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. Last Updated: 07/27/2016

Litigation Over Tobacco Seen As Biggest Threat to Industry

LOS ANGELES -- President Bill Clinton's plan to curb tobacco sales further is one more headache for the besieged tobacco industry but, as a financial threat, the rules are a sideshow to the menacing litigation facing the $45 billion business.


The threat that cigarette makers would have to pay damages to ex-smokers or their families rose dramatically two weeks ago when a Florida smoker won a $750,000 award from Brown & Williamson Tobacco Corp.


But the industry got good news late Friday when, only hours after the president's announcement, an Indiana jury ruled for the tobacco companies in a case brought by a smoker's family there.


The industry -- which never has paid any damages through 45 years of litigation -- had feared that another verdict against it would put the companies at additional risk.


Experts said the threat of rulings against the tobacco industry remains strong because some key evidence used in the Florida case was not available to the jury in Indiana. The evidence was company documents linking nicotine and addiction.


Now the industry has even more legal problems, thanks to Clinton's new rules, although his plan is not expected to have a serious financial impact on the otherwise healthy tobacco companies. Philip Morris Cos., RJR Nabisco Holdings Corp. and others plan to seek court help in blocking the rules.


"The real financial threat here [to the companies] is these lawsuits,'' said John Maxwell Jr., an industry analyst at Wheat First Securities Inc. in Richmond, Virginia. "That's what costs money.''


The challenges likely will drag out the rules' implementation for months, if not years, and so consumers are unlikely to see immediate changes from the president's action.


Philip Morris and RJR Nabisco termed the president's rules unlawful, but declined to elaborate on their financial impact.