Brazilian Court Rejects Main Class Action Filed Against Cigarette Manufacturers

SAO PAULO, May 27, 2011 /PRNewswire/ --

- After 16 years of litigation, Sao Paulo court denies claims for indemnification from Smokers' Association, in line with recent decisions from the Brazilian Superior Court of Justice

The judge of the 19th Civil Court of Sao Paulo denied the claims for indemnification brought by the Association for the Defence of the Health of Smokers (ADESF) in a class action suit filed against cigarette manufacturers Souza Cruz (the Brazilian branch of British American Tobacco Group - BAT, Amex: BTI) (Bovespa: CRUZ3) and Philip Morris Brasil that, according to the plaintiff, was evaluated at more than R$ 30 billion (US$ 18.4 billion). This was the first lawsuit seeking indemnification for damages attributed to smoking cigarettes filed in the country. In the suit, filed in 1995, ADESF sought indemnification for all the "smoking consumers" it alleged to represent, based on the argument that manufacturers' advertising had been misleading and abusive.

At one point in the process, the association managed to receive a favourable decision from a lower court that, however, had been rendered as an advance ruling, with defendants not being given the opportunity to produce the evidence they had requested. In 2008, the Court of Appeals of Sao Paulo (TJSP) recognized that defence had been curtailed and reversed the decision, stating that conviction without proof violates the constitutional right of full legal defence.

The case was remanded to the 19th Civil Court of Sao Paulo for, under due process of law, evidence to be produced, including the expert evidence ordered by the Court of Appeals. Due to the class action nature of the claim, an unprecedented medical court expert examination was carried out (analysing epidemiological aspects of all diseases associated with cigarette smoking), as well as an extensive court expert analysis of advertising that, by explicit ruling of the Court of Appeals of Sao Paulo, covered the last 30 years of advertising of the two defendants in Brazil.

Summarizing, the medical expert concluded that cigarette smoking is a multifactorial behaviour and that "it is not possible to determine in advance if a smoker will develop some type of disease or not, but only to point out the existence of risk factors." The advertising expert, among other aspects, confirmed that "the use of tobacco in all its forms dates back to ancient time, more ancient than advertising," and that "advertising is not the only determining factor in an individual's choice to smoke or not."

Following the statements of the parties and expressly quoting the expert reports, the judge denied the claims for indemnification based on the proof that "smoking cigarettes is merely a risk factor (probability) of various diseases and is not the necessary cause" and on the fact that "the lack of warnings about the harmful effects of smoking cigarettes on packaging and in advertising, when there was no legal requirement for such warnings, creates no liability for the defendants."

Citing ample jurisprudence, including from the Superior Court of Justice (STJ), the lower court judge emphasized that "it has been a well known fact for decades that cigarettes are harmful to the health of smokers" and that, "even though smoking cigarettes causes health risks, there is no prohibition against their manufacture and sale. On the contrary, commerce in cigarettes is a legal activity, permitted in our legal order." Further, the ruling expressly recognized the legality of the manufacturers' advertising and that "cigarettes are a product that are inherently dangerous and not a defective product."

All class and individual actions of this type that have been judged conclusively by Brazilian Courts ended without the intended liability of the manufacturers. From a Brazilian legal perspective, the object of this class action is identical to the hundreds of individual actions that have already been definitively rejected by more than 15 state courts and by the Superior Court of Justice itself. All final rulings handed down by Brazilian courts have denied claims for indemnification from smokers, ex-smokers or their family members, totalling more than 355 cases closed of over 620 cases that have been filed in Brazil since 1995.