Jury Awards $50 Million in Tobacco Case
A San Francisco jury stunned the cigarette industry by ordering Philip Morris to pay a record-shattering $50 million in punitive damages to a Los Angeles smoker who kicked the habit shortly before she was diagnosed with lung cancer.
The award--more than three times what the plaintiff’s lawyer asked for--was a sharp blow to an industry that had hoped its historic legal settlement with the states in November put its major legal problems behind it.
Hundreds more suits by individual smokers are pending in courts throughout the country, and the San Francisco verdict is almost certain to trigger hundreds more. Moreover, the outcome underscores the growing willingness of juries to base verdicts on the conduct of tobacco companies rather than the weakness or bad judgment of smokers.
The $50 million in punitive damages came a day after the same jury awarded $1.5 million in compensatory damages to Patricia Henley, 52, of Los Angeles, a longtime smoker of Philip Morris’ flagship Marlboro brand.
The verdict “certainly confirms the industry’s worst nightmare,” said Stanford University law professor Robert Rabin. Such punitive damage awards could create “a massive degree of unpredictability of just the kind they were trying to avoid” in the recent landmark settlement with state governments.
Legal experts said the $51.5-million award may well be reduced on appeal or even by the trial judge. Even so, they said, a moderate reduction would hardly diminish its importance.
Henley, a former owner of a drain-cleaning business and an aspiring singer, promised to spend the money on educating young people on the hazards of smoking.
“It’s a victory for the children,” said Henley, who smoked Marlboros from age 15 until a year ago. “I don’t touch blood money.”
The award is only the fourth in cases brought by an individual smoker, though other awards have involved filters used in the 1950s that contained asbestos. The first smoker’s win, in 1988, was abandoned after years of appeals, and two others in Florida have been overturned largely on technical grounds. No previous verdict topped $2 million.
“The jury wanted to send a message comparable to what Philip Morris makes,” said jury foreman George Loudis, 37. “The jury as a whole took into account the suppression of known facts by Philip Morris. That was the basis for a lot of hostility.”
Several of the jurors approached Henley and wished her luck after the verdict. Her inoperable cancer is in remission after chemotherapy and radiation treatments.
Henley’s attorney Madelyn Chaber had asked for only $15 million in punitive damages but pointed to Philip Morris’ billions in net worth. Punitive damages are intended to punish wrongdoers and set an example. The jury awarded compensatory damages a day earlier for Henley’s medical expenses and lost life expectancy.
The four-week fraud and conspiracy trial was the first in California since last year’s repeal of a 10-year ban on suits over smoking. Chaber alone has filed 10 cases since then, and analysts predicted that Wednesday’s verdict will spur hundreds more even if it is reduced by San Francisco Superior Court Judge John Munter or cut on appeal.
Philip Morris attorney Bill Ohlemeyer said he is “definitely optimistic” that the award will be struck, especially because California appeals courts have yet to consider many smoking cases. “There are a lot of unsettled issues,” he said.
The evidence in Henley’s case was similar to that in the two Florida cases won by Jacksonville lawyer Norwood Wilner, who took advantage of a flood of documents loosed during the last five years as pressure mounted to regulate the industry and whistle-blowers deserted Philip Morris and other tobacco companies.
Jurors said they were angered by many of the roughly 1,000 company documents they were shown about addiction, the importance of denying that cigarettes cause cancer and other issues.
Loudis, the foreman, said the 12-member group was passionate in part because of the infamous 1953 “Frank Statement” to smokers, in which the companies pledged in newspaper advertisements to investigate smoking and health concerns.
“Philip Morris’ concealment of important information about the health risks, and also their lack of acknowledgment of the severity of the health risks, was critical,” said juror Gwen Leath.
Under California law, only nine of the jurors had to agree on the size of the award. After a three-hour deliberation in which figures from $5 million to $1 billion were considered, 10 approved the $50-million tab. The other two favored lesser amounts, according to the foreman.
The award, coming in what analysts considered a relatively weak case, may prompt Philip Morris, RJR Nabisco and other cigarette makers to seek a new type of global legal settlement, said Sanford Bernstein & Co. analyst Gary Black.
Last year’s $206-billion settlement of lawsuits by states seeking reimbursement for the public expense of treating smokers’ illnesses did not address lawsuits by individuals, although the industry had tried to eliminate punitive damages and class-action cases. Since President Clinton last month pledged a federal lawsuit similar to the state cases, some companies are interested in a settlement of that claim that would also limit awards to individuals, Black said.
“It’s going to force the industry to wake up and say, ‘We have to have another settlement.’ You’re going to have hundreds of claims filed,” Black said.
After Tuesday’s ruling, Philip Morris shares fell $3.94 on Wednesday to $41.44, an 8.7% drop. No. 2 RJR fell $1.38, or 4.8%, to $27.31.
“It’s gonna hurt the stocks some more” today, Black said. Philip Morris’ market capitalization, the value of all its shares, has plunged from $143 billion at its peak last summer to $99.5 billion now, a 30% decline.
In its defense against Henley, Philip Morris suggested that her cancer originated in her thalamus and that Henley knew smoking was dangerous.
Chaber, however, said her client was one of the few who took tobacco executives seriously when they said their product hadn’t been shown to cause cancer. Henley said she became convinced only after reading company documents posted on the Internet since 1994.
The industry is now defending against four more cases brought by Wilner in Memphis and the first class-action suit to reach trial, on behalf of Florida smokers. Later this month, a group of union health-care funds, also seeking reimbursement for treatment costs, go to a first-of-its-kind trial in Akron, Ohio. Hundreds of other cases have been filed.
The last California tobacco trial ended in a verdict for cigarette makers in December 1985, when a Santa Barbara jury found RJR not liable for the death of longtime smoker John Galbraith.
Chaber won an asbestos-filter case against Lorillard Tobacco in San Francisco in 1995. Jurors awarded compensatory and punitive damages to Milton Horowitz, a Beverly Hills psychologist who suffered from mesothelioma, an asbestos-related cancer.
While by far the largest verdict in the history of tobacco litigation, Henley’s win is not the largest punitive damage award to be assessed in a product liability case.
Last August, a Los Angeles County Superior Court jury awarded $760 million in punitive damages to 38 former Lockheed workers who had sued oil and chemical companies for health damage from exposure to chemicals the firms had supplied to Lockheed. Under pressure from the trial judge, the plaintiffs in November agreed to a settlement that pared the punitive damages to $380 million.
Ford Motor Co. in 1978 was ordered to pay $125 million in punitive damages in a case involving fire and explosion hazards of Pinto automobiles. A judge later reduced that award to $3.5 million.
