By Neil Buckley in New York
Published: October 4 2002 19:47 | Last Updated: October 4 2002 19:47
A Los Angeles jury ordered Philip Morris to pay $28bn in punitive damages to a cancer victim in the highest ever award in a individual case against a tobacco company.
Philip Morris immediately said it would appeal against an award its lawyer called "absurd".
But the award was a huge blow both for the company - which was its fourth successive defeat in California court cases - and the industry, which had believed the US litigation threat was receding.
Philip Morris shares, which had already fallen sharply last week, closed 7.4 per cent lower at $36.59 in the wake of the jury's decision. The Dow Jones Industrial average fell sharply to close 188.79 points or 2.45 per cent down at 7,528.40, its lowest level since November 1997.
A jury in the Los Angeles Superior Court said the world's biggest tobacco company should pay the damages to Betty Bullock, a 64-year-old woman with lung cancer.
Ms Bullock argued she had become addicted to smoking after Philip Morris had misrepresented the risks.
The size of the punitive damages award came as a shock after the jury last week awarded compensation to Ms Bullock of only $850,000 - one of the smallest such awards in California tobacco cases.
Some $750,000 was for economic damage, and $100,000 for pain and suffering.
The $28bn punitive damages, designed to punish wrongdoing, outstripped the $24.6bn that an economist witness for Ms Bullock had argued was the net worth of Philip Morris USA - the com- pany's US tobacco arm. The jury found Philip Morris liable for fraud, negligence and product liability claims in Ms Bullock's lawsuit.
Ms Bullock started smoking at 17 and said she had believed Philip Morris's past claims that there was no evidence to show smoking caused cancer.
Michael Piuze, her lawyer, called the damages "long overdue".
"There's no amount of money big enough to punish Philip Morris," he added.
Philip Morris said the award was inconsistent with the evidence and the law. At 33,000 times greater than the compensatory damages, the punitive damages were well above a four-to-one maximum ratio suggested by the US Supreme Court, it said.
It added that the jury should have focused on what Ms Bullock knew about smoking's health risks, and whether anything the company did improperly influenced her decision to smoke.
"Instead, it appears that this decision speaks to more general policy issues regarding smoking that can't fairly be decided in lawsuits like this," said William Ohlemeyer, Philip Morris's general counsel.
The company's attorney told the court that Philip Morris had already been sufficiently punished by the $246bn so-called "master settlement agreement" between tobacco companies and US states in 1998.
The award could be substantially reduced on appeal. A previous $3bn damages award to a smoker also represented by Mr Piuze, Richard Boeken, was later reduced to $100m.
dayuuum!! $28 billion... i wonder what it'll be brought down to.. but still I think it'll be a hefty penalty against them..