Star Scientific, Inc. To Appeal Decision by U.S. District Court Dismissing Its Challenge to the Tobacco Master Settlement Agreement

Business Wire, March 27, 2001

Business Editors

CHESTER, Va.--(BUSINESS WIRE)--March 27, 2001

Star Scientific, Inc. (NASDAQ: STSI) announced today that it will appeal the decision issued yesterday by the United States District Court for the Eastern District of Virginia dismissing the complaint filed by Star Scientific on December 15, 2000, challenging the Tobacco Master Settlement Agreement, and the Virginia Qualifying Statute, on a number of constitutional bases.

Star Scientific is understandably disappointed by the District Court's ruling that dismissed our constitutional challenge to the Tobacco Master Settlement Agreement and the Virginia Qualifying Statute. At the same time, however, we are gratified that the Court "appreciated" our "position", and was troubled that Star "must now suffer as a result of the bad faith of previous market entrants". The Court further noted that Star "has never been accused of the fraudulent, collusive and intentionally dishonest activities of the Big Four", "was not even in existence during the bulk of the time that these activities were occurring", and has taken "every step to provide complete disclosure about the harmful nature of its products". It is particularly significant that the Court concluded that the "financial burden on Star Scientific and others like it may hamper efforts to develop new tobacco technologies", for it had noted that our company "embarked upon research into methods that it and many others believe will reduce the toxic nature of cigarettes" (US District Court Memorandum Opinion, p. 12).

Paul L. Perito, Esq., Star's Chairman, President and COO said, "Although we respect the Court's judgment and appreciate its favorable observations, we continue to believe that the Master Settlement Agreement and the Qualifying Statute are constitutionally flawed, as do many other legal experts, and we will continue to address these constitutional deficiencies in the Court of Appeals." Mr. Perito added, "For these reasons, among others, we believe an immediate appeal to the Fourth Circuit is warranted."

Mr. Perito further noted: "As we move forward with the appeal process, Star Scientific intends to focus its primary resources on the anticipated introduction of two flagship smokeless tobacco products, i.e. a moist snuff and a hard tobacco. We believe that these noncombustible tobacco products represent potentially less hazardous alternatives to adult smokers."

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company has tried, whenever possible, to identify these forward-looking statements using words such as "anticipates", "believes", "estimates", "expects", "plans", "intends" and similar expressions. These statements reflect the Company's current beliefs and are based upon information currently available to it. Accordingly, such forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause the Company's actual results, performance or achievements to differ materially from those expressed in, or implied by, such statements. These risks, uncertainties and contingencies include, without limitation, the challenges inherent in new product development initiatives, the Company's ability to raise the capital necessary to grow its business, potential disputes concerning the Company's intellectual property, potential delays in obtaining any necessary government approvals of the Company's proposed reduced risk tobacco products, market acceptance of the Company's proposed new products, competition from companies with greater resources than the Company, the Company's decision not to join the Master Settlement Agreement ("MSA") and its decision to challenge the constitutionality of the MSA, the effect of state statutes adopted under the MSA and any subsequent modification of the MSA, the Company's dependence on key employees and on its strategic relationships with Brown & Williamson Tobacco Corporation. The impact of potential litigation, if initiated against or by individual states that have adopted the MSA, could be materially adverse to the Company. See additional discussion under "Factors That May Affect Future Results" in the Company's Annual Report on Form 10-K/A for the year ended December 31, 1999, and other factors detailed from time to time in the Company's other filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or advise upon any such forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.