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After having previously given its approval for class action litigation to proceed, Florida’s 3rd District Court of Appeal on Wednesday overturned a $145 billion verdict in favor of thousands of Florida smokers against the tobacco industry and decertified the class. In a sweeping victory for cigarette makers and huge blow to Miami plaintiffs’ attorneys Stanley and Susan Rosenblatt, who represented the class, a three-judge panel unanimously ruled against the plaintiff class on a wide range of grounds. The verdict was the largest punitive award in U.S. history. The court held that each smoker’s claim was too unique and individualized to be tried collectively in a class action. “As now demonstrated by the two-year trial, even though there is a common nucleus of facts concerning the defendants’ conduct, this case presents a multitude of individualized issues which make it particularly unsuitable for class treatment,” said the 68-page opinion written by Judge David M. Gersten; Judges David L. Levy and Mario P. Goderich concurred. The plaintiff class had sued on the theories of strict liability, negligence, breach of express warranty, fraud, conspiracy to commit fraud and intentional infliction of emotional distress. The 3rd DCA also ruled that because many Florida class members are not originally from the state an issue arises as to what law to apply. “Especially in a state which has a highly transient population, choice-of-law problems present an insuperable roadblock to smokers’ class action, even where the class is limited to one state,” the court said. The court also held that Miami-Dade Circuit Judge Robert Kaye’s order demanding payment of classwide punitive damages violated Florida law because it required tobacco companies to pay punitive damages for theoretical injuries to class members without it first being determined that class members had actually suffered injuries. The panel said Kaye, who presided over the case, had put “the cart before the horse.” “The defendants are entitled to a jury determination, on an individualized basis, as to whether and to what extent each particular class member is entitled to receive punitive damages,” the court wrote. “One class member’s circumstances cannot serve as a proxy for another’s.” The court also ruled that punitive damages cannot be set at an amount that will bankrupt a defendant company. One part of the opinion was titled “Awarding the GNP of several European countries is error.” The court determined that the $145 billion verdict was roughly 18 times the defendants’ proven net worth and would bankrupt the tobacco companies. “The amount awarded should be large enough to provide retribution and deterrence, but cannot be so great as to result in bankruptcy,” the court ruled. Finally, the 3rd DCA said that the Rosenblatts, who represented the class, used improper, race-based appeals that require reversal of the landmark verdict. The six-person jury in the case included four African-Americans, according to the court. “Although the emotional appeal of the class representatives’ claims is compelling, our job as appellate judges is not to be swayed by emotion where to do so results in violating established legal principles,” the court held. “The law in the instant case clearly mandates that the trial court order certifying the class be reversed, with instructions that the class members may pursue their claims on an individualized basis.” The court determined that since “each class member has unique and different experiences that will require the litigation of substantially separate issues, class representation is not ‘superior’ to individual suits.” It ordered that the case be remanded back to Miami-Dade Circuit Court and be decertified as a class action. Barring any changes on appeal, the ruling kills the class action and leaves the members of the class — estimated to include 700,000 people — to proceed individually if they choose. The appeal arises from a 1994 class action suit brought by Florida pediatrician Howard Engle and five other lead plaintiffs on behalf of a nationwide group of smokers. The six alleged that they were unable to stop smoking because they were addicted to nicotine and, as a result, developed medical problems ranging from cancer and heart disease to colds and sore throats. The defendants included the Liggett Group Inc., Brooke Group Ltd., the Council for Tobacco Research-USA, the Tobacco Institute, Lorillard Inc., Brown & Williamson Tobacco Corp., American Tobacco Co. and R.J. Reynolds Co. All but one were represented at oral arguments before the 3rd DCA in November by Elliot Scherker, a partner at Greenberg Traurig in Miami. Alvin Davis, a partner at Steel Hector & Davis in Miami, argued separately for the Liggett Group. “We believed very strongly that the trial proceedings had been unfair both in the manner in which the case was structured and in the way the case was tried,” Scherker said. Davis said, “The case removes the emotion and pleas to prejudice from the equation in these cases and requires that these cases, as all others, must decided on the fact.” The Rosenblatts did not return calls for comment. The ruling was devastating for the plaintiffs. The Rosenblatts can ask the three-judge panel to review its decision, request a new hearing before the full 3rd DCA or appeal to the Florida Supreme Court. But throughout the lengthy litigation, despite several requests, the high court has declined to rule on any matter in the case. “This is not an appellate decision that is even slightly ambiguous about its ultimate disposition of the case,” said Mark Gottlieb, at attorney with the Tobacco Products Liability Project in Boston that has assisted in lawsuits against the tobacco industry. “The court found several grounds significant enough to disallow the trial and result in the class not continuing.” But critics said the decision was surprising because the 3rd DCA had reviewed the class certification in the case and given its approval in 1996. “The class was certified based on the 3rd DCA’s criteria, and they narrowed it from a national to a Florida-only class,” Gottlieb said. “But they suddenly now realize the transient nature of the Florida population makes it impossible to have a Florida-only class action. Surprising that these realizations are so late in coming. And after a two-year trial that resulted in such a strong statement from the jury.” Scherker countered that class certification is always reviewed after trial. “There are a lot of unique things in this case, but there nothing unique about the court looking at class certification anew,” he said. The ruling was a giant relief for the cigarette companies, because it wipes out the huge punitive damages verdict, and it’s easier and less risky for them to defend suits filed by individual smokers. “Risks are less for tobacco companies with individual suits,” said David Kathman, an analyst with Chicago-based Morningstar, which is an investment research firm. “These [individual] suits might be for a few million dollars tops. They are less of a threat.” The case was the first statewide class action filed on behalf of smokers against the tobacco industry to be certified in the country. It is among the few such class actions still pending. In most jurisdictions, class actions filed by smokers against cigarette makers have been dismissed. In 1996, the 3rd DCA reduced the class to just Florida smokers, a group estimated to include as many as 700,000 people. In February 1998, Judge Kaye, who presided over the case, issued a trial plan, which was later modified. Under the plan, the case went to trial in several phases. Phase I was a yearlong trial of asserted common issues relating to the defendants’ conduct and the general health effects of smoking. It ended in July 1999, and a jury found the tobacco industry liable for lying to the public about the addictive nature of nicotine and the harmful effects of smoking, thus permitting a potential award of punitive damages. Phase II was divided into two subparts. In Phase II-A, which lasted five months, the jury heard evidence relating to three individual members of the class. The jury found that the tobacco industry deception determined in Phase I caused serious injury to the three people and awarded a total of $12.7 million in compensatory damages. Three months later, in April 2000, the jury in Phase II-B socked the tobacco industry with the $145 billion punitive damages verdict awarded to the entire class without allocation to any class member. Phase III hasn’t started yet — except for one case that was allowed to go forward because the plaintiff, 77-year-old John Lukacs, was dying of cancer. Last June, Lukacs won a $37.5 million judgment in compensatory damages, shortly after which he died. Phase III provides that each of the hundreds of thousands of plaintiffs must try their cases individually before new juries to determine whether the defendants are liable for compensatory damages. Then, after proceedings were completed for all class members, the trial court was supposed to equally divide the $145 billion lump-sum punitive damages award among all class members who succeeded in establishing their liability and compensatory damages claims. Judge Kaye’s order directed the defendants to immediately pay the three individual plaintiffs $12.7 million in compensatory damages and to deposit $145 billion into the court registry for the benefit of the entire class. He retained jurisdiction to conduct further proceedings. The defendants posted a $100 million bond in order to go forward with their appeal. The fate of the Lukacs verdict is unclear in the wake of Wednesday’s ruling by the 3rd DCA. Steven Hunter, who represented Lukacs, said the 3rd DCA opinion will not affect the verdict awarded to his client. “I don’t see how this opinion could affect our award for compensatory damages,” said Hunter, a partner at Angones, Hunter, McClure, Lynch, Williams & Garcia in Miami. “The opinion says each plaintiff has to prove specific causation. We’ve already done that.” But tobacco defense attorney David Ross, a partner at Greenberg Traurig who handled the 3rd DCA appeal with Scherker, disagreed. “Lukacs’ claim was based expressly on the Engle case,” Ross said. “Based on the appellate court’s opinion, I have little doubt that the verdict will not be able to stand.” Following the jury verdict in the Lukacs case, Circuit Judge Amy Donner reserved entering final judgment until the Engle decision was handed down by the 3rd DCA. The Lukacs case will now go back before Judge Donner for a hearing to decide whether to uphold the $37.5 million jury verdict. Regardless of which way she rules, Donner’s decision will most likely be appealed, Hunter said. The Daily Business Review ‘s AnaMaria Colmenares contributed to this report.

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