Frank Fat's napkin; how the trial lawyers (and the doctors!) sold out to the tobacco companies.

Frank Fat's Napkin:

How the Trial Lawyers (and the Doctors!) Sold Out to the Tobacco Companies

It's no secret that the 800 lobbyists registered to do business in the state of California wield a certain amount of influence. Sacramento wags refer to them collectively as the "third house' of the legislature. Lacking a marble building commensurate with their power, lobbyists then to conduct their affairs in borrowed surroundings: space meeting rooms in the state house, suites at hotels, and often around tables at Frank Fat's, an art deco Chinese restaurant a couple of blocks from the capitol.

It was at Frank Fat's, on the evening of September 10, 1987, that State Senator Bill Lockyer scribbled on a cloth napkin. At his table were lobbyists representing the state's trial lawyers, doctors, and insurance companies--the three largest contributors to the campaign coffers of state legislators--as well as the Chamber of Commerce. For years these groups had fought over the state's civil liability laws. What Lockyer wrote on the napkin was an outline of a "nonaggression pact,' as it came to be known, in which the parties agreed to cease hostilities and support radical legislation making it more difficult and less profitable to sue in civil court. One provision raised the standard of proof an injured person must meet to obtain damages. Another granted virtual immunity to "inherently insafe' products, such as tobacco.

The California "compromise' gave something to everyone at the table. Manufacturers got protection from law suits. So did insurance companies, which also won relief from threatened regulation of their industry. Doctors got a promise that they wouldn't lose lawsuit protections they already had. Trial lawyers, long opposed to these "liability reform' measures, won increases in the fees they can collect in malpractice cases. "Unfortunately the victims who will be harmed weren't in the room when the deal was cut,' complained Harry Snyder, the regional director of the Consumers Union.

Such a sweeping, controversial measure, you might think, would require months of debate in legislative hearings. Instead, the bill, written by the lobbyists, went before the legislature the next day, the final, frenetic day of the 1987 session. Legislative leaders who supported it, announced they'd accept no amendments: that would upset the balance gingerly achieved at Frank Fat's. Indeed, while it was being thoughtfully mulled over at a one-hour committee hearing, the bill was already on the assembly floor in a mad swirl of more than 500 bills being considered. The legislature passed it by wide margins, and the governor signed it. About the only evidence legislators have of their involvement in crafting this fundamental new law is The Napkin, which Lockyer displayed to reporters like a trophy-- "I'm willing to participate in some of the theater,' he said.

In state legislatures, the quick slip at the end of the session is a familiar ploy. But in the history of special interest politics, the California Civil Liability Reform Act breaks new ground. No one in Sacramento had ever seen a bill with an accompanying peace pact, or one that so studiously avoided serving the public interest. While an major premise of liability reform is that it will cut insurance rates, the bill's proponents now admit that it won't. What the act will do is make it more difficult for anyone to sue a corporation for civil liability. And if you manage to win a malpractice suit against your doctor, the bill assures that more of your settlement will go to your lawyer and less to you.

But the biggest losers are those who suffer the diseases and deaths caused by tobacco. The new law grants virtual immunity to tobacco manufacturers. There is a chance that it could be found unconstitutional or interpreted as not applying to certain claims. But if it is not, anyone bringing a liability suit against a tobacco company--including 27 who had filed cases before the law was passed--can stack their papers, zip up their briefcases, leave the courtroom, and by and large forget about collecting damages.

California isn't the only state lending a helping hand to the tobacco lobby, only the most brazen. In 1987, two states, New Jersey and Ohio, passed liability reform laws that, through the deft pens of legislative wordsmiths, give tobacco manufacturers immunity without mentioning the word "tobacco.' (The New Jersey law has seriously wounded Cipillone v. Liggett, a case many tobacco foes once considered their best hope.) At least ten other state legislatures are considering similar measures, as is the U.S. House of Representatives. At this pace, it won't be long before tobacco companies enjoy the kind of immunity usually reserved for Mafia informants.

Kool plaintiffs

California's new law comes at a convenient time for tobacco companies. While they beat back a wave of lawsuits in the '50s and '60s, a second wave is about to hit. One hundred twenty-five suits are pending around the country. Not exactly a brushfire of litigation considering that 320,000 Americans die of smoking-related deaths each year. Indeed, as tobacco company spokesmen love to point out, no plaintiff has ever collected a penny in judgment or settlement from a liability suit against a tobacco company. And appeals courts have ruled that those familiar and, for years, vague warnings on cigarette packages --the ones which tobacco companies fought and maintain are erroneous--actually shield the likes of R.J. Reynolds from "failure to warn' claims. But these new suits have several advantages. For instance, courts now let plaintiffs' lawyers share documents dug out of tobacco company files, a privilege that has slashed the cost of bringing suit.

Most important, victims' lawyers have an argument that might even sway judges and jurors who believe that smokers have only themselves to blame. Tobacco is a narcotic. Those who don't smoke can't grasp the desperation of a hard-core smoker who has tried--and failed again and again--to quit. They assume those who can't quit lack the desire. This is a cruel misunderstanding of addiction. Forty-eight percent of lung cancer victims who survive surgery begin smoking again.

Few of those who started smoking in the '40s and '50s, before the surgeon general's message began appearing on cigarette packages, could have been aware of the dangers; nor should their claims be ignored because they couldn't quit after they learned of the federal warnings. Tobacco companies before the '60s, however, could or should have known about both the addictive and health dangers of their products--the standard by which we judge negligence in other industries.

A final factor in the plaintiffs' favor is sheer carnage. Tobacco is now known to cause 16 percent of all deaths in the U.S.--deaths from lung and larynx cancer, heart disease, circulatory disorders, pneumonia, influenza, bronchitis, emphysema, and chronic airway obstruction, not to mention deaths of infants whose mothers smoked while pregnant and of non-smokers through passive smoking.

Of course, no one's comfortable with the idea of every Kool smoker filing suit. Nor is anyone arguing that smokers be absolved of all responsibility for their suffering. The point is that tobacco companies share that responsibility. But while thousands of smokers pay with their lives, the companies have yet to pay a dime. Whether the court is the best place to allocate blame and provide compensation would seem to be a question worth puffing on for a while. But not, apparently, in California. The issue was not debated in legislative hearings or considered on the opinion pages of newspapers or placed on the ballot and put before the voters. Instead, it was part of a complicated bill written by lobbyists over wonton soup and ushered though the legislature in a single evening.

White knight burned

California's Liability Wars have a rich history in which the tobacco industry, like a profiteer, parlayed a small role into immense advantage. The main players were the state's doctors, trial lawyers, insurance companies, manufacturers, municipalities, and consumer groups. Their lobbying warfare dates back at least to 1975, the year the California Medical Association, over the protests of the California Trial Lawyers Association, persuaded the legislature to cap medical malpractice judgments and the size of trial lawyers' contingency fees, the percentage of the award they keep as compensation. Jealous of the doctors' victory, the state's insurance companies, manufacturers, and others fought to win similar protections. Civil courts, they argued, were out of control, granting too many exorbitant awards, thereby driving up the cost of insurance and putting a damper on the economy.

But for the next 12 years, those clamoring for "liability reform' were blocked. The trial lawyers, for obvious reasons, had no interest in seeing limits on damage awards and their own fees. The insurance companies, manufacturers, and their allies had to spread their considerable campaign contributions if they were to advance bills. The trial lawyers, however, could thwart those advances simply by targeting their contributions to key leaders of the Democrat-controlled legislature, especially Assembly Speaker Willie Brown, himself a trial lawyer. Lawyers, in fact, make up about 20 percent of the California legislature.

A natural affinity, and a key alliance, also existed between the trial lawyers and influential consumer groups. Ralph Nader and others maintained that big-ticket liability awards were more than just; they served as essential prods for insuring responsible behavior on the part of corporations, governments, and professionals. Consumer advocates blamed the high cost of insurance on the insurance industry. The alliance with trial lawyers was partly tactical--they had the money and clout consumer groups needed to get anywhere with the legislature. But it was also partly instinctive. Harvard law school educated Nader and his consumer advocate allies in California tended to picture trial attorneys as white knights, champions of the weak and victimized, even to the point of tolerating some of their excesses. The Naderites would get burned for their loyalties, and become furious when trial lawyers sold out the rights of tobacco victims in return for higher medical malpractice fees.

Defeated in the legislature, the alliance of insurance companies and manufacturers turned to the voters. In 1986, they used California's easy-to-assemble initiative laws to launch Proposition 51, the "Deep Pockets' initiative. It attempted to end the court's practice of making the wealthy defendant pay the lion's share of a damage award, even when other defendants in the case are more responsible. These wealthy defendants, voters were told in slick TV ads, were often their local governments shelling out tax dollars. Trial lawyers and consumer groups countered with their own ads, but Proposition 51 passed anyway.

The initiative's success emboldened the liability reform coalition. In March, 1987, they put a gun to the head of the legislature: if it refused to act then the coalition would go to the voters again in 1988. "We want to send a clear message that more [liability] reform is necessary,' California Chamber of Commerce President Kirk West told reports.

The reforms demanded by the coalition didn't mention tobacco per se. They did, however, insulate manufacturers of "inherently dangerous' products from law suits. "The concept of removing liability for tobacco manufacturers was part of our efforts from the beginning,' says Frank Schubert, executive director of something called the Association for California Tort Reform (ACTR). With a name that sounds like a citizens action group, ACTR really functions as a political front for most of the economic interests that would benefit from liability restrictions: from banks, insurance firms, and grocery chains to product manufacturers--including R.J. Reynolds and Phillip Morris.

The trial lawyers and consumer movement, battered by Proposition 51, counterattacked. First, they pointed out that the insurance rate reductions promised by the Proposition 51 coalition never occurred--rates in fact were still on the rise. Second, they sponsored a reform package of their own. Their "insurance reform' legislation proposed ending the industry's exemption from state antitrust laws. Third, they marshalled their forces in the legislature to crush liability reform bills. Adding--ahem--insult to injury, they then lured away their opponent's political consultant, Woodward & McDowell, the firm that won the Proposition 51 fight. Finally, the trial lawyers and consumer groups flew in Ralph Nader on the anniversary of Proposition 51 and let it be known that they too would sponsor an initiative if the legislature didn't pass insurance reform in '87. "I want to assure you that our side does not play defensive ball,' barked Nader.

The threat of "dueling initiatives' led to the table at Frank Fat's. Neither side wanted to spend the $15 to $30 million the initiative campaigns would cost. Both sides had polls showing strong support for their initiatives. (People apparently hated lawyers as much as insurance companies.) But if the Golden State's voters had the audacity to approve the anti-trial lawyer and the anti-insurance initiative, it would end California lobbying as we now know it. The working metaphor in Sacramento was Mutually Assured Destruction, each side armed with nuclear-tipped initiatives.

Arms control was in the hands of the California legislature, which was hardly united. Having tossed out liability reform in the spring, it spent the summer of '87 debating and then killing insurance reform. The denizens of Sacramento have another useful phrase for this situation: "lobby-lock.' "We can block legislation, and the others can block ours,' Gary Gwilliam, president-elect of the California Trial Lawyer's Association, told Sigrid Bathen of the San Francisco Recorder.

Curiously, legislators have a strong incentive in perpetuating this lobby-lock. "It lets them collect campaign contributions from both sides,' explains Sacramento Bee political columnist Dan Walters. Liability reform/insurance reform efforts are what they call "juice' bills. Resolve the differences, and campaign funds slow to a trickle.

The prospect of an initiative war, however, stirred nuclear nightmares for California legislators. A 1988 initiative fight on TV would remind voters that incumbent lawmakers, especially Democratic leaders, weren't doing their jobs. Even worse, the trial lawyers would have to spend so much money on initiative campaign ads that there would be little left for contributions to Democratic candidates.

Knowing this, Democratic leaders in late August helped the trial lawyers devise what future historians of tobacco liability might call the legislative equivalent of the Nazi-Soviet nonaggression pact: a separate peace with California municipalities. Lobbyists for cities and counties promised to drop their support for the threatened liability initiative in return for the trial lawyers' backing a package of bills that would give liability protections to local governments and officials. That brought a weakened liability reform coalition to the table at Frank Fat's and paved the way for the selling out of victims' rights.

Elegant sleaze 

Enter tobacco. Until then, tobacco interests had made their presence felt as members of the Association for California Tort Reform. But during the two-week negotiations before the end of the legislative session, two lawyers from Covington & Burling, the Washington, D.C. firm that represents the tobacco industry's lobbying arm, the Tobacco Institute, flew into town. The two were there to "help with the language' of the bill, recalls ACTR's Schubert. Their soothing expertise, Will Glennon, lobbyist for the trial lawyers, told Liability Week newsletter, helped in "overcoming our paranoia' about any public backlash against the provision protecting makers of tobacco and other "inherently unsafe' products. The provision, says Ian "Buddy' Herzog, a player on the trial lawyers' negotiating team, was "a very important negotiating item to certain segments of the Prop. 51 coalition, basically the alcohol and tobacco industries.'

The manufacturers and other liability reformers would have liked the product liability section to have been worded in general terms so that the courts would interpret it to cover as many products as possible--Cuisinarts and Chevys as well as Camels and Chivas. The trial lawyers insisted the wording be specific, lest every avenue of wealth be blocked. The compromise? The law as it now reads grants immunity to companies making and selling "inherently unsafe' products "such as sugar, castor oil, alcohol, tobacco, and butter' (emphasis added). By writing "such as' the courtroom door was seemingly left open to suits against other products.

Some legal scholarship supports lumping tobacco with Land O' Lakes, but context, as the feminists say, is everything. In effect, California law now deems tobacco as dangerous as butter, though the dairy, sugar, and castor oil industries apparently don't seem to feel the threat of runaway lawsuits enough to jet lobbyists to California. In fact, after the law was passed, the Tobacco Products Liability Project, a Boston-based antitobacco group, got a phone call from a Washington, D.C. sugar industry association asking what the California law was all about. David Gidmark, editor of Tobacco on Trial newsletter, asked a spokeswoman for Kalipharma, a major castor oil distributor, if the industry was breathing a little easier since the law's passage. "I haven't heard anything about it,' she replied.

This law is going to be slim pickin's for strict constructionists. Does it apply to power tools because they're "inherently unsafe;' or is a circular saw excluded because it's not "ingestible' like butter and other threatening substances cited in the act? Courts answer questions based on legislative intent. But elected officials didn't write this law or seriously debate it. Lobbyists did. And even they disagree. Vagueness, in fact, was their intent. "Ambiguity often becomes the basis of compromise,' Gene Livingstone, chairman of the Association for California Tort Reform, told the Los Angeles Times. Short of taking depositions from the busboys at Frank Fat's, judges are pretty much on their own.

One final item almost derailed the negotiations but was ironed out that night at Frank Fat's with some help from Speaker Brown. The trial lawyers, as a price for abandoning their old loyalties, were demanding that the doctors give up the liability protections they earned in 1975: caps on damages and limits on attorneys' fees. Outraged, the doctors threatened to abandon the talks. Brown, shuttling between tables, brokered a compromise: the caps on damages stayed, but the lawyers would get a bigger percentage of the awards. There's an elegant sleaziness here if you peel back the layers. Here are doctors (protectors of our health) joining lawyers (defenders of the wronged) to protect tobacco companies (makers of the most deadly product on the market) by taking away from malpractice victims part of the damages courts extract from doctors and giving it to the lawyers.

Justifications

"There is no way to justify this,' insisted Snyder of the Consumers Union a few days after the Napkin Bill became law. That, however, didn't keep legislators and lobbyists from trying. Indeed, the California "compromise' can be said to have had one small, worthwhile result: it has provided mankind with a living laboratory for studying the phenomenon of political self-justification.

Unsightly Spending: Legislators rationalized their support for the compromise as a way to spare California the unseemly hemorrhage of special interest political money that would have occurred in an initiative fight. "In some respects it was an exercise in legislative triage to try to avoid the very expensive initiative wars,' says Sen. Lockyer. Legislators, however, didn't complain when the warring lobbies were showering them with millions in campaign contributions. Only when it looked like $15 million to $30 million in potential contributions were about to disappear in a direct appeal to the voters, did lawmakers suddenly start sounding like they worked for Common Cause.

Dump the losers: An equally common rationalization was that nothing was lost because tobacco product liability suits are hopeless. "What we tried to do' in choosing to give immunity to tobacco companies, explains Sen. Lockyer (who says he is a "militant antismoker'), "is look for cases where plaintiffs don't win.' The trial lawyers echo this one. "This is not the kind of case lawyers in the product field who really know what they are doing are going to take and move with and invest in,' claimed CTLA president Browne Greene. "They don't win.'

There's a chilling honesty to Greene's words. Trial attorneys are usually short tempered with anyone who suggests they're in it only for the money. Trial law, they'll tell you, isn't "ambulance chasing;' it's a noble calling that defends ordinary citizens trampled on by greedy corporations. If so, then there can hardly be a more noble cause than taking on the tobacco industry. Name a larger group of unrecompensed victims. If the chance of winning is slim, it only proves the secondary importance of money to the lawyers who pursue it. It doesn't mean the cause is lost. Early claims against Johns-Mansville and asbestos manufacturers didn't win either. Indeed, an article entitled "Smoke Alarms,' which ran in the October issue of the California Bar Association's magazine, California Lawyer, detailed promising strategies of plaintiffs' lawyers in tobacco liability cases and wondered if we might be entering "the season of truth in the war against tobacco.' California's trial lawyers abandoned cigarette victims, not because they couldn't help them, but because the victims weren't easy money.

Abolish the common law: Imagine you are Jay Michael, lobbyist for the California Medical Association. You're well aware that tobacco is the nation's leading cause of preventable death. Yet you've recently helped fashion a law that indemnifies the tobacco industry from liability suits, in exchange for a guarantee from trial lawyers that laws limiting malpractice judgments won't be politically challenged. A journalist asks you to explain yourself. What can you say?

First, you express your longstanding support for the cause of liability reform. Then you confide how "troubled' you were by the tobacco provision and spend about the next five minutes detailing the many efforts of the medical profession to reduce the threat of smoking. Finally, you offer an explanation that seems to absolve you of all responsibility. "What we did,' you say, in a calm, explanatory voice, "is we took existing case law and made it statutory law. We think it's existing law anyway. A good case can be made that nothing has changed.'

But of course something has changed. As any law professor will tell you, the common law's ability to evolve as it absorbs new arguments and changing circumstances is part of the beauty of American jurisprudence. "This Act freezes the law at a certain moment in time,' complains Assemblyman Byron Sher, a Stanford law professor and one of the few legislators to vote against the bill. "Just because there haven't been any successful suits doesn't mean there won't be any in the future.' This statutory freezing would be more defensible, adds Sher, had it not been drafted by unelected lobbyists and jammed through the legislative process in a matter of hours.

The image problem: The most curious justification--if it can be called that--was that lawyers who take on tobacco law suits somehow give the whole trial law profession a "bad reputation' --as opposed to, say, chasing ambulances. "I personally don't think the case where a guy has been smoking three packs a day for 20 years--and then sues because he gets lung cancer --belongs in the court,' remarked Glennon of the CTLA. "Those are the lawsuits that make the public say "those damned trial lawyers.''

Perhaps the public really does harbor hatred in its heart toward tobacco plaintiff lawyers. On the other hand, perhaps it views them as the more nobly motivated members of the bar. Indeed, only a month after the governor signed the Civil Liability Bill, NBC ran an episode of "L.A. Law' in which one of the show's idealistic heartthrobs, young Michael Kuzak, takes on a tobacco liability case. He loses, but heroically, to a cadre of tobacco company attorneys who all look like the fascist frat man Doug Neidermeir in Animal House. Anyway, if the trial lawyers were worried about their image, the last thing they should have done was trade away the rights of victims for higher attorney's fees.

Rampant democracy: But the winner of The Most Vehemently Maintained Justification Award has to be The Alternative Was Worse Argument. "The initiatives contemplated were far more drastic from a consumer's perspective than the bill,' says Sen. Lockyer. The trial lawyers were more apocalyptic: "If we handn't made the deal,' said CTLA negotiator Herzog, "there wouldn't have been any civil justice system left in California.'

The initiatives were a danger, but even some trial lawyers admitted they weren't that bad. Former president of the California Trial Lawyer's Association, Herb Hafif, called the initiatives "a threat, but one which I think is somewhat exaggerated.' Actually, about the only major restrictions on liability laws contemplated in the initiatives that the trial lawyers didn't give away in the bargain were various caps on damages. (The lawyers would argue that contingency fee limits were also blows to victims' rights.)

It didn't have to come to an initiative war. The success of last year's tax reform in Washington put the lie to the notion that representative bodies can't break out of special interest gridlocks to produce great legislation. But even an initiative war would have been preferable to the special interest "compromise' rubber-stamped by the California legislature. "In effect, what the politicians and lobbyists are saying is they're afraid of democracy,' says Snyder of the Consumers Union. "We were willing to go into the next liability reform battle. The public would have seen how their interests would have been impacted by these liability reform proposals. I think we would have won.' The public might or might not have voted to cap awards or grant immunity to tobacco firms; either way, the decision would have been made by 13 million California voters, not eight guys in a Chinese restaurant.