By Scott Albright and Taylor Lincoln
ANNAPOLIS – Maryland could wind up with $386.2 million from the settlement of a national lawsuit against tobacco companies, far less than the $4 billion many experts had earlier cited.
An analyst for the Department of Legislative Services told lawmakers Wednesday that the state would get the higher amount only if tobacco consumption did not drop and the federal government did not take a cut of the settlement.
Policy analyst Christine Scott said that was highly improbable. She said Maryland is more likely to get a one-time payment of $143.5 million plus annual payments of about $9.7 million for 25 years.
Even that is contingent on any number of variables, not the least of which is whether Congress will accept the proposed $368.5 billion between tobacco companies and the states.
The new figures drew harsh criticism from anti-smoking groups who said the settlement already gives away too much to tobacco companies, such as immunity from some lawsuits.
“We are adamantly opposed to this so-called `deal’ the tobacco industry is trying to cut,” said Floyd Hartfield, president of the American Lung Association of Maryland, in a prepared statement.
“Granting them protection from further liability would be ignoring an ongoing public health crisis and sweeping it under the rug,” his statement said.
But Steve Duchesne, a tobacco industry spokesman, vehemently disagreed with those who say the deal would let cigarette makers off the hook.
“The characterization of immunity is wrong, simple as that,” Duchesne said.
He said the staggering $368.5 billion settlement — which includes $1 billion a year in smoking-cessation products and $500 million a year in anti-smoking advertising — would seriously wound the industry.
The settlement was negotiated by six attorneys general on behalf of 40 states that sued the tobacco companies seeking to recover the states’ tobacco-related health care expenses over the years.
Maryland was one of those states, filing a suit in May 1996 that sought $3 billion in compensatory damages and $10 billion in punitive damages from the tobacco companies.
A Baltimore Circuit Court judge threw out nine of the state’s 13 counts in May 1997, but the state is appealing that decision. A trial is set for April 1999, but Maryland would proceed with its suit only if the national settlement falls through.
The state could also negotiate its own settlement with the tobacco companies, as Florida, Texas and Mississippi have done, instead of waiting for the national settlement.
Besides settling the current class-action lawsuits, the proposed national deal would also restrict future class-action suits. While individuals could still sue for compensatory damages, they would lose the right to collect punitive damages for past practices of the tobacco companies.
Punitive damages for future tobacco company misconduct would be limited to $5 billion a year in total, and no more than $1 million a year to individuals.
The proposal also makes the industry responsible for driving down teen-smoking rates by 30 percent in five years, 50 percent in seven years and 60 percent in 10 years. Tobacco companies would face steep fines for each percentage by which it failed to meet those targets.
Scott said the goal of lower consumption, for all smokers, has to be taken into account when figuring the payout.
A clause in the $368.5 billion proposal stipulates that the tobacco industry’s payments can be reduced to reflect decreasing consumption rates — a factor ignored in earlier estimates.
Scott also noted that fewer cigarette sales mean less tobacco tax revenue.
Another factor is the federal government, which is asking to get as much has half of any settlement payout for the Medicaid costs it incurred treating smokers’ diseases.
Steve Peregoy, executive director of the American Lung Association of Maryland, scoffed at the industry’s complaints. He said the industry would only have to raise the cost of a pack of cigarettes by 8 cents, for example, to recover any fines it might face for failing to drive down teen smoking.
“If you look at it over time, their monetary penalties are so low that they could easily absorb” them, he said.
Some Maryland legislators said after Wednesday’s briefing that, with or without the settlement, they plan to press on against the tobacco companies.
Del. Barbara Frush, D-Prince George’s and a member of Maryland legislators Against Tobacco for Children’s Health, said her group wants to raise the state cigarette tax by $1.50 per pack over three years.
Last year’s proposal for a $1-a-pack tax died in the legislature, but Frush said supporters of the higher tax are better organized this year and she is confident it can pass.
Frush said the average age for a Maryland child to start smoking is 12, compared to the national average age of 14. The proposed $1.50 tax would help discourage teen smoking, since kids are so “cost conscious,” she said.