UPDATE: US Supreme Court Won't Consider Long-Running Tobacco Case

The U.S. Supreme Court Monday refused to review a landmark ruling that found the tobacco industry violated federal racketeering laws by engaging in a decades-long scheme to deceive the public about the dangers of smoking.

The high court rejected appeals by both the tobacco industry and the government. The industry was seeking to overturn lower-court holdings that it violated racketeering laws, while the government was seeking to revive its rejected attempt to get tobacco companies to forfeit up to $280 billion in profits and pay $10 billion for smoking-cessation programs.

Last year, an appeals court affirmed most remedies that a trial judge imposed against tobacco companies in 2006, which included restrictions on tobacco marketing and a requirement that the industry make corrective public statements about the health effects and addictiveness of smoking.

The appeals court, however, rejected the government's request for additional penalties against cigarette makers. The U.S. Court of Appeals for the District of Columbia Circuit ruled unanimously that there was ample evidence to conclude that the tobacco industry intended to deceive the public about the dangers of smoking. The court also said the government had adequately proven that the tobacco industry was likely to commit future racketeering violations unless restrictions were imposed.

In rejecting the government's bid to have the industry fund a national smoking-cessation program, the appeals court said federal law gave the courts no power to order such a remedy.

The Supreme Court let the D.C. Circuit ruling stand without comment.

The appeals court had issued another ruling in 2005 that rejected the government's bid to disgorge billions in industry profits.

Defendants in the case included Altria Group Inc.'s (MO) Philip Morris subsidiary, Reynolds American Inc. (RAI), British American Tobacco PLC (BTI) and Lorillard Inc. (LO).

All saw a boost Monday from the Supreme Court's decision, with Altria up 3.9% to $20.47, Reynolds American up 4.2% to $53.53, British American Tobacco up 1.3% to $64.91 and Lorillard up 2.7% to $73.74 in recent trading.

Morningstar analyst Philip Gorham said he wouldn't expect major stock moves as a result of any one court ruling, but said investors are relieved that the tobacco companies won't have to forfeit up to $280 billion in profits.

"The market tends to price in the risk of defeat in these cases," Gorham said.

Meanwhile, Altria and its Philip Morris USA unit said in a statement that while they're disappointed the Supreme Court didn't grant their petitions challenging the basis of the suit, they're "pleased the Surpreme Court has confirmed once again that disgorgement is not an available remedy."

The long-running case dates back to 1999, when the Clinton administration alleged that nine tobacco companies and two related trade associations engaged in a 50-year conspiracy to deceive the public about the dangers of smoking. A nine-month trial took place in 2005.

In a 2006 opinion that logged 1,653 pages, U.S. District Court Judge Gladys Kessler ordered a variety of marketing, sales and advertising restrictions on the tobacco industry. Kessler also required cigarette makers to issue corrective statements about the dangers of their products, which would appear on television, newspapers, product packaging and countertop displays in retail outlets.

The appeals court largely affirmed those remedies.

-By Brent Kendall, Dow Jones Newswires; 202-862-9222; brent.kendall@dowjones.com

(Shara Tibken contributed to this article)

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