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Officials fear cut tobacco funds

Advisers to Gov. Bush fear that a huge class-action award will bankrupt the industry, cutting the state's winnings.

By JO BECKER

© St. Petersburg Times, published April 11, 2000


TALLAHASSEE -- Gov. Jeb Bush's top attorney urged the Legislature on Monday to act quickly to protect tobacco companies from a potentially crippling class-action lawsuit award that could jeopardize the state's own multibillion-dollar settlement with the industry.

The state is dependent on the $17.4-billion it expects to receive from tobacco companies during the next 30 years, said general counsel Carol Licko, and lawmakers may have to act within weeks to protect Florida's financial interests.

"There is certainly a threat," she said.

What concerns Licko and several states who depend on money won from the tobacco industry is a huge class-action lawsuit brought on behalf of Florida smokers.

The Miami jury that last week awarded $12.7-million in compensatory damages to three representative smokers is scheduled on May 15 to begin the next phase of the trial -- awarding punitive damages for as many as 500,000 people.

The fear is that the award could near $300-billion, potentially bankrupting tobacco companies and stopping payments to the states.

North Carolina, Georgia, Virginia and Kentucky have acted to shield the industry by capping the bond amount tobacco companies must pay before they can launch an appeal. In Florida, a judge can require a company to post a bond equal to 120 percent of a punitive damage award, essentially holding the money in escrow while the company appeals.

But Florida lawmakers have not reached consensus on what to do.

Some question the risk to the state. Florida law already prohibits punitive-damage awards from bankrupting an industry. Although lawmakers want to protect Florida's assets, many are concerned that they will be seen as protecting big tobacco companies.

Against that backdrop, a select group of state senators met Monday to discuss four options. Bush feels all four ideas have merit and the "potential to reduce risk," Licko said, though stressing that it was not the Bush administration's intent to give tobacco companies any advantages.

Two ideas came from onetime tobacco warriors who fought the industry to win the state's big settlement.

David Fonvielle, a member of the "dream team" of lawyers that helped represent the state in its suit against tobacco companies, proposed a law to cap the amount tobacco companies would have to pay out in punitive damages to $50-million a year.

Warning that other lawsuits are coming against the tobacco companies, Fonvielle said the state must act because "I think it's unrealistic and naive to think this is any more than the tip of the iceberg."

The dream team, however, may have its own motivation to protect tobacco companies from bankruptcy. The lawyers still are owed huge fees, according to Sen. Skip Campbell, D-Fort Lauderdale.

Campbell offered two other suggestions, although he said he still was unsure of the need to do anything.

One would prevent punitive damage payouts while an appeal is pending and remove the ability of a judge to order companies to post bonds. Another would cap the bond amount at $50-million. Both would apply to all class-action lawsuits, not just those involving tobacco companies.

Like Campbell, Attorney General Bob Butterworth is unsure whether the state needs to take immediate action.

But Butterworth, who fought the tobacco companies, found himself criticized for a proposal he put forth. The proposal clarifies existing law to say that compensatory damages must be awarded to all members of a class-action suit before punitive damages can be determined. That could delay a huge award for years.

Butterworth offered the proposal at the request of lawmakers and does not necessarily endorse it, according to his spokesman.

Following the suggestion of Bush, state lawmakers also are considering a plan that would reduce the state's risk by selling to investors a portion of the future proceeds of the tobacco settlement.

- Information from the Associated Press was used in this report.

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