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Losing our way

| February 5, 2013

Contrary to what some headlines might suggest, anti-tobacco litigation is not benefiting plaintiffs.

 

By George Gay

Writing in March last year about litigation, I speculated that, at the then rate of progress, it would take 421 years to hear all of the so-called Engle progeny cases in the United States. The approximately 8,000 Engle progeny cases were those being tried in the wake of a 2006 Supreme Court decision that decertified a class-action lawsuit initially filed by Howard Engle but that allowed former class members to file individual lawsuits. My speculation was based on the fact that, as far as I could determine, it had taken three years to hear 57 cases, a rate of 19 a year.

As I wrote at the time, I had no idea whether special circumstances applied to the early cases, ensuring they would involve lengthy procedures, while subsequent cases would be heard in a much more timely fashion. In fact, my gut feeling tended to the opposite view—that the cases that seemed more clear-cut from the plaintiffs’ point of view would have been the ones to have been put forward first. But I was quite prepared for somebody to write to me saying I was wrong and that the Engle progeny cases would be heard within a short space of time because some specific legal logjam had been broken.

Photo: © lichtmeister - Fotolia.com

Only 7,829 cases to go.

I heard nothing. But, just before Christmas, I saw on the U.S. Tobacco Merchants Association’s website part of a story that had appeared in the Jacksonville Business Journal and that seemed to some extent to support what I had said. The story quoted Chuck Farah, a partner at the Jacksonville, Florida-based law firm Farah & Farah, which is representing smokers in Engle progeny suits, as saying that some of the cases may never be tried because of the sheer volume of the lawsuits. Farah said that of the 2,000-plus cases his firm was involved in, less than 10 had received a verdict so far. He was surprised, he added, at how long the judicial process took for individual cases.

The story quoted another local attorney, W.C. Gentry, of the Law Office of W.C. Gentry, who was among the team of attorneys that represented the State of Florida in its lawsuit against the tobacco industry that eventually led to the 1997 settlement. Gentry said the Engle progeny cases were not expected to stop, but that there was no guarantee that the smokers or their estates would win.

Righting wrongs?

One of the questions that arise from all of this is what is the point of such litigation? Surely, litigation should be about righting wrongs in a spirit of balance and fairness. Specifically in these tobacco cases, it should be about compensating people who have been found to have suffered as a result of using a product they could reasonably have expected not to have caused that suffering, or protecting the manufacturer of that product from unreasonable claims against it.

But such aims have to be qualified by time, I think, or there is a danger that they become meaningless. Either the company should be quickly absolved or the compensation should be delivered into the hands of the person who suffered directly—the person with the disease—while that person is still able to use the money to relieve suffering in whatever way he or she feels is best. There are good reasons for compensating, too, the family members who had to watch their loved one suffer with the disease, especially if that person was the sole breadwinner. But there can be no good reason to compensate the great-great-great-great-great-great-great-great-great-great-great-great-great-great-granddaughter of the person in question, as would be the case, according to my reckoning, 420 years down the line, always assuming that the company/companies being sued had beaten by many times the company longevity record.

Haven’t we lost our way here? Is there not a sense in which some tobacco product liability cases have become a series of interesting legal skirmishes in which the interests of the people who may or may not have been harmed have been pushed into the background? Is it not the case that litigation is failing a lot of those who should be benefiting from it?

Decomplicating matters

I understand that some of the issues are difficult because they are based on opinions rather than facts. And though some cases have been settled, there seems to be a continuing argument about what can and cannot be advanced as evidence. But to some extent these issues are as difficult as we allow them to be.

Would a new, realistic arbitration process be better suited to dealing with some of these cases? What if the major U.S. manufacturers, without admitting liability, paid into an account a sum of money that could be divided between some of the claimants automatically, without the need for huge administration costs? Come to think of it; perhaps there wouldn’t be any need for new money. Most of the funds currently paid as part of the 1998 settlement could be appropriated since they aren’t used to offset tobacco-caused suffering as one might reasonably expect them to be.

The claimants who would be eligible would be those who were suffering from diseases, such as lung cancer, in which smoking could reasonably be assumed to have been the cause or at least a causal factor.

The way I see it is that the amount of money each claimant received would be modest—very modest in relation to the claims currently made when cases finally get to court. But there would be advantages for the claimants who took part because the process would be quick and stress-free, and the amount that each would receive would be calculated on the basis of a simple, transparent formula. For instance, all of those claimants who took up smoking before or during 1966, the year in which the U.S. government first required cautionary information on cigarette packs, would get the same amount. Those who took up smoking after 1966 would receive an amount that could be read off a simple straight-line graph whose x-axis mapped the years following 1966 and whose y-axis showed the amounts payable; the amounts reducing as the years passed. There would be no adjustments for the level of suffering, the size of the person’s family or any other matters.

One of the main objections to such an idea would be that it would mark a return to a sort of class action, and, while it wouldn’t be a long, drawn-out court action but an agreement, it is true that it would bundle together and treat people in groups—as if their cases were the same, when clearly that couldn’t be the case. The seekers after absolute truths would object that some of those people would be getting more than they deserved and some would be getting less than they deserved. And they would be correct. But isn’t the alternative worse? At the moment, it seems, a very few of the people involved are receiving lottery-level awards, while others are going to their graves not having received anything and not knowing whether their loved ones are going to receive anything.

Another objection would be that such a system would not allow the claimants to pursue punitive awards against companies who had been proved to have misled consumers or indulged in other nefarious activities. Again this would be true, but it would not eliminate the pursuit of punitive awards, because some of the claimants would be ineligible to be part of the agreement—perhaps because of the type of disease they were suffering—or would decline to be part of it exactly because they wanted to have their day in court.

The point of punitive

In any case; I would question too what is the use of punitive damages? I know that many people in the U.S. are wedded to the idea of punitive damages and that, on the surface, they seem to be a good way of society’s underlining what it believes is unacceptable behavior by a company. But does it really work? The law might, in some ways, treat companies as if they were people, but let me assure you they are not. If you hit a big company—not only a tobacco company—with a colossal fine, it doesn’t go home that night and lie in bed unable to sleep because it’s wondering how it’s going to pay the school fees.

And the idea that if the fine and repercussions on the bottom line are big enough then the shareholders will vote out the top executives can be greeted only with the question: So what? Those executives are not going to have any sleepless nights either, because they will have already made enough money to live on for the rest of their lives and because, almost certainly, they will turn up at another company. Most executives are too big to fail.

Of course, it might be the case that the punitive damages are such that a company has to cut back on its R&D and marketing spends, and so loses market share to a rival, a situation that has a negative effect on the share price and on the shareholders of the company that was “punished.” But if you look at that from the other direction, unless the rival company were blameless of the activities for which the prosecuted company was punished—unlikely, I would imagine, given that they were both operating within the same industry—the result of the punitive damages would have been actually to have rewarded one company for its ill deeds, albeit that those deeds had not been exposed.

Finally, let’s look at the case where the punitive damages are so huge that the company is forced into administration. Who are likely to be the biggest losers? Almost certainly it will be the claimants who were backed up waiting their turn in court.

We have surely lost our way. What is written above concerns only one group of tobacco cases. There are countless others, at least one other involving thousands of people, at least one involving hundreds, and at least one that goes back 15 years or so.

Tip of the iceberg

There are cases in which governments are suing tobacco companies within their own jurisdictions, cases in which governments are suing companies in other jurisdictions, and cases in which a government in one jurisdiction is taking action against a government in another jurisdiction, perhaps supported by tobacco money. There is a continuing case in Canada that has crossed the 100-day mark and where multiple governments are suing multiple tobacco manufacturers.

Tobacco companies have sued governments over vending machine bans, display bans and the introduction of ugly packaging. Businesses have sued governments over the introduction of public-places smoking bans, and individuals have sued over the imposition of outdoor smoking bans. At least one group of lawyers is suing another group over contested fees originating from a tobacco case, and no doubt some individuals are suing their lawyers over the outcome of tobacco cases.

To my mind, the most worrying trend here is where companies are suing governments, especially where the companies are large and the countries are small. I’m not saying that such cases are always without merit. But it is concerning in a democracy to have companies—and I’m not confining myself to tobacco companies here—that are using the courts to overturn the wishes of an elected government, no matter how wrong-headed those wishes might appear. It could be argued—and I would certainly do so—that rich individuals and companies already have far too much influence on government policy through their support of political parties.

But my most immediate concern is that, as far as I can tell, the level of effort going into these cases bears no relationship to the amount of good that is being done in respect of compensating people for their ill health or forwarding the cause of tobacco harm reduction. Imagine what good could be achieved if all the money currently being spent on tobacco liability court cases were used directly to improve health outcomes. And then add in all the money being spent on court cases affecting other industries. It’s easy to be drawn into the idea that it is only tobacco that winds up in court, but that is far from the truth.

 

 

Judge spells out “corrective statements”

| November 27, 2012

A U.S. federal court has spelled out the “corrective statements” District Court Judge Gladys Kessler ordered tobacco companies to make in 2006 when she found them guilty of violating civil racketeering laws and engaging in fraud to deceive the American people about the health risks of smoking.

The order requires tobacco companies to make corrective statements about the adverse health effects of smoking and secondhand smoke, the addictiveness of nicotine, the lack of health benefits from smoking “light” and “low-tar” cigarettes, and the companies’ manipulation of cigarette design and composition to ensure optimum nicotine delivery.

The corrective statements must be made through newspaper and television advertising, on the companies’ web sites and on cigarette packaging.

Cigarette manufacturers prevail in graphic warnings suit

| August 24, 2012

The U.S. Court of Appeals for the D.C. Circuit today held unconstitutional a regulation by the U.S. Food and Drug Administration (FDA) that would have forced cigarette makers to place nine graphic health warnings on all cigarette packaging and advertising.

Agreeing with arguments made by four tobacco manufacturers, the Court held that the proposed warnings violated the First Amendment because the FDA did not provide evidence that the graphic warnings would “‘directly advance” its interest in reducing the number of Americans who smoke.”

More than informative

“We are pleased that the Court of Appeals agreed with Reynolds that consumers can and should be fully informed about the risks of tobacco use in a manner consistent with the U.S. Constitution,” said Martin L. Holton III, executive vice president and general counsel for R.J. Reynolds, which was one of the plaintiffs.

“Reynolds is committed to providing tobacco consumers with accurate information about the various health risks associated with smoking.”

The Court of Appeals noted that the government can require companies to make “purely factual and uncontroversial” disclosures about the risks of their products in order to prevent consumer deception, but stated that the graphic warnings crossed into unconstitutional territory:

“These inflammatory images and the provocatively-named hotline cannot rationally be viewed as pure attempts to convey information to consumers. They are unabashed attempts to evoke emotion (and perhaps embarrassment) and browbeat consumers into quitting.”

The Court relied on data included in FDA’s regulation that showed the graphic warnings would have little to no effect in reducing tobacco use. In particular, FDA’s analysis of the regulation estimated that the warnings would likely cause no statistically significant change in U.S. smoking rates.