Liggett Would Rather Settle than Fight

WASHINGTON, D.C.: Where you stood on the news that Liggett Group decided to settle lawsuits with 22 states by agreeing to admit that cigarette smoking is addictive depended very much on where in the morass of tobacco litigation you currently sat. States Attorneys General pointed to the fact that the North Carolina-based maker of Chesterfield, Lark and L&M cigarettes agreed to up-front payments of about $25 million, plus 2.5 percent of its pretax profits over the next 25 years, as evidence that tobacco companies are in some way responsible for the health-care costs states are suing to recover. And the fact that Liggett will turn over hundreds of thousands of insider documents that states hope will prove severely damaging to the tobacco industry had plaintiffs almost giddy. While Philip Morris won a temporary restraining order to prevent Liggett from turning over the papers, Mississippi Attorney General Mike Moore said that won't make a bit of difference to other judges around the country. In roughly three months, Mississippi's case against the other four companies will go to trial. By then, Moore said, "We will have the 25 most incriminating documents, and we will bring the other four tobacco companies to their knees." Liggett also agreed to waive any confidentiality agreements with former or present employees, so that they can testify in the 200 other tobacco cases. But despite Moore's enthusiasm, Liggett's defection isn't likely to bring the others to their knees anytime soon. Industry analysts point out that Liggett, a much smaller company than the others, may have dealt in part to make it more attractive for a takeover. And while Liggett's documents may help, tobacco has an excellent track record in litigation, hardly losing a case. In the end, Liggett's move might more than anything provide a push for the other companies to settle. Investors believe lifting the threat of costly litigation would send the valuation of tobacco rocketing skyward -- Philip Morris stock rose $6 in February on rumors that a deal might be near. Wall Street seemed pleased by the settlement news: Brooke Group, the parent company of Liggett, rose 5/8 to 47/8, while Philip Morris tumbled 61/8 to 1157/8 and RJR Nabisco fell 3/4 to 311/2. But Philip Morris won't be following Liggett's lead, at least until the company decides that it's share of the some $600 million Big Tobacco spends annually fending off lawsuits is too much.