Waiting to Exhale--Tobacco lawyers are getting burned by damaging industry revelations. Can they rise from the ashes?
WAITING TO EXHALE
Tobacco lawyers are getting burned by damaging industry revelations.
Can they rise from the ashes?
by Elsa F. Kramer
There are no "butts" about it. Most Americans believe that nicotine is
addictive and that smoking is deadly. Nearly half a million people die each
year from smoking-related illnesses, and the associated health-care costs are
estimated to exceed $50 billion annually. But outside the arena of public
opinion, and inside courts of law, the tobacco industry has repeatedly
snuffed out its opposition. Of the 813 claims filed against tobacco companies
from 1954 to 1994, only 23 cases were tried, and of those the industry lost
only two. Both cases were overturned on appeal.
Tobacco-industry critics say it's not just that juries think smokers
contribute to their own illnesses by lighting up despite health warnings
mandated since 1965. It's the industry's attorneys, they say, who send
plaintiffs' claims up in smoke by invoking attorney-client privilege or work-
product doctrine in order to keep industry secrets from reaching the public.
Filtering the information
At least one court has agreed. Then-U.S. District Judge H. Lee Sarokin ruled
that attorneys played a key role in deceiving consumers about the link
between smoking and disease (Haines v. Liggett Group, Inc., Civ. Action 84-
678 NJ 1992). Sarokin said that the industry and its lawyers had abused legal
doctrines in order to conceal scientific research on tobacco's harmful
effects.
The judge had planned to release to plaintiffs some of the industry's
internal papers held by the Council for Tobacco Research, an industry-
supported group. One of the documents quoted a lawyer as saying that the
Council was originally established as an industry "shield" and often acted as
a "front" for research projects. An appeals court reversed Sarokin, however,
and upheld the industry's claim of privilege, stating that the judge had gone
beyond the evidence before him. The appeals court also removed Sarokin from
the case, ruling that there was an appearance of bias on his part. The
industry documents were not released.
Lawyers were also the focus when the United States Attorney's office and the
Justice Department's criminal division began their investigations into
tobacco company practices. Rep. Martin T. Meehan (D-Mass.) presented a
"prosecution memo" in 1994 recommending that the Justice Department look
specifically at the role of tobacco lawyers in managing the industry's
scientific research.
At least two federal grand jury investigations may involve tobacco-industry
lawyers. One, a securities fraud case against Philip Morris, accuses the
cigarette maker of failure to disclose knowledge of nicotine's addictive
qualities. The other examines the 1994 congressional testimony of tobacco
executives who testified that nicotine is not addictive.
Industry lawyers are alleged to have played a key role in funneling tobacco
money to Healthy Buildings International (HBI), a purportedly independent
indoor air quality inspection company. A former HBI employee claims that
attorneys with Covington & Burling, a Washington, D.C. firm, developed and
had editorial control over an HBI magazine about air quality issues, and
funded the publication with money from Philip Morris.
Covington & Burling has also been criticized for efforts to discourage state
attorneys general from taking action against tobacco companies. Recent
lawsuits aimed at tobacco companies, their lobbying groups and lawyers are
relying on evidence obtained in large part from the industry's own internal
memos, many of which originated in legal departments.
"The Cigarette Papers"
In 1994, thousands of documents from Brown & Williamson Tobacco Company (B&W)
and other tobacco interests were mailed anonymously to the University of
California at San Francisco. University researchers analyzed the data; their
conclusions were published in The Journal of the American Medical Association
in July 1995.
"The documents show a sophisticated legal and public relations strategy to
avoid liability for the diseases induced by tobacco use," the researchers
commented. "The documents show that lawyers steered scientists away from
particular research avenues. ... The documents demonstrate that the tobacco
industry in general, and B&W in particular, were very concerned about the
threat of products liability lawsuits, and they illustrate some of the steps
taken by lawyers at one company to avoid the discovery of documents that
might be useful to a plaintiff in such a lawsuit. These steps included
efforts to control the language of scientific discourse on issues related to
smoking and health, to bring all potentially damaging internal scientific
documents under attorney work product and attorney-client privilege to avoid
discovery, to remove 'deadwood' documents, and to insulate B&W from knowledge
of potentially damaging scientific information," according to the
researchers.
One 1984 memo from B&W's corporate counsel concerning a project to develop a
"safe" cigarette stated the need "to control the risk of generating adverse
evidence admissible in U.S. lawsuits." An earlier memo from within B&W's
legal department proposed procedures for disseminating scientific documents
through the department in order to shield the documents from discovery
requests. A 1985 memo suggested that some material, such as older cancer
studies in mice, be moved to corporate repositories outside the United
States. A 1981 memo indicated that an industry attorney from outside B&W had
met with scientific researchers and "persuaded them to take a new thrust ...
[of] questionable value but no negative."
Legal problems predicted
The big name in tobacco defense is Shook, Hardy & Bacon, a 200-member firm in
Kansas City, Mo. The firm has directly represented several tobacco companies,
and has been involved in activities that prompted recent federal
investigations, including its role in advising the Council for Tobacco
Research. Partner David R. Hardy, now deceased, is credited with the
industry's strategy of avoiding any links between smoking and disease. In a
1970 memo to B&W attorneys, Hardy warned that even casual discussions of
scientific research could be dangerous. Plaintiffs could benefit from
"evidence which tended to establish actual knowledge on the part of the
defendant that smoking is generally dangerous to health," he warned. "I can
anticipate rulings which would leave us defeated by our own hand."
A 1987 memo from another Shook, Hardy attorney concerned the marketing by
R.J. Reynolds of a "smokeless" - and therefore "safer" - cigarette. The
product could "have significant effects on the tobacco industry's joint
defense efforts," the memo said. "The industry position has always been that
there is no alternative design for a cigarette as we know them." Another
memo, written by an attorney for Reynolds, noted: "[T]he aggressive posture
we have taken regarding depositions and discovery in general continues to
make these cases extremely burdensome and expensive for plaintiffs' lawyers,
particularly sole practitioners. To paraphrase General Patton, the way we won
these cases was not by spending all of Reynolds' money, but by making that
other son of a bitch spend all his."
In recent months, former industry employees have come forward to corroborate
the mounting evidence that tobacco executives and lawyers concealed the
health hazards of smoking.
From 1989 to 1993, Jeffrey S. Wigand was the top research scientist for
B&W. After untelevised information he provided last year to CBS' "60 Minutes"
was obtained and published by the New York Daily News, B&W sued Wigand for
fraud, theft of secrets and breach of contract. Wigand subsequently was
deposed as an expert witness in the case of Moore v. American Tobacco Company
et al. The Mississippi suit seeks to force tobacco companies to pay for the
Medicaid costs of smoking-related illnesses.
(At the request of B&W lawyers, a state court judge in Louisville ordered
Wigand to comply with a confidentiality agreement he had signed. But the
Mississippi judge ordered him to appear anyway.)
A key allegation was that industry executives knew nicotine was addictive but
didn't warn the public. Wigand's testimony not only confirmed that allegation
but also implied that his former boss, B&W Chairman Thomas E. Sandefur (now
retired), had perjured himself at a congressional hearing in 1994. During his
testimony, Sandefur had stated under oath that he believed nicotine is not
addictive.
In the Mississippi case, Wigand said that top B&W executives refused to
remove an additive from pipe tobacco that he warned them was carcinogenic. He
testified that B&W in-house lawyers hid or altered potentially damaging
scientific research documents, including information on the possible
development of a "safer" cigarette. Wigand told the court that he was
required to obtain law-department approval on personnel matters. He also
testified that B&W's assistant general counsel routinely marked scientific
research papers "attorney work product" even when they had not been created
for use in litigation.
Counsel for B&W repeatedly objected to the testimony on matters covered by
attorney-client privilege and subject to Wigand's confidentiality agreement
with the company. Wigand wasn't cross-examined, and his deposition was
supposed to have been sealed. But its widely disseminated contents, along
with the contents of the industry documents, are already having impact far
beyond the Mississippi case.
Another smoking gun
One B&W internal memo was published by The Washington Post last fall. In the
document, the tobacco company's attorney, Mick McGraw, warned B&W and
executives of its parent company, BAT Industries, about the risk of buying a
nicotine-patch manufacturer they were interested in. "We obviously need to
make sure that we don't do anything in the nicotine delivery area which could
lead to the FDA asserting or obtaining jurisdiction over cigarettes," McGraw
said.
The memo was written in 1992 during the height of consumer interest in
nicotine patches, and at a time when the FDA had begun its proposals to
regulate cigarettes as drug-delivery devices. Because the FDA does not allow
drugs to be marketed that cannot meet its safety and efficacy standards,
McGraw noted that "if the FDA were to ever obtain jurisdiction over
cigarettes under the current regulatory framework, it would be virtually
impossible to pass these FDA screens. ... If we did anything which suggested
we were simply in the nicotine delivery business, we would run a serious risk
of facing FDA jurisdiction." (McGraw also pointed out the implications of a
tobacco company marketing a product to help people stop smoking.)
The memos were part of reports prepared for talks on the potential
acquisition of the patch company. Included were research analyses from BAT's
German, Canadian and U.S. groups, which contained language clearly at odds
with the tobacco industry's public pronouncements that nicotine is not
addictive. One of the documents in the B&W file, a scientific report on
transdermal nicotine patches, stated that the patch "appears to represent a
potential threat" to the company's interest in selling tobacco. The report
also compared the nicotine-delivery chemistry of patches and cigarettes,
pointing out that smokers potentially have more control over desired blood
levels of nicotine. A memo from BAT's German subsidiary stated that the
disadvantage of patch use "is seen in the danger of people possibly becoming
dependent on it."
The growing docket
These and other revelations have bolstered public opinion against the
industry and its lawyers, and helped the government gain support for proposed
regulatory and legislative changes. Because of the growing docket of tobacco-
related lawsuits, the FDA twice extended the comment period on its proposal,
with the most recent ended April 19. Cigarettes are currently exempt from the
Fair Labeling & Packaging, Controlled Substances, Consumer Product Safety,
and Toxic Substances acts. The FDA would declare cigarettes to be drug-
delivery devices; ban sales of cigarettes through vending machines, which are
thought to be too accessible to minors; ban sponsorship of sporting or
entertainment events by brand names (e.g., Winston Cup races); and ban
billboard ads within 1,000 feet of schools. The rule would permit only black
and white copy on other billboards and in advertising in publications with
more than 15 percent youth readership.
Anti-tobacco legislation introduced last year would increase the excise tax
on cigarettes, evaluate the Medicaid and Medicare costs of smoking illnesses
and charge the tobacco industry accordingly, and eliminate the deductibility
for tobacco advertising and marketing expenses. The tobacco-allotment farming
system, a price-support program dating from the New Deal, has been threatened
with elimination. But such measures face an uphill battle in the current GOP-
controlled Congress (Republicans reportedly received $2.4 million in "soft"
donations from the tobacco industry in 1995), and GOP presidential candidate
Bob Dole has said he will fire FDA Commissioner David Kessler if elected. In
response to the Clinton Administration's initiative against youth smoking and
the proposed regulatory changes, several tobacco companies have already moved
to thwart the FDA, seeking injunctions against what they consider an illegal
overstepping of the agency's authority. OSHA's proposed regulation of
workplace smoking is also being held up in legal hearings.
Precedent-setting litigation
Meanwhile, a New Orleans class-action suit has a potential liability that
analysts say could exceed the entire stock market value of the defendant
companies. Findings in the suit will be precedent-setting, and thus Castano
v. The American Tobacco Co. et al may go all the way to the Supreme Court. A
federal district judge ruled the class action could proceed on the issue of
addiction, and that the defendants could appeal his decision. He also ruled
that the discovery process could go forward pending an appellate court's
finding. The appellate court will decide if the certification was correct.
In an unusual show of solidarity among competing plaintiffs' attorneys, the
class action has been brought by attorneys from 60 prominent firms, including
famous practitioners such as Melvin Belli, Stanley Chesley and John Coale.
Each of the firms has committed to contribute $100,000 annually to the
effort. They seek punitive and compensatory damages for all current and
former nicotine-dependent smokers in the United States. The attorneys have
subpoenaed Shook, Hardy's records of its involvement in tobacco-industry
research, believing the documents will show evidence of the firm's role in
fraud.
(Hutton & Hutton, a Kansas firm and one of the 60 representing plaintiffs in
Castano, has filed a separate lawsuit against smokeless tobacco that could
involve 30,000 people and cost the tobacco companies more than $1 billion if
successful.)
Companies that do business with the industry - manufacturers of glass fibers
and cellulose used in filters, makers of flavoring agents, even suppliers of
tobacco seeds - are seeking ways to cut ties to tobacco companies in hopes of
avoiding involvement in the litigation. Some tobacco lobbyists in Texas are
quitting to avoid becoming involved in that state's similar suit, a federal
case based partially on racketeering, conspiracy and fraud statutes.
Even defendant the Liggett Group has defected from industry ranks and agreed
to settle Castano - the first tobacco company ever to pay a single cent in a
liability lawsuit. Although Liggett neither admits nor denies liability, the
company will pay a percentage of its pretax income toward programs to help
people quit smoking. It will also pay five states $10 million over the next
25 years.
In addition, the company will withdraw its opposition to some degree of FDA
regulation of tobacco. However, attorneys included in the settlement a
provision that Liggett may terminate the agreement if the other tobacco
companies win in court.
Who will take the blame?
In a challenge to New York City's recent anti-smoking ordinance, one
enterprising attorney has filed a complaint against the law as it applies to
cigars. He argues that studies showing harmful effects of second-hand
cigarette smoke do not necessarily hold true for cigar smoke, and he also
challenges the constitutionality of the new law. Additionally, he notes that
"[p]rior to Jan. 1, 1995, a number of desirable women enjoyed the company of
their cigar-smoking male companions and understood the enhancing qualities of
maleness."
Perhaps. But that brand of legal maneuvering has anti-tobacco groups
smoldering. Unsuccessful efforts to suppress the industry's documents are
certain indication of how legally damaging the information will ultimately
be. The smoke has finally cleared from the industry's campaign to deny its
own findings. But who will take the blame for the deaths of so many people?
Will it be the industry executives, working to maintain profits at the health
expense of smokers? Or will tobacco lawyers' legal tactics be on trial?
© 1996 Elsa F. Kramer. This first appeared in the May 1996 issue of Res
Gestae, the journal of the Indiana State Bar Association.
[sidebar to WAITING TO EXHALE]
Tobacco defense strategies
Do the defense strategies that have worked for the tobacco industries during
the last 40 years hold promise for the future? Probably not, according to
Robert L. Rabin, the A. Calder Mackay Professor of Law at Stanford Law
School. Rabin spoke to students, faculty and others interested in tobacco
tort litigation April 11 at the fourth in a series of 1995-96 Distinguished
Lecture Presentations offered by the Indiana University School of Law-
Indianapolis.
"When the invitation to speak was issued about a year ago, none of us could
have anticipated how timely this lecture visit would be," he noted. Rabin
believes that social and political climates of the 1990s, along with the
recent trend toward class certification for cases, will keep claims against
tobacco companies from "vanishing into thin air," as they have in the past.
"The tort system has always been an accurate barometer of what's happening in
society," he says, and a review of tobacco litigation history clearly shows
why things are different now.
Rabin, a leading scholar on tort law and the author of books on litigation
and smoking, divides tobacco claims into three groups to demonstrate the
effect of culture on torts. "From 1954 to about 1965, at the height of
smoking's popularity, about 150 claims were filed against the tobacco
industry," he notes. "The first cases were brought by 'frontiersmen' -
personal injury lawyers, but not the well-heeled, high-profile ones filing
these cases today." The "frontiersmen" were motivated by personal conscience,
or were helping friends, Rabin said. But the tobacco companies were defended
the same way they are now: by high-priced, highly skilled attorneys.
"Back then, there were few products liability suits of any kind. Breach of
quality meant something like a Coke bottle exploding," he says. "But
cigarettes were perceived to be all alike, not inherently dangerous. Breach
of warranty was also narrowly interpreted, and failure to warn wasn't an
issue because there were no studies yet. Most cases vanished without a
trace."
The second wave of litigation, Rabin says, didn't come until nearly 20 years
later. "During the period 1983 to 1992, another 150 or so cases were filed,
and went down to ignominious defeat," he notes. "The tobacco industry
continued its no-holds-barred strategy, and paid its lawyers well. They knew
that losing even one case would set a dangerous precedent."
The popular defense position during those years, Rabin says, was freedom of
choice - that plaintiffs freely chose to smoke despite warnings made
mandatory in 1965. Tobacco attorneys also made sure that plaintiffs' personal
habits were made part of the court record, e.g., drinking, driving styles,
recreational choices - anything that would indicate a willingness to engage
in dangerous behavior. While plaintiffs' lawyers argued that cigarettes'
addictive nature made freedom of choice impossible, tobacco lawyers pointed
out that one of every two people was an ex-smoker. Rabin says juries were
unsympathetic to plaintiffs who freely made the choice to smoke.
Two converging phenomena brought about the third wave of tobacco litigation,
Rabin says. Industry documents about tobacco's addictive qualities, and
efforts to conceal that knowledge, began to be leaked in 1994. Also, products
liability cases such as those concerning the Agent Orange defoliant, the
Dalkon Shield intrauterine device, asbestos and breast implants had
introduced the propriety of collective actions when plaintiffs have the same
exposure in the same circumstances. Rabin points to two cases certified for
class action as examples of new thinking in tobacco litigation. A group of
airline flight attendants has been granted certification (and a Florida
appeals court has affirmed) in a suit against the airline for exposing them
to secondhand smoke in flight. "There is no freedom of choice argument to be
made by the defense here," Rabin notes, "but it will make for a more
difficult case on causation." The Castano case (see main story) asks that the
potentially more than 40 million plaintiffs be reimbursed for costs
associated with addiction, rather than for health expenses. "It's a very
clever way to frame the case," Rabin says, because cigarette package warning
labels make no mention of addiction. "Even if the 5th Circuit Court of
Appeals decides to decertify the case as class, many individual suits will be
brought on that point."
Another form of aggregate case is the state suit seeking reimbursement for
Medicaid and Medicare costs related to smoking illnesses. Nine states have
filed aggregate or class-action suits to date, and more are expected to
follow shortly.
Rabin points out that the costs of litigating these cases, not to mention the
almost unfathomable costs of paying them out if they are won, will have one
particularly desirable effect. "The price of tobacco will go up. Those who
can least afford to pay the increased cost will no longer be able to buy
cigarettes - and that should reduce the number of children who smoke."
- Elsa F. Kramer
© 1996 Elsa F. Kramer. This first appeared in the May 1996 issue of Res
Gestae, the journal of the Indiana State Bar Association.
[sidebar to WAITING TO EXHALE]
Indiana class-action suit filed
Indianapolis attorney William N. Riley, Young & Riley, and other Indiana
attorneys filed a class-action suit May 3 against the tobacco industry on
behalf of all smokers in the state.
The nine-count claim is focused on fraudulent concealment by the industry of
knowledge that nicotine is addictive. Named plaintiffs are Anderson attorney
William J. Norton, who began smoking in 1945, and Indianapolis resident Amy
J. Thompson, who began smoking at age 13. Both are addicted, the lawsuit
says, and unable to quit. "We want the tobacco companies to admit that they
manipulated cigarettes to addict smokers," Riley says. In addition to the
tobacco companies, the suit names Marsh Supermarkets, Inc. among the
defendants because the grocery chain sells cigarettes in Indiana.
Judge Dennis Carroll, Madison Superior Court 1, will hear the case, which
asks for unspecified compensatory and punitive damages and for the industry
to establish a medical monitoring fund for addicted smokers. "If the appeals
court says that Castano can go forward as a class action, this suit will be
dropped, and its plaintiffs will become part of the larger suit," Riley said.
"If Castano is decertified, however, we want plaintiffs in Indiana to be able
to go forward on their own."
Indiana is the ninth state to file an aggregate case against the tobacco
industry. Mississippi, Minnesota, Florida, Louisiana, Massachusetts, Texas,
West Virginia and Maryland have filed similar suits. Representatives from 30
states met May 3 in Chicago to discuss legal strategies, and more are
expected to seek reimbursement of Medicaid costs for treating smoking-related
illnesses. --Elsa F. Kramer
© 1996 Elsa F. Kramer. This first appeared in the May 1996 issue of Res
Gestae, the journal of the Indiana Bar Association.
>Res Gestae, July 1996
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