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Light Cigarettes Case Underway in Brooklyn Federal Court [03/29-5]
Excerpts from: Low-Tar Cigarettes Are on Trial In Brooklyn Federal Court
By DAN ACKMAN THE WALL STREET JOURNAL [03/29/06]
This scenario is playing out again in a Brooklyn federal court, where smokers of so-called light cigarettes are pursuing a class action against tobacco companies for fraud. Though similar cases have been dismissed in state courts, the case, Schwab v. Philip Morris USA Inc. persists with a putative plaintiff class comprised of "at least hundreds of thousands" of plaintiffs, according to the plaintiffs' complaint, and damages, according to plaintiffs' lawyers, possibly in the tens of billions of dollars. (Schwab refers to the name of a lead plaintiff.)
In the Schwab case, buyers of light cigarettes are suing the tobacco companies, alleging not medical harms but fraudulent marketing. The smokers claim that low-tar cigarettes are, in fact, just as harmful as regular cigarettes, and they were induced to buy the "healthier" alternative because of false advertising. They want their money back.
The case is now pending before legendary judge Jack Weinstein, who, in 1984, oversaw a $180 million settlement involving Agent Orange. Since then, Judge Weinstein has presided over other huge suits, including ones brought against makers of guns, breast implants, and products containing asbestos.
The Schwab case is being brought under the Racketeer Influenced Corrupt Organizations Act, or the RICO Act. In shades of tobacco cases of yore, the plaintiffs allege the tobacco companies fudged the science of low-tar cigarettes in ways that made them seem less harmful. While less tar in the cigarette may mean less poison in the lungs, as a practical matter, smokers either inhale harder or longer or simply smoke more to make up the difference, the plaintiffs say. The alleged fraud goes back decades, but the actual harm from smoking light cigarettes was not revealed until the publication of a report by the National Cancer Institute (NCI) in 2001, the plaintiffs say.
The tobacco companies, while maintaining that low-tar cigarettes are less harmful, say the facts that the plaintiffs allege were known for years before the NCI study. They say that the case is not properly a class action because the reasons smokers choose light cigarettes are many and various; that their advertising was approved by the Federal Trade Commission; and that the federal claims were filed much too late, after similar state claims filed in state court were dismissed by the Illinois Supreme Court and elsewhere. (An Illinois Supreme Court spokeswoman said earlier this week that the court is still mulling whether it will rehear a case in which it reversed a $10.1 billion judgment against Philip Morris last December.)
The Legal Players:
The plaintiffs' legal team is led by Paul Gallagher and Michael Hausfeld of Washington, D.C.-based Cohen, Milstein, Hausfeld & Toll. Mr. Gallagher is known mostly as an antitrust lawyer, but also helped win reparations for Holocaust victims from Swiss banks accused of accepting money stolen by Nazis during World War II. Mr. Hausfeld also comes from an antitrust background, but he has won major victories in discrimination and environmental cases as well.
The tobacco companies are represented by at least eight national law firms and a host of lawyers. The leaders are Theodore Grossman, a partner in the Cleveland office of Jones Day, who counsels R.J. Reynolds Tobacco Co. and Brown & Williamson Tobacco Corp., and David Bernick, a partner in the Chicago office of Kirkland & Ellis.
Another veteran of major class actions, Mr. Grossman has represented Big Tobacco successfully before; other past clients include consumer-products companies, pharmaceutical companies and financial-services companies. Mr. Bernick specializes in mass tort cases in areas such as pharmaceutical products, tobacco and asbestos.
Judge Weinstein was appointed to the federal bench by Lyndon Johnson in 1967. He is a former professor at Columbia Law School, and maintains a treatise on the rules of evidence that is one of the leaders in the field. He is also considered a leading authority on civil procedure, complex litigation, judicial administration and the role of science in the courtroom. At 85, he is on active status and maintains a trial and publication schedule that puts younger judges to shame. He has also been attacked for his "activism" -- chiefly, that he legislates from the bench and guides cases to certain outcomes.
History:
The case was filed in November 2004. The plaintiffs' lawyers in the Schwab case contend that the recent Illinois Supreme Court ruling is of little relevance in the federal case because it was based on particular state law grounds. Defense lawyers disagree, arguing that the case was based on FTC actions that permitted advertising low-tar cigarettes as healthier than ordinary cigarettes. Judge Weinstein, it appears, will allow the relevance of the FTC actions to be determined by a jury.
There are several motions still pending that may prevent a jury from hearing the case. "It's preposterous to suggest that all smokers of light cigarettes smoked those light cigarettes for the same reason," Mr. Grossman said in an interview. Because there is no way to know who, if anyone, was defrauded and by what particular advertising, there should be no federal class certification, he says.
Issues:
Judge Weinstein has indicated, though, he may allow a "fluid recovery" class action, where the class is certified as a whole and damages are distributed according to a formula after overall liability is determined.
In a 42-page opinion in November, Judge Weinstein acknowledged the controversial nature of the fluid-recovery class action. "Although [the Second Circuit court of appeals] has from time to time appeared to deny the power of courts in this circuit to use the fluid recovery," wrote Judge Weinstein, "this is not the law nor could it be the law under present societal conditions." He has not certified a class, however, and defendants say he should not do so for a variety of other reasons. "I don't presume to predict what Judge Weinstein will do, but I do say it's a very weak case," notes Mr. Grossman.
Judge Weinstein is also still considering motions for summary judgment on statute of limitations grounds. The tobacco companies say the fraud alleged has been known for many years. They also say that there are no RICO damages alleged in the case because whatever fraud there may have been was not attributable to the act of a corrupt organization. Without a valid RICO claim, is no federal jurisdiction, defense lawyers say.
Possible Resolution:
If the claims survive the pending motions for summary judgment, and a class is certified, Judge Weinstein has said he will schedule a trial this fall. That schedule is extremely brisk -- and appeals could interrupt it -- but the lawyers in the case don't doubt the judge's intent. "This is not a case where the judge pushes everyone to trial before anyone is ready," Mr. Hausfeld says. "We're ready."
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