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Yet it will be months before the agreement becomes law, and that's if--and it's a big if--both Congress and the White House give their consent. Congress won't even consider the issue before September, and dissenting health-care advocates from the American Lung Association to Ralph Nader have vowed a fight.
The dissidents are already complaining that Big Tobacco got too much and gave too little. The proposed settlement buys them freedom from future class actions and caps the annual payout at $5 billion for past wrongdoing, so none of the companies can be wiped out by enormous judgments. Most importantly, it ensures predictability for stockholders, a prospect that in recent weeks has sent the stocks of the two largest companies, Philip Morris and RJR, soaring.
Still, for the $50 billion-a-year industry, the settlement plainly had the sour taste of a bad cigar. Tight-lipped throughout the negotiations, the industry offered up Steve Parrish, a spokesman for Philip Morris, to present its response. After confirming that agreement had been reached, Parrish said there were aspects "with which we disagree," then corrected himself: "with which we do not necessarily agree." After tersely adding that cigarette makers were "looking for a new era of tolerance with regard to the tobacco industry," he hurried away from the mike.
Under the terms of the 68-page, single-spaced proposal, manufacturers will pay $368.5 billion in damages, shelling out $10 billion up front to be followed by annual allotments that will grow from $8.5 billion to $15 billion over the first five years, then hold steady. Any monies not used to settle lawsuits--including those brought by 40 states to recover Medicaid expenses incurred for smoking-related illnesses and 17 class actions--will be applied to antismoking campaigns targeted at youths, to health research and to rigorous federal oversight of the tobacco industry.
In addition, cigarette companies will pay $60 billion in punitive damages. Of that, $25 billion will be placed in a trust fund to be used for public-health programs, with some of the remainder applied to providing health coverage for uninsured children. This aspect of the settlement, which was one of the more contentious issues of the negotiation, is tantamount to an admission of moral wrongdoing, a stunning development for an industry that for 40 years has steadfastly refused to admit any culpability or accept any responsibility for the health consequences of smoking. "Nobody's ever gotten a dime from them yet," reminds John Coale of the Castano Plaintiffs' Legal Committee, a group of 60 personal-injury law firms that made the first serious moves against Big Tobacco back in March 1994. His group has overseen all 17 class actions against the industry. Ironically, if the settlement becomes law, those class actions become moot, although the individuals they represent could make claims for settlement funds.