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Big Tobacco Loses Another Appeal

May 26, 2009 | Parker Waichman Alonso LLP

Big tobacco has lost another important court case.  This time, a three judge panel for the U.S. Court of Appeals for the District of Columbia Circuit said there was ample evidence to conclude that the tobacco industry intended to deceive the public about the dangers of smoking.  According to Dow Jones News Wire, the panel upheld most of a lower court ruling which found that the industry's deceptive marketing schemes violated federal anti-racketeering statutes.

The original 2006 case had resulted in a lower court banning labels such as "low tar" and "light" for cigarettes.  At the time, the court found that tobacco firms had conspired through a "gentlemen's agreement" not to compete over whose cigarettes were the least damaging to health.   Defendants in the case included Altria Group Inc.'s, Philip Morris subsidiary, Reynolds American Inc., British American Tobacco PLC  and Lorillard Inc, Dow Jones said.

In addition to banning labels like "low tar" for cigarettes, the 2006 decision also required manufacturers to issue corrective statements about the dangers of their products, which would appear on television, newspapers, product packaging and countertop displays in retail outlets.

In their appeal, the tobacco companies argued that the original decision was not supported by the law or the evidence presented at trial.  But for the most part, the appeals panel rejected those arguments, Dow Jones said.  In their  92-page ruling, the judges said that  tobacco firms "knew about the negative health consequences of smoking, the addictiveness and manipulation of nicotine, the harmfulness of secondhand smoke, and the concept of smoker compensation, which makes light cigarettes no less harmful than regular cigarettes and possibly more."

According to Dow Jones, the panel upheld the restrictions on tobacco marketing and the corrective statement requirement. However, the judges rejected efforts to force the tobacco industry to fund a $10 billion national smoking-cessation campaign, and it affirmed an earlier ruling that  at the government couldn't force the tobacco companies to forfeit up to $280 billion in profits.

The decision could be appealed, either to the full appeals court, or the U.S. Supreme Court,  Dow Jones said.

This is the second important  appeal the tobacco industry has lost in recent months.  Late last year, in a 5-4 decision, the U.S. Supreme Court ruled that the 1965 Federal Cigarette Labeling and Advertising Act does not protect cigarette makers from fraud lawsuits over how those makers market cigarettes they describe as “light” or “low tar.” Also, the high court said federal oversight of cigarette testing did not preclude those lawsuits.