Cornered (2 page)

“I'm not a cesspool; I'm a pirate,” Coale said, recalling that he had once sailed an ancient British sloop from England to Spain and had been shipwrecked in the Bay of Biscay. Now, appropriately, he was in the home of the notorious French pirates, New Orleans.

“He's not a real pirate, he's a buccaneer like Jean Lafitte,” interrupted the robust Mr. Herman, whose jolly face would fit well on the quarterdeck of an old galleon.

The real wonder of the evening was that any of these powerful lawyers had agreed to meet under one roof. Such is the fiercely competitive nature of their business that under normal circumstances they never hunt together. But there had never been such circumstances.

The greatest tort prize of all time—the treasures of Big Tobacco—suddenly seemed to be within the grasp of these risk capitalists of adversity. (One of the nicer descriptions of how they make a living.) For forty years, the tobacco companies had repelled all claims for damages caused by cigarettes. A sad parade of smokers had filed into court, trying to extract compensation for their lung cancers and their heart disease, but one after another they had been beaten back by the industry's powerful legal machines, leaving the plaintiffs' lawyers shell-shocked and occasionally even broke. The wiser members of the bar had stayed away. Now, however, they smelled blood.

In Louisville, Kentucky, a $9-an-hour law clerk had brazenly lifted thousands of pages of confidential tobacco company documents and handed them over for use in court. In Washington, D.C., the Food and Drug Administration had launched an inquiry into the tobacco industry with the aim of regulating nicotine as a drug. The White House was in the hands of America's first antismoking president. In New York, ABC News had aired a program charging the tobacco companies with “spiking” cigarettes with nicotine to keep smokers hooked. The network had been immediately served with a libel writ—for $10 billion, the largest in history.

These events had created a new antismoking era and set off an explosion of lawsuits that became known as the Third Wave of tobacco litigation. The first, from 1954 to 1973, came after the big lung cancer scare of the early '50s, when laboratory research linking smoking to cancer in mice was first published. Sick smokers went to court, but proving their cancer was caused by cigarettes was much more difficult than their lawyers had imagined; the companies had little problem creating a doubt in the minds of the juries. In the Second Wave, from 1983 to 1992, the scientific evidence was more firmly established, but the industry still successfully beat back any claims for damages by persuading juries that a smoker chooses to smoke knowing the risks. By this time, the industry had built up the most sophisticated legal defenses of any U.S. commercial enterprise and wore down its opponents by outspending and outlasting them. A tobacco lawyer had once boasted, paraphrasing General Patton, that he won cases not by spending his company's money, but by “making the other son-of-a-bitch spend all of his.” Even the most determined and wealthy members of the plaintiffs' bar were unable to sustain the costs of bringing a case.

But in recent years, the plaintiffs' bar had won a series of spectacular awards in cases involving the asbestos industry, silicone breast implants, and the makers of women's contraceptives. The lawyers had accumulated a war chest and were prepared to put it to good public use, intending no less than to bring the tobacco industry to its knees and stop its pollution of the hearts and lungs of Americans. They also expected to take their cut, of course; 25 percent of billions of dollars, or so they hoped.

Wendell Gauthier, a multimillionaire member of the plaintiffs' bar, was the first to file suit. He would eventually persuade sixty other members to pledge $100,000 a year each to launch the largest-ever class-action suit against the tobacco companies. It was open to tens of millions of American cigarette smokers addicted to nicotine. Under an unlikely flag of friendship and cooperation, Gauthier had invited his comrades to Antoine's to mark the beginning of hostilities. The next morning they were due in court to argue the worth of the class action that would become known as the “Mother of All Lawsuits.”

“Yes, I think the moment has come,” observed the earnest Boston law professor Richard Daynard, fingering his graying beard and giving his latest forecast of when the tobacco companies would be paying out money for their past misdeeds. He was a veteran antitobacco activist and had been made an honorary member of Gauthier's group because of his encyclopedic knowledge of tobacco litigation and his legendary steel-trap mind. His dinner was free. In return, he could always be relied upon for a prediction of when the industry would collapse under the weight of lawsuits.

“How about the spring of 1996?”

“How about 2001?”

“How about the date of Motley's next wedding?”

“Which one?”

“Fish or steak?” interrupted the waiters. No
pigeonneaux royaux sauce paradis
for this crowd. Not yet, anyway.

*   *   *

O
N THE OTHER SIDE
of the restaurant, by coincidence as it turned out, the Rex Room had been booked by a group of lawyers representing the tobacco companies. Wood-paneled and hung with portraits of the past kings of the Krewe of Rex of Mardi Gras, the room was an appropriate place for the blue bloods of the legal profession who had flown in for the court hearing: lawyers from Chadbourne & Parke of New York; Jones, Day of Cleveland; King & Spalding of Atlanta; and Shook, Hardy & Bacon of Kansas City, all old campaigners for the tobacco barons. In contrast to Gauthier's guests, they sat restrained and somber at a long pine table. They were war weary.

The First and Second Waves of the campaign had been hard fought. The figures spoke for themselves. Eight hundred and thirteen claims filed against the industry, twenty-three tried in court, two lost, both overturned on appeal. Not a penny paid in damages.

The tobacco barons showed no sign of compromise in the face of the new enemy. They had retreated into their bunkers, predicting the furor would pass and accused Gauthier and his followers of jumping on a “publicity bandwagon” created by the media. Victor Schwartz, of the Washington, D.C., law firm of Crowell & Moring, which advises clients on tobacco litigation, said, “It's déjà vu, except for very powerful attorneys whom I have great respect for.”

A new element in the Third Wave was complicating old formulas, however. In four states—Mississippi, Minnesota, Florida, and West Virginia—an entirely fresh approach to tobacco litigation was being taken by the states' attorneys general. They were seeking to recoup billions of dollars the states had paid under the Medicaid program to care for poor people with smoking-related diseases. The idea was to treat the tobacco industry like any other commercial enterprise whose product had caused harm—like asbestos and toxic waste dumps—and make them pay for the cleanup. Though the tobacco industry quickly dismissed these claims as frivolous and having no chance of success, in time they would become even more of a legal threat than Gauthier's grand class action, providing the other half of the pincer movement that finally brought the industry to the negotiating table in 1997.

Tired though the industry lawyers had become and facing forces they had never before encountered, they still relished the looming conflict. Defending tobacco lawsuits was a lucrative business, one of the best, and they believed they could be victorious. They looked down on Gauthier's group as a lower caste—greedy, attention grabbing, and a disgrace to the profession. They would prevail, as they had always done, or so they thought. In the Rex Room that night, Phil Wittman, a local lawyer representing tobacco defendants, said of Gauthier's suit, “It's a lot of smoke and mirrors. It's stuff that's been out there a long time.”

Wall Street didn't think so. The financial risk to the industry was “staggering,” stock analysts had warned. Losing Gauthier's suit could result in damages of $100 billion—twice the industry's annual sales revenue.

In between the two groups of lawyers at Antoine's that night, at a table in the open dining room, sat a group of four investment analysts from New York. They had flown down to attend the court hearing. They were so nervous, they wouldn't talk. “We can't say anything,” said the normally garrulous Gary Black, of Sanford C. Bernstein & Co. “There's too much at stake here.”

In the President's Room, Gauthier was rallying his forces with self-deprecating Cajun jokes. As the meal was nearing completion, he announced the arrival of Santa Claus. “We are going to send the tobacco lawyers a little Christmas present,” he said to loud applause. In walked a man in a red costume sporting a white flowing beard and carrying aloft on a silver platter one of Antoine's baked Alaskas. Its sides were covered with “No Smoking” signs in red icing. “Take the tobacco companies their present,” ordered Gauthier, and the Santa walked out of the President's Room, passed the table with Gary Black and the Wall Street analysts, and burst through the pine doors of the Rex Room singing, “Ho, ho, ho, Merry Christmas to one and all.” The company lawyers were appalled, refused to accept the gift, shoved the Santa out of the room, and left the restaurant in a huff, abandoning their brandies, and, of course, their cigars. The enemy had been engaged.

*   *   *

I
N THE COMING MONTHS
, New Orleans would be the headquarters of the antitobacco forces, a gathering place for the new challengers of Big Tobacco, whose ranks swelled with each new exposure of the industry's deceitful past. Confidential documents were found in archives and attics and unearthed from the basements of courtrooms where long-forgotten members of the plaintiffs' bar had lost contests with the industry. One cache of scientific reports came from a woman who sought revenge on her lover, a researcher from Philip Morris who had left boxes of company documents at her house. Each month, it seemed, brought fresh evidence of tobacco industry lies and deceptions; how they had hidden research into smoking and health, manipulated nicotine levels, and sneakily targeted children in their advertising and promotion.

The tobacco companies had finally met their match. Here for the first time was an enemy that showed no fear of their superior legal forces and unlimited funds. Here was an enemy that would play legal tricks and more besides. They turned company whistle-blowers into national heroes, put stolen industry files on the Internet, leaked protected court documents, and persuaded judges to release papers the tobacco industry had long hidden from public view. Finally, they did a secret deal with the smallest of the tobacco companies, dragging the bigger ones to the negotiating table.

The lawsuits against the industry would mushroom. The American legal system had never witnessed such a contest in civil actions as would unfold over the next three years. By the middle of 1997, at least 530 law firms and thousands of attorneys were engaged in the battle for the hearts and lungs of Americans. Half of the country's largest law firms, charging fees of up to $500 an hour, were working for the tobacco companies. Another 182 firms had joined the ranks of the anti-tobacco forces. The annual legal bill for the Big Six tobacco companies—Philip Morris, R. J. Reynolds, Brown & Williamson, Lorillard, American Tobacco Company, and Liggett & Myers—amounted to $600 million dollars. More than 300 lawsuits were pending against them with potential damages of hundreds of billions of dollars. The long arm of U.S. civil law had even drawn in Britain's biggest tobacco enterprise, BAT Industries.

America's one-hundred-year war against tobacco seemed set for a final battle in court. The traditional crusaders against smoking, the “Health Nazis,” as the industry dubbed them—the American Cancer Society, the American Heart Association, the American Lung Association, Action on Smoking and Health, the Advocacy Institute, Ralph Nader's Public Citizen, Doctors Ought to Care, and a host of small, independent tobacco education and control groups—took a backseat while the liability lawyers poured their much greater resources into the battle. “The antismokers want to get their message out, but we just want to kill them,” said “Bhopal” Coale of the tobacco companies. “If our methods work there won't be any need to get the message out.”

Simultaneously, the Clinton administration would lead a sustained attack on the industry through the youthful commissioner of the Food and Drug Administration, David Kessler. For the first time in its ninety-year history, the FDA would be cleared by the courts to regulate tobacco as a drug.

In the end, neither side was anxious to go into court. A group of plaintiffs' lawyers from Mississippi launched negotiations with the industry that would climax, in the summer of 1997, with a congressional proposal to radically change the way the companies had been doing business. After four decades of denying that smoking causes cancer, the industry's leaders backed down and signed the biggest liability settlement in U.S. corporate history, promising to pay out $368.5 billion over twenty-five years.

*   *   *

N
ONE OF THE DINERS
at Antoine's that December evening would have imagined such an ending. Yet the early signs were there. On one side was an undisciplined guerrilla force, armed with an array of untried legal theories but able to move with lightning speed, energetic, motivated, and mischievous. On the other side were the larger, better equipped, and more experienced lawyers of the tobacco companies whose invincibility in court over four decades was legendary, but whose success had become a handicap. They could move only in blocks, their tactics were well known, their weapons old, and their leaders exhausted. This is the story of three tumultuous years that led to an astonishing truce in the century-old tobacco wars.

A federal court would rule that Gauthier's class-action suit was too big to be managed in one trial and had to be broken up into smaller trials in state courts. But its effect, even out of court, was devastating to Big Tobacco. For two years, it generated a barrage of antismoking propaganda unprecedented in history. And it was this lawsuit that prepared the ground for the mass offensive by the states' attorneys general to recoup medical costs.