Tobacco Firms Face Review in Florida Suit

The Florida Supreme Court said Wednesday that it would review a lower court’s voiding of a $145-billion punitive award against U.S. cigarette makers, sending down shares of Altria Group Inc. and R.J. Reynolds Tobacco Holdings Inc.

The court will review a Florida appeals court decision to void the record verdict against cigarette makers, ruling that the suit had been improperly filed as a class action or group suit and that the amount of punitive damages was excessive.

The ruling surprised investors because class actions by smokers, who differ in their use of tobacco, have not been very successful in the courts.

“The court’s review has introduced some uncertainty,” said Brian Bruce, director of investments at PanAgora Asset Management in Boston, which has $13 billion in assets, including about 1.2 million Altria shares.

The 6.7% drop in share price of Altria was the biggest since March 2003, reducing its market capitalization by $7.4 billion. R.J. Reynolds fell 5.6%, the most since April 2003.

Without saying why it granted the appeal, the Florida Supreme Court scheduled oral arguments in the case for Oct. 6.

Robert L. Rabin, a law professor at Stanford University, said the court probably would support the appellate ruling, which threw out a jury verdict in 2000 that found the companies responsible for the deaths and disease of thousands of Floridians.

Should the Florida Supreme Court reinstate the suit as a class action, “this $145-billion award isn’t going to stand,” Rabin said. Punitive damages, designed to punish poor conduct, are often reduced on appeal. One of the appellate court holdings was that the jury shouldn’t have awarded punitive damages in the absence of actual damages for all Florida smokers in the case.

Altria said it expected a favorable ruling from the Florida Supreme Court. “At the end of the day, I think the plaintiffs are going to have a very difficult time persuading the court that the appellate court had it wrong,” said William Ohlemeyer, associate general counsel of Altria.

Shares of Altria fell $3.60 to $49.80 and shares of R.J. Reynolds fell $3.47 to $58.08. Both trade on the New York Stock Exchange.