Tobacco Pact Sets Record, Raises Issues

$360B Settlement Faces Congressional, Constitutional Tests Due Process Concerns

Los Angeles Daily Journal

Monday, June 23, 1997

By Daniel Shaw, Don J. DeBenedictis and Marty Graham
Daily Journal Staff Writers

WASHIGTON - After Friday's landmark $360 billion settlement between tobacco companies and anti-smoking forces, several questions remain. The most pressing for lawyers, however, may be whether the pact is constitutional.

Under the agreement - which must be approved by Congress and the president - smokers would see dire new warnings on cigarette packs, get free medical help to kick the habit and be inundated with nationwide anti-smoking advertising.

In return, tobacco companies and investors would get relief from the uncertainty posed by hundreds of pending lawsuits. The deal is to settle 40 state lawsuits that seek to recover Medicaid money spent treating sick smokers and 17 class actions against the industry. Individual smokers' lawsuits that are already pending in court are not expected to be affected, unless those people choose to join the settlement

Of concern to lawyers, the pact would take away the ability of individual smokers to sue for punitive damages for any past misconduct by tobacco companies. Instead, as punishment for all past wrongdoing, the tobacco industry would pay $50 billion into a fund. In addition all class-action lawsuits against the industry would be banned.

Several legal scholars said the settlement terms could raise constitutional issues, depending on what is in the fine print and what if any, changes Congress, makes to the agreement. The major potential issue, said one constitutional expert, is whether the settlement will limit due process.

Erwin Chemerinsky, constitutional law professor at the University of Southern California, said, "Until we see exactly how due process is limited, it's hard to evaluate the due process question."

 Los Angeles attorney Suzelle Smith, a partner with Howarth & Smith, which represents a group of plaintiffs – as well as the widow of a man who portrayed the Marlboro man in ads and died of lung cancer – in a suit against the cigarette makers, said she was particularly pleased that the tobacco companies agreed to pay $60 billion in punitive damages.

"We negotiated long and hard to get the best deal for the public and the punitive damages were a breaking point for a long time," she said. "Much of that money will be used to fight the terrible problem of teen smoking and to educate people to the dangers of smoking."

Smith is among the attorneys involved in the class-action group that arose out a class action filed in New Orleans in 1994. Smith credited the New Orleans suit, known as the Castano Plaintiff Group after the lead plaintiff, Diane Castano, as the single largest force in driving the tobacco companies to the negotiation table.

"It's fair to say that without Castano, the discovery we've done and the momentum we've created, none of this would have occurred," she said. "If it hadn't been for the plaintiffs' lawyers getting out there and suing, the end of smoking addiction would not be in sight"

One unsettled question as of Friday afternoon is which attorneys will be paid – and how. Lawyers' fees and cost are not included in the settlement and will be negotiated after the settlement is approved, said Smith.

"It would be a tragedy if the lawyers who initiated this suit and got the public aboard, and brought the tobacco companies to the table, got sold down the river," she said.

The agreement allows for the industry to pay out $360 billion over 25 years, most of it for anti-smoking campaigns and public health efforts. Of that sum, the agreement would allocate $4 billion a year in compensatory damages into a fund that would pay any smoker who won a suit

The settlement is also significant because it is thought to be the largest verdict or settlement ever reached. The amount dwarfs such well-known previous settlements for asbestos, silicone breast implants ($4.23 billion from 60 manufacturers payable over 30 years), the Dalkon Shield, and the Bhopal, India, chemical spill ($470 million). It is also larger than such record verdicts as the $22 billion against the estate of Philippine President Ferdinand Marcos, the $10.5 billion awarded to Pennzoil against Texaco, and the $5 billion won by Alaskans for the Exxon Valdez oil spill.