocs., 995 F.2d at 429 (holding th at plaintiff's injury may flow from defendant's wrongdoing if "there exis ts a `significant causal connection' such that the harm to the plaint iff can be said to be `inextricably intertwined' with the antitrust consp iracy" (citation to McCready and other cases omitted)). The simple invo cation of this phrase, however, will not allow a plaintiff to avoi d the fundamental requirement for antitrust standing that he or she h ave suffered an injury of the type--almost exclusively suffered by consume rs or competitors-- that the antitrust laws were intended to prevent.

24strongly favors our finding that proximate cause ex ists

here. See Appellants' Br. at 25. No doubt the defen dants in AGC foresaw that their conspiracy favoring nonunion

contractors would harm the unions that had contract s with the target of the conspiracy--unionized contractors . Yet this foreseeability was insufficient to overcome the rem oteness of the union's injury from the defendants' wrongdoi ng.

Our analysis of the first four AGC factors counsels against recognition of the Funds' claims based simp ly on indirect cost increases from smoking-related illnes ses. The Funds are not consumers forced to pay higher prices for tobacco products or competitors harmed by defendant s' ability to conceal the unsafe nature of their produ cts. 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 kno w 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 preve nt people from smoking. Therefore, these claims might meet
the third factor from AGC. If the Funds were consum ers in a market for information and products that would ha ve reduced their expenditures (because they allegedly would have provided the information and products to their participants, some of whom would have smoked less a nd become less ill), their asserted injuries--as consu mers-- may be of the appropriate type.

The Funds' claims of direct injury might also meet the fourth factor from AGC, which focuses on the direct ness or indirectness of the alleged injury. Subsumed in the

"directness" factor is also the issue of whether ot her, more directly injured parties could vindicate the polici es underlying the antitrust laws: "The existence of an identifiable class of persons whose self-interest w ould

25normally motivate them to vindicate the public inte rest in

antitrust enforcement diminishes the justification for allowing a more remote party such as the Union to p erform 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. Sm okers can sue for personal injuries arising from smoking, but they are unlikely (or unable) to press antitrust claims agai nst 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 d irect injuries are necessarily more direct than the indir ect injuries on which much of our discussion has focuse d. Under plaintiffs' direct theory, the tobacco compan ies'

conduct aimed at the Funds induced the Funds to not take certain actions, which led to a greater incidence o f smoking (and of smokers using more dangerous products), whi ch led to more illness, which led to increased health care expenditures being borne by the plaintiffs. Althoug h the alleged wrongdoing was more directly aimed at the F unds, the injury itself certainly was no more direct than the indirect injury that arose from the defendants' act ions

toward smokers.

In another union fund case, a district court focuse d on this alleged direct injury in partially denying the defendants' motion to dismiss. In that case, the co urt analogized the direct-injury claim to a hypothetica l 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 act ion against the defendant for their economic damages ca used 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 present s a causation chain similar to the Funds' direct claim in the

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

fraudulently induced the plaintiffs to spend money that redounded directly to defendant's benefit (i.e., th e funds paid for the procedure that the defendant invented) . In a sense, this is no different than a garden-variety f raud case in which the defendant hoodwinks the plaintiff into giving him "money for nothing." In the present case, plain tiffs' 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 str eam (i.e., smokers' purchase of tobacco products) for t he

defendants. We view this as an indirect connection. In addition, in the New Jersey Carpenters hypothetical , the fraud essentially induced the plaintiffs to enter i nto the relationship that caused their injury: The defendan t induced the plaintiffs to "cover" the cost of defen dant's faulty procedure. In the present case, the relation ship 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 f rom reducing their expenses arising out of this preexis ting 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 2 3-39 (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 al l of the AGC factors, we find that however plaintiffs charac terize their claims--as direct or indirect--they necessari ly fail for being too remotely connected in the causal chain fr om any wrongdoing on defendants' part.

iii. Speculativeness of Damages and Trial Complexit y

We find that AGC's sixth factor does not militate a gainst a finding of antitrust standing, as there is little danger of

27duplicative litigation9 or complex apportionment of damages

among various groups of plaintiffs.10 However, the Funds' damages claims are quite speculative (and very diff icult to measure), implicating AGC's fifth factor. The Funds argue that damages may be easily calculated by aggregatio n and the application of statistical models. We question how easy this process would be. The Funds' alleged damages a re said to arise from the fact that the tobacco companies p revented the Funds from providing smoking-cessation or safer smoking information to their participants, some of whom would have allegedly quit smoking or begun smoking safer

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9. The defendants complain that allowing the Funds to recover for their health care expenditures creates a danger of duplic ative recovery in general (if not duplicative antitrust or RICO damag es), because of Pennsylvania's collateral source rule. See, e.g. , Johnson v. Beane, 664 A.2d 96, 100 (Pa. 1995) ("The collateral source rul e provides that payments from a collateral source shall not diminis h the damages otherwise recoverable from the wrongdoer."). The co llateral source rule, however, is aimed at preventing a tortfeasor from b enefitting from a third party's payment to the injured party. If the tortfe asor himself has already paid a portion of the injured party's damages, his own liability is correspondingly reduced. See, e.g., Restatement (Se cond) of Torts S 920A(1) (1979). We are uncertain how this latter principle would apply when the tortfeasor pays a portion of the injured p arty's damages indirectly--i.e., through the third party payer's s eparate action against the tortfeasor for recovery of the third party's pa yments to the injured party. We need not predict whether Pennsylvania cou rts would apply the collateral source rule in this context, however, as we do not rely on defendants' invocation of the rule to support our h olding.

10. However, to the extent that Fund participants h ave not been reimbursed for certain health care expenditures or have suffered some other pecuniary loss as a result of the tobacco com panies' alleged conspiracy, they could bring their own antitrust cl aims (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 de fendants were able to artificially increase the price of their products b y conspiring to hide a major defect in these products and by inducing cons umers 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 wo uld possibly be able to bring an antitrust or RICO claim. Therefore , to some minimal extent at least, an apportionment of damages betwee n health care payers and smokers might be necessary.

28products, reducing their smoking-related illnesses, and

thereby lowering the Funds' costs for reimbursing s mokers' 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-cessa tion information, how many would have begun smoking less dangerous products, how much healthier these smoker s would have been if they had taken these actions, an d 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 sta tistical 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 contribu tory negligence, the need for medical monitoring and the statute of limitations present too many individual issues t o permit certification"). Yet we do not believe that aggrega tion and statistical modeling are sufficient to get the Fund s over the hurdle of the AGC factor focusing on whether the "d amages claim is . . . highly speculative." AGC, 459 U.S. a t 542.

In some litigation contexts, there is a meaningful distinction between damages that are completely inc apable

of determination and those that are difficult to de termine but are nonetheless measurable. In those contexts, if the latter is the case, aggregation and statistical mod eling may be appropriate (though we need not decide that issu e here) to allow plaintiffs to overcome the difficulty of p roving the amount of damages. Cf. Hilao v. Estate of Marcos, 1 03 F.3d 767, 782-87 (9th Cir. 1996) (allowing use of aggreg ation 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 statisti cal evidence to overcome need to prove individual damag es in putative class action). In the present context, how ever, a finding of antitrust standing must precede a findin g of liability, which itself precedes the assessment of damages. Therefore, the fact that "once liability is establi shed,

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

lenient standard," Danny Kresky Enters. v. Magid, 7 16 F.2d 206, 212 (3d Cir. 1983), does not eliminate from ou r analysis of the AGC factors the speculative (though potentially measurable) nature of plaintiffs' damag es. This speculativeness strongly militates against plaintif fs' position.

iv. The AGC Factors Applied: Summary

Against this somewhat lengthy background, we can no w summarize our review of the AGC factors in this cas e: First, some causal connection appears to exist between the conduct of the tobacco companies and the injury suf fered 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 target ed them, though for the most part their complaint alleges th at the plaintiffs were targeted along with "consumers, sta te and federal governments, medical and health care entiti es, and the public at large." Compl. P 244.11 Third, at lea st some aspect of the plaintiffs' alleged injury--their ina bility to obtain and use information on the dangers of smokin g or on smoking-cessation methods--may be of the type th at the antitrust laws are intended to prevent, i.e., the r estriction of consumer choices, which leads to increased costs fo r 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 al l

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11. Plaintiffs rely, both in attempting to distingu ish their claims from traditional subrogation claims and in their efforts to avoid the import of AGC, on the alleged direct targeting of the Funds b y the tobacco companies. Yet, we find scant mention of this direc t targeting in plaintiffs' lengthy complaint and, when specificall y asked by us to cite portions of the complaint that address this aspect of their case, plaintiffs could muster only three arguably relevant paragraph s (out of 317). See Appellants' Letter Br. of Jan. 25, 1999, at 2. Whil e plaintiffs urged us, at oral argument, to remand so that they might amen d their complaint to include more specific allegations of direct targ eting 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.

30substantially 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 canfin d in which this court or the Supreme Court has found ant itrust standing. These alleged links include the following : (1) the tobacco companies engaged in a conspiracy to suppre ss information and withhold products from the market; (2) the Funds were prevented from informing their members a bout 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) smoke rs contracted more smoking-related illnesses; and,fina lly, (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 sl ight possibility of duplicative antitrust recoveries or problems apportioning antitrust damages, because smokers are unlikely to make their own antitrust claims based o n increased health care expenditures. However, the Fu nds' damages claims are highly speculative and would ent ail complex calculations potentially involving numerous individuals not party to this case, i.e., Fund part icipants who do smoke or have smoked in the past.

The short of it is that, while we find that the pla intiffs' antitrust claims barely meet certain AGC factors, t he fulfillment of these factors is greatly outweighed by the extremely indirect nature of the Funds' injuries an d the highly speculative and complex damages claims. The tortured path that one must follow from the tobacco companies' alleged wrongdoing to the Funds' increas ed expenditures demonstrates that the plaintiffs' clai ms are precisely the type of indirect claims that the prox imate cause requirement is intended to weed out. Cf. Pals graf v. Long Island R. Co., 162 N.E. 99, 103 (N.Y. 1928) (A ndrews, J., dissenting) ("What we do mean by the word `prox imate' is that, because of convenience, of public policy, of a rough

31sense of justice, the law arbitrarily declines to t race a series

of events beyond a certain point.").

What is more, in proposing a solution to the specul ative nature of their damages--i.e., using aggregation an d statistical modeling to measure damages--the Funds focus

too far down the road to assist their case for stan ding: The task of accurately measuring damages can be approac hed only after a plaintiff has met the requirements for standing and has proven liability. While we do not doubt tha t the Funds have paid out more in health care expenditure s than they would have in the absence of tobacco products, "Congress did not intend to allow every person tang entially affected by an antitrust violation to maintain an a ction to recover threefold damages for the injury to his bus iness or property." McCready, 457 U.S. at 477.

3. Lower Lake Erie

Our own precedent that provides the most support fo r plaintiffs' antitrust claim is In re Lower Lake Eri e Iron Ore Antitrust Litigation, 998 F.2d 1144 (3d Cir. 1993). In that case, the district court dismissed for lack of anti trust standing one of plaintiffs' claims that was based o n a theory similar to that put forth by plaintiffs here . The plaintiffs, various steel manufacturers and transpo rtation companies, alleged that certain railroad companies conspired "to preclude potential competitors from e ntering the market of lake transport, dock handling, storag e and land transport of iron ore." Id. at 1151. The steel companies' claim that was dismissed was "based on t he theory that had the conspiracy not delayed the use of selfunloading vessels, the steel companies would have p aid vessel companies a lower rate for lake transportati on." Id.

at 1154. The district court found that this claim f ailed, reasoning that "because the steel companies were on ly potential customers of non-conspiring competitors, (the vessel companies), damages could be ascertained onl y by speculating when the vessel companies would have be gun using self-unloaders absent a conspiracy. Assessmen t of damages would also require additional conjecture re lated to the rates the private docks would have charged to h andle

the self-unloaders." Id.

32After analyzing the factors from AGC, we disagreed with

the district court's conclusion. First, we found th at 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 wou ld have been realized had the less costly transport system been in place," and "it was unquestionably the steel compan ies who

bore the brunt of the increased costs attributed to the railroad's agreement to thwart development of the l ess expensive technology." Id. at 1168.12 This matches closely the Funds' theory in the present case: Delayed intr oduction 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 toba cco companies' agreement to thwart development of safer tobacco products.

There is a key difference, however. In Lower Lake E rie, the use of more expensive unloaders--made necessary by the defendants' wrongdoing--caused a loss of profit s for the plaintiffs without any intervening events.13 The in ability to use cheaper unloaders, in and of itself, caused the plaintiffs' damages. Here, the alleged conspiracy t hat delayed introduction of safer tobacco products only caused damages to the plaintiff Funds after working its wa y

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12. We also found that the steel companies had alle ged injuries of the type the antitrust laws were intended to prevent an d that the existence of other parties with similar injuries did not "dim inish 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 tran sportation from the market, conferred antitrust standing on the steel c ompanies.

13. We note another key difference between Lower La ke Erie and the present case. In Lower Lake Erie, the defendants di d not simply conspire to delay their own introduction of a new product, a s is alleged here. Rather, they engaged in archetypal antitrust conduc t (price-fixing, boycotts, refusals to sell, etc.) in order to preve nt other parties in the unloader market from introducing and using self-unl oaders. See Lower Lake Erie, 998 F.2d at 1153-54. There was no questi on, therefore, that specific antitrust wrongdoing could be linked to sp ecific antitrust injury. Cf. supra note 7.

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

steps: First, without safer products or information on smoking-cessation, smokers continued to smoke dange rous tobacco products. Next, these smokers became more i ll than they otherwise would have without the tobacco companies' alleged conspiracy. Only at this point d id the Funds allegedly suffer damages from the increased c osts of

the smokers' illnesses.

This distinction between Lower Lake Erie and the pr esent case illustrates the most fundamental flaw in plain tiffs' claims. The injuries that they allegedly suffered f rom defendants' wrongdoing are simply too remote from t hat wrongdoing to be cognizable under the antitrust law s. The causal links that plaintiffs must connect in order to make their case are just too numerous and too speculativ e to meet the requirements of AGC and of the Supreme Cou rt'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 discuss ion of proximate cause and remoteness in cases such as McCready and AGC applied to the analysis of proxima te cause in RICO cases as well. See Holmes, 503 U.S. a t 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 Fun ds' RICO claims. We discuss here, however, the specific requ irements 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 inqui ry 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 t o stand at too remote a distance to recover." Holmes, 503 U .S. at 268-69. This was primarily because (1) the more ind irect the injury, "the more difficult it becomes to ascer tain the

34amount of a plaintiff's damages attributable to[def endant's

wrongdoing], as distinct from other, independent, f actors"; (2) allowing recovery by indirectly injured parties would require complicated rules for apportioning damages; and (3) direct victims could generally be counted on to vin dicate the policies underlying the relevant law. Id. at 26 9-70.

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' inabi lity to return investments of customers who had not bought the manipulated stock.14 In the present case, the tobac co companies are in the position of the stock manipula tors 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 b ecause 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

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14. The plaintiff in Holmes was actually a private nonprofit corporation, the Securities Investor Protection Corporation ("SI PC"), which was required by federal law to reimburse the losses of certain investors.

After paying for the losses of investors who had not inve sted 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 a nd conspiracy directed at the Funds themselves might make the Funds more l ike the brokers' customers who did buy the manipulated stock. The Co urt 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 i nvestors in Holmes would have been able to allege direct injury from t he fraud (i.e., their losses derived directly from the fraud, without any intervening links), while the Funds here, even if they were direct targ ets of the tobacco companies' fraud, did not suffer damages until this fraud prevented them from encouraging their participants to smoke l ess or not at all, which led to an increased incident of smoking-relat ed illnesses, which in turn led to the Funds' increased expenses. See supr a at 26-27.

35in Holmes held that the causal connection between t he

nonpurchasing investors and the stock manipulators was too attenuated for the plaintiffs to have RICO stan ding.

The Court reasoned as follows: "If the nonpurchasin g customers were allowed to sue, the district court w ould first

need to determine the extent to which their inabili ty to

collect from the broker-dealers was the result of t he alleged conspiracy to manipulate, as opposed to, say, the b rokerdealers' 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 a re allowed to sue, the court would need to determine t he extent to which their increased costs for smoking-r elated illnesses resulted from the tobacco companies' cons piracy to suppress health and safety information, as oppos ed to smokers' other health problems, smokers' independen t (i.e., separate from the fraud and conspiracy) decisions t o smoke, smokers' ignoring of health and safety warni ngs, etc.16 As in Holmes, this causation chain is much too spec ulative 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 fac tor) that supported its conclusion that nonpurchasing investo rs did not have standing: (1) the court would need to appo rtion treble damages between the brokers and the nonpurch asing customers, and (2) the brokers could vindicate the RICO
claims themselves. See id. at 273. As we noted in o ur discussion of the Funds' antitrust claims, more dir ectly injured parties, i.e., smokers, would be unlikely t o bring

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16. While this complex determination militates agai nst allowing the Funds to bring their remote claim, it addresses one of defendants' objections, that allowing the Funds (rather than sm okers) to bring claims for smoking-related illnesses would nullify the def endants' traditional defenses, such as assumption of risk and comparativ e negligence. These defenses presumably would be available in the prese nt case, in the sense that smokers' own wrongdoing (or ignoring of known risks) would be a factor in establishing and measuring the link betwe en the tobacco companies' actions and the Funds' damages.

36federal claims against the tobacco companies for th e 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 t raceable to defendants' alleged fraud and conspiracy might b ring 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 par ty could better vindicate the RICO claims--may not be as ful ly applicable to this case as to Holmes because the Fu nds allege that they suffered far greater economic dama ges than smokers themselves, many of whom were reimbursed fo r their direct pecuniary losses. Yet we are unconvinc ed that

this distinction is sufficient to overcome the conc erns 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 th e alleged scheme--indeed, interference with that relationship may well be deemed the linchpin of the scheme's success ").17

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17. Because of our conclusion that plaintiffs' RICO and common-law fraud claims fail for lack of proximate cause, we n eed 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 . . . s hall be stated with particularity."). We note, however, that plaintiffs ' allegations are fairly general in nature and do not include "specific alle gations as to which fraudulent tactics were used against" specific plai ntiffs. 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 "a pply 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.

37D. Summary of Federal Claims

At this point in contemporary history, there can be little doubt that the tobacco companies' products have cau sed

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 the ir health care expenditures. It is therefore quite possible t hat 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, cau sing other Fund participants to pay out-of-pocket expens es they otherwise would not have paid. It also may be the c ase 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 in cluded sufficient contributions to the Funds to pay for sm okingrelated illnesses. All of these parties--non-smokin g Fund participants, unions, union members, employers--can claim to have suffered some injury arising out of t he tobacco companies' conduct. At some point, however, the causal link between defendants' actions and the neg ative effects that eventually result is not proximate eno ugh to meet the prudential requirements for antitrust or R ICO standing. In this case, for the reasons set forth s upra at 17- 37, we believe that this necessary proximate-cause connection is missing.18 Therefore, plaintiffs' fed eral claims based on alleged violations of the antitrust laws a nd the RICO statute were properly dismissed by the Distric t Court.

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18. There is arguably a tension between our decisio n here that the tobacco companies cannot be held liable for the dam ages suffered by entities that paid for smoking-related illnesses, a nd the fact that these same tobacco companies recently agreed to pay more than $200 billion to settle claims brought by attorneys general for t he states' similar

costs of their citizens' smoking-related illnesses. We no te in this regard that

an explanation for the putative tension may be found i n any number of places, including state laws conferring standing an d broad rights of recovery on states for wrongdoing against their cit izens or their coffers, as well as the political power of governmental bodi es--and the threat of legislative action--that is lacking in this case br ought by private

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

38III. 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 th eir statelaw claims must also fail.

A. Fraudulent Misrepresentation

While the District Court dismissed the Funds' remai ning

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 cl aimspecific reasons. The District Court found plaintif fs' statelaw fraud claims too speculative to be cognizable. See Steamfitters, 1998 WL 212846, at *3. Just as we hav e found the link between defendants' alleged fraud--p roviding false information regarding the safety of their pro ducts-- and plaintiffs' alleged injuries too attenuated to support a RICO claim, we also find the link too remote to sup port a common-law fraud claim. See Gibbs v. Ernst, 647 A.2 d 882, 889 (Pa. 1994) (requiring proximate cause as an ele ment of fraudulent misrepresentation claim); see also Crawf ord 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 conje ctural," but "only such as can be said to have been the imme diate and proximate consequences of the deceit practiced upon the plaintiffs").19 For this reason, we agree with the District

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19. We recently held that a common-law fraud claim might succeed despite the fact that the fraudulent misrepresentat ion 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 P rods. Liab. Litig., 159 F.3d 817 (3d Cir. 1998). In Orthopedic Bone Screw, we held that "the mere fact that the alleged fraudulent misrepresenta tion was made to [a third party] and not the plaintiffs does not necess arily 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 caus ed them injuries. Id. at 827. We also held that a misrepresentation claim is not necessarily precluded when the alleged injury arises from a thi rd party's (and not the plaintiff 's) reliance on defendant's misrepres entations. See id. at

39Court that plaintiffs cannot maintain their state f raud

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 suc h a claim. See McCarthy, 80 F.3d at 856 (only proximate cause and "threatened loss or injury cognizable in equity" ar e required for injunctive relief under the antitrust laws). Ho wever, as we have detailed above, the necessary element of pr oximate 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 wel l.20

C. Special Duty

The defendants maintain, and the District Court hel d, that a special-duty claim in Pennsylvania requires averments of physical injury. Whether or not this v iew is correct (and we take no position on it),21 we conc lude that plaintiffs' special-duty claim too must fail.

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828-29. These holdings, however, do not help plaint iffs 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 fr aud is much more attenuated than that in Orthopedic Bone Screw, in w hich the plaintiffs were directly harmed by their use of a product that was only available because of the defendants' misrepresentations to th e third party.

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

for a private party under RICO. See Northeast Women's C tr., Inc. v. McMonagle, 868 F.2d 1342, 1355 (3d Cir. 1989). Othe r 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' damage s 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 speci al-duty claim requires

40Special-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. Com mw. Ct. 1990) ("[A] special relationship is found only wher e an individual is exposed to a special danger and the authorities have undertaken the responsibility to p rovide adequate protection for him or her . . . ."); Resta tement (Second) of Torts S 323 (1965) ("One who undertakes
, gratuitously or for consideration, to render servic es to another which he should recognize as necessary for the protection of the other's person or things, is subj ect 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 ca re increases the risk of such harm, or (b) the harm is suffered because of the other's reliance upon the undertakin g."); see also Morena v. South Hills Health Sys., 462 A.2d 68 0, 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 ri sks 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 v iolated by every material omission in such advertising. We are unwilling to so dramatically extend the scope of li ability 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 i t provides loss prevention service and safety counsel to its policyholders" when plaintiff-worker did not aver t hat "the advertisements were part of any contract or other l egal obligation undertaken by [the insurance company] or that

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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 applyin g 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 de fendants claim.

41they adversely affected [the plaintiff]"). 22 Final ly, a specialduty claim is effectively a negligence cause of act ion, and therefore requires the element we have found missin g from plaintiffs' case, proximate cause. See Morena, 462 A.2d at 684 & n.5 (noting that the plaintiff in a special-d uty case must still prove the underlying elements of a negli gence claim, including proximate cause).

D. Unjust Enrichment

Unjust enrichment is typically invoked in a quasicontractual setting, when plaintiff seeks to recove r from

defendant for a benefit conferred under an unconsum mated or void contract. See, e.g., Zvonik v. Zvonik, 435 A.2d 1236, 1239-40 (Pa. Super. Ct. 1981); cf. Meehan v. Chelte nham Township, 189 A.2d 593, 595 (Pa. 1963) (noting that unjust enrichment is an equitable remedy, requiring for re covery that there be both "(1) an enrichment, and (2) an i njustice resulting if recovery for the enrichment is denied" ).

In the tort setting, an unjust enrichment claim is essentially another way of stating a traditional to rt claim (i.e., if defendant is permitted to keep the benefi t of his tortious conduct, he will be unjustly enriched). As the Restatement of Restitution puts it:

The desirability of permitting restitution i n [tort] cases is ordinarily not so obvious as in the cases where there

has been no tort since the tortfeasor is alw ays subject to liability in an action for damages and . . . the right

to maintain an action for restitution in suc h cases is largely the product of imperfections in the tort remedies, some of which imperfections have n ow been

removed.

Restatement of Restitution S 3 cmt. a (1937); see a lso id. at ch. 7 introductory note ("Actions of tort are ordin arily not restitutionary . . . . They are based primarily upo n wrongdoing and ordinarily, through the payment of m oney,

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22. Of course, a company's failure to inform consum ers 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).

42compensate the injured person for the harm suffered by

him as a result of the wrongful conduct, irrespecti ve of the receipt of anything by the defendant."). We can fin d no justification for permitting plaintiffs to proceed on their unjust enrichment claim once we have determined tha t the District Court properly dismissed the traditional t ort claims because of the remoteness of plaintiffs' injuries f rom defendants' wrongdoing.23

For the foregoing reasons, the District Court's jud gment dismissing plaintiffs' complaint in its entirety wi ll be

affirmed.

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23. The District Court did not specifically address plaintiffs' strict liability, negligence, and breach-of-warranty claim s, but these claims

fail as well, for each requires a proximate connection b etween the defendants' conduct and the plaintiffs' injuries, a connection we find missing in this case. See, e.g., Davis v. Berwind C orp., 690 A.2d 186, 190 (Pa. 1997) ("To recover under [strict liability ], a plaintiff must establish . . . that the defect was a proximate cau se of the plaintiff 's injuries . . . ."); Skipworth ex rel. Williams v. L ead Indus. Ass'n, 690

A.2d 169, 172 (Pa. 1997) ("Pennsylvania . . . follows th e 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 pl aintiff is charged with the burden of proving that the defendant's breach i s the proximate cause
of the harm suffered.").

43Appendix

Government Bodies as Plaintiffs

Arizona v. American Tobacco Co., No. CV-96-14769 (A riz. 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 antitrus t, nuisance, and conspiracy claims)

Illinois v. Philip Morris, Inc., No. 96L 13146 (Ill . Cir. Ct. Nov. 13, 1997) (denying motion to dismiss state antitrus t, negligence, and civil conspiracy claims, but dismis sing special duty, nuisance, and unjust enrichment claim s)

Indiana v. Philip Morris, Inc., No. 49D07-9702-CT-0 03236 (Ind. Super. Ct. July 23, 1998) (dismissing conspir acy, antitrust, unjust enrichment, indemnity, assumed du ty, criminal mischief, and nuisance claims)

Iowa ex rel. Miller v. Philip Morris, Inc., 577 N.W .2d 401 (Iowa 1998) (affirming dismissal of deception, spec ial 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 ne gligence claims with leave to amend), petition for review gr anted, No. S068747, 1998 Cal. LEXIS 2475 (Cal. Apr. 22, 19 98)

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, b ut dismissing unjust enrichment, special duty, fraud, breach of warranty, negligence, strict liability, a nd conspiracy claims with leave to amend)

City & County of San Francisco v. Philip Morris, In c., 957 F. Supp. 1130 (N.D. Cal. 1997) (dismissing RICO, negli gent misrepresentation, special duty, warranty, and unju st enrichment claims with leave to amend), and No. C-9 6- 2090 DLJ, 1998 WL 230980 (N.D. Cal. Mar. 3, 1998) (denying motion to dismiss fraud and certain specia l duty claims, but dismissing other special duty claims)

44Texas 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 nuisan ce 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 claim s)

Union Funds as Plaintiffs

Hawaii Health & Welfare Trust Fund for Operating En g'rs v. Philip Morris, Inc., No. 97-00833 SPK (D. Haw. Jan. 25, 1999) (dismissing RICO, antitrust, false advertisin g, 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 l iability, negligence, breach of warranty, fraud, unjust enric hment, 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 Tr ust 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 enrichme nt 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 enrichme nt claims)

Laborers Local 17 Health & Benefit Fund v. Philip M orris, Inc., 7 F. Supp. 2d 277 (S.D.N.Y.) (denying motion to

45dismiss 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 Morri s, 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 di smiss certain fraud and RICO claims, but dismissing antit rust, special duty, and unjust enrichment claims)

New Mex. & West Tex. Multi-Craft Health & Welfare T rust 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 Fu nd 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 enrichm ent claims without leave to amend, and dismissing fraud and conspiracy claims with leave to amend)

Operating Eng'rs Local 324 Health Care Fund v. Phil ip Morris, Inc., No. 97-741291 CZ (Mich. Cir. Ct. Feb. 12, 1999) (dismissing all claims)

Oregon Laborers-Employers Health & Welfare Trust Fu nd v. Philip Morris, Inc., 17 F. Supp. 2d 1170 (D. Or. 19 98) (dismissing antitrust, RICO, consumer protection, u njust 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 Trus t Fund v. Philip Morris, Inc., No. 97-8715-CIV-RYSKAMP, 19 98

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

special duty, unjust enrichment, RICO, and antitrus t claims)

Stationary Eng'rs Local 39 Health & Welfare Trust F und v. Philip Morris, Inc., No. C-97-01519 DLJ, 1998 WL 47 6265 (N.D. Cal. Apr. 30, 1998) (denying motion to dismis s negligent breach of special duty claim, but dismiss ing fraud claims with leave to amend, and dismissing RI CO, antitrust, intentional breach of special duty, unfa ir trade, and unjust enrichment claims without leave to amend )

Steamfitters Local Union No. 420 Welfare Fund v. Ph ilip Morris, Inc., __ F.3d __, No. 98-1426 (3d Cir. Mar. 1999) (affirming dismissal of RICO, antitrust, fraud, spe cial duty, unjust enrichment, strict liability, negligen ce, and breach of warranty claims)

Texas Carpenters Health Benefit Fund v. Philip Morr is, Inc., 21 F. Supp. 2d 664 (E.D. Tex. 1998) (dismissing RIC O, antitrust, tort, breach of warranty, and unjust enrichment claims)

West Va. Laborers' Pension Trust Fund v. Philip Mor ris, 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, 199 8) (denying motion to dismiss)

Other Health Care Payers as Plaintiffs

Minnesota v. Philip Morris, Inc., 551 N.W.2d 490 (M inn. 1996) (affirming denial of motion to dismiss state antitrust, consumer protection, and equitable claim s, 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, u njust enrichment, and conspiracy claims)

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24. --Although the State of Minnesota is the nomina l plaintiff in this case, the state supreme court's decision addressed only those claims brought by Blue Cross.

47Williams & Drake Co. v. American Tobacco Co., No. 9 8-553

(W.D. Pa. Dec. 21, 1998) (dismissing RICO, antitrus t, 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