Tobacco.org

• NY Panel Eyes Light Cigarette Class Case 

A federal appeals court gave a rough reception Tuesday to arguments that tobacco companies owe up to $200 billion to tens of millions of smokers for suggesting over the last three decades that light cigarettes might be less harmful than regular cigarettes.

The three-judge panel of the 2nd U.S. Circuit Court of Appeals has been asked to decide whether to let stand a ruling last summer . . .

Two of the three judges repeatedly expressed doubts about the class action status of the lawsuit as they questioned smokers' attorney Michael D. Hausfeld.

Judge John Walker said he saw a problem in that each smoker would have a different perception of how the tobacco companies marketed the cigarettes. He also said he doubted that the smokers considered health their primary concern since they were deciding to smoke anyway.

"These are all individual decisions," he said.

He also said he believed the statute of limitations may have expired before the lawsuit was filed.

Judge Ralph Winter said he doubted that tobacco companies could convince smokers that light cigarettes were healthier cigarettes with less tar and nicotine because each box still contained a health warning.

"It was a mixed message," he said.

Jump to full article »

NY judges skeptical about light cigarettes lawsuit arguments 

A federal appeals court is hearing arguments that tobacco companies owe up to two hundred billion dollars to millions of smokers for suggesting that light cigarettes might be less harmful than regular cigarettes.

The 3-judge panel of the 2nd US Circuit Court of Appeals will decide whether to uphold last summer's ruling by a federal judge in New York granting class-action status to a lawsuit against cigarette makers.

Jump to full article »

• Tobacco Cos Ask Appeals Court To Deny Class In Lights Case 

Altria Group Inc.'s (MO) Philip Morris USA and other cigarette makers argued Tuesday that a federal judge erred last year in granting class-action status to a lawsuit over tobacco companies marketing of "light" cigarettes.

At a hearing before the 2nd Circuit Court of Appeals, Theodore M. Grossman, a lawyer for the tobacco companies, said there were 65 different brands of light cigarettes with hundreds of advertising campaigns during the 35-year period covered by the class certification.

He said the certification was "overbroad" and the issues so individualized for each brand or each smoker's own circumstances that the case can't be effectively grouped in such a class.

"Almost all of (the light cigarette brands) never spoke of health or safety as part of their advertising," Grossman said.

Jump to full article »

• Court to Hear Arguments In "Light" Smokes Case 

Several major tobacco companies are set to go to a U.S. appellate court on Tuesday to argue about whether a $200 billion lawsuit against them by "light" cigarette smokers should proceed as a class action.

The hearing scheduled before the U.S. Court of Appeals for the Second Circuit is the latest development in the closely watched case, which could potentially expose tobacco companies to hundreds of billions of dollars in liabilities. . . .

The appellate court's decision, although not expected on Tuesday, would help shape how far the case is ultimately allowed to go, said Benjamin Zipursky, professor at Fordham University School of Law.

At Tuesday's hearing, observers should watch out for any indications that the court might give of its thinking, Zipursky said. "Do the judges appear to be leaving any room for partial classes or subsets?"

Jump to full article »

• Law firm won't seek to stop Altria's Kraft spinoff  

Attorneys for plaintiffs in a tobacco liability lawsuit said on Wednesday that they would not seek a court order to try to bar Altria Group Inc.'s spin-off of Kraft Foods Inc. . . .

Law firm Cohen Milstein Hausfeld & Toll in Washington, which represents smokers who contend tobacco companies misled them into thinking that light cigarettes were safer than regular cigarettes, said in a statement that it would not pursue a possible injunction against the planned spin-off.

"After intense investigation and attempted coordination with the United States Department of Justice, which declined to move forward on the issue, Cohen, Milstein, Hausfeld & Toll has concluded that there does not appear a sufficiently strong legal basis to justify proceeding against Altria in an attempt to prevent the spin-off," the law firm said.

Jump to full article »

Kraft says it hopes to be ready to go it alone 

But questions remain whether Altria will be able to proceed with the spinoff on schedule. Kraft was acquired by Philip Morris Cos., the former name of Altria Group, in 1988, making it the world's largest consumer products company. Kraft has been operating as a separate entity under the Altria umbrella since going public in June 2001.

Many legal experts expect an effort will be made to obtain an injunction blocking the spinoff by lawyers involved in the $200 billion Schwab tobacco class-action lawsuit still pending in New York.

"Everybody seems to think that it is going to be advantageous for them to seek the injunction," said Carl Tobias, a tobacco legal expert at the University of Virginia. Altria "may not be able to insulate Kraft from liability."

Jump to full article »

• Altria Judge Says He Won't Rule in Class Action During Appeal 

The judge overseeing a $200 billion lawsuit by smokers of ``light'' cigarettes against Altria Group's Philip Morris unit said the case won't go forward until an appeals court rules on whether it may proceed as a class action.

The decision, made public today, means it is unlikely that U.S. District Judge Jack B. Weinstein in Brooklyn, New York, will be asked to block Altria's planned spinoff of its Kraft Foods unit, which is scheduled for March 30.

Michael Hausfeld, who represents the nationwide class of light cigarette smokers suing tobacco companies in the Brooklyn case, said today he's considering a legal move to block the Kraft deal, to help ensure that Altria can pay if he wins the case.

``No matters related to this case'' will go forward before the appeal is decided, Weinstein said, according to court records.

Jump to full article »

Altria to Spin Off Kraft Unit in March to Spur Growth (Update5) 

Altria Group Inc., parent of the world's largest cigarette maker, will spin off Kraft Foods Inc. on March 30, saying the unit will grow more quickly as an independent company. . . .

Altria's board decided last year to proceed with the restructuring after rulings in a U.S. Justice Department racketeering suit in Washington and two cases in Florida and Illinois went the company's way.

In November, a federal appeals court in New York allowed Altria's Philip Morris USA and other cigarette makers to appeal a judge's decision to let light-cigarette smokers seeking $200 billion in damages sue as a group. The decision delayed the case, which represents the biggest potential legal liability for the tobacco industry.

The ruling emboldened Altria to proceed with spinning off Kraft even as lawyers for the smokers considered trying to block the transaction, arguing the food assets may be needed to cover a potentially large award, investors said.

Camilleri told analysts today he has ``no idea'' whether lawyers in the light cigarettes case may seek an injunction.

``If I was on the other side, I don't think I would do it,'' Camilleri said. An injunction claim would have ``no merit,'' he said.

Jump to full article »

Kraft says it hopes to be ready to go it alone  

But questions remain whether Altria will be able to proceed with the spinoff on schedule. Kraft was acquired by Philip Morris Cos., the former name of Altria Group, in 1988, making it the world's largest consumer products company. Kraft has been operating as a separate entity under the Altria umbrella since going public in June 2001.

Many legal experts expect an effort will be made to obtain an injunction blocking the spinoff by lawyers involved in the $200 billion Schwab tobacco class-action lawsuit still pending in New York.

"Everybody seems to think that it is going to be advantageous for them to seek the injunction," said Carl Tobias, a tobacco legal expert at the University of Virginia. Altria "may not be able to insulate Kraft from liability."

Jump to full article »

• Lawyer considering Kraft injunction 

"The Altria situation raises a number of issues," said Michael Hausfeld, an attorney at Cohen, Milstein, Hausfeld and Toll.

Hausfeld represents plaintiffs in a case known as Schwab after the lead plaintiff, Barbara Schwab. The case claims tobacco companies deceived smokers for years about the safety of "light" cigarettes.

The lawyer said a court is determining whether to affirm the case's class-action certification, which allows the case to continue as a class action suit.

He said if the certification is upheld, Altria's "litigation position changes dramatically" since the plaintiffs are seeking more than $200 billion in damages. The racketeering law under which the case was filed would triple any damage award. Altria would need to be able to pay any damages without the Kraft subsidiary as an asset to go forward with the spin-off.

Hausfeld said any injunction would have to be filed before the spinoff takes place March 30.

Arguments in the appeal are scheduled for March or early April -- a timeline that may have prompted Altria to announce the spinoff Wednesday, Hausfeld said. . . .

Ronan said any attempt at stopping the spinoff would face a number of hurdles, including proving that Altria would be bankrupted by any damage award resulting from the Schwab case.

"That is a huge hurdle for these plaintiff's lawyers to overcome," Ronan said. "They might be realistic enough to say it's not worth the money."

Jump to full article »

Altria to Spin Off Rest of Kraft 

that Altria is poised to jettison its Kraft Foods subsidiary, investors expect the payoff will be a higher share price as the company transforms into almost purely a tobacco company.

Altria Group Inc., whose tobacco operations make the top-selling Marlboro cigarette brand, plans to spin off its majority stake in Kraft Foods Inc. in March.

That will leave Altria consisting primarily of tobacco units Philip Morris USA and Philip Morris International and a stake in beer maker SABMiller PLC.

Altria's announcement Wednesday had been widely anticipated by Wall Street as the first step in a restructuring plan designed to make the company more valuable to investors. Some market watchers believe Altria's share price has not benefitted as much as its should from a rise in the tobacco sector this year.

"2007 is poised to be a key year in the evolution of our company," Chief Executive Louis Camilleri said. . . .

"Once they spin off Kraft, you'll be left with a tobacco business operating in a strong environment, with a vastly improved legal environment, substantial free cash flow and an unleveraged balance sheet," said Charles Norton, portfolio manager of the Vice Fund

Jump to full article »

• Tobacco’s Stigma Aside, Wall Street Finds a Lot to Like 

For all the industry’s apparent troubles, however, the future of cigarettes appears to be brighter than ever.

That at least is the message investors are sending as the Altria Group — the company once known as Philip Morris and the maker of the world’s most popular cigarette, Marlboro — prepares to split itself by spinning off its Kraft Foods division to shareholders and become, once again, primarily a tobacco company. Today, Louis C. Camilleri, the chief executive of Altria, is expected to set a timetable for completing the spinoff.

It is a move that Wall Street is responding to with the equivalent of a standing ovation, but it is not because Kraft Foods, the world’s second-largest food company, after Nestlé, will finally shed the taint of tobacco.

Investors are glad that Altria will finally be rid of Kraft Foods, the maker of Oreo cookies, Velveeta and Tang. Since October, when the company announced its plan for the move, its shares have risen 10 percent.

“Something that is forgotten in all of this is people like to smoke,” said David Adelman, an analyst at Morgan Stanley, who noted that United States tobacco stocks have beaten the Standard & Poor’s 500-stock index in each of the last six years. “It’s enjoyable and there’s not an alternative product.”

He added: “If frozen dinners get too expensive, people will try something else. That’s not true with cigarettes — you are not up at night worried about that product that is going to make cigarettes obsolete.” . . .

Why is Wall Street so infatuated with cigarettes? Cigarettes have certain advantages over other consumer products, not the least of which is that they are addictive. They are inexpensive to make, require almost no innovation, there is a global market for them, and cigarette makers can raise prices without seeing much of a drop in business.

On top of all that, a recent string of court decisions has convinced investors that the worst of the litigation against tobacco companies is over.

That, in turn, has allowed Altria to move forward with a revamping that begins with cutting Kraft loose and will ultimately allow Altria to use the huge amounts of cash generated by cigarettes to buy back stock or acquire other tobacco companies, particularly overseas. . . .

Michael D. Hausfeld, a lawyer in a pending class-action lawsuit against tobacco companies, said he might file an injunction to stop a spinoff of Kraft. The lawsuit, first filed in 2004 and known as the Schwab case after the lead plaintiff, Barbara Schwab, contends that cigarette manufacturers defrauded consumers by marketing light cigarettes as safer than regular cigarettes.

The idea behind seeking an injunction is that a judgment could be so enormous that Altria might need Kraft — with a market capitalization of $57.25 billion — to pay off the damages.

Jump to full article »

At times, as a tobacco investor or a tobacco analyst, it seems like an unending stream of negative news. You hear about smoking bans, a new piece of legislation. You hear about criticism from the World Health Organization. And then lo and behold, manufacturers release their results. And they are good.
David Adelman, an analyst at Morgan Stanley.

If frozen dinners get too expensive, people will try something else. That’s not true with cigarettes — you are not up at night worried about that product that is going to make cigarettes obsolete.
David Adelman, an analyst at Morgan Stanley, on Altria's Kraft spinoff.

• Sebok: Can a Federal Court Tell A Tobacco Company Not to Spin Off Its Subsidiary, In Order to Protect Smokers' Ability to Successfully Sue the Company for Damages? 

Tobacco litigation has produced some of the most difficult problems in tort law that the nation has seen in the past twenty years. This may be partly a result of the incredible amounts of money at stake in the litigation: When enough money is at stake, lawyers tend to pursue every possible avenue in an effort to gain an advantage.

Today, I want to discuss a novel problem that may soon be facing the tobacco industry and the judges of the U.S. Court of Appeals for the Second Circuit. The problem is this: Can a federal judge temporarily prevent a multi-billion-dollar tobacco corporation from "spinning off" one of its massive subsidiaries, in order to protect the interest of smokers suing the corporation?

The Huge Schwab Case, Challenging Big Tobacco on Ads for "Light" Cigarettes . . .

While we are waiting for the appellate court to render its judgment about whether a class action was properly certified by Judge Weinstein, another issue has emerged.

Can Altria Go Through with Its Planned Sale of Kraft Foods Stock? . . .

Michael Hausfeld, the plaintiffs' attorney managing the Schwab case, might make the following argument: Suppose the damages from the class action turn out to be so great (for example, in the hundreds of billions of dollars) that Altria needs Kraft to fund the plaintiffs' damages. If so, he might argue, any attempt to separate the two companies could be construed as an attempt to deprive the plaintiffs of their rightful compensation for the injuries Altria caused them. . . .

If the case gets that far, then there is a good chance that the Supreme Court will have a spectacular opportunity to revisit the question of whether federal courts have the power to enjoin major corporate decisions, even before blockbuster tort cases go to trial.

Jump to full article »

UPDATE 2-U.S.appeals court to review 'light' cigarette case 

A federal appeals court has decided to review a lower court ruling that let a $200 billion lawsuit filed by "light" cigarette smokers proceed as a class action, according to a court document.

The appeals court also stopped proceedings in the suit. The stay in the case, sought by Philip Morris, was issued as of Thursday, the court order said. . . .

"I expect the class will eventually be decertified; this is a first indication of that eventuality," said Charles Norton, co-portfolio manager of Mutuals Advisors Inc.'s Vice Fund, which owns shares in tobacco companies.

Jump to full article »

Judge grants stay in lights cigarette suit; Altria at 10-yr high - MarketWatch 

A U.S. Appeals Court judge stopped proceedings in the $200 billion Schwab "lights" cigarette class-action lawsuit in a decision announced Friday that analysts said was a positive development for the tobacco industry.

Shares of Altria, owner of cigarette giant Philip Morris, climbed 1.7% to close at $85.01 on Friday. That's the highest closing price in at least a decade.

Judge Barrington Parker of the U.S. Court of Appeals for the Second Circuit granted a stay that stops proceedings in Schwab v. Philip Morris USA. A clerk for the court said Friday that the stay was issued Thursday afternoon. The stay will allow the judge to review a lower court ruling that certified the suit as a class-action case.

Jump to full article »