Court Rules for Philip Morris
Philip Morris USA won’t have to face a class-action lawsuit brought by Florida smokers who claim they were misled about the health risks of “light” cigarettes, an appeals court ruled Wednesday.
The three-judge panel in West Palm Beach, Fla., reversed a judge’s ruling consolidating the claims by smokers of Marlboro Lights and Ultra Lights. The appeals court said the issues were too diverse to be grouped together.
The decision “is in line with state and federal courts in more than 60 cases that have determined that the law simply doesn’t allow smoking cases to be fairly tried as class-action cases,” said William Ohlemeyer, Philip Morris associate general counsel. “ ‘Lights’ class actions are no different.”
Ohlemeyer said the Florida court’s opinion supported the company’s arguments in an Illinois class-action appeal, one of the biggest cases facing the largest U.S. tobacco company. An Illinois judge in March ordered the unit of Altria Group Inc. to pay $10.1 billion for defrauding smokers of light cigarettes.
Philip Morris has appealed the ruling, claiming that the damage award would force it into bankruptcy protection and jeopardize billions of dollars in payments the company has agreed to make to all 50 states under an earlier settlement.
Lawsuits in at least 12 states have been filed over light cigarettes, though only cases in Illinois and Ohio currently are certified as class actions. The Ohio suit is limited to plaintiffs from six of the state’s counties.
Edward Sweda, senior attorney with Northeastern University’s Tobacco Products Liability Project, said the Florida ruling probably would have no effect on suits elsewhere seeking class- action status. “We are disappointed with the ruling,” he said, “though there are a number of cases in other states that are going forward.”
Separately Wednesday, analysts said that Philip Morris could save hundreds of millions of dollars as it trims discounts to some wholesalers but that smokers may not see a major change in cigarette prices.
The company has not announced any plans for across-the-board retail price changes.
A new program for wholesalers, which took effect Sunday, lowers the discount awarded to wholesalers at the company’s top performance level and raises the discount for wholesalers at the lower level.
Under the new plan, wholesalers may seek to make up for the lost revenue by raising prices to retailers, which ultimately will be borne by the consumer, or by going after discount brands more aggressively, Prudential Securities analyst Rob Campagnino said in a research note. Such moves could hurt Philip Morris, which focuses on premium-priced brands.
Altria shares rose 39 cents to $54.42 on the New York Stock Exchange.
Bloomberg News and Reuters were used in compiling this report.
