SCOTUSwiki Preview: Altria Group v. Good

The following is Lyle Denniston’s preview and analysis of Monday’s first argument.  Additional updates will be made available here, on the Altria wiki page.

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.

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.

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.

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.

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.