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How They Won It: Taking Big Tobacco to the Jury

Given public sentiment toward Big Tobacco, the last thing the six law firms defending tobacco companies against 37 Missouri hospitals wanted was to have the 12-year-old case end up in front of a jury.

Yet on the morning of April 29, after a week of deliberations, a jury in the Circuit Court of the City of St. Louis returned verdicts in favor of Philip Morris USA Inc., R.J. Reynolds Tobacco Co. and five others that denied the hospitals' request for $455 million in damages.

The verdict validated the work of Andrew McGaan of Kirkland & Ellis LLP, Diane Sullivan of Dechert LLP, Ken Parsigian of Goodwin Procter LLP, Nancy Kaschel of Kasowitz Benson Torres & Friedman LLP, Carl Rowley of Thompson Coburn LLP and David Wallace of Chadbourne & Parke LLP, most of whom had been involved in this case for more than a decade.

The suit, launched by the hospitals in 1998 to recoup money spent treating uninsured smokers, was only the third of its kind to reach the trial stage. With so many parties involved, it took the judge an hour just to read through the jury's verdicts on each of the claims.

"Once the first verdict was read, for Philip Morris, we pretty much knew it was going to be a rout," Wallace, an attorney for British American Tobacco, said. "But to sit there for an hour — you do need to emote at some point."

To appeal to this jury, culled from an inner-city pool not typically favorable to corporate America, the attorneys used a risky strategy for the often ill-perceived tobacco companies: they attacked the hospitals head-on.

"It's an area of concern to go in front of a jury and go on the attack, but we decided to be sober and factual about it," said McGaan, who represented R.J. Reynolds, American Tobacco Co. and Brown & Williamson Tobacco Corp.

"Many of these hospitals are very large businesses, and they're very much run like businesses," he said. "We asked very serious questions about what the hospitals are doing."

Those included inquiries into the aggregate effects of smoking-related illnesses on the hospitals' bottom line.

In making their case to the jury, the hospitals had focused on the estimated amount of money — which during the lengthy case had ranged as high as $4 billion — they had lost treating patients with smoking-related illnesses who could not pay their bills.

But the tobacco companies countered that these cases typically account for only 5 percent of hospital patients. When taking into account the facts that costs are covered for 95 percent of patients and that the hospitals receive tax breaks and federal and state subsidies for providing charity care, the hospitals don't lose money from smoking-related illnesses, according to Parsigian, who represented Philip Morris.

"Smoking does not injure hospitals," Parsigian said. "If cigarettes cause a bunch of people to go to the hospital and 5 percent don't pay their bills, the hospital still got lots of increased numbers of patients."

It was this point that swayed the jury, which ended up voting 9-3 in favor of the tobacco companies, according to Wallace. The defense team interviewed a handful of jurors afterward who said the hospitals did not sufficiently show that they had suffered because of smoking-related illnesses.

"It was pretty clear that the dividing point in the case was, do we look at the whole picture or do we look at the 5 percent that the plaintiffs didn't get compensated for?" Wallace said. "What won the case was that the majority of the jurors said [looking at only 5 percent] didn't make any sense."

In addition to the damages, the hospitals also claimed that cigarettes with nicotine were defective and negligently designed, and that tobacco companies should have been manufacturing nicotine-free cigarettes. They spent two months presenting witnesses who testified to the detrimental effects of nicotine and an alleged conspiracy involving the large tobacco companies to keep the information from the public.

The defense attorneys used cross-examination to argue that nicotine is naturally found in tobacco and that while cigarettes containing nicotine might be harmful, they are not defective, according to Sullivan, who also represented Philip Morris.

By the time it came to present their own case, the tobacco attorneys felt it was more important to drive home the damages argument than engage on the negligent design claims, which would have switched the focus back to the tobacco companies. They called just three witnesses, all to testify on damages, and had no one from the companies speak on the stand.

Much of the success can be attributed to the fact that the group of attorneys worked as a functioning joint defense team, according to McGaan. In the two years before the trial, the attorneys were in constant communication, and once in St. Louis, they ate most meals together and worked around the clock to craft a defense.

Rather than have each attorney repeat the other throughout the trial, they worked together to divvy up tasks, McGaan said.

The hospitals have not yet decided whether or not to appeal the verdict, according to plaintiffs' attorney Kenneth Brostron. The suit began with 75 hospitals, but the number was halved throughout the years as the litigation continued, and though Brostron said they have some appellate issues that merit consideration, he's not sure how eager the hospitals will be to continue fighting.

"It was an extended, very hard-fought, long, litigious case," Brostron said. "I'm grateful that we withstood the aggressive defense of the tobacco companies."

The verdict, coupled with the fact that most third-party suits against tobacco companies have been tossed, should serve as a disincentive to others seeking to bring similar claims, the defense attorneys said. Had the jury gone the other way, not only might hospitals in Missouri have sued requesting damages, but the theory could be extended beyond nicotine to other vices.

"People like to say tobacco is singular, but the theory could apply to fast food, to alcohol, to a whole host of dangerous products," Parsigian said. "You may believe a jury views an alcohol company differently, but the legal theory is not any different."

The plaintiffs were represented by Kenneth Brostron of Lashly & Baer PC.

Diane Sullivan of Dechert LLP and Ken Parsigian of Goodwin Procter LLP represented Philip Morris. R.J. Reynolds, American Tobacco Co. and Brown & Williamson were represented by Andrew McGaan of Kirkland & Ellis LLP. Carl Rowley of Thompson Coburn LLP represented Lorillard Inc. Nancy Kaschel of Kasowitz Benson Torres & Friedman LLP represented the Liggett Group. David Wallace of Chadbourne & Parke LLP represented British American Tobacco.

The case is City of St. Louis et al. v. American Tobacco Co. et al., case number 982-09652-01, in the Circuit Court of the City of St. Louis.