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Stock Analyst Update

Don't Panic over Big Tobacco Judgment

The gargantuan punitive damages almost certainly will not stand.

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Investors need not consider Friday's decision in the Engle case in Florida as the death knell for the tobacco industry.

Although the $145 billion punitive damage figure is staggering and would bankrupt the industry, it is nearly certain that the judgment won't be allowed to stand. Florida law prohibits any judgment from bankrupting a company. Consequently, the judge will almost certainly reduce the punitive damages. The trump card the tobacco companies will play, however, is to appeal the decision and hope to have the case overturned in a higher court. The companies have the resources to continue the appeals process for the next several years.

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Aaron Westrate has a position in the following securities mentioned above: CFIMX. Find out about Morningstar’s editorial policies.