Lorillard, Liggett Close to $8 Billion Settlement
NEW YORK (Reuters) - Tobacco companies Lorillard and Liggett have tentatively agreed to pay a total of $8 billion to settle punitive-damage claims against them in nearly a dozen lawsuits pending in federal court in New York, according to published reports
Such a settlement could insulate the companies from having to pay punitive-damage awards pending against them in other courts, according to the reports and analysts.
Lorillard, a unit of Loews Corp., and Liggett Group, a unit of Vector Group Ltd., were expected to announce the settlement today, the Wall Street Journal said, quoting people involved on both sides of weekend talks.
Spokesmen for Lorillard and Vector, which indirectly owns Liggett, did not immediately return calls seeking comment.
On Friday, shares of Loews closed at $85-11/16, while Vector shares ended at $13-5/16.
Separately, the European Commission said on Monday it had filed a civil lawsuit in a U.S. court against U.S. tobacco giants Philip Morris Cos. Inc. and R.J. Reynolds Tobacco Holdings Inc. over their alleged involvement in smuggling cigarettes into the European Union.
Philip Morris and R.J. Reynolds shares both finished Friday at $35. In pre-open trading on Monday, shares of Philip Morris slipped to $33-11/16.
The punitive-damage claims are being heard before U.S. District Judge Jack Weinstein in Brooklyn.
Lorillard and Liggett have been negotiating with plaintiffs' lawyers for about a month, the New York Times said on Saturday, quoting people close to the talks.
Credit Suisse First Boston analyst Bonnie Herzog is ''concerned that any sort of punitive-damage settlement will hold legal viability on a national level,'' she said in a note issued on Monday. Herzog said she expects an agreement to be finalized within the next day.
The Wall Street Journal said the terms of the tentative settlement call for $8 billion to be paid over 30 years, with Lorillard, the No. 4 U.S. tobacco company, paying most of the bill -- $7.5 billion.
Under the pact, the money would be used to underwrite a national public health trust fund to pay for smoking-cessation programs, medical monitoring and treatment of smoking-related illnesses, though the precise details of how the money would be used have yet to be spelled out, the Wall Street Journal said, quoting a participant in the talks.
Individual claimants would still be allowed to pursue injury claims against the companies for compensatory damages, the newspaper said.
Philip Morris said on Sunday it would continue to vigorously oppose all efforts to certify a national class action smoking and health lawsuit, regardless of other tobacco companies' positions.
More than two dozen state and federal courts have concluded that U.S. law prohibits tobacco cases from being litigated as class actions, Philip Morris said. The No. 1 tobacco company also noted that the U.S. Supreme Court recently ruled that lawsuits that cannot be tried as class actions cannot be settled as class actions.