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New Wave Of Tobacco Litigation Threatens State Settlements

Jul 14, 2003 | AP Two Minnesota cases are part of a new wave of tobacco lawsuits that endanger the billions of dollars in settlement money from the industry that state governments including Minnesota have come to rely on.

Unlike personal injury cases in which sick smokers sue tobacco companies, these new cases explore whether the tobacco companies mislead the public by advertising light cigarettes as less harmful than other cigarettes.

Both cases contend that the tobacco companies Philip Morris in one case, R.J. Reynolds in the other breached Minnesota consumer protection laws when they marketed Marlboro Lights and Camel Lights as having lower tar and nicotine than other brands.

"They are inducing the purchase of a product based on fraud," said Gale Pearson, an attorney who is handling both cases.

The new litigation has tobacco companies scrambling to push bills through legislatures to limit the bonds companies must post to appeal a court verdict. Nearly 30 states have revised their laws out of fear that bankrutpcy would let the cigarette makers off the hook for the billions of dollars they owe under various settlements.

In the first class action of this type to go to trial, an Illinois jury in March returned a $10.1 billion verdict against Philip Morris. The verdict is being appealed.

In Minnesota, a hearing is scheduled for Nov. 3 to determine whether the case against Philip Morris, filed in 2001, can proceed as a class action.

Philip Morris has asked the court to dismiss the lawsuit, saying that it is barred by the statute of limitations and that there is no evidence of injury to the potential class members.

Pearson said her clients were duped into believing that light cigarettes were less harmful than others.

"They're upset that they have been lied to and they feel they are owed something based on the deception," Pearson said.

Tobacco companies introduced light cigarettes to keep smokers with health concerns from quitting, claims Doug Blanke, director of the Tobacco Law Center at William Mitchell College of Law, and other industry critics.

Philip Morris is the target of about 17 "lights" cases pending in 14 states.

William Ohlemeyer, vice president and associate general counsel for Philip Morris, predicted that the company will prevail, if not at the trial level, then on appeal. He said the Illinois verdict is an anomaly.

"Thirty-five courts have held 45 times that you cannot fairly or legally try tobacco cases as class actions," Ohlemeyer said.

An appeals court in Florida recently threw out a $145 billion award against Philip Morris and other companies, saying the case should never have been a class action.

In Illinois, the verdict against Philip Morris prompted talk of a possible bankruptcy filing by the company because state law called for a $12 billion appeal bond. The trial judge reduced the bond to about $7 billion after being lobbied by attorneys general concerned that their states could lose tobacco settlement money.

In Minnesota, the tobacco companies failed to persuade the Legislature to impose a limit on appeal bonds. A Senate bill, which would have capped the amount at $100 million, made it out of the Finance Committee but was never put to a floor vote.

The sponsor, Don Betzold, DFL-Fridley, said he feared that if Philip Morris or another tobacco company went bankrupt as the result of a bond requirement, the state would lose out on the payments from its 1998 settlement with four tobacco companies. The Legislature this year used $1 billion of tobacco money to plug its budget deficit.

"The last thing any one of us from a financial standpoint wants to do is see the tobacco companies file for bankruptcy," Betzold said, since it would allow them to "not have to make payments to the state under the settlement agreement."

Under its 1998 settlement, Minnesota received $6.1 billion, with $1.3 billion coming in each of the first five years to be followed by annual payments of about $204 million.

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