RAI Reynolds American (delisted)

In the recent development of the lawsuit filed against Philip Morris Inc. (PM) in 2000, a lawmaker told the St. Louis jury that the tobacco giant had been misleading its customers as it fabricated its Marlboro Lights cigarettes to be safer than other existing cigarette brands. In this pretentious move, Philip Morris had intended to make the smokers consume larger number of cigarettes, and subsequently it faced the class action, or group case.

The Marlboro Lights brand manufactured by Philip Morris had promised to deliver lesser tar and nicotine to the users. Thus, it was being portrayed as safer than regular cigarettes.

The claimants have demanded a compensation of $700 million plus punitive damages. The class, which was identified as been affected by the ill effects of the cigarette, includes as many as 400,000 current and former Marlboro Lights smokers.

The trial began with opening statements last month. The plaintiff’s lawyer claim that a “reasonable consumer" would expect that it was important to buy the light cigarettes, based on its labeling that promised lower tar and nicotine.

About 700 million packs of Marlboro Light cigarettes were sold in Missouri from early 1995 until the end of 2002, the period the suit covers. The company removed the label of "lower tar and nicotine" from the packs in 2003 and in 2010 it stopped using the term "lights".

However, Philip Morris defended that the packets did contain warning labels similar to those carried by other tobacco packets. Moreover, the plaintiffs could not prove that the Marlboro lights did not provide lesser tar and nicotine.

Philip Morris seems to be tangled with legal tussles, as it is the second accusation against the company to go to court this year in Missouri over marketing practices.

However, the company had been on the winning side last time, as Missouri hospitals lost a jury verdict in April in their claim that Philip Morris, R.J. Reynolds Tobacco Co. (RAI), Lorillard Tobacco Co. (LO) and other cigarette makers manipulated the nicotine content in cigarettes and misrepresented the health effects of smoking. The hospitals claimed that the industry’s promotional activities resulted in increased spending for unreimbursed and uncompensated tobacco-related health care for them.

In another separate case, widow of a man who died of lung cancer, filed a complaint in Bethel Superior Court, of Marshall, accusing Philip Morris USA Inc. and its parent company, Altria Group Inc., of making and marketing cigarettes even though they knew the products were addictive and caused cancer. The lawsuit seeks more than $100,000 on behalf of the Benjamin Francis estate, which belonged to the dead man.

Philip Morris currently holds a Zacks #3 Rank, which implies a short-term Hold rating. On a long-term basis, we have a Neutral recommendation on the stock.

 
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