Supreme Court Rules Against Philip Morris

WASHINGTON – The U.S. Supreme Court ruled on Monday that a class-action lawsuit against Philip Morris USA, a unit of Altria Group Inc., should not be decided in federal court, handing a defeat to the tobacco company.

The justices unanimously reversed a ruling that allowed Philip Morris to transfer the lawsuit to federal court from the Arkansas state court where it initially was filed.

At issue is a suit filed against Philip Morris by two Arkansas women alleging that the company engaged in unfair business practices in marketing its low-tar Cambridge Lights and Marlboro Lights cigarette brands.

Companies facing class-action lawsuits typically prefer to have those cases litigated in federal courts, where they usually fare better than in state courts.

Philip Morris succeeded in having the case moved to federal court, saying it was appropriate because cigarette advertisements had been regulated by a U.S. agency — the Federal Trade Commission.

The move was subsequently upheld by a federal appeals court in St. Louis. The U.S. Justice Department told the Supreme Court that the appeals court's ruling should be overturned.

The Supreme Court agreed and reversed the ruling in an opinion written by Justice Stephen Breyer.

Breyer said the fact that a federal regulatory agency directs, supervises and monitors a company's activities in considerable detail does not bring that company under the scope of the law that permits removal to federal court.

Philip Morris USA issued a statement on Monday saying the ruling "does not negatively affect the ultimate outcome of the case or that of other 'lights' cases ..."

The company's associate general counsel, William Ohlemeyer, said in the statement that the ruling will have a minimal effect on other class action cases against the company because of a law that went into effect in 2005 that requires most of the cases to be heard in federal court.

Charles Norton, a portfolio manager whose Vice Fund counts Altria as its largest holding, said the ruling was expected and should have no have a big impact on the stock.

"Altria has a huge arsenal of defenses that they have successfully used in prevailing in 'lights' related cases and this ruling doesn't really do anything to undermine any of their defenses," Norton said.

But anti-tobacco lawyer Edward Sweda said the ruling could help plaintiffs in similar lawsuits filed in more than 20 states. Sweda, senior attorney for the Tobacco Products Liability Project at Northeastern University School of Law in Boston, said the unanimous ruling "shows that Philip Morris has been exaggerating the regulatory requirements of the federal trade commission."