Tobacco Industry Told To Pay $145B
MIAMI (AP) - A jury ordered the tobacco industry Friday to pay $145 billion in punitive damages to sick Florida smokers, a record-shattering verdict that the cigarette companies had claimed would amount to a "death warrant."
Miami Dade County Judge Robert Kaye reads the jury verdict July 14, ordering U.S. tobacco companies to pay $145 billion in punitive damages to sick Florida smokers.Philip Morris Inc.'s attorney, Dan Webb, called the trial outcome "an unfair procedure, unheard-of in American history," but he predicted its actual effect on the company would be minimal.
"This is a verdict in favor of no one," said Webb, whose company was ordered to pay $73.96 billion, or about half of the total.
Shares of tobacco companies were down Friday following the ruling.
Lawyers for Big Tobacco had said that the five companies could afford to pay only $150 million to $375 million, and that the companies would be put out of business if the award went much higher. Under Florida law, a punitive verdict cannot bankrupt a defendant.
Smokers' attorney Stanley Rosenblatt hugged several clients after the verdict was announced.
"It was a day of reckoning," Rosenblatt said.
The six jurors, who had sat through a two-year trial and heard 157 witnesses, began deliberating the punitive damages question Friday morning after the judge read final instructions. They deliberated less than five hours before reaching a decision.
"Lot of zeros," Circuit Judge Robert Kaye said after reading the jury's breakdown against each defendant.
Friday was the third time the jury has deliberated in the case, the first smokers' class-action lawsuit to go to trial. The panel decided in July 1999 that the industry makes a deadly product. In the second phase, the jury in April ordered the industry to pay $12.7 million in compensatory damages to three smokers representing the class.
The smokers wanted the tobacco companies to pay $196 billion as punishment for making a product that kills 430,000 Americans a year and for misleading the public since the 1950s, when internal research concluded smoking causes cancer.
Top executives from all five defendants made unusual appearances to testify they didn't deserve to be punished because they have changed their ways and are already committed to paying billions of dollars to settle the lawsuits brought by the states.
The ruling was the largest jury damage award ever, far surpassing the $22 billion awarded in Hawaii in 1996 to a treasure hunter who sued former Philippines president Ferdinand Marcos for the alleged theft of gold bullion. That verdict was later overturned.
The largest previous punitive-damage award was $5 billion against ExxonMobil for the Exxon Valdez oil spill in Alaska. The company is appealing. The previous record for punitive damages in a product-liability case was $4.8 billion against General Motors last year in a California car fire. A judge slashed the award to $1.09 billion.
After Friday's verdict, Philip Morris share prices were down 75 cents to $24.25, while shares of RJR were down $1 to $26.125, both on the New York Stock Exchange. Loews Corp., parent of Lorillard Tobacco, was down 31.25 cents at $63.188 a share also on the NYSE. British American Tobacco Industries, parent of Brown & Williamson Tobacco, was down 43.75 cents at $12.313 on the American Stock Exchange.
The industry filed a mistrial motion earlier Friday based on closing arguments by Rosenblatt, charging improper commentary and inflammatory remarks "preclude the jury's rational consideration" of the case. The judge has delayed deciding dozens of mistrial requests.
As the case wound down this week, lawyers for both sides spoke of death - the death of Big Tobacco and the deaths of millions of smokers.
Philip Morris' Webb said the awarding of up to $196 billion would be a "death warrant" for the industry.
Rosenblatt turned the phrase around Thursday, saying it was the cigarette industry that had issued death warrants to millions of consumers.
Lawyers for Big Tobacco had said they could afford $150 million to $375 million, but the companies would be put out of business if the award went much higher. Under Florida law, a punitive verdict cannot bankrupt a defendant.
The range offered by the industry, which has never paid any damages to smokers, amounts to 1 percent to 3 percent of its $15.3 billion audited net worth - or one to four days in wholesale cigarette sales.
"You either destroy them or you don't," Brown & Williamson attorney Gordon Smith told jurors. "Your verdict must reflect the current ability to pay. It must reflect reality, not fantasy."
Rosenblatt told jurors this was "no time for timidity" and asked them to "wipe out 50 years of treachery" by the industry. He told panelists to send a message to the world.
Lowering the $196 billion request "in any substantial way would be a crushing blow to public health in this country," he said in closing remarks Thursday.
"We ask you to speak for all those silent, anonymous victims of tobacco grieved by their loved ones but unknown to a callous and deceitful industry," Rosenblatt said.
The key tobacco defense is that the industry has changed its ways since states began suing in 1994, and that the $257 billion national settlement with the states is enough to pay.
The Florida case is the most serious financial threat to the industry since the national settlement. Any verdict will be appealed and could take at least two years to move through Florida's courts.
Brown & Williamson was the last cigarette maker to offer closing arguments, asking the jury to make it pay the smallest amount based on the company's lowest rank by profits among the defendants.
Smith said 7,000 employees are working to make Brown & Williamson a responsible company, and pleaded: "I ask that you don't kill that dream. Don't stop a better future."
The other defendants were R.J. Reynolds Tobacco Co., Lorillard Tobacco Co., Liggett Group Inc. and the industry's defunct Council for Tobacco Research and Tobacco Institute.