PUBLISHED in the Rocky Mountain News, 12/31/04
http://www.rockymountainnews.com/drmn/opinion/article/0,1299,DRMN_38_3435831,00.html

Excerpt PUBLISHED in Forbes, 3/14/05
http://www.forbes.com/business/forbes/2005/0314/028.html

For those of us who believe in personal responsibility and limited government, our courts have given us reason for optimism for the first time in years. First, in Illinois, the Supreme Court threw out lawsuits against gun manufacturers brought by the City of Chicago as well as victims of violence. Second, although the US Court of Appeals has not yet issued its opinion it appears that the government’s racketeering and fraud case against big tobacco companies is in trouble. Those of us who believe that tort reform is a critical issue for the nation, not least to dissuade the government from trying to raise revenue by suing private industry, should loudly applaud these events.

The City of Chicago sued firearms makers for over $400,000,000, claiming that gun manufacturers were causing a “public nuisance” and that the city was due reimbursement for medical costs incurred by victims of gun violence The Court ruled unanimously that there was no legal basis for holding the manufacturers responsible.

It stands to reason that when someone commits a crime with a gun or a knife it is the criminal who is responsible, not the gun or knife manufacturer. These days, however, reasonableness does not often win the day over emotion and greed, including greed by local and federal governments. This sensible ruling will, with luck, encourage other courts to rule similarly in other cases in which personal responsibility is ignored to go after deeper pockets. This need not apply just to guns, but also to fast food (“It’s not my fault I’m overweight”), alcohol (“It’s the bartender’s fault I drove drunk”), and even hot coffee (“It’s McDonald’s fault that I burned my inner thighs.”)

The government’s case against “big tobacco” is the ultimate example of using the courts to extort revenue from private industry. I do not argue that tobacco companies have been excellent corporate citizens or that there is nothing for which they could be held responsible. However, the government is trying to use RICO laws, developed to go after mafia racketeers, to persecute the companies. The reason is clear: RICO has very large financial penalties if someone is found guilty.

Questioning by one judge was right on target and points toward a likely fatal flaw in the government’s suit: RICO is inappropriate for this case. Judge David Sentelle noted "This RICO law was passed with all sorts of testimony about racketeers and Mafiosa. I've seen the government using it in court against everyone except racketeers and Mafiosa." RICO laws were designed to go after “enterprises” set up specifically to commit crime and fraud. Regardless of what you think of smoking or tobacco companies, the “criminal enterprise” standard clearly does not apply.

The government is arguing that the tobacco companies must pay $280 billion, yes Billion, which they estimate to be the profits generated from 1971 until the passage of RICO laws in 2000. Clearly they have chosen whatever standard maximized the amount they can sue for, regardless of its basis in law or reason. For example, their position assumes that every smoker for 30 years picked up the habit only due to fraudulent advertising.

Another problem for the government: This sort of disgorgement is only applied in cases where courts believe the money would be used to continue to commit fraud. In these days of ubiquitous warning labels and public knowledge of health risks, people do not start smoking because of fraudulent behavior by tobacco companies. Furthermore, the government now must argue that the tobacco companies are likely to keep committing fraud while maintaining that the massive 1998 “settlement” with the tobacco companies including curbing certain types of advertising was a success, positions which are mutually exclusive. The government’s reasoning simply does not hold water, and I trust that their case will not in the end.

The 1998 tobacco settlement showed lawyers that there is big money in going after unpopular habits and ignoring personal responsibility. This trend is even more frightening when the case is joined by the government with its unlimited litigation budget. Lawsuits or the risk of them is a major factor in price increases of many things we care about, and we should cheer each time a court slaps down a case of aggressive attorneys seeking out deep pockets regardless of responsibility. The Illinois gun decision and, with luck, the final decision in the tobacco case, point towards a hopeful trend of courts moving towards recognizing personal responsibility, limiting unsupportable claims against business, and discouraging attorneys and government from trying to raise revenue by attacking unpopular habits or products.

Gun suit news: http://www.boston.com/news/nation/articles/2004/11/18/ill_court_dismisses_gunmakers_lawsuit?mode=PF

http://biz.yahoo.com/iw/041118/076399.html

Tobacco suit news:
http://www.iht.com/articles/2004/11/18/business/tobacco.html