Jury Asked to Hit Cigarette Firms for $154 Billion

Jurors in a landmark class-action case Monday were asked to sock U.S. cigarette manufacturers with a record-shattering $154-billion verdict as closing arguments began in the trial’s crucial punitive damages phase.

The staggering amount--orders of magnitude larger than any civil damage award on record--would serve as an “appropriate” and “just” punishment for the harm done by tobacco companies to the nearly 700,000 Florida residents who have been sickened or killed by smoking during the last decade, plaintiffs’ attorney Stanley Rosenblatt told the jury in Dade County Circuit Court.

It’s not unusual for plaintiffs in civil cases to ask for the moon, in the hope jurors will award even a fraction of their request. But over the course of the nearly two-year trial, Rosenblatt’s sway over the jury has been so complete that any damage award he seeks has a realistic chance of being granted, some legal and financial analysts say.

Rosenblatt is to conclude his closing statement today, and will be followed by lawyers for the five cigarette makers on trial in the case: industry leader Philip Morris Inc., R.J. Reynolds Tobacco Co., Brown & Williamson Tobacco Corp., Lorillard Tobacco Co. and Liggett Group Inc. Jury deliberations could begin as early as Thursday.

Industry spokesmen declined to comment on the damage request, saying they would respond in their closing statements.

Called the Engle case after lead plaintiff Howard A. Engle, a retired pediatrician with emphysema, the suit is the only class action on behalf of sick smokers to go to trial.

In the first phase of the case last July, the six jurors found that cigarette smoking causes 20 different serious diseases, and that tobacco companies had conspired for decades to lie about the risks and addictiveness of their products.

Then in the trial’s second phase in April, jurors ruled that three class representatives were entitled to $12.7 million in compensatory damages. That set the stage for the current phase of the case, in which the jury is to decide whether to award punitive damages in a lump sum for the entire class.

In a memo last week to tobacco shareholders, analyst Bill Pecoriello of Sanford C. Bernstein & Co. predicted that the jury “will remain true to its past deliberations and award the plaintiffs whatever amount Mr. Rosenblatt requests.”

Pecoriello said he expects the case to be thrown out on appeal, echoing industry officials who say the suit should not have been granted class-action status in the first place. They point out that numerous appeals courts have rejected the bundling of tobacco claims because individual members differ greatly in their health problems, smoking histories and awareness of the risks.

“This industry has left a half- century trail of deceit, which has decimated millions of Americans,” Rosenblatt told the jury. At the same time, he said, “no industry in the history of the world has more ability to get its hands on cash, cash, cash, 365 days a year, paid for by 45 million” people who continue to smoke.

Citing testimony by two of his expert witnesses, Rosenblatt said that through cash flow and borrowings the five companies together have the ability to pay between $123 billion and $196 billion in punitive damages. Saying he had “tried to be very conservative and very fair,” he suggested a total award of $154 billion.

Since the punitive damages phase began May 22, testimony and arguments have largely focused on the most realistic way to set the worth of the companies. For their part, lawyers and witnesses for the five companies have pegged their total net worth at less than $20 billion.

They have also maintained that even modest punitive damages aren’t warranted to punish or deter wrongful conduct, arguing that they have already reformed their marketing practices, have launched serious efforts to combat underage smoking, and are now dealing candidly with the public.

Rosenblatt did not spell out exactly how the industry might pay an award of $154 billion. In 1997 and ‘98, the industry agreed to $246 billion in settlements with state attorneys general, but under terms of the deals the companies are paying the money over 25 years through higher cigarette prices.

Circuit Judge Robert P. Kaye has ruled that the jury cannot set damages in the expectation of a multiyear payout. Further complicating the matter, Florida law bars damage awards that are large enough to destroy a business.

The threat to the industry from the Engle case isn’t limited to punitive damages. Compensatory damages have been set for only the three class members who were awarded $12.7 million in April. Theoretically, tens of thousands more could also seek mini-trials in pursuit not only of compensatory damages but also a share of punitive damages.