Florida Court Will Reconsider Ruling That Favors Tobacco Firms in Lawsuit
A Florida state appeals court reopened the threat of huge punitive damages against tobacco companies in a class-action lawsuit by saying it will reconsider a ruling it made two weeks ago. The earlier decision had been considered an important victory for c
Florida's Third District Court of Appeal on Friday vacated its Sept. 3 order requiring that smokers' claims for punitive as well as compensatory damages in the suit be heard individually. The court said it will hear oral arguments on the issue Sept. 30.
If the judges change their stance, the so-called Engle case filed against the country's top five tobacco companies could again pose a significant danger to cigarette makers. "In the absence of another favorable ruling for the industry, Engle once again becomes threatening," said Martin Feldman, a tobacco-industry analyst at Salomon Smith Barney in New York. The court's earlier decision requiring that plaintiffs' damage claims be heard individually would have vastly reduced the tobacco industry's legal and financial risk. News of that decision sent tobacco-company shares up earlier this month.
Although the appeals court's latest ruling was handed down Friday, several Wall Street analysts said they were unaware of the development until after markets closed Monday.
In July, a Miami-Dade County Circuit Court jury found the tobacco companies liable for injuries to tens of thousands of Florida smokers. The trial was set to reconvene earlier this month for the jury to weigh compensatory damages for two plaintiffs and a lump-sum punitive award for the entire class.
But before the second phase of the trial began, a three-judge panel of the appeals court ruled that punitive damages, like compensatory damages, must be determined one smoker at a time. Judge Robert Kaye then delayed the resumption of the trial, giving the plaintiffs' lawyers time to ask the appeals court for a rehearing.
The 11-member court, however, decided to revisit the issue on its own, a rare step that signals that "some members of the court probably have some concerns" about the earlier decision, said Daniel S. Pearson, a partner in Florida law firm Holland & Knight and a former judge on the Third District appeals court.
The court gave no reasons for its decision to reconsider the matter. Analysts speculated that the court could be concerned with everything from procedural issues to substantive ones.
"Despite the fact that it looks negative for the industry, there could be a silver lining here" for the companies, said William Pecoriello, an analyst at Sanford C. Bernstein & Co. "This could open up a window for a motion to decertify the class." The tobacco industry has long argued that individual smokers' cases are too different to be lumped together in a single class action.
Stanley Rosenblatt, who along with his wife, Susan, represents the Florida smokers, couldn't be reached for comment. Tobacco-company lawyers declined to comment, citing a court order barring either side from discussing the case while it is being tried.