Carlton grew up around tobacco as the son of a wealthy North Carolina tobacco farmer. He then went on to North Carolina State University where he became friends with governor-to-be, Jim Hunt. During Hunt's four terms in office, Carlton served as one of his top political advisers. In 1979 he was appointed to the State Supreme Court. During Hunt's 1992 campaign, Carlton and other supporters were caught monitoring the opponent's cellular phone. Carlton and others plead guilty to illegal use of a police scanner and agreed to a combined fine and community service.

When Carlton was approached to help broker the tobacco deal, he saw it as an opportunity to rebuild his name and to help out an industry that had provided his father's good fortunes. Negotiations between the tobacco industry and the attorneys general reached several points of near collapse. Often it was Carlton's finessing that brought players back to the table.

Mike Moore explains how the first meeting with Phil Carlton went:

"I wanted to see his credentials. I wanted to know that he represented the industry. He is a former [State] Supreme Court Judge. I did a lot of checking on him before he showed up. As I am sure he did a lot of checking on me before I showed up. And, he was a very genuine fellow. He was very businesslike and assured us that the industry wanted to have face to face meetings, and I made several conditions for a meeting. I mean, what I told him was that the only way I would meet is if they would bring the Chief Executive Officers of the industry face to face. I wanted Geoffrey Bible seated right across the table from me. I wanted Stephen Goldstone seated across the table from me. Because I wanted to look them eye to eye, man to man to judge their sincerity."