Higher tobacco penalty sought; Federal lawsuit could far exceed $246 billion to be paid to states; 'An even stronger case'


Damages sought in the tobacco lawsuit being prepared by the U.S. Justice Department would exceed all the states' claims combined, potentially forcing cigarette makers to pay billions more and to accept further restrictions on advertising and federal regulation of nicotine, experts said yesterday.

"The value of the claim will be tremendous," said Richard A. Daynard, a law professor at Northeastern University in Boston and chairman of the Tobacco Products Liability Project. "If the suit gets by the initial motions to dismiss -- and I think it will -- the industry will have to settle."

President Clinton announced the planned lawsuit Tuesday night in a late addition to his State of the Union address.

Yesterday, the tobacco industry derided the idea as a political stunt without a sound legal basis.

"The industry intends to vigorously defend itself," said Steve Duchesne, a tobacco industry spokesman in Washington. "The federal government put out Surgeon Generals' reports on the hazards of smoking since 1964 and mandated warning labels on cigarette packs. It can't say now that it wasn't aware of those hazards."

The tobacco industry already has agreed to pay $246 billion over 25 years to settle the claims of all 50 states, who sought compensation for money paid under Medicaid, the joint federal-state program providing health care to the poor. The Justice Department's lawsuit would seek to recover the cost of treating smoking-related illnesses under other federal programs: Medicare, which covers the elderly and disabled, and health programs for veterans, members of the military, federal workers and Native Americans, officials said yesterday.

Together, specialists estimated yesterday, those costs total about $15 billion a year, or substantially more than the $10 billion a year to be paid by the industry under the state Medicaid settlement.

Clinton said in his speech that smoking has cost "hundreds of billions of dollars" under Medicare and other federal programs and added: "You know, the states have been right about this: Taxpayers shouldn't pay for the costs of lung cancer, emphysema and other smoking-related illnesses. The tobacco companies should."

Officials said yesterday it will be several months before any lawsuit is ready for filing. In a hastily prepared fact sheet, the Justice Department said yesterday it is "creating a task force to assess the various legal theories to determine which would be most appropriate to recover federal funds paid out as a result of tobacco-related illnesses."

But the department said the states' precedent is encouraging. "As the successful state lawsuits demonstrated, the tobacco industry's potential liability for government-provided health care is unprecedented," the statement said.

The Justice Department said it may proceed under the Medical Care Recovery Act and the Medicare Secondary Payer Act, which allow the government to collect money paid under Medicare to treat injuries caused by others.

John Banzhaf, a George Washington University law professor who heads Action on Smoking and Health, said those laws create solid legal ground for a federal lawsuit. "The federal government has an even stronger case than the state governments," he said, noting that Maryland required special legislation to shore up its lawsuit.

Other legal observers were not so sure. "Neither of those federal statutes were created with anything like this lawsuit in mind," said Stephen D. Sugarman at the University of California at Berkeley. He added: "That doesn't mean it's totally implausible."

Maryland Attorney General J. Joseph Curran Jr. said yesterday he does not expect a federal lawsuit to have any impact on Maryland's share of the Nov. 21 tobacco settlement, at least $4.2 billion over 25 years, which may begin to flow to the state as early as August. Maryland is also applying Friday for a share of an additional $8 billion in bonus money for states that filed early and had strong cases, he said.

"I do applaud what the president is doing," Curran said. "The responsible party ought to pay for the damages, and that's the tobacco companies."

The federal government says it does have the right to claim a share of the $246 billion the states won, because it has divided the cost of Medicaid with the states in roughly equal shares. But Curran said he still has had no word on whether Washington will demand a share of the settlement.

The idea of a federal lawsuit to recover Medicare and other smoking-related costs has been discussed inside the departments of Justice and Health and Human Services since 1994, when the first state lawsuits were filed. But at that time, many legal experts were skeptical that the states' action would succeed, and attorneys handling the states' cases say they could not interest the federal government in pursuing a claim.

After the major tobacco companies reached a tentative settlement with several state attorneys general in June 1997, the Clinton administration worked with Congress on comprehensive tobacco legislation. A bill sponsored by Arizona Republican Sen. John McCain would have paid the states more than $500 billion, raised cigarette prices, banned some advertising and granted the Food and Administration some power to regulate tobacco.

But after a tobacco industry advertising blitz against it, the McCain bill died in committee early last summer and exploration of a possible federal lawsuit became more serious. After the state settlement was announced in November, several members of Congress urged Attorney General Janet Reno to file suit, officials said yesterday.

In a separate effort, the Justice Department has for three years been conducting a criminal investigation of the tobacco industry for fraud and other violations. No tobacco company has been charged, though a small biotechnology company that worked on high-nicotine tobacco has admitted guilt and is cooperating with the investigation.

Pub Date: 1/21/99

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