Tobacco firms, Miss. seal deal 4 cigarette makers to pay $3.4 billion to state over 25 years


In a move that could affect the proposed nationwide tobacco settlement, four major cigarette producers agreed yesterday to pay Mississippi $3.4 billion over 25 years to resolve a lawsuit over health care costs associated with smoking.

The agreement was the first formal settlement of a lawsuit between tobacco companies and any of the 40 states that have filed actions against them to recover Medicaid funds spent on smoking-related illnesses. Mississippi's case was set to go to trial next week. Similar settlements are expected soon with Florida and Texas, the next states to have trial dates, several lawyers close to the talks said.

Maryland Attorney General J. Joseph Curran Jr. praised Mississippi's agreement but said no such separate deal is likely in Maryland, where the tobacco lawsuit is not scheduled to come to trial until January 1999.

"It's good news, obviously, for Mississippi taxpayers. But it's also a good sign that the tobacco companies are serious about resolving these cases," said Curran, who spoke with Mississippi Attorney General Michael Moore and other attorneys general in a conference call late yesterday.

He said he expects similar separate settlements to be reached in Florida, which has an August trial date, and perhaps in Texas, which has a trial scheduled for October. But in other states, including Maryland, both sides are likely to continue to prepare for trial while awaiting a decision by Congress on a comprehensive, national tobacco settlement, he said.

Under yesterday's agreement, Mississippi would immediately receive $170 million as its share of the industry's initial $10 billion payment, which is part of the national $368.5 billion settlement proposal reached two weeks ago. That is a favorable cut for Mississippi, given its size and medical expenses, the lawyers said.

In announcing yesterday's deal in Jackson, Miss., Moore said the resolution of the case guaranteed Mississippi proceeds from the national agreement, regardless of the broader proposal's fate. That deal, if approved by Congress, would resolve all existing state lawsuits.

"This is a great day," said Moore, who was a principal architect of the nationwide settlement plan. "We have defeated the giant tobacco companies."

Maryland's Curran said that under some allocation formulas, based on the states' respective shares of population and Medicaid spending, Mississippi could receive as little as 0.7 percent of a national settlement. So the deal announced yesterday could be superseded by a comprehensive agreement far less generous to Mississippi, he said.

Curran, like about half a dozen attorneys general among the 40 suing cigarette manufacturers, has said he is not satisfied with the proposed national settlement. He reiterated yesterday his view that the draft settlement limits too severely the Food and Drug Administration's right to regulate nicotine and places undue restrictions on class-action lawsuits and punitive damages.

Moore has avidly lobbied Congress on behalf of the broader tobacco proposal and said yesterday that he will continue to do so because the Mississippi settlement does not give the state the public health benefits included in the broader package. Those include a ban on advertising figures like Joe Camel and the Marlboro man as well as a system under which cigarette manufacturers would pay substantial fines if youth smoking was not reduced.

Still, some say Moore's political effectiveness as an advocate of the tobacco settlement in Congress could be undercut now that he has made a separate pact with the industry. Also, yesterday's agreement could set off a scramble by other states for settlement funds, a development that could weaken the tobacco proposal in Congress. Federal lawmakers are not expected to take up the issue for months.

Industry officials are apparently leery of that possibility. In a prepared statement, Lance Morgan, a tobacco industry spokesman, said the Mississippi settlement underscored the need for Congress to approve the settlement plan.

"The settlement resolves certain legal and financial issues in one state, but it does not and could not address broader issues of concern in Mississippi and throughout the nation," such as reducing youth smoking, Morgan said.

While officials of Florida and Texas have said they are not close to reaching settlements of their Medicaid lawsuits with the tobacco industry, lawyers close to those cases said they expect them to be resolved soon.

Yet even if those cases were settled, the industry would face major problems because Minnesota, perhaps the most vocal critic of the tobacco proposal, has the next trial date in January. And if Congress had not completed work on a bill by then, the state would be expected to go to trial or press for major concessions from the industry.

"The over $3 billion settlement has set a minimum floor," said Hubert H. Humphrey III, Minnesota's attorney general.

The companies involved in yesterday's agreement were Philip Morris Cos.; RJR Nabisco Holdings Corp., the parent company of R. J. Reynolds Tobacco Co.; BAT Industries PLC, the parent company of Brown & Williamson Tobacco Corp.; and the Loews Corp., the parent company of Lorillard Corp.

In 1994, Mississippi became the first state to file a Medicaid-related lawsuit against the tobacco industry. It sought to recover $940 million. While both Moore and cigarette company lawyers had publicly declared themselves eager for a legal battle, both sides were known to privately dread the prospect of losing.

Morgan said that along with receiving $170 million July 15, Mississippi would receive annual payments ranging from $68 million to $110.5 million over the next four years. The state would then receive $136 million annually for every year that cigarettes continued to be sold in the United States.

By contrast, Mississippi's state budget for fiscal 1998, which began Tuesday, is $8.2 billion, according to the state's budget office.

Pub Date: 7/04/97

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