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Reynolds Loss in $23 Billion Smoker Verdict Likely to Be Cut (1)

July 20 (Bloomberg) -- A Reynolds American Inc. unit was ordered by a Florida jury to pay a Pensacola woman $23 billion in punitive damages for her husband’s death from lung cancer, her lawyer said.

Since a Florida Supreme Court decision in 2006, individual plaintiffs in the state have been awarded large verdicts, with most of those being reduced on appeal.

The jury on July 18 also awarded Cynthia Robinson $16 million in compensatory damages for the 1996 death of her husband, Michael Johnson, who was 36, her lawyer, Willie Gary, said in a telephone interview.

Robinson originally sued R.J. Reynolds as part of a class action case against tobacco companies. The original $145 billion verdict was overturned by the state’s top court, which also decertified the class and opened the door to individuals to sue the companies. The court endorsed many jury findings in the case, including that the companies were negligent, conspired to hide information about the dangers of smoking and sold defective products.

Gary said he expects the company, the maker of Camel cigarettes, to appeal the verdict.

“I don’t know what the judges are going to do,” he said yesterday. “I hope and suspect that we will keep the verdict. The jury sent a message.”

Punitive Awards

J. Jeffery Raborn, assistant general counsel at Winston- Salem, North Carolina-based Reynolds American, said the company will file post-trial motions.

“This verdict goes far beyond the realm of reasonableness and fairness, and is completely inconsistent with the evidence presented,” he said in a statement.

The U.S. Supreme Court ruled in 2003 punitive damages usually should be no more than nine times actual damages. The court allowed exceptions for especially egregious conduct, and judges have upheld some punitive awards above the 9-to-1 ratio.

Reynolds American agreed this month to buy Lorillard Inc. for $25 billion. If the deal is cleared by antitrust regulators, the transaction will leave the 400-year-old American tobacco industry with just Reynolds and Altria Group Inc. controlling 90 percent of the market.

The Florida high court’s ruling, known as the Engle decision after Howard Engle, was reaffirmed last year in a different case.

Companies including Reynolds American and Altria’s Philip Morris USA, the biggest cigarette maker, have lost hundreds of millions of dollars in judgments in post-Engle cases, many of which are on appeal.

The case is Williams v. R.J. Reynolds, 2008 CA 000098, Florida First Circuit Court (Pensacola)

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