Ore. Lights' Case Back on Trial

Appeals court vacates PM USA $150 million ruling; Fla. AG seeks compensation from B&W

Published in CSP Daily News

SALEM, Ore. -- Philip Morris USA dodged a $100 million bullet at least temporarily this week when an Oregon court threw out a 4-year-old jury verdict in a lawsuit filed by the husband of Michelle Schwarz, who died of lung cancer in 1999. Because it follows on a March 2002 verdict that was the first such award in the nation based on claims that low-tar cigarettes led smokers to believe they were less dangerous than regular cigarettes, the ruling could set a new precedent for light cigarette lawsuits.

The ruling also has left PM USA to mull what the decision [image-nocss] might mean to the company. Our lawyers are studying it right now to determine what the next steps are, PM USA spokesperson John Sorrells, who characterized the more-than-30-page decision as fairly complicated, told CSP Daily News.

In 2002, a jury ordered Altria Group Inc. unit Philip Morris to pay $150 million in punitive damages to the estate of Michelle Schwarz of Salem, Ore., who died of lung cancer in 1999 at age 53, according to a report by the Associated Press. The jury had agreed with lawyers for her family, who claimed that PM USA fraudulently marketed its low-tar Merit brand as safer than regular cigarettes.

But Multnomah County Circuit Judge Roosevelt Robinson found that amount grossly excessive and reduced it by a third, to $100 million. The Oregon Court of Appeals then completely vacated the jury verdict on Wednesday and remanded the case for a new trial solely to determine the amount of punitive damages.

The court ruled that it was proper for Robinson to reduce the award, but the verdict should get thrown out because he had failed to give the jury specific instructions requested by the tobacco company.

The jury also awarded $168,000 in compensatory damages to Schwarz's family, which Philip Morris attorneys have argued also should be overturned. The Court of Appeals stood by the $168,000 amount.

In other tobacco-litigation news, Florida Attorney General Charlie Crist announced yesterday that his office has moved to have one of the nation's largest tobacco manufacturers held in contempt for violating Florida's historic multi-billion-dollar 1997 tobacco settlement. Crist said Brown & Williamson Holding Inc. failed to report the shipment and sale of billions of cigarettes. As a result, approximately $17 million owed to Florida under the landmark agreement has not been paid.

The original settlement agreement called for the company, formerly known as Brown & Williamson Tobacco Corp., and other manufacturers to pay a lump sum of $550 million to Florida and then make annual payments to the state based on the volume of sales of tobacco products.

Crist's office maintains that B&W has failed to report the shipment and sale of more than seven billion cigarettes manufactured for Star Tobacco & Pharmaceuticals Inc. The failure to report these sales deprived Florida of approximately $17 million in settlement payments and interest. B&W has also refused to provide the state with all requested information about the sales of these cigarettes, according to Crist's court filing.

The tobacco settlement, with the agreement of the companies, was designed to benefit the people of Florida, said Crist. We are asking the court to require this company to live up to its part of the bargain and stop shortchanging the citizens of this state.

According to Crist's motion, the unreported cigarettes were manufactured by B&W and sold in the United States by Star under such brand names as Gunsmoke and Vegas. In 2001, B&W attorneys acknowledged that profits from the sale of Star cigarettes were to be counted under the settlement agreement, but three years later the company asserted that the acknowledgment had been mistaken.

Crist's motion asks the Palm Beach County Circuit Court to compel B&W provide an accurate accounting of its manufacturing, shipping, production costs, revenue and profits associated with the manufacture, shipment or sales of cigarettes since Jan. 1, 1999. It also asks the court to enforce the settlement agreement between Florida and B&W, award the state damages owed because of the violations of the settlement and hold B&W in contempt.

To view a copy of the motion, click here.