Reynolds Appeals Damages in Johnson Lawsuit

Source from:  Winston-Salem Journal  07/31/2014

R.J. Reynolds Tobacco Co. on Tuesday filed an appeal of a $23.6 billion punitive-damages award by a Florida jury, saying the amount is "wildly and absurdly excessive."

Reynolds' attorneys, in a 71-page appeal, asked for a new trial, saying the jury award "reflects a degree of passion and prejudice never before seen in Engle-progeny litigation."

Legal experts have said the Escambia, Fla., jury may have set the sky-high sum to make a point.

Analysts and industry observers, along with legal precedent, suggest it is likely the punitive damages award will be reduced drastically, if not overturned, on appeal.

The jury also determined the widow of Michael Johnson Sr., Cynthia Robinson, should receive $16.8 million in compensatory damages in the "Engle" case even though the jury determined her husband was 29.5 percent at fault for his illness.

"Reasonable minds may differ about the maximum permissible punitive award, but this one exceeds any possible upper limit," the attorneys said in the motion to appeal.

"This passion did not just develop by accident, but was the product of various improper arguments pressed by plaintiff's counsel," Willie Gary, who represented the family. For example, the attorneys said Gary urged the jury to punish Reynolds for damages beyond those experienced by Robinson and her son.

Christopher Growe, an analyst with Stifel Nicolaus, said the U.S. Supreme Court "has set a clear standard for punitive damage awards for single digit multiples at most of compensatory damages.

In October 2002, a Los Angeles jury awarded $26.8 billion in punitive damages in a lawsuit involving Philip Morris USA. The amount was reduced to $26.8 million by a trial judge, and then set aside by an appellate court.

Engle cases have been scrutinized since they sprang from a decision in 2006 by the Florida Supreme Court that decertified a $145 billion class-action lawsuit initially filed by Howard Engle. That ruling allowed former class members to file individual lawsuits stating that cigarettes caused their respective illnesses.

Of the 118 Engle cases that have gone to trial and reached a verdict, 78 have been for plaintiffs and 40 for defendants, according to Ed Sweda, a senior lawyer for the Tobacco Products Liability Project at Northeastern University School of Law.

Tuesday's quarterly regulatory filing by Reynolds shows how out of balance the award both awards are.

Reynolds listed 34 Engle progeny cases in which a jury verdict has been rendered against the company and either the compensatory and/or punitive damages have been set or are under appeal. The list also provides the percentage of fault the jury assigned to Reynolds for the person's illness.

Excluding the Johnson jury awards, the average compensatory damages for the other 33 cases was $3.14 million and the average punitive damages was $2.98 million.

In 19 of the remaining 33 cases, there either was no punitive damages awarded or they were set aside in a subsequent legal ruling. In the 14 cases with punitive damages awarded, none exceed a 4-to-1 compensatory to punitive damages ratio; five had higher compensatory than punitive damages.

The largest pending punitive damages outside the Johnson case are $30 million in the Schoeff lawsuit, which also had $7.87 million in compensatory damages.

In the Johnson motion, Reynolds attorneys suggest compensatory damages of no more $2 million and punitive damages of no more than $2.4 million.

Growe said Reynolds had paid $114 million for damage awards in Engle trials and has an outstanding liability of about $185 million.

Reynolds is not responsible for paying damages while the verdict is under appeal. However, it also could take years, millions of dollars in legal fees and require the placing of a $5 million appeal bond.

Analysts have speculated about what level of potential jury damages it could take to convince Reynolds, Philip Morris USA, Lorillard Inc. and Imperial Tobacco Group PLC to agree to a Master Settlement Agreement deal. The manufacturers have indicated they are comfortable continuing to argue individual Engle cases.

In October, Vector Group Ltd. and its Liggett Group tobacco subsidiary reached a settlement in which it will pay a combined $110 million to more than 4,900 Engle plaintiffs in exchange for the dismissals of their claims. Enditem