Opinion ID: 2065552
Heading Depth: 1
Heading Rank: 4

Heading: Dismissal For Failure To State Cognizable Claims For Relief

Text: Before addressing the legal sufficiency of the Foreign Governments' claims, it helps to put those claims into perspective. Although the Foreign Governments characterize themselves as quasi sovereigns, the specific capacity in which they are suing is functionally indistinguishable from that of an insurer or third party provider of medical care. In that capacity the Foreign Governments could have chosen to stand in the shoes of their injured citizens and bring these actions to enforce their rights as subrogees. Indeed, in some jurisdictions, the Foreign Governments would have been required to do so. Many state and federal courts have adhered to the principle (under both state and federal law) that the victim of a tort is the proper plaintiff, and that insurers or other third-party providers of assistance and medical care to the victim may recover only to the extent their contracts subrogate them to the victim's rights. [25] Had the Foreign Governments followed that procedural path, their complaints would have survived this Rule 12(b)(6) dismissal motion. Yet because they did not, it is not untoward of us to ask why. For an answer, we cannot improve upon Circuit Judge Easterbrook's explanation in International Brotherhood of Teamsters v. Philip Morris, Inc.: Insurers usually may elect to litigate tort claims on behalf of their insureds, using the proceeds first to cover medical costs, but they have disdained that option. They want to recover directly from tobacco producers precisely in order to bypass the elements of subrogation actionsprincipally, that the insurer must demonstrate the existence of a tort and the lack of any defenses to liability. By suing directly, plaintiffs seek to recover even if none of their beneficiaries could prevail in tort litigation. [26] The issue before us, simply stated, is whether this Court should recognize, as legally cognizable under Delaware law, a claim of this kind, by foreign government plaintiffs, that would strip the defendants of defenses which would otherwise be available to them. [27] The Superior Court held that it should not be, and we agree, for several reasons. First, it would be both unfair and unsound policy to allow the Foreign Governments, suing in their capacity as health care insurers or providers, to pursue claims on which their injured citizens, had they sued directly, might not be entitled to recover. As Judge Easterbrook aptly put it: The food industry puts refined sugar in many products, making them more tasty; as a result, some people eat too much (or eat the wrong things) and suffer health problems and early death. No one supposes, however, that sweet foods are defective products on this account; chocoholics can't recover in tort from Godiva Chocolatier; it follows that the Funds and the [Blue Cross Blue Shield insurers] can't recover from Godiva either. The same reasoning applies when the defendant is Philip Morris. If, as the Funds and the Blues say, the difference is that Philip Morris has committed civil wrongs while Godiva has not, then the way to establish this is through tort suits, rather than through litigation in which the plaintiffs seek to strip their adversaries of all defenses. Given the posture of these cases, we must assume, as the complaints allege, that the cigarette manufacturers have lied to the public about the safety of their products. But lies matter only if customers are deceived. Whether smokers relied to their detriment on tobacco producers' statements is a central question in tort litigation, a question that cannot be dodged by the device of an insurers' direct suit. [28] Second, any calculation of damages to the Foreign Governments would be, at best, highly speculative and most difficult to apportion. The Foreign Governments' measure of damages is, and must be, the amounts they expended to provide medical care for smokers afflicted by lung cancer, heart disease and other ailments. Putting aside the problem of determining what portion of those diseases could be attributed to the Tobacco Company Defendants' products, the difficulty for insurers is determining what it means to be injured by paying for medical care. Even if it is assumed that the Foreign Governments might be able to establish the costs that they actually incurred, how is a court to determine what costs the Foreign Governments would have incurred had the tobacco products been safer, or had the Tobacco Company Defendants not misrepresented to the plaintiffs' citizens the risks of consuming their tobacco products? Consider also that because insurers are essentially financial intermediaries, their having paid for, or provided directly, the costs of health care may not have resulted in any damages. Commercial health insurers provide for the costs of smokers' health care by charging higher premiums in advance. If the insurers, using proper actuarial methods, accurately calculate the incremental health care costs attributable to smoking, then the premiums received would adequately reflect those costs and [the insurers'] books balance whether the costs of care are high or low. [29] Thus, the insurers would suffer no damage unless, and only to the extent, that the actual costs of providing health care to smokers exceeded the premiums receivedassuming that such a calculation is possible in the case of Foreign Governments. Although the Foreign Governments are not commercial health insurers, and although the payments received by the Foreign Governments do not take the form of premia paid in advance by policyholders, for purposes of these lawsuits the Foreign Governments are suing in their health insurer (or provider) capacity, and some portion of the taxes they receive on an ongoing basis from their taxpayer citizens would be the functional equivalent of insurance premiums. Third, the Foreign Governments' non-tort claims for unjust enrichment and civil conspiracy do not rest on any sounder footing than their tort claims. We agree with the Superior Court's observation that `in the tort setting, an unjust enrichment claim is essentially another way of stating a traditional tort claim (i.e., if defendant is permitted to keep the benefit of his tortious conduct, he will be unjustly enriched).' [30] Moreover, `[a] claim for civil conspiracy can proceed only where there is a cause of action for an underlying act.' The Foreign Governments have failed to successfully plead any tort supporting their civil conspiracy claim. . . .  [31] The result reached by the Superior Court is consistent with the overwhelming weight of the federal and state court cases, almost all of which analyze the issue in terms of proximate cause. As the United States Supreme Court ruled in Holmes v. Securities Investor Protection Corp., [a] plaintiff who complain[s] of harm flowing merely from the misfortunes visited upon a third person by the defendant's acts [i]s generally said to stand at too remote a distance to recover. [32] United States v. Standard Oil Co ., a case decided 60 years ago, rests upon that same principle. There, the Supreme Court held that not even the United States government could bring an independent action against an alleged tortfeasor to recover the costs of providing medical treatment for its own servicemen. [33] If the United States government is not permitted assert that claim, on what basis should two foreign governments be permitted to do so? Not surprisingly, and consistent with the reasoning in Holmes and Standard Oil, the D.C. Circuit and the Florida Court of Appeals have rejected claims by Guatemala, Nicaragua, Ukraine and Venezuela identical to those brought here. [34] Multitudinous other state and federal appellate courts have unanimously invoked the same rationale in eighteen separate opinions, all holding that third-party payors or providers of medical services, including U.S. States and political subdivisions, hospitals, insurers, ERISA health plans, and a Native American tribe, have no cognizable claims under federal statutory law or state common law to recover medical expenses from the tobacco companies, because the plaintiffs' alleged injuries were entirely derivative of the injuries to the smoker-consumers of the tobacco companies' products. [35] Because the analysis employed by these federal and state courts is couched in the language of proximate cause, it is not surprising that the Superior Court, which relied on those authorities, did likewise. For doing that the Superior Court can hardly be faulted. Although the result reached by the Superior Court is correct, we conclude, nonetheless, that there is a more fundamental basis for holding that the Foreign Governments' claims for relief are not legally cognizable under Delaware law. The difficulty with employing a proximate cause analysis in this factual setting is that it presupposes that the Tobacco Company Defendants owed, and then violated, a duty running directly to the Foreign Governments. That being the premise, relief was denied because the violation of duty was found to be too remote a cause of any damage to be actionable. The flaw in that reasoning lies in its predicatethat a duty is owed by the Tobacco Company Defendants, not only to the consumers of their products, but also to any third-party health insurer or health provider of those consumers, whether they be private insurers, ERISA health funds, or governments. No basis in public policy has been shown for judicially creating such a duty, particularly since the insurers are at all times free to seek judicial relief in American courts through the remedy of subrogation. Indeed, courts in several jurisdictions hold that subrogation is the only path through which health insurers may seek to recover. [36] Moreover, and equally if not more fundamentally, the issues underlying the question of whether tortfeasor liability should be extended to the insurers of tort victims are laden with policy concerns, including the effect this new basis for liability would have on the national economy. So complex and intricate are those concerns that they are better addressed by the legislature(s), not by courts applying common law principles. [37] Accordingly, we hold that although the Superior Court reached the correct result, the better rationale is that in selling their products to citizens of the Foreign Governments who later become injured as users of those products, the Tobacco Company Defendants incurred no legal duty to those Foreign Governments, separate and apart from any duty owed to their citizens.