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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (1439)	3/10/1999 11:40:00 AM
From: porcupine --''''>	Read Replies (1) \| Respond to of 1722

Liability Lawsuits May Continue to Pursue Both Operations of RJR Nabisco March 10, 1999 By BARRY MEIER Despite RJR Nabisco's move to separate its food and tobacco operations, hundreds of smoking-related lawsuits will likely continue to cast a cloud over both businesses for years, legal experts said Tuesday. Legal responsibility for cigarette-related lawsuits against the company in the international arena will shift to Japan Tobacco, which agreed to pay $8 billion for RJR Nabisco's overseas tobacco operations. But a slightly more complex picture exists for tobacco lawsuits filed against the R.J. Reynolds Tobacco Co., the nation's second-biggest cigarette maker, by smokers and others in the United States. Most legal experts said Tuesday that they thought that simply separating the company's tobacco and food operations would not insulate the food company from judgments in cases brought by smokers that the free-standing tobacco company did not have the financial resources to satisfy. Stephen Leach, a bankruptcy lawyer in Washington, said that in such cases, a plaintiff would probably try to enforce the judgment against Nabisco Group Holdings, the new holding company that will retain an 80 percent interest in the food company. "It is hard for me to imagine that the effort would not be made," Leach said. John Coale, a lawyer in Washington who is involved in tobacco lawsuits brought against the cigarette maker, said that while he had not studied the new arrangement, he did not foresee any problems with it. "For all past conduct and pending litigation, they are not off the hook," Coale said. "We would try to put Humpty Dumpty back together again and then we would collect." Nabisco Group Holdings would not be responsible for actions taken by the cigarette company that lead to lawsuits after the spinoff, some legal experts said. Typically, legal responsibility for the actions of a company or any injuries its products create cannot be evaded simply be selling that company or spinning it off. And a company can commit fraud by shielding its assets from legal judgments against its operations. Still, RJR Nabisco Holdings has fought to remove itself from lawsuits filed against R.J. Reynolds, which makes brands like Winston and Salem. And companies that produce both cigarettes and other products have long wrestled with the question of how to separate their tobacco-related operations and the liabilities they represent. As early as 1993, officials of Philip Morris Cos., fearing that an onslaught of tobacco litigation might force it into bankruptcy, studied the issue of isolating their domestic tobacco operations, according to an internal company memo produced during the recent round of state lawsuits. In that memo, Murray Bring, a top company official, wrote that one of the company's goals was to isolate its domestic tobacco operation so that legal claims against it could not be collected from other Philip Morris operations, including Kraft Foods, Miller Brewing and even Philip Morris' foreign tobacco unit. One way to seal off liabilities, he wrote, would be to reincorporate Philip Morris overseas, but he noted that such a move, which did not occur, might be viewed as fraud. Copyright 1999 The New York Times Company