DESK TO P. e4
Seim WN Broth*rs
Tobacco litigation - Supreme Court Ruling on C4xZme v. L4WW Group POS!tivt
for Industry
Edward P. Mally - C212) 783-3566
Max Holmes - (212) 783-3155
June 25,1992
In a split decision handed d&n on June 24, 199Z :he United States Supreme Court
resolved a wnes of questions regarding the basis on whidb consumers may sue tobacco
companies for injuries alleged to have &risen from cigitreft smkin& We view the decision
bonded down as positive for the gobscoo conipanies because it effectiv* ban lowsuits on
certain poa-1390 clons that would hrm been troublemm for the tobacco companks. In
Addition, With a sign t dWm of uncertabsty =nmading CM ATectiozi offtbacco
",tigationvowrensol Wecanonceagain return to onaLyzinglobaccoconspules on the
books of the hadanoutals - prift ficrAft mad M=g cash Saw paeradoo - and en
racto to catqprking lWptbn rhk a a wr=al and not vicadve buslaoss rkk Oat tbt
ampaulas have been Nib% wM 1w yam We view the tolmoos as dmW at currout levels
and recommend the pwdmm of RJR Nabboo w" we continue to value as a low triple-B
and view as an kW cradI We also belim that adifitional raktive value
opportualtin in tobsomqvIated debt sacurida camW be cmated if a further wkkn* of
spreads Occurs in response to my coutimaing 'Wiptim
In the maiority opinion. the Supreme Court ruled that the warning label ntandsted by
CXWW Prohibits uxkm from =WS tobacco, WaVIuda A,;min tUt &ftgr IM Che
Cisarette moubeturers fulad to warn cowman of the da4mv of mokiq& that lobscoo
compatues wet neftm in their advartivin& adm* and promotum, that the tobam
catups neutralized the warning WxJ ymb poadn bqag, or concealed Dqpdye
infannatim bm tW pulblic. As wu the am prior to tkb tuft conamen will be
pwraitted to sue am those poim for A-molm &rWq from uW* dproun pew to 1%5,
and In a new tw1K dw Court will allow =ju tBeft &m" in the period (we
ThumbnailAnakpisbelow).
'Me Cam also found that la"sWts aftiqg breach of ap warrantyintatio"
fraudulent mist eptesentatim and concealment from the Swernment could be b=ShL we
rkw lowoults VW make tbw dAlm as my dMkuk ter ploinWs to whs. 7be Supreme
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BAT INDUSTRIES P.L.C. - MINNESOTA DEPOSITORY COPY - PRODUCED PURSUANT To $ VILD. or
CONSENT JUDGMENT DATED 5/8/98 IN STATE OF A&WESOTA, Er AL. V. IpHiLlp Afoggis, ET AL, CASE No. Cl-9"56s
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Court in its decision noted a nine step test.that must be met in order for plaintiffs to he
sucoessful in pursuing such claims.
AlthouIth this decision can be viewed as a compromise between tht eureme positions
taken by the industry (that the warning label protects tobacco companies from aft lawsuits)
and the Cipollones (that all lawsuits should be slowed), we view the outcome as wighted
in favor of the indusW. deady. the direction of litiption will be one of pursuing claims of
knowing intentional fmud, and unless a 'stnoking gun' is discovered that reveals a
deliberate cover-up by the industry, we believe that plaintM wW have a very diftult time
wbuing claim of Intentional fraud.
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9 Stop Ton - (1) Sulameitit offact; (2) Fam mim be'Wse arconae&14- (3) Fin be
=jZkL (4) C*WPW must k= the bZt is filse, (S) CAmpany must k=d *Ai the false
fed be relled Won, by cDomer at pver=ent; (6) Consuma or Sovangmt must
wrally rely cc the fact; (7) Relism on the fict must be 5ggjfi&We, (s) Damp must be
shown; ad (9) The damp must MWhk= (be caused by) reliance on the fibe fReL
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B.A.T INDUSTRIES P.L.C. - MINNESOTA DEPosITORy Copy pRODUCED PURSUAN T VILD. OF
CONSENT JUDGMENT DATED SON IN STATE Ojr A*NNE T D
SOTA, ET AL. V- PMLAP NO-RRS. ETAL. CASE No. C1.9"665