High court lets Philip Morris victory stand
The U.S. Supreme Court refused Monday to revive a $10.1-billion award against Altria Group Inc.’s Philip Morris USA, rejecting an appeal from smokers who said they were misled about the health risks of “light” cigarettes.
The justices, without comment, left intact an Illinois Supreme Court decision that threw out the case against Philip Morris, the nation’s largest cigarette maker.
The award, which Philip Morris once said would bankrupt the company, was the third-largest trial judgment ever in a smoking case. Anti-smoking activists had hoped the verdict would be the first in a series of awards around the country against the industry over light cigarettes.
“It’s clearly the end of lights litigation in Illinois,” said David Adelman, a Morgan Stanley analyst who has an “overweight” rating on Altria. The rejection also will be “marginally helpful to the industry’s ongoing management of the other outstanding or potential lights cases.”
Shares of Altria fell 33 cents Monday to $83.42. The company said in a statement that it would seek return of a $6-billion note it placed in an escrow account during the appeal.
In overturning the award last year, the Illinois Supreme Court said smokers couldn’t invoke a state consumer protection law because the Federal Trade Commission had endorsed the “light” and “low tar” descriptions in settlements with other cigarette makers. Like many states, Illinois bars claims over actions “specifically authorized” by a government agency.
“The citizens of Illinois now have no effective recourse against Philip Morris for its fraud under Illinois deceptive-practice statutes,” the smokers argued in their appeal, filed in Washington.
Intervention by the Supreme Court might have complicated New York-based Altria’s plan to spin off its Kraft Foods unit. Altria Chief Executive Louis Camilleri said on Nov. 16 that the company was ready to split off the food unit, pointing to what he said was a waning risk of costly awards against the cigarette maker.
The Illinois court’s decision also blocked similar lawsuits in the state against Reynolds American Inc.’s R.J. Reynolds Tobacco and other cigarette makers.
The tobacco industry still faces a separate, nationwide class-action lawsuit on behalf of light-cigarette smokers in federal court in New York. That suit, which invokes federal racketeering law, also raises questions about the legal force of the FTC settlements.
The Illinois case was a class-action suit brought on behalf of an estimated 1.1 million smokers who bought Marlboro Lights or Cambridge Lights in the state over a 30-year period. The suit accused Philip Morris of designing its light cigarettes to maximize nicotine delivery to smokers while registering low nicotine levels on the machine tests required by the FTC.
Philip Morris urged the Supreme Court not to get involved in the Illinois case, saying the dispute concerned only the interpretation of a state statute, not a federal issue warranting high-court review.
“The Illinois legislature and Illinois courts are free to interpret that state-law provision in whatever manner they wish, without regard to federal law,” Philip Morris argued.
