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THE TOBACCO CASE THAT WOULDN’T GO AWAY FINALLY DOES

The class-action lawsuit accusing Philip Morris USA, Inc. of fraud in its marketing of “light” cigarettes has finally been dismissed, ending a lengthy legal journey and significant threat to the largest domestic tobacco maker.

Known as the Price case, the suit alleged the company fraudulently inferred that its “light” cigarettes were less harmful than traditional brands. In March 2003, the trial court in Illinois found for the plaintiffs and assessed Philip Morris with compensatory and punitive damages totaling $10.1 billion. Last year, after appeals, the Illinois Supreme Court ordered the case dismissed.

However, lawyers for the plaintiffs subsequently asked for the case to be reinstated based on the fact that the U.S. Solicitor General has been arguing the same line of reasoning in a different case now before the U.S. Supreme Court. The plaintiffs contended that the Federal Trade Commission (FTC) never authorized or ordered that Marlboro Lights be labeled as “lights” or that they contain “lower tar and nicotine.” However, the Illinois Supreme Court, in the earlier decision, found that the FTC allowed such descriptive language to be used, giving implicit approval in the process.

In its most recent decision, Illinois Supreme Court justices ruled 4-2 to dismiss the case.

Courts in recent years have dismissed numerous class-action cases on behalf of smokers, mainly due to the need to show specific damages on behalf of each individual. Such cases, the courts found, are amenable to individual, not class-action suits. The reduction in such suits has been a positive factor supporting stability in the market for tobacco settlement bonds. As lawsuits challenging both tobacco companies and the Master Settlement Agreement itself have declined, the legal environment has been viewed as more benign by bond investors.

This final nail in the coffin for the Price case brings to a close one of the most highly publicized and most potentially damaging cases against Philip Morris.

8/28/07

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THE TOBACCO CASE THAT WOULDN’T GO AWAY FINALLY DOES

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