Big Tobacco Gets a Chance to Deal

WASHINGTON — The Supreme Court’s decision that the Food and Drug Administration has no authority to regulate tobacco handed the industry a major legal victory that may be worth more as a bargaining chip with Congress than as a shield against government regulation.

The court’s ruling moves cigarette manufacturers toward the unexpected position of asking Congress to regulate their products in exchange for new rules that would allow them to sell “safe cigarettes,” a product that they hope will play a significant role in the future.

In essence, the companies would like the government to put its stamp of approval on the “less risky” cigarettes they are trying to develop. But it is unclear what degree of government regulation they would accept in return for that imprimatur.

Financial analysts also said that the industry may look to Congress to put a cap on the costs of a rising tide of successful litigation by former smokers.

Congress, however, is unlikely to ride to the industry’s rescue, at least this year. Anti-smoking advocates are reluctant to give any ground to the industry, and conservative lawmakers oppose additional regulation of business, regardless of whether a particular industry would tolerate it.

“What the industry wants is containment of lawsuits and peace. . . . And the way to get that is through Congress and by putting themselves in a position where they are willing to be regulated. They are setting themselves up to deal,” said attorney Mary Aronson, a longtime analyst of the tobacco industry.

Small Chance of Cap on Legal Damages

Although there is little chance that Congress would agree to a request to limit litigation against cigarette manufacturers, which is what the industry sought in 1997, there is a small chance “that an annual cap in damages can be legislated by Congress, and the companies would like that and the investment community would find that appealing,” said Martin Feldman, a tobacco analyst at Salomon Smith Barney Inc.

In recent months, the industry has sought to remake its public image. In keeping with its new role of responsible corporate citizen, it struck a conciliatory tone in the wake of Tuesday’s court victory.

“The most important thing that we would like to see is that we . . . have a constructive discussion about what kind of national tobacco policy we should have,” said Mark Berlind, senior assistant general counsel of Philip Morris Corp.

Berlind and Charles Blixt, general counsel of R.J. Reynolds Tobacco Co., both said that they looked to any negotiations with Congress to include new criteria for lower-risk cigarettes.

“If Congress determines that new or additional regulation of cigarettes is appropriate, we would be open to discussing that. . . . We would like to come to a consensus on what constitutes a reduced-risk cigarette,” Blixt said.

Florida Suit Could Force Bankruptcies

The cigarette manufacturers now are being buffeted from all sides. A class-action lawsuit in Florida, which is entering its final stages, is threatening to bankrupt them, or at least force them during the appeal phase to post bond that is so expensive it could cripple the companies.

And lawsuits brought by individual smokers, which the industry in the past easily won, now are resulting in million-dollar compensatory damages and much larger punitive damage awards.

The court’s decision, which cited tobacco as the country’s “single most significant threat to public health,” could create a new nightmare of sorts for tobacco companies. In the absence of federal authority, some states could choose to adopt their own regulations.

Some tobacco experts predicted that, in strong anti-tobacco states such as California or Massachusetts, bills would be introduced to regulate the content of cigarettes--for example, limiting the amount of nicotine.

“Instead of fighting a single fire, the industry may be fighting brush fires in several states,” said David Vladeck, director of Public Citizen Litigation Group, which filed a “friend of the court” brief on behalf of public health groups in the FDA case.

Greg Connolly, who heads Massachusetts’ tobacco-control efforts, agreed.

He noted that after Massachusetts became the first state to put warning labels on smokeless tobacco products in 1985, 30 other states considered their own warning labels. Because conflicting state laws would have created distribution problems for the manufacturers, Congress quickly passed a law that created a uniform federal warning label for smokeless tobacco.

The exact shape of any deal on cigarettes, however, will depend heavily on the outcome of November’s elections.

Vice President Al Gore, the presumptive Democratic nominee, decried the high court’s decision and called on Texas Gov. George W. Bush, his expected GOP opponent, to join him in calling for FDA regulation of tobacco.

“It is time for the Republican Congress and George Bush to show their independence from Big Tobacco and do the right thing by passing legislation,” Gore said. “Tobacco is one of the most addictive substances known to man and should be regulated as a drug.”

Bush replied with a news release saying that Congress should pass legislation similar to a Texas law that prosecutes retailers who sell cigarettes to minors and punishes minors who smoke with fines and removal of driver’s licenses.

Prospects for any form of anti-tobacco legislation also could depend on whether Republicans retain control of Congress.

The dynamics on Capitol Hill that tore apart comprehensive tobacco control legislation in 1998 are still at work. Many Republicans and the business community are leery of giving the FDA additional authority to regulate cigarettes--in part because it would set a precedent for additional regulation of other products.

However, Rep. Henry A. Waxman (D-Los Angeles) has reintroduced comprehensive tobacco legislation. It includes measures that would give the FDA explicit authority to regulate tobacco as a drug and to reduce secondhand smoke.

Industry Officials Oppose Reviving Bills

In the past, however, similar legislation has gone nowhere, and the industry has always been reluctant to allow additional restraints.

Even today, despite the tobacco industry’s conciliatory tone, tobacco officials explicitly rejected the resuscitation of any legislation, including a Republican regulatory proposal crafted in 1998 by Sens. Bill Frist (R-Tenn.) and John McCain (R-Ariz.).

“We didn’t support that, and we don’t want to dust off old proposals,” said Philip Morris’ Berlind.

Matthew Myers, general counsel of the Campaign for Tobacco-Free Kids, said those comments show that Philip Morris is not serious about change and is merely engaging in “shameless public relations.”

The tenor of the battle may be changing, but the end is nowhere in sight.

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Rubin reported from Washington and Weinstein from Los Angeles. Times staff writer Myron Levin in Los Angeles contributed to this story.