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I haven't yet looked at the articles which Doug Rendleman has quoted, but in reply to Matthew Scully's question as to how a restitution involving subrogation might work in principle, I would suggest the following analysis.

First, the States would have to show a substantive reason for recovery. To do this, they would have to demonstrate three things in turn:

(i) that they and the tobacco companies were both liable in respect of the same damage to the same third parties - i.e. they would have to show that they were legally compellable to fund medical care for the smokers under the relevant Medcare statutes, and that the tobacco companies were also legally compellable to make good the same damage, in tort;

(ii) that the smokers were not entitled to accumulate recoveries - i.e. that they were not entitled to take health benefits and recover tort damages from the tobacco companies;

(iii) that as between the states and the tobacco companies it should be the latter rather than the former who should wind up bearing the load of paying for the smokers' loss at the end of the day - to get a court to say this, they would have to get into arguments about the purpose of tort law and the purpose of health care schemes.

Secondly, assuming they could show all three of these things, the companies would still have to ask for the right remedy. This would turn on the question whether their provision of health benefits to the smokers were considered to extinguish the smokers' rights in tort against the tobacco companies.

If it did extinguish them, so that the smokers could not recover the 'collateral benefit' of the health care from the tobacco companies, then the states would have to go for a direct restitutionary action, arguing that the effect of their providing the health benefits was to discharge the companies from a legal liability which they should properly have borne.

If it did not extinguish them, so that the smokers' rights in tort to recover for the cost of the health care subsisted even though this had already been provided by the states, then the states should ask for simple (not reviving) subrogation to the smokers' rights of action. The effect of awarding simple subrogation would be to pre-empt the unjust enrichment either of the smokers or of the tobacco companies at the state's expense which would inevitably follow. The smokers would be unjustly enriched if they were permitted to recover in tort for themselves and so retain the twin benefits they had received from states and tobacco companies (cf point (ii) above); the companies would be unjustly enriched if the smokers forbore from suing them and so effectively released them from liability (cf point (iii) above).

I believe that most U.S. states have a 'real party in interest' rule, which requires claimants who bring subrogated actions to appear on the face of the record as the party really interested in the outcome of the litigation. This makes the resolution of problems like this less confusing than it is in England where, in the absence of such a rule, the courts often make quite unwarranted assumptions about the behaviour of insureds and insurance companies. What would really make life easier, though, would be to adopt a rule that every time a claimant provides a third party with a benefit pursuant to a common liability with a defendant, the effect of this is to extinguish the third party's rights against the defendant unless the third party is entitled to accumulate recoveries from both of them. This would remove simple subrogation from the map.

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Dr Charles Mitchell
Lecturer in Law
School of Law
King's College London
Strand
LONDON WC2R 2LS

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