Mulford v. Altria Group, Inc.

• Decision Date: 16 March 2007
• Docket Number: No. CIV.05 659 MV/RHS.,CIV.05 659 MV/RHS.
• Citation: 506 F.Supp.2d 733
• Parties: Harrison MULFORD III, Rhonda Newby, Cory Fox, and Richard DeLuna, on behalf of themselves and all others similarly situated, Plaintiffs, v. ALTRIA GROUP, INC., and Philip Morris, USA, Inc, Defendants.
• Court: U.S. District Court — District of New Mexico

506 F.Supp.2d 733

Harrison MULFORD III, Rhonda Newby, Cory Fox, and Richard DeLuna, on behalf of themselves and all others similarly situated, Plaintiffs, v. ALTRIA GROUP, INC., and Philip Morris, USA, Inc, Defendants.

No. CIV.05 659 MV/RHS.

United States District Court, D. New Mexico.

March 16, 2007.

Gerard V. Mantese, Mark Rossman, William S. Ferguson, for Plaintiffs.

Andrew G. Schultz, Gregory P. Stone, Martin D. Bern, for Defendant Philip Morris USA Inc.

MEMORANDUM OPINION AND ORDER

VAZQUEZ, District Judge.

On May 5, 2006, Defendant Philip Morris USA, Inc. ("Philip Morris") filed a Motion for Summary Judgment Based on Federal Preemption under FCLAA's Express Preemption Provision, 15 U.S.C. § 1334(b), (Doc. No. 58) (hereinafter "Express Preemption Motion") and a Motion for Summary Judgment based on N.M. Stat. Ann. § 57-12-7 and Implied Federal Preemption (Doc. No. 53) (hereinafter "Implied Preemption Motion"). The Court, having reviewed the briefs and arguments of the parties, the relevant law, and otherwise being fully advised, finds that Defendant's Express Preemption Motion should be granted as to Plaintiffs' claim based on a theory of fraudulent concealment, failure to warn, and warning neutralization and denied as to Plaintiffs' claim based on a theory of fraudulent misrepresentation and that Defendant's Implied Preemption Motion should be denied.

I. INTRODUCTION

Plaintiffs are smokers who purchased Marlboro Lights and Cambridge Lights brands of cigarettes in New Mexico. Plaintiffs have brought a class action suit against Defendants Philip Morris and Altria Group, Inc., who they allege manufactured, "lowered tar" or "Lights" filtered cigarettes under the brand names "Cambridge Lights" and "Marlboro Lights" Plaintiffs allege that Defendants violated the New Mexico Unfair Trade Practices Act ("UPA"), NMSA § 57-12-1 et seq., by deceptively marketing the cigarettes as "Light" and as being "Lowered in Tar and Nicotine." Plaintiffs also allege that Defendants deceptively designed the "Light" cigarettes to register lower levels of tar and nicotine when tested by the Federal Trade Commission ("FTC") testing method than would actually be delivered to consumers of the product. Plaintiffs assert that Defendants fraudulently concealed the fact that the cigarettes are not light or lower in tar and nicotine than regular cigarettes, that people do not smoke like the testing machine, and that smokers compensate when smoking "Light" cigarettes in a way that causes them to get more tar and nicotine than predicted by the machine. Plaintiffs contend that they were economically damaged by Defendants' deceptive practices when they purchased Cambridge Lights and/or Marlboro Lights cigarettes and did not receive "light" or "lowered tar and nicotine" cigarettes.

Defendant Philip Morris argues that Plaintiffs' claim under the UPA must be dismissed because it is expressly preempted by the preemption clause of the Federal Cigarette Labeling and Advertising Act ("FCLAA"), 15 U.S.C. §§ 1331 et seq. Philip Morris, in a separate motion, also argues that Plaintiffs' UPA claim must be dismissed because it is preempted under principles of implied conflict preemption and because Philip Morris' actions were exempt from liability under the UPA, as they were "expressly permitted" by the FTC.

II. BACKGROUND

The following facts are either undisputed or are construed in the light most favorable to Plaintiffs.

A. History of FTC and Congressional Action in the Cigarette Industry¹

The Federal Trade Commission Act ("FTC Act") empowers the FTC to regulate "unfair or deceptive acts or practices in or affecting commerce." 15 U.S.C. § 45(a)(2). This authority includes the regulation of unfair and deceptive tobacco and cigarette advertisements. Watson v. Philip Morris Companies, Inc., 420 F.3d 852, 855 (8th Cir.2005).

In the 1950s, the scientific community began to publish the results of studies demonstrating a link between cigarette smoking and lung cancer. Miller Aff. ¶ 70 & Def.'s Ex. 68. The cigarette industry responded by creating and marketing filtered cigarettes and "lower tar and nicotine" cigarettes. Miller Aff. ¶ 70. In September 1955, the FTC adopted the Cigarette Advertising Guides, which allowed cigarette manufacturers to make claims regarding tar and nicotine levels, but only if they could substantiate their claims "by competent scientific proof." Miller Aff. ¶ 73 & Def.'s Ex. 68 at 299 & Ex. 70; Price v. Philip Morris, Inc., 219 Ill.2d 182, 302 Ill.Dec. 1, 848 N.E.2d 1, 7 (2005). By 1957, the FTC obtained voluntary discontinuance of 75 advertising claims it found objectionable without having to institute formal proceedings. Miller Aff. ¶ 74 & Def.'s Ex. 68 at 278.

Nevertheless, because of the absence of uniform testing, the FTC found the tar and nicotine claims in advertisements misleading and confusing. See Miller Aff. ¶ 76 & Def.'s Ex. 74 at 1. In 1959, the FTC issued an industry-wide advisory stating that "all representations of low or reduced tar or nicotine, whether by filtration or otherwise, will be construed as health claims." Def.'s Ex. 75; Price, 302 Ill.Dec. 1, 848 N.E.2d at 7. The stated purpose for the change was "to eliminate from cigarette advertising representations which in any way imply health benefit." Def.'s Ex. 75; Price, 302 Ill.Dec. 1, 848 N.E.2d at 7. The advisory also noted that any nonconforming advertisements would be forwarded to other Bureaus looking forward to mandatory procedures. Def.'s Ex. 75. After issuance of the advisory, seven major cigarette manufacturers agreed to delete all tar and nicotine claims from their advisements. Miller Aff. 1178 & Def.'s Ex. 80 at 82. Thus, the advisory, in effect, banned advertising regarding tar and nicotine levels. See id.; Def.'s Ex. 79 at 1; Price, 302 Ill.Dec. 1, 848 N.E.2d at 7.

On December 11, 1959, the FTC filed a complaint against Brown & Williamson Tobacco Corporation, which alleged that the company's advertisements violated the FTC Act by representing that the cigarette's filter absorbs more tar and nicotine than filters used in other cigarettes. Miller Aff. ¶ 79 & Def.'s Ex. 81 at 1. In February 1960, Brown & Williamson Tobacco Corporation entered into a consent order to cease and desist making such representations. Id.

On January 11, 1964, the Surgeon General's Advisory Committee on Smoking and Health released a report that concluded: "Cigarette smoking is a health hazard of sufficient importance in the United States to warrant appropriate remedial action." Miller Aff. ¶ 83 & Def.'s Ex. 86 at 33. In response to this report, the FTC promulgated a new trade regulation rule, establishing that it would be a violation of the FTC Act to "fail to disclose, clearly and prominently, in all advertising and on every pack, box, carton or other container [of cigarettes] that cigarette smoking is dangerous to health and may cause death from cancer and other diseases." Cipollone v. Liggett Group, Inc., 505 U.S. 504, 513-14, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992) (citing 29 Fed.Reg. 8325 (1964)). The rule was to take effect on January 1, 1965. Id. Upon a congressional request, however, the FTC postponed enforcement of the regulation for six months. Cipollone, 505 U.S. at 513-14, 112 S.Ct. 2608. After Congress enacted the FCLAA, the FTC then vacated its regulation. Miller Aff. ¶ 89 & Def.'s Ex. 93; see also Price, 302 Ill.Dec. 1, 848 N.E.2d at 7-8.

In July 1965, Congress enacted the FCLAA, which mandated the following warning on cigarette packages: "Caution: Cigarette Smoking May Be Hazardous to Your Health." Pub.L. 89-92, § 4, 79 Stat. 283. The FCLAA provided that no other statement related to smoking and health could be required on cigarette packages, and that no warning at all relating to smoking and health was required for cigarette advertising. Pub.L. 89-92, § 5(a) and (b), 79 Stat. 283. The purpose of the FCLAA was to inform the public that smoking cigarettes may be hazardous to health and to ensure that commerce was not impeded by inconsistent regulations. Pub.L. 89-92, § 2, 79 Stat. 282. Section 5(c) of the Act expressly preserved "the authority of the Federal Trade Commission with respect to unfair or deceptive acts or practices in the advertising of cigarettes." Pub.L. 89-92, § 5(c), 79 Stat. 283.

In 1966, the FTC began to rethink its ban on truthful claims of tar and nicotine content of cigarettes on packages and in advertising based on the health community's view that consumers should be encouraged to expose themselves to lower levels of tar and nicotine, which it considered better for health. See Miller Aff. ¶ 92 & Def.'s Ex. 78 at 6-13. The FTC, however, was still concerned about the absence of a standard method to test tar and nicotine levels, which could lead to manufacturers publishing misleading figures in order to secure a competitive advantage. Def.'s Ex. 78 at 11-12; F.T.C. v. Brown & Williamson Tobacco Corp., 778 F.2d 35, 37 (D.C.Cir.1985).

In March 1966, the FTC announced its reversal of its ban on representations `of tar and nicotine yields in advertising. Miller Aff. ¶ 94 & Def.'s Ex. 78 at 6, Def.'s Ex. 105, and Def.'s Ex. 106. The FTC stated that it would not be a violation of law to make factual statements of tar and nicotine content, expressed in milligrams, of cigarettes so long as (1) no collateral representations are made to reduce or eliminate health hazards, and (2) the statement of tar and nicotine content is supported by tests conducted in accordance with the Cambridge Filter Method. Miller Aff. ¶ 94 & Def.'s Ex. 106.

In 1967, the FTC established a uniform test for analyzing tar and nicotine levels in cigarettes, known as the FTC Method or Cambridge Filter Method, and set up a laboratory to conduct the test itself. See Miller Aff. ¶ 17; Brown & Williamson, 778 F.2d at 36-37. The FTC Method used a smoking machine that takes a 35 milliliter puff on a cigarette for two seconds duration every 60 seconds until the...