CHICAGO & NEW YORK--(BUSINESS WIRE)--The settlement of more than 400 lawsuits in U.S. federal courts filed by Florida smokers, the Engle Progeny cases, resolves some uncertainty in extensive litigation pending against the major cigarette companies, Philip Morris USA Inc. (subsidiary of Altria Inc.), R.J. Reynolds Tobacco Company (subsidiary of Reynolds American Inc.) and Lorillard Tobacco Company (subsidiary of Lorillard Inc.).
Together, the companies will pay $100 million to injured smokers or their families, with $42.5 million each to be paid by Altria and Reynolds American and $15 million by Lorillard. These cases date back to 1994 and involve only those cases pending in federal court, which totaled approximately 700 at the end of 2014, and does not address the state actions that collectively number over 3,000 cases. Final approval of the settlement requires an agreement to participate by all plaintiffs.
Significant litigation risk, which includes product liability, consumer fraud and health recovery cases totaling in the thousands, will weigh on the industry for years to come. Fitch sees the highest litigation risk for the industry stemming from the Engle Progeny legal actions in Florida, which currently consist of nearly 3,900 state and federal cases. Each major tobacco firm has an experienced legal team that has stretched the period to resolution of litigation by effectively using the appellate process. Since 2006, damage awards from Engle Progeny litigation have been manageable and easily satisfied with current cash flows.
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