Bush administration loses $280 billion tobacco appeal

WASHINGTON – The Supreme Court refused Monday to let the government sue tobacco companies for $280 billion, a major victory for cigarette makers.


A federal judge presided over a nine-month trial and has not yet decided whether tobacco companies are guilty of wrongdoing.


The fight at the high court was over the amount of money the companies would have to pay if the judge rules that they violated a federal anti-racketeering law known as RICO by misleading the public about the dangers of smoking.


A lower court said that the government could not pursue Philip Morris, R.J. Reynolds and other companies for profits that the government claims they earned illegally.


The Supreme Court declined, without comment, to hear the Bush administration’s appeal. The case could return to justices later.


The court’s decision sent shares of tobacco companies surging, with Philip Morris USA parent Altria Group Inc. rising by $4.30 to $74.96 and rival Reynolds American Inc. by $5.06 to $83.80.


Attorney General Alberto Gonzales said that while the administration was disappointed, “we continue to believe very strongly in this case.”


Several groups urged the Justice Department not to rush into a settlement with the cigarette makers.


“More than ever, the government should push for remedies that count, and not opt for a weak, watered-down settlement,” said M. Cass Wheeler, CEO for the American Heart Association.


William Corr, executive director of Campaign for Tobacco-Free Kids, said the Justice Department “should not use the Supreme Court’s decision as an excuse to let the tobacco companies off the hook with a weak settlement.”


The judge in the case had urged the sides to try to reach a settlement. Without the threat of a $280 billion judgment, the government has a weaker bargaining position.


“The settlement value of the case dropped,” said Mark Gottlieb, director of the Tobacco Products Liability Project at Northeastern University.


A lawyer for the tobacco companies declined to discuss the next step in the case. William Ohlemeyer, Altria vice president, said Monday’s decision was appropriate.


The lawsuit was filed by the Clinton administration, and the Bush administration lawyer argued that if the court did not step in now to deal with this issue, the case might drag on for several more years. The $280 billion was the most ever sought in a civil racketeering trial.


The tobacco companies’ lawyer, Michael Carvin of Washington, said that the court should give U.S. District Judge Gladys Kessler time to decide the case. He also argued that the government had a weak case.


The Supreme Court is already hearing a case involving the Racketeer Influenced and Corrupt Organizations Act and whether the law can be used against anti-abortion protesters. The law, aimed primarily at fighting mobsters, has both criminal and civil provisions.


The government may still pursue a request for $10 billion for a stop-smoking program and $4 billion for education. The government had been harshly criticized for not asking for more. An expert had recommended a $130 billion stop-smoking program.


The government has spent $140 million since 1999 litigating the case, and the Justice Department is also trying to force tobacco companies to pay those costs.


The federal case is independent of settlements worth $246 billion that states reached with the industry in the late 1990s to recoup the cost of treating sick smokers.


The defendants in the lawsuit are Philip Morris USA Inc. and its parent, Altria Group Inc.; R.J. Reynolds Tobacco Co.; Brown & Williamson Tobacco Co.; British American Tobacco Ltd.; Lorillard Tobacco Co.; Liggett Group Inc.; Counsel for Tobacco Research-U.S.A.; and the Tobacco Institute.

The case is United States v. Philip Morris, 05-92.