Philip Morris Asks to Settle Suits
Philip Morris Cos. is proposing settlement talks with the European Union and a group of Columbian states that have sued tobacco companies for allegedly promoting a global wave of cigarette smuggling.
The settlement idea was floated in a letter to plaintiffs, a copy of which was filed Friday in U.S. District Court in Brooklyn, where the EU and Colombian suits were filed last year.
In the letter, Philip Morris suggested a meeting to determine whether the claims “could be negotiated and resolved.” At such a meeting, the company would present “specific proposals, including concrete steps that Philip Morris can take to support the governments’ anti-contraband efforts,” the letter said.
The letter was sent to Kevin A. Malone, a Florida lawyer who represents plaintiffs in both cases. Malone declined to comment Friday.
The Colombian case, filed in May 2000, accuses Philip Morris and British American Tobacco, the two leading private cigarette makers, of encouraging and profiting from smuggling operations that have cheated 22 provincial governments of tax revenues.
The EU case, filed in November on behalf of the union’s 15 member countries, seeks damages from Philip Morris and R.J. Reynolds Tobacco. The suit also names Japan Tobacco Inc., which acquired RJR’s international operations in 1999. The companies say they aren’t responsible for smuggling of their products.
The letter cited U.S. District Judge Nicholas Garaufis’ suggestion that the parties discuss ways to reduce “the future prospects of contraband cigarettes entering into the European Union or Colombia.”
Max R. Shulman, a New York lawyer for British American, said his client was aware of the Philip Morris overture, and “has always been willing to talk . . . about various things that can be done.”
Garaufis dealt a blow this week to efforts by the companies to have the cases thrown out. In his ruling Tuesday, Garaufis agreed with cigarette makers that the EU had no standing to sue, because it couldn’t show that smuggling caused it economic harm. But Garaufis left room for EU member countries to seek damages individually, sweeping aside defense contentions that cases of this type could not be brought by anyone.
The industry had sought dismissal of the cases under a common law doctrine known as “the Revenue Rule,” which essentially prevents U.S. courts from helping foreign governments collect taxes.
In a ruling that is under appeal, a federal judge in Syracuse, N.Y., last year cited the Revenue Rule in dismissing claims by Canada against R.J. Reynolds, which had been accused of conspiring to smuggle cigarettes to evade Canadian taxes. But Garaufis declared that the rule does not bar him from considering the European or Colombian claims.
Philip Morris’ overture to the plaintiffs was dated July 12, but a copy of the letter was not entered in the court files until Friday.
The lawsuits reflect growing international anger over the multibillion-dollar trade in smuggled cigarettes, which critics say cheats governments of revenue and boosts smoking rates by keeping supplies of cheap cigarettes in the market.
The cases have been inspired by scores of internal documents suggesting that multinational tobacco companies knowingly traded with smugglers and relied on smuggling to compete with rivals, whom they assumed were engaged in it, too. Most of the documents have come from British American Tobacco files.
