Minnesota Permits HMOs to Sue Tobacco Companies without Need to Be Purchaser of Products or to Prove Reliance on Company Statements. (Recent Court Decisions)

Article excerpt

MINNESOTA PERMITS HMOS TO SUE TOBACCO COMPANIES WITHOUT NEED TO BE PURCHASER OF PRODUCTS OR TO PROVE RELIANCE ON COMPANY STATEMENTS; HMOS MAY SEEK PAYMENTS FROM TOBACCO COMPANIES FOR AMOUNTS EXPENDED IN HEALTH CARE BASED ON ALLEGED MISREPRESENTATION UNDER STATE SALES LAWS.

Group Health Plan, Inc., v. Philip Morris, Inc., et al., 621 N.W.2d 2 (Minnesota Supreme Court--January 11, 2001)

The saga of claims against cigarette manufacturers continues. In the late 1990s, an alliance of state attorneys general brought claims against the major tobacco companies seeking reimbursement for public health funds spent on smoking-related diseases. The result was a multibillion-dollar settlement, including a large award of counsel fees for many of the lawyers who represented states on a contingency fee basis and often advanced their own funds to prosecute the litigation on behalf of the states. Minnesota did not participate in the omnibus settlement but instead went to trial against the tobacco companies and prevailed, arguably obtaining more funds than it would have gained as its share under the almost global state settlement.

But that is only the government-vs.-tobacco part of the story. In the aftermath of that litigation, private health providers such as insurers, health maintenance organizations (HMOs), and Blue Cross-Blue Shield plans have moved to bring similar reimbursement actions against cigarette manufacturers. One such action has been brought by major Minnesota-based HMOs in federal district court. In response to defense objections to the propriety of such claims, the federal court certified two questions for review by the Minnesota Supreme Court.

A "certified" question takes place when a federal court asks the relevant state supreme court to render a pronouncement on a matter of state substantive law so that the federal court may be properly informed of the correct applicable law. Although much federal court litigation involves federal law (the Constitution, U.S. statutes, international treaties, etc.), a good deal of the disputing in federal court is lodged in these courts because the litigants are from different states. But the controlling law is then usually the state law of the state with the closest connection to the controversy. Thus, the U.S. district court asked the Minnesota Supreme Court for guidance on the following two questions:

1. Must a private plaintiff bringing a claim of misrepresentation have been a purchaser of the product to have the right to bring a claim? The question was of course important because the HMOs were not asserting that they used cigarettes and became diseased (try to imagine an HMO with lung cancer). …