Tobacco giant Philip Morris was smacked twice in recent days with more legal woes. The company already has its next moves planned to combat one, while waiting to find out more about the other. As usual with Philip Morris, though, these seemingly big troubles mean nothing for now. Having bid shares up so far this year from a low of $18.69 to the current $35 range, investors seem to agree.
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The low-down on the Florida case
Let's address the Florida issue first. Philip Morris, along with the other tobacco companies named in the suit, had hoped to have an appeal heard in a federal court. This is because, traditionally, federal courts have been opposed to the class-action status of suits like the Florida one. Given this, it's surprising that this particular judge didn't do that.
The tobacco companies didn't appeal based on the class-action questions, though. A union, the Southeastern Iron Workers, and its health care plan, attempted to join the suit, and the industry appealed based on that action. Industry attorneys argued that the union involvement brought up issues that only a federal court could answer. U.S. District Judge Ursula Ungaro-Benages disagreed, and did so without even hearing the scheduled arguments for both sides. It's likely that the industry had hoped the federal court would address the class-action questions, along with the "technical" reason they were seeking to change venue, but this judge avoided all of that.
What's next in Florida?
So what now for Philip Morris and the Florida case? More waiting, more filings, and more legal maneuvers can be expected. Being denied a federal appeal, though, certainly hurts. A whole host of post-trial motions will be heard in the Florida court, and Philip Morris has already said that should it not be able to get the case thrown out as a result of those, it'll appeal the case through Florida's appellate system. The company still believes, obviously, that the verdict should be overturned.
As with all legal things related to Philip Morris, the outcome from this is probably still years away. The company is incredibly adept at putting up roadblocks to prevent final closure on the cases against it. And even if it turns out that the damages are not reduced, Philip Morris was assigned about half of them, and the payout will likely be stretched out over many years.
The EU suit
This brings us to the European Commission's civil suit. As of right now, it's not known how much in damages the EU is seeking to recover, and both Philip Morris and R.J. Reynolds have issued statements saying that neither company has actually seen the court papers. A similar suit brought by Canada against R.J. Reynolds was thrown out of court, but it looks like the EU suit could avoid this fate because of its focus.
Whereas the Canadian suit asked the U.S. to basically enforce foreign tax laws, the EU suit asks the court to enforce American racketeering laws. Unsurprisingly, Philip Morris questioned the EU's choice to address the alleged cigarette smuggling through the U.S. court system, rather than through more regulatory avenues.
Litigation risk not new
Investors in Philip Morris know the litigation risks associated with owning this company. Legal uncertainties are nothing new for Philip Morris, and they aren't likely to subside anytime soon. Shareholders may not have known they were signing on for smuggling charges, too, though.
In the end, Philip Morris will continue doing its thing and making money while allowing its lawyers to battle it out in the courts. The company isn't financially at risk right now, nor will it be anytime soon. For now, there's nothing much to be concerned about, no matter how scary all the news of lawsuits might sound. Looking at a chart of Philip Morris so far this year, investors appear to agree.
Your Turn:
What do you think about Philip Morris' legal battles? Will this company ever be caught without a next move? Would you buy it despite these worries? Talk about it with other Fools on the Philip Morris discussion board.
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