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$280b tobacco penalty blocked

Appeals court rejects US request

WASHINGTON -- An appeals court won't reconsider its decision barring the Justice Department from seeking $280 billion in a lawsuit against cigarette companies.

In a vote yesterday the US Court of Appeals for the District of Columbia Circuit was split, 3 to 3, on whether to reconsider the case, according to a Justice Department spokesman.

Officials said the government has not decided whether to appeal the decision to the Supreme Court.

''In the wake of the tied vote . . . the United States will carefully review its options and make a determination in the near future as to what course of action it will pursue," Associate Attorney General Robert D. McCallum Jr. said.

In the case -- filed in 1999 under a federal racketeering statute, RICO -- the government is alleging that cigarette makers conspired for decades to deceive the public about the dangers of smoking. A trial began in US District Court in September.

The Justice Department last month asked the full court to reconsider a panel's 2-to-1 decision that the government could not seek the huge penalty. The panel decided that the government was limited to ''forward-looking" remedies, and that ''disgorgement" -- seeking money allegedly earned through fraudulent means -- was not such a remedy.

US District Judge Gladys Kessler still could impose restrictions on the tobacco companies, such as limiting marketing or requiring the industry to finance public health campaigns or smoking cessation programs.

But Jonathan Turley, a law professor at George Washington University, said the decision puts the government in a ''rather untenable position."

''It lost the majority of its expected damages out of this case," he said. ''On the other hand, it can't simply pick up its marbles and go home."

The Justice Department has spent more than $135 million on the case, filed under the Clinton administration.

William V. Corr, executive director of the Campaign for Tobacco-Free Kids, urged the government to appeal the disgorgement decision and said the ruling ''has a significant impact on the government's ability to use the RICO law against major corporate wrongdoing in all industries."

Failing to appeal could also leave ''major questions about the remedies that are available to Judge Kessler," Corr said.

Representatives of the cigarette companies did not return phone calls or had no immediate comment on the effect of the decision.

The appeals court decision also could weaken the government's hand in any settlement talks with cigarette makers, Turley said.

''Disgorgement was the 800-pound gorilla in the closet," he said. ''I think that 800-pound gorilla is now a midsize chimpanzee."

The defendants in the lawsuit are Philip Morris USA Inc. and its parent, Altria Group Inc.; R.J. Reynolds Tobacco Co.; Brown & Williamson Tobacco Co.; British American Tobacco Ltd.; Lorillard Tobacco Co.; Liggett Group Inc.; Council for Tobacco Research-USA; and the Tobacco Institute.

Altria shares fell 22 cents to $63.90 on the New York Stock Exchange, while Reynolds American Inc., which owns Reynolds Tobacco and Brown & Williamson, lost 5 cents to $77.90, and Lorillard owner Loews Corp. fell 46 cents to $70.25.

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