Judge grants class action suit on 'light' cigarettes
Case charges alleged marketing deception by tobacco companies; stocks hit hard.
NEW YORK (CNN) -- A federal judge has granted class action status to a federal lawsuit claiming nine tobacco companies deceived U.S. smokers by leading them to believe "light" cigarettes were safer than regular cigarettes, according to a court administrator.
Judge Jack B. Weinstein announced the status change in U.S. District Court for the Eastern District of New York Monday morning.
The ruling, a victory for the plaintiffs in the case, sent shares of Altria Group Inc. (down $4.62 to $77.70, Charts) down nearly 5 percent Monday morning and Reynolds American Inc. (down $2.27 to $59.75, Charts) down more than 2 percent during morning trading on the New York Stock Exchange.
Reynolds American Inc. responded by saying it would appeal the decision.
"We disagree with the judge's decision to grant class certification in this matter and we will ask the Second Circuit Court of Appeals to review the decision and to stay all proceedings, pending review," said David Howard, a spokesman for Reynolds, parent of RJ Reynolds Tobacco Co., one of the defendants in the case.
Altria Group Inc.'s Philip Morris USA unit, another defendant, also announced it will appeal the decision.
Opening the suit to class action status allows more plaintiffs to join the suit and, if Weinstein rules for the plaintiffs, could cost cigarette companies billions of dollars in damages, according to prosecuting attorney Michael Hausfeld.
Other defendants in the case include Loews Corp.'s (down $0.14 to $37.86, Charts) Lorillard Tobacco unit, Vector Group Ltd.'s (down $0.23 to $16.49, Charts) Liggett Group and British American Tobacco Plc's (down $0.92 to $55.65, Charts) British American Tobacco (Investments) Ltd.
Hausfeld made the request for class action status earlier this month, arguing in a hearing that cigarette makers violated racketeering laws and defrauded customers for years by touting the decreased risks of smoking "low-tar" or "light" cigarettes and, in turn, raked in billions of dollars.
"They were cheated," said Hausfeld. "People bought these cigarettes because they believed they were safer than regular cigarettes."
According to Hausfeld, the deception employed by the cigarette companies brought them as much as an extra $200 billion in sales. He said many of the people who bought the cigarettes were already concerned about the dangers of smoking and might have stopped had they not been given false comfort that they were making a safer choice.
"They were paying for a cigarette that at least was supposed to be safer," he said. "Many studies show that people would have quit. In fact, the tobacco industry says that every 'light' smoker is a potential quitter."
Studies have shown that smokers of "light" cigarettes compensate for the reduced nicotine by inhaling more deeply.
In a written statement, Philip Morris also said it will seek appellate review of the decision.
"This case involves smokers who are not seeking to recover for personal injuries, who continue to smoke 'light' cigarettes and who paid no more for Marlboro Lights cigarettes than they would have paid for regular Marlboros," Philip Morris spokesman William Ohlemeyer said.
A spokeswoman for Altria told CNN that the company's "lawyers are currently looking at the opinion and cannot comment at this time."
Calls to the other tobacco companies were not immediately returned.
The announcement brought jubilation from the antitobacco camp. "Happy days are here again," said professor Richard Daynard, director of the Tobacco Products Liability Project at Northeastern University School of Law in Boston.
"This is tobacco litigation which the industry has pronounced dead so many times that I ended up starting to believe them. I think it's clearly alive and well and this could be the mother of them all."
Daynard put the industry's potential liability "in the several hundreds of billions anyhow."
The industry has long argued that, in manufacturing "light" cigarettes, it was only doing the government's bidding, an argument Daynard dismissed. "I think that's clearly not the case," he said. "They were supposed to come out with safer cigarettes, but they knew from the very beginning that these weren't safer."
He predicted that Weinstein would issue a restraining order delaying Altria's planned spinoff of its Kraft Foods unit.
Daynard praised Weinstein, who is in his mid-80s, as "really up to speed" on the case and, as a result, unlikely to be intimidated by the industry's legions of top-dollar lawyers.
"The lawyers get to jump up and down and wave their hands, but Weinstein is basically smarter than anybody else in the room generally and more on top of it."
Deborah Schwartz, a representative for the prosecuting law firm Cohen, Milstein, Hausfeld and Toll, said the judge's ruling makes this the largest class action suit in the nation's history. She expects the number of plaintiffs to be in the millions "because it'll be every person who ever smoked or still smokes light cigarettes."
Schwartz said damages could go up to $200 billion.
--from staff and wire reports. CNN's Katy Byron contributed to this report.