Tobacco Firms Score Big Victory in Florida Appeal : Lawsuit: Three-judge panel says class-action damages must be decided one smoker at a time, averting potentially huge award.
Tobacco companies won a big legal victory Friday when a Florida appeals court ruled that damages in a landmark class-action case must be considered one smoker at a time, thus forestalling the risk of a multibillion-dollar punitive-damages award.
In a terse, two-sentence order, the three-judge panel overruled a decision by trial judge Robert Kaye that would have allowed jurors to establish lump-sum punitive damages for as many as hundreds of thousands of state residents who became sick or died from smoking.
Tobacco officials were desperate to overturn that ruling, which could have resulted in a catastrophic punitive damages award.
The ruling means instead that when the second phase of the marathon trial, known as the Engle case, begins Tuesday in Dade County Circuit Court, it will be limited to determining if two lung cancer victims, and perhaps several other designated class representatives, are entitled to damages.
Industry officials were ecstatic, but because Kaye has issued a gag order in the case neither tobacco executives nor plaintiffs attorneys Stanley and Susan Rosenblatt would comment. The Rosenblatts are expected to ask that the full Third District Court of Appeal reconsider the matter. It was unclear if that might delay resumption of the case, the first smokers’ class-action suit to reach a jury.
Investors cheered the news. On a day of huge gains on Wall Street, tobacco shares rose more sharply than the market as a whole. In trading on the New York Stock Exchange, industry leader Philip Morris Cos. rose $2.38 to close at $39.25. R.J. Reynolds Tobacco Holdings rose 75 cents to $28.38. Loews Inc., owner of cigarette maker Lorillard, gained $2.81 to $80.38. And smokeless tobacco marketer UST Inc. gained 88 cents to close at $32.
As a result of the ruling, “essentially the most threatening aspects of the Engle class action have been removed,” said Martin Feldman, a tobacco analyst with Salomon Smith Barney.
But Matt Myers, vice president and general counsel of the National Center for Tobacco-Free Kids, called the ruling “a short-term victory for the tobacco industry . . . [that] does not alter [its] long-term liability exposure.”
“What it does mean is that there won’t be a single jury verdict that provides the knockout punch,” Myers said.
Tobacco companies would rather deal with individual lawsuits, knowing that there is no way tens of thousands of claims will be adjudicated, that the industry will prevail in many cases, and that smokers who do win compensation won’t necessarily get punitive damages as well.
Apart from the Engle case, tobacco companies face hundreds of lawsuits by individual smokers, a pair of huge lawsuits by Blue Cross and Blue Shield plans, and the threat of a federal lawsuit to recover taxes spent treating sick smokers.
Following months of testimony, the six-member Engle jury ruled in July that smoking is addictive and causes cancer, heart disease and other ailments, and that cigarette makers lied for decades to the public about the risks.
That set the stage for a second phase of mini-trials for several class representatives.
Kaye ruled on Aug. 2 that jurors could also decide if punitive damages should be awarded to the entire class, and if so in what amount.
Feldman said that Friday’s ruling turns the Engle case “into something that doesn’t look a lot different than a long string of individual cases” by single Florida smokers.
However, the July verdict would streamline individual trials with ground rules favorable to plaintiffs. That’s because smokers would not have to prove that smoking causes illness and is addictive, or that tobacco companies concealed evidence. The industry would still be able to argue that a smoker’s specific illness resulted from some other cause, and that he chose to keep smoking despite knowing the risks.
