Opinion ID: 797065
Heading Depth: 2
Heading Rank: 2

Heading: Fraudulent Misrepresentation and Suppression

Text: 17 Plaintiffs plead intentional misrepresentations or suppressions as to the true effect of Lights on smokers' health. Plaintiffs alleged that the Manufacturers marketed light cigarettes as being safer than regular brands, when in fact they are actually more harmful. They claim that the Manufacturers' fraud vitiates their consent as to the purchase of Lights and therefore that they are entitled to rescission of all sales of Lights. 18 The Cipollone Court held that some common law fraud claims are not pre-empted by the Labeling Act because they are based on a general duty not to deceive, not on smoking and health. The Court explained that Plaintiffs' concealment claims were not pre-empted to the extent that such claims 19 rely on a state-law duty to disclose such facts through channels of communication other than advertising and promotion. Thus, for, example, if state law obliged respondents to disclose material facts about smoking and health to an administrative agency, § 5(b) would not pre-empt a state-law claim based on a failure to fulfill that obligation. 20 Moreover, petitioner's fraudulent misrepresentation claims that do arise with respect to advertising and promotion (most notably claims based on allegedly false statements of material fact made in advertisements) are not pre-empted by § 5(b). Such claims are predicated not on a duty based on smoking and health but rather on a more general obligation[,] the duty not to deceive. 21 Cipollone, 505 U.S. at 528-29, 112 S.Ct. 2608. Relying on this language, the district court held that Plaintiff's [sic] claims of fraudulent misrepresentation to the extent that they allege a false representation or concealment of material fact are not preempted by the Labeling Act. 22 While the district court correctly stated the test for identifying those fraud claims that survive pre-emption, it erred in applying this test to Plaintiffs' claims. After Cipollone, cigarette manufacturers, under certain circumstances, may be held liable for fraud under state law for affirmative misrepresentations of material fact or for the concealment of material facts. Plaintiffs here have adequately alleged neither.
23 Plaintiffs' sole basis for claiming affirmative misstatement in this case is that the Manufacturers used the FTC-approved terms lights and lowered tar and nicotine in their labeling and advertising to promote their products. While claims based on fraud by intentional misstatement are not pre-empted because Congress did not intend to insulate manufacturers from state liability for affirmative lies, Cipollone, 505 U.S. at 529, 112 S.Ct. 2608, the use of FTC-approved descriptors cannot constitute fraud. Cigarettes labeled as light and low-tar do deliver less tar and nicotine as measured by the only government-sanctioned methodology for their measurement. In fact, the Manufacturers are essentially forbidden from making any representations as to the tar and nicotine levels in their marketing about tar that are not based on the FTC method. 6 The terms light and lowered tar and nicotine cannot, therefore, be inherently deceptive or untrue. 24 Plaintiffs seem to recognize that assigning liability solely on the basis of the FTC descriptors would be problematic. They therefore argue that the descriptors, although accurate under the FTC method, are misleading because they suggest that Lights are less harmful than full-flavor cigarettes. The Cipollone Court held that the Labeling Act pre-empts these implied misrepresentation claims, which arise from statements or imagery in marketing that misleadingly downplay the dangers of smoking, and thus minimize or otherwise neutralize the effect of the federal mandated safety warnings. Cipollone, 505 U.S. at 527, 112 S.Ct. 2608. The Court explained that as these claims are predicated on a state-law prohibition against statements in advertising or promotional materials that tend to minimize the health hazards of smoking, any [s]uch . . . prohibition . . . is merely the converse of a state-law requirement that warnings be included in advertising and promotional materials. Id. (emphasis in original). 25 To hold that the Manufacturers' use of the FTC-approved terms relating to the FTC-approved measurement system constitutes affirmative misstatement under State law would directly undermine the entire purpose of the standardized federal labeling system and most courts have been reluctant to find liability on this basis. In Good v. Altria Group, Inc., 436 F.Supp.2d 132 (D.Me.2006), the district court faced a claim similar to that presented here. The court first noted that except for the use of the FTC descriptors, the 26 record . . . is devoid of any affirmative misstatement. Thus, the Plaintiffs point to no . . . representation [by the Defendant] about light cigarettes inconsistent with what the FTC condoned; no evidence [that the Defendant] ever affirmed that light cigarettes were good for you, were healthy, or would not cause the host of physical problems listed on every package; no evidence that any descriptors [the Defendant] applied to [its light cigarettes] contravened what the FTC and Congress knew the tobacco companies as a group and [the Defendant] in particular were saying about these cigarettes. 27 Id. at 152 (emphasis in original). The court went on to consider what is it the Plaintiffs would have had [the Defendant] say about light cigarettes that it did not say, id., and concluded that to respond to Plaintiffs' concerns, [the Defendant] would have to tell the public that the FTC Method test, though accurate in the laboratory, was inaccurate in real life, id., a message that would directly contravene the entire federal cigarette advertising scheme. 28 What the Good opinion makes clear is that to impose state liability on the basis of the Manufacturers' use of the FTC mandated terms is necessarily to impose a state requirement or prohibition on cigarette advertising as it relates to the relationship between cigarettes and health. As a California state court concluded, in considering a similar set of claims: 29 While [plaintiffs] insist that their Lights case does not depend on a finding of whether the Surgeon General's mandated warning is adequate, logic . . . dictates otherwise . . . . because it is obvious that Defendants' alleged deception respecting their use of the term Light as part of the brand name of cigarettes that actually contain less tar and nicotine . . . could easily be corrected by requiring an additional warning on the packages to the effect that Light cigarettes can be more hazardous than regular cigarettes due to smoker compensation. Hence, in the context of the Federally regulated field of cigarette advertising, the gravamen of Plaintiffs' Light claim is that the warnings mandated by Congress are inadequate with respect to Light cigarettes. 30 In re Tobacco Cases II, 2004 WL 2445337, at  21 (Cal.Super.Aug. 4, 2004)(superseded on other grounds by In re Tobacco II Cases, 51 Cal.Rptr.3d 707, 146 P.3d 1250 (2006)). See also Dahl v. R.J. Reynolds Tobacco Co., 2005 WL 1172019, at  11-12 (D.Minn.2005). But see, Schwab v. Philip Morris USA, Inc., 449 F.Supp.2d 992, 1294 (E.D.N.Y.2006) (holding that plaintiffs' misrepresentation claim under the Illinois Consumer Fraud Act based on defendants' use of the terms Lights and Lowered Tar and Nicotine is wholly unrelated to any failure to warn claim and, therefore, not preempted.). 31 We find the reasoning of the majority of courts compelling, and therefore hold that by the express terms of the pre-emption clause, and under the Court's test in Cipollone, fraudulent misrepresentation claims based on the use of FTC-approved descriptors are pre-empted.
32 The Cipollone Court also recognized a second category of unpre-empted misrepresentation claims — those based on fraudulent concealment of material facts. The Court differentiated between claims based on failures to disclose through advertising and marketing, which are pre-empted, and failures to disclose through other channels, which are not. Again, while the district court recognized that some concealment claims may avoid pre-emption, it erred in finding such a claim here. 33 In considering fraudulent concealment claims, most courts have held that any state law claim that would require additional communication between companies and consumers is pre-empted by the Labeling Act. Johnson v. Brown & Williamson Tobacco Corp., 122 F.Supp.2d 194, 201 (D.Mass.2000) (holding that any communication from a cigarette manufacturer to the public constitutes advertising or promotion); Sonnenreich v. Philip Morris, Inc., 929 F.Supp. 416, 419 (S.D.Fla.1996) (holding that comunication by cigarette manufacturers to their customers of the dangers of smoking is an advertising or promotional campaign); Lacey v. Lorillard Tobacco Co., 956 F.Supp. 956, 962 (N.D.Ala.1997) ([A] claim that a defendant has a duty to disclose additional information concerning cigarette ingredients unavoidably attacks defendants' advertising and promotion); Griesenbeck v. Am. Tobacco Co., 897 F.Supp. 815, 823 (D.N.J. 1995) (A company's attempt to notify its mass market of anything, whether a danger warning or a marketing effort, is considered `advertising or promotion' under the general usage of those terms, and a state cannot impose requirements on such activities without running afoul of the clear language of Cipollone. ). Because a concealment claim relies, by its nature, on an unfulfilled duty to disclose additional information, it would seem unavoidably to impose a state law requirement as to marketing and advertising related to smoking and health. 34 In advancing their fraudulent concealment claim, Plaintiffs rely primarily on Rivera v. Philip Morris, 395 F.3d 1142 (9th Cir.2005), in which the Ninth Circuit held that the plaintiffs' failure to warn and fraudulent concealment claims were not pre-empted by the Labeling Act. The Rivera panel determined that Nevada's common law duty requiring manufacturers to advise consumers of their products' dangers does not specify that those disclosures be made through marketing and advertising, and held therefore, that [a] trier of fact could find that [the cigarette manufacturer] had an obligation to warn consumers of the health risks of smoking outside of packaging, advertising, and promoting. Id. at 1149. While noting that many courts had previously held that any claim requiring public release or disclosure of information is necessarily related to advertising and promotion, the court rejected this reading as inconsistent with Cipollone and with the Labeling Act. Id. at 1148-49. The court decided instead that by preserving some common law claims, the Cipollone plurality envisioned continued avenues of research for cigarette manufacturers to perform [their duty to communicate smoking and health information] through means other than the rigorously controlled avenues of advertising, promotion, and packaging. Id. 35 We consider this general holding of the Rivera court unreasonable. We cannot accept that the Congress meant to create a system in which cigarette manufacturers have the duty both to conform their advertising and marketing to strict federal standards and simultaneously to undercut these representations through other means, as yet undefined. We therefore join the majority of courts in holding that any state law claim that would require additional communication between companies and consumers is pre-empted by the Labeling Act. 36 The Rivera panel also upheld the fraudulent concealment claim on the more limited and specific basis that the defendant could have met its state law obligation to disclose material facts by making such disclosures to the industry-established Tobacco Industry Research Committee, analogizing to the Supreme Court's example of an unpre-empted state law obligation to make disclosures to a state agency. Id. at 1149-50. Because the exemption of this state law duty from the reach of § 5(b) pre-emption finds explicit support in Cipollone, and because disclosure to the government, and possibly to other entities such as trade organizations, does not fall within the common-sense meaning of advertising and marketing, to the extent that a fraudulent concealment claim relies on this type of failure to disclose, it may not be pre-empted. We see no need to decide this issue at present, however, as Plaintiffs have not addressed either the source of this obligation under Louisiana state law, nor its factual underpinnings in their pleadings or in their brief — nor are either of these issues discussed by the district court. 37 We conclude, therefore, that the district court erred in finding that Plaintiffs' claim of fraudulent concealment was not pre-empted.