Tobacco Industry Over Health Care Costs example essay topic

Cigarette Litigation In August 1970 a leading tobacco defense attorney, David R. Hardy, wrote a confidential letter warning that indiscreet comments by industry scientists, including references to biologically active components of cigarette smoke and the search for a safer cigarette, constitute a real threat to the continued success in the defense of smoking and health litigation. The actual knowledge on the part of the defendant that smoking is generally dangerous to health, that certain ingredients are dangerous to health and should be removed, or that smoking causes a particular disease. This would not only be evidence that would substantially prove a case against the defendant company for compensatory damages, but could be considered as evidence of willfulness or recklessness sufficient to support a claim for punitive damages. As the evidence about the health hazards of smoking accumulated, and especially after the 1964 surgeon general's report, liability protection.

The cigarette companies continued to aim propaganda about the smoking and health controversy at the general public. The Cigarette Papers describes plans in 1969 for a public relations campaign intended to set aside in the minds of millions the false conviction that cigarette smoking causes lung cancer and other diseases. As late as 1985, R.J. Reynolds ran misleading ads suggesting that a large epidemiological study had not found evidence of a link between smoking and heart disease. The tobacco companies have always feared that one successful suit would lead to a flood of litigation, sweeping the industry away. Nowadays that fear seems more realistic than ever, given the hundreds of pending state lawsuits, secondhand smoke claims, class actions, and cases filed by individual smokers.

The case started when two small-town Mississippi lawyers declared war on Tobacco Companies and skillfully pursued a daring new litigation strategy that ultimately brought the industry to the negotiating table. For forty years tobacco companies had won every lawsuit brought against them and never paid out a dime. In 1997 that all changed. The industry agreed to a historic deal to pay $368 billion in health-related damages and tear down billboard advertisements.

Mississippi's Attorney General Mike Moore joined forces with his classmate attorney Dick Scruggs and sued tobacco companies on behalf of the state's taxpayers to recoup money spent on health care for smokers. Scruggs and Moore crossed the country in a private jet hawking their battle strategy to other state attorneys general and eventually built an army of forty states. Moore and Scruggs had a number of secret weapons. They took charge of explosive tobacco industry internal documents that no one else would touch. And they protected two of the most important whistle blowers in the history of the tobacco wars: Jeffrey Wig and, the first high-level tobacco executive to turn against the companies; and Merrell Williams, a paralegal who secretly copied thousands of internal documents. The two men held another trump card.

They offered a deal to Bennett Le Bow, CEO of Liggett & Myers: break ranks with the industry and cooperate with the state attorneys general in return for financial stability. They also managed to get a back channel to President Clinton and Senate Majority Leader Trent Lott through political advisor Dick Morris. Scruggs and Moore's success was not limited to getting the industry to a national settlement. For the first time their efforts triggered a massive criminal investigation of Big Tobacco that threatens to put some in jail for deceiving the American public.

Partly because of this criminal investigation, strong forces in the public health community opposed settlement talks. Since October 22nd, 1996 there were 17 state Medicaid reimbursement suits pending against the industry, and numerous parallel suits brought by cities and counties where the state itself has not sued (notably suits by the Cities of San Francisco and San Jose, and by Erie County in New York). Numerous individual suits remain pending, although only two plaintiffs have prevailed at the trial level (Rose Cipollone in New Jersey, whose judgment was reversed by the US Supreme Court, and Grady Carter in Florida, whose trial court judgment is on appeal), and recent plaintiffs have lost (most notably in the Rogers suit in Indiana, the Hutch in suit in Louisiana, and the All good suit in Texas). Numerous class suits remain pending, usually seeking recovery for statewide classes after the refusal of the Fifth Circuit to certify a nationwide class in the Casta no suit. At this time, 17 states are suing the cigarette industry for reimbursement of medical expenses, mostly, in state court. The first five states were Florida, Louisiana, Massachusetts, Mississippi, and West Virginia are suing in state court except for Arizona, Connecticut, Florida, Illinois, Kansas, Louisiana, Massachusetts, Maryland, Michigan, Minnesota, Mississippi, Oklahoma, New Jersey, Texas, Utah, Washington, West Virginia.

In California, the Cities of San Jose and San Francisco have brought Medicaid reimbursement suits. Los Angeles County has sued, along with ten others. The City of New York filed its own suit on October 17, 1996. In September 1996, Cuyahoga County Commissioner Timothy Hagan and Brook Park Mayor Thomas Coyne brought suit on behalf of Ohio taxpayers for Medicaid reimbursement. In Florida on August 30, 1996, the lawyer who won the verdict for Grady Carter filed suit against cigarette makers on behalf of 390 clients. In Minnesota on September 4, 1996, a group of smokers filed a class suit against cigarette makers on behalf of smokers.

In Ohio in September, a well-known lawyer who specializes in class suits, Stanley Chesley, filed a class suit against cigarette makers. The lawyers who represented the first states to settle with the tobacco industry over health care costs were awarded $8.2 billion in fees, the richest legal payout in the nation's history. The money, which will be divided among dozens of lawyers who represented the states, Florida, Mississippi and Texas, is the first to result from a series of tobacco cases that culminated last month in a $206 billion settlement between tobacco companies, 46 states and five United States territories. The fees will be paid by cigarette makers, and their payments, which are limited to $500 million annually, will run until all the lawyers' claims are settled. The payouts will not affect the amounts received by the states. Cigarette makers are likely to pass on the fees, like the rest of the $206 billion settlement, to smokers.

The tobacco settlement would cost the highly profitable industry an average of $14.7 billion annually over the next 25 years, more than twice its profits from domestic cigarette sales in 1996. The industry called that and other terms of the deal a 'bitter pill. ' ' At the same time, the industry was confronted with the very real prospect of vastly expanded Federal regulation, power that it would concede under the agreement. Philip Morris is acknowledging that scientific evidence shows that smoking causes lung cancer and other deadly diseases, after decades of disputing the findings of the United States Surgeon General and other medical authorities. In recent years Philip Morris, the nation's largest cigarette maker, has moved closer to prevailing scientific opinion about the health risks of smoking, as it has faced increasing pressure from smoking-related lawsuits, regulators and Congress. But on a new Internet site it unveiled as part of a $100 million corporate image campaign, the company unequivocally states there is an 'overwhelming medical and scientific consensus that cigarette smoking causes diseases including lung cancer, emphysema and heart disease.

It also states that smoking is addictive as that term is most commonly used today. The move by Philip Morris is part of a trend among tobacco producers to try to put health-related issues behind them after agreeing in the last two years to pay $246 billion to settle lawsuits brought by states seeking to recover their Medicaid costs for treating ill smokers. The company still would require any plaintiff in a lawsuit to prove that their disease was caused by smoking rather than any other factor. Under the amendment added to the tobacco bill, lawyers who took the greatest risk and were involved in cases before 1995 could collect as much as $4,000 an hour.

But the allowable fee would drop on a sliding scale so that those who enter cases after June 17, 1998 could not charge more than $500 an hour, and some lawyers could make tens of millions of dollars from tobacco suits that have been settled. In the suits against tobacco companies, many states and individuals retained private lawyers on a contingency basis, meaning that the lawyers got nothing if they lost in court but were entitled to a percentage of the damages if they won or if the suit was settled. No one anticipated how large those fees might be. In Texas, for instance, the industry settled with the state for $15.3 billion, and the contract calls for lawyers to receive 15 percent. Lester Brickman, a professor at the Cardozo Law School at Yeshiva University who helped draft the Gorton amendment, was hired as an expert by the State of Texas. He concluded that the lawyers' fees would amount to $92,000 an hour based on their work product and the percentage claimed.

However, under the amendment, the lawyers would receive about $2,000 an hour based on the fact that the lawsuit was filed in 1996. According the article "Senate Approves Limiting Fees Lawyers Get in Tobacco Cases" the amendment would allow lawyers who began litigation before 1995, when many put up their own money to bankroll the suits and when the prospect of winning seemed remote, to collect up to $4,000 an hour. Those who became involved between the beginning of 1995 and April 1997, when secret negotiations began between the tobacco companies and states attorneys general, could get up to $2,000 an hour. Lawyers who started cases between April 1997 to June 1998 could charge $1,000 an hour, and those who sign on after June 1998 could get no more than $500 an hour. Some of the most prominent lawyers in the tobacco litigation, like Richard Scruggs of Pascagoula, Miss., who is Senator Lott's brother-in-law, and Ron Motley of Charleston, S.C., rank among those who would qualify for the $4,000-an-hour-fee because they became involved in the tobacco cases early on.

Others, like Hugh Rodham Jr., Hillary Rodham Clinton's brother, would receive a lower hourly rate because they became involved later on. But the hourly rates of even the most highly paid lawyers like Mr. Scruggs, who represented a number of states in the litigation, would vary significantly because many of those states did not file lawsuits until late in 1996 or in 1997. New York's governor and legislative leaders from both major parties agreed to raise the state's cigarette tax by 55 cents a pack in an ambitious effort to provide health care coverage for as many as one million uninsured New Yorkers. The governor and leaders of the Legislature also decided to renew a program that pays hospitals about $1.3 billion a year to train new doctors and treat poor people who show up in their emergency rooms with no way of paying their bills. The plan to expand coverage for the uninsured is expected to cost the state about $750 million over the following three and a half years. It would be financed with revenue from the added cigarette tax, as well as a share of the $450 million a year that the state is to receive from the settlement of the national lawsuit against tobacco companies.

The plan would also be paid for with about $300 million in new federal health care funds. The deal would bring New York's tobacco tax to $1.11 a pack, the highest of any state, and represents the first significant defeat here for the tobacco industry since 1993. The industry has long been one of the most powerful interest groups in state politics, but recent disclosures about its extravagant spending on gifts for lawmakers and other lobbying expenditures have weakened its position. Some lawmakers acknowledge that they hope to use the higher tax to rebuff charges that they are too close to the industry. The additional tobacco tax is expected to raise about $400 million a year for the state. The last increase in the state's cigarette tax came in 1993, when it climbed to 56 cents a pack, from 39 cents.

At the time, that was the highest rate in the country, but 13 other states have since adopted higher rates. New Jersey's cigarette tax is 80 cents a pack, Connecticut's is 50 cents and Pennsylvania's is 31 cents. The move was lauded by anti tobacco groups, which have long asserted that a higher tax would discourage people, particularly teenagers, from smoking and lead others to quit. The 55-cent cigarette tax hike could help move New York to the front of the pack nationally in tackling the tobacco menace.

Bibliography

Modern Trial Page: web in Early Tobacco Suits to Get $8 Billion: web id = 1+view = ! view! +do cid = ! doc! +do cdb = 1998 arc+db name = ! db! +TemplateName = doc.
tmplCompanies' Cost Would Be Great, But So Is Their Outlook for Profit: web id = 1+view = ! view! +do cid = ! doc! +do cdb = 1997 arc+db name = ! db! +TemplateName = doc.
tmpl Philip Morris Admits Evidence Shows Smoking Causes Cancer: web id = 1+view = ! view! +do cid = ! doc! +do cdb = 1999 arc+db name = ! db! +TemplateName = doc.
tmpl Senate Approves Limiting Fees Lawyers Get in Tobacco Cases: New York Raising Tax on Cigarettes To Help Uninsured: web id = 1+view = ! view! +do cid = ! doc! +do cdb = 1999 arc+db name = ! db! +TemplateName = doc.