The tobacco industry yesterday launched a counterattack against a Justice Department lawsuit that seeks billions of dollars for federal health care costs, arguing in court papers that the case is built on faulty reasoning and must be dismissed.

Lawyers representing Philip Morris Inc., R.J. Reynolds Tobacco Co., and other major cigarette makers contended that the massive federal lawsuit unfairly portrays the industry in the worst possible light and ignores the changes that are coming about as part of a $240 billion settlement reached last year with more than three dozen states.

"No matter how reprehensible the Government may claim the conduct of these defendants to have been, the issue on this motion to dismiss is not that conduct: the issue is adherence to the rule of law," the tobacco industry's attorneys wrote.

The 89-page filing in U.S. District Court was the most comprehensive response yet by the tobacco companies to the federal government's lawsuit, which alleges that the United States is entitled to damages under various federal racketeering and health care laws.

The Justice Department's complaint against nine tobacco companies and two industry groups, filed in September, alleged that tobacco executives conspired for 45 years to mislead the public about the dangers of smoking. Besides money damages, the suit seeks a court order that would bar the industry from making misleading claims about cigarettes and health and require the industry to contribute to public education programs.

In their court papers yesterday, the tobacco industry's lawyers said the federal lawsuit ignores the fact that the companies agreed to "radically transform the way tobacco products are marketed in this country" as part of their settlement with the states last year. The lawyers said the racketeering claim cannot stand because the industry is unlikely to engage in future illegal conduct, and they argued that the health care laws--the Federal Medical Care Recovery Act and Medicare provisions of the Social Security Act--are being applied in an "unprecedented and illegitimate" way.

The defense response maintained the federal government cannot make a case to recover health care costs because it "has long known full well of the health risks posed by smoking." Instead of holding cigarette makers liable, Congress chose to address concerns by "requiring explicit warnings on every pack of cigarettes and by collecting $39.5 billion in excise taxes on cigarettes over the last seven years alone," lawyers wrote.

Justice Department officials declined comment on yesterday's court filing, which was submitted by roughly two dozen attorneys from some of the nation's major law firms.

Judge Gladys Kessler, who is presiding over the case, had given the defendants until yesterday to file any motions to dismiss. She instructed the Justice Department to file an answer by Feb. 25. The legal papers will set the groundwork for a hearing before Kessler in May to decide whether the case can continue moving forward to trial.

Because of the case's complexity, Kessler has talked about a trial in January 2003.

The litigation has generated much acrimony inside and outside the courthouse. When President Clinton mentioned the prospect of the lawsuit in his State of the Union address early this year, he quickly generated complaints from Republicans in Congress as well as major business groups such as the U.S. Chamber of Commerce. The opponents contended that the suit could stir more litigation against other unpopular industries.

Although the Justice Department acted less than a year after the tobacco industry agreed to settle lawsuits filed by more than three dozen states, federal officials said that deal did not address the $20 billion spent each year for treatment of smoking-related illnesses through Medicare and other federal insurance programs.

Kessler also has jurisdiction over a set of similar lawsuits filed last year by numerous labor union health and welfare trust funds against tobacco companies. She issued a ruling last week that suggests the tobacco companies will not easily rid themselves of the Justice Department suit. Kessler rejected a bid by the tobacco companies to dismiss the union trust fund cases at such an early stage of proceedings, saying both sides need time to fully air facts and not "speculative arguments."

The judge's ruling described the high legal hurdle the tobacco companies must overcome to have a suit thrown out so fast. "In a motion to dismiss, the Court must accept as true the allegations in the complaint," Kessler wrote, saying that cases can be tossed out only if defendants uncover serious legal deficiencies.

Numerous foreign governments, including Nicaragua, Venezuela and Guatemala, are pursuing similar litigation against the tobacco companies at the federal courthouse. Those suits are pending before one of Kessler's colleagues, Judge Paul L. Friedman.

CAPTION: Attorney General Janet Reno and Assistant Attorney General David W. Ogden announced the federal lawsuit against the tobacco companies in September.