On the morning of May 7, even a first-day paralegal could have smelled trouble at the tobacco talks in Dallas. At a strategy session for 13 of the state attorneys general suing the industry, courtroom warriors Ronald L. Motley and Norwood S. Wilner recounted their recent loss in a Florida suit seeking damages for the estate of a smoker who died of lung cancer. The states' suits seeking to recover smoking-related Medicaid costs, the lawyers warned, won't be slam dunks. "I'm the sumbitch that's got to try the cases, and let me tell you, it's going to be hard to win," Motley said.
That afternoon at a session with industry lawyers, the negotiators expected to take up meaty issues--the states' demands for a $300 billion settlement and Big Tobacco's efforts to cap individual claims and limit exposure to punitive damages. But the meeting quickly descended into bickering over protocol.
That's when Dickie Scruggs walked out. It was no ploy. As a lawyer for 20 of the 32 states suing the industry, Richard F. Scruggs had spent nearly a year engineering the talks, and he had had enough of the chaos. The meeting fell apart, and Scruggs locked himself in a room with Mississippi Attorney General Mike Moore, whose lawsuit had launched the states' assault. He upbraided Moore. "Some of these guys are basically prohibitionists, and you're being too deferential to them," he complained. Eager to get home to Pascagoula, Miss., to celebrate his 26th anniversary, Scruggs hopped his Lear jet, leaving Moore to catch a ride with Motley.
"A SHUDDER." In his New Orleans office, meanwhile, Wendell H. Gauthier was keeping tabs on the meeting by phone. At first, Scruggs's exit shocked the powerful class-action lawyer, who's overseeing more than a dozen tobacco suits. Then he saw that the tantrum, out of character for the disciplined Scruggs, could create leverage. "It demonstrated that Dickie Scruggs could walk away from the deal," Gauthier says. "It sent a shudder through everybody."
Scruggs, Motley, Gauthier, and Wilner: The names call to mind a backwater law firm. But these four Southern plaintiffs' lawyers are the vanguard of the legal attack on Big Tobacco. Constantly crossing paths, sometimes competing, sometimes cooperating, they have woven a legal net around the industry. Working with other plaintiffs' lawyers, AGs, researchers, health experts, and especially Mississippi's Moore, they have brought the industry to the negotiating table--and the brink of a historic settlement. But on May 29, the talks broke down amid disputes about limiting the $46 billion industry's exposure to punitive damages.
By June 3, Scruggs and Moore were again together, this time talking strategy aboard Motley's new 92-foot yacht in South Carolina's Charleston Harbor. Meanwhile, health experts led by former Food & Drug Administration Commissioner David A. Kessler were lining up their own strategy session for June 5, hoping to make smoking reduction a keystone of any pact. Still, Scruggs predicted there will yet be a deal but conceded that Mississippi's suit, set for July 7, will probably go to trial first. "When you've got 32 AGs together," he noted wryly, "it's hard for them to agree on anything."
Among the plaintiffs' attorneys, Scruggs is the chief strategist. He first recruited states to sue, then began pushing for a settlement. His motivation, he says, is pragmatism: "You don't want to give any kind of a pass to an industry that you've said so many nasty, terrible things about, but at the same time, nobody has collected a penny from them." Motley is the club--the steely litigator the industry must face if talks fail. Gauthier masterminded a massive class-action assault that has spawned cases in 15 states and a separate national case. Wilner broke through last year by winning a $750,000 judgment that, if it sticks on appeal, will be the first payment ever by the industry.
Motley, Scruggs & Co. put the industry on the run. Big Tobacco, which never acknowledged even the possibility of settlement until last fall, has spent weeks discussing a landmark treaty. Among the bitter pills makers may swallow: paying $300 billion over 25 years for state Medicaid costs, funding aggressive antismoking ads, extinguishing such icons as Joe Camel and the Marlboro Man, and paying big fines if youth smoking doesn't decline. In exchange, they seek a ban on punitive damages, limits on compensatory awards, and a guarantee against an FDA nicotine ban. But with talks stalled, Moore has vowed to quit his leadership role early this month to prepare for trial.
Whatever happens, the plaintiffs' attorneys are in for rough going. If the talks with Philip Morris Cos. and R.J. Reynolds Co. lead to a deal, they're sure to face scorn for letting the industry off too easily and outrage over the big fees they'll pocket. If there's no deal, they face a grueling lineup of individual cases against a rich and vigorous opponent.
GREAT EXPECTATIONS. Already, public watchdogs are attacking their motives. "The underlying core of what they've been talking about is money," says Kessler. "It's money for victims, money for lawyers, money for states, financial security for the industry. None of that in and of itself will reduce the number of people who smoke."
By far the loudest complaint--and the one most threatening to a deal--is that the public-health community has not had enough say in the talks. Richard Daynard, head of the Tobacco Products Liability Project, says health advocates are right to be skeptical of any deal on which they aren't adequately consulted. "Closed forums are the forums where the tobacco industry has its greatest advantage," he says. Kessler and Representative Henry A. Waxman (D-Calif.) have criticized several proposals. Such opposition could kill the deal in Congress, where House Speaker Newt Gingrich on June 3 threatened to block any settlement if lawyers' fees are too high. President Clinton has vowed to block any pact not backed by the health community.
The carping annoys Scruggs. He says he and Moore personally appealed to Kessler three times to join the talks but that Kessler declined because he wanted to be able to take an objective stance. "If Kessler and Waxman had been in outer space for the last six months and suddenly landed on earth and saw what we have, they would sign immediately and say, `This is fantastic!"' says Scruggs. As the talks have proceeded, he believes, public expectations have risen unreasonably high. Narrowing his eyes behind aviator glasses, the balding, 46-year-old Scruggs asserts: "The perfect has become the enemy of the good."
As for money, if the dozens of lawyers involved got just 1% of the current settlement target--much less than the 25% Scruggs typically gets for settling a big case--they would split $3 billion. Scruggs says the lawyers' payday hasn't yet been discussed but that he doubts it will be calculated like a contingency fee. "Nobody complained about fees when we took this case and put millions of our own money into it," says Scruggs. He claims he has spent $2.5 million, and Motley twice that.
ONE SKIRMISH. In many ways, Big Tobacco's travails can be dated to the moment in 1993 when Scruggs and Motley looked up from the largest asbestos trial ever, tried in Scruggs's hometown of Pascagoula, and asked each other: "What's next?" Earlier, the two had helped engineer a record $1 billion settlement with 20 asbestos makers.
Along the way, they grew knowledgeable about smoking, which asbestos lawyers constantly blamed for the lung and heart ailments plaintiffs complained of. Then Scruggs took a break from the asbestos case to help Don Barrett, a friend from University of Mississippi law school, try a tobacco case. They lost, but after one skirmish with Big Tobacco, Scruggs was hooked.
Within weeks, he launched a full-scale war. The chance came through Mississippi's Moore. A friend whose mother had died of cancer asked Moore to consider suing the tobacco industry on the state's behalf to recover Medicaid costs. Moore liked the idea but not his chances. And the estimated $5 million cost made a suit politically risky. "I needed someone I could trust, and I mean trust with my heart and soul," he says.
Scruggs was an obvious candidate. Moore, like Scruggs, was from Pascagoula, also the hometown of Senate Majority Leader Trent Lott, Scruggs' brother-in-law. Scruggs and Moore had become friends in law school, which Scruggs attended after a stint as a Navy fighter pilot.
Scruggs had launched his law career with a brief stint at a big firm but soon hung out his shingle in Pascagoula. His first big hit was a multimillion-dollar judgment against Pascagoula's own Ingalls Shipbuilding Inc. He later made millions pursuing, and mostly settling, asbestos claims.
When Moore decided to target tobacco, Scruggs wasn't the only one who wanted in. Motley, too, made a bid for the business. Rather than compete, Scruggs decided to work with him. Through research by pollster Dick Morris, he had learned that only 60% of potential jurors sympathized with the state's case. Moreover, the industry was famous for burying rivals in paperwork, and Scruggs's 10-lawyer firm was vulnerable. Motley could offer crucial financial and legal resources and dazzling courtroom skills.
Raised in hardscrabble North Charleston, S.C., the son of a gas station owner, Motley, 53, is a renowned courtroom thespian. Costumes? The tall, dark-haired lawyer once dressed as a doctor to cross-examine a pretentious expert witness. Props? During one trial, he spun "the asbestos wheel of misfortune," with panels displaying each of the industry's excuses for the deadly ailments its product caused.
In addition to triumphing over the asbestos industry, Motley had won major victories in cases involving the Dalkon shield and breast implants. And he says that in 1984, as his mother, a longtime smoker, lay dying of emphysema, he vowed to avenge her death. But he did not move into tobacco until 1993. By mid-1994, he was hosting leading anti-tobacco lawyers at a strategy session at his 9,800-square-foot mansion on Kiawah Island, S.C. "A lot of good plotting was done there," he says with satisfaction.
Moore filed Mississippi's lawsuit in May, 1994. Within days, he and Scruggs were practically living out of Scruggs's jet, trying to recruit other AGs to sue. But it was a tough sell. Only Florida and West Virginia signed on. Minnesota launched an independent case.
"SCARED TO DEATH." In the midst of their recruiting, Scruggs twice drew notoriety. He persuaded whistleblower Merrell Williams to give Congress internal documents he had taken from a law firm representing Brown & Williamson Tobacco Corp.--then bought Williams a house and boat and paid him a $3,000 monthly "consulting" stipend in return. Scruggs is contesting a B&W suit against him for facilitating the leak. Later, his representation of former B&W research chief Jeffrey Wigand raised new questions of conflicts of interest. In November, 1995, after a Kentucky court forbade Wigand from discussing his B&W career, Scruggs escorted him into a Pascagoula courtroom to give a court-ordered deposition in the Mississippi suit--putting his client at odds with the Kentucky court. "Dickie talked him into testifying. Wigand was scared to death," says Barrett, who was there.
Testimony such as Wigand's upped the pressure on Big Tobacco. In March, 1996, Liggett Group agreed to settle its share of the Mississippi suit. Suddenly, states were vying to sign on with Scruggs, Motley, and competing lawyers. Ultimately, 32 states and a half-dozen municipalities would sue. Then RJR Nabisco Chairman Steven F. Goldstone shocked everyone by telling London's Financial Times he would consider a global settlement.
Emboldened, Scruggs called Lott, then Senate majority whip, and asked him to open a back-channel negotiation. That led to a meeting between industry representatives and the attorneys general of four states. But when a draft proposal was leaked to The Wall Street Journal last August, everything stopped.
PAY DIRT. That's when Woody Wilner stepped into the game. After crisscrossing Florida at the controls of his two-engine Piper to recruit clients, Wilner, based in Jacksonville, had filed more than 200 suits against cigarette makers. A 49-year-old University of Florida law school graduate with a Yale University physics degree, Wilner planned to dodge the industry's paper barrage by bringing simple product-liability cases, trying them quickly, and seeking reasonable verdicts. His strategy appealed to Motley, who began working with Wilner. On Aug. 9, Wilner hit pay dirt. A jury awarded $750,000 to the family of Grady Carter, a retired air-traffic controller who contracted lung cancer after smoking for 25 years.
Like Motley and Scruggs, Wilner had fought in the asbestos trenches--but on the industry side. To win the Carter case, he used statistics he had compiled over 15 years of defending asbestos by blaming tobacco.
After Wilner's win, Scruggs again began working to find a line into the industry and establish a negotiating structure. At one point he tried to set up a Presidential commission to work out a deal. Then he found that a rival was sniffing out an alternate route. New Orleans-based Gauthier was meeting with a top tobacco lobbyist, Thomas H. Boggs Jr., hoping to open a settlement parlay.
After his best friend died of emphysema, Gauthier had recruited 65 of the nation's top trial lawyers to pay $100,000 each to fund a class-action. Since cases generally fail because makers point out that smokers chose to smoke, Gauthier's team tried a novel charge: Cigarette makers addict their customers. When the suit was thrown out of federal court for technical reasons, the group scrambled to duplicate it in as many state class-actions as possible.
Despite his expertise in mass class actions--he grew rich representing victims of the 1980 MGM Grand Hotel fire in Las Vegas and the 1982 crash of Pan Am flight 759--it's easy to underestimate Gauthier. Puckish and silver-haired, he has the bayou brogue of an Iota (La.) native and a diploma from little known Loyola of New Orleans Law School.
When Scruggs learned Gauthier was duck-hunting with Boggs at the Tobacco Stick Lodge, an industry playground off Chesapeake Bay, he sprang into action. After a day spent tracking him down, he phoned Gauthier and announced he was flying in to break up the talks. "Dickie," Gauthier protested, "this is a social call. You can't come up here." Scruggs relented only when Gauthier agreed not to cut any deal and to meet Scruggs in New Orleans the next day. There, Scruggs invited Gauthier's group to join his talks.
With the blessing of industry CEOs and close monitoring by the White House, substantive negotiations began on Apr. 1 in Washington. Tense but productive meetings followed in Chicago and Dallas. When Wilner and Motley lost Wilner's second tobacco case on the eve of the Dallas meeting, the industry hardened its stand. But despite friction, there have been moments of humor. Gauthier's forces became known as "the Girths," because they include such portly lawyers as Presidential brother-in-law Hugh Rodham of Miami. To dispel the stress at one session, three Girths encircled Moore, belly-bounced the slender Mississippian, and pronounced him an honorary Girth.
In Motley's view, the breakdown of the talks isn't all bad. As he received news of it at his home off Charleston Harbor, he was excited by the prospect of litigating the first state suit and having Moore free to help. "Finally," he said, "my client can start getting ready for trial."
Last fall, as Scruggs struggled to revive the moribund tobacco talks, Motley offered this advice: "Dickie, let's get ready for trial. Quit tilting at windmills." Unless there's a sudden turnaround in the tobacco talks, Motley and Scruggs will be tilting at far more substantial foes come July 7.