President Targets Tobacco Industry in Massive Lawsuit

President Clinton, taking both the tobacco industry and its opponents by surprise, announced during his State of the Union address Tuesday that the Justice Department would bring a lawsuit to recover from the cigarette companies the accumulated costs borne by federal taxpayers of treating people with smoking-related diseases.

The lawsuit, which would seek to recover hundreds of billions of dollars from the nation’s five major tobacco companies, would dwarf similar suits brought by 40 states against the industry over the last several years.

“You know, the states have been right about this,” Clinton told Congress. “Taxpayers shouldn’t pay for the cost of lung cancer, emphysema and other smoking-related illnesses--the tobacco companies should.”

The president also proposed raising the federal cigarette tax by 55 cents a pack. The tobacco industry’s potential liability in the federal lawsuit is “unprecedented,” according to a senior administration official.

Major Blow Seen for Tobacco Firms

The states and the tobacco companies settled their suits late last year for about $206 billion. Another four states settled earlier for a total of $40 billion.

Matthew Myers, general counsel for the National Center for Tobacco-Free Kids, welcomed the prospective federal lawsuit, calling it at least as strong as the ones brought by the states.

“If the government loses, it’s a significant loss,” he said. “But if the industry loses, it’s the end of the tobacco companies as we know them.

“Just as the tobacco industry thinks it has dodged a bullet with the settlement with the states, the federal government is bringing out the heavy armor. . . . The president’s announcement puts the industry in greater jeopardy than it has ever been before.”

The tobacco industry derided Clinton’s announcement. Scott Williams, a spokesman for the five major cigarette manufacturers, said he was frustrated that the administration had decided to go ahead with its lawsuit after two years of efforts by the industry to satisfy its critics.

“These are legal companies that sell a legal product and employ hard-working Americans and pay billions in taxes,” Williams said. “This economic terrorism by the politicians in Washington has got to stop.”

The suits brought by the states aimed to recover their costs of caring for people under Medicaid, the joint state-federal health insurance program for the poor.

The federal government’s lawsuit would seek to recover the costs to an array of federal health programs including Medicare, which covers the elderly and disabled, and programs run by the Veterans Affairs Department and the Defense Department. If the government recovered damages, the money would go to shore up the Medicare system, administration officials said.

The White House and Atty. Gen. Janet Reno reached the decision to pursue the lawsuit last month after overcoming opposition by some Justice Department attorneys, who were unsure whether the federal government had legal standing to sue.

“Folks in the department have been looking at the issue at different times in the past and more recently have been reviewing the factual and legal issues that are involved here,” Justice Department spokesman Myron Marlin said.

Government lawyers started researching the possibility of a lawsuit nearly two years ago, but the idea lay fallow last year while Congress debated strict new regulations for the tobacco industry.

That legislation--which would have settled all the state lawsuits, raised cigarette taxes by $1.10 a pack and beefed up federal regulation of the tobacco industry--failed after a massive lobbying and advertising campaign by the cigarette manufacturers.

When the legislation died, the government’s lawyers went back to the drawing board and analyzed anew the risks and benefits of bringing such a suit. Among the options still under consideration is suing under the Medical Care Recovery Act, which gives the government the right to recover the costs of treating people if a third party’s negligence is to blame for their illnesses.

Law Professor Studies Issue

Several outside lawyers--including Richard Scruggs, who represented a number of the states in their tobacco suits, and Mississippi Atty. Gen. Mike Moore--promoted the idea of such a lawsuit.

Moore and Scruggs were the first lawyers to sue cigarette makers to recover the states’ huge costs of treating sick smokers. It was the collective weight of the states’ suits that brought the tobacco industry to the bargaining table in 1997.

Another supporter of such a suit is Harvard constitutional law scholar Laurence H. Tribe, who has looked closely at the legal issues at the request of officials in Washington.

The Justice Department, acting on Clinton’s announcement, is setting up a task force to craft a litigation strategy. The government has not yet set a target date for filing its suit, nor has it determined exactly how much it will seek in damages.