Tobacco Firms to Pay $11.3 Billion to Florida

The nation’s cigarette companies on Monday agreed to pay Florida $11.3 billion over 25 years to settle the state’s massive suit against the industry--one of the largest court-approved settlements in U.S. history.

The industry also agreed to several public health concessions that Florida Gov. Lawton Chiles insisted be part of any deal to resolve the suit, which was about to go to trial. The settlement is compensation for money Florida spent treating sick smokers and punitive damages for the industry’s allegedly fraudulent conduct.

The companies pledged to remove all their billboards near schools and playgrounds within 45 days and all billboards in the state within five months. The industry also must remove cigarette-vending machines from any place accessible to children and remove tobacco advertising in sports arenas and on public buses and trains.

Moreover, the companies agreed, in writing, to assist Florida in enacting new laws designed to keep children from smoking.

The Florida settlement came in the fourth week of jury selection in the case, and less than a week after the chief executives of tobacco giants Philip Morris and R.J. Reynolds made key concessions about the possible hazards of their products.

The deal was announced just seven weeks after Mississippi settled its suit against the industry for $3.3 billion. Both state agreements would be superseded if Congress enacts a $368.5-billion national settlement the industry reached with 39 state attorneys general in June.

But with the nationwide agreement under attack in Congress, the separate settlements with Florida and Mississippi ensure that both states will receive hoards of cash and other benefits, even if the 39-state agreement unravels in Washington.

The Florida deal is similar to the nationwide agreement, but not as sweeping. Most important, the settlement doesn’t address overall regulation of the industry because the state has no legal authority to do that.

Public health advocates like Linda Crawford of the American Cancer Society and tobacco analysts such as Martin Feldman of Smith Barney said they think the Florida settlement enhanced the prospects that Congress and the White House ultimately would approve a national deal.

The industry, meanwhile, avoided the massive negative publicity generated by a trial that would have opened up 40 years of damaging internal documents to a jury in a case that was set to be televised live while Congress and the White House were considering the national deal.

Philip Morris, R.J. Reynolds, Brown & Williamson, Lorillard and United States Tobacco Co. are to pay Florida the first $750 million by Sept. 15, with $200 million of that sum specifically earmarked for a two-year pilot program to reduce smoking by minors.

“The people have won on the three important battlegrounds from which we waged this war: protecting Florida’s children, making tobacco pay for the damage it has cost our taxpayers, and forcing cigarette makers to finally tell the truth,” Chiles said in West Palm Beach after a judge approved the deal.

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“Florida’s victory has broken tobacco’s chokehold on the health of our people and the wallets of our taxpayers,” said Florida Atty. Gen. Robert A. Butterworth.

Meanwhile, tobacco forces suffered another big setback in Philadelphia when a federal judge recognized Pennsylvania’s 2 million smokers as a valid class of litigants and said they could present claims against the industry for the costs of monitoring the smokers for disease--a program that could cost the industry $2.5 billion if the plaintiffs prevail in a trial scheduled to start Oct. 14.

Florida’s case was considered one of the biggest threats against the industry because the state had enacted a special statute that made it easier for the state to win a suit against tobacco. The law took away from the industry what has been its strongest defense in suits brought by individual smokers--the argument that smokers made an individual choice to use cigarettes and assumed whatever health risks were associated with smoking.

The rationale for the statute was that the state had incurred expenses treating sick smokers and that it would have been inappropriate for the industry to be able to use such a defense against a government entity, which had never smoked a cigarette.

Analyst Feldman said that statements in pretrial depositions last week by leading cigarette industry executives were a sign that the industry would settle in Florida and reflected the executives’ hopes that a more conciliatory tone would help secure passage of the national settlement, which protects the industry from certain future lawsuits.

On Thursday, Philip Morris Chairman Geoffrey Bible said, under questioning from plaintiffs’ attorney Ronald L. Motley, that cigarettes “might have killed” 100,000 Americans--the first such acknowledgment by an executive with the nation’s largest cigarette maker. A day later, Steven F. Goldstone, RJR’s chairman and a former smoker, acknowledged to Motley, “I have always believed that smoking plays a part in causing lung cancer.”

Some anti-smoking advocates said that Florida’s settlement showed that the industry is on the run and could be forced to cough up billions more dollars and make other concessions without gaining some of the benefits that it would realize from the national deal--in particular a bar on any class-action suits against the industry and a prohibition on punitive damages in any future suits lodged by individuals against the cigarette companies.

“The Florida deal shows that the states can get billions of dollars in damages, disclosure of tobacco company secrets, and industry reforms like advertising and billboard restrictions without the proposed national settlement that compromises public health,” said Minnesota Atty. Gen. Hubert H. Humphrey III, whose suit against the industry is scheduled to go to trial in mid-January.

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Critics of the proposed national settlement maintain that the deal would make it more difficult for the federal Food and Drug Administration to regulate the industry and specifically to reduce the nicotine content of cigarettes. In addition, the critics, including former Surgeon General C. Everett Koop and former FDA Commissioner David A. Kessler, assert that the provisions penalizing the industry if youth smoking is not sharply reduced within five years are woefully inadequate.

President Clinton has made it clear that he finds the restrictions on the FDA unacceptable. Administration officials also have said that the youth-smoking penalties have to be stiffened if the deal is to pass muster at the White House. Some Clinton aides have said the total settlement pot will have to be enhanced--perhaps by as much as $50 billion.

A formal White House review of the deal is continuing, and an administration task force is expected to formally report to Clinton by mid-September. Congressional hearings on the proposal, which began in July, are scheduled to resume on Sept. 3 in Washington.

Most analysts think that the deal will not be enacted before year’s end. Mississippi Atty. Gen. Mike Moore, who was the lead negotiator for the 39 states that settled with the tobacco industry in June, expressed concern Monday that if the settlement is not enacted this year, it could fall by the wayside as Washington gets bogged down in election-year politicking in 1998.

Moore said by phone that during meetings this summer, the industry and the states have “made good progress” on revising settlement language dealing with the FDA’s jurisdiction over the industry. He also said discussions have been held on the penalties if youth smoking is not reduced, but that no accord has been reached. Moore pleaded for swift action by Clinton.

“We need the president of the United States to step in and do these last couple of pieces,” Moore said. “If he wants stronger language regarding the FDA, he can do it by his involvement. If he wants higher penalties, he can pull it off. If we don’t get presidential involvement by the first or second week of September, it’s highly unlikely we’ll get the settlement done this year.”

In recent weeks, tobacco representatives have said they are adamantly opposed to any increase in the youth penalties provision, which would require the industry to pay up to $2 billion annually if smoking by minors is not reduced by 30% within five years and by 60% within a decade.

On Monday, a statement was issued on behalf of the five companies that settled with Florida stressing that the Florida settlement cannot affect “the comprehensive array of public health provisions contained in the proposed national settlement,” including the regulation and sale of tobacco products. . . . While today’s settlement is important, we remain committed to the passage of the comprehensive settlement we agreed to on June 20, 1997.”

Despite the settlement reached in Florida, the state will continue its efforts to obtain 300 additional industry documents it believes deal with the industry targeting youth, said W.C. Gentry, one of Florida’s attorneys. Earlier, several judges had ruled that Florida was entitled to other secret industry documents after concluding the industry had used attorneys to suppress information about the health hazards of smoking. All these documents are potential ammunition against the tobacco companies in other lawsuits.

The industry still faces a bevy of other litigation. At the head of the list is Texas’ $8 billion fraud and medical expenditure recovery suit, which is set to start Sept. 29. Among the other large cases is the Pennsylvania class action.

Philadelphia attorney Stephen A. Sheller, one of the lead lawyers in that case, said Monday’s decision certifying it as a class-action lawsuit was “a major public health victory.” If the plaintiffs win, he said, the industry would have to pay for testing of all the state’s smokers to detect whether they have current or latent diseases.

“This will be the litmus test of whether the cigarette companies really intend to do something about public health,” Sheller said, expressing the hope that the industry would agree to start a monitoring program without going through a major trial. “We’ll know if the leopard has changed its spots by what they do here,” Sheller said.