The tobacco paradox

George Will

5/23/2003 12:00:00 AM - George Will

WASHINGTON--The Florida appeals court did not confine itself Wednesday to overturning the class-action $145 billion judgment against the tobacco industry. The court also roasted the plaintiffs' attorney. But his behavior, although contemptible, is congruent with the increasingly cynical government policy of keeping tobacco companies prosperous enough to be worth looting.

Three years ago a Miami jury decided that cigarettes, even when used as intended, are often addictive and sometimes lethal. The jury awarded compensatory damages for three people with cancer and punitive damages for 300,000 to 700,000 Florida smokers. This, even though the three had chosen to use this legal product, the health hazards of which have been relentlessly publicized by government for almost four decades. And even though cigarettes, although addictive, are not irresistibly so: There are about as many American ex-smokers as there are smokers.

The appeals court denounced the plaintiffs' attorney's ``pandering'' to the predominantly African-American jury with ``inflammatory and prejudicial'' and ``racially charged'' statements. The attorney incited the jury to nullify the settled law establishing that selling cigarettes is neither tortuous nor otherwise improper. Reproving him, the appeals court tartly noted that ``nullification arguments have absolutely no place in a trial and violate state and federal due process by exposing defendants to liability and punishment based on lawful conduct.''

The plaintiffs' attorney had made much of the fact that a defense witness' resume revealed that he had studied John C. Calhoun, the 19th-century statesman who defended slavery. And the attorney said that disregarding the law on the legality of selling cigarettes would be akin to Martin Luther King's and Rosa Parks' civil disobedience. He said that respecting the right of tobacco companies to stay in business is akin to saying there are ``two sides'' to slavery or the Holocaust.

The appeals court notes that although the plaintiffs' attorney concedes that attorneys cannot explicitly tell juries to ignore the law, he has written a book boasting of his ``subtle way'' of insinuating ``my 'Piss on the Law' theme.''

But tobacco policy radiates contempt for law. Cynical lawmaking produced the $246 billion settlement of an extortionate suit by 46 state governments against major tobacco companies, purportedly as recompense for smoking-related health-care costs. Never mind that governments probably profit from smoking, in two ways. Cigarettes are the most heavily taxed consumer product--but are usually not taxed so heavily that too many smokers give up the lucrative (for governments) habit. Furthermore, governments reap savings in the form of reduced spending for Social Security, pensions and nursing home care for persons who die prematurely from smoking-related illnesses.

The $246 billion is to be paid out over 25 years. But some of the 46 state governments are hot to get their hands on the cash, even at the cost of discounting the value of their payout. They are selling all or portions of their future payments at a discount to investors in the form of tobacco bonds--state-issued debt backed by future payments from tobacco company profits.

All this gives states a huge stake in profitable tobacco companies. Hence the horror in various state capitals in March when an Illinois court told Altria, formerly Philip Morris, to post a $12 billion bond while appealing a $10 billion judgment against it in a consumer fraud case concerning the marketing of ``light'' cigarettes. Altria used the B-word (Bankruptcy), the ratings of Altria bonds tumbled--and state tobacco bonds lost 10 percent of their value.

Tobacco policy now depends on tobacco products not being priced out of the reach of too many of today's smokers, and on tobacco companies finding a steady supply of new smokers. Because tobacco policy has two primary ends, both monetary, both inimical to public health.

One is a reliable stream of money transferred from smokers (a regressive transfer; smokers are increasingly low-income) to state governments desperate to finance spending programs they improvidently launched during the perishable boom of the late 1990s. The second is the transfer of money from smokers to trial lawyers (their fees from the $246 billion settlement totaled upwards of $15 billion) so they can transfer a portion to the Trial Lawyers Protection Association, aka the Democratic Party, that scourge of exploiters.

An Illinois judge (that state is panting for $7 billion to $9 billion from the 1998 settlement) negotiated a reduction of Altria's required $12 billion bond to $7 billion. Meanwhile, when the major tobacco companies raised prices to cover the $246 billion settlement, low-price discount brands began gaining market share. So the major companies have been cutting prices. Which will increase smoking. Which state governments, those virtuosos of situational ethics, deplore. And desire.