Britain's BAT to consider U.S. tobacco settlement

By Tim Farrand

Reuters, 5th Mar 1997

Britain's B.A.T Industries Plc spelled out a more conciliatory approach to a string of U.S. tobacco-related lawsuits on Wednesday, saying it was now time to explore settling the claims.

"The on-going cost in legal terms, and the impact on the share price is such that we think it sensible and appropriate to evaluate a settlement," B.A.T chief executive Martin Broughton said.

He put the legal costs at $100 million in 1996, which he expected to rise at least over the next two years.

A sensible settlement would be one that covered all current and future claims and was approved by Congress and the White House, he said.

There have been press reports that a congressionally sanctioned settlement might be in the works under which tobacco companies would settle claims with U.S. states which have filed suits, in response for immunity.

A commentary published in the Journal of the American Medical Association on Tuesday, however, argued that the states were better off seeking compensation from the companies rather than letting Congress broker a deal.

B.A.T has spent an estimated 250 million pounds ($402.9 million) in legal costs fighting tobacco-related law suits. Since the first case was filed in 1954, about 500 cases have been filed although only 19 have reached trial across the industry. There was a big increase in cases filed in 1996, although there are only isolated cases outside the U.S.

"I can't see the legal costs coming down, the trend is for it to continue upwards," Broughton said.

Last week, a federal judge in the United States dismissed a lawsuit filed by the City and County of San Francisco and 10 other California counties against the tobacco industry.

The tobacco industry hailed the ruling as a victory in its fight against lawsuits seeking to force cigarette companies to repay states and municipalities for health care costs of smokers. It is believed to be the first ruling to totally dismiss a lawsuit of this type.

Although anti-smoking lawyers said the ruling was a drawback, they remained optimistic about the more than 20 other cases pending around the country.

So far the company has not been approached by plaintiffs or the U.S. government with any sensible proposals, said Broughton. "There ought to be a sensible figure which gets it sorted out," said Broughton.

Sums of $10 billion and $6 billion -- which represent the profits of the entire U.S. tobacco industry -- have been suggested by plaintiffs as the cost of settlement for the industry.

These sorts of figures are clearly unacceptable, said Broughton, especially in view of the fact that the company is confident it will win the pending cases.

Of the 19 cases to reach the courts the tobacco industry has won all except one which is currently under appeal.

In the last few weeks a federal judge in San Francisco dismissed a lawsuit filed by the City and County of San Franciso and 10 other California counties against the tobacco industry. San Francisco and other counties are among a growing number of municipalities and states that have sued the tobacco industry to recoup Medicaid costs.

The attorneys general from 22 states have filed such suits. The first of the trials, which stems from a case bought by Mississipi is scheduled for June.

On February 18 a West Virginia county circuit judge dismissed all of the state's claims for fraud, negligence, unjust enrichment and conspircay against 17 tobacco companies, saying the attorney general lacked authority to pursue the claim. A case against R.J. Reynolds, a subsidiary of RJR Nabisco Holdings Corp , is due to be heard in April.

A judgement on whether the U.S. Food and Drug Administration has the right to regulate cigarette sales and marketing is expected in the next six weeks.

If the FDA wins its rules would ban free samples and billboard ads near schools and playgrounds, limit vending machine sales, ban sponsorship of sports events and the use of cigarette brands on hats, t-shirts and other products.

The rules would also restrict advertising in some publications and require retailers to see photo identifications for cigarette buyers under the age of 27.

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