The Florida supreme court upheld the key part of a ruling from the appeals court three years ago that overturned the punitive damages.
The court said the award was “clearly excessive” and would “result in an unlawful crippling of the defendant companies”.
Tobacco companies’ stocks rose sharply following the ruling.
The court also upheld key findings in the 12-year-old case known as Engle versus Liggett – among them, that cigarette smoking causes cancer, heart disease and other ailments, and that tobacco companies marketed “defective and unreasonably dangerous” products.
Individual damage awards were reinstated to two cancer patients – $2.9 million to Mary Farnan and $4 million to the estate of Angie Della Vecchia, who died in 1999. But it agreed that smokers would have to sue tobacco companies individually, not as a group.
William Ohlemeyer, vice-president of tobacco company Philip Morris USA, said: “As numerous trial and appellate courts have held, tobacco cases cannot be treated as class actions because liability must ultimately be decided on a case by case basis.”
Joe Martyak, from the anti-smoking group American Legacy Foundation, said the ruling could prove a death knell for class action against cigarette makers.
“I think it’s bad news for public health and it’s even worse news for smokers,” he said. “The ruling underscores that Big Tobacco will literally be able to litigate to death a smoker’s claim for justice.”
A Miami jury ruled in 2000 that the tobacco companies deceived smokers about the dangers of cigarettes and ordered the companies to pay $145 billion to ailing Florida smokers, estimated to number 300,000 to 700,000.
The case, filed by Miami Beach paediatrician Howard Engle in 1994, was the first smokers’ lawsuit to be certified as a class action.
Florida’s appeal court overturned the verdict in 2003 and said Florida’s settlement with the tobacco companies in a multistate lawsuit prevented the awarding of punitive damages. It also stopped the class action against the cigarette makers.
The supreme court said that Florida’s involvement in the multistate settlement did not prevent smokers from suing individually, and gave former members of the class action one year to file those claims.