A $200-billion US lawsuit filed by “light” cigarette smokers gained class action status on Monday, hammering shares of US tobacco companies.
The suit, which accuses tobacco companies such as Altria Group Inc of misleading consumers into thinking light cigarettes were safer than regular smokes, also will delay Altria’s plan to spin off its Kraft Foods Inc unit.
Shares of Altria, which makes the top-selling Marlboro brand, slid 6.4% — their largest single-day percentage loss in more than two years. The Dow Jones US Tobacco index fell more than 5%.
The plaintiffs said the industry’s marketing intended to shift buyers to light cigarettes because of growing health concerns about smoking. But the tobacco companies said the evidence shows “they intended ‘lights’ to refer to a lighter-tasting cigarette and that many consumers understood this,” wrote US senior district judge Jack Weinstein, who allowed the suit to go forward on behalf of all US smokers of light cigarettes. Lawyers for the plaintiffs argued that tobacco firms reaped between $120 billion and $200 billion in extra sales through the “light” cigarettes deception. Light cigarettes were introduced in the 1970s.
The case was filed under federal racketeering law and if the companies are found to have violated that law, damages would be tripled. The judge’s 540-page ruling caught some analysts and investors by surprise due to Weinstein’s comments during a hearing in the case less than two weeks ago.
Philip Morris USA and Reynolds American Inc’s RJ Reynolds Tobacco Co unit said they would appeal Weinstein’s ruling. “Judge Weinstein has repeatedly entertained claims against the tobacco industry that have been rejected by all federal courts and his previous certification of classes against the tobacco industry have been reversed by the Second Circuit Court of Appeals,” said David Howard, a spokesman for Reynolds.