Wall Street Journal Examines Philip Morris’s Successful Defense Strategy

The Wall Street Journal on Wednesday examined how a "pugnacious defense strategy is starting to pay off" for Philip Morris USA as company lawyers work to reduce the number and size of lawsuits alleging harm from cigarettes. According to the Journal, Philip Morris, the nation's largest cigarette maker, was "deluged with lawsuits" after the 1998 national tobacco settlement. As of early 1999, the company faced 670 suits filed by smokers and others. The litigation drove the stock of Altria -- Philip Morris's parent company -- down 57% to $23 per share in 1999.

However, as of May 2 of this year, the number of lawsuits pending against Altria had dropped 60% to 273, and the company's stock had rebounded to $65.76 as of Tuesday. The turnaround came after the company was compelled to "rethink its trial strategy" following a "spate of courtroom losses in California, long a bastion of anti-smoking activism," the Journal reports. According to the Journal, Philip Morris's "change of fortunes is partly due to its longtime strategy of challenging nearly every judgment against it," which has resulted in many plaintiff awards being reduced and many applications for class-action status being denied.

However, Philip Morris also has "benefited" from strategies implemented by lead attorney William Ohlemeyer to replace the company's mostly "white, male and middle-age" legal team with more minority and women lawyers. Meanwhile, Philip Morris successfully petitioned to move many cases from state to federal courts -- which traditionally have dismissed tobacco cases -- and to help persuade more than 30 states to adopt laws that allow companies to file appeals with as little as $25 million posted as collateral. Previously, companies were required to put up as collateral during appeals the value of the awards.

"To be sure, Philip Morris still faces some big court challenges," the Journal reports. The government's 1999 civil racketeering suit continues, and Philip Morris is working through a number of class-action cases and verdict appeals related to its "light" cigarettes.

However, "for the most part, plaintiffs' lawyers who took on the tobacco industry in the 1990s have backed off," according to the Journal. John Coale, a Washington, D.C., lawyer, said, "The days of huge industry-killer suits are over" (O'Connell, Wall Street Journal, 5/11).