JACKSONVILLE, Fla. -- Philip Morris USA, R.J. Reynolds Tobacco Co. and Lorillard Inc. have reached an agreement to settle the Engle progeny cases still awaiting trial in Florida federal courts. Philip Morris and Reynolds have agreed to a $42.5 million settlement per company, with Lorillard paying $15 million.
The Engle progeny cases stem from the 2006 Florida Supreme Court Engle v. Ligget Group decision, which decertified a $145 billion class-action verdict against tobacco companies, but gave former class members the option to file individual lawsuits and use some of the findings from the original trial. These lawsuits, filed in both U.S. District Court and multiple Florida state courts, became known as the Engle progeny cases.
“As point of reference, as of (2014), Reynolds had been served in 3,885 Engle Progeny cases, and had paid out $162.1 million in compensatory/punitive damages,” Wells Fargo tobacco analyst Bonnie Herzog wrote in a research note, adding that Reynolds had $300 million in outstanding liabilities for awards in the remaining cases.
Herzog estimated the various tobacco companies have had an approximately 50% success rate in Engle cases over the past several years.
“We view this is a favorable conclusion for all three to a substantial outstanding legal battle,” she said. “While no individual Engle case posed any significant financial risk to any of the three manufacturers, we do believe the elimination of the aggregate financial risk from all federal cases and the headline risk of any individual case will be viewed favorably by the market.”
"We are pleased to have these federal Engle cases behind us," said Ronald Milstein, Lorillard's executive vice president and general counsel. "We view the federal Engle progeny cases as a unique set of litigation, and the opportunity to resolve them on favorable terms is in the best interests of the company and its shareholders.”
This settlement agreement does not apply to the more than 3,000 remaining cases filed in state courts.
“With respect to the cases pending in state court, we will continue to defend them vigorously, which includes appealing adverse verdicts,” said Jeff Raborn, vice president and assistant general counsel for R.J. Reynolds. Philip Morris and Lorillard also said they would fight the remaining state cases.
The settlement agreement of the federal Engle cases is subject to final approval by U.S. District Judge William G. Young.
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