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Judge Throws Out Parts of U.S. Suit Seeking Damages From Big Tobacco

By Eric Lichtblau and Alissa J. Rubin

In a partial victory for the tobacco industry, a federal judge on Thursday threw out portions of a U.S. government lawsuit seeking to collect billions of dollars in reimbursement from cigarette makers for public health care funds spent on ill smokers.

The ruling leaves intact another part of the massive lawsuit that accuses the tobacco industry of engaging in a 45-year pattern of racketeering through its fraudulent marketing practices.

Federal officials -- though disappointed in the overall decision -- said they are pleased they still will be able to go to trial on that part of their claim.

U.S. District Judge Gladys Kessler said in her ruling that “it is simply inconceivable” that after more than three decades of inaction the federal government can now hold the tobacco industry liable for up to $20 billion a year in medical costs for smokers.

Tobacco industry officials savored that portion of the ruling, saying they believe it could lessen the government’s chances of obtaining big monetary damages in a lawsuit that President Clinton announced to much fanfare in his 1999 State of the Union address.

Philip Morris Cos., the lead defendant among 11 industry companies sued by the government, called the ruling “a big step in the right direction.”

Observers characterized the ruling as at least a partial win for the tobacco industry, but were not quite as confident about the final outcome.

“The bottom line,” said Mary Aronson, an independent tobacco industry analyst, is that federal officials “have fewer claims, fewer pieces of ammunition, but that doesn’t mean they still can’t make a significant recovery.”

Tobacco analyst Martin Feldman of Salomon Smith Barney agreed that dismissal of the two medical cost recovery claims was good for the industry, but noted that the RICO claims left intact by the judge “essentially represent the largest aspect of the government’s claim.”

The U.S. Justice Department, which is litigating the case, had wanted to show in part that the tobacco industry should have to repay the federal government for all the money spent on smoking-related illnesses over the years. Lawyers argued that two arcane federal laws -- the 1962 Medical Care Recovery Act and the Medicare Secondary Payer provisions amended in 1980 -- gave the government the authority to collect for its medical outlays.

“Smoking has cost taxpayers hundreds of billions of dollars under Medicare and other programs,” Clinton said in announcing his surprise plans to pursue the lawsuit last year, following a landmark $246 billion settlement between the tobacco industry and the states.