Nearing Big Tobacco's twilight?
The forces arrayed against the industry threaten bankruptcy. That may lead to major changes.
Litigation against tobacco companies has reached the point where it could eventually force fundamental restructuring of one of the oldest and most profitable industries in America.
Taken together, recent judgments against tobacco firms indicate that their potential legal opponents are more numerous than previously thought - and that those opponents have a better shot at victory than they did only a few years ago.
For tobacco companies, this raises the specter of bankruptcy via liability costs. It may put them under increasing pressure to seek congressional regulation to ensure future financial viability.
If nothing else, some antitobacco activists say they finally see progress toward their own vision of 22nd-century tobacco: A stripped-down industry that focuses on serving existing customers, while making no overt effort to win new ones.
"My guess is that in the future tobacco firms will be run by different executives largely for the financial benefit of their generations of victims," says Richard Daynard, a law professor at Northeastern University in Boston and head of the Tobacco Products Liability Project.
Tobacco's new legal peril has developed quickly. From the beginning of the modern era of tobacco litigation in 1954 until 1996, the industry was never forced to pay anything to an individual litigant. As recently as two years ago, the industry's mammoth settlement with state attorneys general held out the promise of protection against many prospective lawsuits.
What caused the change? In a word, paper. Millions of pages of internal industry documents unearthed by state lawsuits have provided juries an unprecedented glimpse into the mind of Big Tobacco.
In the past, juries have tended to hold smokers responsible for their own smoking. That is especially true for litigants who began smoking after the 1960s, when the federal government forced the industry to slap labels on cigarettes, warning of tobacco's dangers.
But the internal documents have reversed this tendency and caused jurors to increasingly consider the industry's role in luring smokers into addiction.
"When [jurors] see the way tobacco companies behave, it all changes," says Professor Daynard.
Attitude as well as actions have hurt the firms in this regard. Consider an R.J. Reynolds Tobacco Co. memo boasting about making legal cases prohibitively expensive for plaintiffs: "The way we won these cases, to paraphrase Gen. Patton, is not by spending all of Reynolds' money, but by making the other [person] spend all of his," says the memo.
Lately it is the other person that has been winning. Last week, a San Francisco Superior Court jury awarded a Californian $20 million in punitive damages from tobacco firms. It was the third straight West Coast defeat for tobacco. The plaintiff, Leslie Whiteley, took up smoking long after warning labels became standard practice.
This week, a jury in Miami begins deliberations in the first antitobacco class-action lawsuit to ever reach trial. The jury has already held that the tobacco industry engaged in deceptive practices. Since a class-action involves tens of thousands of litigants, punitive damages in the Florida case could total tens of billions of dollars - possibly pushing some tobacco companies into bankruptcy.
The tobacco industry still has some hope in these cases, of course. They could be overturned on appeal, restoring the legal status quo in respect to the industry. State legislators in Florida are considering legislation that would have the effect of greatly delaying tobacco's punitive-damage payout.
But the outcome of these particular lawsuits is no longer the point, say legal experts. Plaintiff lawyers now sense that the once-invulnerable tobacco industry can be beaten. Once that happens, they circle like sharks. More such cases inevitably follow.
"It could be the death of a million cuts," says Stephen Gillers, a tobacco-litigation expert at New York University.
The future shape of the industry is thus an open question, says Professor Gillers. He hazards three possible scenarios. In one, tobacco firms could go to Congress and ask for legislative protection, in return for agreeing to some regulation of their product. Second, they could simply hike prices and accept legal losses as a cost of doing business. Or third, they could launch an aggressive antismoking campaign on their own, in an effort to change their legal situation and persuade juries they are not acting in a predatory manner.
One way or another, cigarettes will continue to be made and sold in the United States. The industry is too large to fade away, and there are too many existing customers to service. Not even the toughest antismoking group wants 43 million US smokers to have to quit, cold turkey.
The focus for many antismoking groups is future generations. And even if they are successful in forcing the industry to in essence de-market itself, young people could still pick up pro-smoking messages through the Internet or foreign cultures.
"There are a lot of ways to be exposed to smoking. That may be where the battle is finally fought," says Gillers.
(c) Copyright 2000. The Christian Science Publishing Society