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Smoker wins suit in Brazil
AP Business News
B.A.T ordered to pay $82,000
• Decision in Brazil raises concern for more
litigation in
growing overseas markets
Thursday, September 25, 1997
BLOOMBERG NEWS
RIO DE JANEIRO, Brazil
A Brazilian judge has awarded financial damages
to a smoker's family
who sued B.A.T Industries Plc's Souza Cruz unit.
Judge Jose de Samuel Marques of the 38th civil
court in Rio de Janeiro
awarded 90,000 reais (or about $82,000), plus a
monthly pension for 35
years, to the widow and two daughters of
mechanic Nelson Cabral
Alves, who died of a heart attack at age 41.
Gary Black, an analyst with Sanford C.
Bernstein & Co., said that it was
the first time a tobacco company was ordered to
pay damages outside
the United States.
The ruling raised concerns among
tobacco-industry executives and
investors that cigarette-makers will face more
litigation in overseas
markets, where they are expanding to increase
their profits. U.S. profit
growth is expected to slow if a proposed $368.5
billion settlement
becomes law.
''You could see the Brazilians coming out of
the woodwork when they
heard a factory worker got $82,000,'' Black
said. ''It's got some people
nervous.''
Despite news of the ruling yesterday, B.A.T's
American depository
receipts rose 3/16 to 17 7/16 a share. Souza
Cruz's shares were
unchanged at 10.3 reais ($9.40) in Sao Paulo.
Michael Prideaux, a spokesman for B.A.T
Industries, said that the ruling
was a ''rogue judgment'' and will be appealed.
That process could take a
year, he said.
Alves, who started smoking at 18, smoked about
four packs of cigarettes
a day. The doctor who prepared his death
certificate said that his death
was related to smoking, according to the lawsuit.
Dana Voelzke, an analyst with Deutsche Morgan
Grenfell in Sao Paulo,
said: ''The key question now is whether it will
stick. I don't think it will.
''It has so little precedent.''
An attorney for Souza Cruz was equally adamant.
''We're sure this ruling will be thrown out,
it's only a matter of time. The
judge in the case didn't follow proper
procedure in allowing Souza Cruz
to present its own side,'' said Gustavo
Binenbojm, an attorney with
Barroso e Associados, a law firm in Rio de Janeiro.
Souza Cruz SA is Brazil's biggest maker of
cigarettes and is the country's
fourth-biggest private company.
It has been a unit of B.A.T since 1914, when
the tobacco and
financial-services company, based in London,
bought a controlling stake.
Souza Cruz is the world's-biggest exporter of
unprocessed tobacco, with
expected sales of 80,000 tons this year,
according to analysts.
''This ruling is absolutely irrelevant in its
potential impact on our results,''
said Elizabeth Benamor, the manager of
shareholder relations at Souza
Cruz.
The company won a similar case in the
northeastern Brazilian city of
Fortaleza last week, Benamor said.
The plaintiff in that case was seeking 80,000
reais from Souza Cruz
because of harm that the plaintiff said was
incurred from smoking. The
plaintiff has tuberculosis.
The judge in that case said that there is ample
information available for
people to decide whether to take up smoking,
according to Souza Cruz.
Wednesday September 24 4:15 AM EDT
B.A.T off as Souza Cruz ruling sparks fears
LONDON, Sept 24 (Reuter) - Shares in B.A.T Industries Plc eased on Wednesday
on fears that litigation against the tobacco industry will grow outside the
U.S., analysts said.
The fears were sparked by a ruling late on Tuesday in Brazil where a judge
ordered B.A.T's subsidiary Souza Cruz (CRUSA) to pay damages to the family
of a smoker who died in 1995.
B.A.T stock fell 4-1/2p to 520p, having touched an early low of 517p, in
brisk trade. More than a million shares changed hands by 0806 GMT.
``The fear is that this will trigger a spate of other claims. Although
people have lodged claims before, this is the first time that any sort of
court judgement has been reached against the industry outside the U.S.,''
said Schroders tobacco analyst Bruce Davidson.
``So the fear is that there will be more claims in Brazil and people may
pursue claims in other markets with a bit more vigour,'' he said.
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Copyright © 1997 Reuters Limited. Friday September 26 3:38 PM EDT
Wednesday September 24 5:15 PM EDT
Souza Cruz ruling could trigger more lawsuits
By James Craig
SAO PAULO, Sept 24 (Reuter) - A Brazilian judge's ruling against local
tobacco giant Souza Cruz (CRUSA), an affiliate of Britain's B.A.T Industries
Plc (BATS.L), could open the sector to a flood of new lawsuits by smokers
and their families seeking damages, bank analysts said.
But its impact on the company's stock will be slight due to the relatively
small damages awarded, Souza Cruz's plan to appeal the decision and the
inconsistent nature of Brazil's courts, they added. ``This opens a bad
precedent but it will not have as big an impact as it would in the United
States, where there is a stronger tradition of jurisprudence,'' said
Lilyanna Yang of Caspian Securities in Brazil. A Rio de Janeiro court late
Tuesday ordered Souza Cruz to pay 90,000 reais ($82,568) plus a monthly
pension to the widow of a smoker who died in 1995. The ruling was the first
time a Brazilian tobacco company had been found responsible for the health
problems of a smoker. But Souza Cruz officials said they plan to appeal the
local court's decision. ``We haven't seen anything like this in Brazil
before,'' said Terezinha Moniz of Fator Securities. The judge's decision may
have been inspired by recent cases in the United States, where tobacco
giants settled out of court multi-billion lawsuits involving smoking,
analysts said.
But Tuesday's ruling, while potentially having little financial impact on
the firm, could spark an avalanche of further cases in Brazil, which has a
less-regulated tobacco market than the United States and where such suits
have been relatively rare. ``From the point of view of costs for the
company, the impact of this case is practically nil. The issue here is the
precedent it is setting,'' said Diogo Pires Goncalves, an analyst with local
investment bank Banco Icatu. ``I don't think there is too bad of an impact
in the short-term, but this is not a good sign,'' he said, adding foreign
firms such as B.A.T are likely to be closely following the outcome of the
appeal.
About a dozen other cases are pending in Brazilian courts against Souza
Cruz, which only Friday won a similar case in the northeastern city of
Fortaleza. Souza Cruz, one of Brazil's largest private companies with $5.67
billion in sales last year, dominates the country's tobacco sector with a
roughly 84 percent market share. U.S.-based Philip Morris Cos Inc (MO)
controls between 13 and 14 percent of the market, with the remainder held by
smaller cigarette maker. While taxes on cigarettes in Brazil are 78 percent
versus 30 percent in the United States and tobacco firms are required to
place warnings on cigarette packs, there are fewer advertising restrictions.
Copyright © 1997 Reuters Limited. All rights reserved.
Friday September 19 8:24 PM EDT
Brazil lawsuit against cigarette firm thrown out
By Simona de Logu
RIO DE JANEIRO, Sept 19 (Reuter) - A Brazilian judge has thrown out a
lawsuit filed against a Brazilian cigarette maker over
the ill-effects of smoking in the first ever ruling in such a case in
Brazil, the company's lawyer said on Friday.
In the case, a former smoker sued Brazil's largest cigarette maker, Souza
Cruz, for deceptive advertising and lung illnesses he
contends were caused by smoking cigarettes.
``This decision is comparable to the outcome of similar court cases in other
countries and confirms the company's position that
smoking is a personal choice exercised by enlightened individuals,'' said
Souza Cruz lawyer Luis Roberto Barroso.
``It is not legitimate to hold a company responsible for the sale of a legal
product,'' he added.
Ceara state court Judge Inacio de Alencar Cortez Neto threw out the case
filed by Edvaldo Nojosa dos Santos, saying it was
the plaintiff's ``free and spontaneous'' decision to smoke and that upon
buying cigarettes, consumers became well aware of the
dangers involved with smoking.
Santos, who said he smoked three packs of cigarettes a day for 20 years and
now suffered from emphezema and tuberculosis,
sued Souza Cruz for an amount equivalent to that which he spent on
cigarettes in his life, Barroso said.
In his ruling, Neto argued that Brazilian law allowed cigarette makers to
advertise their product provided they respected certain
restrictions.
He said Souza Cruz had respected those restrictions and that advertising did
not induce anyone to smoke, but merely sought to
attract smokers to one particular brand.
Under Brazilian tobacco legislation, cigarette makers have to publish health
warnings in television spots and on packaging,
alerting people to a number of health risks associated with smoking.
A new anti-smoking law introduced in July 1996 restricts television
advertising of cigarettes and other smoking products to
between 9 p.m. and 6 p.m. It prohibits commercials and advertisements that
associate smoking with relaxation, sex or sport.
The law also bans smoking in enclosed public areas, except in separate areas
for smokers, as well as on means of public
transport if the journey time is one hour or less. However, the law is not
widely respected.
Smoking is not especially stigmatized in Brazil, where one third of the
adult population smokes, but people are becoming more
aware of the risks of smoking and non-smokers are starting to assert their
rights more.
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