Clinton's Illegal Assault On the Tobacco Industry

By Robert A. Levy
Copyright 1999 Wall Street Journal
February 8, 1999

"Tonight I announce that the Justice Department is preparing a litigation plan to take the tobacco companies to court and, with the funds we recover, to strengthen Medicare." With that State of the Union bombshell, the chickens came home to roost for the tobacco industry.

First, the industry rolled over for state Medicaid suits; then it volunteered to waive its First Amendment right to advertise, submitted to Food and Drug Administration regulation, and agreed to persuade customers not to buy its product. In other words, rather than go to war against the government's money grab, the tobacco companies tried to bribe the politicians. That capitulation--the unprincipled surrender of its right to market a legal product--has spawned Mr. Clinton's new assault on the industry: a proposed tax hike of 55 cents per pack and federal litigation to recoup health costs connected with smoking.

Whenever Mr. Clinton needs money, he calls for Philip Morris. Mr. Clinton simply bypasses the legislative process--not to mention the Constitution--and asks federal courts to create new law. Never mind that the Justice Department has said repeatedly that the federal government has no statutory authority to bring a direct suit to recover smoking-related damages. When the objective is to replenish depleted Medicare coffers, anything goes--including the rule of law.

The feds are entitled to recoup Medicare outlays when a tobacco company causes a smoker's illness. To recover, the government must prove its case just as would the smoker suing on his own. And if the smoker knew about the risks of tobacco but elected to smoke anyway, then tobacco companies would win in court--as they have won consistently for four decades.

Mr. Clinton understands that principle perfectly well: It's called assumption of risk. His former Veterans Affairs secretary, Jesse Brown, invoked it when the government was threatened with liability suits for having provided millions of smokers with cigarettes over the years. It would be "borderline absurdity" to pay for "veterans' personal choice to engage in conduct damaging to their health," he said. "If you choose to smoke, you are responsible for the consequences of your act."

Of course, when the government becomes the plaintiff, it would prefer to ignore such defenses. That's what most of the states did in their Medicaid recovery suits. Florida worked its magic by statute, abolishing assumption of risk for purposes of the state's tobacco litigation. Other states copied the Florida statute, but many decided to make their appeal directly to state judges rather than go the legislative route.

For its part, the Justice Department has already divulged that it will model its suit after Florida's, with or without help from Congress. That means the government will claim it can recover by suing tobacco companies directly, without stepping into the shoes of each smoker and having to prove that smoker's case. The argument, just like Florida's, will be that the government never smoked, therefore it couldn't have assumed the risk.

In effect, Justice will assert that it can recover merely because smoking injured someone protected by Medicare--even though that person, having assumed the risk, would have no right to recover on his own. The same tobacco company selling the same cigarettes to the same smoker and resulting in the same injury will be liable only if the smoker is a Medicare recipient and the government is the plaintiff. Liability thus hinges on the injured party's Medicare status, a happenstance utterly unrelated to any misbehavior by the industry.

Also following the Florida model, the feds will ask the court to ignore the traditional requirement that causation be demonstrated on a smoker-by-smoker basis. Instead, the Justice Department will want to produce only aggregate statistics, indicating a higher incidence of certain diseases among smokers than non-smokers. This means the government could sue for tobacco-related health expenditures on behalf of Medicare recipients without disclosing the names of the recipients or which of them smoked. The industry could neither challenge improper payments made by Medicare nor establish that its product was ever used by a recipient.

Even if the administration's latest litigation scheme somehow could be squared with the rule of law, another tax on cigarettes makes no sense. It's not just the destructive effect of black markets, or the brutal regressivity of price hikes, or the inequity when 44 million adult smokers have to fork up because some retailers violate unenforced laws and sell cigarettes to one million minors. It's also the judgment, by every scholar who has examined the data, that existing excise taxes more than cover the social costs of smoking. The uncomfortable truth is that federal and state governments have benefited handsomely from tobacco taxes, and therein lies one reason they have been unwilling to make cigarettes illegal.

Our adversarial system works quite well when smokers, insurance companies, and the industry fight it out in court, applying settled principles of tort law. The Medicare program can recover like any other insurer, but it should not be exempt from assumption of risk, it should have to prove case-by-case causation, and it must demonstrate actual damages. Under those rules, if the plaintiff can show he was defrauded, didn't realize the risk, became addicted as a result of the industry's deception, and contracted an illness because he smoked, he may be able to prevail. But we cannot hold tobacco companies responsible for consensual adult conduct, least of all by changing the law of torts on a retroactive basis.

If the health imperative is to reduce smoking among children, the remedy lies with state governments. The sale of tobacco products to youngsters is illegal in every state. Those laws need to be vigorously enforced. Retailers who violate the law should be prosecuted. Proof-of-age requirements are appropriate if administered objectively and reasonably. Vending-machine sales should be prohibited in places where children are the main clientele. And if a minor is caught smoking or attempting to acquire cigarettes, his parents should be notified. Parenting is, after all, the primary responsibility of fathers and mothers, not the government.

That approach will work, and it's constitutional. By contrast, the Clinton administration is embarked on yet one more raid on private wealth--a bald attempt to fatten the federal treasure chest without regard for individual liberty, personal responsibility or the rule of law.

By Robert A. Levy, a senior fellow in constitutional studies at the Cato Institute in Washington.

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