U.S. Supreme Court Declines Review of Scott Case

La. class-action judgment ordered cigarette cos. to fund smoking cessation program

RICHMOND, Va. -- Altria Group Inc.'s Philip Morris USA said that the U.S. Supreme Court has declined review of the Scott case, a Louisiana class-action judgment that ordered the nation's major cigarette companies to fund a statewide 10-year smoking cessation program. The decision by the court followed a stay of the judgment by the Supreme Court in September 2010.

Philip Morris USA and Reynolds American Inc.'s R.J. Reynolds Tobacco contended that state courts violated the U.S. Constitution by letting the case go forward as a class action on behalf of all Louisiana [image-nocss] smokers who want to participate in a cessation program, reported Bloomberg. The companies said an individual smoker should have been required to show he or she was entitled to damages.

The question was whether state courts can "impose massive liability in a class action without a truly representative trial of individual claims," the companies argued in their appeal.

"Philip Morris USA is disappointed that the court declined to hear our arguments because we believe the decision in this case rests on a series of constitutional violations and is fundamentally unfair," said Murray Garnick, Altria Client Services senior vice president and associate general counsel, speaking on behalf of PM USA. "It's important to note that Philip Morris USA prevailed on the largest claim, medical monitoring, and that the original verdict has been subject to appeals for seven years. The judgment today is less than a quarter of what the court originally awarded, but still has been calculated without regard to the likely number of class members who will be interested in participating in the program."

The lead Louisiana plaintiff, Deania M. Jackson, urged the Supreme Court not to hear the case, contending she was suing under a state law that does not require individualized proof. Jackson argued that no individual plaintiff would file a suit seeking smoking-cessation services valued at $153 a year.

"That Louisiana makes such a cause of action available as a class action without requiring proof of individualized reliance on misrepresentations does not implicate the due process clause," Jackson argued.

In September, Justice Antonin Scalia issued a stay blocking the order until the nation's highest court decided whether to get involved. In that order, Scalia questioned the Louisiana state court decision that ordered the payments. "The apparent consequence of the court of appeal's holding is that individual plaintiffs who could not recover had they sued separately can recover only because their claims were aggregated with others' through the procedural device of the class action," Scalia wrote.

The Louisiana smokers claimed the cigarette makers hid the health risks of smoking and committed fraud. A 2004 jury verdict in the case was the first to require cigarette makers to pay to help smokers quit. The original award, $591 million, was reduced on appeal.

The decision lets stand 2010 and 2007 decisions by the Louisiana Fourth Circuit Court of Appeals ordering defendants to fund a statewide 10-year smoking cessation program at the cost of $241 million, plus approximately $37 million in interest (calculated from July 21, 2008). The lawsuit was filed in 1996.

Philip Morris USA, as one of four defendant tobacco companies, is responsible for 25% of the judgment, which will be deposited into court. A third-party administrator will be appointed by the court to administer the cessation program.

As of March 2011, Philip Morris USA has recorded $26 million in connection with the case and has recorded additional provisions of approximately $3.7 million related to accrued interest.

The case is Philip Morris v. Jackson.