Altria Gets US High court Hearing on "Lights"

Altria Gets U.S. High Court Hearing on `Lights' Suits (Update3)

By Greg Stohr

Jan. 18 (Bloomberg) -- The U.S. Supreme Court agreed to hear arguments from Altria Group Inc. in a case that may shield the tobacco industry from suits seeking billions of dollars over the marketing of ``light'' cigarettes.

The justices today said they will review a lower court decision that said Altria's Philip Morris USA unit, the nation's largest cigarette maker, must face Maine smokers' claims that it fraudulently portrayed lights as safer than other cigarettes. Philip Morris contends that federal law bars the suit, which invokes a state consumer protection law, from going forward.

The clash may determine the fate of more than 30 similar lawsuits around the country against Philip Morris, Reynolds American Inc.'s R.J. Reynolds Tobacco Co. and other cigarette makers. An Illinois suit at one point threatened Philip Morris with a $10.1 billion award before it was overturned.

``These staggering stakes provide a compelling reason for this court to resolve the question,'' Philip Morris argued in its petition seeking Supreme Court review.

The high court's decision to hear the case suggests it will rule in favor of the tobacco industry, Morgan Stanley analyst David Adelman said in an investors' note. That probably would mark ``the death knell of the remaining lights class-action cases,'' wrote Adelman, who rates Altria shares ``overweight.''

Lower courts have disagreed about the propriety of the suits. In letting the Maine case go forward, the Boston-based 1st U.S. Circuit Court of Appeals criticized a different federal appeals court's decision to block a Louisiana suit over light cigarettes.

Deception Alleged

The lawsuit seeks to recover the money smokers spent on Philip Morris's Marlboro Lights and Cambridge Lights through November 2002, plus punitive damages.

The smokers, led by Stephanie Good, contend that Philip Morris intentionally deceived consumers by describing the cigarettes as being ``light'' and containing ``lowered tar and nicotine.''

``For over 30 years, Philip Morris falsely reported on its cigarette packages that consumers would receive lower amounts of tar and nicotine from Marlboro Lights than from regular Marlboro cigarettes,'' the group argued in a filing that urged the Supreme Court to reject the appeal.

The Supreme Court fight will focus on a pair of cigarette- labeling laws enacted in the 1960s. Those measures require each package of cigarettes to carry a specified warning label while barring additional state law requirements ``based on smoking and health.''

In 1992, a splintered Supreme Court said that law barred some, though not all, smoker lawsuits against tobacco companies.

Cipollone Case

The smokers argue that the 1992 ruling, known as Cipollone v. Liggett Group, permits suits that accuse tobacco companies of violating generally applicable laws, such as those that bar companies from deceiving consumers.

``Congress did not intend to give the tobacco companies a free pass to violate state laws that are promulgated pursuant to traditional state police powers and are binding on all other commercial actors,'' the consumers argued.

Philip Morris contends the Cipollone decision allows those types of suits only if they claim that cigarette makers lied about their products. The company says it didn't lie and simply used terms that had been endorsed by the Federal Trade Commission, the agency that oversees cigarette testing.

The smokers ``do not allege that PMUSA's tar and nicotine descriptors are inherently false and do not dispute that they provide an accurate shorthand means of conveying tar and nicotine testing results to consumers,'' the cigarette maker argued.

Two Hurdles

R.J. Reynolds and the U.S. Chamber of Commerce joined Philip Morris in urging Supreme Court review. Philip Morris is based in Richmond, Virginia, while its parent company's headquarters are in New York. Altria fell $1.38, or 1.8 percent, to close at $75.42 in New York Stock Exchange composite trading.

The pre-emption question is one of two hurdles that have prevented some lights cases from going forward. Courts have derailed other suits by refusing to grant class-action status, a designation that lets smokers with relatively small claims sue together.

The high court case ``is an absolute must-win issue for plaintiffs, but not for the industry,'' Adelman said in his investors' note.

A victory for Altria would mean the lights cases ``are essentially wiped out,'' said Ed Sweda, an attorney at the Tobacco Products Liability Project at Northeastern University School of Law in Boston. He said that result would be a ``tragedy depriving these aggrieved consumers from having their day in court.''

The case is Altria v. Good, 07-562

Bloomberg.com