Tobacco’s Move Could Signal Settlement Steps

Top U.S. tobacco companies have hired a pair of powerhouse Washington law firms in what may be a prelude to an attempted global settlement of the industry’s mounting legal and regulatory problems.

Industry officials confirmed Tuesday that they have retained Verner, Liipfert, Bernhard, McPherson & Hand, and Barbour, Griffith & Rogers, for advice on resolving the multibillion-dollar tobacco litigation. The companies hiring the firms--cigarette makers Philip Morris, R.J. Reynolds, Brown & Williamson, Lorillard and smokeless manufacturer U.S. Tobacco--also retained the public relations firm of Bozell, Sawyer, Miller Group.

Verner Liipfert’s lawyers include former Senate Majority Leader George J. Mitchell and Harry McPherson, a former aide to President Lyndon Johnson. Haley Barbour of Barbour Griffith until recently chaired the Republican National Committee. Lance Morgan of Bozell Sawyer on Tuesday declined to say what roles they might play.

The team’s creation, first reported by the National Journal, reflects a more conciliatory stance by the industry, which has been sued by 22 states and also faces nearly two dozen class-action lawsuits and marketing curbs imposed by the Food and Drug Administration.

Tobacco stocks surged Tuesday on settlement optimism and in response to a favorable ruling last Friday in a West Virginia case.

Nonetheless, observers said a settlement is at least months away, and spokesmen for the industry and its foes strongly denied reports that they are already talking.

“There are no negotiations going on between Philip Morris and state attorneys general or plaintiffs’ lawyers regarding the possible comprehensive solution,” Philip Morris said in a statement.

“We remain confident in the strength of our litigation position, but we would be willing to consider and discuss reasonable ideas that are presented to us and that may be in the best interest of our shareholders,” the company said.

The latest rumors are separate from actual talks between cigarette maker Liggett and state attorneys general. Liggett, the smallest U.S. cigarette firm, last year reached settlements with five states and is trying to extend the agreement to others.

By contrast, observers believe a global settlement could not come until later this year--perhaps following a court ruling on the challenge to the new FDA regulations, and after verdicts in the first attorney general suits give both sides a clearer view of the strength of their positions.

“The industry is clearly making steps to have a dialogue, which is something it hadn’t done in the past,” said David Adelman, senior vice president with Dean Witter Reynolds.

While still unlikely, a settlement “is becoming more possible,” but “it’s certainly not going to happen in two months.”

Reflecting the obstacles, hard-liners among the attorneys general, led by Minnesota’s Hubert H. Humphrey III, have been circulating a draft framework for a settlement containing provisions the industry is almost certain to reject.

The document, obtained by The Times, was described by a Humphrey spokesman as “a line in the sand.” Among other things, it would require the industry’s acceptance of FDA regulation and of a ban on indoor smoking similar to that being considered by the U.S. Occupational Safety and Health Administration.

It would also require the companies to disclose all internal documents except those involving genuine trade secrets and to share technologies for making less hazardous cigarettes. Moreover, it would force cigarette makers to eliminate “gag” agreements that silence former employees and to disband tobacco trade associations “because of their role in years of conspiracy.”

According to the document, a settlement must also include repeal of the federal law barring states from imposing their own tobacco warning labels and advertising restrictions.

The document does not say how many billions of dollars would be paid in settlement damages, but states that 10% of the amount would be earmarked for anti-smoking programs.

“I can’t imagine” these terms being acceptable, said Philip Morris lawyer Michael York.

Minnesota would prefer trying its case to settling, but “if Congress is going to interject itself in the middle of these lawsuits . . . we’re going to insist on a principled outcome,” said Humphrey spokesman Joe Loveland.