TALLAHASSEE (CBS4) – Florida lawmakers last month extended a financial break for tobacco companies that face a crush of lawsuits because of smoking-related illnesses.
But the move came amid a legal challenge that argues the break is unconstitutional because it gives special treatment to cigarette makers.
The issue involves a state law that allows major tobacco companies to post smaller-than-usual bonds when they appeal judgments against them. That saves money for cigarette makers, which already have been hit with a series of multimillion-dollar verdicts in an initial wave of sick-smoker cases.
A key part of the law was scheduled to expire Dec. 31, 2012. But on the final day of this year’s legislative session, lawmakers approved a Medicaid-budget bill that eliminated the expiration date, allowing the financial breaks to continue for an indeterminate amount of time.
The bill, which was signed last week by Gov. Rick Scott, says the extension was needed because the state relies on money from a 1997 settlement agreement with major tobacco companies to help fund Medicaid and other health programs.
House Health Care Appropriations Chairman Matt Hudson, R-Naples, said the concern is that lawsuits could drive those tobacco companies into bankruptcy if the bond relief goes away. He said that would leave the state in a “no man’s land” in continuing to get money from the multibillion-dollar settlement to help pay for Medicaid and the other programs.
“From my standpoint, there are thousands of these cases (filed against tobacco companies), and we’re nowhere near being done,’’ Hudson said Wednesday.
But John S. Mills, an appellate attorney who is representing families in cases against tobacco companies, contends the smaller-than-usual bonds are unconstitutional.
Mills argues, in part, that the Florida Constitution bars special laws that benefit certain private companies. A three-judge panel of the 1st District Court of Appeal ruled against Mills in April, but he is asking for a rehearing or a hearing before the full appeals court.
“In sum, this is an extremely important constitutional issue … that is already arising in many appeals of multimillion-dollar judgments and will potentially arise in literally thousands of cases,’’ Mills wrote in a brief.
The onslaught of cases — and much of the debate about the bond amounts — stems from a 2006 Florida Supreme Court ruling in a class-action lawsuit against the tobacco industry.
That ruling required sick-smoker cases to be heard individually, but also established critical findings about the health dangers of smoking and past misrepresentations by cigarette makers.
While cases are taking time, tobacco companies already are getting hit with large verdicts. As an example, the 1st District Court of Appeal last month upheld a $15.75 million judgment against R.J. Reynolds in an Alachua County case.
Similarly, Mills raised the constitutional issues about bond amounts in an Escambia County case with total damages topping $20 million.
Bonds are important because they help ensure that judgments ultimately get paid when lawsuits are appealed. That is relevant in the smoking cases, because tobacco companies commonly appeal large judgments.
The state law applies to five companies that were part of the 1997 settlement agreement and caps the total amount of bonds that could be posted at $200 million. Also, it places a $5 million maximum bond amount on any individual judgment.
Ordinarily, Mills said parties appealing judgments have to post bonds that cover the full amounts plus interest.
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