Tobacco penalty thrown out

$145 billion award deemed excessive

TALLAHASSEE, FLA. -- The Florida Supreme Court lifted a huge burden from U.S. tobacco companies Thursday when it threw out a record $145 billion punitive damage award against them even though it agreed the companies had misled smokers about the dangers of lighting up.

The court also ruled that individual smokers could sue the companies -- and gave plaintiffs a potent legal weapon by upholding the trial jury's finding that the companies had negligently misled the public about the dangers and addictive nature of cigarettes.

The court, which deemed the July 2000 award excessive, also approved an appellate court ruling that it had been a mistake to certify the lawsuit as a class-action representing an estimated 300,000 to 700,000 Floridians made ill by smoking.

"It's a big sigh of relief, I'm sure, for big tobacco, especially in terms of the punitive damages," said Carl Tobias, a law professor at the University of Richmond. "I think Wall Street reflects that."

Tobacco stocks jumped on the news that the court had rejected an award that the industry said was potentially ruinous. It could also clear a path for Altria Group, parent of the nation's biggest cigarette maker Philip Morris USA, to make a long-awaited move to shed its controlling stake in Kraft Foods.

Altria Group shares rose $4.43 to $77.76 after briefly rising to a 52-week high of $79.10.

Analysts expect Altria will spin off its 87.6 percent stake in Kraft Foods sometime after the resolution of a case in Florida and the federal government's civil-racketeering case.

Shares of Winston-Salem-based Reynolds American, the second-biggest maker of domestic cigarettes, rose $4.59 to $118.95 after earlier touching a 52-week high of $120.99. Reynolds American owns the U.S. tobacco businesses of R.J. Reynolds Tobacco and Brown and Williamson.

"The damages would have been crippling to businesses," said David Howard of R.J. Reynolds. "It was excessive. ... As a matter of law, punitive damages are not intended to put people out of business."

William S. Ohlemeyer, vice president and associate general counsel for Philip Morris USA, said, "As numerous trial and appellate courts have held, tobacco cases cannot be treated as class actions because liability must ultimately be decided on a case-by-case basis."

Ohlemeyer said Philip Morris is reviewing the ruling and deciding if more appellate action is necessary.

The class-action trial lasted for two years, but the seven jurors deliberated less than five hours to reach the $145 billion verdict in 2000. The jury that decided the punitive damages said Philip Morris should pay nearly $74 billion, Reynolds about $36 billion, Brown and Williamson $17.5 billion, Lorillard tobacco $16.25 billion and the Liggett Group $790 million.

And while the justices rejected the punitive damages award in the verdict as excessive, a majority of the state's high court reinstated a $2.85 million damage award to Mary Farnan and a $4.02 million award for Angie Della Vecchia, who started smoking as an 11-year-old and died in 1999.

Farnan broke into tears upon hearing of the court's decision.

"Oh my God, I can't believe it," she said excitedly. "I'm shaking all over. I had no idea."

A $5.8 million award to Frank Amodeo -- who, like Farnan and Della Vecchia, was cancer-stricken and blamed that on his smoking habit -- was not restored in Thursday's ruling because it fell outside the statute of limitations. Amodeo's wife, Margaret, said her husband had not spoken with a lawyer about the ruling and therefore did not have any immediate reaction.

The suit, led by pediatrician Dr. Howard Engle, was filed a decade ago in Miami by the husband-and-wife legal team of Stanley and Susan Rosenblatt.

Stanley Rosenblatt said he was disappointed with the decision but was relieved that the Supreme Court said individuals can sue and that the tobacco industry had misled the public.

"That they lied and were negligent, all those findings can be used and cannot be challenged in the individual cases as they go forward," he said.

Lawyer Tim Howard, who teaches constitutional law and judicial process at Boston University, said the court's decision "opened the door to a hundred thousand suits taking place in Florida for all those that are sick and dying or injured from these products."