Judge's ruling sends tobacco stocks down

THE BALTIMORE SUN

NEW YORK -- Stocks in the largest tobacco companies plunged yesterday after a Florida court became the first to let cigarette-smoking plaintiffs sue as a class.

Dade County Circuit Judge Harold Solomon late Friday certified a class of "all the individuals living and dead who could not quit smoking because of their addiction to nicotine and who have suffered from other diseases and illnesses allegedly caused by cigarette smoking."

Judge Solomon didn't issue a written ruling and didn't explain his reasoning. The suit seeks compensatory and punitive damages of more than $200 billion, more than the combined market value of all the defendants, on behalf of tens of millions of smokers.

Stock in Philip Morris Cos., the world's largest cigarette maker, fell $2.75, to $61.25, wiping out $2.38 billion in market value. It was the third-most-active issue in U.S. trading with volume of 7.3 million shares, more than triple its three-month daily average of 2.2 million.

The stock dragged down the Dow Jones industrial average by almost eight points.

Shares of RJR Nabisco Holdings Corp., the No. 2 tobacco company, were the most active in U.S. trading. RJR shares shot up as much as 37.5 cents, to $7.25, the highest since February, on the news that it will spin off 19 percent of its food business, then fell because of concern about the lawsuit. The stock closed at $7, up 12.5 cents.

"I think the market doesn't know what to think," said CS First Boston analyst Becky Barfield. Ms. Barfield and Roy Burry, an analyst at Kidder, Peabody & Co., echoed Philip Morris' predictions that the class-action certification will be overturned on appeal.

The suit and similar cases have been filed "where you have pro-plaintiff jurisdictions," Ms. Barfield said. "As you go on to other levels of appeal, you get to more thoughtful judges."

The case was filed by attorney Stanley Rosenblatt in May against all the major cigarette companies -- Philip Morris, RJR Nabisco, Loews Corp. unit Lorillard, Brooke Group Ltd. unit Liggett, American Brands Corp. unit American Tobacco, and B.A.T Industries PLC unit Brown & Williamson.

Stock in all but RJR Nabisco were down by the close of trading yesterday.

The suit also seeks damages from the Council on Tobacco Research-USA Inc. and the Tobacco Institute, two trade groups.

The lawsuit claims that the companies and trade groups conspired to mislead smokers about the addictiveness of nicotine.

Philip Morris, the maker of Marlboro and Merit cigarettes, said it was confident that the ruling in the case named for lead plaintiff Howard Engle would be overturned on appeal "because it is contrary to federal and Florida law."

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