PHILIP MORRIS TARGETS PUNITIVES

Says '98 Deal Means State Must Forgo Its Share Of Trial Award.

Philip Morris Inc. thinks it has found a loophole to help take the
sting out of an $80 million punitive damages award in March to the
family of an Oregon man who died of cancer.

Lawyers for the company, the largest cigarette manufacturer in the
United States, on May 13 succeeded in getting Portland, Ore., state
court Judge Anna J. Brown to knock the number down to $32 million.
Williams v. Philip Morris, No. 9705-03957. And they have put Attorney
General Hardy Myers on notice they intend to lay 60% of that figure
off on the state of Oregon.

Mr. Myers' office is fighting back, but whatever the outcome, critics
fear it is just one of many unwelcome surprises that may result from
the convoluted $206 billion agreement between the industry and 46
state attorneys general in November.

The Oregon controversy began with a letter from Jeffrey M. Wintner, a
lawyer at New York's Wachtell, Lipton, Rosen & Katz, written several
weeks after the jury in the Williams case delivered its verdict. Mr.
Wintner pointed to a recent piece of Oregon tort reform legislation
that calls for 60% of punitive damages to be paid to the state rather
than to the plaintiffs.

Mr. Wintner wrote that the state's share constitutes a released claim
under the settlement and that Philip Morris does not have to pay. Mr.
Myers answered that Philip Morris has it wrong, and his office will
seek a ruling to back him up.

The controversy may play out in other states as well. The Oregon
statute is one of at least seven so-called split-award laws
nationwide, said Andrea Curcio, a professor at Georgia State
University College of Law.

"One of the things that really worries me is nobody out there has
taken a really close look at this thing," said Graham Kelder, a lawyer
at the Tobacco Control Resource Center, an anti-tobacco group based in
Boston.

When the settlement was announced in November, attorneys general had
less than a week to decide whether or not to sign. Some critics said
that was not nearly enough time to give the deal proper
consideration.

And they pointed out several potential loopholes. For example, the
agreement permits the companies to obtain an offset for the proceeds
of any new federal excise taxes that are earmarked for the states.

Mr. Kelder oversaw a two-month project, completed in March, to analyze
the settlement agreement--all 60,000 words worth--with funding from
the American Cancer Society.

Another possible loophole was revealed recently when the Wawa store
chain advertised a sale on Philip Morris' Marlboro cigarettes on
Pennsylvania billboards, despite the fact that, under the agreement,
tobacco companies are not to use billboards. Faced with criticism,
Wawa took the sign down.

This article appeared in the June 7, 1999 issue of The National Law
Journal.