• Lights Out for Light Cigarettes
  • September 12, 2006
  • Law Firm: Manatt, Phelps & Phillips, LLP - Los Angeles Office
  • Big cigarette makers must stop describing their products as "low tar," "light," "ultra light," or "mild," according to a court decision in a long-running legal battle with the U.S. Government. But they will not have to spend billions of dollars on campaigns to stop people from smoking.

    Although the Justice Department formally won the case, U.S. Judge Gladys Kessler in Washington, D.C., said she could not force the tobacco makers to pay for $14 billion of anti-smoking remedies because of an appellate ruling in a separate case that limited their liability.

    Instead, the tobacco companies, which include Philip Morris USA, RJ Reynolds Tobacco Company, and British American Tobacco, will have to change their labels, post all of the documents used in the seven-year case on their Web sites until 2016, and take out television and full-page newspaper advertisements to explain the changes.

    The sanctions, set out alongside Judge Kessler's strongly worded ruling—she found that the companies deliberately set out to "increase and perpetuate addiction"—were widely perceived as a slap on the wrist for the tobacco companies.

    The 1,653-page ruling was the culmination of a civil case brought by the Department of Justice in 1999 in the wake of the massive settlements made by the American tobacco industry to individual states in the mid-1990s. The largest firms paid a total of $246 billion in compensation for deceiving customers about the harmful effects of smoking.

    In her ruling, Judge Kessler agreed that the big tobacco companies had systematically sought to hide the true effects of smoking from consumers, particularly through the marketing of so-called "light" cigarettes. "They distorted the truth about low tar and light cigarettes so as to discourage smokers from quitting," she wrote. "They suppressed research. They destroyed documents. They manipulated the use of nicotine so as to increase and perpetuate addiction.”

    The Justice Department originally suggested that the tobacco industry should pay $130 billion to fund a national campaign to reduce the size of America's smoking population. Prosecutors had also wanted the court to impose fines on big cigarette companies if youth smoking rates failed to fall. The scale of the prosecution was brought down by Robert McCallum, a former Associate Attorney General appointed by President George Bush, who said that the Government should seek the more realistic target of a ten-year, $14 billion campaign.

    But that amounted to nothing when Judge Kessler ruled that she was bound by a February 2005 ruling of the U.S. Court of Appeals that decided that the Government could not force the tobacco industry to pay any more for its past behavior. Instead, the companies will just have to pick up the Government's estimated legal bill of around $140 million.

    Significance: Despite the sanctions and Judge Kessler's strongly worded ruling, the decision is widely perceived as a victory for the tobacco companies, since they were not fined. Stocks of all of the defendants rose upon news of the ruling.