Shares in British American Tobacco Plc fell sharply early on Thursday after the latest U.S. legal setback for the tobacco industry.

The stock was down 20 pence or 4.3 percent at 450p by 0720 GMT -- the biggest early decliner in the UK's FTSE 100 index. American depositary shares of British American Tobacco Plc, parent of Brown & Williamson Tobacco Corp., had fallen $1/4 to $15-1/8 on the move while other U.S. cigarette companies also declined. Philip Morris Cos Inc (NYSE:MO - news) fell $3-15/16 or about 13 percent to $27, a 52-week low. A state appeals court in Florida refused to shelter U.S. tobacco companies from punitive damages in a follow-up trial to last July's sweeping liability verdict for as many as one million sick smokers. The unanimous three-judge ruling knocked down arguments by Philip Morris and other defendants in the Engle vs RJ Reynolds class-action that potentially hundreds of billions of dollars in punitive damages be fixed through thousands of individual trials. It also sets the stage for what could be a massive award against beleaguered U.S. tobacco companies by the year's end, analysts said. The prospect of decades of individual trials was a much milder threat to the financial health of cigarette makers than the possibility of a single massive judgment. A spokesman for BAT said the company could not comment because of legal constraints.

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