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From Products Liability Law Daily, April 3, 2015

Tobacco companies can’t hide fraud behind repose period smoke screen

By Pamela C. Maloney, J.D.

Holding that individual smokers did not have to prove reliance on tobacco companies’ allegedly fraudulent claims during the 12-year statute of repose period governing their fraud actions, the Florida Supreme Court concluded that tobacco companies were precluded from raising the fraud statute of repose based on the Phase I findings in Engle v. Liggett Group, Inc., 945 So.2d 1246 (Fla. 2006), that Big Tobacco had committed fraud by concealment based on conduct that occurred during the repose period. Hence, the Florida high court quashed the Fourth District’s decision dismissing a smoker’s fraud claims because the jury found no evidence of the smoker’s reliance within the repose period and reinstated the jury’s verdict awarding the smoker’s estate $6.26 million in damages, including $5 million in punitive damages. The state high court also approved the Fourth District’s decision Frazier v. Philip Morris USA Inc., 89 So.3d 937 (Fla. 3d DCA 2012), to the extent it reached the same conclusion regarding the statute of repose (Hess v. Philip Morris USA, Inc., April 2, 2015, Quince, P.). See also the Florida Supreme Court’s decision in Philip Morris USA, Inc. v. Russo in the “Cases” section of today’s issue of the Products Liability Law Daily.”

Background. The smoker, Stuart Hess, died from lung cancer allegedly caused by his addiction to cigarettes. According to the complaint, Mr. Hess began smoking in the 1950s at 12- or 13-years of age and smoked one to two packs every day. Mr. Hess’s widow filed a complaint against Philip Morris USA Inc. and a number of other tobacco companies, asserting claims for strict liability, fraudulent concealment, negligence, and conspiracy to commit fraud. In her fraudulent concealment claim, Mrs. Hess alleged that the tobacco companies “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.” The complaint also alleged that Mr. Hess had detrimentally relied on and died as a proximate result of the tobacco companies’ fraud. The tobacco companies pleaded the12-year state of repose (section 95.031(2), Florida Statutes (1993)) as an affirmative defense.

Engle Phase I findings; Fourth District’s decision. During Phase I of the trial, the Engle jury decided issues common to the entire class, including that each of the named tobacco companies had committed fraud by concealment during the 12 years preceding the filing of the complaint (both before and after May 5, 1982). This finding was given res judicata in the individual actions filed to determine issues specific to individual smokers, such as legal causation, comparative fault, and damages.

In this case the Fourth District reversed the jury’s findings in favor of Mrs. Hess, explaining that even though the Engle jury had found that the tobacco companies had committed fraud, Mrs. Hess still had to prove reliance and that any fraud committed before May 5, 1982 was barred by the statute of repose. Because the jury had determined that Mr. Hess had relied to his detriment on an omission committed by Philip Morris prior to May 5, 1982, the fraudulent concealment claim and the punitive damages award were foreclosed by the statute of repose.

Mrs. Hess appealed the Fourth District’s holding on the ground that it expressly and directly conflicted with the Third District’s decision in Frazier, the Engledecision, and decisions issued by a number of other Florida district courts of appeal.

Statute of repose. After reviewing Florida case law laying out the distinctions between statutes of limitations and statutes of repose, the Florida Supreme Court emphasized that statutes of repose have been construed as running from the date of a discrete act on the part of a defendant, not from the time a cause of action accrues. Thus, a claim for fraud must be brought within 12 years after the date of the commission of the alleged fraud, as such a definition focuses on the tortfeasor’s action or inaction.

Based on this finding, the court noted that although Engle-progeny plaintiffs still must prove detrimental reliance in order to prevail on their fraudulent concealment claims, they were not required to prove that the smoker relied on the tobacco companies’ alleged fraud during the 12-year repose period. The court concluded that the tobacco companies were precluded from asserting the fraud statute of repose defense because the Engle jury had found that the tobacco companies’ fraudulent concealment conduct occurred within the repose period and because the last act or omission by those companies triggered the fraud statute of repose.

The case is No. SC12-2153.

Attorneys: John Stewart Mills (The Mills Law Firm, PA) for Elaine Hess. Joseph Hagedorn Lang, Jr. (Carlton Fields Jorden Burt, PA), and Andrew Scott Brenner (Boies, Schiller & Flexner, LLP) for Philip Morris USA., Inc.

Companies: Philip Morris USA, Inc.

MainStory: TopStory SofLReposeNews TobaccoProductsNews FloridaNews

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