CHICAGO – A federal judge in New York likely will not rule until 2006 on whether a case that would let smokers sue the tobacco industry over the promotion of "light" cigarettes can move forward as a class action, attorneys said Wednesday.
U.S. District Judge Jack Weinstein issued a ruling earlier this week that paves the way for him to make that decision. In the case, tobacco companies are accused of conspiring to defraud consumers into thinking that light cigarettes are safer than regular smokes.
In an opinion issued Monday, Weinstein found that plaintiffs could use a method known as "fluid recovery" in seeking damages in the case, which was brought forward under federal racketeering law.
Fluid recovery lets damages in large class-action cases be paid out in ways other than just giving cash directly to plaintiffs, such as establishing a large pool of money that could be used for public purposes.
"If he had ruled the other way on this, the case would have pretty much been over," Paul Gallagher, an attorney at Cohen, Milstein, Hausfeld & Toll, who represents the plaintiffs, said in an interview Wednesday. "This lays the foundation, now he has overcome in his mind a huge hurdle to class certification."
Gallagher said it could be early summer before Weinstein decides whether or not to let the case go forward as a class action. If he does, smokers all over the country could seek damages if the defendants lose, as long as the smokers' claims have not already been decided in state courts.
The case is similar to several state court cases in which smokers are using consumer fraud laws to seek damages, including a closely watched Illinois case in which Altria Group Inc.'s (MO) Philip Morris USA unit was ordered to pay $10.1 billion in damages. That case is on appeal to the Illinois Supreme Court.
A lawyer for Altria stressed that Weinstein had not yet decided on whether the multibillion-dollar New York case could proceed as a class action.
"The idea that this allows this case to go forward, that the judge removed a hurdle, is quite overstating" the ruling, William Ohlemeyer, vice president and associate general counsel for Altria, said in an interview.
He also said that the U.S. Second Circuit Court of Appeals, which oversees Weinstein's district in New York, has found in the past that fluid recovery should not be allowed in this type of case.
"Judge Weinstein is entitled to his opinion but I'm quite confident the Second Circuit will disagree with him," Ohlemeyer said. He said Weinstein's ruling was not something that could be appealed until after a potential trial.
Tobacco stock analysts downplayed the importance of Weinstein's decision, though some said it was likely that he would eventually allow the case to proceed as a class action.
"We believe this case will be less of an issue for the industry if other lights cases are resolved favorably," said Bonnie Herzog, an analyst at Citigroup Investment Research. "We do not believe this decision alone will have an impact on the timing of the split-up of Altria."
Altria management has said the company could be broken up into two or three parts once several U.S. tobacco litigation hurdles are cleared.
Defendants in the case include Altria Group Inc. (MO) and Philip Morris USA (search); Loews Corp.'s (LTR) Lorillard Tobacco unit, which has a tracking stock, Carolina Group (CG); Vector Group Ltd.'s (VGR) Liggett Group; Reynolds American Inc.'s (RAI) R.J. Reynolds Tobacco unit and British American Tobacco Plc unit British American Tobacco Investments Ltd.
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