Smoking Guns and the Law: Litigation and the Humbling of Big Tobacco

An Interview with Richard Daynard

Richard Daynard has played a key role in facilitating the successful litigation against the tobacco industry. Associate Dean at Northeastern University School of Law in Boston, he has been involved in a number of organizations devoted to the study of tobacco and public health policy and implementation. He is president of the Tobacco Control Resource Center and chair of the Tobacco Products Liability Project. He is also chair of the Public Health Advocacy Institute’s Law and Obesity Project.

Multinational Monitor: If it is general knowledge that smoking is bad for you, why should tobacco companies be held legally responsible for what happens to smokers?

Richard Daynard: The question is: What was the general knowledge at what point in history; and what did the tobacco companies do to affect the information environment?

That is a sanitized way of saying that these guys deliberately lied, manipulated the media and engaged in a very deliberate disinformation campaign to cloud the question of the extent to which dangers were really proven.

The industry’s efforts were particularly effective with kids and smokers. It was effective with kids because they were told all kinds of things are dangerous, and the government and parents were saying all kinds of bad things about drugs and favorite teenage activities. Tobacco companies, in pooh-poohing cigarette health warnings, said this is all a lot of government gobbledygook.

For smokers who are addicted, it is very hard to make the effort to quit, and very hard to quit. Any rationalization to keep them from making the effort or succeeding was likely to be effective. I think there is no doubt that the tobacco companies’ disinformation kept a lot of smokers smoking long past the time when they would otherwise have quit.

Another thing they did was develop filtered, low-tar and low-nicotine cigarettes for the purpose of reassuring smokers that they had a relatively safe alternative to quitting. In fact, these cigarettes are no safer for the smoker than the old, unfiltered cigarettes. The companies actually had information in their files that showed they knew that, as smoked, these cigarettes were not going to be any safer. But they put them out there, thinking, correctly, that smokers would be reassured.

MM: When did litigation against the industry begin?

Daynard: The litigation against the industry began in 1954, over 50 years ago. The first cases failed because the courts thought a couple of things. Yes, you can get lung cancer, they believed, but it is a rare disease, sort of like getting an allergic reaction to aspirin or something unanticipatable like that. The other thing they thought, as the evidence of smoking’s hazards was starting to come out in the 1950s, was that that was the first time the tobacco companies knew it. In fact, the internal documents indicate that the companies knew well before that, into the mid-1940s.

The cases continued in three waves. The first wave petered out by the early 1960s. Each plaintiff was operating individually, where the tobacco companies had a joint defense. There was sort of a cottage industry, and the plaintiffs were being blown out of the water.

As part of the second wave, we had the Tobacco Products Liability Project, so the plaintiffs were a little more coordinated. But the industry still succeeded with their aggressive defense strategy. There was an infamous memo from an RJR attorney saying, “The way we win these cases, to paraphrase General Patton, is not by spending all of Reynolds’ money, but making the other son of a bitch spend all of his.” They would basically outspend, outlawyer the plaintiffs’ lawyers. There was also hostility in the courts and among juries, who thought that anybody who smoked deserved to get lung cancer — of course, this was the lung cancer the tobacco companies insisted you couldn’t get. But despite that logical inconsistency, judges and jurors were basically hostile to these cases, and they didn’t go very well.

The third wave began in 1994, or a little before that. They were propelled by internal documents from the industry that had come out. Some had actually come out in a famous third wave case, Cipollone, that was almost successful. Many more came out through whistleblowers and through document discovery, particularly done by the Minnesota attorney general, and their law firm, Robins, Kaplan, Miller and Ciresi in Minneapolis. They did for the first time really thoroughgoing document research.

The documents were absolutely incriminating. They were what-did-they-know-and-when-did-they-know-it kind of documents. And the answer is, they knew very early that their products were killing people, that they were highly addictive, that their customers were being fooled. These documents really made a tremendous difference in judges’ and juries’ attitudes. Not only did juries award punitive damages, but judges regularly upheld the punitive damages. They looked at the evidence, too, and they said, this stuff is really outrageous — if there are ever going to be punitive damages, these guys deserve them.

MM: Why did plaintiffs and their lawyers keep trying these suits after 40 years of failure?

Daynard:: Not that many people kept trying. One of the things we did as the Tobacco Products Liability Project was to persuade people that these were good cases, that they were winnable cases, that the failures in the past could be remedied. There were a few lawyers that were persuaded.

One of the things that happened was the release of the documents, particularly by a whistleblower named Merrill Williams, who snuck documents out in his shirt from the Brown & Williamson tobacco company. When these documents came out in the spring of 1994, a lot of lawyers said, “Gee, I can win a case with these documents.” You began to have a lot of lawyers coming in who never would have touched the cases six months earlier.

MM: What is the relationship between the private litigation and the cases filed by the U.S. states, and what were the state cases about?

Daynard:: The state cases were seeking recovery of the states’ Medicaid costs, by and large. The states are obliged by law to pay for the illnesses of people on Medicaid. The theory of the cases was that this is money the tobacco companies should be paying, because it was largely due to their misbehavior that the smokers were continuing to smoke and getting these diseases.

That evidence is really the same in all the cases, government and private. When judges and juries look at it, they find the evidence very damning.

MM: What has been the recent record of the private plaintiffs in these cases?

Daynard:: Since 1994, the plaintiffs have won just about a third of the cases, which is pretty good. Plaintiffs in product liability cases tend to lose most of the cases that actually get tried.

The tobacco companies are very reluctant to settle, because they know that if they settle one case, there are hundreds of thousands more cases: they kill over 400,000 people each year just in the United States. The companies don’t want to open the floodgates; they see what has happened with the asbestos industry.

Plaintiffs are now beginning to get paid. The tobacco companies appeal the cases all the way to the U.S. Supreme Court, so it takes a while. But we are beginning to see the appellate stream run out, and people actually get paid.

MM: What kind of sums have been involved?

Daynard:: We have juries awarding sums of $3 billion and $28 billion in punitive damages, though courts have cut these verdicts down. We recently had a $50 million punitive damage award upheld by the California Supreme Court. We have had the U.S. Supreme Court give the green light to a $10 million punitive damage award.

I think it is pretty clear that a 10-to-1 punitive damage to compensatory damage ratio will be upheld by the U.S. Supreme Court and I think that competent trial lawyers will be able to get those kinds of damages fairly regularly.

MM: What was achieved with the state cases?

Daynard:: With the state cases, there was a settlement. Four of the states settled individually, and then the rest of the states settled in November 1998 in something called the Master Settlement Agreement. That produced an ongoing payment of about $10 billion a year, which resulted in a substantial increase in the price of cigarettes that has produced a dramatic continuing drop in cigarette consumption. The settlement also got rid of ads on billboards and taxicab tops and contained other kinds of public health benefits. Notably, the settlement set up something called the American Legacy Foundation, which ran a very effective advertising campaign, called the Truth campaign, before the money ran out.

There were substantial gains from the state cases, not as much as much as I thought could have been have achieved if the attorneys general had not been so eager to settle, but nonetheless very substantial.

MM: What exactly is the federal government now trying to do?

Daynard:: The U.S. Department of Justice has brought a case under the Racketeer Influenced and Corrupt Organization (RICO) law, relying on evidence that is largely similar to that used in the other cases.

The evidence from the documents shows that a conspiracy began December 15, 1953 in the Plaza Hotel in New York City. The tobacco executives got together and were given a choice by their PR firm. They were told, “You can either let it all hang out, or you can do a disinformation campaign.” They all said, “We’ll do a disinformation campaign.” And they really stuck to it for the next 50 years.

Basically the federal government is saying these guys run a racket, like organized crime. RICO is a law designed for organized crime and the shoe perfectly fits the tobacco industry, which has sold an addictive drug, lied to people and made huge profits. The law basically says that if you have a predicate crime — and fraud, wire fraud, mail fraud are predicate crimes — and you have a pattern of doing these crimes, then the government can come in and get a number of remedies.

One possible remedy that is up on appeal is whether the government can get disgorgement of ill-gotten gains.

But they can also get a wide range of other remedies designed to make sure the defendants, the major tobacco companies, are not able to continue perpetrating these frauds in the future.

MM: What kind of measures might that involve?

Daynard:: That’s really up for grabs, but there are all kinds of possible injunctions. They can be required to stop advertising in various media; they can be required to put larger warnings on their packages; they could be required to use plain packaging so as not to take advantage of the associations that people have between, say, Marlboro cowboys and freedom and the labels on the Marlboro pack. One of the things the government has suggested is they might end up appointing a monitor, who could decide that if a company is continuing to misbehave then its executives must be changed. The government has very broad powers in cases like this.

MM: Apart from the cash for the victims and reimbursement for the government that has been attained, what have been the public health benefits of the litigation?

Daynard:: The litigation has highlighted the misbehavior of the industry, and made it very public.

It has increased the price of cigarettes, both because of the money paid under the Master Settlement Agreement and because the very high defense costs are put into the price of cigarettes. This has produced substantial drops in consumption, especially among kids.

It has resulted in the companies becoming persona non grata in political circles; politicians in general now do not like to be identified with the tobacco industry, which reduces their political clout. It has kept the companies on the political defensive in general. It has made it much more difficult for them to pass as ordinary businessmen, and as an ordinary form of wholesome American business.

MM: What has been the role of the tobacco companies in pushing for changes in the civil justice system — what is called “tort reform” — to enable them to escape from these liabilities?

Daynard:: The tobacco companies probably were the initiators of “tort reform” 15 or 20 years ago. I think there is some evidence that the first discussions of “tort reform” were by lobbyists working for tobacco companies. They obviously keep a low profile. No Congressman, or state senator or representative, unless they are in a tobacco-growing state, wants to say they are introducing a bill on behalf of the tobacco companies. They tend to work through front groups. They tend to get other, more sympathetic potential defendants to be the media representatives. They just cut the checks — and call the shots.

MM: The most significant U.S. Congressional activity in this area is the recently adopted class action reform. How would that have affected tobacco litigation, and how will it affect litigation going forward?

Daynard:: It makes class actions extremely difficult to bring, moving them from state to federal courts. State courts varied — some state courts are friendly and others are unfriendly. But plaintiffs get a much fairer shake in state courts than they do in federal courts, which historically have been almost universally hostile to consumer class actions of any sort, at least in recent years. Class actions will now go to courts that are not only very heavily Republican, but appointed by right-wing Republicans with political and ideological tests for appointments.

The Engle case in Florida, for example, is a class action case on behalf of Florida smokers who got tobacco-caused diseases. It went to trial in state court. After two years of trial, the jury decided the case in a number of phases. In the first phase, they found the defendants were liable on a wide range of legal theories. In the second phase, they found three individual plaintiffs were entitled to recover an average of $4 million each. In the third phase, they found the companies should pay total punitive damages of about $144 billion. This is now on appeal in the Florida courts. We are waiting for the Florida Supreme Court to decide the case. But if there had been the class action reform bill, this would have all gone to federal court and the baby would probably have been drowned right at the beginning.

Another kind of class actions now being brought widely is against Philip Morris and RJ Reynolds, based on the light cigarette fraud that I discussed. These are not for people who were injured, but who were ripped off — basically, they bought these cigarettes thinking they were safer cigarettes. Had they not been deceived, they might have bought some other cigarettes or tried to quit. Those cases also would have gone to federal court and would have been killed.

As federal courts see more consumer class action cases, and realize they are the only forum for class actions, it is not 100 percent clear that they will continue to be as hostile as they have in the past. I hold out a very small degree of hope that at least some federal courts will take seriously their responsibilities to be a federal forum applying the particular state law, and will cease to be as hostile. But that is a small hope.

MM: How would the caps on punitive damages affect the tobacco litigation?

Daynard:: The caps really vary from state to state.

The concern for a while was the U.S. Supreme Court decision in the State Farm case, which the Wall Street tobacco analysts, and some state and federal courts, believed would limit the punitive-damage-to-compensatory-damages ratios to four-to-one, or in some cases to one-to-one. But the Supreme Court subsequently gave the go-ahead to a 10-to-one case, which I think is going to reduce that concern.

We are not going to see the huge ratios that I think would be appropriate in these cases; but there are enough cases to be brought that if you can get a five-to-one or 10-to-one ratio, it makes it economically sensible for plaintiffs’ attorneys to get involved, and that is the critical thing.

The reason for contingency fees [with plaintiffs’ lawyers paid only if the plaintiff prevails] is to recruit champions for plaintiffs. The fact is that the great majority of people who would be plaintiffs are not able to find lawyers. But hopefully enough of them will be able to find lawyers to at least create a substantial deterrent to continued industry misbehavior.

MM: Are there are any “tort reform” proposals that would impact the tobacco litigation?

Daynard:: There are a whole bunch of them, A lot of them are very technical — non-lawyers, and even many lawyers, don’t know where the body is buried. One type of proposal, for example, provides that you can’t file a lawsuit based on a widely known danger from a commonly used product. The industry uses these things basically as total door-closing statutes to keep the cases from proceeding, regardless of the possible demonstration of fraudulent behavior. MM: To what extent have plaintiffs from other countries, or other countries themselves, been able to sue in U.S. courts?

Daynard:: Basically, they can’t sue in U.S. courts. They tried, and they failed. U.S. courts are quite hostile to permitting either other governments or plaintiffs from other countries to sue; occasionally, they are permitted, but never yet in a tobacco case.

There is one case still pending in New York brought by the European Commission and some European countries against R.J. Reynolds for conducting a smuggling and money-laundering scheme.

Philip Morris actually settled a case for $1 billion over 10 years, a money-laundering case that actually hadn’t even been filed yet in U.S. courts, by the European Union.

But aside from that case, I don’t know of any case that has proven viable.

On the other hand, people are beginning to sue in the courts in their own countries. There have been successful cases in Brazil and Argentina. There are cases pending in Japan, Korea and Sri Lanka. A number of cases have been brought in Israel, including by health insurers seeking reimbursement. There are a variety of class action cases pending in Canada, including a medical care reimbursement case brought by the province of British Columbia; other provinces are ready to file similar lawsuits. These cases after a rocky start look like they are going to have pretty clear sailing from here on.

There are cases brought in Africa and Asia, different kinds of cases, not product liability cases, but what are called public interest cases. In these cases, plaintiffs say they are representing the public interest and want to see that laws, such as banning cigarette advertising, be enforced. (This kind of case is something that is very difficult to do in the United States, probably impossible now in just about every jurisdiction.)

In another such case in India, plaintiffs said that under the Indian Constitution, there is a right to health, and therefore the government needs to pass legislation banning smoking in public places. The Indian Parliament proceeded to do just that, following a decision by the Indian Supreme Court.

MM: Why has the United States been such a leader on tobacco product liability cases?

Daynard:: The United States pioneered product liability law. Beginning in the 1950s and 1960s, there were a number of legal scholars and judges who really developed the law. It reached a high point in the 1970s, and began to recede in the 1980s and 1990s, as conservative legal scholars — often paid by industry — began writing articles about how terrible this was. Then you began to see the tide being pushed backwards, and the “tort reform” tide rising.

Other countries — most of which do not have contingency fees, do not have as developed tort law doctrines — have been behind. But I think they are beginning to catch up.