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Illinois Class Action against Philip Morris Goes Up in Smoke:

This morning a divided Illinois Supreme Court overturned a $10 billion class action verdict against Philip Morris. The plaintiffs' theory was that the marketing of "light" cigarettes was a form of consumer fraud. Because the cigarettes have less tar, some smokers compensated for the lower quantity of tar in an individual cigarette by inhaling deeper, or smoking larger quantities. Thus, according to the trial court, Philip Morris deceived smokers into thinking the cigarettes were safer. The plaintiffs theory would seem to pave the way for lawsuits against low-calorie "lite" foods, since some consumers compensate for the lower calories of an individual serving by eating more food.

The majority pointed out that, even if one believes (as did the trial judge) the claim of plaintiffs' experts that "compensation is complete" (that every smoker of high-tar cigarettes who switches to low-tar smokes so much extra that total tar intake is the same), new smokers who started on light cigarettes would have nothing for which to "compensate," and therefore would inhale much less tar than than if they smoked "full-flavored" cigarettes.

The majority of the Illinois Supreme Court relied on section 10(b)(1) of the Consumer Fraud Act, which prohibits Consumer Fraud suits regarding conduct "specifically authorized by laws administered by any regulatory body or officer acting under statutory authority of this State or the United States." In a pair of consent orders, the Federal Trade Commission had authorized the use of "light" and "low tar and nicotine."

The decision on narrow statutory grounds appears to be correct, and to have obviated the need to directly address the plaintiffs' outrageous theory that excessive consumer consumption of a "light" product provides a pretext for suing the manufacturer for fraud.

The majority did state that the plaintiff class appeared to have been overbroad and improperly certified. A special concurrence by two justices pointed out that plaintiffs, even if defrauded, had suffered no economic damages, especially because the class representatives continued to smoke, even after learning that "light" cigarettes were not safer (at least not if the smoker "compensates" by smoking extra).

The Supreme Court opinion is here, in PDF. The Illinois Civil Justice League, one the the nation's best tort reform groups, should have updates later today.

The trend towards lower tar and nicotine cigarettes, which began in the late 1960s with the encouragement of the FTC and Congress, has in fact made cigarettes substantially safer than they had been previously.

There is currently a dispute about whether low-tar cigarette smoke may have more mutagenic properties than higher-tar smoke (the trial judge found in the affirmitive), but, in any case, the trend to lower tar was based on the best scientific evidence available at the time. Moreover, the complaint that the reduction of a known danger (tar) may be partially offset by the increase in another danger is similar to complaining that a food which is advertised for reducing the quantity of something the consumer specifically wants to avoid (e.g., calories, carbohydrates, or salt) may also increase the quantity of some other undesirable item (e.g., a synthetic food additive which some people believe is harmful to health).

That the tobacco companies were sued for manufacturing and advertising a safer product is a good example of the perversity of modern tort law, and of the determination of anti-tobacco extremists to punish cigarette companies even when cigarette companies took affirmitive steps to reduce the dangers of smoking.

P.S. The Illinois Supreme Court was not supposed to, and did not, render any decision about the moral behavior of the tobacco companies. My personal belief though, is that the major tobacco companies, including Philip Morris, have engaged in reprehensible and immoral conduct--specifically, by entering into the multistate compact with the state attorneys general. As detailed in a lawsuit by the Competitive Enterprise Institute, currently pending in federal district court, the compact creates a cartel which protects the major companies from price competition by smaller companies--even though the smaller companies were never accused of the supposed misconduct for which the attorneys general sued the larger companies.

Anderson (mail) (www):
The decision on narrow statutory grounds appears to be correct, and to have obviated the need to directly address the plaintiffs' outrageous theory that excessive consumer consumption of a "light" product provides a pretext for suing the manufacturer for fraud.

Since the "decision on narrow statutory grounds" was correct, is it really necessary to sound like such a tool of the tobacco companies?

The "excessive consumption" is of a product that is addictive and is designed with an eye to preserving, if not enhancing, that addictive quality, despite the companies' knowledge that even the "light" version was harmful to its users.
12.15.2005 11:56am
Bryan DB:
In general, I agree with your point, but your last standard paragraph starts off with a doozy:
"That the tobacco companies were sued for manufacturing and advertising a safer product is a good example of the perversity of modern tort law."

That's a lot like saying that if my cyanide happens to kill people, which of course it would, then if I just make a safer cyanide, that doesn't kill people quite as well, then it would be perverse to punish me. Just because someone makes a bad thing just a little less bad, doesn't make it good.
12.15.2005 12:17pm
DrewSil (mail):

have engaged in reprehensible and immoral conduct--specifically, by entering into the multistate compact with the state attorneys general

I disagree with you here. I agree that this behavior is bad, but the moral culpability lies with the states who offered this compact, and harmed their citizens. It should be expected that a company would jump at the chance for a monopoly when offered by a corrupt state government. In fact turning down a monopoly (and hence failing to capture excess rents) is demonstratably against the interests of the stockholders whose interests the company must promote. The state government is chanrged with promoting the insterests of its citizens which it is here disserving.

Bryan-
If the lawsuit were specifically targeting the manufacturer of cyanide for producing a less toxic brand (rather than for producing it at all) then yes, it would be just as ridiculous.
12.15.2005 12:33pm
Matty G (www):
Bryan DB: Your sarcasm turns out to be the correct line of thinking. Products are regulated at the time of production. No matter how potentially dangerous the product - be it a gun or a bottle of whiskey - the manufacturer of the product should not be held accountable for its use if it was produced in a legal manner. The only legitimate argument - in my opinion - against the tobacco companies is that they purposefully sought to deceive the people making the laws regarding the regulation of the production of cigarettes. Beyond that, it's silly to argue that manufacturers should be held liable for the use of legal products that are not malfunctioning. Should we sue every silverware company each time someone is stabbed with a kitchen knife?
12.15.2005 12:38pm
Observer (mail):
I think your analysis of the multistate compact is wrong. That agreement was not a settlement of real lawsuits for real damages; it was a disguised tax increase on cigarettes. Why shouldn't all cigarette companies bear the burden of cigarette taxes, whether labeled as such or disguised?
12.15.2005 12:52pm
Bob Bobstein (mail):
More on legislative and bureaucratic efforts to combat abusive lawsuits here.
12.15.2005 1:51pm
Paul McKaskle (mail):
For those interested in an html copy of the opinion (which can be edited or put in a smaller font, which some might want to do given that it is extremely long) it can be found at pointoflaw.com.
12.15.2005 2:03pm
Fishbane (mail):
I think your analysis of the multistate compact is wrong. That agreement was not a settlement of real lawsuits for real damages; it was a disguised tax increase on cigarettes. Why shouldn't all cigarette companies bear the burden of cigarette taxes, whether labeled as such or disguised?

Well, no. Even if your analysis is correct, do you want to encourage phony lawsuits that are in reality hidden tax increases? That appears truly perverse.
12.15.2005 2:10pm
Thales (mail) (www):
Of course, the interstate compact also conveniently has the effect of not actually reducing smoking, as ciagarette taxes purport to have as their raison d'etre, but rather providing the states a share of the big tobacco companies' huge revenues on goods with a low elasticity of demand (revenues of course made bigger by the cartelizing nature of the compact).

I don't think a lawsuit is going anywhere, unless the courts decide to incorporate public choice theory and revise the antitrust state action doctrine.
12.15.2005 2:15pm
David M. Nieporent (www):
That's a lot like saying that if my cyanide happens to kill people, which of course it would, then if I just make a safer cyanide, that doesn't kill people quite as well, then it would be perverse to punish me. Just because someone makes a bad thing just a little less bad, doesn't make it good.
The question isn't whether it's "good" -- a question that would seem to be appropriately addressed to individual consumers, or (if one insists) to the legislature, not to the courts -- but whether it's "fraud."

It would be perverse to punish you -- for fraud, or otherwise -- for selling safer cyanide, particularly given that _it's perfectly legal to sell cyanide._
12.15.2005 3:06pm
B. B.:
Another display of the oft-ignored backstop of truly silly tort verdicts in Madison County -- the usually reasonable Illinois Supreme Court.

Nice that there was a way to kick this, because this just seemed like another money grab after the tobacco lawsuits that had a reasonable ground finished up and the lawyer money stream from those dried up. I don't remember cigarette advertisers ever advertising that this was a 'safe' cigarette. And 'light' is a pretty accurate descriptor of the product -- lighter in tar and/or nicotine, and obviously the FTC thought so too. Still harmful? Sure. But so is Bud Light -- it causes just as much liver cancer as Bud, and I don't see people running to sue on that. Yet. "Light" has never meant "less harmful", really.

Personally, I'd rather sue Bud and Miller Lite for fraud or false advertising on their patently false claims of "great taste", but perhaps that's just me.
12.15.2005 3:54pm
John Burgess (mail) (www):
I'd simply sue Bud and Miller (and Coors) for fraud on the basis of their claim to be "beer". Carbonated sour water with hops flavoring doesn't match my definition in the least.

But instead of suing, I'll just avoid buying...
12.15.2005 4:03pm
Justin (mail):
Of course, the interstate compact also conveniently has the effect of not actually reducing smoking, as ciagarette taxes purport to have as their raison d'etre, but rather providing the states a share of the big tobacco companies' huge revenues on goods with a low elasticity of demand (revenues of course made bigger by the cartelizing nature of the compact).

Thales, it would be wise for you to have a clue about what you're talking about rather than taking a stab in the dark and then claiming that as fact. The Mississippi attorney general sued Governor Barbour (who had always opposed the suit in the first place) to keep Governor Barbour and his tobacco-lobbyist lawyer (no joke) from diverting the funds from the smoking cessetion program to the general fund.

Furthermore, because of the various smoking cessetion funds and the increase in ciggerette costs to children (who, if you've read any history on the litigation, were consciously decided to be the benefactors of the litigation), teenage smoking is down more than 50% from the initiation of the lawsuit. MORE THAN 50%.

But yes, those state Attorneys General should be ashamed of themselves. To think, elected officials saving their citizen's children. The arrogance. The selfishness.
12.15.2005 4:25pm
Thales (mail) (www):
Just to make it clear where I stand, I do think that just about anything said by a tobacco company is hogwash, especially about science. I just happen to think Kopel is actually correct that the settlement is anticompetitive and pursued by big tobacco and the states at the expense of consumers. The merits of the underlying tort theory are really beside the point, and Kopel's safer cigarette dictum is risible, just as it is when tobacco "scientists" trumpet similar garbage.

Justin, perhaps I made too many blithe assumptions, based on the normal motivations of those who impose sin taxes and the economic realities of taxing addictive goods. The settlement may well be having beneficial health effects among children, especially given the restriction of kid-friendly advertising (although smoking per se, as opposed to brand choice, is just as cool or not cool without a camel wearing sunglasses, according to most studies I've heard of). But before one trumpets success on this front too loudly, one must disaggregate the measurable effects of the settlement from the downward trend in smoking generally. Maybe people have steadily tired of getting cancer and being lied to by Philip Morris et al, in addition to paying more for their cigs.

Let's just say I'm extremely suspicious of the states that now have a ton of money, which comes in streams from dependable sales of a dangerous product. If they were really concerned about health, why not just ban tobacco the way they have banned less dangerous substances such as marijuana? Probably because they'd like to prevent radical shifts in the economies of several Southern states, and the cash flow is preferable to actually ending smoking altogether.
12.15.2005 7:50pm
Ted Frank (www):
It's hard to ascribe the decline in teen smoking entirely to the attorney-general slush fund (acquired at the great expense of a multi-billion dollar payout from taxpayers (through a regressive tax, mind you) to well-connected plaintiffs' attorneys) when there is simultaneously an extensive effort to make it more difficult to sell tobacco to minors and to make it more difficult for smokers of all ages to find locations where it is legal to do so.

Meanwhile, a group of attorneys general created a cartel through a mechanism that Congress expressly considered and rejected. Silly me for thinking that the Constitutional provision that "No State shall, without the Consent of Congress, ... enter into any Agreement or Compact with another State" actually means that states can't enter into compacts with other states that Congress had refused to consent to, especially when that compact concerns the taxation and regulation of interstate commerce.
12.15.2005 8:43pm
Justin (mail):
Ted, you're seriously stretching (Because, even given the big stretech that your assertion is true, and the equally big stretch that it's even mildly effective, that's done so well to keep drugs and alcohol out of the hands of children is enough of a stretch for me to stop pointing out the absurdity).
12.15.2005 10:32pm
Evan (www):
I'm all for state legislatures and the people placing whatever restrictions, bans, or taxes on tobacco that they want.

What I am not for is extortionist legal firms, who really don't want to curb smoking but instead just want to take over ownership of the industry, using all sorts of questionable legal tactics to corrupt the law and threaten every other legitimate business enterprise in the country.
12.15.2005 11:48pm
sammler (mail) (www):
Evan,

I do not believe you should be so sanguine about "state legislatures and the people placing whatever restrictions, bans, or taxes on tobacco that they want". The reason is that the Tobacco Trust Treaty was not an action of any individual state; it was a compact among the states, forming a quasi-government with national reach but not accountable to the federal government. This is not States' rights, but something closer to the opposite.
12.16.2005 7:13am
sammler (mail) (www):
The linked WSJ editorial contains a response from Iowa's attorney general. Details and a little follow-up, here.
12.16.2005 7:53am
Justin (mail):
What I am not for is extortionist legal firms, who really don't want to curb smoking but instead just want to take over ownership of the industry, using all sorts of questionable legal tactics to corrupt the law and threaten every other legitimate business enterprise in the country.

Really, that was only one firm (I know exactly what you're talking about). Brilliant, if despicable.
12.16.2005 10:42am
TDPerkins (mail):
Anderson wrote:

"The "excessive consumption" is of a product that is addictive and is designed with an eye to preserving, if not enhancing, that addictive quality, despite the companies' knowledge that even the "light" version was harmful to its users."

The users also new it was harmful, the use of the term was "light" was explicitly approved of by the regulatory agency involved, and it was not fraudulent in any way. People also know tobacco is addictive--the active ingredient is nicotine, a stimulant--and since the nicotine is what the poeple want, it is presumably more of what they want if the tobacco companies get more into a cigarette.

All of which is so self evident, I have to think the real reason you object to this resolution in any fashion is that you cannot convince legislators to make yet another substance illegal to use recreationally, although you'd love to.

Yours, TDP, ml, msl, &pfpp
12.16.2005 11:22am
Rich (mail):
Ahhh....Justin. Though I don't (at the moment) have the fact to back it up I don't think that smoking costs had that much to do with the 50% decrease. To my humble brain if you are addicted to nicotine you will pay the cost to get your fix. I think that being made socially unacceptable and a tidal wave of health studies pointing out the deleterious effects of cig smoking.
12.16.2005 12:52pm
Rich (mail):
Sorry. The last sentence should have completed with "....did the trick."
12.16.2005 12:53pm
Justin (mail):
Rich,

"To my humble brain if you are addicted to nicotine you will pay the cost to get your fix"

is correct. That is why the focus is on teen smokers. Teens turn out to have high price elasticity to BEGINNING the vice. Teens are less likely to BECOME addicted if the cost of getting to the point of addicted is high and their amount of disposable income is low. This was a concrete, explicit strategy by the State Attorneys General, and there was a Harvard Business School case talking about the decision to focus on raising the cost, fully aware of the regressive nature and the lack of support for those already addicted, as a solution to the addiction problem.
12.16.2005 1:41pm
Rich (mail):
I would like to see some concrete facts before accepting your hypothesis. There have been many strategies tried in the anti smoking wars and attributing to one strategy a 50% decrease just seems a bit much to me. I thinks its more like social unacceptability+high cost+health concerns=n% decrease. I will try to find some facts to back me up.
12.19.2005 12:24pm