By Tripp Mickle
The three largest U.S. tobacco companies will pay a total of
$100 million to settle hundreds of pending federal lawsuits in
Florida, resolving some--but not all--of the legal uncertainty
that's hung over the industry since a class-action lawsuit was
brought by state residents in 1994.
Altria Group Inc. and Reynolds American Inc. will each pay $42.5
million to resolve about 400 federal cases, and Lorillard Inc. will
pay $15 million. The agreement excludes a handful of federal cases
that have gone to trial.
The settlement is far less than the more than $500 million the
industry has had to pay winning plaintiffs in Florida over the past
decade, but it leaves unresolved more than 3,000 cases pending in
state courts, cases that are bigger and more potentially damaging.
Those suits are more difficult for the tobacco industry to settle
because they are spread across the state's court system. The
industry has fared worse in state court cases, winning just 40% of
approximately 138 trials and paying damages of about $4.5 million a
case, according to Matthew Grainger, an analyst with Morgan Stanley
Research.
The Florida cases, which collectively became known as the Engle
lawsuits, sprang from an initial class action lawsuit filed in Dade
County Circuit Court in 1994 on behalf of a smoker, Howard Engle.
The suit charged several big tobacco companies with misleading
consumers. The defendants included Philip Morris USA, a subsidiary
of Altria Group; R. J. Reynolds Tobacco Co., a unit of Reynolds
American; Lorillard; and Liggett Group, a division of Vector Group
Ltd.
In 2000, a Florida jury ordered that the companies pay a
record-breaking $145 billion in damages, but that decision was
later reversed in a 2006 ruling that decertified the class but
allowed former class members to file individual suits. That paved
the way for more than 9,000 suits to be filed in federal and state
court.
Thousands of those cases have been dismissed. Plaintiffs have
won about 60% of the remaining state and federal cases brought to
trial and been awarded more than $500 million in damages from
approximately 124 cases, according to Morgan Stanley.
The $100 million settlement announced on Wednesday won't become
final unless all the individual plaintiffs in the cases agree to
participate in the settlement, according to both parties in the
case. Plaintiffs attorney Joe Rice of Motley Rice LLC said he
expects that to be resolved in the next 60 to 90 days.
Altria and Lorillard said they will record the charges from
their portions of the settlement in their first-quarter
results.
Write to Tripp Mickle at Tripp.Mickle@wsj.com
Access Investor Kit for Altria Group, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US02209S1033
Access Investor Kit for Lorillard, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US5441471019
Access Investor Kit for Philip Morris International, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US7181721090
Access Investor Kit for Reynolds American, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US7617131062
Access Investor Kit for Vector Group Ltd.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US92240M1080
Subscribe to WSJ: http://online.wsj.com?mod=djnwires