Philip Morris Ordered to Pay $28 Billion to Smoker
A Los Angeles jury on Friday ordered tobacco giant Philip Morris Cos. to pay $28 billion in punitive damages to a 64-year-old woman with lung cancer. The judgment is the largest punitive award to an individual in U.S. history.
Plaintiff Betty Bullock, a Newport Beach resident who also has liver cancer, contended that the firm failed to warn her about the hazards of smoking. Her attorneys introduced reams of internal company documents showing that Philip Morris knew for years that its products were addictive and hazardous even though the company was publicly denying that.
Philip Morris said it would ask to have the award reduced and appeal the entire verdict. The jury of seven women and five men earlier had awarded Bullock $850,000 in compensatory damages.
Legal experts predicted that the award would be slashed substantially by the judge. In any case, Bullock, who is gravely ill, may not live to see any of the money because appeals could take years. Although other plaintiffs have won cases against the cigarette companies, only one, Grady Carter of Jacksonville, Fla., has collected his judgment. The remaining cases are being appealed.
Nonetheless, Friday’s verdict is a reminder that even though the industry paid $246 billion in the late 1990s to settle lawsuits filed by state attorneys general, the cigarette manufacturers still have huge litigation problems.
Hundreds of other cases loom in the wings, and verdicts such as Friday’s will prompt more suits, said Northeastern University law professor Richard Daynard, director of the Tobacco Products Liability Project, which encourages tobacco suits.
“This is a bad omen for Philip Morris,” he said.
When the bailiff read the verdict, there was a moment of stunned silence in the small courtroom of Los Angeles Superior Court Judge Warren L. Ettinger.
Even Bullock’s lawyer Michael Piuze, who asked the jury for an award ranging from $6.6 billion to $20 billion, seemed surprised.
“I think this verdict underlies the disgrace, not just for the tobacco industry but for society as a whole for letting this go on as long as it did.... This is long overdue,” Piuze said.
Jurors said they believed the massive award was justified by the reprehensibility of Philip Morris’ conduct during the last 50 years and the company’s profits.
Asked why the panel had punished the company so severely, jury forewoman Jessica Gelson responded: “I don’t think it’s such a loud message when you consider how long [the company’s conduct] went on and when you look at the number of people who die each year from smoking.”
According to government figures, 400,000 deaths in the U.S. are attributable to smoking each year.
Juror Jose Farinas also said he did not consider the amount staggering, noting: “It’s just a year’s revenue for Philip Morris.”
“We thought about the 50 years of malice and fraud” demonstrated by more than 100 internal company documents introduced during the trial, added Farinas, who teaches math at Van Nuys Middle School. “The documents were very important in that they confirmed that [Philip Morris] knew” that cigarettes were hazardous and addictive and that “they lied to the public.”
Juror Frank Guzman said the panel had a spirited debate over the amount of the award, with individual jurors suggesting awards ranging from $5 million to $100 billion. Eventually, 11 of the 12 settled on $28 billion, more than the nine votes needed for a verdict.
Guzman said the jurors had been told that only 1 in 28,000 lung cancer victims gets his or her day in court, and the panel in effect decided to impose $1 million of punishment on Philip Morris for each of the 28,000.
There has been only one larger jury verdict in a tobacco case: the $144 billion awarded in 2000 to a class of thousands of sick smokers in Florida.
Because the jurors had voted unanimously in the first phase of the trial that Philip Morris had acted with “malice, fraud and oppression,” there was little doubt they would render a punitive award.
Judge Ettinger instructed the jury that it should consider three factors in assessing how large the punitive award should be if the jury voted for one: the amount of punitive damages that would have a deterrent effect on the company; the degree of reprehensibility of the company’s conduct; and that the amount of damages bear a reasonable relationship to the injury suffered.
Before deliberations began, defense lawyer Peter Bleakley moved for a mistrial, contending that Piuze had asked the jury to ig- nore the third factor. But the judge disagreed and denied the motion.
The Bullock verdict was the latest setback for an industry that for more than 40 years had a virtually unblemished record of success in litigation, never paying a dime in damages. The industry’s primary defense was that the plaintiffs knew there were risks when they lighted up and they should be held responsible for their own conduct.
But the tables began to turn against the companies in the mid-1990s, when thousands of damaging internal industry documents leaked out and then more were obtained in the course of litigation. Plaintiffs’ lawyers now are able to use those documents to say that the companies showed no personal responsibility in vigorously marketing products they knew to be addictive and dangerous.
Friday’s verdict marks the sixth straight big loss for the industry in trials on the West Coast--four in California and two in Oregon.
Piuze first raised the issue of corporate responsibility when he questioned potential jurors in the case, and he seized on that theme in remarks after the verdict.
“The judge instructed the jury that corporations are to be viewed like individuals,” he said. “We showed that Philip Morris had personal responsibility” for what happened to his client.
“Betty Bullock admitted that she was partially responsible,” Piuze said, noting that his client, who began smoking at 17, had been urged to stop by her daughter but continued smoking until her cancer diagnosis in 2001.
Though Philip Morris’ attorneys did not deny during the trial that smoking is dangerous, they focused on Bullock’s awareness of the risk and her failure to quit.
Friday’s verdict marked the second time Piuze has vanquished Philip Morris. Last year he persuaded a Los Angeles jury to award $5 million in compensatory damages and $3 billion in punitive damages to smoker Richard Boeken--an award that was reduced to $100 million by a judge. Boeken has since died, and Philip Morris is appealing the $100 million.
Bonnie Herzog, a tobacco analyst at Salomon Smith Barney, said the Bullock verdict was so large as to be almost “comical.”
But Philip Morris executives were not laughing Friday, even though the company’s associate general counsel, William Ohlemeyer, expressed confidence that the verdict would be dramatically reduced. The jurors “were instructed that punitive damages must bear a reasonable relationship to the compensatory damages, and you know 33,000 times [the ratio of the punitive award to the compensatory damages] is not reasonable,” he said.
But industry critic Daynard said, “There is no number large enough to appropriately punish a company whose reckless pursuit of its own profits led to millions of premature deaths.”
Wall Street reacted swiftly to Friday’s verdict, sending Philip Morris’ stock to its lowest level since December 2000. Shares fell $2.91, or 5%, to $36.59 on the New York Stock Exchange. Other tobacco stocks also fell.
The outcome was a setback for veteran Philip Morris lawyers Bleakley and Maurice Leiter, both of Washington-based Arnold & Porter. They tried new tactics in the case, hoping for a better outcome than in the Boeken case.
For years, Philip Morris--as well as the other cigarette companies--fought over virtually every blade of grass in court, down to the definition of ordinary words such as “health.” This time, though, the company presented only one witness during the first phase of the trial and no witnesses during the punitive phase. During that segment, defense lawyers chose only to cross-examine a plaintiff’s expert who testified on Philip Morris’ wealth, saying its domestic tobacco unit was worth $24.6 billion.
Jurors cited that figure when discussing the size of their verdict.
In his closing argument, Bleakley conceded that Philip Morris could absorb a $20-billion punitive award. On the other hand, he told jurors, it would be wrong to render such a verdict because the company already had changed its ways.
But that argument held no sway with the jurors.
“I don’t know what their thinking was,” said jury forewoman Gelson. “I think the evidence was so strong it didn’t matter what they said.”
The verdict and the jurors’ comments “reflect a fundamental change in how jurors view the industry’s behavior,” said Matthew Myers, president of the Campaign for Tobacco-Free Kids in Washington. “The companies are being hung on their own words from their own documents. These cases are less and less about the behavior of individual smokers and more and more about the cumulative behavior of the tobacco industry.”
New York University law professor Stephen Gillers said he saw a silver lining for the industry in a verdict so huge that it was “incoherent.”
“In a backhanded way, this is good for the tobacco companies,” he said, “because it will force the courts to address the lottery quality of this verdict and perhaps might force the Congress to step in and resolve these issues legislatively.”
After rendering their verdict, virtually all the jurors went up to Piuze, his co-counsel Paula Lawlor and their paralegal Ray Goldstein in the courthouse hallway and congratulated them. Then Piuze took the jurors to lunch at a nearby restaurant.
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