Texas Recovers $15.3 Billion From Tobacco Industry in Landmark 1998 Settlement

By the mid-1990s, Texas had spent decades paying Medicaid costs for residents sickened by tobacco-related illnesses. In March 1996, the state filed suit in federal court in Texarkana against the major cigarette manufacturers, seeking to recover those healthcare expenditures directly from the industry that caused them. The state retained five private trial lawyers under a contingency arrangement, each committing millions of dollars of their own money to fund the litigation.

John Eddie Williams, Jr. of what is now Williams Hart and Boundas was one of those five co-counsel. According to a detailed account by legal journalist Mark Curriden in The Texas Lawbook, Williams took primary responsibility for the healthcare-cost damages model. He worked alongside Ph.D. economists to build the projection framework the team used to calculate the state's losses, a figure that eventually anchored the settlement demand.

Filing in federal rather than state court proved decisive. The choice gave Texas nationwide subpoena power, allowing the legal team to compel document production from tobacco defendants and their witnesses across the country. Judge David Folsom set a three-phase trial structure covering racketeering claims first, then fraud, then damages. The pressure of that schedule, combined with the breadth of discovery Texas could pursue, pushed the tobacco companies toward settlement.

On January 16, 1998, the State of Texas and the tobacco defendants reached a settlement of $15.32 billion, to be paid out over the following decades. It was, at that moment, the largest settlement arising from a single lawsuit in U.S. legal history. The five private attorneys were entitled to 15 percent of the total recovery under their contract with the state. In late 1999, after an arbitration proceeding, they agreed to accept $3.3 billion in fees, a reduction from the full contractual amount, according to the Deseret News and other contemporaneous press reports.

Texas has since collected more than $15.8 billion in tobacco payments. The case established that a state government could sue tobacco companies directly for Medicaid reimbursement and win, a model other states had already begun to replicate. Williams and his co-counsel were four of the 'Big Five' named in The Texas Lawbook retrospective: Walter Umphrey, Harold Nix, John O'Quinn, and Wayne Reaud were the other four.