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Big Tobacco Settles Minnesota Lawsuit for $6.6 Billion

Litigation: Accord is reached hours before jury was to begin deliberations. Industry agrees to ban payments to entertainment sources and disband research council.

May 09, 1998|HENRY WEINSTEIN | TIMES LEGAL AFFAIRS WRITER

ST. PAUL, Minn. — Hours before a jury was to begin deliberations, the tobacco industry agreed Friday to pay $6.6 billion to settle a massive lawsuit filed against it by the state of Minnesota and Blue Cross and Blue Shield of Minnesota.

The industry also agreed to a landmark nationwide ban on the much-criticized practice of making payments to movie, television and video producers to feature smoking by actors in their productions.

The cigarette makers also agreed to disband the Council for Tobacco Research, the industry arm that tobacco foes contend played a key role in suppressing the hazards of smoking and propagating disinformation over the last 40 years.

The eleventh-hour accord marked the fourth time in the last year that the once legally impregnable industry settled a suit lodged against it by a state attorney general. It brought the total value of the agreements to $36 billion. The Minnesota case is the only one to go to trial.

The state of Minnesota will get $6.17 billion under the agreement and Blue Cross and Blue Shield will receive $469 million. In addition, the nation's cigarette companies will pay out $440 million in fees to the private lawyers who represented the state and the insurance firm in the suit.

Friday's settlement is the third-largest court settlement in U.S. history--topped only by the $11.3 billion the industry agreed to pay Florida and the $15.3 billion it surrendered to settle Texas' suit.

The huge pot also exceeds by $1.9 billion what Minnesota would have gotten out of a proposed $368.5-billion national settlement announced June 20. And it is three times larger than the $1.77 billion in damages Minnesota and Blue Cross and Blue Shield were seeking compensation for treating sick smokers.

Industry analysts said the tobacco industry settled for the higher figure out of fear that the jury might come down with a huge punitive damages award.

But at a triumphant news conference, Minnesota Atty. Gen. Hubert H. Humphrey III stressed the public health benefits of the agreement and the fact that the case had forced the disclosure of millions of industry documents that will help lawyers in other suits and public researchers and "laid the foundation" for possible criminal action against the industry by the Justice Department.

"Today, the tobacco industry has surrendered, and they have surrendered on our terms--groundbreaking terms that will expose the full truth to the public, recover record amounts for taxpayers, impose tough reforms on the industry and, most important, protect future generations of children."

Andy Czajkowski, the chief executive of Blue Cross and Blue Shield, who shared the platform with Humphrey, hailed the agreement as "a major breakthrough in our fight against the leading public health epidemic of our day and age."

Differing Views of Tobacco Firms

The nation's two leading cigarette companies issued brief but strikingly different statements about the settlement.

Philip Morris Cos., the industry's largest firm, said in a measured announcement read by spokesman Scott Williams outside the federal courthouse here that the settlement underscores the limitations of state-by-state litigation as opposed to a national resolution of the tobacco controversy.

"Another state has settled, but there is no resolution for dozens of others and no certainty about the future outcome of cases in other states," three more of which are set to go to trial later this year, Williams said. The statement also lamented the demise of the proposed national tobacco accord that would have settled this and other suits around the country in return for the industry's acceptance of significant restrictions on its marketing activities.

R.J. Reynolds Tobacco Co., the country's second-largest cigarette maker, released an angry statement complaining about the presiding judge: "We agreed to the settlement because we concluded that it would be extremely difficult to reach a fair outcome, based on what we believe are a series of incorrect rulings by the court favoring the state, which in essence placed a loaded gun to our head."

Throughout the long case, filed in August 1994, industry lawyers have complained that Ramsey County District Judge Kenneth J. Fitzpatrick had been unfair to their clients. But appellate courts upheld all 18 decisions that the industry appealed, including two that went to the U.S. Supreme Court.

Settlement Curbs Selling, Marketing

The settlement clearly represents another bitter pill for the beleaguered $50-billion-a-year tobacco industry. Under the agreement, the cigarette companies are permanently barred in a court decree from:

* Distributing in Minnesota promotional items--such as hats, shirts, or backpacks--that bear the brand name or logo of any domestic brand of tobacco product.

* Misrepresentating the health consequences of using any tobacco products, including any tobacco additives.

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