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Taking a Hit: Yes, $145 Billion Deals Tobacco a Huge Blow, but Not a Killing One

The tobacco industry could be headed for bankruptcy court after getting hit with a record $144.9 billion punitive-damages verdict on Friday by a Florida jury and still litigating a number of individual cases. However, according to some scholars, things are not as bad as they might seem.

The Miami County Circuit Court judge will probably have to substantially cut Friday's award since Florida law does not allow punitive damages verdicts that could bankrupt a defendant.

Appeals of the class-action verdict could drag on for years, and the five defendants -- Philip Morris Cos.'s U.S. tobacco unit, R.J. Reynolds Tobacco Holdings Inc.'s R.J. Reynolds Tobacco unit, British American Tobacco PLC's Brown & Williamson unit, Loews Corp.'s Lorillard unit and Vector Group Ltd.'s Liggett Group have a chance of reversal of Friday's verdict.

Also, even if a multi-billion dollar award was sustained, the cigarette companies could stretch the payments over many years since over the years they have shown astounding resilience to courtroom attacks.

In addition, the tobacco industry has a history of turning adversity to advantage. The surgeon general's famous 1964 antismoking report led not to a government crackdown but to health-warning labels, which the industry has used effectively as a shield against many smokers' claims of ignorance about health risks.


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