[Virginia GASP] Tobacco trial -- Illinois  -- Judge Nicholas Byron
For more information on tobacco litigation, including a link to Judge Byron's written decision, see tobacco.neu.edu

Sharon Price and Michael Fruth et al v Philip Morris; Judge Nicholas Byron
On March 21, 2003, in the case of Sharon Price and Michael Fruth et al vs. Philip Morris Inc., a class action regarding smokers who purchased Marlboro Lights and Cambridge Lights cigarettes because these were represented to be less harmful, Illinois Judge Nicholas G. Byron ruled Philip Morris must pay $10.1 billion:

The Court finds that based upon Philip Morris’ course of conduct with respect to the representations of “Lowered Tar and Nicotine” and “Lights” that Philip Morris’ practices offend public policy, are immoral, unethical, oppressive and unscrupulous and that this course of conduct caused a substantial injury to the Class members in this case.  Therefore, the Court finds that Philip Morris has violated the Illinois Consumer Fraud Act and the Uniform Deceptive Trade Practices Act.  ... [T]he course of conduct by Philip Morris related to its fraud in this case is outrageous, both because Philip Morris’ motive was evil and the acts showed a reckless disregard for the consumers’ rights. (#147, 149)

Excerpts from articles on the decision, PM lobbying Illinois legislators crying "Wolf!", as PM did in 2000 in Virginia and North Carolina.

Excerpts from articles:
  April 11, New York Times, letter
  April 7, Financial Times
  April 1, PR Newswire
  March 21 Bloomberg
  March 21 Reuters
  March 11  and March 22, Edwardsville Intelligencer
  March 21 Post-Dispatch
  March 22 NY Times
  March 21  Press Release, Richardson et al.
  Other News -- Italy Fines PM

Excerpt from letter to The New York Times, April 11, 2003, writer Mark Gottlieb:

Tobacco companies must play by the same rules as other corporations. All losing defendants in Illinois (and most other states) are required to post a bond for the value of a pending judgment plus interest in order to appeal. This is not special treatment intended to punish tobacco companies; it is the rule for all losing defendants.

It would be grossly unfair to allow tobacco companies to be an exception to this law, which is designed to hold damages in escrow so that a defendant cannot plunder the judgment while an appeal is pending. Far from being a denial of due process, the law provides injured parties who prevail with a guarantee that when the process is over, they will get their due.

Excerpts from The Financial Times, April 6, 2003, headlined, Philip Morris rebuffs bond deal, writer Neil Buckley in New York and Aline van Duyn in London
Philip Morris was offered a deal to reduce a potentially crippling $12bn bond it must post to appeal against a $10.1bn legal judgment but refused to discuss it, according to the plaintiffs' lawyer.

Philip Morris USA, the domestic tobacco arm of the Altria group, has until April 21 to post the bond, which it says could force it into bankruptcy.

Altria's shares and bonds have fallen sharply since Philip Morris was ordered to post the surety before it could appeal against the $10.1bn damages award in an Illinois class-action suit on March 21.

Stephen Tillery of Carr Korein Tillery, the lead plaintiffs' attorney, told the FT he had offered last week to accept a reduced bond in return for a non-refundable payment to his plaintiffs. However, he said Philip Morris rejected the idea before amounts were even discussed, arguing it would set a precedent for future cases. Philip Morris said Mr Tillery's proposal was "not a conversation we are interested in having".

The company is focusing on other legal and legislative options. Late on Friday, it filed a motion in the trial court seeking to reduce the bond. It also petitioned another state court to halt any attempt by Illinois to collect the $3bn punitive damages element of last month's $10.1bn award.

Philip Morris is continuing attempts to persuade Illinois legislators to adopt a bill that would cap the size of appeal bonds.

Altria and another subsidiary, Kraft Foods, last week started drawing down their revolving credit lines, with Altria borrowing $1bn on Thursday, and Kraft $1.5bn on Friday.

However, Kraft quashed speculation that it aimed to aid Philip Morris. It said the borrowing was to meet normal business needs after it lost access to the commercial paper market because credit agencies had cut its credit ratings. It was not linked to the Philip Morris lawsuit.

Excerpts from The Associated Press, April 3, 2003, no writer given.
An Illinois Senate committee rejected a plan Thursday to excuse cigarette-maker Philip Morris from paying a $12 billion bond before it can appeal a court judgment.  The measure would have made it easier for Philip Morris to get the appeal bond lowered to $1.2 billion. The company says it cannot come up with the full, $12 billion bond, which was ordered by a Madison County judge who ruled against Philip Morris in a lawsuit over light cigarettes.

The measure to excuse the full bond mustered only three votes from the Democrat-controlled Executive Committee. Seven senators voted "no."

Sen. James Clayborne, D-East St. Louis, argued that requiring the full amount of the bond could bankrupt the company and jeopardize its payments to Illinois under a settlement from a historic national tobacco lawsuit in 1999.

"If they're able to post a $12 billion bond, the judge will require them to post a $12 billion bond," Clayborne said.

Opponents feared the measure would let Philip Morris off the hook for the Illinois lawsuit while it struggles with other judgments across the nation, including $74 billion in damages in Florida.   "This case and the crisis atmosphere it's created could lead to some bad law," said Ann Spillane, chief of staff to Attorney General Lisa Madigan.

A Madison County judged ordered Philip Morris last month to pay $10
billion in damages and $2 billion in legal fees for tricking smokers into believing two of its "light" brand cigarettes are less toxic than regular ones.

Excerpts from press release, April 1, 2003, headlined, Illinois Finance Professor, Author, Finds Altria Group, Inc. Capable of Posting Tobacco Appeal Bond; Linke's Analysis Disputes Tobacco Giant's Claim of Potential Bankruptcy, source, Illinois law firm Korein and Tillery.

PRNewswire -- Today Charles Linke, University of Illinois Professor Emeritus, former Associate Dean for Executive Education, and former Chairperson of the Department of Finance, asserted that Altria Group, Inc. (hereafter Altria) has the financial capacity to post a $12 billion tobacco bond in April 2003.  Judge Nicholas Byron ordered the bond to be paid by Philip Morris as part of the $10.1 billion judgment issued March 21, 2003.

Professor Linke is the author of several publications including Valuing Human Capital:  An Application of Capital Asset Pricing and Pecuniary Value of Man and Wrongful Death Damages.  He also served as the University of Illinois's Associate Dean for Graduate Studies and as the IBE Distinguished Professor of Finance.

After reviewing Altria's 2002 financial report, Linke stated, "The company can post this bond via cash and/or commercial bond, or some combination thereof, without limiting its ability to provide needed operating capital to its subsidiaries."

Specifically, Professor Linke's analysis asserted the following:

"The statement of "Consolidated Statements of Cash Flows" appearing on pages 52 and 53 of the Altria 2002 Annual Report makes clear that Altria does have the financial capacity to post a $12.0 billion bond in April 2003 without limiting its ability to provide needed operating capital to its subsidiaries. Altria spent cash amounts on dividends and repurchases of common stock totaling $8.1B in 2000, $8.7B in 2001, and $11.5B in 2002.  These cash outflows were made after PM USA, a subsidiary of Altria, expensed $5.2B in 2000, $5.9B in 2001, and $5.3B in 2002 as part of cost of sales for the payments under the State Settlement Agreements and to fund the trust for tobacco growers and quota-holders*  This data make clear that Altria generates sufficient cash flow to pay both its State Settlement Agreements and to post a $12B bond in April 2003."

"It is sufficient to note that $14.6B of Altria's $15.0B lines of credit was not drawn on December 31, 2002.  Altria should experience little difficulty in obtaining use of some portion of its existing credit lines and/or obtaining new and expanded credit facilities if it were to commit to lenders that it would devote 50% to 100% of the cash flow that it has been spending on share repurchases and dividends ($11.5B in 2002, $8.7B in 2001, and $8.1B in 2000) to the payment of bonding premiums and/or repayment of bonding loans."

Professor Linke concluded, "While reducing or eliminating dividends and/or share repurchases for six to twenty-four months may be unattractive to Altria, such actions will not impact the demand for its tobacco and food products, and therefore, its cash flow."

*See page 27 of the 2002 Altria Annual Report.

PM lobbies to reduce bond -- April, March 25, 26 -- Excerpts from:
Associated Press, April 3, 2003
The Chicago Tribune
 Korein and Tillery Press Release
St. Louis Post-Dispatch
Associated Press
Chicago Sun-Times-- Impact of verdict on Kraft

PM lobbied to reduce bond -- 2000
Virginia, North Carolina faced similar lobbying, in 2000, to "save" Philip Morris when it cried "Bankruptcy!" as it faced a decision in the Florida Engle trial.

Excerpts from The Chicago Tribune, March 26, 2003, headlined Philip Morris pushing law change, Lisa Madigan says company unlikely to go bankrupt, writer Christi Parsons, with contributions from writer John Chase.

Playing on the fears of a cash-strapped state government, Philip Morris USA is working furiously to change Illinois law and lower the bond that it must post in order to appeal a $10.1 billion judgment in a Downstate court.

Lawyers for the nation's largest tobacco company say Philip Morris could go bankrupt if it must post a $12 billion bond while it appeals.

A bankruptcy would threaten the hundreds of millions of dollars that flow into the State of Illinois' coffers annually from the 4-year-old nationwide tobacco settlement, the company said. The payments are part of $9.1 billion that Illinois was to receive over 25 years.

Philip Morris critics, including Illinois Atty. Gen. Lisa Madigan, argued that the bankruptcy threat was hollow and that the proposed change to state law would unfairly privilege the company.

"This comes at a very important time for us," said Sen. James Clayborne (D-Belleville), the sponsor of a Senate bill that would limit the bond requirement. "We're strapped for cash. We don't want them to go out of business before they can pay the $9 billion they owe us."

Rep. Robert Molaro (D-Chicago), the sponsor of a similar House bill, said: "That's a tough amount of money to give up. It's a lot to put at risk at a time like this."

But with both court and legislative deadlines looming, lawyers for Philip Morris are stepping up their lobbying. On Tuesday, former Gov. James R. Thompson, one of the attorneys representing Philip Morris, joined several business and civic leaders in publicly asking the legislature to act.

"No company can be expected to post a bond of $12 billion," Thompson wrote in a memo circulated in the Capitol. "Philip Morris USA may have to take alternative legal steps to protect its assets during the appeal. These potential legal steps could implicate Philip Morris USA's payments" to the state under the 1998 settlement.

The lobbying push comes less than a week after Madison County Circuit Judge Nicholas Byron awarded the largest judgment in Illinois history to smokers who had sued Philip Morris. The smokers accused the company of misleading them and others into believing its low-tar cigarettes were safer than regular brands.

On Friday, Byron ordered Philip Morris to pay $7.1 billion in compensatory damages to smokers who had bought Marlboro Light or Cambridge Light cigarettes between 1971 and February 2001. He also awarded $3 billion in punitive damages to the state.

Under Illinois court rules, defendants who want to appeal must post a bond equal to the size of the judgment plus costs and interest. Byron set the bond at $12 billion.

Despite Philip Morris' bankruptcy warning, Madigan said she would fight any attempt by the company to avoid posting the full bond.

"I think Philip Morris is doing all that they can to prevent paying out money in verdicts and to the State of Illinois," Madigan said.

"If you look at the stock market and you look at the stock price for Philip Morris, you'll see that they are not on the verge of bankruptcy, and they continue to be a healthy company--although [it is] not healthy for us to use their products."

Excerpts from Press Release, March 26, 2003, SOURCE Korein and Tillery,
Philip Morris Attempting to Divert Attention From Landmark Light Cigarette Verdict With Hollow Bankruptcy Claim And Special Interest Bond Legislation, Experts Say

Legal experts are today questioning the validity of claims made by Philip Morris USA that the $12 billion dollar appeal bond ordered last week by Judge Nicholas Byron in the first consumer fraud judgment on light cigarettes would bankrupt the company.  The lead attorney in the case (Miles v. Philip Morris), Stephen Tillery of Korein and Tillery, says Philip Morris's claim of going broke is an attempt to shift the focus from the real issue at hand.

    "Philip Morris would like the world to focus on their financial woes rather than the court finding that more than a million consumers of light cigarettes were defrauded, many of whom will pay with their lives," Tillery said.

    Today, Illinois Attorney General Lisa Madigan was quoted in published reports pointing out that "the bankruptcy threat is hollow and that the proposed change to state law would unfairly privilege the company."

    "I think Philip Morris is doing all that they can to prevent paying out money in verdicts and to the State of Illinois," Madigan said.  "If you look at the stock market and you look at the stock price for Philip Morris, you'll see that they are not on the verge of bankruptcy, and they continue to be a healthy company -- although [it is] not healthy for us to use their products."

    Legal experts also doubted that the posting of the appeal bond would in any way jeopardize payment of master tobacco settlement (MSA) funds to the state of Illinois. Special interest legislation currently pending before the Illinois General Assembly would seek to limit the size of such bonds, and the impact would be place Illinois behind other states for financial recovery if Philip Morris did file bankruptcy.

    "This is ill-considered special interest legislation.  Philip Morris made millions deceiving Illinois smokers and now wants the Illinois legislature to bail it out," said Donald W. Garner, a professor at the Southern Illinois University School of Law.  "I do not believe that Illinois MSA payments are endangered by the Miles suit and in all events the legislature has no business protecting the tobacco industry from the consequences of their fraud and deceit.  The legislature should note that there is strong Illinois Supreme Court constitutional precedent against such legislation," Garner added.

    "If it is a struggle for them to raise the bond, perhaps they should have thought of that before they deceptively marketed light cigarettes," Dr. Garner said.

Excerpts from The St. Louis Post-Dispatch, March 25, 2003, headlined, Appeal bond could bankrupt Philip Morris, Thompson says, writer Alexa A. Guilar, with contributions from the Associated Press

Illinois' treasury stands to lose billions of dollars it is scheduled to receive from tobacco company Philip Morris USA if the company goes bankrupt paying a $12 billion appeal bond from a recent Madison County verdict, former Gov. Jim Thompson warned Tuesday.

Thompson, now chairman of the Chicago law firm that represents Philip Morris, was in Springfield to urge the Legislature to quickly pass a proposal to cap appeal bonds. That's the money that defendants have to put up when they lose a case and plan to appeal to a higher court.

That would be "physically and financially impossible" for the company, Thompson said. He warned it could bankrupt Philip Morris.

"Illinois' payments (from the tobacco settlement) are in jeopardy, make no mistake about that," Thompson said at a news conference.

But Stephen Tillery, lead attorney for the plaintiffs in the Madison County case, said Philip Morris is trying to play down the amount of revenue it has available. Tillery said that confidential court documents show that the company has more than enough cash on hand to cover the bond.

Though Democrats are traditionally sympathetic to the concerns of trial lawyers, House Speaker Michael Madigan and Senate President Emil Jones, both Democrats from Chicago, are behind the bill, which bodes well for its chances of passage. However, lined up against the bill is one of the state's most powerful and well-funded lobbies, the Trial Lawyers Association.

Jim Collins, executive director of the association, called the proposal unconstitutional. He said that if the Legislature passes a cap, he expects the plaintiff's lawyers in Madison County to challenge it in court. He said the cap would violate the separation of powers between the judicial and legislative branches, and it is improper "special legislation" because it singles out only tobacco companies. Also, Collins said, it is unconstitutional to pass a law retroactively affecting the appeal bond on a case that has already been decided.

Collins also noted that Philip Morris is one of the companies facing a $145 billion judgment in Florida. If that suit bankrupts the company and it has not posted an appeal here, the Illinois plaintiffs and the state, which was awarded $3 billion in the Madison County case, would not get their money, Collins said.

Philip Morris and the plaintiffs are meeting Thursday at the request of Madigan. Collins said the plaintiffs might be willing to negotiate a smaller bond, separate from any legislation.

The bill to cap appeal bonds narrowly passed the House but is stalled in a Senate committee. The amount of the proposed cap is still under debate, with talks so far ranging from caps of $25 million to $100 million.

The bill's Senate sponsor is state Sen. James Clayborne, D-Belleville.

The bill is HB276.

Excerpts from Reuters, March 25, 2003, headlined, Cap in Illinois cigarette appeal bonds uncertain, writer not identified.

Former Illinois Gov. James Thompson lobbied state lawmakers on Tuesday to cap appeal bond requirements that were underscored by a $10.1 billion verdict last week in Madison County, Illinois, against Altria's Philip Morris USA.

But legislative willingness to enact any cap was uncertain.

"I haven't detected any significant movement or concern for changing the appeal bond law, despite the lobbying efforts of the former governor," said Steve Brown, spokesman for House Speaker Mike Madigan, a Democrat from Chicago.

Thompson, whose law firm Winston & Strawn defended Philip Morris in the lawsuit, urged state lawmakers to take immediate action to reform the state's appeal bond rule, calling it outmoded.

Thompson said its existence could ultimately impair the state's ability to collect up to $9.1 billion under a 25-year settlement agreement with U.S. tobacco companies.

Legislation was introduced earlier this year in the Democrat-controlled House that would have capped the appeal bond in civil cigarette liability cases at $25 million. However, a lack of consensus led to the bill being gutted before it was sent onto the Senate, according to State Rep. Barbara Flynn Currie, a Democrat from Chicago and a bill sponsor.

But Thompson told Reuters that a retroactive fix by the legislature was possible because the issue involved appellate procedure. He said a meeting was scheduled on Thursday with lawyers representing the plaintiffs in the lawsuit to see if an agreement could be reached on setting a reasonable appeal bond cap. If there is an agreement, he said it could help sway lawmakers to pass a bill.

Excerpts from Associated Press, March 25, 2003, headlined, Cigarette giant asks Legislature to lift $12 billion burden, writer Christopher Wills.

Cigarette giant Philip Morris, with lobbying help from former Gov. James R. Thompson, is asking Illinois lawmakers to take a huge financial burden off its shoulders.

"It is physically and financially impossible to post a $12 billion bond," said Thompson, a lobbyist. Thompson's law firm defended Philip Morris in the trial that led to last week's $12 billion verdict.

Jim Collins, the [Illinois Trial Lawyers] Association's executive director, argued the bill would be unconstitutional because it applies retroactively and because it is special legislation for a handful of companies.

He also noted Philip Morris is one of the companies facing a $145 billion judgment in Florida. If that lawsuit bankrupts the company and it has not posted an appeal bond here, the Illinois plaintiffs — and the state, which was awarded $3 billion in the Madison County case — would not get their money, Collins said.

Philip Morris and the plaintiffs are meeting Thursday at the request of House Speaker Michael Madigan.

Collins said the plaintiffs might be willing to negotiate a smaller bond, separate from any legislation.

Excerpts from The Chicago Sun-Times, March 26, 2003, headlined, $10 bil. Philip Morris verdict could have impact on Kraft, writer Sandra Guy, with contributions from the Associated Press

Kraft Foods faces enormous uncertainties and, in the short run, higher costs of doing business because of its ties to cigarette maker Philip Morris.

In the landmark ruling, Judge Nicolas Byron ordered Philip Morris to pay $10.1 billion in damages and to put up a $12 billion bond in the next 30 days in order to appeal. The case was historic for two reasons: The lawsuit was the first in the United States to accuse a tobacco company of consumer fraud, and the verdict was the largest in Illinois history.

Philip Morris' parent company, Altria Group Inc. (formerly Philip Morris Cos.), owns 84.1 percent of Kraft's outstanding shares of all classes of common stock, including 50.1 percent of Kraft's Class A common stock and all of its Class B common stock. That gives Altria 97.8 percent of Kraft's shareholder voting power.

So if Philip Morris files for bankruptcy protection, would Kraft be dragged along with it?

Here is what Kraft told potential investors when Philip Morris sold 16 percent of Kraft's shares in a June 2001 public offering: If plaintiffs won a tobacco verdict against Philip Morris, Kraft's common stock owned by Philip Morris "would be among the assets of Philip Morris available to satisfy these liabilities."

Another possibility is that Altria will soon spin off the rest of Kraft. But Altria CEO Louis Camilleri told the Financial Times of London in late January that Philip Morris must await the outcome of its appeal, along with other cigarette companies, of a record $145 billion in punitive damages assessed against them in a class-action lawsuit brought by sick smokers in Florida.

If Altria acted before a court rules on the appeal, Altria could be accused of trying to spin off Kraft in order to keep it from being seized in a bankruptcy, financial analysts said.

In a 10-K filing late Tuesday, Kraft noted that the three major credit rating agencies have put Kraft's credit ratings on "negative watch" for a possible downgrading.

Though the action is expected to increase Kraft's short-term borrowing costs, none of Kraft's debt agreements require accelerated repayment if its credit ratings fall, the company said in the 10-K.

Wesley Moultrie, senior director at Fitch Ratings in Chicago, said Tuesday that most majority-owned companies have the same credit ratings as their parent corporations.

Fitch's concern centers on the short deadline and liquidity risk that Altria faces in posting the $12 billion bond.

Excerpts from Bloomberg, March 21, 2003, headlined, Philip Morris Loses $10 Bln 'Light' Cigarette Verdict, writer William McQuillen

Philip Morris USA, a unit of Altria Group Inc., was ordered by an Illinois state judge to pay $10.1 billion for deceiving customers by advertising "light'' cigarettes as less harmful.

Judge Nicholas Byron told the world's largest cigarette maker to pay $7.1 billion in compensatory damages and $3 billion in punitive damages, according to court papers. Byron also ordered Philip Morris to post a $12 billion bond.

"The scale of the award represents a major challenge to Philip Morris USA because of the bonding issue,'' said Merrill Lynch analyst Martin Feldman.   "The scale of this award is larger than the market anticipated.''

The lawsuit, filed on behalf of 1.1 million smokers in Illinois, is the first class-action light cigarette case to reach trial. With similar suits pending against Philip Morris, R.J. Reynolds Tobacco Holdings Inc. and British Tobacco Plc's Brown & Williamson in other states, investors and analysts have expressed concern that an Illinois loss may lead to a series of expensive judgments.

New York-based Philip Morris said it would ask an appellate court to block the decision, and would also appeal the verdict and the ruling that certified the case as a class-action.

The tobacco company will have trouble with its regular argument that the punitive damages were excessive, since they are about half of the compensatory damages total, said Richard Daynard, a Northeastern University law professor and anti-smoking activist.

"This same kind of case can be brought in most of the other 49 states,'' Daynard said.  "It should be enough money to get Philip Morris's attention.''

This judgment is the second-largest pending against the tobacco giant. In July 2000, a Miami jury told Philip Morris to pay $74 billion to a class of Florida smokers. That case is under appeal.

In closing arguments in Edwardsville last week, plaintiffs' attorney Stephen Tillery asked the judge to award $7.1 billion in compensation from Philip Morris and $14.2 billion in punitive damages.

During the trial, Philip Morris told Byron that it never claimed that light cigarettes were healthier. In addition, company lawyers argued that light cigarette smokers never proved how much tar and nicotine they ingested, as compared with smokers of regular-strength cigarettes.

Documents presented as evidence in lawsuits during the 1990s show the tobacco industry knew smokers using lower-nicotine brands compensated by covering ventilation holes and inhaling more deeply. That meant they were breathing more tar and nicotine than government tests estimated, according to the documents.

The plaintiffs proved that Philip Morris violated fraud laws "through the deceptive act of misrepresenting its Cambridge Lights and Marlboro Lights products as lights," Byron wrote in his 51-page order.  "The court further finds that Philip Morris intended that the class members in this case rely upon the deception created by these misrepresentations.''

Byron awarded the $3 billion in punitive damages to the state of Illinois, rather than to the plaintiffs.

With light cigarette trials on the horizon, Philip Morris said in November it would insert notices into about 130 million packs of light, medium, mild and ultra-light cigarettes saying they aren't safer than full-strength brands.

The company has said the inserts are a response to a U.S. National Cancer Institute report in November 2001 that said low tar or light cigarettes didn't reduce the chances of getting smoking-related diseases, rather than an attempt to protect the company from litigation.

The Illinois lawsuit was brought by Susan Miles of Granite City, Illinois, and certified as a class-action on behalf of people who bought Marlboro Lights or Cambridge Lights. Byron heard the case without a jury.

Excerpts from Reuters, March 21, 2003, headlined Philip Morris Loses $10 Billion Verdict, writer Jessica Wohl

An Illinois judge on Friday ruled that Philip Morris USA deceived smokers into thinking "light" cigarettes were safer than regular cigarettes and ordered the largest U.S. tobacco company to pay $10.1 billion in damages.

Philip Morris USA, part of Altria Group Inc., was the sole defendant in the class action case, in which it was sued under Illinois consumer fraud laws. The company said it would seek an immediate review of the decision.

Punitive damages, awarded to punish a wrongdoer, were appropriate "because Philip Morris' motive was evil and the acts showed a reckless disregard for the consumers' rights," Byron said in the ruling.

The case, known as Miles v. Philip Morris, was the first class-action to reach trial regarding use of the word "light" to promote cigarettes.

The plaintiffs argued they bought light cigarettes thinking they posed fewer health risks than regular cigarettes, and found out only later this was not true.

"The Court finds that the term 'Lights' not only conveyed a message of reduced harm and safety, but also conveyed to Class members that the 'Lights' cigarette product was lower in tar and nicotine," Byron said in his ruling.

Unlike other smoking cases, the plaintiffs did not seek payment for medical monitoring or other health-related claims, but instead wanted repayment of the money they spent on light cigarettes.

Similar cases are pending, but no other trials have begun. An Illinois case against R.J. Reynolds is set for trial in October 2003 and another Illinois case, against Brown & Williamson, part of British American Tobacco Plc, is set for March 2004, plaintiffs' lawyers said.

Byron ordered Philip Morris USA to pay $7.1 billion in compensatory damages to smokers and $3.0 billion in punitive damages to the state of Illinois, according to the ruling.

Byron granted Philip Morris USA's request that the order be stayed for 30 days before the company would have to post bond of $12 billion to file an appeal.

Tobacco companies are lobbying for a cap on appeal bonds, which many say could bankrupt them and endanger the states' 25-year, multibillion-dollar settlement with the industry reached in 1998. The Campaign for Tobacco-Free Kids said Illinois should resist efforts by Philip Morris to pass legislation that would limit the amount of bond money the company has to post in the case.

Excerpts from Edwardsville Intelligencer, March 11, 2003, headlined, Big Tobacco trial nears conclusion; writer, Norma Mendoza.

Plaintiffs are asking for $7.1 billion in actual damages plus twice that in
punitive damages, claiming that Philip Morris used deceptive labeling to
mislead them into believing that Marlboro Lights and Cambridge Lights would
be better for their health because they contain "lowered tar and nicotine."

Because the plaintiffs opted for a bench trial, the case is now Byron's to

In closing, Stephen Tillery, of Carr Korein Tillery in Belleville and St.
Louis, lead attorney for the plaintiffs, said 57,600 Americans have died
from smoking since the trial began Jan. 21. The class action suit was filed
in February 2000 under the Illinois Consumer Fraud Act. Tillery said it is a
landmark case in that it is the first class action suit to come to trial in
Madison County and the first tobacco suit anywhere in the country filed on
grounds of consumer fraud.

George Lombardi, of Winston Strawn in Chicago, presented closing arguments
for Philip Morris. ... Lombardi said they could not cite the amount of tar and
nicotine in the Lights brand they smoked, and in some cases continue to
smoke, nor did they know how much less tar and nicotine the Lights contained
than their former brands.

Lombardi further claimed the smokers are addicted to the nicotine the
cigarettes contain and not to a particular brand of cigarettes.

Tillery said none of those arguments negate the fact that the company was
deceptive and in violation of the consumer laws in Illinois. He said it is
because of the lawsuit that Philip Morris placed an "onsert" on some of its
packages of Marlboro Lights and Cambridge Lights stating that "There is no
such thing as a safe cigarette."

According to Lombardi, the onsert was placed into all of the packages
manufactured during one week, calculated to reach 85 percent of the smokers
of those brands. Information was also placed on the company's Web site and
in newspaper ads.

The onsert states that the terms "Ultra Light," "Light," "Medium." and
"Mild," are meant to be descriptors of the strength of the taste and flavor
of the cigarettes.

It also states that those terms, as well as "low tar," and "lowered tar and
nicotine" also serve as an indication of the amounts of tar and nicotine
yield per cigarette as measured by a standard government test.

For the first time, the information tells smokers the numbers are not meant
to indicate the amount of tar or nicotine actually inhaled by smokers
because people do not smoke like the machines used in the testing method.

The class members include everyone who purchased Marlboro Lights and
Cambridge Lights in Illinois for personal consumption from 1971 up to the
time the case was certified as a class action on Feb. 8, 2001. Tillery used
Illinois tax information and marketing information about cigarettes to
determine how much money consumers spent on the two brands during that time.

... Russ Smith, an attorney from Akron, Ohio, was in
the courtroom to hear the closing arguments. He is involved in a similar
case in Ohio to be brought against a tobacco company for violating Ohio's
consumer fraud laws.

"I can't believe I'm alive to see this continue," Smith said. "I hope I live
to see the tobacco companies broken so they can't make any more cigarettes.
They do more damage than all the Saddam Husseins in the world."

Excerpts from The Post-Dispatch, March 21, 2003, headlined, Philip Morris must pay $10.1 billion, a new landmark, writer, Trisha L. Howard

Philip Morris USA was ordered Friday by a Madison County judge to pay a stunning $10.1 billion in damages for defrauding Illinois residents by advertising Marlboro Lights and Cambridge Lights as lower in tar and nicotine than regular cigarettes.

Madison County Circuit Judge Nicholas G. Byron set a record in Illinois by awarding $7.1 billion in compensatory damages and $3 billion in punitive damages.

Lead attorney Stephen Tillery hailed the verdict as a victory for the public health community.

"The big winners here are the smokers," Tillery said just moments after reading Byron's written judgment. "This order absolutely confirmed that light cigarettes have been proven in this courtroom to be more dangerous than regular cigarettes."

Most suits against the tobacco industry claim that the plaintiffs suffered personal injuries after smoking.

This was the first case in the nation to make it to trial based on the claim that class members suffered economic damages because of the company's fraud.

A professor from the Massachusetts Institute of Technology testified that an analysis of Marlboro Reds and Lights showed that the light cigarettes had higher levels of 22 of the 25 toxic constituents than their regular counterparts, Tillery said.

"These people have not only been duped out of their money, but they have been exposed to a more dangerous product," Tillery said. "That message has to get out to the American public, because it could save lives."

Carr Korein Tillery has similar suits pending in Madison County against R.J. Reynolds and Brown & Williamson. In addition, similar class-action cases have been filed by other firms in other states including Missouri, Massachusetts, Florida and Tennessee.

"People need to know this judgment will follow Philip Morris around," Tillery said. "Even if an appeal is taken, this document establishes liability not just here but every place in this country."

Edward L. Sweda Jr., a senior lawyer with the Tobacco Products Liability Project at Northeastern University School of Law in Boston, agreed that the verdict would set an important precedent.

"What is looming and causing great consternation in tobacco boardrooms across the country is that tobacco companies are facing being held responsible for the despicable scam of representing light cigarettes as a viable alternative to quitting smoking," Sweda said. "This was really a campaign to maximize their profits at the expense of the health and lives of their customers."

Excerpts from Edwardsville Intelligencer, March 22, 2003, headlined, The decision is $7.1 billion, writer Norma Mendoza.

In a landmark decision, Madison County Judge Nicholas Byron on Friday ordered Philip Morris to pay $7.1005 billion in compensatory damages to smokers of Marlboro Lights and Cambridge Lights in the state of Illinois.

The attorneys for the plaintiff were awarded 25 percent of the compensatory judgment. Lead attorney Stephen Tillery estimated it cost some $3 million to see the case through to this point.

In his judgment, Byron said the court finds that " . . . Philip Morris' practices offend public policy, are immoral, unethical, oppressive and unscrupulous and that this course of conduct caused a substantial injury to the Class members in this case."

Byron ordered the tobacco company to pay $3 billion in punitive damages which will go to the state of Illinois. Byron awarded $17,811.64 to Mike Fruth, Pin Oak Township supervisor, and $11,384.77 to Sharon Price, a dispatcher and records clerk in the East Alton Police Department, both members of the Class in the lawsuit.

Tillery used statistics from Illinois tax records and from Philip Morris' own records about its market share in Illinois plus smokers' statements of the length of time they had smoked the brands and number they had smoked per day to calculate their compensation.

Tillery said the decision makes him very happy because, "I've invested blood, sweat and tears in this because I believe in this case. This fraud has to stop, the whole thing has to stop. Little kids need to stop thinking they won't be affected by smoking."

Tillery said 430,000 people die in the United States every year from diseases caused by smoking.

For the first time in a class action, a tobacco company has been found guilty of consumer fraud and deceptive practices for claiming its "light" cigarette brands were lower in tar and nicotine than its regular brands.

The smokers will get back the money they have paid for these brands since 1971 for Marlboro Lights, and since 1986 for Cambridge Lights through the end of the Class Period in the case, Feb. 8, 2001.

Byron concluded that testimony and documents offered at the trial demonstrated that Philip Morris' response to growing concerns about the negative health impact of smoking " . . . was to create a disinformation environment wherein Philip Morris through its own public statements (and through its participation in the Tobacco Institute) knowingly and falsely disputed scientific conclusions that established a connection between smoking and diseases.

"Philip Morris' strategy was to create doubt about the negative health implications of smoking without actually denying these allegations. . . . The evidence at trial establishes that Philip Morris continued this disinformation campaign through the mid-1990s."

In his judgment, Byron reserved continuing jurisdiction to administer and distribute the judgment award among the Class members, based upon their proof of Class membership. He decreed that all unclaimed funds will be divided among 11 law schools, the American Cancer Society for research in tobacco-related cancers, Illinois Domestic Violence programs, Illinois Legal Aid Services and the Illinois Bar Association for costs incurred in administering the awards.

The class action lawsuit of Susan Miles et al v Philip Morris Inc. was certified in Madison County Feb. 8, 2001, and the bench trial before Byron began Jan. 21 and concluded March 6.

Tillery said ... that the company has known for 25 years that the light brands were actually worse for smokers than the regular cigarettes the company makes. He said Philip Morris set up IMBIFO, a biological testing laboratory, in Cologne, Germany, to keep the results out of the reach of U.S. courts.

"It was a revelation to them that they had never faced in the courts," Tillery said. "The studies they did in the mid-70s showed that putting those holes in the filters actually increased the possibility of people getting cancer."

In his judgment, Byron said evidence presented by the plaintiffs indicated that Philip Morris knew for 25 years that ventilating the light cigarettes by placing air holes in the filters actually caused smokers to inhale deeper and hold the smoke in their lungs longer, thereby deriving more nicotine and tar than they would have from regular cigarettes.

Further, the plaintiffs introduced the Massachusetts Benchmark Study which showed, based upon constituent toxicity testing results performed by Philip Morris itself, that Marlboro Lights have higher specific toxicity levels for almost all of the toxic substances measured in cigarette smoke in the study. Byron said this was completely unrebutted by the attorneys for Philip Morris.

Ohlemeyer dredged up the study by the Manhattan Institute which called Madison County the class action capital, although he acknowledged that the Miles v Philip Morris case is the first one to actually go to trial.

Several other class action lawsuits filed in Madison County were settled out of court before trial.

Byron granted Philip Morris's request for a stay of execution and allowed a stay of 30 days.

Thereafter, he said enforcement will only be stayed if an appeal bond of $12 billion is presented and approved.

Tillery said the fact that the judge has already set an appeal bond amount precludes the bond being affected by pending legislation in Springfield to set an appeal bonds cap on judgments against tobacco companies. He said the legislation was created with this case in mind because the tobacco company warned the large amount of damages requested could adversely affect the state's share of the Master Tobacco Settlement, but, he said the General Assembly should also consider the $3 billion punitive damages award that the judge ordered to go to the state.

"If there is one message to get out to the public from this, it is that the judge has found in this order that smokers encountered higher levels of toxic constituents of smoke in the lights than they would have if they had smoked the regular cigarettes," Tillery said.

More than six law firms and dozens of attorneys were involved in the prosecution and defense of the lawsuit. Tillery of Carr, Korein Tillery, said the company's Chicago office furnished attorneys and the Charleston, S.C. firm of Richardson, Patrick, Westbrook and Brickman, also assisted in the case. The defense was represented by the law firm of Winston Strawn in Chicago and the Edwardsville firm of Burroughs, Hepler, Broom, MacDonald, Hebrank and True.

Excerpts from The New York Times, March 22, 2003, headlined, Philip Morris Faces Big Penalty, writer, Sherri Day.

In one of the more striking elements of the ruling, the judge, Nicholas Byron, wrote that Philip Morris, a unit of Altria, knew that light and low-tar cigarettes were actually more harmful than their regular counterparts because of increased ventilation in the reduced-tar product, which allows more toxic smoke to be inhaled by consumers.

"I'm thrilled that this message will go out, and I'm thrilled that this judgment will follow Philip Morris to every courtroom in the United States," Stephen Tillery, the plaintiffs' lawyer, said. "And I'm thrilled that every time a light-cigarette smoker gets sick, they can take this judgment and that their liability has been proven for them."

The lawsuit, which was originally filed by Susan Miles and four other plaintiffs, is the first light, or low-tar, cigarette case to reach a trial. It is also one of the few class-action lawsuits to be certified against a tobacco company. In this case, the class consists of 1.1 million Illinois smokers who bought Marlboro or Cambridge Light cigarettes from 1971 to February 2001.

Philip Morris officials have long claimed that the class in the Miles case should never have been certified. The company also argued that it did not deceive consumers because its light cigarettes have always been labeled with the surgeon general's warning, which alerts consumers to the dangers of smoking.

William S. Ohlemeyer, vice president and associate general counsel at Philip Morris, said ...
"The verdict ignores the law, it ignores the facts and it ignores common sense."

At least nine cases are pending in other states, including California, Missouri, New Hampshire and Tennessee.

Excerpts from Press Release, source, Richardson, Patrick, Westbrook & Brickman, LLC, South Carolina, March 21, 2003, titled, Landmark Ruling: Philip Morris Today Ordered to Pay $10.1 Billion in Nation's First Consumer Fraud Lawsuit on Light Cigarettes, Co-Counsel Richardson, Patrick in S.C., And Carr-Korein-Tillery in Illinois Led Case

CHARLESTON, S.C., March 21 /PRNewswire/ -- In a landmark Illinois Circuit Court ruling today, Philip Morris was ordered to pay damages of $10.1 billion -- $7.1 in actual damages and $3 billion in punitive damages -- for more than 30 years of defrauding American consumers about the dangers of smoking light cigarettes. The case, which is the nation's first consumer fraud lawsuit on light cigarettes, was led by attorneys at Richardson, Patrick, Westbrook & Brickman, and their Illinois co-counsel, Carr-Korein-Tillery.

According to Partner Michael Brickman, who played an instrumental role in the case, because this is the first ruling of its kind, it will "pave the way" for other similar cases currently pending across the country.

"This verdict is truly the first of its kind," says Brickman, "and is the result of years of fraudulent misrepresentations by Philip Morris."

Judge Nicholas Byron found for the plaintiffs in Miles v. Philip Morris based on evidence that proved light cigarettes are just as harmful as regular cigarettes, and may even be more harmful.

The firms presented evidence that showed Philip Morris concealed crucial research data revealing the detrimental effects of light cigarettes for more than 30 years. One study in particular showed that Marlboro Light cigarettes have greater quantities of 22 out of 25 toxic carcinogens than Marlboro Reds.

The case also proved that Phillip Morris designed a cigarette that would intentionally score low on Federal Trade Commission (FTC) machine testing parameters, then sold it as a light cigarette.

RPWB, Carr-Korein-Tillery will also try a similar class action cases pending in Illinois against R.J. Reynolds and Brown & Williamson. The case against R.J. Reynolds is set for trial on October 21, 2003.

Excerpts from Reuters, March 28, 2003, headlined Italy fines Philip Morris, ETI for price fixing, writer Giselda Vagnoni.

ROME, March 28 (Reuters) - Italy's antitrust agency said on Friday it had fined tobacco company Philip Morris International 50 million euros ($53.5 million) and local cigarette maker Ente Tabacchi Italiano (ETI) 20 million euros for price fixing.

"The Guarantor Authority for Competition has determined there was an agreement to restrict competition...between the two key players in Italy's tobacco market, Philip Morris and ETI," the watchdog said in a statement.  It added that between June 1993 and March 2001, state-owned ETI and five Philip Morris (NYSE:MO - News) units coordinated price increases that helped them maintain control of 90 percent of the market and that at times limited competition.

Philip Morris International, a unit of New York-based Altria Group Inc. (NYSE:MO - News), said in a statement it would appeal against the fine.

Italy's antitrust agency launched an investigation into pricing by tobacco companies in its domestic market in June, 2001. It reviewed pricing tendencies between 1993 and 2001.

ETI owns distribution rights in Italy for Philip Morris products including its Marlboro brand cigarettes.

The Italian Treasury is in the process of privatising ETI and the sale is expected to raise about 1.2 billion euros ($1.3 billion).  The head of the antitrust authority later told Reuters the watchdog's ruling would not effect ETI's sale.

Binding bids are due to be handed in by the end of April.

Five groups have voiced an interest in the group, which produces Toscano cigars, including a consortium grouping British American Tobacco and Swedish Match (Stockholm:SWMA.ST - News), Japan Tobacco, and a consortium led by Spain's Altadis.

The Treasury has said it reserves the right to float ETI on the market if the offers it receives are unsatisfactory.

[Virginia GASP] Updated 11 April 2003