JUDGE CUTS DAMAGES IN PORTLAND TOBACCO SUIT

The $79.5 million in punitive damages against Philip Morris is
slashed to $32 million because of legal obligations

A Portland judge on Thursday slashed a $79.5 million punitive damages
award from a lawsuit against Philip Morris to $32 million.

But the reduced amount is still the largest judgment ever against a
tobacco company.

Judge Anna J. Brown of Multnomah County Circuit Court said her
decision was a difficult one and was not a criticism of the jury's
verdict to punish the cigarette-maker for the death of longtime
Marlboro smoker Jessie Williams of Portland. Rather, she said, her
decision was the result of legal obligations imposed by both state and
federal law.

"By no means is my personal point of view substituted for that of the
jury," she said.

The $79.5 million award was granted by a jury on March 30 to the
family of Williams, a former school janitor who died of lung cancer in
1997 at age 67 after smoking for 42 years. Jurors said they were
infuriated by documents showing that Philip Morris executives had lied
for decades about the link between smoking and cancer.

Brown made her decision after a two-day hearing between attorneys for
the Williams family and tobacco giant Philip Morris, makers of
Marlboro. Her decision did not affect $821,485 in compensatory damages
the jury awarded for medical costs and pain and suffering.

Attorneys for both the family and the cigarette company declined
comment on the ruling immediately after the hearing.

But William Gaylord, who represented the Williams family during the
hearing, appeared distressed by the decision.

"It's a significant award, Bill," Jay Beattie, one of the tobacco
company attorneys, told Gaylord after the hearing.

"I'm not going to say anything because I'll regret it later," Gaylord
said.

Gaylord had said during the hearing that any reduction in damages
would be a public relations coup for the company.

The judge faced a fiendishly complex problem. The jury, acting under
the judge's instructions, had slapped the company with the huge
punitive verdict. But under the U.S. Constitution, punishment has to
be proportionate to the degree of wrongdoing.

Brown acknowledged that jurors might feel slighted by her decision,
but she said they acted appropriately, within the limits of their
responsibilities. Their job was to decide on a punitive damages figure
based on the evidence in the trial, she said. But although Oregon law
sets no limits on the amount of punitive damages a plaintiff can seek,
the U.S. Supreme Court has made it clear that the sky is not the limit.

"The U.S. Supreme Court said there are limits," she said. "They're not
going to tell us what they are."

Brown said previous cases involving punitive damages were too unlike
the Portland case to be of much use for comparison.

The $32 million figure, she said, is "my best call."

The punitive damages could have been reduced even further if Brown had
found that Philip Morris had taken steps to keep from lying in the
future.

Beattie argued that the company's participation in a multistate
settlement sponsored by state attorneys general guaranteed that the
company would behave itself.

But Brown found that the multistate agreement did not amount to
"substantial remedial steps" to prevent further wrongdoing.

Gary Black, a tobacco-stock analyst with the New York investment firm
of Sanford C. Bernstein & Co., said investors are returning to
cigarette stocks because of favorable verdicts in other parts of country.

A Missouri jury found in favor of defendant tobacco company Brown &
Williamson Tobacco Corp. on Thursday.

"Most of the country, except the West Coast, says smokers should bear
the burden of their own actions," Black said.

Since 1959, he said, tobacco companies have lost only six of 32 suits
filed against them by individual smokers. Of the six, four have been
overturned on appeal. Only two - a San Francisco verdict and the one
in Portland - are still standing. The San Francisco verdict, in which
a judge reduced $50 million in punitive damages to $25 million - is
under appeal.

Tobacco company attorneys said Thursday it was too early to tell
whether they would appeal Brown's decision.

You can reach Patrick O'Neill at 503-221-8233 or by e-mail at
poneill@news.oregonian.com. The fax number is 503-294-4150. The
mailing address is 1320 S.W. Broadway, Portland, OR 97201.