The U.S. Supreme Court on Monday rejected separate appeals by cigarette makers and the Obama administration stemming from the government's racketeering lawsuit against the tobacco industry, a case that initially sought $280 billion from the industry.
The court's mixed ruling was seen by Wall Street as a win for tobacco companies, as it removed any uncertainty that a huge legal verdict could be reinstated against the companies. Shares of tobacco makers rallied on Monday morning.
The Supreme Court rejected the appeals without any comment.
Cigarette companies appealed to the nation's highest court after a federal appeals court ruled last year that the firms had violated federal anti-racketeering laws by conspiring to lie for years to sell tobacco products they knew were dangerous.
The administration appealed on a separate issue, arguing the appeals court wrongly rejected disgorgement by the industry of billions of dollars in ill-gotten gains and other expensive remedies, like funding a smoking-cessation program.
The case was filed in 1999 by the Clinton administration and originally sought to force the industry to give up $280 billion in ill-gotten gains, the biggest civil racketeering case ever brought by the U.S. government.
During the trial, which began in 2004, the U.S. Justice Department under the Bush administration scaled back its demands to $14 billion for various anti-smoking programs.
Defendants included Altria Group Inc and its Philip Morris USA unit; the R.J. Reynolds Tobacco unit of Reynolds American Inc; Lorillard Inc; Vector Group Ltd's Liggett Group; British American Tobacco Plc and its Brown & Williamson unit; and two now-defunct industry groups.
The Dow Jones tobacco index was up 2.3 percent on Monday morning. Shares of Altria, the largest U.S. tobacco company, were up 4.1 percent at $20.50, while rival Reynolds American Inc was up 4.2 percent at $53.52.
U.S. District Judge Gladys Kessler ruled in 2006 that the companies broke the law and could no longer use expressions such as low tar or light in their cigarette marketing. But she said she did not have the authority to force them to fund a smoking cessation program.
The appeals court ruled that Kessler was limited to forward-looking remedies aimed at future racketeering violations, but had been properly precluded imposing smoking-cessation and public-education remedies.
The Obama administration appealed to the Supreme Court.
Administration attorneys said the appeals court's ruling prevented the trial judge from crafting appropriate remedies for 50 years of unlawful racketeering activity that have harmed ... the lives and health of many millions of Americans.
Tobacco companies argued in their appeals that the government had improperly invoked the racketeering law and that the appeals court erred when it found that a group of corporations could form a racketeering enterprise.
Lawyers for the companies also argued that the appeals court had been too deferential to the trial judge's findings and should have conducted an independent review because the case raised free-speech issues.
They said the decisions by the lower courts to brand their statements about smoking as fraudulent unfairly denied them their constitutional free-speech rights to engage in the public-health debate about smoking.
(Editing by John Wallace and Matthew Lewis)