                    IN THE COURT OF APPEALS OF TENNESSEE
                                 AT JACKSON
                              November 1999 Session

   STEAMFITTERS LOCAL UNION NO. 614 HEALTH AND WELFARE
           FUND, ET AL. v. PHILIP MORRIS, INC., ET AL.

               Interlocutory Appeal from the Circuit Court for Shelby County
                         No. 92260-2 T.D.   James F. Russell, Judge



                  No. W1999-01061-COA-R9-CV - Filed September 26, 2000


Union health and welfare funds brought an action against tobacco companies and their trade
associations to recover the funds’ costs of treating their participants’ smoking-related illnesses. The
tobacco companies moved to dismiss the complaint, arguing that the funds’ economic injuries were
derivative of the participants’ physical injuries and, consequently, too remote for recovery. The trial
court granted the motion to dismiss on the funds’ antitrust claim but denied the motion on the funds’
claims for fraud and deceit, misrepresentation, conspiracy and violation of the Tennessee Consumer
Protection Act. Permission for interlocutory appeal was granted to the tobacco companies by both
the trial court and the appellate court. We affirm the trial court’s dismissal of the antitrust claim and
reverse the trial court’s denial of the motion to dismiss on the remaining claims, finding the
plaintiffs’ alleged injuries are too remote, as a matter of law, to permit recovery. The cause is
remanded for entry of an order dismissing the plaintiffs’ complaint.

  Tenn. R. App. P. 9 Interlocutory Appeal; Judgment of the Circuit Court is Affirmed in
Part, Reversed in Part and Remanded.

HOLLY KIRBY LILLARD , J., delivered the opinion of the court, in which W. FRANK CRAWFORD , P.J.,
W.S., and DAVID R. FARMER , J., joined.

Leo Bearman, Jr., Jill M. Steinberg, Memphis, Tennessee, Kenneth J. Parsigian, Boston,
Massachusetts, Jack E. McClard, Richmond, Virginia, for Philip Morris, Inc.

Jeff Jones, Columbus, Ohio, Albert C. Harvey, Memphis, Tennessee, for R.J. Reynolds Tobacco
Company.

Kenneth N. Bass, Washington, D.C., Lee J. Chase, Memphis, Tennessee, for Brown & Williamson
Tobacco Corporation.

Mary Elizabeth McGarry, New York, New York, for B.A.T. Industries, PLC.
Jeffrey S. Nelson, Kansas City, Missouri, Roger Dickson, Chattanooga, Tennessee, for Lorrillard
Tobacco Company.

Harry Zirlin, New York, New York, William S. Lockette, Jr., Knoxville, Tennessee, for The Council
for Tobacco Research - USA, Inc.

Saul C. Belz, Memphis, Tennessee, for The Tobacco Institute, Inc.

Bruce M. Ginsberg, New York, New York, Gary K. Smith, Memphis, Tennessee, for Hill &
Knowlton, Inc.

Robert G. McDowell, Nashville, Tennessee, for United States Tobacco Company

John McReynolds, Jr., Knoxville, Tennessee, for Liggett Group, Inc.

Edward Bearman, Memphis, Tennessee, for Smokeless Tobacco Council, Inc.

Sylvia Davidow, D’Lisa R. Simmons, Houston, Texas, for Steamfitters Local Union No. 614 Health
and Welfare Fund.

Deborah Godwin, Memphis, Tennessee, for Steamfitters Local Union No. 614 Health and Welfare
Fund.

Louis L. Robein, Metairie, Louisiana, for Steamfitters Local Union No. 614 Health and Welfare
Fund.
Robert J. Connerton, Washington, D.C., for Steamfitters Local Union No. 614 Health and Welfare
Fund.

                                            OPINION

        Plaintiff/Appellees (“Funds”) are multi-employer health and welfare trust funds regulated
by ERISA, 29 U.S.C. § 1001 et. seq. and funded by employer contributions under collective
bargaining agreements. The Funds pay medical expenses for union employees and retirees, as well
as their dependents. The Funds are subrogated to all of the rights and causes of action of the
participants and beneficiaries for whom medical benefits are provided because of injuries and
illnesses caused by any third party tortfeasor.

        On January 7, 1998, the Funds filed a complaint against the Defendant/Appellants cigarette
manufacturers and their trade associations (“Tobacco Companies”), seeking recovery of costs
incurred by the Funds in providing medical treatment and other benefits to participants suffering
from tobacco-related illnesses. In the complaint, the Funds asserted that the Tobacco Companies
concealed or misrepresented information concerning the harmful and addictive nature of tobacco,
that they deceptively manipulated nicotine levels in cigarettes to maintain their addictiveness, and
that they suppressed the development and marketing of safer tobacco products. The Funds

                                                 2
contended that these actions prevented the Funds from implementing programs to educate
participants and beneficiaries about nicotine addiction, to encourage the use of safer cigarettes, or
to encourage beneficiaries to quit smoking. The Funds alleged that, as a result, they incurred
increased health care costs on behalf of participants for the treatment of tobacco-related illnesses,
thereby causing financial injury to the Funds’ assets. The Funds asserted, inter alia, claims for
antitrust violations under the Tennessee Uniform Trade Practices Act, common law claims for fraud
and deceit, negligent misrepresentation, and conspiracy, as well as violations of the Tennessee
Consumer Protection Act (“TCPA”).

       On April 20, 1998, the Tobacco Companies filed a motion to dismiss the Funds’ complaint
under Rule 12.02(6) of the Tennessee Rules of Civil Procedure for failure to state a claim upon
which relief can be granted. In the motion, the Tobacco Companies argued that the Funds’ claims
should be dismissed because their alleged economic injuries were too remote as a matter of law for
recovery.

         On January 29, 1999, the trial court entered its opinion and order granting the Tobacco
Companies’ motion to dismiss the Funds’ antitrust claims but denying the motion to dismiss its
claims for fraud and deceit, negligent misrepresentation, conspiracy, and violation of the TCPA.1
In its opinion and order, the trial court addressed the Tobacco Companies’ argument that, as a matter
of law, the Funds’ economic injuries were too remote for recovery:

        According to all authorities remoteness is a component of any analysis with regard
        to proximate cause. In Tennessee the cases are legion in holding that proximate
        cause is always to be determined upon the facts of each case. Thus proximate cause
        is ordinarily a question for the jury to decide unless the uncontroverted facts and
        inferences to be drawn from them make it so clear that all reasonable persons must
        agree on the proper outcome. Such issues may be preempted by the trial judge only
        where evidence and reasonable inferences therefrom are so free of conflict that all
        reasonable minds would agree with the decision of the trial judge. At this stage in
        the proceedings this Court is of the considered opinion that, given the pleadings and
        factual assertions therein, it is more appropriate for a jury to determine the issue of
        remoteness with proper instructions giving due consideration to the issue of
        remoteness.



Op. and Order at p. 6-7 (footnote omitted). Consequently, the trial court denied the Tobacco
Companies’ motion to dismiss as to the Funds’ claims for fraud and deceit, negligent


        1
          The Funds stated during oral argument on the motion to dismiss that they intended to
voluntarily non-suit their additional claims for unjust enrichment, breach of a voluntarily undertaken
duty, breach of expressed and implied warranties, negligence, and products liability. An order
recognizing non-suits on each of these claims was entered on March 16, 1999.

                                                    3
misrepresentation, and conspiracy. The trial court denied the motion to dismiss on the Funds’ claim
for violations of the TCPA based, in part, on the trial court’s determination that a plaintiff is not
required to establish proximate causation as part of a cause of action under the TCPA.

        On May 6, 1999, the trial court issued an order granting the Tobacco Companies permission
to seek interlocutory appeal of the trial court’s opinion and order. In the order granting interlocutory
appeal, the trial court acknowledged that, though it had found the application of the remoteness
doctrine a jury question, “many courts that have considered similar cases have dismissed
substantially identical third party payor suits in their entirety as a matter of law on remoteness
grounds.” The trial court noted that the United States Courts of Appeal for the Second and Third
Circuits had issued decisions dismissing claims similar to those brought by the Funds in this case
on remoteness grounds. See Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., 191
F.3d 229 (2d Cir. 1999), cert. denied, 120 S.Ct. 799, 145 L.Ed.2d 673 (2000); Steamfitters Local
Union No. 420 Welfare Fund, et al. v. Philip Morris, Inc., et al., 185 F.3d 957 (3d Cir. 1999), cert.
denied, 120 S. Ct. 789, 145 L. Ed.2d 666 (2000). The trial court also cited decisions by numerous
state and federal trial and appellate courts which had dismissed some of the claims brought by third-
party payors but had allowed certain claims to proceed, as well as others which had refused to
dismiss any third-party payor claims as too remote. Acknowledging that its “treatment of the
remoteness doctrine . . . [was] uniquely different from that of other trial courts from around the
country[,]” the trial court concluded that interlocutory appeal of its denial of the motion to dismiss
was warranted in order to “determine whether Tennessee’s common law remoteness limits are
uniform with those of other jurisdictions.” On June 15, 1999, this Court granted the Tobacco
Companies’ application for interlocutory appeal.

       The issue on appeal is whether the trial court erred in failing to grant the Tobacco
Companies’ motion to dismiss on the Funds’ remaining claims for fraud and deceit,
misrepresentation, conspiracy, and violation of the TCPA. There is no dispute as to the trial court’s
dismissal of the Funds’ antitrust claim, consequently, that portion of the trial court’s ruling is
affirmed.

        On appeal, the Tobacco Companies argue that the trial court erred in failing to grant the
motion to dismiss as to all of the Funds’ claims. The Tobacco Companies claim that the Funds’
economic losses are entirely derivative of the physical injuries suffered by participants and are, as
a matter of law, too remote for recovery. The Tobacco Companies note decisions from numerous
state and federal jurisdictions in substantially similar suits, including decisions by multiple federal
appellate courts decided after the trial court issued its opinion and order, which have found claims
similar to those asserted by the Funds in this case too remote as a matter of law.

       The issue presented in this case is a question of law. Consequently, the scope of review is
de novo with no presumption of correctness in the trial court’s decision. See Ridings v. Ralph M.
Parsons Co., 914 S.W.2d 79, 80 (Tenn. 1996).




                                                   4
         Under Tennessee Rules of Civil Procedure Rule 12.02(6), a motion to dismiss a complaint
for failure to state a claim upon which relief can be granted tests the legal sufficiency of a complaint;
it admits the truth of all relevant and material allegations “but asserts that such facts do not constitute
a cause of action as a matter of law.” Riggs v. Burson, 941 S.W.2d 44, 47 (Tenn. 1997) (quoting
Pursell v. First Am. Nat’l Bank, 937 S.W.2d 838 (Tenn. 1996)) (emphasis omitted). When ruling
on such a motion, the Court must interpret the allegations in the plaintiff’s favor and accept
allegations of fact as true. See id. Yet, inferences to be drawn from the facts or legal conclusions
set forth in a complaint are not required to be accepted as true. See id. at 47-48. The motion should
be denied unless it appears that the plaintiff can prove no set of facts in support of his claim that
would entitle him to relief. See Daniel v. Hardin County General Hosp., 971 S.W.2d 21, 23-24,
(Tenn. Ct. App. 1997).

         In Snyder v. LTG Lufttechnische GmbH, 955 S.W.2d 252 (Tenn. 1997), the Tennessee
Supreme Court noted that the doctrine of proximate cause reflects a policy decision made by the
legislature or the courts to deny liability for otherwise actionable conduct based on logic, common
sense, policy, precedent and “our more or less inadequately expressed ideas of what justice demands
or of what is administratively possible and convenient.” Id. at 256, n. 6 (quoting Bain v. Wells, 936
S.W.2d 618, 625 (Tenn. 1997)); see also Kilpatrick v. Bryant, 868 S.W.2d 594, 598 (Tenn. 1993)
(stating that the doctrine of proximate cause encompasses the whole panoply of rules that may deny
liability for otherwise actionable causes of harm). Tennessee courts have recognized that, to be
actionable, conduct must be more than a remote cause of injury. In Doe v. Linder Const. Co., Inc.,
845 S.W.2d 173 (Tenn. 1992), the Tennessee Supreme Court noted:

        As a practical matter, legal responsibility must be limited to those causes which are
        so closely connected with the result and of such significance that the law is justified
        in imposing liability. Some boundary must be set . . . .

Id. at 181 (citing Prosser and Keeton on the Law of Torts, § 41, p. 264 (5th ed. 1984)). The
existence of proximate causation is a jury question unless the uncontroverted facts and inferences
to be drawn from them make it so clear that all reasonable persons would agree on the outcome. See
McClung v. Delta Square Ltd. Partnership, 937 S.W.2d 891, 905 (Tenn. 1996).

        A number of courts have considered the arguments asserted by the parties in this case. The
clear majority of courts have determined that the plaintiffs’ claims must be dismissed because the
injury is too remote to permit recovery. A leading case is Laborers Local 17 Health & Benefit
Fund v. Phillip Morris, Inc., 191 F.3d 229 (2d Cir. 1999), cert. denied, 120 S. Ct. 799, 145 L.Ed
2d 673 (2000). In Laborers Local 17, union health and welfare trust funds brought suit against
tobacco companies to recover money expended to provide medical treatment to the funds’
participants suffering from tobacco-related illnesses. Id. at 233. The funds alleged “damages
inflicted on [their] infrastructure independent of the harm suffered by plan participants[,]” including
losses suffered due to the funds’ inability to control costs, promote the use of safer cigarettes, and
establish education programs. The district court granted, in part, the tobacco companies’ motion to
dismiss for failure to state a claim, but denied the motion as to the funds’ claims for federal RICO


                                                    5
violations, state common law fraud, misrepresentation, and concealment, and for state common law
assumption and breach of a special duty. See id. In its partial denial of the motion to dismiss, the
district court held that “a rational trier of fact could find that defendants’ alleged wrongdoing
proximately caused plaintiffs’ alleged injuries, reasoning that the injuries were arguably (a)
foreseeable and (b) not too remote as a matter of law . . . .” Id. at 233-234. On interlocutory appeal
of the district court’s decision, the appellate court considered the issue of:

        Whether, under the circumstances alleged in plaintiffs’ complaint, economic injuries
        incurred by a union health care trust fund are purely derivative of the physical injuries
        which its participants suffered, and are therefore too remote to permit recovery as a
        matter of law.

Id. at 234.

         At the outset, the Second Circuit found that the issue on appeal raised a question of
proximate cause, namely, “whether the chain of causation linking [the tobacco companies’] alleged
wrongdoing to [the funds’] alleged injuries is too remote to permit recovery as a matter of law.” Id.
at 234. Considering that question in the context of the funds’ RICO claims, the court stated that the
doctrine of proximate causation has traditionally required that there be “some direct relation between
the injury asserted and the injurious conduct alleged.”2 Id. at 235 (citing Holmes v. Securities
Investor Protection Corp., 503 U.S. 258, 268, 112 S.Ct. 1311, 1318 (1992). Therefore, where a
plaintiff’s injuries are wholly derivative of harm to a third party, the injuries are generally deemed
indirect and consequently, too remote, as a matter of law, to support recovery. See Laborers Local
17 at 236 (citations omitted). Noting the impossibility of creating a black-letter rule to dictate the
result in every case, the court cited three policy factors suggested by the Supreme Court in Holmes
to guide the application of the general principle that plaintiffs with indirect injuries lack standing
to sue. See Laborers Local 17 at 236-237 (citing Holmes, 503 U.S. at 269-270, 112 S.Ct. at 1318).
First, the more remote the injury, the more difficult it is to determine the amount of damages caused
by the defendant’s acts as opposed to other factors. Second, recognizing claims by the indirectly
injured creates a risk of multiple recoveries. Third, those who are directly injured are in a better
position to remedy harm without the problems found in suits based on more remote injuries. See
Laborers Local 17, 191 F.3d at 236-237.

        Applying these concepts to the funds’ claims, the Second Circuit found that, whether the
funds’ injuries were labeled as “infrastructure harm” or as “harm to financial stability,” absent injury
to individual smokers, the funds would not have incurred any increased costs in the form of payment
of benefits nor would they have experienced the difficulties of cost prediction and control that


        2
           The court noted, parenthetically, that its decisions have demonstrated that foreseeability and
direct injury (or remoteness) are distinct concepts, both of which must generally be established by a
plaintiff. The plaintiff’s damages may be foreseeable, yet still “too remote to permit recovery.” See id.
at 236 (citing Kinsman v. Transit Co. v. City of Buffalo, 388 F.2d 821, 824-25, & n. 8 (2d Cir. 1968),
and Dundee Cement Co. v. Chemical Labs, Inc., 712 F.2d 1166, 1168 (7th Cir. 1983)).

                                                    6
constituted the crux of their damages. Id. at 239. The court held that the funds’ injuries were
“entirely derivative” of the harm suffered by their participants as a result of using tobacco products.
Id. at 239. Since the defendants’ alleged misconduct did not proximately cause the injuries alleged,
the plaintiffs lacked standing to bring RICO claims against the defendants. See id. at 239.3

        The court found its conclusion consistent with the three policy factors in Holmes. See
Laborers Local 17 at 239-241. The court characterized the damages asserted by the funds as
“incredibly speculative,” noting the difficulty of proving damages which stem from individual
smokers’ decisions of whether, and how often, to smoke. Id. at 239-40.4 The court observed that,
while the smokers in that case would not present a risk of double recovery under RICO, other remote
payors like the employers or health insurers with whom the funds contracted might bring suit,
claiming that they ultimately bore the costs. See id. at 240. Finally, the court stated that, while
individual smokers would not have standing to bring a claim under RICO, individual smokers could
assert other claims against the tobacco companies to remedy the harm done by the defendants’
alleged misconduct. See id. at 241. Therefore, the Second Circuit held that the plaintiff’s injuries
were purely derivative of the physical injuries suffered by plan participants and were too remote as
a matter of law to permit recovery. Consequently, the district court was reversed and the plaintiffs’
claims dismissed. Id. at 244.

        Since the Second Circuit’s decision in Laborers Local 17, the United States Courts of Appeal
for the Third, Ninth, Seventh, Fifth, and Eleventh Circuits have dismissed in their entirety cases
involving claims similar to those brought by the Funds in this case on remoteness grounds. See
Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912 (3d Cir.
1999), cert. denied, 120 S.Ct. 844, 145 L.Ed.2d 713 (2000); Oregon Laborers-Employers Health


        3
         The court used the same reasoning to dismiss the funds’ common law fraud and special duty
claims asserted under state law. See id. at 242-243.
        4
           In International Brotherhood of Teamsters, Local 734 Health and Welfare Trust Fund v.
Philip Morris, Inc., 196 F.3d 818 (7th. Cir. 1999), the court labeled the damages alleged by plaintiff
health care funds against defendant tobacco companies as “hopelessly speculative.” Id. at 826.
Addressing plaintiffs’ contention that defendants’ deception as to the dangers of smoking prevented
plaintiffs from conducting education programs for their participants, the court inquired “[j]ust what
would the insurers have done, had they known more earlier?” Id. at 826. The court queried:

        How effective would [an education campaign] have been? Or: why should we think that
        insurers would succeed where the Surgeon General and warnings on the product failed?
        The insurers now have all the information they say they lacked years ago, but what
        reason have we to believe that this knowledge by insurers has affected cigarette
        consumption? How would any change have affected the receipt side of the insurers’
        ledger? Insurers have been offering lower rates to non-smokers for a long time; what is
        the net effect of these rates on smoking, health, and profits?

Id.

                                                    7
& Welfare Trust Fund v. Philip Morris, Inc., 185 F.3d 957 (9th Cir. 1999), cert. denied, 120 S.Ct.
789, 145 L.Ed.2d 666 (2000); International Bhd. of Teamsters, Local 734 Health and Welfare
Trust Fund v. Philip Morris, Inc., 196 F.3d 818 (7th Cir. 1999); Texas Carpenters Health Benefit
Fund v. Philip Morris, Inc., 199 F.3d 788 (5th Cir. 2000); United Food & Commercial Workers
Union, Employers Health and Welfare Fund v. Philip Morris, Inc., No. 99-13476, 2000 WL
1190787 (11th Cir Aug. 22, 2000). In these cases, each court held that the plaintiffs’ injuries were
“entirely derivative” of the physical harm suffered by their plan participants as a result of using
tobacco products and, consequently, that the plaintiffs had failed to show that the defendants’ alleged
misconduct proximately cause the injuries alleged. Numerous federal and state trial courts have also
dismissed lawsuits by union funds and other third-party payors on remoteness grounds,
characterizing the plaintiffs’ claims as “derivative” or contingent on the claims of individual
smokers. See Rhode Island Laborers’ Health & Welfare Fund v. Philip Morris, Inc., 99
F.Supp.2d 174 (D. R.I. 2000) (dismissed complaint as to federal and state RICO, federal and state
antitrust, state fraud, failure to perform a special duty, and state unfair trade practices act claims);
Republic of Guatemala v. The Tobacco Institute, Inc., 83 F.Supp.2d 125 (D. D.C. 1999) (dismissed
complaint as to federal RICO, federal and District of Columbia antitrust, fraud and intentional
misrepresentation, negligent misrepresentation, negligent performance of a voluntary undertaking,
and conspiracy claims); Hawaii Health & Welfare Trust Fund for Operating Engineers v. Philip
Morris, Inc., 52 F.Supp.2d 1196 (D. Haw. 1999) (dismissed complaint as to federal and state RICO,
federal and state antitrust, various state tort, and state false advertising claims); Seafarers Welfare
Plan v. Philip Morris, Inc., 27 F.Supp.2d 623 (D. Md. 1998) (dismissed complaint as to federal
RICO, federal and state antitrust, state consumer protection act, fraud, negligent misrepresentation,
conspiracy, breach of voluntarily taken duty, and unjust enrichment claims); Texas Carpenters
Health Benefit Fund v. Philip Morris, Inc., 21 F.Supp.2d 664 (E.D. Tex. 1998) (dismissed
complaint as to federal RICO, federal and state antitrust, fraud misrepresentation, breach of special
duty, breach of warranty, negligence, conspiracy, aiding and abetting, unjust enrichment, state
deceptive trade practices and consumer protection acts claims, and vicarious liability), aff’d, 199
F.3d 788 (5th Cir. 2000); Southeast Florida Laborers District Health & Welfare Trust Fund v.
Philip Morris, Inc., No. 97-8715-CIV-RYSKAMP, 1998 WL 186878 (S.D. Fla. Apr. 13, 1998)
(dismissed complaint as to federal RICO, federal and state antitrust, fraud, breach of a special duty,
and unjust enrichment claims); Eastern States Health & Welfare Fund v. Philip Morris, Inc., No.
603869/97 (N.Y. Sup. Ct. Mar. 3, 2000) (dismissed complaint as to state fraud, antitrust, deceptive
trade practices, false advertising, breach of special duty, negligence, negligent product design, strict
liability, entrustment, indemnity, public nuisance, and subrogation claims); Operating Eng’rs Local
324 Health Care Fund v. Philip Morris, Inc., No. 97-741291-CZ (Mich. Cir. Ct. Feb. 12, 1999)
(dismissed complaint as to state antitrust, consumer protection act, fraud, misrepresentation,
concealment, breach of a special duty, unjust enrichment, conspiracy, and false advertising act
claims).

        A minority of courts, all federal district courts, have declined to dismiss actions on
remoteness grounds. See Service Employees Int’l Union Health & Welfare Fund v. Philip Morris,
Inc., 83 F.Supp.2d 70 (D.D.C. 1999) (denied motion to dismiss as to federal RICO, federal and state
antitrust, fraud, breach of a special duty, indemnity, and unjust enrichment claims); Blue Cross Blue


                                                   8
Shield of New Jersey, Inc., v. Philip Morris, Inc., 36 F.Supp.2d 560 (E.D. N.Y. 1999) (denied
motion to dismiss as to federal RICO and antitrust claims); Iron Workers Local Union No. 17 Ins.
Fund v. Philip Morris, Inc., 23 F.Supp.2d 771 (N.D. Ohio 1998) (denied motion to dismiss as to
federal and state RICO claims, federal and state antitrust claims, and conspiracy claims); National
Asbestos Workers Med. Fund v. Philip Morris, Inc., 23 F.Supp.2d 321 (E.D. N.Y. 1998) (denied
motion to dismiss as to federal RICO, unjust enrichment-restitution, indemnity, and breach of an
assumed duty claims). For example, in Service Employees International Union Health & Welfare
Fund v. Phillip Morris, Inc., the district court held that the plaintiffs’ injuries, depletion of its trust
funds, were foreseeable, that individual Fund participants could not recover under RICO for such
damages, and that it was too early in the litigation to conclude that the plaintiffs’ damages were too
difficult to ascertain. See Service Employees International Union, 83 F.Supp. 2d at 84-88.
Therefore, the district court declined to grant the tobacco defendants’ motion to dismiss. Id. at 95.

        In this case, the Funds allege that the Tobacco Companies’ deceptive actions prevented the
Funds from implementing programs to educate participants about the dangers of smoking, and to
encourage participants to use safer cigarettes or to stop smoking altogether. The Funds assert that
the actions of the Tobacco Companies increased the health care costs incurred on behalf of plan
participants for tobacco related illnesses and, consequently, damaged the Funds’ financial assets.

        The Funds argue on appeal that the Funds’ alleged injuries are direct, contending that the
conduct of the Tobacco Companies and the injury for which damages sought are sufficiently related
and need not be “immediately adjacent.” However, as noted in Laborers Local 17, the key inquiry
regarding direct injury is “whether the damages a plaintiff sustains are derivative of an injury to a
third party.” Laborers Local 17, 191 F.3d at 238-39. As in Laborers Local 17, the Funds’ damages
in the instant care are “entirely derivative of the harm suffered by plan participants as a result of
using tobacco products.” Id. at 239. Absent the physical injury to individual plan participants from
using tobacco products, the Funds’ financial assets would not have been damaged. Therefore, since
the Funds’ injuries are “purely contingent on harm to third parties, these injuries are indirect.” Id.

        The Funds in this case argue that the fact of damage is certain, even if “some speculation may
be required to assess the extent or amount of the Funds’ damages. . . .” This can only be
characterized as understatement. Indeed, even if the fact of damage is certain, the amount of damage
must be deemed “hopelessly speculative.” International Bhd of Teamsters, Local 734 Health and
Welfare Trust Fund v. Phillip Morris, Inc., 196 F.3d 818, 826 (7th Cir. 1999). As discussed at
length in Laborers Local 17, it would be “virtually impossible” for the Funds to prove with
reasonable certainty the effect education or smoking cessation programs would have had on the
physical injuries suffered by plan participants since the damages stem from individual smokers’
decisions whether to continue smoking and, if so, how frequently to smoke. The Laborers court also
observed that the plaintiffs’ injuries derived “not simply from defendants’ affirmative misconduct
but also from plaintiffs’ fraudulently induced inaction.” Id. at 240. It noted that “it is often easier
to ascertain the damages that flow from actual, affirmative conduct, than to speculate what damages
arose from a party’s failure to act.” Id. The court in Laborers Local 17 found that “it would be the
sheerest sort of speculation to determine how these damages might have been lessened had the Funds


                                                    9
adopted the measures defendants allegedly induced them not to adopt.” Id. We must reach the same
conclusion.

        Given the fact that the Funds’ injuries are unquestionably indirect, and considering the
speculation required to prove the Funds’ damages, we must conclude that the Funds’ alleged
damages are too remote, as a matter of law, to support recovery. Consequently, we reverse the trial
court’s denial of the Tobacco Companies’ motion to dismiss as to the Funds’ claims for fraud and
deceit, negligent misrepresentation and conspiracy.

        The Tobacco Companies also argue on appeal that the trial court erred in failing to dismiss
the Funds’ claim for violations of the TCPA. The Tobacco Companies assert that Tennessee case
law demonstrates that the TCPA incorporates a requirement of proximate causation. They also claim
that the trial court’s interpretation of the TCPA conflicts with its plain meaning and with judicial
decisions in other jurisdictions construing nearly identical wording in state consumer protection
statutes to require that plaintiffs prove proximate causation.

        Tennessee Code Annotated § 47-18-109, enacted as a part of TCPA, provides that:

        Any person who suffers an ascertainable loss . . . as a result of the use or employment
        by another person of an unfair or deceptive act or practice declared to be unlawful by
        this part, may bring an action individually to recover actual damages.

Tenn. Code Ann. § 47-18-109(a)(1) (1995). In Harvey v. Ford Motor Credit Co., No. 03A01-9807-
CV-00235, 1999 WL 486894, at *2 (Tenn. Ct. App. July 13, 1999), this Court held that plaintiffs
asserting claims under the TCPA are required to show that the defendant’s wrongful conduct
proximately caused their injury. Id.; see also Stracener v. Swindle, No. 01A01-9502-CH-00047,
1995 WL 414873, at *3 (Tenn. Ct. App. July 14, 1995) (stating “proximate causation must be proven
whether the claim is based on fraud . . . or on mere negligence . . . .”).

        Therefore, based on Harvey and Stracener, we find that, in order to assert a claim under the
TCPA in this case, the Funds must show that the Tobacco Companies’ wrongful conduct
proximately caused their injury. In light of our holding above that the Funds’ alleged injuries are
too remote as a matter of law, we also reverse the trial court’s denial of the Tobacco Companies’
motion to dismiss with respect to the Funds’ claim for violations of the TCPA. There is no dispute
as to the trial court’s dismissal fo the plaintiffs’ antitrust claims; therefore, that portion of the trial
court’s ruling is affirmed.




                                                   10
        The decision of the trial court is affirmed in part and reversed in part, as set forth above. The
cause is remanded for entry of an order dismissing the plaintiffs’ complaint. Costs are taxed against
Appellees, Steamfitters Local Union No. 614 Health and Welfare Fund, and their surety, for which
execution may issue if necessary.




                                                        HOLLY KIRBY LILLARD, J.




                                                   11
