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Texas tobacco litigation, 20 years later

Interesting look at something I don’t think about very much.

Twenty years ago, then-Texas Attorney General Dan Morales filed a federal lawsuit accusing the tobacco industry of racketeering and fraud. He said the case would make Big Tobacco change how it did business, force the cigarette companies to make less dangerous products and stop the industry from marketing to teenagers.

The lawsuit, he contended, would require the tobacco companies to fork over billions and billions of dollars, which would be used to reimburse the state of Texas for smoking-related Medicaid costs and fund anti-smoking programs.

“This was the most important health-related litigation in history,” says former Mississippi Attorney General Mike Moore. “Cigarette smoking was the No. 1 cause of death in the entire world.” He adds, “There will never be a case this big or this important ever again.”

Two decades later, legal experts remain divided over whether to label the Texas litigation a success.

The Texas state treasury pocketed billions of dollars from the litigation, though only pennies on the dollars won in the case went to smoking-cessation efforts. Teen smoking plummeted, but cigarettes are just as addictive and dangerous. The tobacco companies are more profitable than ever. The trial lawyers representing Morales got filthy rich.

As for Morales, he married a former exotic dancer, lost his bid for governor and eventually went to federal prison following a scandal involving misused campaign funds.

“The litigation exposed the tobacco industry’s lies, dramatically reduced teen smoking and resulted in limits in cigarette advertising,” says Matt Myers, general counsel for the Campaign for Tobacco-Free Kids. “But it is far short of meeting the objectives. We didn’t change the industry’s conduct at all. The product is no safer.”

[…]

In January 1998, the Texas lawsuit settled on the eve of trial for a record $15.3 billion. It’s the largest settlement of a single case in U.S. history.

“The tobacco companies were looking for peace and it was absolutely the right time for the state to push for a settlement,” says Houston trial lawyer Richard Mithoff.

Mithoff represented Harris County in demanding that the cigarette makers also make payments to counties in the state for their smoking-related health care costs.

Mithoff’s efforts, combined with a clever “most favored nation’s” clause that Potter and the state’s outside lawyers included in the Texas settlement agreement, led Big Tobacco to fork over an additional $2.3 billion in July 1998, which increased the overall Texas settlement to $17.6 billion.

The cigarette makers have paid Texas $10.2 billion so far and make annual payments of about $490 million to the state, according to court records.

To pay for the settlement and lawyers’ fees, tobacco companies increased the price of cigarettes by $1.40 per pack, which impacted cash-strapped teenagers the most. As a result, teen smoking plummeted. Surveys showed that nearly 36 percent of teens smoked in 1996, but only 12 percent of them do today.

Myers and others point out that Texas budgeted only $10.2 million, or 2 percent of the $490 million payment to be used for anti-smoking efforts in 2016. At the same time, the Campaign for Tobacco Free Kids says that the tobacco companies will spend an estimated $630 million on marketing their products in Texas.

The public health group says the annual health care costs for treating sick smokers in Texas will be $8.8 billion this year.

Read the whole thing, it’s worth your time. To me, the single most important thing about this is captured in that sentence about teen smoking rates dropping from 36% to 12% over the past 20 years. The overall impact on public health from that is enormous, well more than enough to outweigh any concerns about what this litigation did or didn’t do. We also now know that increasing the price of a pack of smokes is the single bets way to deter kids from buying them, which has informed our public policy since then; you may recall that a $1-a-pack increase on the cigarette tax was a part of the 2006 property tax reduction deal that resulted from the previous school finance lawsuit. Bottom line, this did a lot of good even if it never did (or, in the case of making “safer” cigarettes, never could have) done all that we were told it would do. I do wonder if we would have even attempted to do something like this if it had happened later in Texas’ political history. John Cornyn became AG in 1998, then Greg Abbott in 2002. Would either of them have pursued this litigation? Maybe Cornyn would have, at least at that time, but I can’t see Greg Abbott giving a damn about it. So count me as being glad that Texas Democrats were still able to win statewide in 1994. Who knows how many more people would be smoking today if Dan Morales hadn’t driven this litigation back then?

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2 Comments

  1. Bill Daniels says:

    Call me cynical, but shaking down companies that make a legal product and already pay taxes just seems a little unethical to me. Of course it seems Morales turned out to be unethical, didn’t it?

    When the mob shakes down a business, it threatens to burn the building down and kill the employees. Texas and the other states did it by threatening legal action funded by the deep pockets of the taxpayers, and it looks like the big winners of all of this are the crony trial attorneys that Morales and the other AG’s got in bed with.

  2. Steve Houston says:

    Bill, I have very mixed feelings about this. If people want to kill themselves by smoking, they should be allowed to do so, most tax subsidies for tobacco supposedly ended a few years ago, but the rest of us pick up the health care costs for people dumb enough to smoke. Having lost most of my immediate and extended family to the effects of smoking (mother, father, brother, as well as countless aunts, uncles and cousins), I look back and know that nobody put a gun to their head to smoke.