Philip Morris Bond Sent Back to Lower Court

An Illinois appellate court Monday ruled that a lower court judge did not have the authority to slash the bond Philip Morris USA Inc. must post while it appeals a $10.1-billion verdict against it in a class-action lawsuit.

The decision related to the case of Price vs. Philip Morris, in which state Circuit Judge Nicholas Byron in March ordered Philip Morris USA to pay $10.1 billion for deceiving smokers into thinking “light” cigarettes were safer than regular ones.

Byron also ordered the tobacco company to post a $12-billion bond aimed at ensuring the company could pay the entire verdict if it lost the appeal.

But weeks later, Byron cut the bond almost in half. It was feared the higher amount could prevent Philip Morris from making payments to states under a landmark 1998 settlement of a class-action suit against cigarette makers.

In its decision Monday, a three-member appellate panel sent the Price case back to the Circuit Court of Madison County to reconsider the amount and terms of the appeal bond.

In after-hours activity, shares of Philip Morris parent Altria Group Inc. traded at $40.51, down from their close of $41.96 on the New York Stock Exchange on Monday.

The Illinois Court of Appeals also granted an order staying enforcement of the Price judgment for an additional 30 days while the matter is under consideration by Byron.

Philip Morris said it still believed Byron had the authority to lower the bond.

“We continue to believe that Judge Byron clearly had the authority to set a bond in an amount that protects the company’s right to appeal,” said William Ohlemeyer, Philip Morris USA vice president and associate general counsel.

Ohlemeyer said in a statement that it was appropriate for the matter of bond amount to be taken up by the Illinois Supreme Court, which is the judicial body that establishes, interprets and oversees the Rules of Court.

New York-based Philip Morris USA, whose cigarette brands include market-leader Marlboro, is the domestic tobacco unit of Altria and the sole defendant in the case.