Florida's Supreme Court Rules In Favor of Tobacco Companies
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
July 6, 2006 12:33 p.m.
In a major victory for the nation's largest tobacco companies, the Florida Supreme Court Thursday upheld a decision to toss out a $145 billion punitive-damage award made against the industry in 2000 in the Engle case.
The case, which was filed against the five largest U.S. cigarette makers more than a decade ago, was the first personal injury lawsuit against the tobacco companies to move to trial and the punitive damages amount was the largest such award by a jury in U.S. history.
"We vacate the punitive damages award because we unanimously conclude that the punitive damages award is excessive as a matter of law," the Florida court wrote in its 79-page ruling.
The decision is likely to free up millions of dollars that the tobacco companies have had tied up in connection with the case, and tobacco stocks jumped following the news.
A class action originally led by pediatrician Howard Engle and five other lead plaintiffs, the Engle suit was filed in Miami in 1994 on behalf of smokers nationwide. The case eventually was limited to roughly 700,000 Florida smokers, but a two-year trial, from 1998 to 2000, ended with the $145 billion punitive-damages award against tobacco companies, with jurors finding them liable for lying about cigarettes.
The $145 billion judgment was overturned by an intermediate appellate court in 2003 for several reasons, including a finding that the individuals represented in the suit were too diverse to have their claims lumped together. One year later, Florida's highest court decided to review the case, and since then, cigarette makers have been anxiously awaiting the outcome.
Other defendants in the case were Reynolds American Inc., the company formed by the merger of defendants Reynolds Tobacco and Brown & Williamson, Lorillard Tobacco Co., a unit of Loews Corp. and Liggett Group Inc., a unit of Vector Group Ltd.
While throwing out the $145 billion judgment, a majority of the state's high court on Thursday said the appellate court erred in concluding that a settlement between the state of Florida and the tobacco companies prevented the plaintiffs from collecting damages. The court reinstated a $2.85 million damage award to Mary Farnan and a $4.02 million award to Angie Della Vecchia. A $5.8 million award to Frank Amodeo, like the two others a cancer-stricken smoker who brought the original suit, was not restored.
A spokeswoman for New York-based Altria said the company is reviewing the decision and had no immediate comment.
Altria's Waiting Game
Altria Chairman and Chief Executive Louis Camilleri has been waiting for the appropriate time to split the company into two or three parts -- a move it expects could unlock further value for the company's shareholders -- and he had cited the Engle case, among others, as a hurdle to mount.
The decision also is very positive for Carolina Group as it will free up $921 million in restricted cash, allowing the company to pay down its intercompany debt to parent Loews at an accelerated rate and pay out its net income more fully in the form of dividends. Carolina has had the cash on its balance sheet under a provision of a bonding agreement Lorillard struck.
Although Carolina and Altria are likely to receive the most tangible benefits from Thursday's ruling, other tobacco companies will likely benefit as well. For example, the tobacco companies are likely to see an improvement in their credit ratings.
Meanwhile, a decision also could come at any time in a high-profile suit brought by the Justice Department. That suit suffered a body blow when the U.S. Supreme Court barred the collection of as much as $280 billion from tobacco companies in the case. |
