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June 4, 2001
Contact: Richard A. Daynard
A jury in Brooklyn, New York today found Philip Morris Inc.. R.J. Reynolds Tobacco Co., Brown & Williamson Tobacco Corp., Lorillard Tobacco Co., Liggett Group, Inc, and United States Smokeless Tobacco Co. liable for monetary damages of $17.8 million for violating New York State consumer protection statutes and committing unfair and deceptive business practices. The plaintiff's verdict surprised the many Wall Street tobacco analysts who had predicted that the tobacco companies would maintain their modest winning streak in the courts. Trials by up to 20 separate state Blue Cross plans are slated to follow in the same court. CASE BACKGROUND This trial resulted from one of three similar cases filed on April 29, 1998 by dozens of Blue Cross and Blue Shield (BCBS) plans and subsidiaries against the major tobacco companies. The other cases, filed in Seattle and Chicago, were ultimately dismissed after rulings by federal courts of appeal. (See opinion of US Court of Appeals for the Seventh Circuit and opinion of the US Court of Appeals for the Ninth Circuit) Because of these decisions and others rejecting claims of third-party payors, the appeal could be difficult for the plaintiffs. In this case involving the claims of one of twenty-one states’ plans acting as co-plaintiffs, only the claims of Empire Blue Cross & Blue Shield (Empire of New York), were presented to the jury. It is believed that the claims of the other states’ plans will be heard at a later date unless the U.S. Court of Appeals for the Second Circuit intervenes. Empire is reportedly the largest health insurer in New York as well as the largest non-profit health insurer in United States. (see original complaint) While the plaintiffs’ claims were based on alleged violations of the federal RICO (Racketeer Influenced and Corrupt Organizations) Act and New York State consumer protection statutes, as well as New York common law fraud, the jury only found the defendants liable under NY consumer protection law. British tobacco giant, BAT Industries, was not found liable to the plaintiffs Prior to trial, the defendants sought dismissal of the case under numerous grounds. In 1999, the trial judge, Jack B. Weinstein, in a thorough and scholarly opinion, rejected the defendants' motions to dismiss. The jury selection began on March 19, 2001 and opening arguments were held on March 26. COMMENT: This case provided the jury
with the opportunity to spend time reading internal tobacco industry documents.
Richard Daynard, Chairman of the Tobacco Products Liability Project and Professor of Law
at Northeastern University observed that, "What this case underlines is that
when juries get to see the documents evidencing the industry's deceptive conduct over the
past forty years, the industry generally loses."
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