Fla. Court Tosses $145B Tobacco Verdict
Fla. Court Tosses $145B Tobacco Verdict
May. 21, 2003
MIAMI (AP) _ A Florida appeals court erased a record-setting $145 billion award against the tobacco industry Wednesday, ruling thousands of Florida smokers could not group themselves together for a class-action attack on cigarette makers.
Tobacco company stock prices jumped on news that the 68-page order by a three-judge panel of the 3rd District Court of Appeal found several flaws with the largest punitive damage verdict in U.S. history and the two-year trial that produced it.
R.J. Reynolds Tobacco, the nation's second-largest cigarette company with brands like Winston and Camels, issued a statement calling the ruling ``a major victory for the tobacco industry.''
``Tobacco couldn't have wished for a more positive decision,'' said Martin Feldman, tobacco analyst at Merrill Lynch.
But Mark Gottlieb, an attorney with the anti-smoking Tobacco Products Liability Project at Northeastern University's law school, called the decision ``a terrible blow'' to Florida's sick smokers.
Margaret Amodeo, whose husband Frank lost his $5.8 million compensatory damage award for throat cancer under the ruling, said they were ``very disappointed.'' He was too hoarse to speak. The decision discarded two other individual awards as well.
Janine Goluba, whose late mother had won a $3.5 million award, said the decision was ``beyond my comprehension. ... Lie, cheat, deceive and still be able to be on top.''
The six-member Miami jury decided almost three years ago that cigarettes are deadly, addictive and defective because they make people sick when used as directed. It set punitive damages for an estimated 300,000 to 700,000 smokers after deciding compensatory damages for Frank Amodeo and two other cancer victims who served as representatives of the group.
But the appeals court agreed with the tobacco industry that the class was unmanageable, found the award would have violated state law by bankrupting the companies, called the trial plan unconstitutional and chided the smokers' attorney, Stanley Rosenblatt, for making racially charged appeals to four black jurors. He had made references to the Holocaust and slavery while discussing the sale of cigarettes.
Rosenblatt and his wife, Susan, who also represented the smokers, were out of town Wednesday and could not be reached for comment. They have the option of asking the full appeals court to review the case.
The court said that while cigarette makers were accused of similar fraudulent conduct, there are enough differences among smokers' cases that they shouldn't be allowed to sue together. The court called its conclusion ``inescapable.''
William S. Ohlemeyer, vice president of Philip Morris USA, the maker of industry-leading Marlboros, said the ruling ``is in line with the country's legal mainstream.''
``This decision clearly shows we were right,'' said Mark Smith, a spokesman for Brown & Williamson Tobacco Corp., whose cigarette brands include Kool, Pall Mall and Lucky Strike.
``We feel that we've been completely vindicated in every respect,'' said Ronald Milstein, vice president and general counsel of Loews Corp.'s Lorillard Tobacco, maker of Kent and Newport cigarettes. He said the verdict ``was fundamentally flawed from the very beginning'' and ``was a travesty of justice.''
Liggett spokeswoman Brandy Bergman said the company was ``pleased with the court's decision.''
In trading on the New York Stock Exchange, shares for Philip Morris' parent Altria Group rose $3.39, or 9.7 percent, to close at $38.30; R.J. Reynolds shares gained $1.57, or 5 percent, to $33.28; and Loews shares rose $1.82, or 4.3 percent, to $44.10.
Gottlieb called the decision ``very surprising'' because the same court created the class in 1996 and refused once before to reconsider its decision. In the meantime, many other courts nationally have denied class-action status for smokers.
Asked about the court's flip-flop, attorney Alvin Davis, who argued the appeal for cigarette makers, said: ``They were dealing with everything on almost a hypothetical basis when it went up the first time. Now they have a record that demonstrates all of the flaws.''
Philip Morris hopes the decision will bolster its challenge to a $10.1 billion verdict in an Illinois class-action lawsuit by 1.1 million Illinois smokers who claimed they were tricked into believing light cigarettes were less harmful than regular brands.
Even with tobacco's victory in the Florida case, Philip Morris, Lorillard and Liggett are out $710 million. After trial, the three companies agreed to pay that nonrefundable amount to keep Florida smokers from challenging the constitutionality of a new state law on appeal bonds enacted during the case. No structure has been created for distribution of the money.
``At the time, it made sense for us,'' said Ohlemeyer. ``It demonstrates how important it was for us to get to the appellate court.''
When the appellate process ends, the industry will get back another $1.2 billion deposited with the court to appeal, a tiny fraction of what it would have been required to pay without a change in the law.
Public policy has been moving against Big Tobacco. The World Health Organization is pushing governments to adopt sweeping anti-smoking restrictions, and several states have banned smoking in most indoor workplaces and restaurants and boosted taxes on cigarettes.
The major tobacco companies settled state lawsuits for smoking-related health care costs in 1998 for a total of $246 billion.
In October, a Los Angeles jury ruled that Philip Morris USA should pay $28 billion to a 45-year smoker with lung cancer, but a judge reduced it to $28 million. Cigarette makers face more than 1,000 lawsuits by individual smokers.