Tuesday, April 08, 2003

$12 billion buys a lot of cigarettes

This is just plain despicable:

Philip Morris USA won a victory Tuesday when a Chicago judge Tuesday temporarily blocked part of a multibillion-dollar award it was ordered to pay, which, coupled with comments from another judge, allayed fears the cigarette maker could be forced into bankruptcy.

The downstate Edwardsville, Ill., judge who ordered the award, after finding Philip Morris USA had deceived customers into thinking "light" cigarettes were safer than regular cigarettes, indicated he may not force the company to post a $12 billion appeal bond.

"I don't want to put this company out of business. At the same time I'm concerned about protecting this judgment," Madison County Circuit Court Judge Nicholas Byron said during a hearing in Edwardsville, on Philip Morris' request to reduce the bond. He added that he could consider a "guarantee" from Altria Group Inc., Philip Morris's parent, but did not elaborate.

Byron last month ordered Philip Morris USA to pay $7.1005 billion in compensatory damages to smokers and awarded Illinois $3.0 billion in punitive damages.

A $12 billion bond just to appeal a verdict is irrational on its face. Phillip Morris documented that they couldn’t raise more than a $1.5 billion bond, and in fact the entire company was not worth $12 billion. Indeed, the company would likely be forced into bankruptcy if Judge Byron’s unethical (and, in my judgment, unconstitutional) bond order stands. To wage such economic destruction for the protection of an already dubious punitive damage award demonstrates just how irrational portions of America’s justice system are today.

The even sicker part of this is that a number of state governments filed an amicus brief in support of reducing the bond. You may wonder why other states would side with Phillip Morris against Illinois. The answer is simple: if Phillip Morris goes into bankruptcy over the Illinois bond, they would almost certainly miss upcoming payments on the existing national tobacco settlement. At a time when government budgets are in deficit freefall nationally, states cannot afford to lose their hard-stolen tobacco funds. Thus, Illinois effort to steal even more money could create an odd cascade of public financing destruction in addition to the economic disaster which would accompany a Phillip Morris bankruptcy.

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