Tobacco, the Tort Bar and Wyeth v. Levine

Tobacco and the Tort Bar. By Mark H Berlind
WSJ, Jun 08, 2009

Congress is on the verge of passing sweeping legislation that would empower the Food and Drug Administration (FDA) to regulate tobacco products. Antitobacco activists are cheering, while some tobacco companies are raising the specter of First Amendment violations. Lost in the debate is the fact that this bill will continue to allow consumers to sue manufacturers that fully comply with the FDA's content and labeling rules.

The FDA tobacco legislation was first introduced in 1996 as part of a comprehensive national tobacco settlement negotiated by public-health groups, attorneys general and tobacco companies. What emerged seemed an equitable balance: Manufacturers would submit to stringent regulatory controls, and there would be significant curbs on smokers' ability to sue them. With the FDA in control of the products and their marketing, the idea was that there ought not to be much basis -- absent outright fraud -- to bring lawsuits against companies that legally supply market demand.

Congress couldn't stomach the thought of providing any liability relief to the industry, so it killed the settlement bill. Cigarettes have remained unregulated by the FDA ever since.

In the meantime, federal and state governments have continued to earn more from cigarette excise taxes than the manufacturers do in profits. As governments have relegated the companies to junior-partner status in the enterprise of feeding Americans' tobacco addiction, it has also saddled them with mounting legal liability and vilification from elected officials.

Today's legislation would impose strict limits on tobacco advertising and labeling, mandate stronger warning labels, and require advance FDA approval of any reduced-risk claims. It would also empower the FDA to change cigarettes' content to make them less addictive and lethal.

However, in a little-noticed provision, the bill also expressly provides that "no provision of this chapter . . . shall be construed to modify or otherwise affect . . . the liability of any person under the product liability law of any State." In other words, the regulatory regime that the legislation would establish can't protect companies from tort liability -- even if they rigorously follow every FDA rule.

This is a bizarre pairing of almost total government involvement in an industry without any government responsibility for, or even modest protection from, the damage claims sure to be generated by that industry for following the law.

The FDA legislation builds on the precedent recently established by the Supreme Court in Wyeth v. Levine. In Wyeth, the Court ruled 6-3 that even if the FDA has approved a drug, the drug maker can still be sued by patients in state court. The majority argued that a litigant is still entitled to claim that the company should have used a stronger warning label than the FDA had required.

But as Justice Samuel Alito observed in his dissenting opinion, "the real issue is whether a state tort jury can countermand the FDA's considered judgment."

The president has proclaimed a "new era of responsibility" for America. But these recent FDA developments -- in which government determines the rules, the business community takes the blame, and trial lawyers take their cut -- seems anything but.

Like elevating the rights of unions over those of secured lenders, the FDA tobacco legislation disturbingly suggests that only those disfavored by the administration will actually be held responsible for anything at all. And it's no secret that the trial bar -- among Mr. Obama's most generous campaign supporters -- has already earned billions from tobacco litigation.

If we truly believe in "responsibility" for businesses, government officials, trial lawyers and ordinary citizens, then regulatory compliance should provide a strong defense against tort claims.

Mr. Berlind is a partner at A.T. Kearney, a global management consulting firm.