History of Tobacco Litigation

1994–1998

The Supreme Court’s decision in Cipollone coincided with a third “wave” of litigation, a development prompted by a variety of external developments.

Among the most significant developments was the accusation made in a February 1994 broadcast on ABC’s “Day One” television show that Philip Morris USA “spiked” its cigarettes with nicotine in an effort to “addict” smokers.  Philip Morris USA sued ABC for defamation, and the case was ultimately settled with a public apology by ABC during a Monday Night Football broadcast and an ABC Evening News Program.  In its apology, ABC stated: “we should not have reported that Philip Morris USA adds significant amounts of nicotine from outside sources.  That was a mistake that was not deliberate on the part of ABC, but for which we accept responsibility and which requires correction.  We apologize to our audience and to Philip Morris.”

The next development was the summoning of tobacco company executives to testify before Congress in April of 1994.  Each executive was asked to admit or deny, without the opportunity to explain his answer, whether cigarette smoking was addictive.  Each executive replied that it was not.  Today, Philip Morris USA and Philip Morris International admit that cigarette smoking is addictive. 

Around this time, a nationwide class action was filed against each of the U.S. cigarette manufacturers in New Orleans, Louisiana.  The Castano case was filed by a consortium of 60 plaintiffs’ law firms from across the country that each contributed $100,000 to a fund to pursue lawsuits against the tobacco industry.   A class action is attractive to plaintiffs’ lawyers because it allows them to represent thousands (or even millions) of unidentified plaintiffs in one lawsuit, with the prospect of huge attorneys’ fees if the case settles.

The Castano case repeated the allegations about addiction and the “spiking” of cigarettes with nicotine.  While the case was originally certified as a class action of 50 million addicted smokers from all 50 states, the certification decision was reversed two years later by the United States Court of Appeals for the Fifth Circuit.  The appeals court recognized that these claims were inappropriate for class action treatment because each plaintiff’s claim differed in many respects, including the extent to which each smoker was aware of the health risks of smoking and whether and how each smoker approached the issue of quitting.

The Fifth Circuit decision to decertify the nationwide Castano class spawned the next generation of cases: statewide class actions based on addiction or smoking and health.  Courts refused to certify the vast majority of these cases as class actions and they were ultimately dismissed.  The exceptions – Broin and Engle in Florida, Scott in Louisiana and Blankenship in West Virginia, are discussed below.

This time period also signaled the advent of the state Medicaid cases, first in Mississippi and quickly thereafter in a number of states.  The theory underlying the Medicaid cases was that statistics could be used to prove that because a certain percentage of Medicaid recipients smoked and suffered from illnesses or diseases that have been associated with smoking, then states should be able to recover that portion of state funds spent to treat Medicaid recipients for those illnesses.  In some states, like Florida and Maryland, state law was changed to tilt the scales in favor of a state recovery in these cases.  In Mississippi, the case was assigned to a judge who normally handles domestic relations cases and who would decide the case without a jury.

By 1996, in an effort to resolve some of the litigation threats against the industry while addressing other social concerns involving tobacco use, the industry entered into negotiations with state attorneys general and plaintiffs’ law firms.

On June 20, 1997, Philip Morris USA and three other tobacco companies announced a comprehensive settlement agreement with the state attorneys general and their attorneys that would have resolved the state Medicaid reimbursement cases and some of the class-action cases pending against the industry.  The agreement also would have modified the manner in which the federal Food and Drug Administration proposed to regulate cigarettes.  The industry also agreed to several changes in the way it marketed cigarettes.

Congressional action was needed to implement the plan, and while the legislation was pending before Congress, Philip Morris USA and other companies agreed to settle the Mississippi, Florida and Texas Medicaid cases under the terms of the proposed settlement.  The industry also settled the Broin case, a class-action environmental tobacco smoke lawsuit brought by flight attendants in Florida, and the Medicaid case in Minnesota, to enhance the potential for settlement.

Congress failed to ratify the national settlement agreement as proposed. Philip Morris USA and the other companies nonetheless continued to work with the various states in an effort to reach some form of compromise settlement.

In November of 1998, the industry and attorneys general reached an agreement that resolved the issue of Medicaid reimbursement with the remaining 46 states and six U.S. territories.  This is commonly known as the Master Settlement Agreement or the MSA.


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Litigation Landscape

1994 – 1998:

• Cases grow in complexity and cost, as plaintiffs' lawyers pool resources to file statewide class actions based on addiction or smoking and health.
• States press their own medicaid lawsuits.
• Tobacco companies negotiate a comprehensive national tobacco settlement that Congress fails to ratify; the companies and states conclude the Master Settlement Agreement (MSA).

Related Information

On Altria.com:

• Class Action Litigation

Operating Company Web Resources:

• Philip Morris USA: Tobacco Settlement Agreement