updated 2/5/2005 5:59:32 PM ET 2005-02-05T22:59:32

When a federal appeals court took away the Justice Department’s biggest hammer in its civil suit against tobacco companies — the possibility of a $280 billion penalty — it may have made a settlement unlikely in the five-year-old case, according to legal analysts.

“I don’t think the industry would be interested in settling this case,” Mary Aronson, a tobacco litigation and policy analyst in Washington, said Saturday in a telephone interview. “I think they’re in a position of power at this point, and I don’t see why there would be any reason for them to want to sit down at a negotiating table with the government to cobble together a settlement.”

Jamin Raskin, a law professor at American University, added: “The government will be much more likely to want to reach a settlement, and big tobacco may want to ride out the storm.”

Most likely, the analysts said, the Justice Department will appeal the ruling Friday by a panel of the U.S. Court of Appeals for the District of Columbia Circuit. The panel decided 2-1 that the government could not use a federal racketeering law to seek $280 billion in penalties against the tobacco industry.

The civil suit alleges the industry deceived the public for decades about the dangers of smoking.

A trial that began in September is scheduled to continue Monday before U.S. District Judge Gladys Kessler. The suit asks the judge to impose other penalties on the industry, such as changing its marketing and advertising and funding anti-smoking programs.

The $280 billion the government sought — a record in such a case — was based on its estimate of money the industry had earned illegally through fraudulent activities.

However, the appeals court ruled that Kessler can order only penalties regarding future acts and not seek “disgorgement” penalties aimed at taking money the companies had already earned. The Justice Department, which has not said what it will do, could appeal the decision to the three judges, the full appeals court or the Supreme Court.

“On this litigation I would say if you’re in for a dime you’re in for a dollar,” Raskin said. “The government may indeed decide to exhaust appeals all the way up.”

The decision — which boosted the stock prices of tobacco companies on Friday — leaves open other penalties that would cheer anti-tobacco groups, Aronson said.

“The true anti-smoking interests, especially entities like Tobacco-Free Kids, would say that changing the behavioral aspects of the tobacco business is more important than disgorgement of ill-gotten gains,” she said.

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