High Court Refuses to Hear Unions’ Smoking Claims

The U.S. Supreme Court handed the nation’s cigarette companies a significant--if unsurprising--victory Monday, refusing to consider lower court rulings that union health funds in New York, Oregon and Pennsylvania cannot sue the tobacco industry to recover money expended treating smoking-related illnesses.

The high court, without comment, upheld decisions last year by federal appeals courts in New York, San Francisco and Philadelphia. All three had ruled that the health funds were too far removed from any harm caused by cigarettes to be entitled to sue and recover damages.

For example, Judge Edward Becker of the U.S. 3rd Circuit Court of Appeals in Philadelphia said, “The tortured path that one must follow from the tobacco companies’ alleged wrongdoing to the funds’ increased expenditures demonstrates that the plaintiffs’ claims are precisely the type of indirect claims” that the legal doctrine of proximate cause “is intended to weed out.”

A federal appeals court in Chicago recently ruled the same way and numerous federal trial courts have said that such suits by union health and welfare funds are not legally viable.

Columbia University law professor John Coffee Jr. said: “It looks like this line of cases has dwindled to a complete failure,” although he acknowledged that some lower federal courts still might permit such cases to proceed.

Indeed, federal district judges in Washington and Brooklyn, N.Y., have permitted similar cases to go forward, as did a state court judge in San Diego.

So far, only one suit filed by a union trust fund has gone to trial and the companies prevailed after a jury trial in federal court last year in Akron, Ohio.

Coffee and other analysts noted that the Supreme Court only accepts about 5% of the cases presented to it each year and, because appeals courts have agreed on the issue so far, it would have been unusual for the court to take the case.

The Supreme Court’s refusal to review the cases “wasn’t unexpected, but it doesn’t eliminate the remaining cases,” nor was it a ruling on the merits, said Matthew Myers, president of the Campaign for Tobacco Free Kids.

Still, the cigarette companies hailed the result as a strong sign that suits of this kind have little merit. “Frankly, it’s hardly a surprise that the U.S. Supreme Court declined to grant review of the decisions given that all the circuit courts that have ruled on these cases have come to the same conclusion: The suits do not state a valid legal claim against the industry and should be dismissed,” said Steven B. Rissman, Philip Morris’ senior assistant general counsel.

The three cases at issue Monday were patterned after similar claims lodged by state attorneys general throughout the nation, starting in 1994. The state suits yielded settlements of $246 billion and agreements by the cigarette companies to curb some of their marketing practices. In several of those cases, the states won preliminary rulings from judges that permitted the cases to go forward, creating sufficient threat to the industry to encourage it to reach the large settlements.

All of the union health and welfare funds alleged that the industry had conspired since the mid-1950s to conceal information about the health hazards of their products and defrauded them into paying to treat union members who had become sick smokers.

Monday’s action by the court has no impact on a Justice Department suit, based on similar contentions, that was filed against the industry in September.

The industry also still faces hundreds of individual claims and a class action suit on behalf of all Florida smokers. Last year, a state court jury ruled that the cigarette companies were responsible for injuries to thousands of smokers. The suit is now in the penalty phase and analysts have speculated that the industry could face punitive damages of tens of billions of dollars.

Moreover, it was disclosed Monday that cigarette industry sales have declined in recent months, at least in part because of price hikes levied by the companies to finance the massive settlements with the states.

Tobacco Free Kids announced that the industry’s first set of year 2000 payments under the settlement are likely to be 13% lower than expected because of the “volume adjustment” provision of the November 1998 national settlement. The provision provides for reduced payments to the states based on the decline in the number of cigarettes sold in the United States by major cigarette companies from 1997 to 1999.

“We believe that the downward volume adjustment is actually good news,” said Kathryn K. Vose, speaking for the tobacco free campaign. “It shows that cigarette price increases imposed after the tobacco settlement are working to begin reducing cigarette consumption in the U.S.”

Weinstein reported from Los Angeles and Rubin from Washington.