Tobacco Industry Told To Pay $145B

Friday, July 14th 2000, 12:00 am
By: News On 6

MIAMI (AP) — A jury ordered the tobacco industry Friday to pay $145 billion in punitive damages to sick Florida smokers, a record-shattering verdict that the cigarette companies had claimed would amount to a ``death warrant.''

Smokers' attorney Stanley Rosenblatt hugged several clients after the verdict, which took the jury less than five hours to reach following a two-year trial.

``It was a day of reckoning,'' Rosenblatt said. ``This was never about money. This was about showing these companies up for what they are.''

The companies plan to appeal the verdict.

Philip Morris Inc.'s attorney, Dan Webb, called the ruling ``an unfair procedure, unheard-of in American history'' but predicted its actual effect on the company would be minimal.

``This is a verdict in favor of no one,'' said Webb, whose company was ordered to pay $73.96 billion, or about half of the total.

The jury also ordered R.J. Reynolds to pay $36.28 billion; Brown & Williamson $17.59 billion; Lorillard Tobacco $16.25 billion; and Liggett Group Inc. $790 million.

``Lot of zeros,'' Circuit Judge Robert Kaye said after reading the breakdown.

Stock prices of the five companies were down moderately following the ruling.

Frank Amodeo, one of three Florida smokers chosen to represented the entire class during the trial, said he hopes this will stop the tobacco companies from marketing cigarettes as if they are safe. The Orlando clock maker contracted throat cancer about 10 years ago after decades of smoking. He cannot swallow and must be fed through a tube.

``There is no amount of money in the world that will change the way I eat,'' Amodeo said.

Another representative, Mary Farnan, a north Florida nurse who contracted lung and brain cancer after smoking for 29 years, called the verdict ``absolute justice.''

``I'm sincerely happy for all of these people,'' she said, pointing to the courtroom where several other ill former smokers sat. (The third representative, Angie Della Vecchia, died last year of lung cancer after smoking for 40 years.)

The six jurors, who heard testimony from 157 witnesses, began deliberating the punitive damages question Friday morning.

It was the third time the jury has deliberated in the case, the first smokers' class-action lawsuit to go to trial. The panel decided in July 1999 that the industry makes a deadly product. In April, the jury ordered the industry to pay $12.7 million in compensatory damages to the three smokers representing the class.

The smokers wanted the tobacco companies to pay $196 billion as punishment for making a product that kills 430,000 Americans a year and for misleading the public since the 1950s, when internal research concluded smoking causes cancer.

Top executives from all five defendants made unusual appearances to testify they didn't deserve to be punished because they have changed their ways and are already committed to paying billions of dollars to settle the lawsuits brought by the states.

The U.S. Chamber of Commerce called the decision ``an obscene symptom of a court system that is out of control.''

``Trial lawyers have subverted the legal system for their own financial gain,'' said Bruce Josten, Chamber executive vice president. ``Legitimate, but politically out-of-favor, businesses have been attacked by attorneys driven by the prospect of absurd punitive damage awards.''

The ruling was the largest jury damage award ever, far surpassing the $22 billion awarded in Hawaii in 1996 to a treasure hunter who sued former Philippines President Ferdinand Marcos for the alleged theft of gold bullion. That verdict was later overturned.

The largest previous punitive-damage award was $5 billion against ExxonMobil for the Exxon Valdez oil spill in Alaska. The company is appealing. The previous record for punitive damages in a product-liability case was $4.8 billion against General Motors last year in a California car fire. A judge slashed the award to $1.09 billion.

After Friday's verdict, Philip Morris share prices closed down 31.25 cents to $24.688 and shares of RJR were off 93.75 cents to $26.188, both on the New York Stock Exchange. Shares of Vector Group Ltd., the parent company of Liggett, were down 43.75 cents to $14.438, and Loews Corp., parent of Lorillard Tobacco, was down 43.75 cents at $63.063, also on the NYSE. British American Tobacco Industries, parent of Brown & Williamson Tobacco, was down 25 cents at $12.50 on the American Stock Exchange.

The industry filed a mistrial motion earlier Friday based on closing arguments by Rosenblatt, charging improper commentary and inflammatory remarks ``preclude the jury's rational consideration'' of the case. The judge has delayed deciding dozens of mistrial requests.

As the case wound down this week, lawyers for both sides spoke of death — the death of Big Tobacco and the deaths of millions of smokers.

Philip Morris' Webb said the awarding of up to $196 billion would be a ``death warrant'' for the industry.

Rosenblatt turned the phrase around Thursday, saying it was the cigarette industry that had issued death warrants to millions of consumers.

Lawyers for the companies said the companies could afford to pay only $150 million to $375 million, and that they would be put out of business if the award went much higher. Under Florida law, a punitive verdict cannot bankrupt a defendant.

The range offered by the industry, which has never paid any damages to smokers, amounts to 1 percent to 3 percent of its $15.3 billion audited net worth — or one to four days in wholesale cigarette sales.

``You either destroy them or you don't,'' Brown & Williamson lawyer Gordon Smith told jurors. ``Your verdict must reflect the current ability to pay. It must reflect reality, not fantasy.''

Rosenblatt told jurors this was ``no time for timidity'' and asked them to ``wipe out 50 years of treachery'' by the industry. He told panelists to send a message to the world.

Lowering the $196 billion request ``in any substantial way would be a crushing blow to public health in this country,'' he said in closing remarks Thursday.

The key tobacco defense was that the industry has changed its ways since states began suing in 1994, and that the $257 billion national settlement with the states is enough to pay.

Nationwide, juries have awarded damages to individual smokers only six times. Three verdicts were overturned, two are on appeal, and one was returned in March with $1.72 million in compensatory damages. The industry has yet to pay anything except for the national settlement.

Joe Cherner, a former Wall Street executive who founded SmokeFree Educational Services 10 years ago, said that the tobacco industry can afford to pay the verdict because smokers are addicted and will pay no matter the price.

``All they will do is raise the price of cigarettes again,'' said Cherner, who testified for the smokers during the trial. ``What is unique and difficult to understand is that this industry may be the only one in America that can afford to pay more that its net worth.''

``If they raise the price of cigarettes a few pennies, they'll be able to certainly pay this award,'' said Patrick Reynolds, the grandson of tobacco tycoon R.J. Reynolds. He became an anti-smoking activist after his father died of emphysema.