Judge Weinstein’s Introduction to his Memorandum and Order is well worth reading for:
1. A brief and helpful accounting of the issues involved.
2. Some indication of the box-bursting, near-grandiosity of Judge Weinstein’s erudition and thinking.
Beyond the case, Judge Weinstein considers the very purpose of the Federal Court and jury systems, this suit’s chances in the Appeals Court, and the Constitution. Citing cases that stretch back to the early 1800’s as well as the 7th Amendment, and holding dear to the principle of the jury system, he quotes William Blackstone from Marbury v. Madison, “where there is a legal right, there is also a legal remedy by suit or action at law, whenever that right is invaded. . . . [E]very right, when withheld, must have a remedy, and every injury its proper redress.” Judge Weinstein seems to feel that if the case should be heard, then the Federal Court must hear it.
He cites Cohens v. Virginia, which determined that a Federal Court
“must take jurisdiction if it should. The judiciary cannot, as the legislature may, avoid a measure because it approaches the confines of the constitution.”
“The case comes down to the role of the jury: should it be permitted to decide this vexing private litigation on the basis of somewhat dubious arguments and questionable proofs when the decision has so many important public social overtones, or should the judges themselves decide by holding that the matter is beyond the ken of a reasonable jury? Here, the fundamentals of the Constitution provide the answer. The first Congress and the States that then constituted the Union still speak clearly enough:”
Text follows of the Introduction from Schwab Memorandum & Order, September 25, 2006:
Tobacco has been woven into the fabric of American history and society since the 1620’s when, as the first cash crop, it saved the colony of Virginia and then, together with cotton, established the economic base for slavery. Edmund S. Morgan, American Slavery, American Freedom, The Ordeal of Colonial Virginia 112, 310 (Francis Parkman Prize Ed., 2005).
In more recent times, through cigarettes—produced and allegedly fraudulently merchandised on a massive scale—it has become the basis for a pandemic, causing the premature deaths of tens of millions of Americans. This case represents one event in this long narrative: the alleged successful effort of defendants to cozen smokers into continuing to buy their products by convincing them that smoking “light” cigarettes was safer for their health.
It is plaintiffs’ view that this campaign caused smokers to buy “light” cigarettes, in large amounts, at a price greater than they would have paid had the truth been acknowledged by defendants. Defendants’ acts, plaintiffs contend, constituted a violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 ff, warranting trebled money damages. 18 U.S.C. § 1964(c). Class action status is sought to bring to bear, on a consolidated basis, the weight of all United States smokers’ claims.
It is charged—with substantial evidence to support the contention—that plaintiff smokers bought cigarettes characterized as “light,” on the suggestion of defendants—the major cigarette manufacturers—that they were less harmful than “regular” cigarettes, when in fact they were at least as dangerous and defendants knew of their dangers. The claim is that the carcinogenic and other adverse effects smokers sought to avoid were not reduced by smoking “light” rather than other cigarettes; that defendants knew this was the case; that they concealed this fact; that they urged plaintiffs—through advertising and other public statements—to smoke these “lights” knowing smokers were being misled; and that they defrauded purchasers of billions of dollars spent for light cigarettes worth less than their purchase price.
On behalf of a prospective class, the named plaintiffs seek class certification pursuant to Federal Rules of Civil Procedure 23(a) and 23(b)(2) and (3) on behalf of the class of persons defined as:
All United States residents who purchased in the United States, not for resale, cigarettes labeled as “Lights” and/or “Light” (collectively “light cigarettes”) that were manufactured and/or sold by Defendants during the period commencing on the first date that Defendants began selling light cigarettes until the date trial commences (the “Class Period”), and who are not, as of the date of trial, members of a certified state class seeking economic damages stemming from their purchases of light cigarettes or having obtained an award of, or a denial of, such damages. Excluded from the Class are individuals who are directors and officers of the Defendants’ corporations, their parents, subsidiaries and/or affiliates.
This litigation is another in the continuing battle of plaintiffs’ lawyers and their clients with the cigarette industry. While limited success by smokers in some suits—and the cost of litigating—have probably had some deterrent effect on aggressive marketing of a product defendants now partly acknowledge to be dangerous, this, and other suits like it, probably have had only a minimal value in reducing what even defendants now concede are the enormous costs to public health of widespread cigarette smoking. More effective in alleviating smoking dangers are probably such legislative and administrative efforts as prohibiting smoking in public and commercial areas, and raising prices, primarily through taxes. Nevertheless, where a cigarette smoker can demonstrate that he or a group of smokers has been damaged by the cigarette industry, the help of the court in resolving the claim and defenses is mandatory. The independent political-economic arrangement defendants made with the states to pay them billions of dollars over many years has not compensated smokers for the individual damages they have allegedly suffered.
Early in our history the Supreme Court ruled that a federal court must decide cases properly brought. It:
must take jurisdiction if it should. The judiciary cannot, as the legislature may, avoid a measure because it approaches the confines of the constitution. We cannot pass it by because it is doubtful. With whatever doubts, with whatever difficulties, a case may be attended, we must decide it, if it be brought before us. We have no more right to decline the exercise of jurisdiction which is given, than to usurp that which is not given. The one or the other would be treason to the constitution. Questions may occur which we would gladly avoid; but we cannot avoid them.
Cohens v. Virginia, 6 Wheat. 264, 404 (1821).
While “the federal courts may, in their discretion, [in some narrowly specified classes of cases,] properly withhold the exercise of the jurisdiction conferred upon them where there is no want of another suitable forum,” Massachusetts v. Missouri, 308 U.S. 1, 19, 60 S. Ct. 39 (1939), the choice in the present case under the federal RICO statute is not between a United States district court and some other forum, but between this court and no effective forum at all.
Plaintiffs have proposed an elegant analysis of the law and facts as a rationale for certifying this litigation as a class action. Their claim is that they, and a class consisting of tens of millions of smokers, were induced by fraud to buy a kind of cigarettes, “lights,” and that they suffered financial damage because they did not get what they thought they were getting—a more valuable, safer cigarette. By relying on federal substantive statutes—the combined “RICO” and Mail and Wire Fraud Acts, 18 U.S.C. §§ 1341, 1343—they seek to avoid one of the serious difficulties with national class cigarette actions: the tort law in the fifty states is not uniform.
They also propose to avoid the other main problem with smokers’ class actions: conduct and motive differences among members of the class. Individuals start and quit smoking and choose various types of cigarettes for different reasons and suffer wide variations in possible harm, creating different specific causation and damage issues attributable to each class member. If plaintiffs’ experts are to be credited in the testimony promised by plaintiffs’ counsel, economic loss of value in purchases of cigarettes allegedly touted as “lighter” when they are not safer avoids this problem of human diversity: first, by the equivalent of statistical averaging and, second, should the jury determine total damages to the class, division of the damages based on claims of smokers for the relative number of cigarettes they bought during the applicable liability period, with unclaimed proceeds to be distributed on a cy pres basis.
Defendants, by contrast, in powerful briefs and arguments, point to what they believe are critical defects in the plaintiffs’ case on the facts and the law requiring not only denial of class certification, but dismissal of the case. They contend that they committed no fraud, that the statute of limitations has run, and that class action procedures are not applicable. Accordingly, they move to dismiss and to deny class certification.
In considering the matter as it now stands, two powerful factors should be kept in mind:
First, is the jury’s constitutional role and its vast discretion in evaluating evidence in a civil suit of this kind under Amendment VII of the United States Constitution. The jury’s power and capacity to deal with complex facts and come to a reasonable resolution of a dispute should not be underestimated.
Second, is the power of the American legal system to overcome a defense that plaintiffs’ claims are so enormous in scope and time, and in diverse persons affected, that they can never be fairly adjudicated in a reasonably comprehensive and relatively inexpensive way. In this connection it is well to recall a central theme of our American legal system: ubi jus, ibi remedium—each right has a remedy. Every violation of a right should have a remedy in court, if that is possible.
The very essence of civil liberty certainly consists in the right of every individual to claim the protection of the laws, whenever he receives an injury. One of the first duties of government is to afford that protection. . . .
“[I]t is a general and indisputable rule, that where there is a legal right, there is also a legal remedy by suit or action at law, whenever that right is invaded.” . . .
“[E]very right, when withheld, must have a remedy, and every injury its proper redress.” The government of the United States has been emphatically termed a government of laws, and not of men. It will certainly cease to deserve this high appellation, if the laws furnish no remedy for the violation of a vested legal right.
Marbury v. Madison, 1 Cranch U.S. 137, 163 (1803) (quoting 3 William Blackstone, Commentaries 23, 109).
In modern times, at least since adoption of the Federal Rules of Civil Procedure and Evidence, the ancient maxim is modified to read, “each violation of a right should have a practicable remedy.” A remedy that is impracticable in execution is—for those whose legal rights have been violated—no remedy at all. Procedures developed through American class action jurisprudence should not be frustrated when a large number of small claims can be aggregated and tried in a way fair to both plaintiffs and defendants. Current widespread partial acknowledgment by defendants of the dangers of their product and alleged efforts to reduce smoking by minors and others does not negate any liability for past delicts not subject to the statute of limitations.
Resolution of many of the factual disputes in the case depends upon widely divergent possible inferences that may be drawn from a huge amount of already available evidence of activities by defendants and members of the putative class. While the American jury has been more and more controlled by devices such as summary judgment, the strong policy embodied in Amendment VII, and the presumption that the system can provide a practical remedy for a widespread violation of a right, requires allowing jurors to draw necessary operative factual conclusions wherever reasonable minds could differ.
In the instant case the wisdom embodied in the Constitution is reflected in the ability of a fair cross section of the community to appreciate and understand evidence of why people smoke, why they do it in certain ways, and what impact actions and policies of defendants in such matters as advertising have had in influencing behavior. The federal petty civil jury provides the ultimate focus group of the law.
In deciding the balance between plaintiffs and defendants, the scale tips heavily in the instant case in favor of allowing a jury rather than a judge to decide the case. Here, in a litigation that arguably might go either way on inferences and facts, the Constitution and basic principle point to certification of the class, allowing the matter to proceed before a jury in a way that is practicable. Denial of motions to dismiss and to exclude relevant and reliable proof, scientific and otherwise, will permit the jury to decide the dispute fairly.
Whether plaintiffs can overcome the defendants’ objections to their proof is subject to trial by jury. There is enough merit to both plaintiffs’ and defendants’ contentions to permit the litigation to go forward. If, as contended by plaintiffs, a huge fraud was perpetrated on tens of millions of people causing them billions of dollars in loss—measured largely by the difference between the value people were led to believe they were getting when they bought “light” cigarettes for safety, and what they received, a non-safe product—recovery dependent on proof should be allowed. The extensive evidence introduced on preliminary motions supports certification of the class and denial of defendants’ motions for summary judgment.
While evidence of fraud on the class appears to be quite strong—and defendants have been less than candid in insisting that there was no fraud—evidence of the percentage of the class which was defrauded and the amount of economic damages it suffered appears to be quite weak—and plaintiffs have been less than candid in failing to acknowledge that deficiency in their proof.
The court in United States v. Philip Morris, No. 99-2496, (D.D.C. Aug. 17, 2006), described in Part II.D, infra and excerpted in Appendix A, infra, has estimated that some fifty percent of those who smoked “light” cigarettes would not have done so had they known the truth. See Appendix A at p. 1203, infra. This estimate, strongly relied on by plaintiffs in argument, see Transcript of Sept. 13, 2006, at 52:5-13, 157:22-159:7, does not fill the gap in their proof since, even if the court was right in United States v. Philip Morris, a significant portion of that fifty percent might have smoked other types of cigarettes purchased at the same price “lights” were selling for. Contrasting the real diverse universe of “lights” smokers with the counterfactual universe of fully advised “lights” smokers to determine the impact of the fraud on the size of the market and its nature for damage purposes is a daunting enterprise even with the many proffered experts holding up their statistical lanterns to help in the search for the truth.
There is considerable merit to defendants’ experts’ position that many, if not all, the plaintiffs would have bought these light cigarettes even if they knew they provided no health advantage over regular cigarettes, and that they received full value for their money. There are also serious objections to the plaintiffs’ plan to divide any damages based on the relative number of cigarettes claimed to have been bought by claimants during the period found applicable by the jury, with cy pres division of the remainder. This form of fluid recovery tends—like almost all aggregate litigation—to overcompensate some and undercompensate other members of the class who may have relied differently on the “lights” designation and may have acted differently and for different reasons relevant to damages. Nevertheless, serious and unique factual-substantive issues now presented can be resolved by the jury with the aid of experts and statistical proof. If plaintiffs are right, they should not be fobbed off by real and imagined barriers of proof and management problems that can be circumvented in a fair adjudication.
Essentially, the issue before the court is not whether a fraud case be proven, but whether damages can be proven for the period since each smoker started smoking, failed to stop, switched to, or started with “lights” rather than the standard cigarettes in vogue up to the introduction of “lights” on a large scale. That introduction to “light” smoking and encouragement of continued use by defendants was allegedly in response to a widespread fright induced by the Surgeon General’s reports and other warnings of hundreds of thousands of deaths caused yearly by cancer attributable to smoking.
Plaintiffs have demonstrated that they may be able to produce sufficient proof to satisfy a jury as to damages based largely on statistics, the law of large numbers, and their experts’ analyses to show a reasonable estimate of total damages, without producing proof of reliance and fraud as to each of millions of smokers, with a damage figure assigned to each smoker and each year that he or she smoked.
If each smoker must be considered separately, as defendants suggest is the case, it would be impossible to proceed with a suit of this nature even if it were absolutely clear that each plaintiff had been damaged in the manner plaintiffs allege. The transactional costs and the relatively small recovery for the difference in value between what an individual smoker paid for and what he received would result in damages measured in tens or hundreds of dollars. The huge costs in bringing this action could not be supported by such individual adjudications.
The question then becomes whether the American legal system, faced with an alleged massive fraud, must throw up its hands and conclude that it has no effective remedy for what at this stage of the litigation must be assumed to be a huge continuing violation of consumers’ rights. In the American legal system, whose watchword has been, as already noted, “no right without a remedy,” the answer is that modern civil procedure, scientific analysis, and the law of large numbers used by statisticians provide a legal basis for a practical and effective remedy. The plaintiffs are entitled to the chance to prove their allegations.
Candor impels recognition of the fact that the Courts of Appeals have not been kind to massive claims against tobacco companies. Despite repeated findings of fact by judges and juries supporting claims of fraud, appellate courts have repeatedly dismissed such cases whether the claim was for consumer fraud, personal injury, or third party damages for costs of medical treatment. The defendants make a strong case that this suit, too, must founder on that appellate predilection for individual suits.
The case comes down to the role of the jury: should it be permitted to decide this vexing private litigation on the basis of somewhat dubious arguments and questionable proofs when the decision has so many important public social overtones, or should the judges themselves decide by holding that the matter is beyond the ken of a reasonable jury? Here, the fundamentals of the Constitution provide the answer. The first Congress and the States that then constituted the Union still speak clearly enough:
RIGHTS IN CIVIL CASES
In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.
See also Brink’s Inc. v. City of New York, 717 F.2d 700, 711 (2d Cir. 1983) (“There is no bright line that divides evidence worthy of consideration by a jury, although subject to heavy counter-attack, from evidence that is not. Especially because of the guaranty of the Seventh Amendment, a federal court must be exceedingly careful not to set the threshold to the jury room too high.”) (quoting Herman Schwabe, Inc. v. United Shoe Machinery Corp., 297 F.2d 906, 912 (2d Cir.), cert. denied, 369 U.S. 865, 82 S. Ct. 1031 (1962)).
If this case presents issues for the jury—as is now the decision of this court—then both the certification question and defense motions for summary judgment should be—and now are—decided in plaintiffs’ favor. That the court believes, on the evidence thus far produced, that the amount of possible damages has been grossly exaggerated by plaintiffs is not a basis for denying their right to a jury trial. Adjustments to damages can be made after all the evidence is in and the jury has made its decision, if that decision is unreasonable.
In Part II and Appendices A, B, C, and D, allegations and prior findings of fact against the tobacco companies on the fraud issue are sampled: First, is the general fraud in hiding the dangers of smoking, and second, is the particular fraud respecting lights. Appendix E includes portions of a Untied States Surgeon General’s report on the health risks posed by “light” cigarettes and the history of their development. Appendix F includes portions of a recent Commonwealth of Massachusetts report on continuing increases in nicotine inhaled from cigarettes, including those designated as “light.” In Part III, the law of RICO is analyzed and defendants’ central motions for dismissal considered.
In Part IV the court considers the role of collateral estoppel in this litigation. Whether an adjudication against either side would be binding on collateral estoppel grounds in suits based on substantive theories similar to the one implicated in the present litigation when recovery is sought for physical injury to smokers rather than economic loss from the purchase of overpriced cigarettes is important. Recoveries for medical damage to the person of smokers are enormously higher than those sought now. This legal problem and the related problem of splitting a cause of action, also discussed in Part IV, do not trump class action advantages since members of the class can opt out. It is a factor, however, that needs evaluation in the context of certification.
In Parts V and VI, the parties’ additional motions for summary judgment are discussed and resolved. Part VII addresses the motion for class certification. The question of class certification is critical for this court and the Court of Appeals. No individual can afford to prosecute the case alone. Denial of certification here or on appeal would constitute a “death knell.” Part VIII contains an analysis pursuant to Rule 702 of the Federal Rules of Evidence of the proposed testimony of experts for defendants and plaintiffs to determine whether a jury should be permitted to hear them; it is concluded that most experts of both defendants and plaintiffs should be heard. Part IX considers management issues, including the use of aggregate proof and fluid recovery.
Part X considers application of Rule 23(f) or section 1292(b) of title 18 to an interlocutory appeal. Based on experience with the trial and other disposition of a number of aggregate tobacco actions in this court, it is the opinion of the court that this class action can be tried to a final judgment that provides appropriate protection against relitigation of the issues adjudicated with fidelity to the applicable substantive law. Federal courts have the institutional capacity to conduct these proceedings. The representation of defendants and plaintiffs is adequate to conduct the litigation for the benefit of all persons whose interests are being adjudicated.
An immediate stay is rejected in Part XI. The Court of Appeals has the power to grant such a stay, but the case, in the trial court’s opinion, should promptly proceed in view of its long history.
Part XII orders that the class sought by plaintiffs be certified. The motions for summary judgment are denied.
Numerous interlocutory orders have been issued in this litigation. See Schwab v. Philip Morris, No. 04-CV-1945, 2006 WL 721368 (E.D.N.Y. Mar. 20, 2006) (overruling plaintiffs’ objections to magistrate judge’s orders); 2005 WL 3032556 (E.D.N.Y. Nov. 14, 2005) (discussing fluid recovery); 2005 WL 2467766 (E.D.N.Y. Oct. 6, 2005) (denying defendants’ motion for summary judgment on statute of limitations); 2005 WL 2401647 (E.D.N.Y. Sep. 29, 2005) (Daubert issues); 2005 WL 2401645 (E.D.N.Y. Sep. 27, 2005) (denying plaintiffs’ motions for partial summary judgment and application of collateral estoppel); 2005 WL 2401635 (E.D.N.Y. Sep. 27, 2005) (denying defendants’ motion to dismiss claims based on increased mutagenicity of “light” cigarettes); 2005 WL 2401638 (E.D.N.Y. Sep. 27, 2005) (denying plaintiffs’ motion to exclude testimony that “light” cigarettes are safer than regular cigarettes); 2005 WL 2401639 (E.D.N.Y. Sep. 27, 2005) (denying plaintiffs’ Rule 16(c) motion for simplification of the issues); 2005 WL 2401642 (E.D.N.Y. Sep. 27, 2005) (denying defendant BATCo’s motion for summary judgment on all claims); 2005 WL 2401643 (E.D.N.Y. Sep. 27, 2005) (denying defendants’ motion to exclude expert testimony on the impact of “light” cigarette marketing on smoking rates); 2005 WL 2401565 (E.D.N.Y. Sep. 26, 2005) (denying plaintiffs’ motion for partial summary judgment on the existence of defendants’ conspiracy); 2005 WL 2401353 (E.D.N.Y. Sep. 26, 2005) (granting defendant British American Tobacco p.l.c.’s motion to dismiss); 2005 WL 2401350 (E.D.N.Y. Sep. 26, 2005) (denying plaintiffs’ motion for partial summary judgment on defendants’ claim that they complied with the directives of the public health community in developing “light” cigarettes); 2005 WL 2401276 (E.D.N.Y. Sep. 26, 2005) (denying plaintiffs’ motion for partial summary judgment on defendants’ claim that smokers knew about compensation and so were not defrauded); 2005 WL 2401633 (E.D.N.Y. Sep. 26, 2005) (denying plaintiffs’ motion for a permanent injunction prohibiting defendants from marketing or selling any cigarette with a “light” or “lights” descriptor); 2005 WL 2401196 (E.D.N.Y. Sep. 26, 2005) (denying plaintiffs’ motion for partial summary judgment on the meaning of the “light” descriptor); 2005 WL 2303821 (E.D.N.Y. Sep. 22, 2005) (granting defendants’ motion for partial summary judgment on plaintiffs’ claims for equitable relief); 2005 WL 2303822 (E.D.N.Y. Sep. 22, 2005) (denying plaintiffs’ motion to strike defendants’ employee-expert reports but requiring those reports to meet the standards of Federal Rule of Civil Procedure 26(a)(2)(B)); 2005 WL 2303823 (E.D.N.Y. Sep. 22, 2005) (granting defendants’ motion to exclude the expert testimony of plaintiffs’ expert on business ethics); 2005 WL 2293381 (E.D.N.Y. Sep. 21, 2005) (denying defendants’ motion for an immediate stay of all proceedings); 2005 WL 2155141 (E.D.N.Y. Aug. 31, 2005) (excluding from consideration on interlocutory orders certain plaintiffs’ experts’ reports); 228 F.R.D. 165 (E.D.N.Y. 2005) (preliminary reflections and questions for the parties). This memorandum and order incorporates and modifies the above orders.