March 27, 2006

Illinois top court undecided on Altria rehearing

CHICAGO (Reuters) - The Illinois Supreme Court still has not decided whether it will rehear a case in which it threw out a $10.1 billion verdict against Philip Morris USA, a court spokeswoman said on Monday.

The case, in which the Altria Group Inc. unit was accused of defrauding consumers into thinking "light" cigarettes were safer than regular smokes, had been on the court's rehearing docket for its March term.

The court issued a comment on that docket Monday, disposing of another case, but did not issue a decision on whether it would rehear the "lights" case.

The spokeswoman said there was no time-frame for deciding whether the court would rehear the case, as requested by attorneys for the smokers who filed the lawsuit.

The court overturned the verdict in December and ordered a lower court to dismiss the case.

A divided Supreme Court at that time ruled that the U.S. Federal Trade Commission had authorized tobacco companies to characterize their products as "light" or "low tar nicotine." The court said a section in the Illinois Consumer Fraud Act exempts a company from being punished for behavior allowed by a specific regulatory body.

Attorneys for the plaintiffs in the case argued that the FTC was never asked specifically whether that was its universal policy on the issue.

Analysts have said it is unlikely the Illinois Supreme Court will rehear the case. But filing for a rehearing in state court is a standard step before trying to bring a case before the U.S. Supreme Court.

The initial $10.1 billion judgment in the class action case was handed down against Philip Morris by a trial court judge in March 2003. The Illinois Supreme Court took the unusual step of bypassing the appellate court and hearing the case on appeal directly from the trial court.

The "lights" case has been closely watched not just because of the size of the ruling, but because it is one of the legal hurdles management has said need to be cleared before it could spin off Altria's Kraft Foods Inc. business from its tobacco businesses.

Altria shares were down 41 cents at $72.53 in morning New York Stock Exchange trading.