Ruling limits tobacco case penalty

? An appeals court Friday dealt a major blow to the government’s attempt to hold the tobacco industry accountable for decades of alleged deceit about the dangers of smoking, ruling the Justice Department can’t seek $280 billion in penalties.

In a 2-1 decision, a panel of the U.S. Court of Appeals for the District of Columbia Circuit found the government could not use a federal racketeering law to seek the huge penalty.

The decision comes in the midst of a monthslong trial in U.S. District Court on the government’s lawsuit contending the industry knew about the health dangers of smoking but hid that information from the public. The trial will continue while the government considers an appeal of Friday’s ruling.

Even if the decision stands, U.S. District Judge Gladys Kessler could impose restrictions on the tobacco companies, such as limiting marketing or requiring the industry to fund public health campaigns or smoking cessation programs.

Still, the appeals court decision was a major victory for tobacco companies. Wall Street greeted it by sending stock prices of cigarettes makers sharply higher.

Charles A. Blixt, executive vice president and general counsel for R.J. Reynolds Tobacco Co., said the ruling “dramatically transforms” the government’s lawsuit.

Government lawyers were reviewing the ruling and had no immediate comment, Justice Department spokeswoman Kimberly Smith said.

Government lawyers could request a rehearing in front of the three judges, ask for the full appeals court to consider the case or appeal to the Supreme Court.

The $280 billion is the highest amount sought in a civil racketeering trial. The government has described the sum as an estimate of money the companies earned illegally through fraudulent activities such as marketing to children while denying doing so.