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Archive for Tuesday, September 26, 2006

Light cigarette’ case now a class-action lawsuit

September 26, 2006

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— In a blow to the tobacco industry, a federal judge ruled Monday that a jury should decide whether tobacco companies must pay tens of millions of smokers up to $200 billion for allegedly duping them into buying light cigarettes over the past three decades.

The cigarette makers said they would appeal but their shares sank on Wall Street as the ruling granting class-action status to the case clouded what had appeared to be an improving legal environment for the industry.

Altria Group Inc., the parent of the nation's largest cigarette maker, Philip Morris USA Inc., said the ruling will delay its long-awaited restructuring plan, which includes a divestiture of its controlling stake in Kraft Foods Inc.

In a conference call Monday afternoon, a top Altria attorney, William S. Ohlemeyer, said that a prerequisite to pursuing the company's restructuring plan is clarity in the overall litigation environment.

"Today's decision is not a step toward clarity. It is a step back of sorts," he said.

His comments came only hours after U.S. District Judge Jack Weinstein granted class-action status to a lawsuit against Marlboro maker Philip Morris USA, its biggest U.S. rival R.J. Reynolds Tobacco Co. and other cigarette manufacturers.

"The plaintiffs are entitled to the chance to prove their allegations," Weinstein said. The judge set a trial date of Jan. 22.

The tobacco companies prefer trying each case on its own, saying circumstances vary widely from one person to another.

"We obviously disagree with the ruling - strongly," said Theodore Grossman, an attorney for Reynolds American Inc.'s R.J. Reynolds Tobacco division. "The law doesn't support class certification."

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