Appeal Could Affect Fee Shifting in Dozens of Tobacco Cases

Appeal Could Affect Fee Shifting in Dozens of Tobacco Cases Photo by John Disney/Daily Report Jason Burnette says the district court made legal errors in rejecting R.J. Reynolds' fee petition.

A federal appeals panel on Friday heard a case that could affect dozens of tobacco cases pending in Florida—involving the interpretation of a Florida fee-shifting statute similar to Georgia’s rule.

The case heard by the U.S. Court of Appeals for the Eleventh Circuit is one of the so-called Engle progeny cases being pursued against tobacco companies in Florida. The cases get that label from a 2006 decision by the Florida Supreme Court, Engle v. Liggett Group Inc. That decision scuttled a class action by smokers that had garnered $145 billion in punitive damages at trial. But it also gave life to a new breed of individual suits.

Under Engle, certain jury findings from the class action—such as the conclusion that nicotine is addictive—may be used against tobacco companies in individual trials. An Eleventh Circuit panel last year rejected the tobacco companies’ argument that this approach violated their due process rights. R.J. Reynolds Tobacco Co. has asked the U.S. Supreme Court to review that ruling.

At issue before the appeals panel Friday was the extent to which a modest settlement offer by a tobacco company—in this case, $10,000—can be deemed insufficient to support the tobacco company’s bid for attorney fees after it wins at trial.

Like Georgia, Florida has a fee-shifting law, known as an offer of judgment statute. Florida’s statute says that a party to a civil case who rejects a settlement offer, then doesn’t do much better when the case is decided in court, may have to pay some of the other side’s fees.

Like Georgia, Florida’s statute allows a judge to deny fees even if a settlement offer met the technical terms of the fee-shifting statute—if the judge deems the offer to have not been made in good faith.

Reynolds, the defendant tobacco company in the case, says the adequacy of settlement proposals under Florida’s offer of judgment statute already is an issue in dozens of Engle progeny cases and is likely to arise in future such cases.

The case before the Eleventh Circuit was brought by Oliver Pickett Jr. on behalf of the estate of his father, who died of lung cancer in 1996 at the age of 52. Pickett alleged that his father died because he was addicted to cigarettes manufactured by Reynolds.

In December 2011, about three months before trial began, Reynolds made a $10,000 settlement offer. Pickett didn’t respond, and the case went to trial, where a jury found for Reynolds on three of Pickett’s four claims. On the fourth, a claim for strict liability, the jury said addiction to cigarettes was the legal cause of the death of Pickett’s father, but the jury awarded no damages.

Based on its $10,000 offer and the defense verdict, Reynolds asked for fees. Florida’s offer of judgment statute allows a party to recover fees from the time the settlement offer was made. Reynolds asked for $41,860, fees for the time that two of its attorneys, Steven Geise of Jones Day’s San Diego office, and Robert Parrish of Moseley, Prichard, Parrish, Knight & Jones in Jacksonville, spent in court during the trial.

U.S. Magistrate Judge Joel Toomey recommended the fee request be rejected. U.S. District Judge Roy Dalton Jr. agreed, citing factors that included the low amount of the offer, the high potential for punitive damages, the verdicts decided in similar cases around the same time as the offer and the protracted, rancorous history of the litigation.

Reynolds appealed, leading to Friday’s argument before Eleventh Circuit Judges Charles Wilson and Adalberto Jordan, both of Florida, and visiting Senior U.S. District Judge Barbara Rothstein of the Western District of Washington.

Jason Burnette, an associate in Jones Day’s Atlanta office, opened Reynolds’ argument Friday by emphasizing that the company had secured a verdict of zero dollars three months after the offer was made and the trial judge had rejected Pickett’s motion for a new trial.

“Our standard of review in this case is abuse of discretion … right?” Wilson interjected, referring to a standard under which appellate judges are relatively deferential to a lower court judge’s ruling. Burnette allowed that was correct. Wilson said it seemed that would be a difficult standard for Reynolds to overcome.

Burnette insisted the district court had made legal errors in rejecting the fee petition. The plaintiff has the burden to show lack of good faith, Burnette said. He added that in cases in which an offer was found to have been made in bad faith, the offer was found to have been made so early in the case that it lacked a good basis.

But Reynolds’ offer was made after discovery was complete, Burnette noted.

At the time of Reynolds’ offer, the plaintiff’s claim for more than $30,000 in medical and funeral expenses—dropped by the plaintiff before trial—remained pending. A jury usually can award funeral expenses without difficulty, Jordan told Burnette, implying Pickett likely would have recovered at least this much if he hadn’t dropped that claim.

Burnette replied that if a jury had found Pickett’s father 80 percent at fault, he would not have recovered any of those expenses.

Wilson wondered if the record showed how Reynolds arrived at the $10,000 figure. Burnette said it did not.

Appearing for the plaintiff, Elizabeth Cabraser of Lieff Cabraser Heimann & Bernstein in San Francisco argued that both the magistrate judge and district judge independently, consistently applied factors as directed by Florida law. The district judge made clear that he put the burden on the plaintiff, she added.

“This was not a very good plaintiff’s case, right?” Jordan asked. He said there was evidence that Pickett’s father knew about the problems of smoking, had been able to quit multiple times and was exposed to carcinogens at work. “Those are not the greatest of facts for a tobacco plaintiff.”

Cabraser disagreed with Jordan’s assessment, while acknowledging there were “difficult” facts. She said Pickett’s father fought addiction as hard as he could but did not succeed in overcoming it.

It is difficult to rank Pickett’s case relative to other tobacco cases, said Cabraser. “Every Engle case is different.”

In “stunning contrast” to the wide range of outcomes in the cases, she said, were Reynolds’ offers in the Engle cases. “They’re always about the same,” said Cabraser. She said Reynolds’ highest offer in the cases has been $15,000, and the company made the same offer it made to Pickett in a case that resulted in a $5 million verdict.

“These were not offers calibrated to the case,” said Cabraser.

Wilson asked Cabraser what would have been a reasonable offer in Pickett’s case.

Cabraser said that an offer for the $30,000 claim for expenses might have served the purposes of the Florida statute. “It wasn’t $10,000,” she said.

Pressed by Jordan on rebuttal, Burnette said the judges who handled the fee request didn’t have before them evidence of offers in other cases, But, said Jordan, if Reynolds were making $10,000 offers across the board, that would show the offers were part of a global litigation strategy, rather that based on individual cases.

Burnette agreed. But, he said of the $15,000 figure cited by Cabraser, “I’m aware of offers that are much higher.”

The case is Pickett v. R.J. Reynolds Tobacco Co., No. 13-13212.

Judge Adalberto Jodan said there was evidence the plaintiff’s father knew about the problems of smoking, had been able to quit multiple times and was exposed to carcinogens at work.