Monday, September 29, 2008

Philip Morris and Walgreens File Suit Over San Francisco's Ban on Tobacco Sales at Pharmacies

In two separate lawsuits, Philip Morris and Walgreens are challenging the constitutionality of San Francisco's recently enacted ban on tobacco sales in pharmacies. Philip Morris has filed suit in federal court, arguing that it has a First Amendment right to sell its products. Walgreens filed suit in San Francisco Superior Court, arguing that the regulation is unfair because its treats various types of retailers differently.

According to an article in the San Francisco Chronicle: "Philip Morris USA, the nation's largest tobacco company, filed suit in federal court Wednesday, arguing the city of San Francisco has unconstitutionally banned pharmacies from selling tobacco products. ... Philip Morris is arguing that it has a First Amendment right of free expression to sell its products. 'Although called a ban on sales, the purpose and effect of the ordinance is to suppress communications directed to adult smokers, in violation of our constitutional rights,' said Joe Murillo, a lawyer representing Philip Morris USA. 'Likewise, the ban unfairly deprives adult consumers of the opportunity to buy tobacco products from legitimate, licensed retail businesses.'"

"Mitch Katz, director of the city's Department of Public Health, remarked that he must have missed the day in social studies class the teacher discussed the constitutionality of cigarette sales. 'Do you remember any part of the Bill of Rights being about pharmacies selling tobacco?' he asked." ...

"Walgreens, meanwhile, filed a brief Wednesday stating the company would lose millions of dollars, equal to 9 percent of a store's non-pharmacy sales, if the ban takes effect. The company said the city is discriminating by not applying the ban to grocery stores or big-box stores that have pharmacies within them and also sell cigarettes. Katz has said it's a contradictory message for Walgreens to use the motto "the pharmacy America trusts" while selling cancer-causing tobacco products. In its brief, Walgreens said grocery stores are also perceived as health-promoting venues and pointed out that Safeway's slogan is "ingredients for life" but that the chain also sells cigarettes."

According to another article in the San Francisco Chronicle: "Attorneys for Walgreens are seeking an emergency injunction to stop San Francisco from banning the sale of tobacco products in pharmacies. In July, San Francisco became the first city in the nation to ban the sale of tobacco products in pharmacies such as Walgreens and Rite Aid, saying sick people getting their prescriptions filled shouldn't be faced with cancer-causing products sitting nearby. But the ban, which is scheduled to take effect Oct. 1, doesn't extend to grocery stores or big-box stores that also have pharmacies. That's why the company wants the plan stopped, said Walgreens spokeswoman Tiffani Bruce. 'Our position is based solely on being fair across different types of retailers,' she said, noting that smokers will just buy their cigarettes at another store down the block."

The Rest of the Story

There is a way in which I believe that Philip Morris could argue that the San Francisco ordinance violates its First Amendment free speech rights, but it is not the way that has been widely reported in the media.

First, the sale of tobacco products itself is not speech, so it would not be protected under the First Amendment. What is protected is speech, which means that Philip Morris would have to argue that the tobacco sales ban in pharmacies has the effect of restricting the company's right to advertising its products in these stores.

In the traditional advertising sense, this could be a hard sell. The ordinance does not actually preclude cigarette advertising in pharmacies. It seems to me that cigarette companies would still be free to purchase cigarette advertising space in pharmacies. Theoretically, they could also have cigarette promotional displays in these locations. The only thing the law precludes is the sale of tobacco products, not the display or advertising of these products.

However, there is one type of cigarette promotional activity that is, in a de facto way, banned by the ordinance. That is the use of cigarette promotional allowances, or fees paid by cigarette companies to a retailer for the rights to sell its product in the store, to have the retailer promote it in a specific way, and to allow the retailer to sell it at a reduced price. Promotional allowances represent a huge proportion of overall tobacco promotional expenditures.

Thus, it seems to me that Philip Morris could attempt to argue that by banning tobacco sales in pharmacies, the city of San Francisco has essentially banned the ability of cigarette companies to use promotional allowances as a method of marketing its product in pharmacies in the city.

Is this a stretch? Certainly, in terms of succeeding in getting a preliminary injunction to halt enforcement of the ordinance, which would require showing a reasonable probability of legal success. But in terms of the ultimate litigation of this issue, it could make for an interesting case. Previous cases dealing with the application of the First Amendment to the protection of First Amendment rights of the tobacco companies have dealt directly with the regulation of cigarette advertising and promotion. This is the first case I am aware of in which the companies will assert that a regulation of tobacco sales has an indirect effect of denying them the right to communicate with customers by promoting their products in a certain way in certain types of stores.

The Walgreens lawsuit may actually have a better chance of success. Walgreens appears to be arguing not that regulating tobacco sales is unconstitutional, but that the specific way in which this ordinance regulates tobacco sales is unfair and further, irrational -- because that unfair treatment of certain stores is capricious.

The basic authority of the state to regulate the places where tobacco products are sold derives from the police powers granted to it by the 10th Amendment of the Constitution, which allow it to enact reasonable laws to protect public health, public morals, public safety, and the general welfare of the community. The key relevant limitations here are first, that the laws must be intended to protect the public's health, morals, safety or welfare and second, that the laws must be fair, sensible, and rational.

The San Francisco ordinance could be found to fail on both accounts.

First, there does not seem to be a compelling government interest in regulating the extent to which the decision a store makes about what products to sell is consistent with its expressed mission (for example, with its motto). This is the only reasonable basis that the city could argue that it needed to invoke its police powers. After all, there is no evidence that the elimination of tobacco sales in pharmacies will have any effect on youth access to tobacco products or on the access of adults to these products. Customers will simply purchase their products from other retail outlets. The ordinance will have the effect not of preventing or deterring people from smoking, but instead it will simply shift the locations where cigarettes are purchased.

So the government's real intent behind the ordinance is exactly as expressed by the city's health director: "it's a contradictory message for Walgreens to use the motto "the pharmacy America trusts" while selling cancer-causing tobacco products." In essence, the government's interest in regulating tobacco sales in pharmacies is to regulate the consistency of these stores' actions with their mottos.

Interestingly, if Walgreens were to change its motto to: "the pharmacy which sells Americans the products they want to buy," it would negate the need for the cigarette sales ban, since this motto would no longer be inconsistent with the selling of tobacco products.

In short, I don't believe that the city can compellingly argue that ensuring that the mottos of stores are consistent with the products being sold is a legitimate government interest. The city cannot successfully argue that the banning of cigarette sales in pharmacies is a measure that is needed to protect the public's health, safety, morals, or welfare.

The ordinance also fails on the second account because the decision to exempt grocery stores and box stores which have pharmacies from the ban (and in fact, the decision to exempt all non-pharmacy stores from the regulation) is irrational -- it is unfair and the unfair treatment of retail outlets appears to be capricious. I am just not aware of a rational basis why a law to protect the public's health from the hazards of cigarettes would require the regulation of cigarette sales only in free-standing pharmacies and pharmacies within drug stores, but not pharmacies in supermarkets or box stores (and not all retail outlets that sell cigarettes).

I think there is a reasonable chance that Walgreens will succeed in obtaining a temporary injunction against the ordinance. First for the above reasons, I think they can argue that there is a reasonable likelihood of legal success. Second, I think they can also argue that there is a danger of irreparable harm because a huge proportion of the company's sales are attributable to tobacco products and the ordinance will directly eliminate these sales -- sales which cannot be recovered and thus make the harm irreparable.

San Francisco Superior Court judge Peter Busch will consider Walgreen's request for a preliminary injunction at a hearing today. I will report the results of the hearing as soon as they are available.

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