COUNTIES GIVEN GO-AHEAD ON TOBACCO SUIT

The issue: Reimbursement for medical costs.

SAN FRANCISCO -- A lawsuit by California counties accusing tobacco
companies of fraud can go to trial, a San Francisco federal judge ruled
Wednesday.

The decision by U.S. District Judge D. Lowell Jensen to deny a dismissal
motion is the first in the nation allowing a suit by local governments to
proceed, San Francisco City Attorney Louise Renne said.

``I'm obviously pleased,'' Renne said. ``Local government is the first
line of defense against the health effects of smoking.''

Along with San Francisco, the plaintiffs include 12 other counties in
Northern and Southern California -- including Santa Clara County -- that
encompass more than half the state's population.

The lawsuit accuses tobacco companies and trade councils of deliberately
hiding thefact that smoking is addictive. It also says the companies
manipulated nicotine levels.

Treatment, Insurance

The result, Renne's spokesman Marc Slavin said, is $200 million in annual
smoking-related costs incurred by California counties. Most of the cost
arises intreating indigents at city hospitals, and health insurance for
public employees.

``They refused to disclose the information they had about the addictive
nature oftheir product,'' Slavin said. ``If we had known what they knew
when they knew it, we might have taken preventive actions.''

The actions would likely have included smoking restrictions and public
education campaigns, he said.

Jensen's decision was not unexpected.

In a February 1997 ruling, the judge indicated that he would permit certain
claims against the tobacco industry to go forward under California law. At
that time, Jensen instructed the counties to redo their lawsuit seeking to
recover the public costs of treating smoking-related illnesses.

In Wednesday's ruling, Jensen essentially rejected the tobacco companies'
bid to have that revised lawsuit dismissed.

Question Of Proof

The judge has nevertheless made it tough for the counties to prevail
against the tobacco companies. In last year's ruling, Jensen said that
public agencies bringing such suits against the tobacco industry must show
that any public health costs were directly caused by smoking-induced
illnesses, which may be difficult for the counties to prove conclusively.

Dan Collins, a Los Angeles attorney who represents Philip Morris Inc., said
tobacco companies were ``obviously disappointed'' but emphasized that the
judge has dismisses several claims.

``He has narrowed the case and made clear that they are going to face a
daunting task to prove their case,'' Collins said.

Slavin says the federal court decision should send a message to Congress,
which is considering a national settlement hammered out between states and
the tobacco companies.

The victory is the second in six months by California communities against
the tobacco giants. Last year, R.J. Reynolds Co. agreed to pay $10 million
to settle a suit that claimed the Joe Camel advertising campaign had
improperly targeted minors.

Along with San Francisco and Santa Clara counties, the plaintiffs in the
current suit include the counties of Alameda, Contra Costa, Marin,
Monterey, Sacramento, San Bernardino, San Mateo, Santa Barbara, Santa Cruz,
Shasta and Ventura.