U.S. to File Suit Against Tobacco Firms

The federal government will file a huge civil lawsuit against the tobacco industry as early as today seeking billions of dollars in damages for treating smoking-related illnesses, sources close to the Justice Department said Tuesday.

In terms of damages sought, the suit would be the largest ever brought by the department, according to legal experts. It would aim to recover from cigarette manufacturers the long-term cost to the federal government of treating sick smokers covered by government health care programs.

Justice Department lawyers have been working intensively on the lawsuit since January, when President Clinton announced in his State of the Union address that the administration had made the decision to sue cigarette manufacturers.

A Justice Department spokeswoman refused to confirm whether the suit would be filed today.

The tobacco industry has been under intense legal pressure since 1994 when state attorneys general began to file multibillion-dollar claims against the industry to recoup the cost of caring for people with smoking-related diseases through the federal-state Medicaid health insurance program, which pays for the health care of the poor and disabled. Those suits were settled last year for $246 billion--$206 billion in one massive settlement by 46 states--which will be paid by smokers through higher cigarette prices.

The federal suit would pose “the most serious financial threat the tobacco industry has faced to date,” said Matthew Myers, general counsel for the National Campaign For Tobacco Free Kids, a Washington-based nonprofit smoking prevention group. “In one case, the tobacco industry has more at risk than in all of the cases brought by the states.”

Philip Morris spokesman Mike York, an attorney, said: “From a strictly legal standpoint, the best thing you can objectively say about this lawsuit is that it is utterly political.

“Future historians will judge this as a classic case of the Clinton administration bullying good professional people in the Justice Department to do something that they don’t think has a valid basis in fact or law,” York said.

Mary Aronson, a Washington-based legal and financial analyst said that “the financial implications could be phenomenal.”

Noting that the federal government potentially has claims under an array of government health care programs, including Medicare, which covers about 39 million Americans, a veterans health insurance program and Defense Department health care plans, Aronson said that the claim “has the potential to dwarf” the big Medicaid suits filed by the states. The filing is likely to “significantly weaken the tobacco stocks,” she said.

The tobacco industry, however, is expected to mount a formidable defense. Legal experts, even advocates of the government lawsuit, said that the industry would be expected to argue that the government has “unclean hands.” They pointed out that the government has aided the tobacco industry through price support programs, devised a health warning system that was meant to inform consumers of the risk of smoking and profited handsomely from cigarette smoking through federal excise taxes.

‘Special Problems for the Government’

“There are special problems for the government . . . such that they’ve been subsidizing the industry, regulating it, they’ve done tobacco research,” said John C. Coffee Jr., a law professor at Columbia University. “It’s hard for the government to say that they knew nothing about the addictiveness of smoking. There are probably memos showing the government knew something about it,” added Coffee, an expert in mass tort litigation who worked on the Massachusetts lawsuit against the tobacco industry, which was part of the national settlement.

The action represents a near-reversal of the Justice Department’s previous reluctance to bring such a lawsuit.

The legal complexities of the tobacco case, the massive document discovery involved and the Justice Department’s institutionally conservative approach to bringing lawsuits once appeared to have made department lawyers leery of taking on such a risky project.

Indeed, as recently as 1997, Atty. Gen. Janet Reno voiced skepticism about the legal standing of the government to bring such a suit at a Senate hearing after five Democratic senators sent her a letter urging her to attempt to recoup the cost to the government of treating tobacco-related illnesses.

However, it was not until the failed effort on Capitol Hill last year to enact national tobacco legislation that the department, under heavy pressure from the White House, took another hard look at the viability of filing a lawsuit.

That was about the same time that a long-running criminal investigation of the tobacco industry by the department appeared to be losing steam. Observers once had thought that major cigarette manufacturers would be charged with lying to the government about the health risks of smoking.

The expected federal civil lawsuit probably poses a far greater threat to the cigarette manufacturers than previous lawsuits, not only because of its financial size but because the government likely would seek as part of any settlement far tighter regulation of the industry.

The legal grounds under which the government would bring a lawsuit have both strengths and weaknesses.

One statute, the Medical Care Recovery Act, allows the government to recoup the cost of treating an injured person from the entity that caused the injury.

“The language of the Medical Care Recovery Act fits the tobacco situation like a glove,” said David Vladeck, who heads Public Citizen Litigation Group and has written extensively on the viability of a federal suit against the tobacco industry.

But the law has been used only to recoup the cost of treating a single injured person, said Vladeck. In its suit against the tobacco industry, however, the government will be trying to aggregate the claims of millions of people treated for tobacco-related diseases at government expense. The industry would be likely to argue that the government must litigate each claim individually--an impossible task. It would be up to federal courts to decide whether the claims could be tried in one massive lawsuit.

‘A Host of Political Reasons’

Another charge that the government is likely to make is that the tobacco industry violated the Racketeer Influenced Corrupt Organizations Act. The law, originally passed to attack organized crime, sometimes has been used to accuse business of engaging in protracted fraud schemes.

Cigarette manufacturers could argue that the government did not suffer any direct injury as a result of the industry’s actions.

“The Clinton administration may well indeed have a host of political reasons for taking this action,” said Mark Smith, spokesman for Louisville, Ky.-based Brown & Williamson Tobacco Corp., the nation’s third-largest cigarette manufacturer.

“Fortunately for us, the government has no legal basis upon which to sue,” Smith added. “Taxpayers should be asking what this legal witch hunt will cost the government--the same government that only a few short years ago admitted that it had no legal basis to bring forward such a case.”

Advocates of the lawsuit, who have pressed the government for years to sue the cigarette manufacturers, said that they expect the industry to disparage the validity of the case.

Myers said: “The tobacco industry will claim this case has no merit. The tobacco industry claimed that the state cases were utterly political and had no merit until they paid $246 billion to settle them.”

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Rubin reported from Washington and Weinstein and Levin from Los Angeles.

* SMOKERS END CHALLENGE

A California group is dropping its opposition to the landmark tobacco settlement. A3