Phillip Morris Awaits Supreme Court's Ruling in $10 Billion Case

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Phillip Morris Awaits Supreme Court's Ruling in $10 Billion Case

Chicago -- The Illinois Supreme Court is expected to issue a ruling today in the $10 billion case involving Philip Morris's cigarette marketing, reported the Chicago Tribune . For more than two years, the state's high court has been reviewing Philip Morris's appeal of a $10.1 billion judgment that found the cigarette company defrauded Illinois smokers by deceiving them into believing its "light" cigarettes were safer than regular varieties.

The importance of the pending ruling was underscored Tuesday when officials at British American Tobacco, the world's second-largest cigarette maker after Philip Morris, said they would delay a planned multibillion-euro bond sale until after the decision comes out, according to the report.

The case originated in a Downstate Madison County state court. The suit sought repayment for every pack of cigarettes every smoker bought since Philip Morris began selling light cigarettes in 1971, according to the report.

The size of the damages, a record for any verdict in Illinois, is about double the annual operating income for Philip Morris, a unit of New York-based Altria Group Inc., which sells Marlboro and other cigarettes in the United States, the Chicago Tribune reported.

At the time of the verdict, the company claimed it did not have the financial resources to post the $12 billion bond that the lower-court judge required before allowing an appeal. The bond later was lowered, according to the report.

A decision against Philip Morris would likely trigger more quakes in the financial markets as well as set back the company's plans to spin off Northbrook, Ill.-based Kraft Foods Inc. The company declined to comment ahead of the ruling, the Chicago Tribune reported.

One of Philip Morris's key arguments on appeal is that the case should never have been allowed to go to trial as a class action -- a type of lawsuit used when a large number of people have similar claims. The company contends that there are too many individual questions of fact to treat the smokers as a class. It hired former governor James Thompson, chairman of Chicago law firm Winston & Strawn, to argue its appeal before the supreme court in November 2004, according to the report.

The newspaper stated that Wall Street is betting on a Philip Morris victory based on a recent Illinois high court decision. Altria's stock rose $1.52, or 2.1 percent, to $74.03 in Tuesday's trading on the New York Stock Exchange.

In August, the court reversed a $1 billion judgment against Bloomington-based State Farm Insurance, ruling, among other things, that the case should not have been certified as a national class action. The court said that 4.7 million claims over State Farm's use of generic parts varied too much to be grouped together.

"The ruling is generally read as a homerun for defendants," Spencer Waller, a law professor at Loyola University of Chicago School of Law, told the newspaper. "It is likely to result in cutting back the nature and size and ultimately the amount of recovery from class actions in Illinois."

But Waller cautioned against using the State Farm decision as a signal of how the court will rule in the Philip Morris matter. He noted in the report the vigorous partial dissent from two justices in the State Farm ruling.

Justice Charles Freeman accused his fellow judges of developing a "new hostility" toward class-action litigation. He went on to say that the majority did not apply the law even-handedly in an attempt to enter "the ongoing national debate concerning class-action litigation," according to the Chicago Tribune .