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Last Updated: Jan 31st, 2007 - 10:58:43 |
Is the smoke clearing? Philip Morris is navigating a minefield of lawsuits
Aug 14, 2006, 16:07
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By many accounts, the legal war against Philip Morris USA and other cigarette companies reached a turning point on July 6. On that day, Wall Street analysts and investors celebrated and sent tobacco stocks higher after the Florida Supreme Court upheld the dismissal of a $145 billion award against major cigarette makers. The ruling removed a potentially bankrupting judgment - including $74 billion against Henrico County-based Philip Morris USA - that a jury ordered six years ago in a class-action lawsuit filed on behalf of Florida smokers. Results of cases According to Philip Morris USA, 1,579 individual and class-action lawsuits have been filed against the company since the 1950s, but only 51 have gone to trial. That figure does not include thousands of flight attendants in Florida who were part of a class-action lawsuit alleging exposure to secondhand smoke. That case was settled in 1997, but many individual claims are still pending. In other lawsuits to date, Philip Morris USA has lost four cases and paid plaintiffs a total of $103 million, the company said. In 1997, the height of the most recent wave of litigation against the company, 437 cases were filed.In 2003, the number of pending cases was 509, but it dropped to 268 by 2005. So far in 2006, only seven lawsuits have been filed. The company said its product-liability-defense costs dropped from $307 million in 2003 to $258 million in 2005. The ruling in that case, known as the Engle lawsuit, was just one of several developments that have prompted some observers to predict better days ahead for cigarette companies after years of legal uncertainty. Other developments include last year's dismissal of an additional $10 billion verdict against Philip Morris USA in an Illinois class-action lawsuit that accused the company of defrauding light- and low-tar cigarette smokers. At the same time, the U.S. Department of Justice's lawsuit against major U.S. cigarette makers, which started in 1999 as an attempt to seize $280 billion in alleged "ill-gotten" profits, has since been reduced to a claim for $14 billion over 10 years. "I think all of those are positive signs for the companies generally and Philip Morris specifically," said Carl Tobias, a professor at the University of Richmond School of Law. "In these blockbuster suits, the industry has been slowly making its way through a minefield and has been doing pretty well," said Anthony Sebok, a professor at the Brooklyn School of Law who nevertheless wrote that the Engle verdict was not a clear-cut victory for either side. "From [the cigarette companies] perspective, it is not unreasonable to suggest that the tide has turned somewhat," said Darren McKinney, director of communications for the American Tort Reform Association. "We've seen a number of rulings in favor of tobacco companies in recent months" Howard Acosta, a Florida lawyer, couldn't disagree more on whether the tobacco industry's legal situation is clearing. "In Florida, there is going to be a downpour in the not-too-distant future," said Acosta, who has doggedly pursued the industry for more than a decade. Acosta said he has filed more than 100 lawsuits, and he has won four jury verdicts, including a 2003 case in which Philip Morris ultimately paid $3.3 million to a man who developed emphysema after starting smoking at age 12 in 1940. "The Engle decision was spun by the cigarette industry," Acosta said. "The stories in the news were couched to demonstrate another tobacco victory when that is not true." That's because the Florida Supreme Court, while ruling that the $145 billion in damages was excessive, also made it easier for thousands of smokers who were part of the class to pursue individual lawsuits against the companies. The court upheld findings that cigarette makers were negligent and that cigarettes are defective and cause diseases, which would mean Florida smokers don't have to prove that in court. Last week, Philip Morris USA and other cigarette makers asked the Florida Supreme Court to reconsider the part of its ruling that upheld those findings, asking that individual claims move forward on a "clean slate." Acosta said he thinks as many as 25,000 smokers will bring lawsuits. The first was filed on July 10 by a woman whose husband died of lung cancer two years ago after he starting smoking at age 11. "The litigation outlook for the tobacco industry is not nearly as rosy as the tobacco public-relations people and their friends on Wall Street would have people believe," said Edward L. Sweda, senior attorney for the Tobacco Products Liability Project at Northeastern University. Still, Philip Morris USA has been dodging lawsuits since the 1950s and doing it successfully, for the most part. The company declined to comment on specific cases or its overall litigation situation, but it did provide some information indicating a declining number of pending lawsuits (see sidebar). Even some of the company's toughest critics concede that it has done well in the courtroom. "They have a very good batting average," said Chuck Tauman, a Portland, Ore., lawyer who has six cases on appeal against cigarette companies. Tauman noted that the industry has won about 75 percent of smoking-related cases. Matthew Myers, president of the Campaign for Tobacco-Free Kids, also conceded that the impact of litigation has never been quite as great as some plaintiff's lawyers had hoped. Yet, Myers and Tauman said, litigation remains a significant threat. "Every time that the tobacco industry has thought that it had put the latest wave of litigation behind them, a new unexpected wave has occurred," Myers said. "The lesson I take from that is, given the number of people who have been injured, the magnitude of the harm and the seriousness of the tobacco industry's behavior, they are likely to always face a litigation threat, often based on legal theories that haven't previously been in play." Among the biggest threats is a group of lawsuits that accuse the companies of deceptive marketing of light- and low-tar cigarettes, which were once believed to be less dangerous than regular cigarettes but are now known to be just as harmful. The $10 billion verdict in an Illinois class-action that was dismissed in December was a light-cigarette case, but 25 others are pending in various states. Among them is a case in New York that has not yet gone to trial that would establish a nationwide class-action. Though the industry has fended off some lights cases, Tauman said he believes those lawsuits offer the best chance for plaintiff victories because the companies have not admitted the dangers of smoking those brands. Philip Morris USA's admission on its Web site and on some cigarette packages that light cigarettes are not safer does not go far enough, he said. Myers also believes that a new Surgeon General's report on secondhand smoke, published in June, could lead to a resurgence of lawsuits alleging health damage to nonsmokers. The report, which says secondhand smoke causes tens of thousands of premature deaths among nonsmokers each year, "will make it easier for future plaintiffs to prove the causal link between secondhand smoke and disease," Myers said. Tobacco lawsuits have tended to come in waves, and Philip Morris identifies the most recent as the "third wave," which started in the mid-1990s because of several factors, including state government lawsuits against the industry that led to the disclosure of internal company documents. McKinney, the Tort Reform Association spokesman, said that many plaintiffs lawyers who sue the industry "are simply playing the lottery," betting that some lawsuits will pay off. "The fact of the matter is, cigarettes - for good or for bad are a lawful and regulated product in these United States, and when adults willfully choose to smoke them, it seems kind of ridiculous for them to turn around 20 years later and say, by the way, I want $300 million," McKinney said. Tauman, who is president of the Tobacco Trial Lawyers Association, said he has not profited from lawsuits in his 10 years of litigating against tobacco. "People see the headlines and the verdicts, but in terms of cash flow, it has been zero," Tauman said. He said he continues to pursue lawsuits to force changes on the industry. Acosta, the Florida lawyer, said he has no intentions of ending his fight with the tobacco industry, which he called "evil" and said he wants to destroy. "From my perspective, the cases are winnable, if properly selected," he said. "I don't represent people that began to smoke after the warning labels [on cigarette packs], and I only represent people that tried very hard to quit." Acosta said his clients include a man who lost his jaw to cancer and then was diagnosed with lung cancer, and a Vietnam War veteran whose wife died of lung cancer at age 49. "This litigation is no joke," he said.
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