Tobacco suits

During the late 1990s, almost every state attorney general in the nation filed a suit against the tobacco industry to recover health-care costs of tobacco-related illnesses. American tobacco companies eventually resolved the suits in one of the largest settlement agreements in history, amounting to more than $300 billion over a 25-year period. These suits on tobacco-related products have been heralded by some as a victory for health and condemned by others as a gross violation of government authority.

It was not until the mid-1960s that the U. S. government took an active role in discouraging smoking. In 1964 the Surgeon General’s office released a 387-page report entitled “Smoking and Health,” which stated explicitly, “cigarette smoking is causally related to lung cancer in men.” The following year, Congress passed the Federal Cigarette Labeling and Advertising Act, requiring tobacco companies to include the Surgeon General’s warnings on all cigarette packages. By 1971 Congress further banned all broadcast advertising for cigarette products.

Private lawsuits were filed against individual tobacco companies as early as 1954 based on legal theories involving product liability and negligent breach of implicit warranty, though none of them succeeded. The first serious challenge came in 1983 after lung-cancer patient Rose Cipollone sued the nation’s fifth-largest cigarette manufacturer, the Liggett Group, for failing to warn her about the dangers of its products. She was awarded a $400,000 judgment, but it was later overturned on appeal. The tobacco industry typically countered these types of charges by emphasizing the role of individual choice and consumer responsibility. Furthermore, tobacco lawyers claimed that it was “common knowledge,” a legal term, that tobacco smokers realized the health consequences of tobacco use before they started smoking. They maintained that smokers made a voluntary decision to smoke and made a voluntary decision not to quit, and therefore voluntarily assumed any risks associated with the habit. Relying heavily on the 1965 imposition of warning labels on cigarettes, the tobacco industry successfully argued that the public was well informed of the reputed risks of smoking when they started. More important, the plaintiffs were never able to produce any direct causal links between smoking and various diseases, such as lung cancer and emphysema.

Opponents of the tobacco industry argued that the health consequences of smoking and chewing were not fully known to the public, but had become known to the tobacco industry, which continued to promote tobacco through massive advertising campaigns, often aimed at youth, and publicly denying research that showed a relation of tobacco use to cancer and emphysema, and other diseases. Furthermore, opponents of tobacco used public documents as well as industry memorandums that, they

Alleged, showed that the tobacco companies were covering up the serious, indeed, lethal effects of tobacco use.

On May 23, 1994, the legal attack on tobacco took an entirely new turn when Mississippi state attorney general Mike Moore filed a lawsuit against the entire industry in an attempt to recoup health costs of indigents’ smoking-related illnesses paid for by the state. This approach allowed plaintiffs to avoid the question of consumer responsibility; the state was forced to pay a portion of smoking-related health costs, regardless of whether private citizens made informed decisions about smoking. Mississippi sued the tobacco industry for selling a defective product that carried with it known risks to individual and public health. Two and a half months later, on August 17, Minnesota attorney general Hubert H. Humphrey III filed a similar suit based on new arguments of fraud; he charged the tobacco industry with knowingly exploiting and manipulating the addictive characteristics of cigarettes to compel continued consumption. Furthermore, competing companies violated antitrust laws to conspire to conceal this information from the general public. Both states employed arguments that circumvented the issue of consumer responsibility. In addition, both cases emphasized the societal damage brought about by teen smoking, and charged tobacco companies with deliberately marketing to underage consumers. They maintained that tobacco companies needed teen smokers in order to facilitate new addictions in each succeeding generation. Tobacco companies rejected all claims, and responded with a countersuit arguing that the state attorneys general had no standing to file suit because they were not directly affected.

Antismoking demonstrators in front of the Philip Morris companies headquarters, July 25, 2002, in New York City

(Platt/Cetty Images)

West Virginia followed Mississippi’s example and filed a similar suit the next month; Florida joined in four months later. Though attracted by the new approach, most other states remained reluctant to file until after the question of standing had been answered. The hesitation ended, however, after the Liggett Group settled its claims with four states in 1995 for a total of $38 billion. The sign of vulnerability on the part of the tobacco industry resulted in an immediate action; 14 states filed suits in 1996 and another 20 filed during the first months of 1997. Each state requested multibillion-dollar judgments.

By early 1997 the federal government attempted to mediate a settlement between the states and the five major tobacco companies, R. J. Reynolds, Lorillard Tobacco, Philip Morris, Brown & Williams, and American Tobacco. Considering the scope of the pending litigation, the tobacco companies were persuaded to settle quickly; they reached an agreement on June 20, 1997, which required congressional approval and a presidential signature because it involved changes in federal law.

Initially, the settlement asked tobacco companies to pay $368.5 billion over 25 years; the states would receive an average of $5 billion a year, while the federal government would receive close to $6 billion a year to fund national antismoking campaigns through the Food and Drug Administration, which would be newly empowered to establish minimum federal standards for public smoking, regulate the production and manufacture of tobacco products, and enforce suspected violations. The agreement included specific provisions banning all outdoor advertising of cigarettes and the use of cartoon characters in printed media. The settlement also prohibited tobacco companies from sponsoring sporting events that cater to children and ordered the industry to set aside $750 million over 10 years to aid those programs affected by the loss of sponsorship. Most important, the agreement measured tobacco company compliance according to declining rates of teen smoking; if the rate did not follow established guidelines, the tobacco companies would be forced to pay additional money. Lastly, $25 billion set aside in a public health trust fund would be used to pay individual claims. In exchange, the tobacco industry would be protected from all future civil suits levied by public agencies, and would be limited in liability for individual suits to a total of $25 billion.

The tobacco industry signed the 1997 agreement because it promised to end all public litigation and set specific limits on the extent of private suits. The federal government would have benefited because it received more than half the award even though it was not party to any suit. Congress rejected it altogether in early 1998. Lawmakers claimed that the agreement was based on tobacco lobbyist groups, but the opposition actually stemmed from deeper concerns of justice and constitutionality. Opponents of the argument said

That the government should never use civil litigation to effect social change; if tobacco products were in fact contrary to the public good, then they should be outlawed directly. Furthermore, government involvement in civil suits represented a clear conflict of interest, since it received annually, on both the state and federal levels, hundreds of millions of dollars in tax revenue from the sales of cigarettes.

In total, 52 pieces of legislation were submitted in both houses of Congress related to the tobacco settlement; none of them passed. Throughout 1998, tobacco industry representatives continued to meet separately with the state representatives suing the industry. By November, a new master settlement agreement required tobacco companies to pay out $250 billion to each of the plaintiff states over a 25-year period; each state legislature could choose to use the money in any way they deemed appropriate. They were also required to spend $2 billion to develop independent antismoking programs for youth and teens, ban all outdoor ads, provide athletic sponsorships, and create retailer education programs to halt the sales of cigarettes to teens. The states agreed to drop their suits, though no limitations were placed on civil suits filed by private plaintiffs. As a consequence, smokers, former smokers, and other interested parties continue to file class-action lawsuits against tobacco companies. Between 2002 and 2004 several cases have been decided in which a group or an individual has been awarded punitive damages—many in the multimillion dollar range—from the tobacco companies.

In 1999 President William J. Clinton announced that the federal government would continue to pursue federal suits against the industry. On September 22, 1999, the U. S. attorneys general filed suits under the Medical Care Recovery Act (MCRA), the Medicare Secondary Payer provisions of the Social Security Act (MSP), and the Racketeer Ineluenced and Corrupt Organizations Act (RICO). This was the first time the government had used RICO against an entire industry.

The following year, in September 2000, a district court judge ruled that the federal government had no standing to sue under the MCRA or MSP. She argued that Congress had not intended these laws to allow the type of monetary recovery the government was requesting. The Attorney General’s office immediately submitted revised claims, but in July 2001, the same judge dismissed these as well. The judge’s rulings led some observers to question whether the state suits would have survived court consideration. Although the district court judge ruled out claims under the MCRA and MSP, she did permit the RICO claims.

Attorney General John Ashcroft pursued the charges under RICO. He argued that the tobacco industry had made false statements about the dangers of tobacco and had marketed to youth. The district court ruled that the government could not hold the tobacco companies responsible for past violations of RICO but could only ask for remedies that would prevent future violations. On those grounds, the judge refused to grant a monetary settlement, but did order companies to remove the term “light” from their packaging and required them to publish statements about tobacco use and health issues. The Court of Appeals has imposed a stay on all remedies required by the district court while the case is being appealed.

The tobacco suits introduced a new approach to civil litigation in American jurisprudence. During the final years of the 20th century, state and local governments filed similar civil suits against gun manufacturers and pharmaceutical companies. The future viability of this approach remains to be seen.

See also property rights.

Further reading: Martha Derthick, U-p in Smoke: From Legislation to Litigation in Tobacco Politics (Washington, D. C.: Congressional Quarterly Press, 2001); David A. Kessler, A Question of Intent: A Great American Battle with a Deadly Industry (Washington, D. C.: Public Affairs Press, 2001).

—Aharon W. Zorea and Amy Wallhermfechtel