|
|
http://laws.findlaw.com/9th/9836024.html |
U.S. 9th Circuit Court of Appeals
OREGON LABORERS v PHILIP MORRIS
9836024
OREGON LABORERS-EMPLOYERS HEALTH & WELFARE TRUST FUND; SCHOOL DISTRICT #1, HEALTH & WELFARE TRUST FUND; PLUMBERS, STEAMFITTERS, & SHIPFITTERS RETIREE HEALTH & WELFARE PLAN, UNITED ASSOCIATION UNION LOCAL 290; LOCAL 11 OFFICE & PROFESSIONAL EMPLOYEES INTERNATIONAL UNION, HEALTH & WELFARE PLAN; LOCAL 125 INTERNATIONAL BROTHERHOOD No. 98-36024 OF ELECTRICAL WORKERS, LOCAL D.C. No. 125, EBA-PGE-IBEW LOCAL 125 CV-97-01051-MA HEALTH & WELFARE TRUST, Plaintiffs-Appellants, OPINION v. PHILIP MORRIS INCORPORATED; RJ REYNOLDS TOBACCO COMPANY; BROWN & WILLIAMSON TOBACCO CORPORATION; BRITISH AMERICAN TOBACCO COMPANY LTD; BAT INDUSTRIES PLC; LORILLARD TOBACCO COMPANY; LIGGETT GROUP INCORPORATED; AMERICAN TOBACCO COMPANY; UNITED STATES TOBACCO COMPANY; COUNCIL FOR TOBACCO 7827 RESEARCH USA INCORPORATED; TOBACCO INSTITUTE INCORPORATED; SMOKELESS TOBACCO COUNCIL INCORPORATED; HILL & KNOWLTON INCORPORATED, Defendants-Appellees.
Appeal from the United States District Court
for the District of Oregon
Malcolm F. Marsh, District Judge, Presiding
Argued and Submitted
May 3, 1999--Portland, Oregon
Filed July 14, 1999
Before: William C. Canby, Jr., Thomas G. Nelson,
Circuit Judges, and Jeremy Fogel, District Judge.1
Opinion by Judge T.G. Nelson
_________________________________________________________________
_________________________________________________________________
COUNSEL
Steve D. Larson and Scott A. Shorr, Stoll Stoll Berne Lokting
& Shlachter, Portland, Oregon, and Michael Spencer, Mill-
berg, Weiss, Bershad, Hynes & Lerach, New York, New
York, for the plaintiffs-appellants.
Herbert M. Wachtell, Wachtell, Lipton, Rosen & Katz, New
York, New York, for the defendants-appellees.
Michael D. Reynolds, Assistant Attorney General, Salem,
Oregon, for amicus curiae State of Oregon.
Carl R. Schenker, Jr., O'Melveny & Myers, Washington,
D.C., for amicus curiae Product Liability Advisory Council.
Jan S. Amundson, National Association of Manufacturers,
Washington, D.C., for amicus curiae National Association of
Manufacturers.
_________________________________________________________________
OPINION
T.G. NELSON, Circuit Judge:
The plaintiffs in this action are six Oregon-based employee
health and welfare benefit trust plans created to provide com-
prehensive health care benefits to their participants, who are
thousands of union and public-sector workers employed under
various collective bargaining agreements. Plaintiffs filed suit
against defendants--eight tobacco companies, three non-
profit public relations/lobbying/research councils and one
public relations firm--under federal RICO, Oregon RICO,
federal and state antitrust laws, and other Oregon state laws.
Plaintiffs seek to recover the costs they have incurred treating
their participants' and beneficiaries' smoking-related ill-
nesses. The district court granted judgment on the pleadings
in favor of defendants, concluding that plaintiffs had failed to
state a claim upon which relief could be granted. We have
jurisdiction under 28 U.S.C. S 1291. We affirm.
I.
Plaintiffs are five health and welfare trust funds that pro-
vide health care benefits to their participants and beneficia-
ries. These funds are formed and operated as legal trusts with
each trust's mission being to pay for health care benefits for
participating workers, retirees and their families.
In their complaint, plaintiffs allege the following: In the
early 1950's, scientific studies linking smoking to health risks
surfaced. Defendants concluded that an awareness of the
health risks associated with smoking could result in regulation
of the tobacco industry and threaten the industry's profitabil-
ity. To prevent this from happening, defendants began a pub-
lic relations campaign to persuade the public that the industry
would research the health risks from tobacco and make a can-
did disclosure of the results. Defendants, however, entered
into a conspiracy to do just the opposite.
Plaintiffs' complaint cites many examples of this alleged
public relations campaign that was being waged at the same
time that defendants were allegedly engaged in a covert
scheme to defraud the public (including plaintiffs) as to the
health risks of smoking. Defendants allegedly sought to con-
ceal the scientific evidence about smoking risks and to main-
tain the powerful "lie" that the link between smoking and
disease was an "open controversy." Defendants' alleged mis-
conduct covered not only the general smoking-disease link,
but also the degree of the health risk, the addictiveness of
smoking, the feasibility of safer cigarettes, the actual safety of
low-tar and filtered cigarettes, and the suppression of compar-
ative safety information about different product designs.
Defendants also allegedly sought to impair the development
and implementation of smoking cessation programs, and
fought efforts to ban smoking in the workplace.
Plaintiffs also allege that defendants conspired to restrain
intercompany competition in making and marketing safer cig-
arettes or alternative products. Defendants allegedly stopped
advertising differences in product safety, fixed the quality
level of products allowed in the market, suppressed product
information, and policed their agreement not to let any manu-
facturer introduce and market tobacco products that were
safer or less hazardous. Plaintiffs allege that this conduct pre-
sents a classic case of horizontal conspiracy to fix product
quality and that, as a result, cigarettes are perhaps the only
product that has not gotten any safer in the last forty-five
years. Finally, plaintiffs allege that defendants targeted teen
smokers to replace the adult smokers that died.
As to damages, plaintiffs allege that defendants' wrongdo-
ing injured them in two causal chains. First, defendants'
alleged manipulation of information and suppression of prod-
ucts prevented plaintiffs from obtaining accurate information
and safer products in operating their health funds, which in
turn prevented plaintiffs from taking action to reduce smoking
rates among their participants. This reduction in smoking
rates would have led to a reduction in smoking-related disease
among the funds' participants which would have in turn led
to lowering plaintiffs' expenditures. Second, plaintiffs allege
that defendants' wrongful fraud and concealment of informa-
tion, suppression of safer products, targeting of children and
manipulation of nicotine resulted in more smoking, less quit-
ting, and smoking of more hazardous cigarettes among the
funds' participants, which in turn resulted in higher incidence
of disease and higher expenditures for medical bills by plain-
tiffs.
Plaintiffs allege that, but for defendants' conduct, plaintiffs
would have undertaken stronger anti-smoking measures.
Plaintiffs further allege that they have borne the brunt of
smoking-related health care costs and that plaintiffs simply
seek to replenish trust assets by recovering from defendants
the injuries that plaintiffs have suffered as a result of defen-
dants' misconduct.
Plaintiffs have asserted the following claims for relief: fed-
eral RICO, Oregon RICO, federal and state antitrust, Ore-
gon's Unfair Trade Practices Act ("UTPA"), fraudulent
misrepresentation and concealment, unjust enrichment, negli-
gent breach of a special assumed duty and civil conspiracy.
Plaintiffs seek damages as well as equitable and injunctive
relief.
Defendants moved the district court for judgment on the
pleadings on each of plaintiffs' claims or, alternatively, for
dismissal for failure to join necessary parties. The district
court granted defendants' motion, finding plaintiffs failed to
state a claim on which relief could be granted. See Oregon
Laborers-Employers Health & Welfare Trust Fund v. Philip
Morris, Inc., 17 F. Supp. 2d 1170 (D. Or. 1998).
The district court held (1) that plaintiffs did not meet the
standing or proximate cause requirements necessary to main-
tain either a federal or state antitrust claim; (2) that plaintiffs'
injuries were entirely dependent upon injuries sustained by
their participants and were thus too far removed from the
challenged harmful conduct to support either a federal or state
RICO claim;2 (3) that plaintiffs did not meet the standing
requirement of Oregon UTPA because they were not
"consumers of defendants' products"; (4) that plaintiffs did
not meet the proximate cause requirements to maintain a
claim for fraud; (5) that the theories of unjust enrichment and
indemnity were inapplicable; (6) that plaintiffs failed to allege
the elements necessary to maintain a claim for breach of an
assumed duty;3 and (7) that plaintiffs' claim for civil conspir-
acy was entirely dependent on the underlying claims for fraud
and UTPA violations and must therefore also fail.
II.
We review de novo a district court's grant of judgment on
the pleadings for failure to state a claim. Nelson v. City of
Irvine, 143 F.3d 1196, 1200 (9th Cir. 1998)."A judgment on
the pleadings is properly granted when, taking all the allega-
tions in the pleading as true, the moving party is entitled to
judgment as a matter of law." Id.
III.
A. RICO and Antitrust Claims for Damages
[1] 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
(1992). Both provide a private right of action for damages
only to those individuals "injured in [their ] business or prop-
erty by reason of" a violation of the law's substantive provi-
sions. 18 U.S.C. S 1964(c) (RICO); 15 U.S.C.S 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
(RICO); Blue Shield v. McCready,
457 U.S. 465, 477
(1982) (antitrust). As the Court explained
in Holmes:
Here we use "proximate cause" to label generi-
cally 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. Accord-
ingly, 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
(citations and quotations omitted) (emphasis
added).
[2] 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 (citing Associated Gen. Contractors v.
California State Council of Carpenters ("AGC") , 459 U.S.
519, 540 (1983)). "Thus, a plaintiff who complained of harm
flowing merely from the misfortunes visited upon a third per-
son by the defendant's acts was generally said to stand at too
remote a distance to recover." Id. at 268-69.
[3] 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 plaintiff's damages attributable to defendant's wrongful
conduct; and (3) whether the courts will have to adopt compli-
cated rules apportioning damages to obviate the risk of multi-
ple recoveries. See id. at 269-70 (RICO); AGC, 459 U.S. at
545 (antitrust).
[4] Plaintiffs in the present case assert that they have suf-
fered 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 smok-
ers. Thus, there is no "direct" link between the alleged mis-
conduct of defendants and the alleged damage to plaintiffs.
See Laborers Local 17 Health & Benefit Fund v. Philip Mor-
ris, 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 (address-
ing RICO and antitrust).
[5] Because we determine that the "remoteness" test weighs
in favor of barring plaintiffs' action, we agree with the Sec-
ond 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.
1. Existence of More Direct Victims of Alleged Wrongful
Conduct
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."
[6] 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, how-
ever, necessarily lead to the conclusion that plaintiffs must
therefore have standing.
[7] First, "Congress did not intend the antitrust laws to pro-
vide a remedy in damages for all injuries that might conceiv-
ably be traced to an antitrust violation." AGC, 459 U.S. at
534. Some injuries caused by an antitrust violation may thus
be left unremedied for lack of a proper plaintiff. As we recog-
nized 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]."
[8] 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
, 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 (quot-
ing Holmes,
503 U.S. at 269
).
[9] The existence of the smokers, who are more direct vic-
tims 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 plain-
tiffs' actions.
2. Difficulty in Ascertaining Damages Attributable to
Defendants' Alleged Wrongful Conduct
[10] 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 expendi-
tures. In order to calculate the damages--i.e., the
costs not lowered due to the antitrust conspiracy--
the Funds must demonstrate how many smokers
would have stopped smoking if provided with
smoking-cessation information, how many would
have begun smoking 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 sta-
tistical modeling: it would be impossible for them to
do so otherwise. Yet we do not believe that aggrega-
tion 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.
[11] 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 cessa-
tion 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 smok-
ing and having been offered smoking cessation pro-
grams. On a fundamental level, these difficulties of
proving damages stem from the agency of the indi-
vidual smokers in deciding whether, and how fre-
quently, 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' affir-
mative misconduct but also from plaintiffs' fraudu-
lently induced inaction. That is, it is often easier to
ascertain the damages that flow from actual, affirma-
tive 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 inefficien-
cies 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 specu-
lation 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.
[12] 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.
3. Potential for Duplicative Recovery or Complex
Apportionment of Damages
[13] This third and final factor also weighs in favor of bar-
ring 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 appor-
tioning 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
(citing AGC, 459
U.S. at 543-44); Laborers Local 17, 172 F.3d at 230.
[14] 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
B. RICO and Antitrust Claims for Equitable Relief
In addition to damages, plaintiffs seek equitable relief
under RICO and the antitrust laws.
1. Antitrust
[15] Standing analysis for equitable relief under the anti-
trust laws is not the same as standing analysis for damages.
See Cargill, Inc. v. Monfort of Colorado, Inc.,
479 U.S. 104
,
110-11 & nn. 5-6 (1986). As the Court explained in Cargill:
[T]he fact is that one injunction is as effective as
100, and, concomitantly, that 100 injunctions are no
more effective than one. Thus, because standing[for
damages] raises no threat of multiple lawsuits or
duplicative recoveries, some of the factors other than
antitrust injury that are appropriate to a determina-
tion of standing [for damages] are not relevant [to a
determination of standing for equitable relief].
Id. at 111 n.6 (citation and quotation omitted) (emphasis
added).
[16] Thus, plaintiffs may not have to meet all three factors
in the "remoteness" test to maintain an action for antitrust
injunctive relief. Plaintiffs do, however, still have to show
antitrust injury--either real or threatened. See id. at 111-13.
This requirement "ensures that the harm claimed by the plain-
tiff corresponds to the rationale for finding a violation of the
antitrust laws in the first place." ARCO v. USA Petroleum Co.,
495 U.S. 328, 342
(1990).
[17] An "antitrust injury" is an injury of "the type that the
antitrust statute was intended to forestall." AGC, 459 U.S. at
540. "The antitrust laws . . . were enacted for the protection
of competition, not competitors." Brunswick Corp. v. Pueblo
Bowl-O-Mat, Inc.,
429 U.S. 477, 488
(1977) (quotation omit-
ted). "The requirement that the alleged injury be related to
anti-competitive behavior requires, as a corollary, that the
injured party be a participant in the same market as the
alleged malefactors." Bhan v. NME Hosps., Inc., 772 F.2d
1467, 1470 (9th Cir. 1985). "In other words, the party alleging
the injury must be either a consumer of the alleged violator's
goods or services or a competitor of the alleged violator in the
restrained market." Eagle v. Star-Kist Foods, Inc., 812 F.2d
538, 540 (9th Cir. 1987).
[18] In their complaint, plaintiffs define the antitrust market
at issue as the market for cigarettes and tobacco products.
Plaintiffs are neither consumers nor competitors in that mar-
ket. They are not, therefore, "participants in the same market"
as defendants, and they have thus not suffered "antitrust
injury." See Bhan, 772 F.2d at 1470; see also Steamfitters,
171 F.3d at 926.
Plaintiffs' reliance on McCready to argue that "there is no
`consumer' or market participant requirement, " is misplaced.
The plaintiff in McCready filed an antitrust action against
Blue Shield, claiming that Blue Shield's "practice of refusing
to reimburse subscribers for psychotherapy performed by psy-
chologists, while providing reimbursement for comparable
treatment by psychiatrists, was in furtherance of an unlawful
conspiracy to restrain competition in the psychotherapy
market."
457 U.S. at 467
. The Court held that the plaintiff, as
a subscriber who had employed the services of a psychologist
and thus a consumer of psychotherapy services, had standing
to maintain the antitrust action. See
457 U.S. at 480
-81, 484-
85. The Court did not hold that there is no "consumer" or
"market participant" requirement.
The present case is distinguishable from McCready in sev-
eral aspects. First, the plaintiff in McCready was a consumer
in the relevant market of "psychotherapeutic services." See
457 U.S. at 483
. In contrast, it is undisputed that plaintiffs in
the present case are neither "consumers" nor "competitors" in
the relevant market of cigarettes and tobacco products.
Second, the Court has explained that the broad language it
used in McCready6 was simply a paraphrase of the antitrust
laws and "added nothing to the even broader language that the
statute itself contains." See AGC,
459 U.S. at 529
& n.19. In
so explaining, the Court noted that the actual plaintiff in
McCready was directly harmed by the defendants' unlawful
conduct. See id.
In contrast, plaintiffs' own argument in the present case
reveals that they were not directly harmed by defendants'
allegedly unlawful conduct, but rather that any harm they suf-
fered is derivative of the harm suffered by smokers.7 As the
Third Circuit stated:
It is true that, drawing on the language from
McCready, we have sometimes expressed the injury
requirement in terms of the harm being "inextricably
intertwined" with the defendant's wrongdoing. The
simple invocation of this phrase, however, will not
allow a plaintiff to avoid the fundamental require-
ment for antitrust standing that he or she have suf-
fered an injury of the type--almost exclusively
suffered by consumers or competitors--that the anti-
trust laws were intended to prevent.
Steamfitters, 171 F.3d at 926 n.8 (citations omitted).
[19] Plaintiffs have failed to allege an injury of the type
that the antitrust laws were intended to prevent. Plaintiffs are
neither consumers nor competitors in the relevant market of
cigarettes and tobacco products. To the extent they have suf-
fered injury, their claims are entirely derivative of the injuries
suffered by smokers. Their injuries are not of a nature to
establish standing for equitable relief under the antitrust laws.
2. RICO
[20] "[I]njunctive relief is not available to a private party
in a civil RICO action." Religious Tech. Ctr. v. Wollersheim,
796 F.2d 1076, 1084 (9th Cir. 1986).
C. State Law Claims
1. Unfair Trade Practices Act
[21] The UTPA grants standing to "any person who suffers
any ascertainable loss of money" resulting from a violation of
the law. Or. Rev. Stat. S 646.638(1). Damages predicated
upon "personal injury" are not recoverable under the UTPA.
See Gross-Haentjens v. Leckenby, 589 P.2d 1209, 1211 (Or.
Ct. App. 1979) (holding the UTPA does not cover personal
injuries). Plaintiffs' damages--expenses to treat smokers'
personal injuries--are clearly predicated upon "personal
injury" and are therefore unrecoverable under the UTPA.
[22] Moreover, "the UTPA is to be construed consistently
with its consumer protective purposes." Cullen v. Investment
Strategies, Inc., 911 P.2d 936, 941 (Or. Ct. App. 1996); see
also Raudebaugh v. Action Pest Control, 650 P.2d 1006,
1008-09 (Or. Ct. App. 1982) (noting that the purpose of
UTPA is to "provide a viable remedy for consumers " and if
"there is an ascertainable loss to a consumer, that consumer
has a cause of action" under UTPA). This emphasis on direct
protection of consumers suggests that the UTPA, like the
other statutes that we have discussed, is not intended to pro-
vide a cause of action to a non-consumer that is wholly deriv-
ative of injury to consumers.
2. Fraud
[23] The Oregon Supreme Court recognizes the prevailing
rule "that a plaintiff may not recover for economic loss result-
ing from negligent infliction of bodily harm to a third
person," Ore-Ida Foods, Inc. v. Indian Head Cattle Co., 627
P.2d 469, 473 (Or. 1981), and has extended this rule to loss
resulting from fraudulent misrepresentation. See Oksenholt v.
Lederle Lab., 656 P.2d 293, 299 (Or. 1982) (holding that
claim for indemnity is a claim for recovery for economic loss
that results from physical harm to a third person and is barred
in both a negligence and fraudulent misrepresentation action
under Ore-Ida).
[24] In the present case, plaintiffs seek only to recover
medical costs paid on behalf of their beneficiaries. This is a
classic claim for indemnity, with plaintiffs attempting to
recover for the economic loss they have suffered as a result
of the physical harm suffered by third parties--the smokers.
Under Ore-Ida and Oksenholt, this claim for damages is
barred.
[25] Moreover, for the same reasons that proximate cause
did not exist for plaintiffs' RICO and antitrust claims, proxi-
mate cause is lacking for their fraud claim. See Oskenholt,
656 P.2d at 299 ("Damages properly recoverable in an action
for intentional misrepresentation are those which are a direct
and necessary result of defendant's acts or omissions.").
3. Unjust Enrichment
[26] Under Oregon law, to state a cause of action for unjust
enrichment, plaintiffs must show that they conferred a
"benefit" on defendants and that it would be unjust for defen-
dants to retain that benefit. See L.S. Henriksen Constr., Inc. v.
Shea, 961 P.2d 295, 296-97 (Or. Ct. App. 1998).
[27] Plaintiffs allege that they conferred a "benefit" on
defendants by paying the medical bills of the smokers. Plain-
tiffs do not, however, allege that defendants had any legal
obligation to pay the medical expenses of the smokers. With-
out a legal obligation on the part of defendants to pay, the
payment by plaintiffs did not "benefit" defendants.
[28] Moreover, because plaintiffs had an independent obli-
gation to pay the smokers' medical expenses, they cannot
maintain an action for unjust enrichment against defendants
just because defendants were incidentally benefitted. See
Restatement of Restitution S 106 (1936) ("A person who,
incidentally to the performance of his own duty . . . has con-
ferred a benefit upon another, is not thereby entitled to
contribution.").
4. Civil Conspiracy
[29] Plaintiffs' claim for civil conspiracy is entirely depen-
dent on their underlying claims for fraud and violations of
UTPA. Because these underlying claims fail, plaintiffs' civil
conspiracy claim must also fail.
IV.
As the district court stated:
However compelling [plaintiffs'] charges may be,
there are very sound judicial policy reasons for limit-
ing legal actions to those parties most directly
injured by the harmful conduct. These policies are
not new and have lengthy historical roots in our
jurisprudence. To allow plaintiffs to maintain actions
that are entirely dependent upon the harm suffered
by others threatens chaos for the judicial system,
especially where others may (and have) filed their
own actions and are capable of recovering a full
range of damages, including the medical costs
sought here.
17 F. Supp. 2d at 1183.
The district court's grant of judgment on the pleadings in
favor of defendants is AFFIRMED. the end
_______________________________________________________________
FOOTNOTES
2 The district court held that plaintiffs also lacked standing under Oregon
RICO because they failed to allege that defendants have been convicted
of mail or wire fraud as required under Oregon RICO. 17 F. Supp. 2d at
1179 (citing Or. Rev. Stat. S 166.725(7)(a)(A)). Plaintiffs have not
appealed the district court's dismissal of their Oregon RICO claim. This
claim is therefore waived.
3 Plaintiffs have not appealed the dismissal of their claim for breach of
an assumed duty. This claim is therefore waived.
4 Plaintiffs assert claims under both federal and state antitrust laws. The
Oregon antitrust statutes are almost identical to the federal antitrust stat-utes. Compare 15 U.S.C. SS 1, 2 with Or. Rev. Stat. SS 646.725, 646.730.
In fact, Oregon courts look to federal antitrust decisions for "persuasive"
guidance in interpreting the state antitrust laws. See Willamete Dental
Group, P.C. v. Oregon Dental Serv. Corp., 882 P.2d 637, 640 (Or. Ct.
App. 1994) (citing Or. Rev. Stat. S 646.715(2)). The district court and the
parties have treated the state and federal antitrust claims as one and the
same for purposes of standing analysis. We do the same.
5 Plaintiffs' argument that their standing to bring RICO and antitrust
actions is "confirmed" by state and common law rules governing proxi-
mate cause, as well as trust law, ignores the test set out by the Supreme
Court for analyzing standing in RICO and antitrust cases. This argument
also ignores the fact that there is an alternative route for the trusts to
recover the damages alleged in the present action--via subrogation in a
non-RICO, non-antitrust action. See Laborers Local 17, 172 F.3d at 235.
6 In McCready, the Court stated: "As we have recognized, `[t]he statute
does not confine its protection to consumers, or to purchasers, or to com-
petitors, or to sellers. . . . The Act is comprehensive in its terms and cover-
age, protecting all who are made victims of the forbidden practices by
whomever they may be perpetrated."
457 U.S. at 472
.
7 Plaintiffs argue that their injuries are "inextricably intertwined with
that of market participants (smokers deprived of a choice of a safer prod-
uct) in that the Trust paid the bills resulting from the restraint."
Ads by FindLaw