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Judge Orders RJ Reynolds Pay 11 Years of Interest for Not Settling

By James Norwood on March 08, 2011 5:48 AM

The next time your client wants to decline a settlement offer, you may want ask them to reconsider. Federal judge Stefan Underhill awarded $15.7M against RJ Reynolds for accumulated interest payments, because they didn't accept a settlement offer, according to the San Jose Mercury News.

Underhill rejected claims by RJ Reynolds that the interest was excessive. He explained that the interest was mandatory as a matter of law and is designed to encourage defendants to accept reasonable settlement offers.

The plaintiff, Barbara Izzarelli had her larynx removed and must breathe through a hole in her throat. She has no sense of smell.

"This is absolutely required by law and it's the penalty that cigarette companies have to pay for refusing to settle. They probably spent ten times that much, if not 100 times that much, litigating this case," Izzarelli's attorney, David Golub said. 

The interest dates back to 1999 when the suit was filed and Izzarelli offered to settle for $400,000. Clearly New England juries will award damages to smokers. He adds that a jury in Connecticut held that Salem cigarettes were unreasonably dangerous and defectively designed.

Evidence in the trial established that Reynolds had a campaign in the early 1970s marketed Salems to minors to establish a long-term customer base and designed the cigarettes with enough nicotine to get a smoker hooked, Golub told the Mercury News.

Clearly, in this case, once the offer of judgment was made, the game changed. It just took this tobacco company more than a decade to pay the price. The plaintiff ended up getting more in interest than the judgment award.

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