# Petition for Writ of Certiorari — Blumenthal v. Philip Morris, Inc.

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386013_2280%3A1

## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1998
- **Citation:** 524 U.S. 937

## Text

ae Supreme Court, u.3.
y FILED

) 2

IN THE

Supreme Court of the United States

OCTOBER TERM, 1997

RICHARD BLUMENTHAL, ATTORNEY GENERAL
OF CONNECTICUT,

Petitioner,

vs.
PHILIP MORRIS, INC., ET AL.,

Respondents.

PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF
APPEALS FOR THE SECOND CIRCUIT

*RICHARD BLUMENTHAL

Attorney General of Connecticut
GREGORY T. D’AURIA

*ELIOT D. PRESCOTT

Assistant Attorney General

Office of the Attorney General

55 Elm Street

P.O. Box 120

Hartford, Connecticut 06141-0120
(860) 808-5020

*Counsel of Record

No.

: IN THE
SUPREME COURT OF THE UNITED STATES
October Term, 1997

RICHARD BLUMENTHAL,
ATTORNEY GENERAL OF CONNECTICUT

Petitioner
V.

PHILIP MORRIS, INC., ET AL

Respondents

PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
SECOND CIRCUIT

*RICHARD BLUMENTHAL
ATTORNEY GENERAL
OF CONNECTICUT

Gregory T. D'Auria

*Eliot D. Prescott

Assistant Attorney General
Office of the Attorney General
55 Elm Street

P.O. Box 120

Hartford, CT 06141-0120

(860) 808-5020
*Counsel of Record

UESTIONS PRESENTED

1. Did the Court of Appeals demonstrate the proper re-

spect for the State's sovereign interests in prosecut-
ing a statutory sovereign enforcement action under
its unfair trade practices and antitrust acts, as re-
quired by the federalism. principles recognized in
Younger v. Harris, when it disregarded the stated
sovereign enforcement aspects of and the broad in-
junctive relief sought in the State's action, and in-
stead characterized the action as one for money
damages only?

Do the federalism principles underlying Younger vy.
Harris permit a federal court to disregard the pur-
poses for a State's pending action asserted in the
State's Complaint and recharacterize the action con-
trary to the State's pleading, for purposes of deter-
mining whether the action implicates an important
State interest under Younger?

3. Does the State of Connecticut's state court sovereign

enforcement action against four tobacco companies,
brought pursuant to the explicit provisions of Con-
necticut's unfair trade practices and antitrust acts,
which empower the sovereign, on behalf of the State
and its citizens, to bring actions to remedy violations
of the acts, and seeking broad injunctive and equita-
ble relief, as well as damages, to remedy one of the
most massive conspiracies, frauds and restraints of
trade in our nation's history, implicate an "important
State interest" for purposes of applying the Younger
abstention doctrine?

In determining the importance of the State interest
implicated by a State's action for purposes of

(i)

a

applying Younger, may a federal court -- consistent
with principles of federalism -- disregard the allega-
tions of a State's complaint, reject the basis for the
State's action asserted in and the relief sought in the
Complaint, and and recharacterize the gravamen of
and the "primary aim" of the action contrary to the
State's pleading?

(it)

LIST OF PARTIES

In both the United States District Court for the Dis-
trict of Connecticut and the United States Court of Appeals
for the Second Circuit, the plaintiffs were Philip Morris,
Inc., R.J. Reynolds Tobacco Co., Brown & Williamson To-
bacco Corporation, USA, and Lorillard Tobacco Co.

The defendant in-both courts below was Richard
Blumenthal, Attorney General for the State of Connecticut.

(iii)

TABLE OF CONTENTS

QUESTIONS PRESENTED o.0. jis cec ceed eee ecea eee M
LAL: SIE FEMMES ra AS FAOES NA fea Racdq hes poem ee tas itt
OPINIONS OF THE COURTS BELOW ............. vi
Rey bt ROI NRPRUA DG RNR eee ic Stig ae tg ENE 2
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED ............0.0.. cee uen cee 2
STATEMENT OF THE CASE oo... 0. iio eee es 2
ASF IEEE Gee LGA aa eae ERO alek See LER EET: 7
I. THE YOUNGER DOCTRINE AND ITS
UNDERLYING PRINCIPLES OF

FEDERALISM, COMITY AND JUDICIAL

~ ECONOMY REQUIRE DEFERENCE TO A
STATE PROCEEDING ADVANCING AN
IMPORTANT STATE INTEREST. ........... 9

Il. INEVALUATING THE IMPORTANCE OF
THE STATE'S INTEREST, A FEDERAL
COURT MUST CONSIDER THE
"IMPORTANCE OF THE GENERIC
PROCEEDINGS" TO THE STATE, AND
NOT FOCUS ON "OUTCOMES" OR
ATTEMPT TO DECIDE STATE LAW
8S SEE 8 | RR Rb a CS 1]

Ill. UNDER THE YOUNGER DOCTRINE,
CONNECTICUT'S STATE COURT

ACTION CLEARLY SEEKS TO

VINDICATE SEVERAL IMPORTANT

SEALS DER EO eA leone bale es 17
CONCRAIOMIOE sco kc Sedat ya Nw Emon Fhe views ancien 22

APPENDIX TABLE OF CONTENTS

(iv)

Cases:

California v. Arc America Corp., 490
5B cS RO RRP EUR er vor Sor tenis beeen 18

Commission on Special Revenue v.
FOIC, 174 Conn. 308, 387 A.2d
~ 2 AG 5. | RIES AN COMA dine ces Me erate eR niet CTY 6

Hood v. Commissioner of
Agriculture, 764 F. Supp. 662

AP RR hoa es de ow sho ceeds ce eke 16
In re Valerie D., 223 Conn. 492, 613
PM TO TEER le ce iN Spo ey 19

Mangini v. R.J. Reynolds Tobacco
Co., 7 Cal. 4th 1057, 875 P.2d
73, cert. denied, 115 S.Ct. 577
Gc. RUDENESS LG OA ESCO ete ae AA 19

Middlesex County Ethics Comm. v.
Garden State Bar Association,

BOG: Sie MER RR PORR Soi ore uae hk wean, 10, 11, 18
Moore v. Sims, 442 U.S. 415 (1979) .............. 10, 19
NOPSI v. Council of New Orleans,

SPER DOE TPO Nee pa ks en ae ba eho passim
Pennzoil Co. v. Texaco, 481 U.S. 1,

EELS PORE Cuia ioievisvaraiaueiecy ees} 10, 11, 16, 20
Philip Morris, Inc. v. Blumenthal,

949 F. Supp. 93 (D.Conn. 1996) ................ fA
Philip Morris, Inc. v. Blumenthal,

123 F.30 103:(20 Cir 1997). 26 oc see. passim
Philip Morris v. Harshbarger, 946

F.Supp. 1067 (D. Mass. 1996) ................... 14

Younger v. Harris, 401 U.S. 37

“fy 04 SSSR PER ha ean pe aaa allg aes MeO BENT a RD passim
Statutes:
CE CUR SUUMNE: @ Bm ER oy bac G asad erate reecepawuees 6
A, OU UR, PD Ue ec hei ae eee deue 5
CU SO AU EE TR ee ay roe week bares 5
CAMS EI UN, OO a cae iS anges rosea siaatl 4
NE ROU NE OSE pc asi youve ci eer uns 6, 18
CO SA SOME Oe ae iinacils kuney Phun ea ers 6
CE CSU Ns SO EP ioe clea oan 4,5, 18
Cont Cite: Sieh Sea a ee Be iN pea aie 19
Pg ek RAE Be) | OS BURR AR AR SDN it neon tee eRe Ia 2
4 US VEY >. & SEamRUALe Ra ROOM TRD UiBe TREE AOC rR LED gL 3
nog RE SRR 55 70> RMR SE a OME PR eG (OR 2
SRT Rs OE CaN Coe Sans EOLA Eee 3

Rules and Regulations:
Supreme Court Rule 10.1(a) & (c) .........0...0.0.00.. 9

vi

ee ee te

Se

:
¢
4
¥
H
;
t
}

IN THE
SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1997 |

RICHARD BLUMENTHAL,
ATTORNEY GENERAL OF CONNECTICUT
Petitioner
V.

PHILIP MORRIS, INC., ET AL
Respondents

PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
SECOND CIRCUIT

PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT
OF APPEALS FOR THE SECOND CIRCUIT

The Petitioner, Richard Blumenthal, Attorney Gen-
eral for the State of Connecticut, prays that this Court issue
a writ of certiorari to review the judgment of the United
States Court of Appeals for the Second Circuit.

OPINIONS OF THE COURTS BELOW

The order of the United States Court of Appeals for
the Second Circuit denying the petitioner's Petition For Re-
hearing and Suggestion For Rehearing In Banc, dated

November 24, 1997, is unreported and is printed in the ap-
pendix to this petition at App. Al. The opinion of the
United States Court of Appeals for the Second Circuit en-
tered on September 12, 1997, is reported at Philip Morris,
Inc. v. Blumenthal, 123 F.3d 103 (2d Cir. 1997), and is
printed in the appendix to this petition at App. A3.

The memorandum of decision of the United States
District Court for the District of Connecticut, Dorsey, C./.,
dated December 23, 1996, is reported at Philip Morris, Inc.
v. Blumenthal, 949 F. Supp. 93 (D.Conn. 1996), and is
printed in the appendix to this petition at App. Al4.

JURISDICTION

The United States Court of Appeals for the Second
Circuit entered judgment on September 12, 1997. The peti-
tioner timely filed a Petition For Rehearing and Suggestion
For Rehearing In Banc, which the United States Court of
Appeals for the Second Circuit denied on November 24,
1997. The petitioner invokes the jurisdiction of this Court
under 28 U.S.C. § 1281(1). This petition is filed within
ninety days of the Court of Appeals’ ruling dated November
24, 1997. Supreme Court Rule 13.1; 28 U.S.C. §2101(c).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED
[Reprinted In Appendix]

STATEMENT OF THE CASE

Or. July 1, 1996, the respondents, Philip Morris,
Inc., R.J. Reynolds Tobacco Co., Brown & Williamson To-
bacco Corp. and Lorrillard Tobacco Co., ("the tobacco
companies") instituted this action against the petitioner,
Connecticut Attorney General Richard Blumenthal, seeking
to bar the State of Connecticut from "prosecuting or

imposing or enforcing the liability" on them pursuant to a
"Threatened Lawsuit" that -- the tobacco companies con-
tend -- would violate their federal constitutional rights. (JA
11)

In their Complaint, the tobacco companies seek de-
claratory and injunctive relief from this "Threatened Law-
suit" in each of nine Claims for Relief.” According to the
tobacco companies, (i) it would violate the Commerce
Clause and the First, Fifth and Fourteenth Amendments for
the State to seek to recover health care costs paid by the
State through its Medicaid program as a remedy for their al-
leged unlawful conduct; (ii) the State's "Threatened Law-
suit" is preempted by federal laws; and (iii) the State's
"Threatened Lawsuit" would violate Connecticut's constitu-
tion, statutes and common law.

Although the tobacco companies contended that
they would suffer irreparable harm from the State's filing of
its "Threatened Lawsuit," none of them sought preliminary
injunctive relief at the time they filed their federal Com-
plaint, nor took any action in federal court thereafter to pur-
sue their claims.

On July 18, 1996, the State of Connecticut in fact
served and filed a state court action against the four respon-
dent tobacco companies in this matter, as well as against
three other tobacco companies and three entities affiliated
with the tobacco industry.” (The State of Connecticut's

” The tobacco companies’ First through Seventh and Ninth Claims
for Relief are brought pursuant to the Federal Declaratory
Judgment Act, 28 U.S.C. § 2201, and their Eighth Claim for relief
is brought pursuant to the Civil Rights Act, 42 U.S.C. § 1983.
(JA 27 to 38)

The State's lawsuit, State of Connecticut v. Philip Morris, Inc., et
al., Docket No. CV 96-0072414 S (Judicial District of Litchfield)
named as defendants, in addition to the four respondents in this
case, B.A.T. Industries P.L.C., Liggett Group, Inc., United States

’ State Court Complaint is reprinted in the Appendix at A18)

This action, now pending in Connecticut Superior Court,”

details a course of fraudulent and illegal conduct by the to-
bacco companies dating back to 1953 and continuing to
date, including the knowing concealment and misrepresenta-
tion of scientific information concerning the health dangers
of their products, the misrepresentation of the addictive na-
ture of their products, the targeting of minors, and an un-
lawful conspiracy in restraint of trade. The Complaint
asserts that the state court defendants, individually and in
concert, have participated in a course of deceptive, unfair
and wrongful conduct intended to mislead public about
the health dangers and addictive nature/of théjr products,
have unlawfully marketed their products to minors, and
have engaged in a continuing conspiracy to_restrain trade, in
violation of the Connecticut Unfair Trade Practices Act
("CUTPA"), Conn. Gen. Stat. § 42-110a, et seg.; the Con-
necticut Antitrust Act, Conn. Gen. Stat. § 35-24, et seq;
and Connecticut common law.

The Complaint seeks broad injunctive and other eq-
uitable relief, including the entry of orders:

Tobacco Co., Hill and Knowlton, the Council For Tobacco
Research - U.S.A., Inc. and the Tobacco Institute, Inc.

’ The State of Connecticut initially filed its action in Connecticut
Superior Court, Judicial District of Stamford. On August 5, 1996,
the ten tobacco defendants in Connecticut's removed that action to
federal court, claiming federal question jurisdiction. The District
Court, Arterton, J., granted Connecticut's motion to remand to
state court, holding that the tobacco defendants’ attempt to
manufacture federal jurisdiction “borders on the frivolous."
Subsequent to remand, the State's action was assigned to one
judge, who is presently sitting in the Judicial District of Litchfield,
where the action is now docketed.

VER Vie Airey be WL ES

(i) enjoining the defendants’ unlawful
conduct’

(ii) requiring implementation of funding of
remedial programs;

(iii) requiring restitution to consumers and
the State for harms caused by the to-
bacco companies' harmful conduct;

(iv) requiring disgorgement of defendants’
wrongfully gained profits; and

(v) assessing civil penalties under CUTPA

and the Connecticut Antitrust Act.
(A127 to A132)

The State's Complaint also requests actual and statu-
tory treble damages under Connecticut's Antitrust Act, in-
cluding actual damages for harm to the general economy of
the State (A129), along with claims for disgorgement and
damages for harm to consumers, as provided for under
CUTPA, Conn. Gen. Stat § 42-110m. (A130 to A132)

In addition, the complaint seeks as one aspect of
damages, but only one aspect, an award for the increased
expenses the State has incurred as a result of the defendants'
wrongful conduct, including, but not limited to, restitution
or reimbursement of Connecticut's increased expenses under
the State's Medicaid and General Assistance Medica! Assis-
tance programs as a result of tobacco-related illnesses.
(A131) See Conn. Gen. Stat. §17b-260 ef seg.; § 17b-220
et seq.

The Commissioner of Consumer Protection of the
State of Connecticut authorized and requested the CUTPA
claim asserted in the State's Complaint pursuant to his statu-
tory authority to monitor, investigate and take action to pre-
vent unfair and/or deceptive trade practices affecting the ©
Connecticut public. See Conn. Gen. Stat. §§ 42-110d, 110k,

110m & 110n. In particular, the Commissioner has acted
pursuant to Conn. Gen. Stat. § 42-110m, which empowers
him to request the state Attorney Geneffl to prosecute ac-
tions to enjoin ongoing unfair trade practices and obtain res-
titution and other equitable relief for such unlawful conduct.
The Commissioner is an appointee of the Governor, the
head of Connecticut's executive branch.

The antitrust claim has been instituted pursuant to
the statutory authority the Connecticut General Assembly
has conferred upon the state's Attorney General, a state
constitutional officer, to investigate, monitor and take ac-
tion against unlawful restraints of trade in the State, see
Conn. Gen. Stat. §§ 35-32(a) & 35-42, and asserts claims,
parens patriae, on behalf of the residents of the State of
Connecticut, and on behalf of the State itself; as expressly
authorized by the Connecticut General Assembly. See -
Conn. Gen. Stat. §§ 35-32(c)(1) & (2).

The Attorney General has brought the common law
counts in his capacity as the state's chief legal officer, with
the duty to act in the state's best legal interest. Conn. Gen.
Stat. § 3-125; Commission on Special Revenue v. FOIC,
174 Conn. 308, 318-19, 387 A.2d 533 (1978).

The tobacco companies’ federal Complaint expressly
acknowledges that it was filed in anticipation of the State's
lawsuit, which was filed less than three weeks after the to-
bacco companies’ Complaint here. (JA 9; 11) No substan-
tive proceedings of any kind took place in the District Court
on the tobacco companies' action, either prior to or after the
initiation of the State's action. Further, the tobacco compa-
nies make no allegation in their federal Complaint that Con-
necticut's state courts will be unable or will refuse to
resolve, fully and fairly, the claims asserted in the State's ac-
_ tion, including any federal constitutional or statutory de-
fenses the tobacco companies may assert.

Concurrent with the institution of the State's action,
the petitioner moved to dismiss the tobacco companies’
Complaint in this case on the grounds of Younger absten-
tion, arguing that the tobacco companies had brought the
action solely to disrupt the State of Connecticut from ap-
propriately and lawfully vindicating its sovereign interests in
state court. The District Court, Dorsey, C.J., agreed and
granted the motion on December 23, 1996. Philip Morris,
Inc. v. Blumenthal, 949 F. Supp. 93 (D.Conn. 1996).

The tobacco companies appealed to the United
States Court of Appeals for the Second Circuit, which re-
versed and remanded, on the ground that the State's action
did not, in that Court's view, implicate any important state
interest. The Court ruled that it could disregard the State of
Connecticut's state court allegation of a sovereign enforce-
ment action, look behind the State's asserted purposes and
characterize the action as merely a subrogation action, the
"primary aim" of which was to recover money damages.
Philip Morris, Inc. v. Blumenthal, 123 F.3d 103 (2d Cir.
1997). After the Court of Appeals' denied his Petition For
Rehearing and Suggestion For Rehearing In Banc, the peti-
tioner has filed this petition.

REASONS FOR GRANTING THE WRIT

The Court should grant this petition and issue the
writ because the Court of Appeals’ decision raises important
issues regarding the application of Younger v. Harris, 401
U.S. 37 (1971), and its progeny.

Specifically, the Court of Appeals' opinion raises
critical issues regarding Younger’s application in this and fu-
ture actions, including whether a federal court in determin-
ing whether a State's action involves and important state
interest for Younger purposes is permitted to disregard the

aaa ae 7

State's asserted interests in favor of its own characterization
of the lawsuit?

To reach its conclusion, the Court of Appeals took
the liberty of disregarding the legal theories the State had
asserted in its lawsuit in favor of the federal court's own,
unsupported recharacterization of the lawsuit. Contrary to
the Court of Appeals’ belief, a federal court does not have
the authority to make unsupported assumptions about the
theory of recovery posited in a state court action or about a
sovereign enforcement action's "primary aim." In this re-
gard, the Court of Appeals did not undertake the proper in-
quiry directed by NOPSI v. Council of New Orleans, 491
U.S. 350 (1989). Rather than f@using on the "importance
of the generic proceedings to the State," as this Court has
instructed; id. at 365; the Court of Appeals instead focused
on one of the "outcomes" the State's lawsuit seeks: money
damages. By its fundamental mischaracterization of the na-
ture Connecticut's state court action against the tobacco
companies and profound misapprehension of the nature and
importance of the interests the State seeks to vindicate by
its action, the Court of Appeals failed to pay the proper re-
spect to State sovereignty that the Younger doctrine
demands.

Finally, the Court of Appeals' determination that
Connecticut's sovereign enforcement action against the to-
bacco companies implicates no important state interest, in
addition to defying logic, is plainly inconsistent with this
Court's precedents. The State's action alleges one of the
most massive conspiracies, frauds and restraints of trade in
our nation's history, inflicting great damage upon the State
and its citizens. The State's action seeks broad remedial re-
lief aimed at the grave injuries the tobacco companies’ con-
duct and their products have inflicted upon the public's
health. It is impossible to ignore the importance of these

goals in light of the historic national settlement presently
pending in Congress. This proposed settlement, which
would include a settlement of Connecticut's lawsuit and
which was negotiated by several state attorneys general, in-
cluding the petitioner, and representatives of all of the re-
spondents, contains many of the same remedial initiatives
claimed in the Connecticut's state court lawsuit, which the
respondents and the Court of Appeals simultaneously argue
manifest no significant state interest.

It is therefore inconceivable that the State's action
does not implicate several important state interests. The
Court of Appeals' dismissive treatment of the State's inter-
ests in this case is an affront to the State and its citizens, and
displays none of the "sensitivity to the legitimate interests"
of the State governments that Younger counsels federal
courts to engage in.

. All of these "special and important reasons" warrant
this Court's granting of the petition. The Court of Appeals'
decision "so far depart[s] from the accepted and usual
course of judicial proceedings," and decides "an important
question of federal law which has not been, but should be
settled by this Court," in addition to deciding a "federal
question in a way that conflicts with applicable decisions of
this court." Supreme Court Rule 10.1(a) & (c).

I. THE YOUNGER DOCTRINE AND ITS
UNDERLYING PRINCIPLES OF FEDERALISM,
COMITY AND JUDICIAL ECONOMY REQUIRE
DEFERENCE TO A_ STATE PROCEEDING
ADVANCING AN IMPORTANT STATE INTEREST.
“Younger . . . and its progeny espouse a strong fed-
eral policy against federal-court interference with pending
state judicial proceedings absent extraordinary

circumstances.” Middlesex County Ethics Comm. v. Gar-
den State Bar Ass'n, 457 U.S. 423, 431 (1982) (emphasis
supplied). As Justice Black eloquently stated for the Court
in Younger, the policy is based, in part, on the traditional
constraints on equity courts, but also on the

even more vital consideration, the notion of
‘comity,’ that is, a proper respect for state
functions, a recognition of the fact that the
entire country is made up of a Union of sepa-
rate state governments, and a continuance of
the belief that the National Government will
fare best if the State and their institutions are
left free to perform their separate ways.
This, perhaps for lack of a better and clearer
way to describe it, is referred to by many as
"Our Federalism."

Younger v. Harris, 401 U.S. 37, 44 (1971). In addition, the
doctrine of Younger abstention seeks to avoid duplicative
legal proceedings and "to avoid unwarranted determination
of federal constitutional questions." Pennzoil Co. v.
Texaco, 481 U.S. 1, 11 (1987).

Although Younger itself concerned a pending state
criminal action, the doctrine "is also fully applicable to civil
proceedings in which important state interests are involved."
Moore v. Sims, 442 U.S. 415, 423 (1979) (applying
Younger abstention to state court child-abuse proceeding).*

“Thus, where important state interests are involved, this Court has
repeatedly held that comity, federalism and judicial economy
require that federal courts avoid interference with a state's
legitimate processes. See e.g., Huffman v. Pursue, Ltd., 420 U.S.
592, 603-06 (1975) (Younger applies with equal force to civil
proceedings brought by state to promote sovereign interests);
Trainor v. Hernandez, 431 U.S. 434, 443-44 (1977) (Younger
applies to suits by state in its role of administering its public
assistance programs in light of important state interest in

10

Thus, to determine if Younger abstention is appro-
priate, a Court must determine that: (1) there is an ongoing
state proceeding; (2) an important state interest is impli-
cated; and (3) there is an adequate opportunity in the state
court proceeding to raise constitutional challenges.
Middlesex County Ethics Comm. v. Garden State Bar Asso-
ciation, 457 U.S. 423, 432 (1982). The Court of Appeals
easily determined that there was an ongoing state proceed-
ing and that the tobacco companies could obtain review of
their federal claims in state court. Philip Morris, Inc. v.
Blumenthal, 123 F.3d 105 (2d Cir. 1997). The Court went
on, however, to state: "we do not find that the federal (sic)
action implicates an important state interest within the
meaning of Younger." Jd. This conclusion simply defies
logic, ignores this Court's precedent and egregiously in-

fringes upon the State's sovereign interests. :
)

I. IN EVALUATING THE IMPORTANCE OF
THE STATE'S INTEREST, A FEDERAL COURT
MUST CONSIDER THE "IMPORTANCE OF THE
GENERIC PROCEEDINGS" TO THE STATE, AND
NOT FOCUS ON "OUTCOMES" OR ATTEMPT TO
DECIDE STATE LAW QUESTIONS.

In NOPSI v. Council of New Orleans, 491 U.S. 350,
375 (1989), this Court stated

[I]t is clear that the mere assertion of a sub-
stantial constitutional challenge to state

safeguarding the fiscal integrity of those programs); Middlesex
County Ethics Comm. v. Garden State Bar Association, 457 U.S.
423, 432 (1982) (reiterating that Younger applies to state's civil
proceedings "necessary for the vindication of important state
policies"). In fact, the Court has applied Younger’ even to civil
proceedings in which the state is not itself a party. Pennzoil Co.
v. Texaco, 481 U.S. 1, 11 (1987) (Younger applies in lawsuit
between private parties).

1]

action will not alone compel the exercise of
federal jurisdiction... . That is so because
when we inquire into the substantiality of the
State's interest in its proceedings we do not
look narrowly to its interest in the outcome
of the particular case -- which could argua-
bly be offset by a substantial federal interest
in the opposite outcome. Rather, what we
look to is the importance of the generic pro-
ceedings fo the State. (emphasis supplied).

While paying lip service to this standard, Philip Morris, Inc.
v. Blumenthal, 123 F.3d 103, 106 (2d Cir. 1997), the Court
of Appeals in fact disregarded it, concluding that Connecti-
cut's state court action did not concern "central sovereign
functions of the state government," and adopting wholesale,
with no analysis, the tobacco companies' characterization of
the State's lawsuit as "primarily" or "essentially" one for
money damages.

The Court of Appeals reasoned:

Although the state pleads its action in state
court as an enforcement action pursuant to
CUTPA and the state antitrust law to pre-
vent deception and unfair and anticompeti-
tive business practices -- arguably important
state interests -- the underlying claim_is
more accurately classified as a subrogation
action grounded in tort. Notwithstanding
certain other claims, the primary aim of the
state is to obtain reimbursement from the to-
bacco industry for expenditures caused by its
allegedly tortious conduct. This purpose has
little to do with eradicating unfair trade prac-
tices or anticompetitive practices.

/d. (emphasis supplied). It then labeled the State's action as
"essentially a suit for money damages." /d. The Court of

12

Appeals therefore dissected the State's Complaint, ignored
its public health and consumer protection aspects and ar-
rived at its own characterization of the action. This charac-
terization is not only conclusory and inaccurate, but is not a
federal court's to make and is contrary to NOPSI.

It is the paradigm of understatement, particularly in
this case, to describe the State's CUTPA and antitrust laws
as implicating "arguably" important interests. The State's
action alleges one of the largest consumer deceptions (con-
cealing smoking's health hazards and addictiveness), re-
straints of trade (conspiring to suppress development of a
less hazardous product) and unfair trade practices (purpose-
fully marketing to minors, who cannot legally purchase to-
bacco products, to replace those killed by the products) in
this nation's history. The relief sought seeks to remedy the
grave injury to public health inflicted by this conduct. Nev-
ertheless, the Court of Appeals held that despite these im-
portant interests, "the underlying claim is more accurately
classified as a subrogation action." Both parts of this state-
ment are unsupportable.

Taking the latter part first, the State's action can in
no way be described as a subrogation claim. To the con-
trary, the State purposely drew its Complaint to make clear
that its claims are in no way derivative of the claims of indi-
vidual consumers harmed by the tobacco companies’ prod-
ucts and/or conduct, but rather seek damages for direct
harm to the State caused by the tobacco companies’ con-
duct. As an example, the CUTPA claim can in no way be
characterized as a subrogation claim because it does not
pray for general damages, such as are available under Conn.

‘Gen. Stat. § 42-110g, but rather is a sovereign enforcement

action, brought at the request the Commissioner of Con-
sumer Protection under Conn. Gen. Stat. § 42-110m that

13

seeks restitution and other equitable relief to remedy wrong-
ful or deceptive conduct.

The proper characterization of the types of claims
the State's action alleges, and the determination of whether
they are cognizable, is a State law question, and one that is
presently pending before a State court judge who has re-
ceived hundreds of pages of briefs on the issue. In fact, al-
though the tobacco companies contend that the State's
causes of action are non-cognizable, they have acknowl-
edged that the State's action is not a subrogation claim at
all.” It is not for a federal court to characterize the grava-
men of the State's action for purposes of determining
whether to apply comity and federalism principles underly-
ing Younger. In fact, the principles of comity and federal-
ism underlying the Younger doctrine prevent such a
characterization. Thus, classifying the State's action as one
of subrogation is not only inaccurate, but improper.

As importantly, the State's claims for Medicaid reim-
bursement, however characterized, in no way "underlie" its
CUTPA and antitrust claims. The State's legal claims, even

~ In Philip Morris v. Harshbarger, 946 F.Supp. 1067 (D. Mass.
1996), upon which the Court of Appeals relied for this conclusion,
the District Court accepted the tobacco companies’ argument that
an action that Massachusetts brought against them in state court
did not involve important state interests. Describing the action as
merely "a suit for money damages; id. at 1077; the District Court
held that the Massachusetts action "is seeking a remedy that is
classically in the nature of subrogation." /d.

Beyond the fact that the State disagrees with this characterization,
and as detailed in the defendant's appellee brief, the District Court
in Harshbarger did not have before it classic state sovereign
enforcement claims that the District Court in the instant case did:
the CUTPA and antitrust claims. Thus, the District Court in this
case correctly distinguished Harshbarger on this ground.

14

RE RE eet ee Se ..

eee ere eee

if involving some overlapping facts, are independent of one
another and do not rise or fall together. This misunder-
standing and mischaracterization was critical to the Court of
Appeal's holding, Under its reasoning, if the State only al-
leged CUTPA and antitrust violations, Younger abstention
would be appropriate because those statutes implicate im-
portant state interests. The minute a claim seeking reim-
bursement is injected into the case, however, the Court of
Appeals holds that the State's expectation of comity van-
ishes and the federal court's respect for the state's legitimate
processes is no longer due. By this theory, perhaps thou-
sands of actions brought by sovereign states in the con-
sumer protection, anti-trust, environmental and health-care
fraud areas would be liable to preemptive collateral federal
lawsuits if they seek monetary recovery, notwithstanding
the extremely important interests they otherwise seek to
vindicate. This is a practical result the federal judiciary
should not tolerate.

Still, the Court of Appeals states that Connecticut's
action is "essentially" one for money damages, with a "pri-
mary aim" of reimbursement. The only support for this
characterization, however, is the tobacco companies’ bald
assertion. The District Court heard no evidence on what
the "primary aim" of the lawsuit was, and, if anything, found
that this was not the primary aim. The only evidence of re-
cord on this point is the State of Connecticut's state court
Complaint, and the Court of Appeals fails to explain how
the terms of that Complaint support its conclusion. The
Court of Appeals cites no Younger case permitting a federal
court or a federal plaintiff to characterize the "primary aim"
of a sovereign's State court suit.

Moreover, NOPSI directs federal courts not to focus
"narrowly" on "outcomes." The Court of Appeals simply
and erroneously ignored this admonition by focusing on the

15

money damages aspect of the State's action. The fact that
the State's action seeks a great deal of money damages
(damages commensurate with the damage inflicted and the
culpability of conduct) is immaterial. The State of Illinois in
Trainor v. Hernandez, 431 U.S. 434 (1977), sought only
money damages, however. Pennzoil Co. v. Texaco, Inc.,
481 U.S. 1 (1987), too concerned only money damages, and
only private parties.

Hood v. Commissioner of Agriculture, 764 F. Supp.
662 (D. Me. 1991), is illustrative of a proper Younger
analysis. Hood involved an enforcement action by the state
commissioner of agriculture to collect money a milk dealer
owed to a state "milk pool." The dealer countered with a
federal suit, claiming the state's action violated the federal
constitution. In response to the State's abstention argu-
ment, the milk dealer claimed that the state suit was merely
a "collection action," thus implicating no important state in-
terest. In entering a Younger dismissal and rejecting the
dealer's characterization, the court noted that "Pennzoil and
Trainor could, by Hood's diminutive characterization, be re-
duced to mere collection actions. To the contrary, how-
ever, both involved important state interests." /d. at 670.
The Court went on to observe, correctly, that in "determin-
ing whether the State's interest is important enough to war-
rant abstention, .. . the focus is not on the state's immediate
interest in the outcome of the specific suit in question, but
on a state's overall interest in enforcing or reviewing actions
affecting the'interests governed by the applicable state stat-
ute or regulation." /d. The Court therefore refused to con-
fine its focus "to whether Maine has a right to collect the
sum of money” Hood allegedly owed. /d. "Rather, the
question is, more broadly, whether Maine has a right to en-
force and collect payments from parties under the Maine

16

,

ng
3

Bs
¥
|
a

CY
ed

4

milk laws in order to protect the important interests of the
state for which those laws were designed." Jd.

Similarly in this case, the focus should be not upon
the sum of money that the State of Connecticut demands,
or, as NOPSI referred to it, "the outcome." Rather, the fo-
cus for Younger purposes should properly be on the impor-
tant interests that Connecticut seeks to protect, and which
the laws upon which the State relies were designed to
protect.”

I. UNDER THE YOUNGER DOCTRINE,
CONNECTICUT'S STATE COURT ACTION
CLEARLY SEEKS TO VINDICATE SEVERAL
IMPORTANT STATE INTERESTS.

The State's action in fact has several aims, and can-
not be categorized as simply as the Court of Appeals sug-
gested. Specifically, the State's action implicates state
interests in protecting trade and commerce by preventing
deceptive, unfair and/or anti-competitive trade practices, in
protecting the welfare of minors and all State residents, and
in preserving the public assistance programs' fiscal integrity.
The importance of these interests to the State is illustrated
by the Connecticut General Assembly's grant of pervasive
civil investigative and enforcement powers to the

* Finally, the Court of Appeals also adopted wholesale the tobacco
companies’ claim that their federal action seeks only to interfere
with the part of the State's suit claiming recovery of Medicaid and
other health care costs. Philip Morris, Inc. v. Blumenthal, 123
F.3d 103, 106 n.2 (2d Cir. 1997). Their prayer for relief in this
action is much more sweeping and directly contradicts this
characterization. (JA A-38 to A-41) Further, there is no
precedent to support parsing the State's claims for relief and
challenging a portion of them in a federal injunctive action to
avoid Younger abstention. To the contrary, NOPS/ instructs
courts to look to "the importance of the generic proceedings to the
State."

17

Commissioner of Consumer Protection and Attorney Gen-
eral to safeguard these interests. The Court of Appeals’
holding that the State's action does not involve an important
state interest is inconsistent with a number of this Court's
precedents.

1. Preventing Deceptive, Unfair and Anti-
competitive Business Practices - The State's Complaint al-
leges that the tobacco companies have engaged in unfair and
deceptive as well as anti-competitive trade practices through
their conspiratorial campaign to misrepresent and conceal
from Connecticut consumers the negative health conse-
quences of tobacco use and the addictive nature of nicotine
-- misrepresentations and concealments designed to enhance
sales of their tobacco products. The General Assembly's
grant of broad and express civil police power to the State's
Commissioner of Consumer Protection and Attorney Gen-
eral clearly demonstrates the importance it places on pre-
serving unfettered and fully-informed trade and commerce.
See Conn. Gen. Stat. §§ 35-32(c); 42-110d(d) & (e);
42-110m.

Similarly, this Court has long recognized the regula-
tion of trade and commerce as fundamental and traditional
areas of state activity. See California v. Arc America
Corp., 490-U.S. 93, 101 (1989) ("state common-law and
statutory remedies against monopolies and unfair business
practices" among the "historic police powers of the States").
Thus, the regulation of business conduct is a sufficiently im-
portant state interest to invoke Younger abstention. See,
e.g., Middlesex County Ethics Comm., 457 U.S. 457, 434
(1982) (regulating conduct of lawyers).

2. Protecting the Welfare of Minors - As alleged in
Connnecticut's state court action, because of the tobacco
companies’ aggressive advertising directed at children, more
than 30% of all Connecticut high school students smoke and

18

OEE RM ARLE TLS NS sed! SND LE AB ANNE BI

LAAN ami

about 90% of all smokers began smoking before reaching
the age of majority. Protecting the welfare of Connecticut's
infants and minors clearly implicates an area of undisputed
State governmental parens patriae responsibility. Jn re
Valerie D., 223 Conn. 492, 613 A.2d 748 (1992); see
Moore v. Sims, 442 U.S. 415, 423 (1979). The State's civil
enforcement action seeks to prevent the tobacco companies
from continuing to market aggressively to minors, plainly
implicating Connecticut's interest in securing compliance
with its criminal laws. See Conn. Gen. Stat. § 53-344 (pro-
hibiting sales or delivery of tobacco products to minors);
Mangini v. R:J. Reynolds Tobacco Co., 7 Cal. 4th 1057,
875 P.2d 73, cert. denied, 115 S.Ct. 577 (1994).

3. Protecting the Fiscal Integrity of the State and Its
Programs - The Supreme Court has held that a "civil
enforcement action. . . brought by the State in its sovereign
capacity" to "vindicate . . . the fiscal integrity" of "its public
assistance programs" is an interest vital enough to require
Younger abstention. Trainor v. Hernandez, 431 U.S. 434,
444 (1977); accord Moore v. Sims, 442 U.S. 415, 423
(1979). Connecticut's state court action plainly implicates
the fiscal integrity of its public assistance programs.”

7/

Like Illinois did in Trainor, the State's Complaint alleges harm to
the fiscal integrity of it general assistance programs. Namely, the
State has been required to expend hundreds of millions of dollars
for tobacco-related illnesses as a result of the tobacco defendants’
unfair, deceptive and anti-competitive business practices. The
Court of Appeals distinguished 7rainor on the ground that in
“safeguarding the fiscal integrity of [its public assistance]
programs" in that case, the State of Illinois sought to vindicate
some of the same interests it might have elected to pursue
criminally. Philip Morris, Inc. v. Blumenthal, 123 F.3d 103, 107
(2d Cir. 1997). The Court stated: "The instant case does not
involve a threat to the ‘fiscal integrity’ of Connecticut's Medicaid
program because no fraud has been committed against that

program." /d.

19

By ignoring these obvious and important State inter-
ests, and instead placing a different characterization on the
State's action, one that focused on "outcomes" rather than
the “importance of the generic proceedings," the Court of
Appeals has made innumerable State enforcement actions
liable to federal preemptive lawsuits such as this in the fu-
ture. See § II, supra.

Finally, the extreme importance of these interests is
particularly underscored by the proposed national settlement
now pending before the Congress. This settlement contains
many of the remedial initiatives that the State of Connecti-
cut's lawsuit demands by way of relief in its state court ac-
tion, including:

* Requiring tobacco manufacturers to disclose all
previously non-public internal laboratory research
and all new internal laboratory research generated
in the future relating to the health effects or safety
of their products;

- Establishing funds from tobacco industry payments
for education-oriented counter-advertising and to-
bacco control campaigns, health benefits programs
and smoking cessation programs;

A ban on all outdoor tobacco advertising and
elimination of cartoon characters and human

Trainor, of course, does not hold that to vindicate an important
state interest the state must be acting "in aid of and closely related
to criminal statutes." Accord Pennzoil Co. v. Texaco, Inc., 481
U.S. 1 (1987) (Younger appropriate although no criminally related
statutes at issue). Further, the State of Connecticut seeks not only
to recoup those increased expenditures (just as the State of Illinois
did in 7rainor), but to enjoin the defendants’, wrongful.conduct, in
part to reduce future wrongful increases occasioned by defendants'
conduct.

. b,
SSDS Ee EERE Se Oe Tre TE

PR PEL Beith Ae SR SS SM

figures such as Joe Camel and the Marlboro Man
in tobacco advertisements;

- Subjecting the tobacco industry to severe financial
surcharges if underage tobacco use does not de-
cline radically over the next decade in order to en-
sure best efforts to decrease underage tobacco
use.

These proposals, which obviously manifest a signifi-
cant national interest, clearly support a conclusion that the
state court action implicates several important state interests
for purposes of Younger. :

21

CONCLUSION

Younger v. Harris, 401 U.S. 37, 43-44 (1971). The
Court of Appeals below looked narrowly at one of the "out-
comes" the State seeks (money damages), rather than
broadly, or "generically," at the important interests the pro-
ceeding seeks to vindicate by seeking that outcome and oth-
ers. The Court mischaracterized the State's action by
labeling it a mere claim for money damages, and departed
from NOPSI by focusing only on that aspect of relief. In ig-
noring the public health interests implicated by this case na-
tionally and in Connecticut, the Court of Appeals failed to
Younger principles properly. This Court should therefore
grant this petition.

Respectfully submitted,
PETITIONER

*RICHARD BLUMENTHAL

ATTORNEY GENERAL

SU #D. DS,
*Eliot D. Prescott

Gregory T. D'Auria

Assistant Attorney General

55 Elm Street

P.O. Box 120

Hartford, CT 06141-0120
Tel. No. (860)-808-5020

*Counsel of Record

No.

IN THE
SUPREME COURT OF THE UNITED STATES
October Term, 1997

RICHARD BLUMENTHAL,
ATTORNEY GENERAL OF CONNECTICUT

| Petitioners
V. )

PHILIP MORRIS, ET AL.
Respondents

4 APPENDIX TO
2 PETITION FOR WRIT OF CERTIORARI

APPENDIX TABLE OF CONTENTS

Philip Morris, Inc. v. Blumenthal, USCA, No.

97-7122, Order Denying Petition For
Rehear ing Containing A Suggestion For
BUMIOIE ME IY NOIR eS oe

Philip Morris, Inc. et al. v. Blumenthal,

Bf 88 ER Me LY 8 9° a TERR et aU oe Se a

Philip Morris, et al. v. Blumenthal, .

USDC, Civil No. 3:96CV1221(PCD)
Ruling On Motion To Dismiss ..................

tate of Connecticut v. Philip Morris. Inc.
et al., Connecticut Superior Court,
Judicial District of Stamford/Norwalk at
Stamford, Return Date August 13, 1996,
RSC SGent ach rt OU REALE elena 7

CORR ReOR PR @ ae bee eee oe akin alr
COON AION. DIRE BSS Sai ce a
Cen: KICK SIME SS 8A oN ae
Conn. Gen. Stat: § 42-110d ... 0.0.0 00.0000000055,
Conn: Gen: Stat.’ §:42-110g 0
Conn: Gen: Stat: 6:42-110k -3 ok es
Conn. Gen. Stat. §42-110m °....0.50.22.0200.5....
Conn. Gen. Stat. § 42-110n: | 06 2

a A ea ee aa i ae eee eae

— EE EE ee

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT
UNITED STATES COURT HOUSE
40 FOLEY SQUARE
NEW YORK 10007
GEORGE LANGE II
CLERK

At a stated term of the United States Court of Ap-
peals for the Second Circuit, held at the United States
Courthouse, Foley Square, in the City of New York on the

24th day of November one thousand nine hundred and
ninety-seven.

UNITED STATES COURT OF APPEALS
FILED
NOV 24 1997

Philip Morris, Inc.

GEORGE LANGE @ CLERK

Plaintiff-Appellant

Dkt No: 97-7122
Blumenthal,

Defendant-Appellee.

A petition for rehearing containing a suggestion that the ac-

tion be reheard in banc having been filed herein by the ap-
pellee Blumenthal.

Upon consideration by the panel that decided the ap-

peal, it is Ordered that said petition for rehearing is
DENIED.

Al

It is further noted that the suggestion for rehearing in banc
has been transmitted to the judges for the court in regular
active service and to any other judge that heard the appeal
and that no such judge has requested that a vote be taken
thereon.

FOR THE COURT
GEORGE LANGE III, CLERK
By: _s/ Beth J. Meador

Beth J. Meador,
Administrative Attorney

UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

No. 1904 - August Term, 1996

(Argued: June 26, 1997 Decided: September 12, 1997)
Docket No. 97-7122

PHILIP MORRIS, INC.; RJ Reynolds Tobacco
Co.; Brown & Williamson Tobacco Corporation, USA;
Lorillard Tobacco Co.,

Plaintiffs-Appellants,

Seba Aa ip zeibd

v.
Richard BLUMENTHAL, Attorney General,
Defendant-Appellee.

Saisie Sek a5 AS at AEs Ras NR ete Es

Before:
MINER, MCLAUGHLIN AND JACOBS.
Circuit Judges.

Appeal from a judgment entered in the United States
District Court for the District of Connecticut (Dorsey, C.J.)
on an order granting defendant's renewed motion to dismiss
plaintiffs' federal action pursuant to the Younger abstention
doctrine, the court having found that important state

A3

interests were implicated in defendant's state action to en-
join the future sale of cigarettes and to recover damages re-
lated to the past and present sale of cigarettes.

Reversed and remanded.

PETER C. HEIN, Wachtell, Lipton, Rosen & Katz,
New York City (William R. Murphy, Ben A. Solnit, Tyler
Cooper & Alcorn, New Haven, CT, Donald B. Ayer, Jones,
Day, Reavis & Pogue, Washington, DC, Edward F. Hen-
nessey, III, David Thomas Ryan, Robinson & Cole, Hart-
ford, CT, David M. Bernick, P.C., Marjorie Press
Lindblom, Andrew R. McGaan, Kirkland & Ellis, Chicago,
IL, Francis H. Morrison, III, James H. Rotondo, Day, Berry
& Howard, Hartford, CT, Gene E. Voigts, John C. Monica,
Shook, Hardy & Bacon, LLP, James RaFogarty, Andrew P
Nemuroff, Lawrence F. Reilly, Epstein Fogarty Cohen &
Selby LLC, Greenwich, CT, of counsel), for
Plaintiffs-A ppellants.

RICHARD BLUMENTHAL, Attorney General,
Hartford, CT (David S. Golub, Jonathan M. Levine, Silver
Golub & Teitell, LLP, Stamford, CT, Gregory T. D'Auria,
Assistant Attorney General, Hartford, CT, of counsel), for
Defendant-A ppellee.

MINER, Circuit Judge

Plaintiffs-appellants Philip Morris, Inc., RJ Reynolds To-
bacco Co., Brown & Williamson Tobacco Corporation,

A4

GAS

USA, and Lorillard Tobacco Co. (the “Tobacco Compa-
nies"), appeal from a judgment entered in the United States
District Court for the District of Connecticut (Dorsey, C.J.)
on an order granting the renewed motion of defendant-
appellee Richard Blumenthal, the Attorney General of the
State of Connecticut (the "Attorney General" or the
state"), to dismiss the Tobacco Companies’ federal action
pursuant to the Younger abstention doctrine. The district
court found that abstention was appropriate because, inter
alia, important state interests were implicated in the state's
lawsuit seeking injunctive relief and monetary damages for
violations of the Connecticut Unfair Trade Practices Act
("CUTPA"), Conn. Gen. Stat? Ann. § 42-110a ef seq.
(West 1992), the Connecticut Antitrust Act, Conn. Gen.
Stat. Ann. § 35-24 et seg. (West 1987 & Supp.1997), and
state common law.

For the reasons that follow, we reverse and remand.

BACKGROUND

The action giving rise to this appeal was initiated in re-
sponse to various well-publicized threats by the Attorney
General to commence an action in state court against com-
panies in the tobacco industry. According to the Attorney
General, that action would seek to recover millions of dol-
lars paid out by Connecticut under its Medicaid and general
medical assistance programs for tobacco-related illnesses.
In 1995, the Attorney General attempted to obtain legisla-
tive authorization for a lawsuit against tobacco companies.
The Connecticut General Assembly declined to enact legis-
lation authorizing such a suit. The Attorney General again
sought authorization in March of 1996, which again was de-
nied by the General Assembly. Notwithstanding the General

AS

Assembly's denial of authorization, the Attorney General
made clear through the press that he intended to proceed
with the legal action.

On June 28, 1996, the Tobacco Companies commenced the
instant action to enjoin the state from filing the impending
suit in state court (the “federal action"). In their complaint,
the Tobacco Companies asserted that "[t]he Threatened
Lawsuit seeks to impose upon [the Tobacco Companies] on

a retroactive basis massive costs of the Medicaid program .
that Connecticut has voluntarily chosen to establish, irre-
spective of traditional principles of law governing the rights
and duties of [the Tobacco Companies] with respect to any
actual Medicaid recipient." (Compl. 16.) The Tobacco
_.-~ Companies challenged on constitutional grounds aspects of
eee the relief that the state intended to pursue.” In particular,
they challenged the recovery of Medicaid payments made by
Connecticut in connection with illnesses that allegedly are
tobacco-related, and they sought to resolve questions about
the consequences of their continuing to do business in Con-

necticut during the pendency of the threatened suit.

Three weeks after the initiation of the federal action, the
state filed suit in Connecticut Superior Court against the
Tobacco Companies and six other tobacco-related compa-
nies and organizations (the "state action"), seeking damages

Vv

The Tobacco Companies asserted in their complaint that the
State's lawsuit and _ interpretation of Connecticut law
unconstitutionally burden interstate commerce and violate the
Tobacco Companies’ rights under the Due Process Clause, Equal
Protection Clause, Takings Clause, Supremacy Clause, and First
Amendment. They sought a declaration that provisions of
Connecticut law, as construed by the state, are unconstitutional.

A6é

and injunctive relief for alleged violations of the state anti-
trust law, CUTPA and state common law. The state al-
leged, inter alia, that the tobacco companies had engaged in
unfair, deceptive and anti-competitive trade practices to
promote the sale of their product, including (1) a campaign
to misrepresent and conceal the ill effects and addictive na-
ture of tobacco use, (2) the manipulation of nicotine levels,
(3) the failure to develop a less harmful product and (4) the
purposeful marketing to children.

The state sought a number of remedies, including a perma-
nent injunction enjoining the companies from continuing
their alleged unfair practices, monetary relief under a vari-
ety of theories, including recovery of Connecticut's past and
future expenditures for tobacco-related health-care costs
under Medicaid and a variety of other programs, and civil
penalties under CUTPA and the state antitrust laws. The
state also sought the disgorgement of all profits attained
through the companies’ unfair or deceptive trade practices.

The Tobacco Companies removed the state action to fed-
eral court pursuant to 28 U.S.C. § 1441. The state argued
that removal was improper due to a lack of subject matter
jurisdiction. It then moved to dismiss the federal action on
the basis of Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746,
27 L.Ed.2d 669 (1971), and to remand the state action to
the state court. The motion to dismiss the federal action
was denied without prejudice pending a determination in the
removed state action on the issue of subject matter jurisdic-
tion. On October 9, 1996, the state action was remanded to
state court for lack of subject matter jurisdiction. The state
then renewed its motion to dismiss the federal action.

A7

The Tobacco Companies argued that Younger abstention
was inappropmiate in this case and that, if the district court
were inclined to abstain, it should do so under the Pullman
abstention doctrine, see Railroad Comm'n of Tex. v. Puli-
man Co., 312 U.S. 496, 501, 61 S.Ct. 643, 645, 85 L.Ed.
971 (1941). The district court found that Younger absten-
tion was proper and declined to address the applicability of
Pullman. Accordingly, on December 23, 1996, the district
court granted the state's renewed motion to dismiss. Judg-
ment was entered on December 27, 1996. This appeal

followed.
DISCUSSION

We have been counseled frequently by the Supreme Court
"that federal courts have a strict duty to exercise the juris-
diction that is conferred upon them by Congress." Quack-
enbush v. Allstate Ins. Co., --- U.S. ----, ----, 116 S.Ct.
1712, 1720, 135 L.Ed.2d 1 (1996). "Abdication of the obli-
gation to decide cases can be justified under [the doctrine of
abstention] only in the exceptional circumstances where the
order to the parties to repair to the state court would clearly
serve an important countervailing interest." Colorado River
Water Conservation Dist. v. United States, 424 U.S. 800,
813, 96 S.Ct. 1236, 1243, 47 L.Ed.2d 483 (1976) (quota-
tion omitted).

The state argues that the instant case provides such "ex-
ceptional circumstances," and urges abstention under the >
Younger doctrine. Under Younger, federal courts may "re-
frain from hearing cases that would interfere with a pending
state criminal proceeding or with certain types of state civil
proceedings," Quackenbush, --- U.S. at ----, 116 S.Ct. at
1721 (citation omitted), such as civil enforcement proceed-
ings, see Huffman v. Pursue, Lid., 420 U.S. 592, 604, 95

A8

ee eT eee ee Dene ee we

a a

S.Ct. 1200, 1208, 43 L.Ed.2d 482 (1975), and proceedings
related to the integrity or administration of the state judicial
system, see, €.g., Juidice v. Vail, 430 U.S. 327, 334-35, 97
S.Ct. 1211, 1216-17, 51 L.Ed.2d 376 (1977) (civil con-
tempt). We have found Younger abstention appropriate
where "1) there is an ongoing state proceeding, 2) an im-
portant state interest is implicated, and 3) the plaintiff has
an avenue open for review of constitutional claims in the
state court." Hansel v. Town Court, 56 F.3d 391, 393 (2d
Cir.), cert. denied, --- U.S. ----, 116 S.Ct. 572, 133 L.Ed.2d

496 (1995).

There is little question that there is an ongoing state pro-
ceeding and that the Tobacco Companies could obtain
meaningful review of their federal claims in the state action.
However, we do not find that the federal action implicates
an important state interest within the meaning of Younger.

In determining whether the "important state interest" re-
quirement has been met, we consider whether the state ac-
tion concerns the central sovereign functions of state
government such that "exercise of the federal judicial power
would disregard the comity between the States and the Na-
tional Government." Pennzoil Co. v. Texaco, Inc., 481 U.S.
1, 11, 107 S.Ct. 1519, 1525, 95 L.Ed.2d 1 (1987). "[Wle
do not look narrowly to [the State's] interest in the outcome
of the particular case," but rather look to "the importance of
the generic proceedings to the State." New Orleans Pub.
Serv., Inc. v. Council of New Orleans, 491 U.S. 350, 365,
109 S.Ct. 2506, 2516, 105 L.Ed.2d 298 (1989), The bur-
den is on the state to establish that an important state inter-
est is implicated. See 7rainor v. Hernandez, 431 U.S. 434,
448. 97 S.Ct. 1911, 1920, 52 L.Ed.2d 486 (1977) (Black-

mun, J., concurring).

A9

In order to ascertain the "generic proceeding" involved in
the action brought by the state, we cannot focus solely or
chiefly upon the style of the state's pleading, such as the
particular causes of action pleaded or statutes invoked. We
must consider the underlying nature of the state proceeding
on which the federal lawsuit would impinge. For example,
in Pennzoil, the Supreme Court analogized the bond-
posting requirement. sought to be enjoined in that case to
the state contempt process at issue in Juidice, 430 U.S. 327,
97 § Ct. 1211, 51 L.Ed.2d 376, and described both of those
challenged state proceedings as "processes by which the
State compels compliance with the judgments of its courts."
481 U.S. at 13-14, 107 S.Ct. at 1527-28.

In the instant case, the Tobacco Companies seek a federal
court injunction prohibiting the state from collecting from
them monies expended by the state for treatment of
smoking-related illnesses.” Although the state pleads its
action in state court as an enforcement action pursuant to
CUTPA and the state antitrust law to prevent deception and
unfair and anticompetitive business practices--arguably im-
portant state interests--the underlying claim is more accu-
rately classified as a subrogation action grounded in tort.
See Philip Morris Inc. v. Harshbarger, 946 F.Supp. 1067,
1077 (D.Mass.1996). Notwithstanding certain other claims,

The state disputes that the Tobacco Companies’ suit is limited to
enjoining the recovery of money expended on Medicaid and other
health care costs, because the complaint asks the federal court to
enjoin the state "from prosecuting, imposing or enforcing liability
pursuant to the Threatened Lawsuit." (Compl.{ E.) However, read
in context, it seems clear that the Tobacco Companies are urging
the district court to enjoin on constitutional grounds an action for
monetary relief. ‘

Alo

lait

ad

WOR SASS CP ON EEE ST Se TED SA A te Moe

the primafy aim of the state is to obtain reimbursement from
the tobacco industry for expenditures caused by its allegedly
tortious conduct. This purpose has little to do with eradi-
cating unfair trade practices or anticompetitive business
practices. See, e.g., Witham v. ITT Hartford, No. CV
960132891, 1997 WL 325443, at *1 (Conn.Super.Ct. June
4, 1997) (purpose of CUTPA is to protect consumers from
unfair trade practices). A subrogation claim grounded in
tort is not a generic proceeding of great importance to the
state.

Moreover, as essentially a suit for money damages, it is
evident that the state action cannot be characterized accu-
rately as a “sovereign enforcement proceeding." The
monetary relief sought by the state also would be available
to a private citizen.” Connecticut General Statutes §
42-110g provides that any private party may seek to recover
actual damages suffered as a result of alleged CUTPA viola-
tions (as the state seeks to do in the instant action) and, in
its discretion, the court may also award the private party pu-
nitive damages and equitable relief. Similarly, while the
state is empowered under Connecticut General Statutes §
35-32 to bring actions in the name of the state or as parens
patriae for violations of the state antitrust laws, and is enti-
tled to recover treble damages, Connecticut General Stat-
utes § 35-35 also entitles private parties to recover treble
damages on their own behalf for antitrust violations. Thus,
on its face, the state action does not appear to differ greatly

“The state also seeks in the state action to recover civil penalties
under CUTPA, see Conn. Gen. Stat. Ann. § 42-1100(b) (West
Supp.1997), and the state antitrust law, see Conn. Gem Stat.
Ann. § 35-38 (West 1987). However, these claims do not affect
the nature of the state action, which primarily is to seck
reimbursement of health care expenditures.

All

from a private action under CUTPA, and the mere fact that
the state is involved as a party does not transform the action
into a “sovereign enforcement" proceeding. See Cate v.
Oldham, 707 F.2d 1176, 1183 (11th Cir.1983); see also
Moore v. Sims, 442 U.S. 415, 423 n. 8, 99 §.Ct. 2371, 2377
n. 8, 60 L.Ed.2d 994 (1979) (that the state is a party to an
action does not itself make Younger abstention appropriate).

Younger The state argues that 7rainor mandates absten-
tion when a state seeks to recover money for one of its pub-
lic assistance programs. See 431 U.S. at 444, 97 S.Ct. at
1917. However, the state action in 7rainor differs signifi-
cantly from the instant case. In 7rainor, the appellees
fraudulently concealed assets when applying for welfare
benefits. The state instituted a civil action to recoup the
benefit payments made to appellees. The Court found that
Younger abstention was appropriate in that case because the
state's suit was brought "to vindicate important state poli-
cies such as safeguarding the fiscal integrity of [its public as-
sistance] programs." /d. Moreover, the underlying civil
claim in 7rainor sought to vindicate some of the same inter-
ests that the state might have elected to pursue in a criminal
prosecution. See id. (plurality), 431 U.S. at 449, 97 S.Ct.
at 1920(Blackmun, J., concurring); Harshbarger, 946
F.Supp. at 1077.

The instant case does not involve a threat to the "fiscal in-
tegrity" of Connecticut's Medicaid program because no
fraud has been committed against that program. There is no
suggestion that any individual who received Medicaid bene-
fits in relation to a tobacco-related illness was not entitled to
those benefits. The mere fact that conduct results in ex-
pense to a state program is not enough to bring an action to
terminate that conduct within the scope of 7rainor. Nor

Al2

can every initiative by a state to improve fiscal soundness by
getting money be deemed a safeguard of "fiscal integrity."
This action, like a subrogation action, primarily concerns the
apportionment of loss based upon theories of tort liability--
who should be responsible for paying for the injuries suf-
fered by those who contracted tobacco-related illnesses. It
bears little relation to the state's administration of its Medi-
caid or general assistance program and does not implicate
the programs’ "fiscal integrity." Therefore, Trainor does
not compel us to abstain under the Younger doctrine.

CONCLUSION

For the foregoing reasons, the decision of the district court
is reversed and remanded. Upon remand, the district court,
in its discretion, may consider whether abstention is appro-
priate under the Pullman doctrine.

Al3

UNITED STATES DISTRICT COURT
“= DISTRICT OF CONNECTICUT

PHILIP MORRIS INC.
R.R. REYNOLDS TOBACCO CO., ;
BROWN & WILLIAMSON TOBACCO CO.,_ :

LORILLARD TOBACCO CO.
Plaintiffs, : Civil No.
: 3:96CV1221 (PCD)
-VS-
RICHARD BLUMENTHAL,

ATTORNEY GENERAL OF CONNECTICUT, :
Defendant.

RULING ON MOTION TO DISMISS

Defendant moves to dismiss under the Younger v. Har-
ris abstention doctrine and pursuant to the Anti-Injunction
Act, 28 U.S.C. § 2283. For the reasons below, defendant's
motion is granted.

I. BACKGROUND

Plaintiffs ("Tobacco Companies") filed suit in district
court (the "present action") to enjoin defendant (the "Attor-
ney General") from filing an impending suit in state court.
Shortly after the present action was filed, the Attorney Gen-
eral in fact filed suit in Connecticut Superior Court. The
state court action seeks damages and injunctive relief for

Al4

SE ee ee ea eRe

alleged violations of state antitrust law, state unfair trade
practice law, and state common law. The Tobacco Compa-
nies removed the state court action to district court. The
removed case came before the Honorable Janet Bond Arter-
ton. The Attorney General moved to dismiss the present
action and to remand the removed case to state court where
originally filed, arguing that removal was improper due to a
lack of subject matter jurisdiction.

The motion to dismiss the present action was denied with-
out prejudice pending resolution of the subject matter juris-
diction issue in the removed case. On October 9, 1996, the
removed case was remanded to state court for lack of sub-
ject matter jurisdiction. The Attorney General then renewed
the motion to dismiss the present action.

fl. ANALYSIS

A. Abstention Under Younger v. Harris

The Tobacco Companies' action raises the issue of federal

court interference with pending state litigation. The Su-
preme Court has noted that "[s]ince the beginning of this
country's history Congress has, subject to few exceptions,
manifested a desire to permit state courts to try state cases
free from interference by federal courts." Younger v. Har-
ris, 401 U.S. 37, 43, 91 S.Ct. 746, 750, 27 L.Ed.2d 669
(1971). Federalism requires comity, which Justice Black
defined as.

a recognition of the fact that the entire country is made up
of a Union of separate state governments, and a continuance
of the belief that the National Government will fare best if
the States and their institutions are left free to perform their
separate functions in their separate ways. This, perhaps for

Al5

lack of a better and clearer way to describe it, is referred to
by many as "Our Federalism" .

Id. at 44, 91 S.Ct. at 750. Therefore, "the normal thing to
do when federal courts are asked to enjoin pending pro-
ceedings in state courts is not to issue such injunctions." /d.
at 45, 91 S.Ct. at 751. Although Younger addressed fed-
eral actions to enjoin state criminal proceedings, the same
principals of comity mandate extreme caution before enjoin-
ing certain kinds of state civil proceedings as well. See,
e.g., Huffman v. Pursue, Ltd., 420 U.S. 592, 604, 95 S.Ct.
1200, 1208, 43 L.Ed.2d 482 (1975); Middlesex County
Ethics Comm. v. Garden State Bar Ass'n, 457 U.S. 423,
432, 102 S.Ct. 2515, 2521, 73 L-Ed.2d 116 (1982).

Abstention under Younger is appropriate when: "1) there
is an Ongoing state proceeding; 2) an important state inter-
est is implicated; and 3) the plaintiff has an avenue open for
review of constitutional claims in the state court." Hansel v.
Town Court for Town Of Springfield, 56 F.3d 391, 393 (2d
Cir.1995). When these conditions are met, abstention is
obligatory. See Colorado River Water Cons. Dist. v. U.S.,
424 U.S. 800, 816 n. 22, 96 S. Ct 1236, 1245 n. 22, 47
L.Ed.2d 483 (1976).

1. Ongoing State Proceeding

There clearly is an ongoing state proceeding in the present
case. The question is whether this element requires that the
state proceeding be brought before the federal action. The
typica! scenario, as in Younger, is that the state action came
first. However, the Supreme Court has held that Younger
also applies in cases where the federal action was filed

Al6

Sp bak aa he te

Fae RH Ee ee G2.

Paes a

hn caR anise sh ehe TR Rd SE

wih en ikea tee

:
|
|

preemptively. Hicks v. Miranda, 422 U.S. 332, 95 S.Ct.
2281, 45 L.Ed.2d 223 (1975).

The Tobacco Companies argue that Steffel_v. Thompson,
415 US. 452, 94 S.Ct. 1209, 39 L.Ed.2d 505 (1974), not
Hicks, controls. Under Steffel, federal courts need not ab-
stain under Younger if there is no pending state proceeding,
lest "the hapless plaintiff [find himself] between the Scylla of
intentionally flouting state law and the Charybdis of forgo-
ing what he believes to be constitutionally protected activity
in order to avoid becoming enmeshed in a criminal proceed-
ing." Steffel, 415 U.S. at 463, 94 S.Ct. at 1217... However,
Steffel applies when there is no pending state proceeding.
The Supreme Court in Hicks specifically distinguished that
scenario from one in which there is a pending state proceed-
ing which, in a race to the courthouse, happened to be filed
second:

Neither Steffel v. Thompson, 415 U.S. 452
[94 S.Ct. 1209, 39 L.Ed.2d 505] (1974), nor
any other case in this Court has held that for
Younger v. Harris to apply, the state criminal
proceedings must be pending on the day the
federal case is filed. Indeed, the issue has
been left open; and we now hold that where
state criminal proceedings are begun against
the federal plaintiffs after the federal com-
plaint is filed but before any proceedings of
substance on the merits have taken place in
the federal court, the principles of Younger
v. Harris should apply in full force.

Hicks. 422 U.S. at 349, 95 S.Ct. at 2292 (footnote
omitted).

Al7

-——— The Tobacco Companies attempt to distinguish Hicks on
several other grounds. First they argue that Hicks applies
only to criminal, not civil, proceedings. This argument is
without merit. As discussed above, Younger applies to cer-
tain types of civil actions. Hicks applies to civil proceedings
to the same extent that Younger does.

Second, the Tobacco Companies distinguish Hicks on the
grounds that the state proceedings brought in that case
could only have been brought in state court, not in federal
court. However, the only reason why the claims in Hicks
could have been brought uniquely in state court is that they
were criminal charges. The distinction therefore is irrele-
vant.and merely rehashes the argument that Hicks only ap-
plies to state criminal proceedings. Furthermore, the cases
cited do not support this argument.

Finally, the Tobacco Companies argue that "comity works
both ways": Respect for federalism would have the state.
not the federal, court abstain. However the only case cited,
Chaulk Services v. Massachusetts Commission Against Dis-
crimination, 70 F.3d 1361 (1st Cir.1995), must be distin-
guished. In Chaulk the state administrative action interfered
with a federal statutory and administrative system constitu-
tionally adopted by congress. There is no such federal ad-
ministrative preemption in the present action.

Accordingly, there as an "ongoing proceeding" for
Younger purposes.

Als

2. Important State Interest

Abstention is proper under Younger in civil cases
only if the proceedings implicate “important state interests."
te A n B
Assn, 457 U.S. 423, 432, 102 S.Ct. 2515, 2521, 73
L.Ed.2d 116 (1982). Civil actions by the state which are
“akin to a criminal prosecution" have been held important
state interests. Huffman, 420 U.S. at 604, 95 S.Ct. at 1208
(civil enforcement of anti-obscenity laws). State enforce-
ment of attorney disciplinary rules are another example.
Middlesex, 457 U.S. 423, 102 S.Ct. 2515. Phrased more
generally, important state interests include "[p]roceedings
necessary for the vindication of important state policies or
for the functioning of the state judicial system." Id. at 432,

102 S.Ct. at 2521.

The Attorney General's claims under the Connecti-
cut Unfair Trade Practices Act ("CUTPA") and under Con-
necticut antitrust law are important state interests. Both
claims are under statutory schemes which contemplate civil
enforcement actions by state authorities to effect state pol-
icy. See C.G:S. § 42-110m(a) (Commissioner of Consumer
Protection can ask Attorney General to sue in name of the
state under CUTPA); C.GS. § 35-32(a) ("The attorney
general, in the name of the state and on behalf of the people
of the state, shall enforce [the Connecticut Antitrust Act]").
These laws are mechanisms for the state to enforce its im-
portant interest in fair trade in Connecticut.

The Tobacco Companies urge following Philip Mor-
ris v. Harshbarger, 1996 WL 676807, 946 F.Supp. 1067
(D.Mass.1996). In Harshbarger Tobacco Companies also
preemptively filed suit to enjoy a state court action by the
Massachusetts Attorney General. The Massachusetts Dis-
trict Court declined to abstain under Younger because it did

Al9

not find an important state interest. The Massachusetts At-
torney General's action; which sought reimbursement for
Medicaid expenditures, was found to be "classically in the
nature of subrogation," and accordingly not an important
state interest. However, Harshbarger must be distinguished
because the Massachusetts Attorney General's suit in state
court did not allege violations of state unfair trade practice
and antitrust law, as does the Connecticut state court ac-
tion. It is therefore unnecessary to address the merits and
applicability of Harshbarger, since the Attorney General's
CUTPA and antitrust claims do implicate an important state
interest.

The Tobacco Companies attempt to gloss over the
absence of unfair trade practice and antitrust claims in the
Massachusetts case by pointing out that the underlying state
complaints in the two cases are "predicated on virtually
identical factual allegations." Surreply Mem. at 2. This is
irrelevant. The Attorney General has alleged an important
state interest by invoking CUTPA and Connecticut antitrust
laws, not merely by the nature of the factual allegations.

The Tobacco Companies argue that Harshbarger
controls because the Massachusetts attorney general sought
non-monetary relief similar to the present action, although
without alleging unfair trade practice or antitrust claims.
This argument misses the point. The existence of an impor-
tant state interest for Younger purposes does not depend on
whether the relief sought is monetary or injunctive. Rather,
it depends on the nature of the claim brought in the underly-
ing state court action. It is therefore irrelevant that similar
relief was sought under different laws, since it is the claim,
not the relief, which determines the existence of an impor-
tant state interest. As discussed above, the Connecticut
state court action's allegations constitute an important state
interest. i

A20

Bia ts aR Nl EC PRT gE ee eT n

EE ee ee Pee hy ee ee eg

The fact that the Tobacco Companies’ complaint in
the present action only seeks to enjoin state court imposi-
tion of monetary, as opposed to injunctive, relief is also ir-
relevant for abstention purposes. The important state
interest element of Younger does not depend on the relief
sought by the federal plaintiff. Nor does it turn on whether
the state court action seeks monetary or injunctive relief.

Accordingly, the important state interest element of
Younger is satisfied.

3. Avenue Of Review For Constitutional Claims In State
Court |

The Supreme Court has held that “when a litigant
has not attempted to present his federal claims in related
state-court proceedings, a federal court should assume that
state procedures will afford an adequate remedy, in the ab-
sence of unambiguous authority to the contrary." ennzoil
v. Texaco, 481 US. 1, 15, 107 S.Ct. 1519, 1528, 95
L.Ed.2d 1 (1987). The Tobacco Companies do not chal-
lenge this element of Younger. P!I.'s Mem. in Opp. at 10.
Since there are no doubts regarding the adequacy of the To-
baceo Companies’ avenue of review for constitutional claims
in Connecticut state court, this element of Younger is
satisfied.

B. Other Arguments Raised By The Tobacco Companies
The Tobacco Companies mischaracterize the rela-
tionship between the Younger abstention doctrine and Ex
Parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714
(1908), which "established the doctrine that when absolutely
necessary for protection of constitutional rights courts of
the United States have power to enjoin state officers from
instituting criminal actions." Fenner_v. Boykin, 271 US.

A2|

240, 243, 46 S.Ct. 492, 493, 70 L.Ed. 927 (1926). Ex
Parte Young held that there is the requisite subject matter
jurisdiction for such suits. Younger abstention is based on
federalism, not on lack of subject matter jurisdiction. Thus
when an action is brought pursuant to Ex Parte Young, but
falls within the requirements of Younger and its progeny,
abstention is appropriate. See Younger, 401 U.S. at 45, 91
S.Ct. at 751.

The Tobacco Companies make a puzzling argument
that claims in the federal action which seek injunctions
against imposition of liability for future, as opposed to past,
sales of tobacco should not be barred under Younger. This
argument is based on mis-cited cases and faulty logic.
Wooley v. Maynard, 430 U.S. 705, 97 S.Ct. 1428, 51
L.Ed.2d 752 (1977), does not stand for the proposition that
ongoing state proceedings can somehow be severed for
Younger purposes into past and future liability. In Wooley,
there were no ongoing state proceedings at issue--only fail-
ure to seek state appellate review of prior convictions under
the same law (covering up New Hampshire's "Live Free or
Die" motto on a car license plate). Wooley is thus
irrelevant.

There is furthermore no logical base to this argu-
ment. Nothing indicates that the state court would take the
unprecedented step of imposing liability for sales which
have not yet occurred. The outcome of the state litigation,
whatever that may be, will affect future liabilities under the
familiar doctrine of res judicata. Injunctions are always
prospective. But these truisms have no bearing on Younger
abstention.

The Tobacco Companies also argue that abstention
analysis in this case should be governed by Pullman, not
Younger, abstention. See R.R. Comm'n of Texas v. Pull- ©
man, 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941).

A22

However, these doctrines are not mutually exclusive. Since
abstention is appropriate under Younger, as discussed
above, Pullman analysis is thus unnecessary.

Ill. CONCLUSION

Defendant's renewed motion to dismiss (doc 44),
dated October 10, 1996, is granted.

SO ORDERED.

Dated at New Haven, Connecticut, December 23,
1996.

s/ Peter C. Dorsey
Peter C. Dorsey
Chief United States District Judge

RETURN DATE: AUGUST 13, 1996 : SUPERIOR COURT
STATE OF CONNECTICUT : JUDICIAL DISTRICT OF
: STAMFORD/NORWALK ~
Vv.
PHILIP MORRIS, INC.; R.J. REYNOLDS

TOBACCO COMPANY; BROWN &
WILLIAMSON TOBACCO CORPORATION:
B.A.T. INDUSTRIES P.L.C.; LORILLARD
TOBACCO COMPANY; LIGGETT GROUP,
INC., UNITED STATES TOBACCO : AT STAMFORD
COMPANY; HILL AND KNOWLTON, INC.;
THE COUNCIL FOR TOBACCO RESEARCH -
U.S.A. INC.; and THE TOBACCO
INSTITUTE, INC. : JULY 18, 1996

COMPLAINT

The State of Connecticut, by its Attorney General
Richard Blumenthal, brings this/action to obtain monetary,
injunctive and other equitable relief, and complains and al-
leges as follows: |

I. NATURE OF THE ACTION

1. For years, and continuing to date, the major
manufacturers of tobacco products and their agents have
engaged in a conspiracy to mislead, deceive and confuse the .
State of Connecticut and its residents regarding the evi-
dence that the use of tobacco products causes debilitating
and fatal disease and that the nicotine in tobacco products is
a powerfully addictive-substance. Although these manufac-
turers promised the Connecticut public that they would lead
the effort to discover and disclose the truth about tobacco
products and health, they have, in fact, systematically sup-
pressed and concealed material information and waged an
aggressive campaign of disinformation about the health

A24

PP Me ee tes Som

Lire ynics etoage

abi ee RB

pg Re eae a RRR SE

ba IT FFIEC: th Peo GRA

F
4
a
3
5
bs
a
q
.
a
“4
7

consequences caused by their products. The tobacco com-
panies have taken these actions, even though they have
known for years, based on their own secret research, that
their products often injure or kill the consumer when used
exactly as intended.

2. The major manufacturers of tobacco products
and the other defendants have known for decades, on the
basis of their own long-concealed research, that nicotine is
addictive. At the same time, at least certain tobacco compa-
nies have developed sophisticated techniques to manipulate
the amount of nicotine delivered by their tobacco products
to the users so as to create and sustain addiction. Yet pub-
licly they have denied, and continue to deny, that nicotine is
addictive and that they manipulate the nicotine delivery of
tobacco products.

3. The tobacco companies and the other defendants
are engaged in this course of conduct despite their knowl-
edge that the vast majority of new users of tobacco prod-
ucts are children and adolescents. Each year, these
companies spend millions of dollars on marketing and public
relations in Connecticut to attract children and adolescents,
with the effect th.. ach year, more Connecticut children
and adolescents begin using and continue to use tobacco
products. The Centers for Disease Control and Prevention
("CDC") has reported that almost 90% of all smokers start
before the age of eighteen. Every day more than 3,000
American teenagers begin smoking Surveys show that in
Connecticut, 28.5% of high school males and 35% of high
school females smoke, and as many as 15.5% of male high
school students use smokeless tobacco. The CDC has de-
termined that, nationwide, 11.9% of all males between the
ages of 12 and 17 use smokeless tobacco products. The to-
bacco companies direct their products at children and

adolescents, who cannot legally purchase them, as a central
part of the manufacturers’ business strategy.

4. Thousands of Connecticut residents die each
year from using the defendants’ tobacco products. The
State of Connecticut is required to spend millions of dollars
annually to purchase or provide medical and related services
for Connecticut residents suffering from tobacco-related
diseases. At the same time the manufacturers of tobacco
products reap huge profits from the sale of tobacco prod-
ucts in Connecticut.

5. The State of Connecticut has a long-standing
policy of preventing minors from using tobacco products
and of preventing anyone from facilitating minors’ access to
or desire for such products. It is a crime in Connecticut to
"sell, give or deliver to any minor under 18 years of age to-
bacco in any form."

6. The State of Connecticut has a nearly 350 year-
old public policy to pay from the public fisc the health care
costs of its needy residents, a public policy that has long
predated defendants' marketing and sale of tobacco prod-
ucts in Connecticut. Since 1650, the year of the earliest re-
corded code of Connecticut, the coionial and state
legislative bodies have undertaken to pay these health care
costs. In the past ten years alone, the State of Connecticut
has spent over $13 billion in health care costs for its needy
residents. Since the earliest days of this state policy, the
State of Connecticut also has had a policy of recovering
those costs from those who should have paid such costs.

Il. THE PARTIES

A. THE PLAINTIFF

7. The State of Connecticut, by its Attorney Gen-
eral Richard Blumenthal, brings this action on its own

A26

i
:
i
|
t
:

behalf, on behalf of its Commissioners and agencies, includ-
ing the Commissioner of the Department of Social Services,
and as parens patriae, on behalf of residents of the State of
Connecticut. This action is brought pursuant to the author-
ity granted, inter alia, by Connecticut common law, Conn.
Gen. Stat. §§ 3-125, 42-110m, 35-32 and 33-301. Claims
herein pursuant to the Connecticut Unfair Trade Practices
Act are brought at the request of the Commissioner of Con-
sumer Protection of the State of Connecticut.

8. The State of Connecticut brings this action to ob-
tain monetary, injunctive and other equitable relief. The
State of Connecticut seeks to. prevent continued violations
of law and duties by the defendants, to cause disgorgement
of defendants’ tobacco-related profits and gains and to re-
cover actual and punitive damages on its own behalf and on
behalf of its residents, including, inter alia, the damages to
its general economy caused by the use of tobacco products.
These damages include, inter alia, past and future expendi-
tures for medical assistance provided under Connecticut's
Medicaid program pursuant to Conn. Gen. Stat. § 17b-260
et seq.; medical assistance provided under the General As-
sistance Medical Assistance Program pursuant to Conn.
Gen. Stat. § 17b-220 et seq.; the costs, both medical and
non-medical, of caring for persons with tobacco-related ill-
nesses who receive services through hospitals, health care
facilities, residential facilities and other similar facilities
owned, operated or maintained by the State of Connecticut
or facilities under contract to the State to render similar
services; and health care benefits for State of Connecticut
employees and retirees, including sick leave and the provi-
sion of health insurance.

A27

B. THE DEFENDANTS

9. Philip Morris Incorporated ("Philip Morris") is
a Virginia corporation with its principal place of business at
120 Park Avenue, New York, New York 10017. Among
other things, Philip Morris manufactures and distributes, or
during times relevant herein manufactured and distributed,
tobacco products under the brand names of Marlboro, Vir-
ginia Slims, Merit, Benson & Hedges, Cambridge, Saratoga
and Parliament.

10. R.J. Reynolds Tobacco Company ("RJR") is a
New Jersey corporation with its principal place of business
at North Main Street, Winston-Salem, North Carolina
27102. Among other things, RJR manufactures and distrib-
utes, or during times relevant herein manufactured and dis-
tributed, tobacco products under the brand names of Camel,
Winston, Salem, Vantage, Doral and Now.

11. Brown & Williamson Tobacco Corporation
("Brown & Williamson") is a Delaware corporation with its
principal place of business at 1500 Brown & Williamson
Tower, Louisville, Kentucky 40202. The American To-
bacco Company ("ATC") was purchased by Brown & Wil-
liamson (or its parent or affiliate) and merged into Brown &
Williamson, and Brown & Williamson has succeeded to the
liabilities of ATC. Among other things, Brown & William-
son manufactures and distributes, or during times relevant
herein Brown & Williamson or ATC manufactured and dis-
tributed, tobacco products under the brand names of Kool,
Belair, Raleigh, Barclay, Viceroy, Lucky Strike, Pall Mall,
Tareyton, and Bull Durham.

12. B.A.T. Industries P.L.C. ("BAT") is a British
corporation with its principal place of business at Windsor
House, 50 Victoria St., London. Through a succession of
intermediary corporations and holding companies, BAT is

A28

the sole shareholder of Brown & Williamson. Through
Brown & Williamson, BAT has placed tobacco products
into the stream of commerce with the expectation that sub-
stantial sales of tobacco products would be made in the
United States and in Connecticut. BAT has also conducted,
or through its agents, subsidiaries, associated companies,
and/or co-conspirators, conducted significant research for
Brown & Williamson on the topics of smoking, disease and
addiction. Brown & Williamson also sent to England re-
_ search conducted in the United States on the topics of
smoking, disease and addiction in order to remove sensitive
and inculpatory documents from United States jurisdiction,
and such documents were and are subject to BAT's control.
BAT is a participant in the conspiracy described herein and
has caused harm in Connecticut.

13. Lorillard Tobacco Company ("Lorillard") is a
Delaware corporation with its principal place of business lo-

| cated at 1 Park Avenue, New York, New York 10016. Lor-

illard is a successor to P. Lorillard Company. Among other
things, Lorillard manufactures and distributes, or during
times relevant herein manufactured and distributed, tobacco
products under the brand names of Old Gold, Kent, New-
port and True.

14. Liggett Group, Inc. ("Liggett") is a Delaware
corporation with its principal place of business at 700 West
Main Street, Durham, North Carolina 27702. Among other
things, Liggett manufactures and distributes, or during times
relevant herein manufactured and distributed, tobacco prod-
ucts under the brand names of L&M, Chesterfield, Eve,
Lark and Dorado.

15. United States Tobacco Company ("US To-
bacco") is a Delaware corporation with its principal place of
business located at 100 West Putnam Avenue, Greenwich,
Connecticut 06830. Among other things, US Tobacco now

A29

manufactures and distributes smokeless tobacco products
under the brand names of Happy Days, Skoal and Copenha-
gen. US Tobacco is the principal manufacturer of smoke-
less tobacco products in the United States. During times
relevant herein, US Tobacco also manufactured and distrib-
uted cigarettes.

16. Hill and Knowlton, Inc. ("Hill and Knowlton")
is a New Jersey corporation with its principal place of busi-
ness located at 420 Washington Avenue, New York, New
York.

17. The Council for Tobacco Research - U.S.A,
Inc. ("CTR"), successor in interest to the Tobacco Industry
Research Committee ("TIRC"), is a non-profit corporation
organized under the laws of the State of New York with its
principal place of business at 900 3rd Avenue, New York,
New York 10022.

18. The Tobacco Institute, Inc. ("Tobacco Insti-
tute") is a corporation organized under the laws of the State
of New York with its principal place of business at 1875 I
Street N.W., Suite 800, Washington, D.C. 20006.

19. As used in this Complaint, the term "defendant"
includes all predecessor and successor entities to the named
defendants.

20. Philip Morris, RJR, Brown & Williamson (in-
cluding ATC), BAT, Lorillard, Liggett and US Tobacco are
referred to in this Complaint as the "tobacco companies."

21. As used in this Complaint, the term "tobacco
products" refers to cigarettes and non-smoking tobacco
such as chewing tobacco and snuff. Non-smoking tobacco
is sometimes referred to herein as "smokeless tobacco."

22. At all relevant times, the tobacco companies to-
gether controlled virtually 100% of the tobacco products
markets in Connecticut and in the United States.

A30

Print oe ne en a aa a

23. The claims against all defendants arise out of
contracts to be performed in whole or in part in the State of
Connecticut; business solicited in the State of Connecticut;
the production, manufacture and/or distribution of goods by
the defendants with the reasonable expectation that the
goods would be used or consumed in the State of Connecti-
cut; the production, manufacture and/or distribution of
goods by the defendants that were used or consumed in the
State of Connecticut; and tortious-conduct by the defen-
dants in or having an effect in the State of Connecticut.

Ill. NATURE OF DEFENDANTS' WRONGFUL
COND AND CONSP

A. IN GENERAL

24. This action arises out of an ongoing course of
wrongful conduct by each defendant individually gis in con-
spiracy with each other.

25. Defendants have pursued a course of conduct
and conspiracy of deceit and misrepresentation against the
public in order to promote and maintain sales of tobacco
products, and the profits derived therefrom, ‘ » shield them-
selves from having to pay the health care costs of to-
bacco-related diseases and to shift those costs to others,
such as the State of Connecticut.

26. The means by which the defendants have carried
out their conspiracy are twofold: first, they agreed to repre-
sent falsely to the public that they were creating a new, un-
biased and therefore trustworthy source to answer questions
about smoking and health, and second, they counted on the
public's acceptance of their representations of such trust-
worthiness to misrepresent, suppress, distort and confuse
the facts about the health dangers of tobacco products, in-
cluding nicotine addiction. The tobacco companies set their
plan in motion by Creating a joint industry research

A31

organization in 1954. Since that time, they have used the
credibility gained by false claims of disinterested industry-
funded research to misrepresent the material facts to the
public. Although knowing of the serious health dangers in-
herent in the use of their products and the addictive nature
of their products, the defendants have utilized the above
scheme to further their fallacious arguments that there is in-
sufficient “objective” research to determine if use of tobacco
products causes disease and death, and that tobacco prod-
ucts are not addictive.

27. The two interconnected strategies of misrepre-
senting their objectivity to gain credibility, and using that
credibility better to deceive the public about smoking and
health, have been repeated consistently for more than four
decades. Defendants have engaged in a continuous conspir-
acy to deceive the public regarding facts material to the de-
cision to purchase tobacco products.

28. Moreover, as internal industry research con-
firmed the dangers of using tobacco products and addiction,
the defendants’ deception rose to a new level: although
promising the public that they would make full disclosure of
the results of their research, defendants concealed their own
negative health and addiction research results from both the
public and public health officials. These research results
have still not been voluntarily released.

29. The defendants also have not disclosed to the
public that the tobacco companies manipulate and control
the content and delivery of nicotine in their products to cre-
ate and sustain consumers’ addiction to tobacco products.

30. The success of the industry's campaign of deceit
and misinformation depended, in large part, on the tobacco
companies acting in concert._ Without the agreement of
each tobacco company to suppress the truth about the

A32

health consequences and addictive nature of using tobacco
products, the deception that the joint industry research ef-
forts were objective would be revealed, and the substantive
claim that “not enough facts are known" to indict the use of
tobacco products would ring hollow. The tobacco compa-
nies agreed to come together and to stay together in order
to accomplish what would not have otherwise occurred --
the unified and consistent distortion of public information
about the use of tobacco products, health and addiction.

31. The defendants were aware that unless they
took the actions they agreed to take and subsequently took,
the volume of their sales of tobacco products would sub-
stantially decrease, and accordingly the profits the tobacco
companies would realize would substantially diminish. De-
fendants were also aware that if they were required to pay
the health care costs caused by the use of their products,
then the tobacco companies’ profits would have been sub-
stantially decreased.

32. The non-tobacco company defendants have
acted in concert with the ei ob companies by
l

implementing marketing and pub lations strategies, fa-
cilities and operations to carry out the purpose and effect of
the conspiracy and wrongful conduct alleged herein.

B. 1953 "BIG SCARE" AND THE JOINT INDUSTRY
RESPONSE

33. In December of 1953, Dr. Ernest L. Wynder of
the Sloan-Kettering Institute published the results of a study
in which he painted the shaved backs of mice with cigarette
smoke, providing biological evidence that cigarette smoke
caused cancer. The previous year, a British researcher, Dr.
Richard Doll, published a statistical analysis showing that
lung cancer was more common among people who smoked
and that the risk of lung cancer was directly proportional to

A33

the number of cigarettes smoked. The widespread reporting
of these studies caused what officials of the tobacco compa-
nies later called the "Big Scare."

34. The tobacco products industry responded
quickly to the mounting adverse publicity of a link between
use of tobacco products and cancer. The Chief Executive
Officers of the leading tobacco companies met on December
15, 1953, at the Plaza Hotel in New York City. Included at
that meeting were representatives of Philip Morris, RJR,
Brown & Williamson, ATC, Lorillard, Liggett and US To-
bacco. Also in attendance was the public relations firm of
Hill and Knowlton, which was to play a central role in for-
mulating and executing the industry response.

35. According to a Hill and Knowlton memoran-
dum summarizing the meeting, industry executives viewed
the problem as "extremely serious and worthy of drastic ac-
tion." The document continues, "officials stated that sales-
men in the industry are frantically alarmed and ‘that the
decline in tobacco stocks on the stock exchange market has
caused grave concern .... "

36. The participants in the meeting agreed that a
strong public relations response from the industry was nec-
essary. From the beginning, the emerging research linking
use of tobacco products and cancer was viewed by these de-
fendants as a public relations problem, not a public health
issue. According to the Hill and Knowlton memorandum
summarizing the meeting:

a. The Chief Executive Officers of all the
leading tobacco companies, except Liggett,
“agreed to go along with a public relations
program on the health issue."

A34

b. "They are also emphatic in saying that the
entire activity is a long-term, continuing pro-
gram, since they feel that the problem is one
of promoting cigarettes and protecting them
from these and other attacks that may be ex-
pected in the future."

c. "The current plans are for Hill and
Knowlton to serve as the operating agency

. of the companies, hiring all the staff and dis-
bursing all funds."

C. CREATION OF TOBACCO INDUSTRY RE

EARCH COMMITTEE

37. Nine days later, Hill and Knowlton presented a

detailed recommendation to the tobacco companies and oth-

ers. The recommendation recognized the importance of

gaining the public trust, and avoiding the appearance of

bias, if the "procigarette" strategy was to be successful. Ac-
cording to the memorandum:

"[T]he grave nature of a number of recently
highly publicized research reports on the ef-
fects of cigarette smoking . . . have [sic] con-
fronted the industry with a serious problem
of public relations.

"It is important that the industry do nothing
to appear in the light of being callous to con-
siderations of health or of belittling medical
research which goes against cigarettes...

"The situation is one of extreme delicacy.

There is much at stake and the industry

group, in moving into the field of public rela-

tions, needs to exercise great care not to add
el to the flames."

a ip
m4
/

( i ne ;

38. As a result of the December 15, 1953 meeting
and the recommendations of Hill and Knowlton, Philip Mor-
ris, RJR, Brown & Williamson, ATC, Lorillard and US To-
bacco agreed to create the Tobacco Industry Research
Committee ("TIRC"). Liggett joined in 1964, the same year
the Surgeon General issued his first report linking cigarette
smoking to lung cancer. Also in 1964, TIRC changed its
name to the Council for Tobacco Research - USA, Inc.
("CTR"). :

39. A second entity, the Tobacco Institute, was
formed by tobacco companies in 1958 to assist in the indus-
try's lobbying and public relations needs. Hill and Knowl-
ton, however, continued to have substantial involvement in
both TIRC and the Tobacco Institute. Hill and Knowlton's
role in these organizations has been described by industry
participants as: "Straddling both and acting as a buffér for
each .... Hill and Knowlton decides whether questions from
outside individuals or organizations are to be directed to the
Tobacco Institute or the T.I.R.C. "

40. Hill and Knowlton coordinated the public rela-
tions activities of both TIRC and the Tobacco Institute. In
this role, Hill and Knowlton helped forge a multi-prong in-
dustry propaganda strategy to counter the growing evidence
that tobacco use causes adverse health consequences and
the- growing call for governmental regulation of tobacco
products. At a 1963 strategy meeting of TIRC, the To-
bacco Institute, Hill and Knowlton and representatives of
the tobacco companies, Hill and Knowlton's role in
responding to the anticipated Report of the Surgeon Gen-
eral was described:

"Because Phase I [of the Surgeon General's
Report] is expected to be scientific in nature,
T.L.R.C. expressed the belief that it will logi-
cally be the responsive agency, with Dr.

A36

Little or Mr. Hartnett as spokesman and with
Hill & Knowlton providing public relations
guidance. By the same token, the Tobacco
Institute believes that Phase II [dealing with
regulatory action] will probably be its pri-
mary concern, again with Hill & Knowlton's
counseling."

D.CONTROL OF TIRC BY TOBACCO COMPANIES
THR H L AND KNOWLTON
41. As had been proposed at the December 15,
1953 meeting, the tobacco companies, through their agent
Hill and Knowlton, operated and effectively controlled
TIRC.

' 42. TIRC's offices were located in the Empire State
Building, one floor below the Hill and Knowlton offices.
Internal documents confirm that Hill and Knowlton, and not
independent scientists, actually ran TIRC. A “highly confi-
dential" internal memo reported:

"Since the [TIRC] had no headquarters and
no staff, Hill and Knowlton, Inc. was asked
to provide a working staff and temporary of-
fice space. As a first organizational step,
public relations counsel assigned one of its
experienced executives, W.T. Hoyt, to serve
as account executive and handle as one of his
functions the duties of executive secretary

for the [TIRC]."

43. There has been substantial staff overlap between
Hill and Knowlton and TIRC (and later CTR). In 1954, 35
staff members of Hill and Knowlton worked full or part time
for TIRC. In that year, TIRC, a purported research firm,
paid $477,955 to Hill and Knowlton, the public relations

A37

arm of the tobacco companies. This amount constituted
over 50% of TIRC's entire operating budget.

E. THE TOBACCO COMPANIES' FALSE PROMISE
TO THE PUBLIC

44. On January 4, 1954, Philip Morris, RJR, Brown
~ & Williamson, ATC, Lorillard, US Tobacco and others an-
nounced the formation and purpose of TIRC, with a full
page newspaper advertisement entitled "A Frank Statement
to Cigarette Smokers." The statement appeared in 448
newspapers across the nation, reaching a circulation of
43,245,000 in 258 cities. The advertisement ran in the daily
newspapers in Connecticut, including newspapers in Hart-
ford, Waterbury, New Haven, Bridgeport and Stamford. As
set forth below, this advertisement included an unambiguous
pledge to the public, including the people of Connecticut
and those who advance and protect the public health, that
through TIRC these tobacco companies would conduct and
report objective and unbiased research regarding the use of
tobacco products and their effects on health.

45. The "Frank Statement to Cigarette Smokers"
stated in part:

a. "Recent reports on experiments with mice
have given wide publicity to a theory that
cigarette smoking is in some way linked with
lung cancer in human beings."

b. "Although conducted by doctors of pro-
fessional standing, these experiments are not
regarded as conclusive in the field of cancer
research."

c. "[T]here is no proof that cigarette smok-
ing is one of the causes [of lung cancer]."

d. "We accept an interest in people's health
as a basic responsibility, paramount to every
- other consideration in our business."

e. "We believe the products we ‘make are
not injurious to health."

f. "We always have and always will cooper-
ate closely with those whose task it is to
safeguard the public health."

g. "We are pledging aid and assistance to
the research effort into all phases of tobacco
use and health."

h. "For this purpose we are establishing a
joint industry group consisting initially of the
undersigned. This group will be known as
[the] TOBACCO INDUSTRY RESEARCH
COMMITTEE."

i. "In charge of the research activities of the
Committee will be a scientist of unimpeach-
able integrity and national repute. In addi-
tion there will be an Advisory Board of
scientists disinterested in the cigarette indus-
try. A group of distinguished men from
medicine, science, and education will be in-
vited to serve on this Board. These scientists
will advise the Committee on its research
activities. "

j. "This statement is being issued because we
believe the people are entitled to know
where we stand on this matter and what we
intend to do about it."

46. These representations were made by these de-
fendants for the purpose and with the effect that consumers
would consider the representations material to their

A39

decisions to purchase and use tobacco products. At that
time, and continuing to the present, these defendants knew
or should have known that their failure to fulfill the duty
they undertook, and other conduct as alleged herein, would
directly stabilize or increase the use of tobacco products.
They also knew that an increase in health care costs for to-
bacco products users, including health care costs that would
be incurred by the State of Connecticut, was the substan-
tially certain consequence of the past and continued use of
tobacco products.

47. By the spring of 1955, the self-defense propa-
ganda strategy recommended by Hill and Knowlton and im-
plemented by the industry through the "Frank Statement"
had made steady progress towards its desired results, in-
cluding‘securing the confidence of those to whom it was di-
rected. Hill and Knowlton reported to TIRC:

a. "[P]rogress has been made.... The first ‘big
scare’ continues on the wane."

b. "The research program of the [TIRC] has
won wide acceptance in the scientific world
as a sincere, valuable and scientific effort."

c. "Positive stories are on the ascendancy."

F. DEFENDANTS' KNOWLEDGE THAT TOBACCO
PRODUCTS USE IS HARMFUL

48. In the years following the 1954 "Frank State-
ment," and continuing to the present, the tobacco compa-
nies have repeatedly acted in breach of their assumed duty
to report objective facts on tobacco products use and
health. As evidence mounted through industry research and
truly independent studies that the use of tobacco products
causes cancer and other diseases, defendants continued pub-
licly to represent that. the link between tobacco use and hu-
man disease was not proven, despite the fact that even their

A40

own studies and information were to the contrary. Inter-
nally, defendants knew and acknowledged the veracity of
the scientific evidence demonstrating the health hazards of
using tobacco products and at the same time suppressed
such evidence where they could and attacked it when it did
appear.

49. Internal industry documents reveal, for example:

a. A 1956 memorandum from the Vice
President of Philip Morris' Research and De-
velopment Department to top executives at
the company regarding the advantages of
"ventilated cigarettes" stated that: "De-
creased carbon monoxide and nicotine are
relatea to decreased harm to the circulatory
system as a result of smoking .... Decreased
irritation is desirable ... as a partial elimina-
tion of a potential cancer hazard."

b. A 1958 memorandum sent to the Vice
President of Research at Philip Morris, who
later became a member of its Board of Direc-
tors, from a company researcher stated "the
evidence . . . is building up that heavy ciga-
rette smoking contributes to lung cancer ei-
ther alone or in association with physical and
physiological factors .. ."

c. A 1961 document presented to the Philip
Morris Research and Development Commit-
tee by the company's Vice President of Re-
search and Development included a section
entitled "Reduction of Carcinogens . in
Smoke." The document stated, in part:

i A4]

"To achieve this objective will require a ma-
jor research effort, because

- Carcinogens are found in practically every
class of compounds in smoke.

This fact prohibits complete solution of the
problem by eliminating one or two classes of
compounds. The best we can hope for is to
reduce a particularly bad class, i.e., the
polynuclear hydrocarbons, or phenols ....

- Flavor substances and carcinogenic sub-
stances come from the same classes, in many
instances." ?

d. A 1963 memorandum to Philip Morris’
President and CEO from the company's Vice
President of Research describes a number of
classes of compounds in cigarette smoke
which are "known carcinogens." The docu-
ment goes on to describe the link between
smoking and bronchitis and emphysema. "Ir-
ritation problems are now receiving greater
attention because of the general medical be-
lief that irritation leads to chronic bronchitis
and emphysema. These are serious diseases
involving millions of people. Emphysema is
often fatal either directly or through other
respiratory complications. A number of ex-
perts have predicted that the cigarette indus-
try ultimately may be in greater trouble in
this area than in the lung cancer field."

A42

Sok OE i ee See ae

FR IIR LG gy LAP LOE

e. Brown & Williamson and its parent com-
pany, BAT, researched the health effects of
nicotine and were aware early on, as re-
ported at a BAT Group Research Confer-
ence in November 1970, that "nicotine may
be implicated in the aetiology [cause] of car-
diovascular disease ...."

f. A 1961 "Confidential" memorandum from
the consulting research firm hired by Liggett
to do research for the company states:

"There are biologically active materials pre-
sent in

_ Cigarette tobacco. These are: a) cancer caus-

ing b) cancer promoting c) poisonous d)
stimulating, pleasurable, and flavorful."

g. A 1963 memorandum from the Liggett .
consulting research firm states:

"Basically, we accept the inference of a
causal relationship between the chemical
properties of ingested tobacco smoke and
the development of carcinoma, which is sug-
gested by the statistical association shown in
the studies of Doll and Hill, Horn, and Dorn
with some reservations and qualifications and
even estimate by how much the incidence of
cancer may possibly be reduced if the car-
cinogenic matter can be diminished, by an
appropriate filter, by a given percentage."

A43

50. These internal Liggett documents sharply con-
trast with the information Liggett provided to the Surgeon
General in 1963. Liggett withheld from the Surgeon General
the views of its researchers and consultants that the evi-
dence showed that the use of tobacco products causes hu-
man disease. Instead, the report Liggett presented to the
Surgeon General focused on alternative causes of disease,
such as air pollution, coffee, alcohol consumption, diet, lack
of exercise and genetics. Liggett criticized the known sta-
tistical association between smoking and mortality and vari-
ous diseases as “unreliably conducted" and "inadequately
analyzed." The Liggett report concluded that the associa-
tion between tobacco products and disease was inconclusive
and that diseases generally associated with tobacco products
were, in fact, due to other factors.

51. Philip Morris also concealed from the public its
actual views of the research conducted outside the influence
of the industry. In a 1971 memorandum, Dr. H. Wakeham,
then Vice President of Research and Development, stated in
referring to a recent study that found cigarette smoke inha-
lation caused lung cancer in beagles: "1970 might very
properly be called the year of the beagle. Early in the year,
the American Cancer Society announced that they had fi-
nally demonstrated the formation of lung cancer in beagles
by smoke inhalation in the now infamous Auerbach and
Hammond study." Although Dr. Wakeham criticized the
mice cancer studies, he conceded that "the beagle test was a
critical one . . . for the cigarette causation hypothesis."

52. Dr. Wakeham's memorandum demonstrates
Philip Morris’ approval of the industry's public dismissals of
these independent studies: "The strong opposition of the in-
dustry to the beagle test is indicative of a new, more aggres-
sive stance on the part of the industry in the smoking and
health controversy. We have gone over from what I have

A44

called the ‘vigorous denial’ approach, the take it on the chin
and keep quiet attitude, to the strongly voiced opposition
and criticism. I personally think this counter- propaganda is
a better stance than the former one."

53. Similarly, BAT's internal view of the validity of
mouse skin painting experiments differed markedly from the
view expressed in public statements. Minutes from a 1969
BAT research conference stated "[h]istorically, bioassay ex-
periments were undertaken by the industry with the object
of clarifying the role of smoke constituents in pulmonary
carcinogenesis. The most widely used of these methods
[was] mouse-skin painting .... In the foreseeable future, say
five years, mouse-skin painting would remain as the ultimate
court of appeal on carcinogenic effects."

54. Two years later a Brown & Williamson public
relations document stated that "[mJuch of the experimental
work involves mouse-painting or animal smoke inhalation
experiments .. . . [T]he results obtained on the skin of mice
should not be extrapolated to the lung tissue of the mouse,
or to any other animal species. Certainly such skin results
should not be extrapolated to the human lung."

G. DEFENDANTS' REPEATED DECLARATIONS OF
THE DUTY

55. The deceptions of the 1954 "Frank Statement to
Cigarette Smokers" were consistently renewed and repeated
by the industry. RJR Chairman Bowman Gray told Con-
gress in 1964: "I stated that we feel, and we are on public
record, that more research is needed and a great deal more
research is needed. We are doing what we can in our best
efforts to encourage and provide for this research." “If it is
proven that cigarettes are harmful, we want to do something
about it regardless of what somebody else tells us to do.
And we would do our level best. It's only human."

A45

56. Another advertisement co-sponsored by TIRC
and the Tobacco Institute, on behalf of the tobacco compa-
nies, called "A Statement about Tobacco and Health,”
stated:

“We recognize that we have a special re-
sponsibility to the public -- to help scientists
determine the facts about tobacco and health,
and about certain diseases that have been as-
sociated with tobacco use. We accepted this
responsibility in 1954 by establishing the
TIRC, which provides research grants to
independent scientists. We pledge continued
support of this program of research until the
facts are known. We shall continue all possi-
ble efforts to bring the facts to light."

57. Additional representations were made in 1970
when the tobacco companies, acting through the Tobacco
Institute, placed a number of advertisements similar to the
1954 "Frank Statement." One advertisement stated in part:

a. “After millions of dollars and over 20
years of research: The question about smok-
ing and health is still a question."

PR a een eee Pre eny M,: WEN eee ty oe tee POS aCUR Petr Rey ee V4 OY I em

b. “In the interest of absolute objectivity, the
tobacco industry has supported totally inde-
pendent research efforts with completely
non-restrictive funding."

Ne ey ee ae ee ge geo ale ee

c. "In 1954, the Industry established what is
now known as CTR, the Council for To-
bacco Research--USA, to provide financial
support for research by independent scien-
tists into all phases of tobacco use and

A46

a
health. Completely autonomous, CTR's re-

search activity is directed by a board of ten
scientists and physicians who retain their af-
filiations with their respective universities
and institutions. This board has full author-
ity and responsibility for policy, development
and direction of the research effort."

d. “The findings are not secret."

58. Another advertisement in 1970 stated that the
industry “believes the American public is entitled to com-
plete, authenticated information about cigarette smoking
and health .... The tobacco industry recognizes and accepts
a responsibility to promote the progress of independent sci-
entific research in the field of tobacco and health."

59. In 1972, Tobacco Institute President Horace
Kornegay testifying before Congress stated that "the ciga-
rette industry is as vitally concerned or more so than any
other group in determining whether cigarette smoking
causes human disease .... That is why the entire tobacco in-
dustry .. . since 1954 has committed a total of $40 million
for smoking and health research through grants to
independent scientists and institutions."

60. In March of 1983, Sheldon Sommers, M_D.,
scientific director of CTR, testified before Congress that:
“Cigarette smoking has not been scientifically established to
be a cause of chronic diseases, such as cancer, cardiovascu-
lar disease, or emphysema. Nor has it been shown to affect
pregnancy outcome adversely."

61. In 1984, RJR placed an editorial style adver-
tisement in The New York Times stating that "[s]tudies

which conclude that smoking causes disease have regularly
ignored significant evidence to the contrary.”

A47

62. In 1994, the chief executives of the tobacco
companies testified under oath before the Subcommittee on
Health and the Environment of the Committee on Energy
and Commerce, U.S. House of Representatives, chaired by
Congressman Waxman ("Waxman Subcommittee"). These
executives knowingly made material misrepresentations
and/or omissions to the Subcommittee about tobacco prod-
ucts, health and addiction, and in particular, stated that
nicotine is not addictive. These statements, as with the
other deceptive statements and misrepresentations cited in
this Complaint, were consistent with defendants’ practice of
providing disinformation to the public and were made with
the knowledge and intention that they would be widely dis-
seminated to the public, and communicated to Connecticut
consumers. These defendants' testimony to the Waxman
Subcommittee included the following:

a. Philip Morris President and CEO William
I. Campbell said, in response to what he de-
scribed as "a number of charges . . . leveled
against the tobacco industry generally, and
Philip Morris specifically, . . . our consumers
are being misled and when that happens
Philip Morris has and will continue to speak
out loudly and clearly. Our consumers de-
serve to know the truth ....". Campbell fur-
ther stated that:

i. “Philip Morris does not manipulate nor independ-
ently control the level of nicotine in our products."

ii. "Cigarette smoking is not addictive."

ii. "Philip Morris research does not establish that
smoking is addictive."

b. Andrew Tisch, then CEO of Lorillard, as-
serted that smoking does not cause cancer.

A48

"We have looked at the data and the data
that we have been able to see has all been
Statistical data that has not convinced me
that smoking causes death. "

c. RJR CEO James W. Johnston said that,
"smoking is no more ‘addictive’ than coffee,
tea or Twinkies."

d. US Tobacco's President Joseph Taddeo
stated:

i, “The assertion that smokeless tobacco
use can be addictive is without merit."

ii. "U.S. Tobacco does not in any way ma-
nipulate the nicotine level in its tobacco
products ...."

ili. "Oral tobacco has not been established as
a cause of oral cancer."

63. These continuing representations by defendants
to the public about sponsoring independent objective re-
search and bringing the truth to light were false and decep-
tive. The misrepresentations were made to gain the trust of
the public to further defendants’ scheme of distorting and
suppressing substantive information about smoking and
health in order to assure the continuing widespread sale and
use of tobacco products.

64. Defendants’ representations that their products
are not addictive were made despite a substantial body of
evidence, including evidence developed by the tobacco
companies themselves, indicating that nicotine is not only

A49

addictive, but is the reason why people smoke and that the
primary, if not sole, function of nicotine is to provide a.
pharmacological effect on the smoker that leads to addic-
tion. The tobac

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386013_2280%3A1. Public record. Not legal advice.