07:28 AM PDT on Thursday, May 18, 2006

By WILLIAM McCALL, AP Business Writer

In a mixed ruling for Big Tobacco, a second jury will have to decide whether $100 million was too much -- or too little -- for Philip Morris to pay for fraudulent marketing that suggested low-tar cigarettes were safer than regular cigarettes.

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In the first verdict of its kind in the nation, a Multnomah County jury in March 2002 awarded $150 million to the family of Michelle Schwarz of Salem, who died of lung cancer in 1999 at age 53.

Judge Roosevelt Robinson later reduced the award to $100 million, ruling the verdict was "grossly excessive."

In a narrow but complex decision handed down Wednesday, the Oregon Court of Appeals ruled the trial judge misinterpreted his duty to give the jury instructions requested by Philip Morris.

But the 5-4 ruling upheld the jury verdict of fraud and negligence against Philip Morris, leaving open only the question of how much money the company should pay.

Under Oregon law 60 percent of a punitive damage award goes to a state fund for crime victims.

The jury had agreed with lawyers for the Schwarz family, who claimed that Philip Morris fraudulently marketed its low-tar Merit brand as safer than regular cigarettes.

A lawyer for the Schwarz family said the case would be appealed to the Oregon Supreme Court, while a spokesman for the tobacco company said an appeal would be considered.

Chuck Tauman, the attorney for the Schwarz family, said the complex ruling rested on a very narrow technical question.

"The court mentioned there were 21 assignments of error that Philip Morris alleged were justified for reversal and they were successful on only one of them," Tauman said.

Overall, he said, the appeals court affirmed the bulk of the ruling, adding support to other cases against Big Tobacco.

"When you look at the effect on public policy and other litigation, it was an overall win for the plaintiffs," Tauman said.

Tauman noted that Robinson, who died in 2004, had called the case one of the crowning achievements of his legal career.

If it survives appeal, the case will be returned to a different trial judge, and a different jury will be selected, Tauman said.

At that point, he said, the new jury could reduce or increase the award.

"And we certainly aren't afraid to put that question to 12 citizens of Multnomah County," Tauman said.

A spokesman for the Altria Group Inc., parent of Philip Morris, said company attorneys were reviewing the ruling.

"It's a fairly complicated opinion, but obviously they've overturned the punitive damages," said spokesman John Sorrells.

Mark Gottlieb, director of the Tobacco Products Liability Project at Northeastern University School of Law, said it was important to note the basis for reversing the punitive damages award was a technical issue, not the size of the award.

Gottlieb said the Oregon Supreme Court could decide the jury instruction issue was, "at most, harmless error," adding it "would seem absurd" for another jury to reduce the award substantially.

The original jury also awarded $168,000 in compensatory damages to Schwarz's family, which Philip Morris attorneys have argued should be overturned.

The tobacco company attorneys had argued that Robinson should have followed a 2001 U.S. Supreme Court ruling that recommended there should be no more than a 9-to-1 ratio between punitive damages and other damages awarded to compensate for losses.