5 Dumbest Things on Wall Street: April 3

What Were They Smoking?

Altria—aka Phillip Morris USA—could have settled a tobacco lawsuit long ago for half a million dollars but instead gambled on a Supreme Court review and lost a bundle.

The Supreme Court dismissed the appeal, leaving Altria to pay a $79 million damage award related to a smoker's death. Altria (Stock Quote: MO) has a history of fighting cases and frequently wins lower judgments in appeal, but they got this one wrong in a big way.

Mayola Williams, a smoker's widow in Oregon, was originally awarded a reduced judgment for compensatory damages of $521,000, but the punitive damages were $79 million. The Supreme Court has set the decade-old case aside twice and a trial court reduced the punitive damages to $32 million.

But the state of Oregon would not give up and Altria would not settle since the tide seemed to be turning and courts were beginning to rule in their favor. On top of losing the bad bet, Altria spent $179 million on overall litigation in 2008.

Lawmakers in Oregon also played a dumb hand.

Clearly salivating at the thought of big money, state legislators passed a law requiring that 60% of the award go to the state. Guess they forgot that Oregon took part in a Master Settlement Plan a few years back and is prevented from collecting additional tobacco-related damages. Altria is fighting Oregon over this, and the case is before an Oregon state court.

At least we know what they were smoking in Oregon. The state is considering legislation next year called the Oregonian Cannabis Tax Act that would relax marijuana laws and tax the weed instead. So, in Oregon's mind smoking cigarettes is bad, but lighting up joints is okay.

Looks like Altria just sells the wrong kind of tobacco in Oregon, they might be better off selling "wacky tobacky" instead.

By Debra Borchardt.

Dumb-o-meter score: 70 -- Altria and Oregon are the new Cheech and Chong singing "Up in smoke, that's where my money goes."