$1bn legal challenge to tobacco industry

The tobacco industry came under renewed attack in the US yesterday as the state of Massachusetts filed a $1bn lawsuit against six giant cigarette companies, including Britain's BAT. The state - where more than 10,000 citizens die each year from smoking-related diseases - is trying to recover the costs of treating diseases caused by the habit.

The suit makes Massachusetts the fifth US state to take on the tobacco industry. Its action is in addition to a well financed class action representing all smokers addicted to nicotine which is pending in New Orleans.

Massachusetts has joined Mississippi, Minnesota, Florida and West Virginia in taking on the tobacco giants. Maryland has also promised to sue, while the big companies are suing Texas, which is considering an action.

The intensification of the acrimony between American government bodies and the industry has underlined the enormous stakes being played for in a business where volumes have grown by a quarter in the past 15 years despite declines in the mature markets of the West.

Scott Harshbarger, the state Attorney-General, said: "Today we say: enough is enough. For too long, the wrong people have paid too much in staggering human and financial costs for a poisonous product peddled by tobacco giants through allegedly deceptive means."

The 75-page complaint he filed alleges that the tobacco industry conspired to mislead the public by denying that cigarettes cause cancer, by denying that they are addictive and by denying that the industry manipulates nicotine levels. The suit claims $1bn of damages based on the amount of taxpayers' funds that the Commonwealth of Massachusetts has spent through Medicaid and other programmes to pay for smoking-related health-care costs. It also seeks court orders requiring the defendants to disclose their research on smoking, addiction and the health consequences of smoking.

"It is time to snuff out this deadly and deceptive conspiracy. It is time for the industry to be forced to tell the truth. It is time for cigarette companies to pay for the damage they have done," Mr Harshbarger said.

The case threatens to become a cause celebre thanks to the involvement on the state's side of Harvard Law School Professor Laurence Tribe, a constitutional law expert who argued in the landmark Cipollone case before the Supreme Court, which established that some liability claims could go forward against the industry. He has argued in more than 20 cases before the court, winning most of them.

The defendants hit back at Massachusetts' claim, with RJ Reynolds counsel Daniel Donahue arguing: "They seek to bypass the traditional principle that the injured party should be the one to file suit and that someone who sues on their behalf is subject to the same arguments." The tobacco industry has never paid damages or settled a tobacco liability claim, in part because plaintiffs' lawyers - who could only hope to recover damages for an individual after years in court - eventually gave up.

BAT's shares shrugged off the latest development, closing 10p higher at 554p.

Investment column, page 18