If Mississippi's first-in-the-nation lawsuit against the tobacco industry went to trial tomorrow, the courtroom would be in a remodeled supermarket on a busy commercial street in this Gulf Coast town of 26,000.

It's not by coincidence that the closely watched litigation is playing out with a Mayberry quality about it, even if it is complete happenstance that the permanent Chancery Court is being refurbished at the same time the tobacco case is hitting stride.The principal architects of the suit, Mississippi Attorney General Mike Moore and product liability attorney Richard Scruggs, deliberately chose this out-of-the-way Jackson County city to keep the ball on home turf and to keep the tobacco giants off-balance.

"We want to be on top of their shenanigans," said Scruggs, whose law practice is located in a half-vacant downtown Pascagoula shopping plaza about a mile from the makeshift courtroom.

But Moore and Scruggs are now engaged on a second front with broad implications as they try to negotiate and gather support for an out-of-court, congressionally approved settlement with the industry.

Some attorneys general are resisting, fearful the industry will escape intact without having to acknowledge allegations that it misled consumers about the hazards of smoking.

"We're at least having a national discussion about it now," Moore said in a recent interview in his Jackson, Miss., office. "As the trial dates creep up, I think we'll see more interest from the industry in a settlement."

That the state of Mississippi would be a leader in the battle against the tobacco industry at first glance seems incongruous. The state is, after all, largely conservative, mainly pro-business and certainly not considered forward-looking when it comes to social issues.

But it was the first of 17 states to try the novel approach of suing tobacco manufacturers for reimbursement of smoking-related health care costs covered by Medicaid. It already has begun deposing key witnesses, including well-chronicled whistleblower Jeffrey Wigand.

Yet, not all is going smoothly and there's some disillusionment both at home and nationally with the conduct of Moore, a media-savvy politician who brought the suit with the help of law school pal Scruggs, a veteran of the asbestos legal wars.

Republican Gov. Kirk Fordice has taken Moore to court over the case, asking the state Supreme Court to rule whether Moore has the authority to bring such a case. A ruling is expected sometime after the November general election.

"If you want to create a good business climate, it's not fair to authorize a business to operate with a license, to tax it and then to allow the attorney general to sue for doing what it is licensed and taxed to do," said Greg Hinkebein, Fordice's legal counsel. "Can the attorney general sue me if I'm a distributor of alcoholic beverages or manufacturer of motorcycles which maim or kill? It's very detrimental to the business climate."

A negotiated settlement, depending on how it was structured, could render moot the suits of other states - including Utah - and individual smokers. If terms of a settlement were congressionally mandated, they would be imposed nationally, effectively ending the pending litigation.

Stanley Glantz, a professor of medicine at the University of California in San Francisco, is strongly opposed to a legislative settlement at this time because of the data coming to light through the legal process. Glantz was one of the first to publish confidential industry documents, which he received anonymously.

"I think a legislative settlement is grossly premature to even talk about," Glantz said in a telephone interview.

If the industry is interested in pursuing a universal solution, it isn't showing its hand publicly.

"A settlement takes two sides and so far all of the conversation has been taking place on one side," said Peggy Carter, spokeswoman for R.J. Reynolds Tobacco Co. "We have no history of settlement and we don't intend to start with lawsuits that have no merit."

Moore, 44, is a Democrat who is in his third term as attorney general. He's been a tireless campaigner on behalf of his state's tobacco suit, flying across country in Scruggs' private jet, consulting with attorneys general in other states and interviewing potential witnesses.

"I'm personally involved in this," he said recently. "I'm the lawyer in my case. I go to my depositions. I've given 500 talks on this. I've seen my job as pushing the envelope as far as I can push it. What is the end game?"

Scruggs estimates his firm has spent about $2.5 million so far in the Mississippi suit. But the financial drain on the firm has been funded by the millions Scruggs and his firm made suing asbestos companies for health-related injuries.

Scruggs, who also is cocounsel in several other state Medicaid cases, including Florida, hired national political pollster Dick Morris to gauge the sentiment of Mississippi residents on tobacco and smoking before the suit was filed.

Morris, an adviser to President Clinton until his relationship with a Washington prostitute made headlines, initially found a 50-50 split among Mississippians on whether tobacco companies should be sued to recover health-care costs.

"It was discouraging," Scruggs said.

Subsequent polling, though, showed broader support for the suit after it was explained to residents. Scruggs said the margin now is somewhere around 3-to-1 in favor of the litigation.

The Mississippi case is pressing forward with witnesses that it hopes will put a human face on incriminating evidence.

Those witnesses include Wigand, the former Brown and Williamson scientist who was featured on the cover of Vanity Fair magazine earlier this year as "The man who knew too much" and was the subject of a controversial CBS-TV "60 Minutes" profile.

Another key player is Merrell Williams, a former Brown and Williamson paralegal who showed up one weekend at Scruggs' law office with boxes of internal company documents. Scruggs later was criticized by tobacco interests for accepting the material and then setting Williams up with a new home, boat and job in the Pascagoula area.

"We inherited a large cache of documents," said Scruggs. "We didn't need more. We needed to organize what we had."

Moore clearly relishes the attention Scruggs and he have gathered in this two-plus-year battle with Big Tobacco. Shortly after they received the Williams documents, for instance, Scruggs and Moore flew to Washington to share their newfound information with Rep. Henry Waxman, D-Calif., who was leading congressional hearings on cigarettes, nicotine and addiction at the time, the Justice Department and the Food and Drug Administration.

"That told the story that had never been told before and the beneficiary of that is everyone in the country now knows," said Moore. "We want them (the tobacco industry) to know that we have the evidence and we want the American public to know we have the evidence."

Some skeptics and critics suggest Moore is motivated to seek an out-of-court solution to the tobacco issue because he won't be ready for a scheduled March 1997 trial date and he's worried that the Mississippi Supreme Court will rule that the attorney general's office lacks the jurisdiction to pursue the matter.

Moore and Scruggs deny assertions that their interest in a universal settlement is for any reason other than in their opinion it's the best resolution that accomplishes multiple goals. And both warn that if one of these Medicaid suits goes against the industry, tobacco companies will seek protection in U.S. bankruptcy court.

Under terms of a preliminary settlement proposal that was leaked to the news media in August, the tobacco companies would pay $6 billion in 1997, an amount that would increase to $10 billion a year by 2001 and continue for another 11 years.

The payments would go into a federal fund that would be funneled back to the states in grants to cover the cost of smoking-related illnesses covered by Medicaid.

The money issue may be the easiest to resolve because shareholders in publicly held tobacco companies want some certainty about the financial ramifications of the industry's growing legal battles. Payments of the magnitude under discussion would still allow the tobacco companies to remain profitable.

Wall Street tobacco analyst Gary Black recently concluded that the industry would be better off financially with a settlement rather than to face an unknown future in litigation.

"In our view, the costs to fund a settlement are a fraction of the litigation risks based on worst-case damage assumptions implied by current valuations," Black wrote in a report for the investment firm Sanford C. Bernstein & Co.

A stickier issue may involve teen prevention efforts and stronger marketing prohibitions for potential underage smokers. And the stickiest issue could revolve around FDA regulation of cigarettes.

In the public health community, there is sentiment that the role of the cigarette in society is about to change dramatically, whether by legal action or government action.

"This could be the most significant social change in 35 years," said Matt Meyers, executive vice president of the National Center for Tobacco Free Kids, a Washington nonprofit organization. "There's the chance of saving more lives with this public health action than anything the federal government has ever done."