It was the largest damage award in history, dwarfing any previous judgment. The tobacco industry’s legal team was quick to denounce the trial as flawed, even “illegal,” and it vowed that the verdict would be overturned, perhaps as early as next week. But for Big Tobacco, the potentially crippling award signals what could be a grim new era in litigation. For years, the industry was able to brag that it never paid a penny in damages because juries ultimately found that smokers were to blame for their own choices. That record began unraveling in 1998, with the $246 billion settlement the tobacco companies negotiated with 46 states. They hoped that settlement, to be paid out over 25 years, would head off individual suits and the potential for devastating jury awards. With the Florida judgment, that’s all changed–and the threat of copycat cases has emerged as a major new concern.
Friday’s verdict was the dramatic end to a groundbreaking two-year trial, the first class-action suit against cigarette makers to go to a jury. But the lawyers will barely have time to get their shirts laundered before the legal wrangling resumes this week. Attorneys for Philip Morris, R.J. Reynolds and the others, who said during closing arguments that such an award would be a “death warrant” for the industry, plan to appeal, a process that begins immediately and could last for decades. That’s considerably longer than the five hours it took the jury of four nonsmokers, one smoker and one former smoker to decide the epic judgment. (“You see numbers like that and they are unreal,” the jury foreman told the Los Angeles Times. “I’ve never written numbers like that in my life.”) That they came back with such a big number in such a short time suggests to observers on both sides of the issue that, basically, the jury was mad as hell. “I don’t think that there’s any question that they were driven by anger,” says Philip Morris attorney Greg Little. “They obviously believe that this industry was not doing what it should have been doing in the ’50s, ’60s, ’70s and ’80s.” Mississippi Attorney General Michael Moore, who brought the first state lawsuit against the tobacco industry and settled it in 1997 for $3.6 billion, is in rare agreement with the tobacco companies. “The fact that all this death and destruction was caused and these guys still lie about it is what really incensed the jury,” Moore says.
Despite the dazzle of big dollars, plaintiffs attorney Stanley Rosenblatt says the case has never been just about money. “This case was about showing these companies up for what they are.’’ But the long-serving panel’s wish to punish Big Tobacco big time may never be realized. Among the immediate issues that could drastically reduce or even erase the award is a Florida law that prohibits verdicts that would bankrupt a company. The companies claimed their combined net worth was more than $15 billion. “There is no industry in America, there’s probably not a country in the world, that could withstand a verdict of this size,” said Philip Morris attorney Dan Webb. In addition, there are dozens of defense motions for mistrial that were deferred during the trial and must now be ruled on by Judge Kaye. Also on the table this week is a Florida law that limits to $100 million the bond a company must post when it loses a lawsuit.
The tobacco companies plainly believe that time is on their side and that the award won’t disrupt the business of selling cigarettes. “This is a verdict in favor of no one and it will have no practical impact on Philip Morris or any of its employees,” Webb said shortly after the damages were announced. Wall Street seemed to agree, with tobacco investors shrugging off the judgment. Shares of Philip Morris, the bellwether tobacco stock, dropped a blase 2 percent after the ruling. Bonnie Herzog, a tobacco-industry analyst with Credit Suisse First Boston, calls the verdict “absurd” and has been telling her clients to buy tobacco stocks.
To overturn the verdict, Philip Morris plans to attack how the judge ran the trial. The company’s attorneys say the structure of the trial, imposed by Judge Kaye, was legally flawed and will not stand up to review. “There was absolutely no discussion of individual choice or individual responsibility,” says Philip Morris’s Little, “the issues that are at the very core of why juries generally rule against the plaintiffs.” During phase one of the trial, instead of confronting sick smokers, the tobacco companies were forced to defend the business practices of the past 50 years. In that phase, which lasted a year and ended in July 1999, the jury found that the tobacco industry produced a deadly product and deceived the public about the dangers of cigarettes.
Philip Morris also has big complaints about the next phase of the suit. Despite the fact that the suit has been certified as a class action with 500,000 to 700,000 members, the company says it was an error to award damages on behalf of hundreds of thousands of unidentified smokers without hearing any evidence about the “validity of their claims.” In a final maneuver before the verdict was read last week, Webb opposed discharging the jury on the grounds that it was required to hear each and every one of the cases. Kaye seemed amused by the argument, which he characterized as novel–and promptly ignored.
While the tobacco lawyers are busy trashing it, the Florida case could serve as a model for scores of future cases. “This has got to make [tobacco executives] shake in their boots,” says Moore. “Forget the lawyers and all this puffing that’s going on. They’ve got to say, ‘Hmmm, if six people got that mad at us, what’s going to happen the next time and the next time and the next time?’ "
What the tobacco companies find particularly frustrating is the Florida jury’s deafness to their ’90s mantra–we’ve changed. During the punitive phase of the trial, Michael Szymanczk, the chief executive of Philip Morris, went so far as to admit on the stand that “smoking is bad for your health.” Philip Morris’s Little suggests that one reason the jury didn’t buy it is because the case took so long that the jurors were out of touch with “all the changes that have taken place over the last three to five years.” Or maybe, as the verdict indicates, it’s the tobacco industry that is out of touch with how much juries have changed in recent years.
