US ruling hits tobacco shares

Tobacco shares skidded in New York yesterday after the United States Supreme Court upheld a Florida law that allows the state to sue cigarette manufacturers for costs incurred treating patients with smoking- related illnesses.

The ruling, which also chilled shares of British American Tobacco in London, down 24.5p to 516p, opens the door for trial to begin on the lawsuit. The trial, in which Florida is seeking $1bn in damages from the main tobacco companies, is set to begin in August.

Philip Morris, America's leading cigarette producer, had asked the Supreme Court to overturn a Florida law allowing such lawsuits, passed by the state legislature in 1995.

The ruling will also give a morale boost to the 21 other US states as well as several large cities that have declared their intention to file similar lawsuits against the industry.

A similar ruling was made last week by the Mississippi court allowing that state to proceed with its own lawsuit. Philip Morris attempted last night to play down the significance of the ruling.

A spokesman in New York insisted that it was "not a ruling on the merits of our constitutional challenge and does not in any way affect our ability to seek a review in the future if that becomes necessary".

Tobacco stocks were knocked even though few observers had expected the Philip Morris challenge to survive. It contends the Florida law unfairly stacks the deck against the tobacco firms.