A Florida Appeals Decision That Zeroed Out the Largest Tort Judgment Ever:
Why It Was Rendered, and What It Means

In 2000, in the infamous Engle case, a Miami jury awarded a $145 billion judgment against the entire tobacco industry. It was the largest tort judgment in the history of law. Many predicted it would be the end of Big Tobacco.

Last week, on May 21, the Third District Court of Appeals in Florida issued a decision that wiped that judgment off the face of the earth.

The significance of this reversal cannot be underestimated. It brings to an end one of the most important episodes of American law--the use of multi-billion dollar lawsuits to change a politically powerful industry.

It also shows that, while the law can be changed to achieve many laudatory social goals, it can change only so much before it snaps back into its old shape. The Florida court had the unenviable task of restoring the law's rightful contours. The reasons it did so are important to understand.

The History of Engle - and Big Tobacco Litigation in General

The original Engle suit was brought in 1994. It purported to be a class action on behalf of every smoker (or surviving heir of a smoker) who had been in injured or defrauded by the tobacco industry in America.

At the time, the idea of beating Big Tobacco in court was viewed as a crazy gamble. The states had not yet begun their campaign to gain restitution from the industry for their health care costs.

Yet clever and aggressive plaintiffs' lawyers, fresh from their recent victories against the asbestos industry, were confident that Big Tobacco was vulnerable, and could be taken down.

In the years that followed the original Engle filing the world of tobacco litigation changed very quickly, in several ways. Big Tobacco won procedural battles in federal court: federal courts of appeals closed the door to class action litigation under federal law - most famously in the 1996 ruling of the U.S. Court of Appeals for the Fifth Circuit in Castano v. American Tobacco Co..

The plaintiffs' bar had been right in its prediction that Big Tobacco would be a vulnerable target. Although the legal hurdles were still high, by the late '90's, the industry was wounded and there was blood in the water.

That brings us back to Engle. In 1996, after the tobacco industry appealed, the Florida appeals court allowed the case to go forward as a class action not for all U.S. smokers, but for all Florida smokers. That meant the action proceeded on behalf of approximately at least 700,000 persons.

Subsequently, the trial judge in the Engle case, Judge Robert P. Kaye, allowed the plaintiffs' lawyers, Stanley and Susan Rosenblatt, to create a trial plan unlike any ever seen in the United States. The tobacco industry tried to get the Florida courts of appeals to review the plan before trial began, but they refused to intervene absent a final verdict in the case.

The Engle Judge's Plan for the Trial

Under the plan, as approved by Judge Kaye the trial was to proceed in three stages.

First, the plaintiffs would be required to prove that smoking could cause disease in general, and that the defendants had engaged in conduct that "rose to a level that would permit a potential award or entitlement to punitive damages."

Second, the plaintiffs would have the opportunity to prove to the jury that the industry had, in fact, acted tortiously towards three hand-picked class representatives; to determine the damages for those three plaintiffs; and to determine the total punitive damages that the entire class would receive.

Third, the plaintiffs would have to prove, on a case-by case basis, which of the remaining members of the class should also receive compensatory damages and a portion of the total punitive award.

At the end of phase two, Big Tobacco was told that it would have to eventually pay at least $145 billion in punitive damages to the class. Many thought that Big Tobacco would have to settle. After all, over the last 25 years, hadn't it been proven that, in the end, it always made sense for a mass tort defendant--especially an unpopular defendant--to settle rather than risking total devastation?

The Legal Problem with the Trial Plan: Setting Plaintiffs Up for a Big, Ugly Win

There were two basic ideas behind the three-stage trial plan. The first was to force the tobacco industry to deal with all of its victims in Florida as a single class.

That idea alone was controversial. Since the Castano decision, virtually every court - state or federal - to consider the question had said tobacco litigation was not amenable to mass class action treatment. In addition, class actions - which help diffuse and disempowered consumers fight back against large, nefarious corporations retain some appeal to many judges. It takes a large litigation to try to redress the balance of power between corporations and consumer in a given industry.

Another aspect of the trial plan, however was far most disturbing - indeed, from a lawyer's perspective, it can only be described as just plain ugly. Under the plan, the jury was asked to decide total punitive damages based on the harms done to only three actual victims.

That's plainly wrong. Punitive damages can only be awarded based on proven wrongs done to actual victims. Then why did Judge Kaye not wait until after stage three to calculate punitive damages?

Many suspected that he wanted to force a settlement, knowing it would be the punitive figure that would be the driving force in convincing the parties to settle - and, more specifically, that the huge figure the jury would settle on to reflect an injury to 700,000 people, would probably convince the defendants to fold up their tents and go home.

But if that was indeed the judge's intent, he was in error. This type of tactic set up the plaintiffs for an ugly win--one that would have been based on economic blackmail, not justice.

The Florida Court of Appeals' Recent Opinion and Its Significance

The Florida court of appeals that issued last week's opinion saw this, and accordingly faulted the plan for its attempt to "put the cart before the horse" - meaning the punitive damages calculation that should rightly have concluded the trial, had been done in the midst of trial instead.

In retrospect, it seems quite obvious that a verdict built on this trial plan would be reversed. But three years ago, when it was rendered, the original $145 billion verdict was taken very seriously nonetheless, by law professors, business leaders, and politicians alike.

What changed over the course of the Engle litigation? Most importantly, it is now well understood that Engle is no longer needed - a truth that may have encouraged the Florida appeals court to write the sweeping decision that it rendered.

In 1994, when Engle was filed, the tobacco industry seemed to occupy a position of political invulnerability. Now, of course, it is a political pariah.

The industry operates under a severely constrained environment. For instance, it now has to pay for ads that are designed to stop people from buying its products. Anti-smoking regulations and sentiments abound in the U.S., as any New York City resident can tell you. Meanwhile, Big Tobacco still faces serious legal challenges by individual smokers, especially in Western states - where juries, angered by what they have read in the media, are still very likely to hold cigarette manufacturers liable for millions of dollars.

Engle and the other huge class actions that were filed during the 90's helped shape the public's attitudes about Big Tobacco. These cases were grand theater--the numbers alone shocked people into recognizing that the role Big Tobacco plays in America is huge on every level: social, economic and political.

Like grand theater, Engle was a melodrama--overdrawn, excessive, and ultimately as much about emotion as about law. It served its purpose, and now it is being retired.

The saga of the case is an example of how lawsuits can sometimes have their greatest effect outside the courtroom, not within. For those who think America is a better place now because Big Tobacco has been domesticated, the legal rights and wrongs of Judge Kaye's trial plan may seem like a secondary concern - and, indeed, even this landmark reversal of a landmark verdict may seem a secondary event.