JUDGE LIMITS SMOKING CASE DAMAGES

MIAMI - A trial witness calls tobacco companies "cash cows," but a
judge limits punitive damages to what the companies can pay now.

In a victory for the tobacco industry, the judge in a Florida smokers'
case ordered jurors Wednesday to assess the industry's ability to pay
punitive damages based on money the companies have now rather than
what they could pay over several years.

A lawsuit, filed on behalf of up to 700,000 sick Florida smokers,
seeks a multibillion-dollar award from the industry as punishment for
decades of misconduct. The jury already ruled the companies make a
deadly product, and it awarded compensatory damages to three smokers
representing the group.

A month ago, the tobacco industry asked that any punitive damages be
based on its ability to pay a lump sum. Circuit Judge Robert Kaye
ruled after the issue arose during testimony of University of Miami
law school finance professor George Mundstock, one of two finance
witnesses for smokers.

He estimated Tuesday that the nation's five biggest cigarette makers
are worth $157 billion domestically and could raise that amount in six
months by borrowing the money or selling themselves.

The industry objected Wednesday when Mundstock was asked how much they
could afford to pay over time. Lead tobacco attorney Dan Webb argued
the intent was to boost the award.

With a payout over time, "you can goose up the amount now and come up
with an enhanced amount of punitive damages," said Webb, arguing that
Florida law restricts an award to a company's net worth.

The judge said the trend is to base such awards on the current ability
to pay.

Webb and smokers attorney Stanley Rosenblatt refused to comment about
the judge's ruling. Rosenblatt argued in court however, that case law
mentions "financial worth" and the desirability of removing profit to
broaden the effect of a punitive award.

The judge's ruling came after Mundstock testified that tobacco company
balance sheets don't reflect their ability to raise money quickly with
cigarette price increases.

"These companies are cash cows," Mundstock said. "Tobacco companies
pride themselves on their cash flow and their ability to generate cash."

The jury was told to return today to hear excerpts from depositions by
tobacco company executives, after which smokers' attorneys plan to
rest their case.

The defendants are Philip Morris Inc., R. J. Reynolds Tobacco Co.,
Brown & Williamson Tobacco Corp., Lorillard Tobacco Co., Liggett Group
Inc., the industry's defunct Council for Tobacco Research and the
Tobacco Institute.