UPDATE 2-US court rules against Altria on light cigarettes

(Adds details, reaction)

By James Vicini

WASHINGTON, Dec 15 (Reuters) - Tobacco firms can be sued under state law for deceptive advertising of "light" cigarettes, the U.S. Supreme Court ruled on Monday in a decision that could affect some 40 suits around the country seeking billions of dollars.

By a 5-4 vote, the high court ruled against Altria Group Inc.'s (MO.N) Philip Morris USA unit and held the Federal Cigarette Labeling and Advertising Act does not bar or preempt such state court lawsuits.

The case involved three longtime smokers from Maine who wanted to proceed with their suit against the largest U.S. cigarette maker. The justices upheld a U.S. appeals court ruling that allowed the lawsuit to go forward.

The class-action lawsuit claimed Philip Morris engaged in unfair and deceptive acts or practices in its representations that certain brands of its cigarettes are "light" or have "lowered tar and nicotine."

The lawsuit said cigarettes like Marlboro and Cambridge Lights are deceptively designed and marketed, and that a smoker of those brands consumes the same amounts of tar and nicotine as a smoker of regular cigarettes.

Lawyers for Philip Morris argued Congress in adopting the federal law in the 1960s wanted one national source of regulation for advertising of cigarettes and health claims.

But lawyers for the smokers said Congress did not intend to give cigarette makers immunity for false statements.

Justice John Paul Stevens, joined by Justices Anthony Kennedy, David Souter, Ruth Bader Ginsburg and Stephen Breyer, said in the court's majority opinion the lawsuit can proceed.

Stevens said neither the Federal Cigarette Labeling Act nor the U.S. Federal Trade Commission's action in this area preempted the fraud claim under state law.

Stevens said the court only ruled on whether the lawsuit can proceed, not on the merits of the claims. The smokers still must prove the company's use of "light" and "lowered tar" violated the state deceptive practices law, he said.

The court's four most conservative members -- Chief Justice John Roberts and Justices Antonin Scalia, Clarence Thomas and Sam Alito -- dissented.

Because liability in this case is premised on the effect of smoking on health, Thomas wrote in dissent that he would hold that the state-law claims are expressly preempted by the law.

NO FINDING OF LIABILITY

"While we had hoped for a dismissal based upon federal preemption, it is important to note that the Supreme Court made no finding of liability," said Murray Garnick, an Altria senior vice president and associate general counsel.