Hughes v. Tobacco Institute, Inc.

Revised January 17, 2002

UNITED STATES COURT OF APPEALS
For the Fifth Circuit

No. 00-40658

RUTH HUGHES, Individually and as Representative
of the Estate of Sherman Hughes, Sr., Deceased,

Plaintiff-Appellant,

VERSUS

THE TOBACCO INSTITUTE, INC.; PHILIP MORRIS, INC.; BROWN
& WILLIAMSON TOBACCO CORPORATION; R.J. REYNOLDS TOBACCO CO.;
B.A.T. INDUSTRIES PLC; LORILLARD TOBACCO CO.; THE AMERICAN
TOBACCO COMPANY; LIGGETT GROUP, INC.; UNITED STATES TOBACCO
COMPANY; THE COUNCIL FOR TOBACCO RESEARCH USA, INC.,

Defendants-Appellees.

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CONSOLIDATED WITH
No. 00-40718

CARLIS COLE; ET AL.,

Plaintiffs,

CARLIS COLE; CHARLES COLE; LOUIS ARDOIN; CHARLES BANKS;
RUTH DAVIS; DONALD FRENCH; LOIS FRENCH; LINDA GOODWIN;
DANIEL HUGHES; BARBARA ORR; DARRELL ORR, SR.; DALE SONNIER;
AGNES VONDY, Individually & as Representative of the Estate
of Luanne Davis, Deceased; KAFFIE WILLIAMS, Individually &
 as Representative of the Estate of Jules Williams, Sr.,
Deceased; FRANK O’PRY; JOSEPH WRAY, the Son of Thomas H.
Wray, Deceased, & Paula Wray Ewing, Executrix of the Estate
of Thomas H. Wray, Deceased; PATRICIA GIBSON, Individually

& as Representative of the Estate of Danny Gibson,
Deceased & as Next Friend of Paul Gibson, Patrick Gibson,
Bryan Gibson, Gayla Gibson & Gabrielle Gibson, Minors,

Plaintiffs-Appellants,

STEVEN FAIRCLOTH,

Intervenor Plaintiff-Appellant,

VERSUS

THE TOBACCO INSTITUTE, INC.; PHILIP MORRIS, INCORPORATED;
BROWN & WILLIAMSON TOBACCO CORPORATION; R.J. REYNOLDS TOBACCO
COMPANY; B.A.T. INDUSTRIES PLC; LORILLARD TOBACCO COMPANY; THE
AMERICAN TOBACCO COMPANY; LIGGETT GROUP, INC.; UNITED STATES
TOBACCO COMPANY; THE COUNCIL FOR TOBACCO RESEARCH USA, INC.,

Defendants-Appellees.

Appeals from the United States District Court
for the Eastern District of Texas

December 28, 2001
Before GARWOOD, DeMOSS, and DENNIS, Circuit Judges.

DeMOSS, Circuit Judge:

Several Plaintiffs, seeking class status, sued numerous

tobacco manufacturer and trade association Defendants, alleging

negligence, strict liability, fraud, misrepresentation, breach of

2
warranty, antitrust violations, negligent and intentional

entrustment, public nuisance, unjust enrichment, aggravated

assault, Federal Racketeer Influenced and Corrupt Organization Act

(RICO) violations, and Deceptive Trade Practices Act (DTPA)

violations. The district court severed Plaintiff Hughes’ claims

into a separate suit so it could proceed to resolution on the

merits.

The Defendants sought dismissal on the pleadings in the

severed case Hughes v. Tobacco Institute, asserting that § 82.004

of the Texas Practices and Remedies Code barred all Hughes’ claims.

The Defendants’ motion was based in large part on this Court’s

opinion in Sanchez v. Liggett & Myers, Inc., 187 F.3d 486, 490 (5th

Cir. 1999), where we held that § 82.004 barred various claims

predicated on the harmful or addictive nature of cigarettes. In

response, Hughes argued that the Sanchez majority erroneously

rejected controlling Texas Supreme Court precedent and informative

legislative history, and that Sanchez’s interpretation of § 82.004

violated the United States and Texas Constitutions.

On May 8, 2000, the district court granted the Defendants’

motion to dismiss Hughes’ claims. The court also sua sponte

dismissed the claims in Cole v. Tobacco Institute, the suit from

which Hughes had been severed, on the same grounds. The Plaintiffs

from both suits appeal here. For the reasons expressed below, we

AFFIRM the district court’s judgment.

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I. STANDARD OF REVIEW

Any party may move for judgment on the pleadings after the

pleadings are closed. FED. R. CIV. P. 12(c). We review rule 12(c)

dismissals de novo. St. Paul Mercury Ins. Co. v. Williamson, 224

F.3d 425, 440 n.8 (5th Cir. 2000). “[T]he central issue is

whether, in the light most favorable to the plaintiff, the

complaint states a valid claim for relief.” Id. Pleadings should

be construed liberally, and judgment on the pleadings is

appropriate only if there are no disputed issues of fact and only

questions of law remain. Voest-Alpine Trading USA Corp. v. Bank of

China, 142 F.3d 887, 891 (5th Cir. 1998). In ruling, the district

court is confined to the pleadings and must accept all allegations

contained therein as true. St. Paul Ins. Co. v. AFIA Worldwide

Ins. Co., 937 F.2d 274, 279 (5th Cir. 1991).

The district court, when presiding over a diversity case, must

apply the law of the forum state. Erie R.R. Co. v. Tompkins, 304

U.S. 64, 78 (1938). And the court is “bound to apply the law as

interpreted by the state’s highest court.” Texas Dep’t of Hous. &

Cmty. Affairs v. Verex Assurance, Inc., 68 F.3d 922, 928 (5th Cir.

1995) (quoting Ladue v. Chevron U.S.A., Inc., 920 F.2d 272, 274

(5th Cir. 1991)). “When there is no ruling by the state’s highest

court, it is the duty of the federal court to determine as best it

can, what the highest court of the state would decide.”

Transcontinental Gas Pipe Line Corp. v. Transportation Ins. Co.,

4
953 F.2d 985, 988 (5th Cir. 1992). This Court’s interpretation of

Texas law is binding on the district court, unless a subsequent

state court decision or statutory amendment renders our prior

decision clearly wrong. Batts v. Tow-Motor Forklift Co., 66 F.3d

743, 747 (5th Cir. 1995).

II. TEX. CIV. PRAC. & REM. CODE § 82.004

In 1993, the Texas Legislature enacted § 82.004, which limits

product liability actions against manufacturers and sellers of

allegedly defective products. Specifically, it provides:

(a) In a products liability action, a manufacturer or
seller shall not be liable if:
(1) the product is inherently unsafe and the
product is known to be unsafe by the ordinary
consumer who consumes the product with the
ordinary knowledge common to the community;
and
(2) the product is a common consumer product
intended for personal consumption, such as
sugar, castor oil, alcohol, tobacco, and
butter, as identified in Comment i to Section
402A of the Restatement (Second) of Torts.
(b) For purposes of this section, the term “products
liability action” does not include an action based
on manufacturing defect or breach of an express
warranty.

TEX. CIV. PRAC. & REM. CODE § 82.004. Another section defines a

“products liability action” as:

any action against a manufacturer or seller for recovery
of damages arising out of personal injury, death, or
property damage allegedly caused by a defective product
whether the action is based in strict tort liability,
strict products liability, negligence, misrepresentation,
breach of express or implied warranty, or any other
theory or combination of theories.

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TEX. CIV. PRAC. & REM. CODE § 82.001.

A. JUDICIAL INTERPRETATIONS OF § 82.004

No Texas Court has had occasion to apply § 82.004 in a tobacco

suit. However, in Sanchez, this Court concluded, as a matter of

first impression, that § 82.004 bars claims premised on the harmful

or addictive nature of tobacco, including those brought as claims

for fraud, misrepresentation, breach of implied warranty, DTPA

violations, and conspiracy. 187 F.3d at 491.

In Harris v. Phillip Morris Inc., 232 F.3d 456, 457-58 (5th

Cir. 2000), and then again in Davis v. R.J. Reynolds Tobacco, Inc.,

231 F.3d 928, 930 (5th Cir. 2000), this Court revisited this issue,

holding that suits for assault were likewise precluded by § 82.004.

In both cases, we reiterated that § 82.004 bars all state law

claims, not expressly exempted by the statute, that are predicated

on personal injury or death from a defective product “regardless of

the theory or combination of theories under which the claim is

brought.” Harris, 232 F.3d at 459; Davis, 231 F.3d at 930.

B. PLAINTIFFS’ CLAIMS

The district court held that our Sanchez decision precluded

“most of [P]laintiffs’ claims as they arise from personal injury or

death caused by a defective product.” We agree. Under Sanchez and

its progeny, § 82.004 bars the Plaintiffs’ negligence, strict

liability, fraud, misrepresentation, negligent and intentional

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entrustment, public nuisance, unjust enrichment, assault, and DTPA

claims because they are all predicated on a product-defect theory.

Sanchez, 187 F.3d at 491.

The district court did correctly recognize that some of the

Plaintiffs’ claims are unaffected by § 82.004's limitation on

liability. Specifically, the court found that the Plaintiffs’

breach of warranty claim survived because it is expressly exempted

by the statute, and that the Plaintiffs’ RICO and antitrust claims

survived because a state statute cannot preempt federal law.

However, the court went on to hold that each of these remaining

claims failed for reasons other than the preclusive effect of

§ 82.004. We agree.

1. Plaintiffs’ RICO Claim

The Plaintiffs assert a RICO claim based on the predicate

offenses of assault and injury to a child, elderly individual or

disabled individual. TEX. PEN. CODE § 22.02 & 22.04. To prevail in

a RICO suit, a plaintiff must demonstrate an injury to business or

property. 18 U.S.C. § 1964(c); Sedima S.P.R.L. v. Imrex Co., 473

U.S. 479, 496 (1985) (“[T]he plaintiff only has standing if, and

can only recover to the extent that, he has been injured in his

business or property.”). The phrase “injury to business or

property” excludes personal injuries. Reiter v. Sonotone Corp.,

442 U.S. 330, 339 (1979). Because the only damages asserted by the

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Plaintiffs are for personal injuries, the district court’s judgment

on the pleadings on this claim was proper.

2. Plaintiffs’ Antitrust Claim

The Plaintiffs next assert an antitrust claim, contending that

the Defendants entered into an agreement to restrain free

competition by coordinating tobacco research on the safety of

tobacco and other products such as the “safer cigarette.” They

also allege that the Defendants entered into a “gentleman’s

agreement” to suppress independent research and to hide any

negative results. As a result of this conspiracy, Plaintiffs claim

that information on the dangers of smoking and addition was

suppressed, that safer cigarettes and products were not developed,

and that cigarette prices increased as a result.

Factors relevant to determining whether a plaintiff has

established antitrust standing include: (1) the causal connection

between the alleged antitrust violation and harm to the plaintiff;

(2) an improper motive; (3) the nature of the plaintiff’s alleged

injury and whether the injury was of a type that Congress sought to

redress with the antitrust laws (antitrust injury), (4) the

directness with which the alleged market restraint caused the

asserted injury; (5) the speculative nature of the damages; and (6)

the risk of duplicative recovery or complex apportionment of

damages. See Sullivan v. Tagliabue, 25 F.3d 43, 46 (1st Cir. 1994)

8
(summarizing antitrust standing factors established in Associated

Gen. Contractors v. California State Council of Carpenters, 459

U.S. 519, 537-45 (1983)). The district court found that several of

these factors weigh against finding antitrust standing for

individual smokers:

First is the risk of duplicative recovery and complexity
in apportioning damages. Section 4 of the Clayton Act
limits recovery to individuals who have been “injured in
their business or property by reason of anything
forbidden in the antitrust laws.” 15 U.S.C. § 15(a) . .
. . [I]n Illinois Brick Co. v. Illinois, [the Court]
limited antitrust standing to plaintiffs who purchased
directly from the antitrust violators. 431 U.S. 720,
729-35 (1977). The Court held that determining the
extent of damages as divided between direct and indirect
consumers would involve evidentiary complexities and
uncertainties which would prolong and complicate
proceedings rendering them ineffective. 431 U.S. at 732.
Another consideration was the risk of duplicative
recovery. Allowing consumers who purchased goods from
distributors who could bring their own suits would result
in two sets of plaintiffs recovering from the defendant
for the same acts. In the present case, this factor
weighs heavily against standing.

. . . .

The second factor which weighs heavily against finding
antitrust standing is whether the type of injury alleged
was intended to be remedied by antitrust law; that is
whether the plaintiffs have suffered an antitrust injury.
. . . The Ninth Circuit has determined that this requires
the injured party to be a participant in the same market
as the alleged malefactors. Parties whose injuries,
though flowing from that which makes the defendant’s
conduct unlawful, are experienced in another market do
not suffer antitrust injury. Individual smokers do not
buy cigarettes from manufacturers, but from retailers who
in turn buy from distributors thus the plaintiffs are at
least one step removed from market in which the
manufacturer defendants participate. Since the
plaintiffs have not shown they were direct purchasers,

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 this factor weights heavily against finding antitrust
standing.

The court finds that these factors alone preclude a
finding of antitrust standing The plaintiffs’ antitrust
claims are therefore dismissed on the basis of the
pleadings.

(Citations and footnote omitted.) We are persuaded by the district

court’s reasoning. The Plaintiffs’ antitrust claims were properly

dismissed on the pleadings.

3. Plaintiffs’ Breach of Warranty Claim

In support of their breach of warranty claim, the Plaintiffs

assert that the Defendants made knowingly false statements as to

the health dangers of smoking and the addictive qualities of

nicotine through advertising and public statements. The Plaintiffs

claim these statements formed the “basis of the bargain” for

themselves and others in both starting and continuing to smoke.

Specifically, Plaintiffs point to statements Defendants made from

1954 to 1994.

As the district court correctly noted, any statement made

before May 5, 1993 is barred by limitations.1 Thus, the only

1
This suit was filed on May 5, 1997, and the applicable statute
of limitations is four years. TEX. BUS. & COM. CODE § 2.725(a)-(b).
The Plaintiffs have not alleged that the Defendants made any
specific representation about future performance, which can, in
certain circumstances, extend the time frame for bringing suit on
an express warranty. See id.; Cornerstones Mun. Util. Dist. v.
Mansanto Co., 889 S.W.2d 570, 577 (Tex. App.—Houston [14th Dist.]
1994, writ denied).

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relevant representation relied upon by the Plaintiffs is a 1994

statement by major cigarette manufacturer executives before the

House Subcommittee on Health and the Environment of the Committee

on Energy and Commerce, that nicotine is not addictive.2 The

Plaintiffs contend that, despite this statement in 1994, the

Defendants have known cigarettes were addictive since the early

1960s.

An express warranty is “[a]ny affirmation of fact or promise

made by the seller to the buyer which relates to the goods and

becomes part of the basis of the bargain.” TEX. BUS. & COM. CODE

2.313(a)(1); American Tobacco Co. v. Grinnell, 951 S.W.2d 420, 436

(Tex. 1997). Only sellers—not trade associations—may be liable

for breach of express warranties. Allgood v. R.J. Reynolds Tobacco

Co., 80 F.3d 168, 170-71 (5th Cir. 1996). Accordingly, judgment on

the pleadings in favor of the Defendant trade associations on

Plaintiffs’ express warranty claims was proper.

The Plaintiffs’ breach of express warranty claims against the

remaining Defendants necessarily fail as well. Defendants’

statements before Congress were made forty-two years after the

Plaintiffs became addicted to cigarettes. Thus, these statements

cannot have formed the “basis of the bargain” for the Plaintiffs’

initial purchase of cigarettes. See generally Grinnell, 951 S.W.2d

2
The district court correctly concluded that most of the other
“representations” cited by the Plaintiffs were insufficient to
constitute express warranties.

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at 436 (explaining that “basis of the bargain” is analogous to the

common law “reliance” element). And, to the extent Plaintiffs’

argument rests on the contention that they continued to smoke in

reliance on the Defendants’ 1994 statement, we agree with the

district court that “any express warranty within the limitations

period was negated by the common knowledge that smoking is

addictive and dangerous to one’s health.” Cf. Allgood, 80 F.3d at

172 (holding manufacture had no duty to warn of the dangers of

smoking because “the dangers of cigarette smoking have long been

known to the community”).

III. PLAINTIFFS’ CONSTITUTIONAL CHALLENGES

Finally, the Plaintiffs contend that this Court’s

interpretation of § 82.004 is unconstitutional. First, they argue

that our interpretation violates the open court’s provision of the

Texas Constitution. The open courts provision provides that “[a]ll

courts shall be open, and every person for a injury done him, in

his lands, goods, person or reputation, shall have remedy by due

course of law.” TEX. CONST. art. I, § 13. To establish an open

court’s violations, the plaintiff must establish that (1) he or she

has a well-established, cognizable common law cause of action that

is being abrogated or restricted, and (2) that restriction of the

claim is unreasonable or arbitrary when balanced against the

statute’s purpose. Diaz v. Westphal, 941 S.W.2d 96, 100 (Tex.

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1997). The district court concluded that the Plaintiffs failed to

establish the first prong, i.e. that they had a well-established,

cognizable common-law claim that § 82.004 abrogated or restricted.

We agree. As recently as 1996, this Court labeled a product

liability action premised on the addictive nature of cigarettes as

a “novel and wholly untested theory.” Castano v. American Tobacco

Co., 84 F.3d 734, 737 (5th Cir. 1996). And just last year another

panel of this Court, whose decision we are bound to follow,

concluded that an assault claim premised on personal injuries from

smoking was not a “well-established” common-law claim.3 Harris,

232 F.3d at 458. Accordingly, we conclude that the district

court’s rejection of the Plaintiffs’ open courts challenge was

proper.

Lastly, the Plaintiffs argue that § 82.004 violates the Due

Process clauses of the United States and Texas Constitutions.

Specifically, the Plaintiffs argue that Sanchez’s interpretation of

§ 82.004 is unreasonable and arbitrary because it, in effect,

grants tobacco manufacturers immunity from suit in the state of

Texas.

3
We do not necessarily agree with the Harris Court’s dicta that
the Texas Products Liability Act does not violate the open courts
provision simply because it does not preclude manufacturing defect
and express warranty claims. See Harris, 232 F.3d at 458.

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 Since no fundamental right is implicated here, § 82.004 need

only be rationally related to the stated legislative purpose.

Texas Workers’ Comp. Comm’n v. Garcia, 893 S.W.2d 504, 525 (Tex.

1995). Thus, the Texas Legislature’s enactment of § 82.004 is

unconstitutional only if it is “clearly arbitrary and unreasonable,

having no substantial relation to the public health, safety,

morals, or general welfare.” FM Props. Operating Co. v. City of

Austin, 93 F.3d 167, 174 (5th Cir. 1996) (quoting Village of Euclid

v. Ambler Realty Co., 272 U.S. 365, 395 (1926)). The Texas

Legislature’s stated purpose is passing § 82.004 was to abrogate

frivolous lawsuits it perceived as wasting judicial time and money,

and to adopt the Restatement (Second) of Torts § 402A. We agree

with the district court that a rational relationship exists between

§ 82.004 and the Texas Legislature’s objective. Accordingly,

§ 82.004 does not violate the Plaintiffs’ Due Process rights. The

district court did not err in rejecting the Plaintiffs’

constitutional challenges.

IV. PLAINTIFFS’ MOTION TO CERTIFY QUESTIONS TO THE SUPREME COURT
OF TEXAS

As an alternative to their urging this Court to reexamine

Sanchez, the Plaintiffs have requested that we certify several

questions to the Texas Supreme Court. Specifically, they assert

that we should ask the court (1) whether this Court correctly

interpreted Texas law in Sanchez, and (2) whether the Sanchez

14
interpretation of § 82.004 violated the Texas Constitution.

The Texas Constitution allows federal appellate courts to

certify questions to the Texas Supreme Court if no Texas Supreme

Court authority is on point. TEX. CONST. art. V, § 3-c; see also

TEX. R. APP. P. 58.1. However, certification is not “a proper

avenue to change our binding precedent.” Jefferson v. Lead Indus.

Ass’n, Inc., 106 F.3d 1245, 1247 (5th Cir. 1997). “Once a panel of

this Court has settled on the state law to be applied in a

diversity case, the precedent should be followed by other panels

without regard to any alleged existing confusion in state law,

absent a subsequent state court decision or statutory amendment

which makes this Court’s decision clearly wrong.” Lee v. Frozen

Food Express, Inc., 592 F.2d 271, 272 (5th Cir. 1979).

A. THE SANCHEZ QUESTION

A panel of this Court interpreted § 82.004 in Sanchez, and two

other panels followed that interpretation in Harris and Davis.

Absent a “subsequent state court decision or statutory amendment

which makes this Court’s decision clearly wrong,” this Court will

deny this and any future motion to certify questions related to the

correctness of our Sanchez decision. Lee, 592 F.2d at 272. We

also take this opportunity to issue the caveat to future litigants

that, absent a contrary Texas Supreme Court opinion or a

legislative amendment to § 82.004, we shall henceforth consider our

15
“Erie guesses” in Sanchez, Harris, Davis, and this case to be

settled law in this Circuit as to the applicability and

interpretation of § 82.004 in regard to tobacco being an inherently

unsafe product, and further appeals may be deemed frivolous by this

Court.

B. THE CONSTITUTIONALITY QUESTION

We likewise decline to certify the question of the

constitutionality of our interpretation of § 82.004 in Sanchez.

“Absent genuinely unsettled matters of state law, we are reluctant

to certify” because we “do not lightly abdicate our mandate to

decide issues of state law when sitting in diversity.” Jefferson,

106 F.3d at 1247-48. The ability to certify questions is a

valuable tool, but we are cautious to avoid its overuse “lest we

wear out our welcome.” Transcontinental Gas Pipeline Corp. v.

Transportation Ins. Co., 953 F.2d at 623 (5th Cir. 1992). The

tests for determining the constitutionality of a statute are

developed enough in Texas for us to apply these tests with

confidence. Thus, certification is inappropriate.

IV. CONCLUSION

Having carefully reviewed the entire record of this case, and

having fully considered the parties’ respective briefing on the

issues of these appeals, we find no error in the district court’s

judgment. Accordingly, we AFFIRM.

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