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Big Tobacco won’t be paying out $23.6 billion to a Florida widow

Camel cigarettes are stacked on a shelf inside a tobacco store in New York July 11, 2014. U.S. cigarette maker Reynolds American Inc is in talks to acquire rival Lorillard Inc in a multi-billion dollar deal that would reshape one of the world's biggest and most profitable tobacco markets, the companies said on Friday. In a statement confirming what people familiar with the matter previously told Reuters, Reynolds, No.2 player in the United States with brands including Camel and Pall Mall, said the talks were consistent with its strategy of weighing options that would help boost shareholder value. Buying Lorillard, which had a stock market value of $22.9 billion on Thursday, would give Reynolds the leading U.S. menthol cigarette Newport and its leading e-cigarette blu.Buying Lorillard, which had a stock market value of $22.9 billion on Thursday, would give Reynolds the leading U.S. menthol cigarette Newport and its leading e-cigarette blu. REUTERS/Lucas Jackson (UNITED STATES - Tags: BUSINESS) - RTR3Y7FF
Reuters/Lucas Jackson
It doesn’t pay anymore to sell cigarettes in the US.
  • Kabir Chibber
By Kabir Chibber


Published This article is more than 2 years old.

A court in Florida has awarded $23.6 billion in punitive damages to the widow of a smoker who died of lung cancer 18 years ago. The judgement is against RJ Reynolds Tobacco, the maker of Camel, Kool, and Winston.

The cigarette maker said the verdict ”goes far beyond the realm of reasonableness and fairness,” and it will, of course, appeal. The lawyer for the widow, Cynthia Johnson, responded, ”This wasn’t a runaway jury, it was a courageous one.”

The case is the latest of many large judgements against tobacco companies—a $10.1 billion judgement against Philip Morris from 2003 is still being batted about in the courts. This particular award is the largest in Florida history in a wrongful death suit filed by a single person. The thing is, Cynthia Johnson is never going to get that much money.

In 2003, the US Supreme Court took on the case of State Farm v. Campbell, where the insurer was ordered to pay $145 million to Curtis Campbell over a disputed liability in a car accident Campbell caused. The compensatory damages in this case were $1 million. The court decided that the punitive damages in this case was excessive and a violation of the due process clause of the fourteenth amendment of the US constitution. It set out that punitive damages should not exceed compensatory damages by a ratio of 9-to-1. “Our jurisprudence and the principles it has established demonstrate, however, that in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process,” the court said.

The effects of this decision were immediate, according to a Harvard Law School paper on blockbuster damages exceeding $100 million in the wake of the 2003 case. Soon after, Beckman Coulter v. Flextronics led to a punitive damages award of $931 million (a ratio of punitive-to-compensatory damages of 321-to-1) but within two months, the parties settled the case for a total of $23 million (a ratio of just under 7-to-1).

That said, some argue that after a many years of wading in to such cases, the court is “almost certainly entering an extended silent phase in its punitive damages jurisprudence and will not be reviewing any more punitive damages awards in the foreseeable future.” But if the Florida appeals courts do listen to past case law, the result of the Supreme Court’s 2003 decision should limit the punitive damages in the Johnson case to just over $150 million.

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