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“A billion here, a billion there, pretty soon you’re talking about real money.” In the wake of the recent $145 billion verdict in a Florida tobacco class action, the late Senator Everett Dirksen’s famous line may have to be retired. A billion dollars just ain’t what it used to be. At least that is what corporate defense lawyers fear will be the upshot of the punitive damages verdict in Engle v. R.J. Reynolds Tobacco Co., No. 94-8273 (Dade County Circuit Court). Even as many observers predict that the record-smashing verdict will eventually be cut or reversed on appeal, lawyers wonder: has the price of sending a message from the jury room to the boardroom inflated to the hundreds of billions? “The whole environment is like walking across a high wire without a safety net,” says defense lawyer Michael Jones, a partner in the Washington, D.C., office of Chicago’s Kirkland & Ellis. Even if a defendant wins most of the time, he says, the stakes have become so high that a single punitive damages verdict can threaten bankruptcy. “You only have to slip once,” he says. Despite a recent U.S. Justice Department study showing that punitive damages are rarely awarded and are usually fairly modest, the very highest verdicts — the ones through which jurors are presumably trying to send messages — have been shooting up for a couple of years. For example, the total of the 10 highest verdicts from 1999 was $9.6 billion, almost twice the total of 1998′s top 10 — $4.9 billion. Many lawyers think that the continued profitability of the cigarette business, in the face of a $246 billion settlement with state governments, has been a big factor, inflating the amount that jurors think it takes to get through to a corporate defendant. The $145 billion Engle verdict can only mean more of the same, they say. BIG WHACK “I knew this jury was going to whack them,” says Victor Schwartz of Washington, D.C.’s Crowell & Moring. “Kaye was able to get the jury into a frenzy,” he said, referring to trial judge Robert Kaye. Schwartz, an authority on tort law and a tort-reform advocate, thinks the size of the Engle verdict makes it all the more likely that it will be reversed. And he says that it may actually help inoculate Big Tobacco against other punitive verdicts in the future. “Now everyone in America knows they’ve been punished,” he says. But the huge verdict may inflate verdicts against other industries, he says. Schwartz jokes that he envisions a case in which a plaintiff’s lawyer sums up to the jury, pockets turned inside-out in false poverty. Drawing a contrast with the Engle verdict, the lawyer will plead, “I’m only asking you for $10 billion.” The way John Banzhaf figures it, on the other hand, Big Tobacco got off easy. Exxon was hit with $5 billion in punitives for the Valdez oil spill, even though not a single human life was lost, says Banzhaf, a law professor at George Washington University who has been battling the industry since the ’60s. Smoking, by contrast, kills 500,000 people every year. The punitive damages in Engle work out to about $300,000 per class member — assuming there are half a million eligible Florida smokers — a figure that Banzhaf says is “quite reasonable.” Brian Panish, a partner at Greene, Broillet, Taylor, Wheeler & Panish in Santa Monica, Calif., sums up the reaction of most plaintiffs’ lawyers to the Engle verdict: “You’ve got to hit ‘em where it hurts — on the bottom line.” Panish was the toast of the Association of Trial Lawyers of America convention in San Francisco last summer after winning a $4.9 billion verdict for his clients against General Motors Corp. The verdict, cut to $1.2 billion by the trial judge and on appeal, set a record for products liability cases. Richard Shapiro of Snell & Wilmer in Phoenix was on the other side of that case as counsel to GM. “Five or 10 years ago, billions of dollars would have been just unthinkable,” says Shapiro. He says lawyers such as Panish, who win big verdicts, encourage other plaintiffs’ lawyers to be even more aggressive in encouraging juries to “send a message.” All through the current wave of tobacco litigation, other defense lawyers have feared that their clients would end up paying for the sins of Big Tobacco. Distrust of tobacco executives will spill over to poison their jury pools, they say. Tough precedents limiting the attorney-client privilege in tobacco cases will be applied to pry loose their clients’ most sensitive documents. An emboldened plaintiffs’ bar, spilling over with tobacco industry money, will look for new corporate targets. The $145 billion Engle verdict is just the latest tobacco development that defense lawyers worry will haunt them one day. The process of reaching the verdict went quickly. According to the Miami Herald, the six men and women of the jury took turns setting out the amounts each thought Big Tobacco should pay. All of the figures were between $100 billion and $200 billion. The jurors took out a calculator and settled on an average figure, then divided the total by each company’s market share. Then they lopped a billion off the figure for the Liggett Group, the smallest of the five major U.S. cigarette makers, as a reward for breaking with the rest of the industry in 1996 to cooperate with the state attorney general lawsuits. After hearing testimony from 157 witnesses over the course of two years, the jurors came back with their verdict in a little more than four hours. Et voila. The largest verdict in the history of mankind. “If the verdict was wrong,” juror James Stowbridge later told CNN, “I think the judge has got the power to overturn it.” “I don’t think the numbers are going to stick, but I think they can afford to pay the numbers,” Stowbridge said, referring to the tobacco companies. Some defense lawyers observing the Miami verdict were troubled by the possibility that the jurors thought the near-certain appeal meant they could send a message to the tobacco industry without having to take full responsibility for the results. “That is fundamentally unsound for the system,” said Chilton D. Varner, a partner at King & Spalding in Atlanta. Varner also deplores the tendency of the media to make jurors into instant celebrities in the biggest cases. “It accelerates the competition between juries to see who can deliver the biggest whack,” she says. Susan Macpherson, a Minneapolis-based trial consultant who works for National Jury Project, looks at it differently. Her company, which generally works for plaintiffs in tort cases, interviews jurors to understand their thinking in big cases, including the jurors in the $4.9 billion GM case. “If there’s a problem with the verdict, they know there’s a way for the system to do something about it,” she says. She says that it is too early to know if Engle will become one of those cases — like the O.J. Simpson acquittal or the McDonald’s spilled-coffee case — that become part of every juror’s consciousness. IT’S THE ECONOMY Another important factor behind the Engle verdict and other record verdicts is the economy, say many lawyers. Dot-com windfalls, a runaway stock market and multibillion-dollar mergers have all conspired to make potential jurors comfortable with figures in the billions of dollars. Because jurors typically calculate punitive damages as a percentage of the profits or net worth of defendants, companies that have merged or are doing well financially can expect to pay big verdicts if they have done something particularly egregious, says trial consultant Macpherson. When the defendants are small companies, Macpherson says, jurors are often conservative, tempering the message-sending impulse with a concern that a big verdict may hurt innocent employees. But as unemployment has become has become less of a threat in the current hard-charging economy, it has also become less of a restraining factor in jury deliberations, she says. Jones of Kirkland & Ellis has also interviewed many big-case jurors in hopes of gaining insights he can use in court. He thinks the Engle verdict and other highly publicized mega-verdicts give jurors permission to look to the extremes when considering a punitive verdict. Add to that the lack of meaningful guidelines for jurors deciding how much punishment is appropriate, he says, and defense lawyers have a problem. “The system really encourages jurors to vent,” he says. ON THE HORIZON In the aftermath of the Engle verdict, tobacco defense lawyers and Wall Street analysts, who had long expected a blockbuster verdict, tried to play down its impact on the industry. Twenty-five other state class actions have been rejected, Florida and Louisiana being the only exceptions. The Louisiana case, involving a much narrower class than Engle, is scheduled for trial next year. Also pending, however, are a potentially huge Justice Department lawsuit and a handful of third-party health care cost-recovery suits, in addition to scores of suits by individual smokers.

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