The Wall Street Journal - 2 April 1996
Milo Geyelin, Staff Reporter of The Wall Street Journal

The case is the huge class action known as Castano and filed on behalf of every allegedly addicted smoker in the U.S. Last year, a federal judge in New Orleans stunned the tobacco industry by granting conditional approval for the case to proceed. Today, the industry will ask a three-member panel of the Fifth U.S. Circuit Court of Appeals to overturn that decision and convert the case back to a conventional lawsuit with a handful of plaintiiffs.

The stakes are enormous. For the tobacco companies, a defeat could expose them to tens of millions of nicotine-addiction claims and possibly hundreds of millions of dollars in damages. Plaintiffs are seeking to recover the costs of smoking, treatment to help quit and punitive damages.

For the plaintiffs' 60-some law firms that are pressing the case, a loss probably would be a sharp setback to the most sophisticated and well-financed legal assault ever mounted against the tobacco industry. And for the civil justice system, the unprecedented size of the Castano suit poses questions about whether it can be resolved without overburdening the courts. That issue lies at the heart of today's arguments, which are expected to attract so many lawyers that the case has been moved to a larger courtroom. Although a decision isn't expected for months, Wall Street analysts will also be watching the arguments closely for any clues about how the panel may rule.

"No court has certified a case like this one," Kenneth Starr, former U.S. solicitor general and current independent counsel investigating Whitewater, wrote in his brief on behalf of the tobacco industry. "It combines almost every factor identified by the courts as making [class actions] unmanageable or inappropriate."

The plaintiffs have high-profile outside legal talent of their own: Harvard Law School Prof. Arthur Miller, an expert in civil procedure and constitutional law. He and Elizabeth Cabraser, a prominent class-action specialist in San Francisco, maintain that proceeding as a class action is a reasonable approach to resolving the suit. "What we have here is a very cautious, prudent decision," Ms. Cabraser says of the lower court ruling.

Under the law, that's all that's required. To overturn the ruling, the tobacco companies will have to show that it is so extreme that it amounts to an abuse of judicial discretion, a high legal standard that appeals courts are usually reluctant to enforce.

For both sides, the critical question is whether the plan crafted by U.S. District Judge Okla Jones II, who died in January, provides the most efficient means for resolving so many potential claims. "The No. 1 question for the court," says Columbia University Law School Prof. John Coffee, "is really going to be the manageability of the class action."

Judge Jones's plan breaks the Castano case into two phases. A first trial would resolve what he determined to be the core factual issues: whether the tobacco companies believed nicotine to be addictive and manipulated its content in cigarettes to hook millions of smokers. A finding against the companies would move the case to its second phase: follow-up trials to resolve individual claims.

The two-step procedure is virtually identical to a plan that was struck down last year by the Seventh U.S. Circuit Court of Appeals in a case involving injury and wrongful-death suits by some 300 hemophiliacs against several major pharmaceutical companies alleging that they contracted the AIDs virus through blood-clotting medicine. Tobacco lawyers will be relying heavily on that decision.

In that case, Chief Judge Richard A. Posner wrote that multiple trials would violate defendants' rights to a single jury to determine core issues, such as the varying degrees to which the companies and the plaintiffs might be responsible for HIV infections. And forcing the companies to stake their future on the result of a single jury trial, Judge Posner ruled, created such enormous liability risk that it amounted to a form of legalized extortion. Defendants invariably settled out of court, thereby forgoing their right to appeal.

Plaintiffs, he ruled, could still pursue trials individually. Underlying his reasoning, Judge Posner wrote, was the fact that few HIV plaintiffs had been successful in the past. "The demonstrated great likelihood [is] that the plaintiffs' claims, despite their human appeal, lack legal merit," he wrote.

In their legal briefs, the tobacco companies predict that the two-tiered approach would bog down in millions of minitrials. In each one, the companies will be free to assert their traditional defense that smokers understand and accept the risks of lighting up and can quit any time. The upshot, the industry argues, will be a tidal wave of individual suits flooding the courts. That would defeat the reason for allowing class actions in the first place -- to promote judicial economy and safeguard the rights of litigants.

But plaintiffs counter that Judge Posner's decision is an aberration that goes against both precedent in the Fifth Circuit, which includes Louisiana, Mississippi and Texas, and a national trend of allowing more class actions. There are significant differences between the two cases, as well, Ms. Cabraser says. Tobacco plaintiffs have a more straightforward claim for damages than did the HIV claimants, she argues. The tobacco claimants are seeking far less in individual damages and there are far more of them. Indeed, says Ms. Cabraser, a major point underscoring Judge Posner's ruling was the relatively small number of HIV claims. The opposite is true in the Castano suit, making individual trials unlikely and a class action the most efficient way to proceed, she says. It would at least allow some common issues to be resolved once and for all, Ms. Cabraser says.

And while the tobacco industry has been quick to embrace Judge Posner's decision, other courts haven't. A month after the ruling, lawyers for Copley Pharmaceutical Inc., in Canton, Mass., asked a federal judge in Wyoming to apply Judge Posner's reasoning and dismiss a class-action suit pending against it over contamination problems with its asthma drug Albuterol. The judge refused, saying Judge Posner improperly injected his own view of the strength of the HIV cases in assessing whether it was appropriately a class action.

Whether the Fifth Circuit in New Orleans will adopt that view, however, is uncertain at best. The three panel members are considered deeply conservative, as is Judge Posner, one of the most influential federal appeals judges in the U.S. Thus, analysts predict they will be receptive to the tobacco industry's viewpoint. Two of the judges -- Jerry Smith, who is 49 years old, and John Duhe Jr., who is 63, were appointed by former President Ronald Reagan. The third, Harold DeMoss Jr., who is 66, was appointed by former President George Bush.

Says Columbia's Mr. Coffee: "I would say that, given the court that has been selected to hear this, that it's probably an uphill battle."

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