Florida Supreme Court Rules Against $ 145 Billion Tobacco Damages

July 7, 2006

The Florida Supreme Court has ruled that Philip Morris USA and other cigarette makers will not pay a $145 billion award, the largest in U.S. history, to Florida smokers. The court refused to reinstate a punitive-damage award that the companies had said would bankrupt them.

The case related to a $145 billion verdict that a Miami jury ruled in July 2000 against Philip Morris, a unit of Altria, Reynolds American Inc.'s R.J. Reynolds Tobacco and other U.S. cigarette companies. A state appeals court had rejected the award in May 2003, calling it "grossly excessive.'' The Florida Supreme Court affirmed that appeals decision today.

The ruling comes as a shot in the arm to the tobacco industry, reeling under multiple lawsuits over smoking-related deaths and disease. It also paves the way for Altria to separate the company's tobacco and food businesses. Shares of Altria Group Inc. and Reynolds American Inc.'s R.J. Reynolds Tobacco jumped to all-time highs as a result of this ruling.

The court held that the case cannot be treated as a class action, and Florida smokers must proceed with their claims individually. Florida smokers in the case were given one year by the ruling to file individual claims.

The court found that the amount of punitive damages was excessive "because it would bankrupt some of the defendants.'' The $ 145 billion verdict was also found to be improper because the trial court had decided the punitive amount for the whole class without first determining what actual damages were needed to compensate smokers for their injuries.

In today's decision, the court upheld $6.9 million in compensatory damages awarded to two smokers who served as representatives of the state-wide class. The court reversed $5.8 million in compensatory damages to a third class representative.

The Florida suit was filed in 1994 on behalf of some 700,000 smokers in the state, including Howard Engle, a Miami Beach pediatrician with emphysema who represented the plaintiffs' class. Florida's 3rd District Court of Appeal overturned the award and decertified the class, asserting that "the issue of damages requires individualized proof with regard to each smoker.''

In addition to Philip Morris, the world's biggest cigarette maker, and R.J. Reynolds, the other defendants in the case include Brown & Williamson Tobacco Co.; Loews Corp.'s Lorillard Tobacco Co.; and Vector Group Ltd.'s Liggett Group Inc. In July 2004, R.J. Reynolds acquired Brown & Williamson's U.S. operations.

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