On December 15, 2008, the United States Supreme Court held that state law fraud claims are not preempted by the federal Cigarette Labeling and Advertising Act, 15 U.S.C. §§ 1331-1341, (“Labeling Act”) or the Federal Trade Commission’s (“FTC”) policy on “light” cigarette advertising and sales.  Altria Group, Inc., et al. v. Good et al., --S.Ct.-- (Dec. 15, 2008).  The Supreme Court was a 5-4 decision, with Justice Stevens writing the majority opinion and Justice Thomas writing the dissent.

The case involves a group of plaintiffs from Maine who smoked “light” cigarettes for over 15 years that were manufactured by Philip Morris USA, Inc. and its parent company, Altria Group, Inc (collectively, the “cigarette manufacturers”).  The plaintiffs allege that the cigarette manufacturers violated the Maine Unfair Trade Practices Act, Me. Rev. Stat. Ann., Tit. 5, §207 (Supp. 2008), (“MUTPA”) by fraudulently advertising that “light” cigarettes delivered less tar and nicotine than regular brands, when such manufacturers knew that this representation was untrue.  The cigarette manufacturers deny this allegation, but also argued that the state law fraud claim, codified in the MUTPA, is expressly and impliedly preempted by the Labeling Act.  More specifically, the cigarette manufacturers contended that Congress did not intend to permit the enforcement of state fraud claims because allowing such claims would create non-uniform state warning requirements, and consequently, defeat the Labeling Act’s purpose.  In addition, the cigarette manufacturers argued that allowing state law fraud claims would interfere with a longstanding policy of the FTC in (1) promoting the development and consumption of low tar cigarettes and (2) encouraging consumers to rely on representations of tar and nicotine content based testing.

The District Court granted summary judgment for the cigarette manufacturers, holding that the state law MUTPA claim was preempted by the Labeling Act.  The First Circuit Court of Appeals reversed the District Court’s decision, ruling that state law fraud claims were not expressly or impliedly preempted by the Labeling Act.  The U.S. Supreme Court affirmed the decision of the Court of Appeals.

In the decision, the majority focused on a textual analysis of Section 5(b) of the Labeling Act, which 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.”  §1334(b).  Relying primarily on the decision in Cipollone v. Liggett Group, Inc., 505 U. S. 504 (1992), the Supreme Court explained that the phrase “based on smoking and health” should be narrowly construed to preempt only rules that explicitly mention “smoking” or “health,” in contrast to the broader interpretation of statutes including the phrases “relating to” or “having a connection with.”  Utilizing this narrow construction, the Supreme Court stated that since the MUTPA does not explicitly mention “smoking” or “health,” it is not a requirement or prohibition based on smoking or health.  Therefore, the MUTPA claim, and similar state law claims predicated on a duty not to deceive, are not preempted by the Labeling Act.

In addition, the Supreme Court addressed the cigarette manufacturers’ argument that the state law claim is impliedly preempted by the FTC’s policy on “light” cigarettes.  After analyzing various industry guidance and FTC decisions with respect to statements of tar and nicotine content, the Supreme Court found that the cigarette manufacturers’ characterization of the FTC’s policy of promoting “light” cigarettes was inaccurate.  Accordingly, the Supreme Court held that this was not a valid argument for preemption of state fraud claims.

The case now returns to the District Court where the plaintiffs will seek to prove that the cigarette manufacturers fraudulently advertised that “light” cigarettes delivered less tar and nicotine than regular brands.

For a full copy of the decision, please click here.