The Miami-based parent of cigarette maker Liggett Group said Wednesday it has reached a global settlement agreeing to pay more than 4,900 sick Florida smokers a total of $110 million to resolve individual lawsuits filed after a statewide class action was disbanded.
Liggett’s parent, Vector Group Ltd., agreed to pay $61 million in a lump sum and $49 million in installments over 15 years to resolve most of the cases. The proposed settlement would be final in about three months contingent on plaintiffs attorneys delivering the required settlement documents.
Liggett, which over time produced the Chesterfield, L&M, Lark and Eve brands, is owned by Vector, which expects to take an after-tax charge of $53 million in the third quarter to cover the cost of resolving litigation.
The individual cases flow from a class action filed in Miami-Dade Circuit Court in 1994 bearing the name of the late Miami Beach pediatrician Howard Engle.
Vector chairman Bennett S. LeBow called the agreement a “landmark settlement, which prudently resolves substantially all of the Engle progeny cases pending against us. The Engle progeny cases have been the biggest litigation overhang on our company in the last decade, and this settlement substantially reduces the ongoing litigation risks as well as related legal fees and expenses.”
LeBow broke with four other industry leaders in 1996, becoming the first tobacco executive to admit the deadly effects of smoking. His admissions paved the way for costly settlements with state attorneys general, who sued for the recovery of health care funds spent treating smoking-related disease.
The recent refusal by the U.S. Supreme Court to consider industry arguments that the company was denied due process in smoker trials led some plaintiffs attorneys to speculate the remaining cases were ripe for settlement.
Neal Roth of Grossman Roth in Coral Gables served as plaintiffs coordinating counsel in negotiations with Vector that spanned more than three years, he said. The recent U.S. Supreme Court decision had no effect on negotiations, he said.
“The numbers were reached a long time ago,” Roth said, but a multitude of other issues needed to be worked out.
Roth credits his partner, Andrew Yaffa, for getting the talks started.
“As Andy said, if you never ask, you never know. It turned out Liggett was agreeable to at least explore the possibility,” Roth said.
There will be no master judge handling the settlement, Roth said. The participating law firms—about 60—are winding down the process of getting their clients’ releases, he said. Notices will be filed in each case dropping Liggett as a defendant, or a dismissal will be filed if Liggett is the only defendant.
Aaron Marks, a partner in the New York office of Kasowitz, Benson, Torres & Friedman, assisted Vector Group general counsel Marc Bell in negotiations.
“It was a terrific accomplishment to have gotten this settlement done,” Marks said. “The company is pleased to put behind it and resolve substantially most of the Engle progeny cases.”
About 5,300 Engle cases are pending, which means the agreement will end about 92 percent of the cases.
Not all law firms joined in. Alex Alvarez of the Alvarez Law Firm in Coral Gables, who has been in trial and on appeal in several cases, said none of his clients participated.
Roth had no estimate on the percentage of the settlement going to attorney fees since that depends on individual retainer agreements. Not accounting for attorney fees, the settlement values the average case at $22,500.
Roth said the decision by Vector’s board to settle was akin to its 1996 decision to end litigation with states on their claims for Medicaid reimbursement.
“That settlement turned out to be more favorable than what happened to the other companies,” Roth said. “Quite honestly, I’m surprised that the other companies, given their fiduciary duties to their shareholders, haven’t done the same.
“Vector and Liggett eliminate hundreds of millions, if not billions, of dollars of exposure, and the other companies keep wanting to do hand-to-hand combat,” Roth said.
None of the other major tobacco companies—Philip Morris USA Inc., R.J. Reynolds Tobacco Co. and Lorillard Tobacco Co.—has expressed any interest in settlement talks, Roth said.
The individual cases were filed after the Florida Supreme Court disbanded the Miami class action in 2006. Smokers were allowed to take anti-tobacco jury findings into their individual cases, giving them a leg up on shared issues while still requiring them to prove their illness was caused by smoking.