Good v. Altria Group, Inc.

• Decision Date: 31 August 2007
• Docket Number: No. 06-1965.,06-1965.
• Citation: 501 F.3d 29
• Parties: Stephanie GOOD, Lori A. Spellman and Allain L. Thibodeau, individually and on behalf of all others similarly situated, Plaintiffs, Appellants, v. ALTRIA GROUP, INC., and Philip Morris USA Inc., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

501 F.3d 29

Stephanie GOOD, Lori A. Spellman and Allain L. Thibodeau, individually and on behalf of all others similarly situated, Plaintiffs, Appellants, v. ALTRIA GROUP, INC., and Philip Morris USA Inc., Defendants, Appellees.

No. 06-1965.

United States Court of Appeals, First Circuit.

Heard January 9, 2007.

Decided August 31, 2007.

Todd S. Heyman, with whom Thomas V. Urmy, Jr., Shapiro Haber & Urmy, LLP, Gerard V. Mantese, Mark C. Rossman, Mantese and Associates, P.C., Samuel W. Lanham and Cuddy & Lanham, were on brief, for appellants.

Kenneth J. Parsigian, with whom Goodwin Procter LLP, H. Peter Del Bianco, Jr., Lambert Coffin, Guy Miller Struve and Davis Polk & Wardwell, were on brief, for appellees.

Before HOWARD, Circuit Judge, SELYA, Senior Circuit Judge, and SHADUR,^* Senior District Judge.

HOWARD, Circuit Judge.

The plaintiffs appeal from the entry of summary judgment for the defendants, Philip Morris USA Inc. and its parent company (collectively, "Philip Morris"), on state-law claims based on the marketing of "Light" cigarettes.¹ The district court ruled that these claims were preempted by the Federal Cigarette Labeling and Advertising Act (the "FCLAA"), which provides 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." 15 U.S.C. § 1334(b) (1998). Because we find that the claims are not preempted, and because Philip Morris's alternative arguments for affirmance are also unavailing, we vacate the decision of the district court and remand for further proceedings.

I.

The plaintiffs, who say they have smoked Marlboro Lights for at least fifteen years, claim that Philip Morris has employed unfair and deceptive practices in "designing, manufacturing, promoting, marketing and selling Marlboro Lights and Cambridge Lights purporting to be `light' and having `Lowered Tar and Nicotine,' all while [it] knew those cigarettes would not deliver less tar or nicotine to the consumer."² These brands have rings of ventilation holes in their filters, causing air to mix with the smoke as the smoker draws on the cigarette. As a result, "Lights" register lower levels of tar and nicotine than their so-called "full-flavor" counterparts under a test known as the "Cambridge Filter Method." This test uses a machine to "smoke" a cigarette collecting the resulting tar and nicotine in a filter for weighing.

The plaintiffs allege that a person smoking "light" cigarettes, however, engages in unconscious behaviors that essentially negate the ventilation effect, such as taking more frequent, voluminous, or longer puffs, covering the air holes with the lips or the fingers, or smoking additional cigarettes. Due to such "compensation," which the plaintiffs attribute to the addictive nature of nicotine, they assert that a smoker consumes the same quantities of tar and nicotine from light cigarettes as from full-flavored ones. The plaintiffs explain that the relative levels of these substances bear on a reasonable consumer's decision on which cigarette to purchase because consumers understand that reducing the quantities of tar and nicotine in cigarettes reduces their adverse health effects. Thus, the plaintiffs allege that Philip Morris has misrepresented material facts by describing its "Lights" as such or as having "lower tar and nicotine," and that Philip Morris—which was aware of the "compensation" phenomenon before it began marketing its "Lights" brands—did so with the intent to deceive.

The plaintiffs claim that these misrepresentations amount to unfair or deceptive acts or practices in violation of the Maine Unfair Trade Practices Act.³ Me.Rev.Stat. Ann. tit. 5, § 207 (2002). This statute entitles any person who suffers a loss of money or property as a result of such acts or practices to sue for "actual damages, restitution and for . . . other equitable relief." Id. § 213(1). The plaintiffs have expressly disclaimed any "damages for personal injuries," but they do seek other relief, including the return of the sums they paid to purchase Marlboro Lights and Cambridge Lights, in addition to punitive damages and the attorneys' fees as authorized by the Act.⁴ The plaintiffs also seek to certify a class of all purchasers of Marlboro Lights or Cambridge Lights in Maine through November 2002.

In response to the plaintiffs' amended complaint, Philip Morris promptly moved for summary judgment. Philip Morris argued that the plaintiffs' claims were (1) expressly preempted by the FCLAA, (2) implicitly preempted by "the efforts of Congress and the [Federal Trade Commission] for 40 years to implement a national, uniform policy of informing the public about the health risks of smoking," and (3) for similar reasons, not cognizable under the Maine Unfair Trade Practices Act, which does not apply to "[t]ransactions or actions otherwise permitted under laws as administered by any regulatory board or officer acting under the statutory authority of the . . . United States." Me.Rev.Stat. Ann. tit. 5, § 208(1).

Each of these arguments relied to some degree on what Philip Morris described as "the FTC's comprehensive, nationwide program regulating the disclosure of tar and nicotine yields." In 1959, the then-seven major American cigarette manufacturers had agreed to delete all tar and nicotine claims from their advertising. The FTC subsequently advised them, however "that a factual statement of the tar and nicotine content (expressed in milligrams) of the mainstream smoke from a cigarette would not be in violation . . . of any of the provisions of law administered by [the FTC]," provided the statement was "supported by adequate records of tests conducted in accordance with the Cambridge Filter Method." Press Release, Fed. Trade Comm'n (Mar. 25, 1966). But this advice did not extend to "collateral representations (other than factual statements of tar and nicotine contents of cigarettes offered for sale to the public) . . . expressly or by implication, as to reduction or elimination of health hazards." Id.

Then, in 1967, the FTC itself began using the Cambridge Filter Method to test, inter alia, all cigarette "brands for which any tar or nicotine statement appears on the label or in the advertising . . . to determine the accuracy of such statement." 32 Fed.Reg. 11,178 (Aug. 1, 1967). Though the FTC understood at the time that this method could not "determine the amount of tar and nicotine inhaled by any human smoker," it was nevertheless adopted to produce results "based on a reasonable standardized method" which were "capable of being presented to the public in a manner that is readily understandable." Press Release, Fed. Trade Comm'n, FTC to Begin Cigarette Testing (Aug. 1, 1967). The FTC agreed to report the test results to Congress periodically in order to ensure their dissemination to the smoking public, and made the first such report in late 1967.

The FTC subsequently proposed a rule requiring cigarette manufacturers "to disclose, clearly and prominently, in all advertising[,] the tar and nicotine content of the advertised variety . . . based on the most recently published [FTC] test results." 35 Fed.Reg. 12,671 (Aug. 8, 1970). But the rulemaking process was suspended when a consortium of cigarette manufacturers, including Philip Morris, reached an agreement with the FTC on a "voluntary program" to like effect. Letter from Horace R. Kornegay, President, The Tobacco Institute, Inc., to Fed. Trade Comm'n (Dec. 17, 1970). By agreeing to the program, however, the manufacturers did not "admit that the failure affirmatively to disclose" the test results in their advertising "constitutes a violation of law," or even that the FTC had the authority to enact the proposed rule. Id. The FTC, for its part, took the position that it "retained the unconditional right to reschedule the . . . Rule proceeding and to take any other action relating to this subject at any time . . . ." 36 Fed.Reg. 784 (Jan. 16, 1971).

Since then, the FTC has neither resumed the rulemaking proceedings suspended by its agreement with the cigarette manufacturers, nor promulgated any formal rule requiring them to disclose the tar or nicotine content of their products. In 1987, the FTC stopped conducting its own tests of cigarettes. The testing continued, however, under the auspices of the Tobacco Institute Testing Laboratory, operated by the major American cigarette manufacturers.⁵ The manufacturers agreed to allow the FTC to monitor the lab's procedures, which included the use of the Cambridge Filter Method. The FTC has obtained the test results from the individual manufacturers through its compulsory process authority, see 15 U.S.C. § 46(b), and reported those results to Congress for each year through 1998.⁶

Based on this regime, Philip Morris characterized the lawsuit as "a challenge to the FTC's regulatory scheme," because "terms like `light' and `lowered tar' . . . convey precisely the same comparative information" as the tar and nicotine measurements derived from testing under the Cambridge Filter Method. The district court agreed, reasoning that

To respond to Plaintiffs' claims, Philip Morris would have to tell the public that the FTC Method test, though accurate in the laboratory, was inaccurate in real life, and that light cigarette smokers . . . infused greater amounts of nicotine and tar than the designation `Lights' and `Lowered Tar and Nicotine' would imply. But, this information, if conveyed through a form of advertising, would run head first into . . . the comprehensive federal scheme governing the advertising and promotion of cigarettes.

436 F.Supp.2d at 152 (internal quotation marks omitted). Finding the plaintiffs' claims thus "grounded on Philip Morris's `advertising or promotion of . . . cigarettes labeled in conformity with the provisions of' federal law...