Revised January 17, 2002
UNITED STATES COURT OF APPEALS
For the Fifth Circuit
RUTH HUGHES, Individually and as Representative
of the Estate of Sherman Hughes, Sr., Deceased,
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.,
CARLIS COLE; ET AL.,
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,
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.,
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
[End Page 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
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.
[End Page 3]
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
(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.,
[End Page 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;
(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[End Page 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
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.
[End Page 5]
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
[End Page 6]
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
[End Page 7]
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)
[End Page 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
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,
[End Page 9]
this factor weights heavily against finding antitrust
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
(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
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.â€"Houston [14th Dist.]
1994, writ denied).
[End Page 10]
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
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 sellersâ€"not trade associationsâ€"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
The district court correctly concluded that most of the other
"representations" cited by the Plaintiffs were insufficient to
constitute express warranties.
[End Page 11]
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.
[End Page 12]
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
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
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.
[End Page 13]
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'
IV. PLAINTIFFS' MOTION TO CERTIFY QUESTIONS TO THE SUPREME COURT
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
[End Page 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
[End Page 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
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.
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.
[End Page 16]