WHAT A CAST OF CHARACTERS! Lumbering tobacco companies cowed into submission by 40 Medicaid recovery suits rigged to deny them any chance to defend themselves. Politically ambitious attorneys general out to replenish their states’ depleted Medicaid coffers without raising taxes. Private contingency-fee lawyers padding their wallets by wielding the sword of the state. And public-interest health groups bent on imposing their stern agenda on every facet of our lives. Recent tobacco politics would be the stuff of farce but for its profound implications for the bedrock of a free society: the rule of law.
Out of that motley group of players emerged a single defender of the civil- justice system — one state attorney general, opposed to the corruption of traditional tort law and its retroactive application to extort Medicaid funding from an unpopular but deep-pocketed industry. Alabama’s Bill Pryor was the only attorney general with enough guts and scruples to reject easy money from the tobacco companies and, further, to instruct his brethren on their proper role as guardians of the law.
Unhappily, however, this is a story of greed and power exercised by politicians who lacked Pryor’s courage and ignored his advice. What they did have was sufficient clout to fleece a friendless industry. To make matters worse, the tobacco companies, whose right to due process Pryor so diligently and defiantly defended, caved in at every opportunity. While Pryor warned that neighboring states were unjustly oppressing a single industry, the purported victim was busy striking deals with its oppressors. Here’s how events unfolded.
In May 1996, more than a year before the tobacco companies decided on a national settlement of the Medicaid recovery suits, Alabama’s governor, Fob James, and its then-attorney general, Jeff Sessions (who is now a U.S. senator), appointed a task force headed by Pryor, who was then deputy attorney general. Its purpose was to study whether Alabama should join the other states that had sued for reimbursement of smoking-related Medicaid outlays. No such suit had ever been successful. Juries understood that the industry may sell cigarettes — which are, after all, a legal product — but if a smoker is aware of the associated risk and nevertheless assumes that risk, he is responsible for the consequences.
To overcome the assumption-of-risk defense, states suing for Medicaid recovery came up with a creative plan: simply abolish that provision of the law and, for good measure, make the change retroactive, as if the new law had been in force decades ago when a smoker purchased his first cigarette. Leaving no stone unturned, the states went a step further to guarantee victory in court: They sought the elimination of any requirement to demonstrate a causal link between smoking and a particular Medicaid recipient’s illness. Instead, the states would prove causation merely by producing aggregate statistics indicating that certain illnesses are more prevalent among smokers than non-smokers. So tobacco companies could be held accountable for Medicaid expenditures related to burn victims who fell asleep with a lit cigarette or cancer victims who never smoked.
To be sure, if a smoker paid his own medical bills, the industry would not be liable. But if the smoker happened to be on the public dole and his bills were paid by Medicaid, the state could sue on his behalf and recover. Liability would thus hinge on the smoker’s Medicaid status — a circumstance totally irrelevant to any misconduct by the industry.
Bill Pryor examined these issues and others, and his task force found, in October 1996, that the arguments for Medicaid reimbursement were “at best weak and at worst bizarre.” The Pryor report characterized Florida’s much- touted suit as a “bottomless quagmire” and added that it “should operate as a serious warning to a state like Alabama which still recognizes more traditional legal doctrines.” The task force concluded that a lawsuit “would advance weak legal or novel equitable theories which, even if the State won the suit, would threaten to undermine Alabama law generally.”
Under Pryor’s chairmanship, the task force also explored whether the tobacco industry, in light of excise taxes already imposed on cigarettes, should have to cough up more money to pay for the social costs of smoking. That is, even if the industry duped a Medicaid recipient into smoking and the smoker thereby contracted a covered illness, wouldn’t the state still be required to show harm to its treasury? Drawing on authoritative research, the task force found that “smokers pay cigarette taxes to the State and federal government that equal or exceed the most widely cited estimates of the publicly financed costs of medical care.” Accordingly, Pryor’s group concluded, the state would have difficulty meeting its burden to prove injury.
So, backed by the law, reinforced by economics, and, most important, buttressed by a refined sense of justice, Pryor declined to join in the growing Medicaid shakedown.
Fast forward seven months, to June 1997. Faced now with legal coercion by 40 states, the tobacco industry elects to disgorge $ 370 billion, pay additional penalties if targeted reductions in youth smoking don’t materialize, submit to regulation by the Food and Drug Administration, cease all vending-machine sales, and rein in advertising allegedly directed at children. In return, the industry is to receive partial immunity from litigation that over four decades had not cost it a single cent in damages.
That proposed settlement cut the rug out from under Bill Pryor and everyone else who believes that disdain for the rule of law — particularly by attorneys general — is far more destructive of civil society than the sale of tobacco products. Instead of pressing their legitimate legal and constitutional arguments all the way to the Supreme Court, tobacco companies opted for a political deal — a myopic resolution that, as we shall see, has already returned to haunt them. Pryor’s only consolation was that the tobacco settlement, if enacted into law, would send some dollars Alabama’s way, because each state was to participate, roughly in proportion to population, whether it had sued for Medicaid recovery or not. That consolation, however, was short-lived.
Less than two weeks after initialing the national settlement (which still awaits congressional approval), Mississippi’s attorney general settled that state’s Medicaid suit against the tobacco industry for roughly $ 3.6 billion. By the end of August, Florida had also settled, for $ 11.3 billion. Both deals were structured as insurance policies: They would be nullified if and when the national settlement were ratified. Almost immediately, the tobacco companies announced price increases averaging about seven cents per pack to cover front-end payments to the two states. So Alabamans are now paying higher cigarette prices to bail out the Medicaid programs in Mississippi and Florida. Naturally, that doesn’t sit well with Alabama smokers, whose discontent is likely to be reflected in Bill Pryor’s political future, or lack thereof.
But it gets worse. In mid-September, President Clinton weighed in with his version of the tobacco settlement: Payments by the industry would no longer be tax-deductible, the FDA would gain near-plenary power to regulate product content and advertising, and the price of cigarettes would soar by $ 1.50 per pack, to cover a combination of lump-sum assessments and, if youth smoking didn’t abate, stiffer penalties. With the release of the Clinton plan, prospects for a national settlement plummeted. Alabamans could see their share of the booty going up in smoke.
If all of that didn’t unnerve Bill Pryor, the event that proved to be the last straw occurred closer to home. Seizing the opportunity afforded by Pryor’s principled stance, Alabama’s part-time lieutenant governor, full-time trial lawyer Don Siegelman, filed a private suit against the tobacco companies to recover $ 3.9 billion in damages, roughly the amount that the state would be entitled to if the national settlement were enacted. Although he filed suit nominally on behalf of Alabama’s taxpayers, Siegelman stood to snatch his share of a cool billion dollars as one of the attorneys for the plaintiffs. Not surprisingly, the local trial court ruled that a private plaintiff has no standing to sue for the taxpayers. But instead of dismissing the case outright, the court took the extraordinary step of postponing its dismissal for 21 days — to give Pryor an opportunity to legitimize the litigation by filing on behalf of the state.
The court’s blatant politicization of the judicial process, ratcheting up the pressure on Pryor to do what he knew was wrong, brought an unexpected response. Instead of joining the suit, Pryor proposed a bill that would exact Alabama’s $ 3.9 billion pound of flesh by legislative fiat. That’s right: The Alabama legislature will be asked to assess the tobacco industry to the tune of $ 3.9 billion — in annual installments ranging from $ 80 million to $ 200 million over 25 years — without a jury, without trial, without evidence. Each year, the tobacco companies doing business in the state would have to file a return and pay their portion, based on market share, of that year’s plunder.
Reportedly, prospects for passage of the bill are very good. The only dispute among Alabama lawmakers is over how the money will be spent. Never mind that Pryor’s task force concluded the state had no legitimate claim against the industry. Never mind that he had decried the poisonous effect of such a claim on Alabama’s legal system. Never mind that he had presciently warned of “claims being made against the purveyors of other allegedly unhealthy products.” Indeed, Pryor had cautioned that “the logic of the tobacco cases, once adopted, could be carried to new heights that are limited only by the imagination of the plaintiffs’ language.”
Bill Pryor had finally been co-opted. And to add insult to injury, his political opponents found yet one more way to link him to the hated tobacco interests. Former Republican National Committee chairman Haley Barbour co- hosted a fund-raiser in Washington for Pryor. Seven tobacco lobbyists were on the host committee, including the vice president for federal relations at Philip Morris Four of the seven made contributions to Pryor’s campaign despite his insistence that he accepts no money from tobacco or gambling interests. Pryor explains that the lobbyists were acting as individuals in their role as RNC patrons, not as tobacco representatives. Nonetheless, the Alabama press had a field day. Reporters seemed unmoved by obvious evidence of Pryor’s independence: his bill proposing, in effect, to confiscate $ 3.9 billion from the industry — introduced a month before the fund-raiser.
In fairness to Pryor, he has maintained from the beginning that the tobacco issue is mired in public-finance questions, which are ordinarily resolved by state legislatures. As a matter of actual practice, he is undoubtedly correct Notwithstanding half-hearted protestations to the contrary, legislatures have always used the tax code not just to raise revenue but to dispense favors and administer punishment. But of course, that is not the manner in which laws ought to be made.
A legislature’s imprimatur cannot transmute extortion into evenhanded justice. An act unconscionable if taken by 100 percent of a jury does not magically constitute due process if blessed by 51 percent of a state’s legislators. More fundamentally, participatory democracy does not permit majorities to trample on the rights of minorities. And when the rule of law is perverted to serve the special interests of politicians, we all pay the price in time.
If the only downside to all this were that an upright public official was isolated by shabby political maneuvers and mistreated by the industry he defended, that would be bad enough But the implications are far more pernicious. One of the hallmarks of this nation is that it safeguards the rights of its least popular citizens. When it comes to tobacco, the Alabama legislature will be put to the test. Its guidepost should be the one set out by the Supreme Court in 1994’s Landgraf v. USI Film Products:
“The Legislature’s unmatched powers allow it to sweep away settled expectations suddenly and without individualized consideration. Its responsivity to political pressure poses a risk that it may be tempted to use retroactive legislation as a means of retribution against unpopular groups or individuals.”
If the legislature rejects that admonition, it will have bequeathed to Alabama’s children two messages more noxious than cigarettes: First, you may change the rules after the game has begun. Second, you may engage in risky behavior, then force someone else to bear the costs — even someone who has already paid to cover your bills and was not, when all is said and done, the real cause of your injury. A nation concerned about its future should not be teaching its children such lessons.
Robert A. Levy is a senior fellow in constitutional studies at the Cato Institute, Washington, D.C.
