Saturday, June 1, 1996

Attorney General Asks for Sanctions Against Tobacco Companies

By PEGGY FIKAC
Associated Press

AUSTIN - Texas Attorney General Dan Morales' office asked a state judge Friday to throw out a lawsuit by tobacco companies that contend Morales overstepped his authority in a federal lawsuit against them.

If the tobacco companies win, Special Assistant Attorney General Suzanne Marshall said it would "effectively cripple the state's ability to do its enforcement actions."

The tobacco companies contend that nothing in the Texas Constitution or state law gives Morales the authority to file much of the $4 billion lawsuit he brought against the nation's tobacco industry in Texarkana in March.

"A member of the executive branch (Morales) has jumped over to the legislative arena," said Mike Hull, an Austin lawyer representing Philip Morris USA.

Hull said the state presented no evidence that the lawsuit was sought by the human services agency charged by the Legislature with overseeing welfare.

Morales is seeking reimbursement of Medicaid money spent on treating smoking-related illnesses.
The hearing before state District Judge Joe Hart of Austin stems from a lawsuit filed last year by tobacco companies in an effort to prevent Texas from suing them.

But Morales sued in federal court anyway, alleging the tobacco industry violated racketeering, wire fraud, conspiracy, antitrust and public nuisance laws.

The attorney general's office wants Hart to dismiss the tobacco companies' state lawsuit, fine them and order them to reimburse the state for defending itself against what Morales calls a "frivolous" action.

The tobacco companies say they have serious claims that should be decided by the state judge. Hart took the matter under advisement.

Ms. Marshall said the companies' claims can be addressed in federal court. She said a ruling by Hart won't dispose of the federal lawsuit because it involves different parties and additional state claims.
Hull said he would have to see how Hart rules before speculating on how the ruling might affect the federal lawsuit.

The companies' lawsuit was described by Ms. Marshall as "a brash attempt" to control the timing, location and type of action brought by the state.

"This was a race to the courthouse," she said.

Jim Scarboro, a Philip Morris attorney from Denver, said the companies aren't guilty of forum shopping.

"The attorney general has been sued in his home territory. ... If there is anyone who is practicing forum shopping, it is the attorney general who is doing so," he said.

Hull noted that when Morales was a state lawmaker, he was author of a bill increasing the tax on tobacco. Tobacco companies have argued that the lawsuit constitutes an effort to collect another, hidden tax.

Ms. Marshall said it was "novel" to suggest paying taxes would protect a company from a lawsuit.
Hull also said Morales' plan to pay outside lawyers helping the state on a contingency fee basis - in which they would get part of the federal share of recovered Medicaid money - is illegal. He said the law requires funds that are recovered to go back into the Medicaid program.

Ms. Marshall defended the arrangement and said that it wasn't the point of the case. She said the point is whether the state can sue companies that it believes has violated the law.