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U.S. High Court Upholds Law Targeting Tobacco Industry

March 18, 1997|HENRY WEINSTEIN | TIMES LEGAL AFFAIRS WRITER

The U.S. Supreme Court handed the tobacco industry a major setback Monday when it effectively upheld the constitutionality of a Florida statute specifically designed to make it easier for the state to win a massive lawsuit against the $50-billion-a-year industry.

The Florida suit alleges that the industry is liable for expenses the state incurred treating Medicaid recipients who allegedly have suffered smoking-related illnesses. Florida estimates these expenses have cost the state well over $1 billion since 1990.

Cigarette companies had urged the high court to review the 1994 law--one of two in the nation and the stronger of the pair--claiming that it violated their rights to a fair trial by taking away defenses that they have used successfully in previous lawsuits.

Without giving any reasons, the high court let stand a June 1996 decision of the Florida Supreme Court, which upheld the constitutionality of the law.

Florida officials said they were elated at the development. The suit, which Florida filed two years ago, is scheduled for trial this summer.

"The decks are cleared for us to proceed to trial Aug. 4 and that's where we're headed," said Dexter Douglass, legal counsel to Florida Gov. Lawton Chiles.

Industry representatives tried to minimize the import of the Supreme Court's position and they maintained that a jury ultimately will find no merit in the state's case. Further, they said, they could again challenge the constitutionality of the law should they lose the Florida suit.

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"This decision not to review the Florida law now is not a ruling on the merits of our constitutional challenge and does not in any way affect our ability to seek a review in the future if that becomes necessary," said Gregory G. Little, senior assistant general counsel for Philip Morris.

Nonetheless, tobacco stocks tumbled, the second time in three trading days that the prices have declined in response to a court decision that was merely procedural. Industry leader Philip Morris dropped $1.625 to $127.50. RJR Nabisco lost $1.125 to close at $32.75 and Loews slid $1.625 to close at $102. Tobacco analyst Martin Feldman said he thought the market had overreacted considering that the Supreme Court had merely maintained the status quo. But he stressed that he expected increasing volatility in tobacco stocks during the next six months as a host of major cases against the industry go to trial.

"The major import of the decision is that it lessens the chances that the Florida case will be postponed," Feldman said.

"There is the potential for an industry loss" in the Florida case and a similar one scheduled to begin in Mississippi in June, Feldman acknowledged, though he predicted that any verdicts against the industry would be reversed on appeal.

The Florida statute specifically provides that the companies cannot argue a so-called assumption-of-risk defense in any suit filed by the state to recover Medicaid expenses.

That defense centers on the concept that smokers are responsible for their own behavior, and it has proved persuasive in convincing jurors in individual product liability cases that they should not award damages to the plaintiffs.

The tobacco companies strenuously contend that the Florida law--or any judicial action that prohibit them from mounting this kind of a defense--denies them due process of law.

It is "as though the state has declared that in football league games, when the state's university team's offense is on the field, the opponent's defense must withdraw to the sidelines," contended industry lawyer Melvin Spaeth in his brief urging Supreme Court review of the law.

Spaeth, of the high-powered Washington, D.C., law firm of Arnold & Porter, also contended that there are "no significant constraints on protections against arbitrary results" in the 1994 statute.

The state sharply disagreed in a brief prepared by well-known Harvard Law School Prof. Laurence H. Tribe and his associate Jonathan Massey. Their brief, in part, was an attempt to minimize the significance of the 1994 Florida law, maintaining that it merely amended a 1990 Florida law that enhanced the state's ability to garner Medicaid reimbursement.

They noted that in upholding the Florida law, the state Supreme Court had made it clear that Florida is required to prove either negligence or a defective product; that tobacco caused injuries, and that the state suffered damages.

The brief also stressed that the 1994 law was "an eminently reasonable solution to pressing fiscal and health care problems confronting the state Medicaid program," noting that Medicaid costs attributable to smoking in Florida from 1990 to 1995 have been estimated at $1.4 billion.

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"Tobacco companies, through the production, promotion and sale of their products, have knowingly created a massive public health crisis. The state, as guardian of the public health . . . has assumed a crushing financial burden--a burden which in all equity and fairness should be borne by those whose lucrative enterprise is responsible for the harm."

Tribe and Massey also asserted that the industry's traditional defenses are inapplicable in suits filed by states because "states did not assume any of the risks of tobacco: they did not inhale."

Thus far, 23 states and several localities, including Los Angeles County, have filed massive suits against the cigarette companies. Four of the cases already have trial dates scheduled, three for this year and one for next January.

Massachusetts is the only other state that has passed a law specifically providing that the state has an independent right to sue tobacco companies on its own, but the law is less detailed than Florida's.

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