Tobacco industry breathes a sigh of relief as court overturns $10.1 billion verdict

Tobacco industry breathes a sigh of relief as court overturns $10.1 billion verdict

The Illinois Supreme Court provided a big relief for the tobacco industry in the country when it bumped off a $10.1 billion case against Philip Morris USA. The suit had alleged that the tobacco giant had defrauded the consumers by indulging in false advertisement of "light" cigarettes.

However Philip Morris was ruled to have deterred smokers from quitting by promoting that the light or low-tar cigarettes were safer and hence could be smoked any number of times without significant adverse affects.

The court found 4-2 in favor of Philip Morris that the company was in the clear as the Federal Trade Commission had allowed it to market the Marlboro and Cambridge brands with the "light" suffix. Justice Rita Garman wrote that "If the FTC has specifically authorized the use of the terms ... [Philip Morris] may not be held liable under the Consumer Fraud Act, even if the terms might be deemed false, deceptive or misleading." The state's Chief Justice abstained from taking part in the process due to a conflict of interest.

This is a huge victory for Philip Morris which was slapped by a $7.1 billion verdict against it by the Madison County Circuit Judge Nicholas Byron in March 2003. An additional $3 billion was also awarded as punitive damages and fees. The company had contended that it would go bankrupt if required to post a bond during the appeal process and after the intervention of many US States, the bond was waived. However, while saying that the case as a major win for the tobacco industry in general, analysts point out that there are still 40 cases of a similar nature and if any of them brings in an adverse verdict, the industry could be swamped by claims of billions of dollars.

In fact the lead attorney in the case, Stephen Tillery said that there were strong grounds for appeal of the case, "We strongly disagree with the court's conclusion that the Federal Trade Commission authorized the use of the words 'lights' or 'lower tar and nicotine.' The Federal Trade Commission has never issued a trade rule, or any other ruling, authorizing the use of those terms," he observed.

Philip Morris USA, which is the owner of the world-famous Marlboro brand said that it was "gratified" by the verdict. The markets also welcomed the verdict as shares in the parent company Altria Group jumped $2.89 or 3.9 percent to $76.62 on the New York Stock Exchange. The group's previous high was recorded at $75.60.