ST. PAUL, Minn. -- The first state lawsuit against tobacco companies to go to trial was settled yesterday for $6.6 billion as jurors were hearing closing arguments. The agreement is likely to raise sharply the cost of future settlements between states and the tobacco industry, or of any tobacco bill in Congress.
The $6.1 billion that Minnesota will receive over 25 years under the agreement is 50 percent more than it would have gained under the settlement that tobacco companies reached in June with 40 state attorneys general.
While the agreement is with a single state, other provisions also have national implications.
The settlement was also the industry's first with a health insurer, Blue Cross and Blue Shield of Minnesota, which will receive $469 million. Last week, 38 other Blue Cross organizations -- including Maryland's -- filed similar suits against tobacco companies to recover their costs from smoking-related health care.
The five tobacco companies sued by Minnesota in its effort to recover Medicaid costs related to smoking also agreed to disband the Council for Tobacco Research, a nonprofit research group that the state accused the industry of using as a public-relations front. And, for the first time, they entered into a consent decree promising not to misrepresent the health
hazards of smoking.
Minnesota Attorney General Hubert H. Humphrey III claimed victory as he announced details of the settlement. "Today the tobacco industry has surrendered, and they have surrendered on our terms," he said.
Other opponents of the tobacco industry were disappointed that Humphrey, who had trumpeted his determination to deal the tobacco industry a punishing blow, had settled after presenting a case that was considered extremely strong.
"Of course I would have liked the case to have gone to the jury," said Dr. David A. Kessler, who as head of the Food and Drug Administration first considered regulating nicotine as a drug. "I really do believe that the state would have won -- but I understand the risks and the reasons for settling."
In explaining their decision to settle, the tobacco companies cited the odds against them in the Minnesota courtroom.
"We agreed to the settlement because we concluded that it would be extremely difficult to reach a fair outcome, based on what we believe are a series of incorrect rulings by the court
favoring the state, which in essence placed a loaded gun to our head," said a statement by R. J. Reynolds Tobacco Co., a subsidiary of RJR Nabisco Holding Corp.
The other defendants were Philip Morris; Lorillard Tobacco Co., a subsidiary of Loews Corp.; and Brown & Williamson Tobacco Corp. and its parent, BAT Industries.
Liggett Group, owned by the Brooke Group Ltd., had previously settled with the state.
After the settlement was announced, two of the 12 jurors said they doubted they would have awarded as much in damages. One of the two, David Olson, a 47-year-old who works for a heating and plumbing contractor, was one of three smokers on the jury. The other, James Livingston, who works in a welding shop, used to smoke.
Three other jurors who discussed the case said they had not made up their minds about a verdict or damages, and were disappointed not to have a chance. "We don't know who we would have held liable," said Dorothy Hallen, a 44-year-old cosmetologist. "We didn't get that far."
Minnesota's suit appeared to have many advantages, including Humphrey, an aggressive anti-tobacco attorney general; a population considered relatively liberal on anti-smoking issues; and a judge who ordered the companies to disclose thousands of secret documents and who instructed jurors they could assume that any documents withheld were harmful to the companies' case.
The documents constituted some of the most damaging evidence in the case. They are expected to figure prominently not only in other state lawsuits, but also in a Justice Department criminal investigation into whether the industry is guilty of fraud.
Minnesota had sought $1.77 billion to cover Medicaid and public assistance costs for the care of people with smoking-related illnesses, plus unspecified punitive damages. Under yesterday's agreement, it becomes the first state to receive a settlement for more than it would have collected under the $368.5 billion agreement proposed in June. According to that agreement, Minnesota would have received $4 billion -- about the same as Maryland.
Yesterday, the companies also agreed to pay $102 million to a fund for smoking cessation treatment. The industry will pay $427 million in attorneys' fees. The plaintiffs' lawyers agreed to accept that amount, 7.1 percent of the $6.5 billion, even though they had contracts promising them 25 percent of any award.
"It's a great victory, and it helps Maryland," Maryland Attorney General J. Joseph Curran Jr. said of Minnesota's settlement.
Curran particularly praised Minnesota's successful four-year campaign to unearth tobacco industry documents, which he said are proving useful as Maryland pursues its case.
"We're prepared to go to trial next April, and with those documents Maryland will have a very strong case," he said.
Of the attorneys general in the 41 states that have sued the tobacco companies to recoup health care money spent on smoking-related disease, Curran and Humphrey have been among the most outspoken critics of the proposed national settlement.
Pub Date: 5/09/98