Shares of Altria Group (NYSE: MO), parent of Phillip Morris USA, and Reynolds American (NYSE: RAI) both jumped more than 3 percent on Monday after the Supreme Court rejected appeals by the government on a suit that sought out upward of $280 billion of profits from the tobacco industry to cover health damages, along with another $10 billion for anti-smoking efforts.
The decision upholds a lower court’s decision that denied the disgorgement of profits. The ruling provided a favorable boost for the industry as investors no longer have to worry about the government’s suit costing cigarette makers billions.
However, the Supreme Court also rejected an appeal by tobacco industry leaders that sought to reverse a decision made by a lower court on racketeering charges. The industry was found guilty for violating federal racketeering laws by conspiring for years to lie while knowingly selling products they knew were a health risk.
The decision, which restricts the way tobacco companies can advertise and market their products is not viewed as a big loss for the industry as the Food and Drug Administration (FDA) has authority to regulate those efforts now.
