Appeals Court Upholds State’s Anti-Tobacco Ads

A federal appeals court Tuesday rejected a bid by R.J. Reynolds Tobacco Co., the No. 2 U.S. cigarette maker, to halt California advertisements criticizing the tobacco industry.

The U.S. 9th Circuit Court of Appeals in San Francisco said the ads, funded by a 1988 voter-approved initiative that imposes a 25-cent-per-pack tax on wholesale cigarette sales in California, do not restrict tobacco companies’ free-speech rights.

R.J. Reynolds, a unit of Reynolds American Inc., and Loews Corp.’s Lorillard Tobacco Co. sued California, saying the use of the tax to fund “anti-industry” ads violated the 1st Amendment and stigmatized tobacco companies. A judge dismissed the suit last year, saying the state may spend tax dollars to promote its policies as long as it doesn’t compel speech by its citizens.

“The tobacco companies have not been deprived of their freedom of expression,” the appeals court said in a 2-1 ruling.

Tom Dresslar, a spokesman for the California attorney general’s office, which represented the state in the case, said the ruling “affirms the legal principle that the government has wide latitude to use tax revenue to speak to the public about policies that have been approved by voters.”

Ellen Wallace, a spokeswoman at the Winston-Salem, N.C.-based maker of Camel and Salem cigarettes, said Reynolds lawyers were reviewing the ruling.

A Loews spokeswoman did not return calls.

Shares of Reynolds American rose $1.20 to $67.45 on the New York Stock Exchange.