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• FTC Releases Reports on Cigarette and Smokeless Tobacco Sales and Marketing Expenditures 

The amount spent on cigarette advertising and promotion by the five largest cigarette companies in the United States declined from $13.11 billion in 2005 to $12.49 billion in 2006, according to a report released today by the Federal Trade Commission. The largest spending category - spending on price discounts - fell from $9.78 billion in 2005 to $9.21 billion in 2006, but still accounted for nearly 74 percent of all marketing expenditures.

The number of cigarettes sold by those manufacturers to wholesalers and retailers declined from 2005 to 2006, while the number given away increased. Overall, the total number of cigarettes sold and given away declined from 354.6 billion in 2005 to 350.6 billion in 2006. A separate report on smokeless tobacco found that spending on advertising and promotion rose from $250.79 million in 2005 to $354.12 million in 2006. The dollar value of sales by the five largest manufacturers declined from $2.61 billion to $2.59 billion, and the number of pounds of smokeless tobacco sold declined from 116.2 million pounds to 115.82 million pounds.

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• USSC cigarette ruling has secondhand results in W.Va. 

If tobacco companies deceived smokers of "light" and "low tar" cigarettes, smokers can sue them under state consumer laws, the U. S. Supreme Court decided on Dec. 15.

Five Justices agreed that federal labeling laws do not pre-empt suits in state courts alleging that tobacco companies violated a duty not to deceive smokers.

In West Virginia, the decision allows Circuit Judge Arthur Recht of Wheeling to lift a stay he imposed on all tobacco suits in West Virginia.

Recht, who handles tobacco litigation by appointment of the Supreme Court of Appeals, imposed the stay while awaiting the decision.

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• Court rules against Altria on light cigarettes  

Tobacco firms can be sued under state law for deceptive advertising of "light" cigarettes, the U.S. Supreme Court ruled on Monday in a decision that could affect some 40 suits around the country seeking billions of dollars.

By a 5-4 vote, the high court ruled against Altria Group Inc.'s Philip Morris USA unit and held the Federal Cigarette Labeling and Advertising Act does not bar or preempt such state court lawsuits. . . .

Vice Fund portfolio manager Charles Norton said the ruling removed one defense used in cases involving light cigarettes, but does not signal a shift in tobacco litigation.

"In spite of today's ruling, I expect the future of (light cigarette) litigation to continue to move in the direction that it has in recent years, in favor of the industry," he said.

A related case is before a U.S. appeals court.

In October, a three-judge panel in Washington, D.C., heard arguments on whether a lower court erred in finding tobacco companies conspired to lie about the dangers of smoking.

Companies, including Philip Morris USA, were found to have violated federal racketeering laws in 2006 by a U.S. District judge, who ruled the firms could no longer use expressions such as "low tar" or light" in their cigarette marketing.

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• Light Cigarettes Makers May Be Sued, Court Rules  

Tobacco companies that marketed "light" cigarettes may be sued for fraud, the Supreme Court ruled on Monday in a 5-to-4 decision that will bolster dozens of lawsuits claiming billions of dollars in damages. . . .

Sixteen years ago, in a decision that produced no majority opinion, a four-justice plurality said the phrase "based on smoking and health" in the labeling law did not apply to pre-empt suits under state laws based on the "general duty not to make fraudulent statements." Justice John Paul Stevens, joined by three justices no longer on the court, wrote the plurality opinion in the case, Cipollone v. Liggett Group Inc. He conceded that the distinction he drew lacked "theoretical elegance."

Indeed, the lower courts have struggled to make sense of that fractured decision. At the argument of the Altria case in October, its lawyer, Theodore B. Olson, called the plurality opinion in Cipollone "baffling, confusing, litigation-generating."

Justice Stevens asked Mr. Olson whether the court would need to "reject the fraud analysis in Cipollone" for Altria to win. Mr. Olson said yes.

But Justice Stevens, writing for the majority on Monday, instead reaffirmed his plurality opinion in Cipollone and turned it into binding law. . . .

"It seems particularly inappropriate," Justice Stevens wrote, "to read a policy of authorization into the F.T.C's inaction" given tobacco companies' failure to tell the commission about studies concerning how "consumers of 'light' cigarettes actually inhale." . . .

Justice Thomas said that some kinds of fraud claims against cigarette makers may go forward, just not those concerning "smoking and health."

"Thus," he wrote, "if cigarette manufacturers were to falsely advertise their products as 'American-made' or 'the official cigarette of Major League Baseball,' state-law claims arising from that wrongful behavior would not be pre-empted."

Forbidding lawsuits based on health claims, Justice Thomas said, would not mean consumers lack protection, as tobacco marketing is subject to regulatory oversight.

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• Editorial - Big Loss for Big Tobacco  

The Supreme Court handed tobacco companies a major and well-deserved setback on Monday, saying smokers may proceed with lawsuits arguing that they were deceived by the marketing of "light" cigarettes.

The 5-to-4 ruling -- with Justice Anthony Kennedy casting his swing vote with the court's four most liberal members -- could do a great deal to rein in deceptive advertising by cigarette manufacturers. It was a welcome departure for a court that has been far too deferential to business. We hope it signals that the justices are moving toward a more balanced approach to business cases. . . .

In recent years, the Supreme Court has issued a series of rulings -- on everything from punitive damages to the criminal case against Enron's accounting firm -- that have made it harder for ordinary Americans to hold corporate wrongdoers accountable.

In these troubled economic times, as the nation is still trying to come to terms with the enormous damage done by the deregulation of the mortgage industry, the national mood is turning strongly toward greater regulation. It has often been observed that the Supreme Court has a tendency to follow the election returns, and it may have done so here. With this decision, the court might be indicating a greater appreciation that when companies do wrong, there needs to be a legal means of holding them accountable.

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• Editorial: Clearing a Legal Haze 

A smoke-and-mirrors legal approach failed the tobacco companies yesterday in their latest attempt to shield themselves from private lawsuits. . . .

It often makes sense to avoid a hodgepodge of state and local rules governing big business in favor of uniform federal strictures. In those cases, the federal government should have exclusive jurisdiction in crafting and regulating the rules. But the tobacco companies in this case tried to stretch the federal Labeling Act to cover much more than Congress intended. They did so in an attempt to shield companies from lawsuits that even the FTC endorsed as a legitimate vehicle for the protection of consumers. The FTC and five justices came to the conclusion that tobacco companies can and should be held accountable if they deceptively advertised their products. The tobacco companies would be smart to finally come to grips with that.

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• Altria Case Deals Blow to Efforts Reining In Lawsuits 

The Supreme Court ruled that consumers can sue Altria Group Inc.'s Philip Morris USA unit under state unfair-trade laws for its advertising of "light" cigarettes, striking a blow against a broad effort by U.S. corporations to limit their exposure to suits filed under state law.

The 5-4 ruling rejected Altria's claim that federal cigarette-labeling laws, which bar states from imposing their own health warnings on cigarette packages, pre-empt consumer lawsuits.

The suit, filed under the Maine Unfair Trade Practices Law, alleges that Altria misled consumers into believing that light cigarettes, which contain less tar than regular varieties, were less dangerous to smoke. The suit says the companies knew smokers typically make up the difference in tar by taking longer or deeper puffs.

Similar suits are pending in other states, exposing the tobacco industry to a new avenue of attack by smoking opponents. . . .

Justice John Paul Stevens, writing for a five-justice majority that included three other members of the court's liberal wing plus Justice Anthony Kennedy, said Maine's antifraud statute complements federal regulatory goals, rather than interfering with them.

He said the Federal Trade Commission "has long depended on cooperative state regulation to achieve its mission because, although one of the smallest administrative agencies, it is charged with policing an enormous amount of activity."

Justice Clarence Thomas, in dissent, said the majority's ruling defeats an "express congressional purpose, opening the door to an untold number of deceptive-practices lawsuits across the country." . . .

For Justice Stevens, the Altria ruling vindicates an opinion he delivered in a cigarette case 16 years ago. In Cipollone v. Liggett Group, Justice Stevens, citing a general presumption against pre-empting state laws unless necessary, upheld portions of a lawsuit . . .

Mr. Obama has said regulatory failures contributed to the nation's economic crisis. A Democratic administration is likely to view state action as complementing federal efforts to police markets, enforce environmental laws or promote workplace safety.

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• Smokers can sue over 'light cigarettes': US Supreme Court 

The US Supreme Court on Monday ruled that smokers can sue Altria and other tobacco companies for allegedly deceptive marketing of "light" or "low tar" cigarettes.

The high court said such lawsuits are allowed under federal law in a 5-4 decision that will add weight to massive claims filed by ex-smokers against Altria, whose Philip Morris unit is best known for Marlboro cigarettes, and other big tobacco producers.

The case involved three residents of the northeast state of Maine who puffed on Marlboro Lights and Cambridge Lights for 15 years and had argued they had a right under state law to sue the companies for allegedly deceiving smokers that light cigarettes were healthier.

Altria had countered the lawsuit was pre-empted by federal law and interfered with the regulatory authority of the US Federal Trade Commission (FTC).

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• FTC Rescinds Guidance from 1966 on Statements Concerning Tar and Nicotine Yields 

t the test method is sufficiently flawed to make statements of tar and nicotine yields as measured by the method unlikely to help consumers make informed decisions. Thus, the underlying premise of the 1966 guidance is no longer valid.

In addition, the Commission believes the statements of tar and nicotine yields as measured by this test method are confusing at best, and are likely to mislead consumers who believe they will get proportionately less tar and nicotine from lower-rated cigarettes than from higher-rated brands. The Commission will not allow its stamp of approval on a test method that is confusing or misleading to consumers.

The Commission vote to rescind the guidance was 4-0, with Commissioners Pamela Jones Harbour and Jon Leibowitz issuing separate concurring statements. In her statement, Commissioner Harbour wrote, "Now that the FTC has removed its apparent imprimatur from the testing method, I urge the scientific community to redouble its efforts. Scientists must develop a test that provides consumers with a meaningful measure of the tar and nicotine yields of the cigarettes they smoke. More importantly, I urge the next Congress to reintroduce S. 625, the Family Smoking Prevention and Tobacco Control Act."

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• FTC dumps test on cigarette tar, nicotine  

Cigarette makers will no longer be able to use government guidance from 1966 to argue that U.S. authorities view cigarettes with less tar and nicotine as safer.

The Federal Trade Commission said on Wednesday it voted 4-0 to rescind its guidance which had allowed tobacco companies to put tar and nicotine figures on cigarette packages derived from the Cambridge Filter Method.

The agency said the numbers were misleading because smokers tend to inhale more deeply when they smoke cigarettes with less tar and nicotine.

"The commission believes the statements of tar and nicotine yields as measured by this test method are confusing at best, and are likely to mislead consumers," it said in its Federal Register notice.

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The commission believes the statements of tar and nicotine yields as measured by this test method are confusing at best, and are likely to mislead consumers.
FTC, in its Federal Register Notice rescinding its Cambridge Test-based tar/nicotine guidleines.

• Smoke Rings / How to fight big tobacco without ever talking about the health risks of smoking. 

Federal pre-emption law stomps around in big boots. Whereas the states-rights "revolution" once celebrated the ingenuity of the various states when it came to working out complex legal problems, federal pre-emption doctrine strives for "national regulatory uniformity" and the consistency of clear federal laws. Thus, if Congress wants to, it may pre-empt or block state lawsuits in areas into which it plants its federal flag. The Roberts Court has been feeling all kinds of love for federal pre-emption lately, which is why Philip Morris is feeling giddy at the prospect of using it to deliver a "knockout blow" . . .

The facts don't look great for the smokers. Altria, Philip Morris' parent company, points to a 1965 statute, the Federal Cigarette Labeling and Advertising Act, which explicitly says that "no requirement or prohibition based on smoking and health shall be imposed under State law with respect to the advertising or promotion of any cigarettes." In other words, states can't go after cigarette companies for misleading ads connecting smoking and health. You can always mouth the word cancer, but if you say it aloud, federal pre-emption kicks in, and your lawsuit evaporates. For their part, the smokers contend that this case has nothing to do with advertising pertaining to "smoking and health." They just want to sue big tobacco for being big fat liars.

Former Solicitor General Ted Olson, representing Altria, points out that the Maine lawsuit is completely obsessed with "smoking and health" and is an obvious candidate for federal pre-emption. . . .

Everyone gets gotcha-ed at least once this morning. Justice John Paul Stevens nabs Olson for citing an Illinois case in which it turns out there was no federal pre-emption. The chief justice triumphantly gets Frederick to admit he misspoke when asserting that the smokers hadn't sought injunctive relief in this case. Then Olson has to explain in his rebuttal that he hadn't exactly abandoned the implied pre-emption argument; he just had better things to do. And when all the smoke clears, it looks to be another good day for big tobacco and another bad day for the folks harmed by it. Big tobacco blames the FTC for its deceptive claims. The FTC blames big tobacco for its deceptive claims. And the Marlboro Man tips his hat and rides off into the sunset.

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• ALTRIA v. GOOD ORAL ARGUMENT 

JUSTICE KENNEDY: Would you accept that amendment to your complaint, that the plaintiff does not seek any damages based on some link between smoking and health?

MR. FREDERICK: I think we would accept that, Justice Kennedy.

JUSTICE SOUTER: How can you accept that and then expect to prove damages in the case? You can accept it to this extent, it seems to me. You can accept it in saying that what we are going to prove at step number one is that it is false to indicate that smoking light cigarettes will result in the ingestion of less tar and nicotine; and we know why you're saying that. But in order to prove damages in your case, you would have to say: People get hurt because there is a relationship between the ingestion of tar and nicotine and their health; and the same cause -- the same causal connection is therefore appropriate for -- for -- is therefore necessary in order to prove that people were hurt.

MR. FREDERICK: In fact in our case we are not proving health-related damages.

JUSTICE SOUTER: No, but you're asking for injunctive relief, I guess.

MR. FREDERICK: No, we are not asking for injunctive relief. We are asking damages for the difference in value between a product we thought we were buying and a product we actually bought.

JUSTICE SOUTER: And the reason -- and the reason the product is of different value is that in fact it is dangerous to health, as opposed to -- or more dangerous or equally dangerous to health as opposed to less dangerous to health; so that at the causation stage you've still got to prove the link between causation and health.

MR. FREDERICK: I don't think so, Justice Souter. I think all we have to prove is that the products were different and that we relied materially on a misrepresentation about what product to use. . . .

JUSTICE SOUTER: What would the harm be, sort of aesthetic?

MR. FREDERICK: If we bought a product thinking that it would be a safer product and it was not, and we would have quit smoking.

JUSTICE SOUTER: If they are healthy as horses, you have no proof that it is not.

MR. FREDERICK: We're -- yes, we do, because the product is different. If you buy a car thinking it's a Ford and it's a Yugo but it still drives, you still have a claim under the lemon laws for deceptive advertising.

JUSTICE SCALIA: But what if Yugos and Fords are worth the same amount of money? . . .

JUSTICE SOUTER: And all I'm saying is what we have here is, you say, a clear preemption provision. But we also have a clear regulatory regime which is at odds with that preemption provision, and presumably we've got to give some effect to that, too.

MR. OLSON: Well, the -- the statute deals with this to a degree in section 1336 by saving certain responsibilities. But I think the more powerful answer is that the background principle, the Federal Trade Commission Act and Federal and State Trade -- Fair Practices Act, are a part of a national scheme just exactly as you said. It's a background --

JUSTICE SOUTER: Well, it's part of a national scheme, but in practical terms you can say that on any subject matter that the FTC regulates. And, nonetheless, the complementary State regimes of -- of regulating deception survive. So that the argument you are making here is an argument that can be made, I suppose, on every subject that the FTC touches.

MR. OLSON: Well, no. As a matter of fact, I could not disagree more, Justice Souter. That's the general background scheme. Then Congress specifically addresses smoking and health in the advertising of cigarettes. . . .

JUSTICE ALITO: Was there a different between saying "light" and saying "lower in tar" in accordance with the Cambridge testing method?

MR. HALLWARD-DRIEMEIER: Yes, Your Honor, because the -- the "light," on its own, much more conveys the impression to the consumer that this is the yield to the consumer himself, the actual human smoker, and in fact that was why the

JUSTICE ALITO: The FTC's position seems to me incomprehensible. If these figures are meaningless, then you should have prohibited them -- are misleading, you should have prohibited them a long time ago. And you've created this whole problem by, I think, passively approving the placement of these figures on the -- on -- in the advertisements. And if they are misleading, then you have misled everybody who's bought those cigarette for a long time. . . .

MR. HALLWARD-DRIEMEIER: . . . Beginning in 1983, when in light of the Barclay's case in which it was determined that a particular cigarette, the yield according to the test method had nothing to do with yield to an actual consumer, the FTC started to inquire about this. But the Petitioners, although they have known since 1967 about the incidence of compensation, failed to disclose that information to the Commission. They have failed to -- they have refused to give them the benefit of their insights, their own studies. The Commission has asked --

JUSTICE SCALIA: The Commission -- when did the Commission know of this stuff? I had a case when I was on the Court of Appeals, so it had to be before 1984 involving so-called lip drape --

MR. HALLWARD-DRIEMEIER: You're right.

JUSTICE SCALIA: -- by which the smoker covers up the little holes that bring in some fresh air.

MR. HALLWARD-DRIEMEIER: In 1978 --

JUSTICE SCALIA: It's been general knowledge for a long time, and the FTC has done nothing about it. . . .

JUSTICE SCALIA: Can I ask a question? I plan to go back and see what the Government said in the -- in the case that Petitioner asserts you have effectively supported his position on -- on express pre-emption. I plan to go back and read it. Assuming I agree with him rather than you, has the government's position changed from what it was then? As far as you know, is the government's position still the same, the position that you delicately did not bring to our attention?

JUSTICE GINSBURG: This is in the Reilly case.

MR. HALLWARD-DRIEMEIER: The Reilly case.

JUSTICE SCALIA: Yes. In Reilly. I haven't read the brief there, I must say. But suppose I agree with Petitioner. Can I assume --

MR. HALLWARD-DRIEMEIER: Of course -- JUSTICE SCALIA: And do you assume that it's --

MR. HALLWARD-DRIEMEIER: The position of the United States as stated in the Reilly case was that the express guarantee provision did not pre-empt a regulation of the nature in that case. It was our position that that, because it was --

JUSTICE SCALIA: No, I'm not asking about -- I'll figure that out on my own. Trust me. I can probably figure that out. But once I have figured it out, can I assume that that is still the government's position --

MR. HALLWARD-DRIEMEIER: Well, I --

JUSTICE SCALIA: -- whatever it is?

MR. HALLWARD-DRIEMEIER: Well, I would think that we would need to revisit the question in light of this Court's holding in Reilly, in light of the additional precedents that there have been over the last decade or whatever it's been since that decision was issued. So --

JUSTICE SCALIA: You have no idea which direction that would lead?

MR. HALLWARD-DRIEMEIER: We have not taken a position on the first -- on the bottom line of the first question presented. Although as I say --

JUSTICE SCALIA: I'm going to hold you to your last position, just -- just for fun.

(Laughter.)

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• Justices Question `Lights' Suits: U.S. Supreme Court Overview 

U.S. Supreme Court justices questioned whether smokers can sue over the marketing of ``light'' cigarettes as the court heard a case that may shield tobacco companies from lawsuits seeking billions of dollars.

In the first argument of the high court's 2008-09 term, the lawyer for a group of Maine smokers contended the state's consumer protection law lets them pursue a claim that Altria Group Inc.'s Philip Morris USA unit fraudulently advertised light cigarettes as safer. The company says federal cigarette labeling laws from the 1960s bar the lawsuit.

A Philip Morris victory would blunt perhaps the most significant legal hazard facing the tobacco industry. The Supreme Court's decision, later this year or next, could block as many as 40 similar lawsuits that seek billions of dollars from Philip Morris, Reynolds American Inc.'s R.J. Reynolds Tobacco and other cigarette makers.

``If I take away from your oral argument that it is your position that this suit is not based on a link between smoking and health, I'm going to have difficulty in accepting your position in this entire case,'' Justice Anthony Kennedy told the smokers' attorney, echoing skeptical questions from Justices David Souter and Antonin Scalia.

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• Analysis: A rough day for the FTC 

A hearing on claims of deception by cigarette companies in their advertising of “light” cigarettes led Monday to strongly worded complaints by Supreme Court Justices that, if consumers were misled, it was partly — maybe even mainly — the government’s fault. Justices Samuel A. Alito, Jr., and Antonin Scalia suggested that the Federal Trade Commission had known for years that those ads were founded on flawed claims, and did little or nothing about it. The comments came as the Court opened its new Term with the hearing in Altria Group, et al., v. Good, et al. (07-562).

Justice Alito was the most blunt: “You,” meaning the FTC, ”created this whole problem,” he remarked to a lawyer for the FTC. “You have misled everyone who has bought these cigarettes for a long time.” The lawyer speaking for the Commission and the Justice Department, Assistant to the Solicitor General Douglas Hallward-Dreimeier, tried to put the onus back on the tobacco industry, saying the companies knew as early as 1967 that its claims of low tar and nicotine in “light” smokes were not valid, yet failed to tell the FTC.

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• Altria Seeks `Knockout Blow' in Supreme Court `Lights' Case  

For the tobacco industry, the new U.S. Supreme Court term has the look of a blockbuster.

The court opens its 2008-09 term today with the first of two arguments involving Altria Group Inc.'s Philip Morris USA unit. The justices will consider whether smokers can sue over the marketing of ``light'' cigarettes. Later on, they will revisit a $79.5 million award to a smoker, hearing a Philip Morris appeal in that case for a second time.

A Philip Morris victory in the lights case would blunt perhaps the most significant legal hazard for the tobacco industry. The high court's decision, later this year or next, could block as many as 40 similar lawsuits that seek billions of dollars from Philip Morris, Reynolds American Inc.'s R.J. Reynolds Tobacco and other cigarette makers.

``The big litigation threat against the industry these days are these light-cigarette cases,'' said David Vladeck, a law professor at Georgetown University in Washington who filed a brief supporting the smokers in the case. ``So the industry is hoping they'll get rid of them in one fell swoop.''

Morgan Stanley tobacco analyst David Adelman said in a Sept. 29 report that he expects the Supreme Court to ``provide a final knockout blow to lights litigation.'' . . .

Philip Morris says the administration's stance is a self- serving effort to bolster the Justice Department's own tobacco suit, which accuses cigarette makers of violating a federal racketeering law by marketing low-tar cigarettes as safer alternatives. A federal appeals court in Washington will consider the industry's appeal in that case later this month.

Both sides in the lights case claim support from several former FTC commissioners. The smokers also have backing from the American Medical Association and 47 states and the District of Columbia. The U.S. Chamber of Commerce and the National Association of Manufacturers are among those that filed briefs on Altria's side of the case.

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