Cornered (32 page)

As a partner at Robins, Kaplan, Ciresi drove his lawyers hard, expecting the relentless pursuit of opponents. “It's not a country club,” Ciresi once said about his law firm, pointing to the difference between his approach to practicing law and that of others in the profession. Some of his colleagues criticize what they call Ciresi's “scorched-earth, take-no-prisoners” style, but he has proven to be extraordinarily effective in complex patent and liability cases. He directed the firm's multimillion dollar victories against Minolta and other camera makers, for patent infringement ($497 million); against the A. H. Robins Co., maker of the Dalkon Shield intrauterine device ($38 million); and against G. D. Searle & Co, makers of the Copper-7 IUD ($8.75 million).

In the Third Wave of tobacco suits, Ciresi created a team of a dozen experienced attorneys who quickly developed a reputation as the armored division of the antitobacco forces: ponderous, but with the heaviest firepower. Ciresi's team, who would work long hours, rarely taking a weekend off, included Gary Wilson, a partner in the firm's mass tort department, and Roberta Walburn, a former reporter for the Minneapolis
Star Tribune
who, as a lawyer, had earned her partnership working with Ciresi on the Bhopal and Dalkon Shield cases. Walburn did most of the courtroom work, preparing motions and pounding the companies with questions about internal documents. The group also included Susan Richard Nelson, who had handled automotive and pharmaceutical product liability, and Thomas Hamlin, an expert in patent infringement.

While Gauthier was waging his propaganda war, and Motley was flying around in his private plane, picking up clients and holding high-profile depositions, and Dick Scruggs and Mike Moore were maneuvering Mississippi into being the first state to go to trial, the Minneapolis team was moving slowly and methodically toward its public confrontation with the industry. Motley and Coale mocked Ciresi's strategy of reviewing millions of documents, saying it was taking too much time and wasn't necessary to win the case. But that was how Robins, Kaplan worked. “Our view was not to be the first to go to trial, but to do it right,” said Walburn.

Over time, the Minneapolis lawyers would become the industry's most implacable foes. Ciresi's team had always believed that the Merrell Williams documents were, as Walburn said, “just the tip of the iceberg,” and they set out to prove it.

From their northern fastness, Ciresi's team kept up an unrelenting barrage of demands for documents, filing hundreds of separate motions to make the companies comply with a discovery request. They were the only ones to challenge the industry on the destruction or concealment of sensitive scientific reports from company files, and they launched the most comprehensive attack on the improper use by the industry of the attorney-privilege rules. Minnesota would force a judicial review of 250,000 documents—or more than a million pages—for which the industry had claimed privilege. They would uncover evidence that led them to charge Philip Morris with routinely destroying potentially damaging documents about smoking and health, a charge the company vigorously denied.

The Minnesota lawyers were also the first to include in their lawsuit the British tobacco giant, BAT Industries. BAT believed it had successfully “ring-fenced” its corporate structure so as to avoid the long arm of United States liability, but the Minnesota lawyers roped it anyway, forcing the company to set up a special document warehouse in England and fill it with seven million pages of the company's files. In a moment of reflection on the Minnesota offensive, Walker Merryman, vice president of the industry's Washington lobbying arm, the Tobacco Institute, would observe, “Minnesota is a state in which we always expect the worst.”

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T
HE
M
INNESOTA CASE
was filed in August 1994 by attorney general Hubert Horatio “Skip” Humphrey III, the son of the former vice president. This was the second Medicaid suit to be filed—Mississippi had filed that May.

It was appropriate that wholesome, health-conscious Minnesota should be among the first to sue. Since the 1970s, it had been one of the country's leading antitobacco states, defeating persistent tobacco industry lobbying in its legislature to pass one of the nation's first antismoking bills in 1975. At the same time, the state had used an increased cigarette tax to fund medical insurance for the uninsured.

Ciresi and Walburn had first discussed suing in 1989 during the Rose Cipollone case in New Jersey, but no formal meetings were held with Humphrey's staff until early 1994 when, as in Mississippi, David Kessler's letter about nicotine manipulation, the ABC News
Day One
program, and the release of the Merrell Williams papers accelerated the process. Humphrey gave Ciresi an exclusive contract, making it the only one of the 39 states that would eventually sue to be represented by a single law firm. If Minnesota won, the state would ask the court to require the tobacco companies to pay all attorney fees. These would be capped at 25 percent of the damages, lower than the standard 33 percent retainer normally asked by law firms under contingency-fee arrangements, but enough to give Robins, Kaplan the promise of the biggest cut of the tobacco riches from a single case in the Third Wave.

In Skip Humphrey, who had just turned fifty, Ciresi and Walburn found a willing participant. Humphrey's father, who died in 1978, had smoked four packs of unfiltered Lucky Strikes a day through the 1950s and the young Skip had always hated the smell of cigarettes. He had inherited his father's liberal bent, particularly in matters of antitrust, health care, and consumer protection. He had an instinctive dislike of Big Tobacco, its political power and its riches, and he would become one of its harshest critics. He would use his political inheritance, his links to the White House forged when he ran Clinton's Minnesota campaign, plus his bid to be governor, to turn the state's lawsuit into the one most respected by the industry.

One reason for Big Tobacco's concern was Ciresi's terrier reputation for never letting go of a case, however complicated and drawn out it became. Another reason was Humphrey's use of Minnesota's tough consumer protection and antitrust laws. The Minnesota suit was never part of the bandwagon driven by Scruggs, Moore, and Motley. Like Mississippi, Minnesota was seeking recovery of Medicaid expenses, but in addition to demanding that the industry pay for the medical bills, Minnesota was charging it with consumer fraud in promoting and selling a product known to be harmful. The state alleged that the industry had engaged in a “decades-long combination of conspiracy and of willful and intentional wrongdoing.”

The fraud began, said the state, with the infamous 1954 “Frank Statement” published by the tobacco companies in newspapers in virtually every city in the United States with a population of 50,000 or more. The industry statement declared, in part, “We accept an interest in people's health as a basic responsibility, paramount to every other consideration in our business.” Minnesota alleged that the conspiracy continued when the companies learned of the addictive powers of nicotine but engaged in a “unified campaign of deceit and misrepresentation to hide this information.” As a result, the companies had been unjustly enriched because they had not paid for the damage to people's health. Now, Minnesota declared, was payback time.

In a second departure from the Mississippi suit, Minnesota further charged violation of the state's antitrust law, which prohibited “unreasonable restraint of trade and commerce.” It was the industry's suppression of research into smoking and health—in particular, its suppression of the development of a healthier cigarette—that, argued the state, “had the purpose and effect of restraining competition in the market for cigarettes.”

Minnesota was also the only state to bring the suit jointly with its largest purchaser of health care, Blue Cross and Blue Shield. The state and Blue Cross were the two largest purchasers of health care in Minnesota. As an employer, the state provided health coverage to its 60,000 employees; Blue Cross had contracts with 12,000 doctors and clinics, 135 hospitals, and 6,000 allied health-care providers.

The state had estimated that cigarettes killed 6,000 Minnesotans each year—out of a population of 4.5 million—and caused thousands of others to develop smoking-related diseases. The total health bill paid by the state and Blue Cross and Blue Shield was estimated at $470 million a year. Total damages sought amounted to at least $5 billion. Any monies recovered could benefit all citizens of Minnesota in the form of lower taxes, and Blue Cross would give the damage award back to the consumer in the form of lower health insurance costs because it is a nonprofit enterprise.

In addition to reimbursement of tobacco-related health-care costs, the state also sought “an end to the forty-year conspiracy,” including the dissolution of the industry's research and propaganda apparatus, the Council for Tobacco Research and the Tobacco Institute, and it demanded the industry open its files to the public, fund a corrective public education campaign, take steps to curb the sale of cigarettes to minors, and set up stop-smoking clinics. How long might this grand lawsuit last? “Our best guess,” said Robins, Kaplan, “is two to five years. The tobacco companies may do everything possible to drag it out.”

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T
HE TOBACCO COMPANIES
sent in their shock troops. At one early court hearing, no fewer than two dozen industry lawyers representing nine tobacco companies filed into the Ramsey County District Court, a splendid art deco building with a big onyx statue in the lobby of an American Indian smoking a peace pipe. The tiny courtroom of Judge Kenneth Fitzpatrick, the state judge assigned to the case, was too small to accommodate all the tobacco lawyers and they had to sit in the spectator seats. Ciresi's team was quite comfortable on their side of the court with only six lawyers.

Over the next few weeks, the industry sought to dismiss the suit using the same subrogation argument they had put forward in Mississippi: any claim for damages had to be brought on behalf of a smoker. By bringing the suit, the state was in effect stepping into the shoes of the smoker; the suit was really no different from a personal-injury claim and the traditional defenses of assumption of known risks should apply. The companies also claimed that Blue Cross and Blue Shield should be dismissed because they had suffered no damage: the extra costs of looking after smoking victims had been passed on to the insured in the form of higher premiums.

It took a year for the Minnesota lawyers to defeat these efforts to dismiss the case, but before Ciresi's team could begin the serious business of document discovery there was a small matter to clear up: BAT Industries of London claimed that it had been wrongfully named in the suit; that it was merely a holding company with only 164 employees and had no meaningful control over Brown & Williamson's activities in the United States. Minnesota countered that BAT not only had full control of B&W but had been selling more than four million cartons of cigarettes a year through its Kentucky subsidiary.

In the ensuing court battle, Ciresi had a special weapon—Minnesota's “long-arm statute.” Most states have such laws to protect themselves against parent corporations that do business in their territory through wholly owned subsidiaries. If their products cause harm, the state has a chance to include the parent company in a claim.

BAT claimed it had never manufactured, tested, designed, marketed, packaged, sold, distributed, or advertised cigarettes anywhere in the United States. Neither had it conducted research with respect to tobacco products or any other goods or products sold or intended for sale in the United States, including Minnesota. It had no offices, or even a telephone number in the state. There were no direct contacts of any kind, the BAT lawyer argued.

Unhappily for BAT, Ciresi put Roberta Walburn on the case. The former newspaper reporter was expert at following corporate paper trails. Walburn unraveled what she would eventually describe to the court as BAT's “attempt to engage in a corporate shell game”; distancing itself from its American subsidiary, Brown & Williamson, through a complex succession of corporate intermediaries.

BAT Industries is a multinational corporation whose corporate pedigree goes back to James Buchanan “Buck” Duke, the founder of the modern cigarette industry. His family—the Dukes of Durham, North Carolina—had started selling snuff tobacco after the Civil War under the ingeniously misleading brand name of Pro Bono Publico. By the turn of the century, having created a cigarette monopoly in the United States with the American Tobacco Company, Duke went to England and joined forces with the Imperial Tobacco Company. In 1902, they created the British-American Tobacco Company Ltd., which became known as BATCo, or simply BAT.

Under the merger, the companies on each side of the Atlantic agreed not to compete for the other's domestic market and assigned brand rights to each other for home sales. Duke's operation in the United States violated the Sherman Antitrust Act and, in 1911, the U.S. Supreme Court declared his American Tobacco Company to be an illegal monopoly. He was forced to sell his majority shareholding in BAT and cancel the trans-Atlantic covenants. BAT was thus free to conduct business all over the world and in 1927 the company bought Brown & Williamson of Louisville, Kentucky.

Today, BAT describes itself as “the world's most international cigarette manufacturer.” The corporate pyramid has BAT Industries at the top, followed by South Western Nominees Ltd., BATUS Holdings, Inc., BATUS Tobacco Services Inc., and Brown & Williamson Tobacco Corp. At the time Walburn did her research, in 1994, BAT was trying to buy the American Tobacco Company, which it eventually did, a year later.

In 1993, BAT had revenues of $36 billion and sold tobacco products in more than forty-eight countries with profits of $2 billion from tobacco sales. As Walburn would observe sarcastically in court, “Not a bad feat for 164 employees.” She was able to persuade Judge Fitzpatrick that BAT had created “a fact dispute.” The Merrell Williams documents demonstrated that BAT was running tobacco and health research in England and that B&W was paying for it. Far from being a distant parent, BAT appeared to be “inextricably intertwined” with its Kentucky relative.