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Although
the emotional appeal of the class' representatives' claim is
compelling, our job as appellate judges is not to be swayed by
emotion where to do so results in violating established legal
principles.
Tuesday, May 27, 2003 Posted: 1839 GMT (
2:39 AM HKT)
MIAMI, Florida (CNN) --
A Florida appeals court Wednesday overturned a
record-setting verdict in a class-action lawsuit that ordered tobacco companies
to pay smokers $145 billion in punitive damages and $12.7 million in
compensatory damages.
In its 68-page ruling, the three-judge panel from the 3rd District Court of Appeals said smokers could not group themselves together in a single lawsuit against the nation's five biggest cigarette makers. The panel called the damages "grossly excessive," and called the jury "irreparably prejudiced."
"Although the emotional appeal of the class' representatives' claim is compelling, our job as appellate judges is not to be swayed by emotion where to do so results in violating established legal principles," the ruling stated.
Shares of the cigarette makers jumped on the news.
The defendants included the No. 1 U.S. cigarette maker, Philip Morris USA, a unit of Altria Group Inc. (MO: up $3.11 to $38.02), along with R.J. Reynolds Tobacco Holdings Inc. (RJR: up $1.89 to $33.60), Lorillard Tobacco Co., a unit of Loews Corp. (LTR: up $1.87 to $44.15); the Brown & Williamson unit of British American Tobacco PLC, and Liggett Group Inc., a unit of Vector Group Ltd. (VGR: up $0.99 to $15.23).
By eliminating class-action status, the three-judge appellate panel discarded the award a Miami-Dade County jury had given sick Florida smokers in 2000 following a two-year trial (Full story). That jury had decided that cigarettes are deadly, addictive and defective because they make people sick when used as directed.
In addition to eliminating class-action status, the appeals court Wednesday agreed with the tobacco industry that the award would have violated state law by bankrupting the companies and called the trial plan unconstitutional, according to The Associated Press.
"Today's decision reversing the ... judgment is in line with the country's legal mainstream, which does not allow class actions in smoking and health cases but preserves the rights of individual smokers in the state to pursue their claims in court," William S. Ohlemeyer, Philip Morris USA vice president and associate general counsel, said in a statement Wednesday.
Anti-smoking advocates said the ruling was a defeat for smokers.
"Absent intervention by the Florida Supreme Court, this would appear to be a terrible blow to the class of sick smokers in Florida," said Mark Gottlieb, an attorney with the anti-smoking Tobacco Products Liability Project at Northeastern University law school, in a report by The Associated Press.
Gottlieb called the decision "very surprising" because the same court in 1996 had fashioned the class during a pre-trial appeal. At the time, the appeals court refused to allow a national class, limiting the class to Florida only. It later refused to reconsider its decision.
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The class-action suit was filed in 1994 when six smokers said they were addicted to nicotine and unable to quit smoking. As a result, they said they developed medical problems, ranging from cancer and heart disease to colds and sore throats.
Originally certified as nationwide, the class was reduced to Florida-only in 1996, because a nationwide class of more than 1 million would have been "unmanageable," the ruling stated.
The 1994 suit sought damages from cigarette companies and related organizations for alleged smoking-related injuries.
In phase one of the trial, the six-member jury decided in 1999 that the industry makes a deadly, defective product and awarded $12.7 million in compensatory damages to three sick smokers. In the second phase in 2000, after deliberating for four hours, a jury awarded $145 billion in punitive damages to the entire class and $12.7 million to three individuals.
The attorney representing between the smokers in the class-action suit had asked the jury to award up to $196 billion in punitive damages.
Philip Morris U.S.A. Inc. took the biggest hit with damages of almost $74 billion. R.J. Reynolds Tobacco Co. was ordered to pay more than $35 billion, Brown & Williamson Tobacco Corp. was ordered to pay more than $16 billion and Lorillard Tobacco Co. was ordered to pay more than $16 billion. Liggett Group Inc. was ordered to pay $790 million, even though, as the appeals court ruled, none of the class representatives smoked Liggett cigarettes.
It was a record-shattering verdict that cigarette companies claimed would amount to a "death warrant."
The appeals court apparently agreed. "Mere participation in the tobacco industry does not destine a corporation to legal suicide," Wednesday's ruling stated.
As an example of what the judges' ruling called a "grossly excessive" award, the ruling showed that the earlier ruling ordered Liggett to pay $790 million in punitive damages, an amount more than 23 times Liggett's net worth and almost twice the company's gross revenues, according to the ruling.
"Moreover it is difficult to fathom how the evidence ... could support the damages [when] most industry experts uniformly praised Liggett as a model of how a tobacco company should conduct itself," the ruling stated.
The appeals court ruled that the more than 700,000 plaintiffs in the class action could pursue their cases individually.
Assigning damages requires individual proof, particularly where "proof of damages is essential to liability," the ruling stated.
Florida law forbids punitive damage awards that could put a company out of business and requires judges to reduce excessive amounts. Circuit Court Judge Robert Kaye refused to cap the jury's award at $15.3 billion, which the five tobacco companies said is their combined net worth.
The risk of a huge punitive damage award led the CEOs of all five companies to take the unusual step of testifying that cigarettes are addictive and dangerous. The admission would have been almost unheard of just a few years ago.
They testified that their companies had changed their ways and are trying to warn people about the risk of smoking.