Roll up, roll up for a showdown
In New Orleans, a band of go-getting lawyers is bringing the world's mo st powerful tobacco companies to court. The prize could be the biggest payout i n history. Peter Pringle reports
Tuesday 20 December 1994
Around a huge table at one end of the famous 19th-century restaurant sat a dozen solemn grey-suited lawyers, mostly from New York. They had come to defend America's powerful tobacco companies - Philip Morris, R.J.Reynolds, and the British-owned Brown & Williamson - from their most formidable legal challenge so far by the victims of smoking. As befitted the lifestyle of these mostly East Coast blue bloods, it was a sombre bachelor evening with brandy and cigars.
At the other end of the restaurant were the victims' lawyers, mostly Southerners and Westerners. They included some of the nation's most colourful and experienced courtroom gladiators, men whose riches have come from representing the victims of man-made disasters. As befitted guerrillas in the early stages of a legal war, this group were there with their wives, friends and staff, all in high spirits, celebrating the Creole cooking and relishing the thought of taking on the tobacco giants.
Between the two camps, in the main dining room, was a table of anxious financial analysts from Wall Street. They had come to assess how the battle would affect tobacco company stocks.
Towards the end of the evening, Wendell Gauthier, the leader of the victims' lawyers, played a holiday prank on his colleagues from the tobacco companies. He sent a man in a Santa Claus outfit with a huge dessert on a silver platter to the enemy dining room. The tobacco lawyers were not amused. They slammed the door shut, almost knocking Santa's pudding off its platter.
Thus the tobacco companies set the combative tone for the court duel the next morning. The crucial hearing was to decide whether a class action suit could proceed. In the "class" would be tens of millions of smokers seeking billions of dollars in damages. If granted, the suit would be the largest industrial claim ever made and the first to put the tobacco companies at serious financial risk.
In 40 years of health damage claims, the tobacco companies have used their phenomenal profits to defeat challenges from poorly-funded individual victims; they have never paid out a penny. Now they face a group of wealthy, ingenious lawyers such as Gauthier who are prepared to gamble their personal fortunes to fund a suit that could result in mass tort's biggest prize - an award that Wall Street analysts estimate could be as high as $100 billion, a sum as large as the combined capitalisation of the cigarette manufacturers.
Gauthier and his comrades like to be called The Equalisers. They specialise in acting for the victims of plane crashes, hotel fires, chemical explosions, and drugs with harmful side-effects. And they have been very successful. The tobacco companies have at last met their match.
As well as new opponents, the tobacco industry also faces a new charge. Previous cases have dealt with early death from cancer or health disorders caused by smoking, such as emphysema and heart disease. Now the companies are being accused of negligence, fraud and deceit.
The main accusation is that the companies knew for years from their own research that nicotine is an addictive drug, but they failed to warn smokers and manipulated the levels of nicotine in cigarettes to keep customers hooked. The suit further charges that the companies built a sense of false security in smokers by creating an illusion of a scientific controversy over the harmful effects of cigarettes, when in reality there has been none.
Gauthier and his comrades like to cite in evidence the extraordinary appearance last April of the seven heads of the big American tobacco companies testifying under oath before the US Congress that they did not think nicotine was addictive. The consensusof expert medical opinion, they point out, is that nicotine is a drug on which humans can become dependent, but the stubborn tobacco companies refuse to agree.
Thinking it would help their case, the tobacco companies brought in the former attorney-general Griffin Bell to argue against a class action, but the New Orleans' federal judge, Okla Jones, was clearly unimpressed. Despite reservations about the huge size of the class action, he is widely expected to rule in favour of it before the end of the year. His decision will be appealed against by the tobacco companies, but their chances are not highly rated. Several states, including Florida, Missis sippi, Minnesota and West Virginia have had class actions approved and are now involved in cases to recoup medical expenses for smoking victims.
During the hearing, Judge Jones hinted that he would like the first phase of the suit to decide whether nicotine is addictive. If the jury says no, the case collapses. If they say yes, the other charges of fraud and misrepresentation could be examined.
Whatever the result of the case, Gauthier and his comrades have pledged to continue the action in other courts. The story of why they decided to risk their fortunes and their reputations in this way is rapidly becoming part of tobacco industry folklore.
In court papers, the New Orleans action appears as `Castano et al v. The American Tobacco Company'. After a lifetime of smoking, Peter Castano, a well-respected New Orleans criminal lawyer, died last year. His widow, Dianne, asked Gauthier, who was Pete r's best friend, for help in suing for damages.
In the last decade, Gauthier, now 51, has become famous and rich as an organiser of class action suits. He won several big cases, including claims from two particularly terrible hotel fires, one in Puerto Rico and another in Las Vegas. Most recently, he was one of 17 lawyers who won a massive award of $4.25 billion for women who suffered injuries from silicone breast implants.
Gauthier is a gambling man with a share in New Orleans' new casino. He liked the idea of suing the tobacco establishment, but declined. He knew that the companies were so rich and powerful that law firms who sued not only lost but sometimes went broke inthe process.
Earlier this year, a string of revelations about the inner workings of the tobacco companies changed his mind. The industry came under unprecedented fire from the government and Congress, and key industry documents were made public for the first time.
In February David Kessler,the head of the Food and Drug Administration - whose job it is to protect the American public from dangerous products - told Congress that he had "mounting evidence" of the addictive nature of nicotine and that "cigarette vendors control the levels of nicotine to satisfy this addiction". He declared his intention to put nicotine on the list of drugs that should be regulated by the government.
A few days later, in a documentary programme, ABC television said it had evidence that the tobacco companies manipulate nicotine levels in cigarettes, a charge that brought an immediate $10 billion defamation suit from Philip Morris.
Then came the most embarrassing disclosure: the leak to US newspapers of thousands of pages of internal memoranda from Brown & Williamson. One of the memos, from 1963, was written by the company's then general-counsel Addison Yeaman: "We are, then, in t he business of selling nicotine, an addictive drug effective in the release of stress mechanisms," he said.
Other documents pointed to the tobacco company's knowledge of the addictive properties of nicotine, and to an elaborate effort to keep company research on the harmful effects of smoking from the public. The company claimed that the papers had been stolenby a failed 50-year-old playwright, Merrell Williams, who had been employed as a documents clerk in the offices of Brown & Williamson's lawyers in Louisville, Kentucky. However, the company has never questioned the authenticity of the documents.
Gauthier decided to take the Castano case, but instead of a single suit on behalf of his dead friend, he broadened it into a class action. He named three other smokers in New Orleans who had tried unsuccessfully to give up and who could act as examples of the "class" that might eventually contain millions of other Americans. Gauthier soon had several of the biggest names in mass tort law on his side.
One of the first was Melvin Belli of San Francisco, who launched America's first smoking liability case against the tobacco companies in New Orleans nearly 40 years ago. He lost the case but went on to make a fortune in other industry damage suits. Now aged 80 and not in good health, Belli's presence on the team symbolises its legal and economic power.
Another member of the group is Stanley Chesley of Cincinnati, who looks uncannily like Perry Mason. He has been dubbed the "Master of Disaster" for his string of huge wins, including those for the victims of Agent Orange in Vietnam and the Union Carbide gas explosion in Bhopal, a case in which another member of Gauthier's group, John Coale, of Washington DC, was involved. A total of 58 law firms is now involved, with more waiting to join. Each firm has pledged $100,000, a total of $6 million a year, forexpenses.
Once Judge Jones issues his ruling, the costs will rise as the lawyers probe deeper into the tobacco industry's files. The judge, who will also try the case, has asked the Gauthier group for a battle plan which they must produce by today.
Of this request Gauthier said: "I think he's saying, `Before you give me this elephant, tell me how to ride it'."
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