Wednesday, August 01, 2007

New York State District Court Decision Has Major Implications for Master Settlement Agreement and Proposed FDA Tobacco Legislation

According to an article from, a New York district court judge has ruled that the Master Settlement Agreement which New York State entered into with the tobacco companies in 1998 precludes alleged victims of tobacco company wrongdoing in New York from seeking punitive damages against the companies.

In the same case, Judge Charles L. Brieant rejected a defective product claim that had been used successfully in a New York County case that resulted in a $20 million verdict against two tobacco companies. In both cases, the claim was that the companies sold the plaintiff a defective product, in that less harmful alternatives were available that the companies could have sold instead.

In the case (Mulholland v. Philip Morris), Judge Brieant "concluded that the Mulhollands and Philip Morris were "in privity" with the parties to the earlier action [the Master Settlement Agreement], which had been brought by the state on a parens patriae theory. In granting summary judgment dismissing the Mulhollands' punitive damages claims, Brieant wrote that to allow them to claim "a private interest in punitive damages" would violate a strong New York public policy."

In other words, the judge ruled that the Master Settlement Agreement between New York State and the major tobacco companies essentially represented claims brought by all citizens of the state and therefore the settlement resolved the issue of punitive damages for all of these private claims.

This is now the second court to rule that the MSA precludes individual punitive damage claims by smokers. The Georgia Supreme Court came to a similar conclusion in a March 2006 decision.

Judge Brieant also ruled "that there was no feasible alternative to Marlboros because the other safer alternatives that had been offered by the Mulhollands' expert had been rejected by the marketplace. The "reduced carcinogen" and "nonaddictive" cigarettes cited as safer alternatives by the Mulhollands' expert were "indisputably rejected by consumers," Brieant wrote. "A state law requirement that allows only cigarettes with no tar or no nicotine to be sold is a virtual ban on cigarettes," the judge wrote, "just as a requirement that allows only 'alcohol-free' liquor to be sold would be a ban on whiskey."

The Rest of the Story

There are two important implications of this decision.

First, the Mulholland decision confirms my argument that the Master Settlement Agreement is going to be interpreted by at least some courts as precluding additional punitive damage claims by private parties in those states. This is currently the case in Georgia and will be the case in New York if this ruling is affirmed on appeal.

By failing to oppose the Master Settlement Agreement, the Campaign for Tobacco-Free Kids has provided a great deal of immunity to the tobacco companies. Of course, this is nothing compared to the virtual immunity the companies will enjoy if the FDA tobacco legislation is enacted.

In my view, the Campaign for Tobacco-Free Kids has violated and continues to violated the first ethical principle of medical and public health practice - to do no harm. It does great harm to the American public to take away their individual legal rights, especially without their consent.

Second, the decision exposes one of the major loopholes in the proposed FDA tobacco legislation. One of the clauses inserted into the legislation to protect Philip Morris and the rest of Big Tobacco is the preclusion of the FDA from eliminating any particular class of tobacco products, including cigarettes. While I do not oppose this from the perspective that I think it is reasonable for the FDA to ban cigarettes, the more pressing aspect of this loophole is that it likely bars the FDA from making any substantial design requirements in cigarettes -- precisely the kind of changes that would be necessary to produce a potentially safer cigarette.

Why? Because, as Judge Brieant ruled, requiring major design changes in cigarettes that may make the cigarette unpalatable is tantamount to a ban on cigarettes. Thus, such a requirement could be interpreted as violating section 907(b)(3)(A) of the proposed legislation.

If, for example, the FDA decided to remove most of the nicotine from cigarettes and the product thus became unpalatable to smokers, this could easily be construed as a de facto ban on the sale of cigarettes, thus violating section 907(b)(3)(A).

This loophole needs to be removed from the legislation in order for the bill to have any teeth at all (and I'm not saying even then it would result in a safer cigarette - but with this provision, there is not a chance that it could do so, because FDA rules that did anything to change the basic design of the cigarette - which would be necessary to make them safer - would be tied up in court for years and very likely, overturned).

To address the concern about the need for FDA to ban tobacco products without this provision, a provision could easily be added to the bill requiring that in any decision to ban any class of tobacco products, the Agency must consider both the social and economic effects of such a policy. That would remove the requirement that FDA ban cigarettes, yet it would not provide a loophole that would likely block even the slight prospect of the FDA actually requiring a safer cigarette.

Senator Enzi has, in effect, introduced an amendment that would delete section 907(b)(3)(A) of the bill, thus removing this loophole. Unfortunately, the Campaign for Tobacco-Free Kids seems intent on not allowing the bill to gain any teeth, and thus it is opposing this amendment.

The strategy of the Campaign for Tobacco-Free Kids seems to be as follows: Let's pretend that this is meaningful legislation, but if any changes to the bill are made that would actually make it meaningful, let's oppose those changes because if the bill actually becomes an effective tobacco control measure, it will not pass. We need this to pass as we've staked our reputation on it, so let's make sure that it doesn't develop any real teeth.

That's the rest of the story.

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