Tobacco firm breaks ranks to settle suit No. 5 cigarette maker agrees to underwrite cost of smoking clinics

Some liability acknowledged

Brooke move linked to its bid to take over board of RJR tobacco

Cigarettes

March 14, 1996|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF Kerry A. White of the Sun staff contributed to this article.

WASHINGTON — A headline on an article in yesterday's Business section about the settlement of a cigarette smokers' lawsuit stated incorrectly that the company involved Brooke Group Ltd. acknowledged some liability for the harm claimed. In settling, Brooke Group and its subsidiary Liggett Group did not admit or accept any blame. The settlement agreement states that they deny "any wrongdoing or legal liability of any kind."

The Sun regrets the error.

WASHINGTON -- In a major break in the 42-year legal war over cigarette smoking, lawyers in a blockbuster lawsuit against the industry reached a settlement yesterday with the No. 5 manufacturer the first time a tobacco company has promised to pay money to help people quit smoking.

After standing undivided since the first smokers' lawsuit was filed in 1954, the industry saw the initial fracture in its ranks when Brooke Group Ltd. settled to get out of a lawsuit in which 60 law firms including Peter Angelos' Baltimore firm have pooled their energies against the manufacturers. Brooke Group, the parent company of Liggett Group, maker of Chesterfield and Eve cigarettes, promised to pay up to $50 million a year for programs to help smokers stop using tobacco.

FOR THE RECORD - CORRECTION

And Brooke promised to curb some ads and promotions that might lead children to start smoking.

Dr. David A. Kessler, commissioner of the Food and Drug Administration, which is planning to crack down on the industry's promotional campaigns, called the deal "a positive development."

"It is encouraging that at least one company recognizes that there is a real effect on our children" from those promotions, Dr. Kessler said.

The deal is based on a never-before-tried legal theory, even though that theory has yet to be upheld by a court and Brooke Group did not admit it did anything illegal.

The theory behind the lawsuit is that the industry intentionally and illegally makes cigarettes addictive in order to destroy smokers' ability to quit. Any payments Brooke makes will be tied to that theory, at least symbolically.

That theory is also the basis for the FDA's effort not yet final to regulate cigarettes as if they were a system for delivering a drug, nicotine, to users.

Although the new deal has been signed, there are some hitches that could undermine it:

A federal judge must approve the deal, and must first agree to let the settlement govern the claims of tens of millions of smokers who have been joined in the lawsuit.

If many individual smokers decide they don't want to be bound by the deal, Brooke Group is allowed to back out of it.

The entire settlement could be scuttled if the rest of the tobacco industry goes on with the lawsuit, and ultimately wins by proving that it did nothing illegal, or by limiting any victory to the few individual smokers who first filed the lawsuit.

Brooke Group's promise to change its promotion of cigarettes that might entice children to smoke could be at risk if the Clinton administration's plan to regulate such promotion ultimately fails in a court test the industry is pursuing.

The other members of the industry's "Big Five" vowed yesterday fight on, expressing optimism that they would win in court and voicing resentment over Brooke Group's deal.

The other members are Philip Morris, Brown & Williamson, Loews Corp.'s Lorillard Tobacco Co. unit and RJR's RJ Reynolds Tobacco Co.

Some denounced the deal as a ploy by Brooke Group's chairman, Bennett S. LeBow, to enhance Brooke's position in an attempted takeover of another tobacco company, RJR Nabisco.

If that takeover happens, RJR could receive the same terms that Brooke is to get under its settlement.

Other tobacco companies, by failing to settle now, will be unable to get as attractive a deal as Brooke did, lawyers for smokers said yesterday.

"We were not after the money," said John P. Coale, a Washington lawyer for smokers and one of the negotiators. "This is the first settlement, and it puts a crack in the wall. That's what we were after: the crack in the wall."

For decades, he added, "These guys have been in lock step."

Mr. Coale conceded that the deal might help Brooke's Mr. LeBow in his takeover bid aimed at RJR Nabisco, and added: "He didn't do this because he's a man on a white horse."

The deal was done, Mr. Coale said, without considering Mr. LeBow's motives, and was achieved only because "everything fits," serving each side's interests.

John Banzhaf, a George Washington University law professor here who has waged his own 30-year campaign in court and at federal agencies against the tobacco industry, called the settlement "a sweetheart deal" for Brooke.

But he was pleased by the settlement, saying it was "likely to irrevocably alter the war against smoking."

Brooke's agreement to the deal, the professor said, "undermines the position of the entire industry, and will make it much harder for the others to resist in courts of law as well as in the courts of public opinion."

Besides making its deal to withdraw from the massive lawsuit that is pending in federal court in Louisiana, Brooke Group is also trying to negotiate a separate deal with several state governments that have sued the industry. Those lawsuits seek to recoup money the states have paid for medical care to smokers.

Although a separate deal in that dispute had been rumored likely to be announced yesterday, no deal was forthcoming. One source close to those negotiations said the deal may have come apart at the last minute. Brooke Group insisted, however, that settlement talks were continuing.

Pub Date: 3/14/96

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