Tuesday, June 12, 2012

Plaintiffs in Illinois Class Action Seek Re-institution of Lawsuit, Claiming State Supreme Court Decision Was Based on False Information

A class action lawsuit filed in 2000 in Illinois alleged that Philip Morris deceived consumers into thinking that some of its cigarette brands were safer by using descriptors such as "low-tar" and "lights." The plaintiffs prevailed, winning a $10.1 billion judgment against Philip Morris in 2003. However, the case was appealed and in 2005, the Supreme Court ruled for the defense, ordering that the trial judge dismiss the case. This week, the plaintiffs have announced that the are seeking re-institution of the case based on the claim that the "factual" information provided by Philip Morris and relied upon by the Illinois Supreme court was false.

According to an article in the Madison St. Claire Record: "Attorney Stephen Tillery is arguing that a judgment in favor of cigarette maker Philip Morris was "fundamentally flawed," because it was based on "false facts advanced by Philip Morris at every step in this litigation." Madison County Circuit Judge Dennis Ruth has reset a hearing originally scheduled for Tuesday involving Tillery's petition for relief from the Illinois Supreme Court's dismissal of Price v. Philip Morris in 2005. The hearing will be held Aug. 21 in the $10.1 billion "light" cigarette labeling judgment that was later overturned. Tillery filed a brief in support of a first amended petition for relief from judgment on May 4."

"According to Tillery, the FTC never allowed "low tar" descriptors, never had a policy of permitting descriptors, never required that Philip Morris disclose test measurements, never allowed the use of descriptors through consent orders and never intended for non-parties such as Philip Morris to take guidance from consent orders. "Because Philip Morris falsely represented contrary 'facts' in the litigation and successfully convinced Justice Garman to rely on those false 'facts' to dismiss Plaintiff's claims, plaintiff's petition should be granted," Tillery wrote."

The Rest of the Story

Unfortunately for the plaintiffs, it is their side, not Philip Morris, which is erring on the facts regarding the FTC's role in propagating the low-tar myth. Let's examine the key points one-by-one:

1. The FTC never allowed "low tar" descriptors.

As part of the history of the FTC's regulation of low tar descriptors, there were two consent orders in which the FTC specifically permitted certain "low-tar" and "light" claims and set out conditions under which these claims could be made.

One of these was American Tobacco Co., FTC Docket No. C-3547 in 1994. As explained by the Illinois Supreme Court: "The agreed order provided, further, that 'presentation of the tar and/or nicotine ratings of any of respondent’s brands of cigarettes and the tar and/or nicotine ratings of any other brand (with or without an express or implied representation that respondent’s brand is ‘low,’ ‘lower,’ or ‘lowest’ in tar and/or nicotine) shall not be deemed' to violate the ban on numerical comparisons. American Tobacco, 119 F.T.C. at 11."

Another relevant consent order was issued in 1971 and involved a complaint against American Brands for implying in its advertising that certain cigarettes were low-tar: "The dispute between the FTC and American Brands was resolved in 1971, with the entry of a consent order that required American Brands to cease and desist from: Stating in advertising that any cigarette manufactured by it, or the smoke therefrom is low or lower in ‘tar’ by use of the words ‘low,’ ‘lower,’ or ‘reduced’ or like qualifying terms, unless the statement is accompanied by a clear and conspicuous disclosure of: 1. The ‘tar’ and nicotine content in milligrams of the smoke produced by the advertised cigarette; and 2. If the ‘tar’ content of the advertised brand is compared to that of another brand or brands of cigarette, (a) the ‘tar’ and nicotine content in milligrams of the smoke produced by that brand or those brands of cigarette, and (b) the ‘tar’ and nicotine content in milligrams of the lowest yield domestic cigarette.” American Brands, 79 F.T.C. at 225."

Thus, the FTC explicitly did allow the use of "low tar" descriptors, as long as the company disclosed the tar and nicotine yields of the brand.

2. The FTC never had a policy of allowing descriptors.

The FTC may not have had a policy of allowing descriptors, but it clearly did allow descriptors under certain circumstances, under its consent orders as described above.

3. The FTC never required that Philip Morris disclose test measurements.

Well, this is kind of misleading. It is technically true that the FTC did not require the disclosure of test measurements on tar and nicotine yields. However, the FTC threatened to require the release of these test measurements, and in response, all the cigarette companies voluntarily disclosed the information, which is printed each year in an FTC report on tar and nicotine yields of all the cigarette brands on the market. Had Philip Morris ever decided not to voluntarily disclose this information, it is quite clear that the FTC would have then mandated the disclosure. So in fact, there was a "de fact" requirement that cigarette companies disclose the tar and nicotine yields of their cigarette brands.

4. The FTC never allowed the use of descriptors through consent orders.

As we have just seen, this is false. In a 1971 consent order, the FTC very clearly allowed the use of low-tar descriptors, as long as the actual yield was provided to consumers and as long as any comparative statements were accompanied by the yields of the relevant products and of the lowest yield product on the market.

5. The FTC never intended for non-parties such as Philip Morris to take guidance from consent orders.

I have earlier provided an extensive discussion of why I believe that the FTC consent decrees do represent industry-wide policy, from which non-parties are to take guidance. Briefly, imagine that the FTC allowed American Brands to advertise cigarettes as low-tar according to the provisions outlined above, but later, did not allow Philip Morris to advertise cigarettes as low-tar at all. Even though the original consent order with American Brands could not be argued to hold the full force of law with regard to Philip Morris, it would be difficult to maintain that the FTC's actions were consistent with the law. This would seem to represent a clear example of unequal and inconsistent application of the law. Thus, I do not find it unreasonable for Philip Morris to assume that the consent order with American Brands provided conditions for the use of the "low-tar" terminology that could be expected to apply to it as well as American Brands.

While it is true that as a matter of the force of law, the consent order did not bind FTC from dealing differently with other companies, as a practical matter, I think that it did bind FTC. Because a federal agency cannot willy nilly apply the law differently to different companies. The reason why the consent order only had the formal force of law with American Brands was simply that American Brands was the company about which a complaint had been filed, and which was therefore party to the consent order. It was not that somehow American Brands' actions were to be regulated differently than those of other companies because of some peculiarity about American Brands that did not apply to Philip Morris and other companies.

Now is it the case that FTC could not now enforce the disclosure rules among the non-signatory companies because it did not represent an industrywide policy? I doubt it. I think if the FTC decided to, it could easily enforce the disclosure requirement and non-signatories would have no argument at all in claiming that they didn't sign the agreement so they don't need to disclose. The FTC could and would (if it had the interest in enforcing it) simply tell the companies: "Sorry - these are the rules that the industry has to follow").

I have trouble accepting the argument that FTC consent orders do not provide overall industry guidance and policy because it is, in fact, through consent orders that FTC enforces the law. FTC does not have to issue a trade regulation rule in order to set industry policy. In fact, enforcement agreements and orders are one of the primary mechanisms by which it enforces the law. And it seems illogical to argue that just because a company is not party to a particular consent order, that the company does not take general or even specific guidance from that order, particularly if the order is as specific as the 1971 consent order is in setting out the precise requirements for the use of tar/nicotine level descriptors.

For the same reason, I have trouble accepting the argument that the fact that the FTC did not ever issue a trade regulation on the issue of descriptors indicates that it never authorized cigarette companies to use these descriptor terms in their marketing. I think the consent order clearly implies a set of requirements that can reasonably be interpreted by the other cigarette companies as indicating FTC enforcement policy on this issue.

I think it's important to recognize that federal agency actions with regard to particular companies do, in fact, serve to set policy and rules for all companies. The converse seems illogical. Could a company being investigated by FTC for using the term "Lowest Tar" brand successfully convince FTC that there was nothing wrong with this action because FTC's consent order applied only to American Brands? I doubt anyone would argue that the use of the term "Lowest Tar" cigarette brand (without appropriate documentation) is lawful under the Federal Cigarette Labeling and Advertising Act, even though there is no trade regulation concerning this issue, even though the 1971 consent order applied only to American Brands, and even though the consent order did not specifically mention the term "lowest tar." I think it's safe to argue that federal law (as interpreted and enforced by the FTC) simply does not allow for the undocumented use of the term "Lowest Tar" brand, even in the absence of a trade regulation on the issue.


The rest of the story is that the plaintiffs in this case are in a very weak position. They are in a weak position because contrary to what the plaintiff's attorneys would have us believe, the blame with respect to the "low-tar" fiasco is not just in the hands of the cigarette companies. It is also in the hands of the federal government, for assuming jurisdiction over, but failing miserably to address the advertising of tar and nicotine levels to smokers.

The Price decision is reminding us, I think, that it is simply not enough to blame everything on the cigarette companies. It is a poignant reminder that the federal government has had a role to play in the tobacco epidemic in this country.

And interestingly, the federal government's complicity in this epidemic stems not so much from its failure to assert jurisdiction over tobacco products, but from its having asserted jurisdiction over aspects of tobacco in a weak and ineffective way, but in a way that ended up preempting meaningful state and local regulation as well as providing a large measure of immunity to the tobacco companies.

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