Pearson v. Philip Morris, Inc.

• Decision Date: 19 June 2013
• Docket Number: A137297.,021111819
• Citation: 306 P.3d 665,257 Or.App. 106
• Parties: Marilyn C. PEARSON and Laura Grandin, individually and on behalf of all similarly situated persons, Plaintiffs–Appellants, v. PHILIP MORRIS, INC., aka Philip Morris USA, Inc., a foreign corporation, Defendant–Respondent, and Philip Morris Companies, Inc., aka Altria Group, Inc., a foreign corporation, Defendant.
• Court: Oregon Court of Appeals

257 Or.App. 106

306 P.3d 665

Marilyn C. PEARSON and Laura Grandin, individually and on behalf of all similarly situated persons, Plaintiffs–Appellants,

v. PHILIP MORRIS, INC., aka Philip Morris USA, Inc., a foreign corporation, Defendant–Respondent,andPhilip Morris Companies, Inc., aka Altria Group, Inc., a foreign corporation, Defendant.

021111819; A137297.

Court of Appeals of Oregon, In Banc.

Argued and Submitted April 09, 2010.

Resubmitted En Banc June 05, 2013.

Decided June 19, 2013.

Scott A. Shorr, Portland, argued the cause for appellants. With him on the briefs were Stoll Stoll Berne Lokting & Schlachter P.C., and Charles S. Tauman and Charles S. Tauman PC.

William F. Gary, Eugene, argued the cause for respondent. With him on the brief were Sharon A. Rudnick and Harrang Long Gary Rudnick P.C.

Before HASELTON, Chief Judge, and ARMSTRONG, WOLLHEIM, SCHUMAN, ORTEGA, SERCOMBE, DUNCAN, NAKAMOTO, HADLOCK, and EGAN, Judges.

ARMSTRONG, J.

Plaintiffs, who purchased Marlboro Lights cigarettes manufactured by defendant,¹ brought this action against defendant under the Oregon Unlawful Trade Practices Act (UTPA), ORS 646.605 to 646.652. Plaintiffs alleged that defendant had violated the UTPA by misrepresenting the characteristics of Marlboro Lights and that, as a result of defendant's misrepresentations, they had suffered economic losses.

Plaintiffs filed a motion asking the trial court to certify the action as a class action, with a class consisting of the approximately 100,000 people who had purchased Marlboro Lights in Oregon from the time in 1971 that Marlboro Lights were introduced until 2001. As an alternative to class certification of the entire action, plaintiffs asked the trial court to certify a class to litigate common issues in the case.

In order for an action to be certified as a class action, the class action must be “superior to other available methods for the fair and efficient adjudication of the controversy.” ORCP 32 B. One factor courts are to consider when determining whether a class action would be superior to other available methods to adjudicate a controversy is “the extent to which questions of law or fact common to the members of the class predominate over any questions affecting only individual members.” ORCP 32 B(3).

The trial court denied plaintiffs' motion for class certification and their alternative motion for certification of an issue class. The court did so because it concluded that whether plaintiffs and the other putative class members had suffered ascertainable losses and, if so, whether those losses had resulted from defendant's representations were questions that could not be resolved based on evidence common to the class and, therefore, common questions did not predominate over individual ones and a class action would not be superior to individual trials.

After the trial court denied plaintiffs' certification motions, defendant moved for summary judgment on plaintiffs' individual claims, asserting, among other things, that they were preempted by federal law. The trial court agreed that the claims were preempted by federal law, granted summary judgment for defendant, and entered a judgment dismissing plaintiffs' claims.

On appeal, we conclude that the trial court erred in granting defendant's motion for summary judgment on plaintiffs' individual claims and in denying plaintiffs' motion for class certification. We also conclude that the trial court's denial of plaintiffs' alternative motion for certification of an issue class was based on the erroneous conclusion that litigation of each of the three elements of plaintiffs' claims—an unlawful trade practice, causation, and damages—would involve individual inquiries of all the putative class members. Therefore, we reverse and remand.

I. STANDARDS OF REVIEW

Whether a claim is preempted by federal law presents a legal question, which we review for legal error. See Willis v. Winters, 350 Or. 299, 309, 253 P.3d 1058 (2011) (applying standard). Whether, for purposes of class certification, a question is a common or individual one and whether common questions predominate are legal questions, which we decide anew, based on the record before the trial court and the trial court's findings, if any. Bernard v. First Nat'l Bank, 275 Or. 145, 154, 550 P.2d 1203 (1976). Whether a class action would be superior to other methods of adjudication is a matter of judicial administration, which we review for abuse of discretion. Newman v. Tualatin Development Co., Inc., 287 Or. 47, 51, 597 P.2d 800 (1979); Joachim v. Crater Lake Lodge, Inc., 48 Or.App. 379, 393, 617 P.2d 632,rev. den., 290 Or. 211 (1980).

II. HISTORICAL AND PROCEDURAL FACTS

We begin with a description of the historical facts that gave rise to this action. We base our factual description on the trial court's letter opinion and the undisputed evidence in the record.² We then recount the procedural facts, describing plaintiffs' claims for relief, the parties' arguments and evidence on class certification, and the trial court's decision. We describe additional evidence later in our opinion as it becomes relevant to our analysis.

A. Factual Background

Scientific studies were published in the 1950s suggesting a link between cigarette smoking and lung cancer. More specifically, the studies suggested a link between tar and nicotine from cigarette smoke and lung cancer. Nicotine is an organic compound found in the leaves of tobacco plants. It is a stimulant and has addictive properties. Cigarette smokers ingest nicotine when they draw cigarette smoke into their mouths and lungs. Along with nicotine, they ingest tar, which is the collection of substances produced when tobacco is burned, apart from water, gases, and nicotine. A smoker's tar intake is closely correlated to the smoker's nicotine intake.

The studies linking tar and nicotine to lung cancer created consumer demand for cigarettes that would deliver less tar and nicotine. In response, cigarette manufacturers introduced filtered cigarettes. The manufacturers marketed filtered cigarettes as safer than unfiltered cigarettes, and the market share of filtered cigarettes rapidly increased.

In a related effort to appeal to smokers who were concerned about the health risks of smoking, cigarette manufacturers began to advertise the tar and nicotine yields of their cigarettes. However, there was no uniform method to measure those yields; each manufacturer employed its own method, which led to consumer confusion. In response, in 1959, the Federal Trade Commission (FTC) told manufacturers that it would construe representations about tar and nicotine yields to be implied health claims that were unsubstantiated, and manufacturers stopped making the representations.

In 1964, the Surgeon General issued the first Surgeon General's report on cigarette smoking and health, which significantly increased public awareness of the health risks of smoking. Around the same time, public health organizations, acting in response to scientific studies linking tar and nicotine to health risks, advocated for the reduction of tar and nicotine in cigarette smoke. For example, in 1966, at the invitation of the Surgeon General, a group of leading scientists met to review the “state of medical knowledge on the significance of the tar and nicotine contents of cigarettes” and unanimously adopted the following resolutions:

“(1) The preponderance of scientific evidence strongly suggests that the lower the ‘tar’ and nicotine content of cigarette smoke, the less harmful are the effects.

“(2) We recommend to the Surgeon General that actions be encouraged which will result in the progressive reduction of the ‘tar’ and nicotine content of cigarette smoke.”

112 Cong Rec 17,270 (1966) (statement of Sen Warren Magnuson). The following year, the FTC changed course and allowed cigarette manufacturers to make representations about tar and nicotine yields, provided that the representations were substantiated by results from a standardized test, which came to be known as the “FTC Method.” To be described as “low tar,” a cigarette had to have a tar yield of 15 milligrams or less as measured by the FTC Method.

The FTC Method of testing involves the use of a cigarette-smoking machine, and it is governed by FTC regulations that specify the depth to which the cigarette is inserted into the machine, the volume of air drawn through the cigarette with each puff, the number of puffs drawn per minute, and the amount of the cigarette that is burned.

In the late 1960s and early 1970s, cigarette manufacturers tested different ways to reduce smokers' tar and nicotine intake, including “ ‘puffing’ the tobacco to reduce the weight of tobacco in a cigarette, altering the blends of tobacco used and porosity of the paper wrapper, changing the density of the tobacco rod, using tobacco stems and reconstituted tobacco sheet, and using a wide variety of filter materials.” US Department of Health & Human Services, National Institutes of Health, National Cancer Center, Risks Associated with Smoking Cigarettes with Low Machine–Measured Yields of Tar and Nicotine, 69 (Oct 2001) (Monograph 13). At the same time, however, the manufacturers considered the possibility that developing cigarettes that would deliver less tar and nicotine could have adverse effects on their sales. For example, in a 1966 market analysis, defendant recognized the relationship between nicotine delivery and cigarette sales, stating:

“[A]ny health cigarette must compromise between health implications on the one hand and flavor and nicotine on the other * * * flavor and nicotine are both necessary to sell a cigarette. A cigarette that does not deliver nicotine cannot satisfy the habituated smoker and cannot lead to habituation, and would therefore almost certainly fail.”

Monograph 13 at 206 (quoting M.E. Johnston, Market Potential of a Health Cigarette, Special Report No. 248, Philip Morris, 5 (June 1966)) (alterations in Monograph...