Feb. 7 (Bloomberg) -- Philip Morris USA, R.J. Reynolds Tobacco Co. and other U.S. cigarette makers must pay to fund quit-smoking programs in Louisiana, an appeals court ruled.

The state appeals court in New Orleans today upheld part of a $591 million jury verdict, saying the companies must pay for a 10-year program including nicotine gum and patches, medications and telephone quit lines. The ruling limits the plan to Louisiana residents who began smoking before 1988, when the state passed a new law governing product-liability suits.

``The majority finds that the pre-1988 smokers were entitled to damages,'' wrote Judge Leon Cannizzaro in a separate opinion agreeing with the 4-1 ruling.

The decision upholds some aspects of the 2004 jury verdict, the first ever to require cigarette makers to pay to help smokers quit. It also reversed at least half the amount in damages assessed by the jury and sent the case back to the trial court.

The decision knocked more than $312 million from the jury award, Altria Group Inc., Philip Morris's parent company, said in a statement. The New Orleans court also ruled the companies won't have to pay interest on the verdict, which Altria said is about $440 million. The case is known as the Scott case, after lead plaintiff Gloria Scott.

`Too Many Issues'

``This case involves too many individual issues and should never have been certified as a class action,'' said William Ohlemeyer, Philip Morris USA vice president and associate general counsel, in a statement. Ohlemeyer said the company will appeal today's ruling.

Jeff Raborn, senior counsel for R.J. Reynolds, said the court reduced potential damages in the case by at least 70 percent. The company will still seek further review, he said.

``We remain convinced that the class should be decertified and the case completely reversed,'' Raborn said in a statement distributed by PRNewswire.

``On the whole, I'm very satisfied,'' said Russ Herman, a New Orleans lawyer who represents the smokers. Herman added that more appeals are likely before any cessation programs can be funded.

A New Orleans jury of eight women and four men returned the verdict in May 2004, after lawyers for a statewide class of Louisiana smokers had asked them to finance smoking cessation programs for 25 years at a cost of more than $1 billion.

The companies called that plan a ``billion-dollar boondoggle'' that most smokers wouldn't use.

Jury Award

The jury awarded $562.7 million to finance 12 quit-smoking programs for periods ranging from five to 10 years. The payment included $130 million for marketing and education to encourage smokers to quit and $102 million for reimbursement of smokers' medication costs. The jury added 5 percent for administration.

Philip Morris and Reynolds American Inc.'s R.J. Reynolds are the two largest U.S. cigarette makers. Loews Corp.'s Lorillard Tobacco unit and Brown & Williamson Tobacco Corp., whose U.S. operations were acquired by Reynolds in 2004, are also defendants.

The suit, filed in 1996, didn't go to trial until 2003. It was delayed by numerous appeals to the Louisiana Supreme Court on jury selection and other issues.

The Louisiana smokers claimed the cigarette makers hid the health risks of smoking and committed fraud.

The case is Scott v. American Tobacco Co., 2004-CA-2095, Louisiana Fourth Circuit Court of Appeal.

To contact the reporter on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net.

Last Updated: February 7, 2007 20:59 EST