Cook County Judge Says Illinois Not Entitled to $3 Billion Damage Award in 'Lights' Case

Business Wire, April 8, 2003

Business Editors

CHICAGO--(BUSINESS WIRE)--April 8, 2003

Court Temporarily Halts Efforts by State to Collect Damages from

Philip Morris USA

A Cook County Circuit Court judge today said he believes the state of Illinois is not entitled to the $3 billion in punitive damages that a Madison County Circuit Court has ordered that Philip Morris USA pay to the state as a result of the verdict in the Price case, formerly known as the Miles lawsuit.

Judge James F. Henry, after a brief hearing, said "I believe, as a preliminary matter, the claim (for damages) was released" by the state as a result of its 1998 agreement with Philip Morris USA and other major U.S. cigarette companies to settle its Attorney General's lawsuit.

Judge Henry granted the company's request to issue a temporary restraining order against the state, which effectively prevents it from attempting to collect the damages should Philip Morris USA be unable to post a bond necessary to appeal the Price decision.

"Our position is crystal clear and legally sound. The state of Illinois relinquished these claims to punitive damage awards when it entered into the Master Settlement Agreement with PM USA and other tobacco companies. We are pleased that Judge Henry, at this point in the proceedings, agrees," said William S. Ohlemeyer, Philip Morris USA vice president and associate general counsel.

Judge Henry ordered the stay remain in effect for 10 days to allow the state to request a hearing on the matter, and said he would meet with attorneys for both sides on Friday to set a hearing date.

Judge Henry also made clear in his ruling that he is taking no position on the issue of the $12.1 billion bond that Madison County Circuit Court Judge Nicholas Byron ordered the company to post in order to appeal the $10.1 billion verdict in the Price case.

"The only issue before me today is, in my opinion, whether the state has given up its right to further monies, and I believe it has as part of the Master Settlement Agreement," he said.

Under terms of the MSA, Illinois is expected to receive between $7 billion and $9 billion over a 25-year period beginning in 1998, with payments to continue in perpetuity under terms of the settlement.

While the hearing in Cook County was under way, the company also was appearing before Judge Byron in Madison County seeking a reduction of the $12 billion bond, an amount Philip Morris USA officials have said the company cannot post.

The company appeared before Judge Henry because the Cook County Circuit Court has exclusive jurisdiction over legal issues arising as a result of the MSA

In its pleadings before Judge Henry, the company asked that the state of Illinois be prevented "from enforcing an award of $3 billion in punitive damages made to it in the judgment entered on March 21, 2003 in (Price)."

Ohlemeyer said Judge Henry's decision does not address the merits of the lawsuit or the verdict, and additional briefings challenging Judge Byron's decision will be filed on or before April 21.

"Nothing in the Cook County request prevents the company from taking further legal action to have the $12 billion bond reduced by the trial or appellate courts, or to have the verdict overturned. Those requests are part of a separate post-trial motion filed under seal with the Madison County Circuit Court," Ohlemeyer said.