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Philip Morris USA, Inc. v. Douglas

Supreme Court of Florida

March 14, 2013

PHILIP MORRIS USA, INC., et al., Petitioner,
v.
James L. DOUGLAS, etc., Respondent.

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[Copyrighted Material Omitted]

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         William P. Geraghty of Shook, Hardy & Bacon, LLP, Raoul G. Cantero, III of White & Case, LLP, Miami, FL, Jennifer Marie Voss and Cathy A. Kamm of Shook, Hardy & Bacon, LLP, Gary L. Sasso of Carlton Fields, P.A., Tampa, FL, Leah A. Sevi, Carlton Fields, Tallahassee, FL, David Boies of Boies, Schiller & Flexner, LLP, Armonk, NY, Lauren R. Goldman of Mayer, Brown, LLP, New York, NY, for Petitioner Philip Morris USA, Inc.

          Gregory George Katsas of Jones & Day, Washington, DC, for Petitioner R.J. Reynolds Tobacco Company.

          Karen Haynes Curtis of Clark & Silvergate, P.A., and Kelly Ann Luther of Kasowitz, Benson, Torres & Friedman, LLP, Miami, FL, for Liggett Group LLC.

          Howard Martin Acosta, Law Office of Howard M. Acosta, Kent G. Whittemore of the Whittemore Law Group, P.A., Bruce Howard Denson of Bruce Howard Denson, P.A., St. Petersburg, FL, Steven L. Brannock, Celene Harrell Humphries and Tyler K. Pitchford of Brannock & Humphries, Tampa, FL, for Respondent James L. Douglas.

          John Stewart Mills and Courtney Rebecca Brewer of the Mills Firm, P.A., Tallahassee, FL, for Respondent Engle Plaintiff's Law Firms.

          POLSTON, C.J.

          We review the decision of the Second District Court of Appeal in Philip Morris USA, Inc. v. Douglas, 83 So.3d 1002, 1011 (Fla. 2d DCA 2012), in which the Second

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District certified the following question of great public importance: [1]

DOES ACCEPTING AS RES JUDICATA THE EIGHT PHASE I FINDINGS APPROVED IN ENGLE V. LIGGETT GROUP, INC., 945 So.2d 1246 (Fla.2006), VIOLATE THE [ ENGLE DEFENDANTS'] DUE PROCESS RIGHTS GUARANTEED BY THE FOURTEENTH AMENDMENT OF THE UNITED STATES CONSTITUTION?

         Applying our decision in Engle, we answer the certified question in the negative and approve the result of the Second District's decision affirming the general verdict for the plaintiff based on strict liability. However, as explained below, we disapprove the Second District's rejection of negligence as a basis for the general verdict because the Second District's analysis requires causation instructions and findings beyond those required by Engle. We also decline the defendants' request to revisit our decision in Engle.

         I. BACKGROUND

         A. Engle and the Phase I Findings

         In 1994, smokers and their survivors filed a class action against cigarette companies and industry organizations for damages allegedly caused by smoking-related injuries. See R.J. Reynolds Tobacco Co. v. Engle, 672 So.2d 39, 40 (Fla. 3d DCA 1996)( Engle I ). The Engle class sought damages " for certain diseases and medical conditions allegedly contracted [because of] addiction to smoking cigarettes containing nicotine produced by the [ Engle ] defendants." Id. The complaint alleged causes of action for " strict liability in tort, fraud and misrepresentation, conspiracy to commit fraud and misrepresentation, breach of implied warranty of merchantability and fitness, negligence, breach of express warranty, [and] intentional infliction of mental distress." Id.

         The Engle defendants filed an interlocutory appeal challenging the class certification. Id. In Engle I, the Third District affirmed certification with the class defined as follows:

[All Florida citizens and residents], and their survivors, who have suffered, presently suffer or have died from diseases and medical conditions caused by their addiction to cigarettes that contain nicotine.

Id. at 40, 42.

          On remand, the trial court developed a three-phase trial plan. In Phase I, the jury was to decide issues common to the entire class, including general causation, the Engle defendants' common liability to the class members for the conduct alleged in the complaint, and the class's entitlement to punitive damages. See Engle v. R.J. Reynolds Tobacco, 2000 WL 33534572, at *12 (Fla. 11th Cir.Ct.2000)( Engle F.J. ), rev'd, Liggett Group, Inc. v. Engle, 853 So.2d 434 (Fla. 3d DCA 2003)( Engle II ), approved in part and quashed in part, Engle, 945 So.2d 1246. If the jury ruled against the Engle defendants in Phase I, the same jury would then decide individual causation and damages for the class representatives and the amount of punitive damages to be awarded to the entire class in Phase II. Id. Then, in Phase III, different juries would decide individual causation and damages for each class member. [2] Id. After all Phase III trials

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were complete, the trial court would divide the punitive damages among the successful class members. Engle II, 853 So.2d at 442.

         Consistent with the trial plan's focus on common liability in Phase I, the class action jury was not asked to find brand-specific defects in the Engle defendants' cigarettes or to identify specific tortious actions. Instead, in instructing the jury, the Engle trial court explained that it was to determine " all common liability issues" for the class concerning " the conduct of the tobacco industry." Though the Engle defendants requested that the trial court use a verdict form that would have required the jury to include narrative explanations identifying specific defects and tortious actions, the trial court rejected it, and they did not provide the court with an alternative form.

         During Phase I, proof submitted on strict liability included brand-specific defects, but it also included proof that the Engle defendants' cigarettes were defective because they are addictive and cause disease. The Engle defendants defended this defect theory, including presenting testimony that cigarettes were not addictive and were not proven to cause disease and that they had designed the safest cigarette possible. Similarly, arguments concerning the class's negligence, warranty, fraud, and conspiracy claims included whether the Engle defendants failed to address the health effects and addictive nature of cigarettes, manipulated nicotine levels to make cigarettes more addictive, and concealed information about the dangers of smoking.

         After a trial on the Phase I common liability issues, the Engle jury returned a verdict in favor of the class on all counts and determined that the Engle defendants' actions entitled the class to punitive damages. See Engle, 945 So.2d at 1256-57. In denying the Engle defendants' motion for directed verdict, the trial court summarized the evidence that had been presented in support of each common liability theory and found it sufficient to support the jury's verdict. See Engle F.J. at *2-5. Specifically, regarding strict liability, the trial court ruled:

There was more than sufficient evidence at trial to satisfy the legal requirements of this [c]ount and to support the jury verdict that cigarettes manufactured and placed on the market by the [ Engle ] defendants were defective in many ways including the fact that the cigarettes contained many carcinogens, nitrosamines, and other deleterious compounds such as carbon monoxide. That levels of nicotine were manipulated, sometime[s] by utilization of ammonia to achieve a desired " free basing effect" of pure nicotine to the brain, and sometime[s] by using a higher nicotine content tobacco called Y-1, and by other means such as manipulation of the levels of tar and nicotine. The evidence more than sufficiently

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proved that nicotine is an addictive substance which when combined with other deleterious properties, made the cigarette unreasonably dangerous. The evidence also showed some cigarettes were manufactured with the breathing air holes in the filter being too close to the lips so that they were covered by the smoker thereby increasing the amount of the deleterious effect of smoking the cigarette. There was also evidence at trial that some filters being test marketed utilize glass fibers that could produce disease and deleterious effects if inhaled by a smoker.

Id. at *2. In addition, regarding negligence, the trial court held that " [t]he [ Engle ] defendants according to the testimony, well knew from their own research, that cigarettes were harmful to health and were carcinogenic and addictive. By allowing the sale and distribution of said product under those circumstances without taking reasonable measures to prevent injury, constitutes ... negligence." Id. at *4.

         With the common liability issues decided, the Engle jury moved to Phase II, in which it found that three class representatives were entitled to compensatory damages under all counts. Engle, 945 So.2d at 1257. In addition, the Phase II jury awarded class-wide punitive damages in the amount of $145 billion based on its findings concerning the Engle defendants' conduct. Id. By this point, the parties had collectively presented " over 150 witnesses [and] thousands of documents and exhibits, and [the jury had heard] over 57,000 pages of testimony." Engle F.J. at *1. Before the individual trials contemplated by Phase III of the class action trial plan could begin, the Engle defendants appealed. See Engle II, 853 So.2d at 442.

         Reviewing the Third District's decision in that appeal, this Court decertified the class " because individualized issues such as legal causation, comparative fault, and damages predominate." Engle, 945 So.2d at 1268. In addition, we reversed the class-wide punitive damages award as premature because, though the Phase I jury decided the Engle defendants' common liability to the class under certain claims, it did not decide the plaintiff-specific elements of those claims and, therefore, " did not determine whether the defendants were liable to anyone." Id. at 1262-63 (quoting Engle II, 853 So.2d at 450). However, we held " that certain common liability findings" made by the class action jury (known as the " Phase I findings" ) would have " res judicata effect" in individual damages actions brought within a year of the opinion's mandate. Id. at 1254, 1277.

          Specifically, this Court in Engle held that the following Phase I findings are entitled to res judicata effect: (i) " that smoking cigarettes causes" certain named diseases including COPD and lung cancer; (ii) " that nicotine in cigarettes is addictive; " (iii) " that the [ Engle ] defendants placed cigarettes on the market that were defective and unreasonably dangerous; " (iv) " that the [ Engle ] defendants concealed or omitted material information not otherwise known or available knowing that the material was false or misleading or failed to disclose a material fact concerning the health effects or addictive nature of smoking cigarettes or both; " (v) " that the [ Engle ] defendants agreed to conceal or omit information regarding the health effects of cigarettes or their addictive nature with the intention that smokers and the public would rely on this information to their detriment; " (vi) " that all of the [ Engle ] defendants sold or supplied cigarettes that were defective; " (vii) " that all of the [ Engle ] defendants sold or supplied cigarettes that, at the time of sale or supply,

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did not conform to representations of fact made by said defendants; " and (viii) " that all of the [ Engle ] defendants were negligent." [3] Id. at 1276-77. However, this Court disapproved the use of the Phase I conduct findings relating to intentional infliction of emotional distress, fraud and misrepresentation, and civil conspiracy based on misrepresentation because they were " inadequate to allow a subsequent jury to consider individual questions of reliance and legal cause." Id. at 1255.

         In Engle, we explained res judicata generally:

The foundation of res judicata is that a final judgment in a court of competent jurisdiction is absolute and settles all issues actually litigated in a proceeding as well as those issues that could have been litigated. We have explained the doctrine of res judicata as follows:
A judgment on the merits rendered in a former suit between the same parties or their privies, upon the same cause of action, by a court of competent jurisdiction, is conclusive not only as to every matter which was offered and received to sustain or defeat the claim, but as to every other matter which might with propriety have been litigated and determined in that action.

Id. at 1259 (alteration in original) (quoting Kimbrell v. Paige, 448 So.2d 1009, 1012 (Fla.1984)).

         B. This Case

         The Second District explained the facts of this case, which applies the Engle Phase I findings to an individual plaintiff's strict liability and negligence claims, as follows:

Philip Morris USA, Inc., R.J. Reynolds Tobacco Company, and Liggett Group, LLC (the [defendants] ), challenge the final judgment entered after jury trial which awarded James L. Douglas, as the personal representative of the Estate of Charlotte M. Douglas, $2.5 million as damages on claims based on Mrs. Douglas' smoking-related death.
Mrs. Douglas began smoking cigarettes in the mid-1960s as a teen. The complaint alleged that it was her addiction to cigarettes manufactured by the [defendants] that caused her to develop chronic obstructive pulmonary disease (COPD) and lung cancer, which ultimately led to her death in 2008 at the age of sixty-two.
Mr. Douglas' third amended complaint alleged claims for strict liability, negligence, breach of express and implied warranty, fraudulent concealment, and conspiracy to fraudulently conceal. Mr. Douglas originally sought both compensatory and punitive damages, but he dismissed his claim for punitive damages before trial. [The jury, using a general verdict form, found the defendants] liable for Mrs. Douglas' death, apportioning fault as follows: 50% to Mrs. Douglas, 18% to Philip Morris, 5% to R.J. Reynolds, and 27% to Liggett. Additionally, the jury found against Mr. Douglas on the issue of Mrs. Douglas' detrimental reliance on concealment or omissions by the [defendants].
The crux of this appeal is whether the trial court erred in the application of the findings reached by a jury and affirmed by the Florida Supreme Court in the class action case Engle v. Liggett Group, Inc., 945 So.2d 1246 (Fla.2006)[, where] the Florida Supreme Court affirmed [eight of] the [class] jury's [Phase I]

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findings[, including] (1) that smoking cigarettes causes certain named diseases; (2) " that nicotine in cigarettes is addictive" ; (3) that the [defendants] " placed cigarettes on the market that were defective and unreasonably dangerous" ; ... and (8) that all the [ Engle defendants] " were negligent."

Douglas, 83 So.3d at 1003-04 (footnotes omitted) (quoting Engle, 945 So.2d at 1276-77).

         In determining whether the trial court properly applied the Phase I findings to Mr. Douglas' strict liability and negligence claims, the Second District examined the trial court's jury instructions and the general verdict form, which did not ask the jury to return specific findings for each cause of action the plaintiff alleged. Id. at 1004-05. Specifically, the trial court presented the jury with a verdict form that contained five questions. The first asked whether Mrs. Douglas was a member of the Engle class; [4] the jury found that she was. The second question asked the jury to determine whether " smoking cigarettes manufactured by one or more of the [d]efendants [was] a legal cause of [Mrs. Douglas'] death" and, if so, to determine whether " smoking cigarettes" manufactured by each of the three named defendants was " a legal cause of [Mrs. Douglas'] death." [5] The jury answered " [y]es" to all parts of question two. Third, the verdict form asked the jury to determine whether Mrs. Douglas " reasonably rel[ied] to her detriment on the concealment or omission by one or more of the [d]efendants of material information not otherwise known or available or their failure to disclose material facts concerning the health effects or addictive nature of smoking cigarettes." The jury answered " [n]o." Fourth, the verdict form asked the jury to apportion fault that was a legal cause of Mrs. Douglas' death between Mrs. Douglas and the three defendants. Lastly, the verdict form asked the jury to determine the damages to Mr. Douglas for Mrs. Douglas' death. The jury awarded $4 million of past damages and $1 million of future damages, which the trial court reduced based on the jury's apportionment of fault.

          After reviewing the jury instructions and verdict form, the Second District addressed ...


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