When then-Texas Attorney General Dan Morales filed a historic federal lawsuit in 1996 accusing the tobacco industry of racketeering and fraud, he said the litigation would bring billions of dollars to the state to fight smoking and improve healthcare, force cigarette companies to make less dangerous and addictive products and reduce teen smoking.
“We are going to bring the cigarette makers to their knees and force them to change how they do business,” Morales told The Dallas Morning News in July 1996.
Thirty years later, the tobacco litigation has proven to be an annual financial bonanza for the state of Texas — and for the trial lawyers involved in the litigation. Youth smoking — and cigarette use overall — has plummeted. But cigarettes are still just as addictive and just as dangerous.
Since the lawsuit settled in early 1998, cigarette makers have paid Texas more than $15.8 billion. But less than one-tenth of one percent — $6.1 million, to be exact — has gone to fund antismoking initiatives, and only pennies on the dollar have been designated for healthcare, according to records compiled by the Campaign for Tobacco-Free Kids.
The state collected another $430.7 million in 2025 and will keep collecting hundreds of millions of dollars annually for decades.
“The tobacco litigation and the results we achieved far exceeded our wildest imaginations,” said Houston lawyer Harry Potter, who was the special assistant Texas attorney general who managed the litigation. “The Texas case remains the largest single-plaintiff civil settlement in history.”
“The sheer size and magnitude of the litigation, the number of great lawyers on both sides, the amount of documents produced during discovery — there has never been a litigation like it, and I doubt there will ever be again,” Potter said.
The Texas trial lawyers hired by Morales to take on the tobacco industry have been paid $2.2 billion in legal fees over the past 25 years, receiving their final payment in 2025.
Morales used the tobacco litigation and his position as Texas AG to launch a bid for governor of Texas, but instead, he went to federal prison to serve a four-year sentence in 2003 after The Morning News published previously confidential government documents showing Morales falsified and backdated contract agreements in order to funnel hundreds of millions of dollars from the tobacco settlement to a lawyer friend.
To be sure, the Texas tobacco case directly led to a dramatic decline in teen smoking in the state by driving the cost of cigarettes up more than $1.50 per pack and severely limiting the makers and distributors of cigarettes from marketing to young people — ads featuring R.J. Reynolds’ Joe Camel and Philip Morris’ Marlboro Man were ended.
But it’s equally true that cigarettes are as dangerous as ever.
“I got involved in this litigation representing the state of Texas to make a difference, to make history, and we accomplished it,” Houston trial lawyer John Eddie Williams, one of the five high-profile plaintiff’s attorneys hired by Morales, told The Texas Lawbook in an interview. “The settlement agreement was an extraordinary outcome for Texas.”
To understand the significance of the Texas tobacco litigation and the impact it had, lawyers say it is important to remember that Texas was only one piece — albeit a large and critical one — in a national effort led by state AGs, trial lawyers and the public health community to address teenage smoking and the enormous healthcare costs associated with cigarette use.
And the lawyers point out that success was far from certain when Texas filed its lawsuit on March 28, 1996.
Sick and dying smokers had sued cigarette makers nearly a thousand times over the decades. Lawyers for the tobacco companies developed a two-prong defense. They told courts and juries that there was no scientific evidence that cigarettes were dangerous or addictive. But even if cigarettes were addictive and dangerous, the smokers already knew it when they started smoking, and they still chose to smoke and thus assumed the risk.
The legal strategy that preyed on taking responsibility for one’s actions was extraordinarily successful. By the mid-1990s, more than 350 lawsuits brought by sick smokers had gone to trial. The tobacco companies had won every single one of them.
Cigarette Litigation Goes National
Then came 1994.
Mississippi Attorney General Michael Moore developed an innovative legal theory. His state would seek to recover more than $100 million in tax dollars paid annually over dozens of years for the healthcare of sick smokers through the Medicaid and Medicare systems. The legal argument effectively dismantled the traditional defense arguments the tobacco companies employed.
“This was the most important health-related litigation in history,” Moore told The Lawbook in an interview last week. “Cigarette smoking was the number one cause of death in the entire world. There will never be a case this big or this important ever again.”
Moore’s cause got a lucky break when a $9-an-hour paralegal for the Louisville, Kentucky, law firm that represented Brown & Williams Tobacco Company stole hundreds of confidential internal tobacco industry documents and sent them anonymously to members of Congress, Moore and a handful of newspaper journalists, including The New York Times, The Wall Street Journal and The Morning News.
The newspapers received the documents in banker boxes with a return address that read only “From Mr. Butts.”
In an interview with The Morning News, the paralegal, Merrell Williams, said he secretly copied thousands of pages of devastating documents showing the cigarette executives knew all along that their products were dangerous and that they targeted teenagers. He snuck those documents out of work each day by wearing a girdle and loose pants.
“I was shocked when I read these documents because they exposed the lies of the tobacco companies,” said Williams, who studied drama at Baylor University in Waco. “I have close family members who died from cancer from smoking.”
Editor’s note: Texas Lawbook reporter Mark Curriden was the legal affairs reporter for The Dallas Morning News and covered the tobacco litigation for The DMN.
The revelation of the documents and Moore’s championing of his state’s lawsuit led four other states — Minnesota, Florida, West Virginia and Massachusetts — to join Mississippi in suing the cigarette makers in 1994 and early 1995 in their respective state courts. Each of the states sought a few billion dollars in damages.
“The tobacco companies say Merrell stole these documents. I say he liberated them,” South Carolina trial lawyer Ron Motley told The Texas Lawbook in a 2012 interview. “I cannot express the importance of those documents as evidence of fraud committed by the tobacco companies.”
The five state lawsuits got another major boost on March 20, 1996, when cigarette maker Liggett Group became the first tobacco company to break ranks with its peers by reaching an out-of-court settlement with the state AGs. Liggett agreed to pay about $50 million annually to the states and agreed to testify that its products were dangerous, addictive and targeted teenagers.
“The Liggett settlement was huge because it provided us access to troves of additional insider documents,” Moore said. “Then, a week later, Dan and Texas filed its lawsuit. And, of course, Texas being Texas, Dan’s lawsuit needed to be bigger than all the rest.”
‘Texas Being Texas — Bigger Than All the Rest’
“The Texas lawsuit was a huge momentum booster for the national effort,” Moore said. “Plus, the lawyers Dan hired to lead the case were trial lawyer powerhouses. They brought deep pockets and major resources to fight a tobacco industry that employed the biggest corporate law firms in America and their scorched-earth tactics.”
Potter said Morales approached him in late 1995 about “tackling a new project taking on the cigarette industry.” Together, they met with Moore at an annual meeting of the National Association of Attorneys General to discuss the possibility of Texas jumping into the fray.
Moore warned Morales and Potter that the tobacco companies would fight them at every turn.
“Word leaked out that we were thinking about filing the lawsuit, and the tobacco companies preemptively tried to block us by filing a declaratory judgment action against us, but an Austin judge rejected,” Potter said.
In 1997, in the midst of the tobacco litigation, cigarette makers teamed with tort reform advocates to successfully lobby the Texas Legislature to pass a law prohibiting Texans from being able to sue the “makers of natural products” that have potential health risks. The law identifies those natural products as milk, eggs, sugar, bread, butter and … cigarettes, which actually have hundreds of chemical additives that experts testified made cigarettes even more addictive.
Morales appointed Potter to be his general supervising the litigation.
“Dan called me and said he was looking for a bunch of junkyard dogs who had a reputation for fighting and winning,” said Williams, who had actually supported Morales’ opponent in the Democratic primary for state attorney general. “We quickly realized that the civil court system could accomplish things that the executive branch or legislative branches of government just could not make happen.”
But Texas also differentiated itself from the other five states by filing its case in federal court in Texarkana, where it accused the cigarette makers of fraud, deceptive trade practices, conspiracy and violating federal racketeering laws.
“By filing in federal court instead of state court, it gave our litigation team nationwide subpoena power,” Potter said. “That was a big hammer that only Texas obtained, and it gave us tremendous advantages in demanding testimony from key witnesses across the country.”
Discovery became its own beast. Rather than refusing to turn over key documents, the tobacco companies took the opposite approach — instead, they produced millions and millions of pages of documents, which made it harder to find what the lawyers called the “hot docs.”
The Texas trial team leased a huge warehouse in Beaumont to house all the tobacco industry’s records.
“The archives were like a scene out of Indiana Jones,” Potter said. “Kinkos had to employ a dozen extra people just to make millions and millions of pages of records. That warehouse with the documents is still there.”
“We discovered a confidential tobacco industry internal legal memo that stated, ‘The goal in litigation is not to spend all of our money, but to force the plaintiffs to spend all of their money,’” Potter told The Lawbook.
‘The Big Five Junkyard Dogs’
While Morales leaned on Potter as his No. 2, he hired five prominent trial lawyers — John Eddie Williams, Walter Umphrey, Harold Nix, John O’Quinn and Wayne Reaud — to fund and run the litigation. The lawyers agreed to commit several million dollars upfront to fund what everyone agreed would be a lengthy and costly litigation battle. In return, the lawyers would get 15 percent of any money that resulted from a courtroom victory or settlement.
Potter said Morales believed each of the trial lawyers — “The Big Five,” as they came to be known — played a critical role.
Umphrey, the oldest of the group, was the clear leader. Williams was tapped to handle the healthcare issues and damages model. O’Quinn was selected for his trial skills but was more of a lone wolf. And Reaud was there “to make sure the other lawyers didn’t get too comfortable,” Potter said.
O’Quinn was widely recognized as one of America’s best trial lawyers, but he was battling the demon of alcoholism and was in and out of rehab in the months leading up to trial.
“We had a difficult time getting and keeping O’Quinn’s attention, which was a problem,” Potter said.
Even though the other lawyers pleaded with O’Quinn to get more involved in the day-to-day tobacco litigation matters, O’Quinn insisted that he would wait until the weeks before trial to start learning the case.
This made the other lawyers nervous, as U.S. District Judge David Folsom has set a trial date for mid-January.
Umphrey and a handful of members of the Texas team convinced Morales and Potter to add Motley, who also represented Mississippi and Florida and had tried cases against Big Tobacco. In addition, Motley had tried asbestos cases with Umphrey and Williams, and they were all friends.
“Ron added the benefit of knowing all of the evidence and the case against the tobacco companies better than any other lawyer,” Potter said. “Plus, he was a damn good trial lawyer.”
Editor’s Note: Click here to read Mark Curriden’s touching tribute to his longtime source and dear friend, Ron Motley, who died in 2013.
Motley brought an additional advantage to the Texas legal team: He had a deep professional relationship with several news reporters, especially at The Morning News. In fact, at a later legal conference, Motley took credit for leaking multiple tobacco industry documents to the newspaperthat led to front-page articles.
Motley and his team of about 15 lawyers and paralegals arrived in Texarkana on a private jet owned by the law firm now called Motley Rice.
The addition of Motley did not please everyone.
“O’Quinn and Motley were oil and water,” Williams said.
In fact, O’Quinn ordered security to remove a Morning News reporter from the state AG’s temporary office space in Texarkana after the reporter published an article about Motley’s addition to the Texas tobacco litigation team.
“I was the youngest of the five, and they all had much bigger egos than me,” Williams laughed during his interview in June with The Lawbook. “We hired several Ph.Ds to help with the incredibly complex damage model. At the end, we called it the ‘BFN’ — the big fucking number.”
South Carolina lawyer Joe Rice, Motley’s law partner and an expert in complex civil litigation settlement agreements, agreed that “there were a lot of big personalities” in the Texas litigation.
“But you do not have to be best friends to work together and be successful,” Rice said. “The Texas team had some great lawyers, and they have deep pockets that could go toe-to-toe with the huge amounts of money the tobacco companies spend on its lawyers.”
In all, the cigarette makers paid their lawyers from Jones Day, Winston & Strawn, Shook, Hardy & Bacon, Davis Polk, Kirkland & Ellis and Wachtell Lipton more than $800 million, according to a former executive at Philip Morris.
The Texas lawsuit filed March 28, 1996, originally sought $8.6 billion but later increased its ask to $13 billion — nearly double any of the previous state cases.
The Mouse House
Meanwhile, the trial lawyers were unearthing incriminating documents weekly throughout 1996 and 1997.
One internal tobacco industry document, for example, stated that the cigarette manufacturers needed to focus their marketing efforts on its key audience — 12- to 16-year-olds.
Another series of confidential documents told the story of a tobacco industry-funded research facility that tested the impact of secondhand smoke on mice. Tobacco executives believed the claims that secondhand smoke was dangerous were exaggerated and sought scientific evidence to prove otherwise.
“They called it the Mouse House, but it wasn’t called the Mouse House because Mickey lived there — and if Mickey did live there, he didn’t live there long,” Motley told The Morning News.
Motley said the cigarette makers pumped secondhand smoke into the sealed containers housing the mice.
“A strange thing happened — all the mice in the test turned gray and died,” Motley said. “The tobacco executive thought that they had been given bad mice. So, they ordered new mice, but it kept happening over and over.”
“After going through several batches of mice, the executives ordered the Mouse House closed, paid everyone who worked there to sign NDAs and ordered all documents about the Mouse House destroyed,” he said.
As the evidence piled up, more and more states joined the litigation.
In April 1997, lawyers for the tobacco companies asked to meet with Moore and Tobacco-Free Kids General Counsel Matt Myers to discuss the possibility of a global settlement that would cover all the states, including Texas, that sued Big Tobacco.
The meeting took place in a conference room at the Marriott Hotel in Crystal City, just outside of Washington, D.C. Those who attended the meeting included the CEOs of the five cigarette makers and elite Wall Street lawyers Herb Wachtell and Meyer Koplow of Wachtell, Lipton, Rosen & Katz and Arthur Golden of Davis Polk & Wardwell.
“The CEOs of Philip Morris and RJR told us that to show they were serious, they agreed right then to give up the Marlboro Man and Joe Camel, their two most successful marketing efforts,” Moore says. “We were stunned. That’s when settlement talks really heated up.”
In June 1997, a group of trial lawyers, state AGs and leaders of the public health community announced that they had reached a tentative settlement agreement with the cigarette makers in which the tobacco companies would pay the states $368.5 billion over 25 years and consent to regulatory oversight of cigarettes by the U.S. Food and Drug Administration.
In turn, the cigarette companies wanted two things: limited immunity from future litigation and future financial predictability.
The downside was that it required approval by the U.S. Congress and the White House. U.S. Senator John McCain was tasked with developing the bill for a vote.
Mississippi, which was set to go to trial in July 1997, settled its lawsuit with Big Tobacco on the eve of trial for $3.4 billion. Florida settled during jury selection two months later for $11.3 billion.
Focus on Texas
Next up on the tobacco litigation docket was Texas.
“Texas suddenly became so very important because it had an actual trial date, and that scared the tobacco companies silly,” Rice says. “The Texas lawsuit wasn’t first, but it was so important because it is such a large state with potentially huge damages.”
In the fall 1997, scores of lawyers flooded into Texarkana, where State Line Avenue straddles Texas and Arkansas. The Texas side was alcohol-free. Across the street, Arkansas sported drive-thru liquor stores.
The town had two primary hotels — the Four Points Sheraton and the Holiday Inn.
Lawyers for Philip Morris booked the entire third floor of the Sheraton, while Motley and his team occupied the fourth floor.
The federal courthouse also sat on the state line. Step off the elevator on the third floor, and the U.S. District Court for the Eastern District of Texas was the hall to the left, while the hall to the right led to Arkansas.
“Texarkana is a growing metropolis — it now has both a Long John Silver’s and a Captain D’s,” Chuck McDonald, a spokesman for Philip Morris — and former communications director for former Texas Governor Ann Richards — told The Morning News in 1997.
The lead lawyer for Philip Morris was Winston & Strawn partner Dan Webb. For Brown & Williamson, the top attorney was Kirkland & Ellis partner David Bernick.
The pair could not have been more different. Webb, a former federal prosecutor and widely regarded as one of the best trial lawyers in the U.S., was open and transparent. He answered reporters’ questions to the best of his ability and got along well with Motley, Williams and Potter. Bernick, by contrast, refused to even recognize that the reporters existed.
“Bernick plays the role of an asshole cigarette lawyer very well,” Motley said.
As the case neared trial, Judge Folsom issued an order that the trial would be divided into three stages, with the racketeering claims going first, all additional fraud claims to be decided second and the causation and damages phase last.
“The judge’s trifurcation order was a devastating blow to the tobacco companies’ defenses,” Potter told The Lawbook.
In November 1997, with trial less than two months away, Philip Morris and R.J. Reynolds sent retired North Carolina Supreme Court Justice Phil Carlton to meet with a reporter with The Morning News without the knowledge of any of its trial lawyers.
Carlton’s message was clear: The Texas litigation needed to settle before Congress could pass the global agreement.
“As long as the lawyers are bashing each other and making heated accuses and demonizing each other, the chances of the Senate passing the McCain tobacco remain very difficult,” Carlton told the DMN.
Come to find out, both sides had hired separate legal teams to focus solely on settlement negotiations.
It worked.
On Jan. 16, 1998, Morales stood before a packed room at the Doubletree Hotel in downtown Austin sporting a large cardboard check for $15.32 billion. He said large chunks of the settlement money would fund healthcare and antismoking programs. The Texas legislature ended up putting nearly all of it in the state’s general budget.
“Dan thought he could dictate that large portions of the money would be spent on healthcare and anti-smoking programs, but he couldn’t,” Potter said.
The McCain tobacco legislation failed to gain enough votes in the U.S. Senate. Many Republicans opposed it because they hated seeing the trial lawyers get so much money and did not want the federal government regulating cigarettes. But several Democrats — pushed by far-left public health advocates — objected because the legislation did not go far enough to destroy the tobacco industry.
Instead, the remaining 46 states reached an agreement to settle their lawsuits for $206 billion in late 1998.
“The pursuit of perfection became the enemy of something very good,” Rice told The Morning News in 1998. “Still, we achieved so much good. The tobacco litigation became the framework for the recent opioid litigation.”
To date, the first four states — Mississippi, Florida, Minnesota and Texas — that settled have collected $37.2 billion from their settlements with Big Tobacco. The other 46 states have been paid an additional $171.2 billion.
“Could the settlement have been better? Yes, of course,” he said. “But our achievements were extraordinary. Cigarette smoking is nearly a thing of the past. Teen smoking has plummeted. The number of lives saved because of this litigation is unprecedented in history.”
Coming Thursday
The Real Harry Potter Stood Up — The Quiet Hero of the Tobacco Litigation