Smokers in Maine have won their bid to force the tobacco company Altria Group to stand trial for allegedly defrauding them into believing that "low tar" and "light" cigarettes were a healthier alternative to regular cigarettes.
The ruling is an important victory for injured consumers and consumer advocate groups who say it will make it easier for local residents to recover damages from national companies involved in alleged deceptive practices.
The decision is a setback for business groups that have been urging the high court to expand the application of preemption principles to help short-circuit state-based consumer lawsuits.
The case stems from a lawsuit filed against Philip Morris USA and its parent company, Altria, charging that the companies engaged in a decades-long fraud on Maine smokers in violation of a state law against deceptive business practices.
Altria responded to the suit by arguing that its products are regulated by federal law and the FTC, not the state of Maine. A federal judge agreed and dismissed the smokers' suit. But the First US Circuit Court of Appeals in Boston reinstated the action, ruling that the state lawsuit is not preempted by federal law.
At the heart of the case was a clash between a state law, the Maine Unfair Trade Practices Act, and a federal law, the Federal Cigarette Labeling and Advertising Act.
Lawyers for Altria argued that the federal labeling act preempted the Maine law. The federal labeling act says in part that if cigarette packages are labeled in conformity with the act, "no requirements or prohibition based on smoking and health shall be imposed under state law" on advertisements or promotion of cigarettes.
Writing for the majority, Justice John Paul Stevens said the Maine state law forbids companies from making fraudulent statements. He said it created a broader duty for companies that extended beyond actions merely related to "smoking and health" that are regulated by federal law.
"We conclude ... that the Labeling Act does not pre-empt state-law claims like respondents' that are predicated on a duty not to deceive," Justice Stevens writes.
In a dissent, Justice Clarence Thomas said the court should have enforced preemption in the case, and created a clear test for the lower courts. In Justice Thomas' view, the Maine smokers' lawsuit imposed obligations tied to the "effect of smoking upon health," and thus must be preempted.
"With this suit, [the smokers] seek to require the cigarette manufacturers to provide additional warnings ... or to prohibit them from selling these products with the 'light' or 'low-tar' descriptors," Justice Thomas writes. "This is exactly the type of lawsuit that is pre-empted by the Labeling Act."
The majority decision also holds that regulatory actions taken by the FTC concerning claims about tar and nicotine do not preempt the Maine smokers' suit.
"The [Maine smokers] still must prove that [the tobacco company's] use of 'light' and 'lowered tar' descriptors in fact violated the state deceptive practices statute," Stevens writes. He adds that "neither the Labeling Act's preemption provision nor the FTC's actions in this field prevent a jury from considering that claim."
The case, Altria Group v. Stephanie Good (07-562), is one of two high-profile cases on the Supreme Court's docket this term raising the issue of federal preemption of state laws and regulations. On Nov. 3, the court heard the case of a Vermont musician whose right hand and forearm were amputated because of a physical reaction to an injected anti-nausea drug. That suit charges that drug manufacturer Wyeth violated state law by failing to adequately warn consumers about possible dangerous effects from the injection of one of its drugs. Like Altria, Wyeth is urging the justices to dismiss the state lawsuit as preempted by federal law and regulations.
The Maine tobacco lawsuit is part of a nationwide legal assault being waged against the cigarette industry. In addition to the Maine case, at least 16 lawsuits are pending in 14 other states that raise similar claims about deceptive marketing of "light" cigarettes. In addition, scores of lawsuits are pressing an array of other complaints.
The Justice Department is waging its own battle against the tobacco companies. In 2006, a federal judge ruled that Altria and other tobacco firms violated civil racketeering laws in part by falsely marketing and promoting low-tar and light cigarettes as less harmful than regular cigarettes.