Florida Court Rules Out $145B Tobacco Verdict

Philip Morris USA and other cigarette makers don’t have to pay $145 billion to Florida smokers, the state’s top court ruled, refusing to reinstate a punitive-damage award the companies had said would bankrupt them.The court ruled against imposing the record $145 billion verdict that a Miami jury handed down in July 2000 against Philip Morris, a unit of Altria Group Inc., R.J. Reynolds Tobacco Co., and other American cigarette companies. A state appeals court threw out the award in May 2003, calling it “grossly excessive.” The Florida Supreme Court affirmed that decision yesterday.Shares of Altria and Reynolds American Inc., which owns R.J. Reynolds Tobacco,jumped to record highs on the ruling. The decision eliminates the biggest financial risk to the tobacco industry from suits over smoking-related deaths and disease. It also removes a roadblock to Altria’s plan to break up the company to make it more valuable to investors.“The window is open, and Altria has an opportunity to go ahead and make the strategic changes they’ve talked about,” said Herb Achey, an analyst at New York-based U.S.Trust, which manages about $107 billion including 22.9 million Altria shares as of March 31.Altria shares rose $4.43, or 6%, to $77.76 in New York Stock Exchange composite trading, while Reynolds American shares gained $4.59, or 4%, to $118.95. Loews Corp. shares jumped 51 cents, or 1.4%, to $36.01.Stanley Rosenblatt, the lead attorney for the smokers, said he hasn’t decided whether he’ll try to appeal to the U.S. Supreme Court. Philip Morris also will consider whether to appeal some aspects of the ruling, the company said yesterday. Altria declined to comment on its plans to restructure the company.In addition to throwing out the punitive damage verdict, the court yesterday held that the case can’t be treated as a class action, which would consider all the smokers’ claims in one case.The Florida smokers must proceed with their claims individually, the court said. Smokers in the case were given one year by the ruling to file individual claims. Individual suits give the smokers less leverage and are easier for the companies to defend.“As numerous trial and appellate courts have held, tobacco cases cannot be treated as class actions because liability must ultimately be decided on a case-by-case basis,” a vice president and associate general counsel for Philip Morris USA, William Ohlemeyer, said in a statement.The court found that the amount of punitive damages was excessive “because it would bankrupt some of the defendants.”The verdict, the largest in American history, was also found to be improper because the trial court decided the punitive amount for the whole class without first determining what actual damages were needed to compensate smokers for their injuries.The six-judge panel ruled unanimously to block the punitive damage award. Other parts of the ruling were supported by different majorities of judges.Smokers who pursue individual suits will be aided by the jury’s findings, most of which were upheld yesterday. Jurors found smoking causes certain specific diseases, including lung cancer and coronary heart disease. The court also upheld jury findings that the cigarette makers placed unreasonably dangerous products on the market and misled smokers about the dangers of smoking.“All these findings are going to make the job of plaintiffs’ lawyers who take on these cases much easier,” said Mr. Rosenblatt, the smoker’s lawyer.In yesterday’s decision, the court upheld $6.9 million in compensatory damages awarded to two smokers who served as representatives of the statewide class.The court reversed $5.8 million in compensatory damages to a third class representative.The Florida decision comes after the Illinois Supreme Court ruled on December 15 that Philip Morris doesn’t have to pay a $10.1 billion damage award to smokers of its light cigarettes in that state.The decision doomed similar suits against other cigarette makers in Illinois.Altria CEO Louis Camilleri, 51, said in November that separating the company’s tobacco and food businesses hinged on winning the Florida case decided today, the Illinois case, and the U.S. Department of Justice’s racketeering suit against cigarette manufacturers.

Florida Court Rules Out $145B Tobacco Verdict

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