What May Stub Out The Tobacco Settlement

Any pact awaits a gamut of constitutional challenges

The odd coalition of cigarette companies, trial lawyers, state attorneys general, and scattered health officials that is lobbying for the landmark tobacco settlement is facing challenges from all sides. Ever since the deal was announced on June 20, it has been under fire--for limiting federal regulation of nicotine, letting the companies off for too little money, and shielding internal documents from the public, among other things.

But even if these issues are resolved and Congress approves the pact next year, it still faces another enormous hurdle: the U.S. Constitution. Almost as soon as it becomes law, an array of private attorneys and special interest groups--such as Action on Smoking & Health, a Washington-based antismoking group--is planning to challenge it in court. They are likely to charge that the deal illegally limits the rights of smokers to sue, of companies to advertise, and of states to establish commercial regulations. Their objections threaten to invalidate key portions of the settlement--and perhaps even the entire deal. "This thing is a constitutional minefield," says Richard D. Hailey, president of the Association of Trial Lawyers of America (ATLA).

Of all the controversial aspects of the pact, perhaps the most troublesome to legal experts are the proposed restrictions on the right of smokers to sue and recover damages from manufacturers. Only rarely has Congress granted a single industry the kind of immunity from lawsuits allowed in the settlement. And in those few cases, the rights of individuals were not shackled as they are in the current accord.

Under the pact, Congress would ban future filing of all class actions against tobacco makers. It also would force the settlement of 20 pending class actions; current claimants would be eligible for smoking-cessation programs but not for cash payments. Additionally, individual litigants would be barred from seeking punitive damages for past industry conduct. The deal would set a $5 billion limit on the amount of damages litigants could collect in any single year.

HEADED OFF? Some legal experts believe such restrictions violate constitutional guarantees to due process of the law and the right to a jury trial. "The cumulative effect of foreclosing class actions, rejecting punitive damages, and capping compensatory damages could so exhaust an attorney's incentive to litigate that claimants with legitimate grievances are denied their day in court," says Robert A. Levy, senior fellow in constitutional studies at the libertarian Cato Institute.

True, some of the federal restrictions in the bill go far. But Laurence H. Tribe, a constitutional law professor at Harvard Law School, believes that such restrictions will survive because claimants are still able to receive some form of compensation. Tribe points out that the Supreme Court has held that there is no constitutional right to recover punitive damages or file a class action. He also believes the pact doesn't interfere with the right to a jury trial since there is no limit on the amount of compensatory damages a jury can award, just a restriction on the timing of their payout. And he notes that the courts already have upheld congressionally crafted damage caps for the coal, vaccine, and nuclear power industries.

Still, counter opponents, Congress has limited an industry's legal exposure only when there's a pressing social or economic reason to protect the industry, a dimension missing in tobacco's case. In 1986, for example, Congress created the National Vaccine Injury Compensation Program, a no-fault compensation system for children injured by vaccinations. But under that law, vaccine claimants who are unhappy with their awards under the no-fault arbitration process are free to go to trial to seek unlimited damages.

Even if the deal does pass constitutional muster, critics warn it may nonetheless establish a dangerous precedent. The problem: Other industries facing a barrage of litigation could be tempted to come knocking on Congress' door. Kyle Logue, assistant professor at the University of Michigan law school, says that "industries whose products are potentially dangerous will look at this closely. The message is, if you are politically savvy, you can get a settlement agreement that would save a lot of litigation costs."

Perhaps just as nettlesome is the issue of states' rights, protected by the Tenth Amendment. It's a red flag for many Republicans in Congress elected on platforms opposing federal meddling in state activities. They're likely to question the provisions that call for federally-mandated changes in state court systems, such as nixing their punitive damages laws. And Stephan E. Lawton, an attorney for the American Cancer Society, thinks that the Supreme Court, which recently upheld the states' position in several states' rights cases, may not take kindly to Congress "directly requiring the states to conduct its own judicial proceedings in a certain way." Lawton says one way to get around the consitutional quagmire would be if Congress rewrites the deal so that states are coaxed to make the changes voluntarily, perhaps by offering them money from the tobacco settlement.

Minnesota is particularly peeved because the pact would override the state's tougher laws on the licensing of retailers of tobacco and on laws requiring the industry to disclose documents. And it would force Minnesota to settle its pending Medicaid case, even though it wants to proceed. Says Scott Strand, deputy counsel to Minnesota Attorney General Hubert H. Humphrey III: "You have serious Tenth Amendment issues when you have Congress commandeering state court systems for federal purposes."

"ALARMING CONCEPT." Scholars are also examining the settlement's potential for running afoul of the First Amendment. As proposed, it would ban tobacco advertising on billboards, in stadiums, and on merchandise. Yet recent Supreme Court decisions have granted commercial speech broad protection. Last year, for example, the court unanimously ruled that a Rhode Island ban on advertising liquor prices was unconstitutional. Earlier decisions found that the government could restrict commercial speech only under special circumstances, for instance when the restriction has a direct effect on advancing a specific interest and when it's not more extensive than necessary.

Of course, it's unlikely that the cigarette makers at the negotiating table would ever claim a violation of their First Amendment rights; as part of the deal, these companies have agreed to waive such rights. But what about a smaller company, perhaps a foreign one, that is not willing to accept the restrictions in the pact? The negotiators hoped to get around the free-speech issue by setting up a separate regime for non-participating manufacturers. These companies would be free to advertise, but they would be required to make substantial payments to a kitty earmarked for liability payments. Forcing nonparticipating companies to pay up to advertise is "an alarming concept because it puts a price tag on your right to speak," warns Douglas J. Wood, a New York attorney who specializes in advertising law.

The tobacco deal is now in the hands of the White House and Congress, which expects a vote by mid-1998. But lawmakers are veering into unknown territory, and it could be years before the courts resolve many of the pact's troubling constitutional issues. Every potential claimant--from individual litigants to advertisers to industries beleaguered by product-liability suits--will be awaiting the outcome.

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