In re Tobacco Cases II

• Decision Date: 02 August 2007
• Docket Number: No. S129522.,S129522.
• Citation: 63 Cal.Rptr.3d 418,163 P.3d 106
• Court: California Supreme Court
• Parties: In re TOBACCO CASES II.

163 P.3d 106

63 Cal.Rptr.3d 418

In re TOBACCO CASES II.

No. S129522.

Supreme Court of California.

August 2, 2007.

Blumenthal & Markham, Norman B. Blumenthal, David R. Markham, Kyle R. Nordrehaug, La Jolla; Thorsnes, Bartolotta & McGuire, Vincent J. Bartolotta, Jr., John F. McGuire, Karen Frostrom, San Diego; Chavez & Gertler, Mark A. Chavez, Mill Valley; and Thomas E. Sharkey, San Diego, for Plaintiffs and Appellants.

Bill Lockyer and Edmund G. Brown, Jr., Attorneys General, William N. Brieger, Acting

Chief Assistant Attorney General, Tom Greene, Chief Assistant Attorney General, Dennis Eckhart, Albert Norman Shelden and Herschel T. Elkins, Assistant Attorneys General, Ronald Reiter, Seth E. Mermin and Alan Lieberman, Deputy Attorneys General, as Amici Curiae on behalf of Plaintiffs and Appellants.

Munger, Tolles & Olson, Gregory P. Stone, Daniel P. Collins, Los Angeles, Steven B. Weisburd, Anne M. Voigts; Seltzer Caplan McMahon Vitek, Gerald L. McMahon and Daniel E. Eaton, San Diego, for Defendant and Respondent Philip Morris USA Inc.

Gray Cary Ware & Freidenrich, DLA Piper Rudnick Gray Cary, DLA Piper US, William S. Boggs, Brian A. Foster, Brian A. Fogarty, San Diego; Shook Hardy & Bacon, Craig Gustafson and Gregory L. Fowler, for Defendant and Respondent Lorillard Tobacco Company.

Howard, Rice, Nemerovski, Canady, Falk & Rabkin, Dechert LLP, San Francisco, H. Joseph Escher III, Todd E. Thomson; Wright & L'Estrange, Robert C. Wright, San Diego; Jones, Day, Reavis & Pogue, Jones Day and William T. Plesec, for Defendants and Respondents R.J. Reynolds Tobacco Company.

Sedgwick Detert Moran & Arnold and Steve D. DiSaia, for Defendant and Respondent Brown & Williamson Tobacco Corporation.

Susan Liebeler; Daniel J. Popeo and Richard A. Stamp, for Washington Legal Foundation as Amicus Curiae on behalf of Defendants and Respondents.

Horvitz & Levy, Lisa Perochet, John A. Taylor, Jr., Jeremy B. Rosen, Encino; Cahill Gordon & Reindell, Floyd Abrams and Joel Kurtzberg, for Association of National Advertisers, Inc., American Advertising Federation and American Association of Advertising Agencies as Amici Curiae on behalf of Defendants and Respondents.

Hugh F. Young, Jr.; Gibson, Dunn & Crutcher, Theodore J. Boutrous, Jr., Gail E. Lees and William E. Thomson, Los Angeles, for The Product Liability Advisory Council, Inc., as Amicus Curiae on behalf of Defendants and Respondents.

Fred J. Hiestand, Sacramento, for The Civil Justice Association of California as Amicus Curiae on behalf of Defendants and Respondents.

KENNARD, J.

In Mangini v. R.J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 31 Cal.Rptr.2d 358, 875 P.2d 73 (Mangini), this court held that the Federal Cigarette Labeling and Advertising Act (FCLAA) (15 U.S.C. § 1331 et seq.), which regulates tobacco advertising, did not preempt a claim against tobacco companies under the state unfair competition law (Bus. & Prof.Code, § 17200 et seq.) for advertising cigarettes in a manner that encouraged minors to begin smoking. The main issue presented here is whether, as the Court of Appeal concluded, the United States Supreme Court's later decision in Lorillard Tobacco Co. v. Reilly (2001) 533 U.S. 525, 121 S.Ct. 2404, 150 L.Ed.2d 532 (Lorillard) is inconsistent with, and thus impliedly disapproved, Mangini. We agree with the Court of Appeal, and we are bound to accept the high court's decision in Lorillard as controlling authority. Accordingly, we will affirm the Court of Appeal's judgment.

I

In 1994, four years before this action was filed, the Attorney General of California joined with the attorneys general of the other 49 states in bringing an action against six tobacco companies, including Phillip Morris Incorporated (Phillip Morris), R.J. Reynolds Tobacco Company (R.J. Reynolds), Lorillard Tobacco Company (Lorillard), and Brown & Williamson Tobacco Corporation (Brown & Williamson). In November 1998, that action was resolved by a master settlement agreement under which the defendants agreed to pay the states a total of $206 billion and consented to an injunction barring them from "[t]aking any action, directly or indirectly, to target" minors in their advertising, promotion, or marketing of tobacco products.¹ (People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2004) 116 Cal.App.4th 1253, 1258-1259, 11 Cal.Rptr.3d 317.) The settlement agreement also enjoined the defendants from engaging in a number of specific advertising and promotion techniques, such as brand-name sponsorship of events with a significant youth audience. The defendants expressly waived any claims that any provision of the agreement violated state or federal Constitutions. (116 Cal.App.4th at p. 1266, fn. 10, 11 Cal.Rptr.3d 317.) The agreement provided that it settled claims only by the state attorneys general, so that individual plaintiffs retained the right to sue.

A month before the master settlement agreement was executed, plaintiffs Devin Daniels, Bryce Clements, Daimon Fullerton, Nicole Morrow, and Maren Sandler filed this class action against Phillip Morris, R.J. Reynolds, Lorillard, and Brown & Williamson on behalf of "all persons who as California resident minors (under 18 years of age) smoked one or more cigarettes in California between April 2, 1994, and December 31, 1999." (Daniels v. Phillip Morris Companies, Inc. (Super. Ct. San Diego County, 1998, No. 719446).) Plaintiffs' complaint, based in large part on the California Attorney General's complaint in the 1994 action, alleged that defendant tobacco companies' advertising and promotional activities intentionally targeted minors.

Specifically, plaintiffs alleged that defendants R.J. Reynolds and Phillip Morris conducted marketing studies to determine how best to induce teenagers ages 13 to 17 to begin smoking; that all defendants designed advertisements and marketing campaigns to appeal to minors; that these campaigns included placing advertisements near schools, near playgrounds, in video arcades, and in youth-oriented publications; that defendants sponsored sporting events and concerts that appealed to minors; and, finally, that defendants paid to have their products used in films that appealed to youth audiences. Plaintiffs alleged that other tobacco companies that did not target minors lost market shares to defendants.

Plaintiffs alleged that defendants' conduct violated the state unfair competition law, which authorizes civil suits for "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising" (Bus. & Prof.Code, § 17200), because the conduct encouraged or induced violation of Penal Code section 308, which prohibits the sale of tobacco to minors and the purchase and possession of tobacco by minors. Defendants' advertising campaigns, plaintiffs alleged, succeeded in inducing plaintiffs and all other members of the class to begin using defendants' cigarettes when plaintiffs were still minors; plaintiffs and the other class members became addicted to nicotine and are unable to stop smoking, spending substantial sums annually to buy cigarettes. In their second amended complaint, at issue here, plaintiffs seek restitution of defendants' profits from the sale of cigarettes to minors since April 2, 1994.

Other plaintiffs filed actions similar to the suit filed by plaintiffs here. The trial court ordered the case added to Judicial Council Coordination Proceeding No. 4042, entitled In re Tobacco Cases II, and it certified the class. In March 2002, defendants jointly moved for summary judgment on the ground that the FCLAA preempted the state law on which plaintiffs' complaint was based. Four days later, defendants jointly filed a second motion for summary judgment on the ground that defendants' advertising and marketing practices were protected speech under the First Amendment to the federal Constitution.

In support of their summary judgment motions, defendants filed declarations stating that their advertising appeals to adults as well as to minors, that defendants themselves do not sell cigarettes to consumers, and that defendants have fully complied with federal labeling requirements. In opposition, plaintiffs submitted declarations asserting that defendants' advertising and promotions deliberately targeted minors, and they attached copies of defendants' advertisements.

The trial court granted both of defendants' summary judgment motions and entered judgment for defendants. Plaintiffs appealed.

On the preemption issue, the Court of Appeal recognized that our decision in Mangini, supra, 7 Cal.4th 1057, 31 Cal.Rptr.2d 358, 875 P.2d 73, was directly on point. The Court of Appeal concluded, however, that Mangini had been superseded by the United States Supreme Court's decision in Lorillard, supra, 533 U.S. 525, 121 S.Ct. 2404, 150 L.Ed.2d 532. Relying on Lorillard, the Court of Appeal affirmed the summary judgment for defendants on the preemption issue, without deciding whether the federal Constitution's First Amendment established an independent ground for sustaining the summary judgment. We granted plaintiffs' petition for review.

II

A. Introduction

As we explained in Dowhal v. SmithKline Beecham Consumer Healthcare (2004) 32 Cal.4th 910, 12 Cal.Rptr.3d 262, 88 P.3d 1, the supremacy clause of article VI of the United States Constitution grants Congress the power to preempt state law. "[S]tate law that conflicts with federal law is `without effect.'" (Cipollone v. Liggett Group, Inc. (1992) 505 U.S. 504, 516, 112 S.Ct. 2608, 120 L.Ed.2d 407 (Cipollone), quoting Maryland v. Louisiana (1981) 451 U.S. 725, 746, 101 S.Ct. 2114, 68 L.Ed.2d 576.) It is well established that "[c]onsideration of issues arising under the Supremacy Clause `start[s] with the assumption that the historic police powers of the States [are] not to be superseded by . . . Federal Act unless that [is] the clear and manifest purpose of Congress,'" and also that "`"[t]he purpose of Congress is...