More Hazards And Headaches

Friday's jury verdict in a closely-watched Florida tobacco trial means more legal hazards and headaches for an industry already under siege on many other fronts.

It isn't the amount of the jury award—$12.7 million to three ailing smokers—that Big Tobacco is worried about.

The tobacco makers can handle paying a few million dollars here or there, and even can take solace in the fact that all of the other jury awards in tobacco cases have been reduced on appeal or by trial judges, or are currently on appeal.

So it isn't the verdict that is giving the industry a headache.

Instead, Big Tobacco is worried—and with good reason—that this award has opened the floodgates to a class-action punitive damages claim in this case (to be evaluated by the same jury) that could easily be in the multi-billion dollar range.

And that's a verdict that few industries would be able to handle, much less one already bombarded by private and public lawsuits.

Here's the skinny: The three Florida plaintiffs—all ex-smokers, of course—who were awarded damages Friday were acting as class representatives for literally hundreds of thousands of other Florida smokers who may have valid claims against leading cigarette makers.

An appeals judge last fall permitted the class to continue to be involved in this case and permitted this jury to award punitive damages if they came back with a compensatory damage award to the three named plaintiffs.

Got it?

Cigarette makers get it. They understand that this is bad news for tobacco, especially considering that the same jury last July decided that the tobacco industry fraudulently conspired to make a dangerous, addictive product that causes cancer, heart disease and other illnesses.

Indeed, the three class representatives who won their compensatory damages Friday were awarded about 90 percent of what they asked for. That's a pretty good ratio in any case, and it's an excellent ratio when you are talking about millions of dollars.

If no settlement is reached in this case—and I don't expect one—then the industry must gear up for a potentially enormous fight which even if it wins, will come at a huge cost in legal fees and years of more uncertainty.

And let's assume that the Florida jury gives the class of smokers 90 percent of the damages they will seek during this upcoming punitive damages phase.

That means that cigarette makers could be looking at a potentially huge verdict against them, one which could cripple the industry unless it is whittled down on appeal. This award won't come anytime soon, but it looks for all the world that, eventually, it will.

By ANDREW COHEN