Lawyers for the seven U.S. tobacco companies facing the largest class action suit in history said yesterday that their defense had been significantly strengthened by a federal appellate court's ruling late last week on a case that pits hemophilia patients against drug companies.
The lawyers said that the ruling, by the 7th Circuit U.S. Court of Appeals in Chicago, provides a precedent to invalidate the legal assault brought by a group of current and former smokers that could cost the tobacco companies billions of dollars in damages.
That opinion, filed late on Friday, was studied intensely over the weekend by tobacco lawyers. The ruling reversed a lower court's decision permitting a class action by 10,000 hemophilia patients -- or their surviving families -- who had been infected by the HIV virus.
The plaintiffs were suing five international drug companies that had supplied the patients with blood-clotting medicine, asserting that the companies knowingly distributed clotting products contaminated with the human immunodeficiency virus, which causes AIDS.
The suit against the tobacco manufacturers contends that the companies, their related units and the Tobacco Institute, an industry group, had concealed knowledge that nicotine was addictive and had manipulated nicotine levels in cigarettes to keep customers addicted.
The companies are the American Tobacco Co., the R.J. Reynolds Tobacco Co., the Brown & Williamson Tobacco Corp., Philip Morris Inc., Liggett & Myers Inc., the Lorillard Tobacco Co. and the United States Tobacco Co.
On March 8, the tobacco companies appealed the ruling of U.S. District Judge Okla B. Jones II in New Orleans, who cleared the way last month for a class action, the first in a federal court against the tobacco industry, that accuses the companies of fraud and negligence in addicting smokers.
Wall Street has followed the Castano case closely for its FTC potential to cost the tobacco companies billions in damages, affecting not only the equity of the companies but their ability to do business in the future.
"The tobacco companies are celebrating prematurely if they think this decision will lend them any measure of comfort in the Castano case," said Dianne M. Nast, a lawyer who presented the plaintiffs' arguments for both the tobacco and drug-company class actions.
The tobacco companies, which have never had to pay any monetary penalties as a result of a court ruling, deny that cigarettes are addictive.