Court Opinion

ID: 8052911
Source: CourtListenerOpinion
Date Created: 2022-09-09 04:13:52.736033+00
Date Added: 2024-06-11T16:37:45.854831
License: Public Domain

Duggan, J.,
dissenting. Because I conclude that the probate court was correct in ruling that the monetary settlement made pursuant to the MSA did not satisfy the State’s lien against the Estate, I would affirm that court’s decision and not reach the sovereign immunity issue.
The State argues that the tobacco litigation involved a direct action relating to damages sustained by the State as a result of actions by the tobacco companies, not a subrogation action brought to enforce those rights Raduazo assigned to the State pursuant to RSA 167:14-a. Therefore, the State argues, none of the proceeds of the settlement are allocable to expenditures made on Raduazo’s behalf, and none may be credited to the lien on her estate. Resolution of this issue turns on an interpretation of the nature of the State’s action against the tobacco companies.
The issue is whether the State brought suit against the tobacco companies in a subrogation action, or whether the State sued independently for the financial harms that it has suffered as a consequence *698of the tortfeasors’ actions, because if the State brought the action in subrogation, then the State stepped into Raduazo’s shoes to enforce a right she would have enjoyed had she decided to bring suit. See McCullough v. Company, 90 N.H. 409, 411 (1939) (superseded by statute on other grounds); see also 73 Am. Jur. 2d § 1 Subrogation (2001). If this were the case, then the State necessarily exercised Raduazo’s rights when it sued and obtained a settlement from the tobacco companies. McCullough, 90 N.H. at 411. Under these circumstances, the equities would arguably weigh in favor of precluding the State from enforcing its lien. In such a situation, the State would have divested Raduazo of her claim against the tobacco companies, and would presumptively have recovered the cost of the benefits Raduazo received. Therefore, allowing the State to enforce its lien would arguably permit the State to recover twice the amount of benefits it actually paid to Raduazo.
If, however, the State’s action against the tobacco companies was a direct action, then the equities would arguably weigh in favor of allowing the State to enforce its lien. In such a situation, the State would not have divested Raduazo of her claim against the tobacco companies, and would not necessarily have recovered the cost of the benefits Raduazo received.
Whether the MSA settled any subrogated claims the State may have had against the tobacco companies requires consideration of the nature of the claims the State made against the tobacco companies and the scope of the release of claims made pursuant to the MSA. A review of the underlying litigation leads to the conclusion that the State’s suit against the tobacco companies was not filed and settled on behalf of smokers like Raduazo, but instead was a direct action filed for the benefit of all citizens whose tax dollars were and will be spent earing for harms that the tobacco industry allegedly caused.
The State filed suit against the tobacco companies in its own name. Neither Raduazo nor her estate was a named party to the litigation. Indeed, the litigation was pursued and settled without any reference to, participation in, or involvement by, any individual Medicaid recipients. The State’s petition does not include any reference to any particular assigned causes of action or subrogated claims asserted by the State on behalf of any Medicaid recipients. All of this suggests that the State did not sue the tobacco companies to enforce any rights that individual Medicaid recipients had assigned to it.
This view of the nature of the State’s litigation against the tobacco companies is consistent with the view expressed by other courts and commentators that the States sued the tobacco companies directly, and not on behalf of injured smokers. See Watson v. Texas, 261 F.3d 436, 444-45 (5th Cir. 2001); State of California v. Superior Court, 99 Cal. Rptr. 2d 735, *699742 (Ct. App. 2000); State v. Philip Morris, Inc., 686 N.Y.S.2d 564, 567 (Sup. Ct. 1998), aff'd, 693 N.Y.S.2d 36 (App. Div. 1999); Jacobson & Warner, Litigation and Public Health Policy Making: The Case of Tobacco Control, 24 J. Health Pol. Pol’y & Law 769, 777 (Aug. 1999); Kelder & Daynard, The Role of Litigation in the Effective Control of the Sale and Use of Tobacco, 8 Stan. L. & Pol’y Rev. 63, 82 (Winter 1997). In deciding to proceed directly, the States hoped to avoid both the need to prove individual causation and the defenses applicable to individual plaintiffs, such as assumption of the risk and comparative fault. According to one commentator:
In essence, the [tobacco] litigation was designed to circumvent the freedom-of-choice and individual-rights strategies that tobacco attorneys had used to win previous litigation. In the [tobacco] litigation, claims were aggregated at the State level to avoid the blameworthiness problems faced by individual litigants and the need to show individual causation. Consistent with the underlying theory of the case, the state attorneys general attempted to prove their case based on epidemiological studies of the population-based harms caused by tobacco, not by harms to specific individuals. Since the state has no choice but to absorb the Medicaid costs of tobacco-related diseases, and it is the taxpayers, not smokers, who are injured financially, the states argued that the traditional industry defenses raised in individual litigation are irrelevant.
Jacobson & Warner, supra at 777 (citation omitted).
The terms of the MSA further support the conclusion that the tobacco litigation was a direct action. While the State released all claims it may have brought against the tobacco companies, the MSA specifically preserves the rights of smokers or their estates to assert their own claims against the tobacco companies. For example, the MSA limits the “releasing parties” to the Settling States and their various subdivisions and constituent institutions. See MSA ¶ II(pp); see also McClendon v. Georgia Dept. of Community Health, 261 F.3d 1252, 1261 (11th Cir. 2001); Floyd v. Thompson, 227 F.3d 1029, 1037 (7th Cir. 2000). “Individual persons under M.S.A. ¶ II(pp)(2)(A) release claims only insofar as they are acting for the state and suing on general injuries, not insofar as they are seeking solely ... private or individual relief for separate and distinct injuries.” Floyd, 227 F.3d at 1037 (quotation and ellipsis omitted). Thus, the State did not release claims against any tobacco defendant held by individuals, and did not extinguish the claims of individual persons who *700were not part of the settlement process to recover health care expenses paid by the individual. See id.
It is true that the State’s petition stated that “[t]he State has expended and continues to expend millions of dollars annually in Medicaid payments and other State-funded programs to provide funds for the diagnosis and treatment of tobacco-related illnesses,” and requested monetary relief including, “the State’s costs under the Medicaid program of providing medical care related to tobacco use.” The Medicaid expenditures cited refer, however, to the State’s expenditures that arose because of the inability of Medicaid recipients to pay for all expenses associated with their care. These costs do not include costs that recipients, through their estates, are ultimately able to pay, but only, as the probate court concluded, those unreimburseable payments made to Medicaid recipients suffering from tobacco-related illnesses. Under this interpretation of the MSA, to the extent that the State collects on its lien from her estate, Raduazo has “paid” for at least some of her own health care expenses, and her estate is entitled to pursue the tobacco companies to recover, among any other claims her estate may have, these expenses.
The majority holds that the State’s litigation against the tobacco companies was based in part upon Raduazo’s statutorily assigned right to recover medical expenses from a liable third party, and that the Estate should therefore be afforded the opportunity to prove that some portion of the State’s lien should be discharged. However, it is unclear what the Estate must prove in order to have the lien discharged. Presumably, at the very least, the Estate must prove that Raduazo’s illness was caused by smoking and that there is some connection between her tobacco use and the defendants who are parties to the MSA. Whether the Estate must prove, as the State suggests, that the tobacco companies who are parties to the MSA are liable for her injuries is an issue about which the majority makes no comment. If, in order to prove that some or all of the lien should be discharged, the Estate is required to prove that the State’s Medicaid payments on her behalf were associated with tobacco-related illnesses, that the illnesses were caused by smoking, and that the tobacco defendants who are parties to the MSA are liable for her illnesses, then today’s decision does nothing more than allow the Estate to prove the same case in an action against the State as it would in an action against the tobacco companies themselves. This seems an odd result, as it would put the State in a position of defending claims the tobacco defendants would be better equipped to defend.
A more difficult question, not addressed by today’s decision, is how the probate court is to determine what portion of the lien should be *701discharged. As the probate court pointed out, and as is clear from the petition in the underlying tobacco litigation, the State sought damages
including but not limited to (1) the State’s costs under the Medicaid program of providing medical care related to tobacco use; (2) the State’s cost of providing to non-medicaid indigent persons medical care related to tobacco use; (3) disgorgement of the pecuniary gain realized by the defendants from wrongful conduct; (4) restitution, civil penalties and attorney’s fees pursuant to RSA 358-A:6, IV for alleged consumer protection violations; (5) civil penalties and attorney’s fees pursuant to RSA 356:4-a, b, and c for alleged antitrust violations and (6) enhanced damages based on the egregious nature of the tobacco defendants’ conduct.
As the probate court pointed out, the MSA does not allocate payments to any specific theory of recovery or relief. Therefore, it is unclear what portion of the settlement payments can be specifically attributed to payments made by the State under Medicaid or other public assistance programs to or for persons with smoking-related diseases.
Even if it were possible to allocate the settlement to specific causes of action and to determine what part is allocable to the Medicaid payments made by the State, the probate court would still need to determine what portion of the settlement allocable to the Medicaid payments are allocable to Raduazo’s assigned claim, as opposed to the claims assigned by other Medicaid recipients suffering from tobacco-related illnesses. This task will be further complicated by the fact that the State probably did not collect the full value of the assigned claims, given that payments were made pursuant to a settlement agreement.
Other courts have recognized that allowing Medicaid recipients to benefit from the MSA may create “administrative problems,” Floyd, 227 F.3d at 1038. There are, of course, many Medicaid recipients who have in the past been required to reimburse the State through execution of a lien or otherwise. Whether those recipients will now be able to recover for the amount of the executed liens remains to be seen. In addition, the MSA covers future claims. Today’s holding raises doubts about the State’s ability to obtain and execute on future liens for future recipients of Medicaid.
Because the State sued the tobacco defendants in a direct action to recover for the unreimburseable financial harms it suffered, because the MSA specifically preserves the rights of smokers and their estates to assert their own claims against the tobacco companies, and because of the potential impact of today’s holding, I would affirm the trial court’s decision *702to grant the State’s motion for summary judgment. Therefore, I respectfully dissent.