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US: Court Voids $145 Billion Judgment in Tobacco Case

by Jeremy W. PetersThe New York Times
July 6th, 2006

The Florida Supreme Court upheld today a decision that threw out a $145 billion judgment against the nation's largest tobacco companies.

The decision, which was widely expected to be in the tobacco companies' favor, reaffirms a lower court decision to void what was the largest punitive award by a jury in United States history.

The decision also removes a major roadblock for the Altria Group, the parent of Phillip Morris, as it tries to spin off its Kraft food division.

The court rejected the jury award as "excessive as a matter of law" and concluded that the case was improperly filed as a class-action lawsuit. The majority opinion said the facts of the case "are highly individualized and do not lend themselves to class-action treatment."

The case began in 1994 when it was filed as a nationwide class-action lawsuit. An appeals court later narrowed the class to include only Florida smokers some 700,000 in all and the case proceeded as a jury trial. In 2000, the jury awarded a $145 billion judgment after determining that the tobacco companies had lied to smokers about the dangers of cigarettes. Three years later, an appeals court overturned the award. Today's decision by the Florida Supreme Court revisited that appeals court decision.

The case involved the nation's leading tobacco companies, including Phillip Morris, R.J. Reynolds and Lorillard. Such a large judgment, the tobacco companies said, would bankrupt them.

Although the decision hands a sizeable victory to the entire tobacco industry, it is perhaps most important for Altria. Altria has been trying to split its tobacco and food businesses since 2004, and its chief executive has said a separation was dependent on the outcome of this case and others pending against the industry. A company spokeswoman said early this afternoon the company was not yet prepared to make a statement.

Shares of Altria jumped almost 8 percent after the decision was announced this morning. Shares of other major tobacco companies also surged on the news.

While the court agreed that the $145 billion award could not stand, it did reinstate about $7 million in damages that the jury awarded two plaintiffs.

The Florida case, the latest in a series of favorable court decisions for tobacco companies, comes as the industry awaits a decision in another lawsuit filed by the Justice Department. In that case, the government is seeking $14 billion from various tobacco companies. It had initially asked for $280 billion in damages, the amount of money that federal prosecutors said tobacco companies improperly gained by lying to consumers. But the government had to reduce the amount after a United States Supreme Court decision limited its ability to collect monetary damages.

In May, the Illinois Supreme Court said it would not reconsider its decision to throw out a $10 billion verdict against Philip Morris.

Melanie Warner contributed reporting for this article.






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