Not In The Clear Yet

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Not In The Clear Yet

BROOKLYN, N.Y. -- Altria Group's Philip Morris, R.J. Reynolds and others have been suffering many legal woes lately. Their futures do not look any brighter either, as U.S. District Judge Jack B. Weinstein recently ruled that a $200 billion class action suit filed by light cigarette smokers may proceed on the behalf of all light users in the nation.

The plaintiffs are eight light cigarette smokers that claim that the tobacco companies defrauded them and other smokers. The Schwab case -- named after the lead plaintiff -- alleges that the tobacco industry misled plaintiffs by marketing low-tar cigarettes as "light" and therefore, healthier. The plaintiffs seek economic damages rather than compensation for death or disease caused by smoking, and the class action suit can cover tens of millions of smokers who bought light cigarettes as far back as 1971, according to a report by BusinessWeek.

Besides Philip Morris and R.J. Reynolds, other defendants include Brown & Williamson Tobacco Corp., Loews Corp.'s Lorillard Tobacco Co., British American Tobacco Ltd. and Vector Group Ltd.'s Ligget Group Inc.

The ruling may be appealed, however. In May 2005, the federal appeals court of New York appealed a class action suit involving millions of smokers that claimed punitive damages against the tobacco industry.

"This judge has certified class actions frequently that are decertified upon appeal," Thomas Russo, of Gardner Russo & Gardner, told Bloomberg News. "They are a very cautious board. They are not going to invite reckless review."

Judge Weinstein questioned the smokers at the hearing on the proof of $200 billion in suffering. "You can't allow the jury to grab a number out of thin air," he said. "There has to be some basis rooted in reality."

But the ruling this week does delay Altria's plan to spin off its Kraft Foods unit, analyst Keith Patriquin told Bloomberg News. The spin-off is "just going to take longer," said Patriquin, of Loomis, Sayles & Co. "If you get class-action status certified, it could be big dollars."

"For the industry, this is a nightmare realized," Jonathon Turley, professor at George Washington University Law School, told BusinessWeek.