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International Reserach Group for Transregional & Emerging Area Studies
The International Reserach Group for Transregional & Emerging Area Studies is a non-partisan and multidisciplinary Think-Tank Organization.
10:55 - 23 March 2000

TOBACCO LITIGATION UNDER TAIWANESE LAWS: THE APPLICABILITY AND LIMITATIONS OF THE U.S. EXPERIENCE

tobacco

By Yen-Lin Lee  , On April 30, 1999

I.                   Introduction         …………………………………………………………..1

II.                A history of the U.S. tobacco litigation and its new developments   ……4

A.       The tobacco problem and the first two waves of tobacco-related litigation         .…………..….4

B.       The third wave of tobacco-related litigation         ………………….7

III.     An overview of the tobacco market and the medical care system in Taiwan          ……………………………16

A.   The Taiwanese tobacco monopoly and recent developments    ..….16

B.   The enactment of the Smoking Hazards Prevention Law          …………18

C.   The medical care system in Taiwan              …………………………..19

IV.            Potential causes of action in tobacco litigation under Taiwanese laws       .21

A.   The Consumer Protection Law           …………………………….….21

B.   The Fair Trade Law         …..…………………………………………28

C.   Torts            .………………………………………………………….33

D.   Unjust enrichment ..……………………………………………37

E.    Contracts               ………………………………………………………38

F.    Summary     .……………………………………………………..39

V.               Potential plaintiffs         ………………………………………………………40

A.   Medicare providers and the subrogation issue       ………………… 40

B.   Individuals–consumer protection groups and aggregated actions      .48

C.   Summary     ..…………………………………………………….49

VI.            Fee arrangements ………………………………………………………51

A.       Attorneys’ fees     …..………………………………………….….51

B.       Court fees ………………………………………………………..52

VII.         Foreseeable problems in tobacco-related litigation under Taiwanese laws                           ……53

A.       The requirement of proximate causation    ..…………………….53

B.       The issue of statutory subrogation   ……………………………… 54

C.       The limitations on statutory claims and grandfather clauses   …… 54

D.       The application of statistics and documentation provided on the Internet          ……………………..55

VIII.      Conclusion ..…………………………………………………………58

IX.            References            ………………………………………………….…..60

X.               Abbreviations                ………………………………………………………63

I.    INTRODUCTION

As a Taiwanese educated in a system controlled by Chinese natives (who fled from China after losing a civil war in 1949), I am very familiar with Chinese history, especially its modern history.  We were taught that in the nineteenth century China—who was trying to ban the smoking of heroin—went to war with Britain to stop the imports and trades of heroin in China.  This war, named the “Ya-Pian War”, e.g., the war of heroin, is very well known in Chinese modern history.  China lost the war; however, heroin was eventually regulated as a drug in the West and its trade is now restricted in most countries in the world.

It may be surprising to find that the same stories are always repeated in history.  A harmful substance—heroin in the nineteen century, tobacco today—is traded from capitalists to smokers, from the West to the East, for a few people’s profit at the price of the health of many others.  As history has shown, the profit from this trading can be large enough to start a war.  The dominate weapon in the warfare today is not an army but economic punishment; the battlefield is not on land but on diplomatic desks or in the courts.  A decade ago, under pressure from the U.S. government, Taiwan was forced to open its domestic market to the tobacco industry and the industry’s aggressive promotional campaigns.  Today, the Taiwanese are pleased to see the U.S. anti-smoking lobby getting stronger and more successful, and a growing worldwide awareness of the hazards of tobacco.  I am motivated by the above trend to review the status of the Taiwanese legal system and how successful to tobacco-related litigation might be in this system.  This is a battle Taiwan must undertake sooner or later.

Tobacco hazards are deadly; millions of people all over the world die annually from smoking-related illnesses.[1]  The United States—which has relied more on litigation as a social control than other countries—has caught the world’s attention due to its recent developments in tobacco liability litigation.  Through the mass media and the Internet, the U.S. has exported the concept and experience of anti-smoking, has inspired an extensive awareness of tobacco hazards, and has promoted anti-smoking litigation all over the world.  Taiwan, while becoming more and more open to and affected by the international community, has closely observed the new legal developments in the U.S., especially since the major tobacco companies that have been defendants in the U.S. cases also dominate her tobacco imports market.

Like other countries, Taiwan suffers from the effects of tobacco use.  According to an official investigation report, almost 20,000 Taiwanese die annually from illnesses caused by smoking,[2] and ninety percent of male and thirty-seven percent of female lung cancer victims are smokers.[3]  The annual cost of these deaths is approximately New Taiwan dollar (NT) $9.7 billion ($0.32 billion).[4]  These tobacco-related illnesses add considerable costs to the already heavy burden of a government-funded medical insurance system.  Like other Asian countries, Taiwan for many decades has allowed a monopoly in the tobacco market.[5]  Tobacco hazards have not gotten the attention they deserve in Taiwan for two important reasons: the tobacco business has been historically owned by the Taiwanese government, which did not aggressively promote tobacco use, and the traditional culture discourages smoking for women and children.[6]  However, ever since Taiwan opened up her tobacco market ten years ago under U.S. government pressure (pushed by the U.S. tobacco industry),[7] the foreign tobacco industry in Taiwan, led by major U.S. tobacco companies, has aggressively expanded its market share by targeting women and children, especially the latter.[8]  Finally, the increase in the number of minors smoking and the awareness of the risks of environmental tobacco smoke (ETS) have turned people’s attention to tobacco hazards.  In response to the people’s call, in 1996 the Taiwan government enacted the Smoking Hazard Prevention Law to control smoking and tobacco promotion.  Also, in light of the U.S. tobacco liability litigation and nationwide settlements, Taiwanese anti-smoking groups are trying to collaborate with international anti-smoking groups to seek compensation for victims of smoking-related illness.[9]  However, in view of the probable delay in securing a global settlement with the tobacco industry and of the difficulties of conducting overseas litigation (foreign plaintiffs pursuing litigation against U.S. tobacco producers in the U.S. will face a formidable obstacle— forum non conveniens doctrine),[10] it would be worthwhile for Taiwanese to consider to bring a case against the tobacco industry in Taiwan.

This paper summarizes the new developments in tobacco litigation in the U.S., introduces the history of the Taiwanese tobacco market and then analyzes, from the perspectives of cause of action and potential plaintiffs, the feasibility of current tobacco litigation under the Taiwanese legal system.  The acknowledgement and enforcement of Taiwanese judgements under the U.S. legal system is beyond the scope of this paper.

II.           AN OVERVIEW OF TOBACCO LITIGATION IN THE

UNITED STATES

A.       The Tobacco Problem and the First Two Waves of Tobacco-Related Litigation

The hazards of tobacco use are a severe problem all over the world, including in the U.S.  There are three characteristics of cigarette smokers—they are at a high-risk for long-term use, have a high rate of dependency and most of them become addicted in their teens.

Cigarette smoking causes over 420,000 deaths each year in the United States, approximately twenty percent of all U.S. deaths annually.[11]  According to the American Cancer Society’s statistics, eighty-seven percent of all cases of lung cancer and nearly one third of all deaths due to cancer are linked to smoking.[12]  The overall cancer death rate of smokers is nearly twice that of nonsmokers.[13]  Smoking is also associated with many other severe illnesses.[14]  Furthermore, according to an Environmental Protection Agency report, passive smoke, i.e., environmental tobacco smoke, results in approximately 3,000 lung cancer deaths annually in the U.S.[15]  As to the high rate of addictive dependency of tobacco smoking, only ten percent of smokers are low-level smokers, while only ten to fifteen percent of alcohol drinkers have drinking problems.[16]  Compared with other addictive drug dependencies, a much higher percentage of people who start smoking will graduate to dependent levels.[17]  As to the age of addiction, eighty-two percent of adult smokers began smoking before they turned eighteen.[18]

In view of the high risks of cigarette smoking, cigarettes should be heavily regulated as a drug, not merely as a habit like alcohol drinking;[19] however, in order to maintain its market and profits, the tobacco industry has used its overwhelming financial ability[20] to aggressively lobby federal and state legislatures and, therefore, has substantially influenced both legislative and administrative regulations.[21]  As a result, “many regulations [have] turned out to be industry-friendly,”[22] and legislation and government agency regulations have been ineffective in regulating tobacco use.[23]  In light of this regulatory failure, private litigation as a means of risk control (on which the U.S. has tended to rely more heavily than other industrialized countries) needed to play a critical role in controlling tobacco hazards.[24]  The tobacco industry, through strategies such as abusing fact discovery proceedings to exhaust and bankrupt individual plaintiffs and their lawyers, shifting the focus of tobacco hazards to freedom of choice and personal blame for risky choices, and failing to offer settlements,[25] seemed to successfully exempt itself from private law control, however.  As of 1994, a total of 808 cases were filed to seek recovery of smoking-related damages from big tobacco companies; however, almost nobody recovered anything for recovery from the tobacco industry.[26]

The first wave of tobacco tort litigation in the U.S. was launched in 1954 and ended in 1973.[27]  The cases in this wave of litigation were primarily based on the theories of deceit, breach of express and implied warranty, and negligence.[28]  Since no evidence showed that the tobacco companies knew of the potential harm of their tobacco products, the allegations of deceit, breach of express warranty and negligence all failed.[29]  Furthermore, the American Law Institute, in its commentary on Section 402A of the Restatement Second of Torts, adopted the court’s holdings on strict liability for defective products, mainly that a producer is “an insurer against foreseeable risks—but not against unknowable risks” and will not be liable for “the harmful effects which no developed skill or foresight can avoid”.[30]  Accordingly, the plaintiffs’ argument based on implied warranty was defeated as well.[31]

The second wave of tobacco cases began in 1983 and receded in 1991.[32]  In this wave of cases, plaintiffs focused on strict liability as the primary claim basis because, at the time, courts in other defective product cases were finding defendants liable under the theories of strict liability and comparative fault.[33]  However, the 1966 Labeling Act requiring tobacco producers to attach warning labels to their products became a strong defense for the tobacco industry.[34]  The industry argued that smokers were aware of the risks in cigarette smoking and, therefore, should be responsible for their individual choices.  Due to the assumption of risk and contributory negligence defenses asserted by the tobacco industry, plaintiffs received no sympathy from their juries.[35]  Eventually, those plaintiffs in the first two waves of tobacco litigation were overwhelmed by the tobacco industry’s resources and defenses.

B.   The Third Wave of Tobacco-Related Litigation

1.         Overview of Litigation

The first two waves of tobacco litigation met with total failure; however, as the hazards of smoking and tobacco use intensified and became more publicly known, people gradually began to understand these hazards — from the perspective of individual harms to that of the social costs.[36]  With new litigation strategies and the disclosure of information previously kept internal to the tobacco industry, new claims of the tobacco industry’s liability eventually brought the unbeatable giant to its knees.

An early breakthrough in the tobacco industry’s defense was the 1964 U.S. Surgeon General’s report which causally linked cigarette smoking with lung cancer.  The reports of the U.S. Surgeon General in 1988 and 1994 further confirmed the addictive nature of tobacco products and the central role that nicotine plays in causing tobacco addiction.[37]  In February of 1994, the tobacco industry’s capability to control nicotine in cigarettes was disclosed for the first time and followed up by an FDA investigation.  Collectively, these events sparked the third wave of tobacco litigation.[38]

The third wave of tobacco litigation began in March 1994, with the decision of a Florida appellate court in Broin v. Philip Morris, and the filing of Castano v. American Tobacco.  Both cases were class actions.  A few more class actions followed.[39]  The most striking event in this new stage of tobacco litigation was the wave of unprecedented state reimbursement suits, the first of which was launched on May 23, 1994.[40]  Mississippi Attorney General Mike Moore, on behalf of the state’s taxpayers, filed a pioneer lawsuit against the tobacco industry to recover the Medicaid costs spent by the state for smoking-related illness.[41]  This suit was not based on a subrogation claim, which would place the state in the shoes of injured smokers, but was based on claims of unjust enrichment and restitution.[42]  The Attorney Generals of Florida, Texas and Minnesota followed by separately filing their own reimbursement lawsuits.  Eventually other states followed.

The causes of action in the reimbursement suits were based on the newly disclosed information that was previously internal to the tobacco industry.  These causes of action are various but include, primarily: fraud; intentional and negligent misrepresentation; emotional distress; negligence; violation of consumer protection statutes; breach of express and implied warranties; strict liability; conspiracy; antitrust claims; and unjust enrichment/indemnity.[43]

The third wave of tobacco litigation has the following characteristics:

a.      Mass Tort Litigation /State Reimbursement Litigation:

In mass tort or state reimbursement litigation, the amount of a claim is typically very large.  The value of the claim has been an incentive for many prestigious and well-financed law firms to join together and pursue these cases on a contingency fee basis.  For example, in early 1995, fifty-nine law firms banded together to pursue a class action suit against sixteen tobacco companies.[44]  In these large cases, it is possible for plaintiffs to be in an equal position to the tobacco industry with respect to the burden of discovery proceedings. (The tobacco industry had used the cost and time requirements of discovery proceedings as an important tactic in exhausting claimants in the first two waves).  State reimbursement litigation is also strategically advantageous for plaintiffs.  First, state may base its claim on unjust enrichment, as Mississippi Attorney General Mike Moore did.  This strategy may effectively defeat the tobacco industry’s powerful defenses: the assumption of risk by and contributory negligence of individual smokers.  Further, the state is in a better position than individuals to prove causation through statistical evidence.  This is almost impossible to do in the cases filed by individuals because causation proved through statistical evidence is less substantial in individual cases.

b.      A Shift in Emphasis from Blaming Individuals to Blaming the Tobacco Industry:

Access to information previously kept internal to the tobacco industry but made public during fact discovery proceedings in early cases in this wave of litigation, and the FDA’s investigation resulted in a shift in the focus of litigation strategies as follows:

(i)                 Intentional Misrepresentation of Tobacco Hazards and Manipulation of Nicotine Content

According to the internal documents of the tobacco industry and the testimony of its ex-employees, the tobacco industry has known since the 1970s about the addictive nature of tobacco products and about the central role nicotine plays in causing and sustaining that addiction.[45]  The tobacco industry had not only withheld this information but also had destroyed evidence of nicotine’s dangers and had suppressed research on the hazards of smoking.[46]  Furthermore, the tobacco industry had financed research and public relations firms, such as the Council for Tobacco Research and the Tobacco Institute,[47] to make misleading statements to the public.  Although the Surgeon General’s report confirmed the addiction of nicotine, the major tobacco manufacturers claimed that their products contained less nicotine than they did in the 1950s.  According to the FDA’s investigations in 1952 and 1994, however, the nicotine level in cigarettes had clearly increased.[48]  In addition, the tobacco industry not only has the patented capacity to manipulate the nicotine in tobacco products[49] but also added a substantial quantity of nicotine to its tobacco products.[50]  That technology, according to the testimony of the researchers who worked for the tobacco industry, is common knowledge in the industry.[51]  Based on this information, the tobacco industry was accused of deception and intentional misrepresentation in this new wave of cases.

ii)                  Preventing from Producing Safer Tobacco Products

Even though the major tobacco companies have successfully developed the capacity to make safer tobacco products, they have, nonetheless, agreed among themselves not to develop or produce the safer tobacco products in order to protect their profits and themselves from being found liable for the damages caused by higher nicotine products.[52]  The above conduct not only involves conspiracy, but also relates to strict liability claims.

iii)                Targeting on Minors

In addition to intentionally hooking consumers with nicotine manipulation, new information also revealed that the tobacco industry had targeted the young to garner a long-term market share through advertising and promotion.[53]  This information combined with the U.S. Surgeon General’s report in 1994—which concluded that nicotine is responsible for the rapid addiction of up to half of all children who experiment with tobacco—raised the question of whether consumers were freely choosing to smoke.

2.      The Nationwide Settlement

a.             1997 Proposed Resolution

After Mississippi Attorney General Moore filed the first state reimbursement lawsuit on May 23, 1994, forty-nine other state attorney generals continuously filed litigation against the tobacco industry to recover their Medicaid costs.[54]  On March 20, 1997, the Liggett Group, one of the smallest tobacco companies in the U.S., reached a settlement with the states’ attorney generals.  In addition to an initial payment of $25 million and annual installments of twenty-five percent of Liggett’s annual pre-tax income for the next twenty-five years, the Liggett Group also agreed to cooperate with the attorney generals in cases against the tobacco industry.[55]  One member’s betrayal was a deadly strike to the industries’ long-time concerted action.  In view of the numerous cases with claims for astronomical amounts from almost all states in the U.S., the tobacco industry—through four major U.S. cigarette manufacturers—proposed to make a nationwide settlement.  Three months later, on June 20, 1997, the state attorney generals and the tobacco industry reached consensus on a proposal for legislation to settle certain lawsuits pending against the tobacco companies.  This proposal required the tobacco industry: to pay $368.5 billion to the states; to address public health concerns, particularly regarding youth access to, and use of, tobacco products; to permit the tobacco companies to operate in a more stable and predictable environment free from the threat of further litigation; and to preserve the rights of adults who choose to use tobacco products.[56]  This proposed resolution later died in Congress, however.[57]

b. Multi-State Agreement

Finally, on November 16, 1998, the four major U.S. cigarette manufacturers and the state attorney generals reached consensus on a proposed agreement to settle the lawsuits filed by the remaining forth-six states and six other U.S jurisdictions.[58]  In this agreement, the tobacco industry agreed to take immediate and concrete steps to reduce access to, and use of, tobacco products by minors in all states, and to address many other issues of concern to the states.[59]  On November 20, 1998, the states announced their acceptance of the settlement proposal.  The settlement will be final on the approval of the courts in participating states.[60]

Although many people felt the settlement was a victory (or at least a step in the right direction), the $206 billion tobacco deal did not win unanimous support.[61]  First, anti-smoking advocates are not satisfied with the negotiated payment compared with the $368.5 billion agreement reached in 1997.[62]  Also, Professors Jon D. Hanson and Kyle D. Logue’s criticisms of the civil liability provisions in the 1997 proposed settlement are applicable to the 1998 settlement: “it substantially weakens the threat tort law might have,” and it “does not adopt any alternative form of ex post incentive-based regulation.”[63]  Finally, the warning requirement is “command-and-control regulation [which] relies heavily on regulators…whereas incentive-based regulation relies instead on the regulated entity, which is usually better informed than regulators.”[64]

3.          Following Cases and Overseas Claims

Although the national settlement silenced the multi-state reimbursement litigation, many class actions by health care providers and smokers are still pending.[65]  The U.S. Department of Justice is also considering filing a reimbursement suit, similar to that filed by the states, against the tobacco companies.[66]  In this anti-tobacco environment, even a case filed by an individual smoker has won substantial compensation.[67]  The third wave of tobacco litigation has not yet ended.

The cases in this wave, with new litigation strategies and astronomical returns, have already caught the attention of the other countries in which the U.S. tobacco industry dominates the domestic tobacco market.  The governments and people in these countries have proposed pursuing lawsuits against the U.S. tobacco industry in their courts or in the U.S. courts for the recovery of the costs produced by tobacco hazards.  In May 1998, Guatemala became the first country to sue the U.S. cigarette makers to recover damages for treating sick smokers.  Bolivia, Nicaragua, and Panama have since followed.[68]  Last January, the Venezuelan government also filed a lawsuit in Miami-Dade County Circuit Court for the public costs of treating sick smokers, for the loss of its labor force, and for taxes lost in the sum of billions of dollars.[69]  In April of 1998, twenty Japanese individuals seeking $770 each for pain and discomfort caused by cigarettes took on Philip Morris, the number one tobacco company in the country, in the court of Nagoya, Japan.[70]  In France, on February 16, 1999, a local branch of the state health insurance agency indicated that it is preparing a suit against both the U.S. and French tobacco companies for up to $90 million.[71]  Finally, in light of the serious smoking problems in Asia and the likelihood that American tobacco firms will dump their products in Asia to recover from the losses incurred in their U.S. settlements,[72] this May, an Asian-Pacific anti-tobacco conference will be held in Taipei to discuss how anti-smoking groups could seek recovery jointly from international tobacco businesses.[73]  The influence of the third wave of U.S. tobacco litigation has clearly reached far beyond the U.S. borders.

III.           AN OVERVIEW OF THE TOBACCO MARKET AND THE MEDICAL CARE SYSTEM IN TAIWAN

A.   The Taiwanese Tobacco Monopoly and Recent Developments

As in many other countries prior to the 1980s,[74] the tobacco industry in Taiwan is a monopoly.  Taiwan’s tobacco monopoly began in 1905 as a moneymaker for the Japanese colonial government.[75].  After World War II, the Taiwanese government took over the monopoly from the Japanese, and, in 1947, the government set up the current Taiwan Tobacco and Wine Monopoly Bureau (TTWMB) to administer the monopoly.[76]  The monopoly’s profit is in the nature of a tax.  From the beginning of the Japanese occupation to 1964, the tobacco monopoly profit was a very important government financial resource in Taiwan; even today it makes up over six percent of the government’s annual revenue.[77]

The monopoly system adopted in Taiwan is a so-called “full-monopoly,” meaning that it is directly owned–from production to retail–by a government agency.[78]  For eight decades, native products held ninety-nine percent of the domestic tobacco market under this monopoly.[79]

In the 1980s, as anti-smoking sentiments grew stronger in the American market, the tobacco industry faced stricter regulations and more litigation.  And the U.S. tobacco companies—in hope of recovering losses in their domestic market—became eager to explore overseas’ markets.[80]  The U.S. tobacco industry chose to aggressively target major Asian markets, which were vulnerable because the tobacco monopoly had kept smoking control and muted anti-smoking awareness.  With the diplomatic aid of the United States government, which invoked Section 301 of the Trade Act of 1974, the major tobacco companies successfully broke the hold of the local tobacco monopolies and opened up the Asian markets for their products.[81]

After Japan, Taiwan became the second Asian market to open up for U.S. tobacco products.[82]  On December 12, 1986, Taiwan signed an agreement with the United States concerning wine, beer and cigarettes.[83]  The agreement allows imports of tobacco products primarily from the United States but also from other friendly countries.[84]  In addition, in view of the worldwide trend of reforming monopoly systems (which began in the 1980s) and in order to meet the requirements for entering into the General Agreement on Tariffs and Trade (GATT), the Taiwanese government has proposed abolishing the decades-old monopoly system and incorporating the TTWMB in the near future.[85]  In December of 1996, the drafts of the “Tobacco & Wine Administration Law” and the “Tobacco & Wine Tax Law,” the primary governing laws for the future tobacco business, were submitted by the Executive Yuan (the Taiwanese Cabinet) to the Legislative Yuan (the Taiwanese congress) for its approval.[86]

B.   The Enactment of the Smoking Hazards Prevention Law

Since 1987, through aggressively targeted advertising and promotion, the U.S. tobacco industry has overwhelmed the Taiwanese tobacco monopoly, which had been fairly restrained in promoting tobacco use among the young.[87]  As of 1996, the importers’—primarily the U.S.—share of the Taiwanese tobacco market had grown to nearly thirty percent, thirty times their share from before 1986.[88]  However, the rise in the number of underage smokers, an increased knowledge of smoking-related illnesses, and the influence of the worldwide anti-smoking trend, have prompted anti-smoking groups to speak loudly over the past few years.  The Department of Health’s 1978 “ Rule of Limiting Smoking in Public Places” which said nothing about tobacco advertising and labeling (which were left to TTWMB to rule), has been found inadequate in meeting the public demands for tobacco control.

In March 1996, in response to increasing cries for reform, the Taiwanese government—after lengthy negotiations with the United States government (which “through the office of the U.S. Trade Representative was going to bat for tobacco interests in a manner that critics say is inexcusable — on any grounds”)[89]and in the shadow of Section 301— eventually passed the Smoking Hazards Prevention Law (SHPL) to regulate tobacco businesses.  The SHPL regulates tobacco companies in the following ways: requiring more health warnings on cigarette packages, banning cigarette sales to minors or through vending machines, limiting advertising and promotion of cigarettes, and restricting smoking in designated areas.  According to the draft of the “Tobacco & Wine Administration Law”, which will be the governing law for the tobacco business after abolishing the tobacco monopoly, the advertising and labeling of tobacco products are also subject to the SHPL.  Through the SHPL and a future collection of social health insurance surtax on tobacco and alcoholic products (provided by Article 64 of the National Heath Insurance Act), the Taiwanese government—like its American counterpart in the 1970s—is beginning to control serious smoking hazards[90] which had been ignored for a long time.[91]

C.   The Medical Care System in Taiwan

The current Taiwanese medical care system, the National Health Insurance, was established in March 1995.  It is a nationwide health insurance program supported by both premiums and government funds; it provides medical care for all Taiwanese residents.[92]

Prior to the establishment of a national health care system, many categorized social insurance programs coexisted, including the Labor Insurance program (established in 1950), the Government Employee Insurance program (established in 1958), the Farmer Health Insurance program (established in 1985) and the Low-Income Households program (established in 1990).  By February1995, a total of ten health insurance programs were in effect in Taiwan.[93]  In combination with the military medical care system, approximately fifty-nine percent of Taiwanese residents were covered by those programs.  In order to protect the remaining forty-one percent–mostly children and the elderly– the Taiwanese government passed the National Health Insurance Act on July 19, 1994.  The Act consolidated various existing social medical care systems and established the unified National Health Insurance program, which was officially launched on March 1, 1995.[94]  The Bureau of National Health Insurance, a government agency, was established on January 1, 1995 to administer and serve as the insurer of this program.[95]

IV.           POTENTIAL CAUSES OF ACTION IN TOBACCO LITIGATION UNDER TAIWANESE LAWS

Although American smokers’ extensive exploration of various causes of action in the third wave of U.S. tobacco litigation might inspire their Asian counterparts, under the civil law system in Taiwan only statutory rights may be claimed in the courts.  To recover damages for smoking-related illnesses through litigation in Taiwan, it will be most important to find—using the facts revealed in the third wave of litigation in the U.S.—appropriate statutory claims under Taiwanese laws.

In accordance with the various allegations and theories mentioned in Part II, the relevant fields under the Taiwanese legal system include: the Consumer Protection Law (the specific law for product liability); the Fair Trade Law (the law about antitrust and unfair competition); and the Civil Codes regarding torts, contracts and unjust enrichment.  The relevant statutory claims and articles will be analyzed in the sections below.

A.                                   The Consumer Protection Law

1.          The Law

The Taiwanese Consumer Protection Law (CPL) was enacted in January 1994 specifically for the purpose of protecting the interests of consumers.  In addition to imposing unprecedented strict liability and punitive indemnity on producers, the CPL also vests consumer protection groups with the right to file lawsuits against producers on behalf of consumers’ interests.  In this Part, I will discuss the statutory rights granted by the CPL.  Procedural issues are discussed in Parts V and VI.

2.          Specific Statutory Rights

According to Section 1 of Article 7 of the CPL, “Business operators engaging in the design, production or manufacture of goods and services shall ensure that the goods and services provided by them shall be free from any danger to safety or sanitation”.  Article 7, Section 2 provides, “Where goods or services may endanger the lives, bodies, health or properties of consumers, a warning and the methods for emergency handling of such danger shall be labeled conspicuously.”  Under Article 7, section 3, the operators who violate the above provisions shall be jointly and separately liable for compensation, provided that if the operators can prove that they are not negligent, the court may reduce their liability.

In sum, under the CPL, manufacturers should provide products that are free from danger to safety or sanitation and with conspicuous and proper warnings of any potential danger.  A manufacturer who fails to meet these requirements will be held strictly liable for the damages caused by the use of his products.  A strict liability claim does not require a showing of negligence or malice, which will only affect the amount of indemnity and punitive damages (proviso of Article 7III, Article 51).

The CPL does not impose unlimited strict liability on the producers, however.  Article 5 of the Enforcement Rules of the CPL (ERCPL) specifically indicates that the “danger to safety or sanitation” as mentioned in Section 1, Article 7 of the CPL shall be present only if the goods, 1) when circulated into the market, 2) lack the generally and reasonably anticipated safety, 3) except in cases where such goods are up to the then scientific and technical or professional standards.  Moreover, to determine whether the goods lack the “generally and reasonably anticipated safety,” Article 5, Section 2 lists three factors, including: 1) the labels and instructions on the goods; 2) the reasonably anticipated use or acceptance of the goods; and 3) the time when the goods are circulated into the market.

In addition, goods will not be deemed to be dangerous “merely on the ground that subsequent goods or services are better in quality.” (Article 5, Section 3)  Producers who assert that their products when circulated into the market were up to the then scientific and technical or professional standards shall bear the burden of proof with respect to such facts under Article 6 of ERCPL.

3.          Application

a.      The Hazardous Nature of Tobacco Products

Since the 1964 U.S. Surgeon General’s report concluded that smoking was causally related to lung cancer, numerous studies have suggested that many of the ingredients in cigarettes are hazardous.  In 1985, the American Thoracic Society issued its first position statement, “Cigarette Smoking and Health,” which reviewed the various adverse health consequences of smoking known at that time; these consequences have been affirmed and supported by new evidence in the following reports.[96]  In 1988, the U.S. Surgeon General’s report concluded that tobacco products are addictive and that nicotine plays a central role in causing addiction.  In 1994, the U.S. Surgeon General’s report further confirmed that the nicotine in tobacco products is responsible for the rapid addiction of up to half of the children who experiment with tobacco.[97]  Smoking-related illnesses and the damage caused by tobacco were affirmed by official and scholarly investigations as well.[98]  Accordingly, the danger tobacco products present to safety and sanitation should be almost unquestionable.

b.      Reasonable Dangers and Proper Warnings

There are still two open issues in determining whether tobacco producers should be liable for the danger of smoking under the CPL, however: 1) whether the danger presented by tobacco products is generally and reasonably anticipated (Article 5 II, ERCPL) and whether the products are up to the then-current scientific and technical or professional standards when circulated into market; and 2) whether the products are conspicuously labeled with a proper warning of such danger as required by the CPL (Section 2 of Article 7, CPL)

As to the first issue, we know from the testimony of ex-employees’ and the internal documents of the major tobacco companies which were publicly disclosed in the third wave of tobacco litigation that early in 1985 the tobacco industry knew that nicotine in cigarettes is addictive, that the industry is capable of controlling the nicotine level, and that it has successfully developed safer cigarettes.[99]  However, in order to discourage its consumers from quitting smoking, the tobacco industry not only refrained from the marketing safer or low-nicotine cigarettes, but also used techniques to manipulate and raise the level of nicotine in cigarettes.[100]  In light of this, the FDA decided to regulate the nicotine in cigarettes and smokeless tobacco as a drug.[101]  Based on the above facts, the danger of nicotine and its addition to tobacco products should not be deemed generally and reasonably anticipated or acceptable.  Nor should it be justified because it is up to the current scientific and technical or professional standards.

With respect to the warning labeling on tobacco products, before the enactment of the SHPL in September of 1997 only basic health warning labels were required by the TTWMB’s rulings.[102]  It is questionable whether such labeling could satisfy the “warning of danger conspicuously ” standards under the CPL.  In addition, according to the current SHPL, the amount of nicotine and tar in tobacco products should not exceed the statutory limitation and shall be clearly stated on the packets along with the other health warnings required by the authorities (Articles 7 and 8 of SHPL).

This raises another question: Are the tobacco manufacturers immunized from liability under the CPL if their products meet quality requirements and bear the health warnings required by law?  Although the compulsory health warnings required by the SHPL reveal some information about nicotine and tar, the most harmful substances in cigarettes, these ingredients are the minimal disclosure requested by the government for the purposes of smoking control policy, however.  There are still up to one hundred other harmful ingredients in tobacco products according to researchers.  Whether the hazards of the dangerous substances in tobacco products have been disclosed sufficiently for smokers to make fully informed decisions and for tobacco producers to be released from their strict liability under the CPL should be determined by considering the factors under Article 5 of the ERCPL.  The government’s requirements under the SHPL are basic; the tobacco industry can not be exempted from strict product liability under the CPL by meeting the requirements of the SHPL.  The producers, who introduce the dangers existing in their products into the market and gain profits from those products, know well what the potential hazards are and should not shift their responsibilities to the government.  It is too rough reasoning to take granted that the statutory labeling required under the SHPL meets the standards set out in the CPL and the ERCPL.

c.       Summary

Based on the facts revealed in the U.S. tobacco litigation cases, to remove or reduce some harmful or addictive substances in tobacco products are not beyond the control of the major U.S. tobacco companies; therefore, the resulting dangers should not reasonably be born by the users.  The tobacco industry should be held strictly liable for at least the damages caused by those substances under Section 1, Article 7 of CPL.  As to Section 2 of Article 7 of the CPL, the warning requirement should not be considered satisfied if the product merely bears the compulsory label required by the other laws; satisfaction of the requirement should be determined by the factors provided in the ERCPL.

4.          Scope of Damages

a      Claimants:

Under Section 3, Article 7 of the CPL, third parties injured by tobacco products may also claim damages from tobacco producers.  This provision allows ETS victims to be protected by the strict liability born by tobacco manufacturers.

b          Coverage:

(i) Grandfather Clause

Under Article 42 of the ERCPL, the CPL does not apply to goods already circulated into the market prior to the implementation of the CPL, i.e., prior to January 11, 1994.  In other words, the damages caused by products entering the Taiwanese market before this date will be not liable under the CPL.

(ii)            Punitive Damages

Even though tobacco producers may be held strictly liable, if they can prove that they were not negligent, pursuant to the proviso of Section 3, Article 7, the court may reduce their liability for damages.  However, if the injuries are caused by the negligence of the manufacturers, the injured may claim, in addition to actual damages, punitive damages up to one time the amount of the actual damages.  And if the injuries are caused by the willful misconduct of the manufacturers, a plaintiff may claim punitive damages up to three times the amount of the actual damages, in accordance with Article 51 of the CPL.  As to the calculation of the actual damages (the CPL has no specific regulation to address this), damages shall be calculated in accordance with the general principles provided by the Civil Codes, which will be discussed under Section C of this Part.

A comparison of Article 7, Section 3 with Article 51, shows that the former stipulates that producers violating Sections 1 or 2 of Article 7 shall be liable to “consumers and third parties,” while the latter provides only that “consumers” may claim for punitive damages.  This raises a question as to whether the ETS victims, i.e., the third parties, may also claim punitive damages under Article 51.  Consideration of the purpose of Article 51, which provides extra protection for victims based on the level of malice of wrongdoing of producers but not based on the contractual relationship of the injured with producers, and of the intention of the CPL to grant direct statutory rights to consumers who are not parties in contract with manufacturers, may lead to the conclusion that the product liability under the CPL is of a nature closer to torts rather than contract law.  In other words, if third parties should be granted claims as consumers under Article 7, then there are no reasons to treat them differently under Article 51.  Therefore, based on the purpose of Article 51 and the overall intention of the CPL as a whole, the ETS injured should be entitled to claim punitive damages under Article 51.  However, since the CPL has been in effect for only four years, there are still not enough court decisions to identify the practice for interpreting Article 51.[103]

5.          Statute of Limitations

There is no specific statute of limitation in the CPL; however, since claims under the CPL are based on the rights between parties without an existing contractual relationship, the claims are of a tort nature as mentioned above.  Therefore, the general statue of limitation rules for torts should apply.  According to the Civil Codes of Torts, the statutory limit for bringing an action is either two years from the time when the claimant becomes aware of the injury and knows the person who should be liable for the damages, or ten years after the misconduct was committed.

6.          The Difficulty in Pursuing a Claim under the CPL

Although the statutory rights granted by the CPL provide the most potential for claimants’ recovery from the tobacco industry for damages caused by smoking-related illnesses, it is still the claimants’ burden to prove proximate causation between the injury and the defective or dangerous products.  Proximate causation is a traditional powerful defense raised by the tobacco companies.  In cases litigated by individual smokers, this defense is still extremely hard to overcome.  The mass litigation or subrogation litigation initiated by medical care providers, it may break fresh ground on the causation issue by relying on new evidence, such as medical statistics.  This is further discussed in Part VII.

B.       The Fair Trade Law

1.          The Law

The Fair Trade Law (FTL) was enacted in 1991 and entered into force in 1992.  Its goals, as Article 1 states, are to maintain order in transactions, to protect the interests of consumers, to ensure fair competition, and to promote the stability and prosperity of the national economy.  The FTL regulates both antitrust activities and unfair competition.  The former includes monopolies, mergers, and concerted actions, and the latter covers counterfeiting activities, trade mark and name infringements, deceptive labeling, trade reputation damaging, multi-level sales, and other deceptive or obviously unfair acts that are sufficient to affect trading orders.  In addition to imposing sanctions such as disciplinary actions, monetary penalties and criminal liability, the FTL also provides statutory bases for consumers to recoup losses caused by a violator’s misconduct.  In this regard, the FTL and the CPL overlap in the field of consumer protection.

2.          Statutory Rights

According to Article 31 of the FTL, an enterprise which infringes upon the rights and interests of another person in violation of the FTL shall be liable for the damages arising from the violation.  The U.S. tobacco industry’s express or implied conspiracy not to produce and market safer tobacco products involves the concerted actions banned by Article 14 of the FTL.  In addition, the fact that the major tobacco companies while aware of the addiction of nicotine and the hazards of tobacco products still conspired to mislead the public—allegedly by suppressing relevant studies, destroying related research results, withholding adverse information regarding cigarettes, collectively funding an organization to make misleading statements, and lying about the level of nicotine in the cigarettes—might be evidence of a violation not only of Article 7, but also of Article 21 and 24 of the FTL.

3.          Application

a.              The Violation of Article 14

A Concerted Action, as defined by Article 7 of the FTL, is an act of enterprises to mutually restrict their activities, such as a contract, agreement or other forms of mutual understanding among competitive enterprises to jointly determine the prices of goods or services, or to restrict quantities, technology, products, equipment, trading counterparts, or trading territories.  The above-mentioned “other forms of mutual understanding” include communications, which regardless of their legal enforceability, will actually result in parallel actions (Article 2 of the Enforcement Rules of the Fair Trade Law (ERFTL)).  In addition, a Concerted Action under the FTL, as further defined by Article 2 of the ERFTL, must be among enterprises at the same level of production or distribution and substantial enough to influence production or the function of supply and demand in the market for goods and services.  According to Article 14, such a Concerted Action is prohibited by the FTL, unless it is beneficial to the national economy as a whole and to the public interest (as required by proviso of Article 14[104]) and has been approved by the appropriate authority.

The big tobacco companies, as mentioned above, allegedly conspired to withhold adverse information about the risks of their products and to not produce the safer cigarettes that they had successfully developed in order to continue hooking consumers and to maintain the industry’s profit margins, as well as their shares of the tobacco market.  These actions indicate that the tobacco companies collaborated to influence the free competition of the tobacco market, which is protected under the FTL.  These actions qualify as a Concerted Action as defined by the FTL.  Furthermore, these actions also eliminated alternatives for consumers and obstructed their freedom to choose safer products for tobacco consumption.  These conspiratorial actions obviously do not qualify for the exception allowed by Article 14, and clearly constitute a violation of Article 14.

Although an enterprise is liable under Article 31 for the damages caused from a violation of Article 14, the damages suffered by consumers due to the deprivation of a healthier tobacco alternative may not be substantial and would be very hard to prove in court.  Also, causation, which is already a difficult issue in tobacco cases, will be even more questionable under this cause of action.  For example, how would a court draw a line between the injuries which incur from smoking stronger tobacco products and those that would incur eventually from smoking a safer product?  Also, what percentage of the injury could have been prevented and therefore attributed to the tobacco company pursuant to this argument?  Accordingly, it would be difficult to pursue the right of recovery under Article 31 by contending a violation of Article 14.

b.          The violation of Articles 21 & 24

Article 21 provides that an enterprise shall not make, on goods or in advertisements relating thereto, any false, untrue or misleading representation—about such things as price, quantity, quality, content, manufacturing process, date of manufacturing, validity period, usage, purpose of use, place of origin, manufacturer, place of manufacturing, processor, or place of processing—that may cause confusion in or mistakes by consumers.  In addition to what has been provided for in this article, the FTL also has a general provision, Article 24, which bans enterprises from engaging in other deceptive or obviously unfair acts that are sufficient to affect trading orders.  Based on the allegations made against the tobacco industry in the U.S. tobacco litigation with respect to the industry concealing the risks of tobacco products and making misleading promotional statements, the tobacco industry’s actions would violate the above two articles and, accordingly, the companies would be liable for related damages under Article 31.

4.          Scope of Damages

As under the CPL, a violation of the FTL which infringes upon the rights or interests of others, is similar to a tort and, therefore, the general rules of torts would be applicable unless special rules are otherwise provided.

Under Article 32 of the FTL, if a violation is an intentional act, a court may based on the extent of infringement and at the request of an injured party award compensation not to exceed three times the amount of proven damages.  In addition, if the infringing party gains any profits from its act of infringement, the injured party may request to have the amount of damages calculated based exclusively on such profits.  As to the scope of claimable damages, there are no special rules provided by the FTL; the general rules under torts, which are discussed in the next section, will control in this case.

5.          Statue of Limitations

Since the claims made under Article 31 are based on an infringement of a right, which is a kind of tort, the FTL has statute of limitations similar to torts.[105]  In accordance with Article 33, the right to claim damages under the FTL shall expire if not exercised within two years from the time when the claimant has knowledge of the act and of the person liable for the damages, or within ten years from the commitment of the act; however, the statute of limitation will not begin to toll if the infringement is ongoing.

6.          The Difficulty in Pursuing A Claim under the FTL

As mentioned above (Paragraph 3, Application), the causation issue is likely to undermine Article 14 of the FTL as a good base for the cause of action in tobacco litigation.  Also, in claims under the FTL (unlike claims under the CPL in which a claimant is only required to prove the damages consumers suffered), a claimant is required to prove that the producers’ wrongdoing violates the FTL.  Therefore, the claimant’s burden of providing evidence to support claims made under the FTL is far greater than the burden of supporting claims under the CPL.

C.                                   Torts

1.          Statutory Basis

The basic and primary governing law in civil cases in Taiwan is the Civil Code.  The articles of the Civil Code which relate to tobacco liability cases are Torts, Contracts and Unjust Enrichment.  With respect to Torts, Article 184 of Civil Code, the primary tort rule, provides two types of basic torts.

Part I, Section 1 of Article 184 provides that “A person who, intentionally or by his own fault, wrongfully injures the rights of another is bound to compensate him for any damage arising therefrom.”  Thus, a tort requires the following elements: (1) wrongful conduct; (2) out of intention or in negligence; (3) injury to another’s right; and (4) proximate causation between (1) and (3).[106]  The “rights” protected under this Part include all statutory rights: property rights, such as intangible property rights, intellectual property rights and statutory or contractual claims; and non-property rights, such as the rights to life, body, health, freedom, name, reputation and status in family.[107]  However, the “rights” protected under Part I of Section 1 do not include purely economic interests and monetary profits (which are protected under Part II of Section 1).  As for negligence, according to Section 2 of Article 184, a violation of a statute that is enacted for the protection of others is evidence of negligence.

In addition, Part II, Section 1 of Article 184 provides that if a person intentionally causes injury to others in a manner that is contrary to the social order or good morals, the provision of Part I will apply.  Under Part II, there is no requirement that a “right” be injured, therefore, a purely economic interest or monetary profit that is protected by law will also be protected from infringement under this Part.[108]

The tobacco industry’s allegedly conspiratorial conduct to conceal the risk of tobacco products and to manipulate the nicotine in cigarettes to hook its customers may be deemed an intentional wrongdoing in a manner contrary to good morals. Accordingly, these actions would constitute a tort under the above tort rules.  However, if the tobacco products have met the quality standards or born the required labels, could the tobacco industry’s conduct be justified?  The purpose of tort law is obviously different from that of administrative regulation.  The former is to provide recovery from injury and to balance the interests between the wrongdoer and the injured; the latter is to control business operations to the degree that benefits society.  If businesses comply with government regulations, they can run without interference from the government; however, they will still not be free from business costs for civil liabilities.  In other words, as long as their practices meet the requirements of government regulations, the tobacco industry can do its business in the market, but even its compliance with these regulations will not limit its liability for damages resulting from torts for which it is responsible.  The Taiwanese Supreme Court followed this reasoning in its decision in an air-pollution case.  It held that a plant operator should be liable for the damages caused to a neighborhood by the pollutant delivered from his plant regardless of the fact that the quantity of pollutant was permissible under the Air Pollution Prevention Law.[109]

The traditional defenses raised by the tobacco industry are the consumers’ assumption of risk and contributory negligence.  As mentioned above, the risk of cigarettes was not fully disclosed or disseminated by the producers, and evidence that the industry targets minors and hooks them by manipulating the nicotine in cigarettes might provide promising support for defeating the defense that according to Article 217 of the Civil Code, a finding of contributory negligence would reduce or even release the liability of the wrongdoer, however.[110]

Another primary problem in tobacco litigation is proving causation.  In fact, this is a problem in claiming every statutory right; however, in torts, the causation problem occurs not only in linking smoking and disease, but also in showing the connection between the conduct of the tobacco industry and the injury of ETS victims.  In addition, unlike the strict liability imposed on producers by the CPL, the basis of a tort action is negligent liability and the claimant bears the burden of proving each factor such as intent or negligence and wrongful conduct.  Since the CPL provides the same recovery as a tort action brought under the Civil Code, the Civil Code is a weaker statutory ground than CPL, given the difficulties in meeting the required burden of proof.

2.          Scope of Damages

Under the Civil Code, the scope of recovery for torts is as follows:

a.      The Actual Damages and Loss of Profits:

According to Article 217 of the Civil Code, the general rule of indemnity applies: “unless otherwise provided by law or by contract, damages shall be only for the injury actually suffered and for the profit which has been lost” (Section 1).  “Profits deemed to have been lost mean those which could have been normally expected, either according to the ordinary course of things, or according to the projects or preparations made, or according to other special circumstances” (Section 2).

If the breach of a duty of care causes death, in addition to funeral expenses, the wrongdoer is also statutorily required to furnish the victim’s life-maintenance to a third party, such as a spouse, parents and underage children (Article 192 of Civil Code).  Also, if a wrongdoer causes injury to the body or health of another, he is required to reimburse the victim for any decrease in earning capacity, with increases as necessity requires (Article 193 of Civil Code).

a.      Monetary Compensation for Emotional Distress:

According to Articles 194 and 195 of the Civil Code, the spouse, parents and children of the dead in a wrongful death case, and the injured in a bodily injury case, may submit claims for a reasonable monetary compensation for emotional distress.  Normally, courts will allow claims per claimant up to NT$1,000,000 (US$30,000).

3.          Statue of Limitations

According to Article 197 of the Civil Code, the primary statue of limitations for tort claims, the limitation is two years from the time when the injured became aware of the injury and of the person who is legally required to make compensation, or ten years after the wrongful act was committed.  Even if the statue of limitations has tolled for a certain claim, the person who is responsible for the damages shall continue to be responsible under the provisions of the Unjust Enrichment for the benefits he derived from the wrongdoing.

.

D.       Unjust Enrichment

Under the Civil Code, there is a chapter on unjust enrichment, in which the basic rule provides that “a person who without legal basis has been unjustly enriched at the expense of another is required to make restitution to the other” (Article 179).  The concept is similar to the theory of unjust enrichment that is articulated in the Restatement, Restitution §1,[111] but it is conditioned on the enriched’s lacking a legal basis for his receipt of benefits.

It is clear that the tobacco producers derive advantages and profits from the sale of their tobacco products while medical care providers and individual smokers bear the costs of illnesses linked with tobacco consumption; however, it is questionable whether this results in the producers enjoying “unjust enrichment” as defined under the Civil Code.

The profits producers enjoy are based on the contractual sale of their merchandise.   Their responsibility for the damages caused by their products will not be relieved even if the injured receives compensation from the insurer under an insurance policy.[112]  Tobacco companies should be responsible to consumers for their damages, or to the insurer if a right of subrogation is claimed.  The producers do not enjoy unjust enrichment just because they have not paid for the damages because the liability continues to exist and may potentially be claimed by the entitled.  Therefore, unlike their U.S. counterparts who used the theory of unjust enrichment in the state reimbursement cases, the medical care provider or individual smokers in Taiwan can not claim restitution on the ground of unjust enrichment for the damages caused by tobacco products.

E.       Contracts

Under the Contract Laws of the Civil Code, Article 227 provides a basis for a party who suffers from the failure of another party to perform a contract to recover damages from the failure; the basis for this claim is the contract between the parties.  Most injured smokers bought tobacco products from retailers, not directly from producers.  Accordingly, they do not have a claim for damages under Article 227 of the Contract Laws.  This is one of the very reasons that the CPL was enacted.

F.         Summary

Based on the above analysis, except for contract and unjust enrichment, the CPL, the FTL and torts would be potential causes of action for litigation against the tobacco companies.

V.   POTENTIAL PLAINTIFFS

Under the Taiwanese legal system, the prospective plaintiffs in a case to recover damages for tobacco-related illness would be individual smokers, ETS victims, anti-smoking groups, and health insurers.  Among these categories, individual victims, as those in the first and second waves of tobacco litigation in the U.S., face a difficult situation given the causation defense asserted by the producers (even though some individual cases in the U.S. have succeeded).[113]  As for anti-smoking groups, the actions they could take under the CPL would be on behalf of individuals and, therefore, would face the same causation issue, even though they have some advantages in paying for court fees and proceedings.  The Bureau of the National Health Insurance (BNHI), the insurer of the national medical care program, which bears almost all of the medical costs associated with tobacco-related illnesses, presents the most serious threat to the tobacco industry.

A.                                   Medicare Providers and the Subrogation Issue

The BNHI, would be the most powerful potential plaintiff in a lawsuit to recover medical costs from the tobacco industry; however, since unjust enrichment can not be claimed as mentioned above, the BNHI has no choice but to file claims for damages in subrogation of the injured.  This raises the question of the statutory basis for the right of subrogation.

According to the current Taiwanese insurance system, the general statutory basis of the right of subrogation is Article 53 of the Insurance Law; however, according to Article 103, the right of subrogation is not applicable to life insurance, and Article 103 is also applied to health insurance, according to Article 130.  Moreover, the National Health Insurance Law (NHIL) does not provide special rules for subrogation, except in the case of automobile traffic accidents, in which case the law states under Article 82 that the BNHI may exercise the right of subrogation against the Insurer providing compulsory third-party liability insurance.[114]  Therefore, it is arguable whether BNHI would be entitled to claim damages from parties other than the insurers of compulsory automobile liability insurance.  This question can be broken into three sub-questions:

1)      Whether the rules of commercial insurance (Insurance Law) apply to compulsory insurance (social insurance)?

2)      If so, do specifically Articles 103 and 130 of the Insurance Law apply to the National Health Insurance and the BNHI?

3)      And does NHIL restrict the BNHI’s right of subrogation to those circumstances set out in Article 82?

1.          Article 53 of the Insurance Law Is Applicable to Compulsory Insurance (NHIL):

The Insurance Law is primarily to regulate commercial insurance; however, in light of the purpose of compulsory insurance–which is to spread risks and costs just like commercial insurance does–the general rules and principles of commercial insurance should govern in the case of the any loopholes left open in the compulsory insurance regulations, “if they are applicable in nature.”

Article 53 of the Insurance Law provides a basis for an insurer to exercise by subrogation the right of the insured to claim compensation from a tort feasor for recovery of the indemnity paid by the insurer.[115]  The purpose of this Article is to let tortfeasors take their responsibility terminally and to prevent the insured from twice collecting the indemnity.  The Article also allows insurers to reduce their insurance overall costs and eventually decrease the premium born by all the insured.  Accordingly, the Supreme Court has held that Article 53 is applicable to the Labor Insurance, one of nationwide compulsory insurance programs in Taiwan.[116]

Based on the above, Article 53 of the Insurance Law should be applied to the NHI, a compulsory insurance program also.

2.          Articles 103 and 130 of the Insurance Law Are Not Applicable to NHIL:

Although there is consensus that Article 53 applies to compulsory insurance as mentioned above, Article 103 of the Insurance Law explicitly provides that insurers of life insurance shall not exercise the right of the insured by subrogation.  Moreover, under Article 130, the same rule applies mutatis mutandis to health insurance.[117]  It can then be concluded that based on the text of Articles 103 and 130, the insurers of NHI program do not have the right of subrogation.

The Insurance Law eliminates the subrogation right of the life insurer for primarily the following reasons.  First, the subrogation right granted by Article 53 is to prevent the insured from receiving unjust enrichment through double reimbursement.  Since a life or one’s health is priceless, an injured victim will never be unjustly enriched from the limited payments of life insurance.  In addition, the payment of life insurance is a done deal by the parties from the beginning; it is more in the nature of an investment return than an indemnity for damages incurred.[118]  And it may be unjustified for an insurer to submit a claim for damages by subrogation against a wrongdoer to recover its insurance payment, which is partly in the nature of an investment return.  Therefore, Article 103 expressly restricts the right of subrogation to life insurance.  The primary reason why Article 130 provides that the principle of life insurance under Article 103 should apply to health insurance is because when Article 130 was enacted in 1963[119] almost all health insurance was paid on a lump sum fee or a per diem basis without a substantial connection to actual damages.  In other words, health insurance was considered similar to life insurance at the time.  Therefore, the principle that “no right of subrogation is available in life insurance” (Article 103) should also apply to health insurance (Article 130).

As the variety of insurance policies has grown, two types of health insurance based on different payment methods have evolved, however.  One type of health insurance (the traditional one) is like life insurance–the payment is a lump sum fee or on a per diem basis agreed to by the parties.  The other type, such as that offered by the NHI, is based on actual medical costs not on a certain agreed-to payment.  The second type of health insurance is much more like property insurance than life insurance.[120]  Since insurance payments under the latter are specifically for reimbursement of actual medical costs, there are fewer issues regarding the value of life and how to prove that value.  Therefore, the interpretation of Articles 103 and 130, as discussed above, which deprives the right of subrogation regardless of the type of health insurance, should encounter serious challenge.  Article 82 of the NHIL, which allows an insurer of NHI to pursue by subrogation medical costs from an insurer of Compulsory Automobile Liability Insurance, is a very good example.[121]  Accordingly, an increasing number of scholars now support drawing a line between the two different types of health insurance in determining whether a right of subrogation is still banned by Article 130.[122]  There is also support for deeming Article 82 of the NHIL, which allows certain subrogation rights, a special rule that supercedes Article 130 of the Insurance Law in NHI cases.  Moreover, Article 130 is totally inapplicable to the NHIL, not only because Article 82 of the NHIL is more specific and therefore should supercede Article 130, but also because, as mentioned in question 1, the Insurance Law could be applied to compulsory insurance such as the NHI, if and only “if applicable by nature.”  In other words, not all articles of the Insurance Law should be applied unquestionably to the NHIL.  Since the device and purpose of the NHIL is more similar to property insurance than traditional health insurance, Article 53 of the Insurance Law, which allows subrogation, should be applied to the NHIL.  And Article 130, which restricts subrogation to apply to the health insurance, should be limited to apply only to the health insurance in which payments are on per diem or lump sum basis, and not including the NHI.  If we agree that Article 130 is applicable to the NHIL (except for the only exception set out in Article 82 of the NHIL) then it would restrict unreasonably the right of subrogation of the BNHI.  In sum, Article 130 by nature should be inapplicable to the NHI.

3.      The Purpose of Article 82 of the NHIL Is Not to Limit the Subrogation Right But to Determine Who the Primary Insurer in Certain Cases Should Be:

According to Article 82 of the NHIL, if an insured receives medical benefits from the NHI as a result of an automobile accident, the NHI insurer may exercise the right of the insured by subrogation to recover the medical costs from the insurer of the compulsory third-party liability, the Compulsory Automobile Liability Insurance (CALI).  This provision raises the question whether the medical insurer, the BNHI, is entitled by the NHIL to seek recovery only of the medical costs resulting from automobile accidents?  While Article 82 of the NHIL expressly and specifically provides for only one type of subrogation right, it may be inferred that no right of subrogation for damages which are beyond the coverage of the CALI in automobile accidents or caused by other events.  However, since under the NHI system, the BNHI pays all medical costs and clinics’ and hospitals’ claims directly from the BNHI funds in accordance with fee rates allowed by the BNHI, the insured never really pays for such charges and never has any idea or evidence of the details of the medical costs.  In fact, no one in practice files claims in court for reimbursement from the wrongdoer for the medical costs incurred but covered by the NHI program.  Therefore, depriving an insurer of the right of subrogation will not grant the insured double protection, but will only transfer the liability that should be born by the wrongdoer to the insured and the public by way of increased premiums due to the increase of insurance costs.  This should not be the goal of the NHIL.

Given this, what is the purpose of Article 82 of the NHIL (which specifically provides that BNHI may claim damages by subrogation in an automobile accident case)?  Why would the NHIL include such a provision if the purpose of this provision is not to specifically and expressly limit the right of subrogation allowed under the NHIL?

In an automobile accident case, the NHI and the CALI are both responsible for the medical costs incurred.  According to insurance theory, a primary insurer should be identified to take the final responsibility,[123] which should usually be the liability insurer.[124]  Article 82 of the NHIL identifies the CALI as the primary insurance in such cases, and also clarifies the related subrogation right as well.  It should not be interpreted that the NHIL eliminates the subrogation right for medical damages beyond the coverage of the liability insurance and for damages caused by events other than automobile accidents.  Since the NHI program is supported by government funds, money from taxpayers and insurance premiums, there is no reason that supports the idea that the BNHI, as a non-liability insurer, should take final liability for the wrongs committed by others.  In addition, there was no indication that such a waiver was intended during the enactment process of the NHIL.  Because there is no express statutory limitation, the subrogation right of the BNHI under Article 53 of the Insurance Law should not be limited in the scope of Article 82 of the NHIL.  In other words, Article 82 of the NHIL allowing the right of subrogation in health insurance program cases, does supercede Article 130 of the Insurance Law, which does not allow the subrogation right in health insurance program cases; however, Article 82 of the NHIL does not show its intent to limit the subrogation right under Article 53 of the Insurance Law.  Therefore, since Article 82 does not literally state that all other subrogation rights should be prohibited, it would not be prudent to unquestioningly accept that a waiver, which is expressly against the interests of the insured and the public, is intended under Article 82.

4.         Issues regarding the Social Health Insurance Surtax on Tobacco

Article 64 of the NHIL provides that the government may impose a social health insurance surtax on tobacco products for a reserve fund.  This Article could raise the question of whether the government intends to recover the medical costs resulting from tobacco use through this surtax and not through litigation by subrogation.[125]  Indeed, a tax imposition is another social control on tobacco hazards; it can reflect the social costs caused by tobacco consumption and reasonably spread the risk and costs among tobacco consumers but not taxpayers.  The surtax has not been collected yet,[126] however, and even when the tax begins, the collection will be imposed on products for the hazards they bring into the market and not for the damages incurred by past use of tobacco products.  Obviously, most smoking-related illnesses are caused by long-term tobacco consumption.  From this perspective, it is not fair to release tobacco companies from liability for injuries caused by past consumption only because there is future tax policy in place.  Therefore, Article 64 is not an appropriate reason for limiting the right of subrogation under the NHI.

5.         Summary

Although Article 130 of the Insurance Law and Article 82 of the NHIL present some issues about the right of the NHI insurer (BNHI) to assume the rights of the injured to recover damages for injuries caused by tobacco consumption, the insurer of the NHI should be entitled to collect those losses, by subrogation, from the tobacco industry.[127]

B.       Individuals–Consumer Protection Groups and Aggregated Actions

Other than when an insurer of NHI executes the right of the injured by subrogation, there is no class action for individual smokers allowed under the Code of Civil Procedure (CCP); however, a proposed CCP Amendment does have such provisions.[128]  Therefore, smokers currently can only file actions against tobacco producers on an individual basis.  In light of this, the CPL provides the most beneficial procedures for the following two types of actions.

1.          Consumer protection groups

According to Article 50 of the CPL, a consumer protection group, qualified under Section 1, Article 49 of the CPL,[129] may be assigned the right to recover damages for twenty or more consumers who are all injured as a result of the same incidents, and may bring a lawsuit in its own name.  The assignment includes the right to recover damages for emotional distress as provided in Articles 194 and 195 of the Civil Code.  After the consumer protection group files an action, some consumers may withdraw their assignment before the court; this withdrawal will not affect the action, even if the number of the consumers who have then assigned their rights falls below twenty (Article 38 of ERCPL).

This type of action has two advantages: one, it prevents repeated fact discovery and, two, it reduces court fees.  Also, the court fees in such an action will be capped at NT$ 600,000 (approximately US$20,000), and any fees over the cap will be waived under Article 52 of the CPL.  Moreover, if a consumer protection group petitions for an injunction to discontinue or prohibit a business operator’s material violation of the consumer protection provided by the CPL, the court fee for the filing will be exempted (Section 3 of Article 53 of CPL).  Since the court fees are calculated by the claim amount (one percent of the claim amount for the first level of court (district court), each 1.5 percent for the second and the third levels),[130] the exemption would be a big advantage in a case like those brought in the U.S. with huge claim amounts.

As to the statute of limitations, since this action is still based on individual claims, the viability of each claim will be determined separately (Article 50).

2.      Aggregated actions

Under Article 54 of the CPL, individual consumers injured in the same consumption (event) may choose one or several of individuals to sue on behalf of the whole group; other consumers injured in the same event may join the action within a period announced by the court and published in the newspapers.  Through aggregated actions, those injured by smoking may share litigation costs.  No court fee cap or exemption will apply to such litigation, however.

C.   Summary

Under the Taiwanese legal system, the potential plaintiffs in a tobacco litigation case would be the BNHI, the government insurer agency which is the insurer of National Health Insurance, qualified consumer protection groups, and individuals.  Since the theory of unjust enrichment is inapplicable to tobacco liability under Taiwanese laws, all actions must stem from the injuries of individuals and, therefore, the plaintiff should be in the individual victim’s shoes.  As the provider of nationwide medical care, the BNHI will be in the best position to prove causation—which is traditionally the most difficult issue to prove in tobacco cases—with statistical evidence.  With the advantage of reduced or exempted court fees, consumer protection groups might also be potential plaintiffs.  Without political concern and pressure which the TTWMB has, consumer protection groups are likely to be more aggressive than the BNHI.  In fact, they have demonstrated this by closely observing the developments in U.S. tobacco liability and by associating with international anti-tobacco organizations.[131]

VI.           FEE ARRANGEMENTS

A.   Attorneys’ Fees

An important feature of the third wave of tobacco litigation in the U.S. is the arrangement for attorneys’ fees.  Because fees in these cases have been determined on a contingency basis, state governments have been able to attract many prestigious law firms to contribute their talent without facing up front the heavy financial burden of attorney fees.  In addition, when several law firms jointly litigate a case, they can share the financial burden and avoid bankruptcy.

The arrangement for attorneys’ fees is even more important in Taiwan.  Since the attorneys’ fees can not be recouped from the losing party under the Taiwanese legal system,[132] the fee arrangement will be a substantial factor in determining whether to bring an action against the tobacco industry.

Under Taiwanese laws, contingency fee arrangements are allowed, except in domestic and criminal cases. (Article 35, Attorneys Ethical Rules).  The Bylaws of the Taipei Bar Association provides some recommendations on caps on attorneys’ fees.  For example, the attorneys’ fee for each level of trial should not exceed NT$ 500,000 (approximately US$16,700) on a lump sum basis, but if the value of the subject in dispute is over NT$ 5,000,000, then the attorneys’ fee may be increased provided, however, the increased portion may not exceed three percent of the value of the dispute.  These recommendations are not binding.[133]  Since these are only recommendations, in practice, contingency fee rates vary from five to thirty percent.

B.       Court Fees

Under Article 78 of the Code of Civil Procedure (CCP), the court fees shall be borne by the losing party, but the plaintiff and appellant are required to advance the court fees and then, if successful in litigation, will be reimbursed by the losing counterpart.  Court fees are calculated per rata on the value of the subject in dispute: in district court (the first instance) they are one percent of the value, in the high court (the second instance) and the Supreme Court (the third instance), they are 1.5 percent of the value.  In the event a case is remanded, there are no additional charges.  As mentioned in Part V, any product liability litigation initiated by consumer groups will enjoy a waiver of the portion of any court fees over NT$600,000.  In individual cases, plaintiffs may petition for an extension on paying the fees until the case is final (Article 107, CCP) if the court fees are substantially beyond their financial ability and credit capability.[134]

VII.        FORESEEABLE PROBLEMS IN TOBACCO-RELATED LITIGATION UNDER TAIWANESE LAWS

A.               The Requirement of Proximate Causation

Based on the analysis in Part V, the CPL, FTL (unfair competition sections) and Torts present the most potential for successful litigation for plaintiffs in tobacco cases; however, all of these require a showing of proximate causation between the tobacco company’s conduct and the injury incurred.  Proximate causation is not defined by law; it is scholarly principle accepted in practice by the courts.  The courts’ interpretation of proximate causation is as follows: if, after considering the facts of the conduct and after objective review of such conduct, it is found that the same result will always happen in the same situation given the same conduct, then that conduct is the proximate cause of the result.  In contrast, if the same result, under objective review, will not always happen in the situation under the same conditions then the condition or conduct is not proximate to the result.  This definition was set out by the Taiwanese Supreme Court in 1959 and has been affirmed by its decisions to date.[135]

As in the cases brought in the first two waves of tobacco litigation in the United States, the causation issue will be a weak point in any case pursued in Taiwan.  It is still questionable whether the link between smoking and smoking-related illnesses would be sufficient to meet the above-stated “proximate causation ” requirement.  Proximate causation in individual smokers’ cases cannot be definitively proven by scientific evidence, except in specific cases.  In cases pursued by the government insurer, the government will still be in the shoes of individual smokers – since unjust enrichment is not available as a cause of action – and proximate causation will still be an issue.  However, if the pool of evidence is large enough, then the probability of proving proximate cause will be more likely.  From this perspective, claims by the government insurer for nationwide damages caused by smoking based on medical and statistic evidence will stand a better chance of success than individual cases.  Proximate causation will always be the most substantial problem in such claims, however.

Besides, how specific liability should be allocated to certain tobacco companies is also a big problem that can undermine a showing of causation.  Since smoking-related illnesses are caused by long-term consumption, it will be difficult to prove loyalty to a certain brand and to claim damages specific to a certain manufacturer.  It will also be difficult to draw a line between any early consumption of local products and later consumption of foreign products.  This difficulty could provide a strong defense for tobacco companies in the future.

B.       The Issue of Statutory Subrogation

Although by a systematic interpretation of the Insurance Law and the NHIL, we can reach the conclusion that the governmental insurer of the NHI (BNHI) is entitled to recover by subrogation its expenditures for smoking-related illnesses, the provisions of the NHIL addressing the insurer’s subrogation right are so confusing that they do not support a single conclusion.  Unless the NHIL is amended to clarify the subrogation rights, subrogation will be another big issue in potential tobacco cases.

C.       The Limitations on Statutory Claims and Grandfather Clauses

Another obstacle for plaintiffs in tobacco litigation is the relatively recent enactment of the relevant statues.  Many important economic laws were enacted recently and, therefore, their scopes of application are limited.  For example, the FTL was effective as of February 4, 1992; wrongdoing conducted before that date could not be claimed under the FTL.  This limitation will make most of the tobacco industry’s harmful decision-making or conduct, which is alleged to have happened before 1992, exempt from the FTL, unless that conduct continued after the FTL was enacted.

In addition, the CPL which is the most beneficial statute for consumers was not enacted until 1994, and its enforcement rule, the ERCPL, provides a Grandfather clause clarifying that the CPL does not apply to goods which had already circulated into the market before the date of enforcement: January 13, 1994 (Article 42 of ERCPL).  This means not only that the tobacco industry is free under the CPL from liability arising from early tobacco consumption, but also that it would create questions for proving causation, i.e., whether pre-CPL consumption played a role critical enough to defeat the proximate causation between later tobacco consumption and the victim’s injuries.

D.       The Application of Statistics and Documentation Provided on the Internet

The various causes of action in the third wave of U.S. tobacco litigation were supported by, and relied heavily on, the disclosure of the tobacco industry’s internal documents and on testimonies from the industry’s ex-employees.  That kind of evidence, which is not easily accessible for the plaintiffs in Taiwan, would be extremely hard and costly for plaintiffs to prepare for the courts.  It would be a big advantage if the documents, which have been released by the tobacco companies on reliable web sites, are allowed to be submitted as evidence in Taiwan.  Furthermore, given the difficulty of proving proximate causation between smoking and the smokers’ injuries, whether or not statistics will be allowed in as evidence before the Taiwanese courts will be critical to the success of the plaintiffs’ actions, especially for cases filed by the governmental insurer.  Unfortunately, it is unlikely that these issues will be resolved in the plaintiffs’ favor.

1.      The Use of Statistics as Evidence

Statistical evidence is allowed to be submitted as a supporting document under the Taiwanese rules of civil procedure.  The real problem is the value of this evidence, since statistics are always built upon some supposition/assumption, and there are unavoidable errors in the result.  In individual smokers’ cases, it is almost impossible to prove the proximate causation required by courts in claims for indemnity.  In a case pursued by the governmental insurer of the nationwide medical care program, the claim basis and the pool of statistics, both of which could cover the entire population in Taiwan, would present a stronger basis than individual cases for showing proximate causation.  This approach is different from the traditional requirement for establishing proximate causation, however; and it is likely that this unprecedented way of producing evidence will face resistance in court.

2.         Using Internet Documents as Evidence

According to Article 363 of the Code of Civil Procedure (CCP), if a document is available only through the electronic media and its original is de facto inaccessible, then the electronic form, with evidence to prove that it is the same as the original, may be submitted as evidence.  Therefore, documents from web sites are accepted as evidence provided the original document is extremely hard to access in Taiwan.

In addition, although a document to be used as evidence should be produced by the claimant (§352, CCP), if it is in the possession of the other party, the claimant may ask the court to order the other party to produce the document (§342 & §343, CCP).  If the party without justifiable reasons fails to do so, the court may consider the claimant’s allegations with respect to the document as true and correct (§345, CCP).  Given that the internal documents of the tobacco industry are in the possession of the tobacco industry and inaccessible to claimants in Taiwan, it should be reasonable for the courts to order the defendants to produce the originals of the documents which have been disclosed to the U.S. public under the rulings of the U.S. courts and are available on web sites now.

Even if the tobacco industry fails on justified grounds to produce the originals, under Article 353 of the CCP, a court has the discretion to base its decision on the evidential strength of a copy of such document.

In sum, the burden of producing evidence is very substantial, especially for overseas plaintiffs.  The use of documents found on web sites would be a feasible way under Taiwanese civil procedure rules to produce this evidence; however there would likely be arguments against this practice.

VIII.    CONCLUSION

From the traditional Taiwanese perspective, litigation as a means to resolve disputes and to achieve revenge is evil and should be avoided; however, from a modern legal perspective, litigation serves as an important device for risk control—it allows the internalization of external business costs and spreads these costs fairly among limited parties.  Litigation plays a critical role in the appropriate operation of complicated risk-control devices.[136]

The third wave of U.S. tobacco litigation has inspired other countries not merely because of the astronomical amount of the claims and settlements, but also, more importantly, because of the awareness it has brought of the severe and damaging effects of tobacco consumption.  These effects, for a long time, have been ignored and left unregulated.

Asian countries have been inspired even more than others by the U.S. litigation.  We see how pollutant imports once again from industrialized countries.  The healthy and vigorous devices of risk control mean even more to those risk-exporting countries.

The Taiwanese legal system is healthy enough to take on this burden of risk control, even though it may face some of the same problems as its U.S. counterparts did in the first two waves of tobacco litigation.  We must emphasize that the end goal of Taiwanese tobacco litigation is not to enrich smokers or medical care providers with an unexpected indemnity or to blame the tobacco manufacturers, but instead, to strengthen Taiwan’s ability to absorb, spread and internalize the risks of tobacco consumption and, thereby, to improve the reasonable allocation of resources in Taiwanese society.

Looking back at modern history, heroin imports led to a war at the end of the nineteenth century, and finally were appropriately controlled in the twentieth century.  At the turning point of a new century, may the third wave of U.S. tobacco litigation will not merely awaken people to the hazards of tobacco consumption but also help build agreement among different countries that properly controlling these hazards is necessary for our future generations.

IX.           REFERENCES

ENGLISH:

Clifford E. Douglas, The Tobacco Industry’s Use of Nicotine as a Drug, in Tobacco and Smoking—Opposing Viewpoints 31-36 (Bruno Leone eds.,1998).

Daniel Givelber, Cigarette Law, 73 Indiana Law Journal 867(1998).

Gary T. Schwartz, Tobacco Liability in the Courts, in Smoking Policy: Law, Politics, and Culture 131-160 (Robert L. Robin & Stephen D. Sugarman eds., 1993).

Graham E. Kelder, Jr. & Richard A. Daynard, The Role of Litigation in the Effective Control of the Sale and Use of Tobacco, 8 Stan. L. & Pol’y Rev 63 (1997).

Greg Rushford, Tobacco Row; USTR Battles Anti-Smoking Rules in Taiwan, Sparking Showdown With Health Advocates, Legal Times, February 3, 1992.

Jack E. Henningfield and Leslie M. Schuh, Smoking and Tobacco Control Monograph No. 7 (1997), in Tobacco and Smoking—Opposing Viewpoints 34 (Bruno Leone eds., 1998).

Jonathan Wike, The Marlboro Man in Asia: U.S. Tobacco and Human Rights, 29 Vand. J. Transnat’l L. 329 (1996).

Jon D. Hanson & Kyle D. Logue, The Costs of Cigarettes: The Economic Case for Ex Post Incentive-Based Regulation. 107 Yale L.J. 1163 (1998).

Keum-Ja Bae, Applying American Tobacco Litigation Theories in Korea, at 52-53, LLM Thesis, Harvard Law School, 1998.

Marc Galanter, Private Litigation and Tobacco Control, presentation at the annual meeting of the American Public Health Association, San Diego (October 30, 1995) (available in the Indiana University Law School or University of Wisconsin Law School).

Mark A. Cohen, Moving Into Taiwan’s Open Wine, Beer, Cigarette Market, East Asian Executive Reports, Section: Taiwan; United States; Volume 9, Number 5; at 7 (1987).

Robert L. Robin, Institutional and Historical Perspectives on Tobacco Torts Liability, in Smoking Policy: Law, Politics, and Culture 110-130 (Robert L. Robin & Stephen D. Sugarman eds., 1993).

Shawn Teng, Alice Lian and Chung-Teh Lee, attorney-at-laws, letter draft (June, 1998) (on the file with the authors).

Steven H. Gifis, Law Dictionary—4th ed., 1996.

Sijbren Cnossen, Specific Issues in Excise Taxation-the Alcohol Problem, in the Reforms of Tax Systems, at 269-286 (Karl W. Roskamp & Francesco Forte eds., 1981).

William D. Novelli, Federal Tobacco Restrictions Are Justified To Protect Youths, in Tobacco and Smoking—Opposing Viewpoints 115-119 (Bruno Leone eds., 1998).

——–.Cigarette Producers See a Fresh Threat in Suits by Individuals, February 12, 1999, the New York Times

——–. In A Landmark Decision, Court Rules Tobacco May Be Regulated as A Drug, USA Today, April 25, 1997.

——–. Tobacco and Smoking—Opposing Viewpoints, 153 (Bruno Leone eds., 1998).

Action on Smoking and Health:

<http://ash.org/auaust97/8-15-97-2.html>

The New York Times:

<http://www.nytimes.com/aponline/f/AP-France-Tobacco-Lawsuit.html>

The State Tobacco Information Center:

<http://stic.neu.edu/>

Tobacco Resolution:

<http://www.tobaccoresolution.com/>

USA Today, Tobacco Settlement:

<http://www.usatoday.com/news/smoke/smoke00.htm>

Bureau of National Health Insurance

<http://www.nhi.gov.tw>

Consumer Protection Commission

<http://www.cpc.gov.tw>

Fair Trade Commission

<http://www.ftc.gov.tw>

CHINESE:

王澤鑑:「商品製造者責任與純粹經濟上損失–最高法院二則判決的評釋及消費者保護法第七條的解釋適用」,法學叢刊第39卷第4期,民國83年10月頁17-28、第40卷第1期,民國84.年.1月,頁13-23。

朱柏松:「商品製造人侵權行為責任論序說」,法學叢刊第34卷第4期,民國78. 年.10月,頁54-99。

朱柏松:「消費者保護法商品製造人責任規定之適用與解釋」,國立臺灣大學法學論叢第24卷第1期,民國83年12月,頁353-409、第24卷:第2期,民國84.年6月頁457-494。

江朝國:「全民健康保險法第八十二條代位權之探討」,月旦法學,民國84年.08月,頁98-102。

沈筱玲:「洋菸酒強敵壓境 公賣局不再一枝獨秀–廢止『菸酒專賣條例』對公賣局財務的衝擊」,會計研究月刊第117期,民國84年. 6月,頁78-83。

吳月瓏:「全民健康保險法第八十二條規定之探討–論健保局行使代位權之適法性及其面臨之困境與評析」。保險專刊第50期,民國86年.12月,頁138-160。

吳從周:「勞保給付、侵權行為損害賠償與保險代位權」,軍法專刊第42卷第:5期,民國85年5月,頁32-38。

陳佳文:「台灣地區菸酒專賣政策及專賣制度之研究」,臺灣銀行季刊第39卷第3期,民國77年9月,頁310-355。

陳碧珠:「社會保險之健康保險人有無代位權之探討」,壽險季刊第69期,民國77年9月,頁43-47。

陳雪香:「經濟自由化下我國菸酒公賣事業之衝擊與因應」,臺灣經濟研究月刊第16卷第9期,民國82年9月,頁30-33。

黃瑞祺、楊豐碩、陳大木:「菸酒公賣事業的挑戰與對策–專訪臺灣省菸酒公賣局曾廣田局長」,臺灣經濟研究月刊第16卷第9期,民國82年9月,頁13-17。

黃瑞祺、楊豐碩、陳大木:「亟待蛻變的菸酒公賣制度–專訪財政部國庫署林劍雄署長」,臺灣經濟研究月刊第16卷第:9期,民國82年9月,頁9-12。

張秀蓮:「因應經濟自由化、國際化,積極推動菸酒專賣改制」,財稅研究第29卷第3 期,民國86年5月頁1-9。

劉代洋:「我國菸酒公賣事業開放民營之影響及趨勢」,臺灣經濟研究月刊第16卷第9期,民國82年9月,頁26-29。

劉代洋:「從社會﹑經濟﹑財政層面探討菸酒公賣事業開放民營之利弊得失」,研考報導第14期,民國80年1月,頁32-49。

劉宗榮:「保險法」,自刊,民國84年8月初版。

藍祖堂:「我國菸酒公賣事業因應經濟自由化之衝突與對策」,研考報導第14期,民國80年1月,頁6-31。

China Times:

<http://www.chinatimes.com.tw/news/papers/ctimes/csocial/88022516.htm>

<http://www.chinatimes.com.tw/news/papers/ctimes/csocial/88021410.htm>

<http://www.chinatimes.com.tw/news/papers/ctimes/csocial/88021204.htm>

<http://www.chinatimes.com.tw/news/papers/ctimes/csocial/88021202.htm>

<http://www.teputc.org.tw/env_news/199706/86062201.htm>

Bureau of National Health Insurance:

<http://www.nhi.org.tw>

X.               ABBREVIATIONS

BNHI  :           Bureau of National Health Insurance

CALI  :           Compulsory Automobile Liability Insurance

CCP                :           Code of Civil Procedures

CPL                 :           Consumer Protection Law

ERCPL           :           Enforcement Rule of the Consumer Protection Law

ERFTL            :           Enforcement Rule of the Fair Trade Law

ERNHIL         :           Enforcement Rule of the National Health Insurance Law

ERSHPL         :           Enforcement Rule of the Smoking Hazards Prevention Law

ETS                             Environmental Tobacco Smoke

FTL                 :           Fair Trade Law

NHIL  :           National Health Insurance Law

TTWMB          :           Taiwan Tobacco Wine Monopoly Bureau

SHPL  :           Smoking Hazards Prevention Law

[1] See Tobacco and Smoking—Opposing Viewpoints, 153 (Bruno Leone eds, 1998)[hereafter TOBACCO AND SMOKING].
[2] See Tobacco Economic Costs Investigation by Department of Health cited by China Times, 1999 02.12 (visited in March 22, 1999) <http://www.chinatimes.com.tw/news/papers/ctimes/csocial/88021202.htm>.
[3] See id.
[4] See id.
[5] Jonathan Wike, The Marlboro Man in Asia: U.S. Tobacco and Human Rights, 29 Vand. J. Transnat’l L. 329, 336, (1996)[hereafter THE MARLBORO MAN IN ASIA].
[6] The culture of tobacco consumption in Taiwanese is very similar to its counterpart in Japan.  Women are not encouraged to smoke.  Even in 1994, among the deaths from lung cancer, ninety-one percent of males were smokers, but only thirty-seven percent of female victims were smokers.  See the statement of the Department of the Health, China Times, February 12, 1999, (visited March 22, 99). <http://www.chinatimes.com.tw/news/papers/ctimes/csocial/88021202.htm>.  For more on the culture of Japanese tobacco consumption, see supra note 5, at 336.
[7] Taiwan was the second Asian market opened up for U.S. tobacco industry under the pressure of 301 Act. by U.S. in 1986, next to Japan.  See supra note 6, THE MARLBORO MAN IN ASIA, at 335.  For details please see Mark A. Cohen, Moving Into Taiwan’s Open Wine, Beer, Cigarette Market, East Asian Executive Reports, Section: Taiwan; United States; Volume 9, Number 5; at 7 (1987).
[8] See supra note 6, at 337, 338.
[9] China Times, 1999.02.12, (visited on March 21, 1999) <http://www.chinatimes.com.tw/news/papers/ctimes/csocial/88021204.htm>.  Also see China Times, 1997.06.22 (visited on March 21, 1999) <http://www.teputc.org.tw/env_news/199706/86062201.htm>.
[10] See supra note 5, at 348-351.
[11] See Jon D. Hanson & Kyle D. Logue, The Costs of Cigarettes: The Economic Case for Ex Post Incentive-Based Regulation, 107 Yale L.J. 1163, 1167 (1998) [hereafter THE COSTS OF CIGARETTES].
[12] See American Cancer Soc’y, Cancer Facts & Figures – 1995, at 1 (1995) cited by Graham E. Kelder, Jr. & Richard A. Daynard, The Role of Litigation in the Effective Control of the Sale and Use of Tobacco, 8 Stan. L. & Pol’y Rev 63, 64 (1997), note 4 [hereafter THE ROLE OF LITIGATION].
[13] Polly A. Newcomb & Paul P. Carbone, The Health Consequences of Smoking: Cancer, 76 Med. Clinics N. Am. 305, 305 (1992) (cited by THE ROLE OF LITIGATION at 64, FN 6).
[14] American Thoracic Society, Cigarette Smoking is Harmful, TOBACCO AND SMOKING, at 17-24 (1998), reprinted from the Official Statement of the American Thoracic Society, Cigarette Smoking and Health, in the American Journal of Respiratory Critical Care Medicine, Vol. 153, at 861-65 (1996).
[15] See supra note 12, THE COSTS OF CIGARETTES, at 1167.
[16] Jack E. Henningfield and Leslie M. Schuh, Smoking and Tobacco Control Monograph No. 7 (1997), in TOBACCO AND SMOKING, at 34 (1998).

[17] See id.
[18] See Supra note 12, THE ROLE OF LITIGATION, at 64 & FN 37.
[19] Not until 1995 did the FDA determine that the nicotine in cigarettes and smokeless tobacco should be regulated as a drug.  See Jack E. Henningfield and Leslie M. Schuh, Smoking and Tobacco Control Monograph No. 7 (1997), in TOBACCO AND SMOKING.  Also see supra note 11, at 1172 & FN 30.  President Clinton adopted the FDA’s findings in April of 1997 and a federal court in North Carolina held that nicotine could be regulated as a drug, see In A Landmark Decision, Court Rules Tobacco May Be Regulated As A Drug, USA Today, April 25, 1997.
[20] The tobacco industry influences Congress through lobbying and campaign contributions.  In 1995, Philip Morris, R.J. Reynolds, and their affiliates gave the GOP close to $ 1.7 million.  The industry’s “soft money” contributions totaled $ 2.3 million. See supra note 12, THE ROLE OF LITIGATION, at 63, FN 85 & 86.  During the first half of 1998, the tobacco industry paid its chief lobbyists $7.1 million (visited on March 22, 1999). <http://www.usatoday.com/news/smoke/smoke247.htm>
[21] Tobacco was listed in the 1890 edition of the U.S. Pharmacopoeia, the federal government’s official listing of drugs, but was removed from the 1905 edition, and, therefore, it was not regulated by the FDA under the 1906 Food and Drug Act. See supra note 12, THE ROLE OF LITIGATION, at 66 & FN 64.  Congress passed industry-friendly acts to protect the tobacco industry from regulation proposed by the federal government.  In 1964, the Federal Trade Commission (FTC) issued a Trade Regulation Rule on Cigarette Labeling and Advertising.  Congress intervened and passed the Federal Cigarette Labeling and Advertising Act (FCLAA) in 1965.  This preempted agency action and provided for a weaker warning statement; the act even prohibited any further requirements for warning statements in cigarette advertising for at least four years.  See THE ROLE OF LITIGATION, at 66.  Moreover, in response to the FTC’s proposed rule in 1969, Congress passed the Public Health Cigarette Smoking Act of 1969 in 1970.  See THE ROLE OF LITIGATION, at 66.  At the state level, under tobacco industry’s operation, much weak and industry-friendly tobacco control legislation was passed to preempt the authority of city, town, and county governments to control the sale and use of tobacco.  See THE ROLE OF LITIGATION, at 69, 70.  In the Consumer Product Safety Act, which Congress enacted on October 27, 1972, tobacco and tobacco products were explicitly excluded from the definition of consumer products.  The 1976 Consumer Products Safety Commission Improvements Act also exempted “tobacco and tobacco products” from regulation under the Federal Hazardous Substance Act, and clarified that the Consumer Products Safety Commission had no jurisdiction over these products.  See THE ROLE OF LITIGATION, at 67, 68.
[22] See id.  See also supra 11, THE COSTS OF CIGARETTES, at 1168 & FN 9.
[23] See supra note 21.
[24] See Marc Galanter, Private Litigation and Tobacco Control, at 1-3, presentation at the annual meeting of the American Public Health Association, San Diego (October 30, 1995) (available in the Indiana University Law School or University of Wisconsin Law School).
[25] See id, at 4.  See also Robert L. Robin, Institutional and Historical Perspectives on Tobacco Torts Liability, in Smoking Policy: Law, Politics, and Culture 110, 113 (Robert L. Robin & Stephen D. Sugarman eds., 1993)[hereafter SMOKING POLICY].
[26] See supra note 24, at 4.
[27] See supra note 24, at 5.  See also supra note 25, in SMOKING POLICY, at 113-118.
[28] See supra note 24, at 5.  See also supra note 12, THE ROLE OF LITIGATION, at 71; and supra note 25, in SMOKING POLICY 110, at 112-118.
[29] See supra note 24, at 5.  See also supra note 25, in SMOKING POLICY 110, at 119.
[30] Lartigue v. R.J. Reynolds Tobacco Co., 317 F. 2d 19 [5th Cir. 1963], cert. denied, 375 U.S. 865 [1963], as cited in supra note 24, at 6.
[31] See supra note 24, at 6.  See also supra note 25, in SMOKING POLICY 110, at 117.  For more details, please see Daniel Givelber, Cigarette Law, 73 Ind. L.J. 867, 872 (1998).
[32] See id. supra note 24, at 7.  See also supra note 25, in SMOKING POLICY 110, at 120 & note 31.
[33] See supra note 24, at 7.
[34] See supra note 24, at 6.  See also Gary T. Schwartz, Tobacco Liability in the Courts, in SMOKING POLICY 131, at 132.
[35] See supra note 24, at 7.  Also see supra note 25, in SMOKING POLICY 110, at 124.
[36] See supra note 5, at 344.
[37] Cifford E. Douglas, Nicotine Is Addictive, in TOBACCO AND SMOKING, at 31.
[38] See supra note 12, THE ROLE OF LITIGATION, at 75-76.
[39] Id., at 72.
[40] Id.
[41] Id.
[42] Id
[43] See id. at 80-81.
[44] The Castano Tobacco Plaintiffs’ Legal Committee pursued a class action suit against sixteen tobacco companies.  See supra note 5, at 343.
[45]An internal report written in 1972 by William L. Dunn, Jr., a scientist with the Philip Morris tobacco company, as disclosed in Cipollone v. Liggett, stated that “Some strong evidence can be marshaled to support this argument: (1) No one has ever become a cigarette smoker by smoking cigarettes without nicotine; (2) Most of the physiological responses to inhaled smoke have been shown to be nicotine-related… The cigarettes should be convinced not as a product but as a package.  The product is nicotine.”   See Clifford E. Douglas, The Tobacco Industry’s Use of Nicotine as A Drug, in TOBACCO AND SMOKING, at 35.  See also THE ROLE OF LITIGATION, at 79-80, 83-85.
[46]In 1983, Philip Morris’ researchers found nicotine to be addictive in rats.  Before their paper was published, which had been peer reviewed and accepted for publication in a celebrated scientific publication, Psychopharmacology, Philip Morris withdrew its orders, closed their laboratory at midnight, and destroyed evidence of their work.  See supra note 45, in TOBACCO AND SMOKING, at 35.  For testimony of the former Philip Morris researchers, see supra note 12, THE ROLE OF LITIGATION, at 76.
[47] See supra note 24, at 14.
[48] See supra note 45, in TOBACCO AND SMOKING, at 35
[49] See supra note 12, THE ROLE OF LITIGATION, at 76-77.  This capacity includes the ability to remove all or virtually all of the nicotine from products, and to then reinsert that nicotine into the final manufactured product in carefully controlled, precisely measured quantities.  See supra note 45, in TOBACCO AND SMOKING, at 36.
[50] See supra note 45, in TOBACCO AND SMOKING, at 36.
[51] See supra note 12, THE ROLE OF LITIGATION, at 77.

[52] Id., at 79-80.
[53] The tobacco industry was aware of the need to capture new smokers at a young age.  In 1976, a secret document written by an RJR executive stated that: “Evidence is now available to indicate that the 14- to 18-year-old group is an increasing segment of the smoking population.  RJR-T must soon establish a successful new brand in this market if our position is to be maintained.” Philip Morris’ researchers in their internal report in 1981 indicated that “Today’s teenager is tomorrow’s potential regular customers…This smoking patterns of teenagers are particularly important to Philip Morris.” See William D. Novelli, Federal Tobacco Restrictions Are Justified To Protect Youths, in TOBACCO AND SMOKING, at 117.  See also supra note 12, THE ROLE OF LITIGATION, at 66.
[54] See Multi-state Agreement description in Tobacco Resolution (tobacco industry) web site <http://www.tobaccoresolution.com/0035.htm>.
[55] Keum-Ja Bae, Applying American Tobacco Litigation Theories in Korea 52-53 (1998) (unpublished LL.M. thesis, Harvard Law School) (on file with the Harvard Law School Library).

The article of settlement fund: “

6.3. Subject to the terms of this Agreement, Liggett shall make the following payments:

6.3.1. An initial payment of $25 million due 120 days from the date of a Future Affiliate Transaction; and

6.3.2. Subject to the provisions of Sections 6.6 – 6.12, payments, each equivalent to 25% of Liggett’s Pretax Income, due 120 days after the end of each fiscal year of Liggett. The first payment shall be made with respect to the first full fiscal year commencing after the date of this Settlement Agreement.”

The article of corporation: “

4.1…5. In accordance with our settlement agreements, Liggett agrees to fully cooperate with the Attorneys General and Settlement Class Counsel in their lawsuits against the other tobacco companies. To that end, Liggett will make available to the Attorneys General, Settlement Class Counsel and other parties with whom we have settled all relevant documents and information, including documents subject to Liggett’s own attorney-client privileges and work product protections, and will assist those parties in obtaining prompt court adjudication of the rest of the industry’s joint privilege claims.”  See Liggett Settlement on March 20, 1997 <http://STIC.neu.edu/settlement/LIGGETTSETTLE.htm>.
[56] See 1997 Proposed Resolution in Tobacco Resolution (tobacco industry) web site (visited in March 22, 1999)<http://www.tobaccoresolution.com/0022.htm>.
[57] Id.
[58] Minnesota, Texas, Florida and Mississippi reached individual settlements with the tobacco industry separately on 5/7/98, 1/16/98, 8/25/97 and 7/3/97, for compensation in the amount of 6.1, 10.5, 10.1 and 3.36 billion.  See Multi-state Agreement Description in Tobacco Resolution (tobacco industry) web site <http://www.tobaccoresolution.com/0035.htm>
[59] See Multi-state Agreement in Tobacco Resolution (tobacco industry) web site. (visited in March 22, 1999) <http://www.tobaccoresolution.com/0035.htm.>.
[60] Id.
[61] USA Today, Tobacco Settlement. (visited in March 22, 1999) <http://www.usatoday.com/news/smoke/smoke279.htm>
[62] Id.
[63] See supra note 12, THE COSTS OF CIGARETTES, at 1318.
[64] Id., at 1322.
[65]The tobacco industry reached the $206 billion legal settlement with the states but still faces class action lawsuits and individual lawsuits by smokers.  114 Ohio union health funds went to trial against the tobacco industry for $2 billion in a federal court in Akron, Ohio in February, 1999. <http://www.usatoday.com/news/smoke/smoke283.htm> (visited in March 22, 1999).  On March 18, 1999, the tobacco industry won this trial (visited in March 22, 1999) <http://www.usatoday.com/news/smoke/smoke284.htm>.  Another lawsuit is seeking at least $200 billion in damages for 500,000 Floridians in Miami. <http://www.usatoday.com/news/smoke/smoke281.htm>.  In February 1999, a jury in San Francisco awarded an individual smoker $1.5 million in tobacco suit. USA Today, February 10, 99.
[66] The Justice Department vs. Tobacco. Was President Clinton’s Announcement News to Them? USA Today, January 21, 1999.
[67] A jury in San Francisco awarded an individual smoker $1.5 million in a tobacco suit in February 1999. USA Today, February 10, 1999.
[68] See Venezuela Sues U.S. Tobacco Industry in Miami—USA Today January 28, 1999.
[69] Id.
[70] U.S. Tobacco Firm under Fire in Japan, USA Today, April 27, 1998.
[71] The New York Times (visited on March 22, 1999) <http://www.nytimes.com/aponline/f/AP-France-Tobacco-Lawsuit.html>.
[72] See Action On Smoking And Health (visited March 24, 1999)<http://ash.org/august97/8-15-97-2.html>
[73] China Times, 1999.02.12 (visited on March 22, 1999) <http://www.chinatimes.com.tw/news/papers/ctimes/csocial/88021204.htm>.
[74] See 陳佳文:「台灣地區菸酒專賣政策及專賣制度之研究」,臺灣銀行季刊第39卷第3期,民國77年9月,頁315-316 [hereafter陳佳文] 。 See also Sijbren Cnossen, Specific Issues in Excise Taxation-the Alcohol Problem, in the Reforms of Tax Systems, at 269-286 (Karl W. Roskamp & Francesco Forte eds., 1981).
[75] See supra note 74陳佳文, 頁313.  See also 陳雪香:「經濟自由化下我國菸酒公賣事業之衝擊與因應」,臺灣經濟研究月刊第16卷第9期,民國82年9月,頁30 [hereafter陳雪香]。
[76] Id.
[77] In the 1950s and 1960s, the monopoly profit made over twenty percent of the government’s annual revenue.  In the 1970s, the contribution declined to ten percent, and then to six percent in early 1990s.  See張秀蓮:「因應經濟自由化、國際化,積極推動菸酒專賣改制」,財稅研究第29卷第3 期,民國86年5月,頁2 [hereafter張秀蓮]。
[78] See supra note 74.
[79] See supra note 77, 頁2。藍祖堂:「我國菸酒公賣事業因應經濟自由化之衝突與對策」,研考報導第14期,民國80年1月,表一[hereafter藍祖堂]。
[80] See supra note 5, at 334.
[81] Id, at 335, 336.
[82] Id.
[83] Because there are no formal diplomatic relations between Taiwan and the U.S., the Agreement was between the two semi-official organizations—the American Institute in Taiwan and the Coordination Council for North American Affairs.
[84] Mark A. Cohen, Moving Into Taiwan’s Open Wine, Beer, Cigarette Market, East Asian Executive Reports, Section: Taiwan; United States; Volume 9, Number 5; at 7 (1987).
[85] See supra note 75, 陳雪香,頁30-33。 See also黃瑞祺、楊豐碩、陳大木:「菸酒公賣事業的挑戰與對策–專訪臺灣省菸酒公賣局曾廣田局長」,臺灣經濟研究月刊第16卷第9期,民國82年9月,頁13-17。 黃瑞祺、楊豐碩、陳大木:「亟待蛻變的菸酒公賣制度–專訪財政部國庫署林劍雄署長」,臺灣經濟研究月刊第16卷第:9期,民國82年9月,頁9-12。劉代洋:「我國菸酒公賣事業開放民營之影響及趨勢」,臺灣經濟研究月刊第16卷第9期,民國82年9月,頁26-29。劉代洋:「從社會﹑經濟﹑財政層面探討菸酒公賣事業開放民營之利弊得失」,研考報導第14期,民國80年1月,頁32-49。  And see supra note 77, 頁1-9; supra note 79,頁6-31。
[86] See supra note 77,頁4。 As of this date, those two proposals have not been enacted.
[87] See supra note 5, at 337.  Also see Greg Rushford, Tobacco Row; USTR Battles Anti-Smoking Rules in Taiwan, Sparking Showdown With Health Advocates. Legal Times, February 3, 1992.
[88] Foreign tobacco market stake: 1976-0.8%, 1986-1.9%, 1995-26.9%, 1996-29.0%.  See supra note 77,附表五。
[89] See Greg Rushford, Tobacco Row; USTR Battles Anti-Smoking Rules in Taiwan, Sparking Showdown With Health Advocates. Legal Times, February 3, 1992.
[90] According to a 1994 investigation of the Department of Health, smoking causes over 19,000 deaths annually in Taiwan.  Thirty percent of cancer deaths are smoking-related, fifth-seven percent of lung cancer deaths are smoking-caused, and total medical costs for smoking-related illness are NT$9.1 billion. See China Times, February 12, 1999 (visited on March 1999). <http://www.chinatimes.com.tw/news/papers/ctimes/csocial/88021202.htm>.
[91]According to the statistics of the celebrated anti-smoking group, the John Tung Foundation, the total number of complaints of ETS and its mediation declined to sixty-nine in 1998, compared with 104 in 1997, the very year SHPL passed. <http://www.chinatimes.com.tw/news/papers/ctimes/csocial/88021410.htm>.
[92] National Health Insurance Profile (visited on March 22, 1999) <http://www.nhi.org.tw>.
[93] Id.
[94] Id.
[95] See Article 6 of National Health Insurance Act: “The Insurer of this Insurance shall be the Bureau of National Health Insurance established by the Competent Authority to administer the insurance business.

The organization of the Bureau of National Health Insurance shall be prescribed by law.” (visited on March 22, 1999) <http://www.nhi.org.tw>.
[96] The Official Statement of the American Thoracic Society, Cigarette Smoking and Health, in the American Journal of Respiratory Critical Care Medicine, vol. 153, 861-65, 1996, American Lung Association.  Reprinted in TOBACCO AND SMOKING, at 18-24.
[97] See supra note 1, TOBACCO AND SMOKING, at 32-33.
[98] Current Smoking Hazard Work Statement, Department of Health, http://203.65.100.161/org2/b1/b1_3_1_1.html#pt1.  Also see China Times, February 12, 1999. <http://www.chinatimes.com.tw/news/papers/ctimes/csocial/88021202.htm>

[99] See supra note 48.  See also supra note 12, THE ROLE OF LITIGATION, at 79-80.
[100] Id, at 77.
[101] See supra note 19.
[102] The Product Labeling Law also provides few general rules for all products.
[103] As of Dec. 1, 1998, the Supreme Court has made no decisions interpreting under Article 51 of CPL.  (According to research conducted on March 5, 1999 in the Supreme Court decision database on the web site of ROC Judicial Yuan. http://wjirs.judicial.gov.tw:8000/bin/yas/judge.asp.
[104] A Concerted Action shall satisfy any of the following circumstances as required by FTL for justification: “

1.     to unify the specifications or models of goods in order to reduce cost, improve quality or increase efficiency;

2.     to jointly research and develop goods or market in order to upgrade technical skills, improve quality, reduce costs or increase efficiency;

3.       to engage in specialized areas of business in order to achieve the enterprise’s rational operation;

4.       to enter into an agreement in respect of the competition in overseas markets in order to secure or promote exports;

5.       to take concerted action in respect of the importation of foreign goods in order to strengthen trading capability;

6.       to take concerted action in imposing limitations restrictions on the quantity of production and sales, equipment or prices in order to adjust to orderly demand when the enterprises in a particular industrial sector suffer hardship to continue their business operations or over-production due to the fact that the market price of goods remains at a level below the average production cost during economic recession; or

7.       to take concerted action in order to improve the operational efficiency or strengthen the competitiveness of the small and medium-sized enterprises concerned. “ (The proviso of §14 of FTL).
[105] Article 197 of the Civil Code: “The claim for damages arising from a wrongful act is extinguished by prescription, if not exercised within two years from the time when the injury and the person bound to make compensation became known to the injured party. The same rule applies if ten years have elapsed from the date when the wrongful act was committed.”

[106] According to legal scholarship and the past practice of the Supreme Court, proximate causation is required.  See decision of the Supreme Court 87-Tai-Appeal-154 (1998).
[107] Purely economic interest or profit is not included in these rights.  The loss of such interest is regulated in Part II of the same Section.
[108] 王澤鑑:「商品製造者責任與純粹經濟上損失–最高法院二則判決的評釋及消費者保護法第七條的解釋適用」(Part I) 法學叢刊第39卷第4期,民國83年10月頁17-28;  (Part II) 第40卷第1期,民國84.年.1月,頁13-23。  Although a few opinions of the Supreme Court have confused the distinction of the protected scopes between Part I and Part II, respected scholars harshly criticize this confusion.  See also footnote 27 of this cited article (Part I).
[109] Taiwanese Supreme Court 83-Tai-Appeal-2197 (1994).
[110] “If the injured party has by his own fault contributed in causing or aggravating the injury, the Court may reduce the amount of damages or give no damages at all.  The injured party is deemed to have committed a fault if he has omitted to call to the attention of the other party the danger of serious injury which the other party had no means of knowing, or if he has omitted to avert or mitigate the injury.” (§217, Civil Code).

[111] See Steven H. Gifis, Law Dictionary—4th ed. p.535, 1996.
[112] The precedent of the Taiwanese Supreme Court adopted the same opinion and held that “ The insurance system is aimed to protect the insured but not to reduce the liability of the wrongdoer for restitution.  The claim for insurance compensation is based on the insurance contract, for which the insured pays a premium, while the claim for indemnity is based on torts.  The two claims are on the different grounds.  The latter claim will not be eliminated by execution of the former claim.  Except for subrogation under Article 53 of the Insurance Law, the two claims will not be deducted by each other.” “The allegation of the appellant regarding the deduction of the insurance payment, which was received by the appellee, from the appellant’s liability is not allowed by laws.” (68-Tai-Appeal-42, 1979).
[113] In February of 1999, a jury in Los Angeles awarded a smoker, Ms. Henley, $1.5 million in a tobacco suit against Philip Morris for recovery of her medical costs, pain and suffering. February 10, 1999, USA Today. The tobacco industry continues to face new threats, see Cigarette Producers See a Fresh Threat in Suits by Individuals, February 12, 1999, the New York Times on the Web. http://search.nytimes.com/search/daily/bin/fastweb?getdoc+site+site+12735+0+wAAA+tobacco%7Eand%7Ehenley.
[114] Article 82: “In case the beneficiary receives medical benefits from this Insurance because of automobile traffic accidents, the Insurer of this Insurance may exercise the right of subrogation against the Insurer of compulsory third-party liability insurance.”
[115] “In case, by reason of occurrence of the damage or loss for which the insurer shall bear insurance liability, the insured has a right of claim for compensation against a third party, the insurer may, after paying the amount of indemnity, exercise, by subrogation, the right of claim of exercise against the third party; provided, however, that the amount he may claim for is, as a limit, not to exceed the amount of indemnity.” “In the event of the third party referred to in the preceding paragraph being a family member or an employee of the insured, the insurer has no right of claim by subrogation; provided, however, that this rule is not applicable where the damage or loss has resulted from the willfulness of such third party.” (§ 53, Insurance Law).
[116] The Supreme Court’s precedent, 68-Tai-Appeal-42 (1979), and decision, 83-Tai-Appeal-3037 (1994), reflect the same opinion. <http://wjirs.judicial.gov.tw:8000/bin/yas/judge.asp> Also see 吳從周:「勞保給付、侵權行為損害賠償與保險代位權」,軍法專刊第42卷第:5期,民國85年5月,頁32-38。
[117] “An insurer of life insurance shall not exercise, by subrogation, the right of claim of the applicant or the beneficiary against a third party, which claim arises out of the risk insured. (Article 103, Insurance Law).

“The provisions of Article 102 to Article 104 and Article 115 apply mutatis mutandis to health insurance.” (§ 130, Insurance Law).
[118]See 吳月瓏:「全民健康保險法第八十二條規定之探討–論健保局行使代位權之適法性及其面臨之困境與評析」。保險專刊第50期,民國86年.12月,頁139-140。
[119] Article 103 and 130 of the Insurance Law have never been amended even though the law has been amended several times since 1963.
[120] See supra note 118,頁143。
[121] “In case the beneficiary receives medical benefits from this Insurance because of automobile traffic accidents, the Insurer of this Insurance may exercise the right of subrogation against the Insurer of compulsory third-party liability insurance.”(§82, NHIL).  See the same opinion in supra note 116,頁34。
[122] See supra note 118,頁142。江朝國:「全民健康保險法第八十二條代位權之探討」,月旦法學,民國84年.08月,頁102。See also supra note 116,頁34。陳碧珠:「社會保險之健康保險人有無代位權之探討」,壽險季刊第69期,民國77年9月,頁46-47。劉宗榮:「保險法」,自刊,民國84年8月初版,頁。

[123] See supra note 118,頁146。

[124]劉宗榮:「保險法」,自刊,民國84年8月初版,頁248。
[125] Draft of letter by Chung-The Lee, Shawn Teng and Alice Lian, attorney-at-laws (June, 1998) (on the file with the authors).
[126] According to the NHIL amendment proposed by the Department of Health, the surtax on tobacco and wine products will be collected on twenty percent of the revenues on those products.  The fund will be specifically used to prevent tobacco hazards.  See China Times, February 25, 1999. <http://www.chinatimes.com.tw/news/papers/ctimes/csocial/88022516.htm>
[127] However, in view of the existing country-owned tobacco monopoly, the supervisor of BNHI, as a government agency, is resistant to bring such an action for recovery of smoking damages and may also choose not to attend the perspective regional negotiation. See China Times, June 22, 1997 <http://www.teputc.org.tw/env_news/199706/86062201.htm>.
[128].See supra note 125.
[129] “A consumer protection group which has been established for more than three years, has applied for and received a rating of excellence by the Consumer Protection Commission, maintains a special staff dealing with consumer protection, and meets one of the following requirements may, with the approval of the consumer protection officer, bring an action for damages in accordance with Article 53 in its own name.

(1)         an association established as a juristic person having more than 500 members, or

(2)         a foundation established as a juristic person having total registered assets of NT$10 million or more”(§49 I, CPL).
[130] Articles 2 and 18 of Law of Civil Litigation fees.
[131] The John Tung Foundation, the most prestigious anti-tobacco group in Taiwan, called for smoking victims assert their rights to damages after a smoker who sued Philip Morris won $1.5 million in a California court on Feb. 10, 1999.  See China Times, February 14, 1999. <http://www.chinatimes.com.tw/news/papers/ctimes/csocial/88021410.htm>

The John Tung Foundation will attend the Asia-Pacific region anti-tobacco meeting held in Taiwan and scheduled for May of 1999.  See China Times, February 12, 1999.

http://www.chinatimes.com.tw//news/papers/ctimes/csocial/88021204.htm

The officer of the Department of Health, the supervisor of BNHI, has had a passive attitude toward tobacco liability in Taiwan. See China Times, June 22, 1997. <http://www.teputc.org.tw/env_news/199706/86062201.htm>
[132] In rare cases, such as when a foreigner sues or is sued in Taiwan, the courts, in light of his poor local language comprehension and knowledge about the legal system, will allow the cost of reasonable attorney fees to be reimbursed by the losing counterpart.
[133] See supra note 125.
[134] According to judicial practices, most plaintiffs benefiting from this provision are indigent, but not those with financial problems (43-Tai-Con-152, Precedent).  Recent judicial opinions tend to be more flexible, allowing people with substantial credit difficulty to have an extension under this article.
[135] In the precedent, 48-Tai-Appeal-481 (1959), and recent decisions, 87-Tai-Appeal-154 and 87-Tai-Appeal-Tai-Appeal-78 (1998), the Supreme Court upheld the same definition and the requirement of proximate causation for indemnity claims.
[136] See supra note 24, at 1-4.

VII.             References

 

ENGLISH:

 

Clifford E. Douglas, The Tobacco Industry’s Use of Nicotine as a drug, in Tobacco and Smoking—Opposing Viewpoints 31-36(Bruno Leone eds.,1998).

 

Daniel Givelber, Cigarette Law, 73 Indiana Law Journal 867(1998).

 

Gary T. Schwartz, Tobacco Liability in the Courts, in Smoking Policy: Law, Politics, and Culture 131-160 (Robert L. Robin & Stephen D. Sugarman eds., 1993).

 

Graham E. Kelder, Jr. & Richard A. Daynard, The Role of Litigation in the Effective Control of the Sale and Use of Tobacco, 8 Stan. L. & Pol’y Rev 63 (1997).

 

Greg Rushford, Tobacco Row; USTR Battles Anti-Smoking Rules in Taiwan, Sparking Showdown With Health Advocates. Legal Times, February 3, 1992.

 

Jack E. Henningfield and Leslie M. Schuh, Smoking and Tobacco Control Monograph No. 7 (1997), in Tobacco and Smoking—Opposing Viewpoints 34 (Bruno Leone eds., 1998).

 

Jonathan Wike, The marlboro man in asia: u.s. tobacco and human rights, 29 Vand. J. Transnat’l L. 329 (1996).

 

Jon D. Hanson & Kyle D. Logue, The Costs of Cigarettes: The Economic Case for Ex Post Incentive-Based Regulation. note 1, 107 Yale L.J. 1163 (1998).

 

Keum-Ja Bae, Applying American Tobacco Litigation Theories in Korea, at 52-53, LLM Thesis, Harvard Law School, 1998.

 

Marc Galanter, Private Litigation and Tobacco Control (1995).

 

Mark A. Cohen, Moving Into Taiwan’s Open Wine, Beer, Cigarette Market, East Asian Executive Reports, Section: Taiwan; United States; Volume 9, Number 5; at 7 (1987).

 

Robert L. Robin, Institutional and Historical Perspectives on Tobacco Torts Liability, in Smoking Policy: Law, Politics, and Culture 110-130 (Robert L. Robin & Stephen D. Sugarman eds., 1993).

 

Shawn Teng, Alice Lian and Chung-Teh Lee, attorney-at-laws, drafted letter (June, 1998).

 

Steven H. Gifis, Law Dictionary—4th ed., 1996.

 

Sijbren Cnossen, Specific Issues in Excise Taxation-the Alcohol Problem, in the Reforms of Tax Systems, at 269-286 (Karl W. Roskamp & Francesco Forte eds., 1981).

 

William D. Novelli, Federal Tobacco Restrictions Are Justified To Protect Youths, in Tobacco and Smoking—Opposing Viewpoints 115-119 (Bruno Leone eds., 1998).

 

——–.Cigarette Producers See a Fresh Threat in Suits by Individuals, February 12, 1999, the New York Times

 

——–. In a landmark decision, court rules tobacco may be regulated as a drug, USA Today, April 25, 1997.

 

——–. Tobacco and Smoking—Opposing Viewpoints, 153 (Bruno Leone eds., 1998).

 

Action on Smoking and Health:

<http://ash.org/auaust97/8-15-97-2.html>

 

The New York Times:

<http://www.nytimes.com/aponline/f/AP-France-Tobacco-Lawsuit.html>

 

The State Tobacco Information Center:

<http://stic.neu.edu/>

 

Tobacco Resolution:

<http://www.tobaccoresolution.com/>

 

USA Today, Tobacco Settlement:

<http://www.usatoday.com/news/smoke/smoke00.htm>

 

Bureau of National Health Insurance

<http://www.nhi.gov.tw>

 

Consumer Protection Commission

<http://www.cpc.gov.tw>

 

Fair Trade Commission

<http://www.ftc.gov.tw>

 

 

CHINESE:

 

王澤鑑:「商品製造者責任與純粹經濟上損失–最高法院二則判決的評釋及消費者保護法第七條的解釋適用」,法學叢刊第39卷第4期,民國83年10月頁17-28、第40卷第1期,民國84.年.1月,頁13-23。

 

朱柏松:「商品製造人侵權行為責任論序說」,法學叢刊第34卷第4期,民國78. 年.10月,頁54-99。

 

朱柏松:「消費者保護法商品製造人責任規定之適用與解釋」,國立臺灣大學法學論叢第24卷第1期,民國83年12月,頁353-409、第24卷:第2期,民國84.年6月頁457-494。

 

江朝國:「全民健康保險法第八十二條代位權之探討」,月旦法學,民國84年.08月,頁98-102。

 

沈筱玲:「洋菸酒強敵壓境 公賣局不再一枝獨秀–廢止『菸酒專賣條例』對公賣局財務的衝擊」,會計研究月刊第117期,民國84年. 6月,頁78-83。

 

吳月瓏:「全民健康保險法第八十二條規定之探討–論健保局行使代位權之適法性及其面臨之困境與評析」。保險專刊第50期,民國86年.12月,頁138-160。

 

吳從周:「勞保給付、侵權行為損害賠償與保險代位權」,軍法專刊第42卷第:5期,民國85年5月,頁32-38。

 

陳佳文:「台灣地區菸酒專賣政策及專賣制度之研究」,臺灣銀行季刊第39卷第3期,民國77年9月,頁310-355。

 

陳碧珠:「社會保險之健康保險人有無代位權之探討」,壽險季刊第69期,民國77年9月,頁43-47。

 

陳雪香:「經濟自由化下我國菸酒公賣事業之衝擊與因應」,臺灣經濟研究月刊第16卷第9期,民國82年9月,頁30-33。

 

黃瑞祺、楊豐碩、陳大木:「菸酒公賣事業的挑戰與對策–專訪臺灣省菸酒公賣局曾廣田局長」,臺灣經濟研究月刊第16卷第9期,民國82年9月,頁13-17。

 

黃瑞祺、楊豐碩、陳大木:「亟待蛻變的菸酒公賣制度–專訪財政部國庫署林劍雄署長」,臺灣經濟研究月刊第16卷第:9期,民國82年9月,頁9-12。

 

張秀蓮:「因應經濟自由化、國際化,積極推動菸酒專賣改制」,財稅研究第29卷第3 期,民國86年5月頁1-9。

 

劉代洋:「我國菸酒公賣事業開放民營之影響及趨勢」,臺灣經濟研究月刊第16卷第9期,民國82年9月,頁26-29。

 

劉代洋:「從社會﹑經濟﹑財政層面探討菸酒公賣事業開放民營之利弊得失」,研考報導第14期,民國80年1月,頁32-49。

 

劉宗榮:「保險法」,自刊,民國84年8月初版。

 

藍祖堂:「我國菸酒公賣事業因應經濟自由化之衝突與對策」,研考報導第14期,民國80年1月,頁6-31。

 

China Times:

<http://www.chinatimes.com.tw/news/papers/ctimes/csocial/88022516.htm>

<http://www.chinatimes.com.tw/news/papers/ctimes/csocial/88021410.htm>

<http://www.chinatimes.com.tw/news/papers/ctimes/csocial/88021204.htm>

<http://www.chinatimes.com.tw/news/papers/ctimes/csocial/88021202.htm>

<http://www.teputc.org.tw/env_news/199706/86062201.htm>

 

Bureau of National Health Insurance:

<http://www.nhi.org.tw>

 
VIII.           Abbreviations

 

BNHI      :               Bureau of National Health Insurance

CALI       :               Compulsory Automobile Liability Insurance

CCP                        :               Code of Civil Procedures

CPL                         :               Consumer Protection Law

ERCPL    :               Enforcement Rule of the Consumer Protection Law

ERFTL    :               Enforcement Rule of the Fair Trade Law

ERNHIL :               Enforcement Rule of the National Health Insurance Law

ERSHPL :               Enforcement Rule of the Smoking Hazards Prevention Law

ETS                                         Environmental Tobacco Smoke

FTL                         :               Fair Trade Law

NHIL      :               National Health Insurance Law

TTWMB :               Taiwan Tobacco Wine Monopoly Bureau

SHPL      :               Smoking Hazards Pr

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