Tobacco Firms Struggling in West Coast Courts

With Friday’s record $28-billion punitive damage award against Philip Morris Cos., West Coast courts continued to be a killing ground for tobacco companies, whose success in fending off product liability claims was once the envy of the corporate world.

The victory by cancer victim Betty Bullock of Newport Beach marked the industry’s fourth straight courtroom defeat in California. With two additional mega-verdicts in Oregon, cigarette makers are winless in six consecutive West Coast trials dating back to 1999. All of the cases are on appeal.

“Despite an enormous amount of work, Philip Morris has appeared to have made no progress in its California litigation strategies,” Martin Feldman, tobacco analyst with Merrill Lynch, said after Friday’s verdict. “Jurors in California continue to remain tremendously angered by the conduct that is portrayed by plaintiffs” through internal industry documents, he said.

The battle is scheduled to resume next week in Sacramento as jury selection begins in a case filed against Philip Morris and R.J. Reynolds Tobacco Co. The two leading U.S. cigarette makers are scheduled to go on trial again Oct. 21 in a case in San Francisco. And Philip Morris and Brown & Williamson Tobacco Corp. will be defending a third case in Los Angeles in January.

Although the industry has suffered a few losses elsewhere, there is wide agreement that California juries seem especially hostile to cigarette makers--and there are a number of theories why this is so.

Reflecting low social acceptance of smoking, California has the nation’s toughest protections against secondhand smoke and the lowest per capita rate of smoking of any state but Utah. Robert Rabin, a Stanford University law professor, notes that Californians have long been concerned with air pollution and healthful lifestyles--and may take a particularly negative view of industries that market dangerous products.

Even in non-tobacco cases, California juries at times have dealt harshly with companies deemed to have ignored health or safety concerns.

In July 1999, for example, a Los Angeles jury ordered General Motors Corp. to pay a then-record $4.8 billion in punitive damages to six people who were badly burned in a fiery wreck. The award was pared by the trial judge to $1.2 billion, and the case is on appeal.

Perhaps most important, anti-smoking sentiment in California has been hardened over the years by state-sponsored ad campaigns that attack not only smoking but also the character and motives of the tobacco industry.

The campaigns, funded by a 25-cent cigarette tax increase passed by voters in 1988, have essentially poisoned the jury pool, tobacco industry officials have complained. Though state health authorities say the ads are intended to promote public health--not successful litigation--many observers believe that they have increased disdain toward the industry.

The Bullock case was the first to be tried since a state Supreme Court ruling that tobacco officials and Wall Street analysts had hoped might get the once-invincible industry back on the winning track. The Aug. 5 ruling barred smokers from presenting evidence of industry deception from 1988 to 1998--the period when a legislative ban on product liability claims against the industry was in place.

But that hope proved illusory, as the ruling reduced only slightly the arsenal of incriminating documents available to plaintiffs, including Bullock and her lawyer, Michael Piuze.

Generated mostly in the 1950s, ‘60s, ‘70s and ‘80s, the documents were the centerpiece of Bullock’s case--and, as intended, focused the jury’s attention on the conduct of Philip Morris rather than on Bullock’s failure to quit.

Although industry officials have sought to define the recent setbacks as a West Coast problem, it’s not clear why that should be a source of comfort. Although its smoking rates are below average, California has about one-eighth of the U.S. population and close to that fraction of the hundreds of thousands of people estimated to get sick or die each year from smoking-related causes.

As a result, there has been no shortage of potential California plaintiffs--only of lawyers willing to invest the time and money needed to battle the tobacco companies. . Only about 65 lawsuits by individual smokers are pending in California now, but if the four victories to date survive appeals, experts say, a flood of filings is likely. Several hundred suits by individual smokers are pending nationwide.

Others question whether juror hostility is an isolated West Coast phenomenon, noting that so few cases have been tried in other areas that it’s difficult to know.

In 50 years of tobacco litigation, barely more than 50 individual suits have been tried to verdicts--with hundreds more abandoned by plaintiffs or dismissed before trial.

Although only four cases have been tried in California since 1999, only one state, Florida, has tried as many. And at times the industry has shown some vulnerability where least expected.

In June, for example, a U.S. district judge in Kansas City, Kan., hit R.J. Reynolds Tobacco with a $15-million punitive damage award in the case of a former smoker who lost his legs to a circulatory disease.

Before the verdict, cigarette makers had never lost a case in America’s conservative Midwestern heartland and had never lost a case in federal court, where stricter rules of evidence generally are thought to favor the defense.

And on Sept. 26--the same day the Bullock jury awarded compensatory damages in her case--a jury in Puerto Rico awarded damages of $500,000 in a wrongful-death case brought by the sons of a deceased smoker.

Even so, of the dozen or so smokers who have won damage awards from cigarette makers, because of lengthy appeals, only one has been able to collect. All of the other cases, including those on the West Coast, are in various stages of appeal.

Despite its poor showing in California, the industry still is hoping for a knockout punch when the cases reach the state Supreme Court.

Defense lawyers contend that in every case plaintiffs have failed to prove an essential ingredient of fraud--namely, that smokers believed and relied on statements by tobacco companies when they decided to start or continue to smoke. Without proof of such reliance, they say, the findings of fraud and punitive damages can’t hold up.

William S. Ohlemeyer, vice president and associate general counsel of Philip Morris, said this “will be an important issue in the appeal of this case [Bullock], as it is in the other California cases.”

The Bullock verdict and the prospect of more punishing defeats for the industry in California could build support for a longshot plan by a New York judge to lump millions of injured smokers into a nationwide class that could split a single pot of punitive damages.

In a novel ruling last month, U.S. District Judge Jack B. Weinstein in Brooklyn ordered a trial that could result in cigarette makers paying billions of dollars into a giant fund to be divided among all Americans who can show proof of smoking-related injuries since 1993. The ruling, which experts say is unlikely to survive industry appeals, is meant to reform what amounts to a lottery system in which a few plaintiffs may reap windfall damages while a greater number suffering identical injuries get nothing at all.

“If we continue the way this verdict [Bullock] indicates ... some plaintiffs get tremendous windfalls by way of social punishment,” but “there will be other cases in other places where juries say you knew the risks” and get nothing, said John Coffee, a Columbia University law professor who has served as an aide to Weinstein.

“I am not predicting the companies will settle tomorrow, but their thinking has to be affected by the growing tendency of California juries to find for plaintiffs,” Coffee said.