The Cigarette Century

by Allan Brandt

  The Mississippi team consulted widely within academic law and the plaintiffs’ bar. Harvard Law Professor Laurence Tribe, who had argued Cipollone before the U.S. Supreme Court, agreed to assist them pro bono.42 In addition to the idea of indemnification, the Mississippi team added the notion of tobacco as a “public nuisance.”43 According to this legal theory, the industry could be held accountable for “the economic by-products of its enterprise.”44 Just like an industrial polluter, the tobacco companies should be responsible for cleaning up their mess. Additionally, the state would seek injunctive relief through prevention programs to protect young people from becoming smokers. Using so-called equitable theories of recovery, the state sought restitution by arguing that its costs for treating tobacco-related diseases constituted the “unjust enrichment” of the companies. In a shrewd maneuver, Moore and Scruggs decided to file the case in chancery court, where it would be heard by a single judge rather than a jury.45

  Governor Kirk Fordice, a Republican whose reelection had been generously supported by the tobacco industry, actively sought to derail the case. In 1996, he filed a petition with the Mississippi Supreme Court arguing that the attorney general, as the governor’s lawyer, could not bring such a suit without his explicit authorization. Further, Fordice claimed that since the Medicaid program was under his authority, such a suit was unlawful without his support. The court eventually refused to adjudicate this dispute, and the case proceeded toward trial.46

  The industry greeted the Mississippi suit with a mixture of alarm and contempt. Clearly, the suit was based on innovative and untried legal theory; at the same time, the state had actively participated in the sale of cigarettes through licensing and taxation, and had benefited from these revenues. On what grounds could it now seek restitution? Moreover, the industry would assert that it was inappropriate for the state to seek to avoid the clearly defined criteria of product liability. The industry petitioned to turn the Medicaid case into a “subrogation action” in which each Medicaid recipient would be independently assessed for diagnosis, cause of disease, and costs. It sought, in other words, to return to the arena of individual plaintiffs claims, which it could subject to the traditional defense. Scruggs responded, “There are not enough courts, judges, juries, or lawyers in the state of Mississippi—probably in the United States—to conduct” the thousands of trials needed. “If you send us to Circuit Court for individual trials and force the State to stand in the shoes of the smoker, you are saying we have no remedy at all for the health care costs that this enterprise has inflicted on the State of Mississippi.”47 Throughout the trial, the industry’s legal team pursued the traditional strategies of defending an individual tort case. The Mississippi state team, by contrast, had worked meticulously to demonstrate that the legal issues and theories of their case were decidedly different.48

  Moore and Scruggs understood that recruiting other states—if possible, all the states—to file similar suits against the companies would radically augment their advantage, even if local conditions and state law did not favor success in a particular state. Backed by a growing coterie of seasoned tort lawyers, they lobbied their colleagues from the state attorneys general’s offices to file suits as well, in an effort to turn their suit into a nationwide legal onslaught on the industry. The ambitious and charismatic Moore frequently touted the historical significance of the Mississippi case. “This is probably the most important public health litigation ever in history,” he contended. “It has the potential to save more lives than anything that’s ever been done.”49 Minnesota filed in August 1994, and West Virginia, Florida, and Massachusetts in 1995. For attorneys general, there was little to lose. Even if the suits were ultimately dismissed, the litigation made a strong political statement against tobacco. All the suits were filed on a contingency basis, with outside counsel—in most instances a combination of Scruggs, Motley, and local state firms—taking on the substantial financial risks; the more states filing, the greater the economies in preparing and trying the cases. Between the time that Moore filed Mississippi’s case in May 1994 and the spring of 1997, more than thirty states joined the cause.50 Attorneys general in states that had not signed on began to see that there could be significant political costs in remaining on the sidelines.51

  Bennett LeBow, CEO of the Liggett Group, settled with five states and the Castano group in March 1997. LeBow was hardly a traditional tobacco executive. A leveraged buyout entrepreneur, he had no long-standing interest in tobacco; rather, he bought and sold companies. At the time, he was eager to acquire R.J. Reynolds. If Liggett were free of liability risk, the value of the company would rise; further, he hoped that any tobacco interests he might acquire would be subject to his agreement.52 The team of Barrett, Moore, Scruggs, and Motley exacted important concessions from LeBow, who was convinced that a deal would give Liggett important advantages over its competitors. The LeBow deal was both with the Castano group and five of the six attorneys general who had filed state cases—Mississippi, Florida, Massachusetts, West Virginia, and Louisiana. The Castano action, however, would soon be decertified by the Fifth Circuit Court of Appeals, nullifying this part of the deal.53

  Ultimately, LeBow signed a second agreement in which, in exchange for immunity from the state claims, he agreed to turn over internal documents not only from Liggett, but from joint industry ventures like the Committee of Counsel—a move the other companies would try to block. LeBow also agreed to acknowledge publicly that smoking causes cancer and is addictive. Further, he conceded that the companies had knowingly marketed to children. In terms of money and documents, the Liggett settlement proved negligible, but it broke the tight alliance the industry had maintained for nearly half a century. The so-called Gentleman’s Agreement on the health issue had been irrevocably breached. LeBow explained, “They can criticize my strategy all they want, but I have a settlement and they don’t.” LeBow’s decision marked a historic setback for the tobacco industry’s legal interests.

  Mississippi Attorney General Mike Moore confidently claimed, “I’ve been a prosecutor all my life. I know what happens when one of the five turns state’s evidence. We’ve got the goods on 98 percent of the industry by turning the little guy.”54 Whether LeBow had achieved some moral epiphany—as he now suggested—or was simply trying to save his second-tier tobacco business (Liggett controlled just 2 percent of the U.S. market), his action forced the major tobacco producers to reevaluate their defense. In LeBow, the antitobacco forces had found the ultimate whistle-blower. What could be more impressive than a CEO offering up new documentation of illegal activities, a long-standing commitment to denial of risk, and a research program focused on understanding, maintaining, and enhancing the product’s addictive properties? LeBow reveled in his new role.

  Minnesota refused the deal. Attorney General Hubert “Skip” Humphrey III was eager to see his case litigated. Unlike the other attorneys general, who had hired the national legal teams of Scruggs and Motley, Humphrey selected the distinguished Minneapolis firm of Robins, Kaplan, Miller & Ciresi. The team was directed by seasoned trial lawyer Michael Ciresi, who had developed an impressive reputation with major victories against A. H. Robins in Dalkon Shield litigation and had little interest in the larger consortium of plaintiffs’ lawyers tying together the other states’ litigation. Minnesota would be the only state represented by a single firm. The state added consumer fraud to its claims and also sought recovery of BlueCross BlueShield health insurance expenditures.55

  Ciresi’s team believed that the Merrell Williams documents were but a small sampling of the industry archive. They requested an index of industry documents used in previous litigations. After repeated motions, the industry admitted such a list existed but insisted that it was privileged as attorney-client communication. Ultimately, the judge required that the list be produced. With this in hand, the Robins/Kaplan team pursued the most aggressive discovery in the history of tobacco litigation. They filed motion after motion seeking memos, reports, and l
etters, repeatedly challenging claims of attorney-client privilege that had protected such materials in earlier cases. Eventually, they pulled in more than 30 million pages of documents from industry files. Ciresi utilized the state’s “long-arm” statute to bring British American Tobacco into the litigation. British American Tobacco, the owner of Brown & Williamson, claimed it had no activity in the United States, but the court eventually ruled—based on extensive research by Ciresi’s partner Roberta Walburn—that there were extensive connections that discovery would demonstrate.

  Ciresi and Walburn offered considerable evidence of systematic destruction of documents. In one document, Thomas Osdene, Philip Morris’s director of research, had written:Ship all documents to Cologne . . . .

  Keep in Cologne

  OK to phone and telex (these will be destroyed) . . . .

  We will monitor in person every 2-3 months.

  If important letters have to be sent please send to home—I will act on them and destroy.56

  Osdene would invoke the Fifth Amendment more than one hundred times in his videotaped deposition, which was shown at the trial over the objections of industry counsel.57

  Ultimately, Judge Kenneth J. Fitzpatrick ruled that Philip Morris had engaged “in an egregious attempt to hide information” and ordered the company to “respond to discovery requests properly.”58 In a major victory for the state, he found that lawyers had reviewed industry materials for the very purpose of claiming privilege. Four decades of legal mastery over the industry records were now unraveling. Special Master Mark W. Gehan was requested to review the documents for which the industry claimed privilege. Spot-checking hundreds of documents, he overruled these claims on the basis of what is known as the crime-fraud exception, designed “to ensure that the ‘seal of secrecy’ between lawyer and client does not extend to communications from the lawyer to the client made by the lawyer for the purpose of giving advice for the commission of a fraud or crime.”59 This ruling opened literally millions of pages of internal memoranda and correspondence to public scrutiny.60

  It did something else as well. Gehan, in effect, charged that industry lawyers had abused the doctrine of attorney-client privilege, committing ethical and possibly criminal violations. His ruling implicated the attorneys as not “representing” the legal interests of their clients but as full-fledged participants in a decades-long conspiracy.61 Attorney control over science—explicitly to shield research from exposure in litigation—had been widely utilized within the industry since the 1950s. As Brown & Williamson attorney J. Kendrick Wells noted in 1979, “Continued Law Department control is essential for the best argument for privilege.”62 On another occasion, Wells urged, “direct lawyer involvement is needed in all activities pertaining to smoking and health” in order to utilize attorney-client privilege.63 The Ciresi team had argued “that counsel for the tobacco industry advised the industry to conceal documents and research harmful to the industry by depositing documents with counsel, by routing correspondence through the industry counsel, by naming damning research projects as ‘special projects’ purportedly ordered by counsel, etc., to cover potentially dangerous materials under a blanket of attorney-client privilege protection, and Plaintiffs wish to tear this blanket away.”64 The meticulous, time-consuming, eye-wearying process of discovery in Minnesota would—in large measure—create the massive record that is now available to the public. The Ciresi team, having built its case on discovery, left behind an unprecedented archive of the industry’s internal workings.65

  With the newly available documents, individual litigations gained new prospects for success. The revelations of the early 1990s had the effect of disrupting traditional views of individual responsibility. In August 1996, plaintiffs’ attorney Woody Wilner broke the four-decade industry record of “never paying a penny” when his client, lung cancer victim Grady Carter, was awarded $750,000 in damages from Brown & Williamson. Carter had smoked for forty-four years before his diagnosis in 1991. Wilner had fought successfully to bring the Williams documents into the case. In addition, he had obtained a “case management order” that placed strict limits on pretrial motions used by the industry to make litigation slow and costly for the plaintiffs.66

  Wilner would lose two cases following Carter but then won again in 1998 in the case of Roland Maddox, who had died a year earlier after smoking Lucky Strikes for fifty years. The jury awarded Maddox’s family $500,000 in compensatory damages and $450,000 in punitive damages. “We are disappointed that the jurors did not find that Mr. Maddox was personally responsible for the choices that he made,” remarked Brown & Williamson attorney John Nyhan.67 A Florida appeals court would strike down the Carter verdict, ruling that the case had been filed six days after the expiration of the statute of limitations, but the Florida Supreme Court reinstated the judgment in November 2000. Grady Carter received $1.1 million (his award plus interest) from Brown & Williamson in 2001.68

  In another individual smoker’s case in 1999, San Francisco trial lawyer Madelyn Chaber won a $51 million verdict (reduced by the judge to $26.5 million) for Patricia Henley, who had smoked Marlboros for thirty-five years before being diagnosed with lung cancer. Chaber, like a number of other attorneys willing to take on tobacco plaintiffs, had done asbestos litigation. Wilner helped her move to tobacco cases by opening his files; Chaber also benefited from discovery in the state suits. “You kill for any one document like this,” she said. “We had thousands.”69 In 2004, Philip Morris was ordered to pay Henley $16.7 million ($9 million punitive, $1.5 million compensatory, and $6.2 million in interest)—the first time the industry had ever paid punitive damages.70

  In 2001, a Los Angeles jury awarded Richard Boeken, a lung cancer victim who had smoked two packs of Marlboros a day for more than three decades, a $3 billion award, the largest punitive damage award ever in individual tobacco litigation and one of the largest jury awards in history. Although it was reduced on appeal to $50 million, Philip Morris turned to the U.S. Supreme Court, arguing that the Federal Cigarette Labeling and Advertising Act preempts such claims and that the award was “unconstitutionally excessive.” The Court refused to hear the case in March 2006, leaving the company owing Boeken’s survivors $5.4 million in compensatory damages, $50 million in punitive damages, and $26 million in interest.71 These victories were stunning, but they never generated the snowball effect that the lawyers sought, and that the industry feared.

  In the state cases, secret negotiations of a “global settlement agreement” between company executives and the attorneys general (all except Minnesota’s Humphrey) began in earnest in April 1997. Such “peace talks” were entirely unprecedented in the history of the tobacco wars. But with thirty state suits hanging over them and others likely, the tobacco companies were unusually vulnerable. Defeat in at least some of these suits seemed inevitable. With a hostile media offering new revelations and with thousands of damaging documents coming to light in court, the industry’s defenses had eroded significantly. No longer could the companies claim that scientific proof of the dangers of smoking was in doubt; their own in-house studies said otherwise. And now their legal adversaries had the resources and power of the state governments backed by the most successful and aggressive attorneys in the liability field. With Liggett having settled, and its CEO having agreed to cooperate with plaintiffs, some suggested that antitobacco forces were positioned to land a disabling or even life-threatening blow. On Wall Street, investment analysts sounded new calls of caution. The liability assault—once considered the quixotic dream of Professor Daynard—substantially suppressed the value of tobacco stocks.72

  The talks revealed a radical change in industry strategy. Following the Waxman hearings of 1994, every one of the CEOs who had denied the risks and addictiveness of cigarettes before Congress had been replaced. A new breed of CEOs, eager to move past the high pitch of passions in the tobacco wars and to relegitimate and stabilize their industry, had taken over.

  While the more experienced soldiers i
n the tobacco wars expressed concerns about the negotiations, the attorneys general, relative newcomers to the battlefield, did not bring decades of wounds to the talks.73 Nor, however, did they have much experience with their foe. For them, the uncertainties of the courtroom set the context for negotiations. The strength of their cases and the likelihood of success varied significantly from state to state. Few could predict with confidence what would happen before an unsympathetic judge or a jury that included smokers. They also understood that the companies would mount an aggressive defense based on the notion that the states had profited handsomely from tobacco through taxes.74 A high-profile loss in a tobacco suit could mean political and ultimately electoral disaster for an attorney general. While antitobacco advocates were used to such defeats, the attorneys general were not. It was the essential uncertainty on both sides that brought plaintiffs and defendants together for settlement talks.

  For the liability lawyers, a settlement would, by its very nature, constitute a victory. Negotiation was their métier, and they were extremely well-versed in high stakes wrangling to avoid litigating cases; a settlement was a far more efficient way to earn their contingency fees than rolling the dice in diverse and potentially hostile courtrooms. Scruggs, Motley, and the other plaintiffs’ attorneys now divided up their firms’ resources between preparing cases and aggressively seeking a negotiated settlement. Given the funds at stake, an unprecedented legal payday was in the offing.75