COURT OVERTURNS ANOTHER
LARGE TOBACCO AWARD

Altria’s success in overturning a $79.5 million judgment continues a string of favorable rulings that have limited awards against tobacco’s largest producer.

In a 5-4 ruling, the U.S. Supreme Court struck down the original award by the Oregon State Supreme Court against Altria, parent of Philip Morris.

The justices ruled that the original Oregon court decision awarded excessive punitive damages to the plaintiff and other individuals who were not part of the case. According to the court, such a punitive award would amount to a “taking of property from the defendant without due process.”

Prohibitive punitive damages have been challenged before. In 2003, The Supreme Court overturned a large punitive damage award against State Farm Insurance Co.

Investors in tobacco settlement bonds have seen legal threats to cigarette companies recede over time. The courts continue to allow some individual cases to be decided in favor of plaintiffs, so long as a causal connection between smoking and death can be established. But awards must be reasonable and in proportion to the injury caused to the specific plaintiff in the case.

As a result, large headline-grabbing awards that could potentially affect the viability of a major tobacco company seem unlikely. This has created a more favorable climate for the tobacco industry and helps ensure that tobacco companies participating in the Master Settlement Agreement will continue to be able to meet their payment obligations under the pact.

2/23/07

About Dr. Abrams