Tobacco

For centuries the leaves of the tobacco plant have been used for making smoking tobacco and chewing tobacco. Tobacco contains small amounts of nicotine, a stimulant that acts on the heart and other organs and the nervous system when tobacco is inhaled, ingested, or absorbed. Nicotine's effect on the nervous system causes people to become addicted to it, and the stimulating effects make smoking and chewing tobacco pleasurable. Concentrated amounts of nicotine are poisonous, however. Although the use of tobacco was condemned on occasion in the past, not until the latter half of the twentieth century have concerted efforts been made to curb tobacco use in the United States.

History

Before the arrival of Europeans in America, Native Americans were growing and harvesting tobacco to be smoked in pipes. Europeans exploring America learned of this practice and took tobacco seeds back to Europe where tobacco was grown and used as a medicine to help people relax. European physicians believed that tobacco should be used only for medicinal purposes. Commercial production of tobacco began in the colony of Virginia in the early seventeenth century where it soon became an important crop. The expansion of tobacco farming, especially in the southern colonies, contributed to the demand for and practice of slavery in America. Most tobacco grown in the American colonies was shipped to Europe until the Revolutionary War, when manufacturers began using their crops to produce chewing and smoking tobacco.

The use of tobacco for other than medicinal purposes was controversial, however: the Puritans in America believed that tobacco was a dangerous narcotic. Nevertheless, chewing and smoking tobacco became increasingly popular. Cigars were first manufactured in the United States in the early nineteenth century. Hand-rolled cigarettes became popular in the mid-nineteenth century, and by the 1880s, a cigarette-making machine had been invented. In the twentieth century tobacco use, especially cigarette smoking, continued to expand in the United States.

By the 1960s, however, scientists had confirmed that smoking could cause lung cancer, heart disease, and other illnesses. Some cigarette manufacturers reacted to these findings by reducing the levels of nicotine and tar in their cigarettes, but the medical community established that these measures did not eliminate the health risks of smoking. Subsequently, extensive research linked cigarette smoking and tobacco chewing to many serious illnesses.

In 1990 an estimated 419,000 deaths in the United States were directly attributable to smoking. The American Cancer Society estimated that smoking caused nearly one-third of all cancer deaths in 1995. Tobacco is responsible for more deaths in the United States than car accidents, acquired immune deficiency syndrome (AIDS), alcohol, illegal drugs, homicides, suicides, and fires combined.

Medical research has not only proved that smoking is injurious to the health of the smoker, but it has also established that nonsmokers can be harmed by inhaling the cigarette smoke of others. This type of smoke is called secondhand smoke, passive smoke, involuntary smoke, or environmental tobacco smoke (ETS). In 1993 the Environmental Protection Agency (EPA) classified ETS as a known human (Group A) carcinogen because it causes lung cancer in adult nonsmokers and impairs the respiratory and cardiovascular health of nonsmoking children. ETS, which is the third leading preventable cause of death in the United States, contains the same carcinogenic compounds as are found in the smoke inhaled by smokers.

As these research findings have appeared, concern over tobacco's effect on health has played an important role in encouraging government regulation of tobacco. At the same time, however, the popularity of tobacco use has resulted in considerable political and financial strength for the tobacco industry. By the 1990s tobacco had become the seventh largest cash crop in the United States, and tobacco growers and manufacturers were realizing $47 billion annually. With such revenues available, the tobacco industry has been able to exert significant influence over tobacco regulation. In 1995 the tobacco industry gave more than $1 million directly to politicians and nearly $3 million in "soft money" (unrestricted donations to political party organizations). Because the industry is also central to the economies of many tobacco-producing states, members of Congress from those states have opposed restrictions on tobacco companies.

Despite the tobacco companies' efforts, the industry is subject to extensive federal and state regulation. Among the federal agencies with minor regulatory interests in tobacco and tobacco products are the Bureau of Alcohol, Tobacco and Firearms, the Department of Health and Human Services, the Department of Agriculture, and the Internal Revenue Service. Federal agencies with broader power to regulate tobacco include the Federal Trade Commission (FTC), the Federal Communications Commission (FCC), and, the most recent to assert jurisdiction, the Food and Drug Administration (FDA).

Federal Regulation of Tobacco Advertising and Labeling

In the 1950s the federal government began to regulate the sale and production of chewing and smoking tobacco because of the growing concern over its adverse effects on the health of consumers. Traditionally, the FTC was the federal agency primarily responsible for the regulation of tobacco products, especially with regard to labeling and advertising. In 1955 the FTC promulgated guidelines that prohibited cigarette advertisements from carrying therapeutic health claims. In 1964 the commission issued a Trade Regulation Rule on Cigarette Labeling and Advertising that strictly controlled the advertising and labeling of tobacco products. The FTC claimed that the failure to warn consumers of the dangers of smoking constituted an unfair and deceptive trade practice under the Federal Trade Commission Act (15 U.S.C.A. § 41 [1994]).

Shortly after the FTC issued its trade regulation rule, Congress intervened by enacting the Federal Cigarette Labeling and Advertising Act (FCLAA) (15 U.S.C.A. § 1331 et seq. [1965]), which was more moderate than the FTC regulation and preempted agency action. The FCLAA required that a health warning be conspicuously displayed on all packages and cartons of cigarettes. As originally enacted, the FCLAA required only the warning, "Caution: Cigarette Smoking May Be Hazardous to Your Health." Subsequently, however, this act was amended to require more explicit warnings. Under amendments added in 1984, cigarette manufacturers must use one of the following labels to satisfy the health warning requirement:

SURGEON GENERAL'S WARNING: Smoking Causes Lung Cancer, Heart Disease, Emphysema, and May Complicate Pregnancy.

SURGEON GENERAL'S WARNING: Quitting Smoking Now Greatly Reduces Serious Risks to Your Health.

SURGEON GENERAL'S WARNING: Smoking by Pregnant Women May Result in Fetal Injury, Premature Birth, and Low Birth Weight.

SURGEON GENERAL'S WARNING: Cigarette Smoke Contains Carbon Monoxide.

The warning labels must also appear on all cigarette advertising, including magazine advertisements and billboards.

In 1986 Congress enacted the Comprehensive Smokeless Tobacco Health Education Act (CSTHEA) (15 U.S.C.A. § 4401 et seq.), which requires smokeless tobacco products to carry one of the following warning labels:

"WARNING: THIS PRODUCT MAY CAUSE MOUTH CANCER"

"WARNING: THIS PRODUCT MAY CAUSE GUM DISEASE AND TOOTH LOSS"

"WARNING: THIS PRODUCT IS NOT A SAFE ALTERNATIVE TO CIGARETTES"

The CSTHEA also requires all manufacturers, packagers, and importers of smokeless tobacco to provide the secretary of the Department of Health and Human Services with a list of all ingredients used in the manufacture of the product, as well as the quantity of nicotine contained in the product. The act further requires the secretary to report biennially to Congress with a summary of research on the health effects of smokeless tobacco, information about whether its ingredients pose a health risk, and recommendations for legislative or administrative action. Finally, the act requires the FTC to report biennially to Congress about the state of smokeless tobacco sales, advertising, and marketing practices and also to make recommendations for legislative or administrative action. Amendments to the FCLAA require similar reports on smoking tobacco products.

In 1967 the FCC decided to act upon citizen complaints it had received regarding broadcast cigarette advertising. The FCC implemented a rule requiring any station that broadcast cigarette advertising to also air public service announcements prepared by various health organizations in an effort to inform listeners and viewers of the dangers of smoking. This FCC regulation was challenged in the courts but upheld under the fairness doctrine, which requires broadcasters to provide a balanced representation and fair coverage of controversial issues of public importance (Banzhaf v. FCC, 405 F.2d 1082 [D.C. Cir. 1968]).

A few years later, Congress also intervened on the issue of broadcast advertising, electing to ban all television and radio advertising of cigarettes. Congress enacted the Public Health Cigarette Smoking Act of 1969 (Pub. L. No. 91-222, § 6, 84 Stat. 87, 89), which was codified as an amendment to the earlier FCLAA. The new regulations took effect in 1971 and prohibited all advertising of cigarettes and small cigars via electronic communication, subject to the jurisdiction of the FCC (15 U.S.C.A. § 1335). The tobacco companies challenged the constitutionality of the Public Health Cigarette Smoking Act, but it was upheld by the courts (Capital Broadcasting Co. v. Mitchell, 333 F. Supp. 582 [D.D.C. 1971], aff'd mem., 405 U.S. 1000, 92 S. Ct. 1289, 321 L. Ed. 2d 472 [1982]). Beginning in 1986, Congress also made it illegal to advertise smokeless tobacco on any medium of electronic communication that is subject to the jurisdiction of the FCC (15 U.S.C.A. § 4402(f)).

The FCLAA, as amended by the Public Health Cigarette Smoking Act of 1969, did not work wholly to the detriment of the tobacco industry. In fact, some legal commentators argue that it actually benefited the tobacco companies. The warning labels that were required to help inform consumers of the health risks associated with tobacco worked to provide the manufacturers with a shield against tort liability. In fact, before the matter was taken up by the U.S. Supreme Court in 1992, several circuit courts held that the FCLAA had preempted state claims against the tobacco companies based on a failure-to-warn legal theory (see Pennington v. Vistron Corp., 876 F.2d 414 [5th Cir. 1989]; Roysdon v. R. J. Reynolds Tobacco Co., 849 F.2d 230 [6th Cir. 1988]; Palmer v. Liggett Group, 825 F.2d 620 [1st Cir. 1987]; Stephen v. American Brands, 825 F.2d 312 [11th Cir. 1987]). In Cipollone v. Liggett Group, 505 U.S. 504, 112 S. Ct. 2608, 120 L. Ed. 2d 407 [1992], the U.S. Supreme Court held that the FCLAA had preempted state law damage claims based on a failure to warn and the neutralization of federally mandated warnings to the extent that those claims relied on omissions or inclusions in the manufacturers' advertisements or promotions. The Supreme Court also held, however, that the FCLAA did not preempt claims based on strict liability, negligent design, express warranty, intentional fraud and misrepresentation, or conspiracy.

The tobacco industry also benefited indirectly from the FCLAA's ban on advertising because when television advertising ceased, so did the antismoking public service messages that broadcasters were previously required to air. In fact, Judge Skelly Wright, the author of the dissenting opinion in Capital Broadcasting Co., noted that the Public Health Cigarette Smoking Act of 1969 was a legislative coup on the part of the tobacco industry. Wright accurately predicted that the loss of the broadcast antismoking messages would result in a rise in cigarette consumption.

Federal and State Regulation of Tobacco through Taxation

In 1994 the tobacco industry spent an estimated $4 billion on tobacco advertising. Even though cigarettes cannot be advertised on radio or television, they are the most heavily advertised product in the United States.

In the early 1990s, in an attempt to raise revenue for the federal government, bills were introduced in Congress to restrict the amount of advertising expenses that tobacco manufacturers could deduct from their gross income. In 1993 tobacco companies deducted an estimated $1 billion from their gross income for advertising expenses. The proposed bills would have used the extra revenue to fund education programs to stop underage smokers and to reduce the federal deficit. The bills did not become law, however.

States have long collected excise taxes on sales of cigarettes. As of 1995, Washington State imposed the highest excise tax, at 85 cents per pack, and Missouri had one of the lowest, at 17 cents per pack. Excise taxes were also imposed on chewing tobacco products. Studies completed in the 1980s demonstrated that as the price of chewing and smoking tobacco increases, consumption of those products decreases.

Federal Regulation of Tobacco as a Drug

In 1988 the surgeon general of the United States issued a report detailing the addictive effects of nicotine. Later scientific studies confirmed this finding. Despite this research the tobacco companies continued to deny that any relation existed between smoking and disease or that smoking was addictive. In an April 1994 congressional hearing on nicotine manipulation, the chief executive officers of seven tobacco companies testified under oath that they believed nicotine is not addictive and that smoking has not been shown to cause cancer. Later, however, some former tobacco company officials publicly confessed that cigarette manufacturers had long known about the health hazards of smoking and had deliberately concealed that information from the public. The first and perhaps best known of these officials was Jeffrey Wigand, the former head of research at Brown and Williamson, one of the large tobacco companies. Voluminous internal records showing that cigarette manufacturers were aware of the dangers of smoking, including the addictive properties of nicotine, were also leaked to the public. One paralegal at Brown and Williamson copied more than four thousand documents and provided them to tobacco opponents. An annotated compilation of those documents was published in 1996 under the title The Cigarette Papers. As a direct result of this growing body of information demonstrating that the manufacturers knew that nicotine in smoking and chewing tobacco can lead to addiction, the FDA in 1994 began examining whether nicotine qualified as a drug under the Food, Drug and Cosmetic Act (21 U.S.C.A. § 301 et seq.), and thus could be regulated as such by the FDA.

The FDA had formerly asserted jurisdiction over tobacco products only to the extent that they carried therapeutic claims. By 1996, however, the FDA had determined that cigarettes and other tobacco products are intended by their manufacturers to be delivery devices for nicotine, a drug resulting in significant pharmacological effects on the body, including addiction. Based on the Food, Drug and Cosmetic Act definition of a drug as an article "intended to affect the structure or any function of the body" and on the FDA's determination that the cigarette and smokeless tobacco manufacturers "intend" these effects, the FDA declared in August 1996 that it had jurisdiction to regulate tobacco products.

The FDA then announced that it would begin by regulating the sale and distribution of cigarettes and smokeless tobacco products to children and adolescents. The issue of children smoking has aroused widespread concern. Studies in the late 1980s and early 1990s demonstrated that despite state laws prohibiting the use of tobacco before the age of eighteen, children had easy access to tobacco products and many had become regular smokers before their eighteenth birthday. In 1996 the FDA estimated that 4.5 million children and adolescents in the United States smoke and that another 1 million children use smokeless tobacco. Accordingly, the FDA promulgated a proposed rule to reduce children's access to tobacco and limit its appeal to them. The proposed rule was published in August 1995, and the FDA invited public comment. The FDA received more than 700,000 pieces of mail on the proposed regulation, the most that any proposed regulation had ever received. After reviewing and analyzing the comments, the FDA published its final rule in August 1996 (21 CFR § 897).

The final FDA rule treated nicotine addiction as a pediatric disease because the use of tobacco products and the resulting nicotine addiction begin predominantly in children and adolescents. The FDA concluded that children do not fully understand the risks associated with consuming tobacco and that they are vulnerable to the sophisticated marketing techniques used by the tobacco industry.

Under the FDA rule, selling cigarettes or smokeless tobacco products to anyone under the age of eighteen is a federal violation. The rule also forbids the distribution of free samples of tobacco products and limits most retail sales to face-to-face situations by excluding most sales via vending machines and self-service displays. In addition, the rule limits tobacco advertising to black-and-white, text-only formats. Billboards and other forms of outdoor advertising are not allowed within a thousand feet of schools and public playgrounds. Sponsorship by tobacco companies of sporting and other events is limited to the corporate name only; the use of logos or mascots such as Joe Camel is forbidden. The rule also forbids the sale and distribution of nontobacco items that carry cigarette logos, such as T-shirts and hats.

The tobacco companies immediately challenged the FDA rule on several grounds, including whether the FDA has jurisdiction to regulate cigarettes as a "device" under the Food, Drug and Cosmetic Act and whether the rule violates advertisers' freedom of speech. In at least one case, a federal court restricted the scope of the FDA's jurisdiction. In Coyne Beahm v. FDA, 966 F. Supp. 1374 (M.D. N.C. 1997), tobacco companies and advertising agencies challenged the FDA's regulation of tobacco products. In April 1997 the district court ruled on the plaintiffs' motion for summary judgment, holding that the FDA could regulate the sale, distribution, and use of smoking and chewing tobacco, but not the advertising or promotion of tobacco products. Both parties planned to appeal the ruling.

State Regulation of Tobacco

State and local governments may also regulate tobacco and tobacco products to the extent that their regulations are not preempted (already addressed) by federal laws. By 1997 every state had some form of regulation of chewing and smoking tobacco products. State governments typically restrict the use of tobacco by minors, require licenses for those who sell tobacco products, and restrict vending machine and individual cigarette sales.

In the Alcohol, Drug Abuse, and Mental Health Amendments Reorganization Act of 1992 (Pub. L. No. 102-321, 106 Stat. 323), Congress declared that it was the responsibility of the states, with help from federal agencies, to restrict minors' access to tobacco products. By 1996 when the FDA called for a minimum age of eighteen for the use of tobacco products, all fifty states already had laws in place establishing eighteen as the minimum age for tobacco use.

The scope of state and local regulation is limited because it may not extend to areas already being regulated by the federal government. For example, because the FCLAA already regulates advertising based on smoking and health considerations, states and localities can restrict advertising only for other reasons, such as to protect citizens' aesthetic sensibilities, to control the location or types of cigarette displays, or to protect children from promotions blatantly aimed at them as consumers.

Whether the FCLAA preempts state regulation of promotions aimed at children is in dispute in the courts. In Penn Advertising v. City of Baltimore, 862 F. Supp. 1402 (D. Md. 1994), aff'd, 63 F.3d 1318 (4th Cir. 1995), cert. granted and judgment vacated, Penn Advertising v. Schmoke, ___U.S. ___, 116 S. Ct. 2575, 135 L. Ed. 2d 1090, aff'd on remand, 101 F.3d 322 (4th Cir. 1996), the court held that the FCLAA did not preempt a local ordinance that barred cigarette advertising in certain locations where children were likely to be found, such as near schools. But in Chiglo v. City of Preston, 909 F. Supp. 675 (D. Minn. 1995), the court overturned a city ordinance that restricted from certain areas cigarette advertising that contained logos, cartoon characters, or any distinctive brand advertising. The court in Chiglo held that the ordinance regulated the content of the advertising and hence was preempted by the FCLAA.

Local laws can also be preempted by state laws if the state law addresses the same issue. Well aware of this limitation, the tobacco industry began a campaign in the 1980s to encourage the adoption of weak, industry-friendly tobacco control legislation at the state level to preempt local governments from imposing stricter controls on the sale and use of tobacco.

Clean Indoor Air Acts

Armed with information showing the effects of ETS, the federal, state, and local governments began considering statutes to prohibit smoking in nonresidential buildings. Federal laws were passed to restrict smoking in transportation systems (49 C.F.R. § 1061.1 [1991]), in government buildings (41 C.F.R. § 101-20.105-3 [1991]), and aboard domestic airline flights (14 C.F.R. § 129.29). Federal regulation of private-sector workplaces has yet to take effect. Federal legislation was proposed, but the tobacco industry was able to muster great resistance to it. As of mid-1997, the proposed legislation was not yet finalized.

States and localities have responded to the concern over ETS by regulating smoking in various public areas. In 1997 more than forty states and the District of Columbia had some form of regulation in place. A minority of states have enacted indoor air quality acts, similar to the rules proposed by the Occupational Safety and Health Administration (OSHA). Some local governments have passed laws restricting smoking in places of entertainment, restaurants, and workplaces and on public transportation. Most of the state and local smoking regulations do not ban smoking in the workplace entirely, but limit smoking to designated areas or private offices.

Many private employers have voluntarily restricted smoking in the workplace. A 1985 survey found that more than 33 percent of employers were already regulating smoking in the workplace, and by 1991 that number had grown to 85 percent. By 1997 many private businesses had established policies that made it nearly impossible for employees to work and smoke. For example, some businesses would not allow anyone who had smoked within a certain time period to enter the building. Other businesses began charging smoking employees more for health insurance benefits. Indeed, businesses are motivated to regulate smoking in part because of the higher absenteeism and increased health care costs of smoking employees.

Tobacco Litigation

Tobacco litigation can be divided into three distinct time frames based on the types of claims pursued and the legal theories on which those claims were based. The first wave of tobacco litigation (1954-1973) involved cases based mainly on the theories of deceit, breach of express and implied warranties, and negligence. Cases filed during the second wave of tobacco litigation (1983-1992) were based on the legal theories of failure to warn and strict liability. Neither of the first two waves of litigation proved to be successful for the plaintiffs.

The first wave of litigation was characterized by the tobacco industry's adamant claims that smoking and chewing tobacco products were not harmful to consumers. Plaintiffs during that time did not have the extensive medical studies demonstrating serious health consequences that are available today to support their claims. Thus, plaintiffs had a difficult time establishing the essential element of proximate cause (causal connection to the injury) in their tort cases. By the time of the second wave of tobacco litigation, the connection between smoking and illness had been firmly established, but the tobacco industry was still able to argue with great success that smokers assumed the risks of smoking by freely deciding to smoke. The FCLAA's requirement that a warning label be placed on all cigarette packaging and advertising supported the tobacco companies' defenses of contributory negligence and assumption of the risk.

During the first two waves of litigation, the tobacco companies were also successful in using their size and financial strength to make litigation as difficult as possible for the plaintiffs. The tobacco industry filed and argued every conceivable motion, took countless depositions, and sent out extensive interrogatories. As a result, it was extremely burdensome and expensive for plaintiffs and their attorneys to pursue their cases.

The third wave of tobacco litigation began in the early 1990s and consists of class action suits brought by those injured by tobacco products and medical cost reimbursement suits brought by states and insurance companies. Legal scholars expect the third wave of litigation to produce more favorable results for plaintiffs and to regulate the sale and use of tobacco more effectively than conventional legislative and administrative regulation has been able to do. The strong-arm tactics used by tobacco companies to successfully fend off plaintiffs in the earlier litigation are not likely to work in the third wave because the class of plaintiffs and their respective attorneys have organized and are working together to their mutual benefit. Plaintiffs also now have new evidence obtained from internal tobacco company documents and former tobacco industry researchers that will significantly bolster their cases.

By the mid-1990s, the tobacco industry faced an enormous amount of exposure to liability. It has been estimated that cigarette-related illnesses and losses in productivity cost more than two dollars per pack of cigarettes in 1985 dollars. Further, studies have demonstrated a direct correlation between an increase in the cost of cigarettes and a reduction in consumption, especially by underage smokers. A reduction in smoking also clearly correlates with fewer adverse health effects and lower health care costs. For these reasons, in 1996 the Board of Trustees of the American Medical Association endorsed litigation against the tobacco companies. Legal experts have theorized that the long-term effects of plaintiff victories in the third wave of tobacco litigation could devastate and ultimately destroy the industry, much as plaintiff victories did in the recent asbestos litigation.

The claims in the third wave of tobacco litigation are based on some new legal theories. First, plaintiffs can demonstrate that tobacco companies knew that nicotine is pharmacologically active and highly addictive but hid that knowledge and, in fact, denied it under oath. Second, plaintiffs can show that tobacco companies manipulated nicotine levels in their products in an attempt to foster addiction in their consumers. Common legal theories used in the third wave of litigation include fraud, intentional and negligent misrepresentation, emotional distress, violation of consumer protection statutes, breach of express and implied warranties, strict liability, conspiracy, antitrust, negligent performance of a voluntary undertaking, unjust enrichment or indemnity, civil claims under the Federal Racketeer Influenced and Corrupt Organizations (RICO) Act (18 U.S.C.A. § 1961 et seq. [1970]), and various criminal theories.

The third wave of litigation began with the certification of two class action suits (Broin v. Philip Morris, 641 So. 2d 888 [Fla. App. 3d Dist. 1994], review denied, Philip Morris Inc. v. Broin, 654 So. 2d 919 [Fla. 1995], and Castano v. American Tobacco, 84 F.3d 734 [5th Cir. 1996]). The class members in Broin were nonsmoking flight attendants who claimed that they suffered from various illnesses caused by their exposure to ETS from air travelers' cigarettes. Castano was based on plaintiffs' claims that the tobacco companies intentionally manipulated nicotine levels, even though the companies knew that nicotine was a hazardous and addictive substance. The Castano class consisted of all nicotine-dependent persons or their estates, heirs, family members, or "significant others" in the United States and its territories and possessions, who have bought and smoked cigarettes manufactured by the defendants. Because of the breadth of the class, the U.S. Court of Appeals for the Fifth Circuit ruled that the plaintiffs in Castano should not have been certified as a class; had the court allowed the case to proceed, it would likely have become the largest class action in U.S. history. After the decertification of the Castano class, plaintiffs' lawyers decided to pursue statewide class action suits in state courts around the nation.

Lawsuits since Castano have sought to eliminate the problem of certifying a large class. For example, Engle v. R. J. Reynolds, 672 So. 2d 39 [Ct. App. Fla. 3d Dist. 1996], review denied, 682 So. 2d 1100 (Fla. 1996), involves essentially the same claims as Castano, but the class is much smaller. The class certified in Engle consists of Florida citizens and residents, and their survivors, who have suffered, presently suffer, or have died from diseases and other medical conditions caused by their addiction to cigarettes. The Engle class action has been allowed to proceed. Several class action suits modeled on Engle have since been brought, and still more are anticipated.

The wave of state reimbursement suits was initiated in May 1994, when the state of Mississippi filed an unprecedented lawsuit on behalf of the state's taxpayers against the tobacco industry to recoup the state's share of Medicaid costs incurred as a result of tobacco-related illnesses (Moore v. American Tobacco, No. 94-1429 [Miss. Chan. Ct. 1994]). The state of Mississippi proceeded on legal theories of unjust enrichment and restitution, based on the fact that the state's taxpayers had been directly injured by the actions of the tobacco industry because they were forced to pay Medicaid costs associated with tobacco-related illnesses. By the middle of 1997, thirty-seven states had filed medical cost reimbursement suits based on legal theories similar to those pursued by Mississippi. In addition, some of the other states brought claims never before considered in this wave of litigation.

In 1994, when the state of Minnesota filed a medical cost reimbursement suit, the insurance company Blue Cross-Blue Shield of Minnesota joined as co-plaintiff, seeking reimbursement for its share of tobacco-related health care costs in Minnesota (Minnesota v. Philip Morris, No. 94-8565 [D.Minn. 1994]). When West Virginia filed its medical reimbursement lawsuit, it named as defendants not only tobacco companies, but also the Kimberly-Clarke Corporation, developer of the tobacco reconstitution process that enables tobacco companies to manipulate nicotine levels. In 1995 the state of Florida filed a lawsuit against the tobacco industry under Florida's Medicaid Third-Party Liability Act, effectively preventing tobacco industry defendants from prevailing under defenses of assumption of risk and contributory negligence. Texas filed suit in 1996 and brought claims based in part on the RICO Act and on theories of mail and wire fraud, antitrust violations, and public nuisance. The state of Washington additionally has sued the law firms that have represented the tobacco companies for many years, arguing that they unlawfully helped their clients keep certain documents confidential. Some of the states have asked that in addition to awarding monetary damages, the courts order the tobacco industry to publish all previous research on the link between smoking and health, establish funds for public education campaigns designed to discourage smoking, disclose the amounts of nicotine in their tobacco products, and order the dissolution of the tobacco industry's nonprofit organizations, the Council for Tobacco Research and the Tobacco Institute.

The most recent tobacco litigation has resulted in a historic settlement agreement. On March 15, 1996, the states of West Virginia, Florida, Mississippi, Massachusetts, and Louisiana entered into an agreement with Brooke Group and Liggett Group to settle those companies' portion of the states' medical cost reimbursement actions. This settlement was noteworthy because it represented the end of the tobacco industry's efforts to present a unified front and to refuse to willingly pay out monetary damages.

By March 1997 the Brooke Group/Liggett settlement agreement had been amended to include twenty-two states. In addition, in conjunction with the settlement agreement, Liggett Group, one of the five largest U.S. tobacco companies, publicly admitted that cigarettes and cigarette smoking cause lung cancer, heart disease, and emphysema. Liggett admitted that nicotine is addictive and that the tobacco industry actively and illegally markets to young people under the age of eighteen. As part of the amended settlement, Liggett agreed to cooperate fully with the twenty-two states by waiving attorney-client privilege and turning over privileged documents. Liggett also agreed to substantially comply with the new FDA regulations and to put warning labels on its cigarettes stating "Warning: Smoking Is Addictive." Liggett further promised to pay 25 percent of its pre-tax profits for the next twenty-five years to settle these actions.

Following several successful lawsuits, the Brooke Group/Liggett settlement agreement, and the FDA's promulgation of its rule regulating tobacco, discussion began regarding a possible global legislative settlement of all tobacco litigation. U.S. Senate Majority Leader Trent Lott agreed to broker an agreement that would allow the tobacco industry to avoid FDA regulation and receive immunity from product liability suits for fifteen years. Talks regarding this proposed global settlement began in March 1997.

Preliminary reports indicate that the proposed settlement calls for the tobacco industry to pay billions of dollars in increasing amounts over fifteen years. The money would be administered by an administrator appointed by the president and would be paid out in grants to all fifty states. The plan also calls for the industry to drop the lawsuits it has brought against industry defectors and whistle-blowers in exchange for immunity from virtually all liability suits for the next fifteen years. By late 1997, the global settlement talks had not produced a final agreement but were proceeding. The parties reported that they were hopeful that an agreement would be reached in the near future.

Criminal Charges

In the 1990s federal criminal investigators began to prepare a case against the tobacco companies and their executives and scientists, four trade associations and industry-funded groups, a scientific consulting group, a public relations consulting firm, two companies that serve as suppliers to the tobacco companies, and a company-funded research group. The alleged crimes include federal perjury, mail fraud, wire fraud, false advertising, criminal conspiracy, criminal racketeering, and the deception of the public, federal agencies, and Congress. One criminal investigation is looking at possible perjury on the part of the industry's chief executive officers while testifying before Congress in April 1994 regarding the addictive qualities of nicotine. Another criminal probe is considering whether the industry misled its shareholders by misrepresenting industry knowledge of the physiological effects of tobacco products. Another investigation is focusing on allegations that an indoor air quality testing company accepted money from tobacco companies to distort test results. Still another probe is investigating the industry's Council for Tobacco Research, including the validity of its nonprofit status and whether it hid research results regarding smoking and health from the government. Finally, a probe is investigating allegations that tobacco companies smuggled cigarettes into Canada to avoid paying Canada's high cigarette taxes. The results of these criminal investigations remain to be seen.

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