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Supreme Court rules out possibility of $280B in damages against tobacco industry

The Supreme Court handed Big Tobacco a major victory Monday when it declined to hear a government challenge to an appeals court ruling that barred the Justice Department from seeking as much as $280 billion in damages in a long-running lawsuit.

Greensboro-based Lorillard Tobacco (NYSE: CG) and Winston-Salem-based Reynolds American (NYSE: RAI), the third- and second-largest cigarette makers in the country, respectively, both are defendants in the government lawsuit.

The U.S. Justice Department sued the country's largest tobacco companies in 1999 under federal racketeering law. The government has argued that cigarette makers for decades misled people about the dangers of smoking.

Federal prosecutors this summer sought $14 billion in damages in the case, money that would be used to fund an anti-smoking education effort and programs to help people quit smoking. That amount, though, is far less than the $130 billion that one government witness testified prosecutors should ask for.

The news from the Supreme Court perked up shares in tobacco stocks. Carolina Group, a tracking stock for Lorillard Tobacco, rose about $2 a share, and were trading at $42 in early afternoon after opening at $39.76. Reynolds American, which opened at $78.83 Monday morning, was trading at $83.03 after lunch.

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