The Illinois Supreme Court recently granted a Petition for Leave to Appeal in Price v. Phillip Morris, Inc., after the Illinois Appellate Court for the Fifth District effectively reinstated a $10 Billion verdict against Philip Morris from 2003. 9 N.E.3d 599 (5th Dist. 2014). The Illinois Supreme Court’s decision to once again weigh in on the case sets the stage for a substantive analysis of class actions and damages awards under the Illinois Consumer Fraud and Deceptive Business Practices Act, codified at 815 Ill. Comp. Stat. 505, et seq. (“Consumer Fraud Act”).
In 2000, plaintiffs Sharon Price and Michael Fruth filed a class action in the Circuit Court of Madison County, Illinois against Philip Morris, Inc., alleging that it had violated the Consumer Fraud Act by fraudulently advertising its cigarettes as “light” or “low tar,” when in fact they were higher in tar and nicotine than represented and more toxic than regular cigarettes. 219 Ill. 2d. 182, 210 (Ill. 2005). Plaintiffs did not seek damages for any alleged adverse health effects caused by Phillip Morris cigarettes but for economic damages resulting from their purchase of the product in reliance on statements which they contended were fraudulent, deceptive and unfair. Id. at 209.
Philip Morris alleged several affirmative defenses, including one based on section 10(b) of the Consumer Fraud Act, which bars suits based on actions “specifically authorized by laws administered by any regulatory body.” 815 Ill. Comp. Stat. 505/10(b)(1). According to Philip Morris, the Federal Trade Commission (FTC) had authorized the use of the terms “light” and “low tar” (“FTC Defense”). 219 Ill. 2d. at 215-16.
The trial court certified a class of over one million Illinois consumers who had purchased cigarettes over three decades, from 1971 to 2001. Id. at 211-12. The case proceeded to trial and in March 2003, the trial court awarded plaintiffs over $7 billion in actual damages and $3 billion in punitive damages. Id. at 230-32. In doing so, the trial court ruled that the FTC had never specifically authorized the use of the terms “light” and “low tar.” Id. at 230-31.
On appeal, Philip Morris argued that the trial court erred by, among other things, rejecting its FTC Defense, in certifying the class and awarding damages under the model presented by Plaintiffs at trial. Id. at 233.
In December 2005, the Illinois Supreme Court reversed the trial court’s decision, ruling that the FTC had in fact approved the use of the terms “light” and “low tar” by entering into various consent decrees in other lawsuits against cigarette manufacturers and, therefore, that the lawsuit was barred. Id. at 265-66, 272. The Court also expressed “grave reservations” regarding the trial court’s decision to certify the class, the proof offered by Plaintiffs at trial, and the Plaintiffs’ novel damages theory but did not actually rule on those issues. Id. at 267-71.
In June 2008, the FTC filed an amicus brief in a case involving Philip Morris parent company, Altria Group, which was pending before the United States Supreme Court. See Altria Grp., Inc. v. Good, 555 U.S. 70 (2008). In its amicus brief, the FTC disavowed ever having adopted a policy authorizing the use of “light” and “low tar” descriptors. Id. at 87. Further, in December 2008, the FTC rescinded prior guidance it had issued regarding statements concerning the tar and nicotine yields of cigarettes, clarified that it had not defined or authorized the terms “light” or “low tar,” and stated that a manufacturer’s continued use of those terms would be subject to prohibitions against deceptive acts and practices. 9 N.E.3d at 603, 608.
Based on these new statements from the FTC, which contradicted the Illinois Supreme Court’s interpretation of FTC policy, Plaintiffs filed a petition for relief from judgment (“Petition”). Id. at 603. After extensive litigation concerning the timeliness of the Petition, the Plaintiffs were permitted to pursue relief from the judgment against them. Id. The trial court, however, ultimately denied the Petition. It ruled that while Plaintiffs had a meritorious claim in the underlying litigation, and that the Illinois Supreme Court likely would have ruled differently in 2005 on the issue of the FTC Defense, the Supreme Court was “equally as likely” to have ruled against Plaintiffs on other issues raised on appeal, such as class certification and damages. Id. at 604.
In April 2014, the Illinois Appellate Court reversed the trial court’s denial of the Petition, effectively reinstating the $10B verdict against Phillip Morris. Id. at 614. On September 24, 2014, the Illinois Supreme Court granted Philip Morris’s petition for leave to appeal.
There is no doubt that the Illinois Supreme Court’s decision to review this case once again will have a profound impact on Illinois consumers, Philip Morris and litigation against tobacco manufacturers. But the reach of the Illinois Supreme Court’s ultimate decision in this case will likely extend beyond that.
Many states have consumer fraud statutes similar to that of Illinois and the Illinois Supreme Court’s decision could therefore provide a model for class action litigation brought under different states’ statutes. It is very likely that the Court will now address the merits of issues it previously tabled, such as the propriety of certifying such a large and diverse class of people (which covered over one million individuals and spanned purchases made in three decades), the feasibility of using consumer fraud statutes in consumer class action litigation (a proposition which has been questioned by several courts), the proof required to sustain such an action, and how damages are to be determined if and when such cases are proved.
We will keep you posted on the developments in this landmark case.