Antitrust Law Daily Wrap Up, ADVERTISING—Cal. App.: No restitution in Philip Morris light cigarettes advertising dispute, (Sep 29, 2015)

By Linda O’Brien, J.D., LL.M.

In an action against tobacco company Philip Morris over the advertising of its light cigarettes, the trial court correctly determined that, although the tobacco company’s advertising was likely to deceive consumers, the plaintiffs were not entitled to restitution since they received value from the light cigarettes apart from the deceptive advertising, the California Court of Appeals in San Diego has ruled. Thus, the trial court’s finding was affirmed (In re Tobacco Cases II, September 28, 2015, McConnell, J.).

In June 1997, a complaint was filed against several tobacco companies, including Philip Morris, which is the only remaining defendant. In January 2001, a seventh amended complaint was filed, which alleged that Philip Morris violated California’s Unfair Competition Law (UCL) and False Advertising Law (FAL) in its advertising of Marlboro Light cigarettes to indicate that they were less unhealthful than Marlboro Reds or other full flavor cigarettes.

In 2013, after a bench trial, the court determined that Marlboro Lights were no less dangerous than any other cigarettes, Philip Morris was aware of that, and its advertising was likely to deceive consumers. The court, however, denied the plaintiffs’ claim for restitution on the ground they received value from Marlboro Lights apart from the deceptive advertising and the evidence submitted to show the difference between what they paid and the value received was incompetent and admissible. The plaintiffs appealed.

Restitution. The appellate court determined that, although the difference between price paid and value received was not the exclusive measure of restitution, the plaintiffs’ full refund theory did not provide an alternative basis for restitution. Under the UCL, the amount of restitution must be supported by substantial evidence and may not be based solely on deterrence. The plaintiffs’ argument that they were not required to prove any consumer losses attributable to the deceptive advertising and the trial court had discretion to order Philip Morris to fully refund the plaintiffs’ expenditures on Marlboro Lights or its profits solely for the purpose of deterrence was rejected. The appellate court noted that injunctive relief was the primary form of relief available under the UCL and restitution was merely ancillary. Without a showing of loss to the plaintiffs, there could be “no restoration of money which may have been acquired by means of such unfair competition.”

While a full refund might be proper when a product confers no benefit on consumers, the appellate court continued, the plaintiffs did not dispute the trial court finding that they obtained value from Marlboro Lights apart from the deceptive advertising. Moreover, it was inherently implausible that a class of smokers received no value from a particular type of cigarette. In this case, the measure of restitution was proper and the plaintiffs did not establish any price/value differential so the court could award restitution.

Injunctive relief. The trial court did not abuse its discretion by denying the plaintiffs’ request for injunctive relief. According to the appellate court, although the UCL imposes liability for past acts, in order to grant injunctive relief, there must be a threat that the wrongful conduct will continue. In Philip Morris I, 449 F.Supp.2d 1 (2006), Philip Morris and other tobacco companies were permanently enjoined from conveying any express or implied health message for any cigarette brand. The plaintiffs’ argument that the offending conduct “continues to this day” as Philip Morris still sells the cigarettes, renamed Marlboro Gold, in light colored packs which ostensibly lead consumers to believe they are less dangerous than cigarettes in dark colored packs was rejected. Since there was no reasonable probability that the past acts complained of would reoccur, injunctive relief was properly denied, the appellate court noted.

The case is No. D065165.

Attorneys: Mark P. Robinson, Jr., Kevin F. Calcagnie, and Scot D. Wilson (Robinson Calcagnie Robinson Shapiro Davis, Inc.), Robert L. Redfearn, Robert L. Redfearn, Jr., and Douglas W. Redfearn (Simon, Peragine, Smith & Redfearn), and Donald F. Hildre and Thomas D. Haklar (Hildre & Haklar) for Trina Watton. Gregory P. Stone, Martin D. Bern, Daniel B. Levin, and Bethany W. Kristovich (Munger, Tolles & Olson) for Philip Morris USA, Inc.

Companies: Philip Morris USA, Inc.

Cases: Advertising CaliforniaNews