## Facts

- A union health-and-welfare benefit fund provided medical benefits to covered participants.
- The fund sued major tobacco companies and related entities, seeking to recover costs it allegedly paid because participants developed smoking-related illnesses.
- The complaint alleged a long-running scheme to mislead the public about the health risks of smoking and the addictiveness of nicotine, including concealment of relevant information.
- The fund alleged participants were induced to smoke, became ill, and the fund paid tens of millions of dollars for diagnosis and treatment.
- The fund asserted two categories of injury:
  - Reimbursement of medical expenditures paid on behalf of participants for smoking-related diseases.
  - “Infrastructure” harms, including alleged increased administrative burdens and reduced ability to manage costs, encourage safer alternatives, and implement anti-smoking programs.
- The fund brought claims under civil RICO and common-law fraud, asserting the injuries were the fund’s own rather than subrogated to participants.
- Defendants challenged proximate cause, arguing the alleged injuries were too remote because they flowed from harm to participants.
- The district court allowed certain claims to proceed and certified an interlocutory appeal on the controlling proximate-cause question.

## Issues

1. Whether a health benefit fund’s medical expenditures for participants’ smoking-related care are too remote and derivative to satisfy RICO and common-law fraud proximate cause.
2. Whether the fund’s asserted “infrastructure” or administrative injuries are sufficiently direct to satisfy proximate cause under RICO and common-law fraud.

## Decision

- The Second Circuit reversed the district court’s ruling that permitted the claims to proceed.
- The court held the fund’s medical-expenditure injuries were derivative of participants’ personal injuries and too remote to satisfy RICO proximate cause.
- The court held the asserted “infrastructure” injuries were not independent of participants’ injuries and also failed the directness requirement.
- The court directed dismissal (or judgment for defendants) on the RICO and related fraud claims for lack of proximate cause.

## Legal Principles

- Civil RICO requires proximate cause, meaning a direct relation between the plaintiff’s injury and the alleged racketeering conduct; “but-for” causation is insufficient.
- A plaintiff generally cannot recover for harm that flows from injuries first suffered by a third party; such derivative injuries are considered too remote.
- Proximate-cause analysis considers practical limits, including:
  - The presence of more directly injured parties who can sue for their own losses.
  - The risk of duplicative recoveries and difficult apportionment if remote plaintiffs are allowed to recover.
- Common-law fraud claims similarly require a sufficiently direct causal link between the alleged misrepresentation and the plaintiff’s pecuniary loss; remote, derivative injuries fail this requirement.

## Conclusion

The court held that a health benefit fund could not use RICO or common-law fraud to recover medical and administrative costs tied to participants’ smoking-related illnesses because the alleged losses were derivative of the participants’ injuries and lacked the direct causal relationship required for proximate cause.


Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., 191 F.3d 229 (2d Cir. 1999)