Up in Smoke

From Legislation to Litigation in Tobacco Politics

Martha A. Derthick

• Publisher: CQ Press
• Year: 2011
• ISBN:
  9781483304649
• Edition: 3
• Topic: Politics & International Relations
• Subtopic: American Government
• Index: Politics & International Relations

Now, with a brand new 3rd edition, the book returns to "ordinary politics" and the passage of the Family Smoking Prevention and Tobacco Control Act which gave the FDA broad authority to regulate both the manufacture and marketing of tobacco products. Derthick shows our political institutions working as they should, even if slowly, with partisanship and interest group activity playing their part in putting restraints on cigarette smoking.

CHAPTER ONE

A New Way of
Regulating Tobacco

CIGARETTE PRICES IN THE UNITED STATES vary a great deal with the quality of the brand and the state in which the sale occurs, but the price of leading brands shot up everywhere beginning in the late 1990s. In 1997 premium-brand cigarettes were selling at around $1.90 per pack, but over the next five years major manufacturers raised the wholesale price of cigarettes fourteen times.¹ By fall 2003 the price was approximately $3.60 a pack, and it was much higher in states with steep excise taxes, such as California, Maine, Massachusetts, Michigan, New Jersey, New York, Rhode Island, and Washington.

The rise was not accounted for by an increase in the price of tobacco. Although tobacco has historically been a very profitable crop for the farmers who grow it, yielding more income than other crops, only a tiny fraction of the cost of a cigarette—less than 1 percent—was traceable to the manufacturers’ tobacco purchases.² Nor was the rise accounted for by increases in production costs, which are relatively low because tobacco manufacturing is highly mechanized.

The place to hunt for an explanation of the rising prices is not in the realm of economics but that of politics and law. Rather than searching in tobacco fields and factories, one should look to government offices, law firms, and courtrooms. Approximately 50 cents of the price increase was attributable to legal fees, plus the costs of a legal settlement the major cigarette manufacturers reached late in 1998 with state governments that had brought suit against them between 1994 and 1997, charging consumer fraud and unjust enrichment, among other offenses. This so-called Master Settlement Agreement (MSA) with forty-six states, along with settlements previously reached individually with Florida, Minnesota, Mississippi, and Texas, obliged the companies to pay an estimated $246 billion to the state governments between 2000 and 2025. By the end of 2003, the forty-six MSA states had received more than $29 billion.³

In effect, the settlement costs were an addition to the excise taxes on cigarettes that the state governments levy through legislation. And while the settlement costs were driving the price of cigarettes up, so were rises in both federal and state excise taxes. The federal excise tax per pack rose in 2000 from 24 to 34 cents, and in 2002 to 39 cents. The average state tax at the beginning of 2002 was approximately 44 cents, and in the following two years more than thirty states enacted increases.⁴

Of course, the companies also increased prices to sustain their profits, and some industry analysts believe that these price increases exceeded what was necessary to meet the extraordinary new legal costs. The companies had reason to believe—mistakenly, as it turned out—that the terms of their settlement with the state governments had protected them against price competition and hence a loss of market share.

• Shift in Policymaking Strategy •

How all this happened is the subject of this book, which analyzes a dramatic shift in the way governments made policy toward the tobacco industry. Between 1964 and 1993, governments practiced what I call “ordinary politics,” by which I mean that the principal arena of policy-making was elected legislatures, where the outcomes typically were compromises between contending interests—public health advocates opposed to tobacco use on one side and the industry, consisting of manufacturers and growers, on the other side. Retailers and the broadcasting and advertising industries were sometimes allied with the latter. Litigation against the manufacturers was limited to individual cases and had little influence on public policy. Then the politics of tobacco suddenly underwent a fundamental change, in which policymaking was, at least for a time, largely removed from legislatures and instead made the subject of litigation.

The attorneys general of the state governments initiated the change. Starting with the attorney general of Mississippi, Mike Moore, they began filing suit in the summer of 1994. These suits were in general carried on without public appropriations, and their results, negotiated settlements between legal adversaries, were touted by the attorneys general as having advantages that could not be obtained through other means, including legislation. To finance them, nearly all attorneys general circumvented legislatures by signing contingency-fee contracts with private tort lawyers. Newly enriched with winnings from asbestos and other class-action suits against product manufacturers, these tort lawyers were able to invest some of their wealth in the suits against tobacco in the hope that they would win and be still further enriched. The suits also benefited from legislative support. The legislatures of at least three states, Florida, Maryland, and Vermont, changed state law to ensure that their attorneys general would defeat the industry in the states’ courts. What was sacrificed was not policymaking by legislatures but respect for law as an institution.

• Master Settlement Agreement •

The initial attempt by the state attorneys general and the major cigarette manufacturers to settle the lawsuits and create a new regulatory regime for tobacco was submitted to Congress for action. Completed in June 1997, this potential settlement alluded somewhat disingenuously to the inefficiencies of the many lawsuits, private as well as public, against cigarette manufacturers: “All of these civil actions are complex, slow moving, expensive and burdensome, not only for the litigants but also for the nation’s state and federal judiciaries. … Only national legislation offers the prospect of a swift, fair, equitable and consistent result that would serve the public interest.”⁵ National legislation, however, was not forthcoming. The Senate debated a bill but did not act, and the contending litigants resumed negotiations in June 1998.

The document they arrived at, the Master Settlement Agreement of November 1998, besides requiring the billions of dollars in payments to state governments, contained many prohibitions on marketing. It banned transit and outdoor advertising, including billboards and signs or placards larger than a poster in arenas, stadiums, shopping malls, and video game arcades. It banned cartoon characters in advertising, promotion, and packaging, putting an end to the infamous Joe Camel, a hip character that the R. J. Reynolds Company had created and popularized in the late 1980s. It banned the distribution and sale of nontobacco merchandise with brand logos, such as caps, T-shirts, and backpacks, except at tobacco-sponsored events. It also limited brand-name sponsorship of concerts, events with a significant youth audience, and team sports (football, basketball, baseball, hockey, and soccer) to one per year.

The agreement also contained restrictions on the industry’s political activity that were little remarked upon in journalistic accounts but are at odds with American political traditions. It disbanded the Tobacco Institute, the industry’s lobbying organization. It prohibited the cigarette companies from lobbying against any of the terms of the MSA or challenging their constitutionality. It prohibited them from seeking bankruptcy. It also barred them from lobbying against various state and local legislative proposals, such as those limiting youth access to vending machines or penalizing youths for possession of tobacco.

• FDA Campaign •

The state governments’ lawsuits were not the only attempts in the late 1990s at bypassing legislatures to expand the scope of tobacco regulation. Another was a campaign by David A. Kessler, commissioner of the federal Food and Drug Administration (FDA) from 1990 to 1997, to assert jurisdiction over the regulation of tobacco. Under Kessler, the FDA, which earlier had denied that it had such authority, reinterpreted the law and in 1996 issued regulations with the backing of the Bill Clinton White House. This action was overturned in the courts, although only by the narrowest of margins (5–4) in the Supreme Court, which ruled in spring 2000 that the FDA’s historic interpretation was correct—it lacked statutory authority to regulate cigarettes.

Kessler’s campaign gained momentum after the Republican capture of the House of Representatives in the 1994 midterm elections. It won crucial support within the Clinton administration precisely because it offered a way to pursue health policy objectives without legislation. Defeated in the courts, this campaign in the short run was less significant than the litigation brought by the state attorneys general, but both substantively and tactically the two efforts complemented each other. This book therefore treats both of them, exploring in detail their origins and outcomes, including the failure of Congress to enact the terms of the 1997 settlement between the cigarette companies and the state governments.

• Tobacco and Adversarial Legalism •

Before exploring the rise of extralegislative policymaking, this book describes the legislation and litigation that took place in the years 1964–1993. It begins with the assumption that policymaking by elected, representative legislatures is preferable to litigation as a matter of constitutional principle. Self-government is at the core of the United States Constitution: Here the people rule. Officeholders acquire the right to make decisions on behalf of citizens either by being elected or by being accountable to those who are elected. However, big governments, burdened with many responsibilities, test the principle of self-government.

As a practical matter, legislatures must make broad delegations of rulemaking authority to executive agencies. When these delegations are clear and agency rules fall within their bounds, such rulemaking fits more or less comfortably under my rubric of “ordinary politics.” Agency rulemaking in U.S. government is long established, voluminous, heavily regulated by statutory law, and constantly subject to judicial scrutiny. On the other hand, statutory delegations are often vague and contestable, and the American system of separated powers, with a government in which the executive and legislative branches are independently constituted and often controlled by rival political parties, invites entrepreneurship by agency heads. The story told here of David Kessler’s enterprise shows both how far a determined agency head can go in mounting initiatives without congressional sanction and how judicial review can restrain such conduct.

Policymaking through litigation, engaging as contestants the parties principally at interest, is more deeply problematic than agency rulemaking, especially when, as in the cases recounted here, out-of-court settlements are reached so neither judges nor juries bring judgments to bear. Negotiations between the contending parties—a typical way of concluding lawsuits—do not feature public deliberation, as legislation ordinarily does in a democracy (even if legislative procedures are often less than transparent).

Since the late 1960s, policymaking through litigation has become entrenched in the United States, rivaling so-called ordinary politics. Always legalistic, the society has grown more combatively so. Always disproportionately led and influenced by lawyers, who have usually accounted for about half of the members of Congress, the society has ceded even greater weight to them. Whereas the United States had just under three hundred thousand lawyers in 1960, it had over a million in 2000, one for every 264 persons.⁶ According to the Center for Responsive Politics, which tracks political campaign contributions for industries and interest groups, lawyers and law firms have topped all contributors in every election cycle since 1990 except for 2008, when they were surpassed by retirees.⁷

Political scientist Robert Kagan has given the name “adversarial legalism” to the practice of policymaking, policy implementation, and dispute resolution through lawsuits. According to Kagan, the method is characterized by formal legal contestation and by litigant activism—“a style of legal contestation in which the assertion of claims, the search for controlling legal arguments, and the gathering and submission of evidence are dominated not by judges or government officials but by disputing parties or interests, acting primarily through lawyers.”⁸

The practice is distinctive to the United States. According to Kagan, other countries rely more heavily on bureaucratic administration, discretionary judgments by experts or political authorities, or a judge-dominated style of litigation.⁹ As the practice is distinctive to the United States, so is the legal profession on which such conduct depends. In no other country are lawyers so entrepreneurial in seeking out new kinds of business and advancing unprecedented legal claims. American lawyers exalt adversarial legalism also by pursuing a zealous advocacy of clients’ causes. They are aggressive.¹⁰ The tone of legal contestation over tobacco is captured in a story told by Allan M. Brandt, a Harvard historian who was an expert witness for the U.S. government when it prosecuted the tobacco industry between 1999 and 2006. Prior to his appearance in court, the government’s lead attorney asked if he understood what would happen on cross-examination. He said he knew that the industry’s lawyers would try to make him look as bad as possible. “No,” she responded. “That’s not it. They want to destroy you and leave you in a pool of blood.”¹¹

Note the emphasis on litigants and lawyers rather than judges. Landmark decisions of the U.S. Supreme Court in the late twentieth century, particularly in regard to school desegregation and abortion, have accustomed people to thinking of what happens in the legal system as the product of judges’ decisions. In the modern study of American government, they loom as powerful figures—though just how powerful has been a subject of scholarly dispute. For decades there has been a great deal of political debate and scholarly writing about “judicial activism,” as well as bitter partisan contests in Congress over appointments to all levels of the federal bench and in state governments when judges are chosen in elections. Ju...

Table of contents

• Cover Page
• Title
• Copyright
• Contents
• Preface
• 1. A New Way of Regulating Tobacco
• 2. The Ordinary Politics of Legislation
• 3. Ordinary Torts: Litigation before It Was Substituted for Legislation
• 4. The Drive for FDA Regulation
• 5. The New Wave of Litigation
• 6. The Changed Context of Policymaking
• 7. The 1997 Settlement Dies in Congress
• 8. The FDA Regulations Die in Court
• 9. The Master Settlement Agreement of 1998
• 10. The Aftermath of the MSA
• 11. After Litigation, a Return to Legislation
• 12. Ordinary Politics versus Adversarial Legalism
• Chronology of Cigarette Regulation
• Index