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Cigarette Cos Burned By Recent Setbacks In Tiny Tobacco Suits

Thousands of small lawsuits, remnants of a failed class action case, are turning into a lingering headache for the U.S. tobacco industry.

The so-called Engle progeny cases in Florida–individual lawsuits that sprang up after court rulings broke up a class action by the same name–have been arriving for trial in recent months, with plaintiffs racking up a number of recent wins against the cigarette makers.

With several thousand such cases on file, navigating these long-running suits could turn into an expensive and laborious prospect for large tobacco companies like Altria Group Inc. (MO) and Reynolds American (RAI), which have shown no inclination to settle.

The number of favorable plaintiff verdicts “may be a problem for the companies, and will encourage other plaintiffs and lawyers to keep pursuing cases,” said Carl Tobias, a professor of law at the University of Richmond. The ultimate outcome of these cases is uncertain as the tobacco companies are appealing verdicts and the legal fights could continue for years, Tobias said.

So far, awards to plaintiff have been in the range of a few millions, and even if these were to hold they are individually not large enough to financially damage the cash-rich tobacco companies. The companies haven’t made payments to plaintiffs under these judgements, because they are appealing them.

Still, given the large number of cases, the payouts could start to add up if verdicts keep going against the cigarette companies. The lengthy procedures also could add to the companies’ overall cost of litigation.

In one recent example, a jury in the so-called “Hall case” against Reynolds in mid-March awarded damages to the plaintiff. A Reynolds spokesman said the company is confident in its defense and is appealing the verdict, which would cost the company $15.75 million in damages.

Matt Schultz, an attorney at law firm Levin Papantonio, which has represented some plaintiffs, estimates there are close to 9,000 Engle lawsuits filed in state and federal courts in Florida. Ed Sweda, an attorney at the Tobacco Products Liability Project at Northeastern University School of Law, estimates that of the 13 progeny cases that have reached a full jury verdict since February 2009, 11 have been in favor of the plaintiff.

The cigarette companies, adept at fighting such litigation, have given no indication that they want to settle. Earlier this year, Altria’s cigarette division, Philip Morris USA, even put out a public statement highlighting how a former smoker who filed suit against Philip Morris USA dropped his Engle case to avoid paying the company’s attorneys fees in case he lost at trial.

“We have a enormous talent among our outside lawyers who handle these cases and have been able to navigate challenges in the past,” said John Mulderig, a lawyer who works on behalf of Philip Morris USA. Mulderig points to victories for Altria and other cigarette companies in the Engle cases. About half of the Engle cases are in federal court, and all of these federal court cases are stayed pending a ruling in the U.S. Court of Appeals for the 11th Circuit, he notes.

In state court, there have been dismissals of cases voluntarily and through rulings, he said.

The individual Engle suits came up after a 2006 court ruling that overturned a $145 billion award in the Engle class action case, decertifying the class action and allowing individual cases within a stipulated time. The class action had been named for pediatrician Howard Engle, who was a lead plaintiff on the original suit, brought on behalf of thousands of smokers allegedly suffering smoking-related diseases. Many of the individual cases have been filed by relatives of smokers who died of diseases linked to smoking.

Law firm Levin Papantonio estimates there will be about 60 Engle trials between now and the end of the year. Cigarette maker Lorillard (LO), which has also been named in some suits, didn’t comment for this article.

To be sure, these cases are much smaller than the mammoth suits that threatened to derail the industry some years ago, and which the industry found ways to overcome.

“It will impact them…but it won’t kill them, and that’s the difference between the former class action and the smaller individual cases,” said Phil Gorham, analyst at Morningstar, about the Engle cases.

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