Court cancels bonanza, demolishes class and damages

By Steve Korris | Dec 15, 2005

Justice Garman What's the legal difference between "specific" and "express?" At the Illinois Supreme Court, it's about 10 billion.

Justice Garman

Justice Karmeier

What's the legal difference between "specific" and "express?" At the Illinois Supreme Court, it's about 10 billion.

In the reversal of Price v. Philip Morris, justices held that the Federal Trade Commission specifically authorized advertising for "light" cigarettes, though they found no express authority on the commission's part.

Justice Rita B. Garman wrote for the majority that, "…while the authorization must be specific--related to a particular thing--it need not be express."

The Dec. 15 decision cancelled a bonanza that Madison County Circuit Judge Nicholas Byron awarded against Philip Morris USA in a class action consumer fraud suit.

Byron certified a class of 1,140,000 plaintiffs. After trial in 2003, he ruled in their favor and calculated their damages at $7,100,500,000, awarding more than $6,000 per plaintiff.

He directed a quarter of the award--$1,775,125,000--to class counsel.

He added $3 billion in punitive damages and awarded it to the state of Illinois.

State consumer fraud law exempts defendants from claims if a state or federal regulatory agency has specifically authorized the conduct at issue.

Byron ruled that the Federal Trade Commission did not specifically authorize "light" labeling. The Supreme Court says it did.

Garman wrote that when Philip Morris USA moved for summary judgment on the question of FTC authority, Byron said it was an issue for trial. Yet at trial, Garman wrote, Byron stated that there was no question.

She wrote that among trial witnesses, the testimony of only two related to FTC authority – plaintiff's expert Neil Benowitz and defense expert John Peterman.

Peterman had worked 17 years for FTC, five as director of its bureau of economics.

At trial he had recited the history of federal regulation of tobacco advertising.

Garman wrote that in a recess after Peterman testified, Byron told defense counsel that, "If you are relying on – just on him, you lose pre-emption and I – I'll just go ahead and not waste your time and strike your defense."

She wrote that Byron's judgment expressly found the plaintiff's experts more credible than those of the defense.

The court majority, having decided the case on the question of FTC authority, did not need to demolish Byron's decisions to certify a class and award damages – but they did so anyway.

Garman wrote that the common questions of fact that Byron identified in support of class action did not correspond to what the justices have repeatedly spelled out.

She wrote that Byron did not inquire whether the plaintiffs were deceived.

"…[w]e question whether it can reasonably be said that the words 'light' and 'lowered tar and nicotine' actually deceived over a million people for decades," Garman wrote.

Byron found that every smoker in the class fully "compensated" for the reduction in tar and nicotine, through changes in smoking behavior, she wrote.

Byron's decision did not explain how a new smoker felt a need to compensate if he lacked a prior habit, she wrote.

Garman also ripped the damage calculation.

"In addition to our reservations about the existence of individual issues that might make class certification inappropriate," she wrote, "we have grave reservations about the novel approach to the calculation of damages that was offered by the plaintiffs and accepted by the circuit court."

She abruptly dropped the topics, calling them issues for another day.

Justice Lloyd Karmeier picked up the thread in a concurring opinion. He declared that the plaintiffs failed to prove any damages. Justice Thomas R. Fitzgerald concurred.

Karmeier linked the decision to the court's Aug. 18 decision that dismissed Avery v. State Farm, a Williamson County class action.

He wrote that plaintiff Sharon Price admitted that she continued smoking light cigarettes after filing the suit.

Karmeier wrote that an organization that submitted an amicus curiae brief stated that, "…there may be more than one way to measure damages." He wrote that he sensed uneasiness.

"Financial loss is not measured by subjective feelings," Karmeier wrote.

Justice Charles E. Freeman, in dissent, wrote that FTC policies did not rise to the level of specific authorization. Justice Thomas L. Kilbride joined the dissent.

Freeman devoted almost as much space to Karmeier's concurrence as to Garman's decision, but could not bring himself to endorse $10 billion in damages. He wrote that, "…the issue of damages is not as cut and dry as these justices would have one believe."

Freeman linked the decision to Avery too, though not as gladly as Karmeier. Freeman wrote that the decisions would cast "a chill wind over consumer protection."

He wrote that he fears that a majority will continue to hold large class actions to different standards "in an effort to reduce the perception that the Illinois court system serves as a playpen for the disingenuous class action practitioner."

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