In general, therefore, the courts have entertained claims only when they are asserted by a plaintiff immediately adjacent to the defendant in the chain of causation. "The general tendency of the law, in regard to damages at least, is not to go beyond the first step." Associated General Contractors, Inc. v. California State Council of Carpenters, 459 U.S. 519, 534 (1983).

Subrogation, the means by which a third-party payor would generally recover against a tortfeasor who has injured its insured (or the party for whom payments have been made) is not a theory that plaintiffs in these social costs suits seek to pursue, because it requires them to present individual proof and to stand in the shoes of the individual consumer (and be subject to any and all affirmative defenses associated with that individual consumer).

The Weinstein Exception: One federal judge has refused to apply the remoteness doctrine - Judge Jack B. Weinstein, in Blue Cross & Blue Shield of New Jersey, Inc. v. Philip Morris, Inc., 36 F. Supp. 2d 560 (E.D.N.Y. 1999) (stating that Blue Cross/Blue Shield entities are "unique" and therefore exempt form remoteness principles applicable to other plaintiffs); and National Asbestos Workers Medical Fund v. Philip Morris, Inc., 23 F. Supp. 2d 321 (E.D.N.Y. 1998) (speculating that future development of "federal common law" under ERISA "may" lead to different remoteness principles for ERISA union funds). National Asbestos went to trial and produced a hung jury. Its current status is uncertain. Blue Cross went to trial and produced a very modest plaintiff verdict of $18 million. That verdict is on appeal, and Judge Weinstein's refusal to dismiss these cases appears likely to be reversed, in light of unanimous appellate precedent, including a decision on point in the Second Circuit.

The Federal Government Exception. While the federal government's claims under (1) the Medical Care Recovery Act, 42 U.S.C. § 2561 et. seq. ("MCRA"), and (2) Medicare Secondary Payor Provisions, ("MSP"), Title XVIII of the Social Security Act, 42 U.S.C. § 1395(y)(h)(2)(B)(ii) and (iii) have been dismissed, the federal government's RICO injunctive claim, which include claims for restitution, is proceeding toward trial.

Other Potential Legal Infirmities of Third Party Suits Include:

Causation and Damages. Another key conceptual hurdle to third party social costs suits is that they depend on aggregate proof of causation and damages. Assuming they can overcome remoteness, these suits must present credible and admissible evidence of causation of damages while at the same time attempting to avoid all the burdens associated with proof of individual injury. In the tobacco cases, plaintiffs relied upon statistical evidence as a means of avoiding proof of individual events. The courts have differed on whether such evidence is generally admissible (as opposed simply to being subject to the usual rigors of cross-examination).

Aggregation is improper when it prevents defendants from raising individualized defenses such as assumption of the risk, non-reliance, statutes of limitations, etc. See Castano v. American Tobacco Co., 84 F.3d 734 (5th Cir. 1996) (instructing trial court to dismiss smokers' class action). See generally Cimino v. Raymark Industries, Inc., 151 F.3d 297 (5th Cir. 1998) (overturning use of statistical proof in mass asbestos litigation); Georgine v. Amchem Products, Inc., 83 F.3d 610 (3d Cir. 1996) (reversing class certification in asbestos litigation where claimants had different exposure and medical histories); aff'd sub nom. Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997); In re American Medical Systems, Inc., 75 F.3d 1069, 1081 (6th Cir. 1996) (vacating class certification where "affirmative defenses (such as . . . assumption of the risk, contributory, negligence, and the statute of limitations) may depend on facts peculiar to each plaintiff's case"); In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293 (7th Cir. 1995) (decertifying mass-tort class action and expressing doubt as to the permissibility of such actions generally); In re Repetitive Stress Injury Litigation, 11 F.3d 368 (2d Cir. 1993) (vacating consolidation of suits); Malcolm v. National Gypsum Co., 995 F.2d 346 (2d Cir. 1993) (rejecting consolidation of asbestos cases); In re Fibreboard Corp., 893 F.2d 706, 711-12 (5th Cir. 1990) (rejecting aggregation because "[t]his type of procedure does not allow proof that a particular defendant's asbestos 'really' caused a particular plaintiff's disease").

While the Third Circuit in Steamfitters did not reject out of hand such aggregate proof in third-party social costs suits, it did conclude that such evidence did not overcome the speculative and uncertain nature of such proof to overcome the policy reasons behind foreclosing suits by third-party payors.

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 statistical modeling: ;it would be impossible for them to do so otherwise. [Citation omitted.] Yet we do not believe that aggregation and statistical modeling are sufficient to get the Funds over the hurdle of the [Associated General] factor focusing on whether the "damages claim is . . . highly speculative."

And in two recent cases, courts granted or affirmed summary judgment where the aggregate proof was deemed insufficient to raise a genuine issue of material fact regarding causation and damages. See Group Health of Minnesota v. Philip Morris, Group Health Plan, Inc., 188 F.Supp.2d 1122 (2002) (on appeal) and The Republic of The Marshall Islands v. American Tobacco Company, No. 1997-261 (R.M.I. Supreme Court) (affirming summary judgment on $4 billion damages claim).

Judge Weinstein's opinions in Blue Cross and Simon II (discussed below), on the other hand, offer extensive justification for use of statistical evidence to provide causation and damages in aggregated actions. While clearly the minority view, Judge Weinstein is an articulate defender of his views and his decisions can not be dismissed out of hand.

Public Services Doctrine. Under the "public services" doctrine, a government that provides public aid to injured individuals may not seek to recover its expenses from the tortfeasors who inflicted the injuries (or from the aid recipients themselves), unless the legislature specifically authorizes such claims. See, e.g., District of Columbia v. Air Florida, Inc., 750 F.2d 1077 (D.C. Cir. 1984) (District Of Columbia could not recover costs of emergency response to plane crash under any common-law theory); City of Flagstaff v. Atchison, T & S. E. Ry., 719 F.2d 322 (9th Cir. 1983) (city could not recover costs of emergency medical services under any common-law tort theory); Dep't of Human Services v. Brooks, 412 N.W.2d 613 (Iowa 1987) (no common-law right to recover expenses of public assistance from recipient or tortfeasor); see also United States v. Standard Oil Co., 332 U.S. 301 (1947) (federal government could not sue to recover its medical expenses for tortious injuries to U.S. soldier).

Business or Property. RICO, antitrust and Consumer Protection Act claims are barred because medical expenses occasioned by personal injuries are not injury to "business or property." 15 U.S.C. § 15; 18 U.S.C. § 1964(c); Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979). The medical expenses sought are an integral component of individual personal injury claims (e.g., Metro-North v. Buckley, 521 U.S. 424, 438-39 (1997); 2 Dobbs, Law of Remedies §§ 8.1(1), (3) (2d ed. 1999)), and accordingly are not "business or property" injury. See Laborers Local, 191 F.3d at 241. To permit third party payors to characterize medical expenses for personal injuries allegedly inflicted upon others as "business or property" injury to themselves would sanction a form of legal alchemy which would permit the existence of insurance to transform state-law claims for personal injuries into federal antitrust and RICO treble damages claims.

Antitrust Injury. Third party payors are not participants in a market that defendants are alleged to have restrained and thus did not suffer antitrust injury. Oregon Laborers, 185 F.3d at 966-67; see also Steamfitters, 171 F.3d at 929 ("we doubt that [the funds allege a] connection link[ing] some antitrust wrongdoing with an antitrust injury").

B. Class Litigation

Class certification in individual personal injury smoker cases has generally been denied. The following are the key cases in which such class certification has been denied.

Castano v. American Tobacco Co., 84 F.3d 734, 742-43, n.15 (5th Cir. 1996) (factual differences regarding class members' exposure to nicotine through different products, for different amounts of time, and over different time periods, each class member's knowledge about the effects of smoking, and the reasons why each plaintiff began smoking impacted the application of legal rules such as causation, reliance, comparative fault, and other affirmative defenses, and choice of law considerations precluded a finding of predominance).

Barnes v. American Tobacco Co., 161 F.3d 127, 143 (3d Cir. 1998), cert. denied, 119 S. Ct. 1760 (1999) (Courts refuse to allow smokers to aggregate their claims in the form of class actions because each smoker's knowledge, behavior, and circumstances are individualized.)

Arch v. American Tobacco Co., 175 F.R.D. 469, 488 (E.D. Pa. 1997) ("Unless it is proven that cigarettes always or never cause addiction, the resolution of the general causation question accomplishes nothing for any individual plaintiff.").

Smith v. Brown & Williamson Tobacco Corp., 174 F.R.D. 90, 94 (W.D. Mo. 1997) (supposedly "common" issues of whether smoking is "addictive" or causes disease are "only common in a general sense," and their resolution "will have little to no legal or practical significance").

The following are key cases granting class certification:

R.J. Reynolds Tobacco Co. v. Engle, 672 So.2d 39 (Fla. App. 1996), rev. denied, 682 So.2d 1100 (Fla. 1996) (court certified a state-wide class of tobacco smokers seeking medical monitoring and damages). Phase I reached a plaintiffs' verdict; Phases II and III, relating to individual damages and punitive damages produced a $145 billion verdict against the tobacco industry. The case was argued on appeal recently, raising the following issues:

That the trial plan violated Florida law and the due process and jury trial rights of the defendants through trifurcation of the trial. Phase I consisted of "common issues" relating exclusively to defendants' conduct and the health effects of smoking. In Phase II-A the jury found that defendants had caused plaintiffs' injuries and that the plaintiffs, though bearing different degrees of comparative fault, were owed $12.7 million in compensatory damages. In Phase II-B, the same jury that heard the previous two phases awarded $145 billion in punitive damages to the entire class. The jury made no finding regarding the size of the class, number of class members who might establish liability and compensatory damages, or the total amount of compensatory damages they might ultimately recover. These issues are to be considered by separate juries in Phase III of the trial plan. Defendant-appellants contend this violated Florida law and state and federal due process and made it impossible to determine if the punitive damages bear a reasonable relationship to the compensatory damages. They also claim the court erred because Phase III juries will have no way of applying Phase I findings since they will not know what conduct was deemed objectionable by the Phase I juries. It is also alleged that it is improper under Florida law to enter a final judgment before all judicial labor is completed.

Broin v. Philip Morris, Inc., 641 So.2d 888 (Fla. App. 1994), rev. denied, 654 So.2d 919 (Fla. 1995) (certification of nationwide class of 60,000 flight attendants exposed to second-hand smoke).

Medical Monitoring Class in West Virginia

Miles Light Cigarettes case in Illinois

Another Weinstein Exception: In re Simon II Litigation, E.D.N.Y., No. 00-CV-5332, purports to effect a consolidation of all tobacco cases then pending before Judge Weinstein and sought certification of a nationwide, mandatory class (with certain limited exclusions, including members of the Engle class) for purposes of pursuing punitive damages and an opt-out class to pursue certain purported common issues. On September 9, 2002, Judge Jack B. Weinstein issued an order pursuant to Rule 23(b)(1)(B) certifying a nationwide mandatory class for purposes of pursuing claims for punitive damages. In re Simon II Litigation, E.D.N.Y., No. 00-CV-5332, memorandum and order 10/15/02.

The court distinguished Simon II from the Supreme Court's decision in Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999). The court found that Ortiz rejected a class settlement in the context of a non-opt out limited fund class for two principle reasons. First, the court noted the Supreme Court's concern with the existence of "conflicts between those suffering current disabilities and [those who might suffer] possible future disabilities." Second, the court viewed the settlement at issue in Ortiz as involving an "arbitrary fund established only for settlement." The court emphasized that the Ortiz majority explicitly left open application for of a limited fund under Rule 23(b)(1)(B) class action in other kinds of cases.

In a 200-page memorandum elaborating on this order, Judge Weinstein endorsed the use of expert evidence employing statistical approaches based on the law of large numbers, epidemiological and demographic data. In re Simon II Litigation, E.D.N.Y., No. 00-CV-5332, memorandum and order 10/15/02. He concluded such methods "may provide a more accurate and comprehensible form of evidence."

"The Federal Rules of Civil Procedure and the Federal Rules of Evidence grant district judges broad authority to shape the nature and scope of admissible evidence for trial. Scientific evidence-such as the sampling and statistical extrapolations-is well suited to mass tort actions. It is particularly appropriate in massive consumer fraud cases-so long as it passes the gate keeping criteria of the Federal Rules of Evidence and Daubert v. Merrell Dow Pharmeceuticals, Inc., 509 U.S. 579 (1993)."

"Sampling and survey techniques are a well-accepted alternative for the trial judge facing crippling discovery and evidentiary costs." Weinstein also noted that statistical and econometric techniques had been admitted under Daubert to establish causation in a wide variety of actions.

Their use is appropriate for massive exposure cases, where "[t]he consequence of requiring individual proof from each smoker would be to allow defendants who have injured millions of people and caused billions of dollars in damages, to escape almost all liability."

Judge Weinstein ruled that the use of such methods will not violate defendants' constitutional rights. Rather, the use of sampling and statistical extrapolations is a "necessary, pragmatic, and evidentiary approach that reflects full due process."

The court also stated: "[since] the instant case may involve serious physical injury, long continued deliberate frauds and large exposure to the public through subvention of medical costs, a ratio [of punitive to compensatory damages] in excess of 6 to 1 or 10 to 1 may be justifiable."

C. Social Cost Suits Regarding Guns

Approximately four years ago, cities throughout the U.S. filed broad cost-recovery suits against gun manufacturers and distributors, relying on a number of theories. A number of decisions have rejected suits against gun manufacturers: See Camden County Bd. Of Chosen Freeholders v. Beretta U.S.A. Corp., 273 F.3d 536 (3rd Cir. 2001) (upholding decision of federal district court in New Jersey); City of Philadelphia v. Beretta U.S.A. Corp., 126 F. Supp.2d 882 (E.D. Pa. 2000), aff'd 277 F.3d 415 (3rd Cir. 2002); Ganim v. Smith & Wesson Corp., 780 A.2d 98 (Conn. 2001); Hamilton v. Beretta U.S.A. Corp., 750 N.E.2d 1055 (2001). Four years later, it would appear that the most attractive theory for cities is a "public nuisance" theory. Here is a brief discussion of a recent Illinois appellate decision reversing dismissal of the City of Chicago's and Cook County's suit against gun manufacturers.

City of Chicago v. Beretta U.S.A. Corp., 2002 WL 31455180, --- N.E.2d --- (Ill. Ct. App. 2002). The suit is premised on a public nuisance theory. It seeks compensation for the costs that the public nuisance imposes on the city and county, including emergency medical response, police programs, prosecution of gun control ordinance violations and criminal misuse of a firearm, and treatment of victims. The suit also seeks punitive damages.

In its dismissal, the trial court noted Illinois' aversion to causes of action based on statistical evidence, and declared that under Illinois law, a suit may not uses statistics as "essentially almost the sole basis for deciding whether individual parties are responsible for a public nuisance". The court also faulted the complaint for making no showing or assertion that applicable enforcement of criminal sanctions had been attempted and found to be inadequate.

In overturning the dismissal, the appellate court noted that Illinois courts have adopted the Restatement's definition of public nuisance. See Young v. Bryco Arms, 765 N.E.2d 1 (Ill. Ct. App. 2001); Restatement (Second) of Torts § 821B(1) (1979). The pleading requirements are not rigorous, and require showing a right common to the general public, a defendant's transgression of those rights, and resulting damages. The court identified a common right to be free from conduct that creates an unreasonable jeopardy to the public's health, welfare and safety, and to be free from conduct that creates a disturbance and reasonable apprehension of danger to person and property. Pleadings allege that defendants intentionally and recklessly design, market, distribute and sell firearms to persons whom the defendants should know will bring those firearms into Chicago, causing crime, death and fear. The court also held that intentional misconduct may constitute unreasonable interference with the public right. This standard was met by plaintiffs' allegation that: the gun makers and distributors flooded the market to people they should have known would illegally transfer or resell those arms; dealers sell guns designed and marketed to be concealed, even though it is illegal in Illinois; and, all defendants intentionally create and maintain an underground market for handguns. These factual allegations were found sufficient to constitute the requisite intent.

The court distinguished case law which absolved gun manufacturers and distributors of liability for criminal misuse of their products by third parties, since those cases did not involve public nuisance claims, and alleged no intentional and unreasonable conduct. The court also held that, even if plaintiffs' allegation of unlawful fostering of an underground market fails, lawful actions could constitute a public nuisance. Moreover, the court found no comprehensive statutory framework in place to preclude civil liability. See also City of Cincinnati v. Baretta U.S.A. Corp., 768 N.E.2d 1136 (Ohio 2002) ("the law does not regulate the distribution practices alleged in the complaint"). See also City of Cincinnati v. Beretta U.S.A. Corp., 768 N.E.2d 1136 (Ohio 2002). There, the trial court dismissed a nuisance claim, was upheld by the appellate court, but was reversed by the Ohio Supreme Court. The Ohio Supreme Court held that there need be no injury to real property to uphold a public nuisance claim, and that it was not fatal to the plaintiffs' claims that the defendants did not control the firearms at the time of the injury (instead, the allegation that defendants created and supplied the secondary market was sufficient to state a claim for creation of the alleged public nuisances). Id. at 1143.

NAACP v. Acusport Corp. If Judge Weinstein's views were to hold sway, nuisance theories may also be pursued by private organizations. In a suit brought be the NAACP on behalf of itself and its members against manufacturers and distributors of handguns, NAACP v. Acusport Corp., --- F.R.D. ---, 2002 WL 31234641 (E.D.N.Y. 2002), Judge Weinstein held that plaintiff stated a nuisance claim under New York law, plaintiff had standing to sue in its own right as an organization harmed by gun violence and likely to benefit from injunctive relief to reduce the proliferation of handguns and their availability to criminals, and plaintiff had representational standing to sue on behalf of its members. See also NAACP v. Acusport Corp., --- F. Supp.2d ---, 2002 WL 31235409 (E.D.N.Y. 2002) (holding that utilization of an advisory jury was proper on the question of nuisance liability and on the nature of appropriate injunctive relief).

Suits by Individuals Against Gun Manufacturers.

Ileto. A federal court in California held that California law, as predicted, bars the suit of two shooting victims and their families alleging survival and wrongful death claims and public nuisance and negligence claims. Ileto v. Glock, 194 F. Supp.2d 1040 (C.D. Cal. 2002). The court rejected plaintiffs' claims for negligent manufacture and negligent entrustment. It also held that the injuries were not foreseeable and the connection between the manufacturer's conduct and the injury of the victims was too attenuated to support victims claims. As for the nuisance theory, the court reasoned that since under California law the manufacture of defective products does not state a cause of action for public nuisance, a fortiori the manufacture of properly-functioning products does not state such a claim. The court declined to agree that the suit was barred (preempted) by extensive federal and state regulations, stating that an activity must be expressly authorized in order to confer immunity on that activity in a nuisance action.

The California Supreme Court in Merrill v. Navegar, Inc., 28 P.3d 116 (2001), held that the appellate court erred in reversing the trial court's dismissal of the negligence claim against gun manufacturers. The court held that the claim was a products liability action based on negligence, which was thus barred by the statute that exempts manufacturers of legal, non-defective firearms from liability for their criminal use. The court held that the Assault Weapons Control Act did not implicitly repeal said statute; that the negligent distribution claim was simply a reformulated claim that the weapon, as designed, failed the risk/benefit test; and that the victims failed to show that the manufacturer's allegedly inflammatory advertising caused the victims' injuries.

The Court of Appeals of New York in Hamilton v. Beretta U.S.A. Corp., 750 N.E.2d 1055 (N.Y. 2001) held, on a question certified by the Second Circuit, 22 F.3d 36, that handgun manufacturers do not owe a duty of reasonable care in the marketing and distribution of their handguns to persons injured or killed through the use of illegally obtained handguns, nor does the theories of negligent entrustment or market share liability apply. Distinguished by Bloxham v. Glock Inc., --- Ariz. ----, 53 P.3d 196 (Ariz. App. Div. 2, Aug 29, 2002).

D. Social Cost Suits Against Lead Paint Manufacturers

Rhode Island

The Rhode Island Attorney General filed a lawsuit against the leading lead paint manufacturers on October 26, 1999, alleging that the defendant manufacturers knew of the health risks of lead paint long before the public did and concealed those risks. For example, the complaint recites:

In 1955, Manfred Bowditch, the Lead Industry Association's Director of Health and Safety, published the following to all LIA members: Childhood lead poisoning is common enough to constitute perhaps my major "headache," this being in part due to the very poor prognosis in many such cases, and also to the fact that the only real remedy lies in educating a relatively ineducable category of parents. It is mainly a slum problem with us, estimated by Keho to run into four figures annually, and as we have no monopoly on either substandard housing or substandard mentalities in the U.S.A. . . .

All claims except the public nuisance claim went to trial. See State v. Lead Ind. Assn., Inc., 2001 WL 345830 (R.I. Super. Ct. 2001) (unpublished) (denying motion to dismiss on public policy grounds, the doctrine of parens patriae, and sufficiency of pleading and upholding public nuisance claim) The court also bifurcated the public nuisance claim and asked the jury to decide solely if a public nuisance exists by virtue of lead paint (presumably the jury was required to determine the generality and uniformity of the risk). The jury hung on this issue (4-2 for the defendant) and a mistrial was declared on October 29, 2002. Some jurors were apparently swayed by the state's concession that it could not prove that any children were poisoned in hospitals, schools or other public buildings - locations that were, to the jury's understanding, part of the state's argument.

New Jersey

A case was brought on identical legal theories by numerous local governmental entities throughout New Jersey, claiming concern for the protection of the public from the hazards attributed to defendant manufacturers' and promoters' conduct. In re Lead Paint, No. MID-L-2754 (Superior Court of New Jersey, Law Division). Actual knowledge of the harms of lead paint is alleged, as well as public misrepresentation of its safety, suppression of studies, opposition to government initiatives to solve lead problems, and favoring increase in profits over citizens' health.

New Jersey plaintiffs seek costs of detecting lead paint and educating the public about preventing lead poisoning, and damages or an order of abatement sufficient to remove lead pigments from homes and buildings, both public and private.

The court dismissed the action, holding that following "Chicago's public nuisance model" is in "direct conflict with statutory, constitutional [Commerce Clause] and case law provisions. However, to narrowly examine a parties' [sic] conduct without the concomitant considerations of control, causation and duty is insufficient for maintaining the action. To merely cloak the action in parens patriae without having pled a substantial cause of action is impermissible." In re Lead Paint, 2002 WL 31474528 *23 (N.J. Super. L. 2002) (unpublished).