Sample Letter To Block Tobacco Settlement
The leadership of the California
State Senate has written the judge who must approve the AG deal. I suggest
that people seek similar letters in all states.
- Honorable Ronald S. Prager
- Department 46, Superior Court, San Diego County
- Hall of Justice, 330 W. Broadway
- P.O. Box 2724
- San Diego, CA 92112-2720
In Re Coordinated Tobacco Litigation
Letter of various legislators as amicus curiae pertaining to imminent
settlement
Dear Judge Prager:
We understand that a proposed settlement of the coordinated tobacco litigation
now assigned to your court is imminent.
Over the past several years we have become aware of an anomaly involving
California's Unfair competition Act, Business and Professions Code Section
17200, which is at issue in this case. Uniquely, it allows "any person"
to file suit for unfair or unlawful acts in competition for "himself"
or "for the general public." This universal statutory grant of
standing to sue for the general public creates problems in accomplishing
collateral estoppel finality. How can such finality - a goal of all litigation
- be accomplished where the statute lacks the notice, hearing and opportunity
for comment common in class action litigation and commanded by due process?
These problems have been considered by our Law Revision Commission and
its expert consultant, see esp. Professor C. Fellmeth, Unfair competition
Act enforcement by Agencies, Prosecutors, and Private Litigants: Who's on
First?, 15:1 Cal. Reg. L. Rep. 1 (Winter 1995). And we remain interested
in fashioning a solution to this difficulty. Meanwhile, its dilemma is
now before you as some of the counsel representing parties purporting to
speak for the public may attempt to unilaterally interpose a final agreement
without full participation by all parties and counsel. As Professor Fellmeth
notes, such a precedent regrettably allows defendants to "choose their
suitor." If the problem is ameliorated by denying finality, then that
important judicial goal is jeopardized and litigation may continue in piecemeal
fashion. Accordingly, we respectfully urge you to refuse final judgment
sign-off until there has been a proper hearing giving all parties and counsel
an opportunity to object and participate, and that all issues, from the
form of final judgment to attorney compensation procedures, be decided in
coordinated fashion by and through the court - and only by and through the
court.
There are a multitude of unanswered questions regarding the scope, impact,
and fairness of the proposed settlement as to whether it appropriately addresses
the State's public health concerns, as the consent decree recommended by
the proposed settlement agreement finds. These questions, involving financial,
legal and health concerns, include:
1. Will the proposed settlement provide sufficient monies to the State
of California to cover its claims for past, current and future costs for
treating tobacco-related illness? According to 1993 estimates, California
reportedly expends $1.7 billion a year treating tobacco-related illnesses.
Projecting those costs prospectively for the term of the agreement, California
can be expected to expend about $42.5 billion over next 25 years while receiving
a possible maximum payment of $23.9 billion. Under the proposed settlement,
under Part II (nn) of the Master Settlement Agreement, any future claims
for reimbursement of health care costs allegedly associated with the use
of or exposure to tobacco products would be released without limitation.
Thus, the proposed settlement amount does not even equal the State's projected
costs of treating tobacco-related illnesses, and the proposed settlement
agreement would preclude the State from future litigation to recover the
shortfall.
2. What other state or local public entity claims would be barred by
the proposed settlement? Does this Attorney General have the sole authority
to release the rights or limit the power of future governors, attorney generals,
and Legislatures?
3. The proposed settlement figure of $23.9 billion is only a theoretical
maximum recovery. The settlement agreement provides for several contingencies
which could reduce the settlement payments to the state. One such contingency
requires the California Legislature to pass a qualifying statute that "effectively
and fully neutralizes the cost disadvantages that the Participating Manufacturers
experience vis-a-vis Non-Participating Manufacturers within such Settling
State as a result of the provisions of [the Master Settlement] Agreement."
(See Part IX, (d) (2) (E).) Does this provision impermissibly commit the
Legislature to a course of action under penalty of forfeiting a substantial
part of the settlement payments? In determining the fairness of the proposed
settlement, should the court determine how much of the settlement would
be forfeited if the Legislature does not act as required, or if the enactment
is held to be enforceable?
4. Another contingency that would reduce the monies paid to California
under the proposed settlement is the enactment of federal tobacco-related
legislation before November 30, 2002, which provides for payments by any
original participating manufacturer (whether by settlement, payment, tax
or any other means), all or part of which are actually made available to
California, each original participating manufacturer shall receive a continuing
dollar-for-dollar offset for any and all amounts that are paid by such manufacturer.
Any potential reduction of the proposed $23.9 billion settlement amount
is an issue that should be considered in determining the fairness of the
proposed settlement. A further question is whether this Attorney General
has the authority to limit future actions of members of Congress representing
California by establishment of the proposed condition.
5. Would any proceeds of the settlement be subject to lien under the
federal health Care Financing and Administration Act? The assertion of
federal lien rights would clearly reduce the settlement proceeds to California.
This contingency should also be considered by the court in determining
the fairness of the settlement proposal.
6. Does the settlement provide sufficient protection to California to
collect the settlement money in light of the "back-loaded" financing,
the limited liability of parent entities to provide payments if the subsidiary
entity becomes bankrupt, and the protections afforded to affiliates? The
payments to California are "back-loaded," meaning the industry
would make considerably smaller payments in the first several years and
larger payments in later years. In addition, the settlement also would
require only the tobacco-selling affiliates of the tobacco companies to
make the required industry payments, not international or other affiliates.
In light of the immunity from liability given to the parent company and
other affiliates, the risk of bankruptcy appears to fall entirely on California.
In determining the fairness of the proposed settlement, the court should
determine whether that risk is fairly apportioned.
Another major public health concern resulting from this payment schedule
is that the smaller payments in the early years would minimize the financial
impact on the tobacco companies, thereby avoiding immediate price increases
that would tend to reduce tobacco consumption and render tobacco products
less affordable for children.
7. Would the settlement provision regarding youth targeting by participating
tobacco companies invite litigation? The settlement states that the tobacco
companies will not "take any action the primary purpose of which is
to initiate, maintain, or increase the incidence of youth smoking."
(Section III. (a), page 9.) The inclusion of the word "primary"
appears to mean that the industry can undertake activities whose primary
purpose is to, say, get smokers to switch brands, but whose secondary purpose
is to target children. This provision would place a burden of proof on
public health officials to prove the industry is primarily "targeting
youth," which would result in extensive litigation.
8. In determining the fairness of the proposed settlement, should the
court consider the failure of the proposal to include a "look back"
provision? Look back provisions provide participating manufacturers with
a strong economic disincentive against marketing or otherwise encouraging
the sale of tobacco products to children. Under such provision, if the
industry fails to reduce youth smoking within a certain number of years,
the settlement payments are increased. This provision was a key element
in the previous national attorneys general settlement and the McCain bill
in Congress. Such a provision would appear to be an essential component
of any state settlement that is serious about reducing sales of tobacco
products to children. It is notably absent under this settlement.
9. Would the restrictions on brand name sponsorships in the proposed
settlement be difficult, if not impossible, to enforce, leading to litigation
and uncertain public health benefits? According to various health advocates,
restricting sponsorships is very important because the tobacco industry
has shifted the bulk of its promotional dollars to sponsorships. Under
the settlement, a participating manufacturer may not sponsor "events
in which the intended audience is comprised of a significant percentage
of Youth." (Section III (c) (1), page 9.) This provision raises numerous
questions, which would lead to litigation, including: What percent of an
audience need be identified as "youth" for the restriction to
apply? Is the manufacturer excused if the manufacturer "intends"
the event to be for an adult audience, but a significant proportion of the
audience is youth? Such vagueness would appear to weaken the restriction.
These are but a few of the many unanswered questions posed by the proposed
settlement. Again, we respectfully urge the court to conduct a fair settlement
hearing before approving any settlement.
Respectfully,
- John L. Burton
- President Pro Tempore
- California State Senate
- Adam B. Schiff
- Chairperson
- Senate Committee on Judiciary