(Adds labeling changes, market share, updated stock price,
paragraphs 10-11 and 15)
By Jonathan Stempel
April 30 An Illinois state appeals court has
reinstated a $10.1 billion verdict against Philip Morris USA in
a lawsuit accusing the Altria Group Inc unit of
misleading consumers about the risks of smoking "light"
cigarettes. Philip Morris USA said it will appeal immediately.
Tuesday's decision by the Fifth District Court of Appeals in
Mount Vernon, Illinois, revives a 2003 judgment handed down by a
state trial judge.
That judgment against the maker of Marlboro cigarettes had
been overturned by the Illinois Supreme Court in 2005, a ruling
that the U.S. Supreme Court let stand the following year.
In 2008, the plaintiffs sought to revive their case after
the U.S. Federal Trade Commission (FTC) rescinded a 42-year-old
policy on how cigarette makers could describe tar and nicotine
levels in their advertising and packaging.
A state court judge dismissed the case in December 2012, but
Justice Melissa Chapman wrote for a three-judge appeals court
panel that he lacked authority to speculate how the policy
change might affect damages. She said the effect of overturning
the dismissal was to reinstate the original verdict.
The lawsuit, brought on behalf roughly 1.4 million Illinois
smokers, began in 2000. It was the first class action case to
reach trial over using the word "light" to promote cigarettes.
Plaintiffs led by Sharon Price and Michael Fruth accused
Philip Morris USA of violating an Illinois consumer fraud law by
deceiving consumers into believing that "light" or "low tar"
cigarettes were safer than regular cigarettes.
Philip Morris USA countered that the FTC had permitted the
use of such terms through prior settlements, or consent decrees,
with other cigarette makers.
"The law does not allow the Fifth District to reopen a
decision by the Illinois Supreme Court based on speculation
about the possible impact of subsequent events," Murray Garnick,
an associate general counsel at Altria, said in a statement.
Altria said its appeal puts Tuesday's decision on hold
automatically. The Richmond, Virginia-based company controls
roughly half of the U.S. cigarette market.
U.S. regulators have since June 2010 banned companies from
using "light," "low" and "mild" in tobacco labeling.
Unlike in many other smoking cases, the plaintiffs had not
sought to recoup money for health-related claims, but rather for
sums they spent on light cigarettes.
"The plaintiffs believe very strongly that this was the
correct decision," said Stephen Tillery, a partner at Korein
Tillery in St. Louis and lead counsel for the plaintiffs. "The
law is abundantly clear. I don't think, as a matter of fact or
law, that Philip Morris has a strong appellate outlook."
Bonnie Herzog, a beverage and tobacco analyst at Wells Fargo
Securities, called Tuesday's decision "very much an unexpected
move," but predicted it would be reversed on appeal.
Shares of Altria were down 11 cents at $40.01 in afternoon
trading on the New York Stock Exchange.
In voiding the original verdict, the Illinois Supreme Court
had said that the FTC intended that its consent decrees would
"provide guidance to the entire cigarette industry."
But according to the Fifth District, the FTC later changed
its approach, saying it had neither defined "light" or "low
tar," nor "provided guidance or authorization" as to their use.
The plaintiffs then sought to revive their case, but Circuit
Judge Dennis Ruth in Edwardsville, Illinois, said they had not
shown it was "more probably true" that the Illinois Supreme
Court might ultimately rule in their favor on damages.
In Tuesday's decision, however, Chapman said the top state
court had not resolved the issue.
"The only ruling it reversed was the trial court's decision
to deny the defendant's motion for summary judgment on the basis
of (the) Consumer Fraud Act," she wrote. "Vacating the dismissal
order will reinstate the proceedings with the verdict intact."
The case is Price et al v. Philip Morris Inc, Appellate
Court of Illinois, Fifth District, No. 5-13-0017.
(Reporting by Jonathan Stempel in New York; Additional
reporting by Martinne Geller in London; Editing by Sofina
Mirza-Reid and Tom Brown)