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Wednesday, April 7, 2010 as of 11:14 AM ET

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Lee Ross

Supreme Court

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Big Tobacco Denied by Big Court

June 28, 2010 - 10:16 AM | by: Lee Ross

The American tobacco industry suffered a major defeat Monday when the Supreme Court announced it will not hear arguments in a collection of cases raising doubts over the merits of a judge’s verdict that strongly takes the industry to task for its past behavior.

The ruling isn’t a total loss for the nation’s top tobacco firms, including RJ Reynolds and Philip Morris USA, because the high court’s decision also shuts down the government’s ability to claim $280 billion in damages from the companies.

That staggering amount of money combined with the overall uncertainty of the outcome of legal action that started more than a decade ago made this one most anticipated cases pending a decision by the high court.

The Clinton Justice Department started the civil case in an attempt to punish tobacco companies and make them pay for the public health costs associated with millions of smokers. In 2006, a federal trial court judge determined that those companies were guilty of defrauding its customers with years of false statements about the health risks associated with smoking.

Judge Gladys Kessler’s 1,600-page opinion ordered the companies to come clean about its past claims and denials of the dangers associated with smoking. She also ruled that the firms could no longer sell “low tar” or “light” cigarettes. A prior court ruling prevented Kessler from assessing financial damages totaling $280 billion that the government wants to take from the companies.

Industry lawyers argued the racketeering law used by government officials–that is also favored by prosecutors going after mobsters–is not appropriate for the types of violations alleged. They also argue the lawsuit is nothing more than an attempt by the government to chill their First Amendment rights. “This is the first case anywhere that extended the fraud statutes to reach industry or company statements about matters of public concern,” lawyers for R.J. Reynolds and Brown & Williamson Tobacco told the Court.

The Obama administration, in a brief written by Solicitor General Elena Kagan, bluntly told the justices that “for the last half century, those defendants have engaged in a pattern of racketeering activity and a conspiracy to engage in racketeering that has cost the lives and damaged the health of untold millions of Americans.” The government asked the high court to affirm the liability ruling but to allow it to pursue the industry’s “ill gotten gains.”

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