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News > Companies
$3B tobacco verdict cut
August 9, 2001: 8:56 p.m. ET

$3 billion damage award against Philip Morris Cos. is reduced to $100M
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NEW YORK (CNNfn) - A California state judge ruled Thursday that a $3 billion verdict against Philip Morris Cos. was excessive and ordered a new trial if the 56-year-old man with lung cancer who brought the suit won't accept the reduced $100 million award as a settlement.

Superior Court Judge Charles McCoy ordered the new trial if Richard Boeken does not accept the reduced amount by Aug. 24.

Philip Morris said in a statement it will "mount an aggressive appeal" challenging the ruling, claiming $100 million is "grossly excessive" and noting no California appeals court has ever upheld a punitive damage award greater than $25 million.

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The decision brings the punitive damages in the trial of the 56-year-old Marlboro smoker which had been the biggest award in a suit by an individual smoker -- more in line with the tobacco industry's last two trial losses in California, which currently stand at about $20 million.

"The concern was with $3 billion, the flood gates were open," Bonnie Herzog, tobacco industry analyst at Credit Suisse First Boston, told Reuters. "This helps to alleviate some of that concern."

Boeken, who is dying from lung cancer attributed to smoking, claimed the company did not warn him of the health risks associated with smoking.

Lawyers for Boeken, a securities and oil broker, claimed at the trial that he began smoking Marlboro cigarettes at age 13 and did not become aware of the health warnings until the mid-1990s. On July 6, jurors awarded Boeken $3 billion in punitive damages and nearly $6 million in compensatory damages.

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In his ruling, Judge McCoy wrote the "punitive damage award was legally excessive because it produced an excessive punitive-to-compensatory ratio."

"While the Court cannot know with certainty what ratio is exactly correct, it finds that a ratio of approximately 20-to-1 is appropriate in this particular circumstance."

The cigarette maker claimed the verdict should be no more than $25 million based on similar cases and that testimony from Boeken was tainted by past criminal convictions the Los Angeles County Superior Court jury was not allowed to hear about.

But the judge ruled the "motion for a new trial relating to matters other than punitive damages is denied in its entirety" and ordered a new trial granted only if Boeken refuses the $100 million.

Company cites jury "prejudice"

"Our appeal will request a complete reversal and retrial on multiple grounds, not the least of which was the passion and prejudice the jury displayed in reaching its verdict," said William S. Ohlemeyer, Philip Morris vice president and associate general counsel, in a statement.

"The Court has now compounded these legal errors by failing to set the verdict aside, or, at a minimum, reducing the punitive damage award enough to bring it in line with California and federal law," Ohlemeyer said.

Credit Suisse First Boston's Herzog said she expected Boeken to accept the ruling rather than risk a new trial.

Judge McCoy also had some harsh words for Philip Morris, predicting it would suffer further damages in the future.

"If Phillip Morris continues to make the argument, attempted with this jury, that even though its highest executives may have lied to the American public about the risks of cigarettes, it bears absolutely no moral or legal responsibility for the deaths of people who consumed its products, because every consumer should have known from the outset that the executives were not truthful, then, in this Court's view ... Philip Morris is entirely correct that it will continue to incur substantial future compensatory and punitive damage awards by other juries," he wrote.

Philip Morris (MO: Research, Estimates) stock fell 32 cents to $44.49 Thursday. The ruling came after the close of regular trading. graphic


-- from staff and wire reports

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.