Tobacco Industry Loses in Fla. Case

$12.7 Million Award In Lawsuit Could Grow Into Billions

A Miami jury ordered the tobacco industry to pay $12.7 million yesterday to three former smokers in an unprecedented class action lawsuit, a decision that leaves cigarette makers vulnerable to a potentially devastating multibillion-dollar judgment.

Circuit Judge Robert Kaye said he would call the six-member jury back within several weeks to begin a hearing to assess punitive damages for an estimated 500,000 Florida smokers who the same panel previously ruled had been harmed by the industry.

The case is the first successful class action by smokers against the tobacco industry, and company attorneys have said the jury's punitive damages could reach a ruinous $300 billion--pushing the companies into bankruptcy.

Yesterday's verdict had been widely anticipated. If the jury had ruled against compensatory damages, the case would not have been able to proceed to the punitive stage. Although many legal challenges remain, and it is impossible to predict how the jury will rule next, yesterday's verdict could signal that jurors are inclined to levy a heavy penalty against the industry.

"This verdict paves the way for what could be the largest punitive damage judgment this nation has ever seen," said Matthew Myers of the Campaign for Tobacco-Free Kids. "I think it shows these jurors remember the evidence of industry wrongdoing, and they are still angry." He called the decision "the industry's worst nightmare."

Tobacco industry officials said that they are disappointed by the decision but that they are confident the jury's decision will be overturned on appeal.

In yesterday's verdict, the jury awarded damages only to compensate for medical costs, lost earnings, and pain and suffering for three representatives of the class.

"Everyone should be happy with what happened," plaintiff Mary Farnan, a 44-year-old nurse with lung and brain cancer who was awarded $2.85 million, told the Associated Press.

"I'm smiling, I'm smiling, I'm smiling," said clockmaker Frank Amodeo, 60, even though the jury blocked his award. The jurors said he had filed his claim too late, but they granted him $5.8 million should the judge decide otherwise.

The third plaintiff, Angie Della Vecchia, died last year at age 53. Her estate was awarded $4.023 million.

All three started smoking as teens, smoked for decades, and claimed to have tried unsuccessfully to quit.

If punitive damages are awarded, the remainder of the smokers in the case would be eligible for mini-trials of their own to collect compensatory damages.

With tobacco companies fighting the punitive damages in court and in key state legislatures, it was unclear yesterday whether the judge's timetable for a punitive phase would hold. State attorneys general also have voiced concern that a large punitive award in Florida could jeopardize the $246 billion settlement reached in 1998 between the tobacco companies and their states.

William S. Ohlemeyer, associate general counsel of Philip Morris Cos., said his company will ask Kaye next week to allow an immediate appeal on whether the punitive phase should be delayed. Leaders of the Florida legislature have been discussing a similar delay, and even the state's attorney general--long-time tobacco foe Robert Butterworth--has drafted a bill that would put the punitive phase on hold.

As did the tobacco companies, Butterworth concluded that Florida law requires that compensatory damages be assessed individually for each Floridian harmed by smoking before any punitive damages can be considered for the class. That could delay the punitive phase for years. Stanley and Susan Rosenblatt, attorneys for the Florida smokers, have successfully argued the opposite.

Ohlemeyer said yesterday's decision supports the industry's argument that smokers should not have been certified as a class.

"We're disappointed with the result, but think it demonstrates precisely why these cases aren't tried appropriately as class actions," he said. "The jury found different percentages of fault with each individual, and that tells us these should be considered case by case, and not in a common-issues trial."

Federal and state judges have reviewed 21 requests to certify cigarette smokers as a class, but the Florida case is the only one that has been approved. Most of those denials came after the Florida class was approved.

While the industry has recently lost lawsuits filed by individual smokers in Florida, California and Oregon, juries have awarded damages to smokers only six times, and the industry has yet to pay any legal judgments.

The industry has settled some major cases, however, including the $246 billion master agreement with the state attorneys generals and a secondhand-smoke case settled for $349 million in Florida. That case involved a class action by flight attendants and was also argued by the Rosenblatts. Each success brings additional suits, and the industry is facing hundreds across the country.

Yesterday's jury decision for the former smokers was no surprise, because the same jury ruled in July that the tobacco industry had addicted and defrauded smokers for decades. Attorneys for the plaintiffs had asked the tobacco companies to pay about $13 million for lost wages, suffering and other personal injuries.

But there will be many appeals in the days ahead, as R.J. Reynolds Tobacco Co. made clear yesterday. "The errors committed by the trial judge during this trial are too numerous to mention, but all of them will be raised during our appeal," the company said in a statement.

Further complicating the picture is a Florida law that requires the loser in a lawsuit to post a bond worth 115 percent of the judgment before filing an appeal. That provision has led some to argue that the industry could be bankrupted by the bond, and thus would be denied its right of appeal. Legislatures in four tobacco-producing states--North Carolina, Virginia, Georgia and Kentucky--have passed legislation in recent weeks to shield company assets in their states from any bonding requirements.

The Rosenblatts have not told the jury what they consider to be an appropriate punitive award, but Florida law forbids judgments that would result in bankruptcy.

The defendants in the case are the nation's five largest tobacco companies--Philip Morris, R.J. Reynolds, Brown & Williamson Tobacco Corp., Lorillard Tobacco Co. and Liggett Group Inc.--and two industry organizations, the Council for Tobacco Research and the Tobacco Institute.

Stock prices of the tobacco companies were mixed yesterday, and they remain substantially lower than they were before the Florida jury made its initial ruling against the industry in July.