Opinion ID: 187362
Heading Depth: 2
Heading Rank: 1

Heading: Light Cigarettes

Text: The first specific fraud finding Defendants challenge relates to their marketing of light cigarettes. The district court found: As their internal documents reveal, Defendants engaged in massive, sustained, and highly sophisticated marketing and promotional campaigns to portray their light brands as less harmful than regular cigarettes. Philip Morris, 449 F.Supp.2d at 860. The court concluded Defendants have known for decades that filtered and low tar cigarettes do not offer a meaningful reduction of risk, and that their marketing which emphasized reductions in tar and nicotine was false and misleading. Id. Defendants contend they should be immune from liability because the Federal Trade Commission (FTC) has blessed their use of labels such as light and low tar. This argument is entirely foreclosed by the Supreme Court's recent decision in Altria v. Good, ___ U.S. ____, 129 S.Ct. 538, 172 L.Ed.2d 398 (2008), concluding the FTC has never condoned the use of light or low tar descriptors. Id. at 550. Defendants point to a 1966 industry guidance letter from the FTC stating that a factual statement of the tar and nicotine content (expressed in milligrams) of the mainstream smoke from a cigarette, as measured by the Cambridge Filter Method, was permissible under the FTC Act. Id. at 549. The Commission made clear, however, that the guidance applied only to factual assertions of tar and nicotine yields and did not invite any `collateral representations... made, expressly or by implication, as to reduction or elimination of health hazards.' Id. Despite Defendants' argument to the contrary, the FTC has in fact never required that cigarette manufacturers disclose tar and nicotine yields, nor has it condoned representations of those yields through the use of `light' or `low tar' descriptors. Id. at 550. Although the FTC never prevented Defendants from using misleading descriptors, agency nonenforcement of a federal statute is not the same as a policy of approval. Id. As the Supreme Court held, neither the handful of industry guidances and consent orders on which petitioners rely nor the FTC's inaction with regard to `light' descriptors even arguably justifies the pre-emption argument advanced by Defendants. Id. at 551. For the same reasons, these actions fail to constitute FTC authorization of the descriptors that could defeat a finding of specific intent to defraud. It is also worth noting that the district court in this case did not find liability solely based on the use of descriptors such as light and low tar. The court found Defendants orchestrated highly sophisticated marketing and promotional campaigns to portray their light brands as less harmful than regular cigarettes. Philip Morris, 449 F.Supp.2d at 860. In addition to the misleading use of descriptors, the district court found [Defendants'] public statements are blatantly false in relation to the marketing of light cigarettes. Id. at 861. The district court went on to find that [a]s part of the Enterprise's scheme to defraud smokers, Defendants withheld and suppressed their extensive knowledge and understanding of nicotine-driven smoker compensation. Id. These findings reveal that fraudulent activity surrounding light cigarettes was not merely limited to the use of misleading descriptors. In addition to the fact that the descriptors were not authorized by the FTC, the district court relied on other fraudulent activity by Defendants. Independent of their FTC-authorization argument, Defendants also insist terms such as light cigarettes are not misleading to the public. They analogize light cigarettes to sodas which are low caffeine and cookies which are low fat. According to Defendants, the public knows that drinking many low caffeine sodas can result in higher levels of caffeine consumption, and eating many low fat cookies can result in higher levels of fat consumption. Defendants thus analogize to light cigarettes, maintaining that it is obvious that smoking many light cigarettes can result in higher levels of nicotine and tar consumption. But the analogy to light cigarettes is inapt. Unlike drinking sodas and eating cookies, the factors behind compensation in light cigarettes are largely subconscious: the smoker will subconsciously adjust his puff volume and frequency, and smoking frequency, so as to obtain and maintain his per hour and per day requirement for nicotine. Philip Morris, 449 F.Supp.2d at 467 (citing internal tobacco company documents). Not only is smoker compensation subconscious, but factors such as puff volume and frequency are not even tied to the number of light cigarettes smoked. The analogy to sodas and cookies fails; the subconscious nature of smoker compensation enabled Defendants to mislead the public about the health effects of light cigarettes. Finally, Defendants argue their descriptors were simply verbal representations of numerical ratings authorized by the FTC, and thus were literally true. Even leaving aside the fact that literally true statements may nevertheless constitute fraud, this claim founders on the district court's finding that there are lights of certain brands with higher tar levels than regulars of other brands from the same company, and there are also lights and regulars of the same brands that have the same FTC tar rating. Id. at 861. This finding, which Defendants do not attempt to show is clearly erroneous, reveals the descriptors were not simply representations of numerical ratings and thus were not literally true.