Tobacco Co's Expected To Appeal
NEW YORK (AP) - The eye-popping $145 billion punitive damage award returned Friday against the five major tobacco companies will likely be tied up in the appeals process for years and is not expected to have any immediate impact on the business.
But it is another black eye for an industry that has been desperately trying to rehabilitate its image. Some tobacco critics say it could drive the industry to embrace additional changes in how it conducts itself in the future.
``The industry is going to look different as a result of this,'' said Richard Daynard, professor of law at Northeastern University's school and an anti-tobacco activist. Companies may have to embrace additional curbs and accept greater federal regulation, he added.
Tobacco company lawyers had told the Florida jury that an award as large as the one it returned was akin to a ``death warrant'' for the five companies.
But the companies said they intended to appeal the case on a number of grounds, saying the award was unrealistically high and the court record was replete with errors.
Business and legal experts said the return of a jury verdict alone does not require the companies to make a payment at this point, so they don't expect any of the companies to seek protection under bankruptcy laws at this point.
``There is no way a judgment can be levied until the appeal process is concluded .... and that could take years,'' said John Coffee, a professor of law at Columbia Law School.
As a result, analyst Martin Feldman of Salomon Smith Barney said the award ``will be almost meaningless to the operating basis of these companies.''
During the trial, the Florida legislature enacted a law that limits the amount of the bond that a company must file to appeal. There had been concerns that the appeal bond requirement would have required tobacco companies and others to pay the full amount of the award, but the law capped the bond at no more than $100 million.
The tobacco companies also plan to ask the judge in the case to reduce the amount of the award to comply with a Florida law that says an award cannot bankrupt a company.
William Ohlemeyer, associate general counsel for Philip Morris Inc., the nation's biggest tobacco company, said there was evidence introduced that ``no one could pay this kind of award.''
Philip Morris and the other four companies had told the jurors they could afford only $150 million to $375 million in damages, based on their estimate that their assets were $15.3 billion more than their liabilities.
The other defendants are R.J. Reynolds Tobacco Co., Brown & Williamson Tobacco Corp., Lorillard Tobacco Co., Liggett Group Inc. and the industry's defunct Council for Tobacco Research and Tobacco Institute.
Tobacco critics say the industry can pay much more than it is admitting, arguing that it can raise prices on cigarettes to generate billions of dollars. And they say the companies own such well-known and valuable brands like Marlboro that they could borrow more.
``A huge verdict in Florida is not a death sentence for the tobacco industry,'' said Matthew Myers, who heads the anti-tobacco group Campaign for Tobacco-Free Kids. ``There are 46 million smokers in the United States today and there will be 46 million American smokers tomorrow.''
Other avenues of appeal will challenge whether the case should have been certified as a class action when other states have disallowed that approach and whether a punitive damage award for thousands of smokers should be calculated before individual trials have established who is qualified to get compensation.
Investors appeared to anticipate the big award, sending tobacco stocks down only moderately on Friday.
Philip Morris share prices closed down 31.25 cents to $24.688 and shares of RJR were off 93.75 cents to $26.188, both on the New York Stock Exchange.
Shares of Vector Group Ltd., the parent company of Liggett, were down 43.75 cents to $14.438, and Loews Corp., parent of Lorillard Tobacco, was down 43.75 cents at $63.063, also on the NYSE.
British American Tobacco Industries, parent of Brown & Williamson Tobacco, was down 25 cents at $12.50 on the American Stock Exchange.