February 2, 2006

Oregon court affirms award against Philip Morris

CHICAGO (Reuters) - The Oregon Supreme Court on Thursday
affirmed a $79.5 million punitive damage jury verdict against
cigarette maker Philip Morris USA in a lawsuit filed by the
widow of a smoker.

Philip Morris, a unit of Altria Group Inc., said it again
plans to seek review of the case by the U.S. Supreme Court,
which had previously set aside the damage award.

The company contends that award of 152 times the
compensatory judgment to the widow of smoker Jesse Williams is
"grossly excessive."

It said the award conflicts with a 2003 U.S. Supreme Court
decision involving State Farm Mutual Automobile Insurance Co.

That decision found that punitive damages generally should
not exceed the amount of compensatory damages in cases with
substantial actual or compensatory damages.

The suit was brought on behalf of the family of Jesse
Williams, a smoker who died of cancer. A jury awarded $821,000
in compensatory damages in 1999, which was reduced under state
law to $521,000.

The trial court reduced the punitive damages award to $32
million, but the Oregon Court of Appeals reinstated the
original $79.5 million punitive award in June 2002.

In 2003, the U.S. Supreme Court granted review of the case,
directed the Oregon Court of Appeals to vacate its June 2002
opinion and ordered it to reconsider the case in view of the
State Farm decision.

The appeals court again found in favor of the plaintiff and
the Oregon Supreme Court again backed that ruling, saying
Philip Morris and other companies had engaged in a decades-long
scheme to deceive smokers even when they knew cigarettes were

"Under such extreme and outrageous circumstances, we
conclude that the jury's $79.5 million punitive damage award
against Philip Morris comported with due process, as we
understand that standard to relate to punitive damage awards,"
the Oregon Supreme Court said in a written opinion filed on

Altria shares were down $1.38, or 1.9 percent, at $72.12 in
afternoon dealings on the New York Stock Exchange.

But one analyst said the ruling should not have a lasting
effect on Altria shares.

"We expect minimal downside to Altria's stock, especially
given the recent weakness, and the fact that we believe this
decision is a one-time event," Bonnie Herzog, analyst at
Citigroup Investment Research, said in a research note.

(Additional reporting by Jessica Wohl in New York)