Wilmington, Delaware, Jan. 31 (Bloomberg) -- Lorillard Tobacco Co., a unit of Loews Corp., can sue a foundation over anti- smoking advertisements that allegedly vilify the cigarette maker, a judge ruled.

The American Legacy Foundation, created under the 1998 settlement by cigarette makers with 46 states, is bound by the agreement's ban on ads that amount to a ``vilification'' of tobacco companies or executives, Delaware Chancery Court Judge Stephen Lamb ruled Thursday. The decision clears the way for Lorillard to press claims against the foundation, company officials say. The ruling follows a third-quarter drop in Lorillard's earnings, Loews officials said in November. Earnings fell 26 percent to $277 million because of a drop in shipments of Kent, Newport and True cigarettes tied to discontinued promotions, analysts said. Lorillard is the No. 4 U.S. cigarette company. ``We are gratified that the court has ruled that ALF cannot escape its obligations under the settlement,'' Ronald Milstein, Lorillard's vice president and general counsel, said in a statement. Officials of the Washington-based foundation said in a statement they'll continue the anti-smoking campaign and will prove in court that their ads don't violate the $206 billion settlement. Lamb's ruling ``simply means the question of whether our foundation has vilified the tobacco industry can go to trial,'' said Cheryl Healton, the foundation's president. ``We remain proud of our work to reduce youth smoking and feel confident that we'll ultimately be vindicated.'' Shares of New York-based Loews, a conglomerate controlled by financier Laurence Tisch, rose $1.05 to close at $44.02 in New York Stock Exchange composite trading. The company's flagship unit is CNA Financial Corp., a Chicago- based insurer. Loews has $1.4 billion in long term debt due through 2007, according to Bloomberg Data.

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