Friday, June 01, 2012

Minnesota Supreme Court Decision Shows Folly of State Tobacco Settlements; Tobacco Companies Outsmarted Attorneys General at Every Turn

Earlier this week, the Minnesota Supreme Court threw out a class action lawsuit against Philip Morris which alleged that the tobacco company defrauded consumers by dishonestly marketing Marlboro Lights as a safer cigarette. In the decision, the Court ruled that the 1998 settlement agreement between the state of Minnesota (through its Attorney General) and the major tobacco companies settled all future claims, even by private litigants, based on state consumer protection laws (which were the basis for the plaintiffs' complaint in the class action lawsuit).

Minnesota had filed suit against the major tobacco companies to recover the costs of treating state smokers for smoking-related illnesses, as did all other states. Unlike 46 of the states, Minnesota settled its lawsuit separately, not with the Master Settlement Agreement. In the settlement agreement, the state agreed to release the tobacco companies from all future claims by the state for tobacco-related damages in return for annual payments of millions of dollars.

The key question in the litigation was whether or not in signing the agreement, the state released only its own future claims against the companies, or whether it also released claims by individual (private) litigants. In the crux of the decision, the Court found that: "the right of a private litigant to bring a lawsuit under subdivision 3a is part of the broader authority of the State AG to bring a lawsuit under subdivision 3 to enforce all remedies available to it. ... We conclude that paragraph III.B. of the Settlement Agreement releases respondents’ subdivision 3a consumer protection claims, and therefore expressly determines the right of respondents to bring those claims."

In other words, in settling its future claims under state consumer protection law, the state was also settling future claims of private litigants.

There is a dissenting opinion regarding whether the Settlement Agreement precludes claims stemming from future tobacco industry behavior (occurring after the settlement date), but the Court rules that claims stemming from both past and future behavior are precluded.

The Rest of the Story

I have already written extensively about the Master Settlement Agreement, opining that it was an example of the Attorneys General being outwitted by Big Tobacco, and selling out the public's health for money and political gain. I have argued that the settlement was one of the worst public health blunders of my lifetime.

Today's story suggests that the individual state settlements were also a blunder and I think demonstrates that the Attorneys General were uniformly outwitted by the tobacco companies, across the board.

The state of Minnesota could have insisted upon retaining the rights of individuals to file actions against tobacco companies under state consumer protection law, but chose not to. The Supreme Court's decision emphasizes this point - that the settlement included very broad language which settled all claims, limited almost only by the subject matter of the claims. The state knowingly entered into this agreement. It seems disturbing that the state would bargain away the rights of individual citizens in return for monetary payments, but this is exactly what Minnesota, and apparently many other states did.

I have stated from the beginning my opinion that from the perspective of the Attorneys General, these lawsuits were never about protecting the public's health. They were about seizing upon an opportunity for monetary gain for the states, and political gain for the Attorneys General. This is seen most readily in the actions that the Attorneys General have taken to interfere with other tobacco litigation in order to protect tobacco industry sales. For example, many of the Attorneys General intervened in an Illinois tobacco court case, submitting an amicus brief to a trial court judge urging him to reduce the $12 billion appeal bond he had ordered Philip Morris to pay, as specified by Illinois law, after the company was found guilty in a class-action lawsuit.

Similarly, Attorney General Bob Butterworth urged the Florida legislature to adopt a law capping the bonds that the tobacco companies would have to pay in the case of a huge punitive damage award in the Engle case, which is exactly what occurred (both the huge punitive damage award and the enactment of the law that protected the tobacco companies, limiting the amount of the appeals bond). Thus, it is clear that Butterworth's primary motivation was not protecting the public's health, but protecting the fiscal health of the state.

This action, spearheaded by the Attorney General who signed the settlement of his state's lawsuit with the tobacco industry and claimed to be motivated solely by public health concerns, turned out to give momentum to a slew of similar legislation in other states, which has limited the amount of money tobacco companies need to pay to appeal huge punitive damages awards.

The rest of the story is that the Master Settlement Agreement was a huge public health blunder, the individual state settlements were not much better, and the Attorney Generals have done to the rights of individual citizens what they allege the tobacco companies had been doing to them.

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