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December 2008Client Alert

United States Supreme Court Allows Consumer’s Claims Over “Light” Cigarettes To Survive Preemption – Altria Group, Inc., et. el. v. Good

The United States Supreme Court issued its opinion yesterday in Altria Group, Inc., et. el. v. Good, regarding whether the Federal Cigarette Labeling and Advertising Act (hereinafter, “FCLAA”) preempts false advertising claims brought under the Maine Unfair Trade Practices Act (hereinafter, “MUTPA”). The 5-4 ruling means that a group of Maine consumers can proceed with their state lawsuit against Altria Group Inc.'s Philip Morris unit over the advertising of light and low-tar cigarettes, which they allege was deceptive. This case has dealt a tremendous blow to the tobacco industry and potentially has ramifications that extend to other businesses that sell to consumers.

In Altria Group, the plaintiffs filed suit alleging that the defendants violated the MUTPA by advertising that their “light cigarettes” contained less tar and nicotine than regular brands. The defendants prevailed on summary judgment by arguing that the FCLAA expressly preempted the plaintiffs’ state cause of action, in large part because cigarette labeling is regulated by the Federal Trade Commission. The First Circuit Court of Appeals reversed the district court’s grant of summary judgment by concluding that in substance, the plaintiffs’ claim was one of fraud, thereby falling outside the FCLAA’s preemption provision.

In upholding the First Circuit’s decision, the Supreme Court stated that language of the FCLAA’s preemption provision did not expressly preempt the MUTPA. Rather, the FCLAA states that “[n]o requirement or prohibition based on smoking and health shall be imposed under State law with respect to the advertising or promotion of any cigarettes the packages of which are labeled in conformity with the provisions of this chapter.” (emphasis added). The Supreme Court reasoned that the phrase “based on smoking and health” does not necessarily preempt the MUTPA because the state law merely codifies a common law duty not to deceive. Thus, the Supreme Court held that the plaintiffs’ fraudulent advertising claim was not preempted because it was based on a duty not to deceive rather than a claim based solely on “smoking and health,” which would fall under the purview of the FCLAA’s preemption clause.

Like Maine, Wisconsin and Illinois have a number of Unfair Trade Practices statutes. Wis. Stats. §§ 100.18 and 100.20, for example, concern fraudulent representations and unfair trade practices. Moreover, 815 ILCS 505/1 et seq. concerns consumer fraud and deceptive business practices. Based on the Supreme Court’s decision, companies may no longer be able to reasonably rely on a preemption argument when their products or the advertising of their products are alleged to be fraudulent.

Altria Group seems to open the door to allowing plaintiffs to use consumer protection statutes to seek remedies under state law that ordinarily might be barred under federal law. More broadly, the decision undercuts a legal theory that the business community has employed in an effort to insulate itself from consumer lawsuits filed in state court. With increasing success, companies have been arguing that federal regulation of their products implicitly barred state action, whether by consumers or state government itself, to hold them liable for injury.

Justice Anthony Kennedy, who is increasingly becoming the Supreme Court’s “swing vote” in many of its closest cases, joined the majority opinion authored by Justice John Paul Stevens. Justices David Souter, Ruth Bader Ginsburg and Stephen Breyer also joined the majority. Justice Clarence Thomas dissented, joined by Chief Justice John Roberts and Justices Antonin Scalia and Samuel Alito.

For additional information about Altria Group or its implications, please contact Paul E. Benson at 414.225.2757 or pebenson@michaelbest.com, Nathaniel Cade, Jr. at 414.225.2785 or ncade@michaelbest.com, or James B. Barton at 414.225.2779 or jbbarton@michaelbest.com.

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