Robert A. Falise, Trustee
v American Tobacco, R.J. Reynolds, British American Tobacco, Brown & Williamson, Philip Morris, Liggett, and Lorillard

Photo of Judge Jack Weinstein
United States District Court,
Eastern District of New York
Honorable Judge Jack B. Weinstein presiding

Filed 1997

Dismissed with prejudice

The case was brought by a Trustee of Manville Personal Injury Settlement Trust, seeking to recover smoking-related healthcare costs borne by the Trust as a result of asbestos litigation.

Timeline

  • 1997 – December 31: Complaint filed.
  • 1999 – November 2: Judge rules Federal court lacks jurisdiction
  • 1999 – November 11: New complaint adds RICO charges
  • 2000 – April 3: Judge Weinstein issues order
  • 2000 – April 18: Court consolidates case with several others for purposes of settlement only
  • 2000 – May 1: Judge issues new order
  • 2000 – September 27: Court dismisses all but RICO and state-law fraud issues
  • 2000 – December 4: Case goes to trial
  • 2001 – January 25: Mistrial, Hung Jury
  • 2001 – June 29: The parties stipulated to a voluntary dismissal with prejudice

Narrative

“This contribution suit was filed by Robert A. Falise, Louis Klein Jr., Frank Macchiarola and Christian E. Markey, Jr., as Trustees of the Manville Personal Injury Settlement Trust against American Tobacco Co., R.J. Reynolds, British American Tobacco, Brown & Williamson, Philip Morris, Liggett, and Lorillard.

“The plaintiffs represent the Manville Personal Injury Settlement Trust, established in 1988 under a bankruptcy plan for Johns-Manville Corp., an asbestos product manufacturer. Johns-Manville filed bankruptcy rather than face the thousands of pending personal injury suits from asbestos workers. Despite its knowledge that smoking increased the risk of asbestos-related illness, Johns-Manville never impleaded the tobacco industry into its bankruptcy.

“The plaintiffs alleged that the defendants concealed dangerous synergy of smoking and asbestos exposure. Had the plaintiffs known of the dangers, they would have impleaded the tobacco industry long ago and make them responsible for a portion of the personal injury claims the Trust was responsible for. The plaintiffs sought to recover $1.4 billion of smoking-related healthcare costs.

“The case was heard in the United States District Court, Eastern District of New York before the Honorable Jack B. Weinstein. On November 2, 1999, the judge ruled that the federal court did not have jurisdiction, and dismissed the case. The plaintiffs brought the case in federal court under federal subject matter jurisdiction, based on the court’s role in the bankruptcy proceeding, but all their claims were state claims. The court ruled that bankruptcy courts only have limited competence, and that competence must be negated by the time the bankruptcy proceedings have terminated. The competence does not extend to a suit against someone not a party to the bankruptcy.

”The original debtor, Johns-Manville, was no longer a party, the case did not prevent interference with the bankruptcy plan, there was no bankruptcy estate, and the plaintiffs are not Johns-Manville’s creditors. Finally, the language of the plan did not provide for that kind of continuing jurisdiction.

“A new complaint was filed [on November 11, 1999] adding four Racketeer Influenced and Corrupt Organization Act claims as bases for federal jurisdiction. In addition, the plaintiffs claimed State Fraud Action violations, unjust enrichment, restitution, contribution, indemnification, and unfair competition.

“The judge granted in part and rejected in part the defendants motion for summary judgement. The court found that the plaintiffs’ RICO actions accrued under the statute of limitation when the claimant asserting the injury filed his claim with the trust. For this reason, the Trust was limited to collecting on Direct Payment Action claims filed with the trust after November 11, 1995 and for future claims to be filed before January 1, 2050. The court granted summary judgment against the plaintiffs’ other RICO claims. It denied summary judgment on the State Fraud Action for claims filed after December 31, 1991.”

“On April 18, the court consolidated the case with several others for the purposes of settlement only.”

“The defendants moved for summary judgment. The court granted the motion in part and denied in part. The court ruled that the plaintiffs had not stated a claim regarding their RICO Settlement or Investment claims. However, they did state a claim regarding direct payment and under the State Fraud Action, showing reasonable reliance on the defendants’ misinformation campaign by the Trusts’ smoking claimants. The defendants’ misrepresentations could be said to be a proximate cause of the plaintiffs’ injuries because unlike in Laborers Local 17,

  1. there was no intervening action on the part of the plaintiffs,
  2. the plaintiffs and the defendants were joint tortfeasers in the claimants’ cases, prohibiting multiple recoveries, and
  3. damages recovered by the plaintiffs would be distributed to those most directly injured by the defendants’ actions. Conpiracy claims based on the unsubstantiated claims were dismissed as well. The Cigarette Labeling and Advertising Act did not preempt the RICO and fraud claims because they were based on intentional misrepresentations.”

“The court dismissed the plaintiffs’ state-law claims for restitution, contribution, indemnification, unfair competition and unjust enrichment. The court found these claims were not related to the bankruptcy jurisdiction of the court, leaving only the RICO and state-law fraud issues for trial.”

The case went to trial on December 4 and ended in a hung jury on January 25, 2001. On June 29, the parties stipulated to a voluntary dismissal with prejudice.

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