Motley Rice’s Big Tobacco Settlement: The $246B MSA and Fees Fight

The Motley Rice tobacco settlement refers to the 1998 Master Settlement Agreement, a $246 billion deal in which the firm’s founding partners, Ron Motley and Joe Rice, represented 26 state attorneys general against the four largest cigarette manufacturers.¹ Signed on November 23, 1998, by 46 states, the District of Columbia, and five U.S. territories, it remains the largest civil settlement in United States history. Motley ran the courtroom side of the case. Rice negotiated the terms.

How Motley and Rice Split the Work

Ron Motley was a Charleston, South Carolina, plaintiffs’ lawyer already known for suing the asbestos industry into bankruptcy.² Mississippi attorney Richard “Dickie” Scruggs recruited him onto the trial team after Mississippi Attorney General Mike Moore filed the first state Medicaid suit against tobacco manufacturers in 1994.³ The novel legal theory: instead of suing on behalf of individual smokers, who kept losing because juries blamed them for their own choices, states sued as third-party payers to recover Medicaid money spent treating smoking-related illness.⁴

Motley described the division of labor in his own terms: “Dickie and my partner, Joe Rice are both very good negotiators… my job is to try the law suit. Prepare it for trial. And their job is to try to find a way, a solution to the litigation problems.” He put it more bluntly with a war analogy. “They are Eisenhower and I am Patton.”²

Motley’s team pulled together hundreds of thousands of internal industry documents, found whistleblowers, and deposed executives and scientists. The strategy was to prove the industry ran as a racketeering enterprise that knowingly sold addictive, deadly products while suppressing the science. The team also hired political consultant Dick Morris to run polling and focus groups. Morris’s work identified the industry’s marketing to children as its most damaging public vulnerability.²

The pivotal witness was Dr. Jeffrey Wigand, the former Vice President of Research and Development at Brown & Williamson, and the highest-ranking tobacco executive ever to publicly describe the industry’s manipulation of nicotine.⁵ Wigand handed the FDA thousands of pages of evidence characterizing cigarettes as drug delivery devices, and paid for it. Brown & Williamson sued him for breach of a confidentiality agreement; he lost his $300,000 salary and was teaching high school by the time the litigation reached its peak.⁶ Rice later credited Wigand’s cooperation paired with Motley’s litigation skills with changing “the public health and tobacco industry landscape.”⁷

For Motley, the case was personal. His mother had died of emphysema, which he attributed to her nicotine addiction.²

From the Failed Global Settlement to the 1998 MSA

By 1997, 39 states had sued the industry.⁴⁸⁹ The immunity required federal legislation, and the bill died in Congress.

The parties went back to direct negotiations. On November 23, 1998, 46 state attorneys general, the District of Columbia, and five territories signed the Master Settlement Agreement with Philip Morris, R.J. Reynolds, Brown & Williamson, and Lorillard.¹ Four states — Mississippi, Florida, Minnesota, and Texas — had already cut their own deals and were not signatories.¹⁰ Because the MSA required no congressional action, it also could not grant FDA jurisdiction or cap the industry’s future liability the way the failed proposal would have.¹¹

What States Got and What the Industry Gave Up

The estimated value is $246 billion, paid annually to settling states in perpetuity as long as cigarettes are sold in the United States.¹⁰ Initial payments from December 1998 through January 2003 ranged from $2.4 billion to $2.7 billion a year.¹² Payments adjust yearly for inflation and cigarette shipment volume. More than 45 tobacco companies eventually signed on as participating manufacturers.

The MSA also imposed permanent marketing restrictions:

Youth-targeted advertising was prohibited, including cartoon characters such as Joe Camel.¹
Billboards and public transit ads were eliminated.¹
Paid product placement in movies, TV, and video games was banned, along with brand-name sponsorship of events with significant youth audiences.¹⁰
Branded merchandise and free samples were prohibited.¹
The industry had to release 14 million internal documents into a public archive and dissolve three industry-funded research groups that had been used to attack science on smoking’s health effects.¹

The settlement also created and funded what became Truth Initiative, whose “truth” countermarketing campaign is credited with keeping 2.5 million young people from becoming smokers between 2015 and 2018 alone.¹ In return, participating manufacturers were exempted from future tort claims by state governments.¹³ The MSA did not resolve claims by individual smokers, who retained the right to sue on their own.

Where the Money Went

Youth smoking rates fell from 23% in 2000 to a historic low of 2% in 2022, driven partly by the “truth” campaign and partly by the price increases tobacco companies passed to consumers to cover their settlement costs.¹ With a cigarette price elasticity of roughly negative 0.4, those higher prices meaningfully cut consumption, especially among teenagers.¹⁴

But the MSA did not require states to spend the money on tobacco control, and most didn’t. Less than 5% of MSA funds went to tobacco control programs. In fiscal year 2003, 47% of payments were folded into general state budgets to cover deficits.¹⁴ By 2006, 15 states were spending nothing at all on tobacco control from their MSA money. By 2008, only Maine, Delaware, and Colorado funded prevention programs at even the minimum level the CDC recommended.⁴

Several states then securitized their future MSA payments, selling them off through state-backed bonds for immediate cash. That trade gave those states a perverse interest in the continued profitability of the tobacco industry, since the bond payments depend on it.¹⁴¹²¹⁵

The Attorneys’ Fees Controversy

The private lawyers who worked alongside the state attorneys general became extraordinarily wealthy. Their fees were negotiated separately from the $246 billion, paid directly by tobacco companies, and often awarded under contingency contracts issued without competitive bidding.¹⁶

A Tobacco Fee Arbitration Panel awarded $10.7 billion across 15 states and Puerto Rico. Scruggs’ firm alone received $1.2 billion.¹⁶ In Florida, a judge calculated that the requested fee amounted to roughly $92,500 per hour, calling it “patently ridiculous” and saying the request “shocks the conscience of the Court.” Arbitrators ultimately awarded Florida’s private counsel even more, at $3.4 billion.¹⁷

Critics questioned who got the work. Five Texas law firms awarded $3.3 billion had been major contributors to the state Democratic Party and Attorney General Dan Morales, and a federal grand jury investigated the financial ties. In Kansas, Attorney General Carla Stovall selected her former law firm, which had no tobacco experience, as local counsel.¹⁶¹⁷¹⁸

Scruggs did not keep his windfall quietly. In 2008 he pleaded guilty to conspiracy to bribe a Mississippi state judge in an unrelated case and was permanently disbarred.¹⁹

Individual Smoker Cases After the MSA

The MSA closed the state books but left individual smoker suits open, and Motley Rice’s most significant follow-on tobacco work has involved the Florida “Engle progeny” litigation. In the underlying 1994 class action, Engle v. Liggett Group, a jury found that nicotine is addictive, cigarettes are defective and unreasonably dangerous, and the manufacturers had conspired to conceal the risks, then awarded $145 billion in punitive damages in 2000.²⁰

The Florida Supreme Court threw out the $145 billion award in 2006 and decertified the class, but preserved the liability findings for individual plaintiffs to use going forward.²¹ More than 8,000 former class members filed individual suits within the one-year window the court set.²⁰

In February 2015, Motley Rice announced a $100 million aggregate settlement resolving roughly 400 Engle progeny cases pending in federal court in Jacksonville. R.J. Reynolds and Philip Morris each contributed $42.5 million, and Lorillard added $15 million. Individual plaintiffs could share in the funds under a formula drawn from past trial outcomes, and participation was voluntary.²² The settlement did not touch thousands of Engle progeny cases still pending in Florida state courts, which continue to generate appellate activity.²³

The Firm After Tobacco

Ron Motley died on August 22, 2013, in Charleston at age 68, from respiratory complications related to a long illness.²⁴ Joe Rice went on to co-lead the BP Deepwater Horizon settlement, the $15 billion Volkswagen emissions settlement, and the $26 billion national opioid settlement finalized in 2022 with Johnson & Johnson, AmerisourceBergen, Cardinal Health, and McKesson. The firm now employs more than 100 attorneys with offices in South Carolina, Connecticut, New York, and Rhode Island.²⁵

1
Truth Initiative. Master Settlement Agreement
2
PBS Frontline. Ron Motley Interview
3
PBS Frontline. Mike Moore
4
PMC (National Institutes of Health). Tobacco Industry Settlement
5
National Whistleblower Center. Jeffrey Wigand
6
PBS Frontline. Jeffrey Wigand Timeline
7
Motley Rice. Tobacco Master Settlement
8
PMC (National Institutes of Health). The Global Settlement and the MSA
9
California Legislative Analyst’s Office. Tobacco Settlement
10
NAAG. The Master Settlement Agreement
11
Public Health Law Center. MSA Overview
12
Office of the New York City Comptroller. Up in Smoke: The Declining Health of NYC’s Tobacco Settlement Bonds
13
EBSCO Research Starters. Tobacco Industry Settlement
14
New England Journal of Medicine. MSA and Public Health
15
KFF. Tobacco Settlement Payments
16
Center for Public Integrity. Tobacco Settlement Helps Everyone but Smokers
17
Cato Institute. Great Tobacco Robbery: Lawyers Grab Billions
18
Stanford GSB. Fiscal Failings of Governments’ Tobacco Settlement
19
FindLaw. Scruggs Disciplinary Proceedings, No. 2008-BD-00451-SCT
20
Public Health Law Center. Engle Progeny Fact Sheet
21
Florida Bar Journal. Engle v. Liggett: Has Big Tobacco Finally Met Its Match
22
Claims Journal. Tobacco Companies Settle 400 Lawsuits for $100 Million
23
FindLaw. R.J. Reynolds Tobacco Company v. Rey, No. 3D23-1015
24
The New York Times. Ron Motley, Who Tackled Big Tobacco, Dies
25
Chambers and Partners. Motley Rice LLC