According to court documents in Altria Group Inc. v. Good, "Respondents, smokers of petitioners' "light" cigarettes, filed suit, alleging that petitioners violated the Maine Unfair [image-nocss] Trade Practices Act (MUTPA) by fraudulently advertising that their 'light' cigarettes delivered less tar and nicotine than regular brands. The District Court granted summary judgment for petitioners, finding the state-law claim pre-empted by the Federal Cigarette Labeling & Advertising Act. The First Circuit reversed, holding that the Labeling Act neither expressly nor impliedly pre-empts respondents' fraud claim."
The Supreme Court held that "the Labeling Act's pre-emption provision [or]...various Federal Trade Commission decisions with respect to statements of tar and nicotine content do not impliedly pre-empt state deceptive practices rules like the MUTPA."
"While we had hoped for a dismissal based upon federal pre-emption, it is important to note that the Supreme Court made no finding of liability. We continue to view these cases as manageable, and the company will assert many of the strong defenses used successfully in the past to defend against this very type of case," said Murray Garnick, Altria client services senior vice president and associate general counsel, speaking on behalf of Philip Morris USA, said in a press statement.
The decision was at odds with recent anti-consumer rulings that limited state regulation of business in favor of federal power.
The tobacco companies argued that the lawsuits are barred by the federal cigarette labeling law, which forbids states from regulating any aspect of cigarette advertising that involves smoking and health. Justice John Paul Stevens, however, said in his majority opinion that the labeling law does not shield the companies from state laws against deceptive practices. The decision forces tobacco companies to defend dozens of suits filed by smokers in Maine, where the case originated, and across the country.
People suing the cigarette makers still must prove that the use of "light" and "lowered tar" actually violate the state anti-fraud laws, but those lawsuits may go forward, Stevens said. He was joined by the other liberal justices, Stephen Breyer, Ruth Bader Ginsburg and David Souter, as well as Justice Anthony Kennedy, whose vote often decides cases where there is an ideological division.
The conservative justices, Chief Justice John Roberts and Justices Samuel Alito, Antonin Scalia and Clarence Thomas, dissented.
Thomas, writing for the dissenters, said the link between the fraud claims and smokers' health is unmistakable. But he also said: "The alleged misrepresentation here-that 'light' and 'low-tar' cigarettes are not as healthy as advertised-is actionable only because of the effect that smoking light and low-tar cigarettes had on respondents' health."
Three Maine residents sued Altria Group Inc. and its Philip Morris USA Inc. subsidiary under the state's law against unfair marketing practices. The class-action claim represents all smokers of Marlboro Lights or Cambridge Lights cigarettes, both made by PM USA.
The lawsuit argues that the company knew for decades that smokers of light cigarettes compensate for the lower levels of tar and nicotine by taking longer puffs and compensating in other ways.
A federal district court threw out the lawsuit, but the 1st U.S. Circuit Court of Appeals said it could go forward.
Nik Modi, tobacco analyst with UBS Investment Research, New York, said in a research note that heading in, the Good case "was a coin flip." He added that "the FTC argument (that because the FTC authorized 'lights' phrases, the industry is not liable) was not the strongest argument and that the decision was close to a 50/50 probability either way."
He said, "However, today's Supreme Court decision did not affect the industry's primary argument against class-action lawsuits: that no two smokers within a class are truly alike in terms of how they interpreted cigarette labeling or marketing or its health impact. This argument has worked for the industry in de-certifying the overwhelming majority of lights class action cases, and worked in the Engle and Price class actions.... While the headlines on the decision would lead one to expect a slew of new class-action lawsuits against the industry, we note that class actions against tobacco are not substantially more attractive today due to: 1.) the primary argument that no two smokers are truly alike, and 2.) the limitations set from past precedents on punitive damage awards."
(Click here to view the court documents.)
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.