ParfumGigi@aol.com

Matthew Hirsch

The Recorder

10-17-2007

In Wisconsin, Kansas and Tennessee, unfair competition suits failed to squeeze hard currency out of U.S. Tobacco, the country's dominant seller of smokeless tobacco products. The plaintiffs in those cases settled for coupons to buy more of the snuff instead.

But not in California.

This morning, antitrust attorneys are set to ask San Francisco Superior Court Judge Richard Kramer to approve a $96 million settlement to resolve claims that U.S. Tobacco, or UST, engaged in "extensive restrictive and exclusionary acts" to eliminate competition for moist snuff.

Under the deal, the company would deny wrongdoing. The defendants, the proposed settlement says, "concluded that further conduct of the litigation would be protracted and expensive."

Attorneys on both sides of the case acknowledged that in the litigation, known simply as Smokeless Tobacco Cases, 02-004250, the plaintiffs enjoyed a measure of home court advantage.

"We're paying cash in California basically because plaintiffs took the position that a coupon settlement would not be approved" by a California judge, said Chris Athanasia, an in-house attorney for US Smokeless Tobacco, a subsidiary of UST. "That seemed to be the opinion of the mediator [ADR Services neutral Laurence Kay] as well."

Allegations of monopolistic business practices by UST came to light in a federal Sherman Act suit filed in Kentucky. A competitor in the smokeless tobacco market, Conwood Sales Co., accused UST in that case of a raft of underhanded business practices, including the use of exclusive vending agreements with retailers and the destruction of competitors' point-of-sale displays.

In March 2000, a federal jury in Kentucky ordered UST to pay Conwood treble damages totaling $1.05 billion.

That verdict was upheld on appeal, and it opened the floodgates for the consumer litigation that followed.

The plaintiff's firm in the Conwood case, Washington, D.C.-based Kellogg, Huber, Hansen, Todd, Evans & Figel, teamed up with plaintiffs firms around the country to file consumer suits claiming they overpaid for smokeless tobacco because of UST's allegedly anti-competitive practices. But, until the California settlement was reached, none of the resulting settlements promised cash payouts.

Robert Friebert, a plaintiffs attorney in Milwaukee, Wis., who worked on an antitrust case against UST in his home state, said that in cases that date back many years, it's difficult to distribute cash settlements because the lawyers don't know who actually used the product years ago. The Wisconsin settlement, which covers a period between 1990 and 2004, gets around that problem by offering $816 in coupons.

"Part of our agreement is that anybody who signs a statement that they used the product is deemed a user," the Friebert, Finerty & St. John attorney said.

According to court documents in the California case, the proposed settlement would apply to class members who were over the age of 18 at the time they purchased smokeless tobacco, and who purchased at least 30 cans of certain brands, including Copenhagen and Skoal. Each qualifying consumer would get $195 to $585.

The total settlement is nearly 100 percent of one damage calculation submitted by the plaintiffs' experts, according to court records. The proposed deal doesn't include details about attorneys fees.

Richard Saveri, a San Francisco plaintiffs attorney who worked on the case, estimated that "probably well over 100,000 people" would be eligible to submit claims for the settlement, which applies to California consumers who have purchased smokeless tobacco since 1990.

In California, like in Wisconsin, consumers would demonstrate that they are eligible to participate in the settlement if they submit a sworn statement. "I don't think consumers are going to commit perjury," he said.

The class action, certified by Kramer in 2004, was less than three months from trial when the parties reached an agreement mediated by Kay, a former justice on the 1st District Court of Appeal.