An Illinois circuit court judge found Philip Morris USA liable in a class-action consumer fraud lawsuit Friday and ordered the company to pay US$10.1 billion for failing to inform consumers that its "light" cigarettes were not less harmful than full-tar cigarettes.
In one of the more striking elements of the ruling, the judge, Nicholas Byron, wrote that Philip Morris, a unit of Altria, knew that light and low-tar cigarettes were actually more harmful than their regular counterparts because of increased ventilation in the reduced-tar product, which allows more toxic smoke to be inhaled by consumers.
Byron, of the Third Circuit, which is in Madison County, ruled that the company must pay US$3 billion in punitive damages to the state of Illinois and US$7.1 billion in compensatory damages to smokers of light cigarettes. Philip Morris was also ordered to pay US$1.78 billion in lawyers' fees.
Philip Morris said it would appeal the verdict. It would have to post a US$12 billion bond to do so.
"I'm thrilled that this message will go out, and I'm thrilled that this judgment will follow Philip Morris to every courtroom in the United States," said Stephen Tillery, the plaintiffs' lawyer. "And I'm thrilled that every time a light-cigarette smoker gets sick, they can take this judgment and that their liability has been proven for them."
The lawsuit, which was originally filed by Susan Miles and four other plaintiffs, is the first light, or low-tar, cigarette case to reach a trial. It is also one of the few class-action lawsuits to be certified against a tobacco company. In this case, the class consists of 1.1 million Illinois smokers who bought Marlboro Light or Cambridge Light cigarettes from 1971 to February 2001.
Philip Morris officials have long claimed that the class in the Miles case should never have been certified. The company also argued that it did not deceive consumers because its light cigarettes have always been labeled with the surgeon general's warning, which alerts consumers to the dangers of smoking.
William S. Ohlemeyer, vice president and associate general counsel at Philip Morris, said Friday that the verdict was little more than a rubber stamp of the plaintiffs' arguments in Madison County, which has more class-action filings per capita than any county in the nation.
The Philip Morris case was the first class-action lawsuit to go to trial in Madison County.
"The verdict ignores the law, it ignores the facts and it ignores common sense," Ohlemeyer said. "What Judge Byron did in the case was award an enormous amount of money to smokers who claim no injuries. It really is the kind of decision that causes people to laugh at what happens in courtrooms. And it draws a lot of attention to Madison County, which has a reputation for runaway verdicts like this."
Ohlemeyer said he was confident that Philip Morris would win its appeal of the verdict.
The company said it would also appeal the US$12 billion bond. Some analysts said the company would not be able to pay it.
Analysts said Friday's decision was likely to provoke a string of similar filings that could be devastating for the beleaguered tobacco industry, which is losing sales to discount cigarette brands. At least nine cases are pending in other states, including California, Missouri, New Hampshire and Tennessee.
"In my view, Philip Morris USA defense on appeal might well be successful," Martin Feldman, a tobacco analyst at Merrill Lynch, said, "but until that point these lights claims are now particularly challenging for PMUSA and the other tobacco defendants."
"In essence, for both the industry and investors in the industry this is a new category of claim to have to worry about," Feldman said.
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