Commentary: Blowing Smoke In The Tobacco Wars

With Baltimore's Mercy Medical Center providing a backdrop for the TV cameras, Maryland Attorney General J. Joseph Curran Jr. on May 1 joined the war against Big Tobacco. Seeking $13 billion in damages and punitive sanctions, he became the eighth state prosecutor to sue cigarette makers for reimbursement of health-care expenses. "They have knowingly peddled a killer product, and their victims have come to hospitals like this to be treated," he proclaimed. "We will take them to the courthouse to seek justice."

Since a federal appeals court on May 23 threw out the Castano class-action brought on behalf of all the allegedly addicted smokers in the U.S., the state reimbursement suits are the most visible legal threat remaining to tobacco. At least 10 more attorneys general are preparing filings similar to Curran's, says anti-tobacco activist Richard A. Daynard. But don't be surprised if those cases eventually meet the same fate as the Castano suit.

UNTESTED THEORIES. Like that class-action, the state reimbursement cases have in many instances been filed by publicity-hungry attorneys and built on untested legal theories. They try to take advantage of a rising public desire to punish Big Tobacco, brought about by new evidence that cigarette makers may have suppressed health information about tobacco, capitalized on the addictive properties of nicotine, and lied to government officials. These revelations--along with Liggett Group Inc.'s Mar. 13 offer to settle some suits--helped to create a widespread impression that the tide of battle had turned. In the days after Liggett's surprise move, share prices of market leader Philip Morris plummeted by more than 15%.

But investors who fled cigarette stocks because of fears about legal liabilities forgot one thing: Courts of law do not operate by the same rules as the court of public opinion. The judges who killed the Castano case were bound by law. The rules governing class actions say that courts can only approve such massive cases when all of the alleged victims have similar claims. But the Castano litigants came from all 50 states, and different rules would have applied in each jurisdiction. Moreover, the arguments of smokers who started before the Surgeon General's 1966 warning differed from those who began afterward. "The law matters," says Oppenheimer & Co. tobacco analyst Roy D. Burry, who believes that the industry will win the reimbursement cases. "The judicial system in this country has major trouble, but it does ultimately work."

The state cases will face different, but equally serious, challenges. The attorneys general claim that Big Tobacco has imposed undue medical expenses on their states, which in turn are entitled to be repaid for those costs. To prevail with this novel argument, the states first must overcome the defense that tobacco has successfully used against plaintiffs for years: that smokers knew about the health risks. Second, the states have to prove that the health costs they incurred are attributable to tobacco-related illnesses, and not to other causes, such as claimants' genetic problems or exposure to hazardous materials. Finally, they will likely have to argue that the health costs of smoking exceed the amount the states rake in on tobacco excise taxes.

Rather than wasting time and money in litigation, tobacco opponents and the industry should discuss a legislative solution. If it's true that the tobacco industry imposes costs on the states, then the rational way to solve the problem is by increasing cigarette excise taxes. That's a problem for the statehouse, not the courthouse.

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