Lorillard in Talks to Settle Punitive Damage Claims

Lorillard Tobacco Co., the nation’s fourth-largest cigarette maker, is negotiating a deal in which the company would pay about $7.5 billion over 30 years to settle punitive damage claims filed by thousands of smokers around the country, according to lawyers close to the case.

If the agreement--which faces a bevy of potential obstacles--is consummated, it could increase the momentum behind efforts to craft a global settlement of hundreds of individual claims and class-action suits around the country.

The proposed settlement could mark a significant break in the ranks of the major tobacco companies, which until now have opposed efforts by U.S. District Judge Jack B. Weinstein to negotiate a nationwide settlement of punitive damage claims.

One plaintiffs’ lawyer compared the possible Lorillard accord to a groundbreaking agreement reached by Liggett, smallest of the nation’s five major cigarette makers, in 1996. At the time, Liggett admitted cigarettes were hazardous to health and agreed to cooperate with plaintiffs’ lawyers in cases against the other companies.

Even if the two sides agree, the pending settlement faces some major hurdles in court. Thousands of plaintiffs around the country potentially would be cut out of a punitive damage award and are likely to object to the deal, contending that they have been denied their 6th amendment right to a jury trial with a full range of remedies.

In addition, some experts on class actions, including Boston University law professor Susan Koniak, said that for Weinstein to certify the suit as a class action would be a “direct challenge” to recent Supreme Court rulings.

At least one prominent plaintiffs’ lawyer, Ronald L. Motley, said he objects to the proposed agreement and will oppose it if it is presented in its current form to Weinstein. “This amounts to a get-out-of-jail free card for Lorillard,” said Motley, of Charleston, S.C., who has made hundreds of millions successfully suing the cigarette companies and asbestos manufacturers.

Another lawyer involved in the talks said that Motley and his partner spurned the settlement because it did not provide compensation for a major client of theirs--the Manville Personal Injury Trust--an entity that compensates injured asbestos workers. The trust is demanding that cigarette makers give billions of dollars to the strapped fund--spawned by the 1982 bankruptcy of asbestos giant Johns-Manville Corp.--pointing to studies showing that smoking dramatically boosts the risk and severity of asbestos illness.

One principal plaintiffs’ negotiator said late Friday that some key issues had not been resolved but that he hoped those problems would be overcome within 24 hours.

Another attorney said some of the key sticking points involved public health issues and how much Lorillard would do in that regard, including whether the company would put new, stronger warning labels on its packages.

Lorillard lawyers did not return calls Friday, and several of the normally garrulous plaintiffs’ lawyers also were not talking.

Still, two plaintiffs’ lawyers, speaking on condition of anonymity, said the agreement would provide significant public health benefits, with a lot of the money going for cancer research--including a new X-ray technology for early detection of lung cancer now being developed at Cornell University--and related activities, including smoking cessation programs. None of the money would go to individual plaintiffs.

But attorney Matthew Myers, president of the National Center for Tobacco Free Kids, said: “It is appalling that the agreement contains no provisions to protect the public health, reduce tobacco use or compensate a single individual that has been hurt.”

Motley offered similar criticism. “Lorillard has not admitted the 40 years of wrongdoing the companies have engaged in, has not agreed to tighter marketing restrictions, nor agreed to put on its packs that cigarettes are dangerous like Liggett has, nor have they agreed to cooperate against the other non-settling companies,” the attorney said.

Motley’s suit, on behalf of the asbestos compensation fund, is scheduled to go to trial early in December against all the cigarette manufacturers, and Motley said he sees no reason to settle now with Lorillard.

Since spring, Weinstein has been attempting to persuade the cigarette makers and the plaintiffs’ lawyers to reach an accord that would resolve all potential punitive damage claims against the companies throughout the U.S. “The time for bringing a close to tobacco litigation is nigh,” Weinstein said in April.

In September, a group of plaintiffs’ lawyers asked him to create a nationwide class action to consolidate all punitive damage cases against the $50-billion-a-year industry.

If the many separate actions continue to be pursued piecemeal, punitive verdicts in different states “would potentially exhaust defendants’ ability to pay” injured plaintiffs, the lawyers asserted in the suit.

The nation’s three largest cigarette makers--Philip Morris Cos., R.J. Reynolds Tobacco Co. and Brown & Williamson Tobacco Corp.--all said they would oppose any effort to certify that case or any other case as a class action. Thus far, about two dozen federal and state courts in other lawsuits have ruled that tobacco suits can’t be treated as class actions.