Price ex rel. Situated v. Philip Morris, Inc.

• Decision Date: 29 April 2014
• Docket Number: No. 5–13–0017.,5–13–0017.
• Citation: 9 N.E.3d 599,2014 IL App (5th) 130017,380 Ill.Dec. 928
• Parties: Sharon PRICE and Michael Fruth, Individually and on Behalf of All Others Similarly Situated, Plaintiffs–Appellants, v. PHILIP MORRIS, INCORPORATED, Defendant–Appellee.
• Court: United States Appellate Court of Illinois

2014 IL App (5th) 130017

9 N.E.3d 599

380 Ill.Dec. 928

Sharon PRICE and Michael Fruth, Individually and on Behalf of All Others Similarly Situated, Plaintiffs–Appellants,

v.PHILIP MORRIS, INCORPORATED, Defendant–Appellee.

No. 5–13–0017.

Appellate Court of Illinois,

Fifth District.

April 29, 2014.

George A. Zelcs, Maximilian C. Gibbons, and Matthew C. Davies, all of Korein Tillery LLC, and Joseph A. Power, Jr., of Power Rogers & Smith, P.C., both of Chicago, Stephen M. Tillery and Robert L. King, both of Korein Tillery LLC, of St. Louis, Missouri, Nina Hunter Fields, of Richardson, Patrick, Westbrook & Brickman, LLC, of Mt. Pleasant, South Carolina, and Michael J. Brickman, of Richardson, Patrick, Westbrook & Brickman, LLC, of Charleston, South Carolina, for appellants.

George C. Lombardi, of Winston & Strawn LLP, Michele Odorizzi, of Mayer Brown LLP, and Kevin M. Forde, of Kevin M. Forde Ltd., all of Chicago, and Larry Hepler, of HeplerBroom, LLC, of Edwardsville, for appellee.

OPINION

Justice CHAPMAN delivered the judgment of the court, with opinion.

¶ 1 The plaintiffs appeal an order denying their petition for relief from judgment (735 ILCS 5/2–1401 (West 2006)). The petition was filed under an unusual set of procedural circumstances. The plaintiffs filed a lawsuit alleging that the defendant's use of the terms “light” and “low tar” in advertising its cigarettes constituted fraud. The plaintiffs prevailed at trial; however, the judgment was reversed on appeal on the basis of a statutory provision barring consumer fraud actions where the challenged conduct was specifically authorized by federal regulations (see 815 ILCS 505/10b(1) (West 2000)). Price v. Philip Morris, Inc., No. 5–09–0089, 2011 WL 722749 (Feb. 24, 2011)(unpublished order under Supreme Court Rule 23). The matter was remanded to the trial court with directions to dismiss the complaint. The plaintiffs subsequently filed a section 2–1401 of the Code of Civil Procedure (735 ILCS 5/2–1401 (West 2006)) petition for relief from judgment, alleging that (1) evidence unavailable to the plaintiffs at trial showed that the Federal Trade Commission never authorized use of the terms “light” and “low tar” by the defendant, and (2) had the plaintiffs been able to present this evidence at trial, the result on appeal would have been different. In ruling on the petition, the trial court found that the plaintiffs (1) had a meritorious claim, and (2) acted with due diligence both in attempting to present that claim at trial and in filing the section 2–1401 petition as soon as possible. However, the court further determined that it was “equally likely” that the supreme court would have reversed on other grounds had it ruled differently on the question of section 10b(1). In this appeal, the plaintiffs argue that the court impermissibly exceeded the scope of section 2–1401 review but ruled correctly on all other issues. We reverse.

¶ 2 The plaintiffs, Sharon Price and Michael Fruth, filed a class action law suit alleging that the defendant, Philip Morris, Inc., violated the Illinois Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (815 ILCS 505/1 to 12 (West 2000)) by advertising its cigarettes as “light” or “low tar.” The defendant raised 27 affirmative defenses, including an exclusion found in section 10b(1) of the Consumer Fraud Act. That statute provides that the Consumer Fraud Act is inapplicable to claims involving conduct that has been “specifically authorized” by any federal regulatory body. 815 ILCS 505/10b(1) (West 2000).

¶ 3 The defendant argued that section 10b(1) applied in this case because the Federal Trade Commission (FTC) specifically authorized use of the terms “light” and “low tar” in consent decrees entered in enforcement actions involving other cigarette manufacturers. In particular, the defendant pointed to a 1971 consent decree entered in an enforcement action against American Brands and a 1995 consent decree involving the American Tobacco Company. Both consent decrees permitted the manufacturers to use the terms in their advertising with certain conditions and limitations. At issue in this case was whether these consent decrees could be deemed regulatory activity. The defendant presented the testimony of an expert witness who stated that cigarette manufacturers relied on consent decrees to tell them what claims they could make in their advertising. The trial court rejected the defendant's contention, finding that “no regulatory body has ever required (or even specifically approved) the use of these terms by Philip Morris.”

¶ 4 On March 21, 2003, the court entered a $10.1 billion judgment in favor of the plaintiffs. On December 15, 2005, the Supreme Court of Illinois reversed that judgment, finding that section 10b(1) of the Consumer Fraud Act barred the plaintiffs' action. Price v. Philip Morris, Inc., 219 Ill.2d 182, 258, 302 Ill.Dec. 1, 848 N.E.2d 1, 46 (2005) ( Price I ). The supreme court found that Philip Morris's actions were specifically authorized by the FTC through a process of “informal regulatory activity,” including the use of consent decrees. Price I, 219 Ill.2d at 258, 302 Ill.Dec. 1, 848 N.E.2d at 46. The court thus found section 10b(1) applicable, reversed the judgment, and remanded the matter to the trial court with directions to dismiss the plaintiffs' complaint. Price I, 219 Ill.2d at 274, 302 Ill.Dec. 1, 848 N.E.2d at 55.

¶ 5 The plaintiffs filed a petition for rehearing, which the Illinois Supreme Court denied on May 20, 2006. They then filed a petition for a writ of certiorari with the United States Supreme Court. On November 27, 2006, the Court denied their petition and declined to hear the appeal. The mandate of the Illinois Supreme Court issued on December 5, 2006. Pursuant to that mandate, the trial court entered an order dismissing the plaintiffs' action with prejudice on December 18, 2006.

¶ 6 A key component of our Illinois Supreme Court's holding was its finding that the FTC itself intended its consent decrees “to provide guidance to the entire cigarette industry.” Price I, 219 Ill.2d at 258, 302 Ill.Dec. 1, 848 N.E.2d at 46. Subsequently, two statements issued by the FTC cast doubt on the factual accuracy of this finding. In June 2008, the FTC filed an amicus brief in an unrelated case before the United States Supreme Court. That brief indicated that the FTC never intended to authorize the use of these terms. Altria Group, Inc. v. Good, 555 U.S. 70, 87, 129 S.Ct. 538, 172 L.Ed.2d 398 (2008) (emphasizing that the federal government in its amicus brief “disavows any policy authorizing the use of ‘light’ and ‘low tar’ descriptors”). The Supreme Court issued its decision in Altria Group on December 15, 2008.

¶ 7 Meanwhile, on December 8, 2008, the FTC issued a rescission of guidance. In so doing, the FTC rescinded a 1966 guidance concerning representations of tar and nicotine content that cigarette manufacturers could make in advertising and cigarette packaging. Rescission of FTC Guidance Concerning the Cambridge Filter Method, 73 Fed.Reg. 74,500 (Dec. 8, 2008) (hereinafter, Rescission of FTC Guidance). The 1966 guidance “did not require companies to state the tar and nicotine yields of their cigarettes”; it merely “set forth the type of substantiation” that would be “adequate” to comply with FTC regulations if companies chose to make such representations. (Emphasis in original.) Rescission of FTC Guidance, 73 Fed.Reg. at 74,501. In addition, the 1966 guidance prohibited manufacturers from making “collateral representations” about any reduction in the health hazards associated with smoking. Rescission of FTC Guidance, 73 Fed.Reg. at 74,501. Most significantly for purposes of this appeal, the 1966 guidance did not address the use of descriptors such as “light” and “low tar.” In the 2008 rescission of guidance, the FTC specifically clarified this point, stating that the agency “has neither defined those terms, nor provided guidance or authorization as to the use of descriptors.” Rescission of FTC Guidance, 73 Fed.Reg. at 74,504.

¶ 8 On December 18, 2008, the plaintiffs filed their petition for relief from judgment. The trial court granted the defendant's motion to dismiss, finding that the petition was not timely filed within two years of the Illinois Supreme Court's decision (see 735 ILCS 5/2–1401(c) (West 2006)). Price v. Philip Morris, Inc., No. 5–09–0089, 406 Ill.App.3d 1228, 376 Ill.Dec. 181, 998 N.E.2d 723 (Feb. 24, 2011) (unpublished order under Supreme Court Rule 23) ( Price II ). This court reversed that ruling, finding that the statutory time limit began to run when the trial court dismissed the plaintiffs' law suit. Price II, order at 10. We remanded the matter to the trial court for further proceedings so the court could consider the merits of the plaintiffs' petition. Price II.

¶ 9 On remand, the plaintiffs filed an amended petition for relief from judgment. They alleged that during the original trial in this matter, they were unable to present evidence of the FTC's stated position with respect to the use of descriptors such as “light” and “low tar.” The plaintiffs further alleged that, had they been able to present this evidence, the supreme court most likely would have ruled differently on the defendant's section 10b(1) defense.

¶ 10 After considering the documentary evidence and arguments presented by both parties, the trial court entered a detailed written order in which it made the following findings: First, the court found that the plaintiffs were diligent in their efforts to present their claim at trial, including evidence of the FTC's position regarding use of the terms “light” and “low tar.” In reaching this conclusion, the court emphasized that (1) FTC commissioners declined the plaintiffs' request to file an amicus brief, and (2) the plaintiffs could not legally compel FTC testimony in this state court litigation (see United States ex rel. Touhy v....