STATE OF MINNESOTA DISTRICT COURT

COUNTY OF RAMSEY SECOND JUDICIAL DISTRICT

CASE TYPE: OTHER CIVIL

________________________________________________________ Court File No. C1-94-8565

The State of Minnesota,

By Hubert H. Humphrey, III,

Its Attorney General,

and

Blue Cross and Blue Shield of Minnesota,

Plaintiffs,

vs. ORDER DENYING DEFENDANTS’

CONSOLIDATED MOTION FOR SUMMARY

Philip Morris Incorporated, JUDGMENT AGAINST PLAINTIFFS’

R.J. Reynolds Tobacco Company, NONSTATUTORY CLAIMS

Brown & Williamson Tobacco Corporation, (COUNTS 1, 8, AND 9)

B.A.T. Industries, p.l.c.,

British-American Tobacco Company Limited,

BAT (U.K. & Export) Limited,

Lorillard Tobacco Company,

The American Tobacco Company,

Liggett Group, Inc.,

The Council for Tobacco Research - U.S.A., Inc., and

The Tobacco Institute, Inc.

Defendants.

________________________________________________________

On November 18, 1997, Defendants brought their Consolidated Motion for Summary Judgment Against Plaintiffs’ Nonstatutory Claims (Counts 1, 8, and 9) before the Honorable Kenneth J. Fitzpatrick of the Ramsey County District Court. This motion was one of the many motions heard by the Court on November 18 - 20, 1997, in this action.

Based on all of the pleadings, files and records herein, having considered the pleadings and evidence submitted by the parties and the arguments and representations of counsel, now, therefore

IT IS HEREBY ORDERED that Defendants’ Consolidated Motion for Summary Judgment Against Plaintiffs’ Nonstatutory Claims (Counts 1, 8, and 9) is DENIED. The attached memorandum is incorporated herein and made a part hereof.

Dated: January 26, 1998 /s/ Kenneth J. Fitzpatrick

Honorable Kenneth J. Fitzpatrick

Judge of District Court

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M E M O R A N D U M

Defendants argue that the State of Minnesota ("Minnesota"), like Blue Cross and Blue Shield of Minnesota ("BCBSM"), is precluded from maintaining a direct tort or equitable claim to recover medical expenditures Defendants describe as "derivative of injuries to third parties." They also argue that Plaintiffs are precluded from bringing a claim in restitution to recover money spent to provide medical treatment to persons whose illnesses were allegedly caused by cigarette smoking.

In Count One, Minnesota asserts a direct tort claim based on Defendants’ alleged undertaking and breach of a special duty. See Amended Complaint ¶¶ 84-88. In Counts Eight and Nine, Plaintiffs seek the equitable remedy of restitution, first, on the ground that Plaintiffs performed Defendants’ duty to the public by funding health care costs allegedly caused by smoking and, second, on the ground that Defendants were unjustly enriched by Plaintiffs’ payment of these health care costs, respectively. Amended Complaint ¶¶ 121-129.

The Court’s purpose in this Order is not to determine the merits of the action, but to determine whether the claims made in counts 1, 8, and 9 are allowed under the laws of this jurisdiction.

I. REMOTENESS

Defendants begin by arguing that Minnesota may not pursue its tort claim and equitable claims for damages because the "causal connection" between the injury claimed by Minnesota and the alleged conduct of the Defendants is too remote. Causation, however, is an issue of fact which is best determined by the jury after presentation of the evidence: "The question of proximate cause is primarily one of fact. It can best be considered and determined when the actual facts that occurred in a particular transaction have been developed upon trial." Morey v. Shenango Furnace Co., 127 N.W. 1134, 1135 (Minn. 1910). Indeed, whether a duty is owed to Minnesota should not be decided until all disputed facts are determined by the jury: " . . . jury’s role is to resolve disputed facts, upon which the court then determines whether a duty of care exists." Gabrielson v. Warnemunde, 443 N.W.2d 540, 543 n.1 (Minn. 1989). A motion for summary judgment must fail if there remains any genuine issue as to any material fact. Minn. R. Civ. P. 56.03; see also DLH, Inc. v. Russ, 566 N.W.2d 60, 70 (Minn. 1997), rehearing denied, (August 5, 1997); Hunt v. IBM Mid American Employees Federal Credit Union, 384 N.W.2d 853, 855 (Minn. 1986). Accordingly, summary judgment at this time would be inappropriate.

The Defendants argue that this Court must conclude that Minnesota is too remote as a matter of law, because the Supreme Court of Minnesota dismissed BCBSM’s tort claim for breach of the special duty. State of Minnesota v. Philip Morris, et al., 551 N.W.2d 490, 495 (Minn. 1996) ("Minnesota"). BCBSM and Minnesota, however, are not in identical positions. As the Supreme Court noted, the Plaintiffs’ claims were based on the Defendants’ assertions that they "would cooperate with the public health authorities." Id. 15 492. BCBSM is an insurer, albeit a statutorily created one, not a public health authority; and the Supreme Court focused on its contractual relationship in the health care arena. Id. at 494-95. It noted that BCBSM was "two steps" removed from the Defendants, in that the tobacco companies are linked to the individual smokers, who are linked to the smokers’ employers, who are linked to BCBSM. Id. at 494. Minnesota is unquestionably a public health authority. It is not "two steps removed" from the Defendants; at worst one "step" can be found, from the tobacco industry to the individual smokers to Minnesota.

Defendants argue that applying Northern States Contracting v. Oaks, 253 N.W. 371 (Minn. 1934), as the Supreme Court did in determining BCBSM’s standing, would lead to the same "remoteness" finding against Minnesota. In Northern States, however, plaintiffs’ workers compensation insurance rating was increased as a result of the killing of its employee through defendant’s negligence, and plaintiffs’ injury was deemed too remote. Minnesota faces less remote injuries: it pays health care vendors directly under Medical Assistance and General Assistance Medical Care. Minn. Stat. §256B.03. The Court agrees that Minnesota’s position is more similar to that of the City of St. Paul. See City of St. Paul v. Sorenson, 167 N.W.2d 17 (Minn. 1969). There the Supreme Court of Minnesota considered and distinguished Northern States Contracting, finding the city’s injury "results directly and proximately from the wrong of another."  Id. at 19. The City could recover the compensation it paid directly to an employee injured by the negligent third party. This Court will not abandon Minnesota precedent to follow other states’ statutory and common law. In the instant action, Minnesota may seek recovery against the Defendants.

Nor is subrogation Plaintiffs’ sole remedy. The Defendants have unsuccessfully argued this point previously, both before this Court in its Rule 12 motions and before the Supreme Court of Minnesota. The Supreme Court of Minnesota rejected this argument, finding that the relief sought was independent from that available to individual smokers, "such as pain and suffering," Minnesota, 551 N.W.2d 51 493; and that the statutes themselves allowed BCBSM to "join the State of Minnesota in pursuit of relief," Id. at 495, under "its statutory and common law antitrust and consumer claims as well as its equitable claims . . . ." Id. at 492. No more need be said on this issue.

II. RESTITUTION

Once again, this is an issue that has been argued before this Court by Defendants in their Rule 12 motion and rejected by this Court and by the Supreme Court of Minnesota, which held that BCBSM had standing to pursue its equitable claims and "to seek the equitable relief pled in its complaint in the form of claims of performance of another’s duty to the public and unjust enrichment." Minnesota, 551 N.W.2d at 492, 497.

Defendants claim that they have not been enriched because they did not "knowingly receive" anything of benefit when Plaintiffs paid health care costs. The courts in the asbestos cases, however, held that unjust enrichment occurs when the plaintiff "abate[s] a hazard created by [a] defendant." Independent School Dist. No. 197 v. W.R. Grace & Co., 752 F.Supp. 286, 304 (D.Minn. 1990). Here the record contains evidence that Defendants have created and perpetuated a health hazard while Plaintiffs have paid health care costs associated with that hazard.

Equity is based on fairness, on the canon that "there was never a wrong for which there was no remedy." Brown v. Maplewood Cemetery Ass’n, 89 N.W. 872, 879 (Minn. 1902). Equity supplements where statutory and common law remedies "are inadequate to do complete justice." Swogger v. Taylor, 68 N.W.2d 376, 382 (Minn. 1955). This case is certainly one for which existing statutory and common law remedies may be insufficient.

Section 115 of the Restatement of Restitution provides a remedy for one who performs a duty to the public owed by or remedies a hazard created by another. The record reflects evidence that Defendants created a health risk, giving risk to an equitable duty to the public, to which Plaintiffs responded. Moreover, Defendants actually assumed a duty to the public health. See "Frank Statement." Defendants cannot now shirk their duty just because Plaintiffs stepped in to provide health care costs to the public. Accordingly, Plaintiffs are entitled to seek restitution.

CONCLUSION:

Defendants Consolidated Motion for Summary Judgment against Plaintiffs’ Nonstatutory Claims (Counts 1, 8, and 9) is denied.

K.J.F.

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