The first settlement of a tobacco liability lawsuit will be a bargain for Brooke Group Ltd. and a bounty for plaintiff lawyers but won't do much for smokers.
Only a small number of people - those who make sworn statements that they light up Lark, L&M, Chesterfield and other cigarettes made by Brooke's Liggett unit - will be eligible. That's 2 percent of all U.S. smokers, or a million people.The most they'll get is partial reimbursement for smoking-cessation treatments. And that's not much: about 55 cents a year for each Liggett smoker.
The biggest insult: Smokers have to use a "900" number - which callers pay for - to find out if they qualify for help.
"I've never seen a class action where you had to pay to get information out of your lawyers," said David Vladek, an attorney and director of Public Citizen Litigation Group, a nonprofit watchdog organization that is reviewing the pact.
The only people to get cash are the more than 60 plaintiffs' attorneys in the class-action, named for smokers widow Dianne Castano. Liggett will pay them fees of an undetermined amount.
It's clearly a good deal for Bennett LeBow, who controls Miami-based Brooke Group. He'll pay 5 percent of Liggett's pretax profit: about $550,000 a year at current income levels. Including settlements announced Friday with five states, Liggett's bill comes to about $2.5 million a year.
That's a fraction of the $10 million a year Brooke spends battling tobacco-related suits.
"Liggett has struck an extraordinarily good deal," said Matthew Myers, general counsel for Smoking OR Health, who's worked informally with the plaintiffs' attorney alliance. "Whether it's good enough for the class members is another question."
Class-action lawyer John Climaco didn't return a call seeking comment on the pact's specifics, disclosed yesterday in a BrookeSecurities and Exchange Commission filing. Brooke declined comment.
"This is a sham," said Sanford C. Bernstein & Co. analyst Gary Black. "The courts are not going to like the fact that it's only 50 cents a person" per year.
Some tobacco foes and the attorneys in the New Orleans class-action suit defended the settlement, describing it as the first chink in the industry's long-impregnable legal armor.
"This agreement represents a major victory for the public health community and a major setback for the tobacco industry," said Scott Ballin, executive director of the Coalition on Smoking OR Health, which is funded by the American Lung Association, the American Heart Association and the American Cancer Society.
Today, five of the six states suing the major U.S. tobacco companies - Mississippi, Florida, Massachusetts, West Virginia and Louisiana - settled their claims with Liggett, the smallest of the nation's five largest cigarette makers.
LeBow, credited by many as a shrewd negotiator, won a number of escape clauses in both the class-action and state settlements.
One says that if he decides too many members of the Castano class opt not to join the class-action settlement, preserving their right to keep suing, he can walk away.
And if not enough states join the five that settled Friday, he can stop making those payments.
Another escape clause says that if any of the remaining tobacco companies prevail in court, Liggett stops paying.
And LeBow made sure his Castano settlement is the best anyone will get.
If the lawyers settle with one of the other cigarette companies for less money in the next nine months, or before LeBow succeeds in his uphill battle to sell Liggett to RJR Nabisco Holdings Corp., they'll have to pay Liggett $250 million.
Opposition from Public Citizen could derail the New Orleans pact.
The Washington-based Ralph Nader affiliate played a key role in persuading another federal judge in New Orleans to throw out a settlement between Bronco II owners and Ford Motor Co.
In a sharp rebuke to lawyers for both sides, the judge said the agreement provided $4 million in fees and costs for plaintiffs lawyers but "effectively zero" for Bronco owners, who claimed their cars had lost value because they rolled over too easily.
U.S. District Judge Morey Sear noted the settlement provided plaintiffs with safety warnings and inspections they already could get for free. He was unmoved by a provision giving plaintiffs a flashlight, a road atlas, and a cellular phone (if they subscribed for service through Ford) along with their inspection.
The fate of the New Orleans settlement rests with Judge Helen Ginger Berrigan.
The question is whether Berrigan, a former president of Louisiana's American Civil Liberties Union chapter, finds the plaintiffs' lawyers' treatment of LeBow a little too liberal.