US tobacco giant forced to pay $23.6bn to widow
Sunday 20 July 2014
America’s second biggest tobacco company has been ordered to pay $23.6bn (£13.8bn) in punitive damages to the widow of a cigarette smoker who died of lung cancer.
That is almost as much as the company said it would spend buying up its closest rival last week.
RJ Reynolds, maker of the Camel, Winston and Kool brands, is 42 per cent owned by UK based British American Tobacco which last week said it would spend $4.7bn to support Reynolds $25bn takeover of number three US cigarette producer Lorillard.
Cynthia Robinson started legal action in 2008 against RJ Reynolds seeking compensation for her husband’s death at the age of 36 in 1996. The Florida jury also awarded her $16m in compensation damages.
RJ Reynolds said it would appeal against the verdicts.
Reynolds’ vice president and assistant general counsel, J Jeffery Raborn, called the damages in Robinson’s case “grossly excessive and impermissible under state and constitutional law.”
“This verdict goes far beyond the realm of reasonableness and fairness, and is completely inconsistent with the evidence presented,” Mr Raborn said in a statement. “We plan to file post-trial motions with the trial court promptly, and are confident that the court will follow the law and not allow this runaway verdict to stand.”
Ms Robinson originally sued Reynolds as part of a successful $145bn class action against most of the large tobacco companies. That was overturned by Florida’s highest court in 2006 but individuals were allowed to go ahead with their own actions.
The Florida high court also backed the jury’s findings that cigarettes are defective and cause disease, and that Big Tobacco was negligent, which meant those issues did not have to be re-argued in future lawsuits.
The US Supreme Court had ruled in 2003 that punitive damages should be no more than nine times the level of damages for compensation. But since then some judges have upheld awards above this scale.
The Supreme Court last month declined to hear a series of tobacco company appeals, mainly from Reynolds, seeking to overturn Florida court judgments totalling more than $70m.
As part of Reynolds’ $27bn takeover of Lorillard the UK’s other big player, Imperial Tobacco, has agreed to buy several of their brands and an e-cigarette business for $7.1bn. Those brands include Winston, Kool and Maverick.
The purchase includes the fact that Imperial will not inherit any historic liabilities for the brands it is acquiring with Reynolds providing an indemnity against any such claims.
Reynolds takeover of Lorillard is expected to complete in the first half of 2015. It would mean that just two companies controlled around 90 per cent of the US cigarette market.
Marlboro maker Altria, formerly Philip Morris, has just over half the market. Imperial will become the third largest with around 10 per cent market share.
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