Verdict Deals Tobacco Firms a Historic Defeat
The tobacco industry suffered a historic courtroom defeat in Florida on Wednesday when a jury ordered the Brown & Williamson Tobacco Corp. to pay $1 million to the family of a smoker who died of lung cancer, including the first punitive damages awarded in 45 years of anti-smoking litigation.
The verdict in Jacksonville was only the second courtroom loss ever for the $50-billion industry, which has settled several major cases during the last year without admitting liability. The result is almost certain to trigger a flood of new lawsuits against the industry, already besieged by about 800 pending claims.
And it further dims cigarette makers’ flickering hopes of resurrecting liability protections as an element of anti-smoking legislation being considered by Congress.
Tobacco stocks swooned on news of the verdict. Shares of industry leader Philip Morris fell $1.88 to $38.38, while RJR Nabisco Holdings dropped 88 cents to $26. Loews Corp., parent of cigarette maker Lorillard Inc., fell $1.94 to $89.06. American depository receipts for BAT Industries, parent of B&W;, dipped 63 cents to $19.56.
The jury of three women and three men deliberated about 11 hours over two days before ordering B&W;, the country’s third biggest cigarette maker, to pay compensatory damages of $552,000 to the family of Roland Maddox, who smoked for 50 years before dying of lung cancer last year at the age of 67.
The jury--which found that B&W; had conspired with other cigarette makers to conceal health information and to contrive a bogus controversy on the risks of smoking--then retired again to deliberate for another hour before announcing an additional punitive damage award of $450,000.
In a prepared statement, B&W; declared itself “shocked by the jury’s verdict. There was nothing B&W; did or could have done that would have in any way influenced Mr. Maddox’s decision to smoke.”
The implications were immense for the embattled industry, which is already struggling to marshal its wealth and legal talent against an unprecedented wave of claims by state attorneys general, health care funds and insurers, as well as by individual smokers.
“I think it’s disastrous to the industry,” said Richard Daynard, a Northeastern University law professor and head of the Tobacco Products Liability Project, which encourages lawsuits against the industry.
“The problem becomes . . . when you have verdicts like this for $1 million it attracts lawyers,” remarked Gary Black, tobacco analyst with Sanford C. Bernstein & Co.
The anti-smoking group Action on Smoking and Health put it more baldly. “Decision Will Bring Lawyers to Court Like Blood Does to Sharks,” it crowed in a press release.
Punitive damages are meant to punish egregious conduct by a guilty party, and when awarded often exceed the compensatory damages. If there was any solace for the industry, it was that the punitive damage award was not extremely high. But tobacco officials were hard put to find a silver lining in the landmark verdict.
The result will enhance the giant-killer image of the small Jacksonville law firm of Spohrer, Wilner, Maxwell, Maciejewski & Matthews, which is responsible for both of the industry’s losses. In 1996, the eight-lawyer firm became the first to defeat the industry when it won a $750,000 verdict for lung cancer victim Grady Carter. That verdict, also against B&W;, is on appeal. The firm subsequently lost two other tobacco cases.
With the verdict, the Florida courts also continue as a dismal swamp for Big Tobacco apart from Spohrer, Wilner’s exploits. Last year, tobacco companies agreed to pay $11.3 billion to settle the state of Florida’s suit for reimbursement of smoking related health care costs, and also settled a secondhand smoke case in Miami on behalf of the nation’s airline flight attendants for $349 million.
Another stiff challenge looms next month when a class-action suit on behalf of all injured Florida smokers is scheduled for trial. And Spohrer, Wilner has about 100 more cases pending in the state on behalf of individual smokers.
Some analysts said the Maddox verdict seems particularly ominous for the industry in light of testimony that Maddox was well aware of the risks--and in fact referred to cigarettes as “coffin nails” and “cancer sticks” in conversation with customers and co-workers at a grocery where he worked.
“Investors are going to be worried about the fact that punitives were awarded against the industry--especially in a case where the plaintiff didn’t seem to be a particularly sympathetic plaintiff,” said Martin Feldman, tobacco analyst with Salomon Smith Barney.
“He appeared to understand the [hazards] of the product, yet the jury was still prepared to award both compensatory and punitive damages.”
Indeed, the industry’s longtime courtroom success had depended in large part on showing that plaintiffs persisted in smoking despite knowledge of the risks. But with the help of incriminating documents--which appear to contradict the industry’s public stance on the risks and addictiveness of smoking--plaintiffs increasingly have been able to change the focus to the industry’s behavior.
In the Maddox case particularly, lead plaintiffs attorney Norwood “Woody” Wilner “was successful in getting the jury . . . to focus on the conduct of the industry rather than the conduct of the plaintiff,” Feldman said.
Maddox also smoked Liggett Group’s Chesterfield brand, and Liggett was originally a co-defendant but settled the case out of court. Liggett’s maverick chief executive, Bennett LeBow, was called as a witness in the case against B&W.; Alone among cigarette makers, Liggett’s stock rose after Wednesday’s verdict.
The plaintiffs showed jurors hundreds of internal documents, most of them from B&W.; Some had surfaced for the first time in other recent cases, but others were stolen and leaked in 1994 by a former paralegal for a B&W; law firm in Kentucky.
John Nyhan, B&W;'s lead trial lawyer, said the stolen documents “were improperly allowed into evidence” by Duval County Circuit Judge Charles O. Mitchell.
“The jurors allowed their passions to be inflamed by these documents, and they rejected our argument that Mr. Maddox should have been personally responsible for the choices he made in his life,” Nyhan said. B&W; said it expects to appeal.
B&W; essentially inherited this case and many others through its acquisition of American Tobacco Co. in 1995. Maddox smoked American’s Lucky Strike cigarettes, which are now a B&W; brand. In the Carter case, too, the plaintiff had been a customer of American Tobacco.
Before 1996, plaintiffs could point to just a pair of pyrrhic victories against the industry. In 1988, jurors in a New Jersey case awarded $400,000 against Liggett, but that verdict was voided on appeal. In 1990, a Mississippi jury found American Tobacco partly liable for a lung cancer death but decided to award zero damages to the widow of the victim.
In addition, cigarette maker Lorillard Inc. has lost two cases stemming from its use of asbestos in the filter of Kent cigarettes in the early 1950s. But those verdicts involved injuries sustained from asbestos exposure, not cigarette smoke.
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