BAT shares knocked by US lawsuit news

TOM STEVENSON

and JOHN CARLIN

A furious tobacco industry closed ranks yesterday after one of its smallest manufacturers broke the line by agreeing to settle two important liability cases in the United States. News of the out-of-court deal, which sets a dramatic and unexpected precedent, sent BAT's shares tumbling in London.

Liggett, which makes about 2 per cent of American cigarettes including the Eve and Chesterfield brands, has offered to settle its portion of two class actions against the industry and could pay out between 2 and 7 per cent of its pre-tax income over the next 24 years to states attempting to recoup the cost of funding smoking-related health care.

To settle a suit brought by 60 law firms on behalf of US smokers claiming to be addicted, Liggett has also agreed to pay a further 5 per cent of its pre-tax income for 25 years. Pending approval by a federal court in Louisiana, it would be the first time a cigarette manufacturer has paid a single cent in legal redress for tobacco-related illnesses.

BAT, which is involved in the US lawsuits through its Brown & Williamson subsidiary, said it would continue to defend its position aggressively. It also pledged to continue the fight to prevent the US Food & Drug Administration from extending its jurisdiction to the tobacco industry.

BAT was joined by the other US tobacco giants in its promise to fight on. Philip Morris, the US's biggest tobacco maker, said it remained "confident in the strength of our litigation position, and we intend to fight and win all of the cases in which we are involved." Lorillard Tobacco said it had no plans to settle any liability litigation.

A spokesman for BAT attempted to play down the impact of Liggett's decision to break ranks with the rest of the industry, claiming that the move was based on a continuing proxy fight with RJR Nabisco to force a split of the bigger company into its constituent tobacco and food operations. Liggett is understood to be attempting to force RJR to take it over and the legal settlement is being seen as a deck-clearing move to force a bid.

As part of the deal with the states of Florida, Massachusetts, Mississippi and West Virginia, Liggett has agreed to fund programmes to help people give up smoking. The states would use the money to help cover costs of treating smoking-induced diseases, as well as education programmes to persuade people to quit cigarettes.

Liggett also said it had agreed to comply with regulations proposed by the Clinton administration to discourage the sale of cigarettes to children - for example by prohibiting the use of cartoon characters in cigarette advertising.

If the court accepts the deal, Liggett would be absolved from further liability in a class-action suit built on the argument that nicotine levels in cigarettes have been deliberately manipulated by US tobacco companies to foster addiction.

Anti-tobacco campaigners have been increasingly confident of substantiating that claim since Jeffrey Wigand, a former BAT employee in the US and the industry's highest ranking defector, turned on his former company, claiming it had long known that tobacco was an addictive drug even when it made public statements to the contrary.

The consortium taking on the tobacco companies represents millions of smokers, as well as former smokers. The total number of plaintiffs involved could add up to 50 million people.

Industry analysts were divided yesterday over the likely impact of Liggett's move. One said: "The settlement is tantamount to an admission of guilt for the whole tobacco industry and that could affect their ability to contest legal action against them. There is no cap on the potential liability of all the tobacco companies to pay compensation to smokers and pay the cost of treating smoking-related illnesses."

Others claimed, however, the development might actually clear away some of the uncertainty that has dogged the industry.

Liggett is the smallest of America's Big Five tobacco makers, which also include RJ Reynolds, American Tobacco, Lorillard Tobacco and Philip Morris. Liggett's proposed damage control exercise has enraged the other companies because up until now it has stood by them, in a united front, to repel attacks by litigators or government health agencies seeking stricter regulations on cigarettes.

Bennet LeBow, chairman and chief executive of Liggett's parent company, Brooke Group, said in a statement that the agreement meant that Liggett's assets would "no longer be held hostage by the tobacco litigation".

"The tobacco industry has lived for too long with the possibility of financial catastrophe from product liability suits that could destroy the industry," Mr LeBow added.

Legal landmarks in the long battle against tobacco companies in the United States

1957: First official warning from the US Surgeon-General that excessive cigarette smoking may cause cancer

1971: Cigarette advertising is banned from radio and television in the US, curb appealed by the tobacco companies, but upheld by the Supreme Court in 1972

1979: The Surgeon General issues a new report, saying cigarettes are more dangerous than previously thought, and would kill 350,000 Americans that year

1983: The landmark Cipollone case is brought, by a dying smoker who charged the companies with failing to give adequate warning about the dangers of smoking. Case finally dismissed in 1992, but courts rule that labelling law does not shield the companies from liability

1988: Surgeon General issues finding that cigarette smoking is addictive under the standards which apply to illegal drugs

1994: Castano vs American Tobacco Co, the first big class action suit in which 60 law firms seek massive punitive and compensatory damages for all past and present smokers

1994: Mississippi brings the first state lawsuit against the industry, seeking re-imbursement of medical costs incurred in treating smokers. Three other states have since filed similar lawsuits

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
film
Arts and Entertainment
Preening: Johnny Depp in 'Mortdecai'
filmMortdecai becomes actor's fifth consecutive box office bomb
News
peopleWarning - contains a lot of swearing
Travel
travel
Arts and Entertainment
arts + ents
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project