The Fifth District Appellate Court on Tuesday reinstated a $10.1 billion verdict in a decade-old class action lawsuit that accused Philip Morris USA of misleading consumers by deceptively marketing “light” and “low tar” cigarettes.
The lawsuit, which has bounced between the courts since it was filed in Madison County in 2000, is believed to the nation’s first to accuse a tobacco company of consumer fraud. The original verdict awarded plaintiffs' attorneys almost $2 billion in fees.
Reaching its decision to reinstate the 2003 verdict, the panel concluded that Madison County Circuit Judge Dennis Ruth exceeded the scope of his Section 2-1401 review when he “attempted to predict how the supreme court would rule on the question of damages."
Contrary to the tobacco giant's assertion, the appeals panel determined that Ruth's discussion of what the Illinois Supreme Court would have decided had it addressed certain issues is “inherently speculative in a way its discussion of the impact of the new information on the issue it actually did decide is not.”
“For these reasons, the order denying the petition for relief from judgment must be reversed,” Justice Melissa Chapman wrote for the panel.
Justices Bruce Stewart and S. Gene Schwarm, who took over for Justice James Wexstten on the panel following his retirement, concurred in the 30-page ruling.
Philip Morris, which is owned by Altria Company, said in a statement that it will appeal Ruth's ruling to the state Supreme Court. While the review is pending, the company noted the appellate court’s decision will be stayed automatically.
“Almost 10 years ago, the Illinois Supreme Court reversed the Price judgment as contrary to Illinois law,” said Murray Garnick, Altria Client Services senior vice president and associate general counsel. “The Fifth District Court of Appeals’ decision…conflicts with that ruling and essentially overrules a decision of a higher court.”
In 2005, the Supreme Court overturned the multi-billion dollar judgment former Madison Circuit Judge Nicholas G. Byron handed down against Philip Morris in 2003 following a bench trial.
The original case, which St. Louis attorney Stephen Tillery filed on behalf of Sharon A. Price, alleged that Illinois smokers were deceived by the labeling of Marlboro “Lights” and Cambridge “Lights” cigarettes and were entitled to a refund.
It claimed that Philip Morris knew when it introduced “light” cigarettes in 1971 that they were no healthier than regular cigarettes and that the “light” version actually contained a more toxic form of tar.
The Supreme Court later threw out Byron's verdict, saying the Federal Trade Commission allowed companies to characterize or label their cigarettes as “light” and “low tar" and as such, Philip Morris could not be held liable under state law even if its labeling was misleading or false.
The U.S. Supreme Court let that ruling stand in 2006, and Byron dismissed the case.
Tillery, however, sought to reopen the case two years later, claiming the U.S. Supreme Court's 2008 decision in Altria Group v. Good constituted new evidence.
The court in Good ruled in favor of three Maine residents who said smokers should be able to use state consumer protection laws to sue cigarette makers for promoting “light” and “low tar” brands.
Ruth heard arguments over Tillery's request for relief from the state high court’s dismissal in August 2012 at a nearly eight-hour long hearing, during which the judge made it clear he expected the losing party of his ruling to appeal.
In addition to the new evidence argument, Tillery argued in support of relief that the Supreme Court justices relied on factually inaccurate information to reach the 4-2 ruling that overturned the verdict.
He argued that the FTC in 2008 said it did not have a formal policy allowing use of “light” and “low tar” labeling, statements that he contends contradicts testimony from a witness in the 2003 trial that it did.
Philip Morris focused its arguments at the 2012 hearing on its contention that while the trial court could grant relief from its own order dismissing the petition, it cannot grant relief from the Supreme Court's decision.
The appeals panel, however, didn't quite buy that argument.
“The flaw in this argument is that the only ruling the supreme court actually reversed was the trial court’s ruling on the defendant’s section 10b(1) [of the Consumer Fraud Act] defense," Chapman wrote.
She explained, “Although it is true that the court may well have reversed the judgment on other grounds, it would not have done so without considering the merits of those issues. We find that granting relief from judgment has the effect of reinstating the proceedings with the verdict intact.”
In the release from Altria, Garnick said 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 on the higher court’s ruling.
"[T]he Fifth District erred in ordering reinstatement despite the fact that the Illinois Supreme Court previously raised other problems with the judgment, including whether the case was properly certified as a class action,” Garnick said in the release.
Tillery said in a statement: “We are pleased with the Fifth District’s well-reasoned decision and are happy that Philip Morris will finally be held accountable for deceiving Illinois consumers.”
Garnick said that if the Illinois Supreme Court declines to review the case at this point, Philip Morris will pursue an appeal in the ordinary course, in which a $250 million bond cap would apply.
The FDA now prohibits the use of “Lights” and other descriptors unless a manufacturer receives authorization to use the terms. The FDA began regulating tobacco products in 2009 under the Family Smoking Prevention and Tobacco Control Act.