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Tobacco cos. OK $2B bond
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May 7, 2001: 2:48 p.m. ET
Three companies agree to post a $2B bond; court stays punitive damage awards
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NEW YORK (CNNfn) - Three U.S. tobacco companies have agreed to post a $2 billion bond in the landmark Engle class-action case in Florida, tobacco executives said Monday.
The agreement is in connection with a stay of massive punitive damage awards against the companies, and assures that the companies will not have to pay their share of the $145 billion Engle verdict while their appeals are pending.
Philip Morris Cos. and Lorillard Tobacco said the agreement for the stay had been approved by the Florida court. R.J. Reynolds Tobacco Holdings identified the third company as Liggett Group Inc., a division of Vector Group Ltd.
 Philip Morris (MO: down $0.79 to $52.21, Research, Estimates) said it would place $1.7 billion into two separate escrow accounts, one totaling $1.2 billion and the other $500 million.
Loews Corp. (LTR: down $0.97 to $70.63, Research, Estimates) unit Lorillard said it will place $100 million into an escrow account which would be released, along with Lorillard's existing $100 million statutory bond, to the court for the benefit of the class once the appeals process is complete. The court will have the right and obligation to direct where these funds are to be paid once the appeal is completed, Lorillard said.
Representatives of Liggett parent Vector (VGR: down $1.39 to $34.10, Research, Estimates) were not immediately available for comment.
R.J. Reynolds (RJR: down $0.75 to $60.98, Research, Estimates), the No. 2 U.S. tobacco company, said it was evaluating the agreement between the three tobacco companies and the class of plaintiffs in the case. It said it remains confident that the verdict will be overturned on appeal.
$145 billion in punitive damages largest ever
In July 2000, a six-member jury in Miami awarded $145 billion in punitive damages to plaintiffs in the Engle sick-smokers case. It was the largest damage award ever handed down by a U.S. jury.
Although divided among five companies, Philip Morris got the biggest hit, with damages of almost $74 billion. R.J. Reynolds Tobacco was ordered to pay more than $35 billion, Brown & Williamson Tobacco Corp. was ordered to pay more than $16 billion, and Lorillard Tobacco Co. was ordered to pay more than $16 billion. Liggett Group Inc. was ordered to pay $790 million.
The jury also ordered the Council for Tobacco Research to pay about $1.2 million and the Tobacco Institute was ordered to pay about $278,000.
Florida's bond-cap statute permitted Philip Morris to post a $100 million bond to prevent plaintiffs from demanding payment of the full amount during the appeal. Prior to Monday's agreement, this stay of the judgment was subject to challenge in the trial court. The agreement preserves the companies ability to pursue an appeal.
-- from staff and wire reports 
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