Liggett Agrees to Pay 5 States for Tobacco Illnesses
In a second precedent-setting settlement of tobacco litigation, the Liggett Group agreed Friday to pay a huge sum to resolve a lawsuit involving tobacco-related illnesses among residents of five states.
Under the terms, Liggett agrees to pay potentially as much as $2 billion over the next 25 years and pledges to make cigarette advertising reforms that include abandoning the use of cartoon characters that appeal to teenagers. The settlement was announced by the attorneys general of Mississippi, Florida, Massachusetts, West Virginia and Louisiana.
Those states had filed lawsuits seeking compensation from the tobacco industry for costs incurred by taxpayers in treating smoking-related diseases contracted by indigent citizens. These Medicaid-related costs have ranged from $60 million a year in West Virginia to $400 million a year in Florida.
Liggett’s settlement with the states follows by two days its agreement to resolve a large class-action lawsuit in New Orleans that alleged cigarette makers manipulate nicotine levels to keep smokers addicted. In both cases, there was no admission of guilt or liability by Liggett, a unit of Brooke Group Ltd. and the nation’s fifth-largest cigarette maker.
Each case involves a commitment by Liggett to begin complying with certain proposed Food and Drug Administration regulations related to smoking by teenagers. The company will abandon the use of cartoon characters like RJR Nabisco Holdings Corp.’s popular Joe Camel in tobacco advertising. It also will limit the use of promotional materials and the distribution of free samples where minors are present.
Mississippi Atty. Gen. Mike Moore, who led months-long negotiations that resulted in the settlement, said that the most important goal was “protection of the public health of this country, primarily the children.”
*
While Liggett’s break puts pressure on the other defendants to settle, Moore said officials will continue to pursue legal action against RJR, Philip Morris Cos., Loews Corp. and B.A.T. Industries. Philip Morris, the industry leader, responded in a formal statement, saying: “We remain confident in the strength of our litigation position. We intend to fight and to prevail.”
Moore invited other states to file their own suits and join in the settlement, enabling them to receive compensation payments from Liggett. Maryland and Texas are expected to do so shortly.
But a spokesman at the California attorney general’s office said that state officials “have not considered” filing such a suit. Some legal analysts said it might be difficult for California to file a case because of a 1987 state law that exempts manufacturers of cigarettes and alcoholic beverages from liability for injuries or deaths caused by their products.
Last year, Assemblyman Byron D. Sher (D-Palo Alto), who opposed the 1987 law, introduced a bill providing that manufacturers and sellers of tobacco products shall not be immune from liability for claims based on “intentional fraud and misrepresentation or conspiracy.” In support of the bill, Sher quoted figures from the California Medical Assn. stating that 42,000 Californians die annually from diseases attributable to tobacco use, costing more than $6 billion in medical bills and lost income due to disability. Heavily opposed by the tobacco industry and other business groups, the bill died in committee.
Under Friday’s settlement, Liggett will pay $135 million into a fund to compensate the five states for past and current medical costs of persons suffering from smoking-related illnesses such as heart disease.
The company will cover future tobacco-related costs of the states by paying $30 million annually over the next 25 years or 2.5% of its pretax profits, whichever is greater. It will establish another fund for additional states filing lawsuits that will amount to at least $50 million a year, Moore said.
The agreement also provides for larger payments if Liggett affiliates with RJR--or any other tobacco company except Philip Morris--within three years, as is being sought by Bennett LeBow, chief executive officer of Liggett’s parent, Brooke Group.
LeBow, in a statement, said that “this comprehensive settlement is good news for . . . shareholders and it is also in the long-term financial interests of the entire tobacco industry.”
LeBow stressed that an escape clause permits Liggett to terminate the deal if any of the remaining defendants in the lawsuits filed by the states win their cases.
Minnesota, which also has sued the tobacco companies to recover costs incurred to provide care for injured smokers, said the deal did not offer enough money and that it would continue to pursue the case.
*
“Anything less than requiring the tobacco industry to pay a fair share of the $470 million in annual costs Minnesotans spend on smoking-related disease . . . and assisting us in digging out the decades of fraud, conspiracy and cover-up committed by the tobacco industry is unacceptable,” said Hubert H. Humphrey III, the state attorney general. “We don’t believe the state of Minnesota should give up significant legal rights simply for a settlement that serves only the interests of Mr. LeBow in his attempts to take over RJR Nabisco,” added Michael Ciresi, Minnesota’s chief outside counsel in the case.
Scott Ballin of the Coalition on Smoking OR Health, a Washington-based advocacy group, said Liggett would not have entered into the historic settlement unless it recognized the solid factual basis on which claims against the industry are grounded. In addition, the firm has agreed to furnish any information it has on “fraudulent or illegal conduct” on the part of other defendants, officials said.
Jackson reported from Washington and Weinstein from Los Angeles.
* STRIKING BACK
RJR attacks Liggett Group. D2
