In May 1996, a federal appeals court decertified a nationwide class action by smokers against cigarette manufacturers, in part because of the predominance of reliance, causation, and other issues requiring individualized proof. Castano v. American Tobacco Co., 84 F.3d 734 (5th Cir. 1996). The next day, two of the Castano plaintiffs filed a similar putative class action in Louisiana state court, alleging that defendants had made defective products, committed fraud, and breached an assumed duty. Plaintiffs sought to recover costs of medical monitoring and smoking cessation services. Although fraud and breach of assumed duty claims require individualized proof of reliance, the court certified a class of Louisiana smokers and former smokers who “desire to participate” in a medical monitoring or a smoking cessation program. The state appeals court and the state supreme court affirmed certification of the class. They decided that the case should proceed in phases, beginning with a trial of common liability issues to determine defendants’ liability to the “class as a whole,” and a trial to determine “the items of damage common to the class,” because the case “boil[ed] down to one fundamental question: Is a cigarette that contains nicotine a defective product?”
During the first phase of the trial, the trial court barred defendants from cross-examining plaintiffs about individualized issues such as reliance, including asking about admissions that might have prevented them from proving their claims. The court also instructed the jury that although reliance is generally required to prove fraud, plaintiffs needed only to establish that defendants “intentionally engaged in actions designed to distort the body of public knowledge concerning smoking and health,” that a class of Louisiana smokers relied on “this distorted body of knowledge,” and that the reliance by the class “caused or contributed to the need for … cessation of smoking programs.” The jury returned a verdict in favor of defendants on the issue of whether cigarettes were “defective.” The jury also found that medical monitoring was not necessary, but found in favor of plaintiffs on their fraud and assumed duty claims and their request for a smoking cessation program. The court then eliminated or invalidated both the class members’ individual (non-personal injury) claims and defendants’ defenses to these claims and deferred litigation of any personal injury claims.
During the second phase of the trial to determine the scope and cost of the cessation program, plaintiffs sought more than $1 billion for a 25 year, 12 part program. The jury agreed that the cessation program should have the 12 parts, limited the duration of the program to 10 years, and awarded about $592 million.
Defendants appealed. In 2007, the state appeals court narrowed the composition of the class, invalidated parts 5-12 of the cessation program, and remanded the case. The state supreme court declined to review the decision. On remand, the trial court rejected additional evidentiary proceedings, reduced the award to $264 million based on the elimination of parts 5-12 of the cessation program, and rejected requests to further reduce the award based on the narrowed size of the class and the elimination of costs associated with parts 1-4 that were rendered unnecessary by the elimination of parts 5-12.
Defendants again appealed. In 2010, the state appeals court recognized that the trial court had failed to conduct appropriate proceedings on remand. Instead of remanding again, however, the state appeals court made its own additional findings of fact, reduced the award to $242 million, and ordered immediate payment. The state supreme court again declined review.
Defendants applied to Justice Scalia, as the Circuit Justice, to stay execution of the judgment ($270 million, including interest, by December 2010). Justice Scalia found that the Supreme Court was likely to grant certiorari, that the other stringent requirements for a stay of execution also were met, and granted the stay. Philip Morris USA Inc. v. Scott, 131 U.S. 1 (2010).
On December 2, 2010, defendants petitioned the Supreme Court for a writ of certiorari. Philip Morris USA Inc. v. Jackson, 2010 WL 4914512. Defendants contend that the Louisiana courts violated the Due Process Clause of the Fourteenth Amendment to the United States Constitution by eliminating defendants’ substantive and procedural protections in the class action that they would otherwise have had in defending themselves against the class members’ individual claims.
The Supreme Court is likely to decide whether to grant this petition later this year. A decision to grant the petition and decide the case would have nationwide implications because the pressures on defendants to settle class actions often prevent defendants from seeking review by the Supreme Court of state court class action decisions, including decisions allowing the use of class actions to restrict defendants’ ability to defend themselves in litigation.