UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK --------------------------------X In Re Simon II Litigation No. 00-CV-5332 --------------------------------X Related to No. 98-CV-0675 No. 98-CV-1492 No. 98-CV-3287 No. 99-CV-1988 No. 99-CV-6142 No. 00-CV-2340 No. 00-CV-4442 No. 00-CV-4632 No. 02-CV-0599 MEMORANDUM AND ORDER APPEARANCES: Plaintiff’s Attorneys: Lieff, Cabraser, Heimann, & Bernstein, LLP 780 Third Avenue, 49th Floor New York, New York 10017-2004 By: Steven E. Fineman, Esq. Lieff, Cabraser, Heimann, & Bernstein 275 Battery Street, 30th Floor San Francisco, CA 94111 By: Elizabeth J. Cabraser, Esq. Richard M. Heimann, Esq. Weitz & Luxenberg, P.C. 180 Maiden Lane, 17th Floor New York, New York 10038 By: Perry Weitz, Esq. 1 John M. Broadus, Esq. Brown Rudnick Freed & Gesmer One Financial Center Boston, MA 02111 By: M. Frederick Pritzker, Esq. Gregory T. Arnold, Esq. Waite, Schneider, Bayless & Chesley Co. 1513 Central Trust Tower Fourth and Vine Street Cincinnati, OH 45202 By: Stanley M. Chesley, Esq. Spohrer Wilner Maciejewski & Matthews P.A. 701 West Adams Street, Suite 2 Jacksonville, Florida 32204 By: Norwood Wilner, Esq. Roda & Nast, P.C. 801 Estelle Drive Lancaster, PA 17601 By: Dianne M. Nast, Esq. Defendant Philip Morris Inc.: Arnold & Porter Thurman Arnold Building 5555 Twelfth St., N.W. Washington, D.C. 20004 By: Murray R. Garnick, Esq. David S. Eggert, Esq. Heather Pigman, Esq. Eric Suter, Esq. J. Benjamin King, Esq. Defendant R. J. Reynolds: Jones, Day, Reavis & Pogue North Point 901 Lakeside Avenue Cleveland, OH 44114-1190 By: Theodore M. Grossman, Esq. Jones, Day, Reavis & Pogue 2 51 Louisiana Avenue, N.W. Washington, D.C. 20001-2113 By: Robert H. Klonoff, Esq. Michael Fried, Esq. Jones, Day, Reavis & Pogue 222 East 41st Street New York, New York 10017 By: Harold K. Gordon, Esq. George Kostolampros, Esq. Defendant Brown & Williamson: Kirkland & Ellis Citicorp Center 153 East 53rd St. New York, New York 10022-4675 By: Peter Bellacosa, Esq. Kirkland & Ellis Amoco Building 200 East Randolph Drive Chicago, IL 60606 By: David Bernick, Esq. Defendant Lorillard Tobacco Co.: Greenberg, Traurig, LLP 885 Third Avenue, 21st Floor New York, New York 10022 By: Alan Mansfield, Esq. Stephen L. Saxl, Esq. Defendant BAT Industries, p.l.c.: Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017-3954 By: Peter Shapiro, Esq. Defendants Liggett Group Inc., Liggett & Meyers, Inc., and certain of its affiliates where applicable: Kasowtiz Benson Torres & Friedman 1633 Broadway New York, NY 10019-6799 By: Aaron H. Marks, Esq. 3 Leonard A. Feiwus, Esq. JACK B. WEINSTEIN, Senior District Court Judge: Table of Contents I. Introduction .............................................................6 A. General Considerations .................................................6 1. Equity ........................................................6 2. Punitive Damages ..............................................12 B. The Instant Case .....................................................14 II. Summary ..............................................................17 A. Options Selected ....................................................18 B. Possible Permutations .................................................19 1. Punitive Damages .............................................19 2. Compensatory Damages .........................................20 3. Advantages and Disadvantages ....................................20 III. Facts .................................................................24 A. Physical Effect of Tobacco .............................................24 B. Industry Conspiracy ..................................................30 1. Formation and Execution ........................................30 2. Public statements from the 1950s to the present ........................36 3. Knowledge from the 1950s to the present ............................40 4. Coverup ....................................................44 5. Other Deceptive Conduct ........................................47 C. Consumer Harm from Deceptive Practices .................................53 1. Knowledge that Consumers Would Act Upon Deceptive Practices .........54 2. Evidence that Misrepresentations Caused Consumers Harm ..............55 a. Expert testimony ......................................55 (1) Dr. Jon Krosnick ................................55 (2) Dr. Jeffery Harris and others ........................58 b. Videotaped depositions .................................60 c. Surveys, medical and psychological literature and documents .....63 IV. Procedural History .......................................................64 A. Individual Plaintiff cases ...............................................64 1. Simon I .....................................................64 2. Decie .......................................................65 3. Ebert .......................................................66 4. Browne .....................................................66 4 5. Simon II .....................................................66 B. Blue Cross Cases ....................................................67 1. Empire Blue Cross .............................................67 2. Other Blue Cross plans ..........................................68 C. Union Health fund cases ...............................................69 1. National Asbestos Workers ......................................69 2. Bergeron ....................................................70 D. Asbestos cases ......................................................71 1. H.K. Porter ..................................................71 2. Raymark ....................................................71 3. Falise .......................................................72 E. Mason (Medicare) ...................................................72 F. Foreign Entities .....................................................73 G. Tobacco Cases Nationwide ............................................74 H. Difficulty in Prosecuting Tobacco Lawsuits .................................81 V. Substantive Law .........................................................82 A. Fraud and Conspiracy ................................................82 B. Preemption .........................................................87 C. Statute of Limitations .................................................91 1. In general ....................................................91 2. Relation Back .................................................94 D. Res Judicata ........................................................98 E. Individualized Proof of Causation and Damages ..............................99 1. Federal Rules of Civil Procedure and Evidence .......................102 2. Appropriateness of Sampling and Survey Techniques ..................105 3. Due Process .................................................111 4. Jury Right ...................................................116 5. Erie .......................................................123 VI. Punitive Damages .......................................................126 A. Principles .........................................................126 B. Caps ............................................................134 1. Supreme Court Cases ..........................................134 2. Applications .................................................136 VII. Choice of Law .........................................................140 A. In General ........................................................140 B. New York Rule of Babcock v. Jackson and Interest Analysis ..................142 C. Application of Babcock Rules to Complex Fact Patterns ......................144 D. Constitutional Limits .................................................158 E. Interest Analysis in This Case ..........................................159 VIII. Class Certification Analysis ................................................169 A. General Requirements ................................................170 5 1. Requirements of Rule 23 ........................................170 2. Subclassing ..................................................175 3. Methods of Modern Notice .....................................177 4. Special Requirements for Limited Fund Actions .......................179 5. Limited Fund Class Action Based on Constitutional Caps ...............180 B. 23(f) Review ......................................................185 C. Amendments to Federal Rules of Civil Procedure ...........................186 D. Jury Trial .........................................................186 E. Rule 23 Findings of Fact ..............................................190 1. Numerosity ..................................................190 2. Commonality ................................................190 3. Typicality ...................................................191 4. Adequacy of Representation .....................................191 5. Limited Punishment under Rule 23(b)(1) ............................194 IX. Disposition of Funds by Court .............................................194 A. Powers ...........................................................194 B. Distribution ........................................................198 X. Trial Procedure ........................................................200 XI. Conclusion ............................................................201 I. Introduction A. General Considerations 1. Equity This class action raises tantalizing factual, substantive