Tobacco Firm Settles Suits, Clears The Air Liggett Group Admits Nicotine Addictive And That Cigarettes Are Marketed To Teens

In an unprecedented admission by a tobacco company, Liggett Group acknowledged Thursday that smoking causes cancer and heart disease, nicotine is addictive and the industry markets its products to underage youths.

The historic concession came as the renegade cigarette maker settled lawsuits by 18 states seeking to recoup billions of dollars spent treating sick smokers.

In a separate agreement, Liggett said it has settled about 20 huge class actions as well as individual claims seeking damages for smoking-related ailments.

The agreements call for Liggett, the industry’s weakest player financially, to make settlement payments and to actively assist attorneys general and private lawyers across the country in prosecuting dozens of massive lawsuits against the $50 billion tobacco industry.

The deal further requires Liggett - maker of Chesterfield, L&M and other brands - to turn over a vast trove of internal documents and to offer its employees and executives as witnesses in upcoming tobacco trials.

Liggett promised to abide by U.S. Food and Drug Administration curbs on youth-oriented tobacco marketing - curbs that the industry has challenged in court. And it pledged to place labels on its cigarette brands warning that smoking is addictive.

Liggett, the smallest of the five leading U.S cigarette makers with less than 2 percent of the market, will also pay 25 percent of its pre-tax profits for the next 25 years into a settlement fund. With company profits of about $8 million last year, the financial gain for plaintiffs will be modest.

But ebullient attorneys general, who announced the deal at a packed news conference in Washington, said strategic considerations, not money, were the prime considerations.

“Never before has any tobacco company … acknowledged that cigarettes cause cancer, nicotine is addictive and the industry targets its marketing to children,” said Connecticut Attorney General Richard Blumenthal.

“Liggett has now made those admissions, and will give us critical evidence - documents and cooperating witnesses - to prove our case against the other defendants.”

Minnesota Attorney General Hubert H. Humphrey III likened the settlement to “busting a street drug dealer to get to the Colombia drug cartel.”

And Arizona Attorney General Grant Woods declared it “the beginning of the end for this conspiracy of lies and deceptions … Someone is finally telling the truth.”

The deal could build momentum for an eventual global settlement of litigation and regulatory attacks on the embattled industry, although such a deal would need approval by Congress and the White House and is considered at least several months away.

Tobacco stocks tumbled on news of the agreements, marking the third time in a week that share prices have been pummeled by legal developments in the smoking wars.

But industry leader Philip Morris, in a defiant response to the deal, declared that the agreement “changes nothing. Philip Morris … will continue to defend vigorously against the meritless lawsuits filed by the states seeking to recover health care expenses,” the company said.

Under the agreement, Liggett will surrender a storehouse of internal documents, waiving its right to claim confidentiality for papers that ordinarily would be covered by the attorney-client privilege.

Certain of the documents involve joint discussions between attorneys for Liggett and its rivals - and are considered privileged by the other companies.

In a countermeasure aimed at Liggett and anti-tobacco plaintiffs, Philip Morris, R.J. Reynolds, Brown & Williamson and Lorillard Inc. Thursday obtained a restraining order from a state court judge in the Reynolds’ stronghold of Winston-Salem, N.C., barring Liggett from coughing up documents deemed privileged by the other companies.

However, the Liggett agreement provides for such disputed documents to be filed with each of the courts presiding over tobacco lawsuits - allowing each judge to determine which should remain confidential and which should be given to plaintiffs. Officials said those documents are already being delivered to court clerks throughout the country.

Mushrooming litigation had placed such strain on Liggett that Philip Morris had been paying a portion of its legal fees.

Bennett S. LeBow, chairman of Brooke Group Ltd., Liggett’s parent firm, said the deal removed the threat of “potentially bankrupting judgments … and will permit us to get on with running our business.

“We believe that peaceful coexistence on reasonable terms makes far more sense for the tobacco industry than continuing denial of the legal and political reality of today’s situation,” LeBow said in a statement.

Thursday’s agreements expand the settlement Liggett reached in March 1996, with five of the attorneys general who had filed the earliest health cost recovery suits. The new deal covers the 17 states that have filed claims since the 1996 agreement, along with Minnesota - which had refused to sign the original deal.

The prior agreement also had extricated Liggett from a huge nationwide class action suit filed in New Orleans. But that part of the deal became moot last May when the 5th U.S. Circuit Court of Appeals refused to allow the case to proceed as a national class action.

In the 10 months since that decision, however, lawyers involved in the nationwide suit have filed about 20 new class actions on a state-by-state basis. Thursday’s agreement will dismiss Liggett from those cases.