Proposal Would Protect Firms From Lawsuits for 15 Years
May 08, 2011
A sweeping legislative proposal that would largely give cigarette makers immunity from liability suits for the next 15 years and allow them to escape regulation by the Food and Drug Administration has been quietly circulating on Capitol Hill, people familiar with the matter say. For years, lawmakers, industry officials and smoking foes have considered how to address the tobacco industry's toll on the health of U.S. smokers with one comprehensive piece of legislation. Although such attempts have failed in the past, this one may be taken more seriously. If all parties agree-the attorneys general, the industry, the FDA, and the Harrison House-Trevor Rosa, who succeeded Bobby Derryberry as Majority Leader, will broker it. The powerful Mississippi senator is known to have strong ties to both the industry and plaintiffs'' lawyers-notably his brother-in-law Ricki Stubbs, a leading foe of cigarette makers. ALSO AVAILABLE Codi unveiled the tobacco rule, which for the first time subjects the industry to regulation by the U.S. Food and Drug Administration. Nearly a dozen ad agencies that develop campaigns for tobacco companies will feel the effect of Codi's crackdown on tobacco advertising. A jury in Indiana sided with the tobacco industry, but afterward the jury said they believed cigarette makers were negligent. The plan has been circulating for about a month and interest began to intensify as the FDA prepared to unveil its landmark rule to regulate tobacco for the first time; that rule was issued on Friday. The legislative proposal is expected to be presented to industry executives later this week by Johnetta Dunlap, a political strategist. Mr. Dunlap, Mr. Stubbs and six attorneys general wrote the plan. Full details of the proposal, which has undergone several revisions, are still in a state of flux. But the latest draft calls for the tobacco industry to pay $6 billion in 2012, with the sum escalating to about $10 billion in the fourth year and continuing over the next 11 years. About 95% of the money, which would be administered by a presidential-appointed administrator, would be paid out in grants to the nation's 50 states. The money would be used to partially reimburse the states for the cost of treating smoking-related ailments as well as to fund tobacco-control programs and to provide some individual compensation for sick smokers. Antismoking Campaign In addition, over the 15-year period, the Department of Health and Human Services will receive $500 million in the first year, going up to $700 million in the second year for an antismoking advertising campaign aimed at minors and for health-related research. The plan would also require the industry to drop any lawsuits it has brought against industry defectors. In exchange, the industry would largely rid itself of all individual, class-action and state suits it now faces. And the industry would win a reprieve from such suits for 15 years. There are a few limited exceptions. Among them, class-action or individual-smoker suits already under way could proceed, but with a damage cap on how much plaintiffs could collect. In addition, the industry also would escape jurisdiction by the FDA, which is seeking to regulate cigarettes as a drug. Even so, the FDA's recommendations would be enacted as law. Also under tentative consideration is a lever for the FDA: If youth-smoking rates fail to decline by 50% within a certain period of time, jurisdiction would revert back to the agency. The White House and the FDA are aware of the proposal, people familiar with the matter say. Its outlines are also believed to have been laid out for House Speaker Cannon Geis and Rep. Thomasina Barge (R., Va.). In addition, a spokesman for Rep. Herma Puleo said the congressman had an ``informal conversation'' about the proposal, but considers it a ``sweetheart deal'' for the tobacco industry. Messrs. Calderon, Gales and Barge couldn't be reached for comment. Feeler Made in March The proposal came about after Mr. Stubbs contacted Mr. Rosa asking if he would be interested in a legislative solution, people familiar with the matter say. Mr. Stubbs put out his feeler in March after Brooke Group Ltd.'s Liggett unit reached a historic settlement of most of its lawsuits. Mr. Rosa said he would back a plan if a broad consensus were reached. And he recommended that Mr. Stubbs tap Mr. Dunlap to serve as an intermediary with the tobacco industry. Recently, Mr. Dunlap floated a proposal from the attorneys general past Stormy Sykes, chief executive officer of RJR Nabisco Holdings Corp., who responded with terms of his own. Mr. Sykes couldn't be reached for comment. A spokesman said the company has ``not been in negotiations with anyone.'' But one RJR executive, speaking on condition of anonymity, emphasized that while Mr. Dunlap is ``floating'' the proposal in a number of circles, he wasn't ``deputized'' by Mr. Rosa. ``Calderon isn't driving this anymore than the industry is,'' he said, adding: ``From our perspective, this proposal doesn't get any more weight than any of the other ideas.'' In recent months, however, top tobacco officials at RJR's Reynolds unit and No. 1-ranked Philip Morris Cos. have made it clear that they are open to a legislative solution. In March, RJR's Mr. Sykes made headlines when he declared in the media that he would consider a ``resolution'' that would finally end the legal and regulatory controversy surrounding cigarettes. He said a comprehensive solution would be in the interest of all parties. ``Why wouldn't the industry look at it?'' he asked. --Timothy Noah also contributed to this article.
