Fla. Court Moves On Engle Case
MIAMI (Reuters) - The Florida Supreme Court Wednesday signaled it might block a giant lump-sum damage award hanging over cigarette companies, boosting tobacco stocks hurt by investor concerns about a massive sick-smokers' lawsuit.
The state's highest court issued an order asking plaintiffs in the Engle sick-smokers suit to respond to a cigarette makers' request that the court throw out the massive class-action case that some say could cost the industry $300 billion to $500 billion in damages.
In issuing the order, the court made it clear it had not yet decided whether or not it would formally review the tobacco industry's petition. And it said its order would not interrupt the penalty phase of the suit, now underway in a Miami courtroom.
But its action was seen as a step in the right direction for Philip Morris Cos Inc, R.J. Reynolds Tobacco and other cigarette firms targeted in the landmark case, the first sick-smokers' class-action suit to come to trial and yield a verdict against the industry.
``We believe this is a positive for the industry because there is no possible downside risk for this review,'' said Bonnie Herzog of Credit Suisse First Boston.
A six-member Florida jury this summer ruled that U.S. tobacco companies were liable for ailments ranging from cancer to heart and lung disease among smokers, sending the suit to the second, penalty phase.
In its order issued Wednesday, the Supreme Court asked the plaintiffs -- a class of as many as 1 million sick Florida smokers -- to respond to the industry's petition on or before Nov. 15. The court also gave the industry until Nov. 22 to file its reply to that response.
Tobacco stock prices rose after the court's action. Philip Morris, the world's largest cigarette firm, closed up $2.9375 to $26.9375. R.J. Reynolds Tobacco Holdings, the second-large U.S. tobacco firm, closed up $2.00 to $21.875.
Those and other tobacco stocks had been pushed down earlier this week by investors nervous about the implications for the industry of the penalty phase of the suit, which began before the same jury Monday.
In a petition filed with the Florida Supreme Court Friday, tobacco makers contended that Miami-Dade Circuit Court Judge Robert Kaye, the trial judge in Howard A. Engle et al vs R.J. Reynolds et al., had violated both the state and federal constitutions in his conduct of the Engle case.
``This case presents a flagrant violation of the Florida and federal constitutions by a trial judge and an equally flagrant abdication of judicial responsibility by the Third District Court of Appeal,'' the petition said.
The appeals court in 1996 had affirmed the trial court's certification of the class, which could include potentially hundreds of thousands of smokers.
Plaintiffs' attorneys Stanley and Susan Rosenblatt and lawyers for the tobacco firms are barred from discussing the case under a gag order issued by Kaye.
The Engle case, named after a Miami Beach doctor suffering from emphysema, was filed on behalf of all Florida smokers who say they were sickened by the habit.
In the first phase of the Engle lawsuit, in which tobacco companies were found liable for fraud, hiding the dangers of smoking, and the illnesses of 40,000 to 1 million smokers, cigarette makers were barred from using defenses that have proven very successful for decades against sick-smoker lawsuits.
But in the second phase, estimated to last for several weeks to two months, lawyers for cigarette makers will be able to present evidence that the dangers of smoking have been widely known for 30 to 40 years and that smokers made free choices and must bear the consequences.