Tobacco Litigation

Tobacco litigation can be divided into three distinct time frames based on the types of claims pursued and the legal theories on which those claims were based. The first wave of tobacco litigation (1954-1973) involved cases based mainly on the theories of deceit, breach of express and implied warranties, and negligence. Cases filed during the second wave of tobacco litigation (1983-1992) were based on the legal theories of failure to warn and strict liability. Neither of the first two waves of litigation proved to be successful for the plaintiffs.

The first wave of litigation was characterized by the tobacco industry's adamant claims that smoking and chewing tobacco products were not harmful to consumers. Plaintiffs during that time did not have the extensive medical studies demonstrating serious health consequences that are available today to support their claims. Thus, plaintiffs had a difficult time establishing the essential element of proximate cause (causal connection to the injury) in their tort cases. By the time of the second wave of tobacco litigation, the connection between smoking and illness had been firmly established, but the tobacco industry was still able to argue with great success that smokers assumed the risks of smoking by freely deciding to smoke. The FCLAA's requirement that a warning label be placed on all cigarette packaging and advertising supported the tobacco companies' defenses of contributory negligence and assumption of the risk.

During the first two waves of litigation, the tobacco companies were also successful in using their size and financial strength to make litigation as difficult as possible for the plaintiffs. The tobacco industry filed and argued every conceivable motion, took countless depositions, and sent out extensive interrogatories. As a result, it was extremely burdensome and expensive for plaintiffs and their attorneys to pursue their cases.

The third wave of tobacco litigation began in the early 1990s and consists of class action suits brought by those injured by tobacco products and medical cost reimbursement suits brought by states and insurance companies. Legal scholars expect the third wave of litigation to produce more favorable results for plaintiffs and to regulate the sale and use of tobacco more effectively than conventional legislative and administrative regulation has been able to do. The strong-arm tactics used by tobacco companies to successfully fend off plaintiffs in the earlier litigation are not likely to work in the third wave because the class of plaintiffs and their respective attorneys have organized and are working together to their mutual benefit. Plaintiffs also now have new evidence obtained from internal tobacco company documents and former tobacco industry researchers that will significantly bolster their cases.

By the mid-1990s, the tobacco industry faced an enormous amount of exposure to liability. It has been estimated that cigarette-related illnesses and losses in productivity cost more than two dollars per pack of cigarettes in 1985 dollars. Further, studies have demonstrated a direct correlation between an increase in the cost of cigarettes and a reduction in consumption, especially by underage smokers. A reduction in smoking also clearly correlates with fewer adverse health effects and lower health care costs. For these reasons, in 1996 the Board of Trustees of the American Medical Association endorsed litigation against the tobacco companies. Legal experts have theorized that the long-term effects of plaintiff victories in the third wave of tobacco litigation could devastate and ultimately destroy the industry, much as plaintiff victories did in the recent asbestos litigation.

The claims in the third wave of tobacco litigation are based on some new legal theories. First, plaintiffs can demonstrate that tobacco companies knew that nicotine is pharmacologically active and highly addictive but hid that knowledge and, in fact, denied it under oath. Second, plaintiffs can show that tobacco companies manipulated nicotine levels in their products in an attempt to foster addiction in their consumers. Common legal theories used in the third wave of litigation include fraud, intentional and negligent misrepresentation, emotional distress, violation of consumer protection statutes, breach of express and implied warranties, strict liability, conspiracy, antitrust, negligent performance of a voluntary undertaking, unjust enrichment or indemnity, civil claims under the Federal Racketeer Influenced and Corrupt Organizations (RICO) Act (18 U.S.C.A. § 1961 et seq. [1970]), and various criminal theories.

The third wave of litigation began with the certification of two class action suits (Broin v. Philip Morris, 641 So. 2d 888 [Fla. App. 3d Dist. 1994], review denied, Philip Morris Inc. v. Broin, 654 So. 2d 919 [Fla. 1995], and Castano v. American Tobacco, 84 F.3d 734 [5th Cir. 1996]). The class members in Broin were nonsmoking flight attendants who claimed that they suffered from various illnesses caused by their exposure to ETS from air travelers' cigarettes. Castano was based on plaintiffs' claims that the tobacco companies intentionally manipulated nicotine levels, even though the companies knew that nicotine was a hazardous and addictive substance. The Castano class consisted of all nicotine-dependent persons or their estates, heirs, family members, or "significant others" in the United States and its territories and possessions, who have bought and smoked cigarettes manufactured by the defendants. Because of the breadth of the class, the U.S. Court of Appeals for the Fifth Circuit ruled that the plaintiffs in Castano should not have been certified as a class; had the court allowed the case to proceed, it would likely have become the largest class action in U.S. history. After the decertification of the Castano class, plaintiffs' lawyers decided to pursue statewide class action suits in state courts around the nation.

Lawsuits since Castano have sought to eliminate the problem of certifying a large class. For example, Engle v. R. J. Reynolds, 672 So. 2d 39 [Ct. App. Fla. 3d Dist. 1996], review denied, 682 So. 2d 1100 (Fla. 1996), involves essentially the same claims as Castano, but the class is much smaller. The class certified in Engle consists of Florida citizens and residents, and their survivors, who have suffered, presently suffer, or have died from diseases and other medical conditions caused by their addiction to cigarettes. The Engle class action has been allowed to proceed. Several class action suits modeled on Engle have since been brought, and still more are anticipated.

The wave of state reimbursement suits was initiated in May 1994, when the state of Mississippi filed an unprecedented lawsuit on behalf of the state's taxpayers against the tobacco industry to recoup the state's share of Medicaid costs incurred as a result of tobacco-related illnesses (Moore v. American Tobacco, No. 94-1429 [Miss. Chan. Ct. 1994]). The state of Mississippi proceeded on legal theories of unjust enrichment and restitution, based on the fact that the state's taxpayers had been directly injured by the actions of the tobacco industry because they were forced to pay Medicaid costs associated with tobacco-related illnesses. By the middle of 1997, thirty-seven states had filed medical cost reimbursement suits based on legal theories similar to those pursued by Mississippi. In addition, some of the other states brought claims never before considered in this wave of litigation.

In 1994, when the state of Minnesota filed a medical cost reimbursement suit, the insurance company Blue Cross-Blue Shield of Minnesota joined as co-plaintiff, seeking reimbursement for its share of tobacco-related health care costs in Minnesota (Minnesota v. Philip Morris, No. 94-8565 [D.Minn. 1994]). When West Virginia filed its medical reimbursement lawsuit, it named as defendants not only tobacco companies, but also the Kimberly-Clarke Corporation, developer of the tobacco reconstitution process that enables tobacco companies to manipulate nicotine levels. In 1995 the state of Florida filed a lawsuit against the tobacco industry under Florida's Medicaid Third-Party Liability Act, effectively preventing tobacco industry defendants from prevailing under defenses of assumption of risk and contributory negligence. Texas filed suit in 1996 and brought claims based in part on the RICO Act and on theories of mail and wire fraud, antitrust violations, and public nuisance. The state of Washington additionally has sued the law firms that have represented the tobacco companies for many years, arguing that they unlawfully helped their clients keep certain documents confidential. Some of the states have asked that in addition to awarding monetary damages, the courts order the tobacco industry to publish all previous research on the link between smoking and health, establish funds for public education campaigns designed to discourage smoking, disclose the amounts of nicotine in their tobacco products, and order the dissolution of the tobacco industry's nonprofit organizations, the Council for Tobacco Research and the Tobacco Institute.

The most recent tobacco litigation has resulted in a historic settlement agreement. On March 15, 1996, the states of West Virginia, Florida, Mississippi, Massachusetts, and Louisiana entered into an agreement with Brooke Group and Liggett Group to settle those companies' portion of the states' medical cost reimbursement actions. This settlement was noteworthy because it represented the end of the tobacco industry's efforts to present a unified front and to refuse to willingly pay out monetary damages.

By March 1997 the Brooke Group/Liggett settlement agreement had been amended to include twenty-two states. In addition, in conjunction with the settlement agreement, Liggett Group, one of the five largest U.S. tobacco companies, publicly admitted that cigarettes and cigarette smoking cause lung cancer, heart disease, and emphysema. Liggett admitted that nicotine is addictive and that the tobacco industry actively and illegally markets to young people under the age of eighteen. As part of the amended settlement, Liggett agreed to cooperate fully with the twenty-two states by waiving attorney-client privilege and turning over privileged documents. Liggett also agreed to substantially comply with the new FDA regulations and to put warning labels on its cigarettes stating "Warning: Smoking Is Addictive." Liggett further promised to pay 25 percent of its pre-tax profits for the next twenty-five years to settle these actions.

Following several successful lawsuits, the Brooke Group/Liggett settlement agreement, and the FDA's promulgation of its rule regulating tobacco, discussion began regarding a possible global legislative settlement of all tobacco litigation. U.S. Senate Majority Leader Trent Lott agreed to broker an agreement that would allow the tobacco industry to avoid FDA regulation and receive immunity from product liability suits for fifteen years. Talks regarding this proposed global settlement began in March 1997.

Preliminary reports indicate that the proposed settlement calls for the tobacco industry to pay billions of dollars in increasing amounts over fifteen years. The money would be administered by an administrator appointed by the president and would be paid out in grants to all fifty states. The plan also calls for the industry to drop the lawsuits it has brought against industry defectors and whistle-blowers in exchange for immunity from virtually all liability suits for the next fifteen years. By late 1997, the global settlement talks had not produced a final agreement but were proceeding. The parties reported that they were hopeful that an agreement would be reached in the near future.

Criminal Charges
In the 1990s federal criminal investigators began to prepare a case against the tobacco companies and their executives and scientists, four trade associations and industry-funded groups, a scientific consulting group, a public relations consulting firm, two companies that serve as suppliers to the tobacco companies, and a company-funded research group. The alleged crimes include federal perjury, mail fraud, wire fraud, false advertising, criminal conspiracy, criminal racketeering, and the deception of the public, federal agencies, and Congress. One criminal investigation is looking at possible perjury on the part of the industry's chief executive officers while testifying before Congress in April 1994 regarding the addictive qualities of nicotine. Another criminal probe is considering whether the industry misled its shareholders by misrepresenting industry knowledge of the physiological effects of tobacco products. Another investigation is focusing on allegations that an indoor air quality testing company accepted money from tobacco companies to distort test results. Still another probe is investigating the industry's Council for Tobacco Research, including the validity of its nonprofit status and whether it hid research results regarding smoking and health from the government. Finally, a probe is investigating allegations that tobacco companies smuggled cigarettes into Canada to avoid paying Canada's high cigarette taxes. The results of these criminal investigations remain to be seen.