WASHINGTON -- The U.S. Supreme Court ruled Monday that Philip Morris Cos. Inc. cannot move a lawsuit by cigarette smokers into federal court, said the Associated Press.
The unanimous decision came in a case that consumers filed against the cigarette company in state court in Arkansas.
Philip Morris, a part of Altria Group Inc., moved the case to federal court in Little Rock, Ark., saying it could do so because the company was pervasively regulated by the Federal Trade Commission (FTC). The court said the fact that a federal agency [image-nocss] directs a company's activities does not permit removing the case to federal court.
The potential for large damage awards from state court juries makes the federal court system a more desirable place for tobacco companies and other defendants sued in class-action cases.
Consumers who smoked Marlboro Lights and Cambridge Lights alleged Philip Morris violated the Arkansas Deceptive Trade Practices Act. The company fraudulently marketed "light" cigarettes as having less tar and nicotine, the suit stated. The company allegedly designed the cigarettes to register lower levels of tar and nicotine in government-approved testing than would be delivered to the consuming public.
The Supreme Court's decision to reverse rulings by lower federal courts in the Watson case and remand it to state court does not negatively affect the ultimate outcome of the case or that of other "Lights" cases, PM USA said in a statement.
"Today's ruling is narrow and merely determined whether the Watson case should be heard in federal court or state court. We have compelling defenses to the Watson claim that have been advanced in state courts," said William S. Ohlemeyer, PM USA vice president and associate general counsel.
Ohlemeyer added that the Watson case will have minimal effect on "Lights" or other class actions filed against the company after enactment of the Class Action Fairness Act in 2005, which requires most class actions to be heard in federal court.
In considering the issue of federal jurisdiction in the Watson case, a three-judge panel for the U.S. Court of Appeals for the Eighth Circuit earlier had ruled that because PM USA tested and marketed its "Lights" cigarettes under the FTC's "direct and comprehensive control," a federal court should hear the case. The Supreme Court reversed that decision, holding that the company's compliance with federal regulations did not confer exclusive jurisdiction on federal courts.
The decision clarified the procedural issue of when defendants, who are acting under a federal agency like the FTC and sued in state court, can remove the case to federal court. While today's decision does not directly address the issue of whether the federal labeling act or agency regulation of a defendant's advertising and marketing activities prevents plaintiffs from suing under state consumer fraud laws, the court did note that PM USA was acting pursuant to "considerable regulatory detail and supervision."
PM USA has long maintained that Congress and the FTC created a comprehensive regulatory scheme for marketing "low tar" and "Lights" cigarettes and, that these types of class actions are pre-empted by federal law or exempted from state consumer fraud laws. Many courts have so held and today's decision adds further support to those rulings. The company previously asked that the Watson case be dismissed on the basis of preemption and the consumer fraud exemption. The company now looks forward to presenting its arguments before the Arkansas state court.
The case is Watson v. Philip Morris USA Inc.
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