40,000 Claims Filed for $580 Million Smokers' Trust Fund
Large number of claims is estimated to decrease the recovery to about $15,000 per claimant
Daily Business Review
June 17, 2008
"Everybody is concerned about the numbers being so large that the recovery is dwarfed," said David J. Sales, a partner with Searcy Denney Scarola Barnhart & Shipley in West Palm Beach, Fla., one of many plaintiffs law firms following the claims process.
Coral Gables, Fla., attorney Miles McGrane III said a Seattle company is tabulating the claims, and a final figure is likely by the end of this week. McGrane is the trustee of the fund created by cigarette makers to avoid a legal challenge to a state law that changed the rules for all appellate bonds. A Miami jury's record-shattering $145 billion award in 2000 was overturned on appeal and the class action was disbanded, but the appellate fund set aside in Engle v. Liggett was reserved for class members.
Miami-Dade Circuit Judge David C. Miller is overseeing the complicated administration of the pile of money. He made some controversial calls during a string of April hearings. He awarded tobacco litigation pioneers Stanley and Susan Rosenblatt of Miami a total of $218 million in legal fees for their work since filing the lawsuit in 1994. Attorneys differed on how the rest of the pot should be distributed, and Miller settled on a per-capita system to equally divide the fund among eligible smokers rather than judge the severity of illnesses.
Many smokers like Gregg Duyser of New Port Richey, Fla., are still upset over the decision after once dreaming of an individual payday worth tens of millions of dollars. Fort Lauderdale, Fla., resident Carl Grant, who lost his father to emphysema and heart disease, also lost any claim to money because his father's death fell outside the recognized timeframe.
Lawyers also drew fire for pitching the fund in advertising even though no attorneys are needed to pursue the claims process. The Fort Lauderdale personal injury firm Kelley Uustal, which is not associated with the court-administered fund, launched a Web site that directed users to the firm's Web site from an address resembling the court's Engle Trust Fund site. The firm took the page down after the Daily Business Review reported the similar Web addresses.
Smokers who made the registration deadline have until Aug. 1 to prove their claims are valid. They must provide Miller with proof of four elements to qualify for a share of the money -- they smoked, were addicted to cigarettes and were Florida residents with one of several smoking-related illnesses before Nov. 21, 1996.
But Miller made the burden of proof heavy enough that many claimants may not be able to meet it. "You could have a drop-off of 25 percent between registration and proof," McGrane said.
Attorneys from across the state have scrambled to find any piece of evidence that could prove someone had a history of smoking. "The largest hurdle now is going to be documenting a smoking history," Sales said. He represents about 750 Engle plaintiffs including about 100 seeking claims money without pursuing a lawsuit for compensatory damages. Plaintiffs and their attorneys have been rifling through medical records, photographs and medicine chests. "In some instances, it's going to require some creativity. Not every doctor records every instance where a person is a smoker," he said. "If the claimants have been hospitalized and there's a complete hospital record, there's a good chance there's proof in some portion of the hospital record. But in many instances, the hospital records are no longer available."
In one case, Sales recalled struggling to find proof of addiction until he realized the client still had a half-empty prescription bottle from the early '90s for smoking-cessation pills. Other clients have plucked pictures from photo albums showing them smoking.
There is still some unfinished business with the fund that could complicate payments. Some lawyers have argued Miller should set aside a fixed percentage to settle outstanding bills like Medicare liens for class members, and the Internal Revenue Service may stake a claim to payments if it determines the fund is a "taxable event."
Philip Morris, Lorillard and Liggett agreed to forfeit $709 million plus interest to be able to challenge the landmark punitive damages award won by the Rosenblatts. Under state law at the time, cigarette makers were faced with paying 115 percent of the verdict to take their case to the 3rd District Court of Appeal.
The agreement set no standards for distributing the money afterward, leaving Miller in uncharted waters. Claimants must also prove they suffer from one of 16 illnesses that the trial jury blamed on smoking. There is no starting date for a diagnosis to be eligible for a share of the fund.
The trust fund is separate from about 8,000 so-called Engle progeny cases filed by individual smokers seeking compensatory damages from cigarette makers under the law of the case. Tobacco companies aren't involved with the fund and aren't part of the fund administration since Miller ruled they had no standing.
The original Engle lawsuit was estimated to cover 700,000 Florida smokers in the lawsuit against Philip Morris, R.J. Reynolds, Brown & Williamson, Lorillard and Liggett. The 3rd District Court of Appeal overturned the verdict in 2003, and the Florida Supreme Court broke up the class in 2006 but allowed plaintiffs to bring individual compensatory suits buttressed by the jury findings.