A Liability and Litigation
Tobacco litigation in the US has generated staggeringly large headline damages awards in state healthcare cost recoupment, individual and class litigation.1 However, this phenomenon was due to the convergence of a unique set of circumstances in the US and is unlikely to be replicated in the UK or elsewhere with the potential exception of Canada.2 Moreover, even in the US litigation cannot provide the fundamental answer to the tobacco problem. Tobacco as a product per se remains immune from extinction by litigation even in the US. In fact product liability litigation in individual cases has provoked larger headlines than actual awards. A handful of individuals have received compensation, but often far less than the awards of ‘runaway juries’ and normally after many years of appeals. Recoveries by states have been significant, but the monetary awards have been manageable and even tailored to be so. The main impact of litigation by the states and federal government has been to enable the legal system to address tobacco regulatory issues that the US political process had been unable to tackle. Whether the results would have been better if the regulatory option had been pursued is a hotly debated topic. Litigation did, however, generate a lot of information through disclosure that has been useful to lawyers and the public health community.
Many legal systems may not wish to place courts at centre stage in such policy decisions. Continental judges see their role far more as applying rather than developing the law. Moreover there is an element of chance as to how the law develops depending on which judge or jury decides the case. This lottery is mitigated to some extent by the US having relatively easy access to the courts and many different state and federal jurisdictions in which to try out legal arguments. Indeed even within the same jurisdiction it is always possible with different facts to persuade a differently composed jury that liability should be imposed. In England, by contrast, one judicial rejection of the tobacco claims effectively killed them off. Thus the efficacy of litigation as a public health tool varies from one jurisdiction to another.
Even the US courts have not challenged tobacco per se. The litigation in the US only became successful because lawyers were able to point to revelations of manufacturers misrepresenting and/or manipulating the product. Prior to such disclosure, the tobacco industry had been able to run the defence that until a certain point no one knew for sure that tobacco caused cancer or slightly inconsistently, even before warnings were introduced, that everyone knew of the risks and smokers should take responsibility for the harm resulting from the risks they chose to expose themselves to.3 This is the ‘no-one knew/everyone knew’ defence. The US litigation has not only been about showing the industry knew far more about the risks and at an earlier stage than they had admitted; although such conduct is relevant to the question of whether warnings should have been given earlier. It has also questioned whether tobacco companies added additives to tobacco or manipulated the level of nicotine to enhance addiction, for then the product is no longer immune from challenge on the basis that it is simply a natural product with only inherent risks. Similarly if filters or light cigarettes are represented as being safer, but actually pose equal or greater risks than conventional cigarettes then legal challenges are possible. Targeting youths, who then become addicted before being mature enough to consent to the risks, is an additional argument. What is disconcerting is that in Europe and elsewhere the ‘no-one knew/everyone knew’ defence has continued to influence courts which either have not been exposed adequately to the internal documents of the tobacco companies or have failed to appreciate how the creation of a controversy – the ‘open question’ – tactic can undermine the value of any information and warnings provided.
Tobacco product liability litigation goes beyond direct challenges to tobacco per se and must be understood as referring also to the conduct of the producers. It is too narrow to restrict the discussion to product liability litigation for sometimes litigation has been under general consumer protection statutes. Some claims have even been framed in purely economic terms of having paid too much for ‘light’ cigarettes as the premium for an allegedly safer product was not justified. Equally compensation claims have not always been for direct physical injury, but have sought to recover medical monitoring costs to check for the onset of adverse health effects or to cover the costs of smoking cessation programmes to wean smokers off the product they have been addicted to. The state claims relied on unjust enrichment arguments to recover healthcare costs.
The term private litigation is apt to cover all situations where the victims of harm are seeking to invoke legal redress through the courts. Even if this redress consists of forward looking regulatory measures this is different from the state enforcement of regulatory rules. This chapter is concerned with this private litigation rather than state enforcement as such, although the line blurs when the state is the plaintiff and seeks forward looking remedies. The distinction remains, however, that this litigation is about seeking compensation or new norms of conduct rather than enforcing those already prescribed in legislation. Compensations claims can always have a forward looking deterrence element as one of their consequences. The public policy dimension of private litigation is a feature of the use of litigation in the US. Even in straightforward product liability litigation, whilst the large damage awards undoubtedly attract many lawyers and litigants, such cases also have important social policy objectives or outcomes. A key feature of much of the recent tobacco litigation, particularly in the US, has been that the ambitions of the parties have extended beyond mere compensation to encompass providing regulatory solutions.
This ‘regulation by litigation’ approach has caused some commentators concern that safeguards in the political process are being by-passed and business is being threatened by the fear of litigation to make concessions.4 Others, however, see such litigation as a safety valve allowing action where interest groups block progress in the political system. Some of the most significant achievements of tobacco litigation have been the agreements by industry to accept controls on its conduct, and whilst some have questioned whether the courtroom should be the forum for imposing quasi-regulatory solutions others have wondered whether the outcomes are strong enough.5 Both arguments may point towards the preference for direct regulation over regulation by litigation. State regulations should allow broader societal perspectives to be considered. Although court procedures are subject to judicial control, giving it a measure of public dimension, the whole process is essentially controlled by the parties. Even if the state is a party this does not always ensure the public interest is fully engaged. For example, in the state healthcare cost recoupment litigation the states had to balance other interests besides regulatory policy, such as damages recovery, which would obviously affect strategy.
Below the various grounds for legal challenge to tobacco are analysed. Many of the fundamental substantive law issues are common to both US and English law. The discussion is mainly restricted to these common law systems, but fairly similar issues arise in most Western legal systems and within Europe sale of goods law and products liability have been harmonised by EU directives. It is the context that differs between US and Europe and this is what is alluded to in the final section which draws some conclusions about the differing impact of litigation on either side of the ‘Pond’.
One aspect of tobacco litigation that is not considered in depth are challenges by those affected by smoke in the workplace. Indeed smoking can also be an issue in neighbour disputes and even child custody case.6 Undoubtedly these cases have had an important impact, but because they derive from concerns beyond consumer protection they will not be a central focus. There are clear overlaps with ETS controls, which are briefly considered later.7 They all assist in ‘de-normalising’ smoking.
B Behavioural Economics
Before embarking on an analysis of the substantive rules it is important to mention the insights of behavioural economics. This is an increasingly popular field of study seeking to explain how consumers actually behave rather than simply accepting the assumption of classical economists that individuals process information efficiently and rationally.8 In particular there is a body of research on how consumers react to perceived risks and this is particularly pertinent to tobacco. This discussion is relevant both to private litigation and regulation. In the liability context it might challenge the role of warnings as a defence, particularly in the context of industry keeping the controversy about health risks alive. It can also help fashion regulation that has the most impact on consumer behaviour and alert regulators to techniques industry might use to diminish the impact of regulations. Industry can also take advantage of these insights and even may have to if they wish to stay competitive.9
For many users, tobacco provides a pleasurable experience even if the downside is that they are addicted to a potentially hazardous product. They may be aware of its alleged dangers, but wish to have an excuse to keep enjoying it for longer. Any suggestion that it is not as dangerous as claimed by the public health community will be ceased upon by smokers looking for an excuse to continue the habit and potentially may have a significant impact on their perception of risks. That is why the creation of controversy about the harm of smoking was so important to the industry and why warnings and counter advertising are so significant to the public health community.
Smoking has always been a topic which has polarised opinions. Just as today people may debate the extent of the risk posed by ETS, so in the 1950s and 1960s people held strong, if not always well informed, views on the risks of smoking. During that period, a lot of publicity and evidence was put out by both the public health community and the tobacco industry.10 That information was probably not always equally considered by all. It would be natural if smokers, who wanted to believe their habit was not so damaging to their health, fastened on to the more positive messages from the tobacco industry that confirmed their initial beliefs.11
There is a strong instinct to anchor assessments around initial judgments, effectively discounting the value of experience and subsequent knowledge.12 Smokers tend to hang on to myths like risks depend on genetics, there is no risk of cancer from only smoking for a few years or the harm can be countered by exercise or taking vitamins.13 The growing amount of statistical evidence may not easily dislodge the smoker’s initial stance. He or she may well prefer to use their real life experiences.14 It may be all too easy to point to individuals who have smoked all their life, look healthy and live to an old age and ignore the statistics about the many others who are no longer alive to give testimony to the impact of smoking on their health. The impact of information and warnings on smokers might depend upon whether they had a relevant incident affect them recently, such as the death of a relative or friend from a tobacco related disease.
Smokers may not be fully aware of the risks of smoking.15 Calculating risk is a difficult task even for scientists. Individuals tend to be too optimistic about their own ability to avoid a risk, especially when they feel they have some control over the situation.16 Many smokers may not acknowledge their risks of cancer and heart disease are above average17 and underestimate their risk compared to non-smokers.18 For example, a French survey found 44 per cent of smokers considered that smoking can cause cancer only with a daily consumption above their own and 20 per cent considered that smoking related cancer only became a high risk with longer duration that their own.19 On the other hand Viscusi suggests that the high profile of risks associated with smoking leads to smokers over estimating the risks, especially of lung cancer.20 Warnings may play an important role in this heightened perception of risk as well as media campaigns. However, as the French study illustrates this may not always be consistently factored into individuals’ own assessment of personal risk. Slovic takes issues with Viscusi on several grounds including that his study asked about the risk to 100 smokers not to the respondent themselves.21 Moreover he notes that perception of risks is correlated to how much one values a product. So if exposed to positive images and feelings about smoking there may be a tendency to downplay risks. But perhaps his most forceful point is that at the time people start to smoke they do not act rationally for affective responses take over and they prefer to think of the pleasure of smoking than the long term risks. This affective effect is especially pronounced for cigarette smoking which is a regular activity giving ongoing pleasure and yet many people believe that they will avoid the downside by quitting in the near future, but their estimates of their ability to quit are far too optimistic.
It is easy to underestimate everyday risks to oneself from things like smoking because the impact is not immediate. This can reduce the impact of warnings as consumers tend to emphasise immediate benefits and downplay delayed costs.22 This may be particularly true of youths. Consumers prefer the certainty of instant gratification over contemplating possible problems. Indeed one might posture a model whereby a rational actor would smoke for a few years in their youth and then stop thereby enjoying the positive effects but only exposing themselves to limited health risks. However, addiction is the flaw making it unwise for anyone to contemplate such a nuanced risk assessment.
Moreover, simply providing information about the product attributes may not be enough, if information is not provided also about how the product is used. The ‘light’ cigarette debate is a classic example of this. The raw data on tar, nicotine and carbon monoxide yields mean little as they are based on smoking machine tests without information on how smokers actually smoke and its impact on yield or the chance of their increasing the number of cigarettes smoked to compensate.23 Of course it is difficult to provide individualised data on use, but at least users need to be able to factor in likely increase in actual yields.
Tobacco companies, along with all consumer product companies, were doubtless aware of the research showing that consumers are affected by how information is presented to them24 and that expected preferences can also be trumped by visceral factors.25 The attempts by the industry to associate themselves with positive images and to mitigate the impact of health warnings might be explained on this basis.26
The role of warnings and assumed knowledge of smokers have often been crucial in litigation, but should be considered in the light of these insights from behavioural economics. Certainly many claimants have lost as they are assumed to have known of the risks, even at a time when industry was denying the link and sometimes before there were any warnings. Once warnings were provided the argument for assumption of risk is stronger, but behavioural economics might suggest that the counter messages put out by industry may be readily received and undermine the effectiveness of the warnings.
Industry conduct has been to the fore in the more recent US cases. Relevant factors include its keeping back the full extent of its knowledge, manipulating the regulators and regulations in order to keep the issue of the effects of smoking in controversy and promoting a positive image for its product. Criticism of the tobacco industry in the popular media, combined with use of the jury system, have assisted in making this conduct legally relevant in the US. To make an assessment of liability without taking into account the true knowledge and behaviour of the industry is myopic for any claim of reasonable conduct or supposed assumption of risk by smokers must be assessed on the basis that the risk-taker had been fully informed of the risks and had not had his perception of those risks manipulated.
Such behavioural economics insights are usually considered most relevant to the development of regulatory policy. However, evidence might be used to show that warnings should have been given earlier than required by statute based on industry knowledge and to the extent conduct sought to dilute the warnings they should arguably not therefore provide a defence. Indeed the case for any statutory pre-emption is undermined if regulators made the rules without full disclosure of industry knowledge.27
These insights do not appear to have been presented fully in the UK and Europe and on the occasions when they have been raised they have not been usually accepted in litigation outside the US. This is strange. Hilton28 is right to note that the liberal assumptions of the British legal system may be a partial explanation, as was to be exemplified in the Scottish case of McTear v. Imperial Tobacco Limited,29 but his characterisation of the US legal system as more proactive may sound strange given the US system inherited the English common law and probably remains more individualistic in private law matters than Europe which has infused welfare state values. The answer may lie in the discovery of the smoking gun of evidence of industry misconduct, the exploitation of that in the media and courtrooms and also the presence of juries that may be less embarrassed by imposing liability than conservative judges.30 Individualism in the US also includes the right of the individual to sue, often for punitive damages, when enterprises abuse that freedom and harm their consumers. On a practical level the US also had a well-resourced trial bar that could persuasively present detailed evidence and sophisticated arguments. Also it should, be remembered the US plaintiff lawyers lost an awful lot of tobacco cases before there was any success. The US provides numerous fora to litigate in, so defeat in one case still allows the lawyers to go on to fight another battle, whereas defeat in one test case in England meant the end of the road for tobacco litigation.
C Sale of Goods and Strict Product Liability Challenges to Tobacco Products
One set of legal challenges focuses on the nature of the product itself. In terms of legal policy towards tobacco these are the most significant. Challenges based on the conduct of the producer, considered in section ‘D’, might harm particular producers, who have behaved inappropriately, or even a generation of producers if it can be shown there was collective bad practice, but will not fundamentally affect the availability of the product. Even if certain producers are driven out of the market it will merely create opportunities for others who produce and market the product according to standards of good business practice.
On the other hand, rules which allow the product itself to be challenged may make it more difficult for anyone to sell the product and might therefore be expected to impact more on the public health dimension by reducing tobacco sales. Unlike regulations that ban products or control their content or marketing, the effects of the private law on the product itself are more indirect. Private law can produce public health results from rules which force the seller of tobacco products to internalise the costs of their activity (i.e. the harm caused by their products).31 The extent of the cost internalisation varies depending upon how strict the liability regime is. In theory as the regime becomes stricter this should lead to increased prices, which in turn due to the laws of supply and demand should result in reduced sales. One of the elements of the MSA32 was that price rises were built in to take account of the liability of the tobacco companies to the states.33 Of course, it is not always easy to see such a direct link. Increased civil liability does not always map easily onto increases in prices. This is particularly so with an addictive product like tobacco as users cannot easily switch to alternatives, but despite this inelasticity of demand tobacco is still price sensitive to some degree. At the very least stricter private law controls on the product make the legal environment more challenging for tobacco companies.
Many of the challenges to products are not frontal attacks on their design, but rather are based on failure to warn of risks that would not otherwise be obvious to the user. Failure to warn of the risks of smoking is an obvious method of attack in relation to the period between when it is alleged that the industry knew of the risks and the introduction of health warnings. Producers with knowledge of the risks should have informed the user about them of their own volition before being statutorily required to do so. Even if framed as a strict liability claim, at the heart such cases are akin to an allegation of negligent conduct.34 Future producers can escape liability simply by providing appropriate warnings. More nuanced attacks based on failure to warn relate to claims that the industry did not explain that ‘light’ cigarettes were no safer than conventional cigarettes or about the risks of addiction. These may be present in sale of goods and strict liability actions, but are easiest explained as claims based on the conduct of the producer and so are covered in detail in the next section.
This section focuses on challenges to the product itself and arguments that it was defective because of matters such as the addition of additives or because less dangerous products could be developed. Additives is the easier one for if they can be shown to pose an additional health risk it will be hard to justify them in terms of enhanced taste. More difficult is the argument that, for instance, mentholating cigarettes enhances the risk as by making the smoke easier to inhale it increases exposure to smoke for self-responsibility can still be invoked as a defence. Suggesting cigarettes are defective because they are riskier than alternatives such as smokeless products or other forms of nicotine can also be readily countered by arguing they are really different products that should not be used as comparators. Cigarettes with tar, nicotine and carbon monoxide above legally prescribed levels risk being found defective, but arguing amounts can be lowered also runs up against arguments that the products would then be significantly different or that in any event compensatory behaviour by smokers needing a certain level of nicotine would not make them any safer. If cigarettes themselves can be made safer by, for instance, reducing nitro-samines, then older designs might in the future be considered defective, but for the moment potential reduced-exposure products (PREPs) are probably not accepted as alternatives to traditional cigarettes by most smokers.
The private law offers two routes to challenge tobacco products: contractual sales law and tort liability. In addition to liability for misrepresentation and express terms of the contract, contract law also implies minimum quality standards into sales contracts. For instance the English Sale of Goods Act 1979 implies terms covering compliance with description and fitness for purpose, but for our purposes the most significant is the implied term of satisfactory quality for it sets an objective quality standard for products.35 Since 1973 these have been minimum non-excludable standards.36 European law has also introduced similar standards in the form of the concept of conformity of contract, which inter alia refers to the normal quality and performance of goods.37 The Unfair Terms in Consumer Contracts Directive38 makes it highly unlikely that contracts could exclude this rule. In the US the Uniform Commercial Code retains the older less consumer friendly merchantable quality concept that was inherited from the English common law. It is also possible to exclude the merchantable quality term in some states of the US, even in consumer contracts, although the courts might be reluctant to come to that conclusion. These quality standards have the air of an objective standard, but are closely linked to consumer expectations that are contingent upon the context in which a product is marketed. In truth where a product has an inherent risk that the public knows about it is going to be hard to condemn the product under a contractual quality standard.
One US scholar goes further and argues that merchantability should only require goods to have to fulfil their basic purpose with other redress being found in product liability and consumer protection laws.39 That is certainly not true in Europe and even in the US there may be some narrow exceptions where tobacco products may fail to meet contractual quality standards, perhaps because they present exceptional or unexpected risks. In some US courts the dangers of addiction may not fit within common knowledge and thus raise the possibility of a claim of un-merchantability.40 The theories justifying contractual liability in such situations have similarities with those in tort law, but in contract law the emphasis is clearly on the failure to fulfil expectations.41 If liability is linked to expectations, then the higher expectations of quality are raised the easier it will be to condemn a poor quality product and make the seller liable. Thus sellers are given incentives by sales law not to raise expectations beyond what the product can actually deliver, for they will have to compensate for any unfulfilled expectations making the offering of such ‘guarantees’ poor commercial sense.42 For instance, a seller who raised expectations by the positive assertion that his cigarettes would not expose the smoker to the risk of lung cancer could be made liable for smokers who relied on that representation, not only on the basis of misrepresentation and possibly negligence, but also because the product itself was not of satisfactory quality as it did not meet the standard a reasonable person would regard as satisfactory taking account, inter alia, of the description of the goods.
Using such implied terms to challenge tobacco products was briefly popular in the first wave of challenges in the US, but the standard became conflated with tortious standards. This was understandable as the 1960s was the period when there were calls for strict tort liability to emerge from the ashes of contractual privity.43 Some courts were willing to leave such questions to juries,44 and it had the possible advantage that as liability was strict it might not have been necessary to prove the companies knew of the risk.45 Some judgments were outrageously conservative arguing contractual liability could only apply where there had been adulteration or a manufacturing defect.46 Such a narrow approach is unlikely to be followed today. However, perhaps inevitably it was only a minority of judges who took the view that tobacco products could not be reasonably fit for use merely because they had the potential to kill smokers,47 with the majority considering that the companies should not become the insurer of their product.48 Thus using contractual quality standards to challenge tobacco products has not been a successful strategy and is one that is not normally used nowadays as tort law provides a simpler route.
(ii) Strict Liability in Tort
Tort challenges to the nature of the product itself rather than the conduct of the producer are based on strict product liability rather than negligence. Strict liability focuses on the condition of the product, whereas negligence concentrates on the conduct of the producer; although often in practice negligence has been applied to products in a very demanding way so as to almost equate to strict liability.
Two competing theoretical bases exist for strict tort liability. One derives from the contractual heritage of product liability and is based on consumer expectations. This gives rise to similar issues as under contractual standards, notably the difficulty in condemning products for failing to meet expectations on the basis of risks that are both inherent and known. The alternative risk:utility basis reflects the traditional principles of tort law involving balancing risks and benefits.
When the American Law Institute drafted s. 402A of the Restatement (Second) of Torts (1965) it simply referred to liability for sellers of ‘any product in a defective condition unreasonably dangerous to the user or consumer’. Risk:utility concepts ran through the provisions and the comments had an express section on consumer expectations.49 Certainly the case law saw some courts favouring the consumer expectation standard, others the risk:utilty standard and yet others adopting a two-pronged standard under which liability would ensue if the plaintiff proved that the product ‘failed to perform as safely as an ordinary consumer would expect when used in an intended or reasonably foreseeable manner or … the defendant fails to prove … that on balance the benefits of the challenged design outweigh the risk of danger inherent in such design’.50
In Cipollone v. Liggett Group51 the District Court of New Jersey rejected the argument of cigarette manufacturers that the social benefit of cigarette production, as opposed to consumption, should be taken into account in determining whether the product was defective so that the profits made, tax revenues generated, employment provided and even the manufacturer’s charitable donations should not be taken into account. The court rejected this approach as it was never intended to weigh the risk to the consumer against the benefit to society at large. However, the limited scope for using strict product liability in the US to challenge tobacco products is reflected in comment (i) to the Second Restatement which stated:
The rule stated in this Section applies only where the defective condition of the product makes it unreasonably dangerous to the user or consumer. Many products cannot possibly be made entirely safe for all consumption, and any food or drug necessarily involves some risk of harm, if only from over-consumption. Ordinary sugar is a deadly poison to diabetics, and castor oil found use under Mussolini as an instrument of torture. That is not what is meant by ‘unreasonably dangerous’ in this Section. The article sold must be dangerous to an extent beyond that which would be contemplated by the ordinary consumer who purchases it, with the ordinary knowledge common to the community as to its characteristics. Good whiskey is not unreasonably dangerous merely because it will make some people drunk, and is especially dangerous to alcoholics; but bad whiskey, containing a dangerous amount of fusel oil, is unreasonably dangerous. Good tobacco is not unreasonably dangerous merely because the effects of smoking may be harmful; but tobacco containing something like marijuana may be unreasonably dangerous. Good butter is not unreasonably dangerous merely because, if such be the case, it deposits cholesterol in the arteries and leads to heart attacks; but bad butter, contaminated with poisonous fish oil, is unreasonably dangerous.
One rare instance of a judge finding cigarettes defective was in Wilks v. American Tobacco,52 when in 1993 Mississippi Judge Bogen stated:
Cigarettes are, as a matter of law, defective and unreasonably dangerous for human consumption. Cigarettes are defective because when used as intended, they cause cancer, emphysema, heart disease and other illnesses. That the result reached here imposes absolute liability on the manufacturers of cigarettes for injuries arising from the use of their products is not a departure from the doctrine of strict liability, rather the logical extension of the doctrine in the light of present day scientific and medical knowledge and the enormous economic burden which cigarettes place on the nations’ economy and its healthcare system in particular.
Such decisions were rare. Moreover, after the passing of the Federal Cigarette Labelling and Advertising Act 1965, and its pre-emptive effect being established in Cipollone v. Liggett Group Inc.,53 it was almost impossible to use strict liability to raise a failure to warn action. Indeed the industry has relied heavily upon the inherent risk argument.54
The Third Restatement (Torts) Products Liability adopted by the American Law Institute in 1997 is less consumer friendly.55 As regards design defects the consumer under the Third Restatement would have to show that the foreseeable risks could have been reduced or avoided by the adoption of a reasonable alternative design. This might be thought to raise the possibility that PREPs are such an alternative, but it would have to be shown that users saw them as a similar product and it may be all too easy to show that they are in reality not direct alternatives. There is some debate as to whether tobacco liability might be successful under the Third Restatement for in some circumstances it may not be necessary to show there was an alternative and the Third Restatement does not contain the Second Restatement’s reference to ‘good tobacco’.56 However, one doubts whether academic dissection of the Restatement to provide arguments for tobacco liability will transfer readily to courtroom.
Europe introduced strict liability in 1985.57 This was a couple of decades after the US and the US debates on the need for strict liability were clearly influential, but equally there were signs that the European drafters were keen to adopt a distinctly European approach. Indeed as European cases do not generally involve juries this may well affect the impact of consumer expectation and risk:utility tests.58