Effective Illegality
Tort litigation is wiping out lawful products by rendering them "illegal"
by Michael J. Martin
Los Angeles Daily Journal of the Law February 8, 2000

The current onslaught of product liability suits directed at the tobacco and firearms industries poses a serious question in the annals of modern jurisprudence, a question that both the business and legal communities must eventually answer: when does the manufacture and distribution of a legal product become "effectively" illegal?

And when can effective illegality, as in the cases of asbestos, breast implants, the Dalkon shield, or Primatene asthma pills, bring about the demise of a legal product?

The idea of effective illegality is novel, but not difficult to define.

In the United States, legal status is conferred upon an activity by a constitutional legislative body, or an appellate court (case/common law). When an act is judged illegal by such bodies, enforcement of
the law or statute is always accompanied by a course of due process: investigation, indictment, trial by jury, and, if the offending party is judged guilty, penalty. In the manufacture and sale of an illegal
product, such a penalty might include a fine, imprisonment, or both.

One might term this sort of illegality -- that defined by a body of lawmakers --"actual" illegality.

"Effective" illegality is not conferred upon an activity by any constitutional body. Neither legislature nor court of law nor administrative order can confer any other but actual legal or illegal status. Effective illegality is conferred by individuals repeatedly filing either single, or more potently, class action lawsuits.

The production and sale of controlled substances is actually illegal: a body of law clearly prohibits such activity. The production and sale of automobiles is actually legal (at least for the moment): no body of
law exists restricting this activity, only regulating it. The production and sale of tobacco and firearms, however, arguably straddles both the legal and the illegal. Such products are herein termed effectively illegal to manufacture and distribute.

Manufacture and distribution of tobacco and firearms involves all of the risks attendant to effectively illegal activities: extensive, exhausting class litigation; out-of-court settlements, under the
threat of mushrooming legal fees; the high legal fees themselves; jury verdicts and judgments.

Effectively illegal activities carry penalties (the risks just described) and the full weight of the law in
their enforcement, either through judgment (if all civil process is exhausted), or through the threat of litigation in the civil courts, which involves tremendous losses of time and money, and the stress
that such losses bring to bear on involved parties.

Comparing and contrasting actual and effective illegality can help clarify the legal grey area in which tobacco and firearms manufacturers now find themselves immersed. As earlier noted, whereas
actual legal status is conferred or repealed by statutes enacted through the public legislative process, or case law, effectively illegal status is conferred through the filing of lawsuits by private individuals and their attorneys.

The act of filing the lawsuit itself, once that act either includes a large enough class or is repeated often enough, confers effectively illegal status on an activity that is, ironically, always actually legal.

Violation of statute calls into operation a trial before penalty phase, which, when it involves monetary payment, is normally termed a fine. No trial may precede the penalty phase of a class action tort, which phase can include a pre-trial settlement for sums that often exceed even the largest of fines.

The aggrieved body in a violation of statute is usually the state, and the state, through the levied fine, receives recompense while the guilty defendant is punished. The aggrieved body in a class action lawsuit is the class itself, which may receive little recompense on a per individual basis, from a defendant that has been judged neither guilty nor innocent. A third party, the attorneys filing suit, frequently receive the lion's share of the eventual settlement, a circumstance rarely seen in fines accompanying violations of criminal law.

Effective illegality is far more precarious for a named defendant than actual illegality. No due process body may ever hear or decide the case prior to the penalty phase of settlement and legal fee payment. Furthermore, the process itself, in the civil arena, penalizes the defendant: vast discovery efforts; stressful and exhausting depositions; pre-trial sanctions, motions, and hearings.

One lawsuit--the beginning of civil process--can metastasize into thousands, and soon the vast corporation finds itself shackled like Gulliver by bonds that can actually replicate imprisonment: forced discovery; asset seizure (in the case of civil racketeering litigation); asset impoundment; and mandatory attendance for long periods of time in depositions or in court. The civil process governs the arena of the effectively illegal; the criminal process the actually illegal. Ill-defined boundaries in the civil process make treading its waters extremely hazardous.

Effectively illegal status can ultimately kill a legal product.

Asbestos, silicone breast implants, and the one lawsuit filed in the case of a cheerleader who suffered heart failure after ingesting a Primatene tablet, are excellent, recent examples. Business executives faced
with products deemed effectively illegal must confront the increasingly-clear reality that a product so stigmatized faces tremendous odds against its continued existence.

Ceasing all manufacture of that product once it becomes clear that it is effectively illegal can avoid a losing battle. And the recognition that not one, but two forms of illegality exist in contemporary American law -- actual and effective -- should lead to a paradigm shift that answers a critical question: under what legal circumstances can a company engage in any particular activity.

Certainly not when that activity is actually illegal; and just as certainly, not when that activity is effectively illegal.