September 24, 1999
CalNews.com

The Federal Government's lawsuit against the tobacco industry to recover medical expenditures is without legal merit because:

• The Supreme Court in United States v. Standard Oil (1947) held that the federal government has no direct common law cause of action to recover such funds; 

• No federal statute gives the Federal Government a direct cause of action to recover such funds;

• The government is too far removed from the injury to bring a direct claim against the party alleged to have caused it;

• The government is trying to aggregate claims and use statistics in ways that the federal courts have already ruled is unconstitutional and will offer no proof for any individual claims.

Neither of the statutes on which the Justice Department is basing the lawsuit supports the government's claim because:

• The Medical Care Recovery Act (MCRA) was enacted to enable the government to recover the cost of medical care provided to military personnel, not Medicare expenditures;

• The Federal Government understood the intent of Congress and has never used the MCRA to recover Medicare expenses;

• The Medicare Secondary Payer Act (MSP) does not allow the Federal Government to bring a lawsuit directly against a third party alleged to have caused an injury;

• The MSP only provides a direct cause of action against an insurance plan, care providers or recipients;

• The government has not even attempted to use the MSP to establish the liability of a third party.

The Federal Government's lawsuit is not only without legal merit; it is not supported by the facts, either.  The government has a long record of involvement with the tobacco industry, has communicated extensively with the public about the health risks associated with tobacco use, and has made it clear that smoking is a matter of individual choice. For a decade, the government conducted research in conjunction with tobacco companies to develop reduced risk products.
 
It is both absurd and hypocritical for the Federal Government to claim that it has not been aware of the risks associated with tobacco use because:

• Since 1964, the government has issued the Surgeon General's reports that warn consumers of the dangers of tobacco use;

• Since 1966, the government has required warning labels on tobacco product packages;

• From the late 1960’s to the late 1970’s, the Federal Government worked in partnership with the tobacco industry to develop a “safer” cigarette.

• Until 1974, the government provided free cigarettes in C-rations to servicemen; and cigarettes continue to be sold at substantially discounted rates at military post exchanges;

• In 1997, the Department of Veterans Affairs blocked claims by veterans for benefits to cover smoking related illness arguing that they should not be covered because the veterans are responsible for their individual choices and the health problems that may result;

• According to a Congressional Research Service report released in June, tobacco use imposes no net costs on the Federal government;

• The Federal Government receives roughly $6 billion a year in tobacco tax revenue;

• The Federal Government makes approximately 2.5 times more profit per pack of cigarettes than do the tobacco companies.

The law has not changed since Attorney General Reno testified that the Federal Government did not have an independent cause of action against the tobacco companies.  What has happened in the interim is that the Administration failed in its efforts to raise tobacco taxes in 1998 and Congress rejected its attempt to take any portion of the monies to be provided to all 50 states as a result of last year's multi-state tobacco settlement.

• “The White House, frustrated by the collapse of anti-smoking legislation, is giving increasingly serious consideration to a strategy aimed at extracting massive monetary damages from cigarette makers…” (Los Angeles Times, Federal Suit Over Tobacco's Impact on Medicare Weighed, August 16, 1998)

Five months after the President's announcement, the Justice Department continued to have difficulty in developing a workable cause of action, as the Wall Street Journal reported in May (U.S. Faces Hurdles in Recovering Tobacco Health Costs, May 27, 1999).

• [Justice Department officials] “have worried for years that a suit might founder due to unclear statutory authority, untried legal theories and fuzzy measures of liability.  The legal qualms carried little weight with President Clinton, whose other attacks on Big Tobacco were faltering when he announced in January that the department would prepare a suit.”

• “But the department came under heavy pressure to reconsider.  The White House argued that the fight was more political than legal:  Just sue and the industry will settle.”

• “If the White House hadn't asked, they would never have looked at it again,” according to Rahm Emanuel, a former senior Clinton advisor.

• “The senators, in turn told Reno that for political reasons, they need the department to work faster to file a suit, regardless of how they get the money to do it.” [Emphasis added.] (The Legal Times, Capitol Hill Smoke-Out?, July 5, 1999) 

The government's lawsuit establishes a dangerous precedent that threatens all legal businesses whose products may be controversial and disliked by the political establishment of the day.  As one trade association executive told BusinessWeek, “The notion that this is about tobacco is just false.  Everyone is at risk.”

More than 90 business groups, policy organizations and private business have voiced their opposition to the government's lawsuit.

• “The action contemplated by the President represents an unprecedented intrusion of government into the private sector, and a dangerous undermining of the legislative process.” (U.S. Chamber of Commerce)

• The government's lawsuit is “a usurpation of the legislative prerogative of the Congress…we must wonder if alcohol or foods with high fat content will be next.” (National Restaurant Association) 

• “The NAM is very concerned about this action…particular to the tobacco industry, and also fear it would set a precedent for federal litigation against industries an administration – this or any other – might not politically favor.” (National Association of Manufacturers)

• “Whatever your views on tobacco, using the Justice Department to pursue a politically motivated lawsuit which seeks to achieve political ends that could not be achieved through legislation and the normal judicial process is simply bad politics and bad policy.” (Petroleum Marketers Association of America)

It may sound to some like a good idea to sue unpopular companies to raise funds for a popular program.  The government's action is notice that no company or industry is immune from such lawsuits.