The Florida Supreme Court lifted a cloud over the tobacco industry Thursday when it refused to reinstate a crushing $144.8-billion class-action verdict that had been overturned by a state appeals court.
The long-awaited ruling came in the landmark Engle class-action case, filed on behalf of up to 700,000 Florida smokers who blamed tobacco-related illnesses on an industry conspiracy to hide the risks and addictiveness of smoking.
In July 2000, after a two-year trial, a state court jury in Miami ordered top cigarette makers to pay the record-breaking punitive damages award. The judgment far surpassed any civil verdict before or since and, according to tobacco executives, would have bankrupted their companies.
A Florida appeals court reversed the judgment in 2003, but plaintiffs sought review by the state's highest court, leading to Thursday's decision.
Anti-smoking groups described the ruling as a major disappointment, while Wall Street investors celebrated the apparent demise of one of the tobacco industry's greatest liability threats. Shares of Altria Group Inc., parent of industry leader Philip Morris USA, surged $4.43, or more than 6%, to $77.76, and Reynolds American Inc., parent of R.J. Reynolds, climbed $4.59 to close at $118.95.
Lead plaintiffs attorneys Stanley and Susan Rosenblatt could still seek review by the U.S. Supreme Court, but it is uncertain whether the court would take the appeal.
Thursday's ruling, while greatly reducing the cigarette makers' financial exposure in the Florida case, did not spell total victory for them. In a complicated, 79-page decision, the court overruled the appeals court by restoring nearly $7 million in compensatory damages that the jury had awarded to two class representatives with lung cancer in an earlier phase of the trial.
The court also upheld several liability findings by the Miami jury, which could serve as favorable ground rules for class members who decide to proceed with their own smoking and health claims.
The jury found that smoking causes lung cancer, heart disease, and more than a dozen other serious ailments; that nicotine is addictive; and that tobacco companies were guilty of fraud for failing to disclose the health risks and addictive nature of their products.
Because of Thursday's ruling, individual claimants in Florida won't have to prove these things, which could reduce the time and expense of trials and increase the number of lawsuits.
But the main thrust of the decision was highly favorable to cigarette makers. In agreement with the appeals panel, the state Supreme Court declared that Florida smokers should not have been lumped together as a single class because of wide differences in health status, smoking history and awareness of the risk.
Moreover, the court ruled that the size of the award "is excessive as a matter of law," in that "it would bankrupt some of the defendants."
"This is essentially very good news for the company," said Charles Blixt, general counsel for R.J. Reynolds, the second-largest U.S. tobacco company. "The significant impact is the reversal and a final end to the $145-billion judgment issued by the trial court."
John Seffrin, who heads the American Cancer Society, called the ruling "a huge disappointment."
"Despite the legal complexities behind today's ruling," Seffrin said in a statement, "one thing remains certain -- tobacco is the leading cause of preventable death in this country and the companies producing these deadly agents continue to do so at the expense of the health and well-being of this nation."
Stanley Rosenblatt, the lead plaintiffs attorney, said the ruling should streamline individual tobacco cases, thereby making it easier for sick smokers to find lawyers willing to represent them.
Lawyers have hesitated to sue the industry on behalf of individual plaintiffs, he said, because "they will smother you in money and time." Now, he predicted, "an individual case can be tried in a week" since the high court reinstated the jury's general liability findings.
The ruling also reinstated compensatory damages awards to two of three class representatives whose individual claims had been tried by the Miami jury prior to the punitive damages verdict.
Mary Farnan and Angie Della Vecchia, longtime smokers who contracted lung cancer, were awarded $2.85 million and $4.02 million, respectively, in mini-trials ending in April 2000.
"I'm glad they confirmed my case," said Farnan, 50. "I sure wish more plaintiffs could have won, but at least they have the right to sue as individuals. I pray every one of them wins."
Farnan, who lives in Inglis, Fla., said she smoked from age 10 to 40, when her lung cancer was diagnosed. Della Vecchia died in 1999 of lung cancer, said Rosenblatt.
The court did not restore a jury award of $5.8 million to class representative Frank Amodeo, who had throat cancer, ruling that the statute of limitations had elapsed before he joined the class. The 67-year-old Orlando resident smoked for 35 years until his diagnosis in 1987; for 19 years, Amodeo said, he has not been able to eat or drink, surviving with a feeding tube.
Named for Howard Engle, a Florida pediatrician -- now 85 -- who has emphysema, the case was filed in 1994 on behalf of a nationwide class of sick smokers. In January 1996, Florida's 3rd District Court of Appeals reduced the class to Florida smokers. A different panel of that court would rule -- seven years and tens of millions of dollars in legal fees later -- that the case should not have been tried as a class action in the first place.
Along with Philip Morris and R.J. Reynolds, defendants have included the Lorillard Tobacco Co., a unit of Loews Inc; Liggett Group Inc; and two now-defunct industry groups.
Tobacco companies still face class actions in several states that accuse them of making misleading claims about the risks of low-tar and -nicotine cigarettes.
And a federal judge in Washington, D.C., is expected to rule this year in the fraud and racketeering case brought against the biggest companies by the U.S. Department of Justice.