From: Reuters
Published April 3, 2008 04:29 PM

U.S. appeals court tosses $800 billion tobacco suit

By Leslie Gevirtz

NEW YORK (Reuters) - A federal appeals court tossed out an $800 billion class-action lawsuit against tobacco companies on Thursday brought by smokers who said they were deceived into believing "light" cigarettes were healthier.

The U.S. Court of Appeals for the Second Circuit said the smokers could not sue collectively. The decision means each individual smoker must prove that she or he had selected the product for perceived health benefits.

The smokers had sued the tobacco companies under the Racketeer Influenced and Corrupt Organization Act, contending they were misled by the industry's marketing and branding efforts into believing "light" cigarettes were healthier than "full-flavored" versions.

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In 2006, in a ruling that stunned the industry, U.S. District Judge Jack Weinstein allowed the case to proceed as a class action. Known as the Schwab case, after the name of one of its lead plaintiffs, the lawsuit had covered a 35-year period and millions of smokers, tobacco companies said.

The plaintiffs had alleged that those who used "light cigarettes" unknowingly ended up getting just as much tar and nicotine because they inhaled more frequently to compensate.

However, the appeals court decertified the class of plaintiffs, saying a "light" smoker might have "preferred the taste" or chosen light cigarettes as a matter of personal style.

"Individualized proof is needed to overcome the possibility that a member of the purported class purchased Lights for some reason other than the belief that Lights were a healthier alternative," Circuit Judge John Walker Jr. wrote in the 39-page decision.

"We are certainly pleased with the court's ruling and agree with its reasoning," said Martin L. Holton III, general counsel for R.J. Reynolds Tobacco. "Numerous courts across the country have held that claims such as these simply cannot be tried as class actions."

But attorney Michael Hausfeld, who represented the smokers, said he planned to "go forward. One way or another, we're going to go ahead.

"We may seek a rehearing, we may go to the Supreme Court, or we may forgo all that and actually try one of the cases," he said.

Goldman Sachs, in an analyst's note, viewed the ruling as a positive, but noted "the consensus view has long been that the 2nd Circuit would overturn Judge Weinstein's certification."

Tobacco stocks were little changed in mid-afternoon trade.

Defendants in the case included: Altria Group Inc's <MO.N> Philip Morris USA unit; Reynolds American Inc's <RAI.N> R.J. Reynolds Tobacco Co; Loews Corp's <LTR.N> Lorillard Tobacco unit <CG.N>; Vector Group Ltd's <VGR.N> Liggett Group <CG.N>; and British American Tobacco Plc's <BATS.L> British American Tobacco (Investments) Ltd.

(Editing by Gerald E. McCormick and Braden Reddall)

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