Philip Morris Case Brings Threat of Fresh SuitsMar 23, 2003 | FT.COM
The tobacco industry is bracing itself for a series of lawsuits claiming companies misled smokers into thinking "light" cigarettes were safer than regular ones. The lawsuits are seen as likely after an Illinois judge ordered Philip Morris to pay $10.1bn in damages.
Anti-tobacco lawyers said the decision, late on Friday, could pave the way for similar class action suits in other states. It was the first suit involving light or low-tar cigarettes to reach a trial.
Shares of Altria, parent group of Philip Morris, could come under pressure on Monday after they fell nearly 6 per cent in after-hours trading on Friday from $35.04 to $33.
Judge Nicholas Byron in the Third Circuit Court of Illinois ordered the tobacco giant to pay $7.1bn in compensatory damages, as the plaintiffs had sought. He awarded $3bn in punitive damages, which penalise companies for wrongdoing, well below the $14bn the plaintiffs had argued for.
But, in a particular blow for the company, he said it would have to post a $12bn bond in order to appeal against the verdict.
Judge Byron accepted the plaintiffs' arguments that Philip Morris USA had intended to deceive consumers into believing that its Marlboro Lights and Cambridge Lights were less harmful than their regular counterparts.
"Philip Morris's motive was evil and the acts showed a reckless disregard for the consumers' rights," Judge Byron wrote.
Philip Morris immediately said it would appeal against both the judge's order and the earlier decision to certify the case as a class action. The class consisted of 1.1m Illinois smokers who bought the company's light cigarettes from 1971 to 2002.
"The decision ignores the law, facts and common sense," said William Ohlemeyer, Philip Morris's vice-president and associate general counsel.
Mr Ohlemeyer added that Marlboro and Cambridge Lights had always carried the same federally mandated health warnings as regular cigarettes. The judge had awarded an "outrageous" amount to a group of smokers who claimed no injury and continued to purchase Marlboro Lights.
The case, unlike most tobacco litigation, was not a personal injury suit but was brought under Illinois consumer fraud and deceptive business practices legislation.
Richard Daynard, chairman of the Tobacco Products Liability Project, which co-ordinates legal action against cigarette makers, said this was a "sensible approach" to protect the public against the industry's "deceptive tactics".
"There are consumer protection statutes that are tailor-made for these cases in most states," he said.
The TPLP said similar class actions had been certified in Florida and Massachusetts, with cases filed in eight other states. Philip Morris said it would argue strongly that such matters should not be handled by state courts.
"The issues are national in scope and governed by federal laws and regulations," Mr Ohlemeyer said. "It is not appropriate for a state judge to substitute his judgment on these issues for those of the Congress and the US Federal Trade Commission."