$10.1 billion award in 'light' cigarette case snuffed out

Daily Record and the Kansas City Daily News-Press, Jan 8, 2006 by Reni Gertner

The Illinois Supreme Court's recent decision overturning a $10.1 billion verdict in a class action filed by smokers of light cigarettes has handed a big victory to the tobacco industry.

Rather than pursuing damages with a traditional product liability claim, the plaintiffs filed suit under a state consumer protection statute, seeking to recover against Philip Morris, Inc. for alleged marketing fraud. They claimed that Philip Morris falsely advertised light or low tar cigarettes as a healthier alternative to regular cigarettes.

But the Illinois Supreme Court said the tobacco giant was exempt from civil liability under state consumer fraud law because it relied on specific authorization from the Federal Trade Commission when it used the terms light and low tar to describe certain cigarettes.

Richard Samp, chief counsel of the Washington Legal Foundation, a pro-business group that wrote an amicus brief on behalf of the tobacco company, said he hoped the decision would leave the plaintiffs' marketing fraud theory dead in the water.

The stock price of the defendant's parent company, Altria Group, rose quickly after the decision was announced.

But consumer groups who supported the plaintiffs claimed the debate about whether it was misleading to label certain cigarettes light is far from over.

Edward L. Sweda, senior attorney with the Tobacco Products Liability Project at Northeastern University School of Law in Boston, noted that there are approximately 40 other similar lawsuits pending in 20 states. Sweda said the Ohio Supreme Court is the next court expected to rule on the issue, because it heard oral arguments in a related case in October.

Samp conceded that the Illinois ruling could be interpreted narrowly.

In some senses, the decision was perhaps less sweeping than it might otherwise have been, because every state has a different consumer fraud statute, he said.

Carl Tobias, a professor at the University of Richmond School of Law, agreed.

My sense is the Illinois decision is relatively narrow, said Tobias, who follows tobacco litigation. I am not certain many other states have similar statutory schemes.

Furthermore, the court didn't decide one key issue: whether it was proper to certify the class in the first place. In 2004, Massachusetts' highest court allowed a class of plaintiffs to go forward in a light cigarette case. (Aspinall v. Philip Morris Cos., Inc., 813 N.E.2d 476)

Fraud 'Safe Harbor'

The class members - all smokers of Marlboro Lights and/or Cambridge Lights who weren't alleging smoking-related injuries - sued Philip Morris under the Illinois consumer fraud statute.

They argued that the company's use of the terms light and low tar to describe their cigarettes was deceptive. They claimed that the defendant knew that light cigarettes were just as dangerous to smokers' health as regular ones, because smokers puff harder and hold the smoke in their lungs longer to get the desired nicotine effect.

The plaintiffs sought to be reimbursed for the light cigarettes they purchased due to allegedly fraudulent, deceptive and misleading statements by Philip Morris.

In 2003, an Illinois judge ordered Philip Morris to pay the plaintiffs $10.1 billion in compensatory and punitive damages, attorney fees and prejudgment interest.

Philip Morris appealed.

The company cited evidence that in two previous consent orders, the FTC had allowed other tobacco companies to use terms like light and low tar in their advertising, as long as the ads also indicated the products' tar and nicotine levels.

A safe harbor provision in the Illinois consumer fraud statute states that the act does not cover [a]ctions or transactions specifically authorized by laws administered by any regulatory body or officer acting under statutory authority of this state or the United States.

Philip Morris argued that the FTC consent orders regarding the other tobacco companies served as specific authorization for it to label its cigarettes as light or low tar, barring the plaintiffs' claim under the consumer fraud statute.

The Illinois Supreme Court agreed.

If the use of these descriptive terms in the manner alleged has been specifically authorized by the FTC in the course of carrying out the duties assigned to it by Congress, this action cannot stand, even if the terms might be found deceptive by a trier of fact, the court said.

Here, [w]e conclude that the FTC's informal regulatory activity, including the use of consent orders [related to light cigarettes], comes within the scope of [the state consumer fraud statute's] requirement that the specific authorization be made 'by laws administered by' a state or federal regulatory body. ... [T]he FTC could, and did, specifically authorize all United States tobacco companies to utilize the words 'low,' 'lower,' 'reduced' or like qualifying terms, such as 'light,' so long as the descriptive terms are accompanied by a clear and conspicuous disclosure of the 'tar' and nicotine content in milligrams of the smoke produced by the advertised cigarette. ... Further, the FTC reiterated this authorization in [a] 1995 consent order, which forbade the representation of tar ratings as 'a numerical multiple, fraction or ratio of the tar or nicotine ratings of any other brand,' but specifically allowed the 'express or implied representation' that a cigarette is 'low, lower, or lowest in tar and/or nicotine.'