When The Smoke Clears, Cigarette Makers May Get Burned

You could almost hear the champagne corks popping at tobacco companies across the country. On Nov. 5, lawyers for the estate of Rose D. Cipollone stunned the industry by announcing that they had dropped the most prominent damage case filed by a smoker. The move capped a bloody, 10-year legal assault on cigarette makers that went all the way to the U.S. Supreme Court.

Tobacco companies hailed the move as a total vindication of their position. "Our view has always been that the cases do not belong in the courtroom," says Charles R. Wall, Philip Morris Cos.'s associate general counsel. "People are aware of the claimed risks of cigarette smoking, so why should they get money?"

LOST LEADER. At first glance, the industry does seem the clear victor in the legal war over cigarette smoking. With the exception of a $400,000 award in Cipollone, no jury has assessed damages against a tobacco company. And since Cipollone was filed in 1983, tobacco stocks have soared. Philip Morris, which is fighting some 24 liability suits, has seen its shares zoom from about $7 apiece to $78. Tobacco stocks surged higher on the news that Cipollone's trailblazing lawyer, Marc Z. Edell, had quit the case--and perhaps tobacco litigation. After spending $1 million to finance Cipollone, his firm had had enough.

But there's another view of Cipollone. Along with other cases, it has buoyed the antismoking movement and may ultimately prove to be the ammunition that badly hurts cigarette makers. As a result of Cipollone, "we have two things that we didn't have before," says Professor Donald W. Garner of Southern Illinois University School of Law in Carbondale. "We have a very clear message from the Supreme Court on how to bring these lawsuits, and second, we have discovered a vast public-relations fraud and gimmick by the tobacco industry that has lasted 40 years."

From the start, Cipollone was more than just another liability suit. Rather, it gave smoking opponents a new weapon when they really needed it. By the 1980s, efforts to regulate smoking had stalled--despite growing evidence that smoking-related illnesses caused some 300,000 deaths a year (the body count has since swollen to 434,000). Encouraged by successful cases involving asbestos and the Dalkon shield contraceptive, lawyers took on the more formidable tobacco industry.

Cipollone quickly put the industry on the defensive in a very visible way, and that pressure has not let up. The case generated "millions of dollars of publicity based on the fact that cigarette companies killed someone," says Michael Pertschuk of the Advocacy Institute. "That's a very strong message."

But Cipollone's greatest power has yet to be felt. In June, the Supreme Court deprived smoking opponents of a key legal weapon: that cigarette makers had an affirmative duty to warn of tobacco's dangers. Instead, the justices endorsed a whole new line of attack, permitting damage suits alleging that the industry hid smoking's risks. And they left room for states to regulate in areas not specifically preempted by federal law.

Now, attorneys are devising theories likely to be more palatable to juries than injury suits. Garner, for one, is urging state attorneys general to bring consumer-fraud cases. And instead of seeking remedies that reward smokers for smoking, such as damages, he suggests forcing tobacco companies to turn over some profits to finance a public-education fund.

The Supreme Court also opened possibilities for state regulation. For example, regulators could force tobacco companies to include package inserts warning that cigarettes are "addictive," says Richard A. Daynard of the Tobacco Products Liability Project.

DECADES OF LIES. Ultimately, Cipollone's most significant legacy may be the file cabinets of documents produced during the litigation. The documents, along with records uncovered in another case brought by Edell's firm, show how industry representatives deceived the public about the link between smoking and disease. They also indicate that industry leaders lied to Congress for decades in a successful effort to fend off regulation.

Such evidence will bolster fraud suits and give lobbyists new ammunition. But the documents go beyond the courts and Congress: In the tobacco industry's own words, they undermine the apparent credibility of an industry on a vital matter of public health.

Before it's here, it's on the Bloomberg Terminal.