According to an article in the Miami Herald, a movement is underway in the Florida legislature to cap the amount of bonds that the tobacco companies must pay in appealing smokers' lawsuits against them. The purpose of the proposed $100 million cap is to protect the hundreds of millions of dollars in payments that the tobacco companies make to the state each year under the terms of a settlement between Florida and Big Tobacco of its own litigation against the industry.
According to the article: "Bracing for the possibility of big verdicts in nearly 9,000 lawsuits in Florida brought by sick smokers, Big Tobacco is backing legislation that sets a $100 million cap on the collective amount of bonds that would have to be posted to file appeals. Sen. Mike Haridopolos, a Melbourne Republican, said he sponsored the bill because of concerns that large verdicts could threaten tobacco companies' ability to pay hundreds of millions to Florida each year under a landmark settlement reached in 1997. ''If they have all these verdicts against them, they could be forced to file for bankruptcy and we wouldn't get any of those settlement dollars,'' Haridopolos said. Losing parties that appeal a judgment are required to post a bond to cover the full amount of damages plus interest. The bond, usually purchased from an insurance company, guarantees the judgment will be paid if the appeals fail. Haridopolos' bill would eliminate the requirement that tobacco companies post a bond in each case once the value of the bonds reaches $100 million. The limit applies to tobacco companies collectively, not individually. Lawyers for smokers or their survivors contend the tobacco companies face no financial threat because the premium on an appeal bond is generally a fraction of the damages. ''They basically get a free appeal' after the $100 million is reached, said Stephen Barnes, a Tampa lawyer whose firm is handling more than 450 cases. 'This is an extraordinary handout and gift.'''
The Rest of the Story
This unprecedented, proposed bailout of Big Tobacco comes about solely because the state entered into a financial partnership with the tobacco companies by virtue of its settlement of litigation against the companies, in which Florida agreed to drop the lawsuit in return for the payment of hundreds of millions of dollars annually.
It was a brilliant maneuver by the tobacco companies, because they are essentially buying their way out of any serious future threat on their profits. As this story illustrates, state policy makers are jumping at even minor perceived threats to the financial stability of the companies in order to protect them.
This makes the bailout of the bank and car industries look small. Not only is the state bailing the companies out of trouble, it has forged a financial partnership with the companies which ensures that the state will never take any action that would seriously threaten Big Tobacco profits. In other words, the state will never take any action taht would seriously make a dent in smoking rates in the Sunshine State.
This is precisely why the Master Settlement Agreement was such a public health disaster, and why it is such a bad idea to tie cigarette tax revenues to critical government programs, such as children's health insurance (SCHIP). It creates a true financial partnership between the federal or state government and Big Tobacco. It removes any incentive for the government to take an action that would actually make a dent in smoking rates. It results in policy makers bailing out the industry and putting industry profits ahead of the protection of the public's health.
The tremendous public health damage that is done by the long-term financial partnership that is created between the government and Big Tobacco far more than offsets the short-term gains from the cigarette tax increase.
Thus, cigarette taxes, like state tobacco settlements, far from being a "win-win" situation for public health, may in some cases be a "win-lose" proposition.
It is unfortunate that tobacco control groups are unable to see the damage to public health protection that these policies are doing.