NEW YORK – On July 6, a class action lawsuit was thrown out by the Florida Supreme Court, freeing up billions of dollars tobacco companies had set aside in escrow, reports The Wall Street Journal.
“Cigarette makers scored a major legal triumph as the Florida Supreme Court upheld a lower-court decision tossing out a $145 billion award against tobacco companies, saying the award--the largest punitive-damages award ever--was ‘excessive as a matter of law,’” writes the newspaper.
“If you look at it over the last five years, there's been a considerable reversal of fortune for cigarette makers” Jonathan Turley, a professor at George Washington University Law School, told the newspaper, adding, “The industry is still taking on a lot of water in terms of lawsuits concerning low-tar cigarettes, but the most significant threats have now evaporated.”
The Journal notes that the case was filed in 1994 on behalf of “all addicted smokers nationwide” and was the first personal injury class action brought against the tobacco companies that moved to trial. In 1996, the case was limited to only smokers in Florida.
“By upholding the jury's finding of tobacco industry wrongdoing, the court has made it easier for literally tens of thousands of individuals in Florida to file suit,” said Campaign for Tobacco-Free Kids President Matthew Myers. However, Robert Rabin, a professor at Stanford Law School, “played down” the impact of individual suits, noting, “The companies might face a handful of fairly substantial punitive damage awards each year, but in the grand scheme of things, that doesn't amount to much.”
Meanwhile, the Chicago Tribune reports that Kraft Foods Inc. “inched closer to becoming an independent public company” after the Florida Supreme Court ruled in favor of cigarette makers. But according to Wall Street analysts, a spinoff of Kraft from Altria Group, the parent company of Philip Morris, won’t happen anytime soon.
“I don't see them spinning off Kraft until sometime next year,” Morningstar Inc. analysts Greggory Warren told the Tribune, noting that a tobacco marketing case filed six years ago by the Department of Justice is pending in Federal District Court in Washington. “It was my feeling all along that it was a pipe dream that Kraft would be spun out immediately,” he said.
The Tribune writes that many legal experts believe a decision in the Department of Justice’s case “could come soon.”
"After Altria has cleared all of its judicial hurdles, we believe a spinoff could occur after about eight weeks at the earliest,” Citigroup analyst David Driscoll told the newspaper, adding, “While today's [Thursday’s] news certainly moves Kraft closer to being spun off, we note that the event itself will likely be a significant headwind to shares of Kraft.”