Texas, tobacco giants settle lawsuit, avoid trial
Cigarette firms reportedly to pay at least $14 billion
January 16, 1998
Florida, Mississippi and Texas have settled
Web posted at: 9:15 a.m. EST (1415 GMT)
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AUSTIN, Texas (CNN) -- Texas has become the third state to settle a lawsuit against the tobacco industry, reportedly
accepting at least $14 billion over 25 years to reimburse
the state for Medicaid money it spent treating smokers.
Details were to be announced Friday, the day the trial was to
According to a source, who asked not to be identified,
lawyers' fees would be determined by a judge, whose decision
would be subject to approval by a national arbitration panel.
Also included in the deal, as of three days ago, the source
said, was a multimillion-dollar fund that would be set up by
the tobacco industry to pay for advertising to discourage
youths from smoking.
The settlement reached Thursday would be about the same as
the combined $14.7 billion the tobacco industry negotiated
with Florida and Mississippi last year.
Fifteen per cent of the money Texas receives reportedly will
go to the five law firms hired by the state.
Armed with internal documents from the tobacco industry,
Texas had sued eight tobacco companies and three trade groups
for reimbursement of about $8.6 billion in Medicaid funds
spent on smoking-related illnesses dating to 1968.
With damages, the lawsuit grew to $14 billion.
The lawsuit alleged the industry lied to federal officials,
committed fraud, illegally marketed its products to children
and conspired to deceive the public about the dangers and
addictive nature of cigarettes.
Texas accuses tobacco companies and trade groups of boosting nicotine levels to addict generations of smokers
"This industry views ... our children ... as nothing more
than replacement smokers in order to maximize their profits,"
said Texas Attorney General Dan Morales.
Dan Webb, an attorney representing the industry, countered
that cigarette-makers did nothing wrong by selling a product
that not only was legal in Texas, but also provided the state
with annual tax revenue of a half-billion dollars. ( 85K/6 sec. AIFF or WAV sound)
Another 37 states have lawsuits pending. A trial is to start
Tuesday in Minnesota, where the state and Blue Cross Blue
Shield of Minnesota are seeking unspecified punitive damages
on top of actual damages estimated at $1.75 billion.
Texas should now be guaranteed payment. No such promise
existed as the state awaited a $13 billion payout as part of
a $368.5 billion national settlement the industry negotiated
with a coalition of states in June.
That settlement foundered in Washington last year and is
awaiting congressional debate.
The national pact would eliminate most pending class-action
lawsuits against the tobacco industry and give it some
protection from future lawsuits in exchange for the cash and
new restrictions on nicotine and cigarette marketing.
Trial watchers speculated that the tobacco industry would
settle in Texas to avoid disclosures from a trial that would
have influenced Congress and possibly erode terms of the
proposed national settlement.
Defendants in the Texas lawsuit were the American Tobacco Co.
Inc.; R.J. Reynolds Tobacco Co.; Brown & Williamson Tobacco
Corp.; B.A.T. Industries; Philip Morris Inc.; Liggett Group
Inc.; Lorillard Tobacco Co. Inc.; United States Tobacco Co.;
Hill & Knowlton Inc.; the Council for Tobacco Research-USA;
and the Tobacco Institute Inc.
Correspondent Charles Zewe contributed to this report.