Date
18 November 2017
A customer buys two packs of Salem cigarettes, which are produced by RJ Reynolds Tobacco. Photo: Bloomberg
A customer buys two packs of Salem cigarettes, which are produced by RJ Reynolds Tobacco. Photo: Bloomberg

RJ Reynolds’ US$23 bln fine unlikely to stand, say experts

decision by a Florida jury to impose punitive damages of US$23.6 billion against RJ Reynolds Tobacco on Friday is likely to be overturned on appeal or have the award reduced substantially, Reuters reported, citing legal experts.

The award, which the cigarette maker has said it will challenge, is deemed to have extended the boundaries for punitive damages that the US Supreme Court has laid down in a series of cases, the lawyers told the news agency.

RJ Reynolds is a unit of Reynolds American, which is buying rival Lorillard in a cash-and-stock deal valued at US$27.4 billion, including net debt.

A Florida state court jury decided the award in a case brought by Cynthia Robinson of Pensacola. She is the widow of a chain smoker, Michael Johnson, who died of lung cancer in 1996 at 36.

After a four-week trial and 11 hours of deliberations, the jury returned a verdict granting compensatory damages of US$7.3 million to the widow and the couple’s child, as well as US$9.6 million to Johnson’s son from a previous relationship, the report said.

The Supreme Court is reluctant to allow punitive damages that are far out of line with compensatory damages in the same case, said Richard Daynard, a law professor at Northeastern University and the chair of its Tobacco Products Liability Project. The court’s general guideline is that the ratio of punitive to compensatory damages should be below 10:1.

The court precedent, though, still leaves room for a punitive award of more than US$150 million, Daynard was quoted as saying.

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