Florida jury slams Reynolds Tobacco with $23.6B in damages

The R.J. Reynolds Building has served as downtown Winston-Salem's architectural signature for 85 years.

The R.J. Reynolds Building has served as downtown Winston-Salem's architectural signature for 85 years.

WINSTON-SALEM, N.C. — R.J. Reynolds Tobacco Co. was hit Friday with $23.6 billion in punitive damages by a Florida state court jury, one of the largest such awards in U.S. corporate and legal history, according to the Winston-Salem Journal.

A jury in Escambia Court determined Thursday that the widow of Michael Johnson Sr., Cynthia Robinson, should receive $17 million in compensatory damages in the “Engle” case even though the jury determined Johnson was 30 percent responsible for his own illness.

Engle cases have been scrutinized since they sprang from a decision in 2006 by the Florida Supreme Court that decertified a $145 billion class-action lawsuit initially filed by Howard Engle. That ruling allowed former class members to file individual lawsuits stating that cigarettes caused their respective illnesses.

About 8,000 plaintiffs have Engle cases pending in Florida courts.

“We hope this verdict will send a message to R.J. Reynolds and other big tobacco companies that will force them to stop putting the lives of innocent people in jeopardy,” plaintiff attorney Willie Gary said in a statement Friday. Gary is one of the nation’s foremost and controversial attorneys involved in personal-injury lawsuits.

Though the punitive damages award is staggering — 75 percent of Reynolds American Inc.’s market capitalization — there is ample legal precedent in and outside the tobacco industry that the amount is likely to be ruled excessive by a state appeals or state supreme court, and possibly thrown out or drastically reduced.

“The damages awarded in this case are grossly excessive and impermissible under state and constitutional law,” Jeffery Raborn, assistant general counsel for R.J. Reynolds, said in a statement Saturday. “This verdict goes far beyond the realm of reasonableness and fairness, and is completely inconsistent with the evidence presented.

“We plan to file post-trial motions with the trial court promptly, and are confident that the court will follow the law and not allow this runaway verdict to stand.”

Of the 118 Engle cases that have gone to trial and reached a verdict, 78 have been for plaintiffs and 40 for defendants, according to Ed Sweda, a senior lawyer for the Tobacco Products Liability Project at Northeastern University School of Law.

The jury verdict came at the end of a heady week for Reynolds, which made official Tuesday a long-rumored bid of $27.4 billion for rival Lorillard Inc. to add Newport, the top-selling menthol brand, to its cigarette portfolio.

According to Gary, Johnson contracted lung cancer as “a direct and proximate result of smoking cigarettes. Johnson became addicted to cigarettes and was unable to quit smoking despite numerous attempts.”

“As a result of their negligence, my client’s husband suffered from lung cancer and eventually lost his life.”

Reynolds would not be responsible for paying damages while the verdict is under appeal. However, it also could take years and millions of dollars in legal fees before a ruling on the appeal could be made.

The most relevant precedent began in October 2002 when a Los Angeles jury awarded $28 billion in punitive damages against Philip Morris USA — the largest tobacco damages award ever issued in an individual case. The plaintiff, Betty Bullock, 64, received $850,000 in compensatory damages from the same jury.

In August 2011, an appeals court reduced the punitive damages to $28 million. Bullock died from inoperable lung cancer in February 2003.

Howard Acosta, an attorney for Robinson, told Law360 on Friday that Reynolds would need to bond the verdict to appeal it, which he said could be as much as $2 billion. Acosta said the bond alone should motivate the tobacco company to “consider settling this case.”

Reynolds spokesman David Howard said he believes Florida state law caps the appeal bond at $5 million.

Another legal element likely to diminish punitive damages for Robinson is that lawsuits involving staggering punitive damages have reached the U.S. Supreme Court level on appeal.

According to a Reuters news agency story, the court ruled in a 2007 lawsuit involving Philip Morris that punitive damages to punish defendant for harming nonparties of the case amounted to a government taking without due process, and was thus unconstitutional.

In October, the Supreme Court declined to hear the appeal of tobacco manufacturers, including Reynolds, of a multimillion-dollar Engle jury award. It was the third time since 2012 that the Supreme Court made that decision.

That meant in those four cases, the tobacco manufacturers had no further legal recourse and were required to pay the award. Reynolds said in its first-quarter earnings report that it had spent $69 million on Engle cases.

In October, Vector Group Ltd. and its Liggett Group tobacco subsidiary reached a settlement in which it will pay a combined $110 million to more than 4,900 Engle plaintiffs in exchange for the dismissals of their claims. It is paying $61 million in a lump sum and $49 million over a 15-year period.

Stephen Pope, managing partner for Spotlight Ideas in London, said the remaining tobacco manufacturers’ Engle exposure could be closer to $2 trillion nationally.

 

Follow

Get every new post delivered to your Inbox.

Join 28,281 other followers