Successful Appellate Defense of Class Action Case Still Permits Individual Lawsuits to be Filed, and Florida Supreme Court Holds that Several Jury Findings Against the Tobacco Companies Still Stand
In a tremendous victory for the tobacco industry defense, the Florida Supreme Court decertified a class action and set aside a $145 billion punitive damage award as excessive. Engle v. Liggett Group, ___ So.2d ___, Case No. SC03-1856 (July 6, 2006). A nationwide class action had been certified almost a dozen years ago – on October 31, 1994 – on behalf of smokers and their survivors seeking compensatory and punitive damages for injuries allegedly caused by smoking. survivors, who have suffered, presently suffer or who have died from diseases and medical conditions caused by their addiction to cigarettes that contain nicotine.” Slip Opn., at 7. Following an interlocutory appeal filed by the defense, the Florida Court of Appeal affirmed class certification but reduced the scope of the class action to “Florida citizens and residents.” See R.J. Reynolds Tobacco Co. v. Engle, 672 So.2d 39, 42 (Fla.App. 1996). The ensuing trial resulted in a jury verdict awarding the named plaintiffs a total of $12.7 million dollars in compensatory damages, and the entire class $145 billion in punitive damages. Slip Opn., at 9.
With respect to the punitive damage award, the Supreme Court held that the trial court’s procedure was fatally flawed. The trial proceeded as follows: Phase I – consisting of the trial on the class action claims for liability and entitlement to punitive damages; Phase II-A – consisting of the trial on the individual class representative’s claims for compensatory damages; and Phase II-B – consisting of a jury trial on the total award of punitive damages payable to the class as a whole. Slip Opn., at 8-9. Phase III (not yet held) would involve the selection a new juries “to decide the individual liability and compensatory damages claims for each class member,” following which “the trial court would divide the punitive damages previously determined equally among any successful class members.” Id., at 10. The Supreme Court rejected this procedure, as well as the size of the award, explaining at page 19:
As a matter of law, the punitive damages award violates due process because there is no way to evaluate the reasonableness of the punitive damages award without the amount of compensatory damages having been fixed. The amount awarded is also clearly excessive because it would bankrupt some of the defendants.
However, the Supreme Court held that “an award of compensatory damages is not a prerequisite to a finding of entitlement to punitive damages,” Slip Opn., at 20 (italics added), but a finding of liability is a prerequisite, id., at 21. The Court explained that it was not possible, therefore, for a jury to determine entitlement to punitive damages in Phase I because it had not determined causation and reliance until Phase II. Id., at 22. The Court further held that the amount of the award was excessive as a matter of law. Id., at 23-27.
While the Supreme Court disapproved of the procedure followed by the trial court, it held that certain factual findings made by the jury in favor of the class members “can stand” – that is, those factual findings will have res judicata effect in any subsequent individual actions filed by members of the class. Specifically, the court concluded:
[I]t was proper to allow the jury to make findings in Phase I on Questions 1 (general causation), 2 (addiction of cigarettes), 3 (strict liability), 4(a) (fraud by concealment), 5 (civil conspiracy-misrepresentation), 5(a) (civil-conspiracy-concealment), 6 (breach of implied warranty), and 8 (negligence). Therefore, these findings in favor of the Engle Class can stand. Slip Opn., at 4.
With respect to class certification, the Supreme Court held that the appellate court erred in decertifying the class because it was bound by its prior affirmance of the class certification ruling (albeit by a different panel). Id., at 27-31. In fact, the Supreme Court expressly held that “the trial court did not abuse its discretion in certifying the class.” Id., at 31 (italics added).
The Supreme Court also held, however, that “the continued viability of this class action” failed because “individualized issues such as legal causation, comparative fault, and damages predominate.” Slip Opn., at 32. But the impact of the adverse factual findings against the tobacco companies will not be affected by the decertification order:
In this case, the Phase I trial has been completed. The pragmatic solution is to now decertify the class, retaining the jury’s Phase I findings other than those on the fraud and intentional infliction of emotion distress claims, which involved highly individualized determinations, and the finding on entitlement to punitive damages questions, which was premature. Class members can choose to initiate individual damages actions and the Phase I common core findings we approved above will have res judicata effect in those trials. Slip Opn., at 36 (italics added, citations omitted).
Finally, the Supreme Court addressed issues concerning the judgments entered in favor of the class representatives. We do not summarize that portion of the opinion here other than to note that the Supreme Court reinstated the judgments in favor of two of the class representatives. Slip Opn., at 50.
NOTE: Though it did not affect the outcome of the case, the Supreme Court held that the 1997 settlement of a 1995 lawsuit by the State of Florida against the tobacco companies under the Medicaid Third-Party Liability Act, which had sought reimbursement of Medicaid funds spent on treating tobacco-related illnesses, did not bar the punitive damage award under the doctrine of res judicata. “‘[L]itigation by a government agency will not preclude a private party from vindicating a wrong that arises from related facts but generates a distinct individual cause of action.'” Slip Opn., at 17 (quoting Southwest Airlines Co. v. Texas Intern. Airlines, Inc., 546 F.2d 84, 98 (5th Cir. 1977)). The Supreme Court also “condemned the tactics” of plaintiffs’ lawyer, who injected into his arguments, and stated in no uncertain terms that “[h]is attempt to incite racial passions was conduct unbecoming an attorney practicing in our state courts.” Id., at 44. However, while plaintiff’s lawyer “ventured very close to the line of reversible error on a number of occasions,” the court concluded that “under the totality of the circumstances these comments did not rise to the level of reversible error.” Id., at 39.