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In the latest cigarette-related lawsuit on behalf of a foreign government, the Brazilian city of Pernambuco is trying to get U.S. tobacco companies to pay for the treatment of sick smokers. The suit, filed Dec. 28, joins more than 20 other cases brought by foreign governments against cigarette makers in Miami-Dade circuit court. It alleges unjust enrichment, fraud, gross negligence and a variety of other claims. Other governments that have filed similar suits include the Russian Federation, Honduras, Tajikistan and several states in Brazil. The lawsuits are part of an ongoing effort to hold cigarette makers accountable for harm allegedly caused in other countries, just as plaintiffs are seeking to hold them accountable in the United States. The litigation campaign, which is being spearheaded by Miami’s Podhurst Orseck Josefsberg Eaton Meadow Olin & Perwin and which includes other law firms around the country, is modeled on the successful effort by U.S. states to recover payments for smoking-related Medicaid costs. But while the legal arguments in these suits mirror those made by the states, foreign governments so far have not found a welcome reception in state and federal courts in this country. The claims have foundered over the issue of whether governments rather than individuals have suffered harm. “I am not optimistic,” says Richard A. Daynard, president of the Tobacco Control Resource Center at Northeastern University in Boston, who has been heavily involved in litigation efforts against cigarette makers. “We have been encouraging foreign governments to sue in their own country.” Such pessimism can be explained by the tobacco industry’s recent legal victories. Last May, the U.S. Court of Appeals for the D.C. Circuit dismissed complaints by Guatemala, Nicaragua and Ukraine alleging fraud and conspiracy on the part of cigarette makers in connection with federal racketeering and antitrust laws. Then, in November, Miami-Dade Circuit Judge Bernard Shapiro dismissed two lawsuits filed by Podhurst Orseck on behalf of Venezuela and the Brazilian state Espirito Santo. And a case brought on behalf of Ecuador in Judge Paul Siegel’s court was voluntarily withdrawn by Podhurst Orseck. Because the three lawsuits that failed in Miami are largely identical to the other pending cases by foreign governments in Miami-Dade circuit court, the prospects of success seem to be diminishing. In what appears to be an effective strategy, tobacco company lawyers have succeeded — through a procedure called multidistrict litigation — in getting all federal cases brought by foreign governments heard in U.S. District Court for the District of Columbia. Due to the unfavorable federal appellate decision in May, that district court must dismiss such cases. Not surprisingly, industry attorneys are attempting to have the Miami-Dade circuit court cases removed to federal court, swept up to the U.S. District Court for the District of Columbia, and dismissed. “Since the settlement [in November 1998] with the states, American courts have thrown the engine in reverse,” Daynard says. “All of the arguments that courts previously accepted are suddenly questionable.” It’s not just foreign governments that are losing against the cigarette industry. HMOs and labor unions in the U.S. also have failed in efforts to recoup the costs of treating smoking-related illness. The industry’s decades-long aura of invincibility in the courtroom may be returning. “The plaintiffs’ lawyers know that federal courts in this country will not tolerate these lawsuits, and [Judge Shapiro's] decision suggests their reception in state courts should be no different,” William S. Ohlemeyer, Philip Morris vice president and associate general counsel, said following the November ruling. Yet the Podhurst firm still insists it can win, and demonstrated its faith by filing the new suit last month. “We think we’re right, so we’re fighting and working very hard,” says Joel Perwin, the partner at Podhurst Orseck who is handling the appellate side of the litigation, while associate Steven Marks handles the trial effort. “We won’t slow down until we have a dispositive ruling by an appellate court.” Perwin says his firm plans to appeal Judge Shapiro’s dismissal in the Venezuela case to the 3rd District Court of Appeal in Miami. The plaintiffs’ difficulties arise from an old legal doctrine called “remoteness.” Attorneys in the Medicaid litigation filed by the states were able to circumvent that defense, but it now appears a formidable roadblock for foreign governments. Generally, remoteness doctrine says a plaintiff, for instance a government, cannot successfully sue based on harm to a third party, but instead must be able to demonstrate direct damages. The tobacco companies have cited this doctrine in arguing that people, not governments, are the only ones who can claim harm. They also have contended that the Medicaid lawsuits were successful only because of special statutes enacted by state legislatures, such as Florida’s Medicaid Third-Party Liability Act, which allowed the state to seek damages without suffering direct harm. The courts have been swayed by the remoteness argument. “Every appellate court, regardless of the plaintiff, has ruled the claim too remote, too indirect, too derivative,” says Kenneth Parsigian, a partner at Goodwin Procter in Boston who’s been leading the tobacco defense in the Miami-Dade Circuit Court cases. Perwin insists, however, that foreign governments are directly harmed by injuries to their citizens who suffer smoking-related ailments. In fact, he notes, the government is the only party which incurs the health care costs, because, unlike in the United States, the governmental clients he represents pay for their citizens’ health care. “When health care is free, the individual has no claim because he did not pay the cost,” says Perwin. “Only the entity who has paid the cost has a claim.” Furthermore, he argues, it’s “completely false” that the states’ Medicaid lawsuits were successful merely because of statutes like the Medicaid Third-Party Liability Act. “It was only a handful of cases in the state litigation that relied on state statutes,” he says. Nevertheless, the foreign governments appear to face an uphill fight in the Miami courts. “Logically, the foreign government cases should work,” Daynard says. “The court allowed state cases to go forward. But now courts are essentially acting as if there were no state cases.”

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