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Judge Declares Mistrial in Light-Cigarette Lawsuit

Altria Group Inc. avoided a potentially costly verdict Tuesday after a Missouri judge declared a mistrial in the first "Lights" cigarette class action to reach a jury.

Plaintiffs sought nearly $1 billion in damages, alleging Altria unit Philip Morris USA misled consumers by marketing Marlboro Lights as less harmful than regular cigarettes. Altria, the largest seller of cigarettes in the U.S., faces 18 other Lights cases across the country, three of which have been class certified.

Jurors began deliberating in a St. Louis circuit court last week after several weeks of testimony but failed to reach a verdict. The deadlock prompted Judge Michael David to declare a mistrial, more than a decade after the lawsuit was originally filed.

U.S. authorities allowed tobacco companies to use descriptions such as "Lights" and "Lowered Tar and Nicotine" on cigarette packages for decades. Since last year, the U.S. Food and Drug Administration has prohibited the use of such phrases.

Altria argued in the Missouri circuit-court trial that its Lights had roughly 10% less tobacco than regular Marlboros and were equipped with longer filters and more ventilation. It also noted Lights packages included the same graphic warnings as regular cigarettes.

Korein Tillery LLC, the law firm representing plaintiffs, said it intends to bring the case to trial again. It said eight of 12 jurors favored damages, one short of the required number. The firm will "just work harder to convince a ninth juror" the next time, it added in a statement.

Altria said Tuesday that the mistrial in Missouri "shows that we have powerful defenses in these 'Lights' cases" and that it continues to view plaintiffs' claims as "baseless."

In a separate multiyear Lights class action involving Altria, the Illinois Supreme Court last month said plaintiffs could appeal an earlier ruling in a lower court. Illinois plaintiffs won a $10.1 billion award in 2003 from a Madison County, Ill., circuit court judge, before the state's highest court reversed that judgment in 2005. The latest ruling means the case will head back to the original court.

Lawsuits remain a headwind for U.S. tobacco companies, which also have seen cigarette volumes fall for several years amid continuing profits. Profit at Reynolds American Inc., the second largest U.S. tobacco company, slipped 3.7% to $367 million from the year-earlier period after recording $63 million in litigation costs. Altria reports Thursday.

Much of the legal activity in the industry revolves around so-called Engle progeny cases in Florida, where thousands of individuals have brought damage claims against tobacco companies after court rulings broke up a class action by the same name. Cumulative damages in more than 50 progeny verdicts since 2009 have totaled about $415 million, according to Morgan Stanley.

Not all of the Engle progeny damages are assigned to tobacco companies. The industry has lost about two-thirds of the progeny cases to date, but Altria and Reynolds won two cases last week.

Four U.S. tobacco companies, meanwhile, filed a joint lawsuit in August against a new federal rule requiring all cigarette packaging and advertising to feature pictures depicting the adverse health effects of smoking by September 2012. Altria hasn't joined that lawsuit.



Published: Tuesday, October 25, 2011

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