Opinion ID: 6983274
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Heading: RICO and Antitrust Claims for Damages

Text: The requirements for standing to maintain a civil action under RICO and the antitrust laws are similar. 4 See Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 268, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992). Both provide a private right of action for damages only to those individuals “injured in [their] business or property by reason of’ a violation of the law’s substantive provisions. 18 U.S.C. § 1964(c) (RICO); 15 U.S.C. § 15(a) (antitrust). Both also require that the alleged violation of the law be a “proximate cause” of the injury suffered. See Holmes, 503 U.S. at 268, 112 S.Ct. 1311 (RICO); Blue Shield v. McCready, 457 U.S. 465, 477, 102 S.Ct. 2540, 73 L.Ed.2d 149 (1982) (antitrust). As the Court explained in Holmes: Here we use “proximate cause” to label generically the judicial tools used to limit a person’s responsibility for the consequences of that person’s own acts. At bottom, the notion of proximate cause reflects ideas of what justice demands, or of what is administratively possible and convenient. Accordingly, among the many shapes this concept took at common law was a demand for some direct relation between the injury asserted and the injurious conduct alleged. 503 U.S. at 268, 112 S.Ct. 1311 (citations and quotations omitted) (emphasis added). A direct relationship between the injury and the alleged wrongdoing, although not the “sole requirement” of RICO and antitrust proximate causation, “has been one of its central elements.” Id. at 269, 112 S.Ct. 1311 (citing Associated Gen. Contractors v. California State Council of Carpenters (“AGC”), 459 U.S. 519, 540, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983)). “Thus, a plaintiff who complained of harm flowing merely from the misfortunes visited upon a third person by the defendant’s acts was generally said to stand at too remote a distance to recover.” Id. at 268-69, 112 S.Ct. 1311. To determine whether an injury is “too remote” to allow recovery under RICO and the antitrust laws, the Court applies the following three-factor “remoteness” test: (1) whether there are more direct victims of the alleged wrongful conduct who can be counted on to vindicate the law as private attorneys general; (2) whether it will be difficult to ascertain the amount of the plaintiffs damages attributable to defendant’s wrongful conduct; and (3) whether the courts will have to adopt complicated rules apportioning damages to obviate the risk of multiple recoveries. See id. at 269-70, 112 S.Ct. 1311 (RICO); AGC, 459 U.S. at 545, 103 S.Ct. 897 (antitrust). Plaintiffs in the present case assert that they have suffered both “direct” injury and “indirect” injury. They claim a “direct” injury based on what they call a “one-link” causation chain. As defendants point out, however, all of plaintiffs’ claims rely on alleged injury to smokers-without any injury to smokers, plaintiffs would not have incurred the additional expenses in paying for the medical expenses of those smokers. Thus, there is no “direct” link between the alleged misconduct of defendants and the alleged damage to plaintiffs. See Laborers Local 17 Health & Benefit Fund v. Philip Monis, Inc., 172 F.3d 223, 233 (2d Cir.1999) (holding that because trust funds’ damages “are entirely derivative of the harm suffered by plan participants as a result of using tobacco products,” the damages were “indirect” and did not “proximately cause the injuries alleged” by the trusts); see also Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912, 928 (3d Cir.1999) (holding that it did not matter whether plaintiffs’ injuries were “direct” or “indirect” because “the plaintiffs’ direct claim comes no closer than their indirect claim to meeting the proximate cause requirement for antitrust standing”). Two circuit courts have addressed the issue of a health trust fund’s standing to bring antitrust and RICO actions. Both the Second and the Third Circuits have held that a trust fund’s claims are “too remote” to allow recovery and that the actions are therefore barred. See Laborers Local 17, 172 F.3d 223 (addressing only RICO); Steamfitters, 171 F.3d 912 (addressing RICO and antitrust). Because we determine that the “remoteness” test weighs in favor of barring plaintiffs’ action, we agree with the Second and the Third Circuits and hold that plaintiffs’ RICO and antitrust claims are “too remote” from defendants’ alleged wrongdoing to allow recovery. These claims are therefore barred.
Plaintiffs argue that their “standing is confirmed” because only they, and not smokers, “can allege injury to business or property for the RICO and antitrust claims at issue here.” Plaintiffs are correct that individuals that suffer personal injury cannot claim medical expenses as “injury to business or property,” and that the smokers are therefore barred from asserting RICO or antitrust claims. See Berg v. First State Ins. Co., 915 F.2d 460, 464 (9th Cir.1990) (holding that personal injury is not “injury to business or property” and is therefore not compensable under RICO). This inability does not, however, necessarily lead to the conclusion that plaintiffs must therefore have standing. First, “Congress did not intend the antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation.” AGC, 459 U.S. at 534, 103 S.Ct. 897. Some injuries caused by an antitrust violation may thus be left unremedied for lack of a proper plaintiff. As we recognized in Exhibitors’ Serv., Inc. v. American Multi-Cinema, Inc., 788 F.2d 574, 580 n. 7 (9th Cir.1986): “The fact that injury has occurred and that other claims have failed does not permit this court to expand the coverage of [antitrust law].” Second, there is an identifiable group of persons-smokers-whose self-interest will motivate them to seek recovery of the damages caused by defendants’ alleged wrongful conduct. Although the smokers cannot “vindicate the public interest in antitrust [or RICO] enforcement,” see AGC, 459 U.S. at 542, 103 S.Ct. 897, they can “remedy the harm done by defendants’ alleged misconduct. Moreover, these actions [by the smokers] will promote ‘the general interest in deterring injurious conduct,’ which Holmes noted as the objective of this policy factor.” Laborers Local 17, 172 F.3d at 235 (quoting Holmes, 503 U.S. at 269, 112 S.Ct. 1311). The existence of the smokers, who are more direct victims of the alleged wrongful conduct and who can be counted on to vindicate the injury caused by defendants’ alleged wrongful conduct, weighs heavily in favor of barring plaintiffs’ actions.
Although the actual damages attributable to medical payments made by plaintiffs due to smoking-related injuries would be as easy to ascertain in the present case as in a direct action by the smokers, the other damages that plaintiffs allege would be very difficult to ascertain. As the Third Circuit stated: The Funds’ alleged damages are said to arise from the fact that the tobacco companies prevented 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 products, reducing their smoking-related illnesses, and thereby lowering the Funds’ costs for reimbursing smokers’ health care expenditures. In order to calcúlate the damages-i.e., the costs not lowered due to the antitrust conspiracy-the Funds must demonstrate how many smokers would have stopped smoking if provided with smoking-cessation information, how many would have begun smoking less dangerous products, how much healthier these smokers would have been if they had taken these actions, and the savings the Funds would have realized by paying out fewer claims for smoking-related illnesses. It is apparent why the Funds argue that they can demonstrate all of this through aggregation and statistical modeling: it would be impossible for them to do so otherwise. Yet we do not believe that aggregation and statistical modeling are sufficient to get the Funds over the hurdle of the AGC factor focusing on whether the “damages claim is ... highly speculative.” Steamfitters, 171 F.3d at 929. The Second Circuit similarly found the damages claim of the trust funds to be highly speculative: It will be virtually impossible for plaintiffs to prove with any certainty: (1) the effect any smoking cessation programs or incentives would have had on the number of smokers among the plan beneficiaries; (2) the countereffect that the tobacco companies’ direct fraud would have had on the smokers, despite the best efforts of the Funds; and (3) other reasons why individual smokers would continue smoking, even after having been informed of the dangers of smoking and having been offered smoking cessation programs. On a fundamental level, these difficulties of proving damages stem from the agency of the individual smokers in deciding whether, and how frequently, to smoke. In this light, the direct injury test can be seen as wisely limiting standing to sue to those situations where the chain of causation leading to damages is not complicated by the intervening agency of third parties (here, the smokers) from whom the plaintiffs’ injuries derive. These concerns become particularly pointed in a case, like the present one, where the injuries are alleged to derive not simply from defendants’ affirmative misconduct but also from plaintiffs’ fraudulently induced inaction. That is, it is often easier to ascertain the damages that flow from actual, affirmative conduct, than to speculate what damages arose from a party’s failure to act. In the latter situation, as in the case at hand, it becomes difficult to distinguish among the multitude of factors that might have affected the damages. Here, for example,. plaintiffs’ alleged damages might have derived from inefficiencies in the Funds’ own management, as well as from non-smoking related health problems suffered by the smokers, and it would be the sheerest sort of speculation to determine how these damages might have been lessened had the Funds adopted the measures defendants allegedly induced them not to adopt. Laborers Local 17, 172 F.3d at 233-34. The difficulty of ascertaining the damages attributable to defendants’ alleged wrongful conduct and the complexity involved in calculating these damages weigh heavily, if not dispositively, in favor of barring plaintiffs’ actions.
This third and final factor also weighs in favor of barring plaintiffs’ actions. It is quite likely that if there are not cases by smokers already pending in Oregon, there will likely be many filed as has been seen in other states. Although the smokers cannot recover under either RICO or the antitrust laws, they can seek recovery under other state law theories for personal injury and the associated medical costs-the same damages that plaintiffs seek to recover. Moreover, although there may be some protection from multiple recovery in state law, this safeguard would not cure the ultimate problem-that the courts would be forced “to adopt complicated rules apportioning damages among plaintiffs at different levels of injury from the violative acts, to obviate the risk of multiple recoveries.” See Holmes, 503 U.S. at 269, 112 S.Ct. 1311 (citing AGC, 459 U.S. at 543-44, 103 S.Ct. 897); Laborers Local 17, 172 F.3d at 230. All three factors of the “remoteness” test weigh in favor of barring plaintiffs’ claims. We therefore hold that plaintiffs lack standing to bring either a RICO or an antitrust claim for damages. 5