Court Hands Tobacco Industry Big Victory
MIAMI (Reuters) - A Florida appeals court handed cigarette makers a big victory Friday, ruling that potentially tens of thousands of damage claims must be tried individually rather than as a group in the Engle class-action suit filed against the companies
The ruling by Florida's Third District Court of Appeals removed the specter of a lump-sum punitive damage award that some analysts had estimated could range any where from $200 billion to $500 billion, said Martin Feldman, a tobacco industry analyst for Salomon Smith Barney.
``This removes the guts of the plaintiff claims. This removes the most threatening aspect,'' Feldman told Reuters.
``There was an expectation of a big punitive damage award on behalf of the whole class. They won't be able to consider a claims on a groupwide basis.''
In a milestone verdict on July 7, a state court jury found that smoking causes certain cancers and other diseases and that the cigarette makers hid the danger of their product from the public. The same jury is scheduled to return Tuesday for the penalty phase of the trial.
Under the plan approved by the trial judge, Miami-Dade County Circuit Court Judge Robert Kaye, the jury was to decide whether to award compensatory damages, which would reimburse the named plaintiffs for actual costs of medical treatment and other losses.
Jurors were also to consider whether to award punitive damages, which would punish the tobacco companies, to the entire class of plaintiffs -- Florida smokers who blame cigarettes for their illness, a class that could number 40,000 to 500,000.
But the appeals court rejected that plan, ruling that ``the issue of damages, both compensatory and punitive, must be tried on an individual basis.''
The ruling does not reverse the verdict or remove the class-action status.
Richard Daynard, chairman of the Tobacco Products Liability Project pressure group in Boston, said the ruling simply puts the format of the case back to what everyone had initially expected.
``This is what everyone thought would happen before Judge Kaye thought he got a bright idea,'' Daynard said.
Daynard said it may be a Pyrrhic victory for the tobacco companies because it will increase the likelihood that they will have to pay out regular damage awards.
He said under Kaye's original plan, some tobacco companies could have faced bankruptcy if the jury had returned a multibillion dollar punitive damage award because they would have had to put up an appeals bond in excess of the award.