Philip Morris Is Burned By Verdict in California
The gargantuan $28 billion punitive-damage award levied against Philip Morris Cos. by a Los Angeles jury reflects the failure of the cigarette maker's new courtroom strategy to overcome California jurors' outrage at the company's past conduct.
The 12-member state Superior Court jury deliberated about eight hours before delivering its verdict Friday. The award to 64-year-old Betty Bullock, a smoker dying of lung cancer, was the largest to an individual in U.S. history.
It was the fourth defeat in a row for Philip Morris in California, despite years of intense effort by the company to find a successful defense for cases tried in the state. California has become a key litigation battleground for tobacco companies, in part because California juries have consistently found against them and have hit them with significant punitive damages. In addition, California's reputation as a bellwether of U.S. public opinion has some industy analysts worried that the legal losses there could be a sign of things to come elsewhere in the U.S.
The jurors earlier had found that Philip Morris, the country's largest tobacco company, concealed the health risks of smoking and was negligent in the design of its cigarettes. They awarded $850,000 in compensatory damages to Mrs. Bullock, who tried her first cigarette at age 17.
A judge is likely to cut sharply the punitive award. Under California law, punitive damages must bear a "reasonable relationship" to the compensatory award. The ratio in this case is about 33,000 to one, far beyond levels approved by courts in the past.
Philip Morris said it will appeal if the trial judge doesn't overturn the verdict, which it calls "inconsistent with the evidence and the applicable law." The company will also ask the judge to at least reduce the amount of punitive damages.
The jurors' decision suggests Philip Morris's legal strategy backfired. In this case, the company didn't try to defend its past conduct but focused on why Mrs. Bullock decided to start smoking and why she didn't quit.
Philip Morris called just one witness in its defense, a former company research scientist, who testified about efforts to develop a safer cigarette. The company relied primarily on Mrs. Bullock's own testimony to make the case that Philip Morris wasn't responsible for her injuries.
"Our goal was to get the jury to focus on the plaintiff and decide that she didn't deserve to recover damages," while discouraging jurors from seeking to make a broader statement about the tobacco industry through their verdict, said William S. Ohlemeyer, the company's associate general counsel.
Mr. Ohlemeyer said the company's efforts appear to have succeeded in limiting the size of the compensatory award. The jury awarded $100,000 for Mrs. Bullock's pain and suffering and $750,000 in economic damages.
The switch in legal strategy came after another Los Angeles jury last year awarded $5.5 million in compensatory damages and $3 billion in punitive damages to a smoker who has since died of lung cancer. The judge reduced the size of the punitive award to $100 million; Philip Morris is appealing.
While Philip Morris changed tactics, Michael J. Puize, the plaintiffs' attorney who won last year's verdict and who is representing Mrs. Bullock, tried practically the same case as he did last year, with the same witnesses and internal company documents. Mr. Piuze argued that for decades, Philip Morris and other tobacco companies tried to cover up evidence about the health risks of smoking and mislead the public about the hazards of cigarettes.
Mr. Piuze's case is recorded on a single computer disk that he shares with other plaintiffs' lawyers from around the country. Known as the "trial-in-a-box," it is designed to be a turnkey lawsuit reducing the time and effort required for a lawyer to bring a case against a tobacco company.
So far, the West Coast has been the scene of the biggest courtroom challenge, with the four straight industry losses in California and two defeats in Oregon. "Philip Morris still hasn't managed to find a strategy that works on the West Coast," and its losses are accelerating, said Martin Feldman, a tobacco analyst at Merrill Lynch. "The key question investors have to be asking is: Will Philip Morris ever start winning these cases?"
Two more cases are set to be tried in California this year -- one in Sacramento, the other San Francisco. Mr. Puize is scheduled to try a third lawsuit, against Philip Morris and British American Tobacco PLC's Brown & Williamson unit, in Los Angeles in January.
Consumer-friendly California has a reputation as a hostile jurisdiction for corporate defendants. Juries in Los Angeles county have made a series of billion-dollar findings against businesses in recent years. The courthouse where last year's case against Philip Morris was tried is known to local lawyers as "the bank," because jurors tend to hand up rich verdicts.
Mounting an effective defense is all the harder for tobacco companies. California has the second-lowest smoking rate in the nation after Utah, and the state government has waged an aggressive antismoking campaign.
Jurors said they were angered by Philip Morris's past conduct and unimpressed with the company's defense. "They knew cigarettes caused cancer and they lied about it," said one juror, Frank Guzman, a 46-year-old supervisor with the U.S. Postal Service. "We wanted to hurt them and we wanted to send a message."
Mr. Guzman said that the jurors were not very sympathetic toward Mrs. Bullock. "We didn't really believe that she didn't know smoking caused lung cancer," he said. "We didn't want to give her anything." But the jury did want to punish Philip Morris, he said.
"There's a message in a verdict like this," Mr. Ohlemeyer conceded. "These people have very strong feelings about the company. And that's something a company like this has to listen to."
But he argued that the plaintiff's attorney, Mr. Piuze, had led the jury astray by asking them to "return a verdict that we all know" won't stand up. Mr. Piuze asked for either $20 billion or $6,666,666,666, a reference designed to compare Philip Morris to the devil. Jurors instead seized on Mr. Puize's comment that there was roughly one lawsuit filed for every 28,000 Californians who have died from smoking. They based their award by figuring that Philip Morris should pay the equivalent of $1 million for each.