COURT HANDS TOBACCO INDUSTRY BIG VICTORY

MIAMI - A Florida appeals court handed cigarette makers a
big victory Friday, ruling that potentially tens of thousands of
damage claims must be tried individually rather than as a group in the
Engle class-action suit filed against the companies by sick smokers.

The ruling by Florida's Third District Court of Appeals removed the
specter of a lump-sum punitive damage award that some analysts had
estimated could range any where from $200 billion to $500 billion,
said Martin Feldman, a tobacco industry analyst for Salomon Smith Barney.

``This removes the guts of the plaintiff claims. This removes the most
threatening aspect,'' Feldman told Reuters.

``There was an expectation of a big punitive damage award on behalf of
the whole class. They won't be able to consider a claims on a
groupwide basis.''

In a milestone verdict on July 7, a state court jury found that
smoking causes certain cancers and other diseases and that the
cigarette makers hid the danger of their product from the public. The
same jury is scheduled to return Tuesday for the penalty phase of the
trial.

Under the plan approved by the trial judge, Miami-Dade County Circuit
Court Judge Robert Kaye, the jury was to decide whether to award
compensatory damages, which would reimburse the named plaintiffs for
actual costs of medical treatment and other losses.

Jurors were also to consider whether to award punitive damages, which
would punish the tobacco companies, to the entire class of plaintiffs
- -- Florida smokers who blame cigarettes for their illness, a class
that could number 40,000 to 500,000.

But the appeals court rejected that plan, ruling that ``the issue of
damages, both compensatory and punitive, must be tried on an
individual basis.''

The ruling does not reverse the verdict or remove the class-action
status.

Richard Daynard, chairman of the Tobacco Products Liability Project
pressure group in Boston, said the ruling simply puts the format of
the case back to what everyone had initially expected.

``This is what everyone thought would happen before Judge Kaye thought
he got a bright idea,'' Daynard said.

Daynard said it may be a Pyrrhic victory for the tobacco companies
because it will increase the likelihood that they will have to pay out
regular damage awards.

He said under Kaye's original plan, some tobacco companies could have
faced bankruptcy if the jury had returned a multibillion dollar
punitive damage award because they would have had to put up an appeals
bond in excess of the award.

``In some ways it's a Pyrrhic victory. They needed to avoid the
cannonball because there was a high likelihood that some of them would
be bankrupt by the end of the year. But the result of the victory is
that they have helped the court with a plan that is likely to result
in damages being paid with great regularity to Florida smokers and
their families,'' Daynard said.

A court order barred attorneys for the plaintiffs and the tobacco
companies from commenting publicly on any aspect of the case.

The Engle class-action suit is named after Howard Engle, a Miami
pediatrician with emphysema.

Defendants are R.J Reynolds Tobacco Co., Philip Morris Cos. Inc.,
Loews Corp.'s (NYSE:LTR - news) Lorillard Tobacco Co. Inc., Brooke
Group Ltd (NYSE:BGL - news).'s Liggett Group Inc., the Brown &
Williamson unit of British American Tobacco Plc, and the industry
trade groups Council for Tobacco Research and Tobacco Institute.