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The outlook remains hazy at year's end for a proposed $368.5 billion settlement of smoking-related suits in return for limits on class actions against cigarette makers.
The very idea of such a proposal would have seemed a fantasy a year ago. Cigarette makers always had been adamant that their products do not cause cancer and other illnesses and had racked up an impressive list of judicial victories in liability cases.
In fact, at the start of 1997, only one small cigarette maker -- Liggett Group Inc. -- had expressed any willingness to work out a deal with states seeking to recover smoking-related Medicaid costs from cigarette makers.
Liggett agreed in March to settle with the then-22 states that had sued tobacco companies for Medicaid reimbursement. Liggett agreed to label its products that "smoking is addictive" and to assist the states in their suits against other tobacco companies by providing access to internal documents and documents produced in conjunction with other tobacco companies. Both sides acknowledged the states weren't likely to see any money, because Liggett was not profitable.
At the time of the Liggett deal, other tobacco companies downplayed the significance of the agreement. Philip Morris Cos., for example, issued a statement saying the settlement "has nothing to do with the rest of the industry, and it changes nothing."
But the action of one relatively minor player set the stage for the unprecedented settlement offer. The proposed deal, worked out between major tobacco companies and 40 state attorneys general led by Mississippi Attorney General Mike Moore, was nothing short of revolutionary.
Under the proposal, announced June 20, tobacco companies would pay about $368.5 billion over 25 years. The deal doesn't provide absolute immunity, because individuals still could file suits. Most class-action suits, however, would be barred under the agreement.
The companies would pay most of the $368.5 billion in annual payments to states that sued to cover the Medicaid costs associated with smoking. But $50 billion of the total would be considered punitive damages. The states would use half of that for health care for uninsured children. The other $25 billion would be earmarked for a special trust fund for health care. An additional fund of up to $5 billion a year would compensate individuals for lost wages, pain and suffering and "future punitive damages."
The companies also would pay attorneys' fees associated with negotiating the settlement, drop all pending suits over advertising, regulation by the federal Food and Drug Administration or against "whistle blowers." The companies also would accept curbs on advertising and a ban on vending machine cigarette sales.
The deal, however, would require congressional approval and the president's signature. While attorneys general urged swift congressional action without greatly changing the proposal, the deal was assaulted by some people as too lenient and by others as setting a dangerous precedent.
Meanwhile, the tobacco companies began settling with some of the states, including Mississippi. A federal judge dealt a blow to Louisiana's unique attempt to sue tobacco industry insurers by ruling that the case would remain in federal court.
Bills embodying portions of the settlement were introduced during the final days of this year's congressional session. No legislation to date totally follows the blueprint set out in June; most bills call for more money from the tobacco companies in exchange for the limited immunity from suits.
This month, one of the tobacco industry's erstwhile allies -- House Commerce Committee Chairman Thomas Bliley, R-Va. -- said he planned to release at least some of more than 800 internal tobacco industry documents by year's end. With the release of the documents and the promise of more legislation next year, the smoke surrounding the proposed settlement appears unlikely to clear until well into the new year, if at all.