The Supreme Court seemed inclined to favor tobacco-industry arguments that federal law pre-empts state lawsuits over deceptive cigarette advertising, even as several justices rebuked the federal government for failing to effectively regulate cigarette marketing.
The Monday argument marked the opening of the Supreme Court's annual term, one that brings several significant business cases. So far, this term lacks the constitutional drama of the last term's docket, when the justices ruled that Guantanamo Bay detainees have a right to habeas corpus, a proceeding to challenge unlawful detention, and handed a major victory to gun owners in a Second Amendment case by overturning a handgun ban in Washington, D.C.
The tobacco case deals with "light" cigarettes, which were marketed as dispensing less tar and nicotine than standard varieties. Although those claims were based on a testing method approved by the Federal Trade Commission, consumer plaintiffs alleged that Philip Morris, a unit of Altria Group Inc. that sells Marlboro Lights, withheld research showing that smokers compensate by taking deeper or more frequent puffs or smoking more cigarettes.
Consumers brought suit under Maine's unfair trade practice law, alleging deceptive advertising. Altria argued that the suit was pre-empted by the federal Cigarette Labeling Act of 1965, which bars states from imposing any rules on "advertising or promotion of any cigarettes…based on smoking and health."
In a 1992 case, the Supreme Court splintered over whether the federal act pre-empted state lawsuits, leaving the rule uncertain. More recently, federal circuit courts have split on the question.
In recent cases, the Supreme Court has been sympathetic to arguments that areas of commerce subject to broad federal regulation -- including medical devices and the securities industry -- are immunized from simultaneous state oversight. The FTC traditionally has seen state enforcement as a complement to its own authority, and in this case isn't opposing the consumers' position.
In Monday's arguments, the lawyer for Altria, Theodore Olson, said the labeling act didn't pre-empt all state deceptive advertising claims against cigarettes, only ones dealing with smoking and health. For instance, consumers could recover against "someone [who] might misrepresent the number of cigarettes in a package," Mr. Olson said.
The plaintiffs' lawyer, David Frederick, had difficulty persuading justices to see how the federal act left room for the lawsuit.
"Our contention here is that a generalized duty not to deceive is not a requirement based on smoking and health. It's based on a duty not to deceive," he said.
Justice David Souter asked what damages the consumers suffered, if not impaired health.
"The product is different," Mr. Frederick said. "If you buy a car thinking it's a Ford and it's a Yugo but it still drives, you still have a claim under the lemon laws for deceptive advertising."
Justice Antonin Scalia disputed the analogy, because light and standard cigarettes are priced the same, while Fords cost more than Yugos.
The justices directed their toughest questioning to the government's attorney, Douglas Hallward-Driemeier. Justice Samuel Alito observed that it has been known for nearly 25 years that tar and nicotine figures in ads for light cigarettes can be misleading. He asked why the trade commission did nothing until this year, when it proposed a revised regulation.
"The FTC's position seems to me incomprehensible," he said. "If these figures are…misleading, you should have prohibited them a long time ago."
Mr. Hallward-Driemeier blamed the industry for the FTC's inaction, saying that although regulators asked for research on the true impact of smoking light cigarettes, tobacco companies "failed to disclose that information to the commission."
The Justice Department brought its own racketeering lawsuit against the tobacco industry that deals in part with cigarette-product marketing. An appeal of a 2006 ruling in that case goes before the Washington-based U.S. Circuit Court of Appeals on Oct. 14.
Dozens of other lawsuits regarding light cigarettes are pending, and their fate could rest on the Supreme Court's decision, which is expected before July 2009.
By: Jess Bravin
Wall Street Journal; October 7, 2008
