DECISION EXPECTED SOON IN IMPORTANT
TOBACCO CASE
The Illinois Supreme Court revealed this week that it will finally
issue its opinion on the Price Lights case, according to its docket
of cases for the September 2005 term. While no specific date for
a decision has been set, the opinion could be rendered at any time.
As a refresher, the Price case is a class-action suit filed against
Philip Morris USA, Inc. in which the plaintiffs charged that Philip
Morris had defrauded smokers of its "Lights" cigarettes
by inferring those cigarettes were less harmful than traditional
brands.
The trial court in Madison County, Illinois, found on March 21,
2003, for the plaintiffs and assessed Philip Morris with compensatory
and punitive damages totaling $10.1 billion. The judge thereupon
ordered the company to post a $12 billion bond to stay the judgment
during appeal. Judge Nicholas Byron, the trial court judge, later
reduced the bond, allowing Philip Morris to place a $6 billion note
in escrow, along with $420 million in interest and $800 million
in cash.
The plaintiffs in the case successfully appealed the reduced escrow
requirement to the Illinois Fifth District Appellate Court in August
2003. On Sept. 16, 2003, the Illinois Supreme Court vacated the
appellate court decision and reinstated the escrowed bond arrangement.
The Supreme Court also decided, by itself, to consider the Philip
Morris appeal of the overall case verdict.
Similar case
Last month, the Illinois Supreme Court reversed and decertified
a similar class-action case, Avery v. State Farm Insurance. That
case, which had no relationship to tobacco, did, however, have similarities
of approach. As a result, hopes were raised that the Supreme Court
may rule similarly in the Price case.
Although the Price case is but one of several in courts across
the country, the size of its award, basis of complaint and the potential
for precedent has drawn great interest from the market for tobacco-related
debt. At this point, most observers, including FMSbonds, expects
the Supreme Court to rule in favor of Philip Morris and continue
the trend of decertification of tobacco class-action suits. Regardless
of the outcome, it is likely that the losing party will yet appeal
to the U.S. Supreme Court, once again delaying a final outcome.
ANALYST CERTIFICATION
SEC Regulation AC
I, Jay H. Abrams, hereby certify that the views expressed in this
research report accurately reflect my personal views about the subject
securities and issuers. I also certify that no part of my compensation
was, is, or will be, directly or indirectly, related to the specific
recommendations or view expressed in this report.
09/16/05
About Dr. Abrams
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