UPDATE 2-US court rules against Altria on light cigarettes

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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.


“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.

“We continue to view these cases as manageable, and the company will assert many of the strong defenses used successfully in the past to defend against this very type of case,” he said in a statement issued in Richmond, Virginia.

Vice Fund VICEX.O portfolio manager Charles Norton said the ruling removed one defense used in cases involving light cigarettes, but does not signal a shift in tobacco litigation.

“In spite of today’s ruling, I expect the future of (light cigarette) litigation to continue to move in the direction that it has in recent years, in favor of the industry,” he said.

A related case is before a U.S. appeals court.

In October, a three-judge panel in Washington, D.C., heard arguments on whether a lower court erred in finding tobacco companies conspired to lie about the dangers of smoking.

Companies, including Philip Morris USA, were found to have violated federal racketeering laws in 2006 by a U.S. District judge, who ruled the firms could no longer use expressions such as “low tar” or light” in their cigarette marketing.

Other firms and trade groups appealing the ruling were the R.J. Reynolds Tobacco unit of Reynolds American Inc RAI.N, Brown & Williamson, Lorillard Inc LO.N, Vector Group Ltd's VGR.N Liggett Group, British American Tobacco Ltd. BATS.L, the Council for Tobacco Research and the Tobacco Institute.

Last month, the Federal Trade Commission rescinded guidance from 1966 which allowed the firms to put tar and nicotine figures on cigarette packages as part of their advertisement.

The agency said the numbers were misleading because smokers believed low tar and nicotine cigarettes were safer even though smokers cancel out that advantage by inhaling more deeply when they smoke the cigarettes.

The case is Altria Group Inc v. Good, 07-562. (Additional reporting by Diane Bartz and Brad Dorfman in Chicago, editing by David Alexander and Anthony Boadle)