[Intl-tobacco] COPYCATS / Around the world, anti-tobacco activists are mimicking U.S.-style litigation. However, the risks appear limited. (fwd)

[Robert Weissman]

COPYCATS / Around the world, anti-tobacco activists are mimicking
U.S.-style litigation. However, the risks appear limited.
by Brandy Fisher ; Source: Tobacco Reporter, Wednesday, 12/1/99

The tobacco industry is facing more and more gold diggers. Following the
U.S. settlement and recent verdicts against the industry, the number of
anti-tobacco lawsuits has spiraled out of control, clogging up the courts.
Recently there has been an increase of cases outside the U.S. as well.

=93It=92s not a significant increase,=94 says Timothy Lindon, associate gen=
eral
counsel for Philip Morris, about the number of cases outside the U.S. =93Bu=
t
certainly there has been an increase. The concept is not new; there have
been a handful of suits for many years.=94

The industry has consistently won such cases throughout the world, and
many tobacco litigation experts say there is no indication that the status
quo will change any time soon.

=93All of the significant litigation outside the U.S. has been
unsuccessful,=94 says Lindon. =93The industry has prevailed largely on the
concept of personal responsibility.=94

There is a long and growing list of recent decisions in which the industry
has prevailed, he says, adding that many claims against the industry have
been dismissed at a very early stage.

=93Judges recognize that people know the risks that smoking may cause
disease and may be hard to quit.=94

U.S. MADNESS.

Emanuel Goldman, managing director and global coordinator of Beverage &
Tobacco Research for Merrill Lynch, says that the major changes to the
global tobacco industry have resulted from mergers, with the exception of
the U.S. He says the most important changes in the U.S. have resulted from
litigation.

Outside the U.S., litigation is not a major issue, he says.

According to Goldman, =93The U.S. has a unique combination of factors that
makes for a tremendous incentive to sue.=94 He singles out four major
factors that have encouraged the proliferation of lawsuits in the U.S.

First, it=92s cheap to sue. Anyone can file a lawsuit in the U.S. for a
nominal fee. Furthermore, many U.S. plaintiffs=92 lawyers work on
contingency fees, which means they will work on cases for free, with the
agreement that if they win, they will take a portion of the winnings. This
often amounts to 30 percent or more. If the lawyers don=92t win, they don=
=92t
get paid.

Secondly, it=92s expensive to defend. The cost of hiring a defense lawyer=
=97or
multiple lawyers, which is usually necessary nowadays=97can be
mind-boggling. Plus, defendants frequently have to go to great lengths to
gather evidence and hire experts to build a strong defense. Lost
productivity and bad publicity are costly factors as well. Often, a
defendant determines that it is cheaper to offer the plaintiff a monetary
out-of-court settlement rather than endure the costs of a lengthy trial,
even if his case is strong.

Third, the loser doesn=92t have to pay legal costs. The U.S. is one of the
few countries in the world that has this policy. There is generally no
penalty for filing a case=97even if the claims are unwarranted.

Because there is little or no cost to the plaintiff, and little chance of
a penalty if the case is lost, plaintiffs have nothing to lose by filing a
suit. And the potential gain is huge.

This is due to Goldman=92s fourth point that amateur jurors award punitive
damages. Punitive damages refers to a monetary award paid to the plaintiff
by the defendant that is meant to punish the defendant for supposed
wrongdoing. Punitive damages are completely arbitrary, decided by a jury,
which is a group of citizens who usually have no legal expertise.
Plaintiffs=92 lawyers often appeal to the emotions of the average citizens,
encouraging them to award outlandish punitive damages to discourage future
wrongdoing. The higher the damages, the more the lawyer makes.

=93No other country in the world has this crazy combination of factors,=94
says Goldman. =93Therefore, don=92t look for any litigation outside the U.S=
=2E
to mean very much.=94

Plenty of other factors explain why the tobacco industry has started
losing cases in the U.S. while it continues to prevail throughout the rest
of the world.

Goldman says there has probably been an increase in =93activist=94 judges i=
n
the U.S., or judges who want to make political statements with lawsuits.
Plenty of U.S. legal experts are suggesting that the judicial system is
now acting as a fourth branch of government rather than its intended role
as a check on the U.S. three-tiered system.

Furthermore, many governments throughout the world have played a more
active role and profited more from the tobacco industry than the U.S.
government. A country with a former state-owned tobacco monopo- ly that
directly profited from tobacco would not have grounds to sue the industry
to reclaim healthcare costs.

Also, many countries don=92t have product liability laws as permissive as
those in the U.S. And few countries have the equivalent of class-action
lawsuits.

HUNTING ABROAD.

The global increase in case loads is in part due to solicitation by U.S.
lawyers, who are dashing into other countries to win more tobacco money.

Confident from the settlement and recent wins in the U.S., and hoping to
further pad their pockets, the lawyers are raising hopes of large rewards.

Many industry people suspect that the lawyers are misleading people about
the successes in the U.S. as well as exaggerating the potential to win
money.

=93It=92s an extraordinary situation,=94 says Goldman. =93The plaintiffs=92=
 firms
are flush with money, and they have little to lose by attempting to sue
[in other countries].=94

Lindon calls this =93U.S. export of litigation.=94 He adds, =93It appears t=
hat
U.S. litigation is not a welcome export.=94

In many countries where plaintiffs=92 lawyers have determined that there is
little chance for success under their own legal system, they have
encouraged their governments to sue to recover healthcare costs through
the U.S. court system instead.

=93That=92s sheer insanity,=94 says Goldman. =93They have their own legal s=
ystems.
But they haven=92t gotten plaintiff-friendly like here.=94

So far, two states in Brazil=97Rio and Goias=97have filed cases in Texas an=
d
Florida state courts. The manufacturers requested to transfer the cases to
federal court=97which is perceived as being less friendly to anti-tobacco
plaintiffs=97and are awaiting the decision.

Also, governmental bodies from Guatemala, Nicaragua, Venezuela, Bolivia
and Panama have filed suits against U.S. cigarette manufacturers.

The cases were filed in different locations, but a federal judicial panel
ruled that the federal cases should be consolidated and heard before one
judge for pretrial purposes. The group of cases is now before a federal
court in Washington, D.C. If the cases proceed through the pre-trial
phase, they will be returned to the original locations for trial.

A suit had also been filed on behalf of Thailand, but it was recently
voluntarily dismissed after it became evident that no one in the Thai
government had authorized the suit.

Many believe that these cases will not be successful.

=93The cases filed by foreign governments are legally and factually very
different than those filed by states=92 attorneys general,=94 says Lindon.
They are actually closer to those filed by unions seeking to recover
healthcare costs, he says, virtually all of which have been dismissed by
federal courts. The courts have consistently ruled that unions and other
third-party payors are too remote from any alleged damages to recover in
these types of suits and should not proceed on an aggregate basis.

The manufacturers have filed a motion to dismiss the Guatemala case based
on remoteness. At press time, a decision was expected soon.

Meanwhile, the government of the Canadian province Ontario an- nounced in
early 1999 it is planning a us$40 billion lawsuit against U.S. tobacco
manufacturers selling cigarettes in Canada to recover healthcare costs for
the treatment of diseased cigarette smokers. The government has been
considering filing the case through the U.S. court system.

Analysts doubt that the U.S. judicial system will let such cases proceed.

=93These cases involve policy choices on smoking made by foreign
governments,=94 says Lindon. =93I doubt U.S. courts are going to want to ge=
t
involved in other governments=92 policy choices.=94

TWISTING THE LAW.

Although the chance for success of these cases is slim, the industry has
no choice but to continue shelling out money to defend itself.

The stakes are high. While current legal and judicial systems do not allow
the madness as in the U.S., the systems themselves could change.

In fact, as far-fetched as it seems, a Canadian province recently passed a
law that makes it easier for anti-tobacco cases to succeed.

British Columbia enacted the Tobacco Damages and Health Care Costs
Recovery Act in November 1998, which allows lawsuits against tobacco
companies to recover costs of treating diseased smokers.

Then the government filed a suit against the industry seeking to recover
several hundred million dollars per year in healthcare costs.

=93The statute changed the rules of evidence dramatically,=94 says Simon
Potter, an attorney with Ogilvy Renault in Montreal, which represents
Imperial Tobacco, though not in the British Columbia matter.

The statute requires the judge to find that if any tort has been committed
by any tobacco company, then all companies are jointly responsible for
that tort, and assumes that tort be applied to all smokers. It also allows
proof of healthcare costs on a purely statistical basis.

The industry filed a motion claiming the law constitutes legislative
interference with the independence of the judiciary. A decision is
expected in December.

Essentially, says Potter, tobacco manufacturers claim that the statute
unconstitutionally removes the power of assessment from the courts. He
says it=92s one thing to attempt to streamline cases, but another to tell a
judge how to rule.

The government=92s case against the industry was put on hold until the
statute is reviewed.

Potter says that no cases have succeeded in Canada thus far. Furthermore,
he says, Canada has had the largest warning on cigarette packs in the
world for quite some time. The government has also been involved in the
growing of tobacco and has encouraged the export of tobacco.

=93They=92ve been collecting enormous amounts of money from tobacco,=94 say=
s
Potter. =93They=92ve essentially licensed the sale of tobacco and endorsed
it.=94

Whether other governments will change their laws to facilitate
anti-tobacco suits remains to be seen. It seems outrageous that a
government would compromise its legal integrity for money. But greed is
infectious, and everyone seems to think that =93Big Tobacco=94 is a gold mi=
ne
with plenty of gold for the taking. -TR