Tobacco Firms Threaten Assault on Cigarette Bill

The tobacco industry, staggered by the prospect of massive new costs and regulations approved this week by a Senate committee, is threatening to launch a legal counterattack on three broad fronts.

But constitutional scholars, lawmakers and public health advocates said that the challenge is unlikely to seriously erode the sweeping bill, which cleared the Senate Commerce Committee, 19 to 1, on Wednesday.

No one doubts that the industry, which is spending more than half a billion dollars a year to defend itself in lawsuits across the country, can martial a phalanx of highly skilled attorneys on its behalf.

However, Matthew Myers, a lawyer and executive director of the National Center for Tobacco Free Kids, said that the industry counteroffensive could prove to be a “two-edged sword.” He predicted that the full Senate might pile on even more costs--to raise even more money for anti-smoking programs--should the industry’s attack claim some of the bill’s other provisions.

If the Commerce Committee bill becomes law, industry attorney J. Phil Carlton warned Committee Chairman John McCain (R-Ariz.) in a letter this week, the industry would challenge three of its major components: marketing and advertising restrictions; penalties for failure to bring down youth smoking rates; and procedures for disseminating internal industry documents.

“We intend to assert our 1st Amendment, due process and other constitutional rights to overturn it in the courts,” Carlton wrote.

The bill, by raising the price of cigarettes by $1.10 a pack over five years and requiring the tobacco companies to channel the proceeds to Washington, would cost the industry $516 billion over 25 years. By comparison, the industry agreed last year to a $368.5-billion price tag in a settlement of lawsuits filed against the tobacco companies by 40 state attorneys general.

The measure also would subject tobacco to regulation by the Food and Drug Administration and restrict the tobacco companies’ freedom to market and advertise--with the goal of reducing the impact on young people.

In return, the cigarette companies would get considerably less legal relief than was included in last year’s settlement with the states. The bill caps the industry’s annual liability in damage suits at $6.5 billion (compared with $5 billion in the earlier settlement), but it would not ban class-action suits or punitive damages for past conduct, which are two of the protections the cigarette companies wanted most.

Without those protections, Carlton wrote McCain, the industry will not agree to sign consent decrees “required to implement many of the provisions” in the settlement.

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The current McCain bill contains a “number of illegal and punitive provisions,” according to Carlton and Meyer G. Koplow, a New York attorney who was Philip Morris Cos.’ principal negotiator in the talks that led to last year’s settlement. In particular, they argued, the legislation’s advertising restrictions would not stand up to a constitutional challenge as an abridgment of free speech.

Myers, the anti-smoking activist, acknowledged that “some portions” of the bill might not survive court battles. But he scoffed at the notion being peddled by some of the bill’s critics that the courts would discard it in its entirety.

“It’s not all or nothing,” Myers declared.

Several legal experts stressed that Congress could protect major portions of the bill easily with a clause stating that, even if certain provisions were deemed unconstitutional, the bill’s other major provisions--cigarette price hikes, FDA regulatory authority and a government campaign to reduce teen smoking--would survive.

“Severability clauses are Congress’ insurance policy,” said David Vladeck, director of Ralph Nader’s Public Citizen Litigation group, which specializes in constitutional law.

Moreover, Vladeck said, the law could include a clause stating that if the industry succeeds in striking the bill’s advertising restrictions, it will also lose the bill’s best feature: the yearly cap on lawsuit damages. Such a clause is included in a summary of the bill prepared by McCain’s staff.

Some critics, such as Nader and the American Lung Assn., said that there is no reason to give the industry any legal protections. Myers said that, if the final bill includes such protections, they almost certainly would be tied to advertising restrictions.

There are two groups of advertising restrictions in the McCain bill: one set that adopts rules promulgated by the FDA and a second, broader set that is embodied in last year’s settlement.

The key FDA rules require black-and-white, text-only advertising except in adult publications, a ban on outdoor advertising of tobacco products at schools and playgrounds, and a ban on tobacco company sponsorship of athletic events. A North Carolina federal judge voided those rules on technical grounds last year, and the decision is on appeal.

The second set provides for a ban on all Internet advertising and all outdoor advertising, a ban on the use of human images or cartoon characters in advertising, and restrictions on point-of-sale advertising and displays.

Most legal experts think that the second set--particularly the bans on Internet and outdoor advertising--is the most vulnerable part of the Commerce Committee bill.

“Cigarette advertising is accorded no less 1st Amendment protection than any other truthful advertising for a legal product,” Floyd Abrams of New York, a highly respected 1st Amendment lawyer, told the Senate Judiciary Committee in February. “To some, that may be an uncomfortable reality, but reality it is.”

Abrams said the fact that the restrictions set forth in the settlement are intended to prevent children from smoking does not necessarily make them constitutional.

However, Vladeck and Richard Daynard of Northeastern University’s Tobacco Products Liability Project, disagreed. Both stressed that the basis for the restrictions is a substantial body of FDA research concluding that tobacco advertising has a powerful effect on children. They also noted that in recent months federal courts have upheld bans on tobacco billboards near schools in Baltimore and Tacoma, Wash.

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On the second front, both Koplow and Carlton contended that the bill’s “look-back” provisions would be illegal unless voluntarily accepted by the industry. These provide financial penalties of up to $3.5 billion a year on the industry if youth smoking rates do not decline sharply.

Koplow asserted that the “look-back” provisions would violate substantive and procedural due process and also might constitute an unjust “taking” of private property or even a bill of attainder--a law that imposes a criminal penalty without a trial. In particular, he said, the look-back is unfair because the industry could be hit with a large financial penalty even if it had made every effort to reduce youth smoking.

But several legal experts dismissed the contentions that the youth smoking penalties are legally vulnerable.

USC constitutional law professor Erwin Chemerinsky and attorney Diane Duffy of the Congressional Research Service said that the youth smoking penalties are likely to survive any legal challenge. As a performance-based legislative strategy designed to reduce underage tobacco use, the penalties are classic economic legislation of a type that has not been struck down by the Supreme Court in 60 years, Chemerinsky said.

“All Congress has to demonstrate is that it had a rational basis” for enacting the measure, Chemerinsky said. And, in a report to Rep. Henry A. Waxman (D-Los Angeles), Duffy cited numerous precedents for congressionally imposed, performance-based penalties, particularly involving the environment.

Additionally, Chemerinsky said, he knew of no case “where a fine by the government was considered an illegal ‘taking,’ ” in contrast to government restrictions on the use of property, which sometimes have been overturned.

On the third front, experts are divided on the bill’s procedures for releasing tobacco industry documents at a special national depository. Much of the material already has been obtained by the state of Minnesota in its pending case against the cigarette companies.

However, the legislation also calls for the creation of a special panel of three federal judges to settle disputes over making privileged documents public.

This would be the first time that such a procedure had been instituted. Normally, documents are kept confidential or made public by individual judges in the context of particular cases.