After Losing In Florida, R.J. Reynolds Has Limited Options On Tobacco Cases

The Florida Supreme Court yesterday upheld a $28 million verdict against R.J. Reynolds, affirming the first of thousands of cases that will be tried following the dismantling of a statewide class action.Reynolds said it will appeal to the U.S. Supreme Court, but it doesn’t have much to entice the SCOTUS justices into taking the case.

Florida Supreme Court

Florida Supreme Court

The problem is fundamental to U.S. law: Appeals courts can only consider issues that were properly raised in the courts below them. And the U.S. Supreme Court, when it’s looking at a state-court judgment, can only consider federal constitutional questions. In the lawsuit by the widow of smoker Benny Ray Martin against Reynolds, the only obvious constitutional question is whether the jury’s award of $25 million in punitive damages is so excessive as to violate the company’s due-process rights.

“Here you had 7.58 to 1,” said Michael Finch, an expert on appellate law at Stetson University School of Law in Gulfport, Fla., who has written on due-process questions surrounding the Florida tobacco litigation. “The only way the Supreme Court would take this is if it wants to address the ratio question.”

The Martin case is one of perhaps 8,000 that were launched against Reynolds, Philip Morris owner Altria and other tobacco companies after the Florida Supreme Court threw out a record $145 billion punitive-damages verdict against the entire industry. In that 2006 decision known as Engle, the court also dismantled a statewide class action and ordered individual trials for thousands of plaintiffs — but kept intact certain key jury findings including that cigarettes were defective and dangerous, and the industry was negligent.

Juries have come to wildly inconsistent verdicts ever since. Reynolds won the first so-called Engle case that went to trial in 2009, and Philip Morris has won several. Juries have awarded plaintiffs in other cases millions of dollars in damages. Miami lawyer Charles Baumberger won a $20 million verdict last year against R.J. Reynolds. He’s still slugging it out with the company at the appeals-court level.

“The tobacco companies are fighting a war of attrition,” Baumberger told me. “They’re trying to retry every issue in the first trial. They’re raising issues, they’re briefing them, and they’re forcing us to answer everything.”

Nothing about the tobacco litigation in Florida is conventional. The original jury verdict came after a trial in Miami where plaintiff lawyers played to the jury’s emotions and racial sentiments. After dismantling the class, the Florida Supreme Court declared essential findings by that jury res judicata or ineligible to be litigated again. So thousands of juries will be presented half a case, in essence, with some issues like whether cigarettes are defective and dangerous beyond their ability to decide.

The Engle class itself only includes smokers who came down with a cigarette-related disease between 1992 and 1996, Baumberger said. Anybody else has to litigate every issue, while the Engle class members are spared much of the expense. Even so, the tobacco companies have had success identifying plaintiffs who either didn’t have smoking-related diseases, or came down with them long enough before 1992 that the statute of limitations bars their case. Juries also have been more sympathetic to smokers who claim they became addicted in the 1950s, before there were warning labels on cigarette packages.

Finch is skeptical Reynolds can convince the Supreme Court to hear the Martin case, since the punitive damages lie well within the standard established in State Farm. But what if juries continue to sock the tobacco companies with punitive damages, so that they collectively exceed constitutional limits?

“The Supreme Court may have to take that up,” Finch said. “There’s no real mechanism for looking at the cumulative effect of verdicts, and that’s a real flaw.”

Baumberger chuckled at the dilemma facing the tobacco companies. They fought to dismantle the original Engle class action and succeeded in setting aside its mammoth $145 billion punitive-damages award as excessive.

“They said it was improper, we must do the trials separately, and now they’re saying that’s not proper, it’s going to bankrupt us,” he said. “They’re speaking out of both sides of their mouth.”

With $2.4 billion in operating profit last year, Reynolds can fund a lot of litigation yet before it can play the bankruptcy card.

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