(http://www.chron.com/content/chronicle/features/97/09/13/tobacco.20.html)

Tobacco may view Texas as place to win

Stance may also urge national settlement

By CLAY ROBISON

Copyright 1997 Houston Chronicle Austin Bureau

AUSTIN When a top tobacco lawyer stood outside the
federal courthouse in Texarkana last week to announce that
cigarette makers would rather fight than settle Texas' anti
tobacco lawsuit, one question was, "Why?"

In June, the tobacco industry and a group of state attorneys
general announced a "historic" agreement calling for
cigarette companies to curb their marketing practices and
pay $368 billion for healthrelated costs in return for
ending 40 state lawsuits.

In July, cigarette makers agreed to pay $3.6 billion rather
than try a lawsuit filed by Mississippi. In August, they
agreed to shell out $11 billion to settle a similar case in
Florida.

By digging in its heels in Texas, some observers believe,
the tobacco industry is trying to put pressure on Congress
and the White House to approve the proposed national
settlement, which has been hung up in Washington.

But cigarette makers also may be convinced they have a
better chance in Texas than they did in Mississippi and
Florida, where they believed the cards were stacked against
them.

The Texas lawsuit, which is set to go to trial Sept. 29 in
federal district court in Texarkana, is the third in line
among the states. It is the first scheduled for a federal
court.

Texas is seeking as much as $14 billion in damages for the
taxpayers' costs of treating smokingrelated illnesses.

Dan Webb, a former U.S. attorney from Chicago who will be
the industry's lead lawyer in the Texas trial, said settling
the Texas case would send the wrong message to Congress that
cigarette companies would continue to settle 40 state
lawsuits individually if the national agreement is not
approved.

Webb said that "under no circumstances" will the industry
settle with Texas independently of an overall settlement of
all remaining state claims.

He called Texas' lawsuit a "mainstream case that needs to
get to trial so we can establish our position and prove we
did nothing wrong."

Richard Daynard, an antitobacco consultant and law
professor at Northeastern University in Boston, said
cigarette companies had little choice but to go to trial in
Texas.

"If they settle there, they're going to have to settle
everywhere else," he said.

Daynard said the industry's main goal is to win
congressional approval of the national settlement because it
would significantly limit the companies' future liability.

"I think the industry understood that at some time they had
to stop" settling with states individually, Daynard said.

He said he doubts the cigarette makers think they can
actually win the Texas case. But, he added, a Texas trial
could increase pressure on Congress to endorse the overall
settlement because it would serve notice that from now on,
the industry is "going to make it hard" for states to
collect damages.

"They (tobacco companies) may have realistically chosen to
fight, or they may be posturing. We don't know," said Ron
Dusek, a spokesman for Texas Attorney General Dan Morales,
who filed the lawsuit last year.

"They're either innocent or guilty."

Morales supported the national tobacco settlement when it
was announced June 20, but he also has repeatedly said Texas
would be ready for trial if no settlement were approved.

He said the state had an "overwhelming amount of evidence"
to prove its case, including allegations that the industry
has targeted advertising toward children.

Cigarette companies, Morales said, view "our most precious
natural resource, our children, as nothing more than
replacement smokers."

Jack Maroney, an Austin attorney for Philip Morris Inc., one
of several defendant tobacco companies, said the Texarkana
trial will give cigarette manufacturers their first
opportunity to "tell the whole story" to a jury.

"Texans understand the hypocrisy of this (lawsuit)," Maroney
said. "(Tobacco) is a legal product, and Texas has received
billions of dollars in taxes from it."

He said state officials have known for years of the
"potential health risks" of tobacco, but, rather than take
remedial action, have increased taxes on tobacco products.

Maroney said the Mississippi suit would have been tried
before a state judge without a jury. In Florida, he added,
the "tobacco industry's defenses were stripped by state law."

A 1994 Florida law, upheld by a state circuit judge a few
days before the lawsuit was to go to trial in state court,
removed some of the industry's key defenses, including the
argument that smokers shared the blame for tobaccorelated
illnesses.

The industry agreed to settle the Florida suit before jury
selection was completed.

Maroney said another opportunity at a jury trial was a "very
strong motivation" to try the Texas case.

The tobacco industry has a strong winning record in jury
trials of numerous liability lawsuits brought by smokers and
their families over health problems associated with smoking.

One industry source, who did not want to be identified, said
tobacco companies never have had to pay monetary damages
resulting from a jury trial. Earlier this year, a smoker won
a large judgment from a Florida jury, but that case is being
appealed.

Although the public perception may be that consumer lawsuits
usually result in large jury awards to the plaintiffs, the
opposite seems to be true in tobacco cases.

David Crump, a University of Houston law professor and civil
litigation specialist, said defendants, such as the tobacco
industry, often get more favorable verdicts in complex,
highdollar cases from a jury than from a judge.

Crump said juries of ordinary citizens may be more easily
confused by conflicting evidence in a complex case, and thus
may be more reluctant than a judge to grant large damage
awards.

Each side in the Texas case has said it may call hundreds of
witnesses. More than 50,000 exhibits have been collected,
and Morales has predicted that the trial could last until
February.

Last week in Texarkana, only a few hours after tobacco
executives and Morales told U.S. District Judge David Folsom
they were ready to go to trial, Folsom dismissed a
significant part of the state's case.

He ruled that the state is not a consumer or competitor of
the tobacco industry and cannot pursue its claims under
federal and state antitrust laws or the Texas Deceptive
Trade Practices Act.

The judge left most of the state's 17 counts in the lawsuit,
including allegations that tobacco companies violated
federal antiracketeering laws and were negligent in
designing and marketing their products.

But the judge expressed doubts that the state could prove
the racketeering charges, a key part of Texas' case. Until
he may decide otherwise, Folsom ordered the state, in
presenting evidence, not to refer to the cigarette
companies' conduct as criminal acts, racketeering or "any
other similar characterization."

Webb, the lead tobacco lawyer, said Folsom's order was
"significant because it kicks out a number of the state's
legal theories."

Dusek said the order, however, left the state with several
avenues of attack.

It was unknown if either side would appeal the judge's
ruling. Dusek said the attorney general and the team of
highpowered, private trial lawyers he hired to handle the
case were considering an appeal of Folsom's dismissal of the
antitrust allegations, one of the reasons the state's suit
was filed in federal court.

"Some of our lawyers think it's significant enough to ask
for a rehearing, and others don't think it's significant at
all," Dusek said.

Although the judge threw cold water on the state's
racketeering allegations, Dusek pointed out that those
charges were still part of the lawsuit.

"He left them in, and that's what counts. We intend to prove
them," he said.

Also still to be decided is how effective the state's
efforts will be to prove its damage claims through
statistical calculations, which already have been attacked
by industry lawyers, rather than through casebycase
documentation of smokingrelated health care costs.

Mississippi Attorney General Michael Moore said Texas will
draw support from other states in the form of evidence and
legal assistance.

"We're going to send all our troops down there," Moore said.
"The industry can huff and puff, but I don't think they're
going to blow any walls down in Texas."

Dusek said Morales filed the antitobacco suit in Folsom's
court because it is part of the federal Eastern District of
Texas, which has a fasterthannormal record of getting
lawsuits to trial.

Folsom, 50, a native of Murfreesboro, Ark., was appointed to
the federal bench by President Clinton. Folsom is a former
state prosecutor in Lafayette County, Ark., and former city
attorney of Murfreesboro and Lewisville, Ark.

Dusek said Morales will present the state's opening
arguments in the case, but the state's lead lawyer will be
John O'Quinn of Houston, one of several private trial
lawyers Morales hired for the case.

Morales said last week that the private attorneys not
Texas taxpayers have spent $10 million to $15 million on
trial preparations. If Texas wins or reaches a favorable
settlement, the lawyers stand to receive much more than that
in contingency fees.

Nancie Katz of the Chronicle's Washington bureau contributed
to this report.