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Sunday, July 20, 2014

A 23.6 Billion Dollar Punitive Damages Verdict Against RJ Reynolds Tobacco Co.

The BBC reports:

A US court has ordered the country's second largest cigarette company to pay $23.6 billion (£13.8bn) to the wife of a smoker who died of lung cancer. 
RJ Reynolds Tobacco Company was hit with the punitive fine in addition to $16.8m (£9.8m) in compensatory damages.
. . .

The punitive damages awarded to . . . [the plaintiff, Cynthia] Robinson were said to be the largest of any individual case stemming from a class action lawsuit filed in Florida.
The Chicago Tribune also has an article on the verdict. Both outlets report that RJ Reynolds plans to appeal, and the Tribune notes that "[s]uch industry appeals are often successful."

RJ Reynolds will almost certainly succeed if it appeals the punitive damages award.

When juries return a verdict on damages, they may award compensatory damages, which serve to compensate the victim for harm suffered and make the plaintiff whole. Juries may also award punitive damages if they find that the defendant acted in a particularly egregious manner. Punitive damages serve to deter defendants from acting this way.

I have blogged previously on cases here and here, where juries have awarded punitive damages thousands of times higher than the compensatory damages. As I mentioned in those posts, the Supreme Court has strongly suggested that punitive damage awards that are more than ten times the amount of the compensatory damage award are unconstitutional violations of due process.

What about this case?

Here, the jury concluded that the plaintiffs were owed $16.8 million in compensatory damages as a result of the wrongful death. The $23.6 billion punitive damages verdict is roughly 1,400 times the compensatory damages that were awarded.

Given the vast disparity between the compensatory and punitive damages, it is highly likely that RJ Reynolds will succeed if it appeals the punitive damages award. While this award is indeed noteworthy, it is not going to be around for long.


Reuters quotes a number of legal experts in this article who also think that the punitive damages award is not likely to stand.

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