Fla. verdict may prompt new lawsuits by smokers
For the tobacco companies that help propel key segments of the Carolinas economy, Friday's $144.8 billion punitive damage award may not be the real concern.
Lawyers and analysts say the verdict is likely to be reduced or thrown out on appeal, and the law in Florida, where the class-action suit was brought by ill smokers, doesn't allow damages to snuff out entire companies.
The real threat, legal experts said Saturday, could be that millions of smokers in other states will line up to sue the industry next - and that the size of Friday's decision will influence payouts ordered by juries in other cases.
"This is the realization of the industry's 50-year nightmare," said Stanford University law professor Robert Rabin. "That nightmare was that when the dam burst, it would burst catastrophically."
Tobacco companies are now in a fight for their very survival, said Phil Carlton, a legal consultant for Philip Morris who once represented the entire industry in negotiations with 46 states. "The notion that any of them can come up with that kind of money is just ridiculous," he said.
The Florida verdict, even if only partially upheld, could force a large hike in the price of cigarettes. A $1-a-pack increase could cut youth smoking in half, prevention experts say, and reduce adult smoking by about a fifth.
But some smokers say they'll keep it up no matter what the cost.
"If I had $50 and wanted a pack, I'd pay $50," said Harold Brown of Charlotte, a smoker for 35 years. "If I want to smoke, I'm going to smoke."
What happens in the Florida courtroom over the coming weeks could determine the industry's response to the jury award - and its fate, said Carlton, who was not an attorney on the case.
If the judge sets aside the verdict or allows each company to post a $100 million bond, as prescribed by a law enacted during the trial, the case can work its way through the traditional appeals process - a process Carlton thinks would result in substantially reduced damages.
But if the judge orders the companies to post 115 percent of the verdict before proceeding with the appeal, as required under Florida's previous law, the industry could be crippled and would have to seek immediate intervention from the higher courts.
"I don't know what alternative there is, other than bankruptcy," Carlton said.
Gregory Little, associate general counsel for Philip Morris, said he believes the structure of the Florida trial was so unfair and the jury's verdict so large that the entire case will be thrown out.
And while similar suits loom, Little said he believed they would never get to trial. Tobacco lawyers argue that class-action suits brought by ill smokers are flawed because each individual's case and health history differs.
Anti-smoking forces took heart, however, in what is by far the largest damage award in U.S. history.
"I think the message has gotten across that these guys are sleazeballs who are willing to do anything to make a buck," said Richard Daynard, who heads the Tobacco Products Liability Project at Northeastern University.
Jurors largely rejected the companies' arguments that they've changed their ways and couldn't afford to pay.
"For the past 50 years these companies have lied, hidden information and burned documents," jury foreman Leighton Finegan said. "It makes me angry that they were able to get away with it for so long."
The Florida case, brought on behalf of an estimated 300,000 to 700,000 smokers, was the first class-action case against Big Tobacco to go to a jury.
The companies face many other lawsuits, filed by both individuals and groups, including a class-action suit scheduled to go to trial early next year in Louisiana. Smokers in that suit want compensation for the costs of treatment and quitting smoking.
The U.S. Justice Department has sued to recover money spent treating smoking-related illnesses, as have several insurers, including Blue Cross and Blue Shield. Suits in Arizona and Illinois accuse tobacco companies of marketing so-called light cigarettes as healthier, even though the companies knew they were equally dangerous.
About 6,000 tobacco farmers have filed an antitrust suit, accusing cigarette makers of conspiring to reduce their purchases of tobacco from farmers. Some foreign countries, including Israel, have lawsuits in their courts.
"I think each of these suits makes it easier to win in the next case," Daynard said. "I think we're going to see more lawyers stepping up to the plate and saying, `These guys are vulnerable.'"
No class-action suits against the tobacco industry are pending in the Carolinas, said Dr. Adam Goldstein, a UNCChapel Hill professor of family medicine.
The industry has effectively fought suits - it has never paid damages to smokers, despite six verdicts won by individuals.
Tobacco companies vowed they would not pay the full amount in the Florida case, either.
"It was a fatally flawed process. This whole trial was," said Don Donahue, an R.J. Reynolds senior vice president. He said there is "no way" the verdict will be upheld.
Reynolds, located in Winston-Salem, faces the second-largest payout: $36.28 billion. Jurors ordered Philip Morris to pay the most: $73.96 billion.
Tobacco lawyers had said their companies could afford up to $375 million, but the industry would be put out of business if the award went much higher. Under Florida law, a punitive verdict cannot bankrupt a defendant.
The most likely outcome of the Florida suit, after several more years of legal maneuvering, will be an out-of-court settlement, said Fred Dickson, director of research at the Branch Cabell investment firm in Richmond, Va.
A 1998 settlement with 46 states is expected to result in a $206 billion payout over 25 years.
That settlement, while larger than the Florida verdict, is less damaging to the tobacco companies because it's spread out over time, Carlton said.
"Jury verdicts don't work that way," he said. "$145billion is $145billion, pay me right now."
If the verdict stands and forces the tobacco companies into bankruptcy, Carlton said, states might lose out on the money they're expecting from the prior settlement.
"They have to get in line like every other creditor," he said.