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Wave of Foreign Tobacco Suits Hits U.S. Shores (fwd)
© The Recorder, Wednesday, November 25, 1998
Wave of Foreign Tobacco Suits Hits U.S. Shores
By Carrie Johnson
Legal Times
WASHINGTON -- One might think
America's major
tobacco companies would be breathing
easy in the wake of
a $206 billion settlement that would
resolve dozens of state
suits over smoking-related health
care costs.
Not necessarily.
'If the federal government can't recover, why should the
U.S. courts
bend over backward to allow a foreign government to
recover?'
-----------------------------------------
-- Tobacco attorney Thomas Frederick
Instead, a passel of tobacco
attorneys is busy fending off
challenges on new, foreign
frontiers.
At least two countries have taken
the unusual step of suing
tobacco concerns in the United
States. The Republic of
Guatemala is proceeding in U.S.
District Court for the
District of Columbia, while Panama has
sued in a Louisiana
federal court. Other foreign
plaintiffs, from the Canadian
province of British Columbia to a
major health fund in
Israel, are suing on their own soil.
Longtime observers say the U.S.
settlement proposal could
spur an international boom in suits
against American
tobacco sellers.
"This settlement, whatever you think
about it, is very
encouraging for other countries," says
Richard Daynard,
who chairs the Tobacco Products
Liability Project at
Northeastern University in Boston.
"You sue 'em, you put
the pressure on, they'll pay."
That's exactly what Guatemala is
banking on. Last May, the
country became the first foreign
nation to sue major
tobacco companies to recover health
care payouts for its
citizens who smoke. But the Guatemala
case also illustrates
the difficulties foreign governments
face when they attempt
to sue tobacco companies in the United
States and abroad.
Earlier this year, Guatemala's then
attorney general hired
Fleming, Hovenkamp & Grayson -- a
Houston firm that
has done work on airline crashes,
faulty polybutylene pipes,
and other big litigation projects --
to handle the tobacco
case on a contingency basis.
The stakes are staggering. In their
amended complaint, lead
lawyers George Fleming and Mark
Hovenkamp estimate
that the country spent $300 million
from 1973 to 1997 in
payouts for smoking-related illnesses.
While smoking rates
in the Central American country are
not as steep as those in
Asian nations, public health advocates
are concerned by
the Guatemalan figures.
A World Health Organization study on
international
smoking rates found that more than 37
percent of
Guatemalan men and 17 percent of
Guatemalan women
smoked in 1989, the most recent year
for which data were
available. About 28 percent of
American men and 23
percent of American women smoked in
1991, according to
the WHO.
Guatemala accuses Brown & Williamson,
Philip Morris,
BAT, Liggett, and other related
entities of negligence,
fraud, restraint of trade, and
violations of federal
anti-racketeering laws, based in part
on statements tobacco
executives and employees made in the
United States and in
Guatemala about the addictiveness of
cigarettes.
"Because Guatemala relied on
defendants' continuing
representations that smoking was not
dangerous, it did not
act to curb smoking by its citizens,
thus expending
enormous sums on health care," the
country's lawyers
wrote in legal papers filed with U.S.
District Judge Paul
Friedman.
The Guatemala suit appears to mirror
many aspects of the
suits filed by American state
attorneys general. For
instance, each focuses on the cost of
smoking-related
illness to public health systems.
Fleming, Hovenkamp also
relies on fraud, conspiracy, and
antitrust violations allegedly
committed by tobacco companies, some
of which have
been alleged in the state suits.
"This is not a 'smoker's case,'" the
Fleming lawyers wrote in
a brief. "It is based on defendants'
deceptive practices, not
on their sales of cigarettes."
Hovenkamp says in an interview that
the settlement --
which affects each state and the
District of Columbia -- will
not hamper his client's ability to
recover from big tobacco
firms.
But Guatemala faces serious questions
about whether it can
sue in Washington and whether its
lawyers are authorized
to pursue the case.
Guatemala is suing 11 defendants,
including the Tobacco
Institute, an industry lobby group
based in Washington.
Only two of the defendant companies,
however, control
cigarette distribution in the nation.
Tabacalera Centroamericana, a Philip
Morris subsidiary,
controls about 73 percent of the
Guatemalan tobacco
market and uses the popular "Marlboro
Man" ad campaign
there. Tabacalera Nacional, a British
American Tobacco
Co. subsidiary, constitutes the rest
of the market through
brands like Lucky Strike, according to
Guatemala's
complaint.
BAT Industries, BATCO and BATUS
Holdings Inc. have
filed motions to get out of the case
on jurisdictional
grounds. Essentially, they argue they
have no presence in
the District of Columbia, where they
are being sued.
Five other defendants, the Philip
Morris Cos., Philip Morris
Inc., Tobacco Institute Inc., the
Council for Tobacco
Research USA Inc., and Brown &
Williamson have
attacked the suit on other grounds,
some of which echo the
U.S. tobacco cases.
"Essentially, what the Republic of
Guatemala has done is
sue in the U.S. and hopes to win based
on the superficial
similarity with the state actions,"
says Thomas Frederick, a
partner at Chicago's Winston & Strawn
who represents the
Philip Morris defendants.
Frederick argues that no U.S. or
Guatemala law would
allow the country to recover public
health outlays for
derivative, "secondary costs" spent on
sick smokers. He
says that U.S. states have passed
these laws, but there is
no federal legislation in place that
would authorize foreign
suits.
"Certainly, if the federal government
can't recover [absent
statutory authority], why should the
U.S. courts bend over
backward to allow a foreign government
to recover?" asks
Frederick, who also represents Philip
Morris in the suit filed
by Panama in New Orleans.
Lawyers in the Washington office of
Chicago's Kirkland &
Ellis who are working on behalf of
Brown & Williamson
characterized the Guatemalan case in a
brief as part of a
"veritable cottage industry of
copy-cat contingency fee
lawsuits seeking to further extend the
already-flawed
theories underlying those claims."
They asserted that
Guatemala "seeks to take this
litigation frenzy to another
level."
Tobacco attorneys also have questioned
whether
Guatemalan officials, including the
new attorney general,
have given Fleming, Hovenkamp
authority to proceed.
Ricardo Viteri, a spokesman at the
Guatemalan embassy in
Washington, says the government is
deciding whether to
pursue the case and is awaiting Judge
Friedman's decision
on pending motions to dismiss the case.
Plaintiffs lawyers say the tobacco
industry's defense
strategies are par for the course.
"They're taking the same
kinds of stances they have in other
litigation," says
Hovenkamp, whose firm also is
representing health funds in
Louisiana, Arkansas, and Tennessee in
their suits against
tobacco firms.
D'Lisa Simmons, another lawyer at
Fleming, Hovenkamp,
says the tobacco companies tried the
same tactic in
Mississippi, when GOP Gov. Kirk
Fordice sued state
Attorney General Mike Moore, a
Democrat, in an
unsuccessful attempt to deny Moore the
right to sue on
behalf of the state's citizenry.
Simmons also says there's a long
history of other
governments bringing cases in the
United States, dating
back to an 1873 maritime dispute
involving a French ship
called the Euryale, which was damaged
by another, foreign
vessel, the Sapphire.
Still, the vexing jurisdictional
questions make it difficult to
predict whether Guatemala's suit will
survive. "These are
tough cases," says Professor Jack
Friedenthal of George
Washington University Law School.
A lawsuit pending in British Columbia
could portend other
problems for tobacco. The province has
tapped Thomas
Berger, a former justice on the
provincial Supreme Court,
to lead the plaintiffs' legal squad.
The BC legislature has
passed the Tobacco Damages Recovery
Act to allow it to
collect on behalf of those citizens
who have purportedly
become ill from smoking.
Observers of the industry say that
Great Britain, Ireland,
and Australia are considering lawsuits
as well.
Defending the litigation is costly.
Wall Street analyst Gary
Black says each case costs tobacco
companies $10 million
a year.
But tobacco analysts and international
experts observe that
not every foreign sovereignty has a
well-developed,
independent legal system under which
to sue the industry,
making litigation unlikely in some
countries.
"The fundamental fact is that the U.S.
is different," says
Timothy Lindon, senior assistant
general counsel for
international matters at Philip
Morris. "Most countries' laws
are inhospitable to these kinds of
claims brought by
governments, when the injuries are
being suffered by
individuals."
In these countries, analysts say,
regulation and legislation
may be preferable to litigation.
The global community is getting help
in learning how to take
on the tobacco industry.
Daynard, the Boston anti-tobacco
expert, says he has
spoken in Brussels, Helsinki, Beijing,
and elsewhere on
how to mount legal challenges to
tobacco companies.
Other groups are using international
conferences as a way
to spread the fire. This week, the
Asia Pacific Association
for Tobacco Control is meeting in the
Philippines, where
tobacco litigation and taxation will
be discussed. Sens. Ron
Wyden, D-Ore., and Dick Durbin,
D-Ill., will host a
Washington-based conference on
international tobacco
control in March.
Says John Bloom, who manages
international issues at the
Center for Tobacco-Free Kids:
"Litigation, regulation, and
legislation are always part of the
picture. These other
countries are going to take action
however they can."
Carrie Johnson is a reporter at Legal Times, a Washington-based
weekly affiliated with The
Recorder.