Tobacco companies seek to pay $300bn as lawsuit settlement
BMJ 1997; 314 doi: https://doi.org/10.1136/bmj.314.7089.1217 (Published 26 April 1997) Cite this as: BMJ 1997;314:1217
The United States tobacco industry is moving towards a historic settlement over compensation for tobacco related illnesses. Discussions have centred on an industry settlement of $300bn (£188bn) in return for immunity from future litigation.
In meetings that lasted for two weeks representatives from the two largest US tobacco companies, RJR Nabisco Holdings and Philip Morris, and their lawyers met with attorneys general from at least 22 states and with other interested parties.
News of a possible $300bn settlement caused tobacco shares to rise.
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Although all sides admitted that the talks were only in the early stages and may not succeed, tobacco companies are clearly eager to negotiate an agreement that would protect them from current and future lawsuits. So far, 23 states have filed suits seeking reimbursement for medical costs for treating patients with smoking related illness and countless suits have been filed by individual people and families.
The settlement under discussion would entail the tobacco industry paying up to $300bn into a fund to be paid out over the next 25 years to people and states making claims against it. The industry would need to agree to strict limitations in cigarette advertising and for tobacco to be regulated by the Food and Drug Administration (FDA), which would become the Food, Drug, and Tobacco Administration.
Under the jurisdiction of the FDA the tobacco companies would abide by the agency's restrictions on cigarette advertising, including a ban on billboard advertising and the use of pictures of real people in advertisements. The administration's rules would also prohibit advertising campaigns targeted at young people, such as the Joe Camel cartoon character, and restrict tobacco companies' sponsorship of athletic events.
“In America and Europe, a lot more is spent on tobacco promotion than on tobacco advertising, so laws that just ban advertising would let marketing continue,” said Professor Richard Peto from Oxford, the main epidemiological witness in the first of the pending state lawsuits.
The number of teenagers who smoke has risen in the past few years, and anti-tobacco proponents, including former FDA commissioner David Kessler, attributed the increase to advertising that appealed to young people. In addition, the industry would be required to establish a fund for educating the public, and especially young people, about the risks of smoking.
“Our goal has been to ensure that the opportunity for fundamental change not be lost or compromised away, that nothing be done to weaken the FDA rule to protect children from the marketing and sale of tobacco products or to weaken FDA authority to oversee the tobacco industry,” said William Novelli and Matthew Myers in a statement from the National Campaign for Tobacco Free Kids, which is participating in the talks.
The current talks follow last month's admission by the Liggett Group, the smallest of the major cigarette makers, that nicotine is addictive and its offer to submit documentation that could potentially indict the entire industry (29 March, p 919).
News of the settlement talks caused stock prices in both tobacco companies to rise sharply, an indication that even such a large sum as $300bn would be worth while for the tobacco industry, which is currently spending about $900m a year in legal fees.
Lonnie Bristow, immediate past president of the American Medical Association, said: “It is critical that any resolution assures a reduction in the illness and death caused by smoking as well as FDA regulation of the tobacco industry.”
Any settlement in the United States over compensation for tobacco related illnesses may have only limited repercussions on the rest of the world, writes Clare Dyer.
Groups of people with smoking related illnesses are suing tobacco companies in Britain and Canada as well as the US, and individual cases are being brought in Italy, France, and Finland. But the US situation is unique in that a powerful and well funded alliance of states' attorneys general and law firms have been able to meet the tobacco giants on near equal terms. In Britain, NHS trusts have stayed out of the group litigation, run as a David and Goliath battle by a single medium-sized law firm, Leigh, Day. Denied legal aid after the initial research, the firm is bringing the action on a no-win, no-fee basis.
Product liability cases are notoriously hard to win in the British courts, where judges rather than juries make the decisions. But senior partner Martyn Day is bullish about the prospects of a settlement. He points out that one of the two tobacco companies being sued in Britain, Gallahers, is owned by the US company American Brands. He argues that the British system, under which a single judge hears all the cases and produces a judgment that can be relied on by others-in this case, he believes, up to 20 000 people with lung cancer a year-makes a settlement an attractive proposition for manufacturers. “If the American tobacco companies walk away with their share prices intact, I would be very surprised if, given the all or nothing nature of the British system, they didn't look at it very seriously here.”