S&P comments on possible risks from tobacco suits
NEW YORK, April 10 - The recent Florida jury verdict in the Engle class-action trial, which ordered tobacco defendants to pay $6.9 million in compensatory damages to two plaintiffs chosen to represent the class, represents another legal setback for the to
While the size of the punitive judgment in the Engle case will be decided in the next phase of the trial, the amount could be significant. Standard & Poor's believes there would likely be a very lengthy appeal process and does not presently expect that the tobacco companies will have to post a substantial bond related to appealing the judgment. Still, the possibility of a sizable award -- even if it takes years to go through the courts -- does add some uncertainty about the future financial flexibility of the tobacco companies. Recent litigation pending in Florida and passed in several other states to limit the immediate financial impact of any punitive judgment by capping the amount of an appeal bond adds further uncertainty as to how this case will ultimately be resolved.
While the industry generally has been successful in most individual cases, and via the appeals process has yet to make any payment on this type of litigation, Standard & Poor's believes that there is some reason for concern about changing jury sentiment against the tobacco companies. The recent loss in the Whiteley individual lawsuit, which is being appealed, was the first time a jury awarded a judgment against the industry to a person who began smoking after warning labels appeared on cigarette packages.
Standard & Poor's will review the magnitude of the punitive part of the Engle class action shortly after the award is announced. Standard & Poor's will assess the significance of this development and present its conclusion, which is not expected to factor in the posting of a large bond for appeal purposes. As in the past, the duration of the litigation will be a factor in Standard & Poor's ultimate determination.