An Analysis of the Civil Liability Provisions of
S. 1530 ("The Hatch Bill")
by
Robert L. Kline and Richard A.
Daynard*
Working Paper #10 in a Series on
Legal Issues in the
Proposed Tobacco Settlement
May 21, 1998
- Tobacco Control Resource Center (TCRC)
- 117 Cushing Hall
- 102 The Fenway
- Boston, MA 02115
*The research and
analysis underlying this Working Paper was supported, in part, by National
Institutes of Health/National Cancer Institute Grant Award No.R01 CA67805-01 Titled "Legal Interventions to Reduce Tobacco Use." Any
opinions, findings, and conclusions or recommendations expressed in
this publication are those of the authors and do not necessarily
reflect the views of the prime sponsor.
Copyright
©1998 Tobacco Control Resource Center. All rights reserved.
Introduction
This working paper is a review of attempts to implement civil liability
provisions of the June
20, 1997 "global settlement" negotiated between the tobacco industry and the
State Attorneys General, using as a specific example S. 1530,
the Placing Restraints on Tobacco's Endangerment of Children and Teens Act, filed by
Senator Hatch.1 The paper will discuss the impact the
proposed legislation has on the civil justice system's goals.2
These goals include deterring harmful behavior; compensating victims; providing
accountability; punishing intentional and flagrant behavior; providing a financial
incentive to encourage positive change; and distributing the financial cost of injury
throughout society, rather than having the injured party bear the entire cost. See
Working Paper #4. In addition, the paper will explore the practical results of
implementation of specific provisions of S. 1530 regarding the rights of parties injured
by the tobacco industry. This paper will examine the claim of S. 1530's drafters that the
bill will preserve injured parties' rights under the civil justice system.
Liability Provisions, Section 251 -259 of S. 1530
Sections
251-259 of S. 1530 address the tobacco industry's immunity and liability under the
civil justice system. Section 256 terminates or grants immunity to the industry for the
health-related Attorneys General lawsuits, past and future class action lawsuits, and past
and future addiction and dependence claims. Subsection 256(c ) states "[a]ll personal
injury claims arising from the use of a tobacco product by an individual shall be
preserved." Section 257 sets forth civil liability for past industry conduct for
those actions "permitted" under Section 256 (presumably the
"preserved" individual lawsuits, but these limitations could also apply to any
remaining Attorneys General or governmental actions). The limitations include a
prohibition of punitive damages, class actions lawsuits or other aggregation of claims,
joint liability for signatories (but no joint and several liability if signatories and non
signatories are defendants), limitations on who may sue and be sued, limitations on the
right of removal and changes to the rules of evidence limiting discovery and admissibility
of a safer product. Section 257 also establishes a complex procedural system within the
federal government to certify and collect a judgment. This section also imposes an annual
cap on the industry's financial exposure in litigation. Section 258 limits liability of
the tobacco industry for harm it will cause in the future including no class actions,
subrogation or aggregation of suits, limits on who may sue and be sued, and limitations on
removal, discovery and admissibility and the same Byzantine certification and collection
system.
Senate 1530's provisions limiting class actions,
aggregation of parties and third party actions undermines the opportunity of individuals
to pursue their rights. The tobacco industry has consistently sought to create a contest
of an individual plaintiff matched against the enormous resources and legal experience of
a multi-billion dollar industry. Indeed, an industry defense attorney summed up the
strategy in the following way:
"The aggressive posture we have taken regarding depositions and
discovery in general continues to make these cases extremely burdensome and expensive for
plaintiff's lawyers. . . . To paraphrase General Patton, the way we won these cases was
not by spending all of [R. J. Reynolds] money, but by making the that other son of a bitch
spend all of his."3
Manufacturers generally, and the tobacco industry in particular, will
not be deterred from future bad behavior if immunity is available. Furthermore, the
industry payments required under S. 1530 are made to the federal government and therefore
do not provide compensation to any injured individual; nor are funds set aside for this
purpose that would otherwise be unavailable. (See section 101 establishing
settlement trust fund.) The tobacco industry has not accepted responsibility nor admitted
any wrongdoing in its behavior; in fact, industry press releases and trial testimony
continue to deny the deadly and addictive qualities of its products. Furthermore, the cap
on damages provides a disincentive for positive change as the industry can now
calculate the cost of injury and make it a business expense, rather than view the cost of
injury as a possibly ruinous burden to be avoided by good corporate citizenship. The
numerous, overly-complex hurdles that plaintiffs must overcome under S. 1530 will leave
the burden of bearing the cost of illness with the individual, not the industry.
Moreover, there are no true punitive damages allowed under the
legislation for the industry's past behavior. The $368.5 billion figure in payments set
forth in the June 20th agreement was arrived at as compensation only for the
state attorneys general cases and Castano class actions - that figure does not even
include full compensation for all the other injured parties, much less account for
punitive damages. The Centers For Disease Control and Prevention estimates the cost of
annual actual direct damages from tobacco related disease at $50 billion and the annual
indirect cost of tobacco use such as loss of productivity to be an additional $50 billion.
Senate 1530's payment figure of $398.3 billion amounts to pennies on the dollar for
compensation.
Applicability of Immunity and Liability For Past Conduct Provisions -
Section 256
The specific language of the "general immunity" provisions of
Section 2564 grants immunity to the tobacco industry
for health-related lawsuits that are brought by federal, state and local governments.
Although it initially appears that non-health related claims would be preserved,
governments seeking reimbursement may be barred from bringing suits on their own behalf
under the "permissible parties" section (see infra). Section 257(e).
Class action lawsuits are barred altogether regardless of legal theory under section 257(c
). The tobacco industry will gain a huge advantage because these type of lawsuits present
the industry with litigation problems it does not face with individual lawsuits. First,
the industry's enormous advantage in money and legal resources is diminished when it faces
plaintiffs with governmental and corporate budgets or the pooling of resources in a class
action lawsuit. Without these legal strategies the tobacco industry can still spend its
opponents into submission. Second, the industry's favorite tactic of blaming the victim is
difficult to present to a jury when the plaintiff is not an individual who can be pointed
to as having "assumed the risk." If third-party reimbursement and class action
lawsuits are eliminated, a united tobacco industry will safely overpower individuals on a
case-by-case basis. Under S. 1530, third-party reimbursement actions and class actions,
the two most successful vehicles for challenging the tobacco industry in court, are
eliminated.
The specific language of section 256 applies to "tobacco
claims" which is defined as "a claim directly or indirectly arising out of,
based on, or related to the health-related effects or attributes of tobacco products
including . . . allegations regarding any conduct, statement or omission concerning the
health-related effects or attributes of such products." Section 5 (24) and Section
255. Putting aside the difficulty of who may be a permissible party under Section 257(e)
discussed above, the qualification "health-related effects or attributes"
implies that the industry would not receive immunity for claims which are not
health-related. This might include claims of fraud or civil RICO aimed at addressing
illegal marketing to minors. However, to the extent that the underlying claim is
health-related, these sections regarding liability provisions would apply and the claim
would be barred.
The preservation of non-health-related claims is reinforced in the
following section dealing with state attorney general actions. Actions by a state or local
government that are "health-related" and are pending on the date of enactment of
this legislation are "terminated". Section 256(a)(1). On the positive side, this
suggests that Attorney General actions currently pending for antitrust, fraud, RICO and
other complaints that are not health-related would not be terminated under this section.
California state cases based on state consumer protection laws would also not be
terminated under this section. See Mangini v. R. J. Reynolds Tobacco Co.,
859 P.2d 672, 7 Cal. 4th 1057 (1994). (But see "permissible
parties" discussion infra).
Senate1530 section 256 may be interpreted to mean that some
health-related claims would avoid the immunity provisions. All benefits and preservation
of rights in this section are merely implied from the language of this section and
S. 1530; litigation advantages to plaintiffs discussed below must be explicitly set forth
in legislation. To trade away public health goals in exchange for a chance to make a
difficult legal argument is poor public policy and poor negotiating. The preservation of
rights implied from the language of S. 1530 should be specifically set out in the
legislation if they are to have any value.
The restrictions upon future actions provided in section 256(a)(2)5 and 256(b)(1)(B)6
include immunity for "all health-related claims arising from the use of a tobacco
product." This language suggests that there may be some health-related claims that
are not based on "tobacco use." For example, actions by non-smokers injured by
second hand smoke, or injuries caused by fires started by cigarettes could be considered
health-related, but not based on the use of cigarettes. The above interpretations of S.
1530 are implied and are not specifically set forth in the bill. These ambiguities are not
adequately addressed and will leave courts puzzled as to which rights are preserved. If
the drafters of section 256 wish to preserve the rights of individuals, they should
specifically set out those rights in the bill.
Permissible Parties - Section257 (e)(1)
Section 257(e)(1) lists parties who may bring a lawsuit for much of the
industry's past conduct. Specifically, "permissible" plaintiffs are limited to:
(A) Individuals bringing claims, or claims derivative of such claims, on
their own behalf for a tobacco-related injury, or the heirs of such individuals. (B)
Third-party payors for claims not based on subrogation that were pending on June 9, 1997.
(C) Third-party payors for claims based on subrogation of individual claims permitted
under subparagraph (A).
Significantly, the term "individual" and not
"person" is used in section 257(e)(1). "Person" is defined as "an
individual, partnership, corporation, or any other business or legal entity."
Section5(15). An "individual" would therefore not include a business, a
government or an organization which would be precluded from suing the tobacco industry for
"all civil actions permitted under Section 256." See Section 257(a). Many
suits permitted under section 256 theoretically exist, but can never be brought for lack
of a "permissible party."
The intended purpose of sections 257(a) and 257(e)(1) may be to
reiterate the preservation of individual lawsuits as initially set forth in 256(c ). But a
literal reading of sections 256, 257(e)(1) and 5(15) together could result in a
prohibition on many lawsuits. The health-related claims of businesses, organizations and
governments based on past or future conduct of the tobacco industry may be barred because
those entities are not listed as "permissible parties." Section 257(e)(1). To
the extent that a business, organization or government could bring a claim based on past
conduct under section 256, the claim would need to conform to section 257, the provisions
of which "shall apply to all civil actions permitted under Section 256"
for past conduct. (emphasis added) Section 257 (e)(1) limits permissible parties to individuals
bringing claims "on their own behalf for a tobacco-related
injury". Businesses, organizations and governments are not "individuals"
under S. 1530, but if they were, claims on their own behalf, such as fraud, RICO, or
anti-trust violations, might be considered economic harms and not necessarily
"tobacco-related." Those qualifiers, separately and together, would probably
prevent a government from suing on practically any issue (except as a third party payor
based on subrogation as described below).
Under section 257(e)(1), third-party payors, such as governments,
businesses and organizations, could bring suit for "claims based on subrogation of
individual claims." Subrogation requires the third party to "stand in the
shoes" of the individual on whose behalf it is suing. Thus, third-party payors would
run into the same extremely high hurdles that S. 1530 puts in the path of an injured
individual plaintiff. In addition, S. 1530 prohibits the aggregation of claims, leaving
the subrogation claims to be fought one-by-one. This approach would be extremely expensive
and inefficient for subrogees and will create a large disincentive for them to pursue
their rights. The result is practical immunity for the industry under a subrogation
theory. Once again, the tobacco industry's "General Patton" strategy of wasting
the opponent's resources will succeed.
Indeed, in the Mississippi Attorney General's action against the tobacco
industry, a preliminary court decision on the subrogation issue was well understood to be
case determinative. If the tobacco industry won the motion to limit the Attorney General
to bringing claims under a subrogation theory, the lawsuit would have been dropped as
unwinnable.
Under S. 1530 third-party payors also could maintain non-subrogation
based claims if the claim was pending June 9, 1997. To the extent State Attorney General
suits fit this description, they are settled in section 256. Other than Blue Cross Blue
Shield of Minnesota, the only non-subrogation based claims pending as of June 9, 1997 were
class action suits brought by union pension funds. Those cases would be dismissed under
the provisions "terminating" class action lawsuits. See Section
256(b)(1). Furthermore, if a case is legislatively "terminated" it is unlikely
it could be amended. If the plaintiff pension funds were to refile their cases
individually, the literal language of section 257(e)(1)(B) prohibits them from filing
subrogation based claims.
Section 257(e)(1) bars governments and businesses from directly suing
the tobacco industry (except as a subrogee) for all "civil actions" that
otherwise appear permissible in other sections of the bill. Section 256 of this bill
(discussed above) would seem to hold out some hope that groups other than individuals
might be able to sue for non-health related injuries (e.g. anti-trust, fraud, RICO). But
section257(e)(1) bars the courthouse door so that governments, businesses, insurers,
pension funds, unions, self-insured employers, and asbestos victim organizations, are not
able to bring law suits against the signatories of the tobacco protocol except to pursue
the rights of individuals on a case-by-case basis. This would prevent the litigation
strategy employed successfully by the state Attorneys General and now the union and health
care funds suing the tobacco industry.
Class Actions and Aggregations of Claims- Section 256(b)(1) and 257(c
)
Section 256(b)(1)7 gives the tobacco
industry immunity from class action suits for all "claims arising from the use of a
tobacco product" now pending and in the future. In Section 257(c )8 there is a more definitive statement that only
"individual actions shall be permitted," and there shall be "no class
action suits" except in the unlikely event that the tobacco industry consents.
Indeed, the "consent to class action" provision is more troubling than an
absolute ban because it raises the prospect of collusive class action lawsuits where the
industry has found a shill in the crowd willing to "bargain" away any successful
strategies that the industry has not had the foresight to foreclose in this legislation.9
Class action lawsuits are a crucial factor in rebalancing the litigation
equation of Big Tobacco versus individuals and smaller businesses. The tobacco industry's
ability and plan to spend its opponents into submission may be undone when individuals are
able to pool their resources. The abolition of class action suits undermines the public
health goal of preserving individuals' ability to effectively seek compensation from the
industry that injured them.
Under section 257(c), to the extent that a state suit or pension fund
suit is an aggregation of claims it would be barred. The State Attorneys General suits
have been feasible because they aggregate claims for reimbursement for payments for
individual Medicaid recipients. In addition, many small pension funds find it is
financially viable to bring suit only if they join forces in class actions to battle the
tobacco giant. Prohibiting class actions allows the industry to pick them off one-by-one.
With organized resistance scattered, the individual plaintiff will be forced to fight a
protracted, costly legal battle alone against a powerful corporation. Once again the
industry's "General Patton" strategy will be brought to bear on the individual
plaintiff.
Addiction and Dependence Claims - Section 256 (b)(2)
Under section 256 (b)(2)10 all
pending actions "for claims based on addiction to or dependence on a tobacco
product" are terminated, and signatories are immune from all such future claims.
Senate 1530 does not define "addiction and dependence" claims.
All individual lawsuits by smokers have as an element the claim that the
plaintiff was addicted to or dependent on tobacco products and was unable to quit despite
warnings or knowledge of the dangers of tobacco use. Virtually any personal injury action
by a smoker - e.g., wrongful death, lung cancer - contains material allegations of
addiction. These allegations are an inherent part of the harm suffered and a necessary
step in defeating the industry's affirmative defenses. Under S. 1530 the plaintiff would
be left with the choice of omitting an important element of the case or including the
addiction claim and losing a pre-trial motion to dismiss the suit. Therefore, it could be
argued that most plaintiffs (other than non-smokers claiming environmental tobacco smoke
injuries) will be foreclosed from effectively pursuing lawsuits for their injuries.11 Thus a broad reading of "addiction and
dependence" claims could undermine the "preservation" of all individual
personal injury claims.
Punitive Damages - Section 257(b)
Punitive damage awards are prohibited for the industry's past conduct.
Section 257(b).12 Instead S. 1530 attributes $95
billion of the tobacco industry's required payments to punitive damages to be paid over 25
years. Section 101(a)(2)(B). If punitive damages are part of the $398.3 billion in
payments, the $303.3 billion attributed to compensatory damages (section 101(a)(2)(A)) is
a remarkably low figure for the industry to pay. The "global settlement" figure
of $368.5 billion was arrived at as compensation only for the State Attorney General suits
and the Castano class action suits; it should not be viewed as compensation for any
claims by the United States government or other plaintiffs and potential plaintiffs not
represented at the bargaining table (e.g., victims of environmental tobacco smoke,
individuals, local governments, union and pension funds). A recent study showed that state
Medicaid payments alone equal $12 billion a year. Multiplied by the twenty-five years of
industry litigation relief contemplated in S. 1530 would come to $300 billion. Therefore,
merely reimbursing state Medicaid claims would absorb seventy-five percent of the
industry's payments.
In addition, the Centers For Disease Control and Prevention has
estimated that the cost of tobacco-related disease and death costs America $50 billion in
direct health costs each year, and an additional $50 billion in indirect costs each year.
The annual payments required in S. 1530 range from $9.7 billion to $16.5 billion. Since
the total payment of $398.3 billion falls short of the CDC's estimate of the compensation
required, it is hard to justify attributing any of it to punitive damages. To the extent
that tobacco industry liability is capped at all, the figure should be raised dramatically
or the advocates of the $398.3 billion should explain why they are accepting such a small
amount.
A further danger of prohibiting punitive damages is that as a practical
matter it would deny individual plaintiffs a meaningful opportunity to sue the industry.
Even if plaintiff attorneys receive a high contingency fee, compensatory damages for most
smokers will not produce the economic motivation for the attorneys to represent injured
parties if there are no punitive damages. The risks of losing the cases are too high,
particularly considering S. 1530's other procedural hurdles.
Joint Liability for Signatory Manufacturers - Section 257 (d)
Section 257 (d) establishes rules regarding the relationship
among defendants in future tobacco litigation. Tobacco company signatories of the National
Tobacco Control Protocol will "agree to joint sharing of liability." Section
257 (d).13 Because the liability burden is shared
jointly by all signatories of the National Tobacco Control Protocol, and not just by named
defendants, each plaintiff will face the full litigation power of the entire industry. The
General Patton strategy is statutorily mandated under S. 1530.
An additional procedural problem for plaintiffs is presented by the
requirement that "[a]ctions involving both signatories and nonsignatories shall be
severed". Section 257(d). This means plaintiffs would have to try their case twice
(with all the attendant expense), and that both signatory and nonsignatory defendants
would be able to mount defenses shifting blame to the missing party.
Limitations on Enforcement - Section 255 and Section 257(h)
The civil liability section of S. 1530 applies to "the enforcement
of all judgments and settlements with respect to tobacco claims maintained against
participating manufacturers." Section 255(a) (emphasis added). A claim that is not
yet a "final judgment or final settlement" is explicitly required to conform to
the Act in order to be eligible for monetary payments. Section 257(h).14 Two separate provisions of S. 1530 require the judgment or
settlement to quote language from S. 1530 or they "shall not be valid or
enforceable." Section 257(h)(3) and 255(c ). Section 257(h) also removes any
requirements for "the posting of a bond" or any "penalt[ies] or enhanced
interest" if a judgment is appealed. Section 257(h)(5). This will encourage the
industry to continue to pursue its war of litigation attrition, including appealing every
case to the Supreme Court, however frivolous their grounds. This vitiates the salutary
purposes of the appeal bond, penalty, and enhanced interest statutes designed to deter
abuse of judicial process.15
Even apparent courtroom victories would be imperiled. Senate 1530
defines a "final judgment" as a judgment where "all rights of appeal or
discretionary review" are at an end. Section 251(1). Thus, a case like Carter v. Brown and
Williamson, Inc., (Fla. 4th Cir. Ct., Case No. 95-00934-CA, August 9,
1996) (a jury award of $750,000 to a smoker who died of cancer) currently on appeal by the
industry, would not be a final judgment and would need to conform to the complex and
difficult payment provisions of S. 1530.
In addition, section 257(h) repeats the limitation of enforcement
requirements of Section 255(b) and (c ). It is not clear if this was for some unknown
purpose, or merely an oversight. Section 257 also includes a requirements that the
Secretary of the Treasury certify that collection of judgment procedures have been met
(e.g., availability of funds) 257 (h)(2). 16
The Limitations on Enforcement section is exactly what it bills itself
as: it places overly complex and unnecessary barriers in the path of a plaintiff who has
been lucky enough to actually win damages against a tobacco signatory under S. 1530.
Sections 255 and 257(h). The barriers would even apply to cases where a plaintiff has
already won a jury verdict, and potentially even settlements agreed to by the tobacco
industry but not yet paid at the time of S. 1530's enactment.
Procedures for Collection of Judgment - Section 257 (i)
Under Section 257(i)17 creates a
complex system of filings and certifications that a plaintiff must pursue in the maze of
the federal bureaucracy. Various government officials are required to make preliminary
decisions with the result being that payment may not occur for well over a year after the
judgment or settlement is finalized. The claimant must register a claim with the United
States Attorney General, the Attorney General must determine if the "requirements of
this section have been met" (this may mean determinations for form and whether
aggregate annual payment caps have been reached), the Secretary of Health and Human
Services (HHS) must certify such a claim, the Secretary of Treasury must certify that this
chain has been properly followed (see Section 257(h)(2)), and the manufacturer has
one year from certification by HHS to make payment. In addition, payment is not required
unless the Attorney General publishes the certification in the Federal Register. The one
year window for payment by the manufacturer may have an affect on the aggregate annual cap
requirements of 257(j) as discussed below.
This cumbersome bureaucratic approach delays payments of judgments even
in the unlikely event that a plaintiff wins a case and all appeals have been exhausted.
Also, the plaintiff must rely on the government to take all actions in a timely fashion or
risk losing the opportunity of payment, through no fault of the plaintiff. Furthermore,
the entire system of checking and double checking is unnecessary since the payment should
come from the defendants and not the Trust Fund. Defendants should make timely payments to
the plaintiff and then receive a credit against their payments into the system as called
for in section 257(j)(3). S. 1530 has engineered a time consuming, overly bureaucratic
system fraught with potential delays and pitfalls that deny a successful plaintiff the
chance to be reimbursed in a timely fashion or perhaps at all.
Limitations on Payments - Section 257(j)
There also is an annual aggregate cap on payments that signatories, as a
group, are required to pay that "shall not exceed an amount equal to thirty-three
percent of the annual fee payments required of all such signatories under section
102" (Licensing Fees Payment Schedule). Section 257(j).18
The Attorney General determines whether that amount has been exceeded based on the
certifications by the Secretary of HHS, in accordance with 257(i)(3). If the thirty-three
percent figure is exceeded, then the excess payments are carried forward to the following
year. Priority of payment is apparently on a first-come-first-serve basis, except if there
are certified obligations in excess of the thirty-three percent figure. Then claimants due
to receive more than $1 million are capped at $1 million with the remainder due in
following years, interest free. As a practical matter, all payments above one million
dollars would probably be delayed until the Attorney General could determine whether the
thirty-three percent figure would be exceeded.
The Attorney General's determination of the amounts of yearly payments
under 257(j)(1) may be called into question in light of the ability of the participating
manufacturers to have one year to pay. 257(i)(4). The Attorney General must compare the
thirty-three percent figure to amount of annual payments, and that may be difficult if the
Attorney General does not know which year a manufacturer will make the actual payment.
This issue can be resolved if the Attorney General determination is "based on
certifications issued under subsection i(3)". See 257(j)(1). The problem of
allocating payments to the proper year remains, however, if the Attorney General also
takes actual payments into account as this subsection suggests.
Importantly, the signatories receive a credit of 80 percent of every
judgment or settlement "to be applied against the amount owed by such signatories to
the National Settlement Trust Fund"(NSTF). The signatories are required to make the
payments to the NSTF regardless of settlements or judgments. The 80% credit means they
will in effect only have 20% of all judgments or settlements at risk. Deterrence is
reduced when legislation gives potential wrong-doers cash credits.
Conclusion
The effect of the changes in the civil liability system wrought by S.
1530, on a legal and practical basis, would be extensive civil legal immunity for the
tobacco industry. The legal bars and prohibitions against successful methods and
strategies for bringing suit against the tobacco industry will stop most lawsuits cold.
Moreover, the practical implications of S. 1530's procedural barriers will chill the
initiation of lawsuits for those claims that are permitted. Senate1530 clearly limits the
possible universe of "permissible parties" to individuals suing on their own
behalf for "tobacco-related injuries," third party payor claims pending as of
June 9, 1997, and third party payor claims if based on subrogation of an individual's
claims. Section 257(e)(1). Yet, other sections of S. 1530 so severely hobble the
"permissible parties" likelihood of success in litigation as to impede even the
filing of such suits.
Senate1530 deprives plaintiffs of the opportunity to use any theory or
strategy that has proven successful in recent litigation. Individuals can not base a claim
on "addiction and dependence" which is a crucial element of any suit for health
problems suffered over a long period of tobacco use. Individuals cannot aggregate their
claims through class actions, joinder, or otherwise to offset the enormous resource and
financial advantages a multi-billion dollar multi-national industry has when litigating
against an individual. An individual cannot receive punitive damages, thus, in a practical
sense, depriving the plaintiff of effective counsel because of the large disincentive for
attorneys to take on such risky cases for small recoveries. This is particularly true when
the plaintiff can expect a General Patton defense and when the legal playing field is
tilted in favor of the tobacco industry. Thus, preserving the rights of individuals to
sue, without allowing them to use the tools necessary for success, is merely preserving a
facade.
Significantly, these limitations apply not just to the industry's past
conduct (section 257), but to future conduct as well (except punitive damages are
available for future misconduct). Section 258(a) and (b). Thus, the ordinary tools of the
civil justice system designed to deter unethical behavior and bad corporate citizenship
will not be available to deter the tobacco industry from continuing the same ugly
practices of the past 40 years.
1 This paper is a
practical application to S. 1530 of the ideas discussed in Changes to the Civil Justice
System Under the Proposed Tobacco Settlement, Working Paper #4 in a Series on Legal
Issues in the Proposed Tobacco Settlement, Richard A. Daynard and John Rumpler, August 13,
1997 (hereinafter Working Paper #4).
2 This paper does not discuss the effect of S.
1530 on the civil justice system as it relates to federalism issues in sections 260-263,
including issues of abstention, injunction of state court proceedings, certification,
removal, and prohibition of state actions. These issues are addressed in Judicial
Federalism and S. 1530, Working Paper #5 in a Series on Legal Issues in the Proposed
Tobacco Settlement, Wendy Parmet, February 17, 1998 (hereinafter Working Paper #5).
3 Haines v. Liggett Group, Inc., 814 F.
Supp. 414, 421 (D.N.J. 1993) (quoting industry attorney J. Michael Jordan).
4 SECTION 256. GENERAL IMMUNITY.
(a)STATE ATTORNEY GENERAL ACTIONS-
(1)PENDING ACTIONS- Health-related civil actions that have been
commenced by a State or local governmental entity, or on behalf of such an entity, against
a manufacturer that is a signatory to the National Tobacco Control Protocol under section
201 and that are pending on the date of enactment of this Act are terminated.
(2)FUTURE ACTIONS- A manufacturer that is a signatory to the National
Tobacco Control Protocol under section 201 shall be immune from any civil action commenced
after the date of enactment of this Act by a Federal, State, or local governmental entity,
or on behalf of such an entity, for all health-related claims arising from the use of a
tobacco product.
(b)OTHER ACTIONS- (1)CLASS ACTIONS-
(A)PENDING ACTIONS- Class actions for claims arising from the use of a
tobacco product that are pending against a manufacturer that is a signatory to the
National Tobacco Control Protocol under section 201, are terminated.
(B)FUTURE ACTIONS- A manufacturer that is a signatory to the National
Tobacco Control Protocol under section 201 shall be immune from any class action commenced
after the date of enactment of this Act for all claims arising from the use of a tobacco
product.
(2)ADDICTION AND DEPENDENCE CLAIMS-
(A)PENDING ACTIONS- Any civil action for claims based on addiction to or
dependence on a tobacco product that are pending against a manufacturer that is a
signatory to the National Tobacco Control Protocol under section 201, are terminated.
(B)FUTURE ACTIONS- A manufacturer that is a signatory to the National
Tobacco Control Protocol under section 201 shall be immune from any civil action commenced
after the date of enactment of this Act for all claims based on addiction to or dependence
on a tobacco product.
(c)PRESERVATION- All personal injury claims arising from the use of a
tobacco product by an individual shall be preserved.
5 (2)FUTURE ACTIONS- A manufacturer that is a
signatory to the National Tobacco Control Protocol under section 201 shall be immune from
any civil action commenced after the date of enactment of this Act by a Federal, State, or
local governmental entity, or on behalf of such an entity, for all health-related claims
arising from the use of a tobacco product.
6 (b) (1)CLASS ACTIONS . . . (B) FUTURE
ACTIONS- A manufacturer that is a signatory to the National Tobacco Control Protocol under
section 201 shall be immune from any class action commenced after the date of enactment of
this Act for all claims arising from the use of a tobacco product.
7 256(b) (1) CLASS ACTIONS- (A) PENDING
ACTIONS- Class actions for claims arising from the use of a tobacco product that are
pending against a manufacturer that is a signatory to the National Tobacco Control
Protocol under section 201, are terminated.
(B) FUTURE ACTIONS- A manufacturer that is a signatory to the National
Tobacco Control Protocol under section 201 shall be immune from any class action commenced
after the date of enactment of this Act for all claims arising from the use of a tobacco
product.
8 257(c) INDIVIDUAL TRIALS- No class action
suits, joinder of parties, aggregation of claims, consolidation of actions,
extrapolations, or other devices to resolve cases other than on the basis of individual
actions shall be permitted without the consent of the defendant. Any defendant, in an
action that involves a violation of this subsection, may remove such action to an
appropriate Federal court.
9 See Amchem Products, Inc., v. Windsor,
117 S. Ct. 2231 (1997); John C. Coffee, Jr., Class Wars: The Dilemma of the Mass Tort
Class Action, 95 Colum. L. Rev. 1343, 1349 (1995) ("Increasingly, defense counsel
have come to understand that the mass tort class action can be utilized to obtain cheap
settlements that pay little attention to the interests of certain structurally
underrepresented classes of claimants).
10 256(B)(2) ADDICTION AND DEPENDENCE CLAIMS-
(A) PENDING ACTIONS- Any civil action for claims based on addiction to or dependence on a
tobacco product that are pending against a manufacturer that is a signatory to the
National Tobacco Control Protocol under section 201, are terminated. (B)FUTURE ACTIONS- A
manufacturer that is a signatory to the National Tobacco Control Protocol under section
201 shall be immune from any civil action commenced after the date of enactment of this
Act for all claims based on addiction to or dependence on a tobacco product.
11 Tobacco industry representatives have
claimed that similar language in the June 20th agreement was intended only to
affect Castano type class action claims where addiction was the injury.
Nevertheless, the language of S. 1530 eliminates all such claims, without reservation.
12 257(b) PUNITIVE DAMAGES PROHIBITED- No
punitive damages shall be awarded in any claim described in subsection (a).
13 (d)JOINT SHARING AGREEMENT- As part of the
National Tobacco Control Protocol under section 201, all signatories shall agree to the
joint sharing of any civil liability for actions for damages arising from the use of
tobacco products. Such signatories shall not be jointly and severally liable for damages
involving nonsignatories. Actions involving both signatories and nonsignatories shall be
severed.
14 Section 257(h)LIMITATION ON ENFORCEMENT-
(1)IN GENERAL- A judgment or settlement concerning any tobacco claim in
a civil action permitted under section 256 that is not a final judgment or final
settlement as of the effective date of this Act shall not be enforced by any court except
in accordance with this section.
(2)OBLIGATIONS- No obligation to pay any amount under a judgment or
settlement to which this section applies shall arise, nor shall a lien, attachment,
garnishment or other means of collecting or securing payment under any such judgment or
settlement issue, become operative, or be enforced, except to the extent that the
Secretary of the Treasury certifies that the requirements of subsection (i) have been met.
(3)REQUIREMENT OF STATEMENT- A judgment to which this section applies
that requires a monetary payment shall not be issued or entered unless such judgment
contains a statement, on the face of the judgment, of the following:
"Satisfaction of this judgment is subject to the requirements of
section 257 of the PROTECT Act."
(4)ENFORCEMENT- A judgment to which this section applies that does not
contain the statement required under paragraph (3) shall not be valid or enforceable.
(5)APPEAL- The posting of a bond or the application of any form of
penalty or enhanced interest may not be required in connection with the appeal of any
judgment to which this section applies.
15 The broad application of the enforcement
and collection requirements to "all judgments and settlements" means that
even judgments or settlements achieved prior to the date of enactment, but not yet paid,
must comply with the Act in order to enforce and collect specified monetary damages.
Parties to prior settlements could not have been aware of this requirement of S. 1530,
therefore, no prior tobacco judgment or settlement contains the required language. The
result is that any money damages gained prior to S. 1530's enactment would be "rolled
back." This would include California local governments' settlement in Mangini v.
R.J. Reynolds Tobacco Co., the Broin v. Philip Morris flight attendants
settlement, and the state settlements in Mississippi, Florida, Texas and Minnesota. (but
see above for discussions of whether cases such as Mangini and Broin are
health-related tobacco claims). To the extent that the settlements can be amended to
accommodate adding the special language, they might be considered other than "final
settlements," and thus subject to the provisions of S. 1530. Section 255(b).
16 An additional problem arises due to a
disparity between the language of the required statement in Section 255( c)(2) and section
257(h)(3) which leads to an odd result. Section 255 (c ) (2) requires the following
language: "Satisfaction of this judgment is subject to the requirements of the
PROTECT Act"; section 257(h)(3) requires this slightly different language:
"Satisfaction of this judgment is subject to the requirements of section 257
of the PROTECT Act"(emphasis added). Each section prohibits entry of judgment unless
the judgment contains "on its face" the required statement. ("A judgment .
. . that requires a monetary payment shall not be issued or entered unless
such judgment contains a statement . . . of the following" sentence. (emphasis
added)). Therefore, to be effective, a judgment must contain both of the differing
"magic words." A problem might arise if one, but not both, "required
statements" was included in a judgment. Although a court might be satisfied with only
one of the almost identical statements it might instead find that the statute's language
regarding inclusion of both statements is mandatory, thus rendering a judgment omitting
one statement to be unenforceable. An unwary plaintiff might stumble here; despite having
won a judgment the plaintiff would not be able to collect.
17 Section 257(i) PROCEDURES FOR COLLECTION OF
JUDGMENT-
(1)CERTIFICATION- A participating manufacturer shall not make, or be
required to make, any monetary payment with respect to any judgment or settlement to which
this section applies unless the Attorney General acting as Trustee--
(A)certifies that the requirements of paragraph (2) have been met with
respect to such payment; and
(B)publishes such certification in the Federal Register.
(2)FILING WITH ATTORNEY GENERAL-
(A)BY PARTY CLAIMING ENTITLEMENT- Any party claiming an entitlement to
monetary payment under a final judgment or final settlement of a tobacco claim to which
this section applies shall register such claim with the Attorney General acting as Trustee
by filing a true and correct copy of the final judgment or final settlement agreement with
the Attorney General and providing a copy of such filing to all other parties to the
judgment or settlement.
(B)OF PAYMENT- Any party making a payment described in this subsection
shall certify such payment to the Attorney General by filing a true and correct copy of
the instrument of payment and a statement of the remaining unpaid portion, if any, of the
final judgment or final settlement involved with the Attorney General and providing a copy
of such filing to all other parties to the judgment or settlement.
(3)DETERMINATIONS- Not later than 30 days after the date of which the
Attorney General receives a registration of a claim under paragraph (2)(A) the Attorney
General shall determine whether payment of such claim is permitted under this section. If
the Attorney General determines that such claim is payable under this section, the
Secretary shall certify such claim.
(4)PAYMENT- Subject to the limitations contained in subsection (j), a
participating manufacturer to which a claim that is certified under paragraph (3) applies,
shall make payment on such claim not later than 1 year after the date of such
certification.
18 Section 257(j) LIMITATIONS-
(1)AGGREGATE ANNUAL CAP- With respect to a calendar year, the aggregate
amount of all tobacco claims judgments or settlements to which this section applies, that
the signatories of the National Tobacco Control Protocol under section 201 shall be
required to pay, shall not exceed an amount equal to 33 percent of the annual fee payments
required of all such signatories under section 102 for the year involved. The Attorney
General, based on certifications issued under subsection (i)(3) shall make determinations
with respect to the amounts of payments to be made in a calendar year.
(2)PAYMENT OF EXCESS- If the amount of the judgments and settlements
described in paragraph (1) exceed an amount equal to 33 percent of the annual fee payments
required under section 102 for the year involved, such excess amount shall be paid in the
following year.
(3)EFFECT OF SETTLEMENT- The signatories described in paragraph (1)
shall receive a credit, to be applied against the amount owed by such signatories to the
National Tobacco Settlement Trust Fund under section 102 for the year involved, in an
amount equal to 80 percent of the aggregate amounts paid under judgments or settlements of
tobacco-related claims to which this section applies for such year.
(5)(SIC) INDIVIDUAL CAP- With respect to an action to which this section
applies, any amount awarded in excess of $1,000,000 may be paid in the year following the
year in which the judgment or settlement was entered, except that this paragraph shall not
apply if all other awards under judgments or settlements entered in the first year can be
paid without exceeding the aggregate annual cap under paragraph (1). Such excess amount
shall carry over from year to year with no payments in any single year exceeding
$1,000,000 and no interest accruing on such amounts until such time as the annual
aggregate cap is not exceeded.
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