Tobacco class actions fire up: courts are certifying more class actions brought against the tobacco industry by injured consumers seeking damages or help with their addiction and by other parties harmed by cigarette makers.

A Miami jury shocked the tobacco industry last year with a $145 billion punitive damages award in the class action Engle v. R.J. Reynolds Tobacco Co. (1) In the verdict's aftermath, tobacco companies and Wall Street analysts confidently predicted that the certified class--consisting of sick smokers and the families of smokers who died from cigarette-caused diseases--would be decertified on appeal.

The pundits asserted that no class actions against tobacco companies could be successful because there are too many differences among potential class members--so that "common" issues are few and trivial--and because there are too many plaintiffs, so that the trial of individual issues would overwhelm the judicial system. They observed that more than two dozen class action suits against tobacco companies were not certified or were decertified on appeal since the mid-1990s.

But the Engle class remained intact, despite several attempts by the defendants to get it decertified, and it is unlikely to be decertified in the future. Engle is the leading example of a traditional mass tort personal injury class in the tobacco arena. But five other class action suits against tobacco companies based on different theories have been certified and are beginning to reach juries.

Two class actions seeking medical services for addicted smokers (one in Louisiana and the other in West Virginia) and three actions based on violation of state consumer protection laws (two in California and one in Illinois) were pending at press time.

Given the variety of these actions and the huge number of potential class members, the future of tobacco class-action litigation looks bright. This is especially true in light of the unprecedented number of internal company documents and powerful witnesses now available due to actions brought by state attorneys general. For example, the Minnesota Tobacco Document Depository contains extensive amounts of material discovered during litigation against the tobacco industry by the state of Minnesota and Blue Cross/Blue Shield of Minnesota, as well as documents from later litigation. (2)

Tobacco products are the leading preventable cause of death and disease in the United States. Every year, they cause more than 400,000 deaths and perhaps 1 million new cases of diseases, including lung cancer, throat cancer, bladder cancer, heart disease, and emphysema. (3)

A class action approach to these harms makes sense for at least three reasons:

* The number of potential plaintiffs is so enormous that trying every claim separately would be impossible.

* The facts underlying the industry's concerted, 47-year-long campaign of disinformation are common to almost all smokers.

* Without class action representation, most potential plaintiffs would not have any representation at all.

In the past, many courts have regarded tobacco cases as better suited to individual adjudication because of multiple individual issues and difficulty of management. (4)

But the newly certified tobacco class actions show that courts are beginning to see class litigation as the best way to achieve justice for a large number of people who have sustained injuries related to a mostly common set of facts and legal issues.

As one court put it, "The very purpose of a class [action] is to save a multiplicity of suits, to reduce the expense of litigation, to make legal processes more effective and expeditious, and to make available a remedy that would not otherwise exist." (5)

The Florida saga

Engle was filed in March 1994 in Florida state court on behalf of a class of U.S. "residents and survivors of United States citizens and residents, who have suffered, presently suffer, or who have died from diseases and medical conditions caused by smoking cigarettes that contain nicotine." (6) In addition to R.J. Reynolds, other defendants were Philip Morris, Lorillard, Brown & Williamson, Liggett Group, American Tobacco Co., the Council for Tobacco Research, and the Tobacco Institute.

In December 1994, the case became the first in which a smokers' class was certified. About a year later, Florida's Third District Court of Appeal upheld the class certification after modifying it to apply only to citizens and residents of the state. The Florida Supreme Court declined to review this decision, setting the stage for trial.

An ambitious three-part trial plan was developed: The first phase would address general liability of the tobacco companies; the second, compensatory damages for some class representatives and classwide punitive damages; and the third, compensatory damages for individual class members and a distribution scheme for punitive damages.

In November 1996 the trial judge ordered notice to be provided to potential class members allowing them to opt out of the class, and jury selection began in July 1998. The panel of 6 jurors and 12 alternates was finally chosen in late October after contentious voir dire.

General liability. In the first phase of the trial, the jury was asked to determine whether the defendants were liable for injury to the class members.

The jury returned its verdict almost exactly one year after jury selection began. It found that smoking causes many diseases; that the tobacco industry defendants had committed fraud and misrepresentation, conspiracy to commit concealment, conspiracy to misrepresent, negligence, intentional infliction of emotional distress, and breach of express and implied warranties; and that all the defendants' conduct warranted liability for punitive damages.

Compensatory damages. After taking a few months off, the same jury returned in November 1999 for the second phase of trial to determine compensatory damages for three of the representative class members. In April 2000, the jury found the defendants liable to all three and awarded a total of $13.6 million in compensatory damages among them.

Classwide punitive damages. The trial plan called for the jury to consider a lump-sum award of punitive damages for the entire class if it awarded compensatory damages to any of the three representatives. This was bemuse the jury would be well prepared to determine an appropriate level of punitive damages after hearing evidence for more than a year, and because determining punitive damages individually for tens of thousands of class members would create a significant class-management hurdle.

But during the course of the trial, critical proceedings were also taking place at the appellate level. In September 1999, a panel of the Third District Court of Appeal scrapped the lump-sum plan and ruled that punitive damages must be determined one plaintiff at a time. (7) Then, in October, the same panel reversed itself and reinstated the lump-sum plan. (8)

While the state appeals court was flip-flopping, the Florida Supreme Court agreed to accept briefs on the punitive damages issue but declined the industry's request to consider the appropriateness of the class certification. In December 1999, the state high court cleared the way for a lump-sum punitive damages award by leaving the second ruling of the appeals court intact. (9)

Testimony in the punitive damages phase of the trial revealed major strategical differences between the plaintiffs and the defendants. The plaintiffs focused on what the tobacco companies could afford to pay and settled on $154 billion as an appropriate punishment, supporting this figure with testimony from two financial experts.

The tobacco companies declined to put any financial experts on the stand. Instead, they argued that the hundreds of billions of dollars they had already been ordered to pay under settlement agreements with states in actions brought by attorneys general were sufficient punishment. The judge, however, instructed jurors that voluntary settlement agreements cannot be considered punishment.

Some of the companies insisted that they had done nothing wrong; others, that they had changed. For example, an attorney for Philip Morris told jurors that a new division of the company had been dedicated to prevention of smoking by minors and had been given a budget of $100 million. An attorney representing R.J. Reynolds effectively threw his company on the mercy of the court, saying, "Reynolds has little or no [ability] to pay a huge punitive damage award. Like many individuals, Reynolds is living paycheck to paycheck." (10)

The defendants' arguments failed to impress the jury, which awarded the class $145 billion, by far the largest punitive damages award ever issued.

Legislative action. While the jury was hearing the punitive damages phase, the Florida legislature passed a law capping the amount of an appeals bond for any defendant appealing a punitive damages award in excess of $100 million at $100 million. Had it not done so, each company would have been required to post a bond for the full value of the judgment against it, plus two years' interest, in order to pursue an appeal. The amounts of the judgments, ranging from $790 million against struggling Liggett to $74 billion against industry leader Philip Morris, raised the question of whether posting the bond would drive some defendants into bankruptcy.

The defendants' appeal After a bizarre post-verdict removal to federal court, the case was remanded to Florida state court in November 2000. The trial judge ruled on a host of post-trial motions and entered final judgment on the completed phases of the trial. The defendants' appeal to Florida's Third District Court of Appeal will probably be resolved by the Florida Supreme Court within the next two to three years.

Under the U.S. Supreme Court's 2001 decision in Cooper Industries, Inc. v. Leatherman Tool Group, Inc., (11) the appeals court will probably review the punitive damages award de novo. But whether or not the court reduces punitive damages on appeal, it is unlikely to decertify the class. The Florida Supreme Court has already twice declined to review the certification issue, and it is not likely to decide that decertification is appropriate after a two-year trial resulting in a string of verdicts against the defendants.

Moreover, Philip Morris and Lorillard have guaranteed payments of more than $700 million to the class, regardless of the outcome of the appeal, in return for a pledge that the plaintiffs will not challenge the Florida law capping the appeals bond, as applied to those defendants. Therefore, the class exists in fact, even if for no other purpose than to receive this guaranteed sum. This irrevocability of the class gives it legitimacy as a practical matter and makes decertification by the Florida Supreme Court even less likely.

The next step. The remaining phase of the Engle trial, which will begin when the defendants' appeal concludes, is intended to determine compensatory damages for individual class members and a distribution scheme for punitive damages. It may be the most burdensome phase.

According to the trial court's rulings on general liability, in order to recover, each class member need establish only his or her history of smoking and diagnosis of one of the diseases that the original jury found were caused by smoking. However, the tobacco companies will arguably be entitled to counter with evidence of other causes and comparative fault.

Even before the jury rendered its verdict on punitive damages, the lead attorney for the defendants demanded that the same jury hear the individual compensatory damages claims of the class members, who are estimated to number in the hundreds of thousands. If a jury trial were permitted in each case, the defendants could create a decades-long queue at the courthouse steps. Fortunately, trial judge Robert Kaye denied the request.

The Florida courts will probably be able to devise a streamlined procedure, short of individual jury trials, that still affords due process to all parties.

For example, the process could begin with trials in a statistically meaningful sample of cases to generate average "discounts" for comparative fault and competing causes of disease, and a "multiplier" for non-economic damages. These could be followed by administrative proceedings for the rest of the class in which each class member's proven out-of-pocket costs are reduced by the average discounts and increased by the average multiplier.

This approach would impose the same total damages liability on defendants as if each case were tried individually. But it would greatly reduce transaction costs while protecting the plaintiffs' due process right to recover.

Also in Florida, an earlier class action involving the same court, judge, plaintiff counsel, and defendants, but an entirely different class, remains in litigation. Broin v. Philip Morris, Inc., involves a national class of flight attendants who were exposed to secondhand smoke on the job. This class action resulted in a settlement of the general liability phase of the trial favorable to the class. (12) Phase II, which involves individual compensatory damages claims of several thousand members of the class, is ongoing in the Florida courts.

Other certified class actions

The Louisiana case, Scott v. American Tobacco Co., seeking medical monitoring and smoking cessation services for addicted smokers, was brought on behalf of all Louisiana residents who were smokers on or before May 24, 1996. (13) Jury selection began last summer and was continuing at press time.

Scott is the only surviving descendant of an ambitious national action, known as Castano, filed in 1994 by the Plaintiffs' Legal Committee, a consortium of attorneys based in New Orleans. (14) Castano sought to provide medical monitoring for all smokers in the United States at the tobacco industry's expense. The case was certified as a class action in federal court in 1995.

But the U.S. Court of Appeals for the Fifth Circuit decertified the class in May 1996, partly on the basis that the claims against tobacco defendants were not mature torts. The court noted that no plaintiff had won damages against the industry in 40 years of litigation. "The collective wisdom of individual juries is necessary before this court commits the fate of an entire industry or, indeed, the fate of a class of millions to a single jury," wrote Judge Jerry Smith. (15)

If the Castano class sought certification today, the outcome might be different. Tort claims against tobacco companies have certainly matured: Since the 1996 ruling decertifying the Castano class, juries have rendered more than 20 verdicts in tobacco cases. While they have ruled in favor of defendants more often than not, in the past three years about 30 percent of verdicts handed down in cases involving individual claims were in favor of plaintiffs. Juries in two Florida cases in addition to Engle, three in California, and one in Oregon have awarded plaintiffs billions of dollars in compensatory and punitive damages against the industry, although not all the verdicts have survived appeal. (16)

After decertification of Castano, the Plaintiffs' Legal Committee nevertheless decided to file class actions based on the Castano approach in as many states as possible. Most of these were not certified because of the Fifth Circuit's ruling and the daunting prospect of managing a class involving so many claimants--often around 25 percent of a state's residents.

Scott, however, was certified as a class action. As in the Engle and Broin cases in Florida, industry attempts to decertify or derail the action have been repeatedly rejected by the state supreme court. (17)

The class is seeking medical monitoring and smoking cessation services from the defendants. If the jury finds general liability in the first phase of the Scott trial, a second phase will determine the damages common to the class. While punitive damages are not generally available in cases seeking medical monitoring and smoking cessation services, the relief they seek reduces the harm caused by class members' addiction to nicotine. The attorney fees awarded to class counsel would probably be considerable given these claims' complexity and difficulty.

The similar West Virginia case, known as In re Tobacco Litigation (Medical Monitoring), and formerly as Blankenship, was brought on behalf of state residents who had smoked the equivalent of five "pack years" or more (smoking one pack of cigarettes per day for one year equals a "pack year"). (18)

The class was certified, and the case went to trial in January 2001. But unlike some cases, it did not involve allegations of common injury due to nicotine addiction, so when a witness inadvertently made a reference to addiction, a mistrial was declared.

In April 2001, the trial judge rejected the industry's contention that the mistrial destroyed the class certification. The judge rescheduled the case, permitting the trial to include the issue of addiction. The case began trial in September.

The three other pending certified tobacco class actions are based on the theory that violations of state consumer protection laws constitute a common injury sufficient to form a class.

In California, Judge Ronald Prager, who has been managing a docket including more than two dozen tobacco cases in recent years, recently certified two tobacco classes. In November 2000, he certified a class of 1.5 million California residents who smoked cigarettes as minors, on the theory that the defendants' sales and marketing practices directed toward minors were unlawful and deceptive, in violation of California's Business and Professions Code. (19) Plaintiffs are seeking to recoup profits from cigarette sales to minors after April 2, 1994.

The other California class, which Prager certified in April 2001, comprises every California resident who purchased cigarettes in the state during a time period yet to be established. (20) This suit also alleges unlawful and deceptive sales and marketing activities in violation of the California Business and Professions Code.

Specifically, the plaintiffs allege that tobacco industry defendants manipulated the chemical constituent products and, through deceptive advertising and marketing, misled the public about the health risks and addictive nature of smoking. The lawsuit seeks restitution in the form of refunds for all cigarettes purchased by class members during the time period. If the plaintiffs prevail, monies that are not claimed by class members will probably be used to provide cessation services to California smokers.

The third consumer protection case is pending in Illinois, where a class was certified in February 2001 to redress the allegedly deceptive practices used by Philip Morris in selling its Marlboro Lights and Cambridge Lights cigarettes. (21)

According to the suit, cigarettes sold as "light" are regular cigarettes with tiny holes in the filter that dilute the smoke with air. When "tar" and nicotine are measured by a machine, their intake is lower than that from regular cigarettes, and these measurements are printed on the pack and included in marketing materials for light cigarettes. But when consumers smoke light cigarettes, they ingest these chemicals at much higher levels because their lips or fingers cover many of the holes.

The Illinois class alleges that the defendant's failure to deliver what it purported to sell--a less toxic cigarette--is a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. The suit seeks refunds for the purchase price of the light cigarettes. To avoid overlap with other litigation, the class excludes Illinois consumers with personal injuries caused by smoking light cigarettes.

Justice in sight

Courts are certifying class actions against tobacco companies, and these cases are reaching juries. Whether they are brought on behalf of a traditional class of injured smokers, a class seeking medical monitoring and smoking cessation services, or a class of deceived consumers, these actions show great promise in helping millions of plaintiffs injured by the tobacco industry obtain justice.

Notes

(1.) No. 94-08273 CA 22 (Fla., Dade County Cir. Ct. July 14, 2000).

(2.) See Richard A. Daynard & Mark Gottlieb, Keys to Litigating Against Tobacco Companies, TRIAL, Nov. 1999, at 18.

(3.) United States Centers for Disease Control & Prevention, Smoking-Attributable Mortality and Years of Potential Life Lost--United States, 1990, 42 MORBIDITY & MORTALITY WKLY. REP. 645-49 (1993).

(4.) See Castano v. Am. Tobacco. Co., 84 F.3d 734 (5th Cir. 1996); Barnes v. Am. Tobacco Co., 176 F.R.D. 479 (E.D. Pa. 1997), aff'd, 161 F.3d 127 (3d Cir. 1998), cert. denied, 526 U.S. 1114 (1999); Small v. Lorillard Tobacco Co., 679 N.Y.S.2d 593 (App. Div. 1998), aff'd, 720 N.E.2d 892 (N.Y. 1999).

(5.) Broin v. Philip Morris Cos., 641 So. 2d 888, 191 (Fla. Dist. Ct. App. 1994) (quoting Tenney v. City of Miami Beach, 11 So. 2d 188, 189 (1942)).

(6.) First Amended Complaint, Engle, No. 94- 08273 CA 22.

(7.) See Engle v. R.J. Reynolds Tobacco Co., 1999 WL 689284 (Fla. Dist. Ct. App. Sept. 3, 1999).

(8.) See Engle v. R.J. Reynolds Tobacco Co., 743 So. 2d 524 (Fla. Dist. Ct. App. 1999).

(9.) See Engle v. R.J. Reynolds Tobacco Co., 751 So. 2d 51 (Fla. 1999).

(10.) William McQuillen, RJ Reynolds Attorney Johnson's Miami Trial Arguments: Comment, Bloomberg (July 12, 2000), at quote.bloomberg. com/newsarchive/.

(11.) 121 S. Ct. 1678 (2001).

(12.) No. 91-49738 CA (22) (Fla., Dade County Cir. Ct. settled Oct. 8, 1997). The first phase was settled for $300 million (establishing a research foundation) and a limited waiver of the limitations statute--claims must be filed within a year of approval of the settlement.

(13.) 725 So. 2d 10 (La. Nov. 4, 1998) (certifying class).

(14.) Castano v. Am. Tobacco Co., 160 F.R.D. 544 (E.D. La. 1995).

(15.) Castano, 84 F.3d 734, 752.

(16.) Carter v. Brown & Williamson Corp., No. 95-934-CA (Fla., Duval County Cir. Ct. Aug. 9, 1996); Widdick v. Brown & Williamson Corp., No. 97-03522-CA (Fla., Jacksonville County Cir. Ct. Aug. 9, 1996); Henley v. Philip Morris Cos., No. 995172 (Cal., San Francisco Super. Ct. Feb. 10, 1999); Williams v. Philip Morris, Inc., No. 970503957 (Or., Multnomah County Cir. Ct. Mar. 30, 1999); Whiteley v. Philip Morris, Inc., No. 303184 (Cal., San Francisco Super. Ct. Mar. 27, 2000); Boeken v. Philip Morris, Inc., No. BC 2226593 (Cal., Los Angeles County Super. Ct. June 6, 2001).

(17.) See Scott v. Am. Tobacco Co., 725 So. 2d 10 (La. Ct. App. 1998), writ denied by 731 So. 2d 189 (La. 1999) (per curiam), and writ denied by No. 2001-C-1100, 2001 WL 739662 (La. 2001).

(18.) No. 00-C-6000 (W. Va., Ohio County Cir. Ct. third amended complaint filed Dec. 6, 1996).

(19.) In re Tobacco Cases II, No. JCCP-4042 Case 719446 (Cal., San Diego County Super. Ct. Nov. 30, 2000).

(20.) In re Tobacco Cases II, No. JCCP-4042 Case 711400 (Cal., San Diego County Super. Ct. Apr. 11, 2001).

(21.) Miles v. Philip Morris Cos., No. 00-L-112 (Ill., Madison County Cir. Ct. Feb. 8, 2001).

Richard A. Daynard is a law professor at Northeastern University in Boston and chair of the Tobacco Products Liability Project based at the university. Mark Gottlieb is a staff attorney for the project and editor of the Tobacco Products Litigation Reporter.