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Tobacco Industry Up After Favorable Ruling

CHICAGO -- Big Tobacco was on the rise Monday after a federal judge handed the industry a key victory in the government's $280 billion lawsuit against it, according to Investor's Business Daily.

Shares of Altria Group, parent of No. 1 cigarette maker Philip Morris, bounced as high as $51.41 during the session but finished the day up almost 4 percent at $49.60. R.J. Reynolds, meanwhile, finished a penny higher at $66.85 after rising to $69 and change earlier.

"In essence, [the] tobacco-friendly decision by Judge Kessler was important and has the potential to alter significantly the direction of this claim," wrote Merrill Lynch tobacco analyst Martin Feldman. "We would expect tobacco equities to react positively to this news."

Late Friday, U.S. District Court Judge Gladys Kessler gave cigarette companies the chance to immediately appeal her earlier ruling to the Circuit Court of Appeals. Her ruling, made last month, denied a tobacco-industry motion to dismiss a "disgorgement" claim in the Department of Justice action.

The conspiracy and racketeering case, first brought in 1999, charges the industry with lying about health risks associated with smoking and seeks disgorgement of profits from past decades. The industry has argued that the law limits the size and scope of such disgorgement.

Kessler's ruling allows the industry to ask the appeals court to decide if disgorgement is the appropriate remedy and, if so, how much it might be limited. If the appeal is accepted, it could postpone the start of the trial of the Justice Department's case, currently docketed for mid-September.

Without Kessler's permission to immediately appeal her ruling, tobacco firms would have had to wait until after the trial to seek a higher court's finding on this issue. If successful, the industry could limit the amount of disgorgement going into the case.

In other tobacco news, a Florida-based investment group plans to buy the 18-month-old Anderson Tobacco Co. for about $6.5 million, the two companies said, according to the Associated Press.

The deal will allow Anderson Tobacco to restart production of its low-cost Savannah brand cigarettes, said Rick Riggs, who sells the cigarettes for Anderson, and Adam Runsdorf, president and CEO of Cornerstone Investment Group.

Cornerstone is a private equity investment firm based in Boca Raton, Fla. The firm specializes in financing, purchase and development of undercapitalized or distressed small- to medium-size companies with annual sales between $5 million and $50 million.

"We undercapitalized, so we had to have a cash injection," Riggs said. "This is a really good thing. The sale is going to change everything." Riggs will stay on as director of marketing and sales.
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