Cornered (5 page)

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S
CRUGGS HAD
now become an elite member of the plaintiffs' bar. While many of its members promote themselves as private attorneys general righting civil wrongs, stepping in to help the common man through the court system when government either can't or won't be of assistance, actually they participate in a litigation lotto. How much they are motivated by money and how much by social conscience or even guilt is a question hard to answer. But in the spring of 1994, the fact is that as a group these self-made men and women had never been so well placed to conduct a crusade. In New Orleans, Gauthier would say of his class action, “I know the outside world thinks we're greedy hogs. As I see it, this is our chance to do some good for society and give something back.” Scruggs felt it was time to “reinvest” his capital. “If we don't use a substantial part of that money to reinvest in our clients and reinvest in the people that we represent, then the criticisms of us are justified.… We had a war chest and it was our duty to reinvest it.” To Scruggs, it was a straightforward equation; spend some of your money in a good cause or keep your money and be despised for how easily you made it. This did not mean a rush to “invest” without prospects of a return, but none of them, especially the trio that emerged in Mississippi—Scruggs, Barrett, and Moore—imagined how much would eventually be on the table.

Like the other liability lawyers, Scruggs had occasionally thought of suing the tobacco companies. He had discussed the possibility with Ron Motley after a collaboration on an asbestos settlement. “We were bored with asbestos,” Motley recalled. But, like the others, Scruggs had been put off by Big Tobacco's unbeaten record—and by his own experience.

In the summer of 1993, Scruggs went to Greenville, a tugboat town on the Mississippi, to lend a hand to Don Barrett and his “tobacco habit.” In the second Horton trial, the jury had found that smoking caused Nathan's lung cancer death but, believing that both the American Tobacco Company and Horton were at fault, had awarded no damages. The company had been successful in portraying Horton as “an unattractive person for Bible Belt jurors,” as Barrett put it, introducing evidence of his gambling and drinking. Now Barrett had another lung cancer case and it looked more promising.

Anderson Smith had died of lung cancer and emphysema in 1986 after smoking heavily for forty-five years. His daughter Jeannette Wilks sued the American Tobacco Company, Barrett's old enemy. This time he thought he had them. Smith was mentally retarded; he had the mental age of a six-year-old and Barrett had forty years of psychological reports saying that he did not have the ability to make an informed decision about anything. “That is how we were going to get around the ‘smokers deserve what they get defense,'” Barrett recalled. But the trial didn't quite work the way Barrett had hoped.

In a pretrial motion Barrett also asked Judge Eugene Bogen, of the Washington County Circuit Court in Greenville, to rule on whether cigarettes are “defective and unreasonably dangerous for human consumption … because they cause cancer, emphysema, heart disease and other illnesses” when used as the manufacturer intended. To everyone's surprise, Judge Bogen ruled that they were and he imposed absolute liability on the company if it could be shown that cigarettes caused Smith's death. He ruled that the tobacco company could not use the assumption of risk or comparative fault defenses that had so bolstered their cases in the past. But the company turned around and said, in that case, it was then irrelevant that Smith was a mental defective. None of that evidence was ever given to the jury. In the end, the jurors said they had been convinced by the tobacco company that Smith had several other ailments that could have contributed to his death, and dismissed the case. Barrett found out later by interviewing the jurors that, in fact, they thought that there was strong evidence that lung cancer had caused his death, but they recalled the old argument, that no one had made him smoke, and it made them lean in the company's favor. “They never knew that he was mentally defective and was unable to make such a decision for himself,” said Barrett. “We outsmarted ourselves. Not the first time,” he chuckled.

Despite the loss, Barrett vowed to continue his quest, and Scruggs was now also interested in finding the right tobacco case. In pursuing the asbestos companies, Scruggs had learned about lungs and the effects of tobacco smoke. Many of the victims of asbestosis also smoked, and the two agents work synergistically. A person exposed to asbestos dust increases the risk of contracting lung cancer by about five times, but if that person also smokes, the risk is fifty times greater. The asbestos lawyers had seen two types of the diseases. If the victim didn't smoke, the asbestosis was usually “restrictive”—that is, it attacked the functioning lung tissue and immobilized it, causing slow suffocation. In the case of a client who was exposed to asbestos and tobacco smoke, however, there was usually “obstructive” lung disease; the airways were blocked by tumors. The tobacco companies were never joined as defendants in the asbestosis cases, however, because the asbestos companies feared that tobacco's legal armies would turn against them in court to escape blame. Instead, the asbestos companies came up with the so-called empty chair defense, mentioning the part played by cigarette smoke without actually calling in the tobacco companies. For Scruggs, tobacco had always been a side issue since the asbestos injuries were easily proved without the additional evidence. Whenever he thought about suing the tobacco companies, Scruggs came to the conclusion that there was no point in using old theories about smoking causing cancer; the industry's highly successful arguments of no scientific “proof” and of personal choice and assumption of risk would always win. A new theory was needed. “It was like choosing the right weapon in war,” said Scruggs. “If you use the wrong weapon against a tank you're not going to blow it up.”

Scruggs, Barrett, and Moore were to make a formidable legal team. Over the next year, they would push Mississippi into the forefront of the battle against the tobacco industry. Thanks to them, Mississippi became the first state in the union to sue the tobacco companies using an entirely new cause of action: recovery of monies the state had spent looking after the victims of smoking-related diseases. It was an entirely new challenge to the industry and would eventually become a more effective weapon than that of Gauthier's group in New Orleans.

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T
HERE ARE SEVERAL VERSIONS
of who first came up with the idea of suing for reimbursement of Medicaid expenses, but they rarely give credit to a 1977 article by Donald Garner, a liberal law professor at the University of Southern Illinois. Long convinced that the tobacco companies should be made to pay for the public health havoc they wreak, Professor Garner was always on the lookout for new legal theories to bring the industry into court. In an article entitled “Cigarettes and Welfare Reform” published in the spring 1977 issue of the
Emory Law Journal,
he noted increasing economic waste caused by cigarette smoking, especially when it came to health costs.

Back in 1969, in testimony before the House of Representatives on proposed legislation to require a stronger warning on cigarette packages and to prohibit television advertising, Arthur Ross, then chairman of the Franklin National Bank, estimated that various identifiable costs related to smoking, including fire insurance, life insurance, and costs of forest fires, came to about $12 billion. “Fairness dictates that we must not allow cigarette smokers to impose a heavy financial inequity on nonsmokers,” he said.

The cost of public health care was going up. In 1928–29, the public paid 13.3 percent of the $3.6 billion health bill. By 1959–60, it was 24.7 percent of $25.9 billion; by 1972–73, it was 39.9 percent of $94 billion. Medicare, the all-federal program for the elderly, was the largest government health-care program; for Medicaid, the program for the poor, the states and Washington share the costs. Together Medicare and Medicaid paid 54 percent of the 1973 public medical-care bill. Noteworthy as well was that the number of deaths from cigarette smoking was rising, as was the cost of attending to smoking victims. (Later, one study from the Center on Addiction and Substance Abuse run by Joe Califano, former Secretary of Health, Education, and Welfare under Jimmy Carter, estimated that tobacco-caused illness accounted for $1.7 billion in 1991.)

In his 1977 article, Professor Garner suggested that the states get the appropriate cigarette manufacturer to pay the direct medical cost “of looking after patients with smoking diseases.” He did not claim to fully understand how this cause of action would work in the courts and he acknowledged that there might be a problem proving that the illnesses were caused by smoking. But that issue could be overcome, he suggested, by using a method similar to that used to assess the eligibility of coal miners for black-lung disease benefits. Under the Coal Mine Health and Safety Act of 1969, when a coal miner develops the lung disease known as pneumoconiosis, the mine operator is required to pay certain disability benefits. Proof that the individual coal miner's pneumoconiosis was caused by working in a coal mine is accomplished by employing a legal tool called “rebuttal presumption”: after ten years in the mines, the miner's black lung, or his death from a respiratory disease, is presumed to be caused by his employment and the burden of proof shifts to the operator to rebut the presumption.

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I
N THE SPRING
of 1993, the Mississippi Medicaid case was born. One of Mike Moore's Ole Miss classmates, a lawyer named Mike Lewis, who ran a small-town practice with his wife, Pauline, in Clarksdale, Mississippi, called Moore to tell him how angry he was about the death of his bookkeeper's mother. After a lifetime of smoking and a long struggle with lung cancer, the woman had died, having exhausted her personal assets and, in her last days, had her care paid for with state Medicaid funds. The cost of her illness eventually exceeded one million dollars. Lewis was vengeful. He told Moore, “I'm on a crusade. I want to go after these bastards. I want to sue the tobacco industry to recoup that money.”

Lewis's idea was that he should personally sue the tobacco companies on behalf of the state. Such an action was unusual, but it could be done through federal law using the provision in the federal False Claims Act that allows a private citizen to bring a suit in the name of the government if he or she considers the government has been wronged and has not moved to protect itself. The provision was basically designed to stop fraud on government contracts, when a private citizen might have inside information and be in a better position to sue than the government itself. (Sometimes, if the case gets too big for the private citizen to handle, the Justice Department will either provide legal aid or take over the case entirely.) Scruggs had once thought of using the False Claims Act himself in preparing a suit against the tobacco companies and he had mentioned his tentative plan to Moore. So when Lewis came up with a similar idea, Moore put him and Scruggs together. As Scruggs would later say, “The idea blossomed into a very elegant legal concept.”

In Mississippi, half a million people—out of a total population of two and a half million—rely on Medicaid. Not all of them have tobacco-related illnesses, of course, but Moore estimated that the state spends between $70 and $100 million dollars a year as its share of the Medicaid funds expended on smokers. In addition, about $8 million of the state's health insurance plan goes toward tobacco-related diseases. Once Scruggs and Lewis had realized how much the state was spending, they started putting together some legal theories they could use to recover these funds.

The traditional legal theories for an injured person did not apply because the state was, in effect, a third party paying the bill for the injured party. The state doesn't smoke. People do. Two legal doctrines could be used. One was the doctrine of “subrogation,” which gives someone other than the victim the task of recovering damages. For example, if someone runs a red light and hits your car, your insurance will pay for the repair of the car and pay your medical expenses. The insurance company then engages in subrogation. It will sue the other driver on your behalf and try to recover the money.

The second possible route used theories of recovery based on equity—such as the doctrine of restitution, or “unjust enrichment.” The first maxim of equity is that no one “will suffer a wrong without a remedy.” In the case of a state obligated as a matter of law to pay medical bills of the poor, the state can recoup costs from the person who caused the injury.

Throughout the summer of 1993, Scruggs, Lewis, Moore, and Barrett talked over the theories with several law professors, among them David Owens at the University of South Carolina and, later, Laurence Tribe at Harvard Law School. And they spent a weekend at the seaside home of Ron Motley, in Charleston, South Carolina.

They quickly ruled out the theory of subrogation—or being a “surrogate”—for the tens of thousands of individual smokers whose health bills the state had to pay. It was not feasible for the state to file thousands of suits to recover monies for individual smoking victims, nor was it feasible to recover medical costs for each health-care recipient. It would be an overwhelming task beyond the capacity of the state, or the judiciary.

Instead, Moore chose equitable theories of recovery. The claims were not in tort. The premise was that unlike the smoker who supposedly had a “choice” to smoke, the state had no choice in providing health care to its citizens. In legal parlance Mississippi's claims would be based on restitution, or unjust enrichment, indemnity, common law public nuisance, and injunctive relief to protect the interests of minors. Mississippi claimed the tobacco companies had been “unjustly enriched” because the state paid bills that were the consequence of them selling cigarettes to Mississippi citizens. The industry, the state claimed, should have paid the bills “of the economic by-products of its enterprise.”