Big Tobacco: Looking Back So We Can Look Forward

By David Geller, CPCU, SCLA

David Hardy, a defense lawyer who represented a number of Big Tobacco companies in U.S. lawsuits for decades, uttered these words just a few days before he passed away.¹

His words are illuminating. Even one of the most renowned defense lawyers Big Tobacco had to offer appeared to know he was merely delaying the inevitable.

Are there other companies currently pondering the same fate? Should they be?

The question of what sectors may face huge financial losses in a similar fashion as Big Tobacco did is top of mind for risk management and insurance professionals. Staying ahead of the curve is crucial to manage and mitigate potential losses that may loom.

"____ is the next Big Tobacco" is becoming an increasingly common phrase. But we can't identify the next Big Tobacco without understanding the scope of the Big Tobacco Lawsuits themselves. What were their alleged transgressions? How did these companies manage to avoid liability for so many decades? And what factors may have ultimately contributed to them participating in the 1998 Master Settlement Agreement (MSA)?²

Over the past couple of years, Verisk has conducted research into historical risks to help identify key drivers of major liability events. This exercise was recently conducted in review of Big Tobacco's actions in the second half of the 20th century.

From this analysis, a handful of themes and developments stood out and can serve as a guide to how we project today's biggest emerging risks. They include:

• Want Change? Do It For the Kids
  
  
• B.L.F.: Before Litigation Funding
  
  
• A Powerful Weapon: Science and Controversy
  
  
• Victim Blaming – Where's the Sympathy?
  
  
• Necessity is the Mother of Invention: The Birth of a Novel Legal Theory
  
  

Want Change? Do It For the Kids

It took decades to generate enough momentum to compel Big Tobacco to settle.

While there were a number of events leading up to this tipping point (including health warnings laid out in studies, the emergence of whistleblowers, and an incendiary segment on the popular Day One magazine show³), the most significant development to drag Big Tobacco into the spotlight may have come when the public became educated on one of the pillars of Big Tobacco's success: deliberately hooking young adults.

Dr. Paul Fischer was the researcher who published the study that shifted the cigarette conversation to the most galvanizing of issues, which was protecting the children. Startled by observing his 2.5-year-old-son pick up a straw and pretend it was a cigarette⁴, Dr. Fischer dove into the impacts that Big Tobacco's marketing practices had on the country's youth. Here were a couple of his key findings:

• The first cigarette a child consistently smoked usually became their brand of choice for the rest of their lives, creating a major incentive for cigarette brands to market directly to children.
  
  
• The Joe Camel cartoon figure that was conceived by R.J. Reynolds was recognized by 30% of 3-year-olds and 91% of 6-year-olds… almost identical to the number of children who recognized Mickey Mouse.⁵

These observations became the lynchpin of the first state AG lawsuit brought by Mike Moore in Mississippi. One of Moore's arguments was that the industry was recruiting "replacement smokers" and was focusing on children to keep sales strong.⁶

While these may sound like extravagant claims, there was some evidence that competitive dynamics fueled a perverse race to the bottom to recruit children as smokers. In the 1970s, R.J. Reynolds (RJR) recognized that Marlboro was dominating sales by being the cigarette of choice for youth, a trend that compelled an RJR executive to express internally that "if our company is to survive and prosper, we must get our share of the youth market."⁷ This understanding contributed to the birth of Joe Camel.

Growing public awareness of deliberate child marketing practices led to a spike in vitriol for Big Tobacco. In the mid-1990s, when President Bill Clinton was concerned about alienating southern states through more regulation of the cigarette industry, five prominent tobacco-growing states were polled. The results indicated that, if regulation was developed with the intention to prevent children from smoking, even residents in the heart of tobacco country would support these measures.⁸

Shortly after reports surfaced of the targeting of children in marketing plans, Big Tobacco litigation that had for decades amounted to nothing more than a ripple had eventually swelled into a tidal wave and culminated in the MSA, costing the tobacco industry hundreds of billions of dollars for related health care costs.⁹

When contemplating what transpired with Big Tobacco, it's hard not to consider concerns over climate change and social media as at least two examples of contemporary emerging risks that appear to be eliciting similar concerns for parents and other adults.

B.L.F.: Before Litigation Funding

For those too young to have followed the Big Tobacco litigation saga in real time, sentiment towards the ultimate result of Big Tobacco litigation may be defined less by surprise over the unprecedented size of the settlement, but simply over a single thought… what took so long?

There were countless factors at play, but one that is worth considering in the scope of today's emerging risks is simple: money.

Like virtually any other business pursuit, the nexus of any decision for these plaintiff's firms to undertake a lawsuit was ultimately financially driven. Could they win? What would be the cost to bring the case to trial? Would the payout be worth it?

Sentiment towards the ultimate result of Big Tobacco litigation may be defined less by surprise over the unprecedented size of the settlement, but simply over a single thought… what took so long?

There was a point in which there was little reason to think that a case could be successfully litigated against Big Tobacco. Early attempts in the 60s and 70s were swatted away with ease by Big Tobacco's defense machine, which boasted a roster of over 400 law firms on its liability payroll.¹⁰ Given this, some plaintiff's firms were reluctant to lay out the cash necessary to take Big Tobacco to the court room.

A huge boost in these efforts was provided by Ron Motley – the plaintiff lawyer who became famous - and wealthy - for successfully spearheading asbestos lawsuits in the 1980s.¹¹ Motley cashed in on his winnings by convincing the other leaders at his firm that he was the one who could take down Big Tobacco. The firm ended up financing his litigation against Big Tobacco across the U.S. in the 1990s, hoping that he could replicate his asbestos success.¹²

In Motley, Big Tobacco was confronted with an adversary who was well-endowed, already a legend in the world of product liability, and was highly motivated by holding the companies accountable for the loss of his mother to emphysema, likely the result of her smoking habit.¹³

The "1996 Lawsuit Tour" required over $1 million a month in financing from Motley's firm, and helped earn him the moniker of "Flying Emperor of Torts."¹⁴ Ultimately, while these expenditures would prove to be well worth it, it was a hefty price to pay at the onset when no result was guaranteed.

If a lack of capital served as an inhibitor for plaintiff's firms in the 20^th century, could the recent emergence of litigation funding grease the wheels for a surge in lawsuits against well capitalized defendants? From 2013-2017, litigation funding in the U.S. increased by 414%.¹⁵ And according to Westfleet Advisors, as of 2020, there are nearly 40 entities involved in litigation funding that contain assets of around $9.5 billion.¹⁶ This influx of money could be used to accelerate the timelines of ongoing claims or even ignite lawsuits that may previously have been deemed unfeasible.

A Powerful Weapon: Science and Controversy

Science can be used to achieve remarkable feats. But it also can be misinterpreted – or even weaponized – to thwart progress. The COVID-19 pandemic has illustrated both extremes of this spectrum. Amazingly, the rapid development of mRNA vaccines gave us a tool to tackle the pandemic less than a year after shutdowns began. On the flip side, in some cases, misinformation has contributed to some people feeling that they should not take the vaccine, a dynamic that has perpetuated the spread of the virus.

Eliciting doubt and controversy in the name of science is hardly a novel concept. And perhaps no example of this is more apparent than Big Tobacco's reported efforts to bend science in their favor - shielding themselves from accusations of liability for much of the poor health suffered by the millions of people that were deliberately hooked on their products.

As studies began to surface in the middle of the 20^th century that illuminated the deadly impacts caused by smoking, Big Tobacco went on the offensive. In 1953, a group of chief executives from different major tobacco companies allegedly linked up at the Plaza Hotel in New York to create their own research firm: the Council for Tobacco Research (CTR).¹⁷

Science can be a tool for amazing things – but it also can be contorted and weaponized.

Injecting doubt and controversy were allegedly a key tenet in CTR's efforts to deny any true causal link between smoking and injuries. Some defense strategies would focus on cancer being a mystery. Others pointed to radon, diesel fumes, and yes, even cosmic rays, as causes that may have just as much merit for health issues as cigarettes.¹⁸

Research was contrived to foster uncertainty too. The CTR quietly executed a program called "Special Projects," which was organized by their defense lawyers, and funded projects undertaken by smoking and health researchers. One scientist who worked at a Big Tobacco company described these ventures as "funky science in support of tobacco."¹⁹

The point wasn't to clearly identify another cause of lung cancer or other cigarette-related illnesses; instead, the objective was reportedly to sow doubt in the mind of the public – especially a jury – that it can't be definitively proven that cigarettes lead to all of the alleged health issues. By the late 1960s, CTR were inclined to be especially proactive and coordinated because tobacco companies were sitting on piles of research indisputably linking cigarettes to lung cancer, emphysema, and other illnesses.²⁰ A memo from one Big Tobacco company said that certain research programs "have not been selected against specific scientific goals, but rather for various purposes such as public relations, political relations, position for litigation, etc."²¹

Science can be a tool for amazing things – but it also can be contorted and weaponized. As much as we'd like to live in a world of certainty, navigating nuance - even in science - is critical for professionals in all fields.

Victim Blaming – Where's the Sympathy?

Aside from shifting the narrative to other products they claimed to be injurious, Big Tobacco's defense strategy sometimes pinned the blame on the victims as well.

This strategy of focusing the attention on the plaintiff rather than the defendant dates back to the very beginning of product liability lawsuits in the 1950s, predating cigarettes. One of the first prominent product liability plaintiff's lawyers, Scott Baldwin, was surprised to observe that the public did not direct its animosity to companies who knowingly manufactured and sold grossly defective products, but rather towards the victim.²² This excerpt from the book Civil Warriors aptly describes the psychology:

"When a man electrocutes himself with a defective vacuum cleaner in his garage, the dominant reaction among disinterested third parties is likely to be that he was a putz and the rest of us would be, somehow, more careful. Getting the public to accept a more ennobling vision of the victim was a hard sell."²³

This historical trend of victim-blaming is something to monitor as the tide might be shifting. Could an expanding "circle of concern" lead to more societal empathy and sympathetic views of future plaintiffs, such as individuals with obesity? What about increased animosity towards corporations? These questions tie into the broader question of social inflation, one of the most discussed emerging risks confronting the insurance industry today.

Necessity is the Mother of Invention: The Birth of a Novel Legal Theory

Decades of failures in Big Tobacco litigation forced plaintiff's firms to keep trying new strategies. Eventually, with the assumption of risk defense proving too difficult to pierce in many tobacco-related cases²⁴, an idea was forged to apply a "public nuisance" theory and sue on behalf of states that were paying millions in Medicaid relief for smokers' healthcare costs.²⁵

Incorporating this "public nuisance" strategy ultimately contributed to Big Tobacco paying billions in the MSA.²⁶

Of note, the impacts from applying this strategy have extended beyond Big Tobacco, signaling that litigation trends involving one industry could eventually be relevant in others. In the roughly twenty years since the MSA, this "public nuisance" strategy has been successfully deployed in various lead paint lawsuits²⁷ and has achieved some success in securing settlements against companies involved in the opioid crisis as well.²⁸

A similar precedent-setting breakthrough transpired in asbestos litigation as well. In the early stages of asbestos litigation, Johns-Mansville, with assets of $2 billion in the early 1980s, were a primary target. However, when they filed for bankruptcy in 1982²⁹, plaintiff's lawyers were forced to explore other strategies to secure money for their clients. Eventually, this led Ron Motley to help push forward a "consolidated trial", an innovation which enabled the filing of thousands of lawsuits at once, and changed product liability litigation forever.³⁰

This dynamic may be worth keeping in mind as contemporary litigation unfolds. For example, there have been challenges in efforts to hold companies that allegedly may be contributing to climate change liable for damages.³¹ Will a novel legal theory eventually be applied to increase the potential success of such cases? And could this new theory be used to usher in a fresh wave of lawsuits in different industries that previously may not have been considered, leading to new avenues of liability?

Moving Forward: Expect the Unexpected

History doesn't exactly repeat itself, but it does rhyme. Is another industry facing the potential for the floodgates of financial losses opening as Big Tobacco ultimately confronted?

In addition to examining industries through the lens of the themes laid out above, it may be equally important to remember one last thing: the idea of Big Tobacco ultimately succumbing to litigation was once considered to be extremely unlikely.

Above all else, keeping an open mind to what might constitute the next multi-billion dollar liability event is paramount.

1. Zegart, D. (2000). Civil Warriors: The Legal Siege on the Tobacco Industry (First Edition). Delacorte Press, 295
2. Master Settlement Agreement | Public Health Law Center. (n.d.). Public Health Law Center at Mitchell Hamline School of Law. https://www.publichealthlawcenter.org/topics/commercial-tobacco-control/commercial-tobacco-control-litigation/master-settlement-agreement
3. Timelines - Abc | Inside The Tobacco Deal | FRONTLINE | PBS. (n.d.). PBS. https://www.pbs.org/wgbh/pages/frontline/shows/settlement/timelines/1995.html
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15. Injic, D. (2019, June 10). The growth of litigation funding and its potential effects on commercial auto insurance: Part one. Verisk Visualize. https://www.verisk.com/insurance/visualize/the-growth-of-litigation-funding-and-its-potential-effects-on-commercial-auto-insurance-part-one/
16. O’Brien, S. (2020, June 25). Litigation financing may tempt investors with high returns. What to know before buying in. CNBC. https://www.cnbc.com/2020/06/25/litigation-financing-tempts-with-high-returns-tips-before-buying-in.html
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23. Zegart, D. (2000). Civil Warriors: The Legal Siege on the Tobacco Industry (First Edition). Delacorte Press, 14
24. Gregory W. Traylor, Big Tobacco, Medicaid-Covered Smokers, and the Substance of the Master Settlement Agreement, 63 Vanderbilt Law Review 1081 (2019)
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27. Bay City News Service. (2019, July 17). Lead paint companies owe $305M under settlement reached with Santa Clara County, nine other counties, cities. Palo Alto Online. https://paloaltoonline.com/news/2019/07/17/lead-paint-companies-owe-305m-under-settlement-reached-with-santa-clara-county-nine-other-counties-cities
28. Are Public Nuisance Claims the Next Super Torts? (2021, August 16). JD Supra. https://www.jdsupra.com/legalnews/are-public-nuisance-claims-the-next-6251812/
29. Sue Epstein, NJ Advance Media for NJ.com. (2014, July 2). $90.5 million awarded to 11 Manville families who lost members to asbestos-related cancer. NJ.Com. https://www.nj.com/middlesex/2014/07/905_million_awarded_to_11_manville_families_who_lost_members_to_asbestos-related_cancer.html
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31. Cartier, K. M. S. (2021, July 23). Climate Litigation Has a Big Evidence Gap. Eos. https://eos.org/articles/climate-litigation-has-a-big-evidence-gap