## Facts

- Purchasers of “light” (low-tar/low-nicotine) cigarettes sued major cigarette manufacturers and affiliates, alleging deceptive marketing that portrayed “lights” as delivering less tar/nicotine and implying reduced health risk.
- Plaintiffs alleged smokers commonly “compensated” (e.g., deeper inhalation or blocking ventilation holes), so “lights” did not meaningfully reduce tar/nicotine intake.
- Plaintiffs sought civil RICO damages, alleging economic injury from (a) paying a price premium for an allegedly safer product and (b) purchasing/smoking more cigarettes than they otherwise would have.
- The district court certified a nationwide Rule 23(b)(3) damages class and approved an aggregate damages plan: estimate the share of valid claims and average loss, multiply to create a class fund, distribute via claims process, and direct leftovers cy pres.
- Defendants obtained interlocutory review under Rule 23(f).

## Issues

1. Whether Rule 23(b)(3) predominance was satisfied when RICO causation and injury would require individualized proof of exposure, reliance (or its causal equivalent), and economic loss.
2. Whether fraud-based RICO elements—proximate cause (“by reason of”), injury to “business or property,” and damages—could be established primarily through common proof for a nationwide class of “light” cigarette purchasers.
3. Whether an aggregate, statistically modeled damages fund with claims processing and cy pres distribution was consistent with Rule 23 and RICO’s requirement of individualized injury and damages.

## Decision

- The Second Circuit vacated the class-certification order and remanded.
- The court held that individualized questions of causation and injury predominated over common issues for the proposed RICO class.
- The court rejected the proposed aggregate damages methodology as incompatible with proving each class member’s RICO injury and causation.

## Legal Principles

- Rule 23(b)(3) predominance is not met when establishing liability turns on individualized determinations of whether each plaintiff was harmed “by reason of” the alleged misconduct.
- In fraud-based RICO theories, reliance or its causal equivalent often requires individualized proof; a uniform marketing campaign does not, by itself, establish class-wide causation.
- RICO requires each plaintiff to show a concrete injury to “business or property” and a causal connection between the predicate acts and that injury.
- Statistical averaging and aggregate damages funds cannot replace proof of individualized RICO injury and causation where class members’ motivations, exposure, and purchasing behavior vary materially.

## Conclusion

The Second Circuit vacated certification of a nationwide RICO damages class of “light” cigarette purchasers because determining causation and economic injury would require individualized inquiries, and the district court’s aggregate damages model could not substitute for proof that each class member suffered a RICO-compensable loss caused by the alleged deception.


McLaughlin v. Am. Tobacco Co., 522 F.3d 215 (2d Cir. 2008)