STATE OF WEST VIRGINIA
THIRTEENTH JUDICIAL CIRCUIT
KANAWHA COUNTY

March 31, 1997

Deborah L. McHenry

Managing Deputy Attorney General

State Capitol, Building I, Room 26-E

Charleston, WV 25305

Victor Woods

Assistant Attorney General

State Capitol, Building I, Room 26-E

Charleston, WV 25305

Robert B. King, Esq.

P.O. Box 3394

Charleston, WV 25333-3394

Leslie Wharton, Esq.

555 Twelfth Street, NW

Suite 1114

Washington, DC 20004-1202

Barbara McDowell, Esq.

Metropolitan Square

1450 G Street, NW

Suite 700

Washington, DC 20005-2088

Michael B. Victorson, Esq.

P.O. Box 1791

Charleston, WV 25326

Re: McGraw, et al. v. American Tobacco Company, et al.

Civil Action No. 94-C-1707

Dear Counsel:

The Court has reviewed the motions and memoranda relative to the dismissal of Counts Nine and Ten of the Third Amended Complaint. After careful review of the memoranda and the oral arguments of counsel, the Court is prepared to issue a ruling with respect to the outstanding motions to dismiss.

The motions to dismiss have been made pursuant to Rules 12(b)1 and 12(b)6 of the Rules of Civil Procedure. It is important to remember the scope and breadth of this Court's review when such a motion to dismiss is made. First, of course, all alleged facts relevant to Counts Nine and Ten are assumed to be true. Second, the Court's inquiry in assessing the legal sufficiency of this complaint is limited to the four walls of the complaint. Last, the counts should be dismissed only if there is no set of facts which plaintiff can prove in support of its claim which would entitle the plaintiff to relief. With that in mind, we will look first at Count Nine of the complaint. Count Nine alleges a cause of action under the Consumer Credit and Protection Act. In the moving defendants' motion to dismiss, it is alleged that the plaintiffs, PEIA and DHHR, cannot recover damages under Chapter 46 Article 6 Section 106(1). This Court disagrees. §46A-6-106 reads as follows:

"Any person who purchases or leases goods or services and thereby suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment by another person of a method, act or practice prohibited or declared to be unlawful by the provisions of this article, may bring an action in the circuit court of the county in which the seller or lessor resides or has his principal place of business or is doing business, or as provided for in sections one and two [§§ 56-1-1 and 56-1-2, repealed], article one, chapter fifty-six of this Code, to recover actual damages or two hundred dollars, whichever is greater.... "

It is undisputed that the term "person " as used in this statute includes agencies like the plaintiffs here. The complaint alleges the purchase of medical services and goods by the plaintiffs who, as a result, suffered loss of money as a result of the alleged conduct of the defendants, which was in violation of the Act. This Court finds these allegations to be sufficient under the statute and applicable case law. The argument is advanced in the reply memorandum that under the opinions of Orlando v. Finance One of West Virginia. Inc., and State ex rel MiUer v. Secretarv of Education of the U.S. this is not sufficient. However, in the Orlando opinion, which is cited in State ex rel Miller, Justice Brotherton states:

West Virginia Code 46A-6-106 requires that in order to bring an action for damages, a consumer must have suffered "ascertainable loss of money or property, real or personal as the result of the use or employment by another person of a method, act or practice prohibited or declared unlawful by the provisions of this article. "

Again, the Court finds the complaint to be sufficient in this regard. Next, the moving defendants allege that restitution is not recoverable under Count Nine of the complaint. After review of the complaint, the Court disagrees based on the allegations found therein. Next, the moving defendants advance that fees and costs are not recoverable. Again, this Court disagrees. The argument is made that under the particular section of the Code, since the legislature did not make fees and costs a part of recovery, but did so in other sections, that they are not recoverable. The West Virginia Supreme Court opinion of Muzelak v. King Chevrolet holds that there is authority in equity to grant fees and costs to the prevailing party under certain circumstances even without express statutory authorization. This holds true even in an instance, like here, where the legislature has expressly allowed for punitives in some sections and not in others. Next, the argument is made that punitive damages are not available under the statute. This Court has reviewed the statute, and agrees with the defendants, and although it is argued by the plaintiffs that punitives are equitable damages, this Court disagrees with that position, and finds no authority for an award of punitive damages under the statute. If plaintiffs discover other authority for imposition of punitives, this Court will reconsider this issue during the pendency of the litigation.

The moving defendants allege that the plaintiffs' claims should be dismissed under the preemption clause. The defendants rely heavily on the Cipollone opinion. After careful review of this and other opinions and the complaint, the Court finds that the allegations of fraudulent concealment, conspiracy and the claims relating to minors extend far beyond advertising and labeling, and are not preempted by the Fraudulent Labeling and Advertising Act, even under the guidelines of the Cipollone opinion. The defendants also urge the Court's dismissal arguing that the statute at 46A-5-101 has a four year statute of limitations. The Court finds the statute of limitations to be applicable, but under the allegations contained in the complaint (which is the basis of this Court's review at this time), the acts are alleged to be continuing and, therefore, dismissal is not proper based on statute of limitations. Lastly, with respect to Count Nine, the moving defendants urge dismissal because the allegations are largely based on fraud and are not pled with sufficient specificity. Although the Court may, at some point, order more specific pleadings, the Court does not find this to be grounds for dismissal. In summary, the moving defendants' Motion to Dismiss Count Nine of the Third Amended Complaint is denied for the reasons stated herein.

Now turning to Count Ten of the Third Amended Complaint, an antitrust violation is alleged. The moving defendants seek dismissal in the first instance because no injury to business or property can be shown. These defendants argue that the injury stated by the plaintiffs is merely a thinly disguised personal injury or product liability claim. This Court strongly disagrees. When one looks to the allegations of the complaint, and to the nature of the plaintiffs' business, and if one accepts the allegations contained in the complaint as true, there is an injury to plaintiffs' business or property. In oral argument for dismissal on this ground, the moving defendants relied heavily on the Allman opinion. The Court finds this to be distinguishable in that there, the individual plaintiffs were seeking recovery of medical costs, and specifically, costs of nicotine patches. Next, the moving defendants argue that there is no "antitrust injury," or that the same is too remote or speculative. In other words, the moving defendants claim that the plaintiffs' alleged injury is not "of the type the antitrust laws were intended to prevent, and that flows from that which makes the defendants' acts unlawful." Even a cursory review of the complaint reveals that an antitrust injury is alleged. Assuming that there was a conspiracy or agreement to prevent the development, production and/or marketing of a safer cigarette, there could, in fact, be a provable injury of the type the antitrust laws were intended to prevent. This Court is not persuaded by the defendants' claim that the alleged injury is one that is more of a defective product than an antitrust type injury. Proof of the injury is not a matter for today's consideration. The moving defendants also argue that the plaintiffs are not consumers, competitors or other participants in the West Virginia tobacco market, and that, therefore, their antitrust claim must fail. Section 47-18-9 of the West Virginia antitrust statutes reads as follows:

Any person who shall be injured in his business or property by reason of a violation of the provisions of this article may bring an action therefor and shall recover threefold the damages by him, together with reasonable attorneys' fees, filing fees and reasonable costs of the action. Reasonable costs of the action may include, but shall not be limited to the expenses of discovery and document reproduction....

This Court finds the opinion of McCreadv helpful. When one looks at the facts outlined in that opinion together with the allegations in the complaint, this Court finds dismissal is unwarranted and improper. The moving defendants also allege dismissal because the complaint is versed in conclusory language. Upon a full reading of the complaint, the Court denies the motion to dismiss on this ground as well. Lastly, with respect to Count Ten, the defendants argue that pre-1978 conduct must be dismissed because our statute wasn't enacted until after that time period. The Court agrees with the plaintiffs' position that under the applicable statute, it is the injury that triggers application. Thus, if there is continuing injury as alleged, and which for purposes of this motion is assumed to be true, dismissal on this ground would be improper. However, because this defense is alleged, the Court anticipates ordering, at some point, more specificity with respect to the acts and injuries in violation of the antitrust statute. Therefore, this Court finds no grounds to dismiss Count Ten of the Third Amended Complaint.

With respect to Kimberly Clark's Motion to Dismiss, this Court has carefully examined the Third Amended Complaint, as well as the oral argument made in opposition thereto and the limited written responses made in objection, and finds that dismissal is proper under Rule 12(b)1, and, therefore, grants said motion.

Ms. McHenry, please prepare an order consistent with the rulings outlined in this letter noting the appropriate objections and exceptions for the moving defendants. Mr. Victorson, please prepare a separate order for your client noting the plaintiff's objection and exception.

Sincerely,

Irene C. Berger

Judge Thirteenth Judicial Circuit

ICB/ks