Monday, October 24, 2005

Master Settlement Agreement May Have Provided Immunity for Tobacco Companies

An article in the Florida Coastal Law Review warns that the Master Settlement Agreement (MSA) between 46 states and the major tobacco companies may have provided substantial tort immunity for the tobacco companies, presumably an unintended effect of the Attorneys General signing this contract (see: Reeder HC. The 'law of tobacco' is a major contributing factor that hampers effective resolution to the country's tobacco problem. Florida Coastal Law Review 2004 (Fall); 6(1):17-175).

Writing in the Fall 2004 issue of the journal, Cleveland-based public interest law attorney Harold C. Reeder writes that: "the tobacco settlement may have given cigarette manufacturers some form of tort immunity. This is in effect what the appellate court in the Engle class action determined in overturning the $145 billion punitive award, holding that the tobacco settlement precluded such award. If the appellate court in Engle is correct on this issue, then this gives even more ammunition to those who criticize 'policymaking through litigation' since this preclusion of punitive damages was not clear at the time the settlement agreement was announced."

The Rest of the Story

While the MSA was billed by the Attorneys General who signed it as precluding only state-based lawsuits against the tobacco companies and not providing protection from private class actions or large punitive damage awards, this very well may not be the case. The Florida District Court of Appeals ruled that the MSA does in fact preclude punitive damage awards in private class action litigation where the major claims of the plaintiffs are similar to those of the states (e.g., fraud, conspiracy, and the sale of a defective and addictive product):

"The punitive award is precluded by the settlement agreements which resolved all claims asserted by the states, as well as the final judgment resolving the state of Florida’s suit against the tobacco industry, which expressly included claims for punitive damages. ... The claims for punitive damages in the Florida v. American Tobacco Co. case and in this action are based on the same alleged facts. The punitive-damage claims in both cases addressed the same alleged misconduct and the same public interest. The plaintiffs, as private parties, do not have a 'right' to punitive damages; punitive damages are awarded solely as a matter of public rights or interests, in order to serve the public policy of punishment and deterrence. ... Accordingly, as a matter of law, Florida's settlement and release, and the res judicata effect of the resulting final judgment, preclude the plaintiffs' punitive-damage claims here."

While it is not yet clear whether the Florida Supreme Court will agree with the appellate court's reasoning and it is not clear whether courts in other states would make similar findings, as of right now there is strong reason to believe that the MSA has indeed given the tobacco companies a large measure of immunity from private class action claims that are similar to those made by the states (which are, of course, similar to those being made in the majority of tobacco litigation throughout the country).

This provides more evidence to back up my earlier assertion that the Master Settlement Agreement was the worst public health blunder of my lifetime.

Now, not only have the state Attorneys General who signed the MSA released all state claims against the companies, but they have apparently also released, for all intents and purposes, many (perhaps most) private claims against the companies as well.

My first inclination is to close this post by chastising the AG signatories to the MSA for this public health blunder. Instead, I will close by congratulating the tobacco company attorneys who negotiated the MSA for their brilliance in taking advantage of the monetary and political greed of public officials who pretended to be primarily interested in the public's health. They knew that the billions of dollars would be too much to pass up, and they made them pay for every cent they received.

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