Big Tobacco off $145 billion hook
Florida Court refuses to reinstate biggest damage award in U.S. history; stocks soar; ruling mixed.
ATLANTA (CNN) -- The Florida Supreme Court Thursday upheld a ruling tossing out a $145 billion verdict against Big Tobacco but also agreed with many of the findings criticizing the industry for selling a dangerous product.
The long-awaited decision lifted one of the biggest financial clouds over tobacco companies and sent their stocks soaring. (Check the stocks).
The Supreme Court upheld the key part of a Florida appeals court ruling three years ago that overturned the punitive damages, at the time the largest award in a U.S. product liability case.
In the 79-page decision, the justices agreed with the appeals court ruling that the case should not have been certified as a class-action on behalf of hundreds of thousands of sick Florida smokers. Tobacco lawyers had said the individual cases were so different they could not be lumped fairly into a single class.
The high court also said the punitive award was "clearly excessive" and would "result in an unlawful crippling of the defendant companies."
But the court did reinstate some individual damage awards: $2.8 million for Mary Farnan, who was diagnosed with lung cancer in 1996, and $4 million for Della Vecchia, who was diagnosed with lung cancer in 1997. A $5.8 million award to Frank Amodeo was reversed because the statute of limitations had run out, the court said.
Clearing up clouds
The ruling clears one of the biggest legal hurdles for Altria, the owner of Philip Morris Cos., the nation's biggest cigarette maker, to spin off its Kraft Foods business. Altria management has said repeatedly that it plans to spin off Kraft after the tobacco case, known as Engle, and other cases are cleared up. (Full story)
Though the decision means that Big Tobacco's accountants can remove a major potential liability from their ledgers, the decision is by no means an unalloyed victory for the industry, an anti-smoking crusader said.
The ruling upheld the lower court's findings that cigarettes cause a laundry list of diseases, that nicotine is addictive and that cigarettes were defective and unreasonably dangerous.
In addition, the court agreed that the industry concealed information about smoking's dangers, that the defendants "agreed to misrepresent information relating to the health effects of cigarettes or the addictive nature of cigarettes," and that the defendants were negligent.
In the future
That means those points will not have to be re-argued by future plaintiffs, said professor Richard Daynard, head of the Tobacco Products Liability Project at Northeastern University School of Law in Boston.
"This is a fabulous decision," he told CNN. "It basically upholds the findings of the jury, and it provides a simplified procedure for every citizen of Florida" who has been injured by tobacco and wants to file a claim.
The ruling "provides a very simple procedure for potentially hundreds of thousands of people to file in Florida, and for potentially doing that in other states," he added.
Asked why tobacco stocks surged in response to the ruling, he said, "Because they don't understand what the case is about. It's that simple."
Nobody had expected the $145 billion award would stand, he said, and the court's conclusion on that matter was no surprise.
But Joe Martyak, an official with the anti-smoking group American Legacy Foundation, said the ruling could prove a death knell for class actions against cigarette makers.
"I think it's bad news for public health and it's even worse news for smokers," he said. "The ruling underscores that Big Tobacco will literally be able to litigate to death a smoker's claim for justice."
The class-action suit was led by Dr. Howard Engle, a pediatrician who started smoking as a teenager, and filed by lawyers Stanley and Susan Rosenblatt in Miami.
The husband-and-wife team had no immediate comment. "Let them decipher the ruling," their receptionist said.
Defendants included Altria's Philip Morris, maker of Marlboro and other brands; the R.J. Reynolds Tobacco and Brown & Williamson units of Reynolds American; Lorillard Tobacco; and Vector Group's Liggett.
A spokesman for Philip Morris said lawyers were still reviewing the ruling, and had no immediate comment.
Shares of Altria (up $4.43 to $77.76, Charts) jumped 5.7 percent, Reynolds American (up $4.59 to $118.95, Charts), whose brands include Winston, Salem and Kool, climbed about 4 percent and Loews Corp (up $0.51 to $36.01, Charts) rose about 1.5 percent.
-- from staff and wire reports
Related: Kraft CEO ousted ahead of spin-off