|
Summary Boston --- In a landmark decision, the California Supreme Court today eliminated almost all the protection from litigation that the tobacco industry had enjoyed in the Golden State. Except for tobacco company conduct from 1988 through 1997, tobacco companies maybe held fully liable for the harm caused by their products in California courts. With this clarification of the repeal of immunity, victims of tobacco industry fraud and deceit will have an opportunity to get some justice in a state where all three tobacco trials since 1999 have resulted in plaintiff's verdicts with punitive damages. In order for lawyers to strategize about this significant legal development, the Tobacco Products Liability Project will its host 19th Annual Conference in San Francisco on November 22-24, 2002. This first West Coast conference of the Tobacco Products Liability Project will help lawyers prepare themselves to represent the victims of tobacco industry wrongdoing. For more information about the 19th Annual Conference of the Tobacco Products Liability Projects, please see http://tplp.org.
Background In 1988 the California Legislature passed a statute dubbed the "Napkin Deal" that provided immunity for the tobacco industry from litigation in California. A group of influential political figures including tobacco industry lobbyists met at Frank's Fat’s restaurant in Sacramento where the final details of the proposal were written on a napkin. The agreement became California Civil Code §. 1714.45, which barred claims against tobacco or other products whose risks were allegedly well-known. Tobacco lawsuits pending in California at the time were dismissed. In 1997 the California Legislature repealed the napkin deal statute. The question before the California Supreme Court in the Myers/Naegele cases the precise effect of the repeal. Betty Jean Myers started smoking at age 16. In April 1998, after 41 years of smoking, she was diagnosed with lung cancer. She sued RJR and Philip Morris in March 1999 (Myers v. Philip Morris, S095213). A federal judge dismissed the suit, ruling that the repeal was entirely prospective and did not eliminate pre-1998 immunity created by the “Napkin Deal.” On appeal, the Ninth Circuit Court of Appeals asked the California Supreme Court to clarify the issue. The certified question is: “Do the amendments to Civil Code section 1714.45 that became effective on January 1, 1998, apply to a claim that accrued after January 1, 1998, but which is based on conduct that occurred prior to January 1, 1998?” The other case before the California Supreme Court was the Naegele case (Naegele v. R.J. Reynolds, S090420). There, a lawsuit was filed in 1998 by the family of Edward Bingham, a San Francisco house painter who started smoking in 1951 at age 13 and who was diagnosed with lung cancer in 1996. He died in 1999. Tobacco company lawyers claimed both that the companies are shielded from any claims that accrued prior to January 1, 1998, including those of the Naegele family. They also argued that the immunity provided by the 1988 law was intended to apply retroactively -- thereby shielding them from claims based on their pre-1988 conduct as well as their pre-1998 conduct. Attorneys for the smokers contended that that interpretation would prevent anyone from suing unless they started to smoke after January 1, 1998. At stake in the court's ruling were the fate of 75 pending lawsuits, countless potential lawsuits to be filed in the future, and successful, multi-million verdicts in several cases tried in recent years -- Boeken (6/2001 - $100 million), Whiteley (3/2000 - $21.7 million); and Henley (2/1999 - $26.5 million). It is not immediately clear whether the decision will create an opportunity to challenge these three verdicts. While the complaints and trial testimony referenced industry conduct occurring during the 1988-1997, none of these cases were premised on that conduct or depended upon that conduct to reach the final verdicts. It is likely that the defendants will attempt to seek new trials on that basis, although they will almost certainly not be successful in those efforts. Oral arguments in these two cases took place on May 7, 2002. In Naegele, the California Supreme Court focused on the argument that the industry should receive no immunity, even during the decade (1988-1998) that § 1714.45 was on the books, because of its fraudulent behavior. Counsel for Myers argued that any remaining immunity should not apply to cases filed since the repeal of immunity went into effect in 1998. Commentary Northeastern University law professor Richard Daynard, who is also Chair of the Tobacco Products Liability Project (TPLP), hailed the ruling as a clear sign that "tobacco companies' days of domination in the courthouse have come to an end. California has led -- and now will continue to lead even more forcefully -- the way in holding the tobacco companies responsible for their wrongdoing." TPLP attorney Mark Gottlieb observed that, "the ten years of industry conduct that is excluded from liability is legally insignificant because this industry has been playing fast and loose with the truth for half a century. This 10 year conduct exemption will provide very little protection for the tobacco industry in California. Attorneys attending the TPLP tobacco litigation conference in San Francisco in November will be ready for the new era in tobacco litigation for California and beyond." Edward Sweda, TPLP's Senior Attorney, wondered when the U.S. Securities and Exchange Commission (SEC) is going to take a look at an industry that does not prepare for its enormous liability problems by reserving some or most of its profits in a fund to pay off potential verdicts. "At RJR's last shareholder meeting in April, I asked CEO Andrew Schindler about this dubious accounting practice, which gives investors the appearance of greater profits when it is obvious that this industry will eventually pay tens of billions of dollars in verdicts to its victims. Schindler responded that he is counting on a perfect performance in appellate courts. Mr. Schindler's appellate team just lost a big one in the California Supreme Court, and it is becoming increasingly clear that tobacco companies will be paying dearly for its conduct in California and elsewhere."
-- ## --
Read the Opinion
here. |