Big win for big tobacco

Helen Palmer Jul 6, 2006

KAI RYSSDAL: That was a $145 billion sigh of relief you heard today from US tobacco companies. Florida’s Supreme Court threw out a damage award in a big class action suit down there. The case dated back more than 10 years. It was the biggest punitive award ever by a jury in this country. And it was by far the biggest burden hanging over the American tobacco industry. Helen Palmer has more from the Marketplace Health Desk at WGBH.

HELEN PALMER: The tobacco industry won on two vitally important issues. First, the Florida Supreme Court overturned the punitive damages; and second, it ruled that these thousands of sick smokers can’t band together as a class to fight these cases.

JOHN COFFEE: The industry, while it’s breathing a sigh of relief, can’t take total comfort from this decision.

Columbia Law School’s John Coffee says the court didn’t overturn some important rulings in this case — that tobacco causes several diseases, and that the companies wilLfully misled consumers. Coffee thinks smokers can use the rulings that still stand to streamline and speed up their individual cases.

COFFEE: All members of this class are more or less two-thirds of the way home to a finding of compensatory damages, after that they can continue to seek punitive damages.

There could even be some case consolidation. Say, all Marlboro smokers with lung cancer could fight as a group. Tobacco foes like Mark Gottlieb of Northeastern University say these individual cases could still prove pricey for the industry.

MARK GOTTLIEB: The total amount that the industry could be liable for in the final analysis could indeed be approaching that $145 billion.

Although Wall Street responded positively to the companies’ legal victory, Morningstar analyst Gregg Warren says problems remain.

GREGG WARREN: You still have the Department of Justice lawsuit that’s sitting out there, that the tobacco companies are going to have to come to some sort of settlement with. And there are the little cigarette cases that are still sitting out there.

Warren says these legal troubles will hamper the Altria Group’s wish to split Kraft Foods off from Philip Morris in the immediate future.

In Boston, I’m Helen Palmer for Marketplace.

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