Strategy Of No Settlements

By the mid-1980s there was no doubt among tobacco industry executives about the seriousness of the products liability issue. A July 22, 1985, restricted briefing document titled "B&W's Public Issues Environment" outlines the potential importance of products liability actions against Brown and Williamson and the principal strategy to be followed: no settlement payments are to be made.

B&W will continue the strategy of intensive litigation of each case with the objective of exploiting each case's favorable factors and a policy of no payments to plaintiffs in settlement of cases. In the event manufacturers experience losses in the smoking and health cases, the selection of contingency strategy would depend upon the scope of the losses. During the planning period the most attractive strategy probably will be to continue intensive litigation of the cases with no settlement payments and the acceptance of losses as charges against income. The current insurance coverage of $1,000,000 would quickly be absorbed and the adoption now of internal financial structures to fund losses could be a negative influence on juries. Such structures should be re-evaluated if losses occur. A possible contingent strategy of settlement also should be reassessed on an opportunistic basis. Pressure will develop in the Congress for superfund legislation [pursuant to which corporations that produce hazardous substances are taxed, and the resulting fund is used to pay for the costs associated with the release of hazardous substances] applicable to smoking and health lawsuits if large scale plaintiff victories occur; such a fund would be financed by contributions from cigarette manufacturers amounting to a large percentage of profits. {2228.02, pp. 1–2}

The strategy of refusing to settle with any plaintiff was one that the industry had devised when the first products liability actions were filed in

the mid-1950s, and the industry has religiously observed it to this day. The tobacco companies decided that they would defend every suit, regardless of cost, and would do so regardless of how many appeals were taken. As part of this strategy, the industry also decided that it would spend whatever it must to exhaust the plaintiff's resources in each case. Thus, the litigation in this area became a war of attrition in which the richest party, rather than the one with the best legal case, would win (9).