Tobacco lawsuit features new twists, turns

Just a few months ago most flue-cured tobacco growers were barely listening as a handful of their peers went on the attack against cigarette manufacturers. Grower meetings with almost an evangelical flair, led by the growers' lawyer, Al Pires, enticed several thousand growers to pay $100 each and join the suit.

At that point, the complaint sounded simple enough. Pires proclaimed that tobacco companies had left growers and quota owners out of the Master Settlement Agreement. He further alleged that companies were responsible, among other things, for the nearly 50 percent drop in flue-cured quota over the last three years. The suit was promoted as a way to collect enough money to pay quota owners eight dollars per pound for their quota and growers four dollars per pound for the tobacco they grew.

As of sometime late this summer, that suit has taken quite a turn. Growers are now working with a Washington, D.C. law firm, Howry, Simon, Arnold and White. This is the largest group of anti-trust lawyers in the country.

As one tobacco leader told me, "These are not lightweights. They are not ambulance chasers or so-called plaintiff's attorneys. This firm is taking on the suit because they see it as a slam dunk. This is not just about the money for them. They were heavily involved in gathering the evidence that led to the eventual breakup of AT&T. They are familiar with the 1911 antitrust breakup of the American Tobacco Company. They are convinced they can win this case in court, and they are willing to negotiate a settlement without going to court."

They are charging the tobacco companies with conspiracy to fix prices, which is a violation of anti-trust laws. The lawyers have filed the suit as a class action on behalf of all tobacco farmers and quota owners.

Lawyers from the firm met with tobacco leaders in Raleigh back in October, to lay out the basis of their case. They reiterated their belief that they have enough evidence and witnesses to prove price fixing and anti-trust law violations.

The lawyers have concluded that the way tobacco is currently bought and sold is illegal. Buyers from most tobacco companies must illegally agree on the prices they will pay. How else, they reason, can anyone explain why the maximum price paid on any given day on a market in Virginia will be exactly the same as the price paid on a market in Georgia? How else can the top price paid for a given grade be the same for all buyers in the warehouse?

"They have people who will testify to conversations about price fixing. They have evidence of meetings in hotels and testimonies of warehouse ticket markers and company people who will tell the judge what goes on at our tobacco markets. They say they can show the judge why a farmer has no say so in who gets his tobacco in the case of a tie bid. That is evidence enough that there is no auction, just an allocation system. The companies are being charged with conspiracy to allocate the tobacco rather than actually bidding on it," says one tobacco industry insider who has listened to the lawyers' presentation.

If there is a good side to this issue of producers suing buyers, it is that lawyers for the growers seem to be working with tobacco leaders to develop an out-of-court settlement. According to individuals in the meeting with lawyers and tobacco leaders, the lawyers intend to push for several changes in the way tobacco business is conducted in the future. And, they are asking the tobacco leaders to help formulate the changes that will be imposed through any settlement of this suit. This is an opportunity for tobacco leaders to fix the things that are wrong with our current tobacco program and marketing system and to influence the way this industry functions in the future.

Grower leaders over time have made lists of changes that need to occur. Among other things, they want to get the quota into the hands of active growers. They want to fairly compensate quota owners for any quota they will have to give up. They want to compensate growers for income lost because of dramatic cuts in quotas over the last three years. In addition, they want to radically change the way tobacco is bought and sold in the U.S. to make the system fairer to buyers and sellers.

What should growers do at this point? Stay in touch with tobacco grower leaders. Representatives of most tobacco grower groups have met with the new lawyers and heard their presentations. It is rapidly becoming clear that this is a very serious lawsuit. Most leaders I've talked with believe that significant things will happen by December.

Meanwhile, any growers who intend to grow and sell tobacco in 2001 and who have not yet installed heat exchangers in their bulk barns should put retrofits on their high priority lists. We don't yet know exactly how individual growers will be affected by this lawsuit, whether it goes to court or is settled out of court. But we do know that every domestic cigarette manufacturer has said they will purchase low nitrosamine tobacco next year. Growers who are not prepared to certify that their cured leaf has not come into contact with the products of combustion from curing oil or gas could find it nearly impossible to sell next year's crop.

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