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Last Updated: Wednesday, 21 May, 2003, 16:13 GMT 17:13 UK
Huge tobacco ruling overturned
A US court has backed five cigarette companies' appeal against a record $145bn (87bn) fine, in a major legal victory for the tobacco industry.

A Florida appeals court quashed the fine on Wednesday, saying the plaintiffs - 700,000 Florida residents suffering from smoking-related diseases - were not entitled to take collective action against the tobacco companies.

"The fate of an entire industry and of close to a million Florida residents cannot rest upon such a fundamentally unfair proceeding," the court said.

"This unprecedented punitive award is excessive as a matter of law."

Lawyers for the plaintiffs had argued in court that their clients should be compensated because the tobacco companies had misled them about the health risks of smoking.

Shares rally

The $145bn fine, imposed in July 2000, was the largest damages award on record in the US at the time. The tobacco companies warned that paying it might put them out of business.

Shares in the five tobacco companies targeted by the action - Philip Morris, RJ Reynolds, Lorillard Tobacco, Brown & Williamson, and Liggett Group - rose sharply as soon as the appeals court reached its decision.

Shares in Altria, Philip Morris' parent company, closed 9.7% higher at $38.30, while RJ Reynolds was up 5% at $33.28.

Merrill Lynch analyst Martin Feldman said the tobacco industry "could not have wished for a more favourable outcome."

The court said that while it had barred the plaintiffs from taking out a single lawsuit in a so-called class action against the tobacco firms, they remained free to sue individually.

The decision marks a major legal victory for the tobacco industry, which in recent years has been hit by numerous multi-billion dollar awards in cases brought by ill smokers.

Cigarette firms have long argued that class action lawsuits are inappropriate in smoking and health cases, because not all victims of smoking-related illnesses can be assumed to have had the same appreciation of the risks involved in consuming tobacco.

Closing in

Earlier this year, there was speculation that Philip Morris might go bust after it said it was unable to pay a $12bn bond as part of a separate lawsuit.

The bond was later reduced on appeal.

The tobacco industry is still fighting a second case brought by the US Justice Department, which wants cigarette firms to pay $289bn in compensation for damaging public health.

The Florida appeals court decision came on the day that 192 countries, including the US, signed up to a World Health Organisation-sponsored treaty aimed at curbing tobacco use.

The treaty commits signatories to restricting tobacco advertising and emphasising the health risks of smoking.

Philip Morris vice president William Ohlemeyer
"You can't fairly try a tobacco case as a class action."

Key anti-smoking treaty adopted
21 May 03  |  Health
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19 Mar 03  |  Business
Tobacco firm 'must pay' $1bn fine
13 Jan 03  |  Business


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