Fitch: Engle decision a plus for Altria, Reynold, Loews

The Supreme Court of Florida's approval of the Third District's reversal of the $145 billion class-action punitive damages award against the domestic tobacco industry is an extremely favorable development for tobacco companies, according to Fitch Ratings.

Fitch is maintaining its current ratings and outlooks for Altria Group, Inc. (parent of Philip Morris USA), Reynolds American, Inc. (parent of R.J. Reynolds Tobacco Co. and the former Brown and Williamson Tobacco Corp.) and Loews Corp. (parent of Lorillard Tobacco Co.), which had incorporated a high likelihood of the court's decision.

The court unanimously concluded that, "the punitive damages award is excessive as a matter of law." The court also found that causation and fault are highly individualized and are not easily aggregated into a class.

This outcome has greatly reduced the uncertainty around tobacco industry litigation, which is the primary risk factor affecting the ratings.

However, the plaintiffs may still seek further appellate review. Escrow funds will not be returned until the conclusion of any appeals.

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