Nicaragua Files Suit Against U.S. Cigarette Firms

The U.S. tobacco industry was slammed by a widening foreign legal assault Thursday as the Republic of Nicaragua filed a large damage suit and Brazil threatened such action to recover costs for treating smoking-related illnesses.

Nicaragua’s suit follows ones filed in U.S. courts in recent months by Guatemala and Panama. The suits are patterned after those filed throughout the U.S. by state attorneys general that led to a massive settlement in November.

In another significant move, Brazilian officials said Thursday that they are planning to file a similar suit. Because Brazil, with a population of 164 million, is a vastly larger country than the other Latin nations that sued, its case potentially could yield much greater damages. In addition, because Brazil is a large tobacco producer, the suit would take on added symbolism, akin to Virginia, Kentucky or North Carolina suing the cigarette companies--something that has never happened.

Nicaragua’s case comes at a time when U.S. cigarette companies are attempting to increase their market share abroad as they anticipate declining sales in the United States due to price hikes stemming from the recent $206-billion legal settlement with the states, adverse publicity precipitated by those suits and counter-advertising programs that will be funded by those settlements.

The suits by foreign nations represent a potentially large problem for the companies just as they have put behind them the largest threat they have faced until now--the state suits--according to Richard Daynard, director of the Tobacco Products Liability Project in Boston, a nonprofit group that encourages litigation against the tobacco industry.

“We’re just beginning to get a picture of the full extent of their possible liability,” said Daynard. He noted that the industry is also facing suits in Britain, Israel and British Columbia. A judge in the Marshall Islands ruled earlier this week that a case filed against the U.S. tobacco companies there could go forward.

Although he expressed considerable skepticism about the prospects of suits filed by foreign countries, leading Wall Street tobacco analyst Gary Black said it is clear that the industry will be fighting legal battles for some time to come.

“The bottom line is the litigation is not going away,” Black said.

Timothy J. Lindon, Philip Morris’ senior assistant general counsel, denounced the Nicaragua suit as “a groundless action that is a copycat” of cases filed by state attorneys general in the U.S.

Indeed, the nature of the Nicaraguan case and the others filed so far is similar to those lodged by numerous states. Nicaragua, a nation of 4.3 million people, alleges that U.S. cigarette companies conspired for more than four decades to hide the health hazards and addictiveness of their products.

Similarly, the industry’s denunciation of the suits by foreign countries parallels the criticism tobacco officials leveled when states began to sue them in 1994. But eventually those cases snowballed and led to massive settlements in the last two years, after the industry had gone 40 years without paying a dime in damages in litigation.

The suit, announced in Miami by Nicaragua’s attorney general, Julio Centeno Gomez, also asserts that his nation has been forced to incur substantial expense for decades to provide public health care and related benefits to its residents for tobacco-related illnesses.

“Nicotine consumption in Nicaragua is like a permanent Hurricane Mitch plague on the society of our country,” Centeno said.

In 45 years, said George M. Fleming, the Houston attorney whose firm filed the case and the one for Guatemala, “incalculable damage has been done to this country that could have been prevented if the defendants had not conspired to control competition and conceal important independent research that identified the true dangers associated with tobacco use--chronic disease and death--for which Nicaragua has had to pay the price.”

Nicaragua’s suit does not ask for a specified amount of damages. Guatemala is seeking about $1 billion.

The suit also alleges that the defendants violated provisions of the Racketeering Influenced and Corrupt Organizations Act and the Sherman antitrust act. The suit was filed in Puerto Rico

Philip Morris and other U.S. cigarette companies already have filed a motion to dismiss the Guatemala suit. The motion is pending in federal court in Washington. The companies contend that the U.S. is not the proper forum for the suit.

The defendants also include Liggett Group, Brooke Group, British American Tobacco/BAT Industries, British American Tobacco (Investments) Ltd./British American Tobacco Co., Brown & Williamson Tobacco Corp., the Tobacco Institute and the Council for Tobacco Research-USA.