Price v. Philip Morris, Inc., 96236.

CourtSupreme Court of Illinois
Citation219 Ill.2d 182,848 N.E.2d 1
Docket NumberNo. 96236.,96236.
PartiesSharon A. PRICE et al., Appellees, v. PHILIP MORRIS, INC., Appellant.
Decision Date15 December 2005

George C. Lombardi, Jeffrey M. Wagner, Julie A. Bauer, Stuart Altschuler, James R. Thompson, of Winston & Strawn, L.L.P., Michele Odorizzi, Joel D. Bertocchi and Michael K. Forde, of Mayer, Brown, Rowe & Maw, L.L.P., Kevin M. Forde, Chicago, Larry Hepler and Beth A. Bauer, of Burroughs, Hepler, Broom, MacDonald, Hebrank & True, L.L.P., Edwardsville, for appellant.

Stephen A. Swedlow, Robert L. King, of Swedlow & King, L.L.C., Joseph A. Power, Jr., Larry R. Rogers, Sr., Todd A. Smith, Larry R. Rogers, Jr., and Devon C. Bruce, of Power, Rogers & Smith, Chicago, Stephen M. Tillery and George A. Zelcs, of Korein Tillery, St. Louis, MO, Michael J. Brickman, Jerry Hudson Evans and Nina H. Fields, of Richardson, Patrick, Westbrook & Brickman, L.L.C., Charleston, SC, for appellees Sharon Price et al.

Leonard F. Amari, of Amari & Locallo, J. Timothy Eaton and Kathleen Holper Champagne, of Ungaretti & Harris, L.L.P., Chicago, for appellees Washington University (St. Louis) School of Law et al.

Michael A. Pope, Aron J. Frakes, of McDermott, Will & Emery, Chicago, Donald J. Russell and Alan E. Untereiner, of Robbins, Russell, Englert, Orsek & Untereiner, L.L.P., and Robin S. Conrad, Washington, D.C., for amici curiae Chamber of Commerce of the United States et al.

David E. Bennett, James A. Spizzo, of Vedder, Price, Kaufman & Kammholz, P.C., Chicago, for amicus curiae Illinois Manufacturers' Association.

Robert N. Hochman, Chicago, Gene C. Schaerr and Stephen B. Kinnaird, Washington, D.C., of Sidley, Austin, Brown & Wood, L.L.P., for amicus curiae National Association of Manufacturers.

Jay H. Tressler, Dion J. Sartorio, of Tressler, Soderstrom, Maloney & Priess, Chicago, Mary A. Wells and L. Michael Brooks, Jr., of Wells, Anderson & Race, L.L.C., Denver, CO (Hugh F. Young, Jr., Reston, Virginia of counsel), for amicus curiae Product Liability Advisory Council, Inc.

Michael W. Coffield, Joel J. Africk, Chicago, Andrew I. Gavil, Washington, D.C., for amici curiae American Medical Association et al.

Thomas G. Griffin, Chicago, Megan E. Annitto, New York, New York, for amicus curiae Citizens' Commission to Protect the Truth.

Thomas R. Meites, Paul W. Mollica, of Meites, Mulder, Burger & Mollica, Chicago, Allison M. Zieve and Brian Wolfman, Washington, D.C., for amici curiae Public Citizen, Inc. et al.

John B. Kralovec, of Kralovec, Jambois & Schwartz, Chicago, for amici curiae Economists Robert Solow and George Akerlof.

Eugene I. Pavalon, of Pavalon, Gifford, Laatsch & Marino, Chicago, Stephen Gardner, Dallas, Texas, Leslie A. Brueckner, F. Paul Bland, Jr., Arthur H. Bryant, Washington, D.C., for amici curiae Trial Lawyers for Public Justice et al.

Justice GARMAN delivered the opinion of the court:

After a bench trial in the circuit court of Madison County, the court found defendant, Philip Morris USA, Inc. (PMUSA) (formerly known as Philip Morris, Inc.), liable for fraud in violation of the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (815 ILCS 505/1 et seq. (West 1998)), and the Uniform Deceptive Trade Practices Act (Deceptive Practices Act) (815 ILCS 510/1 et seq. (West 1998)), and awarded the estimated 1.14 million members of the plaintiff class compensatory and punitive damages, attorney fees, and prejudgment interest totaling $10.1 billion. We ordered that PMUSA's appeal be taken directly to this court pursuant to Supreme Court Rule 302(b) (134 Ill.2d R. 302(b)).

We have permitted the Chamber of Commerce of the United States and the Illinois Chamber of Commerce; the National Association of Manufacturers and the Illinois Manufacturers' Association; and the Product Liability Advisory Council, Inc., to file briefs amici curiae on behalf of the defendants. We have also permitted Public Citizen, Inc., along with various public health organizations; economists Robert Solow and George Akerlof; the Trial Lawyers for Public Justice, along with various consumer advocacy groups; the American Medical Association, along with numerous medical societies; and the Citizens' Commission to Protect the Truth to file briefs amici curiae on behalf of the plaintiffs. 155 Ill.2d R. 345. In addition, 11 Illinois law schools that, depending on the outcome of this appeal, may receive some of the proceeds of the punitive damages award have been permitted to intervene. 735 ILCS 5/2-408 (West 2002).

We now reverse the judgment of the circuit court on the basis that this action is barred by section 10b(1) of the Consumer Fraud Act (815 ILCS 505/10b(1) (West 2000)).

A. History of FTC Regulation of the Cigarette Industry

The immense documentary record reveals the following industry history, which is essentially undisputed.

The FTC's jurisdiction over the advertising and testing of cigarettes is premised on the Federal Trade Commission Act, section 45(a) of which declares unlawful: "unfair methods of competition in or affecting commerce, and unfair and deceptive acts or practices in or affecting commerce." 15 U.S.C. § 45(a) (2000). As early as the 1930s, the FTC took action against tobacco companies that made unsupported claims about the health benefits of smoking their particular brand of cigarettes. See, e.g., Julep Tobacco Co., 27 F.T.C. 1637 (1938).

In September 1955, the FTC issued its first Cigarette Advertising Guidelines, which permitted cigarette manufacturers to make claims regarding tar and nicotine yields, but only if they could substantiate their claims by "competent scientific proof":

"No representation, claim, illustration, or combination thereof, should be made or used which directly or indirectly:

2. Represents that any brand of cigarette or the smoke therefrom is low in nicotine or tars, acids, resins, or other substances, by virtue of its ingredients, method of manufacture, length, added filter, or for any other reason or without any assigned reason, than any other brand or brands of cigarettes when it has not been established by competent scientific proof applicable at the time of dissemination that the claim is true and, if true, that such difference or differences are significant.

NOTE: Words, including those relating to filtration, which imply lesser substances in the smoke, through filter comparisons or otherwise, are considered subject to this guide." 6 Trade Reg. Rep. (CCH) par. 39,012 (1988) (FTC Release, September 22, 1955, entitled "Guides").

Different manufacturers used different testing methods, however, making cross-brand comparison unreliable. In late 1959, the FTC Bureau of Consultation issued an industrywide advisory stating that "all representations of low or reduced tar or nicotine, whether by filtration or otherwise," would be construed as health claims. The purpose of the advisory and the accompanying demand for prompt compliance by the tobacco industry was to "eliminate from cigarette advertising representations which in any way imply health benefit." Letter of William H. Brain, Attorney, FTC Bureau of Consultation (December 17, 1959). The FTC indicated its intent to take enforcement action against cigarette manufacturers making such representations, effectively banning advertising regarding tar and nicotine levels. See 3 Trade Reg. Rep. (CCH) par. 7853.51, at 11,730 (1988) (reporting that, in 1960, the FTC and the tobacco industry reached an agreement that the companies would refrain from advertising tar and nicotine content).

In 1964, Dr. Luther Terry released the groundbreaking Report of the Surgeon General's Advisory Committee on Smoking and Health. The Report concluded that "[c]igarette smoking is a health hazard of sufficient importance in the United States to warrant appropriate remedial action." Department of Health, Education, and Welfare, U.S. Surgeon General's Advisory Committee, Smoking and Health, at 33. Later that same year, the FTC promulgated a trade regulation rule defining it an unfair and deceptive act within the meaning of section 5 of the FTC Act to "fail to disclose, clearly and prominently, in all advertising and on every pack, box, carton or other container in which cigarettes are sold to the consuming public that cigarette smoking is dangerous to health and may cause death from cancer or other diseases." Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking, 29 Fed. Reg. 8324, 8325 (1964).

Congress' enactment in 1965 of the Federal Cigarette Labeling and Advertising Act (Labeling Act) (Pub.L. 89-92, 79 Stat. 282, codified at 15 U.S.C. § 1331 et seq. (2000)), contained a preemption provision that vacated the newly promulgated trade regulation rule. The Labeling Act served two purposes. First, it was intended to inform the public of the hazards of smoking. Second, it was designed to address the emerging problem of inconsistent state regulation of cigarette labeling and advertising. Pub.L. 89-92, § 2. The Labeling Act required manufacturers to place a specific warning label on all cigarette packs. Pub.L. 89-92, § 4. The Act also required both the Secretary of Health, Education, and Welfare and the FTC to make annual reports to Congress on the health consequences of smoking and the advertising and promotion of cigarettes. Pub.L. 89-92, § 5. (The content of the warning was subsequently revised on two occasions: in 1969, when the Labeling Act was amended by the Public Health Cigarette Smoking Act (Pub.L. 91-222, 84 Stat. 87 (1969)), and in 1984, when the Labeling Act was again amended by the Comprehensive Smoking Education Act (Pub.L. 98-474, 98 Stat. 2200 (1984)). Prior to the adoption of the 1984 revisions, both the FTC and the Surgeon General recommended to Congress that the...

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