STATEMENT of
Robert A. Levy, Ph.D., J.D.
Senior Fellow in Constitutional Studies
Cato Institute
Washington, D.C.
before the
Committee on the Judiciary
United States Senate
July 16, 1997
Mr. Chairman, distinguished members of the Committee:
My name is Robert A. Levy. I am a senior fellow in constitutional studies at the Cato Institute. [1] I would like to thank the committee for inviting me to testify on selected aspects of the global tobacco settlement that has been much in the national news of late. Pursuant to a discussion with your staff, Mr. Chairman, I am submitting with this statement a more extended Cato Policy Analysis entitled “Tobacco Medicaid Litigation: Snuffing Out the Rule of Law,” which I request be inserted into the record.
The “Proposed Resolution” negotiated by state attorneys general, plaintiffs' lawyers, public health advocates, and the tobacco industry is a shameful document, extorted by public officials who have perverted the rule of law to tap the deep pockets of a feckless and friendless industry. While the agreement may serve the political interests of 39 attorneys general and pad the wallets of private contingency fee lawyers, it is destructive of the health of a free nation.
First, because of a bargain to which they were not even a party, future claimants may not litigate as a class, sue for punitive damages covering past acts, or collect compensatory damages in excess of an agreed upon cap -- they lose common law rights they have long enjoyed under the Seventh Amendment. State attorneys general have no authority under our system of government to extinguish the rights of third parties through agreements with second parties. Second, the U.S. Congress, if it enacts legislation codifying the settlement, will be interceding in product liability cases that have long been the prerogative of state and local jurisdictions, thus exercising power beyond that enumerated in the Constitution and flouting our federal system of dual sovereignty. And third, states that have manipulated the law in a scheme to fund their Medicaid programs without raising taxes will be rewarded for their misbehavior.
If tobacco companies were the only victims of this settlement, that would be bad enough; but the unhappy prospect is yet more incursions by a government with an insatiable appetite for social engineering -- a government that seems to have abandoned the principles of free choice and personal responsibility in favor of regulatory mandates and absolution for the consequences of our acts.
The negotiated settlement speaks to these interrelated issues: money, health, and marketing. For the committee's consideration, I offer my views on each of those matters, then I comment briefly on three particularly important civil litigation questions that you raised, Mr. Chairman, in your “Summary of the Global Tobacco Settlement.”
The Negotiated Settlement
Money.
The tobacco industry will be required to disgorge approximately $370 billion over 25 years and pay a penalty if targeted declines in youth smoking do not materialize. Part of the money will fund anti-smoking campaigns, programs to help smokers kick their habit, and health care for uninsured children. Another chunk will reimburse the states for their Medicaid outlays.
Some analysts argue that the tobacco companies will simply pass those costs along to their customers by raising the price per pack of cigarettes (now roughly $1.90) by as much as 75 cents. Economists anticipate that sales volume will decline, however, by about 4 percent for each 10 percent increase in the retail price. [2] If so, a full 75-cent price hike (roughly 40 percent) would reduce the number of cigarettes sold by about 16 percent. That reduction will mean diminished government revenues from sales and income taxes, along with higher unemployment costs as the misfortune of the tobacco manufacturers predictably spills over to farmers, wholesalers, retailers, the advertising industry, and promoters of sporting events, to name a few of the innocent bystanders. The costs are uncalculated, and perhaps incalculable, but nonetheless real and substantial.
Moreover, one must ask why tobacco companies should be responsible for anti-smoking campaigns and programs to help smokers break their habit. After all, cigarettes are legal; and the choice to smoke is freely made. Claims that some consumers are hopelessly addicted, having relied on fraudulent information and deceptive advertising, not only strain credulity but require proof. Such claims cannot be resolved by legislative fiat or by negotiation under threat of legal coercion. Equally objectionable, the industry will be required to finance health care for uninsured children. By what possible logic can that problem be laid at the doorstep of the tobacco companies? Selling tobacco to children is illegal; those laws should be vigorously enforced; violators should be prosecuted; proof-of-age requirements are reasonable, as are restrictions on vending machine sales in areas like arcades and schools. But no one has shown that the tobacco companies have broken the law. To hold a single industry financially liable because some families are unable or unwilling to insure their offspring is an unconstitutional bill of attainder -- an imposition of punishment without notice, without a trial, and without evidence. It is no more than a bald transfer of wealth from a disfavored to a favored group.
There is neither legal nor moral justification for any payment whatsoever to reimburse state Medicaid programs. First, in order to fatten their own coffers, the states have simply expunged the requirement that they prove causation. Instead of having to show that a Medicaid recipient smoked and his smoking was the cause of his illness, the states need only produce generalized statistics indicating that certain diseases are more prevalent among smokers than nonsmokers. [3] Second, authoritative studies have concluded that excise taxes collected on cigarette sales already exceed the social costs attributable to smoking. [4]
The Medicaid lawsuits that precipitated this settlement were created out of whole cloth by states filling the dual and conflicting roles of lawmaker and plaintiff. Florida set the pattern by enacting a new statute, allegedly resting on principles of equity, that strips tobacco companies of their traditional rights and puts in their place a shockingly simple rule of law: The state needs money; the industry has money; so the industry shall give and the state shall take. Under the new regimen, the state can sue tobacco companies directly, without stepping into the injured party's shoes. By that sleight-of-hand, Florida can collect from the industry even when the illness is the smoker's own fault; the statute abrogates all of the industry's affirmative defenses, including assumption of risk. If a smoker happens to be a Medicaid recipient, individual responsibility is out the window. The same tobacco company selling the same product to the same person resulting in the same injury is, magically, liable not to the smoker but to the state. Liability thus hinges on a smoker's Medicaid status, a happenstance totally unrelated to any misdeeds by the industry.
A handful of private attorneys -- later to be hired at contingency fees ranging from 10 to 30 percent of the recovered damages -- were responsible for the novel legal theorizing that became the Florida statute and the model for the other states. [5] Those members of the plaintiffs' bar are now hopelessly conflicted, serving as government sub-contractors with financial incentives geared to the magnitude of their conquest. They are driven by the contemplation of a huge payoff while, at the same time, they fill a quasi-prosecutorial role in which their overriding objective is supposedly to seek justice.
What is worse, contingency fee contracts were awarded without competitive bidding to attorneys who often bankrolled state political campaigns. [6] In Mississippi, attorney general Mike Moore selected his number one campaign contributor, Richard Scruggs, to lead the Medicaid recovery suit. [7] In Texas, attorney general Dan Morales chose five firms for the state's multibillion-dollar tobacco litigation scheduled for trial in September; four of the five firms contributed a total of nearly $150,000 to Morales from 1990 to 1995. [8]
In West Virginia, tobacco defendants successfully challenged the state's contingency fee contract. [9] Attorney general Darrell McGraw had hand-picked six lawyers, without competitive bidding, and declined to specify his selection criteria. [10] He did say, however, that "the State and her citizens stand only to benefit. The State has no exposure. There are no lawyer hourly fees. There are no costs. The taxpayers are thus fully protected." [11] He could have propounded a similar argument if the state were to hire private lawyers to prosecute criminal cases, and only pay for convictions. But defendants as well as taxpayers must be protected. The Supreme Court reminds us that an attorney for the state "is the representative not of an ordinary party to a controversy, but of a sovereignty whose obligation to govern impartially is as compelling as its obligation to govern at all." [12]
Notwithstanding the Court's admonition, the Medicaid suits fashioned by state attorneys general and their allies in the private bar retroactively eradicate settled legal doctrine and deny due process to a single industry selected more for its financial resources and current public image than for its legal culpability. The implications in the future for other industries and even for individuals should be plain. This destruction of the rule of law must be stopped or none of us, in time, will be secure. The mark of a free society, after all, is how it treats not its most but its least popular members. Today it is tobacco companies. Tomorrow it could be anyone.
Health.
Under the “Proposed Resolution,” the FDA is authorized to regulate nicotine as a drug and, after the year 2009, the agency can ban nicotine altogether. Conspicuous warnings on each pack will advise smokers that cigarettes are addictive, cause cancer, and can kill. Tobacco companies will have to disclose harmful ingredients and research to the FDA, and smoking will be prohibited in most public places and in the workplace.
Those provisions could be just the tip of the iceberg, of course, with tobacco merely the first and easiest victim. Right around the corner could be similar restrictions on alcohol, coffee, chocolate, diet drinks, dairy products, red meat, fast food, sugar, sporting equipment, cars -- you name it. Proposals from supposedly intelligent people in positions of responsibility include grading foods for their fat content, taxing them proportionately, and using the tax revenues for public bike paths and exercise trails. [13] When decisions about the products we choose to consume are entrusted to an unelected and unaccountable bureaucracy, the loss of personal freedom is inescapable. To those who care about such things, that situation is intolerable.
Indeed, allowing Congress to make product selections on our behalf is not much better than assigning those matters to an administrative agency. Arguably, we might ask the government to serve as a gatherer of, and repository for, the data that are necessary to facilitate voluntary and informed consumer transactions (although there is no apparent reason why the private sector couldn't better perform that function). But once we relegate such choices to the state, we should not be surprised by pernicious side effects, including a flourishing black market, rampant and organized crime, and a backlash among rebellious teens. A war on tobacco will produce no better results than our endless war on drugs, or Prohibition before that. Instead of forays into South American countries to destroy their coca fields, we could find ourselves combing the back roads of North Carolina hunting down tobacco farmers.
Improved health for our children is an objective that no reasonable person could disapprove. But make no mistake, dollars and cents -- not health issues -- are the driving force behind the tobacco settlement. When their own money is on the line, both federal and state governments opt for financial health over smokers' health. Facing illness claims by military personnel to whom the U.S. government had dispensed cigarettes free of charge, Veterans Affairs secretary Jesse Brown told the former soldiers to pay their own freight for having chosen to smoke. [14] When sued by a prisoner who was denied a nicotine patch for the habit he developed in a Florida jail, the state pleaded that it was no more responsible for his purchase of cigarettes than for his “buying a candy bar at the canteen.” [15] If that principle renders the government immune from liability, it renders private companies immune as well.
Florida has especially unclean hands when it comes to smokers' health. Over nearly a decade, the state manufactured cigarettes and dispensed them to its prison population. For good measure and not a little revenue, the state sold some of its cigarettes to local jurisdictions. [16] More recently, Florida invested $825 million of its pension assets in tobacco stocks. [17] And most hypocritically of all, when a two-vote margin in the last Congress ensured that federal tobacco subsidies would be renewed, 10 of the state's 23 representatives voted for renewal. [18] On one hand, Florida bemoans the ill health of its citizens and blames tobacco companies; on the other hand, the state produces and sells cigarettes, provides equity capital for Philip Morris, and helps subsidize tobacco farmers.
Marketing.
The proposed settlement is draconian in its restrictions on advertising and merchandising. Vending machine sales are prohibited. Text-only, black-and-white ads are the rule, except in adult publications. Billboards and store signs facing the street are proscribed. Joe Camel and the Marlboro Man are history, as are other cartoon and human advertising images; no more merchandise with company logos; no more sponsorship of athletic events.
If the industry had not “consented” to those limitations, they would never have passed First Amendment scrutiny. After all, commercial speech is constitutionally shielded, albeit to a lesser degree than political speech. [19] But it doesn't require a constitutional scholar to conclude that the proposed rules are ridiculous. We treat flag burning and KKK orations as protected speech -- correctly in my view. We even insulate “gangsta rap” from the censors, despite its message to youngsters that the drug culture is admirable and killing police officers is a pleasurable recreational activity. Yet if Tiger Woods shows up wearing a sports jacket emblazoned with Joe Camel our new speech guardians will see to it that the executives of R.J. Reynolds are held accountable. Given the types of expressive communication that receive undiluted First Amendment aegis despite their minimal social utility, the restrictions on tobacco advertising in general and Joe Camel in particular are quite simply unfathomable.
To be sure, critics of the industry point to the impact of tobacco ads on credulous, uninformed, and innocent teenagers. But the debate is not whether teens smoke; they do. It's not whether smoking is bad for them; it is. The real question is whether there is a link between tobacco advertising and the decision by children to begin smoking or to increase their consumption. There is no evidence to establish that link. The primary purpose of cigarette advertising is to persuade smokers of one brand to switch to another. [20] Six European countries that have banned all tobacco ads have since seen overall consumption increase -- probably because health risks are no longer documented in the banned ads. [21] In the United States, every relaxation of the restrictions on promoting health-related product improvements has generated a blizzard of ads, “healthy” competition for market share, and significant declines in tar and nicotine content. [22] Not surprisingly, whenever health claims are outlawed, the industry promotes imagery and endorsements, the very ads that anti-smoking zealots decry. We need more health-based ads, not fewer.
Even if we accept the argument that the tobacco companies have targeted underage prospects, they surely have not accomplished their objective. Over the 1985-95 decade, during the heyday of Joe Camel, the percentage of kids aged 12-17 who smoke dropped from 29 percent to 20 percent. [23] Taking a longer term view, the average age of first-time regular cigarette users has neither advanced nor declined from 1962 through the latest 1994 data. [24] And inner-city teens report that they are cynical about, even resentful of, cigarette ads; the percentage of minority youngsters who regularly smoke has plummeted over the past 10 years. [25] Although some ads may have succeeded in gaining brand share, they have been singularly unsuccessful in expanding the overall market, especially among children.
Civil Litigation Questions
Let me turn now, Mr. Chairman, to certain of the litigation questions you invited me to address. Some of these are related specifically to the proposed settlement; others are more general and more fundamental, pertaining to the constitutional authority of Congress, if any, to be legislating in the way the settlement proposes it to legislate.
Rights of Litigants
Traditional principles of tort law enable injured parties to litigate to try to shift their losses to those they allege may be morally and legally responsible for the losses. Those principles are recognized in a general way by the Seventh Amendment to the U.S. Constitution. Although states may make marginal changes in that law, they may not, in my view, take steps that in the aggregate cut into the core of a litigant's rights. [26]
As part of the proposed settlement, tobacco companies will be exempt from all punitive damages for past conduct and immune from any new class action lawsuits, but not from suits by individuals -- although successful plaintiffs will be subject in the aggregate to an annual cap on compensatory damages of roughly $5 billion, with a carry-forward claim permitted if the cap is exceeded in any given year. The questions we must consider are whether the industry's immunity from litigation and the socialization of alleged losses unconstitutionally encroach upon the rights of litigants.
Some would argue that the proposed $5 billion annual cap on compensatory damages will have little practical effect: in over 40 years of litigation by smokers and their families, not one final adjudication of damages against a tobacco company has resulted. [27] Jurors understand -- even if most of the state attorneys general seem not to -- that free people may choose the products they wish to consume; but having made their choice, those people are responsible for the consequences. Nevertheless, with the recent discovery of inculpatory industry documents, plaintiffs may be able to prove that they were deceived. Fraudulent misrepresentation, if relied upon, deprives consumers of an opportunity to make informed judgments, in which case an industry defense based on assumption of risk is negated. Such claims and counterclaims are best resolved by a jury, however, unimpeded by a limit on compensatory damages.
Regarding the proposed settlement's limitation on class action suits, another practical argument arises out of two just-decided Supreme Court cases. Both cases make it more difficult for plaintiffs' attorneys to file tobacco class actions. Thus, the argument goes, barring those actions will be of no consequence. In Metro-North, [28] the Court held that a plaintiff who had been exposed to asbestos, but had contracted no disease, could not collect for "negligent infliction of emotional distress" or “medical monitoring” under the Federal Employers' Liability Act. Many tobacco class actions have demanded medical monitoring expenses even though plaintiffs had no physical illness and no symptoms; their only alleged injury was an addiction to tobacco.
In a second asbestos case, known as Georgine, [29] the Court concluded that a common interest in settling claims is not enough to certify a class if the named plaintiffs could not fairly represent other class members at trial. While courts can consider a settlement as one factor in deciding whether to certify, the requirements of Rule 23 [30] must be satisfied. It would appear, therefore, that the prospects for a court-approved class tobacco settlement are now less likely. Any such settlement would have the same certification problems that the Court criticized in Georgine, but on a far broader scale. The asbestos settlement involved 250,000 plaintiffs nationwide; a statewide tobacco class would probably include millions of claimants with diverse illnesses, smoking habits, and awareness of the risks -- not to mention a greater variation in employment, weight, age, diet, other lifestyle choices, family history, education, wealth, and exposure to other causal agents. In short, plaintiffs' lawyers will likely have a much tougher time obtaining class certification to litigate diverse claims that should probably be litigated separately.
Of course, it is one thing to require attorneys to be more careful in structuring a class of plaintiffs; it is quite another to prohibit class actions altogether. The cumulative effect of foreclosing class actions, rejecting punitive damages, and capping compensatory damages could so exhaust an attorney's incentive to litigate that claimants with legitimate grievances are denied their day in court. That is sufficient reason to oppose partially immunizing the industry from litigation. The proper resolution of the tobacco problem is for the industry, smokers, and their insurance companies to fight it out through the tort system. State attorneys general may join the fray, provided that state Medicaid programs, like any other insurer, bear the same burden of proof that the injured party would have borne, and be subject to the same defenses that the tobacco companies could have asserted against a smoker. [31]
Federal Preemption of State Claims
While it is doubtful that states can constitutionally enact legislation that bans class actions, prohibits punitive damages, and puts limits on compensatory damages, there is no doubt in my mind that such legislation is beyond the authority of Congress to enact.
As the Supreme Court said in the Lopez case only two terms ago, “[t]he Constitution creates a Federal Government of enumerated powers.” [32] The powers of Congress are delegated by the people, enumerated in the Constitution, and thus are limited by that delegation and enumeration. The point is made in the very first sentence of the Constitution, after the Preamble. It is reiterated in the Tenth Amendment: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the states respectively, or to the people.”
Nowhere in the Constitution is a national police power -- entailing such concerns as health, morality, education, and welfare -- conferred upon Congress. Indeed, Justice Joseph Story, an ardent nationalist, remarked that inspection and health regulations, even those that affected interstate commerce, were “purely internal” and do not come under the purview of Congress. [33] But as the country grew and some believed that problems required national solutions, Congress sought to earmark a specified constitutional power that would justify its ambitious regulatory agenda. The Commerce Clause became the vehicle of choice.
Yet Justice Stevens, in the Supreme Court's most recent Commerce Clause case, identifies the central purpose for which the clause appears in the Constitution.
During the first years of our history as an independent confederation, the National Government lacked the power to regulate commerce among the States. Because each state was free to adopt measures fostering its own local interest without regard to possible prejudice to nonresidents, what Justice Johnson characterized as a “conflict of commercial regulations, destructive to the harmony of the States” ensued. See Gibbons v. Ogden, 9 Wheat. 1, 224 (1824) (opinion concurring in judgment). In his view, this “was the immediate cause that led to the forming of a [constitutional] convention.” Ibid. “If there was any one object riding over every other in the adoption of the constitution, it was to keep the commercial intercourse among the States free from all invidious and partial restraints.” Id. at 231. [34]
Lamentably, Congress has expanded the Commerce Clause to a general regulatory power -- tantamount to a national police power. And the Court -- especially after Franklin Roosevelt's notorious Court-packing scheme -- has facilitated federal overreaching by condoning legislation that has no basis whatever in the Constitution. If Congress thinks it necessary to add to its enumerated powers, the Framers crafted an amendment process for that purpose. Rather than avail itself of that process, however, Congress has simply ignored the limits set by the Constitution and eviscerated our most basic defense against tyranny: the doctrine of enumerated powers.
Today, we are in dire need of a re-limitation of federal power, which has ballooned in large measure through amplification of the Commerce Clause. Instead of serving as a shield against interference by the states, the commerce power has become a sword wielded by the federal government in pursuit of a boundless array of social and economic programs. In a recent article in the Harvard Law Review, Northwestern University law professor Gary Lawson got it exactly right: “The post-New Deal administrative state is unconstitutional, and its validation by the legal system amounts to nothing less than a bloodless constitutional revolution.” [35]
The fundamental principle, then, is simply this: No matter how worthwhile an end may be, if there is no constitutional authority to pursue it, then the federal government must step aside and leave the matter to the states or to private parties. Congress can proceed only from constitutional authority, not from good intentions alone. That was the principle the Court restated in Lopez when it said, for the first time in nearly 60 years, that the power of Congress to regulate commerce among the states is not a power to regulate anything and everything. In applying that principle, however, the Court went only a little way toward rolling back Congress's expansions, saying that Congress must show that the activity regulated “substantially” affects interstate commerce. As Justice Thomas said in his concurrence, that is not a proper reading of the Commerce Clause, which was meant to enable Congress to assure the free flow of goods and services among the states.
Applied to the case at hand, for Congress to have authority to legislate in this area, it is not enough to proclaim that tobacco products are transported across state lines and sold in large volume to customers in many states. To legitimately invoke the commerce power, Congress must show that the proposed settlement is necessary (i.e., essential) and proper (i.e., not violative of other rights) to assure the free flow of interstate commerce. There has been no such showing by Congress or by any of the parties to this settlement. Nor could there be. Health risks attributable to tobacco, and marketing tactics by tobacco companies, have little to do with the unhampered movement of trade. They are, incontrovertibly, subjects of a police power that belongs, under our system, to the states.
Should the states adopt inconsistent or conflicting regulations that interfere with the free flow of commerce, then Congress can surely supersede such regulations and remove any such interstate barriers. But the states, to my knowledge, have either refrained from legislating in respect of tobacco marketing or health risks, or have legislated in a manner that creates no serious obstacles to trade. And differences among the states with regard to class certification, punitive damages, and caps on compensatory damages -- to the extent there are such differences -- have not been demonstrated to prevent, delay, or diminish interstate transactions.
Accordingly, it is fair to conclude that the federal government is not constitutionally authorized to enact legislation that partially immunizes the tobacco industry from litigation or that enacts the remaining provisions of the proposed tobacco settlement. Absent constitutional authorization, Congress should move promptly and emphatically to reject the settlement and help restore the doctrine of delegated, enumerated and, therefore, limited powers.
Federal Taxation to Fund Treatment of Smokers
One suggested alternative to the proposed settlement is for Congress to use its taxing and spending power -- e.g., by implementing a surcharge on Medicare or an additional excise tax on tobacco -- to fund the treatment of ill smokers. That option would be simpler and administratively less expensive. In the case of an excise tax hike, the parties who would pay the tax (smokers and tobacco companies) are the same parties who would pick up the bill if the settlement is approved. On the other hand, there are several powerful reasons not to consider a tax increase as the solution to the tobacco problem.
First, the Medicare system is itself constitutionally infirm; there is no enumerated power that authorizes the federal government to redistribute income in order to finance health insurance for the elderly. Second, the Medicare tax is imposed upon nonsmokers as well as smokers. If any adjustment in Medicare were to be made, it should be to increase premiums for smokers alone. Third, as noted above, researchers have concluded that tobacco excise taxes already offset the entire public costs associated with smoking-related illnesses. And fourth, the courtroom, not the Congress, affords parties an opportunity to defend themselves; as a just society, we cannot suffer our national legislature to embark upon a punitive crusade against an outcast industry without guaranteeing due process.
Of paramount importance, federal taxation for treatment of ill smokers is an idea that reflects a profound misunderstanding of Congress's authority to tax and spend. The power to “lay and collect Taxes, Duties, Imposts, and Excises, to pay the Debts and provide for the common Defence and general Welfare” [36] has been accorded three markedly different interpretations. One interpretation, held today by many in Congress, is that Congress was granted plenary power to determine and provide for the general welfare. Serious scholars, as well as the Supreme Court, [37] have rejected that view because it manifestly contradicts the premise of limited government; indeed, it would render the Constitution's list of enumerated powers entirely superfluous.
A second view, held by Alexander Hamilton, is that the General Welfare Clause conferred on Congress a power to tax and spend over and above its power to carry out its other enumerated powers -- provided only that the spending was for the general rather than for any particular welfare. In 1936, that construction was accepted by the Court in the Butler case. [38] The Court distinguished national (i.e., general) from local (i.e., particular) benefits, retaining for itself the prerogative to decide what Congress was about. But less than a year later, in Helvering v. Davis, the Court abandoned its oversight function, holding that the discretion to distinguish national from local “belongs to Congress, unless the choice is clearly wrong, a display of arbitrary power.” [39] That left things for all practical purposes in the hands of Congress. As Roger Pilon has put it:
[A]lthough Congress's now independent power to spend for the general welfare was still limited by the word “general,” the Court would not itself police that limitation but would instead defer to Congress as to whether any expenditure was general or particular -- the very Congress that was already raiding the Treasury and redistributing its contents with ever greater particularity. [40]
Not surprisingly, no federal statute has ever been invalidated because it did not serve the general welfare. So much for enumerated powers -- the centerpiece of the Constitution.
The third interpretation -- which in truth was the original understanding -- comes from James Madison and Thomas Jefferson, who argued that the General Welfare Clause conferred no additional power whatever: it was a summary or convenient means of referring to the enumerated powers in the aggregate; and it was a further shield against the power to tax and spend for enumerated ends, by limiting that power to serving the general welfare. Thus, like the Commerce Clause properly construed, the General Welfare Clause was meant to be a shield against the abuse of power, not a sword of power, as it is today.
Plainly, Madison and Jefferson were correct. If Congress could first define the general welfare, then appropriate money for its furtherance, any limits on federal power where money is involved evaporates. Even if Congress had no power at all to enact legislation, it could simply appropriate funds and claim that it was exercising an independent power to provide for the general welfare. Unhappily, that is precisely what has transpired in the wake of the New Deal Court.
Today, the redistributive powers of Congress are everywhere -- except in the Constitution. The result is the feeding frenzy that is modern Washington, the Hobbesian war of all against all as each tries to get his share and more of the common pot the tax system fills. That must be ended. It is unseemly and wrong. More than that, it is unconstitutional, whatever the slim and cowed majority on the New Deal Court may have said. The Framers did not empower government to take from some and give to others. They did not establish a welfare state. [41]
Recommendations
It is difficult to imagine that legislation could transgress as many fundamental constitutional principles as the proposed tobacco settlement does. I have commented on the more egregious infractions -- commercial speech, litigants' Seventh Amendment rights, due process, enumerated powers, federalism. There are other constitutional provisos that I have not mentioned, or have mentioned only in passing, but which the committee should certainly consider -- equal protection, prohibition on bills of attainder, regulatory taking of vending machine property, the unprecedented delegation of legislative authority to the FDA. Finally, at yet another level, even if Congress could somehow identify a constitutional underpinning for the settlement, it is indisputably bad public policy. To say that Congress may enact legislation is not to say that Congress is well-advised to do so.
The correct disposition of the proposed settlement is the one that Steve Forbes has suggested for the tax code: Kill it, drive a stake through its heart, bury it, and start over. To secure the liberty of all citizens, we must resolutely defend and protect our least popular citizens, including the tobacco companies. Disputes between private parties cannot be resolved in secret negotiations involving defendants who have the boot of government resting on their necks, state attorneys general who seek to replenish their Medicaid coffers without fiscal discipline, contingency fee lawyers who wield the sword of the state while retaining a financial interest in the outcome, and advocacy groups that have subordinated the rule of law to their health concerns, however well-intentioned. Our courts, not our legislatures, are constituted for the resolution of private disputes. They can do justice only if the rule of law -- objective and evenhanded -- is scrupulously applied.
Meanwhile, Congress should eliminate tobacco subsidies. The president can exhort youngsters not to smoke. States should vigorously enforce laws against the sale of tobacco products to teenagers, demand proof of age at retail establishments, and regulate vending machine sales in areas like arcades and schools. The front-line defense against inadequate labeling and other deceptive advertising is common law fraud. Although the post-1937 expansive view of the Commerce Clause would likely permit the federal government to dictate cigarette warning labels, a correct reading of the clause would obligate Congress to predicate any such legislation upon a determination that a national uniform rule is imperative to facilitate the free flow of commerce. Alternatively, if various states, pursuant to their police power, established incompatible labeling requirements, Congress could act upon finding that the incompatibility threatened to impede interstate commercial dealings. Otherwise, warning labels are properly beyond the reach of the federal government.
Most important, state and federal courts must not allow state attorneys general to proceed with their Medicaid reimbursement suits, which deny due process to a single, unpopular industry. States may not retroactively impose new rules of law; and individuals must be held accountable for the consequences of their actions. Otherwise, if we are foolish enough to continue along the path outlined in the “Proposed Resolution,” the resolution itself should be stamped with a label: “Warning: This Settlement Is Dangerous to Your Liberty.”
[1] A biographical sketch is attached.
[2] See, e.g., W. Kip Viscusi, "Cigarette Taxation and the Social Consequences of Smoking," in James Poterba, ed., Tax Policy and the Economy (Cambridge, Mass.: MIT Press, vol. 9, 1995), p. 52.
[3] Fla. Stat. Ann. § 409.910(9)-(9)(a) (1995) (“In any action brought under this subsection, the evidence code shall be liberally construed regarding the issue of causation [which] may be proven by use of statistical analysis”).
[4] See, e.g., William G. Manning, et al., "The Taxes of Sin: Do Smokers and Drinkers Pay their Way?" Journal of the American Medical Association, March 17, 1989; Jane G. Gravelle and Dennis Zimmerman, Cigarette Taxes to Fund Health Care Reform: An Economic Analysis (Washington, D.C.: Congressional Research Service, 1994); Viscusi, supra.
[5] See Michael Orey, "Fanning the Flames," American Lawyer, April 1996.
[6] Carolyn Lochhead, "The Growing Power of Trial Lawyers," The Weekly Standard, September 23, 1996, p. 21.
[7] Ibid. at 22.
[8] Ibid. at 23.
[9] McGraw v. American Tobacco Co., Civ. No. 94-C-1707 (Cir. Ct. Kanauha County, Nov. 29, 1995).
[10] Jack Deutsch, "McGraw Supporters May Profit from Suit," Charleston Daily Mail, August 18, 1994, p. 1B.
[11] McGraw v. American Tobacco Co., Civ. No. 94-C-1707, Memorandum in Opposition to Defendants' Joint Motion to Prohibit Prosecution of Action Due to Plaintiff's Unlawful Retention of Counsel (Cir. Ct. Kanauha County).
[12] Berger v. United States, 295 U.S. 78, 88 (1935).
[13] E. Katherine Battle and Kelly D. Brownell, Confronting a Rising Tide of Eating Disorders and Obesity: Treatment vs. Prevention and Policy, 21 Addictive Behaviors 755-65 (1996). Mr. Brownell is director of the Yale Center for Eating and Weight Disorders.
[14] Bill McAllister, "Smoking by GIs Raises Liability Issue at the VA," Washington Post, April 24, 1997, p. A1.
[15] Waugh v. Singletary, Case No. 95-CVC-J-20 (D. Fla., July 11, 1995).
[16] Milo Geyelin, "Florida Made, Gave Out Prison Cigarettes," The Wall Street Journal, January 27, 1996.
[17] See "B.A.T. Plays Down Florida Fund Decision," Reuters, May 28, 1997. Not until late May, 1997, did Florida's pension trustees order the state's portfolio managers to liquidate tobacco stockholdings.
[18] “House Votes,” CQ Weekly 54, no. 24 (June 15, 1996): 1720.
[19] In Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of N.Y., 447 U.S. 557 (1980), the Supreme Court held that non-misleading commercial speech about a lawful activity cannot be regulated unless (1) the government has a substantial interest in doing so, (2) the regulation directly and materially serves that interest, and (3) the regulation is reasonable and no more extensive than necessary to achieve the desired objective. More recently in 44 Liquormart, Inc. v. Rhode Island, 116 S. Ct. 1495 (1996), the Court declared that even "vice" products like alcoholic beverages are entitled to commercial speech protection. And in Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 73-74 (1983), the Court cautioned that adult discourse may not be dictated by what is fit for children.
[20] See, e.g., John E. Calfee, "The Ghost of Cigarette Advertising Past," Regulation, November/December 1986, pp. 35-45.
[21] Michael J. Stewart, “The Effect of Advertising Bans on Tobacco Consumption in OECD Countries,” International Journal of Advertising 12 (1993): 155-80.
[22] Calfee, supra.
[23] Substance Abuse and Mental Health Services Administration, Preliminary Estimates from the 1995 National Household Survey on Drug Abuse (Washington, D.C.: U.S. Department of Health and Human Services, 1996), p. 68.
[24] Ibid. at 99.
[25] See Amy Goldstein, “Experts Uncertain Why Black Youths Shunning Cigarettes,” The Detroit News, August 21, 1995.
[26] For the moment, I put aside that it is the federal Congress, not the states, that is asked to legislate the terms of the settlement. That overriding fact -- one that implicates enumerated powers and federalism concerns -- is addressed in the next subsection.
[27] See Robert L. Rabin, "A Sociolegal History of the Tobacco Tort Litigation," Stanford Law Review 44 (1992): 853. A Florida jury in August 1996 awarded $750,000 to a victim of lung cancer (Carter v. Brown & Williamson Co., Case No. 95-934 (Fla. Cir. Ct. 1996)), but even that lone victory may not hold up on appeal.
[28] Metro North Commuter Railroad Co. v. Buckley, No. 96-320, June 23, 1997.
[29] Amchem Products, Inc. v. Windsor, No. 96-270, June 25, 1997.
[30] Fed. R. Civ. P. 23, which establishes the criteria for class certification.
[31] Just to be clear about my views on this matter, I want to emphasize that the industry's partial immunity from litigation is an injustice to claimants, but one that pales by comparison with the enormous injustice that the proposed settlement visits upon the industry itself. Legislation that eliminates the industry's immunity while approving or indeed tightening the remaining settlement terms would, therefore, be the least equitable of all solutions.
[32] United States v. Lopez, 514 U.S. 549, 633 (1995). For a succinct overview of the theory of the matter, see Roger Pilon, A Government of Limited Powers, in The Cato Handbook for Congress, 104th Congress 17-34 (1995).
[33] Commentaries on the Constitution of the United States (1833).
[34] Camps Newfound / Owatonna, Inc. v. Town of Harrison, No. 94-1988, May 19, 1997, p. 5.
[35] The Rise and Rise of the Administrative State, 107 Harv. L. Rev. 1231, 1234 (1994).
[36] U.S. Const. art. I, § 8.
[37] United States v. Butler, 297 U.S. 1 (1936).
[38] Ibid.
[39] 301 U.S. 619, 640 (1937).
[40] A Court Without a Compass, 40 N.Y.L. Sch. L. Rev. 1004, 1005 (1996).
[41] Roger Pilon, supra, note 32 at 23.
