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Decision of Florida Appeals Court Full of Inconsistencies and Strange Conclusions; Suggests a Strong Case for Appeal to the Florida Supreme Court
CASE BACKGROUND
A national class action on behalf of sick smokers and the estates of those who died as a result of smoking-caused disease was filed on May 5, 1994 by Miami attorneys Stanley and Susan Rosenblatt. On October 31, 1994, the trial court in Miami certified the nationwide class. The tobacco company defendants appealed the class certification and on January 31, 1996, the Third District Court of Appeals affirmed the class certification but narrowed the class to citizens and residents of Florida (see 672 So. 2d 39). The tobacco company defendants again appealed, this time to the Florida Supreme Court and on October 2, 1996, the state's high court rejected the appeal. The case proceeded to trial with a trial plan calling for three phases: 1) determination of general liability; 2) determination of compensatory damages for a selection of representative class members and, if such liability is found, determination of punitive damages for the whole class; and 3) determination of compensatory damages for all class members on an individual basis. The first phase of the trial began in October of 1998 and resulted in a verdict for the plaintiff on July 7, 1999. The jury found that smoking cigarettes could cause 20 diseases or medical conditions, including lung cancer, heart disease and emphysema; that cigarettes are addictive; and that the tobacco companies' conduct rose to the level that would permit the potential award of punitive damages.
While the jury took a break after ten months of work, tobacco companies challenged the trial plan which called for the jury to determine a lump sum punitive damages award for the entire class if defendant liability was established for any of the representative class members in the next trial phase. On September 3, 1999, a panel of the Third District Court of Appeals including two of the three judges who would issue the decertification order on May 21, 2003, agreed with the tobacco companies and voided the trial plan. The same panel reconsidered and, on October 20, 1999, the Third District Court of Appeals denied the tobacco companies' motion and retained the trial plan with its lump sum punitive damages provisions. The same jury of six returned for the next part of the trial. The second phase of the trial began on November 1, 1999 and was divided into two parts. In the first, three individual class members' claims for damages were tried as if they were separate individual cases. During this portion of the trial, the tobacco companies filed a desperation motion to the Florida Supreme Court called an an Extraordinary Writ Under the All Writs Power motion to urge the state's high court to void the trial plan or decertify the class. The Florida Supreme Court rejected this motion and let the trial plan and class certification stand on December 27, 1999. Meanwhile, the plaintiffs were presenting the jury with evidence proving that the defendant tobacco companies were liable for injuries to the three representative class members. This phase of the trial resulted in verdict establishing tobacco company liability for the injuries to the three representative class members on April 7, 2000. $6.9 million in compensatory damages were awarded to lung cancer victim Mary Farnan, a 44-year-old nurse, and to the husband of Angie Della Vecchia, a longtime smoker who died of lung cancer last summer at the age of 53. Despite questions about the statute of limitations, the jury awarded plaintiff Frank Amodeo, a throat cancer victim and 60-year-old clockmaker $5.7 million. This verdict opened the door to the second part of the second phase On July 14, 2000, a Florida jury in the Engle class action trial issued a jaw-dropping punitive damages verdict against the tobacco industry totaling approximately $145 billion. The verdict broke down among tobacco companies as follows: Philip Morris Inc. - $73.9 billion; R.J. Reynolds Tobacco Co. - $36.2 billion; Brown & Williamson Tobacco Corp. - $17.5 billion; Lorillard Tobacco Co. - $16.2 billion; and Liggett Group Inc. - $790 million. The trial judge, Robert Kaye, denied the defendants' post-trial motions and issued a final judgment on November 6, 2000. Thus began the appeals process leading up to the May 21, 2003 decision of the Third District Court of Appeals.
ANALYSIS
The Third District Court of Appeals' decision showed a surprising lack of regard to prior decisions of the Third District as well as some very dubious conclusions that will likely invite review by the Florida Supreme Court or an en banc review by the other appeals judges in the District.
Decertification:
The first and most obvious question raised by the decision is: why review and modify the class certification in 1996 and then wait for the longest civil trial in U.S. history to take place and then nearly another three years after that to come to the realization that individual issues among class members pose a problem?
For a class action to be approved, common issues among class members must predominate over individual issues. The Court points to issues involving the fact that some Florida residents are transient and, therefore, questions about whether Florida or another state's laws could apply to particular class members' claims could arise. The Court notes that there were differences in how the jury regarded the proportion of fault attributed to the three representative class members themselves and that each of the representative class members' illness and experience was different. Of course! These are not new issues that became apparent since the class was certified. The Court was well aware that the state hosts more part-time residents than other states. The Court knew that everyone's experience with smoking-caused disease was not identical in 1996. The Court could certainly anticipate that a jury might regard the proportion of fault attributed to the different class members differently. In fact, that is precisely why this trial plan called for a third phase to settle individual issues for each class member. Surely that approach is more efficient than holding separate full trials for each and every class member. It took a year in the first phase of the trial for both sides to present the underlying issues that apply to every class member. Why go through that same exercise thousands of times? But this is precisely what the Court suggests is the better approach. The truth is that there simply aren't enough attorneys and court rooms available to try each individual case fully and that such an approach would deny the vast majority of the members of the class an opportunity to be heard.
The strangest rationale for decertifying the class nearly three years after the trial is cited on page 14 of the decision where the Court says, "it would further be unjust to bind absent class members to a negative decision where the class representative's [sic] claims present different individual issues than those of the absent members." The strange thing about this is that it simply did not happen and the jury found that the individual class representatives' claims were sufficiently proven to establish defendant liability. Perhaps one might consider it considerably more unjust to absent class members as well as class representatives to spend two years trying the case and then ruling that the entire process was a waste of the time, money, and emotional investment staked in the trial.
Lump Sum Punitive Damages:
The other glaring inconsistency involves the Court's ruling on the lump sum punitive damages which it describes as "the cart before the horse." The point of a lump sum punitive damages finding was that this jury had heard more about the tobacco company defendants than any other jury had ever heard and would, therefore, have the requisite knowledge of the underlying facts to determine the appropriate sanction. A judge or jury hearing the individual claims of class members in the third phase of the trial would not have the time to hear the full sordid tale of tobacco industry deceit multiplied by the tens of thousands of class members.
Two of the three judges on this panel were on the three judge panel that ruled that lump sum punitive damages were unlawful in September of 1999 only to reverse themselves the following month. Now, once again, the Third District Court of Appeals has flip-flopped on this issue. One can only speculate as to why the Third District Court of Appeals would give the green light to the trial plan in 1999 (and the Florida Supreme Court would decline to intervene when asked) only to reverse itself a second time more than three years later. The only thing that has changed since 1999 is that the jury has since issued its verdict on punitive damages and this court clearly dislikes the number of zeros in that verdict.
Punitive Damages:
In the punitive damages phase of the trial, the tobacco companies declined to put on any expert witnesses to explain to the jury what they could afford to pay out in punitive damages. Instead, they submitted their audited financial statements that asserted that their combined net was just over $8 billion. The plaintiffs, on the other hand, presented industry experts who suggested that the defendants' ability to pay was much greater than their declared net worth. For example, under the terms of the Master Settlement Agreement (MSA), the industry will pay about about $6 billion this year to 46 states. Four other states, including Florida, will receive higher per capita payments under their own settlements with the tobacco defendants that predate the MSA. Advertising and promotion expenses industry-wide for this year are expected to be in the $6-8 billion range. Tobacco companies pay dividends to their shareholders that amount to billions of dollars per year. These are telltale signs that the companies' ability to pay far exceeds their declared net worth. The jury saw through the smokescreen of the financial statements and found the plaintiffs' experts to be more credible. The Court strongly disagreed.
But instead of reducing the punitive damages awarded by the jury as is often the practice when such awards are reviewed on appeal, the Court instead came to the remarkable conclusion that the State of Florida's 1997 settlement with the tobacco industry barred punitive damages awards against tobacco companies in any future Florida proceeding. The Court wrote at page 64 that, "as a matter of law, Florida's Settlement and Release . . . preclude the plaintiffs' punitive-damages claims here." This conclusion is sharply at odds with the language of the settlement agreements themselves and raise the question: why did the Third District Court of Appeals permit a trial plan calling for punitive damages to go forward in 1999 if all punitive damages claims against the tobacco industry were settled in 1997 or 1998? If that is what the court supervising the trial court believed, then why send tens of thousands of class members on a wild goose chase?
The Court cites to a few land use, zoning, and nuisance cases that were resolved by state action. Rulings in these cases restrict private civil litigation of the same issues. One would be hard-pressed to find a less analogous set of cases. The claims of the sick class members or their survivors involve lung cancer, emphysema, bladder cancer, kidney cancer, heat disease, stomach cancer, and the other included conditions are not nuisance or zoning claims and most certainly were not settled or released by the State of Florida.
The State of Florida sued the tobacco companies to recover Medicaid program costs of treating indigent smokers whose medical treatment was necessitated as a result of smoking cigarettes under provisions of Florida statutes including the Third Party Liability Act and the Florida Racketeering and Corrupt Organizations Act. The State of Florida sought punitive damages from the tobacco defendants. On August 25, 1997, the State entered into a Settlement Agreement with the tobacco industry defendants and, as part of the agreement, released all of the claims of the State and its counties, municipalities, public hospitals, universities, and other public entities. The rights on individuals or classes of individuals were not affected in any way.
The Court maintains that the trial court committed a reversible error by instructing the jury not to consider the Florida Settlement Agreement or the Master Settlement Agreement (MSA) with 46 states in regard to the issue of punishment and deterrence. However, the Florida Settlement Agreement is very clear on this point. It states in section VI(c): "neither this Settlement Agreement nor any evidence of negotiations hereunder, shall be offered or received in evidence in this Action, or any other action or proceeding, for any purpose other than in an action or proceeding arising under this Settlement Agreement." Likewise, the MSA contains a nearly identical provision at section XVIII(f): "Neither this Agreement nor any public discussions, public statements or public comments with respect to this Agreement by any Settling State or Participating Manufacturer or its agents shall be offered or received in evidence in any action or proceeding for any purpose other than in an action or proceeding arising under or relating to this Agreement."
Conclusion:
This analysis, produced within 24 hours of the release of the Court's decision, can only touch on the many inconsistencies apparent in this ruling. It appears that virtually every argument raised in the tobacco industry's briefs and oral presentations was embraced by the Court. There is much here for the Florida Supreme Court to examine and there are several possible conclusions that could result from that court's inevitable review. The case could be retried; the punitive damages could be reduced or integrated into the third phase of the trial; the trial court's final judgment could be reinstated; or the class could, indeed, be decertified. However the matter is ultimately decided, it is extremely unlikely that the Third District Court of Appeal's May 21st ruling will be the final word in the Engle case.
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