Monday, December 15, 2008

“Light” Cigarette Suit Not Barred by Federal Law, FTC Actions: U.S. Supreme Court

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

Smokers can pursue a suit based on claims that tobacco company Philip Morris violated the Maine Unfair Trade Practices Act by advertising and promoting “light” cigarettes, the U.S. Supreme Court ruled on December 15.

The Court rejected contentions by Philip Morris and its parent company, Altria Group, that the state law claims were expressly preempted by the Federal Cigarette Labeling and Advertising Act and impliedly preempted by Federal Trade Commission actions.

Express Preemption

The Labeling Act provided that “[no] requirement or prohibition based on smoking and health shall be imposed under State law with respect to the advertising or promotion of any cigarettes the packages of which are labeled in conformity” with the Act.

Philip Morris contended that Congress could not have intended to permit the enforcement of state fraud laws because doing so would defeat the Labeling Act’s purpose of preventing nonuniform state warning requirements. However, fraud claims rely only on a single, uniform standard: falsity, the Court pointed out.

In Cipollone v. Liggett Group, Inc., 505 U.S. 504 (1992), the Court held that a common law fraud claim was not preempted by the Labeling Act. As in Cipollone, the smokers' alleged a breach of the duty not to deceive by claiming that the deceptive marketing statements “light” and “lowered tar and nicotine” induced them to purchase the product.

The presence of the federally-mandated warnings might bear on the materiality of the allegedly fraudulent statements, but that possibility did not change the case from one about the marketing statements to one about the warnings, according to the Court.

Implied Preemption

The smokers’ claims were not impliedly preempted by FTC actions. Neither the handful of FTC industry guidances and consent orders on which Philip Morris relied nor the Commission’s inaction with regard to “light” descriptors even arguably justified the preemption of state deceptive practices laws, the Court held.

The smokers still must prove that Philip Morris’ use of “light” and “lowered tar” descriptors in fact violated the state deceptive practices statute, but neither the Labeling Act’s preemption provision nor the FTC’s actions in this field prevented a jury from considering that claim, the Court concluded. The decision of the U.S. Court of Appeals in Boston (CCH Advertising Law Guide ¶62,656, 2007-2 Trade Cases ¶75,877, CCH State Unfair Trade Practices Law ¶31,454) was affirmed and remanded.

Justice Stevens wrote the majority opinion, joined by Justices Kennedy, Souter, Ginsberg, and Breyer. Justice Thomas dissented, joined by Chief Justice Roberts and Justices Scalia and Alito.

The December 15, 2008, decision in Altria Group, Inc. v. Good, will be reported at CCH Advertising Law Guide ¶63,232 and in CCH Trade Regulation Reports and CCH State Unfair Trade Practices Law.

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