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RICHMOND, Va. -- Altria Group Inc.'s operating subsidiary, Philip Morris USA Inc. (PM USA) is recording a fourth-quarter pre-tax charge of $62 million due to tobacco and health judgments in two lawsuits as well as incurring approximately $57 million in interest costs related to the two cases.
According to the Wall Street Journal, the $119-million charge will not weigh too heavily on Altria's bottom line as the company recorded a $1.17-billion profit in the third quarter. Altria and other cigarette makers have benefited from cost cuts, higher prices and growing demand for smokeless tobacco products.
In a separate legal matter, PM USA responded to a recent Oregon Supreme Court ruling by saying the court "misapplied the law" when it decided the company is required to pay the state 60 percent of a $79.5-million punitive damages award plus interest in a 14-year-old individual smoking and health case.
The decision pertains to the Williams case, where in 1999 an Oregon jury awarded compensatory and punitive damages to an individual smoker, according to a company release. Under Oregon law, the state is entitled to 60 percent of any punitive damages award. PM USA argued that the state released any right to collect the award when it signed the Master Settlement Agreement with tobacco companies in 1998.
"We believe that the Oregon Supreme Court misapplied the law and reached an erroneous result," said Murray Garnick, Altria Client Services senior vice president and associate general counsel, speaking on behalf of Philip Morris USA. "As the lower court recognized, the state released its claims to any punitive damages when it signed the Master Settlement Agreement."
In 1998, the nation's leading cigarette manufacturers signed the Master Settlement Agreement with 46 states, five U.S. territories and the District of Columbia. The agreement imposed significant restrictions on a range of cigarette marketing activities and required the participating manufacturers to make billions of dollars of settlement payments to the states. In return, states including Oregon agreed to release claims "directly or indirectly based on, arising out of or in any way related, in whole or in part to" allegations of tobacco-related conduct, according to PM USA.
"This decision is grossly unfair and contrary to the language and spirit of the Master Settlement Agreement," Garnick added.
The remaining 40 percent of punitive damages plus interest was previously paid to the plaintiff in the Williams case.