$26.5-Million Award Is Upheld in Smoking Case

The tobacco industry suffered a sharp defeat late Wednesday, when a state appeals court in San Francisco upheld a landmark $26.5-million verdict against Philip Morris Inc. in a case brought by a lung cancer victim who smoked its Marlboro brand.

The ruling in the closely watched case affirmed the award of compensatory and punitive damages to Patricia Henley, a 54-year-old Los Angeles County woman whose case was the first to be tried after the Legislature lifted a virtual ban on anti-tobacco suits four years ago.

Since Henley’s victory in March 1999, two other anti-tobacco suits have been tried in California, both resulting in major losses for cigarette makers, which have appealed those verdicts as well.

Wednesday’s ruling came after the stock market had closed, but Bonnie Herzog, a tobacco analyst with Credit Suisse First Boston, said she expects tobacco stocks “to face downside pressure ... on this news” when trading resumes today.

And Martin Feldman, an analyst with Salomon Smith Barney, said the ruling underscored the industry’s legal problems in California: “At the end of the day, the tobacco industry must develop an expertise to win these cases in California, because California jurors seem to have a greater anger against the industry than those anywhere else in the country.”

But Wednesday’s ruling does not spell the end of a long-running legal slugfest that will ultimately affect the Henley case, as well as all tobacco litigation in California.

The main issue when the case goes to the state Supreme Court will be what evidence of industry misconduct can be introduced in light of the Legislature’s decision to grant immunity to the industry in 1988, and its repeal of the law a decade later.

“I think what [the appeals court] did was wrong,” said William S. Ohlemeyer, vice president and associate general counsel for Philip Morris, adding that the company is “fairly optimistic” about its chances before the Supreme Court.

Henley, who hopes to plow her damages into a foundation to fight smoking and help children with respiratory problems, said, “I am so excited that the truth came out here.”

A San Francisco County Superior Court jury had awarded Henley $1.5 million in compensatory damages and another $50 million in punitive damages--more than three times what Henley’s lawyer, Madelyn Chaber, had asked for. Superior Court Judge John E. Munter later pared the punitive damages to $25 million.

In its appeal, Philip Morris argued, among other things, that Munter had given erroneous jury instructions, that there were no grounds for punitive damages, and that the immunity statute had barred lawsuits against it. But the 1st District Court of Appeal, in a 54-page ruling, used biting language to reject these claims, calling Philip Morris’ behavior “reprehensible.”

“The record reflects that defendant touted to children what it knew to be an addictive and cumulatively toxic product while doing everything it could to prevent addicts and prospective addicts from appreciating the true nature and effects of that product,” said the three-judge panel in its unanimous ruling. “The expected and intended result of this conduct was that millions of youngsters were persuaded to, and did, enslave themselves to a habit that was likely to, and did, bring many of them to an early loss of the enjoyment of life, illness, and death. We agree with the jury and the trial court that only a very substantial award was sufficient to reflect the moral opprobrium in which defendant’s conduct should be held.”

“A little hand-slapping going on there,” Chaber exulted in response to the ruling.

“We’re incredibly pleased,” said Ted Pelletier, a lawyer for Henley in the appeal. “We obviously think it’s the right decision.”

Henley is a high school dropout who took up smoking in the early 1960s at the age of 15. She went on to run a small business and once aspired to a career as a country-Western singer. She quit smoking in the fall of 1997, but was diagnosed with cancer a few months later.

A year after her victory, Leslie J. Whiteley became the second plaintiff to defeat cigarette makers, winning a $21.7-million judgment against Philip Morris and R.J. Reynolds Tobacco Co. The Ojai woman died at the age of 40 in July 2000, about three months after the verdict, which is also on appeal.

This last June, a Los Angeles County Superior Court jury ordered Philip Morris to pay Richard Boeken, a 57-year-old Topanga man, $5.54 million in compensatory and $3 billion in punitive damages, a record award for an individual smoker.

The punitive award was later pared to $100 million, and the case is being appealed.