NEW YORK -- Five of the largest tobacco companies in the country won a legal victory late last week when a federal appeals court rejected an attempt to establish a nationwide class that would have established an industry fund to pay punitive damages for yet-to-be filed claims from smokers across the country.
On May 6, the Second Circuit U.S. Court of Appeals overturned a class-certification order in the smoking and health case that was originally entered on Sept. 19, 2002, by a federal judge in Brooklyn, N.Y. The proposed class, known as Simon II, is [image-nocss] a class-action case that claims that deceptive marketing practices by the tobacco industry caused its members' addictions to cigarettes, according to Bonnie Herzog, a tobacco stock analyst with Smith Barney, New York.
The defense argued, among other things, that certification of the class would violate federal court rules as well as the constitutional rights of both absent class members and the defendants, and that such suits are totally unmanageable and are generally brought for the sole purpose of coercing settlement.
Noting that the proposed class failed to satisfy the threshold requirements for certification, the Second Circuit court ruled, We must vacate the district court's certification order and remand for further proceedings.
By vacating the order, the Second Circuit has rendered it null, effectively cleaning the slate as if the decision had never occurred, which is certainly positive for the tobacco industry, said Herzog. Also, the Second Circuit remanded the proceeding [back] to the district court where a different class will have to be proposed and certified, whichwe feel is unlikely. Furthermore, if the plaintiffs do proceed in filing another nationwide class action against the industry under different grounds, this will likely take many years.
Philip Morris USA and R.J. Reynolds Tobacco Co., two of the five defendants named in the case, both applauded the court's ruling.
The appeals court decision is the correct and proper one, said William S. Ohlemeyer, Philip Morris' vice president and associate general counsel.
Charles A. Blixt, executive vice president and general counsel for R.J. Reynolds, agreed. This decision is correct and in line with decisions made by every other federal court and most state courts [in other cases], which have determined that class-action lawsuits are not appropriate for trying smoking and health cases, he said.
Other defendants named in the Second Circuit's case included Brown & Williamson Tobacco Corp., Lorillard Tobacco Co. and Liggett Group Inc. If the class, and thus the fund, had been approved, cigarette price increases would likely have resulted to establish and maintain the fund.
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