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Tobacco companies, opponents welcome California decisions

SACRAMENTO, California (CNN) -- In two decisions Monday, the California Supreme Court essentially held the line on people's ability to sue tobacco companies.

Both tobacco companies and an anti-tobacco group found reason to be happy with the decisions.

The court basically upheld the immunity from liability that the tobacco companies enjoyed from 1988 through 1997 under a law that the legislature then repealed. That law gave them immunity for making a product that consumers knew to be dangerous, but only if it was sold in pure, unadulterated form.

The court, in its opinion in cases filed against Philip Morris Cos. and RJ Reynolds Tobacco Co., upheld the immunity statute in broad terms, but made exceptions, including saying that cigarettes made with additives could be considered adulterated products. Plaintiffs still have to prove they suffered harm.

"We are pleased that the California Supreme Court refused to rewrite the rules after the fact," said Charles A. Blixt, executive vice president and general counsel for R.J. Reynolds Tobacco. "In 1988, the California legislature recognized that products like tobacco, which have well-known, inherent health risks, should not be subject to personal injury claims."

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Both he and a representative of Philip Morris Cos. said the decision should bring reversals in cases on appeal.

"The decision provides an additional basis on which we will argue for the reversal of three cases now on appeal," said William S. Ohlemeyer, vice president and associate general counsel for Philip Morris.

In those cases, the company said, smokers were suing for injuries allegedly caused by conduct occurring while the law was in effect.

Morgan Stanley analyst David Adelman agreed, calling the decisions good for the industry and for stockholders.

The decisions, he said, "should likely provide a sufficient independent basis to overturn the three outstanding California trial losses." They also should make it harder for future plaintiffs to pursue smoking claims, "increase the market's confidence that the California Supreme Court will dismiss tobacco claims on other grounds as well," and dampen attorney interest in pursuing such cases.

Merrill Lynch's Martin Feldman added, "In our opinion the burden on future plaintiffs in California will be greater while the industry's defenses should become less difficult. Critically, the court ruled that no evidence of either the industry (or the smoker) may be introduced in the 1988-to-1998 period."

But the Campaign for Tobacco Free Kids disagreed on the decisions' impact.

"The California Supreme Court today handed a victory to smokers injured by decades of tobacco industry deception, product manipulation and other wrongdoing by denying the industry's request for legal immunity for all actions it took before 1998," said the group's president, Matthew Myers.

"The court's rulings in two separate cases show that the tobacco companies face a greater liability risk, especially in California, than they have led investors to believe."

He said the court ruled against Philip Morris' contention that the 1988 law "provided it with immunity for all prior wrongdoing," not just for the time the law was in effect.

Second, he said, "the court ruled that even during the 1988-to-1998 period, the industry's immunity is limited and the tobacco companies can still be sued for certain actions during this period, such as manipulating cigarettes to make them more addictive."

"These rulings," Myers said, "leave the tobacco industry open to the vast majority and the most severe of the claims they are facing in California. Almost all of these cases involve industry behavior that took place before 1988."