Legions of Lawyers Lead Charge in Tobacco War

The U.S. tobacco industry is facing a string of history-making trials this year in what is emerging as the biggest and costliest showdown in the annals of American civil litigation.

With multibillion-dollar courtroom battles set in Mississippi, Florida, Texas and Minnesota, the future of the besieged industry increasingly depends on lawyers--armies of them.

More than 500 law firms and thousands of individual attorneys have already been mobilized for the escalating fight, a Times survey of tobacco cases shows, with massive new lawsuits being filed on virtually a weekly basis.

The Times study identified 348 firms that have been enlisted to defend the tobacco companies and their trade associations in cases throughout the country. Another 182 law firms are massed on the other side.

“This litigation is in a class by itself,” said Deborah Hensler, a Rand Corp. expert in mass tort cases, referring to the scale of the battle and the economic stakes for the $50-billion tobacco industry.

Cigarette companies generally will not discuss litigation expenses. But Gary Black, one of Wall Street’s best-known tobacco analysts, has estimated the industry’s legal bills at $600 million a year--a staggering amount that appears credible based on the limited public information available.

BAT Industries, parent company of cigarette maker Brown & Williamson Tobacco Corp., said recently that B&W; alone spent $100 million in 1996 defending tobacco cases, up from about $60 million in 1995.

Philip Morris Inc., the world’s biggest cigarette maker, disclosed last year in a court document that the industry has spent $100 million in a single case in Minnesota just locating, analyzing and copying more than 20 million pages of documents sought by the plaintiffs. Philip Morris’ share of that expense has been $60 million, according to company attorney Peter Sipkins.

In another case in Florida, document production has been so extensive that tobacco lawyers recently rented out every high-speed copier in Tallahassee, the state capital, according to one government official.

Experts say the litigation will only get more expensive, as costly pretrial depositions and trials are conducted. The most expensive of these defense lawyers make more than $500 an hour.

The river of money flowing on the plaintiffs’ side is also substantial, though it is certainly smaller by comparison. An alliance of 62 law firms, known as the Castano group, has raised more than $17 million to fund class-action litigation around the country, said Russ Herman, a New Orleans attorney and member of the group’s executive committee. Herman said eight of the Castano firms have already invested from $500,000 to $1 million apiece.

Though cigarette companies have successfully fended off lawsuits since the 1950s, the legal pressures have grown exponentially since 1994, when new theories of liability and explosive revelations in once-secret industry documents triggered a flood of new cases--many on a scale the industry had never encountered.

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The new wave of suits features an unprecedented alliance of state attorneys general and well-heeled plaintiffs’ lawyers. None of the new mega-cases has yet been tried, but two are scheduled for trial in June and others are set for August, September and January.

Looming in the background is speculation about a global settlement of the litigation--which would require action by Congress and payments by the industry of as much as $250 billion during the next 25 years. However, most experts consider such a settlement unlikely until at least a couple of the biggest cases are concluded.

Among the key law firms opposing the tobacco industry are Ness, Motley, Loadholt, Richardson & Poole, a Charleston, S.C., firm that made a fortune suing asbestos manufacturers. Another is Robins, Kaplan, Miller & Ciresi, a Minneapolis firm renowned for its work on the Dalkon Shield product-liability case and the Bhopal chemical spill in India.

Others range from San Francisco’s Lieff, Cabraser, Heimann & Bernstein, which has won numerous multimillion-dollar class-action verdicts, to the pint-sized (seven lawyers) Barrett Law Offices in Lexington, Miss., which has been battling the cigarette companies for more than a decade.

A prominent part of the plaintiffs’ strategy has been an aggressive media campaign--consisting mainly of selective leaks of industry documents--aimed at blackening the industry’s image.

Embarrassing documents figured heavily in a landmark plaintiffs victory in August when a Florida jury awarded $750,000 to a lung cancer victim--the industry’s first loss if it stands up on appeal. The jury in the case was the first--but probably not the last--to see explosive documents suggesting that the industry knew 35 years ago that its products were addictive.

In its own effort at spin control, Philip Morris has made Washington, D.C., attorney Michael M. York, winner of a 1986 Pulitzer Prize for investigative reporting, a prominent member of its legal team.

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A former Washington Post reporter who began practicing law in 1994, the 43-year-old York dives into legal trouble spots to offer Philip Morris’ views on the litigation.

The cigarette companies are also represented by many of the biggest names in U.S. corporate law, including firms in every state or city where they have been sued. Among them are three heavyweight firms in Southern California: Latham & Watkins; Gibson, Dunn & Crutcher; and Munger, Tolles & Olson.

The industry has also hired some of the legal world’s marquee names, including Kenneth W. Starr, the special counsel investigating the Whitewater controversy, and Dan K. Webb, the former U.S. attorney in Chicago who prosecuted the Operation Greylord judicial corruption case. Later, in private practice, Webb defended former Rep. Dan Rostenkowski (D-Ill.) against criminal charges.

The plaintiffs have a few high-profile specialists of their own, including Harvard University law professor Laurence H. Tribe, a distinguished constitutional scholar who is providing pro bono assistance to several state attorneys general. Former Maine Atty. Gen. Jim Tierney has worked as behind-the-scenes advisor to the attorneys general, using a Web site at his Maine farm as a communications link.

And Chicago attorney Cliff Douglas, a self-styled “freelance guerrilla,” is assisting plaintiffs in several cases while also serving as special counsel to Rep. Martin T. Meehan (D-Mass.), one of tobacco’s leading critics on Capitol Hill. In 1995, Douglas wrote a memo outlining potential criminal violations by the industry that helped persuade the Justice Department to launch a criminal investigation.

The battles between the opposing sides have grown increasingly hostile, and some industry lawyers have even had to hire their own attorneys. Brendan V. Sullivan Jr., who represented Oliver L. North during the Iran-Contra hearings, now represents Shook, Hardy & Bacon, a longtime defender of the tobacco industry that has been sued along with its clients in several cases.

In one bitter exchange of letters, Sullivan threatened to seek sanctions against San Diego anti-tobacco lawyer Patrick J. Coughlin if Coughlin named Shook, Hardy as a defendant in one lawsuit. Coughlin, a former assistant U.S. attorney, replied that as a prosecutor he had always known Sullivan’s law firm, Williams & Connolly, to vigorously defend “even the worst criminals no matter the charge or the evidence.”

Not surprisingly, legal and financial experts differ widely on the financial threat the litigation poses to the industry. With literally tens of millions of potential claimants, “the number of people who could qualify as victims is vastly greater than” with litigation for asbestos-related illness, said Geoffrey Hazard, a University of Pennsylvania law professor and director of the American Law Institute.

“I think these companies are staring at an economic catastrophe,” Hazard said. “I can see how it can be postponed,” but not “how it can be avoided.”

Martin Feldman, a tobacco analyst at the Smith Barney Inc. investment firm, said the companies’ pockets are so deep that their huge “litigation costs have virtually no effect on the earnings potential” of the firms, whose profits for last year exceeded $12 billion. Philip Morris alone has a market value of roughly $100 billion.

Gary Black, a Sanford Bernstein & Co. analyst who estimated the tobacco industry’s annual legal costs at $600 million, says the industry is wealthy enough to withstand big damage awards. In a recent report, Black wrote:

“The doomsday crowd continues to miss one fundamental point about tobacco: Unlike other products involved in mass torts, cigarettes will continue to be sold even if hundreds of juries declare them to be dangerous. . . . Higher prices--not bankruptcy--would flow from sharp increase in legal expense.”

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As they have through four decades of fending off attacks, cigarette makers have closely coordinated their legal defense strategy. But a simmering conflict between the biggest companies and Liggett Group, the smallest of the five major U.S. cigarette firms, has threatened to boil over.

Liggett last year settled five of the state attorney general lawsuits and is seeking to expand the settlement to states that have filed suits since. But reports that Liggett may cough up documents considered privileged by its rivals have brought thinly veiled threats of legal action by the larger firms. The situation is particularly ironic because Philip Morris--fearful that courtroom losses by financially weaker Liggett will trigger more suits against all the firms--has been paying part of Liggett’s legal fees.

At least 300 lawsuits are pending against tobacco companies, about twice as many as there were a year ago.

Separately, nearly two dozen class-action suits have been filed by private lawyers. Most of these cases seek damages on a state-by-state basis for all allegedly addicted smokers in each state. Others were filed on behalf of all state residents who allegedly got sick or died from smoking, or who allegedly were harmed by secondhand smoke.

But 23 lawsuits (and the number keeps growing) have been filed by states seeking to recoup Medicaid funds allegedly spent treating indigent victims of smoking-related diseases.

Local governments in California and New York--including Los Angeles County, San Francisco and New York City--have also sued to recover health care costs. The massive suits are based on the premise that tobacco companies ought to pay the costs engendered by their products the same way an oil company would be held responsible for the costs of cleaning up a big spill.

Southern Illinois University law professor Donald Garner first advanced the concept of suing the industry over public health costs in a legal journal article 20 years ago.

For their part, industry lawyers say the suits highlight the hypocrisy of the states, which have been happy to collect billions of dollars in tobacco taxes. Even if they lose some of the Medicaid cases, the companies say, they will be entitled to substantial offsets because people purportedly killed by smoking in middle age did not draw social welfare benefits as senior citizens.

Like other attorneys general involved in the Medicaid claims, Mississippi’s Mike Moore has deputized a squad of private lawyers to do the heavy lifting. Among Moore’s top guns is his University of Mississippi Law School pal Richard “Dickie” Scruggs of Pascagoula--a trim former Navy fighter pilot who joined the smoking wars after making millions of dollars suing asbestos firms.

Scruggs said his 10-lawyer group already has sunk $3.5 million into the tobacco litigation--part of it shuttling Moore and himself to meetings and depositions on his law firm’s six-passenger Lear Jet.

Quipped Scruggs, one of at least half a dozen anti-tobacco lawyers with their own planes: “That airplane’s had the wings flown off of it on the litigation.”

On Thursday, the Mississippi Supreme Court dashed the tobacco industry’s last remaining hope that the Medicaid case there would not go to trial. The court dismissed challenges to the case by the industry and by Gov. Kirk Fordice, who had contended that Moore did not have the authority to file such a lawsuit.

The upcoming tobacco trials are expected to last months and attract platoons of Wall Street analysts and lawyers. There almost certainly will be a run on lodging, office space and rental cars in the small Gulf Coast city of Pascagoula, where Mississippi’s case is scheduled for trial June 2.

When one local real estate agent recently canvassed residents of affluent waterfront neighborhoods to see who wanted to rent their home to Philip Morris lawyer Stephen D. Susman during the trial, one of the letters went to Scruggs. Though Scruggs declined the offer, the price was right for one of his neighbors. Thus, Susman and Scruggs will soon be neighbors on Beach Boulevard--at least for a while.

In Mississippi and other states, attorneys general have negotiated fee arrangements that generally call for the private firms to collect from 10% to 25% of any recovery.

The South Carolina firm of Ness, Motley dominates the Medicaid litigation, having been retained by 15 states and Los Angeles County. Twenty of the firm’s 68 lawyers are working on tobacco litigation, said lead partner Ronald L. Motley, a renowned trial lawyer.

This year “is Armageddon for the cigarette companies,” Motley said, “because we going to whip their ass.”

Responded York: “I’m sure I can predict victory as confidently and aggressively as Mr. Motley, but not quite as elegantly.”

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Smoking Wars

Tobacco companies face more than 300 lawsuits. With several mega cases soon scheduled for trial, 1997 should be a pivotal year. Here is a snapshot of the most important cases:

* Medicaid claims: So far, 23 states have sued the industry to recover tax funds they allege were spent treating indigent victims of smoking-related illnesses. Health-cost recovery claims have also been filed by several local governments in California and New York, including Los Angeles County and New York City.

Key showdowns: Mississippi’s Medicaid case is scheduled for trial June 2. The Florida, Texas and Minnesota cases are scheduled for August, September and January, respectively.

* Class actions: Nearly two dozen class-action suits have been filed by private lawyers. Most were filed on a statewide basis and seek damages for all allegedly addicted smokers within that state. Others have been filed on behalf of people claiming injuries from secondhand smoke.

Key showdown: The Broin case, seeking damages for all U.S. flight attendants believed to have been harmed by secondhand smoke, is scheduled for trial in Florida on June 2.

* Individual claims: More than 200 lawsuits have been filed by individual smokers or their survivors. Most of the cases are in Florida, where a Jacksonville jury in August returned a precedent-setting $750,000 verdict against Brown & Williamson Tobacco Corp. in a lung cancer case.

Key showdown: Raulerson vs. R.J. Reynolds Tobacco Co. is scheduled for April 7 in Jacksonville. The case is being brought by the lawyers who won the $750,000 verdict last summer.

* Other battles: The industry and its foes are locked in a number of other high-stakes battles over tobacco regulation. In a pair of federal cases in North Carolina, the tobacco companies are trying to block new Food and Drug Administration regulations that limit youth-oriented tobacco marketing and are seeking to invalidate the Environmental Protection Agency’s declaration that secondhand smoke is a carcinogen. In Massachusetts, the industry is fighting to overturn a new state law that requires tobacco firms to disclose all additives and ingredients used in each of their brands.