Altria Group v. Good

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Authorship: Lyle Denniston

Contents

[edit] Briefs and Documents

Docket: 07-562

Issue: Whether the Federal Cigarette Labeling and Advertising Act preempts state law deceptive practice claims in connection with the advertising of cigarettes as “light” or containing “lower tar and nicotine.”

Merit briefs

Amicus briefs

Oral Argument: Transcript

Decision: Affirmed and Remanded in a decision by Justice Stevens

[edit] Pre-Argument Articles

[edit] Argument Preview

The right of smokers to go to court to challenge claims by tobacco companies that the health risk is less if they use ”light” cigarettes will be weighed in Altria Group, et al., v. Good, et al. (07-562) – the first case to be argued in the new Term.

[edit] Background

More than four decades ago, the Federal Trade Commission – the federal government’s main regulator of business conduct – told the major companies making and selling cigarettes that it would not challenge factual statements they made about the tar and nicotine content of cigarettes, if the claims were based on tests done using what is called the “Cambridge Filter Method.” That method uses a machine to take one puff, two seconds long, at a specific level of intake, every minute, with the cigarettes to be smoked to a specified length. Supposedly, the test was designed to produce uniform data about the tar and nicotine yields of cigarettes, and thus a uniform policy on the issue. The cigarette makers did not have to make statements in their ads or on their labels about the test results, but the FTC guidance gave them legal cover if they did.

At that time, in 1966, the FTC’s embrace of the Cambridge testing method reflected the public health community’s belief that the lower the tar and nicotine yield in cigarettes, the less harmful they would be to smokers’ health. With the FTC guidance in hand, the tobacco industry, as it introduced new smokes with lower tar and nicotine yields in response to rising health concerns, was free to promote them as “light” cigarettes – a shorthand for the Cambridge test results the industry recited. In 1970, the FTC thought about laying down a formal rule requiring the manufacturers to disclose in their ads the tar and nicotine content based on the most recent test results, but that did not go forward because a group of manufacturers agreed on a voluntary program (with the proviso that they were not admitting they had broken the law earlier).

The question at stake in the new Altria Group case is how much legal cover the FTC’s 1966 statements provided for the industry and whether that guidance insulated the manufacturers from smokers’ lawsuits, based on state laws, challenging the claims of lower tar and nicotine yields. The case, as taken to the Supreme Court, suggests a clash between the Federal Cigarette Labeling and Marketing Act and FTC actions, on one side, and Maine’s Unfair Trade Practices Act, on the other.

Three individuals who live in Maine – Stephanie Good, Lori A. Spellman and Allain L. Thibodeau – filed a class-action lawsuit, based on state law, seeking to represent all buyers of Marlboro Light or Cambridge Light cigarettes, for a period up through November 2002. The lawsuit asserted that the three individuals had smoked those “light” cigarettes for at least 15 years, and claimed that Philip Morris, the manufacturer, had used unfair and deceptive practices in making, promoting and marketing Cambridge Light and Marlboro Light cigarettes with statements that they were “light” because lower in tar and nicotine. The lawsuit contended that the company knew all along that the cigarettes would not – when actually used by smokers – deliver less tar or nicotine to the user.

The low yields of the test method, according to the lawsuit, were offset by the actual smoking habits of users: they “compensated” by taking deeper puffs, holding the smoke in their lungs longer, or smoking more cigarettes. The lawsuit did not seek compensatory damages, but rather a return of the money smokers had paid for “light” cigarettes, along with a claim for punitive damages and recovery of their attorneys’ fees.

Philip Morris sought dismissal of the case, contending that state law claims had been displaced by the federal cigarette labeling and advertising law or FTC actions. The company made two claims of “preemption” of such state law claims: it said they were expressly pushed aside by the federal law controlling cigarette marketing, and were impliedly preempted by the FTC’s four-decades-long effort to implement a uniform policy on disclosing the health risks of smoking. A U.S. District Court dismissed the lawsuit on preemption grounds, but the First U.S. Circuit Court of Appeals in Boston reinstated it.

The Circuit Court concluded that the lawsuit was based on claims of false statements about the two brands’ tar and nicotine content – that is, it was not based on health hazard claims that are regulated by federal law, but rather on the duty not to deceive consumers.—a duty imposed by state law. That disposed of the express preemption claim. The Circuit Court also said the FTC’s actions did not amount to a formal regulation of the use of tar and nicotine yields, rejecting the implied preemption claim.

[edit] Petition for Certiorari

Philip Morris, joined by its parent, Altria Group, filed its appeal in the Supreme Court last October, raising both levels of the federal displacement argument: express preemption by federal law, implied preemption by FTC actions since 1966. “The lower courts,” the petition said, “have reached conflicting decisions on whether claims like these are preempted by federal law….A definitive answer to this question will significantly impact the outcome of dozens of pending lawsuits in which the plaintiffs are alleging billions of dollars in potential liability.” The disagreement among the federal appeals courts, the company argued, “obliterate the [federal] Labeling Act’s objective of establishing national uniformity in the regulation of cigarette advertising and promotion.’ Because the case presented both levels of the preemption question, and because the facts are largely undisputed, it “presents the ideal vehicle” for resolving the conflicting views.

The appeal was supported by another tobacco company, R.J. Reynolds, and by the U.,S. Chamber of Commerce. But the federal government was not involved at that stage, and the Court did not seek to enlist its views.

The smokers, responding to the appeal, stressed the claim that their lawsuit was based only on the state-law duty not to deceive, not on any law contradicting federal marketing regulation, and the assertion that the Supreme Court has never held that the federal cigarette labeling law has any implied preemptive effect. The smokers also contended that the FTC also has barred use of some of the disputed phrasing in a consent decree with another company. Their response notes that they are not seeking damages for any health-related injuries, but only “economic damages.”

The Court granted review on Jan. 18, 2008, and the merits briefing began.

[edit] Merits Briefs

The Philip Morris appeal, whatever its merits, ran into a substantial obstacle after the Court had agreed to hear it: the federal government opted to get involved in the case in mid-June, filing a brief supporting the Maine smokers. The brief filed on behalf of the United States and, in particular, the Federal Trade Commission, lined up with the smokers only on the meaning and impact of what the FTC has done, in the beginning and since – that is, the question of whether state laws claims are preempted by implication. This challenge, the brief contended, “should be rejected because it is based on a mischaracterization of the scope and effect of the FTC’s actions concerning cigarette advertising…The Commission does not view [the smokers’] lawsuit as undermining the FTC’s policies in any way….None of the actions on which petitioner’s preemption argument relies preempts state lawsuits such as this.” Directly disputing Philip Morris’ claim that the FTC’s actions left it no choice, the government brief said it had never issued any “mandates’ and has never explicitly authorized the companies to use descriptive words or phrases as shorthand indications of the test results.,

Three weeks after that brief was filed, the Philip Morris appeal took a second blow: the Solicitor General’s office notified the Court that the FTC had proposed to “rescind” its 1966 guidance that had provided legal cover for the industry’s “light” cigarette claims for more than four decades. In announcing its study of that proposal, the FTC said it had been concerned “for some time” that the machine testing method might be producing “misleading” information “to consumers who rely on the yields as indicators of the amount of tar, nicotine, and carbon monoxide they actually will get from smoking a particular cigarette. In fact, the current yields tend to be relatively poor indicators of tar, nicotine, and carbon monoxide exposure, and do not provide a good basis for comparison among cigarettes.”

The appeal has drawn the usual array of contending forces: pro-business and manufacturing groups on Philip Morris’ side, the anti-smoking community and consumers’ advocates on the other, with the state of Maine defending its own law’s validity.

The case was set for oral argument on the first day of the 2008 Term, Oct. 6. On Aug. 18, the Court agreed to allow the Solicitor General’s office to take part in the oral argument, dividing time with the smokers’ side.

[edit] Analysis

With the federal government, and the government’s principal consumer-protection agency, lined up against it, Philip Morris faces a stern test, at least on the implied preemption part of its appeal. The Court would not be likely to accept the industry’s characterization of what the FTC had done, when the FTC itself directly disputes those assertions.

On the express preemption aspect of the case, the outcome depends in part on whether the Court views the consumers’ lawsuit as narrow in the scope of its demands, so that it interferes little or not at all with congressional policy on cigarette marketing. But the coming decision may depend more heavily upon whether the Court is willing to make a significant new statement on the preservation of legal options for consumers under state law – a federalism concern. The Court’s most recent preemption decision, the 8-1 ruling last Term finding federal displacement of state-law claims on medical devices (Riegel v. Medtronic), was robustly protective of the federal prerogative, but primarily because there was clear-cut federal approval of those devices.

The main difficulty with the express preemption argument is the same as that encountered by the implied preemption challenge: both are keyed, in a significant way, to interpretation of FTC’s actions. The District Court decision, reversed on appeal, based the finding of express preemption upon that Court’s interpretation of the federal labeling law as seen through the lens of FTC’s supposed authorization of the “light” cigarette claims – something that the FTC now energetically disputes.

[edit] Oral Argument Analysis

A hearing on claims of deception by cigarette companies in their advertising of “light” cigarettes led Monday to strongly worded complaints by Supreme Court Justices that, if consumers were misled, it was partly — maybe even mainly — the government’s fault. Justices Samuel A. Alito, Jr., and Antonin Scalia suggested that the Federal Trade Commission had known for years that those ads were founded on flawed claims, and did little or nothing about it. The comments came as the Court opened its new Term with the hearing in Altria Group, et al., v. Good, et al. (07-562).

Justice Alito was the most blunt: “The FTC’s position seems to me incomprehensible,” he remarked to a lawyer for the Commission. “You’ve created this whole problem by, I think, passively approving the placement of these figures in the advertisements. And if they are misleading, then you have misled everybody who’s bought those cigarettes for a long time.” The lawyer speaking for the Commission and the Justice Department, Assistant to the Solicitor General Douglas Hallward-Dreimeier, tried to put the onus back on the tobacco industry, saying the companies knew as early as 1967 that its claims of low tar and nicotine in “light” smokes were not valid, yet failed to tell the FTC.

But that argument did not dissuade Justice Scalia. “When did the Commission know this stuff? I had a case when I sat on the Court of Appeals, so it had to be before 1984…It’s been general knowledge for a long time, and the FTC has done nothing abput it.”

The government’s counsel also drew some implied criticism from Chief Justice John G. Roberts, Jr., who wondered why the Solicitor General’s office had decided to take part in the Altria Group case on only one of the two issues at stake. Roberts pressed unsuccessfully to get the government’s current view on the other issue, but then Justice Scalia said the government had taken a position years ago, favoring the tobacco industry on that point, and he would “hold you to that” if the government did not state a position now.

The case tests whether individual smokers are barred, by federal law, from suing under state law to challenge alleged deception in the ads promoting “light” cigarettes as being low in tar and nicotine. The industry is making two claims to try to head off such lawsuits: first, that federal law on cigarette labeling and other marketing tactics expressly preempts state law claims, and, second, that actions by the FTC over the years allowed such ads, actions that amounted to implied preemption of state law claims.

Joining in the case, the FTC and Justice Department opted to side with the smokers who sued, but only on the implied preemption question. They argued that the FTC has never ordered or authorized claims of low tar and nicotine for “light” cigarettes. (Since 1966, the FTC has been telling the industry that it would not challenge them if they made such claims based on a testing method the FTC had endorsed. Only now is the FTC considering whether to withdraw that guidance, saying the evidence now is that that method produces misleading results.)

The Chief Justice told the government lawyer that Philip Morris and its parent, Altria Group, had given up on the implied preemption issue, so it would be “pretty easy” for the government to win on that question. So, Roberts asked, what is the goverment position on the express preemption issue. Hallward-Driemeier repeatedly insisted that it had no position.

Theodore B. Olson, a Washington attorney representing the company, in rebuttal told the Chief Justice that it had not given up on the implied preemption, and had focused on its “strongest” argument — express preemption — because that involved something on which Congress had explicitly spoken. (At one point in his opening argument, Olson said “I’d like to spend no time on the implied preemption argument,” to which Justice Scalia responded: “Good idea.”)

David C. Frederick, a Washington lawyer speaking for the four Maine smokers seeking to sue under state law for deception in Philip Morris ads for “light” smokes, had major difficulty with his main argument: that the case was not about smoking and health, but only about deceptive advertising. But several Justices said the only reason smokers would worry about tar and nicotine content was because of the health hazards of those substances.

In his initial argument and in rebuttal, sought to undermine any suggestion that the Maine smokers’ case was directed at deceptive advertising, not at smoking and health issues. He frequently read from the smokers’ complaint, and contended that the state law claims at issue “track nearly verbatim” the preemption provision of the federal cigarette labeling law.

Overall, Olson’s argument on express preemption was a sweeping one. Although he at a couple of points suggested that there could be a role for the FTC or for a state attorney general to act to police deception in cigarette advertising, when pressed he made it clear that the concession — if it was one — was limited to situations where the ad claims had literally nothing to do directly or indirectly with smoking and health.

He gave as one example an ad that claimed wrongly how many cigarettes there are in a pack. “There is not a preemption if there is not a relationship between the prohibition and smoking and health,” Olson said. He said, in response to a hypothetical suggested by Justice Anthony M. Kennedy, that there could not be a requirement that a cigarette maker disclose that smoking while using a particularly drug would cause a severe allergic reaction.

“I think the point here,” Olson summed up, “is that Congress decided that it wanted one uniform source of regulation of advedrtising of cigarettes with respect to smoking and health” — the labeling law. “Congress wanted the statements, certain statements, on cigarette packages. It didn’t want any confusion about what the marketing or promotion of cigarettes would be.”

In his rebuttal, he sought blunt the efforts by Frederick to make the core of his case the issue of deception rather than regulating messages on smoking and health. “I ask the Court,” Olson said, “to sit down and compare the labeling statute with the [smokers’] complaint. And the words are indistinguishable….Consumers understand that reducing the quantities of tar and nicotine in cigarettes reduces their adverse health effects. That is what this case is all about.”

[edit] Opinion Analysis

For l6 years, lower federal courts have labored over the right way to apply a significant Supreme Court ruling on consumers’ right to sue in state courts to challenge corporate wrongdoing, when the companies involved insist they are insulated by federal law. The problem, those judges found, was that no one could be sure just what the main opinion meant, and, besides, that opinion represented the views of only four Justices. Now, that 1992 opinion has gained majority support, so five Justices appear to accept that it says what it needs to say.

The decision at issue is Cipollone v. Liggett Group — for years, the Court’s most significant ruling on smokers’ lawsuits against cigarette manufacturers. Cipollone’s revival — indeed, its conversion into majority-endorsed doctrine — came on Monday in the Justices’ 5-4 ruling in Altria Group, et al., v. Good, et al. (07-562), another case involving smokers’ legal rights.

On the surface, Cipollone was a 7-2 ruling, but actually the vote lineup was 4-3-2, with the four votes grouped together controlling the reasoning. There are two facets to that reasoning, and both of them apparently now represent the views of five Justices — an undeniable majority.

One of these rationales is important in a general sense, applying to any kind of case in which makers of consumer goods or providers of consumer services claim that state lawsuits against them cannot go forward because they have been displaced (technically, “preempted”) by federal law. The other rationale is more vital to cases involving smokers’ court cases against tobacco companies.

The more general “Cipollone doctrine” is that clauses in federal laws that "preempt" enforcement of similar or parallel state laws are to be given a “narrow reading.” And that notion relies, in part, on an even broader doctrine: there is a “presumption” that Congress did not intend to displace state remedies for business-caused harms, so the burden is on business to overcome that presumption and show that Congress clearly intended to foreclose a state remedy.

The second doctrine, for use in tobacco cases, is a somewhat clumsily worded phrase. It was supposed to guide lower courts in deciding whether a smokers’ lawsuit can go forward. The judge is to look at Congress’ cigarette labeling law, first enacted in 1965, and then look at the specific complaint in the smokers’ lawsuit, and compare the two.

If the lawsuit would result in imposing a new duty on cigarette companies that would compel them to say something — or not say something — in their ads or marketing about the health hazards of smoking, the lawsuit is blocked because that is the ground that has been taken over by the federal labeling law.

But if the legal duty that would emerge out of the lawsuit is something else, a broader legal obligtion detached at least in theory from claims about smoking and health, the lawsuit may proceed.

Applying the two rationales in Cipollone, Justice John Paul Stevens’ opinion for himself and three others ruled that smokers’ lawsuits cannot go forward if they claim that the tobacco companies did not warn them, in their marketing, about how unhealthy it is to smoke cigarettes. But the Court also ruled that, if the manufacturers’ marketing was an attempt to deceive by misrepresenting or leaving out key facts about their products — in a word, “fraud” on the consumer, the lawsuit is allowed.

Justice Stevens, also the author of Monday’s ruling in the Altria Group case, applied some of each rationale in concluding that three Maine residents could go ahead with their class-action lawsuit claiming that Philip Morris USA deceived them, under Maine consumer-proteciton law, by describing reduced-nicotine cigarettes as being “light” or “lower in tar and nicotine.” Some 40 similar lawsuits pending in an array of other states also presumably can proceed. Those lawsuits, lawyers for tobacco companies say, seek billions of dollars in damages.

Stevens again recited the doctrine that federal preemption laws are to be interpreted narrowly, and he again relied upon the notion that lawsuits claiming fraud or deception by tobacco companies are not directly tied to smoking and health.

This time, Stevens gathered the votes of Justices Stephen G. Breyer, Ruth Bader Ginsburg, Anthony M. Kennedy and David H. Souter to support his opinion.

Recognizing the clumsiness of the Cipollone formulation allowing fraud claims to proceed in smokers’ cases, Stevens said: “While we again acknowledge that our analysis of these claims may lack ‘theoretical elegance,’ we remain persuaded that it represents ‘a fair understanding of congressional purpose.’ “ (The quoted material is from Stevens’ Cipollone opinion.)

This majority combination led to a doubling of the dissenting corps on tobacco lawsuits. Justices Antonin Scalia and Clarence Thomas, who had dissented in Cipollone 16 years ago, were joined on Monday by Chief Justice John G. Roberts, Jr., and Justice Samuel A. Alito, Jr.

Justice Thomas, who wrote the dissent for the four of them, protested most strenuously about the revival of the concept that federal preemption clauses are to be interpreted narrowly. He said the Court’s more recent rulings in consumer lawsuits have walked away from that presumption, and he suggested that the majority’s embrace was so lukewarm that its defense of Cipollone’s “confusing test is confined to one sentence and a footnote.”

However, since Justice Thomas so rigorously challenged the presumption and called explicitly for Cipollone’s test to be overturned, it is clear that this was a main point of discussion among the Justices in their deliberations on Altria Group, and yet Stevens assembled a majority to hold on to the test.

Thomas went on to challenge Stevens on the application of that test in this particular case. The smokers were contending that they were deceived because Philip Morris had not acknowledged that it knew smokers of “light” cigarettes would actually find ways to smoke those cigarettes that overcame the benefits of lower tax and nicotine content.

That, Thomas wrote, means that Philip Morris’ alleged misrepresentations had an effect on the smokers that was directly related to the health risk of smoking — precisely what federal labeling law covers.

[edit] Links and further information


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