Tobacco Firms Nervously Watch Wrongful-Death Suit
The case was regarded by some courtroom onlookers as mainly a novelty, one of those outlandish legal offerings that only serve to clog an already overburdened court system.
But lawyers from all over the country have sat in on the proceedings as spectators, and even a major New York investment firm sent an observer to watch the opening day of the trial.
And the defense has marshaled enormous resources in the case. At times, there have been seven lawyers in the courtroom, backed by five public relations representatives and a troop of paralegal aides, secretaries and office assistants.
The case involves the family of a Santa Barbara man who smoked for more than 50 years and died of lung cancer and other ailments. The family has brought a wrongful-death suit against R. J. Reynolds Tobacco Co., maker of the cigarettes the man smoked.
The legal firepower brought to the trial, expected to be completed this week, by Reynolds and the attention it has received from others is a measure of its importance to the firm and the rest of America’s $60-billion-a-year tobacco industry. At stake are millions of dollars in damages on behalf of dead or dying smokers and their families, with secondary effects on tobacco stocks and corporate liability law.
The Santa Barbara case is one of 45 cigarette liability cases pending throughout the country, and the first to go to trial. If Reynolds loses, “personal injury lawyers will be attracted to these cases like vampires to blood,” said David Goldman, a tobacco industry analyst for Dean Witter Reynolds Inc.
In fact, personal injury attorneys from around the country sat in on opening statements, taking notes. Financial analysts have kept tabs on the proceedings and one firm, Salomon Bros. Inc., even sent a representative from New York to assess the situation.
“Legal issues are unpredictable,” said Diana Temple, a vice president at Salomon Bros. who dispatched a staffer to Santa Barbara. “And the stock market dislikes unpredictability.”
For the tobacco companies, the Santa Barbara case is just a beginning. To claim victory, they must win not only this case, but every one after it, said Calvert Crary, litigation analyst for Bear Stearns & Co. in New York. As a result, he said, the tobacco companies “are in a much more difficult position than the plaintiffs.”
So far, the tobacco companies, who have never lost a product liability case or paid any damages, in or out of court, have fared well. Last week a federal judge in Knoxville threw out a $55-million liability suit against Reynolds because, he said, the plaintiff failed to show the jury that “the defendant’s product was defective and unreasonably dangerous.”
And here in Santa Barbara, Judge Bruce Dodds has handed a series of setbacks to San Francisco attorney Melvin Belli, who represents the family of John Galbraith, who died three years ago at 69. Belli has been prevented by the judge from mentioning cigarette company advertising and restricted in his use of the U.S. surgeon general’s report on cigarette smoking.
But, legal experts say, the tobacco companies can’t afford to be overconfident. Since the last wave of cigarette liability cases in the 1960s, courts throughout the country have grown steadily more receptive to all kinds of product liability actions. Public attitudes toward smoking have shifted, and there is mounting scientific evidence linking cigarettes to cancer and other ailments.
But, legal experts say, plaintiffs’ attorneys should fare better in other cases and could have a better chance of winning.
Different Situation
“Those who think the tobacco companies can’t lose are in kiddie land . . . ,” Crary said. “The state of product liability today is different than in the past when other cigarette cases lost.”
Manufacturing cigarettes is big business--last year tobacco sales for Reynolds alone totaled about $5 billion--and cigarette companies are able to marshal tremendous resources in each case. During the first week of the Galbraith trial, Reynolds had five lawyers at the defense table and two in the courtroom, and five public relations representatives working in Santa Barbara, along with a staff of legal secretaries, paralegal aides and office assistants.
The tobacco companies will have a great advantage during the first few cases because of superior resources, Crary said. They can travel around the country, take an almost unlimited number of depositions and do greater research. But their advantage eventually will be neutralized, he said, because the plaintiffs’ attorneys will learn more after each case and will begin pooling information.
Other Industries
If the tobacco companies begin losing cases, many other industries could be affected, said John Strauch, an attorney who is coordinating all Reynolds’ product liability cases. And the courts, he predicted, would be swamped with suits against the manufacturers of diet soda, liquor and any other product associated with health problems.
In the past, victims’ families had difficulty winning cases. One of the major problems faced by the plaintiffs was that if cigarette companies showed that the victims were aware of the risks, the courts would not award compensation, said Stanford Law School professor Robert Rabin, an authority on product liability law. But awareness of the risks no longer automatically precludes compensation, Rabin said.
And under the doctrine of “strict liability,” plaintiffs can now collect damages for injuries suffered from a dangerous product even if the manufacturer was not negligent.
Different Concept
Courts now use “comparative fault” to determine damages, Rabin said. In a $1-million suit, if the plaintiffs can show that the smoker was 20% at fault and the tobacco company 80% at fault, then the smoker’s family can collect $800,000. Twenty years ago, the smoker’s family “would have gotten nothing,” Rabin said.
And if a plaintiff can convince a jury that the victim was addicted and couldn’t stop the unhealthy behavior--an argument proffered by Belli--then the victim’s family can recover the entire amount.
The tobacco companies can be expected to lose at least one case, Rabin said. And several losses could precipitate great changes in the tobacco industry.
“It could lead to all kinds of legislation against the tobacco industry,” Rabin said. “There would be more support for banning advertising and the movement to ban smoking in many places would be bolstered. And the price of a pack of cigarettes would be much more expensive than it is now.”
Stocks Reflect Troubles
Tobacco stocks already have suffered as a result of the publicity about the suits.
“They have been miserable performers since all the litigation talk,” Crary said. “And recently the rest of the market has gone bananas, but the tobacco stocks haven’t done much.”
Tobacco stock is a “risky” investment now, agreed UCLA law professor Gary Schwartz, an expert on product liability law who has examined the effect of the suit on the stock. He noted that the stocks could increase sharply if the tobacco firms win the first round of suits this year, but also could plummet in the face of legal setbacks.
“If the tobacco companies decisively win a number of suits right off the bat, a lot of lawyers out there will see that they can’t pay off their home mortgage in one fell swoop,” said Emanuel Goldman, a security analyst for Mongomery Securities in San Francisco. “But they will be out there looking for the pot of gold at the end of the cigarette rainbow if a case or two go the other way.”
