Group Health Plan, Inc. v. Philip Morris USA, Inc. ( 2003 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 02-1684
___________
Group Health Plan, Inc., a nonprofit *
Minnesota Health Maintenance *
Organization; Healthpartners, Inc., a *
nonprofit Minnesota Health *
Maintenance Organization, *
*
Appellants, * Appeals from the United States
* District Court for the District of
v. * Minnesota.
*
Philip Morris USA, Inc.; *
R.J. Reynolds Tobacco Company; *
Brown & Williamson Tobacco *
Company, suing as Brown & *
Williamson Tobacco Corporation; *
Lorillard Tobacco Company, Inc.; *
Liggett Group, Inc.; Hill & Knowlton, *
Inc.; Council for Tobacco Research *
USA, Inc.; The Tobacco Institute, *
Inc.; Smokeless Tobacco Council, Inc., *
*
Appellees. *
___________
No. 02-1688
___________
Medica, a nonprofit Minnesota Health *
Maintenance Organization, and *
subsidiary of Allina Health System, *
*
Appellant, *
*
v. *
*
Philip Morris USA, Inc.; *
R.J. Reynolds Tobacco Company; *
Brown & Williamson Tobacco *
Company, suing as Brown & *
Williamson Tobacco Corporation; *
Lorillard Tobacco Company, Inc.; *
Liggett Group, Inc.; Hill & Knowlton, *
Inc.; Council for Tobacco Research *
USA, Inc.; The Tobacco Institute, Inc., *
*
Appellees. *
___________
Submitted: May 15, 2003
Filed: September 16, 2003
___________
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Before MORRIS SHEPPARD ARNOLD and HANSEN, Circuit Judges, and
READE,1 District Judge.
___________
MORRIS SHEPPARD ARNOLD, Circuit Judge.
For the purposes of the summary judgment motion that we review today,
several tobacco companies (Tobacco) conceded that they conspired to mislead the
public as to the health risks of smoking. As the district court2 did, we consider
whether three Minnesota nonprofit health maintenance organizations (HMOs) have
presented sufficient evidence of causation of harm and damages to recoup certain
health-care costs of their members that resulted from tobacco use. For the reasons
expressed below, we affirm the summary judgment entered in favor of Tobacco on
the HMOs' damages claims, but we remand for further consideration of the HMOs'
suit for injunctive relief.
I.
This case involves the question of what a plaintiff must show to prove
causation of harm, injury in fact, and damages under three Minnesota
misrepresentation statutes (unlawful trade practices, see Minn. Stat. § 325D.13, false
statement in advertising, see Minn. Stat. § 325F.67, and prevention of consumer
fraud, see Minn. Stat. § 325F.69, subd. 1) and under Minnesota's antitrust statutes
(Minn. Stat. § 325D.49-.66). We have the advantage of some recent guidance from
the Minnesota Supreme Court on the question.
1
The Honorable Linda R. Reade, United States District Judge for the Northern
District of Iowa, sitting by designation.
2
The Honorable Paul A. Magnuson, United States District Judge for the District
of Minnesota.
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Following Tobacco's motion to dismiss for failure to state a claim upon which
relief can be granted, see Fed. R. Civ. Proc. 12(b)(6), the district court certified two
questions to the Minnesota Supreme Court. Only the second question is currently
relevant, namely, whether the HMOs must "prove individual purchaser reliance on
the defendants' statements or conduct in order to be eligible for relief in the form of
damages under [the misrepresentation statutes]," Group Health Plan, Inc. v. Philip
Morris Inc., 621 N.W.2d 2, 5 (Minn. 2001). The Minnesota Supreme Court
responded that although proof of "traditional common law reliance" was not
necessary for a private plaintiff to recover damages, "causation remains an element
of such a claim." Id. at 13. Although the Minnesota Supreme Court declined to
delineate exactly what constituted proof of causation, it stated that the relevant
statutes require "some legal nexus between the injury and the defendants' wrongful
conduct" before a recovery may be had, id. at 14 (internal quotation omitted), and
that it was the HMOs burden to prove that nexus, id. at 15. The court also directed
the district court to look to cases under the Lanham Act, 15 U.S.C. § 1125(a), for
guidance, because those cases, in its view, "reflect the appropriate sensitivity to the
remedial goals of the statute that are paralleled in the [misrepresentation] statutes at
issue here." Id. at 15 n.11.
As the district court recognized, the requisite proof of the "legal nexus between
the injury and the defendants' wrongful conduct" to recover damages entails proof of
causation of harm, injury in fact, and damages resulting from Tobacco's conceded
actions. The district court held that the HMOs' evidence of causation and damages
was insufficient to raise a genuine issue of material fact and thus granted Tobacco
summary judgment on the damages claims. See Group Health Plan, Inc. v. Philip
Morris Inc., 188 F. Supp. 2d 1122, 1126 (D. Minn. 2002). We affirm this part of the
judgment of the district court because we conclude that the HMOs have not made out
a submissible case on the issue of damages.
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II.
A.
To determine what evidence will support an award of damages under the
Minnesota misrepresentation statutes, we look to Lanham Act cases, as the Minnesota
Supreme Court has indicated we should. We have held that before a case under that
act can proceed to a jury, the district court " 'must ensure that the record adequately
supports all items of damages claimed and establishes a causal link between the
damages and the defendant's conduct, lest the award become speculative or violate
section 35(a)'s prohibition against punishment.' " Porous Media Corp. v. Pall Corp.,
110 F.3d 1329, 1336 (8th Cir. 1997) (quoting ALPO Petfoods, Inc. v. Ralston Purina
Co., 913 F.2d 958, 969 (D.C. Cir. 1990)); see also Xoom, Inc. v. Imageline, Inc., 323
F.3d 279, 286 (4th Cir. 2003). A damage figure set "arbitrarily or through pure
guesswork is impermissible." Broan Mfg. Co. v. Associated Distribs., Inc., 923 F.2d
1232, 1236 (6th Cir. 1991) (internal quotations omitted); see also BASF Corp. v. Old
World Trading Co., 41 F.3d 1081, 1095 (7th Cir. 1994). Before damages are
awarded, we require " 'substantial evidence in the record to permit a factfinder to
draw reasonable inferences and make a fair and reasonable assessment of the amount
of damages.' " Broan, 923 F.2d at 1236 (quoting Grantham & Mann, Inc. v.
American Safety Prods., Inc., 831 F.2d 596, 602 (6th Cir. 1987)); see BASF, 41 F.3d
at 1095; cf. Cardinal Consulting Co. v. Circo Resorts, Inc., 297 N.W.2d 260, 267
(Minn. 1980).
As for the proof required for an award of damages under Minnesota antitrust
law, we observe that "Minnesota courts have consistently held that Minnesota
antitrust law is to be interpreted consistently with the federal courts' construction of
federal antitrust law." State by Humphrey v. Alpine Air Prods., 490 N.W.2d 888, 894
(Minn. Ct. App. 1992), aff'd 500 N.W.2d 788 (Minn. 1993). As we have indicated
with respect to federal antitrust law, " '[o]nce causation of damages has been
established, the amount of damages may be determined by a just and reasonable
estimate as long as the jury verdict is not the product of speculation or guess work.' "
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Amerinet, Inc. v. Xerox Corp., 972 F.2d 1483, 1494 (8th Cir. 1992), cert. denied,
506 U.S. 1080 (1993) (quoting MCI Communications Corp. v. AT&T Co., 708 F.2d
1081, 1161 (7th Cir. 1983), cert. denied, 464 U.S. 891 (1983)); see also Admiral
Theatre Corp. v. Douglas Theatre Co., 585 F.2d 877, 893 (8th Cir. 1978). We
believe that a "fair and reasonable" estimate and a "just and reasonable" one amount
to one and the same thing, and thus we hold that the required showings under the
misrepresentation statutes and the antitrust statutes are identical.
B.
As the district court noted, the HMOs "have only one expert, Dr. [Jeffrey]
Harris, who purports to provide the necessary causal link between Defendants' alleged
misconduct and Plaintiffs' claimed damages." Group Health Plan, 188 F. Supp. 2d
at 1130. The district court, however, excluded Dr. Harris's testimony as inadmissible
under Daubert v. Merrell Dow Pharm. Inc., 509 U.S. 579 (1993), because it was
"speculative, inconsistent, and therefore unreliable." Group Health Plan, 188 F.
Supp. 2d. at 1131. We review the application of Daubert for an abuse of discretion.
United States v. Bahena, 223 F.3d 797, 809 (8th Cir. 2000), cert. denied, 531 U.S.
1181 (2001).
The HMOs' allegations of conspiracy are of two sorts: Tobacco conspired to
conceal the truth about the adverse health effects of smoking, and Tobacco conspired
to refrain from developing safer tobacco products. Dr. Harris, an economics
professor at the Massachusetts Institute of Technology and a treating physician at
Massachusetts General Hospital, postulated a "counterfactual" world in which
smoking would have been safer and fewer people would have smoked because
Tobacco would not have so conspired. He utilized "the well-accepted doctrine of
attributional-risk theory" to calculate what the HMOs' health care expenditures
attributable to smoking would have been in this counterfactual world. See Group
Health Plan, 188 F. Supp. 2d. at 1132. The damages to the HMOs would equal the
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difference between current expenditures attributable to smoking and those that would
have occurred in the counterfactual world.
To measure how much safer smoking would have become, Dr. Harris sought
to determine the rate at which Tobacco introduced less hazardous products would
have increased absent the alleged misconduct, something he calls the "retardation-of-
innovation effect." To measure how many fewer people would have smoked,
Dr. Harris sought to determine how the prevalence of smoking rates would have
changed over time if there had been no concealment of health-related information,
both in terms of the rate at which individuals began smoking (initiation rates) and of
the rate at which they quit (quit rates), something he calls the "disinformation effect."
The overall decline in the HMOs' expenditures attributable to smoking in this
counterfactual world is based on a composite of these effects and their actual
expenditures today.
Regarding the "retardation-of-innovation effect," Dr. Harris posited that the
conspiracy hampered the rate of innovation by a factor of two-and-a-half. To reach
this conclusion, Dr. Harris assumed that the relative risk to smoking adhered to a
simple proportional decay formula, and then estimated how a coefficient in that
logarithmic formula would have changed absent the conspiracy. In doing so, he
pointed to facts such as the one that the average yield of tar in a cigarette had dropped
from 37 milligrams to 12 milligrams from 1953 to 1994, estimating that this drop
would have been achievable in no more than twelve to sixteen years had Tobacco
spent more money on researching and developing safer products. (Dr. Harris noted
that "the cigarette industry's actual research-and-development spending per dollar of
sales during 1953 to 1980 was less than one-quarter of that of the chemical industry
and less than one-sixth of that of the pharmaceutical industry during the same
period." He then attempted to estimate how long it would have taken to achieve and
market the drop in tar had Tobacco spent comparable amounts on research and
development). The district court noted that this analysis was unduly speculative,
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particularly "Dr. Harris's bald speculation about the connection between money and
innovation." Id. at 1133.
Regarding the "disinformation effect," Dr. Harris estimated that initiation rates
for smoking would have declined by nine percent annually for approximately the last
fifty years and that four-and-a-half percent of smokers would have quit annually (as
opposed to the real world rate of two to four percent a year). As for initiation rates,
Dr. Harris noted that while those rates for young men appeared to be dropping in the
1950s and 1960s, they rose among young women from 1967 to 1974 because of
advertising that targeted them. He theorized that Tobacco's success in recruiting new
smokers was attributable to "the disinformation campaign promulgated jointly by
Defendants; the failure of Defendants to disclose what they knew about the additive
effects of nicotine; and the concerted use of lifestyle advertising aimed at youth,
especially young women." As for quit rates, Dr. Harris based his estimations on
surveys and studies pertaining to the impact of several current anti-smoking
campaigns on such rates.
The district court criticized the estimations pertaining to initiation rates as
being nothing but an "inspired guess," noting that "[w]hile it is possible that the
decline in initiation rates was slowed by Defendants' misconduct, it is equally
possible that [that decline was] slowed by a host of other sociological factors." Id.
at 1134. Further, the district court found that the quit-rate estimations were faulty
because the anti-smoking campaigns entailed more than simply providing better
health information and thus the "surveys and studies do not focus on the
disinformation effect of Defendants' alleged misconduct" and were "irrelevant to the
issue of causation." Id.
The district court also found Dr. Harris's methodology to be internally
inconsistent because it failed to account for "the relationship between the innovation
effect and the information effect in his counterfactual world." Id. In particular, the
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court criticized Dr. Harris for not considering that if "improved safety was
communicated to consumers, the decline in initiation rates might well slow and quit
rates might well fall." Id. In the district court's view, therefore, Dr. Harris's expert
report was simply too flawed and speculative to be admitted. Id.
The HMOs concede that Dr. Harris's report involves some speculation, but they
argue that the need to speculate is inherent in long-duration conspiracy cases because
plaintiffs cannot actually undo the conspiracy and see what would have happened if
it had not existed. They point out that Dr. Harris derived his various estimations from
real-life examples and data points and argue that this is the best that can be expected.
Any deficiencies, they contend, go to the weight to be given to the report and not to
its admissibility, cf. Hurst v. United States, 882 F.2d 306, 311 (8th Cir. 1989), and
doubts about the admissibility of expert testimony should be resolved in favor of its
admission, see Clark by Clark v. Heidrick, 150 F.3d 912, 915 (8th Cir. 1998). They
call our attention to Dr. Harris's eminent qualifications and publication record, and
the fact that every other court that has considered the admissibility of Dr. Harris's
testimony under Daubert has admitted it. See, e.g., Falise v. American Tobacco Co.,
107 F. Supp. 2d 200, 205-06 (E.D.N.Y. 2000).
Tobacco responds by pointing to many of the same flaws and speculative
estimations that the district court did, arguing that the total amount of speculation
here is clearly beyond any reasonable limit. It also directs our attention to comments
from a Canadian trial court that were highly critical of Dr. Harris's credibility and
notes that no version of Dr. Harris's analysis on this issue has ever been published or
submitted to other experts for review outside the litigation context.
There is no doubt, in our estimation, that Dr. Harris's expert testimony entails
a great deal of speculation, for although his estimations are oriented in real-world
examples and data points, his use of them often involves inferences that approach
leaps of faith. Cf. Glastetter v. Novartis Pharm. Corp., 252 F.3d 986, 991 (8th Cir.
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2001) (per curiam). But the Daubert inquiry does not end there, for while the cases
are legion that assert that expert testimony is inadmissible when it is based on
speculative assumptions, see, e.g., J.B. Hunt Transport, Inc. v. General Motors Corp.,
243 F.3d 441, 444 (8th Cir. 2001); Boucher v. U.S. Suzuki Motor Corp., 73 F.3d 18,
21-22 (2d Cir. 1996), that does not mean that testimony must by excluded if an expert
occasionally speculates (which is inevitable). What is required is that when experts
"testify in court they adhere to the same standards of intellectual rigor that are
demanded in their professional work." Rosen v. Ciba-Geigy Corp., 78 F.3d 316, 319
(7th Cir. 1996) (Posner, J.), cert. denied, 519 U.S. 819 (1986). Although courts cast
their assessment of how much speculation is permissible in various verbal forms, their
conclusions in cases involving counterfactual estimations essentially come down to
this: A certain amount of speculation is necessary, an even greater amount is
permissible (and goes to the weight of the testimony), but too much is fatal to
admission. Cf. United States v. Cavely, 318 F.3d 987, 997-98 (10th Cir. 2003), cert.
denied, 71 U.S.L.W. 3724 (June 27, 2003); Amorgianos v. National R.R. Passenger
Corp., 303 F.3d 256, 270 (2d Cir. 2002); Joy v. Bell Helicopter Textron, Inc., 999
F.2d 549, 569-570 (D.C. Cir. 1993).
This formulation of the inquiry may be accurate but it is not too helpful in any
particular case. But it is critical to bear in mind that the district court is the
"gatekeeper," and we owe significant deference to its determination that expert
testimony is excessively speculative. See Peitzmeier v. Hennessy Ind., Inc., 97 F.3d
293, 296-97 (8th Cir. 1996), cert. denied, 520 U.S. 1196 (1997). Even if we believe
that we might have come to a different conclusion as an original matter from the one
that the district court did, we can reverse only if "we are convinced that the District
Court made a clear error of judgment" on the basis of the record before it. See
Bahena, 223 F.3d at 809. When, as here, the essence of the appeal is merely that the
district court chose too strict a threshold, we will be hardpressed to conclude that
such an error exists.
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Having carefully reviewed the record and Dr. Harris's expert report, we believe
that the issue is closer than the district court thought, for Dr. Harris's work is
thorough, sophisticated, and often well-grounded in the relevant scientific literature.
But we are nonetheless unable to conclude that the district court committed a clear
error of judgment in excluding the testimony, for predictions like the estimated nine
percent annual decline in initiation rates strike us as inspired guesses at best.
We note, moreover, that excessive speculation is not the only (or most
significant) difficulty that we have with Dr. Harris's testimony. That testimony also
is inconsistent with one of the main premises underlying the HMOs' theory of
conspiratorial liability, namely, that Tobacco fraudulently marketed "low tar" and
"light" cigarettes as allegedly healthier alternatives to normal cigarettes, while
knowing that they were not safer because smokers would find ways to compensate
for the decreased nicotine levels (such as puffing more frequently, increasing the
duration of smoke inhalation, smoking more cigarettes per day, smoking cigarettes
to a shorter length, and pinching filters to decrease their effectiveness). Dr. Harris's
calculations regarding the "retardation-of-innovation effect" are predicated on the
belief that, absent the conspiracy, smoking would have become safer because low-tar
cigarettes would have been on the market sooner and smokers would have switched
to lower-tar brands, a proposition that was directly contrary to the HMOs' theory of
the case.
While we recognize that a proponent may call a witness to testify on its behalf
and not endorse everything that the witness says, see, e.g., United States v. Logan,
121 F.3d 1172, 1174-75 (8th Cir. 1997), we believe that the disconnect between
Dr. Harris's work and the HMOs' theory of liability weighs heavily against the
admission of his testimony under Daubert because it undermines the existence of a
"legal nexus between the injury and the defendants' wrongful conduct" and thus does
not properly "fit" the HMOs' case. Cf. Amorgianos, 303 F.3d at 270. Based on all
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the appropriate considerations, we conclude that the district court did not abuse its
discretion in excluding Dr. Harris's testimony.3
Because the HMOs do not have any other evidence demonstrating the amount
of damages caused by Tobacco's alleged misconduct, a factfinder in this case would
have to act arbitrarily to set a damage amount. We thus conclude that the HMOs'
proof of damages is insufficient to allow them to proceed to trial on their damages
claims.
C.
The HMOs argue, however, that it is Tobacco that is obligated to differentiate
between damages caused by the alleged misconduct and lawful or innocent causes of
their injury, relying both on an Eighth Circuit antitrust case, National Farmers' Org.,
Inc. v. Associated Milk Producers, Inc., 850 F.2d 1286 (8th Cir. 1988), cert. denied,
3
The HMOs also contend that the district court abused its discretion by failing
to hold an evidentiary hearing prior to its Daubert ruling. Although in limine
hearings are generally recommended prior to Daubert determinations, see Padillas
v. Stork-Gamco, Inc., 186 F.3d 412, 418 (3d Cir. 1999), they are not required, see
Lauzon v. Senco Prods., Inc., 270 F.3d 681, 685-86 (8th Cir. 2001). The only legal
requirement is that the parties "have an adequate opportunity to be heard" before the
district court makes its decision. See, e.g., Nelson v. Tennessee Gas Pipeline Co., 243
F.3d 244, 249 & n.3 (6th Cir. 2001), cert. denied, 534 U.S. 822 (2001); Cortes-
Irizarry v. Corporacion Insular De Seguros, 111 F.3d 184, 188 n.3 (1st Cir. 1997).
Here, the parties were allowed to exceed the normal page limits in their briefs on
Tobacco's motion for summary judgment, and the district court permitted the HMOs
to present written submissions by Dr. Harris and other experts in support of their
argument. We thus conclude that the HMOs had an adequate opportunity to be heard
on the Daubert matter.
The HMOs also argue that because there was no Daubert hearing we should
review the district court's exclusion of Dr. Harris's testimony de novo. Our case law
is clear, however, that we review the exclusion of testimony under Daubert for an
abuse of discretion despite the absence of a hearing. Lauzon, 270 F.3d at 685-86.
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489 U.S. 1081 (1989), and on the Minnesota "indivisible injury" doctrine. We
disagree for the reasons that follow.
In National Farmers, the plaintiff had produced evidence that could serve as
a "yardstick" of the amount of damages caused by the defendants' antitrust violations,
but this evidence did not account for exactly which parts of defendant's alleged
misconduct caused which part of the damages. National Farmers, 850 F.2d at 1297,
1307. As part of an explanation that a plaintiff needed only to "present evidence as
to the amount of its damages sufficient to allow the finder of fact to make a just and
reasonable estimate [of damages]," id. at 1306-07, we said that even if on remand
some of the alleged misconduct turned out not to be an antitrust violation, the
"yardstick" estimate would still suffice; that was so because "the fact that the
[defendants'] illegal conspiracy was composed of lawful and unlawful conduct so
tightly intertwined as to make it difficult to determine which portion of the damages
claimed were caused by the unlawful conduct should not diminish the recovery." Id.
at 1307. We went on to observe that the district court "should recognize that the
harmful consequences of certain unlawful conduct may have been exacerbated by
otherwise lawful conduct. In such a situation, the fact that lawful conduct contributed
to additional injury should not prohibit recovery for that injury." Id. As we believe
is readily apparent, this passage from National Farmers simply means that a
"yardstick" estimate can be "just and reasonable" even if it does not "prove with
precision" which damages were caused by which aspects of the alleged misconduct.
See id. at 1306. More importantly, we do not interpret National Farmers as relieving
the HMOs of the duty to set forth a "yardstick" estimate of the damages caused by
Tobacco's alleged misconduct in the first place.
The HMOs submit that their total health care costs attributable to smoking is
an acceptable "yardstick," but this argument strains credulity because selling tobacco
is not a strict liability activity. The HMOs primary "yardstick" was Dr. Harris's
expert testimony, but that, as we explained above, is simply out of the case.
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The Minnesota indivisible injury rule does not help the HMOs either. "The
single indivisible injury rule can be traced back to Flaherty v. Northern Pac. Ry. Co.,
39 Minn. 328, 40 N.W. 160 (1888), and holds that tortfeasors whose separate
negligent acts operate together to cause damage to another are each liable for the
whole amount of the resulting damage." Morlock v. St. Paul Guardian Ins. Co., 650
N.W.2d 154, 164 (Minn. 2002) (emphasis added) (Anderson, J., dissenting); cf.
Canada by Landy v. McCarthy, 567 N.W.2d 496, 507 (Minn. 1997). When the harm
to the plaintiff is caused by a combination of the conduct of more than one tortfeasor,
the "burden of proving that the harm is capable of being separated lies with each
defendant who contends it can be divided." Canada, 567 N.W.2d at 507; see
Mathews v. Mills, 288 Minn. 16, 22, 178 N.W.2d 841, 845 (1970). The purpose of
the doctrine is to allow a plaintiff to recover damages even if it cannot prove exactly
which damages were caused by which tortfeasor, as it is more fair for the loss to fall
"on defendants who are clearly proved to have been at fault" than on an "innocent
plaintiff." See Mathews, 288 Minn. at 22, 178 N.W.2d at 845; see also Edmonds v.
Compagnie General Translantique, 443 U.S. 256, 260 n.8 (1979); Restatement
(Second) Torts §433(B)(2) cmt. d (1965). This doctrine, however, is plainly
inapposite where, as here, plaintiffs have not set forth any evidence of the amount of
damages caused by the misconduct, because the issue of whether (and how) to
apportion the damages "among at-fault defendants," see Blatz v. Allina Health Sys.,
622 N.W.2d, 376, 390-92 (Minn. Ct. App. 2001) (emphasis added); see also
Mathews, 288 Minn. at 24, 178 N.W.2d at 846, is simply never reached. Where there
is no reasonable estimate of damages, we need not consider whether the injury is
indivisible or capable of being apportioned (and who has the burden there), for there
is no amount of damages to apportion among the defendants.
III.
The HMOs also contend that the district court should not have granted
summary judgment on their suit for injunctive relief because Tobacco never properly
raised the issue in its motions before the district court. Tobacco disagrees, pointing
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to the last sentence of its motion for summary judgment on causation, injury, and
damages, which requests the court to "grant summary judgment for Defendants on
Plaintiffs' remaining causes of action," and argues that because the HMOs did not
raise their contention before the district court, their argument is waived. Tobacco also
maintains that injunctive relief is improper here because the HMOs cannot prove that
they were damaged or likely to be injured in the future.
A party moving for summary judgment has a prefatory burden to inform the
district court of the basis for its motion, and to identify the part of the summary
judgment record that it believes demonstrates the absence of a genuine issue of
material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Handeen v.
Lemaire, 112 F.3d 1339, 1345-46 (8th Cir. 1997). It is only after the moving party
has fulfilled this burden that the nonmoving party must set forth specific facts
showing that there is a genuine issue for trial. Dush v. Appleton Elec. Co., 124 F.3d
957, 963 (8th Cir. 1997). Tobacco never satisfied this prefatory burden here, because
it never identified those aspects of the record that showed an absence of a genuine
issue of material fact with respect to the request for injunctive relief.
We therefore believe that the matter of injunctive relief ought to be remanded
to the district court for additional briefing and consideration. Our ruling on the
HMOs’ damages claims was bottomed on the utter absence of evidence on the amount
of damages, but that does not mean that the record is devoid of evidence supporting
the fact of damage itself. Indeed, we believe that the record contains a mountain of
evidence tending to show that advertising generally causes people to begin smoking
and causes current smokers to smoke more, which increases costs for the HMOs. If
one concedes that a portion of the advertising was fraudulent, which Tobacco has
done for the purposes of this motion, a reasonable person could infer that that
fraudulent portion caused a part of those costs, even if the HMOs' participants
differed slightly from the populations used to study the effect of advertising generally
on the prevalence of smoking. In other words, although the evidence in the case is,
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as we have said, insufficient to allow a factfinder to arrive at a reasonable estimate
of the extent of harm caused, we hold that it was sufficient to raise an inference that
harm has in fact been caused.4
IV.
We therefore affirm the judgment of the district court as to the HMOs' damages
claims and remand for further consideration of the HMOs' injunctive claims.
HANSEN, Circuit Judge, dissenting.
I respectfully dissent from that portion of the court's opinion that affirms the
district court's judgment in favor of Tobacco on the HMOs' damages claims. The
court affirms based on its conclusion that the HMOs failed to make out a submissible
case on the issue of damage calculation, despite the fact that the district court's
analysis reached only the element of causation. I would reverse the judgment on the
HMOs' damages claims because, even without Dr. Harris's Daubert barred testimony,
the HMOs have presented sufficient evidence to create a genuine issue of material
fact on causation to survive a motion for summary judgment on that issue.
First, I believe the district court erred in concluding that the Minnesota
Supreme Court's opinion "militates against" the availability of a presumption to
establish causation in the consumer protection claims. 188 F. Supp. 2d at 1127. In
footnote 11 of its opinion answering the certified questions, the Minnesota Supreme
Court suggested that the nature of the proof required to establish the element of
reliance in a Minnesota consumer protection action is similar to the kind of proof
required to establish a violation of the Lanham Act. The court explicitly cited cases
4
Tobacco raises preemption issues pertaining to the Federal Cigarette Labeling
Act. We leave it to the district court to consider what effect, if any, these issues have
on the HMOs' prayer for an injunction.
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in which plaintiffs were entitled to presumptions of consumer confusion where
defendants engaged in certain intentional conduct. Nevertheless, the district court
declined to consider whether similar presumptions are available to the HMOs to
prove reliance where, for the purposes of this summary judgment motion, Tobacco
has admitted to engaging in intentional, deceptive behavior and to spending large
sums of money on advertising.
In interpreting the Minnesota Court's statement that "in a case such as this, it
will be necessary to prove reliance on those statements or conduct to satisfy the
causation requirement," 621 N.W.2d at 13, the district court correctly noted that
"Plaintiffs bear the burden of proving that a causal nexus or link exists between
Defendants' conduct alleged to have violated the consumer protection laws and
Plaintiffs' claimed damages." 188 F. Supp. 2d at 1127. Nevertheless, the district
court then erroneously concluded that the HMOs cannot rely upon a presumption or
inference as a method of proving causation. In doing so, I conclude that the district
court conflated the burden of proof with methods of proof and with the burden of
production. It is clear under Minnesota law that a plaintiff may meet his initial
burden of production and offer proof in the form of a rebuttable presumption. See
Minn. R. Evid. 301 cmt. ("A presumption is a procedural device that satisfies the
burden of producing evidence."); see also Fed. R. Evid. 301 ("[A] presumption
imposes on the party against whom it is directed the burden of going forward with
evidence to rebut or meet the presumption, but does not shift to such party the burden
of proof in the sense of the risk of nonpersuasion, which remains throughout the trial
upon the party on whom it was originally cast."). An unrebutted presumption is
sufficient to raise a material question of fact concerning reliance, and therefore
causation, so as to defeat a motion for summary judgment.
Second, the district court mistakenly concluded that the HMOs' circumstantial
evidence of causation was not sufficiently "tethered" to their participant population
to meet their burden of production on a motion for summary judgment. The
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Minnesota Supreme Court held that circumstantial evidence is a permissible method
of proving causation in consumer protection cases. See 621 N.W.2d at 14 ("[T]he
showing of reliance that must be made to prove a causal nexus need not include direct
evidence of reliance by individual consumers of defendants' products. Rather, the
causal nexus and its reliance component may be established by other direct or
circumstantial evidence that the district court determines is relevant and probative as
to the relationship between the claimed damages and the alleged prohibited conduct.
. . . [W]e reject the view [] that our misrepresentation in sales laws require proof of
individual reliance in all actions seeking damages."). Similarly, plaintiffs may rely
on circumstantial evidence to establish an inference of causation in an antitrust case.
See St. Louis Convention and Visitors Comm'n v. Nat'l Football League, 154 F.3d
851, 863 (8th Cir. 1998) (applying federal antitrust law); Minn. Twins P'ship v. State
ex rel. Hatch, 592 N.W.2d 847, 851 (Minn.) (noting that Minnesota's antitrust statute
is to be interpreted consistently with federal courts' construction of federal antitrust
law), cert. denied, 528 U.S. 1013 (1999).
Nevertheless, the district court concluded that the HMOs' evidence, including
surveys of citizens in other states, was not "relevant and probative." In general, the
district court was unwilling to infer that "people in Massachusetts and people in
Minnesota would similarly perceive and then act on the lie [Tobacco's
misrepresentations]." 188 F. Supp. 2d at 1130. Without some evidence from
Tobacco that these surveys are not representative of the HMOs' participant
population, and given the nationwide scope of Tobacco's advertising campaigns, I
believe this is precisely the type of reasonable inference that plaintiffs are entitled to
on a motion for summary judgment. To require more flies in the face of the
Minnesota Supreme Court's conclusion that proof of individual reliance is
unnecessary.
Because the district court recognized that "a more lenient standard of proof
with regard to the amount of damages is available . . . after [Plaintiffs] have shown
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that they have" suffered injury caused by Defendants' wrongdoing, id. at 1128, I read
the district court's opinion as granting summary judgment on the issues of causation
and injury in fact alone. The district court did not discuss the HMOs' evidence as to
damage calculation, and it appeared not to reach the question of whether the damage
calculations that are in the record, if any, would be sufficient under the more lenient
standard of proof which applies once causation has been established.
Our court's opinion appears to meld the district court's causation analysis into
a new damage calculation analysis. The beginning of the opinion affirms on the basis
of a failed damage calculation, but the analysis cites to the district court's discussion
of causation. Section A sets out the basis for affirmance and announces the standard
of proof on the issue of damage calculation, but section B starts with the district
court's finding that the HMOs "have only one expert, Dr. Harris, who purports to
provide the necessary causal link between Defendants' alleged misconduct and
Plaintiffs' claimed damages." Supra at 6 (emphasis added). The opinion goes on to
discuss Dr. Harris's theories and the district court's Daubert ruling as to their
admissibility to prove causation. After somewhat reluctantly affirming on the
Daubert ruling, section B concludes by stating that "[b]ecause the HMOs do not have
any other evidence demonstrating the amount of damages caused by Tobacco's
alleged misconduct, a factfinder in this case would have to act arbitrarily to set a
damage amount." Id. at 12 (emphasis added). However, by my reading, the district
court did not reach the question of whether there was evidence as to the amount of
damages because it granted summary judgment only after it determined that the
HMOs' theory of causation was flawed.
The district court's statement that Dr. Harris was the only expert purporting to
present evidence of causation does not necessarily allow this court to conclude that
he is also the only expert calculating damages. Although we may affirm on any basis
supported by the record, we should not appear to rely on district court findings where
none were made. This court may give deference to the district court's view that
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Dr. Harris's reports were too speculative to prove causation, but there is no similar
element of deference available as to their admissibility for proving the amount of
damages where the district court never reached that determination and where a more
lenient standard of proof applies once causation is established.
I believe the last paragraph of Section III of our court's opinion demonstrates
the inconsistency of its damages approach. In remanding the claims for injunctive
relief, the court appears to conclude that causation and injury in fact have been
established. Supra at 15-16 ("Indeed, we believe that the record contains a mountain
of evidence tending to show that advertising generally causes people to begin
smoking and causes current smokers to smoke more, which increases costs for the
HMOs. If one concedes that a portion of the advertising was fraudulent, which
Tobacco has done for the purposes of this motion, a reasonable person could infer
that that fraudulent portion caused a part of those costs, even if the HMOs'
participants differed slightly from the populations used to study the effect of
advertising generally on the prevalence of smoking. In other words, although the
evidence in the case is, as we have said, insufficient to allow a factfinder to arrive at
a reasonable estimate of the extent of harm caused, we hold that it was sufficient to
raise an inference that harm has in fact been caused."). These statements are
inconsistent with the opinion's earlier statement that the only causal link between
Tobacco's misconduct and the HMOs' damages is Dr. Harris, whose testimony was
properly excluded under Daubert. While I concur in the court's decision to reverse
and remand the judgment on the claims for injunctive relief, I find the procedural
grounds mentioned by the court in the first and second paragraphs of Section III to
be sufficient to reach this end.
For the reasons explained above, I would reverse the summary judgment in
favor of Tobacco on the claims for damages and injunctive relief, and remand to the
district court for further proceedings.
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A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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