Florida Tobacco Ruling Applies in Federal Cases

Reynolds American Inc. (RAI)’s R.J. Reynolds Tobacco unit lost its bid to overturn jury verdicts over smoking-related deaths after arguing that federal courts shouldn’t apply a ruling by the Florida Supreme Court that made it easier for smokers to prove their cases.

The U.S. Court of Appeals in Atlanta today upheld verdicts for family members of two smokers who sued Reynolds, the No. 2 U.S. cigarette maker. In the ruling, a three-judge panel said the 2006 Florida ruling applies to several thousand cases against cigarette makers pending in federal courts in that state.

Florida’s highest court in 2006 decertified a statewide class action and threw out a $145 billion punitive damage verdict against the industry. At the same time, the court endorsed many jury findings in the case, including that the companies were negligent, conspired to hide information about the dangers of smoking and sold defective products. The court also ruled that individual class members could sue and could use the jury findings in their cases.

“We cannot say that the procedures, however novel, adopted by the Supreme Court of Florida to manage thousands of these suits under Florida law violated the federal right of R.J. Reynolds to due process of law,” U.S. Circuit Judge William Pryor Jr. said in the opinion today.

Different Case

The Florida ruling is known as the Engle decision after Howard Engle, the lead plaintiff in the case filed in 1994 on behalf of Florida smokers who were addicted to nicotine and developed cancer, heart disease and other illnesses. Engle, a Florida pediatrician, died in 2009.

The Florida Supreme Court this year reaffirmed its Engle ruling in a different case.

“We are disappointed that the court rejected our constitutional arguments,” Jeff Raborn, R.J. Reynolds vice president and assistant general counsel, said in an e-mailed statement. “It is both unfair and unprecedented to impose liability unless and until some jury has actually decided all of the facts on which liability depends.”

Raborn said the company is seeking a rehearing before the entire court and will ask the U.S. Supreme Court to review the case, if necessary.

In today’s decision, the federal appeals court affirmed a $27,500 verdict for Alvin Walker, for the death of his father, Albert Walker, and a $7,676 verdict for George Duke III, for the death of his mother, Sarah Duke. The verdicts were sharply reduced because the juries attributed 90 percent of the fault to Walker and 75 percent to Duke.

Industry’s Argument

The industry has argued that the 2006 ruling improperly restricts tobacco companies’ ability to defend themselves at trial.

Companies including Reynolds and Altria Group Inc. (MO)’s Philip Morris USA, the biggest cigarette maker, have lost hundreds of millions of dollars in judgments in post-Engle cases, many of which are on appeal.

Altria had about 1,300 Engle cases pending against it in federal court as of July 22, it said in a regulatory filing. Reynolds said it had 2,014 federal Engle cases as of June 30.

The case is Walker v. R.J. Reynolds Tobacco Co., 12-13500, U.S. Circuit Court of Appeals for the Eleventh Circuit (Atlanta).

To contact the reporter on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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