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03/05/98 09:51 FAX 202 456 5557 DOMESTIC POLICY COUNCIL 5 005/007 1 005 03/04/98 WED 19:31 FAX 5. Section 602 (b) would prohibit punitive damages from being awarded on the basis of past conduct of tobacco companies. The State Attorneys General have testified that the settlement proposal already provides $60 billion in punitive damage payments from the companies. Does the Administration support this provision? If so, why? If not, why not? Please provide what changes you would recommend. *See also question II (2), below. 6. Section 602 (c) and (e) effectively provide that no suits other than individuals bringing personal injury claims, and third-party payors, can be brought against tobacco companies. Does the Administration support this provision? If so, why? If not, why not? If you believe the classes of permissible plaintiffs should be expanded, please specify what additional plaintiffs should be added. II. EVALUATION OF THE RATIONALE AND RECOMMENDATIONS OF THE STATE ATTORNEY GENERALS. 1. Some State Attorneys General have stated that, on balance, the proposed settlement's $368.5 billion in funding for public health, research, education, and prevention programs greatly outweighs any recommended limits on liability provided to tobacco companies. One key factor relied on by the State Attorneys General is that unless certain liability claims were prohibited, companies in the industry would face bankruptcy or move overseas as a result of repetitive damage awards and settlements. This would scuttle the public programs mentioned above, and deny individual plaintiff's any chance of recovery. Testimony was presented by the State Attorneys General's negotiating team that the tobacco industry's profit margin is approximately $7 billion a year. Please address this concem of the State Attorneys General. I would like to have the Administration's views on the question of whether bankruptcy is a realistic concern under the status quo, and whether the $368.5 billion payment from the companies could be jeopardized by eliminating (or significantly lessening) the proposed liability restrictions. What does the Administration believe would be the result if companies moved out of the U.S.? What figure on the tobacco companies' annual profitability does the Administration rely on, when making decisions regarding a possible annual payment from the companies in a proposed settlement? 2. A plaintiffs' attorney assisting the State Attorneys General in the settlement negotiations stated that the punitive damages payment of $60 billion contained in the settlement is a major public interest achievement, notwithstanding the settlement's cap on additional punitive damages. This was stated for two reasons:

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    "ocrText": "03/05/98 09:51 FAX 202 456 5557\nDOMESTIC POLICY COUNCIL\n5\n005/007\n1\n005\n03/04/98 WED 19:31 FAX\n5. Section 602 (b) would prohibit punitive damages from being awarded on\nthe basis of past conduct of tobacco companies. The State Attorneys General have\ntestified that the settlement proposal already provides $60 billion in punitive damage\npayments from the companies. Does the Administration support this provision? If\nso, why? If not, why not? Please provide what changes you would recommend. *See\nalso question II (2), below.\n6. Section 602 (c) and (e) effectively provide that no suits other than\nindividuals bringing personal injury claims, and third-party payors, can be brought\nagainst tobacco companies. Does the Administration support this provision? If so,\nwhy? If not, why not? If you believe the classes of permissible plaintiffs should be\nexpanded, please specify what additional plaintiffs should be added.\nII. EVALUATION OF THE RATIONALE AND RECOMMENDATIONS OF\nTHE STATE ATTORNEY GENERALS.\n1. Some State Attorneys General have stated that, on balance, the proposed\nsettlement's $368.5 billion in funding for public health, research, education, and\nprevention programs greatly outweighs any recommended limits on liability provided\nto tobacco companies. One key factor relied on by the State Attorneys General is\nthat unless certain liability claims were prohibited, companies in the industry would\nface bankruptcy or move overseas as a result of repetitive damage awards and\nsettlements. This would scuttle the public programs mentioned above, and deny\nindividual plaintiff's any chance of recovery. Testimony was presented by the State\nAttorneys General's negotiating team that the tobacco industry's profit margin is\napproximately $7 billion a year.\nPlease address this concem of the State Attorneys General. I would like to\nhave the Administration's views on the question of whether bankruptcy is a realistic\nconcern under the status quo, and whether the $368.5 billion payment from the\ncompanies could be jeopardized by eliminating (or significantly lessening) the\nproposed liability restrictions. What does the Administration believe would be the\nresult if companies moved out of the U.S.? What figure on the tobacco companies'\nannual profitability does the Administration rely on, when making decisions\nregarding a possible annual payment from the companies in a proposed settlement?\n2. A plaintiffs' attorney assisting the State Attorneys General in the settlement\nnegotiations stated that the punitive damages payment of $60 billion contained in\nthe settlement is a major public interest achievement, notwithstanding the\nsettlement's cap on additional punitive damages. This was stated for two reasons:"
}