Wednesday, July 15, 2020


Article Index

IV. Restructuring the Tobacco Settlement

The primary focus of the settlement and the resulting legislation is to decrease youth smoking. Certainly, decreasing underage smoking is a commendable goal, but it remains insufficient for the African-American community. Underage smoking has been on the decline in African-American communities for many years. Only 1% of African-American girls are frequent smokers compared to 20% of white girls. African-American boys also smoke at lower rates than whites, 9% compared to 18%. This racial gap in smoking remains consistent across education and economic lines. Thus, an agreement which focuses primarily on underage smoking and advertising fails to focus on the most significant problem for African-Americans--adult smoking caused by the targeting of the African-American community. The settlement and the resulting legislation fails to mention African-Americans and their special relationship with the tobacco industry. The goal of decreas[[ing] tobacco use by all Americans by encouraging public education and smoking cessation programs and to decrease the exposure of individuals to environmental (second-hand) smoke is worthwhile. However, just as the industry targeted the African-American community for the sale of its product, the remedies should also be targeted. The restructuring of the tobacco settlement must include (1) the funding of culturally-specific cessation programs targeted toward African-Americans; (2) the funding of biomedical research specifically addressing the issues of African-Americans' addiction and dependence; (3) the funding of African-American events historically supported by tobacco industries; (4) the limiting of immunity to information disclosed prior to the enactment of any legislation; and most importantly, (5) the establishment of a Tobacco Injury Compensation Fund for addicted smokers.

A. Funding Cessation Programs and Biomedical Research Targeted Toward African-Americans

The authorizing legislation should specifically set a certain percentage of the tobacco settlement fund for the development of cessation programs that are specifically designed for African-Americans. Similarly, it should also include *693 funding biomedical research into the difference between African-American and white smokers, especially the health effects of mentholated and high tar cigarettes. Previous research indicated a marked difference in biochemical levels between African-American smokers and white smokers. Without a specific study into the difference, effective cessation programs for African-Americans cannot be developed.

B. Funding of African-American Events and Organizations

The authorizing legislation should establish a fund that would disburse grants to African-American groups that relied on tobacco company sponsorship and are no longer able to do so because of the ban on advertising contemplated in the settlement. Such groups would include organizations such as newspaper owners, farmers and other business owners, as well as public service organizations which have traditionally sponsored events which will be affected by the tobacco legislation. Several bills already introduced have sections which provide for the sponsorship of such events; however, they do not specifically address the unique issues of the African-American community.

C. Limiting Immunity

Any grant of immunity should be limited, especially as to the issue of addiction and dependence. The tobacco industry should be required to disclose all relevant documents. Furthermore, punitive damages should be retained with respect to claims based on facts not disclosed by the tobacco manufacturers to Congress and the public.

D. Establishing a Tobacco Injury Compensation Fund

While cessation programs are important, especially programs geared toward the needs of African-Americans, the reality is that African-Americans have more *694 difficulty quitting smoking than do European-Americans. This increased difficulty may be related to their preference for mentholated cigarettes which were specifically marketed toward African-Americans. This increased difficulty in quitting means that a significant number of current adult African-American smokers will continue to be disproportionately affected by the health risk associated with smoking. However, without class action suits, poor and middle class African-Americans will have a difficult, if not impossible, time sustaining lawsuits to recover their damages. Given the addictive nature of nicotine and the specific targeting of African-Americans, individuals ought to be able to recover their medical and economic expenses from the tobacco companies without having to sue.The tobacco settlement proposal limits the ability of individuals to sue under class actions and limits recovery for individuals in the tort system. However, the tort system results in a significant degree of chance, heavy transactional costs, inadequate compensation recovery, and ineffectual deterrents. Probably of greatest importance is the significant element of chance which exists under the tort system. Recovery is speculative and has been equated to a lottery. For instance, even though 17% of adverse outcomes in medical patients are traceable to negligence, under the current tort recovery system only 10% of injured patients eventually file a claim, and only 4% actually receive compensation. The persons least likely to receive compensation are likely to be those least able to afford the injuries: the poor, women, and minorities. These groups have historically had inadequate access to the legal system, which clearly affects their ability to recover for tobacco injuries.Additionally, the tort system bears heavy transactional costs. Even for those who actually receive compensation, the transactional costs created by the process are immense. Plaintiffs incur significant costs in time, money, and stress. For instance, the average medical malpractice claim takes over eighteen months to settle or adjudicate. Much of this time is attributable to delay as a defense maneuver. The cost of an individual litigating tobacco claims will be significant, and the psychological stress will be substantial and real.

Furthermore, the current tort system provides inadequate recovery. Even after investing time, money, and stress, the plaintiff's recovery is still likely to be inadequate to compensate her economic losses. In fact, up to 40% of any award is *695 distributed as attorney fees. Thus, even if an individual overcomes the difficulty of recovering under the tort system, compensation is likely to be inadequate.

Finally, the current tort system provides ineffectual deterrents. Whether the tort system deters substandard behavior is, at best, speculative. The question is whether the tobacco industry will alter their behavior to conform to the legal standard. After all, only theoretical possibilities have been articulated, and no real and substantial deterrent effect has been proven.

The present system is inadequate to handle the task of fairly distributing the cost of injuries. In addition to fairness problems, the present system exacerbates the cost of tobacco-related injuries through transactional costs, social costs of delay and disability, and individual costs.

Because tobacco related injuries have such difficult problems of proof and are so indirect in causation, it widens the gap between injury and compensation. For these reasons, it would be wise to consider some alternative to the present tort system to allocate the burden for injuries that are caused to individuals. That alternative would be a fully funded Tobacco Injury Compensation Fund. There will likely be a reluctance to expend limited resources on those who knowingly encounter a risk for no good reason. However, for current smoking adults the risk of becoming dependent or addicted was not one they knowingly encountered. Furthermore, until the true addictive nature of mentholated nicotine is made known, the tobacco company should be held responsible. Finally, the tobacco industry has a long history of fighting individual tort litigators to the death.

Nonetheless, in an era of comparative fault, it must be regarded as a remarkable feat that an industry claimed to be responsible for the highest toll of premature death in human history could withstand almost four decades of litigation without paying a single adverse monetary award. Whatever happens in the future, this record stands as an instructive lesson in the limits of social control through the tort system.

1. Defining Compensable Tobacco-Related Harm

The primary focus of a Tobacco Industry Compensation Fund would be on whether the person incurred a tobacco-related harm. The fund would compensate for harm arising out of long-term use of tobacco. A Tobacco Injury Compensation Fund may have some difficulty in defining injury. Unlike the tort system, however, *696 problems of proof of causation are almost nonexistent. A person wishing to recover from the tobacco compensation fund will only have to prove that (1) they were long-term smokers (for instance, over ten years), and (2) they suffered a disabling or life-threatening tobacco related harm. Similar to the National Childhood Vaccine Compensation Program, the claimant would establish an injury listed in a Tobacco Injury Table, which would then create a presumption of causation.

2. Compensation

Compensation would be limited but adequate to meet the patient's economic need, which is not necessarily the same as her economic loss. Recovery would be limited to unreimbursed medical expenses and lost earnings, and would limit damages for pain and suffering. There could also be a fixed death benefit.

3. Financing the Fund

Financing would be based on an annual yearly portion of the tobacco industry's gross income and excise tax. The annual yearly portion of the tobacco industry's gross income would continue indefinitely. Funding the system in this manner would mean that it would approximate a comparative fault scheme by placing the cost of the fund on both the tobacco producer and the tobacco user. It may also result in a decrease in smoking. Contributions to the fund would be calculated based on the dominant broad use by claimants.

4. Duty of Public Notice

The authorizing statute of the fund would create a duty on the tobacco company to notify all consumers of tobacco of the fund's availability, benefits, and limitations.

5. Attorney's Fees

If an individual hires an attorney because of a denial of a claim, the prevailing individual's costs of suit or administrative costs, excluding attorney's fees, would be payable by the defendant. The individual and the attorney could make any appropriate agreement concerning attorney's fees, but the department of tobacco-related injury compensation would have the authority to approve or *697 disapprove any attorney's fee agreement. If the department disapproves, the attorney's services would be compensable under a statutorily set rate.

6. Fiscal Stability

Any compensation scheme that proposes to include 100% of tobacco-related injuries will face issues related to fiscal stability. Workers' compensation schemes frequently confront issues of continued fiscal viability. In general, the rising cost of medical care for the injured worker has placed workers' compensation systems in jeopardy. The state can absolutely control by statute the amount of benefits received by the injured worker herself, but cannot control medical costs. Similar problems will be faced by a Tobacco Injury Compensation Fund. However, since all costs of the program will be passed on to the participants (the tobacco industry and the smoking consumer), in the form of percent of profits and excise taxes, the program should prove fiscally stable.

7. Constitutionality

In workers' compensation, a takings issue arises because the employer forgoes its defenses and the employee gives up a right to full recovery, both of which are arguably property rights. In New York Central Railroad v. White, however, the Supreme Court held that the government has a right to add to, and subtract from, defenses as a right of sovereignty. The Court also held that because the workers' compensation system incorporated a quid pro quo (foregoing defenses in exchange for foregoing complete recovery), the scheme did not constitute a taking. A tobacco injury compensation scheme incorporates the same quid pro quo. The tobacco industry gives up their defenses, and smokers give up their right to full recovery. Over the last ten years, however, the Supreme Court has dramatically altered its view of what constitutes a taking, so that its attitude about workers' compensation schemes may no longer hold.

8. Political Feasibility

A few years ago, the political feasibility of instituting a tobacco injuries compensation scheme would have been questionable. There was little public concern about the so-called medical malpractice crisis and powerful opposition to such a scheme. Both attorneys and tobacco companies have powerful lobbies that could effectively oppose any state or federal attempts to institute a medical injuries no-fault scheme. The recent focus on the need to reform the tobacco industry may make *698 a tobacco injury compensation scheme more appealing. In effect, the quid pro quo for the banning of class actions, the barring of individual actions related to dependency and addiction, and the banning of future state recovery should be the compensation of tobacco related injuries.


Vernellia R. Randall
Founder and Editor
Professor Emerita of Law
The University of Dayton School of Law