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Reynolds American, Inc. FORM 8-K - Current Report 

Reynolds American Inc. (NYSE: RAI) today announced third-quarter 2011 adjusted EPS of $0.70, up 2.9 percent from the prior-year quarter as higher pricing and productivity improvements more than offset cigarette volume declines. Adjusted results exclude a charge of $0.07 per share for accruals for four Engle progeny lawsuits and implementation and integration costs. Third-quarter reported EPS was $0.63, down 3.1 percent.

For the first nine months of 2011, adjusted EPS was $1.96, up 3.7 percent, while reported EPS was $1.75, up 26.8 percent. Nine-month adjusted results exclude the above items as well as the charge for the Scott lawsuit, tax items, and 2010 charges for health-care changes and Canadian governments’ settlements. Both third-quarter and nine-month earnings results reflect the impact of the sale of Lane, Limited earlier this year.

RAI tightened its 2011 adjusted EPS guidance range to $2.63 to $2.68. This guidance excludes charges related to Engle progeny lawsuits, the Scott lawsuit, implementation and integration costs, and tax items. . . .

The $63 million accrual was recorded in the third quarter for the four Engle Progeny lawsuits that have proceeded through the appellate process in the state of Florida, and which the company will ask the U.S. Supreme Court to review. This amount includes $53 million for compensatory and punitive damages and $10 million for attorneys’ fees and statutory interest.

For the first nine months of 2011, adjusted operating income was $1.62 billion, up 0.6 percent from the prior-year period. Nine-month adjusted results also exclude the Engle progeny lawsuits accruals, a charge of $139 million related to the Scott smoking-cessation lawsuit, and $16 million in implementation and integration costs.

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EDITORIAL: Helping Louisiana smokers quit a deadly addiction: An editorial 

Now, it will be up to New Orleans Civil Judge Richard Ganucheau to determine which programs will get the money. He's said previously that he will appoint a third-party administrator to oversee the effort. . . .

Louisiana was one of the states that benefitted from a legal settlement between state attorneys general and tobacco companies that included a $206 billion payment to states. But states used that money for a variety of purposes. Louisiana used tobacco settlement money for health care but also for education.

That's why it's important to have this money, which is specifically aimed at helping people quit smoking, and to make sure that it's used as effectively as possible.

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• High court undoes Scalia's pro-tobacco order 

Supreme Court Justice Antonin Scalia exercised a rarely used power last fall to let Philip Morris USA and three other big tobacco companies delay making multimillion-dollar payments for a program to help people quit smoking.

Scalia, a cigarette smoker himself, justified acting on his own by predicting that at least three other justices would see things his way and want to hear the case, and that the high court then would probably strike down the expensive judgment against the companies.

This week, the court said he was wrong about that.

On a court that almost always acts as a group, Scalia singlehandedly blocked a state court order requiring the tobacco companies to pay $270 million to start a smoking cessation program in Louisiana. The payment was ordered as part of a class-action lawsuit that Louisiana smokers filed in 1996. They won a jury verdict seven years ago.

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I think it reasonably probable that four justices will vote to grant certiorari, and significantly possible that the judgment below will be reversed.
Supreme Court Justice Antonin Scalia, on why he used a rarely-used power to halt Scott/Jackson payments last Sept. AP gets opinions on why his prediction failed.

U.S. Supreme Court Declines Review of Scott Case 

“Philip Morris USA is disappointed that the Court declined to hear our arguments because we believe the decision in this case rests on a series of constitutional violations and is fundamentally unfair,” said Murray Garnick, Altria Client Services senior vice president and associate general counsel, speaking on behalf of PM USA. “It's important to note that Philip Morris USA prevailed on the largest claim, medical monitoring, and that the original verdict has been subject to appeals for seven years. The judgment today is less than a quarter of what the court originally awarded, but still has been calculated without regard to the likely number of class members who will be interested in participating in the program.”

Today’s decision lets stand 2010 and 2007 decisions by the Louisiana Fourth Circuit Court of Appeals ordering defendants to fund a statewide 10-year smoking cessation program at the cost of $241 million, plus approximately $37 million in interest (calculated from July 21, 2008). The lawsuit was filed in 1996.

Philip Morris USA, as one of four defendant tobacco companies, is responsible for 25 percent of the judgment, which will be deposited into court.

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• Tobacco Cos. Urge Post-Dukes Review Of $270M Deal ($$) 

Philip Morris USA Inc. and other tobacco giants told the U.S. Supreme Court on Tuesday that Wal-Mart v. Dukes underscores the need for the court to hear their appeal of a $270 million judgment in a Louisiana class action brought by smokers.

According to the tobacco companies, a Louisiana state court had violated their due process rights and abandoned essential principles of class litigation by allowing lead plaintiffs who had quit smoking to represent a class of smokers who sought to set up a smoking cessation...

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Scott v. American Tobacco Co., Inc., 949 So. 2d 1266 - La: Court of Appeals, 4th Circuit 2007 

BELSOME, J., dissenting in part and assigning reasons.

I respectfully join in with the majority's findings regarding the damages awarded to the pre-1988 smokers and the conclusion that the award is not the type 1292*1292 to which pre-judgment interest applies. Additionally, I concur in the affirmation of the trial court's decision that 10 years should be the duration of the cessation program. I depart from the majority's opinion on one issue; the post-1988 smokers should remain in the class.

While the majority correctly finds the LPLA provides the exclusive theory of liability against a manufacturer after September 1, 1988, I disagree with the ultimate conclusion. At issue is whether a product designed for human consumption is not defective within its design even though it requires the creation of a cessation program for its users. Why would a product free from defect necessitate a cessation program for its users? That declaration by the jury combined with the responses given in other jury interrogatories, namely that the defendant engaged in fraud and designed a product that was intended to cause its users to become addicted, clearly suggests that such a product is defective per se. It is inconceivable for a product intended for human ingestion to not be defective in design, even though it significantly increases the risk of contracting diseases such as lung cancer, bladder cancer, chronic obstructive pulmonary disease and cardiovascular disease. That conclusion simply defies all logic.

How can the court reconcile those findings with the conclusion that the product was not defective in design? Arguably, because the cigarette manufacturers accomplished their objective in designing a product that would cause the public to become addicted to harmful substances, the manufacturers are able to escape liability under the LPLA. That reasoning produces an illogical and unjust result. The post-1988 smokers are being exposed to the same substances that the jury found to be hazardous to human health and are facing an increased risk of disease, yet, they will be excluded from receiving help to overcome their addiction because the jury, apparently using a very literal interpretation of "defective in design", found the product did what it was intended to do.

In the confines of the LPLA "unreasonably dangerous" is synonymous with "defective". Thus, the jury's determination that the product was not defective in design is inconsistent with its other findings, as well as the evidence in the record and therefore, manifestly erroneous. Accordingly, I would reverse and render on that issue.

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Wal-Mart Gets Top U.S. Court Review in Sex-Bias Case 

The justices today said they will review a federal appeals court decision that approved a single suit to cover women who worked at the retailer’s 4,400 Wal-Mart and Sam’s Club stores since 2001. Wal-Mart, facing billions of dollars in potential liability, contends the lower court made it too easy for workers with different job histories to band together in a single case. . . .

A decision throwing out the suit, the largest-ever U.S. employment class action, might affect several pending cases. A suit on behalf of more than 700 women against Costco Wholesale Corp. is on hold until the Supreme Court resolves the Wal-Mart case. Tobacco companies including Altria Group Inc. say the Wal- Mart case may affect their challenge to a Louisiana court order requiring them to spend more than $270 million on a smoking cessation program.

The lower court ruling “would dramatically broaden the circumstances where classes can be certified in all types of cases against all types of companies,” Wal-Mart’s lawyer, Theodore Boutrous, said in an interview.

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No. 2009-CA-0461. - SCOTT v. AMERICAN TOBACCO COMPANY INC RJR - LA Court of Appeal 

The “tobacco companies”1 suspensively appeal2 the Amended Judgment rendered on July 21, 2008 in this class action matter which ordered them to deposit into the court's registry the full amount of $263,532,762 with legal interest from June 30, 2004, until paid, in order to fund a court supervised comprehensive smoking cessation program. Ms. Deania Jackson3 timely filed an answer to the appeal. La. C.C.P. art. 2133 A. For the reasons which follow, we amend the judgment and, as amended, affirm. . . .

The tobacco companies assign four errors. They complain that the amended judgment incorporates errors of its original judgment which were “left intact” by our decision in Scott I. We address this assignment in Part II. They also complain that their Due Process rights have been violated by the refusal of the trial court to empanel a new jury to determine the issues remanded to the trial court. We address this assignment in Part IV. A third complaint is that the award is excessive because the trial court condemns them to pay for program components which we ruled in Scott I were not recoverable by the class. We address this assignment in Part V. Their final complaint is that the trial court erred in awarding post-judgment interest and in the date selected from which interest is to be calculated. We address this assignment in Part VI.

Ms. Jackson, as the class representative, assigned five errors. She first contends that the trial court's Amended Judgment is legally correct and should be affirmed. But, out of an abundance of caution, if the tobacco companies are to obtain relief on their assignment of error in which they urge us to revisit our decision in Scott I, then she too seeks to preserve her right to relief from our judgment in these particulars: (a) legal interest from the date of judicial demand7 should be awarded, (b) the comprehensive smoking-cessation program should include all twelve components proved at trial, (c) the tobacco companies should be ordered to deposit a sum of money for funding the court-supervised cessation program, (d) amendment should provide that the tobacco companies' product was defective in design both prior to and after September 1, 1988, and provide that the “exclusivity” provisions of the Louisiana Products Liability Act (LPLA) do not insulate the tobacco companies from post-1988 conduct in this case, and (e) the judgment should provide that medical monitoring is reasonably necessary. We address all of her assignment in Part II. . . .

Accordingly, Phillip Morris USA Inc., The Tobacco Institute, Inc., R.J. Reynolds Tobacco Company, Lorillard Tobacco Company, and Brown & Williamson Tobacco Company (now known as Brown & Williamson Holdings, Inc., individually and as successor by merger to The American Tobacco Company), in solido, shall deposit into the registry of Civil District Court for the Parish of Orleans the full sum of $241,540,488, with judicial interest from July 21, 2008, until paid.

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Another major class action dispute 

The nation's major tobacco companies ask the Supreme Court to overturn a $270 million smoking-cessation program mandated by a Louisiana state court. The case is a major new challenge to the class-action approach to consumer grievances.

In a new sign that the spreading use of class-action lawsuits is creating major new controversy for the Supreme Court, the nation's major tobacco companies on Thursday mounted a broad constitutional challenge to use of that device as a way to get around examining the specific claims of individuals who claim injury. The case arrived at the Court even as the Justices were preparing to consider taking on a case on the legality of a huge class-action claim against Wal-Mart Stores, the popular discount retailer. The new petition in the tobacco case, Philip Morris USA, et al., v. Jackson, et al., has been docketed as 10-735. Its filing follows a favorable temporary ruling for the companies by Justice Antonin Scalia in September. . . .

Here is the question the petition presented: "Whether the Due Process Clause prevents state courts from employing the class-action device to eliminate fundamental substantive and procedural protections that would otherwise apply to class members' individual claims." At issue is an award that is now estimated at $270 million.

Justice Scalia, in his Sept. 24 order temporary staying the mandated program to encourage smokers to give up the habit, wrote that "the extent to which class treatment may constitutionally reduce the normal requirements of due process is an important question." Scalia, acting in his role as Circuit Justice, noted the "national concern over abuse of the class-action device."

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• US big tobacco contests 270-million-dollar suit  

US tobacco companies and an industry trade group have filed an appeal with the US Supreme Court against a class action lawsuit that awarded 270 million dollars to half a million smokers.

In the appeal filed Thursday, tobacco companies including Philip Morris and R.J. Reynolds argued that the Louisiana suit wrongly aggregated "disparate, highly individualized claims" spanning 50 years into one claim to recover costs of smoking cessation programs.

The tobacco companies and trade group argue the Louisiana court used the "unorthodox" procedure of filing a class-action suit to get around examining individuals' specific claims.

"The end result was a 270-million-dollar judgment requiring defendants to pay for smoking-cessation services for every member of the class even though no class member ever proved the established elements of his or her individual claim or confronted any individual defenses," the appeal said.

"The handling of this case by the Louisiana courts represents a profound departure from 'traditional' procedure." . . .

In September, Supreme Court Justice Antonin Scalia granted the tobacco companies a temporary stay against the Louisiana court's decision, saying it was important to consider "the extent to which class treatment may constitutionally reduce the normal requirements of due process."

Scalia also said that there was "national concern over abuse of the class-action device."

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Pfizer stock sold, Roberts to hear company's cases 

Acting in a class-action tobacco lawsuit from Louisiana, Justice Antonin Scalia last week displayed the broad but rarely used power of a single justice.

Scalia, a cigarette smoker himself, raised concerns about the legal rights of tobacco companies in extending for at least a few months his earlier order that relieves the companies of immediately paying $270 million for a smoking cessation program in Louisiana.

Noting national concern over the abuse of class-action lawsuits in state courts, Scalia said the companies might not be able to recover all their money if they ended up winning in the Supreme Court.

A Louisiana appeals court had a substantially different view of the 14-year-old case, noting that the plaintiffs are aging and dying at a significant rate.

The case went to Scalia because he oversees the 5th Circuit, which includes Louisiana. . . .

However, they more often seek their colleagues' views. A review of court records by The Associated Press found that the last justice to act alone for something other than a delay of a few days was Sandra Day O'Connor, in a 2002 case that involved the release of government documents.

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Scalia Stays $270 Million Tobacco Verdict, Hints At Reversal  

A $270 million tobacco verdict in Lousiana might be in trouble, as U.S. Supreme Court Justice Antonin Scalia has ordered the action stayed while the high court mulls adding it to its schedule. In a 5-page opinion issued late Friday, Scalia said the Louisiana courts may have erred by refusing to allow Philip Morris and other cigarette companies to question individual plaintiffs about whether they relied on false statements to continue smoking. Since it is "significantly possible that the judgment below will be reversed," Scalia said, he would exercise his seldom-used power to stay the action until the court takes it under review.

The class action was cleverly constructed to consist only of Louisiana smokers, and sought money for smoking-cessation programs instead of individual cash payments. That relieved the lawyers of proving that individual smokers actually believed cigarette marketing materials more than the U.S. Surgeon General's explicit warning on every pack of cigarettes that the products could kill them. Apparently I'm not the only one who finds this question interesting; Scalia, in his opinion, noted that "the court eliminated any need for plaintiffs to prove, and denied any opportunity for applicants to contest, that any particular plaintiff who benefits from the judgment (much less all of them) believed applicants' distortions and continued to smoke as a result."

Scalia also appears to be itching for a fight over class actions in general.

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• PHILIP MORRIS USA INC. ET AL. v. GLORIA SCOTT ET AL. ON APPLICATION FOR STAY (PDF) 

Respondents brought this class action against several tobacco companies on behalf of all Louisiana smokers.The suit alleged that the companies defrauded the plaintiff class by “distort[ing] the entire body of public knowledge” about the addictive effects of nicotine. The Fourth Circuit Court of Appeal of Louisiana granted relief on that theory, and entered a judgment requiring applicants to pay $241,540,488(plus accumulated interest of about $29 million) to fund a 10-year smoking cessation program for the benefit of the members of the plaintiff class. . . . The Supreme Court of Louisiana declined review. . . .

The applicants have asked me, in my capacity as Circuit Justice for the Fifth Circuit, to stay the judgment until this Court can act on their intended petition for a writ of certiorari. . . .

Given those considerations, I conclude applicants have satisfied the prerequisites for a stay. I think it reasonably probable that four Justices will vote to grant certiorari, and significantly possible that the judgment below will be reversed. As for irreparable harm: Normally the mere payment of money is not considered irreparable, but that is because money can usually be recovered from the person to whom it is paid. If expenditures cannot be recouped, the resulting loss may be irreparable. Here it appears that, before this Court will be able to consider and resolve applicants’ claims, a substantial portion of the fund established by their payment will be irrevocably expended. Funds spent to provide anti-smoking counseling and devices will not likely be recoverable; nor, it seems, will the $11,501,928 fee immediately payable toward administrative expenses in setting up the funded program.

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Cigarette Makers Get Stay by Top Court on $270 Million Award 

U.S. Supreme Court Justice Antonin Scalia temporarily blocked a court order that would force the nation’s tobacco companies to spend more than $270 million on a Louisiana smoking cessation program.

Scalia today issued a stay of a Louisiana state court judgment while the Supreme Court decides whether to hear an appeal from companies including Altria Group Inc.’s Philip Morris USA and Reynolds American Inc.’s R.J. Reynolds. It extends a Sept. 14 stay that was also issued by Scalia.

The cigarette makers contend that the Louisiana courts improperly let the case go forward as a class action on behalf of all Louisiana smokers who want to participate in a cessation or medical monitoring program.

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• Louisiana Court of Appeals Orders Tobacco Companies to Pay Over $230 Million for Court-Approved Smoking Cessation Program 

Nearly fourteen years after the lawsuit was originally filed, the Court of Appeal of Louisiana, Fourth Circuit on Friday affirmed a trial court judgment in Scott v. American Tobacco Co., et al., that the major American tobacco companies must fund a smoking cessation program to benefit more than 200,000 Louisiana smokers.

Attorney Steve J. Herman, who represents the plaintiffs, said: “after a three-year trial and a six-year appeals process going all the way to the U.S. Supreme Court, we are happy with the court’s unanimous decision, and optimistic that the court-supervised programs awarded by the jury in 2004 can now be funded, so that smokers can get assistance in quitting from qualified Louisiana health care providers.” Attorney Herman can be reached at 504-680-0554. . . .

“This case is a trailblazer,” added Richard A. Daynard, founder of TPLP and a Northeastern University Law Professor. “Attorneys in the other 49 states should file similar claims so that their citizens can also get the benefits of this program,” he concluded.

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