Tobacco firm scores court victory, but industry faces plenty of suits

CHARLOTTE, N.C. — The Illinois Supreme Court handed the tobacco industry a huge victory Thursday by tossing out a $10.1 billion fraud judgment against Philip Morris USA over the marketing of its "light" cigarettes.

But while shares of parent company Altria Group Inc. soared to an all-time high on the news, industry critics warned that the Illinois decision does not insulate U.S. cigarette companies from future lawsuits. There are at least 40 similar suits pending against companies like Philip Morris and Reynolds American, any of which could result in awards into the billions of dollars, tobacco opponents said.

"They need to keep their legal teams ready," said Richard Daynard, president of the Boston-based Tobacco Control Resource Center and a longtime industry foe.

Philip Morris USA, which makes the popular Marlboro brand and controls about half the U.S. cigarette market, issued only a terse statement saying the Richmond, Va.-based company was "gratified" by Illinois court's decision.

Investors were more openly enthusiastic. Shares of New York-based-based Altria Group rose sharply after the court's ruling and by the end of trading, the share price hit $76.62, up $2.89 or 3.9 percent, on the New York Stock Exchange. That surpassed the stock's previous all-time high of $75.60.

Shares of Winston-Salem-based Reynolds American, No. 2 in the industry to Altria's Philip Morris rose 55 cents to $97.40 on the NYSE. Earlier in the day, Reynolds American shares flirted with the $100 barrier.

The Illinois high court's ruling in Price vs. Philip Morris — the so-called "Price Lights" case — addressed whether Philip Morris acted fraudulently when it labeled some cigarettes as "light" or "low tar and nicotine."

By a 4-2 vote, the court found that the U.S. Federal Trade Commission had authorized such characterizations.

"If the FTC has specifically authorized the use of the terms . . . (Philip Morris) may not be held liable under the Consumer Fraud Act, even if the terms might be deemed false, deceptive or misleading," Justice Rita Garman wrote for the majority.

"I think they (Philip Morris) can take some comfort from this victory," said Carl Tobias, a law professor at the University of Richmond who follows tobacco litigation. "It does seem like this could dissuade individuals from pursuing them vigorously in other states."