Big win for tobacco in $239bn Florida case

MIAMI - In a huge victory for the tobacco industry, the Florida Supreme Court has refused to reinstate a US$145 billion ($239bn) punitive damages award against major cigarette makers found liable for selling a dangerous product.

The long-awaited decision lifted one of the biggest financial clouds over tobacco companies and sent their stocks up sharply. It upheld the key part of a Florida appeals court ruling three years ago that overturned the punitive damages, one of the largest awards in a US product liability case.

The high court said the award was "clearly excessive" and would "result in an unlawful crippling of the defendant companies."

The ruling cleared one of the hurdles for Altria Group Inc.'s plan to spin off Kraft Foods Inc..

But the Supreme Court also upheld key findings of the Miami trial court 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.

The high court reinstated individual damage awards to two cancer patients - US$2.9 million to Mary Farnan and US$4 million to the estate of Angie Della Vecchia, who died in 1999. But it upheld decertification of the class of plaintiffs, meaning smokers would have to sue individually, not as a group.

Individual lawsuits against tobacco companies are seen as far less likely to succeed than class actions.

Tobacco stocks helped boost the overall US share market. Shares of Altria rose as high as US$79.00. Shares of Reynolds American Inc. hit a new high of US$120.50. Carolina Group, the tracking stock for Loews Corp.'s Lorillard Tobacco Co., jumped to an all-time high of US$55.26. Shares of Vector Group went as high as US$17.11.

A Miami jury ruled in 2000 that the tobacco companies deceived smokers about the dangers of cigarettes and ordered the companies to pay US$145 billion to ailing Florida smokers, estimated to number 300,000 to 700,000.

The case, filed by Miami Beach pediatrician Howard Engle in 1994, was the first smokers' lawsuit to be certified as a class action.

Florida's Third District Court of Appeal overturned the verdict in 2003 and said Florida's settlement with the tobacco companies in a multistate lawsuit barred the awarding of punitive damages. It also decertified the class action.

The Supreme Court ruled that Florida's participation in the multistate settlement did not prevent ailing smokers from suing individually, and gave former members of the class action one year to file those claims.

The high court ruling eliminates the largest class-action liability hanging over the tobacco industry, said Charles Norton, co-portfolio manager of Mutuals Advisors Inc.'s Vice Fund, which owns shares in most of the tobacco companies.

Smokers who sue could benefit from the high court's approval of trial court decisions that smoking causes diseases and that cigarette companies sold defective products and concealed the truth about the dangers.

Stanley Rosenblatt, the Miami lawyer who sued the giant tobacco companies said he had not decided whether to appeal to federal courts.

Defendants in the case included Altria's Philip Morris USA unit; the R.J. Reynolds Tobacco Co. and Brown & Williamson units of Reynolds American Inc.; the Lorillard Tobacco Co. unit of Loews Corp, and Vector Group's Liggett.

- REUTERS