Court Reinstates Tobacco Verdict

The tobacco industry’s West Coast blues continued Wednesday when an appeals court upheld a verdict against Philip Morris Cos. and restored an $80.3-million damage award that the trial judge had trimmed.

The 3-0 decision by the Oregon Court of Appeals continued a string of West Coast setbacks for cigarette makers, which have lost five straight cases in Oregon and California, including the verdict upheld Wednesday.

Most striking about Wednesday’s ruling was not the rejection of Philip Morris’ appeal, but a finding that the trial judge had erred in paring the verdict to $32 million. “An award that might be a serious punishment for one defendant could be only a minor inconvenience for another,” the appeals court said.

The ruling came in a suit filed by survivors of Jesse D. Williams, a Portland school custodian and longtime Marlboro smoker who died of lung cancer in 1997 at the age of 67.

In what was then a record-breaking verdict, a Portland jury ordered Philip Morris to pay his survivors about $800,000 in compensatory damages and $79.5 million, or 97 times the amount, in punitive damages.

Trial Judge Anna J. Brown later trimmed the award to $32 million, noting that the U.S. Supreme Court has declared that punitive damages should bear a reasonable relationship to the size of a compensatory award.

But the appeals panel rejected Brown’s reasoning, saying, “We see nothing in a ratio of 97 to 1 that raises our judicial eyebrows, given the egregious nature of the defendant’s conduct as implicitly determined by the jury.”

Philip Morris said it will take its case to the Oregon Supreme Court and remains hopeful the verdict will “be reversed or the case sent back for a new trial.”

Bonnie Herzog, a tobacco analyst with Salomon Smith Barney, called the decision “disappointing ... and perplexing,” but said Philip Morris has solid grounds for appeal.

But Richard Daynard, head of the Tobacco Products Liability Project at Northeastern University, which promotes litigation against the industry, said the ruling “gives the lie to the assumption on Wall Street that these punitive damage verdicts are going to get themselves reversed.”

Said Daynard, “the evidence against this industry is just so damning, and the harm they’ve done so massive, that it’s really hard

Since 1999, tobacco companies have tried 26 lawsuits by individual smokers and have won 18, according to a count by Philip Morris. The majority--and the largest--of its losses have come in Oregon and California.

Besides the Williams verdict, a Portland, Ore., jury in March ordered Philip Morris to pay about $150 million to the family of Michelle Schwartz, a longtime smoker who died of lung cancer at the age of 53. The judge in that case reduced the award to $100 million.

Like both Oregon cases, California verdicts of $26.5 million, $21.7 million and $105.5 million are all on appeal. Philip Morris was the defendant in five cases, though R.J. Reynolds Tobacco Co. also was named in one.

In the Williams case, jurors found Philip Morris guilty of defrauding smokers over a period of decades by misrepresenting evidence concerning the hazards and addictiveness of smoking.

In its appeals, Philip Morris has argued that there was no evidence that plaintiffs acted on the basis of its statements, which it said is a prerequisite for a finding of fraud.

Philip Morris shares fell 36 cents to $57.36 on the New York Stock Exchange.