Dismissal of Union Trust Funds' Calif. Tobacco Claims Upheld
San Diego, Oct. 25 (Bloomberg) -- A California appeals court upheld the dismissal of a lawsuit against Philip Morris Cos. that sought to force it and other tobacco sellers to repay union trust funds for the costs of treating smoking-related illnesses.
The six funds, including the Operating Engineers Local 12 Health & Welfare Trust Fund, appealed San Diego Superior Court Judge Ronald S. Prager's dismissal of their negligent misrepresentation and intentional fraud claims, which had sought to collect hundreds of million of dollars in profits made by the tobacco industry.
The appeals court found the plaintiffs did not demonstrate ``reversible judicial error'' and kept Prager's ruling intact. California law generally allows only the direct victim, not third parties such as insurers or funds, to seek damages for negligence.
The funds' suit ``impermissibly sought damages for derivative injuries that were too remote,'' the state court said in the 36- page opinion.
After Prager dismissed key portions of the funds' claims, the plaintiffs in April 2000 asked him to dismiss the entire suit in hopes of a more favorable ruling from the appeals court.
In addition to Philip Morris, other defendants included R.J. Reynolds Tobacco Holdings Inc., British American Tobacco Plc's Brown & Williamson unit, Loews Corp.'s Lorillard unit, UST Inc.'s United States Tobacco Co. and Brooke Group Ltd.'s Liggett unit.
Shares of New York-based Philip Morris, the world's largest tobacco company, fell 74 cents to $49.39. Shares of R.J. Reynolds, based in Winston-Salem, North Carolina, rose 1 cent to $58.08. New York-based Loews shares fell 48 cents to $50.45.