A Bad Settlement Forces Tobacco Firms to Pay for Others' Sins
By Richard A.Epstein
CHICAGOFirst, some disclosures. I have never puffed a cigarette in
my life.
And I have advised the cigarette maker Philip Morris on its
defense strategy for nearly 13 years.
I see no contradiction there.
Smoking is not a habit I wish to acquire. Nor is it a practice for
which tobacco companies should be held liable. The $368.5 billion
settlement to which the tobacco industry agreed last month (in which I
played no role) represents the substitution of political muscle for sound
legal principle.
The 1969 federal law on cigarette labeling required specific
warnings on cigarette packs and then barred states from imposing
additional "requirements or prohibitions" on smoking.
As the U.S. Supreme Court correctly held in its 1992 decision
in Cipollone vs. Liggett Group, people who began smoking after 1969
could not sue on the ground that they had not been adequately warned
of the dangers. Individuals who started smoking earlier and tried to sue
tobacco companies for damages were all unsuc
cessful. Juries found that they indeed knew of the risks of smoking.
And claims of addiction failed because too many smokers had already
quit.
So why did a triumphant industry succumb to this monster
settlement? Because the plaintiffst lawyers skillfully shifted their
firepower to faceless classaction litigation. These broad suits promised
to bring the question of what the tobacco companies knew about their
product to the fore while relegating the issue of what smokers knew
about the dangers of their habit to the fringes.
In addition, the states sued in an effort to get the tobacco
industry to pay for treating the smokingrelated illnesses of people in
the government's Medicare health program for the elderly. Courts have
uniformly held that states could recover such medical costs only when
individuals were entitled to do so.
But the states conjured up a dubious legal theory that would
apply only to the tobacco companies and government heaith care providers.
The states argued that they should be able to recover smokingrelated
Medicare costs even when individual claims would be barred.
Meanwhile, on the regulatory front, nicotine suddenly became
a drug subject to regulation by the Food and Drug Administration.
This war on multiple fronts forced the tobacco companies to
capitulate to stiff terms. But the deal is unholy from the plaintiffs' side.
If tobacco is a deadly scourge, why not urge Congress to ban it
altogether? Because plaintiffs' lawyers and states will not receive a single
dime if tobacco is not sold.
So the settlement extracts copious mea culpas from the
tobacco industry and then gives the states a continued interest in seeing
that enough cigarettes are sold for the tobacco companies to keep
paying the fixed tariff. In effect, tobacco's old adversaries have made
themselves its new coowners.
I suspect that the financial and regulatory burdens of this
settlement may kill the goose that lays the golden egg. In any case, the
plaintiffs should have been sent home emptyhanded.
What could be done? Labeling requirements can be
strengthened. Medicare premiums should be raised for smokers.
Tobacco subsidies should be eliminated. The president can rail against
smoking.
But individual smokers should own up to the consequences of
their actions.
And the tobacco industries liability for smokingrelated illnesses
should be zero.
The writer, a law professor at the University of Chicago,
contributed this comment to The New York Times.