(Bloomberg) -- A $4.7 billion jury verdict against Johnson & Johnson in July helped spark the company’s biggest annual share loss in a decade, spotlighting the potential cost of alleged health risks from its popular baby powder.

But investors may have overreacted when a St. Louis jury sided with 22 women who claimed asbestos in the powder caused their ovarian cancer. While the award was eye-popping -- the sixth-largest ever in a product-defect case -- J&J may pay far less, or nothing. No verdict of that size has survived appeal.

Indeed, of the 25 largest U.S. jury awards, 23 were reversed, drastically cut or against defendants with few or no assets who couldn’t pay, according to data compiled by Bloomberg. The remaining two, including the one against J&J, are being appealed. Most such revisions are by judges overruling angry jurors or enforcing court-imposed limits on punitive damages.

“It’s pretty common for judges to reduce enormous verdicts,” said Jean Eggen, who teaches mass tort law at Widener University in Philadelphia. Juries “sometimes can be somewhat arbitrary,” she said. “The civil system is set up so a judge can determine if it’s overvalued.”

Even if trial judges don’t intervene, defendants have more opportunities to knock down verdicts through multiple appeals that can lead to new trials or force plaintiffs to settle for far less. As a result, it’s become a truism in civil litigation that the larger the jury verdict, the more likely it is to be reduced or reversed.

To be sure, such lawsuits aren’t without risk for companies, especially in cases alleging defective products, where there may be hundreds or thousands of similar claims putting pressure on defendants to seek settlements.

“Even though a lot of times it’s vapor, a large verdict draws other cases,’’ said Victor Schwartz, who represents corporations and is general counsel for the American Tort Reform Association.

Since losing its first big talc-related verdicts in St. Louis in 2016, the number of such cases against J&J jumped to more than 11,700 from 1,400, and the company expects more. The number of trials set for this year will more than triple to at least 26 from just eight in 2018. While J&J disputes any link between its baby powder talc and cancer, it may have to cough up as much as $20 billion in settlements to resolve all the cases, according to Bloomberg Intelligence litigation analyst Holly Froum.

Share Drop

The $4.7 billion verdict in July, upheld by the trial judge in December, has been appealed by the company, which saw its shares tumble 7.6 percent in 2018. J&J probably will be able to win a reversal or reduce its liability in the long run, said David Logan, law professor at Roger Williams University in Bristol, Rhode Island.

“That’s real money,” Logan said. “This particular verdict will go down.”

A big reason jury awards are so vulnerable is that they often include substantial punitive damages or awards for non-economic claims such as pain and suffering that “feed a narrative of jury craziness,” Logan said. These components have put verdicts in product-defect cases at risk.

Mark Lanier, the lawyer who won the J&J verdict in July, said he expects the award to survive on appeals because the punitive portion, at $4.14 billion, meets Supreme Court guidelines when divided among the 22 plaintiffs. “The award isn’t outrageous,” he said. “We ought to be OK.”

Still, judges routinely cut back punitive awards, and the “higher the verdict, the greater the level of scrutiny,” according to Bob Clifford, a Chicago-based plaintiffs’ attorney.

Trial courts may uphold punitive awards, but they’re less likely to be sustained on appeal if they exceed guidelines issued by the U.S. Supreme Court in 2003, said Schwartz of the American Tort Reform Association. The guidelines limit punitive damages to no more than nine times a compensatory award, and the ratio may be 1-to-1 if the compensatory award is particularly high.

“Some lower court judges don’t follow the guidelines,’’ which means the awards end up being cut back or reversed completely on appeal, Schwartz said. “The appellate courts listen to arguments. You don’t have a family crying. There’s no emotional pandering. It’s a different ballpark.”

Some reductions are huge. A California jury in 2005 awarded $1.8 billion to plaintiffs who claimed they were cheated in an essay contest that offered a house as a prize. The judge cut the payout to $1.8 million and the case was settled the following year for $1.18 million, or 99.9 percent less than the jury award.

Even if plaintiffs win, they may have to endure long appeals along with reduced payouts. In 1994, an Alaska jury awarded $5 billion in punitive damages to fishermen, property owners and business owners who alleged environmental harm from the Exxon Valdez oil spill in 1989. It wasn’t until 2008 that the U.S. Supreme ruled they were entitled to $507.5 million in punitive damages from Exxon Mobil Corp.

With so many appeals, verdicts can blow up at any stage. In 2014, a Florida jury decided R.J. Reynolds Tobacco Co. should pay $23.6 billion in punitive damages to the widow of a smoker who died of lung cancer at age 36, the second largest-ever individual verdict in a product-defect claim. The trial judge substantially cut that to $11.9 million in compensatory damages and $16.9 million in punitive damages. In 2017, the Florida Supreme Court threw out the verdict and ordered a new trial, scheduled for next month.

And some cases wind up being tried multiple times. In 2000, Exxon was ordered by a jury to pay the state of Alabama $3.5 billion in a fraud claim, including $3.42 billion in punitive damages. The verdict was reversed, and at a second trial in 2003, a new jury awarded $11.86 billion, most of which was punitive damages. The trial court cut the total to $3.6 billion. But the Supreme Court of Alabama in 2007 tossed out the punitive portion, leaving only the compensatory judgment, which had grown with interest to $142 million.

“It was a total miscarriage of justice,” said Jere Beasley, who represented the state of Alabama. “Maybe the $11.8 billion was too high, but the judges were afraid of letting a large punitive award stand.’’

--With assistance from Jef Feeley and Steven Raphael.

To contact the reporter on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net

To contact the editors responsible for this story: Elizabeth Wollman at ewollman@bloomberg.net, Steve Stroth

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