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Reynolds, Lorillard, PM USA Settle ‘Engle Progeny’ Cases

GREENSBORO, N.C., WINSTON-SALEM, N.C. and RICHMOND, Va. — Tobacco manufacturers Lorillard Inc., R.J. Reynolds Tobacco Co. (RJR) and Altria Group Inc. subsidiary Philip Morris USA (PM USA) all entered into tentative agreements Wednesday to settle the "Engle progeny" lawsuits in U.S. federal courts.

Under the terms of the transaction, RJR and PM USA will pay $42.5 million each, while Lorillard will pay $15 million to settle a vast majority of the outstanding progeny cases. These agreements are subject to approval by individual plaintiffs.

A small number of federal cases are still pending, as well as lawsuits on the state level.

The Engle progeny cases arose from a 1994 class-action case on behalf of Florida residents and survivors of Florida residents who were injured or died from medical conditions allegedly caused by addiction to smoking. The class was later decertified by the Florida Supreme Court; however, the court permitted members of the Engle class to file individual claims, including claims for punitive damages.

"We are pleased to have these federal Engle cases behind us," said Ronald Milstein, Lorillard's executive vice president and general counsel. "We view the federal Engle progeny cases as a unique set of litigation, and the opportunity to resolve them on favorable terms is in the best interests of the company and its shareholders. We will continue to vigorously defend ourselves in all current and future Engle progeny cases pending in the Florida state courts."

Jeff Raborn, vice president and assistant general counsel for R.J. Reynolds, said he is also "pleased to put the federal Engle litigation behind us. With respect to the cases pending in state court, we will continue to defend them vigorously, which includes appealing adverse verdicts."

The settlements are a favorable conclusion for all three tobacco companies involved, according to Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities LLC.

"While no individual Engle case posed any significant financial risk to any of the three manufacturers, we do believe the elimination of the aggregate financial risk from all federal cases and the headline risk of any individual case will be viewed favorably by the market," Herzog wrote in a research note. 

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