Legal Challenges To Regulation

On August 14, 1978, Ernest Pepples sent a "Privileged" memorandum to several high executives at the company regarding a paper entitled "Up from the Bombshelter," which was written by Charles Morgan, a noted

civil rights attorney in the 1960s, who later represented the tobacco industry. Although the documents include only a tiny fragment of the paper, we know from those fragments and from Pepples's memo that Morgan believed the industry should adopt aggressive legal measures to challenge government regulation of tobacco. For example, at one point, Morgan states:

We recommend the initiation of litigation to strike down legislation which forbids private property owners to allow free and unrestricted assembly by smokers in their businesses, restaurants, hotels, bars, stores, and similar facilities. {2211.01, p. 57}

Pepples explained that the paper had been reviewed and discussed by the Committee of Counsel, a Tobacco Institute committee consisting of the chief counsel of the tobacco companies, and by Horace Kornegay, then president of the institute, and that the memo dealt "with the main currents of the deliberations arising from [the] paper" {2210.01}.

In his analysis of Morgan's paper, Pepples notes:

Although some of the specific recommendations in Morgan's paper seem impractical, there is already wide agreement with one of his underlying ideas; namely, that now it has become timely for the industry to adopt a more aggressive stance in objection to some of the anti-industry measures being proposed. {2210.01}

Pepples then explains that challenging the Federal Trade Commission's attempts to impose further restrictions on cigarette advertising is a worthwhile endeavor because the industry has a reasonable chance of prevailing and there is "genuine value to be gained by winning":

The hard part is to find the right thing to stand and fight about and the right time and place to do so. The FTC wants to do something more about cigarette advertising because the display of the health warning in advertising has not been sufficiently "effective." By effective the FTC means a reduction in sales of cigarettes. The Commission attack will be founded on the now familiar premise that cigarette advertising tends to overcome the effect of the Surgeon General's warning and in so doing the advertising amounts to an unfair practice within the meaning of Section 5 of the FTC Act.

We can fight on that battlefield. We have a good argument and we will not be alone. The First Amendment issue is raised by the attempts to regulate the commercial expression on the vague ground of "unfairness." Here the FTC goes far beyond the familiar notions of falsity, deceit and misrepresentation. There is no lie or deceit present in cigarette advertising, whether you view the words alone or as a whole with the imagery. The FTC has to make its case in the mushy area of "unfairness." While "unfairness" under the Act may prove a flexible tool in regulating conduct, such as bait-and-switch

practices, the attempts to use it for the expansive regulation of the substance of expression contained in advertising runs right up against First Amendment considerations.

Another important legal issue concerns the res judicata effect to be given to the 1972 Consent Order under which the Surgeon General's warning is required in cigarette advertising. The Consent Order was based on a broadranging complaint that covers almost all of what the Commission is likely to come up with the next time around. Whatever legal validity and strength the FTC contentions in that complaint may have had, they should be taken as settled and not be open for relitigation time and time again [emphasis in original]. {2210.01, pp. 1–2}

Res judicata is a legal term meaning, literally, a thing that is definitely settled by judicial decision. When that is the case, the issue—in this instance the effect of the Surgeon General's warning—may not be opened up again by the same court or another court. Thus, Pepples is saying that the 1972 Consent Order settled all the issues relevant to the order and that the FTC contentions surrounding the order should receive no further hearing.

These are "good" legal issues, there is a reasonable chance of prevailing, and there is a great deal of genuine value to be gained by winning. Moreover the issues are sufficiently basic and of broad applicability that the industry will not necessarily be standing out there alone. For example, as to the First Amendment issue the makers of sugared cereals are already locked in battle, and the beer industry may soon be, on some of the same grounds as those that will be of concern to the cigarette industry. {2210.01, p. 2}

However, there were two important areas of concern that the attorneys did not believe were worth pursuing, despite Morgan's recommendations. The first of these was the ban on broadcast advertising on cigarettes, which the attorneys believed could not be challenged successfully on constitutional grounds and, in any event, was not worth fighting about:

He [Morgan] also says that the time is right for attacking the broadcast ban on cigarette advertising, again resting his arguments in the federal constitution.

With respect to Morgan's ideas about the broadcast ban, the First Amendment issues are theoretically interesting. The ban is a clear restriction of expression. The Court has recently affirmed that commercial forms of expression are protected by the First Amendment. But we are the wrong industry and this is the wrong issue on which to try to enlarge on this new-found constitutional protection for advertising. The Court has left many questions about the protection of commercial speech unanswered and this might be a very bad case to bring on early, before the Court has developed the rule more fully. The Court has already hinted that mere product advertising may enjoy the lowest degree of protection. Add to the foregoing factors that the case

involves issues of the public health and the protection of children and one can see that a negatively-inclined Court would have plenty of ammunition to use against the First Amendment argument.

Judges are only people and people are not favorably inclined toward this industry. On crucial points in the debate, the public opinion percentage scores against the industry read like a thermometer in July. Over 90 do not believe anything we say. Over 90 think cigarettes are dangerous. Even among smokers we lose. People say they want to quit. In an unaided poll a strong majority said that public smoking should be banned. About half of the people believe that ambient smoke is hazardous. With these kinds of attitudes floating around, Courts will likely be very negative toward cigarette advertising and any First Amendment argument which is advanced to get cigarettes back on TV [emphasis added]. {2210.01 pp. 2–3}

This frank assessment of the unpopularity of the tobacco industry and the extent to which the public was aware of the dangers of smoking for both smokers and nonsmokers indicates that the industry was far ahead of most politicians of the day in these realizations. In 1978 it was still only a rare politician who understood the industry's credibility problems and was willing to stand up to it. Pepples continues:

We have some discouraging history in this regard too. When the industry tried to impose the Fairness Doctrine in reverse—giving tobacco companies a right to reply to free anti-cigarette ads—Lewis Powell [an attorney at the time, who later became a justice of the Supreme Court] was hired and brought the case in the friendly 4th Circuit [of the US Court of Appeals]. Although it should have been won, the case was lost. It's bad law but there it is.

Even if the broadcast ban now were struck down, the pressures from government and non-government sources for counterads would be tremendous. The Fairness Doctrine may no longer require stations to carry anti-ads, as Morgan notes, but it certainly doesn't forbid stations to do so. The resumption of advertising on television would almost certainly be accompanied by the return in force of anti-smoking announcements [emphasis added]. {2210.01, p. 3}

Since the television and radio advertising ban was upheld in court, Pepples was undoubtedly correct in his assessment that it was not worth challenging. More recently, however, the advertising issue has shifted dramatically: there has been serious discussion of banning cigarette advertising altogether or of severely restricting its content. In August 1995 the FDA proposed a moderate set of restrictions designed to reduce the appeal of cigarettes and smokeless tobacco products to children and adolescents (8). The industry, of course, does not view such restrictions in the same way it did the broadcast ban. After the broadcast ban it merely

shifted its advertising to another medium, and it vigorously opposes any across-the-board restrictions or prohibitions.

In addition, Pepples rejects the notion that restrictions on public smoking are unconstitutional:

Similarly the recommendation for a wave of industry sponsored litigation attacking the constitutionality of public smoking ordinances is not convincing. A basic fallacy in Morgan's arguments is the assumption that the case involves an issue concerning the right of assembly and association. None of the anti-smoking ordinances in fact restricts a smoker's right of association or assembly. None of them exclude smokers from any place or infringe the rights of smokers to associate with whom they choose and assemble where they please. Instead they regulate activity or conduct. The ordinances do invoke the police power to restrict the activity of smoking in certain places.

A second major fallacy is the failure to recognize this police power aspect. The states have extensive authority to regulate the use of privately owned commercial property especially where questions of public health and safety are concerned.

With respect to the litigation recommended, the chances for success are relatively slight and with a small chance of winning, the prizes to be won would be practically valueless. If an anti-smoking ordinance is knocked down the most likely result would be the environmental protection "No Smoking" signs would be taken down and Fire Marshall's "No Smoking" signs would be put back up. No doubt the anti-smoking ordinances cover a somewhat broader group of public places than the Fire Marshall's have traditionally covered, but the Fire Marshall's authority is broad and could be more widely exercised in the future. One has to conclude, therefore, that the practical effort of a victory over the anti-smoking ordinances would be something less than sweeping [emphasis added]. {2110.01, pp. 3–4}

This analysis is particularly interesting for two reasons. First, it provides further evidence that the industry recognized nonsmokers' rights and clean indoor air as crucial issues in 1978, long before the mainstream health establishment did. Second, it indicates that the industry's chief lawyers agreed that they could not challenge a clean indoor air law on constitutional grounds; thus, they clearly conceded that public smoking is not a constitutionally protected right. Pepples's recognition that public smoking laws regulate conduct and do not interfere with constitutional freedoms is in sharp contrast with the position the tobacco industry has consistently taken when opposing the passage of such laws. In fact, the industry always frames the issues in terms of the effect of a proposed law on the "rights" of smokers (chapter 10).