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B.A.T shocked by U.S. tobacco ruling

By Tim Farrand

LONDON, June 11 (Reuters) - British-based B.A.T Industries Plc said on Thursday it was very disappointed and shocked by a court decision against its American tobacco making arm Brown & Williamson.

But the company rejected claims the verdict would damage the tobacco industry's chances of securing national U.S. legislation aimed at protecting it against future lawsuits.

"It was one that we had hoped to win," said B.A.T Industries director of group public affairs Michael Prideaux.

Reading from a statement issued by B&W he said there was nothing B&W did or could have done that would have influenced the plaintiff's decision to smoke.

"It's also clear that the plaintiff's safer cigarette claim was flawed since his practice was to tear off the filters from filtered cigarettes," said the B&W statement.

B&W said it will ask the judge to set aside the verdict and would appeal the decision if necessary.

The jury in Jacksonville, Florida found B&W negligent in the design and manufacture of Lucky Strike cigarettes, and awarded the family of the late Roland Maddox about $1 million in damages.

The courtroom defeat was only the tobacco industry's third in four decades of litigation and represents the biggest damages award ever made against it.

Shares in B.A.T were off 15 pence at 591p. But U.S. tobacco shares were lightly traded in London with Philip Morris Cos Inc and RJR Nabisco Holdings stock unmoved from their New York closing levels.

B.A.T and Britain's investment community played down the court decision, pointing out that the industry has fended off the vast majority of lawsuits against it.

"There are always cases where the jury will come up with a verdict against the weight of the evidence, but I don't think a few verdicts changes the odds that much," said Prideaux.

Timothy Young, analyst at SG Securities, noted that the prevailing tide was in favour of the industry.

"I don't think this can be seen in any sense as opening a floodgate of successful cases," said Young.

"It's very exceptional for companies to lose cases like this, they tend to be appealed and the track record over time has been very positive," said SBC Warburg analyst Mark Duffy.

He said the big financial risks for tobacco companies were not individual cases but class actions like state Medicaid lawsuit where companies could potentially be made to pay out billions of dollars.

Roland Maddox, who smoked for nearly 50 years before his death from lung cancer last year, was represented by attorney Norwood "Woody" Wilner who won a case against B&W in August 1996 on behalf of sick smoker Grady Carter.

B&W appealed the Carter decision and a ruling is expected in the next few weeks.

"We have always believed that the Carter one will be overturned on appeal," said Prideaux.

Wilner has filed four cases for October in Florida but it is unlikely more than one will come to trial.

A number of cases against the industry are due to be heard in July. They include the huge class action suit on behalf of Florida's sick smokers.

The lawsuit, named for Howard Engle, a Miami Beach paediatrician stricken with emphysema, was filed in 1994 and the start of the trial had been postponed at least twice.

The previous judge in the case had estimated that the Engle lawsuit represented 200,000 to 500,000 Floridians.

Forty-one states have filed lawsuits against tobacco companies seeking recovery of Medicaid, state health care costs, for the treatment of tobacco-related illnesses.

Four states, Florida, Minnesota, Mississippi and Texas, have so far settled their lawsuits. The Texas case was closely watched by other states because Texas law is similar to their own. In Iowa the industry won a state Supreme Court decision which blocked that state's Medicaid lawsuit.

At the national level, the tobacco industry broke off negotiations on tobacco legislation with Congress in April.

State and tobacco companies had reached an agreement in June 1997 that would have required the industry to pay $368.5 billion over a 25-year period to settle states' claims in return for immunity from all claims for punitive damages and current and future class action lawsuits.

The settlement, designed to reduce smoking by teenagers and adults, is currently bogged down in debate at the Senate.

07:49 06-11-98


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